Several Chambers and Trade Associations related to Commerce and Industry, said local industrialists are worried about the proposed China - Sri Lanka FTA negotiations.
They are cautioning the government of possible adverse economic impacts to the domestic industry.In a statement issued by the National Chamber of Industries (CNCI) after a recent meeting held among them they highlighted that the Government has earlier requested recommendations of the Chambers to reduce the said negative list to 30% which had initially been at 40.21% of the total tariff lines.
They request the government not to reduce the negative list to 10% from the present level which has already been agreed as 30% and not to phase out CESS within a period of five years, which is the only measure available to safeguard the local industries.
The proposed Free Trade Agreement (FTA) between Sri Lanka and China has become a point for discussion in various circles among the industrial sector today. The main reason is that the Government has recently disclosed their requirement of reducing the Sri Lanka negative list to 10 % and to phase out the import CESS to zero within five years after implementation of the proposed FTA.
However, the latest scenario is to reduce the Sri Lankan Negative list to 10% and to remove the CESS which has been imposed to safeguard the Sri Lankan industries within five years upon implementing the proposed FTA.
“This is a situation which needs serious attention of the industrial sector. At a time where the world’s most developed country is considering to impose tariff and tax for imports from China, it is imprudent for our country to relax safeguards for our industries.
WTO recognises the need for adopting safeguarding measures for protection of domestic industries as para tariffs imposed to achieve this objective. Phasing out the para tariffs, such as CESS, will be a death knell, leading to the closure of our local industries.
Large economies enjoy the benefits of economies of scale while local industries are burdened with high energy, high labour, inflated raw material costs, facing an un-levelled playing field, causing non-competitiveness.
Sri Lankan industrial sector is dominated by SMEs which accounts for 90% of the total industrial establishments.During the nearly three decades of terrorism, this sector has been the back-bone of the nation and sustained the economy, despite all the adversities, surmounting all local and global challenges.
These SMEs are dependent on large industries for backward/forward integration for supply sourcing of raw materials, marketing and other services. Removal of tariff protection, will adversely affect these SMEs, both directly and indirectly which will lead to their non-competitiveness and closing down, creating unemployment and adversely affecting the economy.
The majority of the local industrialists have funded their investments, in their respective industries, with borrowed funds, from banks and financial institutions, using their personal assets as security.
Sri Lanka is lacking in strong economic fundamentals to develop and safeguard the local industries; such areas are high bank interest rates, non- competitive parity rate for our rupee, effective labour laws focused on improving productivity and problems relating to conflicting investment policies
It was the consensus among all present that they were not in agreement to this FTA at all. No local industrialist seems to be in need of an FTA between Sri Lanka and China other than a very few in certain selected industries.
It was also the view of those present at the meeting that the criteria for entering into such FTAs, should be the sustenance, growth and development of the Sri Lankan economy.
The importance of safeguarding local industries can be very evidently seen today; even in USA which is considered to be the largest economy in the world.
The business community of Sri Lanka, has rejected these proposals completely and requests the government to extend BOI facilities, for investments in manufacturing facilities in Sri Lanka, that are of strategic importance and add-value, contributing to economic development and prosperity of the nation and it’s people.
Therefore, they earnestly request the government not to reduce the negative list to 10% from the present level which has already been agreed as 30% and not to phase out CESS within a period of five years, which is the only measure available to safeguard the local industries.
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