Developing a strong business-government partnership locally would help to address the opportunities and challenges from whichever form of Brexit that emerges, and will be key to protecting Sri Lanka’s interests, Executive Director, Lakshman Kadirgamar Institute of International Relations and Strategic Studies, Dr. Ganeshan Wignaraja said.
He said the European Union is Sri Lanka’s largest market for goods exports, mostly consisting of garments, and the UK is the most important destination within the grouping. As such, any drop in demand for Sri Lanka’s goods due to the negative impact of Brexit, or any change in tariff access to the UK market, is likely to be a negative shock for Sri Lanka and its prized garment sector.
“Given the fragility of the Sri Lankan economy following the Easter Sunday attacks and political uncertainty linked to elections, even if this shock is small it may still have significant implications for the country.
Sri Lanka must continue to closely monitor developments in the Brexit process. Political developments in the UK over the coming weeks and months, particularly the race to succeed Theresa May as UK Prime Minister, will play a crucial role in determining the outcome.
In the meantime, developing a strong business-government partnership locally would help to address the opportunities and challenges from whichever form of Brexit that emerges, and will be key to protecting Sri Lanka’s interests,” Dr. Wignaraja said.
Sri Lanka is facing internal and external headwinds to its economy. Internally it is grappling with the post Easter terror attacks to restore normalcy and revive the economy and externally the slowdown projected for the global economy this year and next year as well.
“The outcome of the Brexit process remains uncertain. A new UK Prime Minister is expected soon, possibly a hardline Brexiteer. The available studies suggest that, whatever form it eventually takes, Brexit is likely to slow the UK’s growth and have some knock-on impact on the rest of the European Union (EU). Given that the EU is the largest trading block in the world, accounting for around a third of global trade, Brexit is, therefore, likely to have significant implications for the rest of the world,” Dr. Wignaraja said, adding that the impact will vary between countries with some possibly seeing increased trade with the UK as its firms seek new markets.
He said that as Brexit is happening amidst a slowing world economy facing heightened US-China trade tensions, it is another worrying global risk.
Brexit has been put on the backburner since it became clear that departing Prime Minister Theresa May could not muster the majority in the UK parliament to back the Brexit deal she struck with Brussels.
“Policymakers have stepped up their engagement with the UK since the Brexit vote in 2016 to ensure that Sri Lanka maintains the concessionary tariff access its exports currently enjoy when entering the UK market thanks to the EU’s GSP+ scheme,” Dr. Wignaraja said, adding that this must continue and should be complemented with greater political and economic engagement with other EU markets to diversify trade and investment links.
Attracting outbound UK financial and professional services firms into the Colombo Port City is another imperative. Greater efforts should also be made to attract more tourists from emerging EU states, such as those in Eastern Europe.