As Arab countries sever ties with Qatar in an ensuing diplomatic row, trade and investments between Qatar and the rest of the world is in the spotlight with many nations trying to ascertain the impact the political crisis will have on economies.
Director General of the Board of Investments (BOI), Duminda Ariyasinghe speaking to the Nation this week noted that the crisis will not have an immediate impact and any ongoing projects between the two countries will continue to function as normal. “Qatari investments in Sri Lanka will be unhindered by the crisis,” he said.
There are currently two Qatari-based investments in Sri Lanka. This includes a Biomass Power plant, a joint venture where Sri Lanka’s investment totals to Rs. 65 million. This company comes under the Section 17 company of the BOI which states that they enjoy certain benefits.
The other investment is a medical testing facility valued at Rs. 33 million. The foreign owned company comes under the Section 16 of the BOI under which the local laws apply.
According to the Department of Commerce, Sri Lanka’s export to Qatar totalled USD 78 million in 2014. The year-to-year bilateral trade between the two countries stood at USD 66 million in 2013, and surged by 18% to USD 78 million in 2014. Bananas were the main export to Qatar, making up nearly 31% of total exports in the same year. According to the Department of Commerce of Sri Lanka, Qatar is Sri Lanka’s 33rd import partner and 65th export partner.
Where imports are concerend, 67 percent of imports from Qatar in 2013 were plastics, followed by fertiliser’s which accounts for 27 percent and petroleum gases accounts for 4.4 percent.
Meanwhile Anushka Wijesinha, Chief economist who also heads the Economic Intelligence Unit at the Ceylon Chamber of Commerce said that while it was too premature to assess the impact there will however be reprecussions.
“It is too early to provide a specific estimate of what the impact would be. This issue is still playing out, there are so many geo-strategic and diplomatic undercurrents at play. Some of the channels of impact for Sri Lanka will be oil prices, migrant worker remittances, and aviation,” he said.
“The region has many key oil producing countries as well as countries that are hosts for Sri Lankan migrant workers. On oil, The strait of Hormuz which is close to Qatar is a strategic choke point for energy shipments. Qatar is a major LNG supplier as well. Already the regional instability has caused a spike in oil futures. But overall, supplies remain high so it’s unclear where it’ll stabilize.”
Explaining further he said that Qatar accounts for one fourth of all migrant worker departures from Sri Lanka each year. He added: “In terms of remittances, over 20% of our import bill is covered by remittances from the Middle East. We are working on getting country- specific numbers. The impact of these recent events on migrant worker remittances from the region is yet unclear.”
On aviation, the impacts are not yet clear aside from the obvious issues of Qatar Airways and flight changes etc for Sri Lankan passengers. There can be an impact from the trade side due tocargo; Majority of cargo volumes are actually carried on passenger aircraft. “I hope this crisis will not last long, as any instability is not good for trade as well as global business sentiments,” he added.