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Sri Lanka Has the Potential to More Than Double Its Exports to South Asia

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If trade barriers are overcome, trade within South Asia can increase three-fold, from $23 billion to $67 billion, suggests a new World Bank report. Sri Lanka has the potential to more than double its exports to South Asia. Increased intraregional trade will provide a greater variety of goods and services at cheaper prices for Sri Lankan consumers, better access to inputs for producers and exporters, increased investment, export diversification and growth.

South Asia is the world’s most rapidly growing region. It is also the world’s least integrated region. Man-made trade barriers have hampered intraregional connectivity and kept South Asian countries from maximizing their prospects. Trade within South Asia accounts for only 5 percent of the region’s total trade, compared for 50 percent in East Asia and the Pacific. Sri Lanka’s exports to South Asia are equivalent to only 11 percent of its global exports.

The report, A Glass Half Full: The Promise of Regional Trade in South Asia, launched today, highlights four critical obstacles to regional trade – border tax distortions, nontariff barriers, connectivity costs, and trust deficits – and offers options for policymakers to address them.

The report helps to quantify commonly known benefits associated with a more integrated South Asia. For example, the actual value of Sri Lanka’s exports to South Asia is $1.2 billion, but the potential value is $2.8 billion. This $1.6 billion gap between the two is equivalent to 15 percent of Sri Lanka’s total global exports. Closing the gap will not only enhance but also help diversify Sri Lanka’s trade.

“Sri Lanka is brimming with possibilities for greater regional integration,” says Dr. Idah Pswarayi-Riddihough, World Bank Country Director for Sri Lanka and the Maldives. “Trade barriers and insufficient connectivity to the region are preventing Sri Lanka from maximizing the benefits of its proximity to South Asia.”

In addition to tariffs, para tariffs such as port and airport development levy and cess create an anti-export bias. Para tariffs more than double the average import tariff in Sri Lanka. Additionally, 44 percent of Sri Lanka’s imports are not provided concessional treatment under the South Asia Free Trade Agreement. And about 23 percent of its exports to South Asia suffer from the same non-concessional treatment. Non-tariff measures further increase the cost of imports.

Limited air connectivity with South Asia also raises the cost of trade, particularly in services. One success story is air services liberalization between India and Sri Lanka. Increased air connectivity between the two countries since 2003 has lowered costs, and increased passenger traffic and the volume of air cargo. There are now 147 weekly flights between Sri Lanka and India, and since 2005 India has been the biggest source of tourist arrivals in Sri Lanka. The number of Indian tourists tripled from 113,323 in 2005 to 356,729 in 2016, as a result.

“Air services liberalization between Sri Lanka and India serves as a potent example for the rest of South Asia,” says Sanjay Kathuria, World Bank Lead Economist and lead author of the report. “Given the region’s complicated history, size asymmetries, and a trust deficit, policy shifts need to be implemented gradually. Air services liberalization entailed small steps backed by persistence which cumulatively made a substantial impact.”

Recommendations provided in the report include targeting sensitive lists and para tariffs to enable real progress on SAFTA. It also calls for a multi-pronged effort towards addressing non-tariff barriers, focusing on information flows, procedures, and infrastructure.

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Finance

Digitalization crucial to SIDs’ COVID-19 recovery, long-term development

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The upscaling of digital technologies presents a host of opportunities for small island developing states (SIDS) to diversify their economies, boost manufacturing, gain greater access to global value chains, and improve disaster preparedness. However, significant obstacles remain, including inadequate digital infrastructure, insufficient training opportunities for women and young people, a growing digital divide, and a lack of data and policy knowledge. That’s according to an expert panel convened for the Global Manufacturing and Industrialisation Summit’s Digital Series on the topic: “How Information and Communication Technologies can foster inclusive and sustainable industrial development in Small Island Developing States”.

Ralf Bredel, Chief of the Asia-Pacific Regional Programme at the United Nations Industrial Development Organization (UNIDO), said that SIDS share common challenges such as limited resource bases, long distances to primary markets, and vulnerability to climate change.

