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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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Fast-tracking a Zero Waste Economy: Business Leaders Commit to Circular Economy Action

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Denmark, Japan, the Netherlands and the United Arab Emirates have committed to joining a major global initiative to redesign the global “take-make-dispose” economy into a more circular one. They join over 50 government and business leaders who are part of the Platform for Accelerating the Circular Economy (PACE), which was launched at the World Economic Forum Annual Meeting 2018 in Davos.

PACE includes the heads of some of the world’s largest companies such as Royal Philips and Unilever; senior representatives from the governments of Indonesia, Nigeria, the People’s Republic of China and Rwanda; and heads of organizations, including the Ellen Macarthur Foundation, World Resources Institute, Global Environment Facility, UN Environment and World Bank.

All are committed to efforts that cut waste and pollution and fast-tracking circular economy solutions in which products and materials are redesigned, recovered and reused to reduce environmental impacts. Extending the life of products creates new business opportunities and revenue streams, while minimizing the environmental impact of mining, resource extraction, refining and manufacture.

Japan’s commitment comes as the second World Circular Economy Forum – hosted by the Ministry of the Environment of Japan and Finnish innovation fund Sitra – gets underway in Yokohama, Japan.

Japan is one of the most resource-efficient economies globally, and has recently launched its 4th Fundamental Plan for Establishing a Sound Material-Cycle Society a new public-private Plastics Smart campaign. The Netherlands government aims to achieve circularity by 2050 and halve the use of primary resources by 2030 and Denmark launched its Circular Economy Strategy and a related National Action Plan on Plastics. The UAE is committed to shaping strategic action to advance the circular economy.

To date, PACE, which is hosted and facilitated by the World Economic Forum, has catalysed major projects and collaborations to advance the circular economy, including the Global Plastics Action Partnership, which was launched in collaboration with the Friends of Ocean Action at the Forum’s Sustainable Development Impact Summit in New York. PACE is also focused on waste from electronics. In 2016, 44.7 million metric tonnes of e-waste was generated, equivalent to the weight of 4,500 Eiffel Towers. E-waste contains a number of toxic substances that can cause great harm to health. At the same time, the UN estimates that some 55 Billion Euro worth of secondary raw materials lays idle in e-waste.

Antonia Gawel, Head of the Circular Economy Initiative, World Economic Forum, said: “We have the knowledge, power and technologies to drive circular economy action. We just need to act more quickly and build partnerships to scale solutions. The Fourth Industrial Revolution offers great opportunities in this area – which is why PACE is excited to explore its potential with an expanding group of partners.”

Frans van Houten, Chief Executive Officer, Royal Philips, and PACE Co-Chair, said: “A circular economy is essential if we are to achieve global economic growth whilst stopping unsustainable resource consumption. Large corporations, SMEs and governments must collaborate to transform supply chains and the modern consumption economy. Philips is pleased to partner with private and public sector organizations through PACE enabling large-scale projects with firm commitments and decisive action.”

Naoko Ishii, Chief Executive Officer and Chairperson, Global Environment Facility (GEF), and PACE Co-Chair, said: “It is a real pleasure for me to welcome a growing network of governments to PACE.  The world urgently needs to move to a more Circular Economy, and PACE is a strong platform that brings together a broad coalition of stakeholders to accelerate action.”

Yoshiaki Harada, Minster of Environment, Japan, said: “We all have a common view on realizing a circular economy on a global scale by networking and accumulating knowledge and experience of public and private entities around the world. The Ministry of the Environment of Japan has decided to participate in PACE, and share our knowledge and experience globally. As part of our contribution to PACE, we would like to provide information on excellent actions, experiences and technologies of Japan’s public and private entities registered in our “Plastics Smart” Campaign.”

