Colombo: Sri Lanka must not feel insecure about the prospect of entering the Comprehensive Economic Partnership Agreement with India, a senior IMF official said. (Agencies)
Addressing the Chartered Accountants here in a seminar, IMF's representative in Sri Lanka, Koshy Mathai dismissed the main fear on the Sri Lankan side over entering the CEPA that local market would get flooded with Indian goods.
He said the chances of this happening were minimal. "The agreement has been structured out according to certain categories," Mathai said.
His comments came after Sri Lankan political parties across the spectrum united against the CEPA with India.
The Marxist JVP dubbed its part of India's expansion plans in the island. Some of the local industrialists are also sceptical of the benefits to be gained by Sri Lanka on the CEPA.
He said that Sri Lankans must realise that regional trade was as important as one's traditional export partners.
"Sri Lanka exports only 5 per cent t India and only 1 per cent to China, the two fastest growing economies in the world."
Korea sends 35 per cent of its exports to counties in the region, Mathai said, adding that Sri Lankan exporters need to analyse these trends.
He said the challenge for Sri Lanka would be to do better than India in attracting foreign direct investment (FDI).
"People have asked me why Sri Lanka should bother to increase its ease of doing business rankings when India had managed to attract high FDIs with the same rankings. But the reality is that Sri Lanka can never offer the same economy of scale as India can.
Therefore Sri Lanka must be better than India to attract FDIs," Koshi said. He advised Sri Lanka to use monetary tools to build up its reserves.
The IMF bailed Sri Lanka out when it reserves sank to a low in 2008 during the height of the decisive military battle with the LTTE.
Its USD 2.6 billion stand-by facility boosted the island nation's reserves and its broader economic outlook.
Colombo: Sri Lanka must not feel insecure about the prospect of entering the Comprehensive Economic Partnership Agreement with India, a senior IMF official said.