Sri Lanka could help Chinese manufacturers offset trade war impact


Sri Lanka is wooing Chinese manufacturers, urging them to make use of its preferential duty-free treatment by the US and Europe as a way to offset the growing tariff pressure of the trade war.

The country’s development strategies minister, Malik Samarawickrama, was in Beijing on Wednesday as part of an investment forum at the Sri Lankan embassy attended by dozens of Chinese businesspeople.

“China has invested heavily in infrastructure and they are assisting us to invest in ports, roads, railways, water supplies and so on. Now we would like China to get involved in setting up their manufacturing plants in Sri Lanka, primarily for the purpose of exports,” he said.

“They can make use of the preferential market access we have – we have duty-free access to European Union countries and we have free-trade agreements with Pakistan, Singapore and India. And, since the cost of manufacturing in China is going up, we would like the Chinese to look at Sri Lanka for their manufacturing and we want it to be exported back to China.”

Along with trade officials and diplomats, Samarawickrama, one of Sri Lanka’s most senior government ministers, was also keen to boost investor confidence following the deadly Easter Sunday bombings in Colombo which killed 253 people.

“Let me assure you, absolutely, Sri Lanka is safe for investment,” he told the dozens of representatives from Chinese state-owned and private companies who attended the forum.

“We must bring to your notice that none of the industries have been affected as a result of the bombings and none of the export orders were cancelled or delayed. This is a testament to the resilience of the economy.”

China is one of Sri Lanka’s largest trading partners and – sometimes controversially – the largest financier of its booming new infrastructure. Other big lenders to the island nation are the Asian Development Bank and Japan.

Earlier this year the Sri Lankan government signed a US$989.5 million loan agreement with China’s Export-Import Bank for a major new motorway project. And last month Sri Lanka’s finance ministry confirmed it was in talks with the China-led Asian Infrastructure Investment Bank for a loan of nearly US$1 billion for energy and motorways.

The surge of Chinese investment has raised concerns that Sri Lanka could become caught up in the rivalry between China and India as Beijing seeks to expand its influence in South Asia and the Indian Ocean.

Last month, Sri Lanka signed an agreement with India and Japan to jointly develop the East Container Terminal at the Port of Colombo, which some observers said could become a competitor to the China-funded Hambantota Port, and was perhaps a sign that the island nation was seeking to neutralise the growing influence of China.

Samarawickrama denied claims the involvement of Japan and India in Sri Lanka’s biggest port project was to counter China’s influence.

Under the agreement, he said, the terminal was owned by Sri Lanka Port Authority, with a 51 per cent stake, while Japan and India would develop the remaining 49 per cent.

“We need the expertise from Japan,” Samarawickrama said. “We need the Indians to get involved in the operation because 75 per cent of the transshipment cargoes in the Colombo port come from India and India is extremely important to us.

“They are the operators of the terminal and they are not building any ports.”