Why economies depend on ports

2017-10-11 00:29:13

RIS Director General Professor Sachin Chathurvedi says trade and investment should be linked 

Delhi: A visiting delegation of senior Sri Lankan journalists on an extensive familiarisation tour recently took part in a stimulating discussion focusing on the rationale behind India’s development cooperation with South Asian countries, with officials of the Research and Information System for Developing Countries (RIS).  

The New Delhi–based autonomous policy research institute specialises in issues related to international economic development, trade, investment and technology.   

Conceived in 1979 as a think tank for Non-Aligned Movement (NAM) countries, today RIS is envisioned as a forum for fostering effective policy dialogue and capacity-building among developing countries on global and regional economic issues.  

  • Our economies are crucially dependent on development of ports
  • Afghanistan should be connected with Ho Chi Min city in Vietnam. Afghanistan connects with Central Asia.
  • Statistics clearly indicate the fact that both countries have benefited from the Indo-SL FTA

The discussion with the group of seventeen journalists from print and broadcast media focused on India’s approach to South-South cooperation, which is distinct from traditional North-South cooperation, where emphasis is placed on mutual gain and commitment by the countries involved, freedom from imposed conditions, and policy coherence.  

RIS is engaged across inter-governmental processes of several regional economic cooperation initiatives. RIS Director General Professor Sachin Chathurvedi said through its intensive network of think tanks, RIS sought to strengthen policy coherence on international economic issues and the development partnership canvas.  

“Economists from India, Sri Lanka and Bangladesh came together in defining what the economic contour of South Asia’s rationale approach would be for creation of this entity,” Prof. Chathurvedi said, elaborating on the history of RIS, especially noting the contributions of the late Dr. Saman Kelegama in this regard.  

According to Prof. Chathurvedi RIS is studying present challenges in the region along with the optimal focal areas of cooperation.   

These include analysing how oceans were being utilised as development cooperation was transcending borders.   

“Many of our economies are crucially dependent on development of ports and development of the ideas around them,” Prof. Chathurvedi noted.  

“When RIS was established we realised trade and investment cannot be studied separately because it was also the time that the world economy saw a surge in Foreign Direct Investments (FDIs). We found that trade and investment would have to be linked together in the process. By early eighties we found that technology plays a far greater and more important role in driving the way trade and investment should go.”   

“Trade, investment and technology alone are not sufficient to explain comparative advantage of countries and their international engagement. It is also very important for us to engage in finance as financial market drives trade, investment, technology to a great extent,” he explained.  

RIS officials divulged that during a World Trade Organisation meeting in Nairobi last year, the biggest challenge that the Director General of WTO identified was in the area of financing: countries are not able to finance imports.   

Prof. Chathurvedi believes that these are particularly countries which were crucially dependent on commodities. Surprisingly 38 countries in the world are crucially dependent on one commodity while another 52 countries are crucially dependent on 3 to 4 commodities for their exports.  

“If this huge spectrum of countries is dependent on commodity exports and commodity prices are crumbling down, you can imagine how difficult it is for such countries to see that their imports are taken care of and financed. Globally instead of trade financing going up, trade financing has come down by more than 38% in just 10 years rendering countries vulnerable to imports,” he said.  

He elaborated on the conditionalities imposed when imports are negotiated among countries.   

“Suppliers of the products are themselves determining what sort of conditionality and what sort of price you will have to pay for imports that countries end up with.”   
“There are several countries which are ready to supply goods and are also ready to finance those imports. We are researching into such import-linked vulnerabilities which have multiplied over the years.”  

According to experts at RIS, the vulnerabilities don’t stop at imports alone, it is linked to technology.   

“There are entities which must decide on what kind of technology countries should import, along with the goods. The kind of financial autonomy or market you enter in, when you import is also a point of concern,” the experts clarified.  

The pillars of study at RIS are also dedicated to bilateral free trade agreements, connectivity and trade facilitation.   

During a World Trade Organization meeting in Nairobi last year, the biggest challenge that the Director General of WTO identified was in the area of financing: countries are not able to finance imports.  

“Our idea is that Afghanistan should be connected with Ho Chi Min city in Vietnam. Afghanistan connects with Central Asia. Connecting these regions will be in terms of motor vehicle agreements, customs coherence, fast clearance of goods and services, compatibility of trade linkages between countries, easy tracking facilities,” he said.  

