2014/15 Knowledge Sharing Program with Sri Lanka: Upgrading Technology to Improve Export Competitiveness in Sri Lanka
Total Page:16
File Type:pdf, Size:1020Kb
2014/15 Knowledge Sharing Program with Sri Lanka Sharing Program 2014/15 Knowledge 2014/15 Knowledge Sharing Program with Sri Lanka: Upgrading Technology to Improve Export Competitiveness in Sri Lanka MINISTRY OF STRATEGY AND FINANCE 2014/15 Knowledge Sharing Program with Sri Lanka: Upgrading Technology to Improve Export Competitiveness in Sri Lanka 2014/15 Knowledge Sharing Program with Sri Lanka Project Title Upgrading Technology to Improve Export Competitiveness in Sri Lanka Prepared by Center for International Economic Studies (CIES) Korea University, Graduate School of International Studies Supported by Ministry of Strategy and Finance (MOSF), Republic of Korea Korea Development Institute (KDI) Prepared for Government of Sri Lanka In Cooperation with Ministry of Policy Planning, Economic Affairs, Child, Youth & Cultural Affairs, Sri Lanka Program Directors Siwook Lee, Executive Director, Center for International Development (CID), KDI Hong Tack Chun, Dean of KDI School of Public Policy and Management, Former Executive Director, CID, KDI Kwang-Eon Sul, Honorary Fellow, CID, KDI Program Officer Eunsong Kim, Research Associate, Division of Policy Consultation & Evaluation, CID, KDI Seung Ju Lee, Research Associate, CIES Jinhun Ahn, Research Associate, Korea University Hanhin Kim, Research Associate, Korea University Senior Advisor Dae-Hee Yoon, Former Minister of Government Policy Coordination Project Manager Sunghoon Park, Professor, Graduate School of International Studies, Korea University and CIES Authors Chapter 1. Sunghoon Park, Professor, CIES/Korea University Yoocheul Song, Professor, CIES/Dongduk Women's University Herath Jayasundara, Director, Board of Investment Chapter 2. In Soo Kang, Professor, CIES/Sookmyung Women's University Hee Sik Jeong, Senior Research Fellow, Korea Automotive Research Institute Sejun Mo, Director, Korea Automotive Research Institute Inoka de Alwis, Assistant Director, Ministry of Industry and Commerce Chapter 3. Hosaeng Rhee, Professor, CIES/ Myongji University Woosung Lee, Research Fellow, STEPI Shehan de Silva, Manager, SLINTEC Himali Athaudage, Director, MOTR English Editor Danial Kae, Freelancer Government Publications Registration Number 11-1051000-000620-01 ISBN 978-89-8063-953-3 94320 ISBN 978-89-8063-827-7 (set) Copyright ⓒ 2015 by Ministry of Strategy and Finance, Republic of Korea Government Publications Registration Number 11-1051000-000620-01 2014/15 Knowledge Sharing Program with Sri Lanka: Upgrading Technology to Improve Export Competitiveness in Sri Lanka MINISTRY OF STRATEGY AND FINANCE Preface In the 21st century, knowledge is one of the key determinants of a country’s level of socio-economic development. Based on this recognition, Korea’s Knowledge Sharing Program (KSP) was launched in 2004 by the Ministry of Strategy and Finance (MOSF) and the Korea Development Institute (KDI). The KSP aims to share Korea’s development experience and knowledge accumulated over the past decades to assist the socio-economic development of its partner countries. Former high-ranking government officials are directly involved in policy consultations to share their intimate knowledge of development challenges. Their involvement complements the analytical work of policy experts and specialists who have extensive experience in their fields. The government officials and practitioners effectively pair up with their counterparts in development partner countries to work collaboratively on pressing policy challenges and to share development knowledge in the process. The Program includes policy research, consultation and capacity-building activities, all in order to provide comprehensive, tailor-made assistance to the partner country in building a stable foundation and fostering capabilities to pursue self-sustainable growth. 2014 is the fourth year the KSP has been conducted with Sri Lanka, and the third year a Strategic Development Partner Country (SDPC) KSP has been conducted with Sri Lanka. Based on the written demand survey form as well as discussions with the government of Sri Lanka, the third year of the SDPC KSP with Sri Lanka, entitled ‘Upgrading Technology to Improve Export Competiveness in Sri Lanka’ was launched in August, 2014, focusing on the following three topics: Framework of Joint Venture Partnership with Global Companies and Local Partners, Development of The Automobile Components Manufacturing Industries of Sri Lanka through The Creation of Forward Linkages with Global Value Chains (GVCs), and Technology Business Incubators in Support of Technology-based Industries in Sri Lanka. I would like to take this opportunity to express my sincere gratitude to Senior Advisor Mr. Dae-Hee Yoon as well