SRI LANK SRI LANKA Trade and Investment Trade and Investment - - PDF document

9/23/2016 1

SRI LANK SRI LANKA

Trade and Investment Trade and Investment Opportunities Opportunities

SRI LANKA

Air Routes Sea Routes

• Island Nation of 65000 Sq. Kilometers
• Population of 21 Million
• Labour Force - 8.928 million (2015 est.)
• Ethnic groups:

Sinhalese 74.9%, Sri Lankan Tamil 11.2%, Sri Lankan Moors 9.2%, IndianTamil 4.2%, other 0.5%

• Religions:

Buddhist (official) 70.2%, Hindu 12.6%, Muslim 9.7%, Roman Catholic 6.1%, other Christian 1.3%, other 0.05%

• Literacy rate 93.3% (2014)
• Strategically

connected to major shipping and air routes to the East and West

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MACROECONOMIC MACROECONOMIC PERFORMANCE PERFORMANCE

Source: Central Bank of Sri Lanka, 2015

Sri Lanka - Key Economic Indicators

2005 2010 2015 GDP at Current Market Price (USD. Bn) 23.5 56.7 82.3 GDP Growth % 6.2 8.0 4.8 GDP per Capita (USD) 1,241 2,744 3,924 Inflation % 11 6.2 0.9 Total Exports (USD Bn.) 6.3 8.6 10.5 Total Imports (USD Bn.) 8.9 13.5 18.9 Unemployment rate (%) 7.2 4.9 4.6

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ECONOMIC ECONOMIC INFRASTRUCTUR INFRASTRUCTUR E

Source: Central Bank of Sri Lanka, Sri Lanka Ports Authority and Airport and Aviation S i (P t) Ltd

Recently completed key projects 22% increase in energy generation, 2010 - 2015 3 expressways (170 km) in the last 5 years

INFRASTRUCTURE - FORGING AHE

A new internati

• nal port

construct ed in the South, 10 km from the main maritime route connectin g East & 3rd terminal

• f Colombo

Port added 2.4 million TEU in 2013 2nd international airport at Mattala in 2013 added

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Source: Global Competitiveness Report 2015-2016, World

2

Best in Best in South Asia for Overal South Asia for Overall Quality l Quality of

• f

National Infrastructure National Infrastructure Overall Quality of National Infrastructure 2015 (rank out of 140 countries)

16

MALAYSIA

26

SRI LANKA

71

THAILAND

74

INDIA 99 VIETNAM 102 CAMBODIA

106

PHILIPP ILIPP INE INES

124BANGLADESH

75 71.8

103 103

MOBIL ILE E PENETRATI ATION ON (Subscriptio ns per 100 persons) 17 10

30 30

78 77.3

88.7 88.7

INT INTERNET PENETRATI ATION ON (Users per 100 persons) ACC ACCESS TO TO ELECTRICI ICITY TY (Subscriptio ns per 100 persons) 10.1 10.2

18.7 18.7

ACC ACCESS TO TO FINAN ANCE CE (Number of branches per 100,000 adults)

ECONOMIC INFRASTRUCTURE

Source: Road Development Authority, Economic and Social Statistics 2015, Central Bank of Sri Lanka, World Bank Database 2014/12, Household Income and Expenditure Survey 2012/13, Department of Census and Statistics of Sri Lanka 2012 UNDP H man De elopment Report 2012

India, Pakistan, Bangladesh Sri Lanka South Asia

9/23/2016 5 EASE OF DOING BUSINESS RANKINGS

Source : Doing Business 2015 - World bank / IFC

Sri Lanka India Bangladesh Vietnam China Indonesia Ease of doing business (overall)

