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Sri Lankan industrialists worry over China trade deal, cess removal

Economy Next | 14 August 2017

Sri Lankan industrialists worry over China trade deal, cess removal

Sri Lankan industrialists have voiced concern over a proposed free trade agreement with China and government plans to reduce import tariffs that protect them, saying they feared they might not be able to compete.

The government has said the FTA with China would give exporters access to the world’s biggest market and that it wants to liberalise the economy by removing import cesses that give undue protection to local industries at the expense of consumers.

The Ministry of Industry and Commerce said in a statement that it assured industrialists the forthcoming China FTA is designed keeping the local industry concerns in mind and that they would be briefed on the deal’s progress.

“We will not allow local industries and employment to be hit by any Free Trade Agreements,” Minister of Industry and Commerce Rishad Bathiudeen told industrialists at a meeting on the forthcoming government budget.

Industrialists from footwear, electrical and electronic products, pharmaceuticals, cosmetics, rubber, wood, automotive components, boat building, processed food and packaging were represented at the forum along with business chambers.

According to the Department of Commerce of Sri Lanka, in the five year period of 2012 to 2016, Chinese imports to Sri Lanka surged 67%, from 2012’s $2.56 billion. Chinese imports in 2016 increased by 15% to US $ 4.27 billion from 2015’s $3.73 billion.

The numbers included light-vessels and dredgers Chinese companies had imported for the huge port city reclamation project next to Colombo port.

The ministry statement said several industrialists complained that they are in the dark regarding the FTA work’s progress with regard to sectoral coverage of each industry.

“Sri Lanka – China FTA is cross cutting and many local industries could be affected if proper study on impact of domestic industries is not done before agreeing to terms and conditions of the FTA. We came to know that the government may bring down the negative list from proposed 30% to very low 10%. If that happens, many of our domestic industries may close,” said Managing Director of Tantri Motors, Athula Haputantri.

“In addition to lowering the negative list, there also appears to be decision to take off the cesses. Cess in the only protection that the local farmers and industrialists have against heavy import competition and if it’s removed, there can be a crisis for local industries.”

The government has said it would reduce import cesses to open up the economy which in the past decade had become more closed with lobbying for protection by business interest groups.

The protective tariffs had reduce Sri Lanka’s economic competitiveness, reflected in the falling share of exports in the overall economy. The goverment has said there will be transitional arrangements for businesses.

 source: Economy Next