“ICT has the potential to help SIDS in overcoming some of the challenges derived from the isolation and remoteness. It can support trade in economic diversification. This is even more true under the current circumstances, with COVID-19 and the restrictions on people’s movements and the heavy blow to SIDS’ economies in relation to their continued reliance on tourism,” said Bredel.

Vanessa Gray, Head of the Division for Least Developed Countries (LDCs), Small Island Developing States (SIDS) and Emergency Telecommunications at the International Telecommunication Union (ITU), added, “We know that small islands are naturally prone to disasters caused by earthquakes and severe weather events and are being affected by climate change, resulting in increased tropical cyclones, hurricanes, flood and landslides, to name a few. Connectivity can help address these events by providing remote communities with access to early warning systems, real-time weather information, remote sensing and geographic information systems.”

Gary Jackson, Executive Director of the Caribbean Centre for Renewable Energy and Energy Efficiency (CCREEE), said that countries in the region are “pushing the envelope” towards energy efficiency.

“We have to recognize that islands don’t have what we call a supergrid, don’t have a lot of interconnections that would give us reliability and availability and that’s what people really want,” said Jackson. “So one of the things we have to consider is how we move towards decentralization, decarbonization and some of the things that we need to do to ensure that reliability, availability and affordability are consistent with what people require.”

Michelle Marius, Publisher of the ICT Pulse blog highlighted a continuing gender gap concerning digital employment. “We do have so many girls and women in the workforce. Many of them, sometimes even in management positions in reputable organisations, but somehow we still have not been able to crack that barrier between women in tech and digital entrepreneurship by women” she noted.

Amjad Umar, Director and Professor of ISEM (Information Systems Engineering and Management) programme at Harrisburg University of Science and Technology, said, “We know that, in many cases, SIDS do not have 3G technologies – they are still at 2G range. So, we specifically designed this plan (for the ICT4SIDS Partnership) that produces solutions that would work with very, very low technologies…”

“Digitalization consists of people, processes and technologies,” underlined Umar.

Concluding, moderator Martin Lugmayr, Sustainable Energy Expert at UNIDO, stressed that there is a long way to go towards realizing inclusive and sustainable industrial development in SIDS, particularly in light of current circumstances. “COVID-19 recovery must have a long-term perspective. Iit has to be green, it has to be blue in the case of Small Island Developing States, and it has to be digital,” he said.

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Human Rights

UN officials fear US terrorist designation will hasten famine in Yemen

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© UNICEF

Senior UN officials have expressed concern over the potential impact of the decision by the United States to designate Yemen’s Ansar Allah, more commonly known as the Houthi movement, a terrorist group, the Security Council heard on Thursday. 

Briefing the online meeting, UN Special Envoy Martin Griffiths said Yemen was going through dark times following a deadly attack last month on its newly-formed Cabinet, and with millions facing potential famine, but emphasized that peace is still possible. 

Mr. Griffiths condemned the 30 December attack at the airport in Aden, which targeted the Government officials who had just arrived from Saudi Arabia.  Dozens of civilians, aid workers and a journalist were also killed. 

“The attack cast a dark shadow over what should have been a moment of hope in the efforts to achieve peace in Yemen. The formation of the Cabinet and its return to Aden was a major milestone for the Riyadh Agreement and for the stability of state institutions, the economy, and the peace process”, he said

“The Government has launched an investigation into the Aden attack and has made its conclusions public earlier today that Ansar Allah was behind the attack.” 

‘Chilling effect’ on peace efforts 

For more than five years, Yemen has been mired in conflict between the internationally-recognized Government, which is backed by a Saudi-led coalition, and Houthi rebels. 

On Sunday, the United States announced it will designate the group a Foreign Terrorist Organization (FTO) under domestic law.  Mr. Griffiths expressed serious concern over this prospect. 

“We fear in my mission that there will be inevitably a chilling effect on my efforts to bring the parties together. We all hope to have absolute clarity on far-reaching exemptions to be able to carry out our duties”, he said. 

