New Zealand is to open a High Commission in Colombo in 2018, according diplomatic sources. Last year when Prime Minister Ranil Wickremesinghe visited News Zealand on an official tour, then PM of New Zealand John Key announced that the two countries will open High Commissions in each other's capitals. Key said Sri Lanka was rebuilding after a generation-long civil war, "and we are keen to support that process both politically and by growing our strong economic relationship". "Establishing High Commissions in Wellington and Colombo in the next few years will help support that process." Key said the ties the two countries were building justified the opening of High Commission, which he said would probably happen within two years.
New Zealand is not making good headway in growing its trade with India, the second-most populous country in the world. Our country has fallen short of its New Zealand-India strategic goal of increasing our goods exports to at least $NZ2 billion per year by 2015. India is an important market for New Zealand, but maintains high tariff levels such as more than a 34% average tariff on agricultural goods.
The other option for New Zealand to conclude a deal with India is through the Regional Comprehensive Economic Partnership agreement. Having 16 countries at the negotiation table indicates this agreement may take a considerable amount of time and effort to conclude.
Is New Zealand thinking about Sri Lanka? Connecting one of the busiest shipping routes in the world, Sri Lanka’s geographic location links the east and west in the spice routes, also known as maritime silk roads. The island nation, barely 30km away from India, across the Palk Strait, has more than 2,500 years of historic relationships with India. Sri Lanka may provide New Zealand with the gateway to India.
Unsurprisingly, India is Sri Lanka’s largest trading partner. Sri Lanka is India’s second-largest trading partner among the South Asian Association for Regional Co-operation member countries. Trade between the countries recorded a remarkable growth after the Sri Lanka-India free trade agreement (FTA) was enforced in 2000. Total trade between the two countries increased from $US658 million in 2000 to $US3.6 billion in 2013.
In addition, the relationship between Sri Lanka and India is further strengthened by both countries being members in regional and multilateral trading arrangements such as the Asia Pacific Trade Agreement, South Asia FTA, Bay of Bengal Initiative for Multicultural Technical and Economic Co-operation, Global System of Trade Preferences and the World Trade Organisation.
The newly elected Sri Lankan President Maithripala Sirisena’s decision to visit India on his first overseas trip indicates strengthening the relationships further. Recently, Mr Sirisena and Indian Prime Minister Narendra Modi signed four significant agreements, which include steps to simplify trade and reduce non-tariff barriers on both sides. Furthermore, the countries’ central banks have agreed on a currency swap worth $US1.5 billion ($NZ2.04 billion).
Sri Lanka is clearly interested in turning the country into a trading hub to provide gateways to other larger, fast-growing and emerging markets. It has initiated negotiations with India to transform the existing Sri Lanka-India FTA into a more comprehensive economic and technology co-operation agreement. In addition, this small island nation is in the process of restoring the GSP+ concessions with the EU and refreshing the FTA with Pakistan. Furthermore, Sri Lanka is eyeing deals with China and Singapore.
Sri Lanka is not new ground to New Zealand’s dairy industry. New Zealand’s dairy has played a significant role in Sri Lanka for a few decades now. Fonterra is well established in the country with more than 500 staff. New Zealand and Sri Lanka first signed the Dairy Co-operation Arrangement in 2013. New Zealand is planning to fund the $NZ2.6 million Dairy Training Excellence Initiative and $NZ3.3 million extension to the Wanni Dairy Regeneration Activity under the Dairy Co-operation Arrangement. A recently opened Fonterra demonstration farm and training centre aim to contribute to the strengthening of the Sri Lankan dairy industry.
New Zealand’s Prime Minister visited Sri Lanka three times during the past few years and several business agreements were signed during the Prime Minister’s recent visit. In addition, the Minister of Foreign Affairs and Primary Industries Minister have made visits to the island nation during the past few years.
Is New Zealand really capitalizing on the strong relationship with Sri Lanka to open doors to India and even to other South Asian countries? Both Sri Lanka and New Zealand were strong supporters of the global multilateral system, which safeguards the ability of small states to promote and preserve their interests. It is time for New Zealand to strategically think about taking this bilateral relationship to the next level. Collective effort by these two small countries may bridge the gap between New Zealand and India.
The writer is University of Otago’s (New Zealand) first PhD in International Business. He is the only PhD in International Business in Sri Lanka and New Zealand. He is a published author on international business, trade and relations in both academic and professional media outlets. He has experience in sales, strategy, project management and operations at multinational corporations in various parts of the world. He is also a postgraduate visiting lecturer in International Business at University of Colombo.
- Otago Daily Times (New Zealand)