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Last modified on: 12/30/2010 11:28:48 PM "The Role of International Agreements and Diplomacy in Promoting Sri Lankan Business"

"The Role of International Agreements and Diplomacy in Promoting Sri Lankan Business"

(Dr. Kohona at PIM)

Dr. Palitha T.B. Kohona , Secretary to the Ministry of Foreign Affairs delivered a public lecture at Postgraduate Institute of Management (PIM) , Sri Lanka's leading business school under the theme "The Role of International Agreements and Diplomacy in Promoting Sri Lankan Business" on Tuesday (June 24). The Foreign Secretary highlighted Sri Lanka's economic progress even under terrorist threats and the how the country's economy is challenged by anti Sri Lankan propaganda carried out by LTTE and others.

Dr. Wickrema Weerasooriya,

Distinguished Invitees,

Ladies and Gentlemen,

It is with great pleasure that I address you today on the subject "The Role of International Agreements and Diplomacy in Promoting Sri Lankan Business". I spent a considerable number of years either negotiating international agreements affecting trade and investment or interpreting them to ensure proper implementation. My earliest experience in this area was with regard to fisheries agreements. This early exposure to the fishing industry and its regulation through international instruments is partly responsible for my fondness for sushi and sashimi. I was particularly fortunate to have been involved with the development of the treaty regime for Southern Bluefin Tuna, then involving the three major producers of this product, Australia, Japan and New Zealand. Although in Sri Lanka, we still tend to think of fish as a livelihood provider for small operators, globally, it is a multi billion dollar business. Southern Bluefin Tuna fetches in excess of 200 dollars per kilo in the Tokyo Tsukiji fish market and it is usually air freighted, when fresh. Intergovernmental agreements regulate fisheries in many areas of the world. The European Economic Community regulates fishing through quotas allocated to its member states, largely as a conservation measure. You will recall that the European cod fishery collapsed in the eighties due to over fishing and had to be restored through multilateral action.

Subsequently my involvement extended to negotiating trade and also investment protection agreements, in particular, the Uruguay Round of Agreements. Today, a range of agreements, both multilateral and bilateral, impact on trade and investments across the globe. In the trade area, the most prominent framework is provided by the World Trade Organisation Agreement and its related treaties. Many countries of the world are parties to these agreements, which are designed to liberalise world trade. These are not free trade agreements but mechanisms designed to liberalise trade. The prevailing view is that liberalised trade will increase global prosperity and will benefit more people. The major trading powers of the world, the US, the EC, Japan, China, India, Brazil, Australia et al, are all members of the WTO. A prominent exception is the Russian Federation which is still negotiating its accession conditions. But let me strike a note of caution, just in case you begin to believe that we are in a jolly world of free traders competing with each other on equal terms for market share. The members of the WTO, especially the bigger ones, are the ones who have constantly acted inconsistently with the sprit, if not the law, of the organisation in the furtherance of their national interests. For example the US, the EC and Japan subsidise their farmers to the tune of over 350 million dollars per annum. In the process they have impacted adversely on agriculture producers, especially on developing country producers. Agriculture still remains the critical stumbling block in the Doha Round which is being negotiated now. While the developed countries, tend to emphasise liberalisation for the areas in which they are strong, for example in the area of services, they are not too enthusiastic about liberalising areas in which they are weak. Agriculture, textiles and garments, aviation, are examples. In fact, some commentators believe that the entire intellectual property regime under the TRIPS is anti-competitive and it is a regime that is strongly supported by developed countries.

More recently, as you know, I spent ten years at the UN as the Head of the UN Treaty office. The UN Treaty office is the custodian of over 500 multilateral treaties deposited with the Secretary General, and on his behalf, is responsible for managing them, including by providing interpretative statements. This was a minefield that had to be negotiated with extreme care as each country had its own perception on how a particular treaty impacted on its interests. In addition, under Article 102 of the Charter of the UN, over 50,000 treaties were deposited with the UN. What is significant about this treaty framework is the intricate manner in which the international community was legally interconnected and how bilateral relations were minutely regulated. Countries enter into treaties voluntarily and in the process negotiate benefits for themselves and invariably are required to make concessions. The international treaty framework reflects a meticulous balancing of global rights, obligations and standards across the entire spectrum of human activity.

