WT/TPR/M/347

20 January 2017

(17-0379) Page: 1/32

Trade Policy Review Body 1 and 3 November 2016

TRADE POLICY REVIEW

SRI LANKA

MINUTES OF THE MEETING

Chairperson: Ms Irene Young (, )

CONTENTS

1 INTRODUCTORY REMARKS BY THE CHAIRPERSON ...... 2 2 OPENING STATEMENT BY THE REPRESENTATIVE OF ...... 4 3 STATEMENT BY THE DISCUSSANT ...... 8 4 STATEMENTS BY MEMBERS ...... 12 5 REPLIES BY THE REPRESENTATIVE OF SRI LANKA AND ADDITIONAL COMMENTS ...... 29 6 CONCLUDING REMARKS BY THE CHAIRPERSON ...... 32

Note: Advance written questions and additional questions by WTO Members, and the replies provided by Sri Lanka are reproduced in document WT/TPR/M/347/Add.1 and will be available online at http://www.wto.org/english/tratop_e/tpr_e/tp_rep_e.htm.

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1 INTRODUCTORY REMARKS BY THE CHAIRPERSON

1.1. The fourth Trade Policy Review of Sri Lanka was held on 1 and 3 November 2016. The Chairperson, Ms. Irene Young (Hong Kong, China), welcomed the delegation of Sri Lanka headed by H.E. Mr. Rishad Bathiudeen, Minister of Industry and Commerce; the delegation from Sri Lanka; and the discussant, H.E. Ambassador Dr Stephen Ndungu Karau ().

1.2. The Chairperson recalled the purpose of the Trade Policy Reviews and the main elements of the procedures for the meeting. The report by Sri Lanka was contained in document WT/TPR/G/347 and that of the WTO Secretariat in WT/TPR/S/347.

1.3. Questions by the following delegations had been submitted in writing before the deadline: ; Canada; Australia; ; New Zealand; Chinese Taipei; Brazil; and Republic of Korea. The following delegations submitted written questions after the deadline: China; and .

1.4. Members were also pleased to have with them the United Nations Industrial Development Organization which – as agreed by Members earlier – was attending this meeting as observer on an ad hoc basis.

1.5. At the previous TPR in 2010, Members had commended Sri Lanka for its solid economic performance despite a myriad of adverse factors. During the current review period, the country's economy had shown resilience and had continued to grow at an average annual growth rate of 6%. However, the fiscal position was weak and seemed to be getting worse, with public debt rising to 76% of GDP last year. In their advance questions, the Chairperson noticed that some Members had asked how this problem was to be addressed. Members knew that the Government had started pursuing fiscal consolidation through structural reforms which, among other things, sought to increase tax revenues and improved the operations of state-owned enterprises. In fact, Members had already stressed the importance of introducing tax and SoE reforms in the last TPR. The Chairperson believed they would like to learn more about the development on these fronts.

1.6. Last time, Members saw the need for Sri Lanka to deepen its regulatory reform and improve the business environment. In this TPR, Members raised again questions about the restrictions and incentives for foreign investment. Enactment of the Underutilised Assets Act in 2011 had also prompted some Members to ask about the new expropriation policy for companies and their assets. As Sri Lanka's FDI inflow ran low and attracting foreign investment became a matter of priority, it was useful to know how the Government intended to address Members' concerns in this regard.

1.7. In 2010, noting that Sri Lanka's exports were concentrated in certain markets and products, Members encouraged the country to step up its diversification efforts. While some progress had been made, agriculture and clothing still accounted for over 70% of exports, and clothing was highly reliant on two major export markets. Given that export diversification was an area identified by Sri Lanka for Aid-for-Trade assistance, Members wished to have more information on the Government's action plan.

1.8. With regard to specific trade measures, Members were pleased to note that, since the last TPR, Sri Lanka had implemented a customs single window and had accepted the WTO Trade Facilitation Agreement. It had also reduced the number of tariff bands from four to three. However, some of the concerns that Members had raised six years ago, about Sri Lanka's tariff regime, remained unaddressed. For instance, Members still saw a large number of levies and charges in addition to the tariffs, and indeed more tariff lines where the MFN rate exceeded the bound rate. It would be useful to know how these issues would be addressed.

1.9. The previous review had also raised certain questions regarding: the use of domestic preferences in government procurement; enforcement of intellectual property rights; and adoption of competition policy legislation. Six years on, it seemed that Sri Lanka had continued to use price preferences in procurement and had not yet introduced any substantial changes to its IP and competition regimes. If there was more updated information, the Chairperson hoped it could be shared with the Members in this TPR.

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1.10. The Chairperson encouraged Members to make use of this opportunity to discuss in greater detail, not only the key issues identified above, but also other issues of interest to them and of systemic importance to the multilateral trading system.

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2 OPENING STATEMENT BY THE REPRESENTATIVE OF SRI LANKA (H.E. MR. RISHAD BATHIUDEEN)

2.1. At the outset, let me thank the WTO Trade Policy Review team for their comprehensive report on Sri Lanka, also to you, Madam Chair, for your introductory remarks. We appreciate the role played by His Excellency Dr. Stephen Ndungu Karau as the discussant.

2.2. My delegation wishes to thank all the Members who made written questions to us. We have received around 138 questions from 12 Member countries. We have already submitted written responses to most of the questions and the questions received late would be answered shortly.

2.3. I consider that the fourth Trade Policy Review of Sri Lanka at the WTO is taking place at a historic moment of my country mainly for two reasons.

2.4. Firstly, it takes place under the National Unity . The National Unity Government was established for the first time in the history in January 2015 by the coalition of the two main political parties in the country. The two main political parties have agreed to work together on a national development agenda upholding democracy and good governance, although the two parties have differences in their political ideology. The main objective in forming a National Government is to provide a common platform to deliver long term social economic solutions that can solve the key problems of the country.

2.5. The National Unity Government is in the process of introducing transformative reforms to the economy to further align it with the global economic direction while concentrating achievement of the Sustainable Development Goals declared in the agenda of the UN Sustainable Development Summit held in 2015.

2.6. Secondly, this Trade Policy Review is focusing on the developments in the country after ending prolonged civil conflict against terrorism of 30 years in 2009. During the conflict one-third of the country has not been in a position to effectively contribute to GDP growth in the country. After the defeat of terrorism from the country in June 2009, my Government encountered enormous challenges in rehabilitating, resettling and guaranteeing sustainable livelihood for the conflict affected people in the North and the East of the country.

2.7. I myself was a victim of this ruthless terrorism in the country. Although we peacefully lived in the northern part of the country, as Muslims we were given ultimatum by the terrorists to leave the Northern Province within 24 hours. We had to abandon all what we earned and the businesses that we ran for many years. We left the Northern Province with a shopping bag of material that we can carry. My family lived in many years in refugee camps and I managed to represent them to reach the Parliament as a member.

2.8. The rehabilitation and rebuilding process in my country cost the Government dearly both in capital and recurrent expenditure which have substantially increased and the Government had to rely on debts from international sources. We are thankful to all those who generously assisted Sri Lanka in this exercise. At the same time, the Government had to continue its infrastructure developments in the country to create conducive business environment.

2.9. Developing its infrastructure to increase its economic potential has resulted in Sri Lanka's reliance on foreign debt. The official estimate of what Sri Lanka currently owes its financiers is US$65 billion. The country's debt-to-GDP currently stands around 75% and significant portion of all government revenue is currently going towards debt repayment.

2.10. As a result of the above, the Government started experiencing fiscal difficulties to meet with country's both development and rehabilitating needs. The fiscal deficit to GDP has increased from 6.5% in 2011 to 7.5% in 2015. In the light of the above, the Government is making every effort to consolidate its fiscal position.

2.11. We will give priority to enabling an increase in earnings through a policy of minimizing regressive taxes, increase the ratio of direct and indirect income tax generation in the medium term from 80%: 20% to 60%: 40%, strengthening the tax management processes while removing tax holidays and benefits.

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2.12. Let me now briefly mention about my country and its performance during the period of this Trade Policy Review. Sri Lanka is an Island with 65 610 km2 with a population of 21 million. The GDP of Sri Lanka is at US$82.2 billion in 2015. The per capita income has increased from US$2744 in 2010 to US$3924 in 2015 becoming a lower middle income country. Sri Lanka was able to maintain its economic growth at an average rate of 6.4% over the period from 2010 to 2015 despite external pressure arising from the global economic slowdown and the domestic economic challenges. The services sector is the largest contributor to the GDP having accounted for 60% followed by 31% from industry and 9% from agriculture.

2.13. The macroeconomic environment supported by the policy directives has been instrumental in achieving such economic results. Sri Lanka has been able to achieve many of its millennium development goals in the country, particularly eradicating of extreme poverty, primary education at 100% level, gender equality, child mortality by reducing infant mortality by 2/3, maternal health by reducing infant deaths 33 to 100,000, combating communal diseases i.e. elimination of Malaria from the country and working towards environmental sustainability.

2.14. In addition, Sri Lanka has been able to achieve a literacy rate of 93% facilitating towards establishing a knowledge-based work force in the country. Sri Lanka has been leading in many social and business development indices in the region. Sri Lanka has ranked 73 among 144 countries placing it ahead of other emerging economies on global competitiveness index of the World Economic Forum. The World Doing Business index has ranked Sri Lanka at 110 out of 190 countries.

2.15. With regard to import and export trade, Sri Lanka maintains a greater openness to international trade. My country introduced open trade policies since 1977. The consecutive Governments of Sri Lanka continue to engage in the policy measures towards trade liberalization.

2.16. Sri Lanka has been a founding Member of GATT and WTO. Sri Lanka is a country that believes in the multilateral trading system for establishing a level playing field for all its Members in the international trade with due recognition for development needs of developing countries and in particular small and vulnerable economies. While appreciating recent outcomes of multilateral negotiations and, in particular, outcomes of Nairobi Ministerial, Sri Lanka looks forward to effective implementations of the decisions reached at this Ministerial.

2.17. Flexibilities through Special and Differential Treatments have been widely recognized for smaller economies during the DDA process. Further, Ministerial Declaration of MC-10 made in Nairobi (Paragraph 26) emphasized on such flexibilities for SVEs with the aim of facilitating their fuller integration into multilateral trading system by taking into account the needs of SVEs in all areas of negotiations. Sri Lanka seeks such flexibilities and Special and Differential Treatments during the process of WTO future negotiations.

2.18. Let me now refer to trade policy developments in Sri Lanka. With regard to tariffs, Sri Lanka's bound commitments made to the WTO are relatively at a lower level in both agriculture and non-agriculture products. With regard to applied rate, currently Sri Lanka maintains three bands tariffs at zero, 15% and 30%. Over 56% of tariff lines are at zero duty level. Out of the remaining tariff lines, a majority is confined to lower bracket of tariff.

2.19. Despite Sri Lanka's commitments to trade liberalization, a lower tariff structure has forced formidable challenges to the Government, in particular to the revenue sources.

2.20. The global market slowdown and the fluctuation on the global demand for the commodities that Sri Lanka trades have increased the country's vulnerability to external pressures. As a net food importing country, the situation has been critically reflected in the balance of payment.

2.21. The country's exports which stood at 30% GDP in the year 2000 has decreased to 15% in 2014. Our total exports in 2015 to the world were at US$10.5 billion while imports remained at US$19 billion. This is further aggravated due to lower import tariff structure maintained by the country. In certain instances, the Government has been compelled to adjust its applied tariffs to manage external vulnerabilities and domestic sensitivities.

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2.22. I observed that many questions raised by the Members of the WTO were also concentrated on these temporary measures. I wish to inform them that this is a temporary phenomenon and those measures are not at the expense of our commitment to the multilateral trading system. At the same time, I solicit attention of the WTO Members to assess the development needs of the country as a small economy.

