Mofcom.gov.cn
Joint Feasibility Study on
a China-Sri Lanka Free Trade Agreement
July 01, 2014
Table of Contents
1 Review 1
1.1 Background and Objective of the Study 1
1.1.1 Background 1
1.1.2 Objectives of the Study* 2
1.2 The Scope and Structure of the Study 2
1.2.1 The Scope of the Study 2
1.2.2 The Structure of the Study 2
2 Overview of the Chinese and Sri Lanka Economies and Foreign Economic Policies 4
2.1 Chinese Economy and Foreign Economic Policy 4
2.1.1 Chinese Economy 4
2.1.2 Chinese Foreign Economic Policy 7
2.1.3 China’s FTA Practice 9
2.2 Sri Lanka Economy and Foreign Economic Policy 13
2.2.1 Sri Lanka Economy 13
2.2.2 Trade performance 16
2.2.3 Macro Economic Growth Targets 19
2.2.4 Sri Lanka’s Foreign Economic Policy 20
2.2.5 Sri Lanka FTA Practice 21
3 Bilateral Trade and Economic Relations between China and Sri Lanka 25
3.1 Overview of Bilateral Trade and Economic Relations 25
3.2 Two-way Trade in Goods 25
3.2.1 Imports by Sri Lanka from China 26
3.2.2 Sri Lanka’s Exports to China 34
3.3 Two-way Trade in Services 37
3.4 Two-way Investment 37
3.5 Bilateral Economic Cooperation 39
3.5.1 Economic Cooperation and Development 39
3.5.2 Tourism Cooperation 48
3.5.3 Cooperation in Other Fields 49
3.6 Existing Legal and Institutional Framework of Bilateral Trade and Economic Cooperation 50
3.6.1 Legal and Institutional Framework of Bilateral Economic Cooperation 50
3.6.2 Legal and Institutional Framework of Bilateral Investment 51
3.6.3 Legal and Institutional Framework of Intellectual Property 52
3.6.4 Legal and Institutional Framework of Tourism 52
3.6.5 Other Legal and Institutional Frameworks 53
4 Trade in Goods 54
4.1 Overview of Trade Policies Applying to Trade in Goods 54
4.1.1 Tariffs 54
4.1.2 Trade Policies of Non-tariff Measures 59
4.2 Other Trade Policies Affecting Trade in Goods 60
4.2.1 Rules of Origin 60
4.2.2 Customs Procedures and Trade Facilitation 64
4.2.3 SPS and TBT 68
4.2.4 Trade Disciplines/Trade Remedies 75
4.3 Trade in Specific Sectors 78
4.3.1 Tea 78
4.3.2 Fish and Fisheries Products 85
4.3.3 Machinery and Electronics 95
4.3.4 Textile and Clothing 101
4.3.5 Rubber Products 115
4.3.6 Coconut Products 124
4.3.7 Gems and Jewellery 130
4.3.8 Fruits and Vegetable Products 137
5 Trade in Services 146
5.1 Overview of Trade Policies Applying to Trade in Services 146
5.1.1 Overview of Services Sectors 146
5.1.2 Trade Policies Affecting Trade in Services 147
5.2 Trends in Service Sectors 149
6 Investments 159
6.1 Investment Policies of China and Sri Lanka 159
6.2 Investment in Specific Fields 163
6.2.1 Machinery 163
6.2.2 Pharmaceuticals 165
6.2.3 Motor Spare Parts 166
6.2.4 Others 167
6.2.5 Tourism & Leisure 168
6.2.6 Higher Education / Skills Development 169
6.2.7 Health 169
6.2.8 Alternative Energy 170
6.2.9 Mineral based industries 170
6.3 FTA Impact to Direct Investments 171
6.3.1 Potential Impact of China- Sri Lanka FTA on FDI to Sri Lanka 173
7 Strengthening Bilateral Economic Cooperation in Key Areas 174
7.1 E-commerce 174
7.2 Small and Medium Enterprises 176
7.3 Trade and Investment Promotion 178
7.3.1 Trade promotion 178
7.3.2 Investment promotion 179
7.3.3 Transparency 180
7.4 Industry Cooperation 181
7.5 Cooperation in the Development of Pilot Zone 182
7.6 Other Related Areas of Cooperation 183
8 General and Institutional Provisions, Dispute Settlement 184
8.1 General Provisions 184
8.2 Joint Committee 184
8.3 Consultations 184
8.4 Contact Points 184
8.5 Dispute Settlement 185
9 Conclusions and Recommendations 186
9.1 General Conclusions 186
9.2 Sector Specific Conclusions 186
9.2.1 Trade in Goods 186
9.2.2 Trade in Services 187
9.2.3 Cooperation in Other fields 187
9.2.4 Investment 187
9.3 Recommendations 187
Annex I Partial Equilibrium Method 188
List of Tables
Table 2-1 Import and Export of China’s Trade in Goods, 2005-2012 5
Table 2-2 Import and Exports of China's Trade in Service Sectors 6
Table 2-3 The FDI Inflow and Outflow of China, 2003-2012 7
Table 2-4 China’s Signed FTAs and the Main Contents 10
Table 2-5 Key Economic Indicators - 2012 13
Table 2-6 Sectoral composition of GDP for year 2012 14
Table 2-7 Paddy Production in Sri Lanka 2010-2012 (Mt’000) 16
Table 2-8 Imports - Exports and Trade Balance (2003-2012) 16
Table 2-9 Direction of Exports of Sri Lanka - 2012 17
Table 2-10 Composition of Exports -2012 18
Table 2-11 Direction of Imports of Sri Lanka - 2012 19
Table 2-12 Composition of Imports -2012 19
Table 2-13 Tariff Liberalization Programme under the ISFTA 23
Table 2-14 Tariff Liberalization Program under the PSFTA 24
Table 3-1 Bilateral Trade between China and Sri Lanka 25
Table 3-2 Overview of Bilateral Trade 26
Table 3-3 Sri Lanka's Imports from China @ 4 digits Level 27
Table 3-4 Imports to Sri Lanka from China – HS Chapter-Wise (US$ Mn) 33
Table 3-5 Sri Lanka's Exports to China @ 4 digits Level 34
Table 3-6 Exports by Sri Lanka to China Chapter-Wise (US$ MN) 36
Table 3-7 Chinese Projects in Sri Lanka (As at End of October 2013) 38
Table 3-8 Cumulative Chinese Financial Assistance to Sri Lanka Including Loans and Grants (1971 -2012) 42
Table 3-9 Projects with Chinese Grants 45
Table 4-1 Tariffs Summary of China 54
Table 4-2 Applied Tariffs of China by Product Groups 54
Table 4-3 In-Quota Interim Duty Rate on Imported Goods 55
Table 4-4 Tariff Structure in 2012 56
Table 4-5 Import duties collected 2002 – 2012 (US$ Mn) 57
Table 4-6 Summary of Sri Lanka’s Bound Tariffs and Applied Tariffs in 2011 57
Table 4-7 Sri Lanka’s Bound & Applied Tariffs by Product Categories (2011) 57
Table 4-8 Preferential Rules of Origin of China (2013) 61
Table 4-9 Summary of Rules of Origin Provisions in Sri Lanka’s RTAs 63
Table 4-10 Import and Export of Tea Products of China 80
Table 4-11 Key Indicators for the Tea Industry 80
Table 4-12 Sri Lanka Tea direct exports to China in MT, US$ MN (2006 to 2012) 81
Table 4-13 The Import Tariff Rates Distribution of China's Tea Products in 2012 82
Table 4-14 Import of 0902.40 by China 84
Table 4-15 Imports of 0902.30 by China in 2012 84
Table 4-16 Import and Export of China’s Fish and Fisheries Products 87
Table 4-17 Contribution of Fishery Sector for GDP from 2002-2012 87
Table 4-18 Fish Imports and Exports from 2002-2012 88
Table 4-19 Fisheries Contribution in Export Earnings and Balance of Fish trade 89
Table 4-20 Top 10 Fisheries Exports by Sri Lanka to the World (US$ million) 89
Table 4-21 Top Exports of Chapter 03 to China by Sri Lanka 90
Table 4-22 Top Ten Imports by Sri Lanka in Chapter 03 (US$ Mn) 90
Table 4-23 Exports by China to Sri Lanka under Chapter 03 (US Mn) in 2012 91
Table 4-24 The Import Tariff Rates Distribution of China's Fish and Fisheries Products in 2012 92
Table 4-25 Trade Potential for Sri Lankan Exports to China – Chapter 03 94
Table 4-26 Import and Export of China’s Machinery and Electronic Products 96
Table 4-27 Top 20 Imports of Chapter 84 and 85 by Sri Lanka from China in 2012 98
Table 4-28 The Import Tariff Rates Distribution of China's Machinery and Electronic Products in 2012 100
Table 4-29 Import and Export of China’s Textile and Clothing Products 103
Table 4-30 Export Destinations and Values of Sri Lanka Apparel Exports (US$ MN) 106
Table 4-31 Top Export Items with Export Potential to China (US MN) 106
Table 4-32 Focused Investments in Backward Integration 110
Table 4-33 Import of Yarn, Fabric and Apparel into Sri Lanka 111
Table 4-34 Apparel Imports to China from the World under HS 61-63 112
Table 4-35 China’s Annual Imports of Chapters 61, 62 and 63 from Sri Lanka in 2011 and 2012 112
Table 4-36 The Import Tariff Rates Distribution of China's Textile and Clothing Products in 2012 113
Table 4-37 Applicable Import duties in Sri Lanka for Yarn, Fabric & Apparel 114
Table 4-38 Import and Export of China’s Rubber Products 117
Table 4-39 Contribution of Rubber Sector to GNP (2007 - 2012 (US$ Mn)) 118
Table 4-40 Key Indicators of the Rubber Industry 118
Table 4-41 Top 10 Exports by Sri Lanka in 2012 – Chapter 40 119
Table 4-42 Top 10 Exports by Sri Lanka to China – Chapter 40 119
Table 4-43 Top 10 Imports by Sri Lanka under Chapter 40 (2012) 120
Table 4-44 Top 10 Exports by China to Sri Lanka under Chapter 40 (2012) 120
Table 4-45 The Import Tariff Rates Distribution of China's Rubber Products in 2012 121
Table 4-46 Potential Exports to China under Chapter 40 (US$ Mn) 123
Table 4-47 Import and Export of China’s Coconut Products 125
Table 4-48 Key Indicators for Coconut Plantations 125
Table 4-49 Export of Coconut, Coconut-Related products by Sri Lanka 2012 126
Table 4-50 Top Exports of Coconut and Related Products to China 2012 126
Table 4-51 The Import Tariff Rates Distribution of China's Coconuts in 2012 127
Table 4-52 Import and Export of China’s Gems and Jewellery Products 132
Table 4-53 Exports of Gems and Jewellery by Sri Lanka (US$ Mn) 133
Table 4-54 Top Imports by Sri Lanka in Chapter 71 (US$ Mn) 134
Table 4-55 The Import Tariff Rates Distribution of China's Gems and Jewellery Products in 2012 135
Table 4-56 Top Potential Exports to China by Sri Lanka - Chapter 71 (US$ Mn) 136
Table 4-57 Import and Export of China’s Fruits and Vegetable Products 139
Table 4-58 Imports of Chapter 08 from China by Sri Lanka in 2012 140
Table 4-59 Imports of Chapter 07 Products by Sri Lanka from China in 2012 141
Table 4-60 The Import Tariff Rates Distribution of China's Fruits and Vegetable Products in 2012 142
Table 4-61 Potential Exports under Chapter 07 by Sri Lanka to China (US$ Mn) 143
Table 4-62 Potential Exports under Chapter 08 by Sri Lanka to China (US$ Mn) 144
Table 4-63 Potential Exports under Chapter 20 by Sri Lanka to China (US$ Mn) 145
Table 5-1 The Output Value and Employment of China’s Services Sectors 146
Table 5-2 Import and Export of China’s Trade in Services 2009-2012 148
Table 5-3 Foreign Direct Investment in China’s Services Sectors 149
Table 5-4 Import and Export of China’s Trade in Tourism Services, 2009-2012 152
Table 6-1 Sri Lanka’s Inward FDI from India 172
List of Figures
Figure 3-1 Imports to Sri Lanka from China (Chapter Wise) - in 2012 33
Figure 3-2 Exports by Sri Lanka to China Chapter-Wise (USD MN) 36
Figure 3-3 Sectoral Distribution of Assistance from China 2008 - 2012 43
Figure 3-4 China Outbound Tourism (1995-2011) 48
Figure 4-1 Imports under HS84 and HS85 from China 97
Figure 4-2 Exports of Chapter 84 by Sri Lanka 99
Figure 4-3 Exports of Chapter 85 99
Figure 4-4 Growth – Performance (US$ MN) 105
Figure 4-5 Product Profile of Exports 105
Figure 4-6 Composition of Markets 105
Figure 4-7 Strategic Growth Plan (2010-2016) US$ Mn 111
Figure 6-1 Impact of FTAs on FDI 173
Review
1 Background and Objective of the Study
1 Background
The bilateral relations between China and Sri Lanka were deepened through frequent visits by the leaders of the two States. China and Sri Lanka entered into the Sino- Lanka Agreement on Rubber-Rice exports on 17th December 1952 which was even before the two countries established diplomatic relations. In 1957, China established diplomatic relations with the Democratic Socialist Republic of Sri Lanka. Over more than half a century, the leaders and people of the two countries maintained close contacts and achieved fruitful cooperation in various fields.
A Trade and Payment Agreement was signed in 1982, which provided MFN treatment for products of export and import of both countries. In 1984 both countries signed an Agreement on Economic and Technical Cooperation and these two agreements were amalgamated in 1991 establishing the Sri Lanka-China Joint Committee for Trade and Economic Cooperation. The first session was held in 1992 and thereafter 1996, 2000, 2008 and 2013. Further strengthening economic ties between the two countries, the first SriLankan Airline flight to Bejing took place in June, 2005.
China always remained a friend of Sri Lanka in hours of need. Demonstrating the strong ties between the two countries, Premier Wen Jiabao visited Sri Lanka after the 2004 December Tsunami, which devastated Sri Lanka. The Government of China granted US$ 28 Million for the reconstruction of six fishery harbors and the Fishery Town in Panadura that was damaged consequent to the 2004 Tsunami. They were rebuilt with Chinese financial assistance at a cost of Rs. 550 Million.
On May 27 to 30, 2013, the Democratic Socialist Republic of Sri Lanka President Mahinda Rajapaksa paid a state visit to China at the invitation of the People's Republic of China President Xi Jinping. The two sides agreed to build strategic cooperative partnership with sincere and mutual assistance and enduring friendship, and agreed to establish a joint working group on trade to study feasibility of China-Sri Lanka Free Trade Agreement and issues of expanding development of Sri Lanka’s exports to China promoting trade balance as well as establish working group on economic cooperation to conduct studies on project cooperation, financing arrangement and investment cooperation.
In August, 2013, China and Sri Lanka decided to establish the Joint Feasibility Study Group of China - Sri Lanka Free Trade Agreement (FTA) under the joint working group on trade, a focused on carrying out feasible study. The Joint Feasibility Study Group of China - Sri Lanka Free Trade Agreement (FTA) held the first meeting in the capital, Colombo, Sri Lanka on Oct 17, 2013. The two sides have now agreed on a joint research framework and model.
2 Objectives of the Study*
*as agreed at the working group meeting held on 17th October 2013 in Colombo
▪ To provide background information to commence negotiations on CSFTA.
▪ Identify specific products sectors for expansion and diversification of trade between the parties.
▪ Identify specific areas for enhancement of investments and economic cooperation.
▪ Identify the benefits and challenges that may derive from the proposed FTA.
▪ To make conclusions and recommendations on options for future action including scope, framework and architecture and FTA for furthering bilateral trade investment and economic cooperation to expand and enhance the benefits in these areas.
2 The Scope and Structure of the Study
1 The Scope of the Study
The core objective of the feasibility study on the Free Trade Agreement (FTA) is to explore the prospects for liberalization of bilateral trade and investment through an FTA, consistent with the WTO rules. In addition, this study encompasses a wide range of other areas of mutual interest to enhance economic cooperation between the two countries. The study will provide the broadest possible basis for consideration of future actions by the Governments of China and Sri Lanka.
2 The Structure of the Study
The other chapters of the study have the following structure:
Chapter 2: Overview of the Chinese and Sri Lanka Economies and Foreign Economic Policies
This chapter will review economic performances of Sri Lanka and China and their foreign economic policies in terms of implementation of WTO Agreements, Regional Agreements and other Agreements regarding bilateral trade and investment and economic cooperation.
Chapter 3: Bilateral Trade and Economic Relations between China and Sri Lanka
This chapter will provide an overview of the bilateral trade and economic relations of the two countries, two-way trade and investment performances and sets out the existing legal and institutional framework of bilateral trade and economic cooperation.
Chapter 4: Trade in Goods
This chapter will cover the policies applicable to trade in goods, including tariffs, non-tariff measures, rules of origin, customs procedures and SPS and TBT measures. Further, it describes specific product sectors of economic importance to both countries for the purpose of identifying and deciding on preferential market access.
Chapter 5: Trade in Services
This chapter will describe the overview of trade policies on trade in services and their trends, as well as prospects of the specific sector of trade in services.
Chapter 6: Investment
This chapter will describe the overview of investment policies, legal framework for investment including special laws, bilateral investment treaties, Double Taxation Agreements and specific areas of Investments.
Chapter 7: Strengthening bilateral and economic corporation in key areas
This chapter will identify sectors such as e-commerce, SME for strengthening corporation and trade and investment promotion and Industry Corporation. It will also include corporation in other related areas.
Chapter 8: General and Institutional Provisions, Dispute Settlement
This chapter will describe general and institutional provisions on dispute settlement mechanism.
Chapter 9: Conclusions and recommendations
This chapter will include general and sector specific conclusions and recommendations, suggestions including the roadmap.
Overview of the Chinese and Sri Lanka Economies and Foreign Economic Policies
1 Chinese Economy and Foreign Economic Policy
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1 Chinese Economy
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1 Recent Development of the Chinese Economy
In the last decade, China accelerated its industrialization and globalization steps and has achieved a successful development. The average annual GDP growth rate between 2002 and 2011 remained at about 9%, and the GDP reached RMB 51.93 trillion in 2012[1]. China is now the world's second largest economy after the United States. However, China’s GDP per capita is still relatively low though it rose from USD 1,263 in 2001 to USD 6,100 in 2012[2]. In 2012, according to the poverty relief standard of annual net income of 2300 RMB per capita, the rural poverty population of China was 98.99 million. China is the largest developing economy in the world, yet its per capita GDP in 2012 just ranking the 83rd. Due to the powerful production capability and comprehensive industries and sectors, Chinese products are able to fulfil the needs from home and abroad. Meanwhile, some products seriously rely on imports from other countries.
The average growth of value added of the industrial sector slowed in 2010, 2011 and 2012. It was 7.9%[3] in 2012, but it was still much faster than China's services and agriculture sectors. In 2012, the share of industry (including manufacturing, mining, and electricity generation) in GDP amounted to 45.3%, which was higher than that of services (44.6%) and agriculture (10.1%)[4].
