{"id":47617,"date":"2015-09-05T17:07:57","date_gmt":"2015-09-06T00:07:57","guid":{"rendered":"http:\/\/www.lankaweb.com\/news\/items\/?p=47617"},"modified":"2015-09-05T17:08:22","modified_gmt":"2015-09-06T00:08:22","slug":"sri-lanka-should-be-the-hong-kong-of-india","status":"publish","type":"post","link":"https:\/\/www.lankaweb.com\/news\/items\/2015\/09\/05\/sri-lanka-should-be-the-hong-kong-of-india\/","title":{"rendered":"Sri Lanka should be the Hong Kong of India"},"content":{"rendered":"

Chanaka Bandarage<\/strong><\/em><\/span><\/h2>\n

No one would disagree that Hong Kong rode to its prosperity on the back of China (after the Chinese Revolution, Hong Kong underwent a rapid and successful process of industrialization, from the late 1940s, and became a rich nation).<\/p>\n

After the liberalisation of China\u2019s trade (Chairman Deng\u2019s Open Door Policy\u2019 in the late 1970s), Hong Kong grabbed the opportunity and increased its trade with China by tenfold.\u00a0 Within few years, the tiny Hong Kong\u2019s exports to China surpassed its imports from China.<\/p>\n

When it comes to India, Sri Lanka is today placed in a similar position as that of Hong Kong.<\/p>\n

India is a significant global player and it is estimated that economically it may surpass China (given China\u2019s fast ageing population and the gender imbalance), and it has the ability to become the world\u2019s biggest economy.<\/p>\n

Unlike how Hong Kong prospered thanks to China (Hong Kong is located in very close proximity to China); Sri Lanka (located in very close proximity to India), has thus far been unable to grab the opportunity and capitalise on India\u2019s growth.<\/p>\n

India had closer to a double digit GDP growth in the past decade, but, as stated before, Sri Lanka failed to capitalise on this.<\/p>\n

In the past ten years Sri Lanka \u2018put all its eggs only in the China basket\u2019.\u00a0 After the war, it sadly developed a relationship of mistrust and annoyance with India (true, Thamilnadu created the problem, but, Sri Lanka diplomatically failed to secure New Delhi\u2019s support).<\/p>\n

Sri Lanka failed to relaise that it cannot rise to prosperity solely on the back of China, but, it could comfortably do so on the back of India.<\/p>\n

Indeed, China is an excellent friend for Sri Lanka. This has been the case historically. Sri Lanka should be ever grateful for China\u2019s help afforded to Sri Lanka during many difficult times. But, China is too far away from Sri Lanka and it is very \u2018different\u2019 than that of Sri Lanka.\u00a0 On the other hand, Sri Lanka and India are very similar when it comes to many things such as the culture, food, attire, language (English is well spoken in both countries; also, Sinhala (a Sanskrit) and Tamil, an Indian language), sports, religion, values and traditions and physical characteristics of the people.\u00a0 The fact that Sri Lanka\u2019s first King (Prince Vijaya) was an Indian (from Bengal) and that Sri Lanka\u2019s third King, Panduwasdewa, was married to a blood relative of Lord Buddha (Princess Bhaddha Kachchayana of the \u2018Shakya Wangsha\u2019), are notable and significant features of the relationship.<\/p>\n

Furthermore, Sri Lanka and India are separated only by a short stretch of the sea and apart from the examples in the preceding paragraph, excellent, brotherly relations have existed between the two nations from time immemorial (of course, despite animosities between Sri Lanka and Thamilnadu). \u00a0India as a nation has never invaded Sri Lanka in a war like manner. \u00a0Sri Lanka\u2019s Anagarika Dharmapala was a person who recently brought the two countries closer. \u00a0Another was Mrs Sirimavo Bandaranaike.<\/p>\n

In the past decade, India\u2019s exports to Sri Lanka almost doubled, Sri Lanka failed to keep pace with the growth of its exports to India.<\/p>\n

The recent Sri Lankan governments (in the past 20 years), rather than building a manufacturing and productivity based economy, focussed on a service based economy (it was the \u2018easy way out\u2019).\u00a0 Thus, such unproductive and non-manufacturing ventures like communication centres, beauty palours, trishaw taxis (there are over one million of them in the country), importation and distribution of illicit drugs such as heroin and ecstasy, betting centres, lottery sales centres, small-scale casinos, massage parlours in the guise of Ayurveda centres, private tuition centres (even Sinhala, Buddhism and History are taught for school children in these centres), variety of international schools and tourism based industries (the latter is somewhat good) mushroomed in the country.\u00a0 They became the wholemark of the country\u2019s economy.\u00a0 These ventures, though created jobs, generated no or less GDP for the economy.\u00a0 The governments by trying to reduce the country\u2019s unemployment, gave jobs as public servants to thousands of people who supported them politically during elections (these were not merit based appointments, hence the lethargic and corrupt public service that we have today).<\/p>\n