2.23. The external sector performances during the period of the review have reflected challenges encountered in the global trading environment as well as domestic economic concerns. As mentioned, the trade deficit in absolute terms has widened during the period reaching over 10% of the GDP.

2.24. Despite the benefit of lower expenditure on fuel imports, the slowdown in the growth of world demand for Sri Lanka's exports and resulted declining process have negatively reflected on the trade balance. Pressure on the balance of payment due to this significant gap has somewhat compensated from the remittances to the country by the Sri Lankans working abroad in particular in the Middle Eastern region. However, it is necessary for the Government to introduce policy directives to ensure exports led growth to the economy.

2.25. These developments directed the new Unity Government to embark upon on a new strategy of its trade relations with major trading partners and to work on an export-led economic growth strategy. In this regard, the new Unity Government has emphasized on the following areas.

a. Developing an enabling environment to strengthen the country's entry into global value chain. Exports of apparel from Sri Lanka have been the major industry that contributes over 50% of the total exports. This sector has joined the global value chain with developing partnership with major distribution channels. The objective of the national unity government is therefore, to facilitate similar engagements with regard to other products and services areas.

b. Developing competitive business environment and facilitating FDI to the country. The workforce in Sri Lanka is providing a promising competitive edge for investing companies in Sri Lanka. The Government's objective is to move away from traditional manufacturing engagements to knowledge-based industries in the country.

c. Developing strategies to enhance Sri Lanka's bilateral and regional trade engagements thereby diversifying country's products and markets and integrate into the global value chain of production in both goods and services. Sri Lanka is a party to Regional Trade Agreements with neighbouring countries, South Asian Nations and Asia-Pacific countries. While upholding the country's commitments to the multilateral trading system, Sri Lanka will explore further opportunities for bilateral and regional trade with emerging economies. Sri Lanka has already initiated negotiations for bilateral FTAs with China and Singapore, in addition to its bilateral agreements with and Pakistan. Sri Lanka believes that this approach will provide opportunities to diversify its products and markets. We are hopeful that Sri Lanka will also regain GSP+ market access to the EU in the near future.

d. Promoting the country as the economic hub in Asia in developing necessary infrastructure for this purpose. Sri Lanka is strategically located connecting East and West via sea and air routes. The country's business environment complemented with educated work force has great potential for Sri Lanka to be the economic hub in Asia. Towards this objective, the Government of Sri Lanka has expanded its seaports capacity by establishing a new port in the south of the country. Similarly, a new airport has been established. Other facilities such as , banking system, insurance, and IT infrastructure have been developed. The Chinese silk route of trade is crossing the country and therefore, Sri Lanka as the business hub, will encourage trading partners for enhanced engagement.

e. Sri Lanka aims at effective implementation of Trade Facilitation. Sri Lanka, being a country open for trade, believes that minimizing trade barriers and reducing transaction cost of trade are effective and efficient ways for future development. Sri Lanka has placed great importance on the adoption of the Trade Facilitation Agreement. Sri Lanka has ratified the Trade Facilitation Agreement and our Instrument of Acceptance has been submitted to the Director General of WTO on 31st May 2016. I am pleased to mention here that my country in close liaison with the WTO, the Group, ITC, UNCTAD, World Customs

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Organization, UNIDO and the World Economic Forum, is working on an implementation programme and our objective is to establish a productive trade facilitation programme in the country with the assistance of the above international agencies and donor community.

2.26. Last but not least, I would like to mention that the National Unity Government is making dedicated efforts aimed at overcoming the challenge the country's economy is currently experiencing. Towards this target, Sri Lanka continues to maintain transparent trade and investment policies, minimizing non-tariff barriers, facilitating Foreign Direct Investment as a measure of attracting capital and technology. Sri Lanka is expected to reach the targets set in the 2030 Agenda through export-led economic strategy.

2.27. Sri Lanka has so far achieved substantial economic progress despite the interrupted setbacks experienced due to external vulnerabilities and domestic issues. We are optimistic that Sri Lanka as a united country would be able to overcome all these challenges and improve its trading results with all our trading partners.

2.28. Once again, I thank all of you for your patience and also the Chair and the WTO Secretariat for their valuable contributions. Thank you.

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3 STATEMENT BY THE DISCUSSANT

3.1. I would like to join you in welcoming the delegation of the Democratic Socialist Republic of Sri Lanka led by Honourable Minister Rishad Bathiudeen, Minister of Industry and Commerce to the fourth Trade Policy Review of Sri Lanka.

3.2. I am pleased to have been invited, in my own capacity, to participate as a discussant at the fourth Trade Policy Review of Sri Lanka. I thank the WTO and the Government of Sri Lanka for the reports which have provided us with a good basis for today's discussions. I also thank the Chair for her introductory remarks as well as the Honourable Minister for his insightful presentation on the state of the Sri Lankan economy. I also thank you all for participating in this Trade Policy Review.

3.3. Members of the WTO attach a lot of importance to the Trade Policy Review process since it contributes to achieving greater transparency in, and understanding of, the trade policies and practices of Members. The review, therefore, does not only give us the opportunity to discuss and understand Members' policies but also the opportunity to suggest corrective remedies where such policies are not friendly and supportive to economic and trade development. We also expect that the outcome of this review will contribute to the realization of development goals being pursued by Sri Lanka.

3.4. My comments as a discussant will focus on three areas. First, the economic environment of Sri Lanka during the review period, that is from 2010 to 2015. Second, Sri Lanka's trade policies and practices, and finally I will broadly touch upon developments in key economic sectors.

Sri Lanka's Economic Environment from 2010 to 2015

3.5. Since the last review in 2010, the economy of Sri Lanka has performed relatively well. The economy has shown resilience in the aftermath of the global financial crises and following the resolution of the internal conflict, growing at an average annual growth rate in real GDP of 6% during the period under review. Growth was mainly driven by , , wholesale and retail trade, and financial services sectors. It can therefore be observed that Sri Lanka's economy has transitioned from a previously predominantly rural-based agriculture economy towards a more urbanized economy driven by services.

3.6. Since the end of the internal conflict, Sri Lanka has been focusing on long-term strategic and structural development, as it strives to become an upper-middle-income country. As part of these development plans, Sri Lanka launched a "Mahinda Chinthana – Vision for the Future" in 2010 which outlines overall economic and development policies as well as setting out specific targets including for GDP and export growth, and also for structural change to reduce the reliance on agriculture in order to focus on development of the services and industrial sectors. Implementation of programmes under the new "Vision for the Future" is therefore critical for Sri Lanka to realize its long term economic and development objectives.

3.7. Trade has continued to play an important role in the economy. However, its contribution has been declining. Trade in goods and non-factor services as a proportion of GDP declined from 55% in 2011 to 48.5% in 2015. The share of merchandise trade in GDP declined from around 47% in 2011 to 36% in 2015. In contrast, the contribution of services to the GDP increased to 60%. These changes have been mainly attributed to weak demand in key merchandise export markets and an increase in tourism-related activities during the period under review. A key challenge that Sri Lanka faces is that its trade remains concentrated on a few markets and on a few products. The EU and the U.S. markets account for more than 55% of total exports. While exports continue to be heavily concentrated in textile and clothing, and agriculture which accounted for over 70% of total exports in 2015. Sri Lanka's exports are mainly textiles and clothing, , rubber, machinery and transport equipment, gems and jewellery. Imports are mainly transport machinery and equipment, textile fabrics, petroleum products and food stuffs. It would be important to know the steps that are being taken by the Government of Sri Lanka towards diversification of exports and markets.

3.8. With respect to fiscal policy, it is noted in the Secretariat report that weak fiscal position and the resulting public debt overhang continues to constrain growth sustainability and development in Sri Lanka. During the period under review, the fiscal deficit increased from 6.5% of GDP in 2011 to

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7.5% in 2015. Likewise, as a result of persistent fiscal deficit, public debt rose from 71% of GDP to 76% during the same period. Sri Lanka needs to tackle fiscal deficit in order to sustain growth and meet its long-term growth objectives. It is also noted that weak fiscal position has been exacerbated by bloated and underperforming sate-owned enterprises which continue to be a drain to the national budget.

3.9. In order to address fiscal deficit, Sri Lanka has continued to take steps to enhance tax compliance, and to improve tax audit and risk management. Initiatives are also being taken to increase the efficiency of the Customs and Excise Departments. I am also pleased to note that Sri Lanka has embarked on a programme of reforming state-owned enterprises to make them more efficient and improve their performance. In addition to these initiatives, Sri Lanka should consider an expansion of the tax base in order to raise more revenue. It is also important for Sri Lanka to ensure that its fiscal policy entails increasing public investment in order to build up physical and social infrastructure for long term growth, and improving business environment for private investments.

3.10. With respect to , the Central Bank of Sri Lanka is responsible for formulating and implementing the monetary policy whose objective is to achieve economic and price stability. The monetary policy framework of Sri Lanka places greater reliance on market based policy instruments and use of market forces which have enabled the country to achieve desired objectives. For instance, private credit has been growing steadily overtime while has been maintained at a single digit level. Sri Lanka should therefore continue to implement policy reforms aimed at addressing private sector competitiveness and productivity so that monetary policy plays an optimal role in efficient resource allocation and supports the country's vision for sustained high long-term growth. There is also a need to improved coordination between fiscal and monetary policies which is an essential pre-requisite for the achievement of growth, employment and price stability objectives.

3.11. The Central Bank of Sri Lanka has also been pursuing free floating exchange rate policy which has resulted in stabilizing the with a 2% band against the U.S. dollar. A stable exchange rate is an important signalling mechanism to investors regarding the stability of Sri Lanka's macroeconomic environment. Foreign reserves have been maintained at around 3-4 months' worth of imports which indicates that Sri Lanka is favourably positioned to withstand an immediate external shock to the economy.

3.12. Preferential trade agreements have been the cornerstone of the trade policy regime of Sri Lanka as well as the springboard in its participation in the multilateral trading system. Sri Lanka's preferential trade regime has remained unchanged during the review period and it continues to provide long-standing reciprocal preferences pursuant to two bilateral agreements with India and Pakistan, and two regional trade agreements – the Asia-Pacific Trade Agreement (APTA), and the South Asian Free Trade Area (SAFTA) Agreement. Developments during the review period included the launch of free trade negotiations with China and the deepening of the bilateral relationship with India. There is no doubt that widening the scope of preferential trade agreements and deepening the existing bilateral arrangements will enhance market access for Sri Lanka's exports.

3.13. On investment regime, it is noted that since the end of the internal conflict, Sri Lanka has recognized the importance of rebuilding the economy and establishing an attractive environment for foreign direct investment (FDI). As part of its Vision of 2010, it was recognized that FDI would be an important avenue to bring new technology and development in Sri Lanka. In this connection, Sri Lanka has strived to implement various policy measures aimed at attracting FDI. For instance, the One-Stop-Shop (OSS) has been formally established to expedite the investment approval process. However, FDI has not reached desired levels envisaged, and remains at about 2% of GDP and heavily concentrated in infrastructure development and tourism. Some recent government policies, such as restricting land purchases by foreigners and utilization of the "Underutilized Asset Act", adopted by the parliament in November 2011 to expropriate companies and assets, may have sent mixed signals to foreign investors. In addition, Sri Lanka continues to restrict investments in key strategic sectors such as tea, , communication and fishing. I am sure Members would be interested to know if there are plans to liberalize these sectors including removing restriction on the sale of land to foreigners.