as all the project consultants including Dr. Sunghoon Park, Dr. Yoocheul Song, Dr. Insoo Kang, Dr. Hosaeng Rhee, Mr. Heesik Jeong, Mr. Sejun Mo, and Dr. Woosung Lee for their immense efforts in successfully completing the 2014/15 KSP with Sri Lanka. I am also grateful to Executive Director Dr. Siwook Lee, Program Director Dr. Kwang-Eon Seol, and Program Officers Ms. Eunsong Lee, and all the members of the Center for International Development, and KDI, for their hard work and dedication for this Program. I would also like to extend my warmest thanks to the Ministry of Finance and Planning, Economics Affairs, Child, Youth and Cultural Affairs of the Government of Sri Lanka, local consultants, the program officer, and the participants for their active cooperation and great support. Last but not least, our team is deeply indebted to the excellent and generous support provided by H.E. Ambassador Won-sam Chang and Counsellor Ms. Jisun Jun at the Korean Embassy in Colombo. In your hands is the publication of the results of the 2014/15 KSP with Sri Lanka. I sincerely hope the final research results including policy recommendations on the selected areas could be fully utilized to help Sri Lanka in achieving economic development in its priority areas in the near future. Jaiwon Ryou President Center for International Economic Studies Contents 2014/15 KSP with Sri Lanka .................................................................................................. 013 Executive Summary ............................................................................................................ 017 Chapter 1 Framework of Joint Venture Partnership with Global Companies and Local Partners Summary .......................................................................................................................... 026 1. The Role of Joint Ventures and Their Benefits and Shortcomings ..................................... 028 1.1. Consortia (or Contractual Joint Ventures) ............................................................... 028 1.2. Cooperative Joint Ventures (or Mixed Joint Ventures) .............................................. 029 1.3. Restructuring Joint Ventures ............................................................................... 029 2. The Procedure of Establishment of Joint Venture .......................................................... 036 3. Analysis of the Current Status of Joint Venture FDIs in Sri Lanka ...................................... 038 3.1. Trends of FDI Attraction in Sri Lanka ..................................................................... 040 3.2. Trends of Joint Venture FDIs ................................................................................ 041 3.3. The Distribution of JV Companies into Major Industrial Categories ............................ 042 3.4. The Distribution of Manufacturing Joint Venture Investments into Sub- Sectors ........... 042 3.5. Composition of Countries of Origin of JV Companies ............................................... 043 3.6. Additional Benefits Given to JV Companies ............................................................ 043 3.7. Criteria to Select Some Industries as “Challenged Areas” and “Opportunity Areas” ....... 044 4. The Experiences of Other Countries ............................................................................ 044 4.1. The Case of Korea .............................................................................................. 044 4.2. The Case of the People’s Republic of China ............................................................ 047 5. Policy Recommendations .......................................................................................... 049 5.1. Challenges to Sri Lanka’s Joint Venture FDIs ............................................................ 050 5.2. Opportunities in Sri Lanka for Joint Venture FDIs ..................................................... 052 5.3. Supportive Regulations ....................................................................................... 057 5.4. Policy Actions Needed for Fostering Joint Venture FDIs in Sri Lanka ........................... 059 Appendix ......................................................................................................................... 063 References ....................................................................................................................... 077 Chapter 2 Development of the Automobile Components Manufacturing Industry of Sri Lanka through the Creation of Forward Linkages with Global Value Chains Summary ......................................................................................................................... 080 1. Introduction ...........................................................................................................