Total employment of labour force was 767 million in 2012, with 371.02 million in the towns and cities. The registered urban unemployment rate was 4.1%[5] at the end of 2012, which was the same in 2011.
2 Foreign Trade
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1 Trade in Goods
Foreign trade plays an important role in China's economic development. The rapid growth in trade contributed greatly to the growth of GDP. China's exports maintained the growth rate of 15% between 2005 and 2008. In 2009, under the impact of the international financial crisis, China's imports and exports fell respectively by 11.2% and 16% (See Table 2-1).Between 2010 and 2011, with the world economic recovery, the momentum of China's imports and exports soared, with an import growth rate of 34.7%, and export growth rate of 22.5%. In 2012, due to the sharp slowdown in world economic recovery, the international market demand remained weak, and under the situation of greater downward pressure on domestic economy, China's imports and exports would continue to maintain steady growth. Imports and exports amounted to USD 3.8668 trillion, up 6.2% from 2011; among which export volume amounted to USD 2.0489 trillion, up 7.9%; and import volume amounted to USD 1.8178 trillion, up 4.3%. China’s main exports were machinery products and equipment, textile and apparel as well as metals and metal products. The main importers of Chinese products were EU, USA, Hong Kong China, Japan and the Republic of Korea. China’s main imports were machinery products, mineral fuel, oils and ores. China’s main sources of imports were Japan, EU, the Republic of Korea, Taiwan China and USA.
Table 2-1 Import and Export of China’s Trade in Goods, 2005-2012
(US Dollars in billions)
|Year |Total Trade |Growth Rate (%) |Export Value |Growth Rate (%)|Import Value |Growth Rate (%)|
|2002 |620.8 |21.8 |325.6 |22.4 |295.2 |21.2 |
|2003 |851.0 |37.1 |438.2 |34.6 |412.8 |39.8 |
|2004 |1154.6 |35.7 |593.3 |35.4 |561.2 |36.0 |
|2005 |1421.9 |23.2 |762.0 |28.4 |660.0 |17.6 |
|2006 |1760.4 |23.8 |968.9 |27.2 |791.5 |19.9 |
|2007 |2173.7 |23.5 |1217.8 |25.7 |956.0 |20.8 |
|2008 |2563.3 |17.9 |1430.7 |17.5 |1132.6 |18.5 |
|2009 |2207.2 |-13.9 |1201.7 |-16.0 |1005.6 |-11.2 |
|2010 |2972.8 |34.7 |1577.9 |31.3 |1394.8 |38.7 |
|2011 |3642.1 |22.5 |1898.6 |20.3 |1743.5 |24.9 |
|2012 |3866.8 |6.2 |2048.9 |7.9 |1817.8 |4.3 |
Source: China Statistical Yearbook 2002 – 2013.
2 Trade in Services
According to WTO statistics, in recent years, China has always been a net importer of trade in services. In 2012, China's total exports and imports of services amounted to USD 470.58 billion (statistical calibre: international balance of payment, excluding government services), an increase by 12.3 % compared to 2011, only accounting for 5.6% of that of the world's and 10.8 % of the total volume of China's foreign trade, among which the imports were USD 280.14 billion and exports worth USD 190.44 billion, resulting in a trade deficit of USD 89.7 billion. The trade deficit came from four major areas: tourism (USD 51.95 billion), transportation services (USD 46.95 billion), insurance services (USD 17.27 billion), fees of proprietary rights and royalties (USD 16.71 billion). On the contrary, a large amount of surplus gained in the following two areas: consultation (USD 13.43 billion) and the computer and information services (USD 10.61 billion) (See Table 2-2).
Table 2-2 Import and Exports of China's Trade in Service Sectors
(US Dollars in 100 millions)
| |Total Trade |Export Value |Import Value |
|Year |2011 |2012 |2011 |2012 |
|2003 |535.05 |1.44 |28.55 |5.74 |
|2004 |606.30 |13.32 |54.97 |92.54 |
|2005 |603.25 |-0.50 |122.60 |123.03 |
|2006 |658.21 |9.11 |161.30 |31.57 |
|2007 |747.68 |13.59 |187.20 |16.06 |
|2008 |923.95 |23.58 |406.50 |116.80 |
|2009 |900 |-2.6 |433.00 |6.5 |
|2010 |1057 |17.4 |590 |36.3 |
|2011 |1160 |9.7 |601 |1.8 |
|2012 |1117 |-3.7 |772 |28.6 |
Source: National Statistics Bureau of China.
2 Chinese Foreign Economic Policy
China's foreign economic policy is to serve the “reform and opening up” policy. In November 2013, Certain Decisions on Major Issues about Comprehensively Deepening Reform of the Central Committee of the Communist Party of China (hereinafter referred to as the Decision) pointed out that to adapt to the new situation of economic globalization, we must accelerate the mutual promotion between internal and external opening up, boost the close integration of “bringing in” and “go-global”, promote orderly and free flow of international and domestic key factors, efficient allocation of resources, in-depth market integration, speed up cultivating participation in and lead the new international economic cooperation and competition advantage, and to promote reform through opening up.
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1 Policy of Trade in Goods
China’s policy with regard to trade in goods includes tariffs, licenses, rules of origin and customs procedures, SPS, TBT, trade remedies, etc. (See Chapter 4)
In November 2013, the Decision points out that we should speed up the construction of free trade areas. Adhering to the rules of the world trading system, the bilateral, multilateral and regional sub-regional open cooperation, we should expand areas of mutual interests with all countries and regions, and speed up the implementation of free trade area strategy with surrounding economies. The market access, customs supervision, inspection and quarantine and other administration systems should be reformed; the negotiations on new issues such as environmental protection, investment protection, government procurement, electronic commerce should be speeded up, to form a global network of free trade areas with high standards.
2 Policy of Trade in Services
Under the GATS, China made specific commitments in 9 of the 12 major sectors upon its accession to WTO in 2001, including business services, communication services, construction and related engineering services, distribution services, educational services, environmental services, financial services, transport services, tourism and travel related services[7].
In November 2013, the Decision points out those inland cities should be supported to develop more international airlines, and multimodal transport, serving as the bridge to connect the north and south foreign economy. Establish a developmental financial institution, to speed up interconnected infrastructure with neighboring countries and regions, to promote the construction of the Silk Road economic belt, maritime Silk Road, and form new pattern of all-around opening up.
China’s commitments on trade in services are also scheduled in free trade agreements like the CEPA, the China-ASEAN, the China-Pakistan, the China-Chile, the China-New Zealand, the China-Singapore and the China-Peru Agreement. (See Chapter 5)
3 FDI Policy
Major laws and regulations specifically related to FDI include: the Law on Chinese-Foreign Equity Joint-Ventures, the Law on Chinese-Foreign Contractual Joint Ventures, the Law on Foreign-Capital Enterprises, and their respective implementing regulations.[8] Under the three laws, types of foreign investment enterprises (FIEs) are equity joint ventures, contractual joint ventures and wholly foreign-owned enterprises (WFOEs). On 1st March 2010, the newly adopted Regulations for the Administration of the Registration of Foreign-invested Partnership Enterprises came into force. Since then, foreign enterprises or individuals can set up an enterprise in the legal form of a partnership[9] in China.
The Catalogue for the Guidance of Foreign Investment Industries stipulates the basic principles concerning FDI in China. It classifies foreign investment projects into four categories: the encouraged, the permitted, the restricted and the prohibited. The current Catalogue for the Guidance of Foreign Investment Industries entered into force on30th January, 2012.
In November 2013, the Decision clearly points out that it is advisable to ease investment access, including unifying the laws and regulations, maintaining stable, transparent and predictable foreign policy; promote orderly open of the service sectors such as finance, education, culture, and health care; untie foreign investment access restrictions on services, such as brood endowment, architectural design, accounting audit, trade logistics and e-commerce services, and further liberalize the general manufacture. China also encourages the outflow of FDI. In 1997, the “go-global” strategy was put forward for the first time and since then China has enacted a series of policies to encourage investment abroad.
The governmental agencies in charge of the administration of the FDI outflow include the Ministry of Commerce (MOFCOM), National Development and Reform Commission (NDRC), State Administration of Foreign Exchange (SAFE), etc. On 1st May 2009, the Measures for Overseas Investment Management enacted by MOFCOM were implemented. It stipulates the basic principles for domestic enterprises on the management of overseas investment . In accordance with the Regulations on Foreign Exchange Administration of Overseas Investment issued by the SAFE in July 2006, China eliminated restrictions on foreign exchange with regard to FDI outflow.
In November 2013, the Decision also points out that China should improve the marketization of formation mechanism for RMB exchange rate, accelerate the marketization of interest rate, and improve the treasury bonds yield curve showing the relationship between market supply and demand. To promote two-way open up of capital market, orderly increase the degree of convertible cross-border capital and financial transactions, China will establish and perfect the macro-prudential management under the framework of external debt and capital flow management system, to realize RMB capital account convertibility.
3 China’s FTA Practice
Although the multilateral trading system remains the main channel to promote trade liberalization, China has been intensifying its pursuit of bilateral/regional free trade agreements with different trading partners over the last decade. Regional trade arrangements has served as new platform for promoting trade and investment.
Currently, China is working on 18 FTAs with 31economies, among which 12 free trade agreements have been signed. Another 6 FTAs including China-South Korea FTA, China-the GCC FTA[10], China-Australia FTA and China-Norway FTA, and China-Japan-Korea FTA and the Regional Comprehensive Economic Partnership Agreement (RCEP) are being negotiated.
The concluded and signed FTAs are the Mainland and Hong Kong Closer Economic and Partnership Arrangement (CEPA Mainland-Hong Kong), the Mainland and Macao Closer Economic and Partnership Arrangement (CEPA Mainland-Macao), the China-ASEAN FTA (ACFTA), the China-Pakistan FTA, the China-Chile FTA, the China-New Zealand FTA, the China-Singapore FTA, the China-Peru FTA, the China-Costa Rica FTA, Cross-strait Economic Cooperation Framework Agreement (ECFA), China - Iceland FTA and China-Swiss FTA. In addition to the free trade agreements with Iceland and Switzerland which haven't come into effect, the rest have already been implemented.
Table 2-4 China’s Signed FTAs and the Main Contents
|FTA |The Main Contents |
|The CEPA Mainland-Hong Kong |In 2003, the Central Government of China signed the Closer Economic Partnership Arrangements (CEPA) with the|
| |Government of the Special Administrative Region of Hong Kong. 10 supplements were signed between 2004 and |
| |2013 respectively. The CEPA was one of the first FTA implemented in Mainland China. |
| |According to the CEPA, Mainland China gradually eliminated the tariffs on imports originated from these two |
| |Special Administrative Regions (SAR) since 1st January 2004, completed by 1st January 2006. Under the CEPA, |
| |Mainland China has also gradually liberalized markets in various service sectors by relaxing market access |
| |restrictions. |
|The CEPA Mainland-Macao |In 2003, the Central Government of China signed the Closer Economic Partnership Arrangements (CEPA) with the|
| |Government of the Special Administrative Region of Macao. 10 supplements were signed between 2004 and 2013 |
| |respectively. The CEPA was one of the first FTA implemented in Mainland China. |
| |According to the CEPA, Mainland China gradually eliminated the tariffs on imports originated from these two |
| |Special Administrative Regions (SAR) from 1st January on, completed by 1st January 2006. Under the CEPA, |
| |Mainland China has also gradually liberalized markets in various service sectors by relaxing market access |
| |restrictions. |
|The China-ASEAN FTA |On 4th November 2002, China and ASEAN signed the Framework Agreement on Comprehensive Economic Cooperation. |
| |The Agreement on Trade in Goods and the Agreement on the Dispute Settlement Mechanism of the Framework |
| |Agreement on Comprehensive Economic Cooperation between ASEAN and China were signed in November 2004 and |
| |entered into force on 1st January 2005. According to the Agreement on Trade in Goods, China has been |
| |gradually reducing tariffs on thousands of goods to zero originated from ASEAN members. |
| |The Agreement on Trade in Services of the China-ASEAN Free Trade Area was signed in January 2007 and entered|
| |into force on 1st July 2007, under which China shall lower the market access requirements of some service |
| |sectors including construction, environment, transportation, sporting and business services, etc. |
| |In August 2009, the two Parties signed the Agreement on Investment which will facilitate the two-way |
| |investment and strengthen the relevant cooperation. |
|The China-Pakistan FTA |The China-Pakistan Free Trade Agreement was signed on 24th November 2006 and entered into force on 1st July |
| |2007. According to the Agreement, China shall follow two phases to reduce the tariffs of all products. In |
| |the first phase when after the enforcement of the Agreement in five years, China shall reduce the tariffs on|
| |the products which take up 85% of the total tariff lines in five categories with different reduction. The |
| |second phase begins from the sixth year of the enforcement of the Agreement, and since then China shall |
| |eventually realize duty-free in 90% of all its tariff lines and trade value as well. |
| |Meanwhile, both sides have reached an agreement on detailed provisions in investment, rules of origin, trade|
| |remedy, TBT and SPS. |
| |On 21st February 2009, China signed the Agreement on Trade in Service of the China-Pakistan FTA which |
| |entered into force on 10th October 2009. According to the Agreement, China shall further open 28 sub-sectors|
| |in six main sectors of service in addition to its WTO commitment. |
|The China-Chile FTA |On 18th November 2005, China and Chile signed the China-Chile Free Trade Agreement which entered into force |
| |on 1st October 2006. Under the FTA, 63% of China's import tariffs were eliminated in two phases from 1st |
| |October 2006 to 1st January 2007. Most other tariffs are to be eliminated within five or ten years with the |
| |aim of 97% of China's import tariffs being eliminated by 1st January 2015. |
| |The Supplementary Agreement on Trade in Services of the Free Trade Agreement between China and Chile was |
| |concluded on 13th April 2008. According to the Agreement, China shall further open 23 services sectors and |
| |its sub-sectors including computer services, air transport services, sports services, etc. in addition to |
| |its WTO commitment. |
|The China-New Zealand FTA |On 7th April 2008, China signed the China-New Zealand Free Trade Agreement which entered into force on 1st |
| |October 2008. The Agreement covers areas of trade in goods, trade in services and investment. It is the |
| |first FTA that China has signed with a developed country. |
| |According to the agreement, China shall eliminate tariffs on 97.2% of imports originated from New Zealand by|
| |different phrases. When the FTA took effect on 1st October 2008, China has immediately eliminated the |
| |tariffs on all the goods of which MFN tariffs were below 5%. The tariffs of other goods have been gradually |
| |reduced since 2008. Meanwhile, China also made much more liberal commitments than that of WTO in sectors of |
| |business services, environmental services, sports services, transportation services, etc. |
|The China-Singapore FTA |The China-Singapore Free Trade Agreement (CSFTA) was signed on 23rd October 2008 and entered into force on |
| |1st January 2009. The Agreement covers many areas such as trade in goods, trade in services, movement of |
| |people and customs procedures. |
| |According to the agreement, China committed to eliminate the tariffs on 97.1% of goods imported from |
| |Singapore before 1st January 2010. Meanwhile, the two sides made commitments beyond their WTO commitments in|
| |areas including health services, education services, accounting services, etc. |
|The China-Peru FTA |The China-Peru FTA was signed on 28th April 2009 and came into force on 15th January 2010. |
| |According to the agreement, in the area of trade in goods, China shall through different phases eliminate |
| |the tariff on 90% of goods originated from Peru which include aquatic products, minerals, fruits, etc. |
| |Meanwhile, China also made a commitment to further opening its related service sectors. In terms of the |
| |investment, the two sides shall provide each other, the investors and their investments, the national |
| |treatment, the most-favoured-nation treatment, and fair and impartial treatment after the accession, and |
| |encourage the bilateral investment and provide relevant facilitation. Meanwhile, the two sides also reached |
| |a wide range of consensus on issues in terms of intellectual property, trade remedy, rules of origin, |
| |customs procedures, TBT, SPS, etc. |
|The China-Costa Rica FTA |The China-Costa Rica FTA was signed on 8th April 2010. |
| |According to the agreement, in the area of trade in goods, the two sides shall through different phases |
| |implement zero tariffs on more than 90% goods originated from each other. Meanwhile, in the area of trade in|
| |services, China shall, on the basis of its WTO commitments, further open in 7 sectors and sub-sectors |
| |including computer services, real estate, market research, translation, interpretation and sports |
| |The two sides also reached broad consensus in intellectual property, trade remedy, rules of origin, customs |
| |procedures, TBT, SPS, cooperation, and many other areas. |
|Cross-strait Economic |On June 29th, 2010, the cross-strait economic cooperation framework agreement was signed. The agreement |
|Cooperation Framework |covers the main economic activities between two sides, including market opening of trade in goods and trade |
|Agreement |in services, rules of origin, early harvest program, trade remedy, dispute settlement, investment and |
| |economic cooperation, etc., fully reflecting the present situation and characteristics of the cross-strait |
| |economic trade relations and providing an important safeguard mechanism for the normalization of |
| |cross-strait economic ties, institutionalization and liberalization. |
|The China - Iceland FTA |The China-Iceland FTA was signed on 15th, April 2013. This Agreement is the first FTA that China signed with|
| |a European country, covering areas of trade in goods, services, investment and so on. |
| |According to the Agreement, after the establishment of FTA, China shall eventually make the zero-tariff |
| |products up to 96% counted by the number of taxable items, or 100% by trade volumes. Besides, China’s |
| |commitments on trade in services which are higher than that of the WTO are also scheduled in the Agreement |
| |and specific provisions are given to the issues including investment, natural person movement, SPS, TBT, |
| |rules of origin, customs procedures, competition policy, and intellectual property rights. |
|The China - Swiss FTA |The China-Swiss FTA was signed on 6th July 2013. The Agreement is the first package FTA China has signed |
| |with a continental European country. Both sides have reached an agreement with high level of trade |
| |liberalization in goods, and a consensus on the government procurement, environment, labour and employment |
| |cooperation, intellectual property rights and competition rules. |
| |According to the Agreement, Switzerland shall apply zero-tariff on about 99.7% of exports to China from the |
| |implementation of the Agreement. China's exports to Switzerland shall eventually apply zero- tariff on 84.2%|
| |of exports to Switzerland. If products of partial reduction in tariff are involved, Switzerland's |
| |participation in tariff reduction is 99.99%, and China’s is 96.5%. Meanwhile, on the basis of the WTO |
| |commitments, both sides will further reach an agreement to open the relevant service sectors. Switzerland |
| |committed to further open in areas including travelling, translation and others. China made a commitment to |
| |further open some service sectors, such as securities sector. |
2 Sri Lanka Economy and Foreign Economic Policy
2.
1.
2.
1.
2.
1 Sri Lanka Economy
The government economic policy framework has been developed based on the key principles set out in “Mahinda Chinthana- towards a new Sri Lanka, 2005” and “Mahinda Chinthana- Vision for a new Sri Lanka- A ten year horizon – Development framework 2006-2016”.