Yemen remains the world’s worst humanitarian crisis. Some 16 million people will go hungry this year, and 50,000 are already essentially starving to death, amid a shortfall in aid.  Preventing a massive famine is the most urgent priority, the UN Humanitarian Affairs chief and Emergency Coordinator told ambassadors. 

Yemenis stockpiling food 

Mark Lowcock called for the FTO designation to be reversed, which Mr. Griffiths also supported, outlining its potential impact on aid relief in a country that overwhelmingly relies on food imports.

He explained that humanitarian agencies provide food vouchers or cash to needy Yemenis so they can shop at markets. 

 “Aid agencies cannot, they simply cannot, replace the commercial import system,” he stressed.  “What this means is that what the commercial importers do is the single biggest determinant of life and death in Yemen.” 

Mr. Lowcock reported that Yemenis are already rushing to markets to stockpile food, while commercial traders fear the designation will affect their operations.   

“Some suppliers, banks, insurers and shippers are ringing up their Yemeni partners and saying they now plan to walk away from Yemen altogether”, he said.  “They say the risks are too high. They fear being accidentally or otherwise caught up in US regulatory action which would put them out of business or into jail.” 

Although the US plans to introduce licences so that some aid and imports can continue, the relief chief said further details will not be available until 19 January, the day the designation takes force. 

Reverse designation, or face catastrophe 

The head of the World Food Programme (WFP), David Beasley, gave a blunt assessment of the prospects, putting aside his prepared remarks to speak “heart-to-heart”. 

“We are struggling now without the designation. With the designation, it’s going to be catastrophic. It literally is going to be a death sentence to hundreds of thousands, if not millions, of innocent people in Yemen,” he said. 

Mr. Beasley, an American, also removed his “UN hat” for a moment, to speak about his engagement with Washington, which allocated $3.75 billion to WFP last year.  

“I’m very grateful for that”, he said. “But this designation, it needs to be re-assessed, it needs to be re-evaluated, and, quite frankly, it needs to be reversed.” 

Mr. Beasley added that Yemen is among several countries facing famine, and the COVID-19 pandemic has only exacerbated these crises. 

The WFP chief called for Gulf States “to pick up the humanitarian financial tab for this problem in Yemen”, and urged the Council and world leaders to apply pressure on the warring parties to end their fighting. 

 “I can assure you that Mark Lowcock and I will be before you pretty soon talking about other countries,” he said.  “And if we can’t solve this one – this is man-made completely – shame on us.”

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Development

World Bank Plans to Invest over $5 Billion in Drylands in Africa

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The World Bank plans to invest over $5 billion over the next five years to help restore degraded landscapes, improve agriculture productivity, and promote livelihoods across 11 African countries on a swathe of land stretching from Senegal to Djibouti.

World Bank Group President David Malpass announced the investment at the One Planet Summit, a high-level meeting co-hosted with France and the United Nations that is focused on addressing climate change and biodiversity loss.

“This investment, which comes at a crucial time, will help improve livelihoods as countries recover from COVID-19 while also dealing with the impact of both biodiversity loss and climate change on their people and economies,” said Malpass.

The more than $5 billion in financing will support agriculture, biodiversity, community development, food security, landscape restoration, job creation, resilient infrastructure, rural mobility, and access to renewable energy across 11 countries of the Sahel, Lake Chad and Horn of Africa. Many of these efforts are in line with the Great Green Wall initiative. This builds on World Bank landscape investments in these countries over the past eight years that reached more than 19 million people and placed 1.6 million hectares under sustainable land management.

“Restoring natural ecosystems in the drylands of Africa benefits both people and the planet,” said Moussa Faki Mahamat, Chairperson of the African Union Commission.  

Working with many partners, PROGREEN, a World Bank global fund dedicated to boosting countries’ efforts to address landscape degradation, will also invest $14.5 million in five Sahelian countries – Burkina Faso, Chad, Niger, Mali, Mauritania.

The World Bank Group is the biggest multilateral funder of climate investments in developing countries. In December 2020, the World Bank Group announced an ambitious new target for 35% of its financing to have climate co-benefits, on average, over the next five years.

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