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3.14. Sri Lanka is an active Member of the (WTO) and has progressively and continuously liberalized its market in order to integrate into the multilateral trading system. We welcome the fact that Sri Lanka granted MFN treatment to all its trading partners, made proposals to the Doha Development Agenda and participated actively in the regular work of the Committees at the WTO. Most notable during the review period was the submission of many WTO notifications that pertained mainly to customs valuation, agriculture, import licensing, SPS, TBT, TRIMs and TRIPS which demonstrated that Sri Lanka is committed to fulfilling its WTO obligations, including notifications.

Trade Measures and Practices

3.15. On trade measures and practices, it is noted from the Secretariat report that the tariff regime remained relatively unchanged during the review period, with applied rates declining slightly from an average of 11.5% in 2010 to 10.3% in 2016. It is also noted that over 50% tariff lines are duty-free, about 20% tariff lines have a 15% duty, and 23% have a duty of 30%. The structure of applied MFN tariff consists of ad valorem rates, specific and alternate rates. The specific and alternate rates consist of 4% of tariff lines, and in my observation, this can make the trade regime non-transparent, complex and unpredictable. I know Members would be interested to know if there are plans to convert non-ad valorem rates into ad valorem in order to enhance transparency of the tariff regime. In addition to the tariff, it is noted that Sri Lanka applies a number of additional levies and charges which significantly increases the cost of importation as in some cases they can exceed 100% the C.I.F. Sri Lanka should therefore consider simplifying and rationalizing its tariff regime by limiting the number of rates to make import regime more transparent and predictable.

3.16. It is further noted that the applied MFN rate exceeded the bound rate for 132 lines in 2016, up from 103 lines in 2010. The products affected included, inter alia, products, alcohol, beverages, textiles, carpets and switches. Although the authorities have stated that this trend was as a result of reduction in the number of tariff bands from four to three in November 2015, it would be important for Members to know when corrective measures will be taken.

3.17. On customs procedures, I would like to commend Sri Lanka for the main developments that have taken place in terms of implementation of single window system in January 2016 and the ratification and subsequent notification of its acceptation of the WTO Trade Facilitation Agreement. Sri Lanka has also notified its Category A commitments which identified 11 provisions for implementation upon entry into force of the Agreement.

Sectoral Performance

3.18. Regarding Sri Lanka's sectoral performance, most developments during the review period were witnessed in the services sector which dominates the economy and accounts for around 60% of the GDP and is responsible for around 45% of employment. For instance, in the tourism sector, developments during the review period included the launching of a new policy and strategy for the sector, aligning regulations with international standards, and establishing a "One Stop Unit" for investment in tourism. In the financial sector, a number of regulatory policies were introduced to strengthen the management of the sector which contributed to the growth and stability of the financial sector. The insurance subsector has undergone substantial liberalization and deregulation which has contributed to its expansion, reaching a growth of 15.12% in total premiums in 2015. Although there was no major liberalization in the telecommunication, the sector continued to experience significant growth during the review period, mainly due to growth in the mobile telephone subsector. There were also developments in the transport sector particularly in both ports and roads in terms of new investments aimed at improving infrastructure. The reforms being undertaken in the services sector are commendable and it is important that Sri Lanka sustain the reform process and increase public investments in order to realize the full potential of the services sector. Sri Lanka should also diversify its services sector in order to minimize the risk of reliance on a few services sectors.

3.19. The agriculture sector remains an important contributor to the economy. According to the Secretariat report, it accounted for 8.7% of the GDP and about 28% of the total employment in 2015. Unfavourable weather conditions pose a major challenge to the growth of the agriculture sector as it impacts negatively on many commodities. However, there is scope for Sri Lanka to

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3.20. Manufacturing sector continues to play a significant role in the economy and trade, contributing for nearly 20% of GDP and about one fourth of total exports. Manufacturing activities, however, are concentrated in a few sectors – textiles and clothing sector, rubber and plastic sector and food and beverage sector. As part of Sri Lanka's 2010 Government development policy, "Mahinda Chinthana – Vision for the Future", the Government set priorities for the industrial sector in which it planned to promote diversification and encourage high-valued added production for the sector. However, according to the Secretariat report, due to financial and technological constraints, the progress has been too slow to make a significant impact in the industrial structure of the country. Sri Lanka should strive to implement its industrial policy in order to bring desired changes to the sector. Aid for trade can play an important role in addressing some of the challenges that faces the industrial sector.

3.21. In conclusion, I believe that my comments will be useful in promoting fruitful and constructive discussions on trade policies and practices of Sri Lanka. There is no doubt that some positive developments have taken place in a number of areas during the review period and the Government of Sri Lanka is on the right path in undertaking appropriate steps aimed at propelling the country to the category of upper-middle income countries. I thank you all for your attention.

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4 STATEMENTS BY MEMBERS

EUROPEAN UNION

4.1. As acknowledged by both reports, Sri Lanka has performed economically relatively well during the review period maintaining an average annual growth rate in real GDP terms of 6%, despite the external pressure arising from the global economic slowdown and the domestic economic challenges.

4.2. The EU commends the progress made by Sri Lanka following the elections last year and welcomes in particular the implementation of an ambitious reform agenda that has allowed Sri Lanka to make improvements in many areas, including on governance and rule of law.

4.3. From the reports, we also learn that trade has played and is bound to play an important role in the economy. With this in mind, the EU is following with interest the process of reorientation of the economy launched by the Government in 2015, which took Sri Lanka on a path of sound, dynamic and more open economic policy. In particular, the EU welcomes the Government's policy statement presented at the end of last year, announcing Sri Lanka's commitment to carry out reforms to its national trade policy aimed at encouraging investment and facilitating trade, which in turn will lead to the economic diversification Sri Lanka is seeking.

4.4. The EU praises Sri Lanka's engagement in the WTO and, in particular, commends Sri Lanka for not only having ratified the Trade Facilitation Agreement but for having promptly submitted its category A commitments notification.

4.5. The EU enjoys a strong relationship with Sri Lanka. We have a Partnership Agreement on Cooperation and Development that dates back to 1995 and there was a recent important visit of Sri Lankan Prime Minister to Brussels.

4.6. While trade volume is relatively small in size, Sri Lanka remains an important trading partner for the EU. The EU is the number one destination for Sri Lankan exports, accounting for 27% of the total trade of Sri Lanka. In 2015, the total trade in goods between the EU and Sri Lanka was €4.7 billion with a €0.5 billion surplus for Sri Lanka.

4.7. We heard the call of Minister on GSP+ status. In July 2016, Sri Lanka submitted its new application to EU preferential treatment under the GSP+. The EU is well aware of the economic importance for Sri Lanka of being granted GSP+, considering that well over 80% of Sri Lanka's exports would be eligible for such preferences. The EU is currently conducting a technical assessment of the application and will inform Sri Lanka of its intentions by the end of November. A final decision will be taken by the EU at the very latest by mid-May 2017.

4.8. The EU is committed to supporting Sri Lanka on its path to inclusive growth and sustainable development also through development assistance. The EU and its Member States continue to be collectively a leading grant donor to Sri Lanka. During the period 2005-2015, the EU provided close to €500 million in grants and €250 million in concessional loans to Sri Lanka. The allocation for the EU-Sri Lanka bilateral development assistance for 2014-2020 amounts to €210 million. Additional funds are available from other EU instruments, including Trade Related Assistance currently amounting to €8 million.

4.9. The EU welcomes the course Sri Lanka has taken in the developments of its trade policy. I would only address a couple of issues of concern.

4.10. The EU's main concern regards the excise duties on large-engine vehicles that may go up to 700% of the value of the actual manufacturer's price for a 3500 cc engine, or 400% for a smaller engine size vehicle of 1999 cc. While these excise duties are not discriminatory per se, as they also affect domestic producers, the EU considers that such excise duties are prohibitive and act as a deterrent to potential customers.

4.11. Second, the EU acknowledges the positive developments in terms of customs procedures that occurred during the period under review and praises Sri Lanka for having already implemented a single window system in this context. However, as regards the WTO Customs

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Valuation Agreement (CVA), the EU would like to encourage Sri Lanka to make an additional effort to lift burdensome requirements for business.

4.12. Sri Lanka, in its report, concludes that the country is poised towards becoming a geo- economic hub in the Indian Ocean. The EU hopes that this review will help Sri Lanka in its endeavor and remains committed to continue supporting Sri Lanka's efforts to face socioeconomic challenges.

CANADA

4.13. This review comes at an opportune time. The Government of Sri Lanka has demonstrated its intent to pursue meaningful economic reforms. In July, the World Bank provided Sri Lanka with a $100 million credit facility to reduce obstacles to private sector competitiveness, establish transparent, well-managed public institutions and improve fiscal sustainability. Indeed, the World Bank has called on Sri Lanka to move from a public sector-driven economy to one that can harness the full potential of private-sector dynamism.

4.14. If successfully implemented, these reforms should help release untapped potential in the Sri Lankan economy. Indeed, Sri Lanka's average annual growth rate was a commendable six per cent during the review period, mainly attributable to expansion within the construction, wholesale and retail trade, and financial services sectors.

4.15. Recently, the country's precarious financial situation has created headwinds to growth. In May, Sri Lanka received an IMF bailout to help meet short-term debt repayments. While this relieved pressure in the short-term, Sri Lanka must continue to work to narrow its budget deficit in order to provide long-term economic stability and predictability for businesses, and thereby to achieving its full potential for growth.

4.16. Another important characteristic of a stable business environment, for both exporters and importers, is transparency in government decision-making and use of public resources. On Transparency International's Corruption Perception Index, Sri Lanka ranks 83 out of 168 countries. Clearly, there is room to improve. In this spirit, a transparent, rules-based, procurement system will promote confidence in the use of public resources. Canada looks forward to receiving more information about Sri Lanka's intent to implement to Central Procurement Agency as outlined in its 2016 national budget.

4.17. Positively, Sri Lanka's ranking in the World Bank's ease of doing business assessment rose in 2016 to 107, up six positions from its 2015 rank, with improvements in ease of starting a business, dealing with construction permits and obtaining electricity. Canada encourages Sri Lanka to continue making the changes necessary to maintain a predictable and stable business environment. Sri Lanka also took an important step in this regard by ratifying the WTO's Trade Facilitation Agreement in May 2016.

4.18. Canada is mindful of Sri Lanka's ongoing efforts to review its macroeconomic policies and to formulate a new agricultural policy with the goal of making the country self-sufficient in a number of primary commodities by 2018 and transforming the sector from subsistence farming to agribusinesses with export market potential by 2020. We trust that these reforms will be undertaken in as an inclusive manner as possible.

4.19. Our more specific questions and concerns are shared by a number of other Members in their submissions. These include important questions about Sri Lanka's Technical Barriers to Trade regime, including how technical regulations and conformity assessments are established; agricultural tariffs and their application, including with regard to special commodity levies; and regarding Sri Lanka's plan to introduce a new Trade Regulation Act and how this proposed act will help facilitate trade.

4.20. Finally, Canada notes the important work being undertaken through the Standards and Trade Development Facility to improve the competitiveness of Sri Lanka Spice and Fruit and Vegetable sectors. By developing a national standard on Good Manufacturing Practices in the cinnamon sector and ensuring proper training for operators along the value chain, Sri Lanka will be better positioned to achieving its goal of reversing the decline in cinnamon exports. Likewise, by

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- 14 - enhancing inspection and certification capacity of quarantine services and training farmers on good agriculture practices, the Fruit and Vegetable sector is better prepared to realize its export potential.

