Sri Lanka needs to adjust trade arrangements

Sri Lanka will have to adjust to the new EU/UK trade environment and ensure the island’s exports keep moving favourably.

“There are various issues Sri Lanka should seriously look at in the process of re-establishing its trade links with the UK and also with the EU,” biz leaders told the Business Observer.

The Brexit transition process may take some time, “but we will call upon the government to take measures to look at trade arrangements and establishing new links,” they said.

The UK will once again become a separate customs area and that means they have to establish a new Customs code.

“This is an area we will have to follow closely,” a leading exporter said.

In the medium term, Sri Lanka will have to face many changes and challenges. “In the immediate short term, the currency movement and the pound getting weaker will have an impact on export pricing and inbound tourism,” he added.

The Sterling Pound plunged Rs. 21 against the Sri Lanka rupee on Friday. Britain is also Sri Lanka’s third largest source of tourism arrivals. British tourists are known as high-end tourists. Chairman, Jetwing Group, Hiran Cooray said the there will be a short-term impact on the tourism industry as the value of the Pound has gone down already. “However, we hope the markets would stabilise after the transition period, and the impact on the tourism industry would be less.”

Apparel is one of the major exports to the UK. “In the medium term if Sri Lanka gets GSP+ in early 2017,...

we may have a disadvantage as over 40% of our apparel and other exports go to the UK market in EU. If we as a country cannot develop a bi-lateral arrangement with the UK, it will affect apparel and rest of the exports in some way in the future,” said Rohan Masakorala of the Shippers’ Academy Colombo.

Bank of England Governor Mark Carney said there will inevitably be a period of uncertainty following the decision to leave the EU. “But there will be no immediate change to our relationship with the EU. It will take some times for the UK to establish new relationships with the rest of the world. So some market and economic volatility can be expected, but we are well prepared for this, he said.

Carney added the BOE will make available additional funds of £250 bn through its normal market operations to stabilize markets, as needed.

Managing Director of the International Monetary Fund (IMF) Christine Lagarde urged the authorities in the UK and Europe to work collaboratively to ensure a smooth transition to a new economic relationship between the UK and the EU, including by clarifying the procedures and broad objectives that will guide the process. “We strongly support the commitments of the Bank of England and the ECB to supply liquidity to the banking system and curtail excess financial volatility. We will continue to monitor developments closely and stand ready to support our members as needed.” As the people of the United Kingdom voted to leave the European Union, Sri Lanka’s largest chamber, the Ceylon Chamber of Commerce said in a statement that Sri Lanka needs to aggressively pursue diversification of export markets (including new trade agreements), create a conducive environment for our businesses to thrive and be agile in a volatile environment and take measures to boost the competitiveness of our exports.