A disorderly Brexit could roil global financial markets, worsen uncertainty and raise risk aversion which could affect developing Asia more broadly, said Utsav Kumar- Senior Country Economist at Asian Development Bank.
Noting that the confidence effects can also be significant due to Brexit, he said that Brexit impact on world GDP via trade and production linkages would be small; but the UK and the EU would be affected the most.
He made these comments speaking at a seminar organized by the Ceylon Chamber of Commerce and held under the theme, ‘Brexit and its Implications to Sri Lanka’ in Colombo last week.
He said further that the impact of Brexit through trade and production channels are small even for Sri Lanka. However he emphasised that some sectors will be affected more.Noting that non tariff measures are more worrisome, he said new set of rules could impede flow of trade between the UK and other trading partners.
Dr. Ganesh Wignaraja, Executive Director of the Lakshman Kadirgamar Institute delivering the keynote speech at the seminar stated that the EU is the world’s largest trading bloc and Brexit will be a significant change in the status quo, amidst a messy and unpredictable environment as the outcome of the Brexit vote is still unclear.
Speaking on some strategic implications for Sri Lanka, he said that on the trade front, Sri Lanka will have to work in a much smarter way to conduct export promotional activities targeting other EU markets especially France and Germany while making efforts to invest in upgrading to The European Union Social Protection Systems Programme (EU- SPS ), Technical Barriers to Trade (TBT) and ethical standards.
‘Furthermore, Sri Lanka should adhere to GSP + conditionality, he said adding that Sri Lankan businesses should make efforts to fully utilise the EU Generalised Scheme of Preferences to better garner more opportunities.
“Furthermore, we should also be very conversant with our ethical standards, especially in the areas of human rights, labour rights and transitional justice. We will have to look at those issues seriously as part of our governance and nation building agenda.” he said.
On the FDI front, he stressed that Sri Lanka needs to engage with UK and the EU investors to further increase FDI in Sri Lanka and to attract the EU FDI into long-term infrastructure under the auspices of 2018 EU Master Plan.
“The EU master plan is still on the drawing board. But it is going to be true very soon. Hence, we need to carefully watch that space in order to seize any imminent opportunities.” he said.
In addition, measures should be taken to attract UK FDI in financial, legal and creative services to the Port City, he noted.
“Port City is a 15 year project. We need to have diversified sources of FDIs for Sri Lanka and we should not purely depend on FDIs from China. We need to ensure that Chinese state owned agencies or private sector companies don’t make this a ‘Mini China’. Therefore, we need to make sure that the Port City project is open to other countries in the rest of the world.
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