4.21. Canada is a committed partner in supporting Sri Lanka's economic development as it looks to continue capitalizing on the dividend of the peace reached in 2009. Sri Lanka has tremendous economic potential such areas as tourism, maritime industries, renewable energy and infrastructure projects. Part of the challenge will be to develop these sectors sustainably and in line with the needs and expectations of citizens. Canada considers that sustainability encompasses social as well as environmental dimensions: for economic growth to be sustainable, the benefits must be shared inclusively. To this end, Canada has and will continue to invest in projects in Sri Lanka that will support inclusive economic development, including increasing the development of small-scale agricultural businesses as well as ensuring as greater economic opportunities for women.

4.22. In closing, it is clear that Sri Lanka has much to be proud of. While work is needed to address significant financial challenges, Canada encourages Sri Lanka to continue on a path of economic liberalization and to pursue the reforms necessary to allow private sector dynamism to drive economic growth. We recognize that this is not always an easy path to follow – Sri Lanka can count on Canada's support through these reforms.

AUSTRALIA

4.23. Australia applauds the ongoing economic reform agenda adopted by Sri Lanka during the period of review.

4.24. Australia congratulates Sri Lanka on its impressive GDP growth, averaging 6.4% over five years (2010-2015).

4.25. But we note sustaining this will require a strong focus on macroeconomic stability, removing barriers to trade, high and sustained investment in infrastructure and human capital, and continued progress in fiscal consolidation and debt reduction.

4.26. Australia commends Sri Lanka's efforts to attract foreign investment, including the introduction of a single electronic gateway for exports and imports, simplifying the tariff structure, and eliminating quantitative restrictions.

4.27. We encourage Sri Lanka to stay the course of delivering ongoing economic, trade and structural reforms.

4.28. Obstacles to foreign land ownership, rigid capital controls, and an unpredictable tariff regime remain barriers to further Australian trade and investment in Sri Lanka.

4.29. We also encourage the Government to continue to push for State Owned Enterprise (SOE) reform, and private sector competitiveness.

4.30. As part of this review, we hope to gain a greater understanding of Sri Lanka's ambition for its agriculture sector – particularly plans to transform the sector to an agribusiness export industry by 2020.

4.31. We are also particularly keen to understand how Sri Lanka is seeking to balance revenue generation from tariffs and taxes on fine foods and alcoholic beverages; and encouraging the development of a cost-effective tourism sector.

4.32. Finally, we congratulate Sri Lanka for ratifying the Trade Facilitation Agreement in May.

4.33. This Agreement – when implemented – will strengthen global trade and economic growth; create jobs; and deliver substantial development benefits for WTO Members, including Sri Lanka.

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NEW ZEALAND

4.34. The objective of the Trade Policy Review Mechanism is "to enable a multilateral assessment of the effects of policies on the world trading system."1 It is in this context that New Zealand sees these processes as a key opportunity for WTO Members to better understand other Members' trade policies, including the effects of these policies on the world trading system. We believe that Members need to use these reviews in the way that Ministers intended when they concluded Annex 3 of the . It is this perspective which has informed New Zealand's comments and observations in this Trade Policy Review of an important bilateral partner.

4.35. New Zealand is encouraged by Sri Lanka's steady economic performance since its last review in 2010. The national reconciliation process, constitutional reform and policy aimed at reconstruction and growth have set Sri Lanka on a good track. Trade has demonstrably had an important role in Sri Lanka's economy, although its increase in recent years has been outpaced by Sri Lanka's growth in GDP. This shows there is still much to be taken advantage of by Sri Lanka in this space.

4.36. Sri Lanka has benefited from its emphasis on structural economic reforms, including in terms of trade policy. These have placed Sri Lanka well to further its economic development and New Zealand welcomes Sri Lanka's stated intention to undertake further action.

4.37. New Zealand welcomes Sri Lanka's key priorities to renegotiate existing trade agreements, adopt an export promotion strategy, encourage more foreign direct investment, and promote the diversification of exports. These measures and the maintenance of a transparent and predictable trading environment will contribute to Sri Lanka's continued growth, including through building conditions conducive to attracting foreign investment which taken together can be expected to have a positive impact on both poverty alleviation and broader development objectives.

4.38. In this regard, New Zealand notes that the use of mechanisms to encourage Sri Lankan export growth, such as Special Commodity Levies, in products including milk powder, has broader systemic implications. Needless to say these should be administered in a non-discriminatory way so as not to restrict importation of these same products. New Zealand also encourages Sri Lanka to ensure that any financial assistance provided to the fishing industry does not contribute to over-capacity or overfishing.

4.39. Reciprocal Prime Ministerial visits between Sri Lanka and New Zealand in 2016 underscored the importance of greater trade and investment to increased prosperity. Agricultural cooperation was noted to be an important facet of the commercial relationship between Sri Lanka and New Zealand; cooperation which is underpinned by mutually compatible trade policy.

4.40. New Zealand welcomes the quality products that are traded between New Zealand and Sri Lanka, such as Sri Lankan tea and cinnamon and New Zealand dairy products. New Zealand appreciates the progress that Sri Lanka has made in reducing its dairy tariffs and encourages Sri Lanka to take the remaining steps necessary to bring its applied tariffs back in line with its WTO bindings as a priority. .

4.41. New Zealand emphasises the importance of trade liberalisation for the effective functioning of the WTO rules-based trading system. New Zealand welcomes Sri Lanka's active role in WTO negotiations, as a fellow WTO member who relies on international trade in agricultural products for its prosperity and in this regard we join others in encouraging Sri Lanka to update its agriculture-related notifications in line with the commitments established through the .

4.42. We congratulate Sri Lanka on its selection to be the Coordinator for the Asian developing Members group in the WTO for the year 2016. We note the importance of this position, including in terms of encouraging the implementation of the Ministerial decisions of the Ninth and Tenth WTO Ministerial Conferences in Bali and Nairobi respectively, and continuing to address the ongoing

1 https://www.wto.org/english/thewto_e/whatis_e/tif_e/agrm11_e.htm accessed on 29 September 2016.

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- 16 - issues relating to agriculture, Non-Agricultural Market Access (NAMA) and services. New Zealand continues to appreciate working with Sri Lanka in its capacity as Coordinator.

4.43. New Zealand also notes that Sri Lanka has participated as an observer to the WTO Agreement on Government Procurement (GPA) since 2003. In this respect, New Zealand continues to encourage Sri Lanka to align its policies with the GPA's non-discrimination principles.

4.44. We further note the positive reforms in the energy sector and the structural and taxation reforms the government of Sri Lanka is taking, particularly with respect to the reform of fossil fuel subsidies. This is a very positive development and we encourage Sri Lanka to share with Members its experience of such reform, including perhaps in the Committee for Trade and the Environment. In the meantime, we also encourage Sri Lanka to continue these important reforms. The removal of fossil fuel subsidies helps levels the playing field for investment in and uptake of renewable energy and associated technology. Such measures will support implementation of Sri Lanka's Energy Empowered Nation development plan.

4.45. New Zealand appreciates Sri Lanka's continued commitment to the multilateral trading system and we welcome the positive steps that Sri Lanka has taken in the six years since the last TPR.

BRAZIL

4.46. Brazil congratulates Sri Lanka for its strong economic performance during the period under review. As mentioned in the report by the Secretariat, despite external chocks such as the global financial crisis, Sri Lanka's GDP expanded on average by 6% per year in real terms during the period 2011-2015. Moreover, the GDP per capita grew more than 25%.

4.47. In Sri Lanka's last Trade Policy Review, our delegation noted with great satisfaction the end of the internal armed conflict in May 2009. This circumstance provides a much needed opportunity to step up economic and institutional reforms to foster the consolidation of the process of national reconciliation. Today, Brazil congratulates Sri Lanka for having taken this opportunity, implementing prudent macroeconomic policies that resulted in the curbing of inflation. Indeed, inflation declined from 7.5% in 2012 to less than 1% in 2015. Those are encouraging achievements in the generation of a stable economic environment, a crucial enabling condition for the acceleration of development. We would like, therefore, to recognize and commend Sri Lanka for its efforts to implement sound policies so as to guarantee fiscal, monetary and financial discipline. We recommend the Sri Lankan Government to persevere in its efforts to improve transparency with the creation of an open business environment.

4.48. We would also like to highlight and praise Sri Lanka for the ratification of the WIPO Marrakesh VIP Treaty, which is an enabling legal instrument for the international cooperation on the access to culture for blinds, visually impaired or otherwise print disabled persons. The implementation of the Marrakesh VIP Treaty is a high priority for the Brazilian Government and we are looking forward to establishing international networks that can provide accessible reading material for those that need them the most.

4.49. Bilateral trade flows have more than doubled from 2011 to 2015, even though from a relatively modest basis. In 2015, bilateral trade totaled US$169 million. Brazilian exports were concentrated in sugar. Sri Lankan exports, for their turn, were concentrated in rubber and textiles. The relations between our countries continue to prosper in a constructive and open way, as demonstrated by the growing flows of bilateral trade, but it is our view that there is still much room for improvement. Trade between Sri Lanka and Brazil is yet much below its potential. We envisage a growing possibility of doing business on ethanol production from sugarcane and in airspace industry products. We stand ready to do the utmost to work in this direction and intensify bilateral trade in co-operation with the Sri Lankan authorities and businessmen.

4.50. My delegation thanks Sri Lanka for the reply to the question raised by our delegation.

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SINGAPORE

4.51. Singapore and Sri Lanka enjoy a robust trade relationship. Bilateral trade was worth more than S$2 billion last year. We believe that bilateral co-operation will continue to grow, especially with the recent launch of the Sri Lanka-Singapore Free Trade Agreement (SLSFTA negotiations in July. The aim is to conclude a modern, comprehensive and high quality Free Trade Agreement which complements efforts to boost our respective economies.

4.52. Sri Lanka's economic reform taken during the period under review has borne fruit. This is evidenced by the impressive annual GDP growth rate of 6%. We note Sri Lanka's commitment towards the sustained long-term growth of its economy, as demonstrated by its efforts to diversify exports, reduce reliance on agriculture and develop its services and industrial sectors. Sri Lanka's ongoing modernization of its customs regime is also commendable. For example, a single window system was implemented in January this year, which allows for the submission of information to a single electronic gateway and the use of electronic funds transfer or online payments.

4.53. We are concerned that the number of applied tariffs exceeding bound rates has increased from 103 to 132 lines since the last review. We call upon Sri Lanka to bring its tariff regime into conformity with its WTO commitments as soon as possible. This will bring greater predictability to trade.

4.54. Sri Lanka is to be commended for having regularly notified its measures. We welcome Sri Lanka's recent ratification of the Trade Facilitation Agreement (TFA) and its acceptance of the Protocol amending the TRIPS Agreement last year. We express our appreciation to Sri Lanka for having taken on the coordinator role of the Asia-Pacific Group of Developing members.

4.55. We thank Ambassador Susiri Kumararatne and his delegation in Geneva for the close cooperation between our two delegations.

REPUBLIC OF KOREA

4.56. Korea and Sri Lanka have a long history of bilateral economic relationship. The bilateral trade reached US$362 million in 2015. Korean companies and business people have been the leading foreign investors in Sri Lanka. Although the FDI by Korea to Sri Lanka has been somewhat decreased recently, Korea hopes that its economic partnership with Sri Lanka will continue to grow and develop in the future.

4.57. Turning to Sri Lankan economy's overall performance, I wish to note that, as the Secretariat report mentioned, it has been successfully overcome the global crisis and has kept growing. After the financial crisis, Sri Lanka demonstrated its economic resilience, with an average annual growth rate in real GDP of 6% during the review period. Inflation has been also well controlled, thereby declining from 7.5% in 2012 to less than 1% in 2015.

