Key Actors in Foreign Policy Private Sector & IFIs LKI Foreign Policy Forum June 2017 Deshal de Mel

Outline Context: The importance of economic diplomacy Coordination with the Private Sector Economic Agenda of Foreign Policy Trade in Goods & Services Investment Non-Resident Sri Lankans IFIs

The Importance of Economic Diplomacy Foreign policy has an important role in supporting external economic agenda. With a $85 bn GDP the domestic market alone is insufficient to generate sustainable high economic growth. In the last decade economic growth has been largely domestic market driven. Necessary to shift the balance to greater outward orientation. Sri Lanka’s exports have been concentrated in too few products (apparel and tea) and narrow markets (Europe and N. America). SL firms need to shift into new products and new markets – both agendas can benefit through a proactive role of the government engaging with private enterprise.

A Matter of Coordination Foreign relations are an important externality for the business and commercial relations of private enterprise. At the same time, strong commercial relations can be constructive for inter-governmental bilateral relations eg. India-US trade chambers which pushed the agenda for bilateral relations. Foreign ministry must coordinate with a number of actors to be fully cognizant of the country’s external economic priorities. Private sector – Chambers of Commerce, Industry groups with trade exposure (eg. Apparel, IT etc.) Foreign Ministry consultations with relevant business chambers and industry bodies should take place at a regular structured forum (quarterly or bi-annually). More specifically, necessary for SL overseas missions to have structured engagements with key export industry bodies and regular channels of communication before and during mission. Foreign Ministry could have an advisory group comprising key non-state actors – private sector, civil society etc. that can provide objective feedback and perspectives on key foreign policy issues.

Economic Agenda of Foreign Policy The economic agenda of foreign policy should encapsulate strategy and activities in promoting Sri Lanka’s interests in; Trade of Goods & Services Foreign Investment & Capital Markets Economic engagement with Non-resident Sri Lankans with a view to positioning Sri Lanka as a fulcrum for trade in goods and services in the Indian Ocean, leveraging its strategic logistical location at the mid-point of east and west Asia. Sri Lanka should endeavor to regain its historical legacy as a liberal, trading economy, open to economic engagements with all partners within a transparent, rules based multilateral trading system.

Trade in Goods & Services Position Sri Lanka as a location for production of high quality, authentic, and sustainable manufactured goods, agricultural products, and services, with a view to developing a global reputation for this through consistent messaging across several channels. Proactive engagement in target countries such as relevant industry associations, events, targeted company visits, public engagements, and other interactions with relevant stakeholders. Support Sri Lankan enterprise to identify and gain access to new markets. Sri Lankan embassies should build networks and relationships in target countries with relevant business channels such as industry associations, distribution networks, procurement arms of target companies, regulatory bodies, government agencies, for sectors of current and future business interest to Sri Lankan exporters of goods and services.

Trade in Goods & Services Facilitate collaboration between SL enterprise and global technological leaders and research bodies to enable technology transfer. For example, there is significant technological capacity in Israeli agriculture – which could have great value if applied in Sri Lanka, either through FDI or direct engagement with research bodies. Support Sri Lankan enterprise in its engagements with foreign governments and regulatory bodies and help advocate on behalf of Sri Lankan business interests overseas – be it in trade or investment. International Enterprise Singapore www.iesingapore.gov.sg is an excellent example of how governments can support private enterprise in expanding its global footprint.

Investment - FDI Foreign relations are an important element in the investment climate. A positive bilateral relationship can support a FDI decision and a vice versa. Policy miscommunication is a key constraint for FDI in SL. Foreign service is often the first touch point for investors even prior to BoI – necessary to be well versed in investment priorities and key sectors. Necessary for Sri Lanka to shift to an active role in targeting FDI. Foreign Service needs to support BoI, in conjunction with relevant private sector companies, to target and approach specific companies that may have a FDI opportunity in SL. Potential target - Global multinationals that have large scale operations in southern India where certain segments of the operation could take place in Sri Lanka. Private sector companies can be a conduit – eg. Local representatives of foreign principles, potential local JV partners etc.

Economic Engagement of Non-Resident Sri Lankans Expatriate Sri Lankans could play an important role in contributing to Sri Lanka’s economy through investment, access to networks for trade, remittances, and as informal ambassadors of Sri Lanka’s economic narrative in their resident countries. An illustrative example of this is the role played by non-resident Indians in California’s Silicon Valley in the development of India’s IT hub in Bangalore. The potential for using Sri Lanka’s expat community to develop trade and investment networks has not been fully utilized. A key foreign policy objective should be to help organize overseas Sri Lankan business professionals, enterprise owners, technology leaders, and others influential in the corporate sector, into formal networks. An example of this is “Advance” (https://www.advance.org/) a network of Australian professionals living and working overseas. A similar network of overseas Sri Lankan professionals could enable Sri Lanka based enterprises to engage with these networks to help explore and develop linkages with requisite business channels in those countries.

Economic Engagement of Non-resident Sri Lankans For example, a Sri Lankan exporter wanting to connect with the procurement department in Walmart, may have a better chance of linking to the correct person and executing a transaction if she can obtain an introduction through an expat Sri Lankan who happens to work for Walmart in a senior position. At present, exporters in Sri Lanka rely on private networks to obtain such connections, whereas a formal network of this nature, facilitated by the Ministry of Foreign Affairs, could help a multitude of export companies in Sri Lanka.

International Financial Institutions Changing role of WB, ADB, and traditional multilateral lenders. To be expected with economic advancement. IMF has a critical role at this juncture – primarily reform oriented to build confidence in the global market. SL increasingly integrated with global capital markets – important implications for government communication in the global theatre. Large scale financing requirements for infrastructure – PPPs with international financing. Opportunities through MSR, AIIB etc. Regardless of financing source, policy ought to embody the principles of competition, contestation, and transparency in bidding processes, and robust, transparent rules based frameworks of operation for such transactions.

Thank You!