Table 2-5 Key Economic Indicators - 2012
|Key Economic Indicators |
|Demography | |
|Population |20.3 Mn |
|Labour Force |8.5 Mn |
|Unemployment (% of Labour Force) |4% |
|National Production & Growth |
|GDP @ Current Market Price |US$ 59.4 Bn. |
|GDP Per Capita |US$ 2,923 |
|GDP Growth Rate |6.4% |
|External Trade |
|Exports |US$ 9,774 Mn. |
|Imports |US$ 19,183 Mn. |
|Trade Balance |US$ -9,409 Mn |
|Source : Central Bank of Sri Lanka |
|Sri Lanka’s Ranking in Some Indexes |
|Doing Business Index (189 Countries) |81 |
|Global Competitiveness Index (142 Countries) |52 |
|Human Development Index (186 Countries) |92 |
|Logistic Performance Index (137 Countries) |81 |
|Global Food Security Index (105 Countries) |62 |
The Gross Domestic Product (GDP) in Sri Lanka was at US $ 59.42 billion in 2012. The GDP value of Sri Lanka represents 0.10 percent of the world economy. The Sri Lankan economy generated a 6.4 percent annual growth in 2012 pursuant to an 8 percent annual growth in the two preceding years. The country’s per capita income reached near US $ 3,000 level in 2012, underscoring sustained positive movements in the per capita growth that was witnessed since 2005, in which year the per capita income was US $ 1,200. Sri Lanka is also a developing economy and its per capita GDP ranking is 119. While the limited leading export products of Sri Lanka are competitive in the world, it lacks diversification.
Table 2-6 Sectoral composition of GDP for year 2012
|Sector |Value (US$ Mn) 2012 |As Share of GDP (%) 2012 |
|Agriculture, forestry and Fisheries |2666.3 |11.1 |
|Agriculture, Livestock and Forestry |2344.3 |9.8 |
|Fishing |322.0 |1.3 |
|Industry |7286.1 |30.4 |
|Mining and Quarrying |666.7 |2.8 |
|Manufacturing |4101.9 |17.1 |
|Electricity, Gas and Water |571.9 |2.4 |
|Construction |1945.6 |8.1 |
|Services |14041.9 |58.5 |
|Wholesale and Retail Trade |5522.9 |23.0 |
|Hotels and Restaurants |165.6 |0.7 |
|Transport and Communication |435872 |14.3 |
|Banking, Insurance and Real Estate etc |269744 |8.9 |
|Ownership of Dwellings |76926 |2.5 |
|Government Services |207559 |6.8 |
|Private Services |70779 |2.3 |
|Gross Domestic Product |3047277 |100.0 |
Source: Central Bank Report of Sri Lanka
1.
2.
1.
2.
1.
1.
2.
1.
2.
1.
1 Agriculture Sector
The Agriculture sector grew by 5.8 percent in 2012, which contributed for 11.1 percent share of GDP. Agriculture, livestock, forestry and fishing are the key sub sectors which have contributed to the performance of this sector.
The contribution from agriculture sector to GDP has played a vital role in Sri Lanka’s Economic Development. This sector was the third highest contributor during the last decade and the second highest contributor to employment, and was at 31.0 per cent in 2012. It is the main source of livelihood of the rural population, which accounts for 70 per cent of the total population. Therefore, the Agriculture sector will remain as the largest in absolute terms, and must be strengthened to attain higher growth rates and to play a dynamic role in the overall Economic Development of the country.
The average growth of the Agriculture sector during the last year was 5.8 per cent compared with 10.3 per cent in industry and 4.6 per cent in service. Even though its relative position in the Economy has been declining with the growth of industries and services, because of its strong linkages with other sectors, agriculture continuous to be the main element of Sri Lanka’s economy. Therefore, the Agriculture sector is a significant determinant of national and provincial GDP.
The agriculture sector will continue to play an important role in the application of strategies targeted towards a planned socio-economic development of the country. Sri Lanka, as a Net Food Importing Developing Country (NFIDC), it is essential to target for a rapid growth of the agricultural sector, particularly the domestic food production, floriculture and export crop sectors to achieve self-reliance at national level.
2 Livestock Sector
Livestock is an integral part of the agriculture economy of Sri Lanka. The consumption of livestock produce has increased dramatically over the last two decades. While the consumption needs of poultry products are supplied from domestic enterprises, milk and dairy products are sourced in increasing quantities from abroad. The import bill on dairy products is close upon one fifth of the total import bill on food commodities. The policies and strategies aim to develop the livestock sector in the pursuit of exploring the contribution of livestock for the economic development and social stability of the country. The livestock sub sector contributes around 1.2% of national GDP.
3 Dairy Sector
Dairy sector is the most important of all livestock sub sectors. The domestic milk production only constitutes about 17 percent of the requirement and the rest is imported. The import bill on dairy commodities is around 15 billion rupees or approximately US $ 13 million. The government attention is most focused on the dairy sub sector; to develop this sector into a ‘local industry’ and it aims at producing 50% of country’s requirement of milk by the year 2015.
4 Agriculture and Food Security
1 Paddy
The paddy sector receives the highest priority in the development agenda because paddy is the staple food in Sri Lanka. Over the time, the paddy sector has been transformed rapidly from the traditional to commercial status due to the adoption to new methods of cultivation, and high yielding varieties, and extensive investment in irrigation, and settlement and other infrastructural developments undertaken at different periods of time. The paddy production has increased in recent years making the country self-sufficient in rice.
Table 2-7 Paddy Production in Sri Lanka 2010-2012 (Mt’000)
|Item |2010 |2011 |2012 |
|Production |4,301 |3,894 |3,846 |
Sources: Department of Census and Statistics, Department of Customs, Central Bank of Sri Lanka
2 Domestic Field Crops
Following the government development policy towards making Sri Lanka self-sufficient in food and agricultural products, various initiatives have been taken through Divi Neguma" programme to encourage production. The production of field crops, including maize, green gram, red onion, big onion, chillie, cowpea, kurakkan, black gram and ground nut have increased significantly in 2012. With the achievement of self-sufficiency in paddy and maize, the government aims to achieve self-sufficiency in green gram, black gram, cowpea, soya bean, onion, dried chillie, potatoes ground nut and kurakkan by 2015.
Gross official reserves and total external assets of the country continued to increase in 2012. The total foreign reserves of the country increased to US $ 8.4 billion at the end of 2012, from US $ 7.2 billion in 2011.
2 Trade performance
Sri Lanka’s exports to the world have increased from US $ 6.3 billion in 2005 to US $ 10.5 billion in 2011, although earnings from exports declined by 7.4 percent in 2012 to US $ 9.8 billion mainly due to the decline of the industrial exports to EU and the USA.
Similarly, imports to the country have also increased from US $ 8.8 billion in 2005 to US $ 20.3 billion in 2011. India, China, Singapore and UAE continued to be the dominant suppliers to the country. In 2012, total expenditure on imports declined by 5.4 percent to US $ 19.2 billion with comparison to 2011. Continuous growth in imports has caused to widen the trade gap from US $ 2.5 billion in 2005 to US $ 9.4 billion in 2012. In terms of global trade, Sri Lanka’s share in exports remains at 0.05 percent while imports remain at 0.1 percent.
The following table illustrates the current trends in exports and imports of Sri Lanka.
Table 2-8 Imports - Exports and Trade Balance (2003-2012)
|Year |Export (US $ Mn) |Import (US $ Mn) |Trade Balance (US $ Mn) |
|2002 |4699.1 |6104.8 |-1405.7 |
|2003 |5,133.3 |6,671.9 |-1538.6 |
|2004 |5,757.2 |7,999.8 |-2242.6 |
|2005 |6,346.7 |8,863.2 |-2516.5 |
|2006 |6,882.7 |10,253.0 |-3370.3 |
|2007 |7,640.0 |11,296.5 |-3656.5 |
|2008 |8,110.6 |14,091.2 |-5980.6 |
|2009 |7,084.5 |10,206.6 |-3122.1 |
|2010 |8,625.8 |13,450.9 |-4825.1 |
|2011 |10,558.8 |20,268.8 |-9710.6 |
|2012 |9,773.5 |19,182.6 |-9409.1 |
Source: Central Bank Report of Sri Lanka
2.
3.
1 Direction of Exports of Sri Lanka
The USA and the EU continue to be the major export destinations for Sri Lankan products accounting for 68 % of its total exports. Sri Lanka’s exports to the USA demonstrated a growth of 8.4 % in 2012 compared to 2011. Sri Lanka’s exports to the USA amounted to US $ 2.1 billion in 2012. The following table demonstrates the current export destinations of Sri Lanka and their rankings.
Table 2-9 Direction of Exports of Sri Lanka - 2012
|Country |Rank |Value (US $ Mn) |Share % |
|USA |1 |2,126 |21.7 |
|United Kingdom |2 |1,059 |10.8 |
|India |3 |576 |5.8 |
|Belgium- Luxembourg |4 |533 |5.5 |
|Italy |5 |508 |5.2 |
|Germany |6 |455 |4.2 |
|Russia |7 |262 |2.7 |
|United Arab Emirates |8 |223 |2.3 |
|Japan |9 |217 |2.2 |
|Iran |10 |196 |2.0 |
|France |11 |177 |1.8 |
|Netherlands |12 |159 |1.6 |
|Canada |13 |144 |1.5 |
|Turkey |14 |139 |1.4 |
|Australia |15 |135 |1.4 |
|China |16 |113 |1.2 |
|Hong Kong, China |17 |110 |1.1 |
|Syrian Arab Republic |18 |107 |1.1 |
|Chile |19 |104 |1.1 |
|Singapore |20 |100 |1.0 |
Source: Central Bank Report of Sri Lanka
2 Composition of Exports
The largest contribution to export earnings in 2012 came from industrial exports (75.4%) followed by agricultural exports (23.9%). Among industrial exports, textile and garments remained the major contributor. Agricultural exports were mainly driven by tea, spices, rubber and coconut products. Table 2-10 illustrates the composition of Sri Lanka’s exports with its share for 2012.
Table 2-10 Composition of Exports -2012
|Category |Value (US$ Mn) |Share % |
|Agricultural Exports |2,331.5 |23.9 |
|Tea (including packeted) |1,411.9 |14.4 |
|Rubber |125.1 |1.3 |
|Coconut |208.9 |2.1 |
|Spices |256.1 |2.6 |
|Vegetables |13.3 |0.1 |
|Unmanufactured Tobacco |42.2 |0.4 |
|Minor Agricultural Products |76.0 |0.8 |
|Sea Food |198.0 |2.0 |
|Industrial Exports |7,371.2 |75.4 |
|Textiles and Garments |3,991.1 |40.8 |
|Rubber Products |859.4 |8.8 |
|Petroleum Products |463.0 |4.7 |
|Gems, Diamonds and Jewellery |558.9 |5.7 |
|Food, Beverages and Tobacco |284.3 |2.9 |
|Machinery and Mechanical Appliances |297.5 |3.0 |
|Printing Industry Products |41.8 |0.4 |
|Transport Equipment |164.9 |1.7 |
|Leather, Travel Goods and Footwear |55.4 |0.6 |
|Ceramic Products |35.8 |0.4 |
|Other Industrial Exports |619.2 |6.3 |
|Mineral Exports |61.3 |0.6 |
|Unclassified |9.6 |0.1 |
|Total Exports |9,773.5 |100.0 |
Source: Central Bank Report of Sri Lanka
3 Direction of Imports of Sri Lanka
As stated elsewhere in the text, India, China, Singapore, UAE and Malaysia continue to be the major suppliers of goods to Sri Lanka. The following table illustrates the direction of imports to Sri Lanka.
Table 2-11 Direction of Imports of Sri Lanka - 2012
|Country |Rank |Value US $ (Mn) |Share % |
|India |1 |3,640 |19.0 |
|China |2 |2,667 |13.9 |
|Singapore |3 |1,683 |8.8 |
|United Arab Emirates |4 |1,289 |6.7 |
|Malaysia |5 |811 |4.2 |
|Iran |6 |778 |4.1 |
|Hong Kong, China |7 |605 |3.2 |
|Japan |8 |552 |2.9 |
|South Korea |9 |532 |2.8 |
|Thailand |10 |458 |2.9 |
Source: Central Bank Report of Sri Lanka
4 Composition of Imports
The share of intermediate and investment goods accounted for 84.2 percent of the total imports in 2012 due to continuous expansion of economic activities in the country. Import value of intermediate goods increased mainly due to higher expenditure of petroleum products, while the investment goods recorded a substantial increase of 21.1 percent. The expenditure on consumer goods imports was partly driven by import of motor cars and sugar and sugar confectionery products.
The following table illustrates the composition of imports and their share for the year 2012.
Table 2-12 Composition of Imports -2012
|Category |Value (US$ mn) |Share % |
|Consumer Goods |2,995.2 |15.6 |
|Food and Beverages |1,304.4 |6.8 |
|Other Consumer Goods |1,690.8 |8.8 |
|Intermediate Goods |11,569.9 |60.3 |
|Investment Goods |4,589.8 |23.9 |
|Unclassified Imports |27.7 |0.1 |
|Total Imports |19,182.6 |100.0 |
Source: Central Bank Report of Sri Lanka
3 Macro Economic Growth Targets
1. Per Capita Income (PCI) to reach US $ 4000 by 2016 and export target of US $ 20 billion by 2020.
Sri Lanka has already graduated from a low income country to a lower middle income country. The next step, in terms of PCI is the upper middle income country status which Sri Lanka envisages to attain by 2016. Sri Lanka will continue to monitor a number of key areas to ensure a continuous growth of its per capita income beyond US dollars 4,000. It is also envisaged to achieve export target of US $ 20 billion by 2020.
2. FDI inflow target of US $ 5000 million, to reach by 2016
Foreign Direct Investment (FDI) flows to Sri Lanka, in the first half of 2013, reached US$ 430 million. It is expected to reach US $ 2 billion by end of the year.
4 Sri Lanka’s Foreign Economic Policy
The “Mahinda Chintana - A Ten Year Horizon – Development Framework 2006-2016" (TYHDF 2006-2016) identifies international trade as one of the significant macroeconomic instruments to achieve the country’s development goals. It envisages closer integration of trade promotion in the national development framework by further rationalization of trade and tariff policies, facilitation of a fair trading environment and encouragement of investment. The trade objectives within the TYHDF 2006-2016 also focus on increasing integration of the Sri Lankan economy with global markets.
Sri Lanka is committed to pursue an outward-oriented trade regime following the principles of the WTO, with a view to enhancing overseas market access for its products and achieving greater integration into the world economy. Towards achieving the desired objectives, Sri Lanka continues to simplify her tariff structure and encourage foreign direct investment into the country for infrastructure development and expanding the output while generating employment opportunities.
Sri Lanka's unilateral trade liberalization process was initiated in 1977, and successive governments have continued these policy measures despite the internal conflict of the past and the recent global economic downturn.
Sri Lanka also actively engages in negotiations at regional and bilateral levels while maintaining her multilateral commitments and obligations. At multilateral level, Sri Lanka remains committed to a fair, equitable, transparent and progressively liberalized multilateral trading system, with due consideration given to the needs of all developing countries. Sri Lanka actively participates in the negotiations on the Doha Development Agenda (DDA), particularly in areas such as Agriculture, NAMA, TRIPS, and Trade Facilitation.
Sri Lanka, being a Net Food Importing Developing Country (NFIDC), has placed a great importance on the need for flexibilities to safeguard rural development, livelihood of farmers and food security.
At regional level Sri Lanka is a member of the South Asian Free Trade Area (SAFTA) and the Asia-Pacific Trade Agreement (APTA). Sri Lanka is a founding member of Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation (BIMSTEC) and Indian Ocean Rim Association for Regional Cooperation (IOR-RAC). She is also a member of the Global System of Trade Preferences (GSTP).
Bilaterally, Sri Lanka has entered into two FTAs with India in 1998 (Indo-Sri Lanka Free Trade Agreement (ISFTA)) and with Pakistan in 2002 (Pakistan-Sri Lanka Free Trade Agreement (PSFTA)).
Preferential tariffs are granted for agreed products under regional and bilateral trade agreements namely; South Asian Preferential Trade Agreement (SAPTA) South Asia Free Trade Agreement (SAFTA), Asia-Pacific Trade Agreement (APTA)), India-Sri Lanka Free Trade Agreement (ISFTA), and Pakistan-Sri Lanka Free Trade Agreement (PSFTA) and also under the Global System of Trade Preferences (GSTP).Trade policy aims at minimizing the use of non-tariff barriers. A few import restrictions are maintained mainly relating to health, safety, security, environment and public moral reasons.
In complying with WTO TRIPS Agreement, Sri Lanka enacted new comprehensive intellectual property legislation in 2003. The new Act covers: copyright and related rights; industrial designs; patents; marks and trade names; layout designs of integrated circuits; unfair competition and undisclosed information; and geographical indications. The new Act has also extended the term of copyright protection, from life plus 50 years, to life plus 70 years. Comprehensive legal provisions have also been introduced to fight against piracy.
The Imports and Exports (Control) Act No. 1 of 1969 and by Special Import Licence Regulation No. 1 of 1977, as amended, regulate the list of goods subject to import licensing. Sri Lanka has notified to the WTO of her rules regarding import licensing procedures in May 2003. The Department of Import and Export Control administers the import and export measures on selected products on the basis of economic, national security, health and environment reasons. Licenses are processed within two working days. Block Licenses (valid for 01 year) are issued to importers of pharmaceuticals, who have continuously imported pharmaceuticals during past three year period.
5 Sri Lanka FTA Practice
1 Global Level
1 Global System of Trade Preferences (GSTP)
Global System of Trade Preferences is a tariff preferential scheme negotiated under the aegis of the United Nations Conference on Trade and Development (UNCTAD) with a view to increasing South – South Trade and Economic Cooperation. The first and the second round were concluded and concessions have been exchanged among member countries on a narrow range of products.
2 Regional Level
1 South Asian Free Trade Area (SAFTA)
Sri Lanka is a member of the South Asian Association for Regional Cooperation (SAARC). The eight members of the SAARC namely Afghanistan, Bangladesh, Bhutan, India, the Maldives, Nepal, Pakistan and Sri Lanka signed the Agreement on the South Asian Free Trade Area (SAFTA) in January 2004 and it was implemented with effect from 1 January 2006, superseding SAPTA. The Agreement covered goods in the first phase and contained special and different treatment for LDCs and Sri Lanka was recognized as a small economy member country for special dispensation.
Since the implementation of SAFTA, US$2.3 billion worth of goods have been traded among the member states, out of which Sri Lanka has exported US$1.53 million worth of goods to Bangladesh, India, Maldives, Nepal and Pakistan while Sri Lanka has imported US$4.82 million worth of goods from Bangladesh, India, Maldives and Pakistan during the period of July 2006 to Dec 2012.
Under the Trade Liberalization Programme of SAFTA, the customs duties on products from the region will be progressively reduced. The SAARC member countries are in the process of reducing the existing Sensitive List by 20%, which shall be implemented in the near future.
SAARC Agreement on Trade in Services (SATIS)
The SAARC Agreement on Trade in Services was signed in April 2010 to include Trade in Services to the SAFTA. Subsequently, it was decided to exchange the initial request and offer lists amongst its Members, which are currently ongoing. However, Sri Lanka’s offer remains limited to what was offered in the DDA.