Sri Lanka, for its part, has developed complex chains of interconnectivity with a range of countries around the world and international organisations over the years. Some of these linkages go back hundreds of years and even millennia. Many, originating in cultural, religious, trading and colonial factors, are today based on multilateral and bilateral treaties. While we emphasize our treaty based linkages, we must not forget our very strong intrinsic cultural connections, particularly in our own region. While the colonial links have served us well, we must also exploit the important historical cultural links within our own region - a region which is now vigourously contributing to the economic advancement of the world.

Sri Lanka's contemporary bilateral and multilateral treaty connections substantially underpin much of its global relations whether they are political, economic, commercial, etc. It could be said that very little of Sri Lanka's external relations is undertaken today without relying on a complex web of multilateral and bilateral treaties. An understanding of this factor would substantially facilitate our trading and economic activities. While these treaties establish or reflect bilateral interests and in many cases, global standards, they also impose binding rights and obligations. Admittedly, we are part of a system that is not perfect, but it is a system that is gaining in strength. For example a letter posted in a roadside mail box in Colombo would reach its destination in any corner of the world without hindrance, thanks in part to our postal service, but essentially due to a well established framework of international rules relating to postal services first established in 1865. Similarly, international telephonic communications, sea transportation, air travel, banking, trade transactions, etc take place against the background of an intricate web of international norms underpinned by treaties to which Sri Lanka is a party. Modern commerce would not have reached today's level of overriding importance in the absence of this treaty framework. We owe our modern prosperity to a large extent to this framework of global norms.

Sri Lanka, as a member of the international community, is dependent on this network of norms for its development and continuing prosperity and naturally others who are its members are also in a position to use this facility to exert influence on us. They will definitely insist on their treaty rights. In addition, it is the window through which the world observes us. It is also the window for us to show our best face to the world. We need to be constantly conscious of its potential and its drawbacks. This is a challenge to our diplomacy. While we benefit from it, we also open ourselves to the world through it.

Let me pause over a few examples. Sri Lanka is a Member of the WTO. The WTO Agreement requires Sri Lanka to take agreed measures towards progressive trade liberalization. Currently a new regime is being negotiated called the Doha Round. The previous one was the Uruguay Round. We must engage actively in these negotiations both as an individual country and as part of a group or groups that have common interests. This would be a task for our diplomats. Cross-border trade is enhanced, through bilateral Free-Trade Agreements (FTAs). Sri Lanka concluded the first FTA with India in 1999, and a similar FTA was signed with Pakistan in August 2002. The Agreement with India has resulted in the bilateral trade reaching approximately US$ 3 billion. Sri Lanka is now in the process of negotiating Comprehensive Economic Partnership Agreements with both these countries. These are in the nature of Economic Integration Agreements (EIAs) - a primary vehicle in liberalizing trade policies, the ultimate benefactors of which will be the people of Sri Lanka. The expansive nature of such Comprehensive Economic Partnership Agreements, aiming at the liberalization of trade in goods as well as services, is also consistent with the obligations undertaken by Sri Lanka under the main substantive agreements of the WTO system such as the General Agreement on Tariffs and Trade (GATT), the General Agreement on Trade in Services (GATS), the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) and the Agreement on Trade-Related Investment Measures (TRIMS), which were the outcome of the Uruguay Round of Trade Negotiations held from 1986 to 1994. They entered into force as a package in 1995.

There are other important categories of international agreements which benefit Sri Lanka economically. I note that Sri Lanka uniquely provides extensive protection to foreign investments under Article 157 of the Constitution. These investment protection treaties ensure that globally accepted standards are respected by the parties in their dealings with foreign investors. In particular, political risk is covered. Bilateral Investment Treaties (BIT) play a major role in this regard as they provide a degree of reassurance to foreign investors. Sri Lanka has entered into over 25 such investment treaties with other States. Most recently, the Government of Sri Lanka was able to finalize two further Agreements with the Czech Republic and Jordan.

Following a proactive approach to establishing economic and trading relations, the government in February 2007 concluded an Agreement on a Framework Programme for Financial Cooperation with Hungary, while an Agreement on Economic and Technical Cooperation with China was signed in February, 2007. Other developments concerning the subject of bilateral economic relations were the signing of an Agreement on Trade and Economic Cooperation with Israel (in April 2007) and a Trade Agreement with Jordan, in May 2007. Similar agreements have also been signed with Iran. These agreements are always preceded by considerable activity through the diplomatic channel.

Sri Lanka has also entered into over 50 Bilateral Air Services Agreements. The conclusion of such agreements dates back to 1948, when Ceylon (as Sri Lanka was then known) entered into an Air Services Agreement with India. This was immediately followed by agreements with countries such as Pakistan (1949), Thailand, Myanmar and Australia (1950) and the Netherlands (1953).

