The Hindu : Measures to boost bilateral cooperation

Online edition of India's National Newspaper
Thursday, Oct 30, 2003

Business

Business

Measures to boost bilateral cooperation

By V. S. Sambandan

COLOMBO OCT. 29. The Indo-Sri Lankan Joint Study Group to explore the possibility of a Comprehensive Economic Partnership Agreement (CEPA) between the two countries has recommended a range of measures, spanning trade, services and foreign direct investment (FDI), to substantially boost bilateral economic co-operation.

The Joint Study Group, which submitted its report to the two Prime Ministers, Atal Bihari Vajpayee and Ranil Wickremesinghe, when they met in New Delhi earlier this month, suggested creating a new line of credit of $100 million for infrastructure after the current line of credit is replenished.

The group, which wants the CEPA to be built upon the existing Free Trade Agreement, and notified to the WTO, also proposed establishing a $100 million Economic Co-operation Fund. For trade in goods, the group has mooted reduction in the size of the negative list and encouragement to Sri Lankan tea and garment exporters.

At least in two areas its recommendations — on rules of origin and national treatment — are likely to become sensitive subjects when further negotiations on the CEPA take place.

On the Rules of Origin (RoO) the group, co-chaired by Rakesh Mohan, Deputy Governor of the Reserve Bank of India, and leading Sri Lankan entrepreneur, Ken Balendra, has recommended "`additional flexibility'' by considering "abolition of the requirement of the requirement for HS conversion where domestic value addition exceeds 40 per cent of the FOB of the finished product'' and "dispensing with the conversion requirement where CIF value of non-domestic input is less than seven per cent of the finished product.'' In addition, to "encourage'' Sri Lankan and Indian exporters "to source inputs from each other'' the group has suggested "considering imported inputs from other countries as domestic inputs.''

It may be recalled that RoO and the Negative List for trade in goods were issues that engaged considerable attention before the Free Trade Agreement, signed in 1998, became operational. Moreover, the working of the FTA has also had difficulties in the RoO, particularly with respect to copper. Indian High Commission officials here feel that "irrespective of the high profile nature of the group the recommendations on RoO are premature and unrealistic.''

In addition to the RoO suggestion, the recommendation that "pre-establishment national treatment'' be accorded to sectors where 100 per cent FDI is permitted on the automatic route in both countries, is also likely to touch a raw nerve as these two issues address the core of cross-border economic activities.

Trade in services

For trade in services, the group wants the two countries to enter into negotiations "that cover all service sectors and modes of supply under the GATS framework.'' It has called for binding market operations in telecommunications, computer and related services and e-commerce.

One area in which New Delhi's response was an immediate acceptance was in liberalisation of bilateral air services. With Indian private operators expressing interest, Colombo's response would now determine the pace at which this issue moves. In addition to air services, the group has suggested liberalising visa regimes "to include more categories for visitors for long-term, multi-entry and simplify procedures for other visas.''

Printer friendly page
Send this article to Friends by E-Mail

Business