Press release: Economic prospects appear good but sustainable
growth requires further reform
This second Trade Policy Review of Sri Lanka has provided a
constructive exchange of views between Sri Lanka and its trading
partners, thereby clarifying many aspects of Sri Lanka's trade policy
regime. The resulting discussion has been greatly facilitated by the
valuable contributions of Secretary Wickremasinghe, together with the
other members of his delegation, and our discussant, Ambassador
Muhammad Noor Yacob.
Members commended the Government's efforts to press ahead with the
reconstruction and rehabilitation programme outlined in the policy
document “Regaining Sri Lanka”, encouraging the authorities to
continue trade and other economic reforms, which along with lasting
peace would be essential for the achievement of sustained economic
growth and poverty reduction. Members reiterated their support for Sri
Lanka's peace and reform process and expressed their readiness to
contribute to it. They praised Sri Lanka's privatization initiative
and steps to deregulate the petroleum and energy sectors. Concerns
were raised about Sri Lanka's heavy dependency on a few export markets
and products, such as textiles and clothing.
Members appreciated Sri Lanka's constructive involvement in the WTO
and urged the authorities to continue its active participation in the
current negotiations on agriculture, industrial products and services.
They noted Sri Lanka's shift towards regional agreements. In response,
the authorities reiterated the country's firm commitment to the
primacy of the multilateral trading system, stressing that their
regional agreements would complement multilateralism.
Several Members expressed concern about the tariff regime's lack of
predictability and transparency. They also noted, inter alia: the high
level of applied MFN tariffs, particularly for agricultural products;
the low percentage of bound rates; the large gap between bound and
applied rates; high tariff escalation and consequently high effective
protection. Members also remarked on other import charges (notably the
surcharge and the Ports and Airports Development Levy) and encouraged
Sri Lanka to overhaul its duty exemptions. Members referred to the
special import licensing regime and sought clarification on which
goods were subject to licensing for “economic reasons”. In addition,
questions were raised regarding import restrictions on meat products,
import prohibitions on GM products, standards, and contingency
Members welcomed the simplification of customs procedures,
particularly the introduction of computerized systems for customs
clearance, and encouraged further streamlining. On government
procurement, Members commented, inter alia, on the existence of price
preferences for locally manufactured products and local work contracts
as well as on the opacity of tendering procedures. Sri Lanka was
encouraged to reform the procurement system and Members welcomed Sri
Lanka's announced intention to apply for observer status in the GPA.
Members welcomed the introduction of new intellectual property
legislation, and emphasized the need to follow this up with effective
implementation and enforcement.
On services, Members expressed their appreciation of steps taken by
the authorities to reduce state involvement and eliminate foreign
equity restrictions in financial services. They commended efforts to
liberalize the telecommunications market and encouraged Sri Lanka to
continue this process.
Members also expressed their appreciation of the oral and written
responses provided by the Sri Lankan delegation; they look forward to
receiving replies to any outstanding questions.
In conclusion, this Review has provided Members with considerable
insight into Sri Lanka's trade and trade-related policies. It has
helped to identify areas where further reforms could establish the
basis for sustained economic growth, and thus lasting peace and
prosperity. Members encouraged Sri Lanka to liberalize its trade
regime further and to continue its active participation in the DDA