There has been renewed activity in the field of air services, especially, during the recent past. For instance, in April 2007, Sri Lanka signed an Open Skies Air Services Agreement with Switzerland. Also, a memorandum of Understanding which provides for liberalized air services between Sri Lanka and China was signed in March 2007.

Currently agreements are being pursued with a range of European countries. The European Commission has asked that Sri Lanka enter into a EC wide agreement on air services which will ensure consistency with Community law. Along with air services agreements, we also seek to make visa formalities easier for our business people. This, as you will appreciate, is not an easy task.

Sri Lanka is a State Party to the major international conventions and protocols concerning environmental protection, such as the Montreal Protocol, the Vienna Convention on the Ozone Layer, the UN Climate Change Convention, the Kyoto Protocol to the Climate Change Convention, the Convention on Biological Diversity, the Cartagena Protocol on Bio-safety, the Basal Convention on the Control of Transboundary Movements of Hazardous Wastes, the Stockholm Convention on Persistent Organic Pollutants and the Convention on International Trade in Endangered Species.

Domestic legislation has been enacted to ensure that the international obligations arising from these multilateral instruments are adequately given effect to in Sri Lanka. For instance the Flora and Fauna Protection Ordinance introduced as far back as 1937, the National Environment Act of 1980 and other relevant legislation which have been amended consistently to meet the international standards.

The critical importance of Sri Lanka's participation in these multilateral environmental agreements is two fold. For one, we become part of the global effort to ensure the sustainability of our environment for future generations. On the other hand, we create business and economic opportunities. Compliance with key environmental treaties is an essential precondition for the extension of the GSP+. In addition, under the Kyoto Protocol we could join the global carbon credit market under the Joint Implementation Mechanism. There are also significant subsidies being offered by the EC and others for environment standards compliant investments. Sri Lanka is also pushing to have accepted the principle that tropical rainforests must be ascribed a marketable carbon value.

These international agreements confer extensive benefits to Sri Lanka. The benefits gained through our international network of treaties have helped Sri Lanka in great measure to expand our exports, find new markets, attract more investors and in the process, create employment, reduce poverty and achieve economic development. Our success in expanding our trading activities has contributed significantly to our compliance with wider global standards. Outside the international legal framework, but in line with UN goals, Sri Lanka has shown considerable success in accomplishing the Millennium Development Goals, which aim at reducing poverty and improving the lives of people, as agreed upon at the Millennium Summit in 2000. We should be proud that the number living in poverty in Sri Lanka has dropped to 15.2%. Our literacy rate remains very high. The Government has a target of achieving a 50% computer literacy rate by 2010. While much more needs to be done, the progress Sri Lanka is making is noteworthy, especially at a time when the entire country is challenged by the brutal terrorism perpetrated by the LTTE.

In this context, it needs to be remembered that the LTTE, consistent with the strategy of other terrorist groups who have sought to cripple the economies of target countries, has aimed its sights at the economy of this country. It is a strategy which appears to be succeeding to some extent, unfortunately due to the conscious or unwitting acquiescence of certain international players. The LTTE has attacked major economic targets in the country, and has threatened to continue such attacks. Unfortunately, against this obvious background, we also hear talk of trade concessions being withdrawn, development assistance being reduced and harsher economic conditions being imposed by our international partners. This approach does not help at a time this country is struggling to maintain its democracy and its democratic institutions in the face of the LTTE's determined efforts to cripple it economically. Tourism and inward investments have been a key focus for the LTTE. No great wisdom is needed to understand the terrorist motive. The LTTE's prime motive has always been to see that Sri Lanka is debilitated economically, that its development is stultified, and the lives of its people made miserable. Terror is sown to reap a harvest of misery. What then is remarkable is that the successive Governments of Sri Lanka have continued the process of ensuring economic development amidst vast difficulties.

