The Hindu : Business : India, Sri Lanka aim at comprehensive economic cooperation

Online edition of India's National Newspaper
Saturday, Oct 02, 2004

Business

Business

India, Sri Lanka aim at comprehensive economic cooperation

By R. Gopalakrishnan

CHENNAI, OCT. 1. Trade Ministers and officials of India and Sri Lanka today called for taking their economic cooperation well beyond the current Free Trade Agreement (FTA) to the proposed Comprehensive Economic Partnership Agreement (CEPA) while correcting certain negative experiences of the four-year-old FTA.

Participating in the eighth meeting of the India-Sri Lanka Joint Business Council (JBC) here, they emphasised the radical progress that the two countries had made under the FTA, which has taken annual bilateral trade for the first time above the level of $1 billion to touch $1.3 billion (about Rs. 5,400 crores). It has catapulted India to the position of the largest supplier to Sri Lanka. India has also emerged as the third largest foreign investor in the island nation.

As for Sri Lanka, it has been able to reduce its adverse trade balance with India, from 1:15.7 in 1998 to 1:4.5 in 2003.

The proposed CEPA will not only expand the list of goods covered under the FTA, but also promote cooperation in services, investment and trade facilitation (namely, easing of customs procedures).

Negative aspects of FTA

The negatives in the operation of the FTA, pointed out by the Sri Lanka side, including the Minister for Trade, Commerce and Consumer Affairs, Jeyaraj Fernandopulle, and the Chairman of the Sri Lanka-India Joint Business Council, W. Granwille Perera, included lack of diversification of Sri Lanka's export basket except to a limited extent, levy of discriminatory tax on imports by Tamil Nadu in violation of Article 5 of the FTA (national treatment or non-discrimination vis-à-vis domestic goods), procedural difficulties at the ports and conversion of goods under the harmonised system (HS) of classification (which has implications by way certain goods becoming eligible to FTA concessions despite not meeting the minimum value addition norms or Rules of Origin).

Mr. Fernandopulle advised businessmen of both countries to take full advantage of the "cumulative rules of origin" under the FTA, which enabled manufacturers to benefit from the agreement with a mere 25 per cent value addition by sourcing an additional 10 per cent of the value of the final goods from the other country. He expressed dissatisfaction with the level of value addition recorded in Sri Lanka and said both sides should focus on using the FTA for export to third countries.

Trade in services

E. V. K. S. Elangovan, India's Minister of State for Commerce, said, "it is imperative that the letter and spirit of the agreement are strictly adhered to by both sides, particularly with regard to the Rules of Origin". The agreement should not be used for diversion of third country goods.

"A handful of fly-by-night operators cannot be allowed to hold our bilateral FTA to ransom", he said, and called for putting in place a "credible and dependable" surveillance system on both sides. He emphasised the scope for trade in services, such as tourism, shipping, logistics, professional and airline services.

Nirupama Rao, India's High Commissioner to Sri Lanka, indicated that India would relax the approval procedures for investments from Sri Lanka. K. G. Baalakrishnan, Chairman of the India-Sri Lanka JBC, called for liberalisation of the bilateral air services agreement to include destinations such as Jaipur, Khajuraho, Goa, Varanasi and Bhubaneswar.

Mangala Moonesinghe, Sri Lankan High Commissioner to India, said the issues regarding the Rules of Origin and inspection agency certification were gradually being resolved.

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

Business