Tomorrow’s International Order will be decided in Sri Lanka’s immediate neighborhood: German Ambassador

Affirms Brexit won’t change an iota of EU’s firm commitment to Sri Lanka

‘It may not be easy to attract German investors. However, it’s certainly worth the effort because once committed to a country, they stay. Besides, German investors not only bring capital, they also share know-how which adds sustainability to the partner country’s development’

BY SANATH NANAYAKKARE

At a time both India and Japan – members of the informal Quad grouping – which includes the U.S. and Australia is seen as a counter to Beijing’s influence in the Indo-Pacific region, the German Government decided on new ‘Policy Guidelines for the Indo-Pacific’, in September 2020, The Island recently interviewed senior diplomat Holger Seubert, the Ambassador of the Federal Republic of Germany to Sri Lanka; he threw more light on why Germany made this key decision as well as the long-standing relations between Sri Lanka and Germany. Excerpts of the interview:

How do you view the trade between Sri Lanka and Germany?

The balance of trade between our two countries has always favored Sri Lanka – in other words – there’s a significant export surplus for Sri Lanka. In recent months, Germany’s exports to Sri Lanka plummeted by an excruciating 50% year-on-year. Given the fact that overall German exports to the Asia Pacific region declined by only 11% in the same period of time, this is alarmingly above-average. It is obvious that Sri Lanka’s import restrictions played an important role here. On the other hand, Sri Lankan exports to Germany fell by only 10% which can be explained by the pandemic. The bilateral trade balance has thus further deteriorated from Germany’s point of view. Germany currently imports goods and services of more than double the value from Sri Lanka than it exports to it. Bilateral trade between our two countries is becoming more and more of a one-sided affair which of course is of concern to the disadvantaged German side.

How do you asses German assistance to Sri Lanka all these years?

Technical and financial cooperation between Germany and Sri Lanka has a long history, going back to the year of 1956. Currently there are bilateral programs in the fields of vocational training, promotion of small and medium enterprises (SME), biodiversity, renewable energies and national reconciliation.

Support in the vocational training sector has for long been the flagship of our bilateral cooperation. The Ceylon-German Technical Training Institute in Moratuwa, which was established in 1959, is a well-known example for successful cooperation in this area. Based on the experiences of vocational education in Germany, we support vocational schools in implementing demand-driven training programs in close cooperation with the private sector. In the wake of the Covid-19 pandemic, the project is working with private sector partners to develop an innovative e-learning platform that will improve accessibility to ICT-related training courses. By 2024, a total of 45 million Euros will have been invested by the German Government in this sector, including major projects like the Sri Lankan German Training Institute in Kilinochchi and the planned establishment of the Sri Lankan German Training Institute in Matara.

Regarding the development of the SME sector, we put strong emphasis on improving business development services for SMEs through digitalization. In the period 2020-2022, a total of 3.5 million Euros will be allocated to this program, plus an additional 1.7 million Euros for immediate COVID-19 response. Our joint efforts include facilitation of export processes and micro insurances for SMEs as well as the establishment of crisis resistant business plans leading to better market access for SMEs in the agricultural and tourism sectors.

We also cooperate with our Sri Lankan partners in promoting renewable energies and in increasing energy efficiency. The “Green Energy Champion” campaign has just concluded its third competition round. It is showcasing innovative ideas (government, private sector and civil society) and enabling the winners to realize their vision. Up to now, a total of 600,000 Euros has been invested and we are looking forward to continuing the initiative in close cooperation with the Sri Lankan government.

How have relations between the European Union (EU) and Sri Lanka evolved economically?

With 27 Member States and 450 million customers with high income, the EU is the largest market in the world. Over the last 25 years, the EU has become Sri Lanka’s second largest export market (behind the US). Trade with the EU significantly benefits Sri Lanka that has a trade surplus with the EU of over 1 billion Euros. Sri Lanka’s top export goods to the EU are, in this order, garments, rubber, vegetables, machinery, tea and fish.

Since the opening of the EU Delegation in the country in 1995, the EU taxpayers have provided roughly one billion Euros in development assistance, the environment, human rights and academic exchanges being main contents. Furthermore, the EU is assisting low-income communities in Sri Lanka, for instance by making sure that farmers get adequate prices for their products in the EU.

Through its preferential tariff system GSP+ (Generalized System of Preferences), the EU has granted duty free access to about 7,000 Sri Lankan products. In my view, GSP+ has worked very well for Sri Lanka although its full potential has not been used yet. Exports to the EU have increased by more than 25% under GSP+. Fish exports have even doubled; other notable growth sectors include clothing, tea, tyres, gems and motor vehicle parts. It is a fact that Sri Lanka, being a “lower middle-income country”, benefits significantly from the EU’s GSP+ scheme.

