Pushing Sri Lankan trade beyond tea and dairy

Sri Lanka's new-found peace and a tourism drive could boost bilateral trade by millions of dollars, beyond traditional dairy and tea.

Despite the country's civil war, which ended in 2009, New Zealand has long-standing trade links with Sri Lanka.

New Zealand's biggest company, Fonterra, dominates the Sri Lankan dairy market. It has 600 staff and a factory in Bigyama.

Sri Lanka is New Zealand's fifth-biggest market for whole milk powder.

At least 7000 Sri Lankans now live in New Zealand.

Ties between the countries took another small step this week, with the first trade delegation from the embryonic Sri Lanka New Zealand Business Council.

The group of 10 people, representing nine Sri Lankan businesses, hosted a cocktail function at New Zealand Trade & Enterprise's Auckland waterfront office last night, following an afternoon farm tour.

The companies range from publishers to hotel owners, as well as those with traditional interests in dairy, rubber and tea products.

Potential in the millions

Lionel Silva, chairman of paper and wood importer Lidechsi Group and vice-president of the 110-strong Sri Lanka Australia New Zealand Business Council, heads the delegation.

He told NBR ONLINE his company imports 5000 tonnes of wood and paper products worth millions of dollars a year, so there is potential for further trade in the millions.

Another businessman, Manjula Lanerolle, managing director of grain and seed company Glolan International, says he doesn't expect to sign any contracts this week but hopes the trip will eventually result in some deals.

He is hopeful of getting exports from existing growers and is optimistic of enticing grain and seed growers to plant contract crops for guaranteed prices.

"We can develop the same business out of New Zealand that we have in Australia, because even though there are products like lentils and green peas being grown here, they are smaller crops which are not being exported at the moment."

Sri Lanka's GDP growth in 2011 was 8.3% – the country's largest since independence from British rule in 1948.

A government aim to triple tourism numbers by 2016, to 2.5 million visitors, has sparked a flurry of construction, including a second international airport, major highways and several new hotels, which could add about 4000 rooms in capital Colombo within five years.

Two-way trade between New Zealand and Sri Lanka for the year ended March 2011 was almost $350 million, with almost $300 million of that New Zealand dairy exports.

Of the $40 million of imports from Sri Lanka, almost half is tea and rubber products is another 14%.

In 2009, Sri Lanka was our 43rd biggest trading partner.

Distance a false perception

Sri Lanka's Honorary Consul in Wellington, Aruna Abeygoonesekera, says there is potential for the export of many New Zealand products in sectors such as forestry, fisheries, software and publishing.

Sri Lanka's main exports are garments, tea and rubber products, and its biggest trading partners are the United States and United Kingdom – not exactly close neighbours – and India.

The distance between the countries is not a trade barrier, Mr Abeygoonesekera says.

"I think it's a perception. Sri Lankans see Australia and New Zealand as countries they can do business with as much as their traditional ones, like Europe and the United States. I don't think they're that far away."

The Sri Lanka New Zealand Business Council's co-vice president Thusith Samaraweera, general manager of hotel company Waters Edge, says peace has swept away bureaucratic red tape.

However, Radio New Zealand reported in May the country was putting restrictions on milk powder imports to protect domestic farmers. 

Also, assurances of uniform peace are at odds with a Ministry of Foreign Affairs and Trade warning about travel to the country.

The Safe Travel website says there is extreme risk in northern areas of Sri Lanka because of post-conflict security force activity, and "some risk" in other areas, including the capital Colombo.

Still, the country is deemed safe enough to host the Twenty20 cricket world cup tournament – which will see Sri Lanka and New Zealand clash on Thursday.

Diplomatically, Mr Silva says the short form of the game is too fickle to predict a winner.

Mr Lanerolle says the Kiwis have a post-tournament tour, which will include two tests.

"You'd better write something so we can get some New Zealanders over there for the test matches," he says with a grin.

DATA COMPARISON

SRI LANKA

Population:                  20.6 million (2011)
GDP:                            $US59.5 billion
GDP per capita:           $US2900
Forecast GDP growth: 6.2% (2012)

NEW ZEALAND

Population:                  4.4 million (2011)
GDP:                            $US159 billion 
GDP per capita:           $US35,900
Forecast GDP growth: 2% (2012)

Source: Economist Intelligence Unit

dwilliams@nbr.co.nz