The Indo-British trade agreement poses serious risks to Sri Lanka’s economy, with concerns about declining investments, competitiveness, and job creation. Experts suggest a series of reforms, including better investment incentives and focusing on new markets, to overcome these challenges.
Sri Lanka’s economy is set to face significant challenges due to the proposed Indo-British trade agreement, market experts warn. If the deal goes ahead, there may be a shift in investments toward India, as it becomes a more attractive destination for foreign capital.
Experts point out that Sri Lanka’s high energy costs, expensive labor, and elevated tax rates make it a less favorable option for investors. India’s lower production costs, cheap labor, and ability to offer products to the UK market under favorable tax terms are making it increasingly appealing for international investors.
Key challenges Sri Lanka may face include:
Decreased Foreign Investment: Investment flows may reduce as investors turn to India, with industries like garments, electronics, and auto parts particularly affected.
Reduced Global Competitiveness: With higher production costs, Sri Lankan products may struggle to compete with Indian alternatives in international markets.
Fewer Employment Opportunities: The lack of new investments could hinder job creation in Sri Lanka’s economy.
Impact on High-Tech Industries: High-tech industries, in particular, may see a decline in investment as India strengthens its technological capabilities and research infrastructure.
To address these challenges, experts recommend several measures:
Enhance Investment Incentives: Offer better tax breaks, energy concessions, and flexible labor laws to attract investors.
Cut Production Costs: Focus on energy efficiency, renewable energy adoption, and improving labor productivity.
Explore New Markets: In addition to traditional markets, Sri Lanka should look to emerging Asian markets for new opportunities.
Strengthen Trade Agreements: Leverage existing trade agreements and establish new free trade partnerships to improve Sri Lanka’s global standing.
Boost Investment Promotion: Streamline the investment approval process to create a more attractive environment for investors.
Develop Human Resources: Investing in technical and vocational education to create a highly skilled workforce will further attract investors.
Market analysts agree that Sri Lanka’s government needs to formulate a comprehensive strategy to mitigate the risks posed by the Indo-British deal. Without urgent action, the agreement could seriously damage the Sri Lankan economy, they warn.