107 130 174 90 84 109

Starting a business

98 155 117 119 136 173

Trading across borders

90 133 172 99 96 105

Resolving Insolvency

78 136 155 123 55 77

B o a r d o f I n v e s t m e n t o f S r i L a n k a

Sri Lanka India Thailand Vietnam China Indonesi a Myanmar Labour (US$ Monthly) Shop floor 工场 141 260 286 130 538 209 68 Managers 885 1,431 1,597 1,020 2,001 1,448 562 Power for Business (US$ per Kwh） 0.15-0.20 (24x7 power) (1) 0.08 – 0.09 (2) 0.08 – 0.12 0.14 0.036 – 0.163 0.13 0.08 0.12 Water Business (US$ per cum) 0.46 (1) 0.65 (2) 1.12 0.30 – 0.51 (1) 0.39 (2) 0.73 0.98 1.37 0.88 Office rent (US$ per sqm) 15 - 18 13 20 34 – 36 119 20 1.86 – 45 Housing (US$ per month) 1,600 2,791 – 4,652 (1) 1,580 (2) 2,687 2,600 – 2,700 2,428 – 6,829 1,700 – 2,500 2,500 Telephone - Local (US$ per min.) 0.01 – 0.02 0.01 0.1 0.01 0.03 0.01 0.02 Internet (Broad band) (US$ per month) 77.85 61.4 60 83.68 47 83.46 1,500

Factor Costs - Competitive with Asian Neighbours

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SOCIAL SOCIAL INFRASTRUCTUR INFRASTRUCTUR E

Source: Human Development Report 2015, United Nations Development Programme

HIGH HUMAN DEVELOPMENT

Human Development Index Ranking 2015 (out of 188 countries)

6 2

MALAYSIA MALAYSIA

73

SRI LANKA SRI LANKA

9 3

THAILAND THAILAND

1 1 5

PHILIPPINES PHILIPPINES

1 1 6

VIETN VIETNAM

1 3

INDIA INDIA

1 4 2

BANGLADESH BANGLADESH

1 4 3

CAMBODIA CAMBODIA

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SOCIAL INFRASTRUCTURE: EDUCATI

Source: Human Development Report 2015, United Nations Development Programme, UNESCO Institute for Statistics 2015 estimates UNDP 2013

LITERACY RATE

(15+, % of population, 2015)

THAILAND 96.7 PHILIPPINES 96.3 MALAYSIA 94.6 VIETNAM 94.5 SRI LANKA 92.6 CAMBODIA 77.2 INDIA 72.1 BANGLADESH 61.6 MEAN YEARS OF SCHOOLING (of adults,

years) (2013)

SRI LANKA 10.8 MALAYSIA 9.5 PHILIPPINES 8.9 THAILAND 7.3 CAMBODIA 5.8 VIETNAM 5.5 BANGLADESH 5.1 INDIA 4.4

SOCIAL INFRASTRUCTURE: HEALTH

Source: World Development Indicators, World Bank, Trends in Maternal Mortality 1990 – 2015, UNICEF

LIFE EXP LIFE EXPECTANCY AT ECTANCY AT BIRT BIRTH

(Years, 2015)

VIETNAM 75. 8 SRI LANKA 74. 2 THAILAND 74. 2 BANGLADESH 71. 2 MALAYSIA 68. 1 PHILIPPINES 68. 1 CAMBODIA 67. 8 MATERNAL ERNAL MORTALITY TALITY

(Deaths per 100,000 live births, 2015)

THAILAND 20 SRI LANKA 30 MALAYSIA 40 VIETNAM 54 PHILIPPINES 114 CAMBODIA 161 INDIA 174 BANGLADESH 176 IMPROVED ROVED SANITATION ITATION

(% of population with access, 2015)

MALAYSIA 96% SRI LANKA 95% THAILAND 93% VIETNAM 78% PHILIPPINES 74% BANGLADESH 61% CAMBODIA 42% INDIA 40%

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LABOUR AND EMPLOYMENT

54% 54%

Labour Force Participation rate 35% Female 65% Male

4.6% 4.6%

Unemployment Rate

Share of Employed

45% Services 28% Agriculture 27% Industry

Source: Annual Labour Force Survey 2014, Department of Census and Statistics of Sri Lanka, World Development I di t W ld B k

LABOUR FORCE AT ITS LARGEST

Source: Census of Population and Housing (various years), Department of Census and Statistics of Sri Lanka

900,000700,000500,000300,000100,000100,000300,000500,000700,000900,000 00-05 05-09 10-14 15 - 19 20 - 24 25 - 29 30 - 34 35 - 39 40 - 44 45 - 49 50 - 54 55 - 59 60 - 64 65 - 69 70 - 74 75 - 79 80 & Over Population Age

