Doing the 'triple-jump' for wealth creation

Challenge of global integration:

By Chandani Jayatilleke

In an interview with the Business Observer, Deputy Finance Minister Dr. Harsha de Silva discusses a concept called 'The triple jump plan' which is similar to a popular athletic event in which competitors attempt to jump as far as possible by performing a hop, a step, and a jump from a running start - for economic growth in Sri Lanka.

Sri Lanka is moving ahead with its regional economic integration plan, seeking to become the preferred trade and investment destination of the sub continent.

Deputy Foreign Minister and economist, Dr. Harsha de Silva says the first step of the 'triple jump plan' is the creation of a political platform and ensuring that politically, Sri Lanka is well-integrated with the world.

"We cannot do trade with any of the countries if we do not maintain cordial, diplomatic relationships. For instance, we cannot trade with Europe if the EU imposes trade sanctions on Sri Lanka such as the GSP plus barrier we are faced with at present," he said.

Economic integration

While the government is not into trade and business - it is business people who do business and investors who create wealth. "It is the responsibility of the government to maintain relations - and the government has to go down this road to ensure that we build bridges so that trade can travel on it. The bridges that were burnt or damaged due to unfriendly diplomacy are being rebuilt and strengthened now," he said. President Maithripala Sirisena was invited for the G7 summit in Japan and Dr. de Silva says it shows the great respect for Sri Lanka by world leaders and institutions whether it is the UN, the US, Japan, India, China or Europe.

"There is a sense of appreciation and acceptance of what this government has been doing for its people over the past 16 months, be it human rights, democracy, press freedom or the attempt to crack down on corruption and do away with white vans. And the rule of law has been reinstated.

"In a way we have become an equal partner to many other developed countries not in terms of wealth, but in terms of democratic society. This is the first step of the 'triple jump'. It is not easy; we have a long way to go to bring more facilities to the people."

"Just imagine what could have been happened if you rewind and go back to the pre-2015 era. There were several common words such as 'Geneva' and 'electric chair' - where are those words now?

"What would have happened if we went down that road? We would have had to face severe economic embargos and the situation would have been quite severe. Today, people are saying a 4% increase in VAT is a huge problem; it could have actually been a 400% increase in taxes because we wouldn't have even been able to survive economic embargos we were subjected to at that time. Fortunately we were able to sort out those issues and take Sri Lanka out of the mess that it was heading to." The second step of the plan is economic integration and Sri Lanka is now trying to promote economic relations with the world by using its natural advantage - the location, its people and the historical advantage of being a trading destination.

ETCA

In this context, the Deputy Minister said trade agreements are a priority. "We can't be the hub in the region - or the world if we are unable to formulate preferential trade agreements among a group of countries. "We already have free trade agreements (FTAs) with India and Pakistan. We need to expand the FTA with India into an Economic and Technical Cooperation Agreement (ETCA). That is the integration we are looking at to leverage the country's growth.

"We also need to expand the FTA with Pakistan. We are in the process of finalising an FTA with China and we are also going to announce an FTA with Singapore - the next will be with Turkey which would be the gateway to Europe. "The government is also discussing the possibility of setting up a sort of preferential trade agreement with the US. It is important that we enter into these types of agreements with the countries that we seek to trade with." When it comes to trade agreements, the Economic and Technical Cooperation Agreement was due to be finalised with India by the middle of this year. However, the announcement of ETCA negotiations has already created an uproar among several groups, alleging lack of communication on how the negotiations are being conducted. Deputy Minister Dr. de Silva says there's nothing to hide about the details of the agreement. "The framework document has been given to all the professional bodies that have been working with the Department of Commerce. It is a broad framework for improving economic and technical cooperation between the two countries." However, he said that it has been politicised for the advantage of a few bankrupt politicians. "They are creating opinions saying if Sri Lanka opens up its professional services to India, plane loads or ship loads of doctors, engineers, architects and lawyers will descend upon Colombo and start businesses, or take the jobs of the locals. However much we explain to professional organisations that what is called 'mode 4' is closed in this framework - these people continue to mislead the country." (Mode 4 means natural persons and professionals going to another country and establishing themselves as natural persons of that country and practicing their profession or migrant work). Prime Minister Ranil Wickremesinghe very clearly explained this in Parliament and 'mode 4' can be opened only if the industry itself needs some sort of opening of identified professions, sub professions or specialisations within professions. The only two sectors for which people are requested, are dockyard related services such as underwater welders and certain high level software professionals.

There is a CEPA between India and Singapore already with 160 jobs open from India to Singapore. But that doesn't mean that people who are qualified to do these jobs are freely accepted in Singapore. There are various limits, from visas to other conditions. Besides countries such as Australia, the US and UK have positive lists which they open depending on their job needs, with many rules and regulations, he said.

Benefits of trade pacts

Trade pacts can bring immense benefits to people. "It is all about collaborating so that consumer surplus increases, benefitting the consumer. (For example, assume a consumer goes out shopping for a CD player and he or she is willing to spend $250. When this person finds that the player is on sale for $150, economists would say that this person has a consumer surplus of $100.)

"Secondly it gives access to a larger market - a larger market means an increase in investment - the investors create jobs and wealth in such a market. More jobs and more quality jobs will bring greater income for the consumer. What ultimately happens is the cost goes down and income goes up. That is what the consumers want to improve their quality of life," he said.