2 Asia-Pacific Trade Agreement (APTA)
Asia-Pacific Trade Agreement (APTA) which is the successor to the Bangkok Agreement (BA) came into force in November 2005. Three rounds of negotiations have already been concluded. The six Participating States comprise of Bangladesh, China, India, Laos, Republic of Korea and Sri Lanka and APTA has formally welcomed Mongolia as the seventh (7th) Participating State of APTA during its 42nd Session meeting on 25th October 2013.
The fourth round of APTA Negotiation was launched at the Second Session of the Ministerial Council held on 26th October 2007, with a view to reaffirm commitment to further widening product coverage and deepening the tariff cuts and to extend negotiations into other trade related areas such as trade facilitation, services, investment and non tariff measures.
During 4th round, it has been decided to increase product coverage up to 27% of total tariff lines at 6 digit level with an average Margin of Preference (MOP) not less than 33% with an exemption for Least Develop Countries (LDCs) to comply with the aforesaid percentages. Sri Lanka also succeeded in getting the same relaxation negotiated by LDCs.
Sri Lanka's major exports to APTA countries are: natural rubber, desiccated coconut, coconut fibre, copra, coconut oil, tea, cloves, and crude glycerine.
Sri Lanka receives preferential market access to China only through APTA. However, market access thus provided is limited in terms of product coverage and MOP. Therefore, Sri Lanka’s exports to China under APTA are largely concentrated in one tariff line (Coir fiber).
3 Bilateral Level
1 Indo-Sri Lanka Free Trade Agreement (ISFTA)
The Framework Agreement of ISFTA was signed on 28th December 1998 and entered into force with effect from 1st March 2000, provides duty free concessions to a wide range of products traded between the two countries. The Agreement covers only trade in goods and requires the two countries to offer market access for each other's exports on duty free basis and concessionary tariffs. The ISFTA trade liberalization program was fully completed by November 2008.
Table 2-13 Tariff Liberalization Programme under the ISFTA
| |India |Sri Lanka |
|Negative List |429 Tariff lines |1,170 Tariff Lines |
| |(at HS 6-digit level) |(at HS 6-digit level) |
|Zero Duty List |1,351 Tariff lines |342 Tariff Lines |
|(100% immediate duty reduction with |(at HS 6-digit level) |(at HS 6-digit level) |
|effect from 1st March 2000) | | |
|Residual List |2,799 Tariff lines |880 Tariff Lines |
|(50% margin of preference(MOP) upon |(at HS 6-digit level) |(at HS 6-digit level) |
|coming into force of the Agreement) | | |
| |The MOP in respect of these items shall be |The MOP in respect of these items shall be |
| |increased to100% in two stages within three |increased to |
| |years of the coming into force of the |-70% at the end of the First year |
| |Agreement |-90% at the end of the Second year |
| | |-100% at the end of the Third year |
|Phasing out List from 1st March 2000 |N/A |2,802 Tariff lines |
| | |(at HS 6-digit level) |
| | | |
| | |Tariff shall be brought down by |
| | |not less than 35% before the end of the Third year |
| | |from date of entry into force |
| | |not less than 70% before the end of the Sixth year |
| | |from date of entry into force |
| | |not less than 100% before the end of the Eighth year|
| | |from date of entry into force |
| | | |
| | |The tariff of two items (HS Codes 2523.21 and |
| | |2523.29) reduced at end of 8 years from the date of |
| | |entry into force of the Agreement, despite their |
| | |being in the Negative List of Sri Lanka |
|Tariff Rate Quota |Garments , Tea, Pepper, Desiccated Coconut |N/A |
| |,Vanaspati and selected Textile items are | |
| |subjected to the Annual Tariff Quota. | |
2 Pakistan Sri Lanka Free Trade Agreement (PSFTA)
The Framework Agreement of PSFTA was signed on 1 August 2002 and PSFTA entered into force effective from June 12, 2005.
Table 2-14 Tariff Liberalization Program under the PSFTA
| |PAKISTAN |SRI LANKA |
|No Concession List |541 Tariff Lines at 6 digits |697 Tariff Lines at 6 digits |
|100% immediate duty reduction |206 Tariff Lines at 6 digits |102 Tariff Lines at 6 digits |
|(12.06.2005) | | |
|Tariff Rates Quota |Apparel and Tea are subject to Annual Tariff |Basmati and Potatoes are subject to Annual Tariff |
| |Quota |Quota |
|Phasing Out List |-Upon entering into force not less than 34% |-Upon entering into force not less than 20% |
| |(12.06.2005) |(12.06.2005) |
| |-At the end of the second year not less than 67% |-At the end of first year not less than 30% |
| |-At the end of third year not less than 100% |-At the end of the second year not less than 40% |
| | |-At the end of the third year not less than 60% |
| | |- At the end of the fourth year not less than 80% |
| | |- At the end of the fifth year not less than 100% |
PSFTA includes provisions for reviewing all its Annexes every two years.
Standing committees under both ISFTA and PSFTA have been established to review the progress and address implementation related issues.
Asymmetric nature between Sri Lanka and the other two economies was duly recognized and reflected in all elements of the agreements. Both agreements were notified to the WTO under the Enabling Clause of 28th November 1979 of GATT 1947.
Bilateral Trade and Economic Relations between China and Sri Lanka
1 Overview of Bilateral Trade and Economic Relations
Modern trade relations between Sri Lanka and China began with the signing of Rice –Rubber pact in 1952 and have continued to strengthen since then.
According to statistics of the General Administration of Customs P.R.C., in 2012, the bilateral trade volume has reached USD 3.171 billion, among which China's exports amounted to USD 3.01 billion, while imports reaching USD 162 million.[11]
By the end of 2012, the turnover of Chinese contracted projects in Sri Lanka reached USD 1.53 billion with 4390 dispatched labors.[12]
2 Two-way Trade in Goods
According to Chinese Customs, the value of trade between the two countries increased from USD 1.434 billion in 2007 to USD 3.171 billion in 2012, representing an annual increase of 17.2%. In 2012, China exported products of USD 3.01 billion (+0.67% compared to 2011) to Sri Lanka, accounting for 0.15% of China’s total exports. China imported USD 162 million (+7.1%compared to 2011) from Sri Lanka, accounting for 0.01% of China’s total imports. China enjoyed a trade surplus worth of USD 2.848 billion in the bilateral trade with Sri Lanka in 2012, increasing 0.32 % in comparison with 2011 (See Table 3-1). China's main imports from Sri Lanka were plant fiber, tea, rubber, ore sand and apparel. China's main exports to Sri Lanka were machinery, electronic products, and cotton, knitting and chemical fiber.
Table 3-1 Bilateral Trade between China and Sri Lanka
(US Dollars in 100 millions)
|Year |2007 |2008 |2009 |2010 |2011 |2012 |
|Export |13.86 |16.24 |15.69 |19.95 |29.90 |30.10 |
|Import |0.48 |0.59 |0.71 |1.02 |1.51 |1.62 |
|Total Trade |14.34 |16.84 |16.40 |20.97 |31.41 |31.71 |
|Trade Balance |13.38 |15.65 |14.99 |18.93 |28.39 |28.48 |
Source: General Administration of Customs of the P.R.China
According to Sri Lanka Customs, China is currently the 2nd largest supplier of goods to Sri Lanka, accounting for 14% of Sri Lanka’s total imports of US$ 19.2 billion in 2012. As far as Sri Lanka’s exports are concerned, China absorbs 1.2%, becoming the 16th export destination of Sri Lanka. The imports from China to Sri Lanka which stood at US$ 0. 6 billion in 2005 accounting for 7.6% of Sri Lanka’s total imports, surged to US$ 2.6 billion in 2012 accounting for 14%. However, Sri Lanka’s exports to China remain proportionately at a lower level. Sri Lanka’s export to China which stood at US$ 28 Mn in 2005, has only increased up to US$ 108 Mn over the last 8 years accounting for 1.2% of the Sri Lanka’s total export to the world. The balance of trade has been highly in favor of china widening the deficit to US$ 2.5 billion in 2012 from US$ 0.6 billion in 2005 registering more than fourfold increase in the deficit.
Table 3-2 Overview of Bilateral Trade
|Period |Imports |Share of Total Sri Lanka imports (%) |Exports |Share of Total Sri |Balance of Trade |Total Trade |
| |US$ Mn | |US$ Mn |Lanka Exports (%) |US$ Mn |US$ Mn |
|1 |8517 |Telephones |37.7 |112.9 |
| | |sets | | |
| | |including | | |
| | |telephones | | |
| | |for | | |
| | |cellular | | |
| | |networks of| | |
| | |for other | | |
| | |wireless | | |
|84 |Nuclear reactors, boilers, machinery and mechanic |152.6 |311.0 |473.7 |
|85 |Electrical machinery and equipment and parts thereof; |136.9 |295.3 |400.2 |
|52 |Cotton |128.1 |190.2 |207.1 |
|60 |Knitted or crocheted fabrics |95.3 |158.2 |174.5 |
|55 |Man-made staple fibres |70.0 |121.5 |143.6 |
|31 |Fertilisers |24.1 |113.1 |103.0 |
|73 |Articles of iron and steel |61.5 |81.6 |99.7 |
|87 |Vehicles other than railway or tramway rolling-stock, and parts |54.5 |99.6 |98.8 |
|72 |Iron and Steel |31.1 |60.9 |74.4 |
|39 |Plastics and articles thereof |32.9 |54.2 |69.2 |
|86 |Railway or tramsway locomotivers, rolling-stock & parts |0.3 |0.4 |55.6 |
|58 |Special woven fabrics; tufted textile fabrics;lace; tapestries; |23.9 |37.4 |46.1 |
|28 |Inorganic chemicals; Organic or inorganic compounds of precious metals, |15.7 |30.8 |35.3 |
|69 |Ceramic products |16.0 |25.5 |31.8 |
|94 |Furniture; bedding, mattresses, mattress supports, cushions, etc |45.0 |14.1 |30.6 |
|90 |Optical, photographic, cinamatographic, measuring, |14.3 |22.6 |29.7 |
|48 |Paper and paper board; articles of paper pulp, of |18.2 |29.3 |28.5 |
|54 |Man-made filaments |20.0 |28.0 |26.7 |
|29 |Organic chemicals |17.8 |21.6 |25.4 |
| |Others |949.8 |855.9 |552.8 |
Source: Sri Lanka Customs
Figure 3-1 Imports to Sri Lanka from China (Chapter Wise) - in 2012
1 Sri Lanka’s Exports to China
Sri Lanka’s major exports to China are tea, coconut-based products, rubber and rubber products, Garments, some electrical components and mineral products. The following table provides detailed information on exports from Sri Lanka to China
Table 3-5 Sri Lanka's Exports to China @ 4 digits Level
|S/N |HS Code |Description |Value (US $'000)|% | | |
|2 |0902 |Tea, whether or not flavoured. |6.44 |11.27 |14.63 |13.53 |
|3 |2614 |Titanium ores and concentrates. |1.75 |3.92 |13.81 |12.77 |
|4 |4005 |Compounded rubber, unvulcanised in primary forms or in plates, sheets or strip. |4.64 |7.86 |6.89 |6.37 |
|5 |6109 |T-shirts, singlets and other vests, knitted or crocheted. |0.94 |2.74 |4.16 |3.84 |
|6 |4012 |Retreaded or used pneumatic tyres of rubber; solid or cushion tyres, inter-chang |1.58 |3.53 |3.60 |3.33 |
|7 |2401 |Unmanufactured tobacco; tobacco refuse |0.28 |0.20 |3.37 |3.12 |
|8 |4001 |Natural rubber, balata, gutta-percha, guayule, chicle and similar natural gums |2.59 |7.76 |2.51 |2.32 |
|9 |6204 |Women's or girls' suits, ensembles, jackets, blaze |0.33 |0.58 |2.47 |2.28 |
|10 |6310 |Used or new rags, scrape twine , cordage, rope and cables and worn out articles |0.54 |1.92 |2.18 |2.01 |
|11 |3802 |Activated carbon; activated natural mineral products; animal black |1.70 |1.66 |1.64 |1.51 |
|12 |6116 |Gloves, mittens and mitts, knitted or crocheted. |0.18 |0.47 |1.38 |1.27 |
|13 |6203 |Men's or boys' suits, ensembles, jackets, blazers |0.14 |0.42 |1.20 |1.11 |
|14 |5607 |Twine, cordage, ropes and cables, whether or not plaited or braided |0.85 |3.05 |1.16 |1.07 |
|15 |8504 |Electrical transformers, static converters (for example, rectifiers) and inductors |1.39 |1.53 |1.10 |1.02 |
|16 |4015 |Articles of apparel and clothing accessories (including gloves), for all purpose |1.48 |1.58 |1.07 |0.99 |
|17 |6505 |Hats and other headgear, knitted or crocheted |0.67 |0.55 |1.02 |0.95 |
|18 |6104 |Women's or girls' suits, ensembles, jackets, dress |0.20 |1.50 |1.02 |0.94 |
|19 |6212 |Brassiers, girdles, corsets, braces, suspenders, garters and similar articlesparts thereof |0.10 |0.52 |0.81 |0.74 |
|20 |9031 |Measuring or checking instruments, appliances and machines |0.45 |0.88 |0.79 |0.73 |
|21 | |Other |34.54 |21.58 |15.54 |14.38 |
| | |Total |89.11 |104.06 |108.12 |100.00 |
Source: Sri Lanka Customs
Table 3-6 Exports by Sri Lanka to China Chapter-Wise (US$ MN)
|S/N |Chapter |Description |2010 |2011 |2012 |% |
|2 |09 |Coffee, tea, mate and spices |6.6 |11.4 |15.3 |14.1 |
|3 |40 |Rubber and articles thereof. |10.9 |22.2 |15.0 |13.8 |
|4 |26 |Ores, slag and ash |3.1 |6.1 |14.7 |13.6 |
|5 |61 |Articles of Apparel and clothing accessories, knitted or |2.3 |6.3 |8.9 |8.3 |
| | |crocheted | | | | |
|6 |62 |Articles of Apparel and clothing accessories, not knitted or |1.2 |2.5 |6.1 |5.6 |
| | |crocheted | | | | |
|7 |24 |Tobacco and manufactured tobacco substitutes |0.3 |0.2 |3.4 |3.1 |
|8 |63 |Other made up textile articles; sets; worn clothing |0.7 |2.0 |2.3 |2.1 |
|9 |85 |Electrical machinery and equipment and parts thereof; sound |1.7 |2.1 |1.8 |1.6 |
| | |recorders and reprod | | | | |
|10 | |Other |33.7 |20.7 |12.9 |11.9 |
| | |Total |89.1 |104.1 |108.1 |100.0 |
Source: Sri Lanka Customs
Figure 3-2 Exports by Sri Lanka to China Chapter-Wise (USD MN)
3 Two-way Trade in Services
In recent years, China's contracted project in Sri Lanka has developed rapidly whose turnover reached USD 140 million in 2007. By the end of 2012, the accumulated value of contracts signed amounted to USD 9.052 billion and the turnover completed reached USD 5.583 billion, among which in 2012 the newly signed contracts valued USD 1.047 billion while the turnover completed valued USD 1.53 billion.[13] In addition, the dispatched labor of Chinese contracted projects in Sri Lanka rose to 4390 people by the end of 2012.[14]
For Sri Lanka, to undertake an analysis on bilateral Trade in Services, no data are available.
4 Two-way Investment
In recent years, the economic and trade tie between the two countries has become increasingly closer. Sri Lanka officially declared that China has become the largest investor in Sri Lanka, particularly in the fields of infrastructure construction, i.e. port, railway, hotel, etc, as well as fishing and garment processing and so on, leading to a further development of the cooperation between the two countries in investment. The Sri Lanka government will offer the Chinese government and individual investors a wider range of preferential policies, focusing on attracting investment to key areas as infrastructure, fisheries, electronics, clothing, rubber, computer software, tourism, etc. By the end of 2012, China's accumulated direct investment to Sri Lanka reached USD 243 million in which the portion of 2012 was USD 80.34 million, while China's total number of projects invested by Sri Lanka amounted to 67 with the actual total investment worth of USD 18.91 million.[15]
For Sri Lanka, after introducing the open economy, FDI inflows to Sri Lanka from various countries have shown an increasing trend. Chinese investors have also played a key role in this regard with 24 Chinese projects operating in Sri Lanka as at end of October 2013 with an estimated investment value of US $ 121.25 Mn. Most of these investments are in the sectors of Textile & Apparel, Fisheries, and Manufacturing.
Table 3-7 Chinese Projects in Sri Lanka (As at End of October 2013)
|No |Name of the Enterprise |Product Description |Value (US$ Mn) |
| |Approved /Awaiting Agreement | | |
|1 |Garment Hangers For Export |Garment Hangers |0.73 |
|2 |Apartment Complex At Rajagiriya |Apartment Complex |21.3 |
|3 |Mixed Development Project In Colombo-04 |Mixed Development Project |11.7 |
|4 |Deep Sea Fishing |Deep Sea Fishing |6.9 |
| |Awaiting Implementation | | |
|5 |Blue Ocean Fishery (Pvt) Ltd. |Deep Sea Fishing |12.6 |
|6 |Yoshidasha (Pvt) Ltd. |200 Roomed Five Star Hotel In Kandy |41.9 |
|7 |Kowloon Mining (Pvt) Ltd |Process Quartz And Rutile |1.4 |
|8 |Yuhang (Pvt) Ltd. |Cocopeat Bricks & Twisted Fibre |0.8 |
| |Awaiting Commercial Operation | | |
|9 |Rui Yang Fishery Intl. Company (Pvt) Ltd |Process Fresh Fish |0.3 |
|10 |Mega Ten Bioenergy (Pvt) Ltd. |10 Mw Dendro Power Plant |10.3 |
|11 |Vedanta Lanka (Pvt) Ltd. | Tropical Fruits, Vegetables & Spices |1.3 |
| |In Commercial Operation | | |
|12 |Ante Leco Metering Company (Pvt) Ltd. |Energy Meters |0.4 |
|13 |Lanka- Yuncheng Plate Making Company P.L |Printing Cylinders |0.7 |
|14 |Creative Cycles (Pvt) Ltd. |Bicycles,Export Bicycle Wheels |0.6 |
|15 |Great Cycles (Pvt) Ltd. |Bicycle Frames & Forks, Assemble Of Bicycle & |1.6 |
| | |Wheels | |
|16 |Opel Embroidery Services (Pvt) Ltd. |Provide Embroidery Ser |0.07 |
|17 |Textured Jersey Lanka Plc |Fabric & Related Products |3.8 |
|18 |Rasuki Apparel (Pvt) Ltd. |Garments |- |
|19 |Daiyin Lanka Apparels (Pvt) Ltd. |Apparel & Textile Products |0.1 |
|20 |Lisen Lanka (Pvt) Ltd. |Polyethylene Tereththalate (Pet) Flakes |0.9 |
|21 |C.L. Intl. Consultancy (Pvt) Ltd. |Management Consultants |0.05 |
|22 |Taian Lanka Steel Company (Pvt) Ltd. |Steel Tubes |0.5 |
|23 |Taprobane Seafoods (Pvt) Ltd. |Deep Sea Fishing |3.1 |
|24 |Flying Star Lighting (Pvt) Ltd. |Cfl Bulbs & Bulb Holders |0.2 |
| |Total | |121.25 |
Source : MIS/Board of Investment of Sri Lanka
5 Bilateral Economic Cooperation
3.
