World Bank says Sri Lanka has untapped export potential in India’s local and regional value chains

World Bank says Sri Lanka has untapped export potential in India’s local and regional value chains

A recent report released by the World Bank has stated that there is untapped export potential for Sri Lanka if it plugs into India’s local and regional value chains.The World Bank report has noted that South Asia has been unable to reach full potential in creating regional value chains because of low intra-regional foreign direct investment (FDI).Inter-regional FDI outflows from South Asia only made up 0.3 percent of total South Asian outflows in 2015, and inter-regional FDI inflows made up 1.1 percent.
According to the report, FDI inflows from South Asia to Sri Lanka came up to 4.7 percent of its total inflows and outflows made up 14.4 percent.
Out of total inter-regional FDI flows in South Asia, 48.2 percent flowed into Sri Lanka, mainly due to large inflows from India, the report has noted.
India was the source of 91.7 percent of South Asian FDI inflows to Sri Lanka, while 56.4 percent of Sri Lanka’s South Asian FDI outflows went in the Maldives, and 32.0 percent to India, the report has further stated.
“There is a fantastic market right here (in South Asia), which we’re not exploiting,” Sanjay Kathuria, Lead Economist and Coordinator, South Asia Regional Integration, The World Bank Group has been quoted as saying.Sri Lanka sources 20.4 percent of its imported intermediate goods from South Asia, and exports 18.4 percent.

OSL take:

The statement made by the World Bank is indicative of the potential in Sri Lanka’s export sector where neighboring India is concerned. Sri Lanka already has a free trade agreement (FTA) with India and the two countries are now in the process of finalizing Economic and Technology Cooperation Agreement (ETCA). Sri Lanka is on an excellent footing to engage in trade businesses with India. The island nation would therefore provide an excellent base ground for foreign businesses to carry out trade with India.

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Article Code : VBS/AT/20181012/Z_3

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