July 27, 2012
Reposted from Lanka Business News
By Charitha Fernando
Sri Lanka can further improve its business climate to propel growth, attract more investors while freeing trade could ease also soften the impact of a Eurozone crisis, a diplomat has said.
British high commissioner (ambassador) John Rankin, told an annual meeting of Sri Lanka’s Ceylon Chamber of Commerce that greater protectionism could threaten trade and investment, a driver of growth amid a global economic slowdown.“As economies across the world further tighten, the risk of greater protectionism will pose threats, to the trade and investment that drives our economic growth,” Rankin said.
The Great Depression was prolonged due to tit-for-tat protectionism that stopped the free exchange of goods between citizens of different nations.
It was British activists in the liberal tradition who promoted free trade, defeating Mercantilist values of restricted trade, high taxes on foods, slavery and imperialism which were also practised by the British East India and Company and its earlier Dutch version even in Sri Lanka.
The Anti-Corn Law League of Richard Cobden, John Bright and George Wilson ended the grip of farmers, land owners and the elected ruling class on people’s hunger by ending import taxes on grain.
Lower food prices increased disposable incomes of all citizens, freeing money to be spent on other goods, raising living standards and increasing demand for industrial goods.Britain became an industrial powerhouse and people shifted from agriculture to industry, in turn improving the labour productivity of agriculture itself.
“A Eurozone crisis would not just be bad for the economies of the Eurozone members but also the UK and other countries for whom Europe is a leading trading partner,” Rankin said.
“A hard landing for key emerging economies mostly India and China would have a direct impact on businesses that export to those countries.”
The EU is Sri Lanka’s largest market with exports amounting to 2.2 billion Euros in 2010.
Around 36 percent of the island’s total exports go to the European Union.
Sri Lankan exports to UK have risen by 14 percent to 804 million pounds in 2011 despite a tightening of the UK economy.
Rankin said apart from positively engaging in international negotiations to face the Eurozone crisis, individual countries can focus on their domestic economic policies to meet the challenge.
“The single most important thing that governments can do is to create certainty and stability, increased transparency over public contracts, incentives to grow and confidence that their businesses will not be subject to arbitrary action,” he said.
Last year Sri Lanka began expropriating private businesses again, a practice that was mainly advocated in Eastern Europe by people like Karl Marx.
Rankin said Sri Lanka has made strides in overall business efficiency and performance and the ease of doing business.
Sri Lanka ranks 89 out of 183 countries in the World Bank’s ease of doing business indicators.
Rankin said UK has some of the least barriers to entrepreneurship in the world and one of the most open countries to trade and investment.
“It takes just thirteen days set up a business in the UK and we have one of the most stable and transparent political environments in which to do business,” Rankin said.
“We have cut corporate tax rate to the lowest ever rate in UK and it will be cut further over the next two years to encourage businesses to locate in the UK and grow,”
Sri Lanka is estimated to have received around 437 million US dollars in foreign direct investments up to May this year, the Central bank said.
Rankin said potential British investors scouting for investment opportunities in post war Sri Lanka look for clear and efficient approval processors, greater flexibility in promoting the private sector, and reduced bureaucracy in setting up businesses.
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