Changes needed to strengthen trade with Japan - Minister Amunugama

Vishmi Wijeratne

The Senior Minister of International Monetary Co- operation and Deputy Minister of Finance, Dr. Sarath Amunugama said that in order to strengthen trade relations with Japan, certain changes would be necessary. Among them were the necessity of a Japanese airline, A Japanese hotel, a Japan based bank and a Japan based stock broking company. While these suggestions had been applauded by the Japanese delegates at 'The 17th Joint Meeting of The Sri Lanka - Japan and Japan Sri Lanka- Business Co-operation committees,' the Chairman of The Japan and Japan Sri Lanka- Business Co-operation Committee and Senior Corporate Adviser of the Itochu Corporation, Kouhei Watanabe told the 'Daily News Business' after the seminar that these suggestions had been proposed to the Chinese government and in due time would be implemented.

"We do not have a direct flights from Sri Lanka to Japan, which often hinders business opportunities between the two countries and we have been in doubt about when these suggestions were made before the end of the war, however now that the thirty year armed conflict had come to its end, it may be the time to proceed with the implementation of these suggestions.. However, it must beagreed on and by the Japanese thus exact tidings of the implementations cannot be stated," Watanabe said.

Sri Lanka being one of the fastest growing nations in Asia, according to sector specialists on various fields, had all the necessary assets to be Japan's next Investment destination.

While Japan is Sri Lanka's tenth largest export destination, it is also Sri Lanka's 5th largest source of imports, according to statistics of the Central Bank of Sri Lanka.

Advisory Member/ Assistant to Chief Executive Officer of Itochu Corporation (a leading trading company in Japan), Masahiro Nakagawa pointed out a few ideas as to why Sri Lanka maybe considered as Japan's next investing destination.

"Japan is currently facing a few problems related to trade, the economic growth over the past decade has been -0.6% on an annual average, based on nominal GDP.

We also have an aging population which is also declining.

We have several more problems due to the strong yen, high corporate income tax rate, failure to sign free trade agreements, prohibition against temporary staff in manufacturing sectors, stiffer environmental regulations and electric power shortages, which had made us realize the necessity to find more inventer destinations as products could be manufactured with added quality at a cheaper price," he said.

Japan has been facing a severe job crisis during the last decade, cutting over 3 million jobs. Currently, 2.75 million of the Japanese population remains completely unemployed.

The situation in Japan provides no vacancies for jobs, thus according to Nakagawa having Japanese companies in Sri Lanka, would provide job opportunities for both countries.

"We have several advantages in placing companies in Sri Lanka, where the country maintains a high growth rate under a stable government, consisting of a highly literate population.

Sri Lanka has joined with India and many other countries under Free Trade Agreements and is rich in tourism resources. Added to that, Sri Lanka's extraordinary reactivation of the economy since the ending of the war along with the strong GDP rates, makes Sri Lanka a much desired spot for investment," he said.

A few requests on making Sri Lanka more desired had been made by Nakagawa.

The strengthening of the Board of Investments (BOI) one stop functions and authority, economic policies that promotes the development of manufacturing and incentives for companies already in the country.

While taking the above requests into consideration, various officials from many sectors had proposed reasons for Japan to see Sri Lanka as an investor destination.

Saman Kelegama of the Institute of policy studies in Sri Lanka, stated in his presentation that the ties between Japan and Sri Lanka for the past 60 years, had created bilateral trade ties that value up to US $ 1.2 billion as recorded in 2011.

"Sri Lanka currently has around 37 Japan based companies in Sri Lanka, with a few more attracted on several exciting investments. However, to achieve further, the country needs to be vigilant about the needs of Japan," he said.

Meanwhile, representing the BOI, Executive Director of Promotions of the BOI, Shivan de Silva said, Sri Lanka's business environment was feasible in many aspects such as Total Foreign Ownership, Non Restrictions on Repatriation of Earnings, Safety of Foreign Investments, which had been guaranteed by the Constitution, Strong, Intellectual Property Law in line with WIPO regulations , National Treatment is guaranteed in the Investment Protection Agreement and Double Taxation Relief Agreement with 27 to 38 countries, including Japan.

"The free trade agreements in Sri Lanka, Free Trade Agreements (FTA) with India & Pakistan, provides several advantages in tapping on India as the Indo-Lanka FTA provides 100% Duty free access to India for 4,232 products while also providing 100% Duty free access to Pakistan for 4,686 products through Pakistan-Sri Lanka FTA," he said.

De Silva also pointed out a few more areas that Japan could help develop, Higher Education & Skills Development, Water Supply and Drainage projects (*PPP Basis), *Housing for the Underserved ($ 700 Million.), Port and Logistics related activities and Oil and Gas Exploration.

Speaking of the IT and BPO sector of the country, Chairman of Emirates - Sri Lanka Association of Software and Service Companies, Dinesh Saparamadu said that though the IT and BPO sector contributes only US$ 0.4 billion of the total of US $ 10 billion exports, it is a recognized field for most outsourcing companies such as HSBC, IFS, Motorola and more.

"We plan to being an industry that would generate 80,000 jobs by the year 2016, while being able to provide US $ 1 billion export revenue.

Japan may look at this as a place of possible investment," he said.

Saparamadu also said that Sri Lanka offers remarkably low costs, considering the value offered, according to international salary surveys, compensation costs for sample IT positions are 10% lower than India and 20% lower for BPO functions and in addition to low costs, companies consistently report low attrition, the rates are just under 20% in Sri Lanka, whereas rates in India and the the Philippines typically range from 20-25% in IT to 30-35% in BPO.