4.
5.
1 Economic Cooperation and Development
The economic cooperation between China and Sri Lanka has a long history. There were a large number of cooperation in infrastructure development and social and economic development, particularly in the areas of infrastructure construction as the port aviation, energy development, roads and highways, irrigation, etc.
According to the Joint Communiqué issued in May 2013, the two sides agreed to further promote the mutually beneficial bilateral cooperation in investment. Chinese government will continue to promote competitive Chinese enterprises to invest in Sri Lanka, and to encourage private enterprises of the two sides to strengthen investment cooperation, with a focus on fields like tourism, infrastructure construction, light industry, food processing and packaging, agriculture, and export-oriented enterprises. The two sides also agreed to enhance an all-round cooperation in tourism, laying foundations to promote the exchange among travel agencies and workers in tourism industry. China will also continue to encourage Chinese citizens to travel to Sri Lanka and assist in exploring the Chinese tourism market. To strengthen cooperation under the framework of the Asia Pacific Trade Agreement, the two sides agreed to launch the Sino-Sri Lanka FTA negotiations process, to set up an expert group to conduct feasibility studies, to encourage the use of domestic currency in bilateral trade and investment. The two sides will work together to upgrade their bilateral economic cooperation to a new level.
1. Economic and Technical Assistance
The economic and technical assistance from China began in 1957. A series of projects have been constructed such as the Bandaranaike Memorial International Convention Hall, the Supreme Court building and the National Performing Arts Theatre. When the Indian Ocean tsunami occurred at the end of 2004, Chinese government provided Sri Lanka with tsunami special assistance, relieved a batch of matured debts, and dispatched medical teams to carry out rescue work. Civil society in China also donated enthusiastically. As a result, "the China-Sri Lanka Friendship Village" and "the Red Cross Village were built with the money collected.
2. Transport Facilities Cooperation
In 1999, the Railways Bureau of Sri Lanka bought from China National Machinery & Equipment Import & Export Hubei Co., Ltd 15 six-section diesel–multiple-units manufactured by CSR Sifang Co., Ltd whose products were welcomed by Sri Lanka railway section for a comprehensive merit with high quality and reasonable price. This deal laid a good foundation of the export of Chinese locomotives and carriages to Sri Lanka.[16] After that, China National Machinery Import & Export Corporation and China National Machinery & Equipment Import & Export Hubei Co. Ltd negotiated respectively with the Ministry of Transport and the Railways Bureau of Sri Lanka on their passenger train and diesel multiple units import project from China. By offering favorable loans that Sri Lanka requested, China signed with Sri Lanka a passenger train export contract worth of USD 20 million and a multiple unit contract worth of USD 30 million in 2006.[17]
Chinese companies also involved in the high speed rail project from Colombo to the Colombo International Airport, mainly including old-line reconstruction over 20 km, new two-lane railway 11 km, housing construction, communications signal, power, multiple units, passenger train and viaduct etc., worth of about USD 170 million. A preliminary consensus was reached in August 2006 on the technical plan, overall costs, etc., and part of favorable loans and commercial loans were also provided by China.[18]
3. Communications Project Cooperation
The cooperation was also conducted in communications projects. In the late 1990s, Shenzhen ZTE Corporation and Huawei Corporation began to develop the communications business in Sri Lanka. Two companies broke the long-term monopoly of foreign companies in Sri Lanka telecommunications area, so that China's high-end communications technologies and products successfully entered the local market. In 2005, ZTE and Sri Lanka Telecommunications signed the CDMA contracts, making the debut of Chinese wireless terminal devices in Sri Lanka telecommunications companies. By the end of 2009, ZTE's total contracts in Sri Lanka amounted to USD 70 million. Also in 2005, Huawei realized the first cooperation with Dialog, the largest mobile operator in Sri Lanka, which shook the long-term monopoly position of world-renowned telecommunications suppliers Alcatel and Ericsson, and then Huawei launched CDMA business cooperated with Lanka Bell and Suntel, selling 170 thousand terminals. By the end of 2009, the total turnover of Huawei has reached USD 50 million.[19]
4. Cooperation in Other Projects
Sri Lanka has been actively participating in the South Asian Countries Trade Fair (SACTF), which is held in China since 2007 and rename as China-South Asian Expo, and became the theme countries in 2011 fair and the rotating presidency country of the South Asia Business and Trade Forum in the same year. With increasingly frequent high-level reciprocal visits and deepening economic and trade cooperation of the two sides, the scale of Sri Lanka exhibitions have been expanding year after year. The number of Sri Lanka exhibitors in 2013 reached to more than 220 people and booths to 130.[20]
In November 2011, China CAMC Engineering Co., Ltd. (CAMCE) signed with the Ministry of Water Resources of Sri Lanka in Colombo a cooperation agreement on the Yan Oya Reservoir Project worth of USD 175 million. According to the agreement, CAMCE will build 5 dams and some supporting irrigation canals using loans from China. The construction period is 4 years. Upon completion, the project can irrigate 7000 hectares crops, give direct benefits to 7000 rural families and at the same time, create 3000 job opportunities in rural areas.[21]
In November 2013, China Communications Construction Company Limited and Board of Investment of Sri Lanka signed an investment agreement on the Port City Project in Colombo. The first-stage of the Port City Project mainly includes infrastructure construction like breakwaters, hydraulic reclamation, bank protection, roads, etc. When completed, it will form a land area of 233-hectare and become a high-end city complex in South Asia integrated with finance, tourism, logistics, IT, etc. The total investment of the project is about USD 1.4 billion and the construction period is 3 years. With a planning building area of 5.2 million m2 and a capacity of 160 thousand people, Port City Colombo, upon completion, will create 83 thousand jobs and become the central business district of Colombo.
1 The Development Framework
The strategic directives in relation to the economic development of Sri Lanka are well articulated in the Development Policy Framework of the Government; MahindaChintana – Vision for the Future. The policy document embodies a more gradual approach to reform, combining the positive attributes of market economic policies, including encouragement of foreign direct investment (FDI) with support for domestic enterprises. The core of the MahindaChintana – Vision for the Future is to achieve high growth rates through investment in large scale infrastructure and the knowledge economy, and focus on rural development to help lagging regions. The strategy is seen with the commencement of the infrastructure development of Sri Lanka in the fields of ports, roads and highways, power, public utilities, arts and culture. It is in this context that the Government embarked on a more rational and productive journey to create better infrastructure conveniences to the nation that would bring enormous economic gains in its economic development strategy.
The bilateral relationship between China and Sri Lanka has now reached new heights with China emerged as one of leading development partners of Sri Lanka in the recent past. In 1971, the Government of Sri Lanka has obtained a loan amounting to US$ 6.70 million to import rice. Since then the total assistance extended by China up to 2012 was US$ 5,126 million of which US$ 4,818 million or around 94 percent was extended during the last 8 years. With the accelerated infrastructure development programme initiated by the Government of Sri Lanka to build a modern infrastructure network suitable for an upper middle income economy in 2005, the annual commitment made by the People’s Republic of China has drastically increased and stands at US$ 800-1,000 million at present. The current Chinese loan portfolio includes 64 loans and the funds received under these loans have been invested in high priority strategic development areas of roads, aviation, power and energy, highways, irrigation and ports. The annual disbursements under these loans remain around US$ 600 million.
During the year 2013, the Government of Sri Lanka was able to secure US$ 749 million under the Preferential Buyer’s Credit Facility of the EXIM Bank of China for implementation of Kadawatha to Kerawalapitiya section of the Outer Circular Expressway Project (US$ 520 million) and the Integrated Water Supply Scheme covering the Gampaha, Attanagalla and Minuwangoda areas (US$ 229 million). In addition, US$ 449 million has been secured under the Government Concessional Loan Facility for implementation of the Kurunegala Water Supply and Sanitation Project (US$ 77 million), the Hambantota International Hub Development Project (US$ 252 million) and the building of necessary supportive infrastructure at the recently commissioned MattalaRajapakse International Airport (US$ 120 million). The Relocation of Moratuwa University Project will be financed through the loan assistance of US$ 76 million obtained under the Buyer’s Credit Facility of the EXIM Bank of China. Accordingly, the total commitment from the EXIM Bank of China in 2013 is US$ 1,272 million. In addition, the Government has secured financial assistance of US$ 1,344 million under 2014 lending pipeline for implementation of road rehabilitation projects in the southern part of Sri Lanka and also for the Extension of Southern Expressway Project from Matara to Mattala International Airport. These funds are also mobilized from the EXIM Bank of China under the PBC and GCL facilities.
Table 3-8 Cumulative Chinese Financial Assistance to Sri Lanka Including Loans and Grants (1971 -2012)
|Sector |No. of Loans & Grants |Amount (US$ million) |% |
|Roads & Bridges |19 |1,642 |32 |
|Power & Energy |11 |1,751 |34 |
|Ports & Shipping |5 |1,183 |23 |
|Aviation |2 |232 |5 |
|Other |27 |318 |6 |
|Total |64 |5,126 |100 |
Source: Department of External Resources
The Government also held initial discussions with the China Development Bank to obtain US$ 680 million to finance development projects in the road sector and the water sector. A Memorandum of Understanding was signed in this regard during the visit of His Excellency the President Mahinda Rajapaksa to China.
During the past, China had funded several projects including the Supreme Court Complex, the Central Mailing Exchange, Gin Ganga Flood Protection Scheme and the redevelopment of the Lady Ridgeway Children’s Hospital. In the aftermath of the tsunami disaster China helped Sri Lanka build three fisheries harbors for those affected by the event and extended US$ 300 million worth of support.
The landmark projects implemented with Chinese assistance in the recent past include Southern Expressway Extension (Galle - Matara), Hambantota Port Development Project, Norochcholai Coal Power Project (900 MW), Mattala International Airport Project, Colombo - Katunayake Airport Expressway Project, Rehabilitation and Reconstruction of Highway Projects, Moragahakanda Multi-purpose Development Project (Irrigation, drinking water and electricity) and Matara- Kataragamarailwayline extension project and the NelumPokuna Art Theatre.
Figure 3-3 Sectoral Distribution of Assistance from China 2008 - 2012
2 Recent Developments
In 2011 Chinese Premier Wen Jiabao met with President Mahinda Rajapaksa in Beijing where Premier Wen expressed the view that China is ready to help with the Sri Lanka’s economic development, promote infrastructure, enlarge trade and investment cooperation and strengthen cultural and personal exchanges. The two countries signed agreements on a wide range of cooperation that covers infrastructure development in transport, tourism, telecommunications, and port development. Agreements for funding several projects including the Colombo Lotus Tower Project and the Hambantota Port Development Phase II were also signed.
The Fifth Session of the Joint Committee on Trade and Economic Cooperation between the Government of the Democratic Socialist Republic of Sri Lanka and the Government of the People’s Republic of China was held in Colombo on 24th April 2013 following which further financial assistance to Sri Lanka’s infrastructure development, enhanced market access in China for Sri Lanka’s export of high value garments, manufactured tea and rubber products and industrial goods made out of primary raw material, greater inflow of Chinese tourists and investors to Sri Lanka have been explored while strengthening mutual economic cooperation.
3 Grant Assistance
The government of China annually extends Grants Assistance to the tune of RMB 100 Million (US$ 10 – 15 Million) to Sri Lanka in support of projects in culture, art, health and other social facilities The BMICH, the Superior Court Complex, the Lady Ridgeway Children’s Hospital and the Nelum Pokuna Performing Arts Theatre are landmark projects developed in Sri Lanka, with Chinese Aid. Aid from China distinguished by its soft terms and its relevance to the development needs of the country. It is noteworthy that in May 1964 China waived off all the interest on all the loans given to Sri Lanka.
1 The BMICH
The BMICH built at a cost of around Rs. 35 million was handed over to the Sri Lankan Government as a gift from the People’s Republic of China in 1971 in memory of S W R D Bandaranaike, Prime Minister of Sri Lanka from 1956 to 1959. The Non Aligned Summit was held in Sri Lanka in 1974 and the venue was the BMICH. In 1998 another Exhibition Centre was built next to the BMICH on the same ground, once again as a gift from the People’s Republic of China. It is named the Sirimavo Bandaranaike Memorial Exhibition Centre. The grant of Chinese aid to Sri Lanka began during Mrs. Bandaranaike’s term of office.
2 Lady Ridgeway Children’s Hospital
This Children’s Hospital which was built with grant funds from the Chinese Government has all medical facilities and has specialized units in varying fields. It is also one of the well-equipped hospitals in Sri Lanka headed by senior consultants providing quality service to both inpatients and outpatients.
3 Superior Courts Complex
The Superior Courts Complex was built with a grant fund of US $15 Million funds, provided by the Chinese Government on a request made by the late President J.R. Jayawarden, symbolizes the success of China – Sri Lanka relations.
4 Nelum Pokuna Performing Arts Theatre
Nelum Pokuna Mahinda Rajapaksa Theatre is a landmark project in the development of performing arts in Sri Lanka. It is a state of the art performance 5 storied theatre with a seating capacity of 1,288 and other modern facilities and is situated in Colombo.
Table 3-9 Projects with Chinese Grants
|Project Title |Amount |
| |US$ Million |
|Polonnaruwa Water Supply & sanitation |32.9 |
|Maintenance of BMICH |2.1 |
|International Study center BMICH |1.5 |
|Construction of Exhibition center BMICH |1.8 |
|Muthurajawela oil tank farm project |3.6 |
|Renovation of fisheries Harbors damaged by Tsunami |18.2 |
|Construction of few selected Road Infrastructure |14.5 |
|Bandaranaike Memorial International Conference Hall |15.7 |
|Superior Court Complex |3.6 |
|Lady Ridgeway Hospital |2.0 |
|Kandy Road (Kiribathgoda to Kadawatha) |10.0 |
|Childcare and Maternal Building- Colombo North Teaching Hospital |6.5 |
|Development of Ambulatory Care Center of National Hospital |14.5 |
|Provision of Sports Goods for youth in Jaffna |0.2 |
4 Major Projects Funded with Chinese Assistance
1 The Second International Airport at Mattala
The Economic Policy Framework of the Government recognizes the establishment of a second international airport in the South as an alternative international airport to the Bandaranaike International Airport, Katunayake, to promote aviation connectivity in the Region. The project was funded by the EXIM Bank of China under a concessional loan and was constructed by the China Harbour Engineering Corporation. The new airport adds value to the aviation industry, facilitating economic development, international trade, tourism, and employment. The new airport is specially designed as an environmental friendly carbon neutral airport.
2 International Seaport at Hambantota
The development of a port in the South of Sri Lanka was planned to reap the benefits of the busy international shipping line which is located close to Sri Lanka. H.E President Mahinda Rajapaksa, prioritized the development of the Hambantota Port and Airport Projects and placed same in centre stage in his 10 year development Framework – Mahinda Chintana Vision for the Future. The proposal embodied the construction of a deep water harbor in Hambantota, being a location just half an hour off the world’s busiest sea-lane which is used by 100 – 200 ships a day. The project is financed through the EXIM Bank of China. The Sri Lankan Government and EXIM Bank of China entered into an agreement on 30, October 2007 pertaining to the construction of the Hambantota Harbour which was signed under the patronage of President Mahinda Rajapaksa, following his State Visit to China in February 2007. It is expected that at least 20 percent of the shipping traffic, mainly oil tankers, would call over at the Hambantota Port, while many of the 4,500 oil tankers passing this sea route annually would anchor in Hambantota for bunkering, ship repairing, to purchase food, water and medical supplies and for logistic purposes. The main construction work of Phase I of the project was completed in 2012. The total estimated construction cost of Phase 1 is US$ 361 Million, out of which, 85 per cent is funded by the EXIM Bank of China.
3 Southern Expressway Extension to Matara
The extension of the Southern Expressway section from Galle to Matara, which is 35km in length is under construction and is scheduled to be completed by 2013. The Southern Expressway will be extended up to Hambantota connecting Mattala International Airport in the South.
4 Puttalam Coal Power Plant
The 900 MW Coal Power Plant was initiated with long term financial assistance from China, to reduce dependency on oil for power generation. The investment in this project includes the construction of a jetty, transmission lines, power stations and an ancillary administration facility in Puttalam. Phase I of the project targeting the generation of 300 MW commenced in 2011 and the other 600 MW generation is expected in early 2014.
5 Colombo-Katunayake Expressway
The 25.8-km long, 4 lane expressway was declared open by H.E. the President Mahinda Rajapaksa on 27th October 2013. This will be the gateway to Sri Lanka connecting the Bandaranaike International Airport with the Capital City Colombo. This expressway reduces the travel time from Katunayake to Colombo to around 20 minutes, what usually takes over an hour. The total estimated cost of the project is US$ 292 Million out of which EXIM Bank of China is funding US$ 248.2 Million while the balance will be borne by the Government.
6 Moragahakanda Multi-purpose Irrigation Project
The Moragahakanda Multi-purpose Irrigation Project will provide irrigated water to 81,442 hectares of land in the dry zone in the North Central, Northern. North Western and Eastern Provinces. It will meet domestic and industrial water requirements of the townships in Jaffna, Kilinochchi, Anuradhapura, Trincomalee, Polonnaruwa and Matale. It will also add 25MW of hydropower electricity to the national grid. It is expected that the related annual agricultural benefits from paddy cultivation will be around US$ 30.1 Million.
The project is also expected to facilitate the fresh water fish breeding industry and further contribute to the national economy. The country would annually save around US$ 2.49 Bn. From power generation. The Moragahakanda Irrigation Project is the second largest irrigation project, next to the Victoria Reservoir, of the Mahaweli diversion scheme.
7 Reconstruction of the Northern Highway
The Northern Highway (A9) which spans over 153 km was re-constructed with Chinese assistance of around US$ 166 Million. This will facilitate rapid development in the North and East for which the Government has accorded highest priority, after the end of the conflict. A9 provides connectivity to Pulliyankulam - Mulativu road and Pulmudai – Kokkilai road as well.
5 Technical Co-operation
The exchange of education assistance between the two countries began with providing 7 scholarships to Sri Lankan Students in 1974. Since then the number of students moving to China for higher education and medicine has increased.
The Chinese Government also provides a large number of long term and short term annual scholarships to Sri Lanka, to promote public service capacity building. The two countries have signed a wide range of cooperation agreements. Letters of Exchange have also been signed between the two countries on many occasions i.e. on Technical and Support Services for the Sirimavo Bandaranaike Centre for International Studies, on the donation of a MRI Scanner etc. Further, many joint workshops have been held at both destinations to strengthen identified areas of cooperation.