Against the background of broad relations underpinned by treaties and other agreements, Sri Lankan governments have taken proactive diplomatic initiatives to maintain a continuous dialogue with key international players with a view to ensuring continued economic connectivity and national security. For example, H.E. the President has made several visits to targeted countries over the last two and a half years. He has also attended the General Assembly of the UN, the ILO, meeting different world leaders, the G11 Summit, the Baoa Forum, the Commonwealth Heads of Government Summit and the World Food Summit. Almost all his visits have enabled business delegations which have accompanied him to exploit resulting opportunities. All of these visits have been used by the President to consolidate our bilateral relations, to explain Sri Lanka's position to the world, to highlight positive developments, reassure the world of our policy approaches, including on economic issues, and to listen to the views of our interlocutors. Every possibility has also been used to encourage and facilitate economic and trading contacts. For example, the President, in his address at the Rome Food Summit, proposed the creation of regional and national buffer stocks of food, funded internationally, as a means of countering the global food crisis. The Prime Minister, the Minister of Foreign Affairs and other Ministers have also made similar visits to a range of countries. Visits have also been undertaken at senior officials' level. Some of the benefits obtained following these contacts to facilitate business may not be obvious but nevertheless are very significant. Many foreign delegations at senior level have come to our fair isle in recent years. Regular visits to Sri Lanka have been undertaken by senior officials of the UN and other international organisations. Importantly, in the face of a determined terrorist challenge and its sophisticated propaganda machine, we have used these visits to explain to the world measures undertaken by the government and its security forces to counter the brutal threat of terrorism that confronts us, the evolution of the political process designed to address the concerns of our minorities, particularly the Tamil minority, the APRC process, measures taken to consolidate and advance our democratic institutions, in particular, holding elections in the Eastern Province after a lapse of 14 years, and measures undertaken to address the economic and social needs of our people. The achievements of our country in recent times, including our success in substantially attaining the Millennium Development Goals, our high ranking in the UN Human Development Index, in initiating vast development programmes, building extensive new infrastructure, including roads, three power plants and two harbours and in creating opportunities for industrial and services expansion have been highlighted. In addition, these visits have contributed towards encouraging inward investments and foreign tourist arrivals, particularly from new sources. I am certain that there are areas where we could perform better. We will keep trying.

It is important to note that despite the adverse publicity and the determined efforts to denigrate the country, even from within, Sri Lanka received a record level of FDI, US $ 751 million, in 2007 and tourist arrivals though unsteady, recorded increases from the Middle East, Eastern Europe and Asia. As you are aware, a bond issue of US $ 500 million resulted in an over subscription of US $ 1.6 billion.

It is evident that Sri Lanka's proactive engagement in the world stage has brought tangible benefits, in particular, the government's active diplomacy has clearly resulted in increased development assistance flows to this country. Japan has increased its bilateral assistance to Sri Lanka to US $ 618 million. China has emerged as a major development partner and is funding projects to the value of over one billion dollars. The contribution of Iran to our development efforts exceeds US $ 1.9 billion. India is also emerging as a major participant in our development projects with over US $ 500 million. The Republic of Korea contributes in the region of US $ 117 million. The Asian Development Bank and the World Bank are also major collaborators in our development efforts. Countries such as the US, Germany, France, Spain, Australia, the Czech Republic, Austria and Hungary are also important partners. The European Union is especially significant with its contribution of over Euros 129 million. At a time when global development assistance levels have dropped, Sri Lanka, seeking to provide a better economic future for its people, has succeeded in increasing assistance to itself. These development projects create opportunities for business and, of course, increased prosperity for the people.

In this context, I would also like to spend a little time looking at Sri Lanka's economic performance. Trade is an important element in our economic advancement and our prosperity. Historically Sri Lanka benefited enormously from international trade and there was a time when this country was a major emporium in East-West trade relations. Then Sri Lanka featured in an exaggerated manner in the imagination of Western cartographers. This can only be explained in terms of our impressive trade links. In more recent times, traders from afar came to Sri Lanka looking for valuable commodities such as cinnamon, gems and elephants. Things are not too different today and it is very important for us to maintain our trade relations unaffected by extraneous factors. We must continue to deploy our diplomatic service to advance our economic and trade relations. There is much in the statement that "The business of today's diplomats is business". I note that many modern foreign services have been amalgamated with their trade ministries. Take for example Australia, New Zealand, Singapore, the UK and Canada.