4.58. On the other hand, as the Secretariat report also says, the role played by trade has been reduced in the economy, as trade in goods and non-factor services declined from the equivalent of about 55% of GDP in 2011 to 49% in 2015. While Korea would like to appreciate Sri Lanka for trying not to resort to protectionist measures and for remaining unchanged in general, despite harsh circumstances surrounding the Sri Lankan economy, at the same time, we would like to request the Sri Lankan Government to take more open policies in regard with trade. Its MFN tariff rates are still high, particularly in the agricultural sector, which is 24%. There is room for growth in services trade. In addition, we believe that the diversification of expert sectors and the simplification and elimination of additional levies and charges on a variety of export and import products would substantially contribute to the growth of trade in Sri Lanka.

4.59. After the resolution of the internal conflict, Sri Lanka has become more attractive to foreign investors. The Government also recognizes the importance of FDI. However, FDI levels remain relatively low, and in 2015, FDI inflows declined and stood at about 2% of GDP, which is below the Government's target of 3% of GDP. Korea would like to request Sri Lanka to create a better investment environment, by eliminating or modifying potentially investment-restrict policies and legal measures, including land ownership restrictions.

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4.60. Another thing Korea is concerned about is, as many of the previous speakers pointed out, the chronic fiscal deficits experienced by Sri Lanka. Since it is closely related to its trade policy and performance in general, Korea is very concerned about it. In this regards, we re-submitted the same questions on Sri Lanka's fiscal policy, which were raised by Korea in 2010. In this regards, I very much appreciate Sri Lanka's response to Korea's advanced written questions, including the one, related to fiscal deficit, and we will carefully review the response later.

4.61. It is also our hope that Sri Lanka will continue to actively participate in helping strengthen the WTO multilateral trading system, guided by its rehabilitation programmes as Minister Rishad Bathiudeen mentioned in his opening remarks, as well as the long-term strategic blueprint, the 2010 "Mahinda Chinthana – Vision for the Future" which include many key elements for economic growth and trade promotion. With this, I would like to conclude by expressing my sincere appreciation to the Sri Lankan delegation for its hard work and wish Sri Lanka every success in its fourth TPR.

CHINA

4.62. Sri Lanka has maintained a robust growth of 6% in average from 2011 to 2015, and trade has continued to play a vital role in its economic development. During the period under review, important efforts have been made by the government of Sri Lanka to liberalize its trade and investment regime, with a vision to build Sri Lanka as the trading hub in the South Asian region. The TFA ratification of Sri Lanka this year, in which 11 provisions are identified in category A, is a good demonstration of their strong commitment to trade liberation. Additionally, Sri Lanka has launched FTA negotiations with China in 2014, we hope this FTA could be successfully concluded as early as possible, and bring benefits to the people from both countries.

4.63. Sri Lanka is a staunching supporter of the multilateral trading system, and an active participant in the DDA negotiations. We highly commend the role of our Sri Lanka colleague here in Geneva, and look forward to working more closely with them in the future.

4.64. On the bilateral front, China and Sri Lanka maintained sound economic and trade cooperation. Bilateral trade is increasing rapidly in the review period, and China has become Sri Lanka's second largest trading partner and third largest source of foreign investment. Our statistics showed that the bilateral trade between China and Sri Lanka reached US$4.6 billion last year, and continued to grow by 6% in the period between January and August this year. Investment from China to Sri Lanka is also accelerating our accumulated investment in Sri Lanka reached US$890 million by the end of last year, and between January to August this year, new investment from China has increased 70% on a year-to-year basis. Moreover, China is Sri Lanka's largest tourist source today. From January to August this year, nearly 200,000 Chinese tourists have arrived in Sri Lanka, a 32% increase from the same period last year.

4.65. Looking ahead, China is willing to step up a more comprehensive cooperation with Sri Lanka within the framework of the Belt and Road Initiative, and ready to promote the bilateral ties to a new level.

4.66. China has posed some written questions to Sri Lanka for clarification, and is grateful for the replies received, which we will study closely.

UNITED STATES

4.67. I would like to begin by expressing my Government's best wishes for the Government of Sri Lanka. Under President Sirisena, your commitment to human rights, democracy, and the rule of law is noted and greatly appreciated. We also note your Government's commitment to the progressive adoption of world class trade and investment rules.

4.68. This review comes at a historic moment for Sri Lanka. With the end of a long civil war and a renewed commitment to democratic values, we see opportunity for prosperity to regain and consolidate its foothold in your nation. With enlightened governance, sound economic policies, and peace, we see a bright future for all Sri Lankans.

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4.69. Sri Lanka's high literacy rates, well established export industries, and commitment to economic reform provide strong potential for much higher growth rates and employment creation. In traditional exports like apparel and agricultural products, there is ample room for growth by moving up the value chain. A small but rapidly growing IT sector oriented to entrepreneurship promises to complement these existing export giants. Also, with peace restored, tourism has boundless potential. Finally, Sri Lanka is well placed in its ambition to become a regional services hub.

4.70. The United States and Sri Lanka have an expanding trade relationship totaling US$3.25 billion in two-way trade in 2015. The United States remains Sri Lanka's largest single-country market.

4.71. We would like to underscore our regard for Sri Lanka's commitment to principles of openness to international trade and an investor friendly climate. In particular, we laud Sri Lanka's goal to adopt world-class trade and investment standards – the first South Asian country to make such a commitment. With this in mind, we note, however, the Secretariat's observation of the slow pace of implementation of trade and investment reforms. Sri Lanka has made substantial use of import surcharges and other charges applied mainly on imports. We continue to hope that the government's commitment to economic reform and its desire to establish Sri Lanka as a regional services hub – which will require expedited movement of goods, services and workers into and out of the country - will provide increasing opportunities for Sri Lanka to reduce the barriers to imports.

4.72. We hope, too, that Sri Lanka is bearing in mind the benefits to its trade that can result from binding a greater number of its tariff lines beyond the current 36.4%. The binding of tariff lines makes trade more predictable for your domestic industries that require inputs at the lowest cost.

4.73. The Secretariat report further notes that other charges can considerably increase the cost of imports into Sri Lanka. Eliminating or significantly reducing such charges would also enhance predictability and affordability of inputs for competitive domestic consumption and production. We also hope that the Government will take care to abide by WTO rules when modifying its tariffs. Here, I must mention our concern about some applied tariff lines that apparently exceed their bound rates.

4.74. Exporters of non-traditional goods exporting at least 80% of their production enjoy a number of tax concessions. We would like to know Sri Lanka's rationale for such concessions not only in light of its WTO commitments but also in terms of the economic and trade distortions that these can create.

4.75. We are pleased to acknowledge an important policy development that has taken place since Sri Lanka's last Review. Sri Lanka's legislation implementing the WTO Customs Valuation Agreement (CVA) is a major step forward. According to the Secretariat, however, that legislation grants the authorities the flexibility to depart from CVA rules when deemed necessary, in the interest of the national economy or for any other reason, allowing for the use of minimum values. During the period under review, the Secretariat points out, Sri Lanka has applied such minimum import prices when calculating import taxes applied to used cars. We are disappointed that Sri Lanka's implementation of this important agreement has taken this turn and would like to know what options Sri Lanka may be considering to mitigate this unfortunate legislative outcome.

4.76. The Secretariat report notes that the Government of Sri Lanka remains determined to reduce further the list of sectors in which foreign investment is restricted. We also note that many restricted sectors may be open to specific projects, depending on a case by case review. We welcome this flexibility and other approaches to open the economy. Another positive step would be for the government of Sri Lanka to decide to participate in the Agreement on Government Procurement. Also, to promote a positive climate for business and economic growth, we encourage the efforts by Sri Lanka to address governance issues, including strengthening the rule of law and combating corruption.

4.77. We hope that this trade policy review will help us to understand more clearly the ways in which Sri Lanka is addressing the important issue of protection of intellectual property rights. We believe that more can be done, particularly in the area of enforcement.

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4.78. Finally, the United States will continue to work with Sri Lanka to strengthen and deepen our relationship. Recent political changes in Sri Lanka have dramatically increased the scope for bilateral cooperation and we are taking full advantage of that in our greatly expanded development assistance programs. We look forward to working with Sri Lanka as we implement our bilateral 5-year Joint Action Plan to Boost External Trade and Investment. We are confident that this Plan will serve as a road map to higher growth, employment generation, increased opportunities, and higher living standards for the people of Sri Lanka.

MALAYSIA

4.79. Sri Lanka showed a resilient growth throughout the review period maintaining an average annual growth rate in real GDP of 6%. This was driven by construction, wholesale and retail trade, and the financial services sectors. However, we also note that during the review period, trade in goods and non-factor services declined from the equivalent of about 55% of GDP in 2011 to 49% in 2015. This indicates that Sri Lanka is no exception to the global economic trend.

4.80. Malaysia and Sri Lanka have had long-standing bilateral trade relations. Total trade between the two countries stood at US$570 million in 2015, a contraction from US$722 million in 2014. Total exports of Malaysia to Sri Lanka was valued at US$481 million, while imports increased by 82% to US$90 million.

4.81. Malaysia welcomes efforts by Sri Lanka in focusing on long-term strategic and structural development since the end of its internal conflict. Nevertheless, much can be done to ensure that the investment regime facilitates and provides a more conducive environment for potential investors.

4.82. Sri Lanka has been an attractive FDI destination due to the many incentives in place for investments. According to Board of Investment data, since 2011, FDI inflows have been growing steadily and reached US$1.6 billion in 2014, while the stock of FDI in 2014 stood at almost US$10 billion. We note that, based on the Secretariat report, Malaysia is among the largest investors in Sri Lanka, along with the , China, India and Hong Kong, China. Malaysia's key investments are in property development, construction, power and telecommunication among others. As such, it is certainly important for us to work closely with Sri Lanka in improving investment facilitation that would benefit all sides.

4.83. To further enhance Malaysia-Sri Lanka bilateral trade, Malaysia is pleased to highlight that a proposal has been made last May, for an FTA between Malaysia and Sri Lanka. Both sides are studying closely the potentials in order to take the initiative a step further.

4.84. Malaysia appreciates Sri Lanka's effort at the multilateral front. We welcome efforts to implement the expanded Information Technology Agreement which was ratified by Sri Lanka in May 2016. I take this opportunity to thank H.E. D.S. Kumararatne, Ambassador/Permanent Representative of the Permanent Mission of Sri Lanka to the WTO, for his dynamic role as the current Chairperson of the Asia Group. We appreciate him and his delegation's continuous engagement here with the other WTO Members.

4.85. Malaysia has submitted a few questions in advance of this meeting and welcomes the responses from Sri Lanka.

4.86. As highlighted earlier, with Malaysia's vast interest in Sri Lanka, any newly introduced policies, regulations as incentives would have an impact on our investment. We therefore, welcome updates from Sri Lanka on its new proposed Investment Act to replace the Strategic Development Act.

4.87. We also note that Sri Lanka currently has no laws and regulations to address safeguard measures. However, there has been a proposal on a trade defense bills on anti-dumping, countervailing and safeguard measures submitted to Cabinet. For purpose of transparency, we encourage Sri Lanka to share updates on the new legislation.

4.88. We also look forward to obtaining additional information on the 23 Agricultural Development Mega Zone that Sri Lanka is proposing in making its agricultural products more competitive.

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EL SALVADOR

4.89. We are pleased to participate in this important review of the trade policies of Sri Lanka, with which we are united by diplomatic ties and friendly relations.

4.90. As regards Sri Lanka's performance, the national economy has shown resilience in the aftermath of the global financial crisis, with an average annual growth rate in real GDP of 6% during the review period. Growth was mainly driven by the construction, wholesale and retail trade, and financial services sectors.

4.91. The extensive reforms made to this Member's trade policy regime since 1977 have placed the country in a sound position from the economic development standpoint.