2 Tourism Cooperation
In 2003, the Chinese government officially granted Sri Lanka Approved Destination Status (ADS). In August 2005, China National Tourism Administration and Sri Lanka Ministry of Tourism signed the Memorandum of Understanding on Tourism Cooperation, aiming to further strengthen the existing friendly relations and the tourism cooperation between the two countries, as well as the mutual understanding between Chinese people and Sri Lankan people. The two counties encourage and promote the reciprocal bilateral contacts and exchanges of tourism sectors and tourism units. Sri Lanka would develop cultural and historical attractions for tourists from China, and assist Chinese people who were on a trip or on investigation in Sri Lanka, and hotel management related institutions that launching tourism related training project. China gave permission to the publicity and promotion activities of Sri Lanka through Chinese media, exhibitions and trade fairs, and would provide convenience and preference for those activities. In 2012, Sri Lankan visitors to China reached 43 thousand person-time (+13% compared to 2011), while the figure of Chinese citizens who chose Sri Lanka as first visiting spot of their tour accounted to 37 thousand person-time (+130% compared to 2011).
Furthermore, Sri Lanka Tourism Development Authority is expected to conduct a series of promotional campaigns in China and under this programme, a promotional event entitled “Sri Lanka Week” was held in Beijing.
China is also expected to provide professional services to its media channels and experts to develop international level television programmes for the tourism industry. To this effect, an Agreement was signed between the Sri Lanka Tourism Promotion Bureau and China Central Television and a team of officials from China Central Television is expected to be in Colombo to prepare a series of documentaries to promote Sri Lanka tourism in China.
1 Outbound Tourism
Figure 3-4 China Outbound Tourism (1995-2011)
[pic]
China Outbound Tourism to Sri Lanka
In 2012, tourist arrivals to Sri Lanka continued to boom with an impressive increase of 58 percent in relation to Chinese tourists standing at 25,781 compare with 16,308 arrivals in 2011.
The improved domestic connectivity and the direct Sri Lankan Airlines flights to Beijing, Shanghai, Guangzhou and Kunming can now be leveraged to achieve a substantial boost to tourists from China and to promote Sri Lanka as a popular tourist destination among Chinese tourists.
3 Cooperation in Other Fields
In addition to the sphere of economic cooperation, Sri Lanka and China have excellent relations in a number of sectors which have been cemented through numerous agreements, MoUs and special arrangements. There have also been a number of sister city agreements between Chinese cities and counterparts in Sri Lanka. Through cooperation in the fields of youth affairs and sports these cultural ties have been further strengthened.
In December 1998, China's State Environmental Protection Administration (SEPA) and the Sri Lankan Ministry of Forest and Environment signed the Cooperation Agreement on Environmental Protection with a purpose of practicing and implementing environmental protection and the rational use of resources by means of scientific and research exchange and information sharing.
In April 2005, the Ministry of Agriculture of China together with the Sri Lankan Ministry of Agriculture and Land signed the Memorandum of Understanding on Agricultural Cooperation, and initiated the Sino-Sri Lanka Agricultural Cooperation Committee to be responsible for formulating and implementing cooperation projects as the exchange of agricultural science information, seeds, seedlings and breeding material, etc. The meeting would be held in China and Sri Lanka alternatively every two years.
Sri Lanka and China have entered in to the following key Memorandums of Understanding in 2007, for close cooperation in several areas which are important to both nations.
1. Agreement on Economic and Technical Cooperation Grant Aid from China between Sri Lanka Foreign Affairs Minister Rohitha Bogollagama and Chinese Foreign Minister.
2. MOU on Urban development between Chinese Minister of Construction Wang Guangtao and Sri Lankan Minister of Urban Development and Sacred Area Development Dinesh Gunawardana.
3. MOU on Friendship between Hambanthota District and Guaugzhou City between Chinese Assistant Minister on Foreign Affairs Cui Tiankai and Sri Lankan Secretary of the Foreign Ministry Palitha Kohona.
4. Agreement on Cooperation between Film Industries Chinese Bureau Director Tong Gang and the Sri Lankan Ambassador in China Nihal Rodrigo.
5. MOU for Donation of Eye Corneas between DCE China Red Cross Society Jiang Yiman and President of Sri Lanka Eye Donation Society Hudson Silva.
6. MOU on Agriculture and Agriculture Mechanization between Chairman of the Chinese CAAMS Chen Zhi and Sri Lanka Secretary of Foreign Affairs Dr. Palitha Kohona.
7. MOU for Student Exchange between Kelaniya University and Beijing Foreign Studies University between the Chairman of the Beijing Foreign Studies University Hao Ping and the Sri Lankan Ambassador Nihal Rodrigo.
In fields such as defense and education, there is multi-layered cooperation. Interactions between the respective militaries, strategic studies institutions and educational establishments have been well established.
Beyond the strict economic purview, there have also been good cooperation in promoting air services and linkages, immigration, transportation, science and technical cooperation, agriculture, information technology etc.
6 Existing Legal and Institutional Framework of Bilateral Trade and Economic Cooperation
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1 Legal and Institutional Framework of Bilateral Economic Cooperation
In January 1980, Chinese government signed the Agreement on Economic and Technological Cooperation with Sri Lanka to provide interest-free loans and engineering and technical personnel for technical assistance.
In May 1984, the Governments of the two countries signed the Agreement on the Establishment of the Joint Committee of Economic and Trade Cooperation and established the Committee to be responsible for the research, consultation and investigation of the bilateral economic and trade cooperation, and when necessary, holding meetings between the two countries alternatively.
In August 2003, the two governments signed the Agreement on the Avoidance of Double Taxation on Incomes and the Prevention of Tax Evasion in order to avoid double taxation.
In April 2005, the governments of the two countries signed the Agreement on Further Deepening Bilateral Economic and Trade Cooperative Relations, deciding to set up an additional division-level consultative committee in line with the Joint Committee of Economic and Trade Cooperation to further explore economic and technical cooperation in trade, economy, investment promotion, tourism and other areas.
In September, 2012, the two governments signed the Visa Exemption Agreement on Holders of Diplomatic, Service (official) and Ordinary Service Passport, and it entered into force on April 18, 2013.
By jointly announcing the People's Republic of China and Democratic Socialist Republic of Sri Lanka Joint Communiqué in May 2013, the two countries declared that they would upgrade the bilateral relation to a strategic partnership and would reach a series of consensus on specific issues such as sovereign territory, economic and trade cooperation, investment, etc. The two sides decided to establish a trade working group and an economic working group under the framework of the Joint Committee of Economic and Trade Cooperation committed to the study of specific measures to accelerate trade facilitation and promote investment and financing cooperation and to a balanced development of bilateral trade.
A general trade agreement signed in 1982 and an Agreement on Economic and Technical Co-operation signed in 1984, which were amalgamated into the Sri Lanka - China Joint Committee for Trade and Economic Cooperation in 1991, provides a broader framework for economic cooperation. At the fourth Session of the Sri Lanka – China Joint Committee for Economic Co-operation was held in April, 29th 2008 in Beijing, China, the two sides agreed to co-operate on various fields, including investment and development projects.
The existing legal framework comprise of a number of Parliamentary Acts including inter alia the Foreign Loan Act No. 29 of 1957, Appropriation Act, Monetary Law Act and the Financial Management (Responsibility) Act No. 3 of 2003.
These legislations provide a common framework for Sri Lanka to engage with all development partners including China. In addition, the Loan Agreements and Memorandum of Understandings (MOUs) signed between Sri Lankan Authorities and Chinese Authorities provide more focused framework for cooperation with regard to specific development initiatives.
2 Legal and Institutional Framework of Bilateral Investment
On purpose of encouraging enterprises in the two countries to increase mutual investment and creating a favorable environment for the two-way investment, in March 1986, the Governments of China and Sri Lanka signed the Agreement on the Promotion and Protection of Investments, according to which the two counties planned to strengthen cooperation in fields like the infrastructure, production and processing, energy, jeweler, mineral resource exploration and development, agriculture and agricultural machinery, fisheries, etc. and push the establishment of joint venture projects. The agreement entered into force on March 25, 1987.
In the recent past, China and Sri Lanka entered in to the following investment related agreements for close cooperation.
MOU on Two-way investment Promotion was signed between Director of Investment Agency of China Mr. Liu Ya Jun and the Secretary to the Treasury Dr. P.B. Jayasundera in 2007.
An investment facilitation agreement was signed between Development Bank of China and the Central Bank of Sri Lanka in 2009.
1 Other Legal Framework of Investment of Sri Lanka
The key legislations facilitating investments in Sri Lanka are;
▪ Board of Investment Law No. 4 of 1978
▪ Strategic Development Projects Act No. 14 of 2008
▪ Finance Act (Hub Operations) No. 12 of 2012
3 Legal and Institutional Framework of Intellectual Property
At present, no bilateral cooperation agreement in the area of intellectual property has been concluded with China.
4 Legal and Institutional Framework of Tourism
In November 2002, the government of China officially granted Sri Lanka Approved Destination Status (ADS) for Chinese citizens. On August 30, 2005, China National Tourism Administration and Sri Lanka Ministry of Tourism signed the Memorandum of Understanding on Tourism Cooperation aiming to better promote the bilateral cooperation in tourism.[22]
In Sri Lanka, tourism and leisure industry is under the purview of the Ministry of Economic Development and it has legal entities namely Sri Lanka Tourism Development Authority, the Sri Lanka Tourism Promotion Bureau and the Sri Lanka Institute of Tourism & Hotel Management that responsible for Tourism development, tourism promotion and human resource development for the sector.
5 Other Legal and Institutional Frameworks
Since the establishment of diplomatic ties in 1957, the friendly relations of the two countries have developed smoothly in all aspects. After the reform and opening up of China, the two countries signed the intergovernmental agreements on cultural cooperation and the annual implementation plan by which the cultural relation has been strengthened day by day. The latest Sino-Sri Lanka Cultural Cooperation Agreement was signed in August 2005. In May 2007, a Confucius Institute was founded in University of Kelaniya. In June 2012, Ministry of Culture of China and Ministry of Culture of Sri Lanka signed the Memorandum of Understanding on the establishment of a Chinese Cultural Centre in Sri Lanka.
In the field of environment, in December 1998, China's State Environmental Protection Administration (SEPA) and Sri Lanka Forest and Environment Ministry signed the Agreement on Environmental Cooperation.
Trade in Goods
1 Overview of Trade Policies Applying to Trade in Goods
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1 Tariffs
China
According to China’s WTO accession commitment, all tariffs in China are consolidated in the WTO. In 2012, the simple average MFN applied rate of China was 9.8%, with agricultural products 15.1% and non-agricultural products 8.9%. China still remains tariff quotas on part of agricultural products and chemical fertilizer products.
Table 4-1 Tariffs Summary of China
|Summary |Year |Total |Ag |Non-Ag |Binding coverage |Total |100 |
|Simple Average MFN |2012 |9.8 |15.1 |8.9 |Ag |Tariff Quotas |5.0 |
|Applied | | | | | |(in %) | |
| | | | | | |Special |0 |
| | | | | | |Safeguards | |
| | | | | | |(in % ) | |
Source: WTO, IDB
With respect to industrial products, the highest average MFN of product groups applied tariffs are levied on Electrical Machinery (24.5%), Leather, Rubber, Footwear, etc. (13.1%), Transport Equipment (13.1%) and Manufactures, n.e.s. (11.6%). The lowest average MFN of product group applied tariff on industrial products is on Wood, Paper and Furniture (4.9%).
For tariffs on other product groups, please refer to Table 4-2.
Table 4-2 Applied Tariffs of China by Product Groups
|No. |Product Groups |MFN Applied Tariff |
| | |Average of Duties (%) |Duty-free in100% |Maximum Duty (%) |
|1 |Agricultural Products |15.1 |7.8 |65 |
|2 |Fish & Fish Products |10.2 |8.9 |23 |
|3 |Minerals, Gems and Precious Metals |9 |11.1 |50 |
|4 |Metals |7 |4 |30 |
|5 |Petroleum |6.3 |5 |9 |
|6 |Chemicals |6.6 |0.7 |47 |
|7 |Wood, Paper, Furniture |4.9 |36 |20 |
|8 |Textile and Clothing |11.3 |0 |38 |
|9 |Leather, Rubber, Footwear, etc. |13.1 |0.4 |25 |
|10 |Electrical Machinery |24.5 |29.4 |35 |
|11 |Non-electrical Machinery |7.8 |13.5 |35 |
|12 |Transport Equipment |13.1 |0.3 |45 |
|13 |Manufactures, n.e.s. |11.6 |10.3 |30 |
Source: Ministry of Finance of the P.R.China
China applies tariff rate quotas on six kinds of agricultural products and two non-agricultural products including wheat, maize, rice (whether or not husked), sugar, wool, wool tops, cotton and chemical fertilizer.
Table 4-3 In-Quota Interim Duty Rate on Imported Goods
|No. |Description of Goods |Number of HS-8 Digit Tariff Lines |M.F.N. (%) |In-quota Duty Rate (%) |
|1 |Wheat |7 |65 |1-10 |
|2 |Maize (Corn) |5 |20-65 |1-10 |
|3 |Rice, whether or not husked |14 |10-65 |1-9 |
|4 |Sugar |7 |50 |15 |
|5 |Wool |6 |38 |1 |
|6 |Wool Tops |3 |38 |3 |
|7 |Cotton |2 |40 |1 |
|8 |Chemical Fertilizer |3 |50 |4 |
Sri Lanka
Currently, Sri Lanka has 6,818 tariff lines at the eight- digits level. Over 96% of tariff lines are ad valorem, levied on the c.i.f. value of imports. Currently Sri Lanka has a four-band tariff structure with 30%, 15%, 5% and 0%. Except for few items, in general, raw materials for local industries are kept at low duty rates, while rates for finished products at higher and intermediate products in between.
Sri Lanka does not have a tariff quota system on any imports under its general tariff policy. Under the Pakistan Sri Lanka Free Trade Agreement (PSFTA), Sri Lanka operates a tariff quota system for imports of basmati rice and potatoes, but quota allocation is undertaken by the Pakistani authorities, which allocate quotas to exporters of these two commodities. This is the only TRQ system Sri Lanka operates on imports at present. A limited number of Sri Lanka exports are subject to TRQs under both the ISFTA and PSFTA. Under the ISFTA, India operates a TRQ system on apparel, which enjoys duty free access for which quota allocation is undertaken by Sri Lankan authorities on a first-come, first-served basis, with other conditions. Export of pepper is also subject to a TRQ which is administered by India. Under the PSFTA, export of tea, betel leaves and selected apparel items are subject to TRQ. The Government of Pakistan administers these quotas while Sri Lanka authorities grant necessary certificates on rules of origin to exporters.
Table 4-4 Tariff Structure in 2012
|Duty Rate |No of Tariff Lines (8 Digits Level) As at 31.12.2012 |
|Free |3,024 |
|5% | 410 |
|15% |1,587 |
|30% |1,504 |
|75% | 04 |
|100% | 05 |
|Specific | 84 |
|Specific & Ad valorem | 200 |
|Total |6,818 |
Table 4-5 Import duties collected 2002 – 2012 (US$ Mn)
|Year |2002 |2003 |
|Product |AVG |Duty-free in % |
|groups | | |
|1 |APTA |Products must be wholly obtained or produced in the member country, or the value of |
| | |non-originating parts or components used in the manufacture must be no more than 55% |
| | |of the FOB value of the product. The country of origin is defined as the country where|
| | |the last processing operation takes place. In addition, goods must conform to the rule|
| | |of direct consignment. |
|2 |ASEAN |Products must be wholly obtained or produced in a party; or the content of products |
| | |originating in - a party should be no less than 40% of the total value; or the value |
| | |of the non-originating parts or components used in the manufacture of the products |
| | |must be no more than 60% of the FOB value of the product. The country of origin is |
| | |defined as the country where the last processing operation takes place. In addition, |
| | |goods must conform to the rule of direct consignment |
|3 |Least Developed Countries |Products must be wholly obtained or produced in the country of origin or the value of |
| | |non-originating parts used in the manufacture of a good may be up to 60% of the FOB |
| | |value of the product. In addition, goods must conform to the rule of direct |
| | |consignment. |
|4 |Hong Kong, China |Products must be wholly produced in Hong Kong, China or have Hong Kong, China content |
| | |of at least 30% of value added; in addition, the final stage of processing must be |
| | |carried out in Hong Kong, China. Goods must enter into Mainland China directly. |
|5 |Macao, China |Products must be wholly produced in Macao, China or have Macao, China content of at |
| | |least 30% of value added or have resulted in a change in the HS 4-digit tariff |
| | |heading; in addition, the final stage of processing must be carried out in Macao, |
| | |China. In addition, goods must conform to the rule of direct consignment. |
|6 |Chile |Products must be wholly obtained or produced in Chile or China;or the value of |
| | |non-originating parts or components used in the manufacture must be less than 60% of |
| | |the FOB value of the product. The country of origin is defined as the country where |
| | |the last processing operation takes place. In addition, goods must conform to the rule|
| | |of direct consignment. |
|7 |Pakistan |Products must be wholly obtained or produced in China or Pakistan; or the value of |
| | |non-originating parts or components used in the manufacture must be less than 60% of |
| | |the FOB value of the product. The country of origin is defined as the country where |
| | |the last processing operation takes place. In addition, goods must conform to the rule|
| | |of direct consignment. |
|8 |New Zealand |Products must be wholly obtained or produced in China or New Zealand; or products be |
| | |produced in New Zealand, using non-originating materials that conform to a change in |
| | |tariff classification(some products must also be conform to a regional value content |
| | |or a process requirement). In addition, goods must conform to the rule of direct |
| | |consignment. |
|9 |Singapore |Products must be wholly obtained or produced in China or Singapore; or the percentage |
| | |of regional value content shall not be less than 40% of the product. In addition, |
| | |goods must conform to the rule of direct consignment. |
|10 |Peru |Products must be wholly obtained or produced in China or Peru; or products be produced|
| | |in Peru, using non-originating materials that conform to a change in tariff |
| | |classification (some products must also be conform to a regional value content or a |
| | |process requirement). In addition, goods must conform to the rule of direct |
| | |consignment. |
|11 |Costa Rica |Products must be wholly obtained or produced in China or Costa Rica; or products be |
| | |produced in Costa Rica, using non-originating materials that conform to changes in |
| | |tariff classification, regional value content, other manufacturing process or |
| | |combination of the above rules or other requirements. In addition, goods must conform |
| | |to the rule of direct consignment. |
|12 | Iceland |Products must be wholly obtained or produced in China or Iceland; or products be |
| | |produced in Iceland, using non-originating materials that conform to changes in tariff|
| | |classification, regional value content, or other requirements. In addition, goods must|
| | |conform to the rule of direct consignment. |
|13 |Switzerland |Products must be wholly obtained or produced in China or Switzerland; non-originating |
| | |materials that used in production or processing substantially changed in China or |
| | |Switzerland; or exclusively produced from originating materials of both parties. |
Sri Lanka
Under Preferential Agreements, the Department of Commerce is the Issuing Authority whereas designated trade chambers issue Certificates of Origin for non-preferential exports. The following table illustrates the Rules of Origin Criteria under Preferential Trading Agreements in which Sri Lanka is a Member State/Country.