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ADB Invests $25 Million in Private Equity Fund to Help Small Businesses in Southeast Asia

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The Asian Development Bank (ADB) signed an agreement to provide a $25 million equity investment to Exacta Asia Investment II, L. P. (Exacta II), a private equity fund, to provide much-needed investments for small and medium-sized enterprises (SMEs) in Southeast Asia.

“ADB’s investment will help well-managed and middle-market SMEs in Southeast Asia to realize their growth plans, thereby driving employment, tax generation, skills transfer, and regional trade,” said ADB Director for Private Sector Investment Funds and Special Initiatives Division Ms. Janette Hall. “Investing in Exacta II allows ADB to participate in Southeast Asia’s continued economic growth while providing development benefits for people in the subregion.”

ADB’s support will allow Exacta II to invest growth equity into smaller firms—particularly those from Indonesia, Malaysia, Philippines, Singapore, Thailand, and Viet Nam—whose growth is driven by domestic consumption and export. This will help address the issue of low private equity penetration in Southeast Asia, which is crucial to create new jobs, drive economic growth, and encourage further investments in related sectors.

Exacta II, a private equity fund with a target capitalization of $250 million, intends to invest about $10 million to $40 million per transaction in some of Southeast Asia’s SMEs and lower middle-market companies, particularly in the manufacturing, technology, and service sectors.

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Suzhou Forum Calls for Faster Energy Transformation for Better Lives and Prosperity

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Senior government officials, business leaders and key players in the global energy sector met today at the Third International Forum on Energy Transitions (IFET) in Suzhou, China. The international gathering, co-organized by the National Energy Administration of China, the International Renewable Energy Agency (IRENA), and the Jiangsu Provincial People’s Government of China, is an important platform for dialogue and collaborative action on how to transform energy systems towards a sustainable, low-carbon and resilient energy future.

Over the last decade, renewables have brought disruptive change to the global energy landscape. Driven by rapid technological advances, enabling policy frameworks and plummeting costs, renewables have created unprecedented opportunities to rethink the way our energy systems operate. IFET aims to identify solutions to scale up the latest renewable energy innovations, particularly in end-use sectors, accelerate power sector transformation, increase renewable energy financing, and transform urban energy systems.

In his keynote remarks, IRENA Director-General Adnan Z. Amin stressed the need to take the global energy transformation to the next level by strengthening innovation, mobilizing investments and modernizing gird infrastructure. Accelerating renewables deployment is essential to tackle challenges such as climate change, sustainable development and meeting growing energy demand. The Director-General underlined that the energy transformation offers us vast socio-economic benefits in terms of powering sustainable growth, creating jobs and creating local value-added.

Leading the way on the energy transformation are those frontrunner countries, like China who, early on, recognised the potential opportunities in and are developing the policies, market mechanisms, and systems necessary to reorient their economies towards the high-tech industry and workforce of the future. As highlighted in IRENA’s Corporate Sourcing Report, it is not only countries that are leading the way: companies in 75 countries actively sourced 465 terawatt hours of renewable energy in 2017, enough to power a country the size of France.

In his speech at the Sub-Forum on International Cooperation on Renewable Energy Industry Development, the Director-General also highlighted that international cooperation is needed to share lessons and experiences to overcoming challenges in transforming existing energy structures to low-carbon sustainable systems based on renewables and energy.

During his remarks at the Energy Future session, the Director-General identified five priority action areas to advance the energy transformation. These include: fostering a power sector that integrates higher shares of variable renewables and decarbonising end-use sectors, strengthening system-wide innovation, scaling up investment, ensuring equitable costs and benefits of the transition, and furthering international cooperation.

The previous conferences in 2015 and 2016 adopted the Suzhou Declaration and Consensus, respectively, which called for higher levels of ambition and decisive action to accelerate the energy transition.

IRENA also participated in the Belt and Road Energy Ministerial Conference taking place in Suzhou at the same time. Renewable energy has been identified as central to one of the initiative’s key pillars as a means to build a sustainable energy future.

IRENA

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