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Red tape, political crisis hits EU investments

27 Jan 2019

By Easwaran Rutnam European Union (EU) investments to Sri Lanka took a hit as a result of government red tape and the recent political crisis. The EU Ambassador to Sri Lanka Tung-Lai Margue told The Sunday Morning that investors from the EU have raised concerns over the technical difficulties, administrative difficulties, fiscal difficulties, and customs difficulties they face when looking to invest in Sri Lanka. Tung-Lai Margue said that EU investors have also raised concerns over the legal environment and lack of adequate tax incentives in order to invest in Sri Lanka. He said that they also question if there are long-term visas offered to investors who visit Sri Lanka. “All these matter. There is so much potential in Sri Lanka that needs to be properly exploited. If the investment world is better here, people will come,” he said. He said that the EU office in Colombo, together with the Minister of Development Strategies and International Trade Malik Samarawickrama, were meeting with the respective ministries to discuss policies related to the business environment. Meanwhile, the Ambassador said that new public projects which were to be funded by the EU were put on hold since the political crisis erupted. He said that some private companies also suspended their projects in Sri Lanka as a result of the political instability. “I think they will come back to re-discuss things,” the Ambassador added. The Ambassador said that during the political crisis, President Maithripala Sirisena and the Government were reminded by the EU of the commitments given by Sri Lanka to continue to enjoy the EU GSP Plus trade facility. He said the President was told that failure to adhere to the commitments would mean the EU would be forced to reconsider its deal with Sri Lanka. Increase in exports “We are delivering on our part. GSP Plus was in place since May, 2017 and we have seen the benefits to your economy,” he said. The Ambassador said that the President had assured Sri Lanka’s commitment to the conditions linked to EU GSP Plus. Since Sri Lanka regained EU GSP Plus in May, 2017, there has been an 18% increase of exports to the EU. “The EU is the biggest market for Sri Lankan exports. So we are speaking of a lot of money and a lot of profits that will have a positive impact on the economy and the people,” the Ambassador said. The Ambassador noted that an EU monitoring team is expected in Sri Lanka to assess the country’s compliance to the 27 international conventions linked to GSP Plus. The 27 international conventions include human rights, labour rights, environment rights, and good governance. “The main thing is we are not expecting every country to implement the 27 conventions in one go. What we will look at is if there have been improvements. If the trend is positive,” Tung-Lai Margue added. On China’s involvement in Sri Lanka, the Ambassador said that since 2015, there had been a more balanced approach taken by Sri Lanka with India, Japan, and even western countries being offered more investment opportunities in Sri Lanka as opposed to just China. EU-Asia strategy initiative Meanwhile, the Ambassador also said that Sri Lanka had shown interest in a new initiative launched by the EU called the EU-Asia strategy. “It’s about connectivity and a number of elements related to transport, energy, and digital services,” he said. The Ambassador said that the new EU initiative will compliment China’s One Belt One Road (OBOR) initiative. “We will not look to rival the Chinese initiative. We will see how we can adjust to the Chinese initiative. I would say the characteristics could be interesting for the Asian countries. It would be a rule-based approach; a fair approach,” he said. The Ambassador said that he discussed the EU initiative with a few ministers in Sri Lanka and was awaiting the budget allocations by the EU for the new initiative to take things forward. The EU noted that with Asia requiring an estimated € 1.3 trillion per year for infrastructure investment, there were significant opportunities for EU companies, provided that robust legal frameworks were in place. In its strategy to connect the EU and Asia, the EU will look to combine financial sources from international financial institutions, multilateral development banks, and the private sector to ensure sustainable domestic and international finance for connectivity, while ensuring transparency and a level playing field for businesses. The EU feels, a better connected Europe and Asia through transport links, energy, as well as human and digital networks would strengthen the resilience of societies and regions, facilitate trade, promote the rules-based international order, and create avenues for a more sustainable, low-carbon future. Asked about inconsistent policies of successive governments in Sri Lanka, the EU Ambassador said that there needed to be a consistent policy and openness to more competition. He said he was confident Sri Lanka would maintain a consistent economic policy in the future, no matter what government was in office.

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