How do you view German Investment, doing business, regulatory framework?

German investors have a strong reputation of being faithful, albeit demanding partners. Faithful because a German investor’s decision is always based on long-term considerations, i.e. on plans to uphold and extend investment for a long period of time; rarely will you see a German investor to withdraw, once engaged in the country he is most likely to stay there for decades. On the other side, German investors tend to be quite demanding, before going ahead with an investment they undertake a thorough check of the business environment in the future partner country. They are doing so to make sure that their investment will not just be temporary but sustainable. To recap, it may not be easy to attract German investors. However, it’s certainly worth the effort because once committed they stay. Further to this, German investors not only bring capital, they also share know-how which adds sustainability to the partner country’s development.

Sri Lanka has a number of strengths making the country an attractive destination for German investment. The Island’s geographical position is perfect for doing business in the Asia Pacific region. Sri Lanka has the chance to further develop its position as a regional trading hub and major trans-shipment centre. Furthermore, education in Sri Lanka is generally good, the quality of locally produced goods is high, environmental standards are in place and observed.

However, not everything is perfect, of course. A look into the World Bank’s latest Doing Business Report shows Sri Lanka ranking number 99 (out of 190) with a pronounced weakness in the field of “enforcing contracts”. When I talk to German entrepreneurs, they tell me that reliability has to be considered key to any investment. Hence, if the World Bank’s assessment is accurate, Sri Lanka might wish to work on this weakness as it might then be able to attract more foreign investment.

From a German investor’s perspective, there is room for improvement in other areas as well. Over-protecting local industries does not add to an investment destination’s attractiveness. Closing borders to imports cannot be considered conducive to this objective, either. What German investors expect is the establishment and protection of a level playing field for foreigners (i.e. no discrimination against local companies), a consistent tax policy and reliable application of international rules and regulations.

To give you an example for the latter: German investors are currently concerned about the application of rules known as UCP 600. This Uniform Customs & Practice for Documentary Credits (UCP 600) is a set of rules that apply to finance institutions which issue letters of credit, i.e. financial instruments helping companies to finance trade. These rules and regulations aim at standardizing international trade, thus reducing risks of trading goods and services. German investors would like to see UCP 600 strictly applied in Sri Lanka.

How does Germany view Sri Lanka’s relationship with China as an Indian Ocean nation?

As a diplomat, I cannot comment on other countries’ relations.

However, I am in a position to inform you about Germany’s relations to the Indo-Pacific Region. In this regard, there is news to tell: Just recently (September 2020), the German Government decided on new German “Policy Guidelines for the Indo-Pacific“. The motivation for these guidelines lies in two indisputable facts: Asia’s growing importance – economically as well as politically – and an increasing strategic rivalry between the US and China. Germany is convinced that the shape of tomorrow’s international order will be decided in the Indo-Pacific, thus in Sri Lanka’s immediate neighborhood.

As an internationally active trading nation, Germany cannot content itself with remaining on the sidelines of these dynamic developments. Consequently, in its Policy Guidelines for the Indo-Pacific, Germany defines its main interests in the region as follows:

* Open shipping routes: A disruption to the maritime routes would have serious consequences for the prosperity for all countries in the world.

* Open markets and free trade: Germany firmly believes that rules-based free trade enhances freedom and prosperity on all sides.

* Protecting our planet: In the interest of future generations, the aim must be to ensure that growth in the Indo-Pacific region is environmentally friendly. Germany is ready to engage with partners to manage natural resources, to preserve biodiversity and to use energy efficiently.

* No hegemony: Germany firmly believes that no country should – as in the time of the Cold War – be forced to choose between sides. Every country should be free to choose membership in economic and security structures.

In its policy guidelines, the German Government underlines its commitment to intensify dialogue with BIMSTEC (Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation). By doing so, Germany will build on already existing projects such as the one on maritime governance with Sri Lanka. This project, implemented by the renowned German Max Planck Foundation, provides expert advice to Sri Lanka with regard to the implementation of UNCLOS (United Nationals Convention on the Law of the Sea) which Sri Lanka joined in 1994.

How will a potential Brexit deal affect Sri Lanka?

I am not in a position to comment on how relations between the United Kingdom and Sri Lanka may be influenced by Brexit. However, there is one thing I am absolutely sure about: Brexit will not change an iota of EU’s firm commitment to Sri Lanka. The EU will definitely continue to be a close partner and a friend – as will Germany as one of the EU’s major players. This is what I will be primarily working on during my tenure as German Ambassador to Sri Lanka.