The governments not knowing how to create employment for its citizens (both skilled and unskilled workers) encouraged them to leave the country in search of the \u2018greener pastures\u2019.\u00a0 Lots of women ended up working as domestic maids in Middle Eastern countries (stories have emerged that some of them have been treated like slaves) and lots of men were found jobs in South Korea. The governments were unconcerned in paying attention to the adverse socio, cultural and psychological effects of the family members that were left in the country, caused as a result of the mass migration of people to overseas countries.\u00a0 Drastic stories have emerged about the plight of children and elderly who were left in their respective homes helpless. \u00a0The governments liked the idea that its citizens left its shores as their remittance became the biggest source of revenue for them.\u00a0 The rulers plundered and mismanaged the public wealth from the left, right and the centre.<\/p>\n

The governments borrowed heavily, especially in the past 10 years, the injection of such monies to the economy created somewhat an artificial growth in the GDP (of 6%).\u00a0 Today, Sri Lanka is a hugely debt ridden country, its foreign debt alone has exceeded US$25 billion (?), which is far too much for a country of the size of Sri Lanka.\u00a0 The country owes money to other sources too, including local banks and various employee trust funds.<\/p>\n

Unlike in the 1960s and 70s, where governments helped to build a strong manufacturing\/productivity base economy, in the last 35+ years, large numbers of small factories, textile mills and small businesses were compelled to be closed down.\u00a0 Local businesses were unable to compete with the influx of cheap Chinese, Taiwanese and Indian exports to the country.\u00a0 Like few third world countries have done in the past 20 years, Sri Lanka failed to become a newly developed country (apart from corruption, mismanagement and maladministration, the effects of the war was a major impediment for the country\u2019s development).<\/p>\n

Today in Sri Lanka, almost everything is imported, including the country\u2019s main staple diet, rice.\u00a0 Basically Sri Lanka today has very few items available to export to India (or to any other any country); except things like fish harvested from the sea, some agricultural\/horticultural products and a few value added items imported from other countries for the sole purpose of re-export.\u00a0 The irony is that this is a country that once produced fine electrical and electronic items, textiles, furniture, handicraft, confectionaries, tyres, bicycles, batteries, razor blades, perfumes and even motor cars.<\/p>\n

During 2011\/12, India\u2019s exports to Sri Lanka amounted to $4.3 billion, Sri Lanka\u2019s exports to India during the same period amounted to only $721 million.\u00a0\u00a0 The total bilateral trade is earmarked to reach $10 billion in the near future; the trade balance will continue to be very much in favour of India.<\/p>\n

Since of late, India has been pressurising Sri Lanka to sign CEPA – \u2018Comprehensive Economic Partnership Agreement\u2019.\u00a0 No doubt that such an agreement would provide Sri Lanka preferential access to the very large Indian market, but due to CEPA, the country could be flooded with cheap Indian exports.\u00a0 They can destroy the country\u2019s remaining, very small scale production\/manufacturing based economy.\u00a0 The writer does not say that Sri Lanka should flatly say \u2018no\u2019 to CEPA, he states Sri Lanka should use CEPA as a bargaining tool to obtain more favourable trade advantages from India.\u00a0 For example, Sri Lanka should ask India to rectify the anomalies (several) in the Free Trade Agreement (FTA) that both countries signed in 1998.\u00a0 Sri Lanka should demand that it should be given export access to the entire Indian market, with zero tariffs (1.2 billion people!). \u00a0If the latter could be achieved (a difficult task, but a possibility), Sri Lanka should be able to sign CEPA.<\/p>\n

Furthermore, prior to signing CEPA, Sri Lanka should implement adequate measures to protect its local industries from the possible massive scale intrusion of Indian products into the country.\u00a0 An intelligent and a tactful Sri Lankan leadership should be able to successfully achieve this.<\/p>\n

This is the time for Sri Lanka to negotiate with India on trade and obtain the best economic outcome for itself. Sri Lanka should seriously ask India to stop poaching on her waters which causes US$1 billion loss to Sri Lanka per year (this could be a pre-condition to signing CEPA).<\/p>\n

If Sri Lanka foolishly enters into trade agreements, international contracts etc with overseas countries (including that of India), without obtaining competent legal counsel (some of the past foolish examples are the Hedging deal, Air Lanka agreement, Cairns oil contract, Shell gas deal, IOC deal etc), it is the innocent public who will pay the ultimate price for the huge misdeeds of the politicians.\u00a0 The few examples cited herein brought forth billions of dollars of losses to Sri Lanka.<\/p>\n