1971

Female Male 900,000700,000500,000300,000100,000100,000300,000500,000700,000900,000 00-05 05-09 10-14 15 - 19 20 - 24 25 - 29 30 - 34 35 - 39 40 - 44 45 - 49 50 - 54 55 - 59 60 - 64 65 - 69 70 - 74 75 - 79 80 & Over Population Age

1981

Female Male 900,000700,000500,000300,000100,000100,000300,000500,000700,000900,000 00-05 05-09 10-14 15 - 19 20 - 24 25 - 29 30 - 34 35 - 39 40 - 44 45 - 49 50 - 54 55 - 59 60 - 64 65 - 69 70 - 74 75 - 79 80 & Over Population Age

2001

Female Male 900,000700,000500,000300,000100,000100,000300,000500,000700,000900,000 00-05 05-09 10-14 15 - 19 20 - 24 25 - 29 30 - 34 35 - 39 40 - 44 45 - 49 50 - 54 55 - 59 60 - 64 65 - 69 70 - 74 75 - 79 80 & Over Population Age

2012

Female Male

9/23/2016 9 WORK FORCE - Educated , trainable & efficient

• 49.8. % of the population - Men 67.8%, Women

33.4%

• Reputed for its precision, quality and productivity
• Skilled and semi skilled workers at competitive

wage rates

• Renowned for high calibre professional skills
• World class reputation in the production
• f high end garments and lingerie markets
• Second largest pool in the world of UK qualified

Accountants (25,000) and Accountancy students (86,000) .

Investment Investment Facilitation Facilitation

9/23/2016 10 Services Provided:

• Ease of Company Registration
• Resident Visa processing for BOI Investors
• Department of Inland Revenue functions
• Custom functions
• Environment concurrence for expediting environmental clearances
• Attending to Utility issues
• Assistance in finding suitable land for BOI projects
• Attending to queries of new investors and existing BOI enterprises

BOI (ONE STOP SHOP)

EASE OF DOING BUSINESS FACILITATION CENTRE

• Duty Free Imports;

– Capital Goods – Raw Materials (For Export Oriented Activities)

• Exemption from Exchange Control restrictions.
• Government to introduce the new tax concessions

Incentives For Investment

9/23/2016 11 Land (Restrictions on alienation) ACT, No. 38 of 2014

• Transfer of Land is prohibited for

1) A foreign national 2) A foreign company 3) A company incorporated in Sri Lanka with more than 50%

• f shareholding of foreign national
• r a foreign company

However foreigners can obtain land subject to a maximum of 30- 99 years lease agreement

• The above prohibition will not apply to;

a) The transfer is to a Diplomatic Mission / Inter Governmental or international, Multilateral or Bilateral Mission b) The transfer is that of a Condominium Parcel situated on or above 4th floor c) Where the Ministers in- charge of Finance & Land, in the interest of National Economy, have got Cabinet Approval, by order published in gazette to exempt Foreign National or Foreign Company from above prohibition, (provided there is a substantial transfer of foreign remittance to purchase the land) d) foreign company engaged in international commercial operations and the land is purchased to locate or relocate its global or regional operations or to set up a branch office. Cont..

FTA FTAS & PREFERENTIAL PREFERENTIAL ACCESS TO KEY ACCESS TO KEY MARKETS MARKETS

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AGREEMENTS FOR PREFERENTIAL MARKET ACCESS

ISFTA India - Sri Lanka Free Trade Agreement (2000)

SIGNED AND IN SIGNED AND IN EFFE EFFECT PSFTA

Pakistan‐Sri Lanka Free Trade Agreement

APTA

Asia Pacific Trade Agreement

SAFTA

South Asia Free Trade Agreement

Indo‐Sri Lanka Free Trade Agreement (ISFTA)‐2000

• Why trade with India is important‐

‐large market‐1.2 billion people ‐Imports US$ 391 bn worth goods from the world ‐Average growth of Imports for the last 10 years‐ 13% ‐low cost and less time to transport goods from SL to India ‐sea and air connectivity

