Sri Lanka is one of the active countries in SAARC which shares a fairly good relations with its fellow countries. It can play a pioneering role in the security of Asia and in spearheading the establishment of a SAARC anti-terrorism unit.
Sri Lanka has recorded an impressive growth in economy in spite of reeling under civil wars for years. The economy of Sri Lanka mainly depends on areas like tourism, tea export, apparel, and textile and rice production. Remittances also include a significant part of country’s revenue.
The GDP in Sri Lanka expanded by 3.8% in the first quarter of 2017 over the same period last year. GDP growth rate in Sri Lanka averaged 6.07% from 2003 until 2016, reaching an all-time high of 16.12% in the first quarter of 2012 and a record low of 0.48% in the fourth quarter of 2013.
Export and Import
Sri Lanka has been the biggest export market for India. Trade between the two countries is carried out as per guidelines mentioned in the Indo-Sri Lanka Free Trade Agreement (SAFTA). Major items of export from India are pulses, wheat, other cereal spices, oil meals, fresh vegetables, miscellaneous processed items, drugs pharmaceuticals and fine chemical, inorganic/ organic agro chemicals, rubber manufactured goods except footwear, glass, glassware ceramic, paper/wood products, plastic and linoleum products, machinery and instruments, iron and steel bar/rod etc. primary and semi-finished iron and steel, electronic goods, cotton yarn, fabric, made-ups, and petroleum crude and products.
In 2016, Sri Lanka exported goods worth $10.4 billion and imported goods worth $19billion, resulting in a negative trade balance of $8.57 billion. In 2016 the GDP of Sri Lanka was $81.3 billion and its GDP per capita was $12.3,000.
The bilateral trade of Sri Lanka and Bangladesh is quite successful. Their trade relations are a clear example of South-South cooperation which is essential for the developing world. The trade agreements between the two countries include cooperation in coastal shipping, agriculture, education, investment, information and communication technology. There will also be agreements relating to radio, TV and films. Agreements for cooperation between two standards testing institutions, news agencies, Chittagong BGMEA Fashion Institute and Sri Lanka Textile and Apparel Institute are also in the pipeline. Although Sri Lanka and Nepal are celebrating 60 years of diplomatic relations with close cultural and religious ties, trade and investment between the two countries are not quite relevant despite several bilateral trade agreements. At the Nepal Investment Summit held on March 3, 2017, Sri Lankan investors have pledged to invest a total of $500 million in Nepal mainly on hydropower, solar and wind power. Sri Lanka has also committed to reconstruct two earthquake-damaged heritage temples.
Sri Lanka is India’s second largest trading partner in SAARC. India and Sri Lanka signed FTA in 1998, which facilitated increased trade relations between the two countries. Sri Lanka has long been a priority destination for direct investment from India. However, the proposed Economic and Technological Cooperation Agreement (ETCA) between India and Sri Lanka is likely to facilitate trade in services, investments and technological cooperation.
Establishing direct flights between Sri Lanka and Afghanistan can boost trade between the two countries as Afghanistan has an abundance of untapped reserves such as gold, copper and lithium, a key component necessary for the manufacture of laptops and Blackberry phones. Recently, Sri Lanka and Pakistan have agreed to include services in a bilateral FTA. The volume of trade between Sri Lanka and Pakistan has been estimated at about $325 million a year.
The first annual bilateral consultation between Sri Lanka and Bhutan discussed several issues from political relations, trade, investment, tourism, human resource development, to cultural exchanges, and cooperation in regional and multilateral forums. The bilateral forum will enhance and strengthen friendly cooperative relations between the two countries and exchange cooperation in the field of education, human resource development and try to tap the potential that exists in this area.
There is also a lot of potential for Sri Lanka and Maldives to develop trade between the two countries. Sri Lanka exports fruits and vegetables to the Maldives. There are resorts in Maldives that are owned by Sri Lankan parties such as Aitken Spence, John Keells, etc. There are some other businesses in Maldives as well in which Sri Lankans have invested in.
The World Bank said the country has ample opportunities to build on its success due to its enviable location for trade, relatively educated work force and remarkable natural assets. Sri Lanka suffers from a skills mismatch, a result of the education system not equipping people with the abilities that businesses want.
Sri Lanka urged collaboration among SAARC member countries to encourage inflows of foreign direct investment. Sri Lanka’s free trade agreements started not with any distant continents but in its own backyard-and more investments in South Asia can help stop the brain drain from the region.