ECONOMYNEXT – Sri Lanka has to integrate with the region and look outward to grow, Deputy Industries Minister Chathuranga Abeysinghe said in a post-budget forum with Deloitte, in partnership with Echelon Magazine.
One of the measures announced in the budget was to phase out so-called para-tariffs, which mushroomed after a 25-page gazette put up trade barriers in November 2004, after money printing led to currency depreciation and high inflation.
“Now, for us, a small country to grow, the most important thing is how far you integrate with the regional economy,” Deputy Minister Minister Abeysinghe said.
“Now, if you really take Sri Lanka, we have the East Asian and Indian markets as one of our key markets to grow with. So, but at this point, we are not directly connected through trade agreements.
“Not only bilateral. I think we will have to now look at multilateral as well. So, Australia and East Asia are ready to get us on board as long as we do our homework. So, I think that is where the para tariff discussion is coming through.”
“And from the Ministry of Industries, we are very much educating our industries that the window is closing.”
All kinds of tariffs block exports, by making inputs expensive, unless the industries are within free zones. Food taxes and also drive up the need for higher wages.
In an import-protected country, there is almost no chance that a domestic producer will become export competitive, compared to countries that have free trade and stable money in East Asia, analysts say.
In Sri Lanka, high food and building material taxes, as well as motorcycle taxes may also be driving people to countries in the Middle East with monetary stability, where wages are higher.
Meanwhile, Minister Abeysinghe said Sri Lanka was looking at helping firms boost productivity.
“So, your productivity is the key,” he said. “And how do you really help them in transformation and be productive?
“So, we keep telling the industrialists there is no local market anymore. So, even if you are producing for local consumption, you are actually competing with the imported items. So, basically, there is no difference.
“Now, whatever you produce, it has to be globally competitive. And that is where the goal is at.”
Based on Sri Lanka’s location, there were massive opportunities, he said.
“If you really take Sri Lanka, within two hours of a flight, we have about 3.4 billion population to serve,” he explained.
“So, I think that is where we are looking at as a government. So, I think from the Ministry of Trade and on the taxes and the trade agreements, in the next two years, we would see Sri Lanka getting into a stronger collaboration with the region.
Because we already have good ties with Europe. We have the GSP extending and we manage with the US.
And I think the other market that if you have to look at is China. So, I think, but before that, we have to get the region on board.
“So, that’s where the small countries have great potential.”
In Asia, Hong Kong was the first small country to industrialize in the 1950s.
Hong Kong was already a centre for entrepot trade before World War II, and there were some industries including ship-building before the war. Industries expanded when it returned to British rule after Japanese occupation ended, and it was one of the few Asian countries with monetary stability.
Hong Kong’s first export destinations were the UK, Thailand and Indonesia data show. After World War II there were UN trade restrictions imposed on Communist China due to the invasion of South Korea.
In sharp contrast to Keynesianism in London, British administrators including John James Cowperthwaitedeliberately refused to poke their fingers into businesses and followed a policy of ‘positive non-intervention’.
Hong Kong’s GDP was much bigger than Singapore, before the hand-over to China, and the territory was one of the main sources of FDI when Singapore scrapped import duties and made the city state into a free trade zone.
(Colombo/Nov08/2025)