OBOR “very significant for Sri Lanka” says Central Bank Governor

OBOR “very significant for Sri Lanka” says Central Bank Governor

Colombo, May 18 (newsin.asia): China’s One Belt One Road (OBOR) global infrastructure project will be “very significant” for Sri Lanka, said Dr.Indrajit Coomaraswamy, Governor of the Central Bank of Sri Lanka (CBSL).

Addressing the Foreign Correspondents’ Association here on Wednesday, Coomaraswamy said that Sri Lanka has a special place in the OBOR scheme because of its strategic location in the Indian Ocean.

“The Chinese consider Sri Lanka as the pearl of the Indian Ocean,” the Governor remarked.

However, to get the best out of the OBOR project, Sri Lanka must negotiate properly and hard to “get a good deal,” he cautioned.

On the fate of the controversial China-funded Hambantota port in South Sri Lanka, the Governor said that while the percentage of stake the Chinese partner will get is still under negotiation, Sri Lanka will be getting US$ 1.1 billion in the first year of the deal (US$ 100 million immediately on signing the agreement, US $ 300 million after three months, and the rest in the remaining months of the current year).

He said Sri Lanka needs the US$ 1.1 billion, which the debt-equality swap will fetch, to repay its debts.

Dr.Coomaraswamy pleaded for a broader view at Hambantota port project for assessing its true value.

“Hambantota port should not be seen only as a port but as a means to trigger economic development of the Southern and Uva provinces which had been  neglected by Sri Lankan governments down the line,” he said

The Governor said that Sri Lanka needs to borrow from abroad to fund its development schemes, but the better thing would be to set up a system to attract Foreign Direct Investment which will boost exports and earn foreign exchange.

He regretted that Sri Lanka’s exports have been falling. In this context he welcomed the possibility of signing the India-Sri Lanka Economic and Technical Cooperation Agreement (ETCA) by the end of this year.

Asked if Sri Lankan politics would allow the signing of ETCA, the Governor said that to make the agreement acceptable, it has to be negotiated carefully giving due recognition to the asymmetry between the Indian and Sri Lankan economies and to the needs of the smaller Sri Lankan economy.

But Sri Lankans must realize that it will be senseless not to exploit the huge one billion strong Indian market next door through mechanisms like ETCA. He pointed out that Mexico, a small country bordering the US, has benefited immensely by entering the North American Free Trade Agreement.

He pleaded for rationality in decision making on foreign trade and investment agreements.

“In South Asia we seem to go by our heart more than by our brain,” he joked

He  pointed out how South East Asia countries have set aside political differences to enter into fruitful economic agreements.

Dr.Coomarswamy said that the Sri Lankan government is working out schemes to make doing business in Sri Lanka easier.

The Governor expressed concern about the sharp rise in the credit given to the private sector and said that too much of it is going into the construction industry and private consumption. Even money borrowed by the Small and Medium Enterprises (SME) sector is being diverted to the construction sector which is said to yield quick and good returns.

On the shortage of labor in Sri Lanka (said to  be 400,000) Coomaraswamy said that labor is there but it is in the wrong place, either in the Middle East or in domestic agriculture. Also, too many are in the low skills category. That calls for training facilities upgrade skills and employability, he said.

(The featured image at the top is that of Sri Lanka’s Central Bank Governor ,Dr.Indrajit Coomaraswamy)