4.92. As noted from the Government report, these reforms have also contributed towards significant achievements in the social development sphere, where the country has made major strides in meeting the Millennium Development Goal targets set for 2015.

4.93. Trade continues to play an important role in the Sri Lankan economy, accounting for around 49% of GDP in 2015. As is the case for El Salvador, Sri Lanka's exports largely consist of agricultural products and clothing; this in itself represents a challenge for countries such as ours in terms of product and market diversification.

4.94. In light of the above, El Salvador and Sri Lanka are working closely together on a number of issues under discussion at the WTO in order to promote the interests of the developing countries in various areas of negotiation, through their participation in groupings such as the G33 and the Group of Small, Vulnerable Economies.

4.95. As indicated in the Secretariat report, Sri Lanka has tabled various proposals in the negotiations and has participated in the WTO's regular work and Committees. Another point worthy of note is the transparency of this Member, which made many notifications during the review period that pertained mainly to customs valuation, agriculture, import licensing, sanitary and phytosanitary measures, and technical barriers to trade. No less relevant is the major step it has taken in depositing its instrument of ratification of the Trade Facilitation Agreement.

4.96. I therefore take this opportunity to thank Ambassador Kumararatne and his team for their active participation in the work of this Organization, which demonstrates Sri Lanka's firm commitment to the multilateral trading system.

MONTENEGRO

4.97. Montenegro would like to associate itself with the statement of the European Union.

4.98. Montenegro would like to appreciate firm and continuous commitment of Sri Lanka to the multilateral trading system and it active and constructive engagement in the works of the WTO and effective cooperation with all Member states. We commend Sri Lanka for ratifying the TFA and for its contribution to the final negotiations resulting in strengthening of the WTO both in Bali and in Nairobi.

4.99. Montenegro wishes to congratulate the Government of Sri Lanka on its economic performance since its last review. As the Secretariat notes, the Sri Lankan economy has shown resilience in the aftermath of the global financial crisis and the resolution of internal conflict in Sri Lanka, with an average growth rate in real GDP of 6% during the review period. As the Secretariat further notes, construction, wholesale and retail trade and financial services have driven this growth. Given the challenges that the world economy has faced during this period – and still faces – these statistics are impressive.

4.100. At the same time, however, Montenegro notes the Secretariat's report that the main risks to growth and sustainability in Sri Lanka are result from the weak fiscal position – in particular, the fiscal deficit has increased from 6.5% of GDP in 2011 to 7.5% in 2015, well above the Government target of 4.4%. Montenegro hopes that notwithstanding such challenges, the Government of Sri Lanka can continue to improve on its excellent performance during the review period.

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4.101. In this context, Montenegro will follow with interest developments pertaining to the strategic key priorities of Sri Lankan Vision of the Future including its export promotion strategy, foreign direct investment and diversification of exports.

4.102. Although our two countries have a modest trade and economic relations, there has been an increase interest of Montenegro to Sri Lanka's focus and reliance on the services sector. Montenegro's economy is increasingly reliant on the service sector and tourism; and we regard the services sector as an area of important economic growth and sustainability. My delegation notes that the services sector accounted for approximately 56.6% of Sri Lankan GDP in 2015 and that Sri Lanka has maintained an average growth rate in this sector of 7% over the period.

4.103. In addition, tourism has been a focus of the Sri Lankan Government as a sector to expand the economy and invest in infrastructure. The sector has a significant impact on the economy contributing over 12% to the foreign exchange earned in 2015. Montenegro will continue to follow closely implementation of the new policy and strategy for this sector, aligning regulations with international standards, and establishing a "One Stop Unit" for investment in tourism.

4.104. Finally, Montenegro is looking forward to continuing excellent and constructive engagement with the Sir Lankan in Geneva and my distinguished colleague Ambassador to the WTO, R.D. Susiri Kumararatne and his team.

PAKISTAN

4.105. Sri Lanka is among Pakistan's main trading partner, we have a trade preferential agreement in force since 2005. Our two countries are working together to further enhance bilateral trade and recently, efforts were directed towards an even more comprehensive economic partnership agreement (CEPA) that will include trade in services, investment and Customs cooperation. Pakistan investments in Sri Lanka are in the manufacturing and construction sectors, and the deepening of the comprehensive economic partnership agreement will further boost bilateral trade between our two countries. In January 2017, Trade Development Authority of Pakistan will hold a second edition of a single country exhibition in Sri Lanka.

4.106. The transition of Sri Lankan economy from a low income to a middle income was accompanied by some challenges, which the Government of Sri Lanka addressed with well targeted strategies. We commend the bold steps taken by Sri Lankan Government in carrying out and in implementing strategic policies for growth such as the ones outlined in the Government 2010 vision for the future. Remarkable performances have been achieved by Sri Lanka since the last review in 2010: the economy has grown at an average 6.4% between 2010 and 2015, both trade in goods and in Services recorded positive and strong growth. GDP per capita based on Power Purchasing Parity is continuing its increasing trend, in 2005 GDP per capita was around US$5'000 and by 2015 this amount has double to reach over US$10'000.

4.107. As a result of Sri Lankan economic development, it performed well in the in 2015, where Sri Lanka ranked 73rd, with the highest score in Human Development Index value in South Asian Countries. According to World Bank, Sri Lanka has comfortably surpassed most of the MDG targets set for 2015. Sri Lanka economic development has contributed to overcome successfully its human development challenges with a marked decline in poverty.

4.108. Furthermore, other international indicators such as the WEF global competitiveness index 2016-17 ranked Sri Lanka as the second highest among Countries. The WEF Global Gender Gap report of 2016, ranked Sri Lanka at 100th place out of 138 countries

4.109. Services sectors have made significant contribution to the economic growth of Sri Lanka. Reforms in Telecom sector has improved Sri Lanka ranking in WEF Network Readiness Index from 76th out of 148 in 2014 to 63rd out of 139 in 2016. UNCTAD B2C e-commerce index 2016 ranked Sri Lanka second highest in South Asia. Sri Lanka has the most affordable prepaid mobile and fixed broadband internet tariffs in the World. This is further confirmed in the 2016 World Bank report titled Digital dividends which indicates "If you want to make a mobile phone call, go to Sri Lanka".

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4.110. We applaud the different reforms carried out in several key sectors to enhance growth and we would like particularly to highlight reforms made in two specific areas indicated by the World Bank in its October 2016 report: Starting a Business and Protecting Minority Investors. In the past five years, Sri Lanka has implemented the highest number of Doing Business reforms in the region, with 12 reforms in total. As part of such reform, we commend Sri Lanka for ratifying the WTO Trade Facilitation Agreement.

4.111. At the WTO in Geneva, we highly appreciate the positive and active engagement of Sri Lanka via its Mission led by H.E. Ambassador Kumararatne, mainly in Sri Lanka's role as the coordinator of the group of Asian developing countries, and for his close collaboration in Friends of Ecommerce for Development.

INDIA

4.112. We would like to commend the Government of Sri Lanka for achieving sustained economic growth at an average rate of 6% from 2010 to 2015. The per capita income of Sri Lanka has also increased significantly from US$2744 in 2010 to US$3924 in 2015. The Secretariat report mentions that the main risks to growth sustainability and development in Sri Lanka result from the weak fiscal position and resulting public debt over hang. The country also faces challenges relating to energy security, skill development gap, food security, low productivity and lack of diversification in the economy. We have noted that Government of Sri Lanka's long term strategic and structural development plans since the end of internal conflict in the country have borne results. We also appreciate the measures being taken by the Government of Sri Lanka to address the challenges by bringing fundamental challenges to tax policy and administration to boost revenues and public finances and efforts to boost exports and promote investment in the country.

4.113. India and Sri Lanka share centuries old ties of friendship and civilizational linkages. Both countries are closely linked through geography, history, religion, language, culture and trade. In recent years, the relationship has further deepened and strengthened in all spheres with regular exchanges at the highest level.

4.114. India and Sri Lanka also share a close and vibrant economic and commercial partnership. India is Sri Lanka's largest trading partner and Sri Lanka is amongst India's largest trading partner in South Asia. The total trade between both countries in 2015-16 stood at US$6.05 billion with exports from India amounting to US$5.30 billion and imports from Sri Lanka amounting to US$742 million. The India-Sri Lanka Free Trade Agreement which came into effect in 2000 provides a framework for trade between both countries. In 2015, both countries have mooted an Economic and Technological Cooperation Agreement covering trade in goods, services, investments, technology cooperation, capacity creation and other elements, which is under discussion. Bilateral investments are also on an upswing. Indian companies are investing in Sri Lanka in the areas of petroleum, retail, IT, financial services, real estate, hospitality and tourism with cumulative investments for over US$1 billion. Similarly, Sri Lankan investments into India in the areas like garments, real estate, hospitality industry and the logistic sector are also growing.

4.115. India and Sri Lanka also have a multifaceted development cooperation partnership. Since the end of the internal conflict in Sri Lanka, the Government of India has put in place a robust programme of assistance to help the Internally Displaced Persons' return to normal life. Sri Lanka is one of the major recipients of development credit given by India with cumulative commitments of US$2.6 billion, including US$436 million as grants. Under development credit, major railway projects have been undertaken in Sri Lanka. Buyer credit agreements have also been signed for water supply and other projects. India is also working closely with the Government of Sri Lanka in other sectors as well, including education, health, transport connectivity and capacity building.

4.116. To conclude, there is tremendous potential to further strengthen and take our bilateral relationship to greater height in all spheres. We also look forward to working with the authorities of Sri Lanka in further expanding our trade and investment ties for mutual benefit.

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MAURITIUS

4.117. We wish to commend the efforts of the Government and People of Sri Lanka towards national reconciliation as a major step for restoring economic and social normalcy. There have been notable initiatives to attract and bolster investment with a view to making Sri Lanka an important logistics and services hub in the region. We believe that focus on infrastructure development as well as continued improvements in the political environment and security situation will enhance prospects for foreign direct investment and tourism.

4.118. Sustained economic growth rates, and macro-economic stability measures, will ensure that the Government of Sri Lanka delivers on the inclusive trade agenda and achieve the Sustainable Development Goals.

4.119. Sri Lanka and Mauritius share the same characteristics, as Small and Vulnerable Economies and Net Food Importing countries. We also have similar objectives as regards broadening and diversification of growth pillars. Agriculture, NAMA, the fisheries as well as the services sectors are key areas of interest in the WTO negotiations for both of our two countries.

4.120. As members of the Indian Ocean Rim Association, both Sri Lanka and Mauritius share the same vision and economic objectives to deepen intra-regional trade and improved trade facilitation measures so as to enable further trade in goods and services between our two countries.

4.121. The Mauritius delegation looks forward to working closely with the delegation of Sri Lanka and in various groupings, as we head to important discussions at the WTO with a view to reaching meaningful outcomes for MC11.

GUATEMALA

4.122. Sri Lanka is a multi-ethnic and multi-faith country, famous for its tea, coffee and rubber production. It has a growing industrial economy, which has significantly increased its per capita income in recent decades. Thanks to its natural beauty, the diversity of its landscapes and its invaluable cultural heritage, Sri Lanka has become a world-renowned tourist destination.

4.123. Although trade between Guatemala and Sri Lanka is limited (around US$5 million in 2015), the two countries share many characteristics that have brought them closer together and enabled them to cooperate closely within the WTO framework. It is important to note that, as a member of the Group of Small, Vulnerable Economies, Sri Lanka has consistently made a proactive and dedicated contribution to the Group's work.

4.124. Turning to the review that brings us here today, we note Sri Lanka's resilience in the face of the global crisis and the country's 6% annual growth in real GDP during the review period. We also underscore the gradual strengthening of Sri Lankan institutions and the structural reforms undertaken, as reflected in the Mahinda Chinthana Vision for the Future programme, the efforts made to encourage more foreign direct investment, and the measures aimed at simplifying and increasing the efficiency of key sectors, such as that of financial services.