• Trade with India

‐Exports grew from US$ 55‐US$643 Mn. from 2000‐2015 period ‐6% of SL’s exports to the world is to India ‐68% of exports under ISFTA ‐Imports grew from US$ 54‐ US$ 4268 Mn. from 2000‐2015 ‐accounts for 22.5% of total SL’s imports from the world ‐6% of imports under ISFTA

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• Top Exports to India‐ Pepper (13%), Arecanut (11%), other vessels for the transport of

persons and goods (8%), Animal feed( 8%), cloves (3%), wiring sets for vehicles(3%), Waste and scrap paper (3%), Black tea (3%), Petroleum oil preparations(2%), Marble (2%)

• Concessions under ISFTA

‐Duty free access to all products except 196 items (at HS06) in the negative list (100% Duty free access to India for 4,232 products) ‐Tariff rate quotas(TRQ)‐ can export duty free up to the quota limit per year ‐Apparel (8 million pieces) ‐Tea (15,000 MT) ‐Pepper (250,000 MT) ‐Desiccated Coconut (500 MT) ‐Margin of Preference (MOP) of 25% from applied import duty for textiles

• ROO –Wholly obtained products

‐Not wholly obtained ‐35% DVA, HS transposition at 4 digit level, bilateral cumulation (SL‐25%, India ‐10%) of Free on Board (FOB)

Indo‐Sri Lanka Free Trade Agreement (ISFTA)

Pakistan Sri Lanka FTA (PSFTA)‐2006

• Why trade with Pakistan is important‐

‐Market of 180 million people ‐Imports US$ 46 bn worth goods from the world ‐Average growth of Imports for the last 10 years‐ 9%

• Trade with Pakistan

‐Exports grew from US$ 55‐US$73 Mn. from 2006‐2015 period ‐0.7% of SL’s exports to the world is to Pakitan ‐80% of exports under PSFTA ‐Imports grew from US$ 147‐ US$ 297 Mn. from 2006‐2015 ‐accounts for 1.6% of total SL’s imports from the world ‐14% of imports under PSFTA

9/23/2016 14

Pakistan‐Sri Lanka Free Trade Agreement (PSFTA)

Top Exports to Pakistan‐Betel leaves, Black tea (16%), vegetable products (14%), pepper(11%), Desiccated coconut(7%), Fibre board(6%), Coconut (6%), Labels, badges of textile materials (4%), Fibre board (4%), Surgical gloves(2%), Sewing thread (2%) Concessions under PSFTA ‐Duty free access to all products except 540 items (at HS06) in the negative list (100% Duty free access to Pakistan for 4,686 products ) ‐Tariff rate quotas(TRQ)‐ can export duty free or at preferential duty up to the quota limit per year ‐Selected Apparel products: total of 3 million pieces per annum with a ceiling of 200,000 pieces from each tariff line (HS 06) ‐Tea (10,000 MT) ‐Margin of Preference (MOP) from applied tariff Ceramic products 20% Betel leaves 80% Selected cosmetic products (SL national brands ) 50% Selected apparel products 35% (up to quota limit) ROO –Wholly obtained products ‐Not wholly obtained ‐35% DVA, HS transposition at 6 digit level, bilateral cumulation (SL‐ 25%, Pakistan‐10%) of Free on Board (FOB)

South Asian Free Trade Agreement (SAFTA‐2006)

• This is among South Asian countries‐India, Pakistan, Bangladesh, Nepal, Bhutan,

Maldives, Afghanistan, Sri Lanka

• Since there are FTAs with India and Pakistan trade with other countries is important. –

Bangladesh and Maldives

• Under SAFTA‐with India (3%) trade, with Pakistan (1%) trade
• Countries have separate negative lists
• ROO‐
• Wholly obtained products
• ‐Not wholly obtained ‐40% DVA
• ‐HS transposition at 4 digit level
• Cumulation
• Aggregate content –at least 50% of Free on Board (FOB)
• DVA‐20% of FOB
• HS transposition at 4 digit level under general rules and HS transposition at 6 digit level

under product specific rules

• 191 lines are given product specific rules

9/23/2016 15

Asia Pacific Trade Agreement (APTA)‐1975

• Members‐ Bangladesh, China, India, Lao PDR, Republic of Korea ,Sri Lanka,

Mongolia

• The Agreement is a Preferential Agreement and a positive list agreement.
• Only provides Margin of reduction from applied rate of tariff
• Key markets of interest to SL‐China, Korea
• India, Bangladesh‐ utilisation‐1%‐insignificant
• ROO
• ‐DVA‐45% of FOB value
• Cumulative ROO
• ‐Aggregate content to be 60% of FOB value
• Electronic / electrical products,
• Machinery and Appliances
• Processed Food Items
• Medical Devices
• Automobiles and components
• Rubber Products
• Ceramic Products

