Lanka should expand India, China trade link

Gayan Kanchana

Sri Lanka should expand the trade link with emerging markets such as China and India, when consumption in industrialized nations is weak and countries like China and India are trying to boost consumption, International Monetary Fund’s resident representative Koshy Mathai said.

“Now China and India have given more economic freedom to their citizens,” he said addressing the 117 Annual General Meeting (AGM) of Colombo Tea Traders’ Association (CTTA) in Colombo recently.

Mathai said the trade link with East Asian countries have grown fast due to their integration with global supply chains where parts made in one country are put into final products in another and 20 percent of the country’s exports go to the United States, 39 percent to the European Union and basically 60 percent are going to two regions which are growing at an absolutely pathetic rate.

Sri Lanka’s export to India and China amounts only to 5 percent and 1 percent respectively. He emphasized the need to change this situation.

“Emerging economies are growing at 6.5 percent and countries like China and India are growing even faster China at 10 percent and India at 8 percent. Emerging market countries are providing the main source of growth to the world as a whole,” he said.

Mathai said the Global growth is forecast at 4.5 percent this year and 2012 which is robust. But advanced states were growing at only 2.5 percent and the actual outturn could be lower rather than higher.

“Both the US and some European countries are suffering from the effects of heavy deficit spending. Critics point out that some states that increased deficit spending to manipulate growth in a recession are now in worse trouble than they were. Their financial sectors were still weak and unable to extend credit,” he said.

“We’ve got many economies that were trying to consolidate their fiscal positions. They are trying to tighten government deficits and reduce the burden of debt that built up so strongly in many of these countries,” he said.

Newly elected CTTA Chairman Jayantha Keragala said their duty is to protect the Ceylon tea market and industry which came from predecessors and to hand it over to their successors even better.