As you know, Sri Lanka's per capita income has now surpassed US$ 1617 a year. We are now a middle income country, albeit at the lower end. Our economic growth rate was 6.8% in 2007. Our industrial exports increased by over 8% during the same time while agricultural exports increased by about 6%. Unemployment is at a historic low although inflation is a problem. Inflation, which is afflicting a broad range of countries worldwide, appears to be unavoidable given that Sri Lanka is deeply dependent on imports of energy and essential consumables which have all substantially increased in cost at the source. In many instances, prices have escalated tremendously. It is hoped that global conditions would improve and help us to deal with this problem better in the future. Sri Lanka's proactive managements of its international relations has assisted in confronting the terrorist challenge in a substantive manner. Importantly, it is to be remembered that Sri Lanka is a party to 12 of the UN sponsored treaties in this area and is a party to the SAARC Convention on Terrorism. Sri Lanka played an active role in fashioning UN and SAARC approaches to terrorism. These treaties which command wide participation bind their parties to a global framework to counter different aspects of terrorism, including terrorist fund raising. Sri Lanka has concluded bilateral agreements, including with the US, Thailand, Myanmar, Laos, Cambodia on intelligence sharing and security cooperation matters. Cooperation in intelligence sharing has resulted in successful naval operations by our Navy and the prosecution of LTTE operatives in other countries. Furthermore, the constant efforts made by Sri Lanka has succeeded in having the LTTE proscribed in the US, Canada, 27 countries of the European Union, India etc. The LTTE fronts, the TRO and other charities, are proscribed in the US and Canada. We hope that the EU will follow soon. This will have a serious effect on LTTE fund raising efforts around the world. Some of these countries, in particular the US, Canada, the UK, France, Italy and Australia, have commenced judicial action against LTTE fundraisers, gunrunners and extortionists and its front organizers. It is important to note that terrorism is a scourge that has been condemned as an unacceptable means of political expression by the international community and should not be given a new lease of life through misguided efforts to penalise the government.

The European Union has become Sri Lanka's major trading partner. Bilateral trade exceeds US$ 3 billion affecting over 100,000 jobs directly. Against this background it is vitally important for us to continue to enjoy the GSP + concession in the future. At present we are making a concerted effort through our diplomatic missions to maintain this concession.

The question has been asked whether Sri Lanka could satisfy the conditions related to the extension of the GSP+ facility when it comes up for review this year. We will continue our efforts to convince our partners that we will be able to meet the conditions underlying the granting of the GSP+ concession. I note that Sri Lanka is a party to the key conventions that underpin the GSP+ facility in the areas of human rights, the environment, labour and good governance. Sri Lanka has performed exceptionally well and been commended in the areas of the environment and labour enabling us to market our clothing under the slogan "Garments without guilt". Many comments have been made concerning Sri Lanka's compliance with the commitments undertaken under the different human rights conventions, in particular the ICCPR. I note that the Supreme Court has held that the ICCPR is justiciable under the law of Sri Lanka and the convention has been adequately given effect under our law. While the wider struggle against the brutal terrorist challenge continues, in parallel, the government has taken a range of measures to ensure that global human rights standards are met within the country. The One-Judge Commission on Disappearances (the Tillakaratna Commission) was appointed to investigate alleged disappearances. An Independent Commission of Inquiry is investigating a number of high profile incidents. It commenced public hearings in early March. Until the end of last month, its inquiries were observed by a group of International Independent Group of Eminent Persons. It is true that the IIGEP has decided to conclude its work and has also made certain comments. Both the Commission and the Attorney General's Department have responded to these comments. Sri Lanka's military has been provided extensive human rights training by the ICRC. Sri Lanka has also continuously interacted with high level UN officials responsible for different aspects of human rights and has not hesitated to invite them to Sri Lanka.

Unfortunately, today Sri Lanka is being subjected to the type of scrutiny to which even developed countries are not subject. The standards that are being applied to us, for an in explicable reason, appear to be the harshest. I cannot help but ask, how long is it since that minorities were accorded equal treatment in many countries of the developed West, including those who stand in judgement over us? This question can be posed legitimately but I do not propose to pursue it. What is important is to recognise that Sri Lanka, fighting the most brutal terrorist organisation in the world, has made a genuine effort to protect global human rights standards while protecting the vast mass of its civilian population while maintaining the sovereignty and integrity of the country.

It is also an unfortunate to observe the cynical willingness of some to accept allegations made by organisations overtly sympathetic to the LTTE and some NGOs, who have a vested interest in continuing their operations in this tourist heaven. I wish that the current tendency to preach from an exalted pulpit would, at least, be limited to those who could boast of a gentler past.

Ladies and Gentlemen, in a globalised world it is not unexpected that everything that we do and do not get highlighted, sometimes disproportionately. Unfortunately, given the sophistication of the propaganda machine of the LTTE, many real and perceived actions in our performance get flashed across the world in real-time. Some of this material gets picked up by NGOs and even governments. It is for us to deal with these barrages of propaganda as effectively as possible. This is our challenge.

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