Sri Lanka seeks to expand economic ties with Korea

The Embassy of Sri Lanka has contributed this article on the occasion of the 68th anniversary of the country's independence. — ED.

President of Sri Lanka Maithripala Sirisena
/ Courtesy of Embassy of Sri Lanka

Sri Lanka and Korea enjoy longstanding friendly relations and historical bonds based on Buddhist cultural links spanning centuries.

Since the establishment of diplomatic relations in 1977, there has been the steady expansion of bilateral relations in the political, economic and cultural spheres.

In terms of high-level visits, a presidential visit from Sri Lanka to Korea took place in April 2012, while the Prime Minister of Korea visited Sri Lanka in August 2013. These friendly ties are currently poised to be further elevated in the run-up to the two countries celebrating 40 years of diplomatic relations in 2017.

At present, following the inauguration of the new national unity government in Sri Lanka led by President Maithripala Sirisena and Prime Minister Ranil Wickremesinghe in 2015, there is greater focus on widening and deepening the existing friendly relations with Korea, with particular emphasis on the political and economic spheres.

The two countries are discussing the possibility of the exchange of high-level visits in 2016 and 2017, beginning at foreign ministerial level. The next round of political consultations between Sri Lanka and Korea are also scheduled to be held in Colombo this year.

The next round of political consultations between Sri Lanka and Korea will take place in Colombo, Sri
Lanka, this year.

Sri Lanka is a lower middle income country with a GDP per capita of $3,500, and has maintained a steady economic growth of over 6 percent in the last 10 years.

In accordance with the new government's economic policy framework which is focused on promoting investment and exports, integration in global value chains, and creating a knowledge economy, Korea is emerging as a country of prime focus with which to further expand economic ties.

Sri Lanka has identified Korea among a small basket of countries with which to explore the possibility of entering into a bilateral preferential trading arrangement (PTA or FTA) in the future.

In this regard, an initial joint study to examine the potential in trade and investment was launched in 2015 and is in process.

It has been proposed to establish a Joint Working Group between Sri Lanka and Korea to explore new avenues of enhancing bilateral economic cooperation.

Under such a mechanism, some important areas including customs cooperation, technology transfer, addressing market barriers such as regulatory requirement on imports, and steps towards enhancing trade, investment and tourism, could be discussed.

Korea remains as one of the most important sources of foreign direct investment to Sri Lanka. Korean investment in Sri Lanka has over 70 companies based in Sri Lanka and has generated more than 4,000 job opportunities in the country.

The possible target sectors for Korean investment in Sri Lanka include manufacturing of electronics/electrical equipment, light engineering, logistics and warehousing, ship/boat building and repair, automotive parts manufacturing, development of industrial zones, agriculture and agro-based products, fish processing, rubber based industries, textiles and textile accessories, tourism and leisure industry, and knowledge based industries.

Korean investors and joint ventures can make use of Sri Lanka's ideal location along the Indian Ocean sea and air routes to access and service markets in Southeast Asia, the Middle East and East Africa through the Indian subcontinent.

Sri Lanka's FTAs with India and Pakistan can also be utilized in this endeavor.

The Sri Lankan government has also proposed to establish 11 business and technology development zones throughout the country, as well as an information and agricultural technology zone in Kandy this year, which will provide added impetus to attract Korean investment.

The Sri Lankan government also hopes to introduce an investor friendly Foreign Exchange Management Bill, which would help attract foreign exchange flows. An FTA between Sri Lanka and China is currently under negotiation.

There is a modest but steady increase in bilateral trade between Sri Lanka and Korea which currently stands at approximately $487 million. The main export from Sri Lanka to Korea is apparel, accounting for 34 percent of Sri Lanka's total export earnings from South Korea in 2014.

With Sri Lanka being one of the main exporters of apparel, Ceylon tea (Sri Lanka is world renowned for its tea), rubber and rubber-based products, spices, and gems, diamond & jewelry, there exists tremendous potential to further access the Korean market.

Sri Lanka also has the global monopoly in the supply of "True Cinnamon" with over 85 percent supply share in the world market, which should be attractive to the discerning Korean market. There also exists much potential to export ICT and BPO services, sea foods and fisheries products, aquarium fish, fruit & vegetable, and floriculture products to Korea.

Cooperation between the chambers of the two countries has provided an effective framework to further enhance trade and investment ties. MOUs exist between Sri Lanka's Chamber of Commerce and the Korea Chamber of Commerce and Industry and the Busan Chamber of Commerce and Industry. Sri Lanka's Board of Investment has an MOU with the Small and Medium Business Corporation of Korea.

Plans are underway for an exchange of visits by investment/trade delegations of both countries this year.

Additionally, Sri Lanka and South Korea are members of the Asia Pacific Trade Agreement, formerly known as the Bangkok Agreement, whose member countries cover a total population of about 2.5 billion, which provides a vast potential market to increase the level of intra-regional trade flows among participating states.

Sri Lanka has enormous potential to attract more tourists from South Korea with the commencement of three direct flights a week by Korean Air between Seoul and Colombo from 2013.

Korean tourist arrivals in Sri Lanka which stood at 4,318 in 2010 has increased to 14,373 in 2015, registering a significant growth of 232 percent. Sri Lanka is a unique tourist destination which offers the tourist a remarkable combination of experiences.

Within a mere area of 65,610 kilometers lie eight UNESCO World Heritage Sites, 1,330 kilometers of pristine coastline, 15 national parks with abundance of wildlife including herds of elephant, nearly 500,000 acres of lush tea estates, 250 acres of botanical gardens, 350 waterfalls, 25,000 water bodies, and ancient cities and cultural sites which are 2,500 years old.

Korean ODA to Sri Lanka is an important aspect of the bilateral relationship.

Its importance is demonstrated by the fact that Sri Lanka stands as the second-highest recipient of Korean ODA in terms of cumulative disbursements ($430.4 million), and is placed at number five in terms of commitments ($652.5 million), out of 52 developing countries.

This bilateral partnership is further strengthened with the recent visit of President of the EXIM Bank of Korea Lee Duk-hoon to Sri Lanka this January.

A very important aspect of bilateral cooperation is labor relations, with approximately 30,000 Sri Lankan contractual workers engaged in the manufacturing, construction and fisheries sectors under the Employment Permit System in Korea.

The Sri Lankan government pays high attention to the welfare of its worker community in Korea, through regular visits to employers, briefings, and facilitation of consular and other services and cultural events.

The Government of Sri Lanka is deeply appreciative of the opportunities granted to Sri Lankan workers by the Korean government whose contribution and remittances continue to make a significant impact on the economies of the two countries.

There are over a hundred Sri Lankan students studying in leading Korean universities pursuing undergraduate, postgraduate and doctoral/postdoctoral studies.

Korea's Saemaul Undong (SMU) program or the "new village movement" based on the principles of diligence, self-help and cooperation, has resonance with Sri Lanka. The SMU program is implemented in two model villages in Sri Lanka, with plans for further expansion to other regions.

There remains great potential for the further enhancement of relations between the two countries in sectors such as science and technology, defense, and cultural relations.

Action is underway to enter into and renew bilateral agreements in the respective fields to enhance cooperation in these sectors.

Korean drama and pop music are increasingly popular in Sri Lanka, and the showcasing of each other's cultures can lead to the further elevation of this friendly and mutually beneficial partnership.