4.125. We note the short and medium term challenges of stepping up efforts to simplify the country's tariff and tax systems, and of strengthening and revising the legal framework of state-owned enterprises, as their outstanding obligations are the equivalent of 12% of GDP.

NEPAL

4.126. The circulated reports reveal that since the trade liberalization initiated in 1977, several trade policy reforms have been achieved, which have laid strong foundation on socio-economic development of Sri Lanka.

4.127. We are glad to disclose that Sri Lanka has performed relatively well since its last review in 2010. Its economy has shown resilience following the initiatives of the internal conflict, and gathered strength even in the face of the global financial crisis.

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4.128. We appreciate that since its last review, the Government has been guided by its 2010 "Mahinda Chinthana – Vision for the Future" which focuses on structural changes and sets out specific targets for GDP and export growth by reducing the reliance on agriculture and diversifying to other important areas like manufacturing and services.

4.129. The progressive and continuous liberalization of the market to integrate into the multilateral trading system, coupled with a commitment to fulfilment of WTO obligations, has made Sri Lanka a more reliable and predictable trading partner.

4.130. Relatively stable macroeconomic architecture of Sri Lanka remained supportive to increasing per capita income and maintaining the economic growth at an average rate of 6% per year over the review period despite external pressure arising from global economic slowdown and other domestic economic challenges.

4.131. As close South Asian neighbour, Nepal and Sri Lanka are the members of the Non-Aligned Movement (NAM), the South Asian Association for Regional Co-operation (SAARC) and the Bay of Bengal Initiatives for Multi-Sectoral Technical and Economic Cooperation (BIMSTEC).

4.132. We want to recall that two agreements to trade and air service to link both countries were inked during President Mahindra Rajapaksa's state visit to Nepal in 2009. The improved air connectivity between the two countries has significantly contributed the increase of tourists to Nepal. Nearly 40 000 Sri Lankan tourists visit Nepal every year through the direct air link between Kathmandu and . Nepal and Sri Lanka can package their unique beaches and mountains and the complementary of cultural experiences for the growth and promotion of tourism within and into South Asia.

4.133. Nepal exports lentil, plastic, wood and charcoal, carpet, art, electrical machinery and equipment, sound recorder, television, etc. to Sri Lanka while Nepal imports from Sri Lanka mainly cocoa and cocoa preparations, coffee, tea, spices, electrical machinery and equipment and so on. However, compared to the potentials for enhanced trade, investment and joint economic collaboration between two nations, there is much to do to seize the opportunity already available under South Asian Free Trade Agreement (SAFTA) and BIMSTEC for enhanced trade flows between the two nations. We encourage wider exploration and larger awareness building by the Business Councils established between Nepal and Sri Lanka in stimulating the trade relations further.

4.134. Finally, it is appreciable that Sri Lanka is striving to reach the status of upper-middle- income country focusing on long-term strategic and structural transformation of its economy. We wish Sri Lanka a success in this direction.

JAPAN

4.135. We, Sri Lanka and Japan, have been important partners for years. Japan is the third largest importer for Sri Lanka. Also, Japan has been one of the largest donors for years. Japan will make continuous efforts to maintain and further develop the strong ties between us.

4.136. Let me begin by touching on the general economic situation. According to the Secretariat's report, the economy of Sri Lanka has been well since the last review. The country's average annual economic growth rate during the review period was over 6%. Moreover, Sri Lanka has successfully maintained relatively low unemployment rate, and has reduced inflation rate to less than 1%. Those achievements are commendable.

4.137. Having said that, Japan believes Sri Lanka has problems with relatively weak fiscal position. In this regard, Japan is glad to read in the Secretariat's report that the Government is now undertaking a reform. Japan hopes that those efforts by the Government will have a fruitful outcome.

4.138. Let me turn to the country's trade policies.

4.139. According to the Secretariat's report, Sri Lanka's primary objective of its trade policies is to renegotiate existing trade agreements including two bilateral agreements with India and Pakistan and two regional trade agreements. Furthermore, according to the report, Sri Lanka seems to have

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- 26 - a clear intention to enter into negotiations with not only China and India but also the United States. Although it is unfortunate that there is no FTA currently in force between Sri Lanka and Japan, Japan positively evaluates the country's efforts toward trade liberalization through FTAs.

4.140. Apart from the FTAs, according to the report, Sri Lanka has a plan to enact the new Trade Regulation Act and replace the Imports and Exports (Control) Act. Japan requests Sri Lanka further explanations about this plan.

4.141. Now let me briefly touch upon the country's investment policies.

4.142. Despite the continuous efforts by the Government of Sri Lanka, the country is still a challenging place to do business. According to the recently published report by the World Bank, it ranked 110th out of 190 economies.

4.143. Sri Lanka has introduced several restrictions to foreign investment. Among others, Japan pays much attention to the land act of 2014 which prohibits the transfer of land to a foreigner. It seems to be difficult to estimate potential impact of this new act on foreign investors' activities. Japan requests Sri Lanka to provide Members with detailed explanations of this new act especially about the point on whether the introduction of the new land act removes a land transfer tax of 100% or not.

4.144. In conclusion, I would like to express our strong wish to continue cooperation between the Democratic Socialist Republic of Sri Lanka and Japan.

KENYA

4.145. We commend Sri Lanka for the reforms that have been implemented during the review period which enabled the country to achieve an average rate of real GDP growth of 6% between 2011 and 2015, driven mainly by the tourism, construction, wholesale and retail trade, and financial services sectors. We note the reports that economy is dominated by the services sector, which accounts for 60% of GDP, followed by manufacturing at 20%, and agriculture at 9% of GDP.

4.146. Although the contribution of agriculture to the economy and trade has been declining, it remains an important sector for the Sri Lanka in terms of employment, food security and livelihood, particularly for the majority of the population living in the rural areas. In this context, there is need for the Sri Lanka to improve productivity in agriculture in order to realize the full potential of this important sector.

4.147. We note that Sri Lanka has pursued strategic trade policy initiative aimed at achieving greater integration into the global economy through preferential reciprocal trade agreements as well as multilateral arrangements. We therefore welcome the various bilateral and regional integration initiatives which have contributed in expanding market access opportunities for the Sri Lanka's exports and which we consider complimentary to multilateral approach.

4.148. At multilateral level, we appreciated the active role Sri Lanka has continued to play in the work of the WTO both in the regular committees and in the Negotiating Groups. Sri Lanka has also shown commitments in the implementation of negotiated outcomes as demonstrated by its acceptance of the Trade Facilitation Agreement (TFA) and submission of its category "A" commitments. Further, on trade facilitation, we commend Sri Lanka for establishing of the single window system which allows all entities involved in importing and exporting to submit required regulatory information to a single electronic gateway and to use electronic funds transfer or online payments.

4.149. At bilateral level, Kenya and Sri Lanka have continued to enjoy cordial economic and diplomatic relations since 1970. In December 2013, the presidents of the two countries witnessed the signing of an Agreement establishing the Joint Commission for Cooperation which is the primary point of contact for advancing, monitoring and evaluating bilateral ties between the two countries.

4.150. Sri Lanka remains an important trading partner for Kenya. The two countries share one thing in common in that they are key producers and exporters of tea to the world market. Total

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- 27 - trade between Kenya and Sri Lanka was valued at US$14.3 million in 2015, up from US$10.2 million in 2014. Kenya's main exports to Sri Lanka include natural sodium carbonate, salt, pepper, and tea which is used for blending purposes. Sri Lanka's main exports to Kenya include , general industrial machinery, and equipment.

4.151. In conclusion, we wish Sri Lanka a successfully trade policy review process and looks forward to continued collaboration and constructive engagement with Sri Lanka, both bilaterally and here at the WTO.

RUSSIAN FEDERATION

4.152. The Russian Federation follows with great interest the economic performance of Sri Lanka, following the resolution of the internal conflict. The continuous growth of its economy, with an average annual rate of 6%, enables us to give an overall positive assessment of the economic policies pursued by Colombo. The reforms implemented by the Government of Sri Lanka since the last TPR have greatly contributed to this performance.

4.153. Diplomatic relations between the Soviet Union and Sri Lanka were established on 19 February 1957. But the history of our bilateral relations has started much earlier. The first Russians appeared in Ceylon in mid XIX century, and a Russian Consulate was established in Galle in 1891.

4.154. The solid basis for the mutually beneficial cooperation was laid down in the 60s and 70s of XX century by the package of bilateral agreements signed by our countries in the spheres of trade, economy, science, technology and culture. During the years of our bilateral relations, thousands of Lankan students have graduated from universities of the Soviet Union and then Russia in medicine, engineering and education.

4.155. Presently, Russia and Sri Lanka enjoy gradual growth of bilateral trade. Since 2002, Russia holds the stable position of leading importer of Sri Lankan tea. In 2015 Russia imported 41.9 thousand tons of tea for a total sum of US$193.8 million.

4.156. Besides tea, Russia imports from Sri Lanka rubber, leather, spices and garments. And Sri Lanka imports from Russia steel, ferrous metal wares, asbestos, fertilizers, electrical equipment for metallurgical works. Several Russian and joint enterprises are registered in Sri Lanka, with the total volume of Russian investments exceeding US$7 million.

4.157. In February 2016, the first meeting of the Russia-Sri Lanka Intergovernmental Commission on Trade, Economic, Scientific and Technical Cooperation was held in Moscow. The two parties discussed the ways to strengthen bilateral trade and economic relations and signed a Protocol to elaborate an Action Plan.

4.158. During this TPR, the Russian delegation has not addressed any written questions to Sri Lanka. Should the need arise we will be ready to discuss bilaterally.

4.159. To conclude, we look forward to work with the authorities of Sri Lanka in order to expand our trade and investment ties for mutual benefit.

OMAN

4.160. Oman and Sri Lanka enjoy excellent political, economic and trade relations. These relations are expected to grow and expand in the years ahead. Both Oman and Sri Lanka are members of the Indian Ocean Rim Association (IORA).

4.161. Oman is pleased to note that despite the global financial crisis, Sri Lanka has been able to attain a reasonable economic growth with an annual growth rate in real GDP of 6% since the last Trade Policy Review in 2010. The per capita income has increased from US$2,744 in the year 2010 to US$3,924 in 2015. Inflation has been maintained at a very low level. All this is testament to the fact that the extensive economic reforms that Sri Lanka has embarked upon are beginning to show signs of improvements in Sri Lanka's economic performance.

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4.162. Oman commends Sri Lanka for its strong commitments to the multilateral trading system and for adhering to the rules and disciplines of the WTO. It has been abiding by its commitments under the multilateral trade agreements and has not been a main party in any dispute under the WTO Dispute Settlement Mechanism during the period of review.

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5 REPLIES BY THE REPRESENTATIVE OF SRI LANKA AND ADDITIONAL COMMENTS

5.1. It is with great pleasure that I participate in the second day of the meeting of Sri Lanka's 4th Trade Policy Review. On behalf of my country and the delegation, I convey my profound thanks to the Ambassadors and representatives of the WTO Member countries who have actively participated in our trade policy review meeting. I am delighted to observe the interest of the Members in our trade and economic policy developments.

5.2. At this concluding phase of the Trade Policy Review of Sri Lanka, it is opportune to indicate some of the positive conclusions that delegates have graciously pointed out during the discussions on Tuesday 1st November 2016.