Now that Sri Lanka has a new government and India\u2019s Mr Modi has extended the true hand of friendship to Sri Lanka, if wise and intelligent, this is the opportunity for Sri Lanka to grab and try to become the \u2018Hong Kong of India\u2019 (note the remarkable turnaround in the relationship between the two nations \u2013 in 2013 India even boycotted CHOGM; the year prior to that it co-sponsored a resolution against Sri Lanka at the UNHRC in Geneva).<\/p>\n

If Sri Lanka (still, very much a third world country), wants to become rich capitalising on India\u2019s massive economic growth (the Indian middle class alone is more than 250 million, by 2025, this number is likely to increase to 550 million); it should evaluate (before signing CEPA) what goods it could and should produce for the Indian market.\u00a0 For example, if properly planned, Sri Lanka can be a large scale food and agro business supplier for India (notably, things like tea, spices, fresh fruits, vegetables and flowers (true, India is the world\u2019s largest tea producer, but, there is a scarcity of tea in India, and there is the tremendous potential to introduce \u2018Ceylon Tea\u2019 (the world\u2019s finest) in India, in a very big scale).<\/p>\n

If Sri Lanka is to sign CEPA, Sri Lanka should ask as a precondition that India should assist Sri Lanka to become the logistic hub to various production chains in India.\u00a0 Few industry examples that come to the writer\u2019s mind are automobile and IT components, manufacturing of pharmaceutical products, electrical machinery and parts and food processing products.<\/p>\n

In this regard, the new Sri Lankan government must work hard in creating these opportunities for Sri Lankan companies.\u00a0 Creating new economic zones solely for the purpose of manufacturing products for India is a good idea.\u00a0 Since land is in scarcity in most parts of Sri Lanka and they being closely located to India, such economic zones can be established (with Indian aid) in the North, South and East of Sri Lanka (for example, in Kilinochchi, Hambanthota port area and Trincomalee respectively), but, all Sri Lankans should be able to work in those ventures.<\/p>\n

India has agreed to spend money on Sri Lanka\u2019s Railway projects, massive scale housing developments in the North and the Sampur Power plant project.\u00a0 It has offered millions of dollars as lines of credit to Sri Lanka, also a massive currency swap agreement that is currently in place. Sri Lanka should accept these gifts with gratitude.\u00a0 This is in addition to the US$5 billion (or more) that India\u2019s private sector is earmarked to invest in Sri Lanka in the coming years. India is Sri Lanka\u2019s largest source of foreign tourists.<\/p>\n

But, it is still too early for Sri Lanka to say \u2018yes\u2019 to the rail and road link that India wants to build at its own cost (an ADB loan project) over the Palk Strait from Dhanushkodi to Talaimannar.\u00a0 Naturally, due to Thamilnadu hostility, the people in Sri Lanka has a strong reservation about this proposed mega-project; despite the fact that it could bring huge and unprecedented level of economic benefits to Sri Lanka, including a tenfold increase in tourist numbers, especially thousands of new European and US tourists that will travel from India to Sri Lanka by rail or road.\u00a0 It is up to the new Sri Lankan government to convince its people as to why this new rail\/road bridge is necessary and that it is not harmful to Sri Lanka\u2019s sovereignty and territorial integrity.\u00a0 For this, the new government will have a lot of explaining to do to its people.<\/p>\n

srilankasupportgroup@bigpond.com<\/em><\/p>\n","protected":false},"excerpt":{"rendered":"

Chanaka Bandarage No one would disagree that Hong Kong rode to its prosperity on the back of China (after the Chinese Revolution, Hong Kong underwent a rapid and successful process of industrialization, from the late 1940s, and became a rich nation). After the liberalisation of China\u2019s trade (Chairman Deng\u2019s Open Door Policy\u2019 in the late […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[88,86],"tags":[],"class_list":["post-47617","post","type-post","status-publish","format-standard","hentry","category-chanaka-bandarage","category-sri-lanka-support-group"],"_links":{"self":[{"href":"https:\/\/www.lankaweb.com\/news\/items\/wp-json\/wp\/v2\/posts\/47617","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.lankaweb.com\/news\/items\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.lankaweb.com\/news\/items\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.lankaweb.com\/news\/items\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.lankaweb.com\/news\/items\/wp-json\/wp\/v2\/comments?post=47617"}],"version-history":[{"count":0,"href":"https:\/\/www.lankaweb.com\/news\/items\/wp-json\/wp\/v2\/posts\/47617\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.lankaweb.com\/news\/items\/wp-json\/wp\/v2\/media?parent=47617"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.lankaweb.com\/news\/items\/wp-json\/wp\/v2\/categories?post=47617"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.lankaweb.com\/news\/items\/wp-json\/wp\/v2\/tags?post=47617"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}