Speaking of future engagements, Professor Chathurvedi underscored the need for promoting and adopting regulations among countries.   

“We are in an era, where technology is appearing as a real opportunity and also as a real threat to our existing products. There are countries which do not believe in regulation of technology. If you do not regulate technology it may end with a number of challenges.”   

“The RIS initiated the policy stating that South Asian countries must adopt a regulatory approach amongst themselves. Sri Lanka was the first country which in 2007 issued a circular to ban the import of genetically modified products. “However Sri Lanka was pressurised and in 2007 itself Sri Lanka had to withdraw the order. Yet it is absolutely important to have regulatory structures in place and have a wider consensus on technology regulation in a country. It is not being opposed to technology but more about being in favour of responsible research and innovation. This is one area where South Asian Countries can easily cooperate,” he stressed.  

Noting of development where Sri Lanka is concerned Prof. Chathurvedi briefed on their recent collaborations with the island nation.   

“We had taken our views to Sri Lanka and we had a very stimulating conference in Colombo and then with your agriculture experts in Kandy. The former president had given a sizable grant to establish a nano-technology centre close to Colombo. We are aware that Sri Lanka too is trying to cope up with new technological changes and challenges that are coming in. For smaller countries it’s a considerable challenge,” he added.  

Under the Indian Government’s Technical Economic Cooperation Programme, Prof. Chathurvedi said India now was laying much emphasis on port development.   

“There are 12 ports being developed under the Sagar Mala Project, which is a strategic and customer-oriented initiative of the Government of India to modernise India’s Ports. Its aim is to augment port-led development and coastlines.”  

“It would be giving a major initiative on how port development would affect our partnership with Sri Lanka as most of our imports first land in Sri Lanka before reaching India. Ports are also coming up in Sri Lanka and therefore what would happen to our relationship with Singapore is also a question in the line,” he said.  

Prof. Chathurvedi also believes that Sri Lanka can play an extremely important role in terms of the Asia-Africa Growth Corridor. Negating several reports he said, “Media was quick to jump to conclusions that this was India’s response to One Belt, One Road, and then India, China comparisons were drawn. But during our discussions we identified that Sri Lanka can play an extremely important role in the Asia-Africa Growth Corridor. As of now India is committed to spending around USD 10 billion within the next five years with Africa under the lines of credit programmes by the Indian government. Japan has committed USD 30 billion  for the next three years.”  

Capacity building, education and skill development continue to be extremely important in development cooperation. Sri Lanka’s specialisation in apparel export was complimented in the discussion whilst the need to identify additional skills required by Sri Lanka for enhancing product quality, was also noted.   

“Sri Lanka is involved in research and development and also involved in branding, the two ends which are completely missing from the Value chain of developing countries,” he said.  

Responding to a question from journalists on the proposed Economic and Technology Cooperation Agreement (ETCA), Prof. Chathurvedi said according to statistics from the Department of Commerce of Sri Lanka and the IMF, before any trade agreements took place, India’s exports were 13 times higher than Sri Lanka’s exports to India.   

“This has gone down drastically and now it has come down five times the value, in 2016. In 2013 total trade was USD seven billion which started with USD 653 million in 2000. In recent times however it had come down. Over the last three years the imports and exports of Sri Lanka have constantly declined.   

“All statistics clearly indicated the fact that both countries have benefited from the Indo-SL Free Trade Agreement,” Prof. Chathurvedi said.  

“It is important for us to see that the countries which are getting into trade of goods and services also leverage development potential through grants, development cooperation and through lines of credit. So, all encompassing, we should see a development compact, and that is across the modalities of engagement.   

“Therefore ETCA signifies a great advancement over FTA. It is a role model for countries to engage in, especially when small and larger economies are exchanging among themselves or are getting engaged,” he added  

On a final note, Prof. Chathurvedi said an important aspect of development cooperation is to ensure that countries are not indebted.   

“They should not be borrowing and then losing out control of their own assets. Cooperation should evolve in such a way that they are ensuring their sustenance while also ensuring the ability to have technology, to meet their development goals through concerted efforts” Prof. Chathurvedi said.     

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