POTENTIAL PRODUCTS FOR INDIA & PAKISTAN MARKETS

Source : BOI Research B o a r d o f I n v e s t m e n t o f S r i L a n k a

9/23/2016 16

GSP

• GSP provides‐ 3.5% tariff reduction from the applied rate for 3700 products‐sensitive goods
• f EU, 20% tariff reduction from the applied rate for 3300 products‐non‐sensitive goods of

EU

• GSP+ : duty free access to all products
• GSP+ eligibility –vulnerability‐not upper or high income country
• ‐Product concentration of exports‐largest exports covered by GSP
• ‐share of exports to EU as a % of GDP–SL‐less then 2%
• ‐Effectively rarify and implement 27 core international conventions on
• human & labor rights, environment & good governance
• The Application & Approval Process‐
• SL demonstrates commitment towards 27 international conventions
• EC and European External Action Service (EEAS) jointly assess the application for 6 months
• Compliance assessment by governing bodies of international conventions
• European Council assess for 6 months and then the EU Parliament debates for 4 months.

Thus application process takes 10 months.

GSP ROO

• HS Code/ Heading (4 digit level) of the finished product is different from the HS

Code/ Heading (4 digit level) of the imported inputs

• A given % of final value is added in the exporting country
• The product has undergone a given process of manufacturing inside the exporting

country.

• Regional Cumulation‐ Where goods originated in one member country (of a

regional group accepted by EU) is further processed in another member country, it can be considered as originating in the latter. Eg: SL can use fabric imported from India to manufacture apparel and export to EU under GSP scheme.

• Bilateral Cumulation ‐ Where goods originated in EU are used in the manufacturing

process of the beneficiary country, the products can be considered as originated in beneficiary country provided a minimum amount of processing is done there.

• Product

eligibility, ROO and applicable tariffs: http://exporthelp.europa.eu/thdapp/index.htm

9/23/2016 17

BENEFITS UNDER EU GSP SCHEME

• Enjoy generous tariff reductions of EU GSP Scheme granted to developing countries.
• The EU is Sri Lanka’s largest market, accounting for one-fourth of all exports (29%),
• f which garments constituted around 60 per cent.
• 98 per cent of exports from Sri Lanka to the

EU are eligible for preferential treatment.

• The "GSP+" will provide full removal of tariffs on essentially the same product

categories as those covered by the general arrangement. Sri Lanka has applied for GSP + in June 2016 and expects positive results.

• The fisheries ban from EU has been uplifted from April 2016.

B o a r d o f I n v e s t m e n t o f S r i L a n k a

AGREEMENTS FOR PREFERENTIAL MARKET ACCESS

ON THE ON THE CARD CARDS

EU GSP+

Gaining duty free access to the European Union

9/23/2016 18 AGREEMENTS FOR PREFERENTIAL MARKET ACCESS

UNDE UNDER NEGOTIATIONS OTIATIONS Sri Lanka - China FTA

Third round of negotiations concluded

Sri Lanka – India Economic Technology Cooperation Agreement covering services &

AGREEMENTS FOR PREFERENTIAL MARKET ACCESS

PROPOSED POSED

Singap

• re -

Sri Lanka FTA

9/23/2016 19

BILATERAL TRADE BILATERAL TRADE ELATIONS BETWEEN LATIONS BETWEEN THAILAND AND THAILAND AND SRI LANKA SRI LANKA

Bilateral Trade (2015)

• Exports to Thailand – US$ 33.51 Mn.
• Imports from Thailand- US$ 497.75

Mn.

