The country will not get any trade benefits from the China-Sri Lanka Free Trade Agreement (FTA) if the local industries continue their current modus operandi, was the consensus reached at a recently held forum titled “Doing Business with China: FTA and Beyond Forum,” organized by the Sri Lanka ExportersAssociation and Verité Research.
“In India, a huge market with potential was opened up with the FTA, but many were left disappointed. So the issue is not of market opportunity. China will be a very good opportunity for Sri Lanka, but are we ready to exploit that market?” Ceylon Chamber of Commerce CEO MangalaYapa questioned, opening the forum.
He opined that Sri Lankan businesses will have to do a lot of restructuring and changes, as it is very difficult to create a product or service which is suitable for a newly accessed market and sustain that product.“In Sri Lanka, the people or vendors pick the fruit and its consumed maximum within a few days. People know what tree or what region the fruit comes from. When we export, it is to a customer who doesn’t know this, and whose needs we don’t know. This is where marketing, packaging, certifications and safety and sanitary standards come in,” Yapa reasoned. He said Sri Lanka needs to understand the Chinese traditions, culture, markets, the unique value propositions to the consumers, while increasing competitiveness and productivity.
Hayleys Group Senior Economist Deshal de Mel said that research into these matters should be a public good as it is in the UK, as most small and medium enterprises in Sri Lanka cannot afford their own research. Australia conducted 12 months of market research into China prior to starting their exports, while their 8-year negotiations for an FTA concluded two weeks ago.
De Mel meanwhile noted that Sri Lanka should capitalize on niche markets in China. “The highly affluent Chinese are looking for highly individualized products, and authentic natural products. For this we will need proof and certificates of origins,” De Mel said reiterating Yapa’s point. Ex-Chairman of Tea Exporters’ Association Niraj De Mel and Past President of Sri Lanka Apparel Exporters Association Yohan Lawrence also agreed on the points made by Yapa and Deshal De Mel. Niraj De Mel said that while China is the world’s largest producer and exporter of green tea, young Chinese with disposable are looking for quality black tea.“We shouldn’t make the mistakes we did with Russia and Ukraine. In China we need high value tea,” he said.
Yohan Lawrence said that the FTA will be crucial for the apparel industry to reach its target of US$ 8.5 billion by 2020, and while the European luxury brands that are manufactured in Sri Lanka will be ready for the Chinese market, a need exists for Sri Lankan luxury brands as well. Meanwhile Verité Research Economic Research Head Subhashini Abeysinghe said that in addition to market research, the Sri Lankan private sector should also engage in networking with its Chinese counterparts, and that it is the duty of the Department of Commerce to facilitate both these activities, and yet the government does not provide it with a sizable budget for these crucial activities.
According to her, China is responding to the slowing global economy by further stimulating domestic demand in addition to its long held policy of catering to outside demand.Chinese domestic spending as a share of GDP is currently at 36 percent, which could increase to 50 percent by 2020, thereby creating opportunities for Sri Lanka.