Sri Lanka and Pakistan have not done well in areas such as cooperation in trade and investment.
The targets that we have set for ourselves in this sphere seem to be quite low, said State Minister of Money, Capital Markets and State Enterprise Reforms, Ajith Nivrad Cabraal at the Trade and Investment Forum organised by the Pakistan High Commission last week.
Excerpts of the speech:
The targets that we have set for ourselves in the sphere of trade and investment seem to be quite low. We should not be looking at 300 or 400 million dollars of trade and investment. We should be talking about trade and investment between ourselves in billions of dollars. We all know that there is a resource gap in our countries, and that such a source gap has to be filled with investment. In the colonial times, many of those countries that reached high per capita incomes, didn’t fill the resource gap with investment.
They took the dubious step to conquer other countries and forcibly grab resources. By doing so, they were able to reach the prosperity levels that they are at today. But our two countries have not done it that way. That is how our countries have progressed and developed.
So let’s see how we can do even better. To do that successfully, we have to make sure that we invest in each other’s countries.
We have been mainly investing in the West for too long. We have invested in those countries based on the “credit ratings” given by various Western credit rating agencies. Then, we get about a 1 percent return. But, when those countries’ investors invest in our economies, we pay about 7 percent as interest, due to our supposedly “poor credit rating”.
Have you ever wondered why when we lend money to the West, it is called an “investment”, but when they lend money to us it is called a “loan”?
In accordance with that strange arrangement, we suffer from an interest differential of around 6 per cent on our reciprocal investments. On that basis, if we have forex reserves of 10 billion dollars and our market borrowings are higher than that, we will have a 6 percent up-front negative carry on our total reserves.That works out to about six hundred million dollars.
We need to think as to how we can cooperate with each other and in particular, as to where we can invest in each other’s economies and countries. Your State Bank of Pakistan and our Central Bank of Sri Lanka should now be looking at ways and means by which we can cooperate in our respective forex investments. These are the big tickets that can make an impact in our cooperation.
That’s a very important part where we can make a significant difference in the way we do business and investment between our two countries in the future. We must also promote trade within our private sectors.
Let’s agree to work together to achieve that kind of a global outcome, which is essential for the continued growth of our countries.
Pakistan is a 300 billion dollar economy. We are a 80 billion dollar economy. In that context, I think if we can work out a scheme where our two countries have trade relationship of at least a billion dollars very soon. That would be a great outcome for both our countries. Let’s also make our respective countries preferred destinations. Let’s make Pakistan a preferred destination from Sri Lanka, and Sri Lanka a preferred destination fromPakistan. Let’s visit each other’s countries frequently.Let’s play a little more cricket as well. Maybe some club teams, school teams, or over-50 cricket teams (I can also participate then), women’s teams, can play each other. We can also have exchanges of students. We already have that happening.
I welcome the Pakistan Foreign Minister’s suggestion that we should now move from geo-politics to geo-economics, and why not? I think that’s an excellent basis for future cooperation, when we are reshaping our respective economies. We must keep that in mind, because I think it would be an important factor when we push forward our own economies. In that regard, I must also proudly mention that Sri Lanka is today emerging from economic stagnation which dragged us down over the last five years. In fact, Sri Lanka has been able to go through the recent difficult period with the Covid pandemic, even while maintaining low interest rates and protecting the value of our Rupee.
Going forward, a continuous pipeline of investments would be a priority for us in much the same way that it will be for you. So, come invest with us. In the same way, Sri Lankans could invest with you. We have the Port City which is an exciting value proposition. We have the Hambantota Industrial Zone. We would like you to consider making investments there too. I also know you have some great industries in Pakistan. You have the pharma industry.
Let’s now promote a sustainable South-South dialogue and partnership. One of the best economists of our country in the 1980s, Dr. Gamani Corea who was the Secretary General of UNCTAD, was the man who first proposed the “South-South” cooperation. Unfortunately, that laudable concept didn’t get enough traction at that time, but today would be a good day for us to take that initiative forward. That would be a tribute to that great man as well.