Table 4-9 Summary of Rules of Origin Provisions in Sri Lanka’s RTAs
|Trade Agreement |General Criteria |Cumulative Provisions |Product Specific Rules (|
| | | |PSR) |
|ISFTA |DVA 35% of FOB |Aggregate content -35% of FOB and |In principle agreed |
| |and CTH |Exporting Country content-25% of FOB | |
|PSFTA |DVA 35% of FOB |Aggregate content -35% of FOB and | |
| |and CTSH |exporting Country content-25% of FOB | |
|SAFTA |DVA and CTH |Aggregate content |191 |
| |DVA |50% of FOB | |
| |30% of FOB- LDC |and | |
| |40% of FOB - Non LDC |Exporting Country content-20% of FOB | |
| |35% of FOB - Sri Lanka | | |
|SAPTA |DVA |Aggregate content |- |
| |40% of FOB - Non LDC |50% of FOB - Non LDC | |
| |30% of FOB - LDC |40% of FOB –LDC | |
|APTA |DVA |Aggregate content |In principle agreed |
| |45% of FOB – Non LDC |60% of FOB | |
| |35% of FOB – LDC |Exporting Country content-nil | |
|GSTP |DVA |Aggregate content |- |
| |50% of FOB - Non LDC |60% of FOB | |
| |40% of FOB -LDC |Exporting Country content-nil | |
DVA : Domestic Value Addition
CTH : Change of Tariff Heading
CTSH : Change of Tariff Sub Heading
% refers to the minimum value addition
2 Customs Procedures and Trade Facilitation
China
China joined the International Convention on the Simplification and Harmonization of Customs Procedures in 1988, and signed the Protocol on its Amendment in June 2000. The procedures of customs clearance, supervision and duty collection adopted by China are consistent with the Revised Kyoto Convention.
To enforce the Revised Kyoto Convention, China Customs has been taking actions to simplify its clearance procedures. Since 2005, China has been improving its supervision to shorten the releasing time of goods and to enhance the clearance in an efficient manner. The customs procedure reform in China achieved considerable achievements which was advocated by the World Customs Organization (WCO). On August 1st 2012, General Administration of China Customs began to launch pilot program about paperless reforms on clearance in 12 regional customs (Beijing, Tianjin, Shanghai, Nanjing, Hangzhou, Ningbo, Fuzhou, Qingdao, Guangzhou, Shenzhen, Gongbei, Huangpu), piloting items extending to all on-site operations and all experimental ones. The rest regional customs just picked up by themselves one or two on-site operations or part of operations to carry out pilot program about paperless reforms on clearance. Piloting enterprises extended to those classified B or a higher level in accordance with the provisions on customs enterprises classification.
China attaches great importance to international customs practice and is an active player in relevant international organizations including the WCO and APEC. China has fully implemented customs-related WTO Agreements and the Collective Action Plans under the APEC Sub-committee on Customs Procedures (SCCP CAP) items.
The major tasks of China Customs that stressed mutual cooperation are enhancing efficiency clearance, lowering costs, and backing up export expansion of foreign trade; unremitting efforts have made for these.
Sri Lanka
1 Legal framework
The Sri Lanka Customs Department falls within the jurisdiction of the Ministry of Finance and Planning and the Ministry is responsible for strategic policy guidance of the department. Sri Lanka Customs is one of the oldest customs administrations in the world. It performs its functions mainly within the legal framework of the Customs Ordinance No 17 of 1869 and subsequent amendments and regulations issued there under. Further, the Customs Department meets obligations of other acts and ordinances belonging to other government entities.
Meeting the obligations of the international conventions and treaties is another responsibility vested with Customs. CITIES Convention and Basel Convention are some of the conventions that have international obligations which are implemented at the port of entry. The Plant Protection Act No 35 of 1999 and Control of Pesticides Act (Amendment) Act No 6 of 1994 are to name a few of local legislature implemented at the port of entry (customs). The department is accountable for managing the broader control and sea operations within its territory.
2 Major functions
In the broader context, main functions of the Customs Department are (a) collection of government revenue (which is nearly 55% of the total tax revenue of the government), (b) trade facilitation, (c) law enforcement (d) protection of environment and biodiversity and (e) management of data (mainly on imports and exports).
Collection of revenue is mainly from imports. Customs import duty (CID) and Port Authority Levy (PAL) are collected at the point of customs.
Law enforcement is necessary to prevent custom offences and also to take action for those who have committed customs offences including narcotic offences in land and in territorial waters. Protection of biodiversity is mainly required to avoid intrusion of alien species of flora and fauna and related diseases into the country that are harmful to natural environment, agriculture and biodiversity. Sri Lanka is considered as one of the world's 25 biodiversity hotspots. Also boarder protection is required to avoid smuggling of items that are of archeological value.
3 Link with International Trade Organizations
Sri Lanka became a signatory to the International Convention of Harmonized Commodity Description and Coding System (HS) and a member country to the World Customs Organization (WCO) and signatory to Kyoto Convention. Sri Lanka implements WTO agreement on Customs valuation and Sri Lankan tariff nomenclature is organized at 8 digit level. The Sri Lanka customs applied WTO Valuation Agreement to all the tariff lines before year 2000. Presently, Sri Lanka customs implements latest version which is 2012 HS code. By now, all the goods are valued using the transacted value method. However, in order to prevent undervaluation of goods SL customs uses other measures to verify such situations. Such measures are training of customs officers, data analysis, access to new information sources etc., Also, universal application of unit rates for sensitive selected items are in place to curb undervaluation. This has been introduced to absorb seasonal variations of agricultural crops.
Sri Lanka Customs maintains close relationship with Regional Intelligence Liaison Office of WCO in the Philippines. It is one of the WCO's enforcement pillars since information and intelligence sharing play a significant role in customs administrations.
Further, arrangements are being made to sign an agreement with India for mutual customs cooperation.
Pre-shipment certificates are used only for importation of used vehicles. Sri Lanka has a Special Import Licensing Scheme imposed by the Import and Export Control Department for which the customs is the implementation authority. Products under this scheme are subject to non-automatic licensing, as and when the country requires import of these goods.
4 Entry points
Customs entry points are mainly Colombo and Mattala international airports and Colombo, Galle, Hambantota and Trincomalee sea ports. Due to its geo-strategic location, amidst maritime routes became attractive since past to many a main shipping line than any other port in the region. Hambantota, is increasing its potential in terms of containerization, information technology application and state-of-the-art technology. Also, the newly built Mattala airport located close to Hambantota sea port is increasing its potential in terms of passenger and cargo handling within a short period of time.
5 Trade facilitation
Trade facilitation usually refers to how procedures and controls governing the movement of goods (imports and exports) across national borders are in place to reduce cost burdens and maximize efficiency in terms of financial, physical and human resources while safeguarding legitimate regulatory objectives. Customs taking action to maximize efficiency by avoiding disturbances that accrue in the form of delays in cross border checks, time penalties which pave the way for forgone business opportunities and reduced competitiveness are major areas of concern in this regard.
With the opening of the Sri Lanka economy to world trade in 1977, trade facilitation became a term that is of significant importance in national economic agenda. Importance was given to world trade and trade facilitation in varying degrees in subsequent development plans after 1977. The present regime has put impetus to trade facilitation by creating a fair trading environment and rationalization of tariff structure. Encouraging investment through policy measures and introducing structural changes in the institutional architecture and investment regime has made significant changes in facilitation of trade. Establishment of Board of Investment (BOI), Export Development Board (EDB), Free Trade Zones (FTZs), Export Processing Zones (EPZs), establishment of export villages (to produce export oriented products) are to name a few such measures.
Sri Lanka became a party to WCO and WTO with a view to enhancing overseas market access and better integration into world market. Sri Lanka's trade policy focused on value based measures rather than non-tariff measures thereby maintaining greater transparency. Sri Lanka simplified its income tax structure to two digit level of 12% in order to encourage export production and draw more Foreign Direct Investments (FDIs).
Declaring the Colombo and Hambantota sea ports as free ports is a landmark decision taken by the government of Sri Lanka.
Automation and simplification of custom processes and procedures, minimum paperwork and human intervention, and lesser physical inspection of air and sea cargo relating to imports and exports are measures taken by the customs in terms of trade facilitation. Facilities provided by the customs are taken into consideration in calculating ease of doing business indicator along with other measures. Online information is also available on tariff and non-tariff measures and their effects.
The customs process for imports is channeled through the Customs Declaration (referred to as CUS$ec), which coincides with the software requirements of the ASYCUDA system. The Asycuda is the software introduced by the WCO (World Customs Organization) for customs administrations for international trade.
Presently, an automated system for import cargo clearance is halfway implemented and will be fully operational by 1st January 2014. Presently, CUS$ecs are processed by the importers from their offices electronically and payment gateways have been introduced through state banks, mainly Bank of Ceylon and Peoples Bank to make their payments. The arrangements are being made to bring the private sector banks into this network. Low risk cargo is released with less physical verification and high risk cargo is subject to physical verification.
With regard to the exports, in order to ensure speedy clearance, changes have been made to the export process and are effective from 30th October 2013. With these changes processing time and cost will be drastically reduced. The declarant (exporter) shall submit an e-cUS$ec online through the ASYCUDA system and physical verification will be made only on selected cargo. High compliance exporters will be receiving greater benefits under this scheme. All these processes apply to both sea cargo and air cargo as well.
6 Customs risk analysis and post audit
A risk management committee has been established within the department and risk averment measures are reviewed periodically. Risk averment measures are implemented on the recommendation of this Committee. A separate division for intelligence gathering also has been established and expected to develop intelligence received from parties.
Post audit plays a vital role in securing government revenue and a separate Directorate has been established for the purpose. It is expected that the revenue forgone due to various reasons should be collected by this unit. Also it is considered as a tool for risk management and trade facilitation and to ensure compliance to customs law.
3 SPS and TBT
1 Sanitary and Phytosanitary Measures
China
Since accession to the WTO, China has committed to comply with the SPS Agreement and ensure conformity with the SPS Agreement of all its laws, regulations, decrees, requirements and procedures related to SPS measures.
The General Administration of Quality Supervision, Inspection and Quarantine of China (AQSIQ) is responsible for inspection and quarantine concerning the entry and exit of plants, animals, their products, and food. Based on risk analysis, AQSIQ is authorized to determine whether the import of a product is permitted, to establish inspection and quarantine conditions for the entry of imported products, and to sign with related government authorities of other countries agreements on general SPS issues or for specific products. At the same time, AQSIQ has the right to raise certain requirements on entry inspection and quarantine, and to negotiate with related government authorities of other countries on general SPS issues or detailed inspection and quarantine requirements for specific products.
Sri Lanka
Sri Lanka implements the WTO Agreement on SPS and is a signatory to the Convention on Bio Diversity, Stockholm Convention on Persistence Organic Pollutants, Montreal Protocol, Basel convention, Rotterdam Convention for implementation of prior informed consent procedure on the importation of pesticide. Ministry of Health is Sri Lanka's enquiry point on SPS matters. Sri Lanka is a member of the Codex Alimentarius Commission and the World Organization for Animal Health (OIE), and a contracting party to the International Plant Protection Convention (IPPC).
Sri Lanka has made 18 notifications to the Committee on Sanitary and Phytosanitary Measures, covering measures in areas such as foodstuffs covered by SLSI standards; shelf-life of imported foods; wood packaging material; food packaging materials and articles; meat and meat products; milk and milk products; plants, plant products, organisms, soil, and other culture media; food colouring substances; tea, coffee, cocoa and their products; vinegar; irradiated foods; bottled or packaged drinking water; iodized salt; melamine in food products; and genetically modified food. One measure was notified as an emergency measure, concerning live domestic and wild birds, hatching eggs, table eggs, etc.
Sri Lanka currently does not have recognition of equivalence of other countries' SPS measures.
Food imports are regulated by the Food Control Act No. 2 of 1950 and its amendments. The SLSI operates a generalized hazard analysis critical control point (HACCP) registration scheme to certify food safety. A certificate holder develops and maintains its food safety assurance programme based on the internationally accepted principles of ISO 22000. Other legislation covering SPS issues include the Plant Protection Act No. 35 of 1999, and the Animal Diseases Act No. 59 of 1992.
Under the Animal Diseases Act No. 59 of 1992, the importation of any animal, animal product, veterinary drug or veterinary biological products, animal semen or embryo requires a permit issued by the Director General, Department of Animal production and Health on the recommendation in the Ministry of Livestock Development. To obtain the permit in the case of animal products, the importer is required to produce a certificate from the Chief Veterinary Officer of the country of origin of the animal product, stating that the product is free from any infective substance that is likely to cause disease in animals as well as Zoonotic diseases.
For live animals, a certificate obtained from the Chief Veterinary Surgeon or authorized veterinary surgeon of the country of origin of the animal is required. The certificate must set out: the country of origin of the animal; that the animal is and has been free from disease and has not been in contact with diseased animals for three months prior to its exportation; that the place of origin of the animal has been free from disease for three to twelve months (depend on the type of animal) prior to the date of the departure of the vessel carrying the animal from the port of exit; and that the animal has been immunized against the specified diseases.
Imports of meat or meat product must be accompanied by a certificate issued by a competent authority in the country of origin warranting that they are fit for human consumption and free from any infective substance that is likely to cause disease in animals. Animal products to be imported into Sri Lanka must be slaughtered and processed in establishments registered with the veterinary authority in the country of origin. Imports of live animals for human consumption are prohibited.
All animals imported into Sri Lanka are subject to quarantine for a minimum period of 30 days. The DAPH is responsible for enforcing Sri Lanka's quarantine legislation with respect to live animals and related products which has the stated purpose of ensuring that exotic diseases are not introduced through the importation of livestock and livestock products.
Imports of veterinary drugs or veterinary biological products require a certificate from the Chief Veterinary Surgeon (or a veterinary surgeon authorized by him/her) in the country of origin of the product, certifying the safety of such drug or veterinary biological product. The manufacture of veterinary drugs and veterinary biological products requires a licence valid for a period of one year from the date of issue.
Department of Agriculture is the body in charge of plant health issues; it has the responsibility of enforcing the implementation of the Plant Protection Act No. 35 of 1999 and its regulations in relation to plant quarantine activities. Plant imports must be accompanied by a permit, granted by the Deputy Director of Plant Quarantine or the Director of Seed Certification and Plant Protection. Permits are issued immediately for vegetable seeds that are included in an approved list, which is published in newspapers periodically. Consignments must be accompanied by: a phytosanitary certificate issued within 14 days prior to dispatch; a declaration stating that the consignment is free of soil; and a certificate of origin.
Importers of fresh fruits and vegetables for human consumption must produce a certificate from the plant protection authority of the country of origin stating that the fruit has been in cold storage for more than two weeks; no certificates are accepted from countries where there are fruit flies. Upon arrival in Sri Lanka, the consignment is inspected by a Plant Quarantine Officer and/or a representative from the Seed Certification and Plant Protection Centre of the Department of Agriculture.
The importation of certain plants is prohibited, except for research. Imports of any plant, plant material, plant product or seed from "Tropical America" are prohibited to prevent the introduction of the "South American Leaf blight pathogen of rubber". Imports of soil and living modified organisms (LMOs) are prohibited. Imports of some live fish are also banned. Since June 2004, imports of animals and animal products of ruminant origin are allowed only from countries, which have officially been declared as "BSE Provisional Free Status" by the OIE. Imports from a number of countries were specifically forbidden.
In 2001, Sri Lanka notified to the SPS Committee restrictions on imports of 21 genetically modified categories of products on the grounds that safety for human consumption is not known. Sri Lanka banned the importation of genetically modified (GM) food products on 1 September 2001. Imports of items included on the banned list must be accompanied by a certificate stating that they do not contain GM organisms.
2 Technical Barriers to Trade
China
Since its accession into the WTO, China has made great effort in modification of related laws and regulations in the areas of technical regulation, standards and assessment, in order to unify the catalogue of products, unify the compulsory requirements, standards and conformity assessment procedures, unify the label, and unify charging in the quality and safety permission and certification system for imported products. By this way, China’s measures are made consistent with the WTO Agreement on Technical Barriers to Trade (hereinafter referred to as the WTO TBT Agreement).
According to the principles set out in the WTO TBT Agreement to protect human health or safety, animal or plant life or health, or the environment, to prevent deceptive practice and protect national security, AQSIQ established and published a catalogue of imported and exported products, which shall go through compulsory examination required by national technical regulations. Those examinations can be undertaken by bodies designated by AQSIQ.
The Standardization Administration of China (SAC), working under the AQSIQ, is responsible for exercising the unified management of standardization in China, formulating development programs, as well as drafting and revising national standards. SAC is also responsible for the examination, approval, numbering and publication of national standards, and for the coordination, guidance and registration of sector, local and entrepreneur standards. It also stands for China in the International Organization for Standardization (ISO), the International Electro-Technical Commission (IEC) and other international or regional standardization organizations.
The Certification and Accreditation Administration of China (CNCA) under the AQSIQ is responsible for exercise of the unified management, supervision and coordination of certification and accreditation work in China. China Compulsory Certification (CCC) system is implemented by CNCA. Products listed in the Catalogue of Products Subject to Compulsory Certification shall not be sold, imported or used in any commercial activities without CCC marks. Currently, the Catalogue21 covers 20 groups, consisting of 158 sub-categories, and includes household appliances, motor vehicles and accessories, fire-fighting products, agricultural machinery, ornaments, toys, etc.
Sri Lanka
The Sri Lanka Standards Institution (SLSI) is the National Standards Body of Sri Lanka, established under the Bureau of Ceylon Standards Act No. 38 of 1964. The SLSI is Sri Lanka's national authority for notifications and its National Enquiry Point. The SLSI, under the Ministry of Technology, Research and Atomic Energy, is also the body responsible for the elaboration and dissemination of information on technical regulations (mandatory standards).
The Sri Lanka Standards Institution (SLSI) is in charge of formulating standards, certifying products and systems, inspecting imports and exports, and providing laboratory services such as industrial measurement and calibration services. The national standards formulated by the SLSI are developed through a committee and consultative process, with the voluntary involvement of all interested parties representing consumers, producers, users, public institutions and independent technical organizations. The SLSI generally appoints technical committees to advice in the preparation of standards.
The SLSI's policy is to follow as much as possible international standards in the formulation of national standards; international standards are adopted as Sri Lanka Standards, whenever feasible. The authorities have noted that, in the selection of standards formulation projects priority is given to standards that facilitate internal and external trade and to enhance the international competitiveness of Sri Lanka.
There are over 1,250 Sri Lanka Standards relating to products, commodities, materials, processes and practices and the majority of these standards are in line with the international standards. Standards are revised periodically to take into account the developments of new materials, processes and technologies. Sri Lanka Standards are voluntary unless made compulsory under the provisions of the Sri Lanka Standards Institution Act or by specific reference to standards in other acts and regulations.
The "SLS Marks Scheme" is Sri Lanka's product certification scheme. This scheme enables the SLSI, under the provisions of the Sri Lanka Standards Institution Act, to grant permits to local and foreign manufacturers producing goods conforming to Sri Lanka Standards to use the "SLS" mark on their products. The SLS mark certifies that the product has been manufactured in accordance with the relevant Sri Lanka Standards specification and verified by regular inspections and tests by the SLSI. Although product certification is essentially voluntary, the certification of 20 locally manufactured or produced products is mandatory under the Directions issued by the Commissioner of Internal Trade. Permits are valid for three years and may be renewed; they may be revoked if production stops, if fees are not paid or if the product does not conform.