• Investments from Thailand -USD

33.42 mn

SRI LANKA AND THAILAND

9/23/2016 20

Sri Lanka’s Exports to Thailand

• precious stones and semi‐precious stones (47%)
• diamonds,
• Wheat flour and Maslin flour,
• tea,
• Apparel,
• crustaceans, ‐shrimps, crabs,
• Special woven fabrics,
• food preparations,
• rubber tyres,
• vegetables,
• imitation jewellery,
• mineral water and
• activated carbon.

Sri Lanka’s Imports from Thailand

• Sugar
• dried fish,
• motor vehicles,
• fabrics,
• fibres,
• natural rubber,
• petroleum oil,
• cement,
• malt extract for food preparations of flour,
• carbon,
• containers for compressed or liquefied gas,
• lifts, escalators,
• yarn,
• bulldozers, levelers, scrapers,
• paper and paper board,
• buttons, fasteners,
• maize and
• electrical transformers

9/23/2016 21

Investments from Thailand

No. Name of the Project Product Description

• Est. Investment (Rs.Mn.)

New Sector District Foreign Local Total Section 16 Awaiting Implementation 1 RED OIL (PVT) LTD. CONSULTANCY SER.FOR FILM INDUSTRY 10.00 ‐ 10.00 Services Colombo 2 LAKE LODGE (PVT) LTD. HOTEL 10.20 ‐ 10.20 Tourism & Leisure Matale In Commercial Operation ‐ 3 ASANO LANKA (PVT) LTD. SHIP REPAIRING,MAINTENANCE,SER VICES 1.20 1.80 3.00 Services Colombo 4 S D S PROPERTY DEVELOPERS (PVT) LTD. MULTI STOREY BUILDING 81.00 9.00 90.00 Infrastructure Colombo 5 WORLD EXPRESS (CMB) LTD. ENTREPOT ORGANISATION 1.35 6.15 7.50 Tourism & Leisure Gampaha 6 BENJARONG (PVT) LTD. THAI & CHINESE FOODS 2.80 1.80 4.60 Tourism & Leisure Colombo 7 ASIA CAPITAL LTD. FINANCIAL SERVICES 360.00 640.00 1,000.00 Services Colombo 8

• INST. OF AYURVEDA &

ALTERNATIVE MEDICINE AYURVEDA & ALTERNATIVE MEDICINE 1.25 3.75 5.00 Infrastructure Kalutara 9 G R S LANKA (PVT) LTD. CONSULTANCY SER .FOR GEMS & GEM BASED INDUSTRY 3.00 3.00 6.00 Services Colombo 10 HILBURN COLLEGE (PVT) LTD. EDUCATIONAL FACILITIES FOR NATIONAL & INTL. EXAMINATIONS 2.00 8.00 10.00 Knowledge Services Colombo

Investments from Thailand (Contd.. )

Section 17 ‐ Awaiting Commercial Operation ‐ 11 KALUTARA LUXURY HOTEL & RESORT (PVT) LTD 141 ROOMED FIVE STAR HOTEL 1,342.00 858.00 2,200.00 Tourism & Leisure Kalutara In Commercial Operation 12 P H RESORTS (PVT) LTD. 158 ROOMED FIVE STAR HOTEL AT TANGALLE 2,662.20 2,623.05 5,285.25 Tourism & Leisure Hambantota 13 A M S INTL. (PVT) LTD. GOLD/SILVER JEW.,GEMS,DIAMONDS 173.00 ‐ 173.00 Manufacturing Colombo 14 BISCHOFF GAMMA LANKA (PVT) LTD. EMBROIDERY LACE 650.00 ‐ 650.00 Apparel Colombo Total 5,300.00 4,154.55 9,454.55

9/23/2016 22

Potential Trade from Sri Lanka to Thailand

• gems and jewellery,
• vulcanized rubber, other than hard rubber,
• Food preparations,
• Ignition wiring sets and other wiring sets for vehicles, aircraft
• r ships
• Animal feed preparations,
• Pepper
• Fresh or chilled yellow fin tunas
• apparel,
• Activate carbon
• Waste Paper
• Sacks and bags of polymers of ethylene, Bicycles and other

cycles (including delivery tricycles),not motorized,

• rubber gloves and vulcanized rubber gloves and mittens