5.3. There is a general consensus on the healthy and robust economic performance of Sri Lanka showing an average growth rate of 6% during the period of the Trade policy Review and a GDP per capita growth exceeding 25%. Moreover, my country has been congratulated for maintaining a reduced rate of inflation less than 1% and a relatively low rate of unemployment. These salutary developments have taken place amidst external global financial upheavals as well as domestic constraints.

5.4. Delegates have noted Sri Lanka's ratification of two important instruments of international obligation, namely the WTO Trade Facilitation Agreement, the submission of Category A commitments and the WIPO Marrakesh VIP Treaty.

5.5. At the same time, I would like to take this occasion to address in broad overview the few areas of concerns presented by the delegations. The Sri Lanka delegation has already made detailed assessment and answers to the approximately 138 questions received from 12 Member countries. However, as we conclude our review on Sri Lanka, it is my pleasant duty to briefly enumerate the same.

5.6. In regard to trade measures and practices, both the discussant and several delegations have mentioned that some bound rates have exceeded the MFN rate for a number of products. Sri Lanka has taken steps to adjust the applied duty rates which have exceeded the Sri Lanka's bound rates to the WTO in the budget 2017 except few tariff lines on emerging health and social considerations.

5.7. The concerns of some of the WTO Members on the application of some duties and charges, Sri Lanka wishes to inform that Sri Lanka is reviewing the additional taxes, namely Ports and Airports Development Levy and CESS Duty and it is expected to phase out those additional levies starting from 2017.

5.8. Sri Lanka has also noted the concerns raised by some delegations on the implementation of the Customs Valuation Agreement on application of minimum value for Custom Valuation of used vehicles. I wish to state that Sri Lanka has done away with the application of Article 10 of the Customs Ordinance that empowers the application of minimum value for valuation of motor vehicles.

5.9. In the case of the excise tax on motor vehicles, which is applied on non-discriminatory basis, has been structured to promote importation and use of new generation of motor vehicles with alternative energy source and environment friendliness which are suitable for road networks of Sri Lanka. For instance, applied tax on all type of electric vehicles is less than 50% of CIF value and on import duty on hybrid vehicles is 100% of CIF value.

5.10. In respect of concerns expressed by certain delegations on the area of land ownership and investment regime, Sri Lanka wishes to inform the Membership of the WTO that a new land policy has been introduced and accordingly the new Land (Restriction on Alienation) Act No. 38 of 2014 was promulgated. With introduction of this new law, the previous law related to 100% land transfer tax law was abolished. Now the Companies with less than 50% foreign shareholding are permitted to purchase land outright and others will be eligible to lease and for a maximum period of 99 years. The upfront payment of land lease tax by foreign companies that was originally introduced was subsequently removed and the applicable amendments to the law are being presented to the parliament.

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5.11. With regard to the Incentive Regime of Sri Lanka, currently it does not offer any incentives contingent upon export performances and a new incentive regime will be announced at the forthcoming budget in 2017, which will be neutral and horizontal in application.

5.12. We thank the delegations who have also taken cognizance of the growing fiscal deficit and enjoined on us the necessity to take appropriate remedial measures. In this regard, we wish to put in perspective the course of action to be taken by the Government of Sri Lanka. The Government has committed to improve its fiscal position in the medium term by increasing the revenue collection, reducing the budget deficit and rationalizing the public expenditure. These initiatives will be supported by rationalization of Public Debt related to SOEs by converting them into the joint venture equity or equity and restructuring SOEs in response to the market driven business environment.

5.13. I wish to convey our sincere thanks and gratitude to Madam Irene Young, Chairperson of the Trade Policy Review Body, H.E. Dr Stephen Karau, discussant to our Trade Policy Review, for his insightful comments on our trade policy. Also to Mr Yonov Frederick Agah, Deputy Director General, WTO; Mr. Willy Alfaro, Director, Trade Policies Review Division; Mr Masahiro Hayafuji , Counsellor, Trade Policies Review section; Ms. Denby Probst, Counsellor, Trade Policies Review section; Mr. Usman Ali Khilji, Trade Policy Analyst, Trade Policy Review section, for their dedicated efforts in producing comprehensive reports which have been useful for our meeting.

5.14. Sri Lanka believes that the 4th review of Sri Lanka's trade policy has provided valuable opportunity for Members to enhance their understanding on Sri Lanka's economic and trade policies. I, therefore, would like to conclude my remarks by expressing my deepest appreciation to all Members for the great interest and support expressed during the 4th Review.

DISCUSSANT

5.15. My assessment is that, during our first meeting on Tuesday, we had excellent discussions on the economic performance of Sri Lanka as well as its trade policies and practices since its last review in 2010. The contributions from delegations were constructive and encouraging.

5.16. I wish to highlight that delegations commended Sri Lanka for the reforms it has implemented since the resolution of internal conflict which have enabled the country to achieve impressive economic growth. The delegations also encouraged Sri Lanka to sustain the reform process including the implementation of programmes under the new "Vision for the Future" in order to realize its long term economic and development objectives.

5.17. Further, delegations commended Sri Lanka for its active participation in the work here at the WTO and for progressively and continuously liberalizing its market in order to integrate into the multilateral trading system. The delegation of Sri Lanka at the WTO, led by H.E. Ambassador Susuri Kumararatne, was commended for raising the profile of Sri Lanka's participation at the WTO. Positive developments were also pointed out particularly in the area of customs procedures where the single window system has been implemented. It was also noted with appreciation by many delegations that significant reforms were undertaken in the services sector and have achieved the desired results.

5.18. Some of the challenges facing Sri Lanka such as weak fiscal position; underperforming state-owned enterprises; concentration of trade on a few markets and products; and undiversified services sector, were also highlighted by many delegations. Concerns were also raised including the costly import regime due to application of additional levies and charges; complex tariff structure which makes the import regime less transparent and unpredictable.

5.19. We appreciate the comprehensive statement by the delegation of Sri Lanka which has outlined some of the measures the Government intends to take in addressing some of the challenges faced as well as the concerns that were raised by delegations. We welcome the reforms that have been mentioned with regard to land ownership.

5.20. At this point, let me conclude by thanking you, Madam Chair, for giving me the opportunity to participate as a discussant for the fourth Trade Policy Review of Sri Lanka. I also thank the Members for their valuable contribution and the delegation of Sri Lanka led by the Honourable

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Rishad Bathiudeen for its constructive engagement during the review. I thank you for your attention.

EUROPEAN UNION

5.21. The EU would like to thank the delegation of Sri Lanka for the replies it has provided to the EU's advance questions. The replies and the discussion held last Tuesday and today have been very instructive for better understanding Sri Lanka's trade and economic policies. The EU has no follow-up questions.

5.22. As noted last Tuesday by several Members, Sri Lanka needs to make additional efforts to improve its business environment and, in particular, to diversify further its economy.

5.23. In this regard, the EU will follow closely the works of the Government and welcomes the objectives to adopt export promotion strategy, encourage more foreign direct investment, and promote the diversification of exports.

5.24. In this respect, the EU would like to underline that improving the business environment requires also the effective implementation of the various policy initiatives and plans that will be adopted by the Government in the future.

5.25. Finally, we heard the call of Minister on GSP+ status on Tuesday and have taken careful note of that. As already indicated, the EU is well aware of the economic importance for Sri Lanka of being granted GSP+ status. We are currently conducting a technical assessment of the application and will inform Sri Lanka accordingly by the end of this month, with a view of the final decision being taken by mid-May 2017, at the very latest, following the necessary internal procedures.

5.26. In conclusion, we would like to thank again the delegation of Sri Lanka for its constructive participation in this exercise.

UNITED STATES

5.27. Just a few words of appreciation for the work that the delegation of Sri Lanka has devoted to this exercise and our special thanks to the Honourable Minister for clearly having reflected on the interventions from Tuesday. The remarks that were provided this morning were very helpful to put the pieces together. Thank you very much for that.

5.28. I was chatting before the meeting with the Ambassador and noted, in anticipation of the United States Trade Policy Review which is coming up in a few weeks, that this is a very challenging process for all Members but we consistently find, despite the difficulties and the discomfort of occasionally being criticized on certain policies, that there is great value in hearing from other Members and understanding clearly what other Members are reflecting about our own trade policies. And we certainly hope that this has been the positive experience for the delegation of Sri Lanka.

5.29. We, the United States, were a bit uncharacteristically late in submitting our written questions so we are, for that reason, looking forward to still receiving written responses and will, as appropriate, follow-up with your colleagues at the Mission here in Geneva.

5.30. I would just like to say that we have very much appreciated some of the verbal responses that we had on issues that we have raised and, in particular, on the issue of customs valuation with respect to imported used automobiles where we received some reassurances and some documentation, which is being examined in our capital. We very much appreciate that and, again, I think it reinforces and demonstrates the usefulness of this ability to engage with each other. Thank you very much again to all of you for your efforts and congratulations.

Agenda item: Adoption of TPRB's Annual Report for 2016

5.31. The TPRB adopted its Annual Report for 2016 contained in document WT/TPR/W/114/Rev.1.

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6 CONCLUDING REMARKS BY THE CHAIRPERSON

6.1. This Trade Policy Review has provided a very good opportunity for Members to understand better recent developments in Sri Lanka's trade policies and the challenges it faces. We owe this to the active participation of the Sri Lankan delegation, our discussant, and the 21 delegations which took the floor.

6.2. At this meeting, Members praised Sri Lanka for having achieved robust real GDP growth despite adverse circumstances. Noting the country's high and increasing level of public debt, Members urged Sri Lanka to continue with its fiscal consolidation efforts and deepen its structural reforms, including the reforms of state-owned enterprises and trade policies. Recognizing the importance of the agricultural sector to Sri Lanka's development, Members welcomed Sri Lanka's plans to move forward from subsistence farming to agribusiness, with a view to accessing export markets by 2020.

6.3. Members were informed by the Sri Lankan delegation that the National Unity Government's objective was to provide a common platform to deliver long-term social and economic solutions that could solve key problems currently affecting the country. More specifically, the Government intended to implement an export-led growth strategy which focused on, inter alia, facilitating the country's entry into global value chains, providing a competitive business and investment environment, diversifying the country's products and export markets, and promoting the country as the economic hub in Asia.

6.4. Members appreciated Sri Lanka's active involvement in the WTO, especially the role played by the delegation as coordinator of the Asian Group of Developing Countries. Many commended Sri Lanka on its ratification of the Trade Facilitation Agreement and the establishment of a customs single window for exports and imports. Some Members also encouraged Sri Lanka to accede to the Agreement on Government Procurement. While they welcomed Sri Lanka's overall commitment to the multilateral trading system, some Members raised concern about customs valuation and the use of minimum values. The delay in submitting notifications in the agriculture area was also an issue to be addressed.

6.5. Members acknowledged Sri Lanka's marked improvement in doing business and corruption indices, and hoped to see further progress. In particular, Members sought the removal of obstacles to trade and investment, such as the restrictions on foreign ownership of land and rigid capital controls. Many expressed concern about the unpredictable tariff regime, which was compounded by a myriad of additional taxes and levies including a high excise duty on automobiles and the special commodity levy. Members also noted an increase in the number of tariff lines where the applied rates exceeded the bound rates.

6.6. During this review, Sri Lanka received nearly 140 advance written questions, and has already responded to most of them. In a month's time, Members should receive Sri Lanka's replies to all the outstanding questions, which will then mark the successful conclusion of this TPR.

6.7. This TPR has enabled Members to better understand Sri Lanka's trade policies and to highlight pertinent issues in specific areas. In his responding statement, the Minister has addressed most of concerns raised by Members, and has taken note of other comments and suggestions. I hope the delegation finds this exchange useful in helping Sri Lanka make further progress in its economic and trade reforms, and in due course, successfully accomplish its "Vision for the Future".

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