Apart from the SLSI, the Telecommunication Regulatory Commission (TRC) sets quality regulations and technical specifications for equipment and quality of service (QAS) standards. Telecommunications equipment, including imports, requires type approval from the TRC. Provisional type approval based on sample test results is initially granted for six months; this may be extended for another six months. Subject to satisfactory performance (including after-sales service), full type approval is issued, generally for five years.
The SLSI is a member of the International Organization for Standardization (ISO). The main piece of legislation is the Sri Lanka Standards Institution Act No. 6 of 1984.
Since 1996, Sri Lanka has made about 30 notifications to the Committee on Technical Barriers to Trade. It has accepted the WTO TBT Code of Good Practice.
There were about105 trade related technical regulations in place and most of them 102 are included in the Imports (Standardization and Quality Control) Regulations 2006, framed under the Imports and Exports (Control) Act, No. 1 of 1969 as amended by Act No. 28 of 1987, which specify a list of products that must conform to a Sri Lanka Standard (SLS) to be allowed to be imported. These goods are subject to the Import Inspection Scheme (IIS) to ensure their conformity with the relevant SLS. In formulation of national standards (SLS), the Institution always takes into account all the equivalent standards established by other countries and International Organizations such as ISO, IEC, ASTM & Codex.
For inspection purposes, goods are classified under five categories of consignments. Goods classified under categories 1 to 4 carry some kind of certificate of compliance with the stipulated standard, issued by a body recognized by the Sri Lanka Standards Institution (SLSI). However, with respect to Category 4, if the two standards are fully compatible, a quality certificate need not be submitted and, in instances where only a particular requirement of a national standard deviates from the Sri Lanka Standard, a test certificate is required to certify that the particular requirement complies with the Sri Lanka Standard. The inspection of products in these categories is done through samples drawn from the consignments, which are subject to testing either randomly or when there is a reasonable doubt regarding the quality of the consignment. Consignments classified under Category 5 are sampled at the port, and will not be released until the test report is available, or where facilities are available, the SLSI may release the goods to a customs bonded warehouse, until clearance.
The Sri Lanka Accreditation Board for Conformity Assessment (SLAB) is the National Accreditation Authority for Sri Lanka. The SLAB was established under Act No. 32 of 2005. The Board functions as an autonomous body under the purview of the Ministry of Science and Technology.
The SLAB conducts four accreditation schemes. Their purpose is to allow bodies both in the public and private sector, once they have been assessed for competence and credibility by the SLAB, to perform the necessary conformity assessment for the different regulatory authorities. The accreditation scheme for testing and calibration laboratories is based on ISO/IEC 17025 (General requirements for the competence of testing and calibration laboratories). All types of laboratories covering chemical testing, biological testing, physical and mechanical testing and calibration laboratories are included under this scheme. The accreditation scheme for medical/clinical laboratories is based on ISO 15189 (Medical laboratories. Particular requirements for quality and competence), and covers clinical pathology, clinical biochemistry, haematology, microbiology and serology, histopathology, immunology, molecular biology, pharmacology and nuclear medicine. The accreditation scheme for inspection bodies is based on ISO/IEC 17020 (General criteria for the operation of various types of bodies performing inspection) and provides a formal recognition to organizations required to conduct various types of inspections for regulatory purposes.
The fourth accreditation scheme is the most relevant for international trade. The accreditation scheme for Certification Bodies (CBs) covers systems and product certification, and is based on ISO/IEC 17021 (Conformity Assessment: requirements for bodies providing audit and certification of management systems), and on ISO/IEC Guide 65 (General requirements for bodies operating product certification systems), respectively. The certification provided by these CBs includes certification of Quality Management Systems (QMS), Environmental Management Systems (EMS), Food Safety Management Systems, and Occupational Health and Safety Management Systems.
There were about ten laboratories and institutions accredited for chemical testing, two for mechanical testing, six for biological testing, and two for calibration, all operating from Sri Lanka.
Sri Lanka has no Mutual Recognition Agreements (MRAs) with third countries on issues related to technical regulations, standards, or conformity assessment procedures have been reached.
SLAB is a full member of the Asia Pacific Laboratory Accreditation Corporation (APLAC) and is a signatory to the APLAC's MRA (since December 2009), which covers testing laboratories (ISO 17025) and medical laboratories (ISO 15189). The APLAC is a cooperation of accreditation bodies in the Asia-Pacific region that accredit laboratories, inspection bodies and reference material producers. Accreditation bodies in 24 economies in the region are members of APLAC. SLAB is also a full member of the International Laboratory Accreditation Cooperation (ILAC), and a signatory to ILAC's MRA (also since December 2009). The ILAC MRA covers testing laboratories including medical testing laboratories.
SLAB also has full membership status in the Pacific Accreditation Council (PAC), an association of accreditation bodies whose objective is to facilitate trade and commerce among economies in the Asia Pacific region by promoting the international acceptance of the accreditations granted by its members. SLAB is also in the process of seeking membership of the International Accreditation Forum (IAF). SLAB also has a technical co-operation programme with the Swedish Board for Accreditation and Conformity Assessment (SWEDAC). Technical assistance for development of SLAB accreditation activities is provided by SWEDAC and funded by the Swedish International Development Agency (SIDA).
Technical regulations from trading partners are accepted as equivalent after evaluation of a declaration of conformity and a technical dossier. The certificates, tests, and inspection reports issued by conformity assessment bodies that are not accredited by SLAB may be recognized based on the equivalence of accreditation procedures and on the basis of technical soundness and capability of the bodies issuing the certificates.
Testing and/or inspection are carried out by SLSI or laboratories and institutions accredited by SLAB in accordance with national or international standards.
4 Trade Disciplines/Trade Remedies
Trade disciplines (or trade remedies) refer to trade policy tools that allow governments to take remedial action in exceptional situations against imports causing predefined difficulties to the domestic economy. Trade remedies mainly include anti-dumping measures, countervailing measures and safeguard measures. According to relevant WTO rules, such measures are subject to procedural and substantive conditions (e. g. cause of serious injury to domestic industry).
China
1 Anti-dumping
China takes anti-dumping measures according to the provisions of Foreign Trade Law of the People's Republic of China and the Regulations of the People's Republic of China on Anti-dumping.
According to WTO statistics, as of 31st December 2012, there had been totally 916 cases initiated against China by other members of the WTO, including India (154 cases), United States (112 cases), European Union (111 cases), Argentina (89 cases), Brazil (62 cases), mainly targeting products of base metals and articles of base metal (232 cases, Catalogue fifteenth) ,the chemical or allied industries (179 cases, Catalogue sixth), machinery, electrical equipment and relevant parts (114 cases, Catalogue sixteenth), textile articles (78 cases), and foot-wear products(66 cases, Catalogue seventh), ceramics and glass products (61 cases, Catalogue thirteenth) etc. According to the statistics from WTO, as of 31st December 2012, China had totally initiated 200 cases, mainly targeting products of the chemical or allied industries (116 cases, Catalogue sixth), Resins, plastics and articles; rubber and articles thereof (39 cases, Catalogue seventh), Paper, paperboard and articles (13 cases, Catalogue tenth), Base metals and articles (13 cases, Catalogue fifteenth) etc.
In the FTAs China has signed, the issue of anti-dumping measures was addressed. The relevant parties usually promised that potential anti-dumping measures should be first handled through consultations and negotiations. Bilateral and multilateral anti-dumping measures should not be adopted simultaneously.
China has not initiated any anti-dumping investigation against Sri Lanka.
2 Countervailing Measures
China undertakes countervailing measures under the provisions of the Foreign Trade Law of the People's Republic of China and the Regulations on Countervailing Measures of the People's Republic of China.
According to WTO statistics, as of 31st December 2012, 62 cases had been initiated against China by other members of WTO, including United States (33 cases), Canada (14 cases), Australia 7 cases), European Union (5 cases), Mexico (1case), India (1 case), and South Africa (1 case). The relevant products are mainly base metals and articles of base metals (34 cases, Catalogue fifteenth), machinery and electrical equipment (3 cases, Catalogue sixteenth), products of the chemical or allied industries (3 cases, Catalogue sixth), articles of paper (3 cases). According to the statistics from WTO, as of 31st December 2012, China had initiated 6 countervailing investigations, 2 cases against European Union and 4 cases against the United States. The relevant products are mainly Grain Oriented Flat-rolled Electrical Steel, potato starch, White Feather Broilers, sedans and cross-country vehicles with engine displacements of 2.0 litres and above, solar-grade polycrystalline silicon etc.
In the FTAs China has signed, the issue of countervailing measures was addressed. The relevant parties usually promised that potential countervailing investigation should be first handled through consultation and negotiation. Bilateral and multilateral safeguard measures should not be adopted simultaneously.
China has not initiated any countervailing investigation against Sri Lanka.
3 Safeguard Measures
China undertakes safeguard measures under the provisions of Foreign Trade Law of the People's Republic of China and Regulation of the People's Republic of China on Safeguard Measures. According to the statistics of WTO, in the aspect of global safeguard measures, as of 31st March 2013, there were 255 cases of Safeguard initiations by Reporting Members. China had initiated only one safeguard measure on steel products as of 31st March 2013.
In the FTAs China has signed, the issue of safeguard measures was addressed. The relevant parties usually promised that possible safeguard measures should be first handled through consultation and negotiation. Bilateral and multilateral safeguard measures should not be adopted simultaneously.
Sri Lanka
Sri Lanka currently has no laws or regulations governing anti-dumping or countervailing actions. Sri Lanka notified the Committee on Anti-Dumping Practices that it had not established an authority competent to initiate and conduct an investigation within the meaning of Article 16.5 of the Agreement and thus had not, to date, taken any anti-dumping actions within the meaning of Article 16.4. Sri Lanka also stated that it did not anticipate taking any anti-dumping actions for the foreseeable future.
A similar notification was made in respect to countervailing measures to the Committee on Subsidies and Countervailing Measures on 20 October 2009.
Sri Lanka also has no laws or regulations relevant to safeguard measures.
However, Sri Lanka is in the process of submitting draft bills on anti-dumping and countervailing measures, and on safeguard measures. These were originally gazetted in 2005 and submitted for approval to Parliament in 2006. Following discussions on various provisions of the bills, revised texts are expected to be submitted again for approval in the near future. The Department of Commerce would be the investigating authority and main body in charge of implementing this legislation once parliamentary approval is obtained.
2 Trade in Specific Sectors
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1 Tea
1 Description of the Sector
China
1. Overview of the Industry
As the home of tea, China is the first country to discover and make use of tea, with its areas of tea plantations and total consumption topped the world. In 2012, the global production of tea reached 4.528 million tons, among which China's tea production reached 1.761 million tons, accounting for 38.89% of the world total volume. The plantation of tea is widely spread with a large number of varieties in China. The tea producing regions cover 19 provinces, municipalities and autonomous regions all over the country, from Shandong Peninsula in the north to Hainan Island in the south, and from Taiwan in the east to Tibet in the west. The highest tea producing area stands 2600 meters above sea level, and the lowest just dozens of meters or hundreds of meters from the sea level. According to different origin and craft, Chinese tea is classified into six categories, namely black tea, green tea, Oolong tea, white tea, yellow tea and dark tea.
As one of the major tea categories in China, the production of green tea is the highest among six categories of tea in China. In 2012, the production of green tea was 1.18 million tons accounting for 67% of China's total production of tea. The range of the plantation of tea in China is very wide, and the major provinces include Henan, Guizhou, Jiangxi, Anhui, Zhejiang, Jiangsu, Sichuan, the Southern Shanxi, Hunan, Hubei, Guangxi, and Fujian. Chinese green tea is of high quality and varied brands. More than 100 brands are well-known home and abroad, such as the West Lake Longjing, Dongting Biluochun, Huangshan Maofeng Tea, Xinyang Maojian and so on. To promote the development of Chinese tea industry, China has focused on intensification, ecologization and mechanization during the production process. While increasing its production, Chinese tea industry also advocates the idea of “green, organic and sustainable development” to improve the comprehensive utilization by deep processing.
Oolong tea is China’s second main tea category, and it is typical for China. In 2012, the production of Oolong tea reached 215 thousand, accounting for 12.2% of the total production. Oolong tea is mainly produced in Fujian, Guangdong and Taiwan. In recent years, Sichuan, Hunan and other provinces also have a small amount of production. According to the producing area, Oolong tea are divided into Guangdong Oolong Tea, Taiwan Oolong Tea and Fujian Oolong Tea. The Dahongpao, called "king of tea", enjoys the top place among Fujian tea, 4% of Oolong tea production in China is exported abroad mainly to Japan, Southeast Asia, Hong Kong and Macao. Black tea is China's third main tea category, most of which is grown in tropical or subtropical hilly region with weak acidic soil, mainly including Hunan, Yunnan, Chongqing and some economically backward areas in western China. The black tea plays a very important role in adjusting the economic structure, increasing local farmers' income and promoting rural employment. Farmers there have more enthusiasm to plant black tea and thus the quality of black tea has also been improved significantly. In 2012, the production of black tea reached 181 thousand, accounting for 10.28% of the total production. Tongmuguan, Wuyi Mountain of Fujian Province in China is the cradle of black tea, Produced here, Lapsang Souchong Black Tea is the originator of world black tea. Lapsang Souchong Black Tea can be dated back to the late Ming Dynasty and so far has about 400 years of history. 20% of black tea production in China is exported to more than 60 countries and regions. Qimen black tea is most famous among them and is one of the world's four most famous black tea.
2. The Foreign Trade
The tea is an advantaged agricultural product in China. And China is one of the main tea exporting countries in the international market. In recent years, the scale of Chinese tea products in foreign trade expands year by year. In 2012, the volume of exports of Chinese tea reached USD 1.121 billion, a year on year increase of 10.2%; the volume of imports USD 80 million, 15.8% and trade surplus USD 1.04 billion, 9.8%. China’s major import partners of the products in this sector are Sri Lanka, India and Taiwan China, accounting for 67.94% of the total import. And the major export partners in this sector are Kingdom of Morocco, USA and the EU, accounting for 33.92% of the total import.
Tea products are the major goods of the bilateral trade between China and Sri Lanka. In 2012, China exported USD 8 million of tea products to Sri Lanka, accounting for 0.27% of China's total exports to Sri Lanka. In the same year, China imported USD 22 million of tea products from Sri Lanka, accounting for 13.53% of China's total imports from Sri Lanka.
In terms of the market share, although tea products accounted for a small proportion of bilateral trade between China and Sri Lanka, Sri Lanka still remains one of major importing sources of China as the proportion of imports increasing year by year. From 2010 to 2012, the proportion of tea products from Sri Lanka in China's total imports of this sector increased from 23.21% to 28.31%. In 2012, Chinese tea products exported to Sri Lanka accounted for 0.72% of the total exporting volume of tea products from China to the world.
Table 4-10 Import and Export of Tea Products of China
(US Dollars in 100 millions)
| |China's Trade with the World |China's Trade with Sri Lanka |The Ratio between China's Trade with Sri |
| | | |Lanka and China's Trade with the World (%) |
|Year |2010 |2011 |2012 |2010 |
|1. Production |Mn. kgs |291.1 |331.4 |327.5 |
| a. High grown |Mn. kgs |73 |79.1 |78.2 |
| b. Medium grown |Mn. kgs |44.8 |56.1 |52.6 |
| c. Low grown |Mn. kgs |173.3 |196.2 |196.7 |
| | | | | |
|2. Extent | | | | |
| a.Total Extent |'000 hec. |212.7 |212.7 |206.1 |
| b.Extent in bearing |'000 hec. |181.4 |181.4 |197 |
| | | | | |
|3.Yield |kg/ha |1,312.00 |1,478.00 |1,475.60 |
Source: Ministry of Plantations
In 2012, Sri Lanka was the third largest producer of black tea in the world, and the top exporter of black tea. Furthermore, Sri Lankan tea under the mark of “Pure Ceylon Tea” has long established itself as a quality premium product in the global tea market. Sri Lanka has continued to develop this brand, and has made strong inroads into high end value added teas.
The import and export of tea are governed by regulations imposed by the Sri Lanka Tea Board. Sri Lanka Tea Board issues exports licenses for tea based on regulations governing quality of the tea. Similarly, all tea importers must be registered with the Sri Lanka Tea Board and imports must be done under a permit issued by the Sri Lanka Tea Board.
1 Exports
Black tea (bulk and packeted) remained Sri Lanka’s top export in 2012, with exports totaling US$ 1.4 billion, amounting to 14.5% of Sri Lanka’s total exports. The five top destinations for black tea in 2012 were Russia, Iran, Syria, Turkey and Iraq, while China ranked 21st in export destinations for Sri Lanka’s black tea. Sri Lanka remained the top supplier of black tea to China with a share of 22% of China’s imports.
The following table gives the composition of exports of tea to China from 2006 to 2012 in metric totals and value in US$ Million. The table further shows that while bulk tea continues to dominate exports to China, there has been some improvement in the export of value added teas.
Table 4-12 Sri Lanka Tea direct exports to China in MT, US$ MN (2006 to 2012)
|Category |2006 |2007 |2008 |2009 |2010 |2011 |2012 |
|Bulk |441 |680 |761 |714 |940 |2089 |2635 |
|Packets |6 |14 |40 |26 |281 |223 |222 |
|Tea Bags |44 |53 |66 |48 |90 |149 |168 |
|Instant Tea |0 |0 |75 |0 |3 |0 |0 |
|Green Tea |37 |173 |63 |17 |1 |0 |59 |
|Others |51 |43 |59 |46 |25 |0 |0 |
|Total (MT) |578 |964 |969 |852 |1341 |2461 |3084 |
|Value in US$ million |1.8 |2.8 |3.6 |3.4 |5.7 |11.1 |13.5 |
Source: Sri Lanka Customs
2 Imports
Sri Lanka imported US$19.6 million worth of tea in 2012, with bulk black and green tea composing the majority of the imports. These imports are mostly for blending purposes.
The top exporters to Sri Lanka were China, India, Kenya, UAE and Iran, with China enjoying 43.6% share of Sri Lanka’s imports. China’s main export to Sri Lanka has been 0902.20, with a value at US$7.4 million.
2 Tariffs Applying to Tea Products
China
According to the statistics of Customs P.R.C., in 2012, the tea sector had 12 8-digit tariff lines, which belonged to the ad valorem duty. Among them, there were 11 tariff rates of APTA, representing 91.67% of the total tariff lines in this sector. China's average import tariff level is only 8.42% with the highest tariff rate at 16%, including 21012000(Extracts, essences, concentrates & preps of tea or mate). And there is no Zero-tariff in this sector. The tariffs of most products are 7.5 % (See Table 4-13).
Table 4-13 The Import Tariff Rates Distribution of China's Tea Products in 2012
|Distribution of Tariffs |China |
| |No. |Percentage of the Total Sector(%) |
|30 ................
................
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