Government will not say ‘yes or no’ to CEPA, says Deputy Minister Harsha
The new Sri Lankan government is pursuing a ‘Social Market Economy’ giving priority to competiveness and social justice in trading and business.
The aim is to make local business and trade more competitive and productive both here and overseas while maintaining social justice to pass its benefitsto everyone and not confining it only to a handful of individuals.
Deputy Minister Harsha de Silva and Samson Group MD. Kulatunga Rajapakse.
Assets and human resources are to be handled carefully and in a justifiable manner in achieving economic targets for the benefit of the country under this new economic policy, Deputy Minister to Prime Minister’s Ministry of Policy Planning and Economic Affairs, Harsha de Silva revealed at a seminar in Colombo this week.
This seminar on ‘Comprehensive Economic Partnership Agreement (CEPA) and its Implications on Sri Lanka’s Economy’ was organised by the National Chamber of Commerce of Sri Lanka (NCCSL).
“We will say ‘no or yes’ to any agreements with India or China. As long as they are asymmetric in that we as a small country benefit significantly we must push for such agreements,” he said.
“However we must not blindly enter into such agreements. We must study in detail our own experiences and that of other similar countries in order to negotiate the best deal for us,” he asserted.
Referring to the GSP Plus concessions, he said the government has been able to negotiate successfully with the Trade Commissioner in Brussels and the political leadership of the European Union European on regaining this facility.
He expressed the belief that the country would be able to regain GSP Plus by the middle of next year.
This will provide exporters the much awaited concessions to re-enter into EU markets, he added.
The policy of the last regime was not conducive for exports. In fact the exports’ to GDP ratio fell from about 35 per cent a decade ago to 15 per cent at present.
This is the complete opposite of what a country that is attempting to become a trade hub should be faced with, he pointed out.
Sri Lanka has all the right ingredients to become a regional trading hub, but wrong policies and misalignment in trade and foreign policies have resulted in this sorry situation at present.
“The government needs to not only reverse the trend but to actively promote exports if we are to move towards our goal. In this background, any bilateral or multilateral trade agreement that benefits Sri Lanka must be pursued”, he added.
Prof. Rohan Samarajiva, Chairman LIRNEasia delivering the key note address noted that one of the controversial issues in CEPA which are being debated in the country during the past several years was the movement of ‘natural persons’.
He pointed out that much of the opposition to CEPA was with regard to the services that are provided through the movement of natural persons, which is covered by Mode 4 (the technical details about the CEPA and Modes via which services occur).
The arrival of Indian medical professionals to Sri Lanka to provide services to patients in the country is an instance of exchange services via Mode 4.
Prof: Samarajiva said that “arrival of service professionals subsequent to relaxed visa procedures would result in a better service being offered to the customers and recipients of the services, and any shortcomings could be resolved if there is more liberalisation in provision of services and enhanced competition”.
The benefits gained by consumers in Sri Lanka after the deregulation and arrival of more competition into the telecommunication industry were highlighted by him to clarify how increased competition benefits consumers.
Speaking on the disputed relaxation of immigration laws to facilitate the movement of persons across India and Sri Lanka, Prof. Samarajiva outlined that Mode 4 rules do not envisage the abolition of these laws but attempt reduction of discretion and increase of certainty in relation to the immigration laws.
According to him it is essential to put in place a visa system ensuring grant of multiple entry visas to professionals and to allow inter-firm mobility to professionals with the objective of developing a highly liberal form of regulating trade-related movement of natural persons in terms of Mode 4.
Sri Lanka signed a Free Trade Agreement (FTA) with India in 1998 that came into operation from January, 2000. This agreement which was signed in a rush has not been able to bring expected benefits to Sri Lankan entrepreneurs even after 15 years of operations, Kulatunga Rajapaksa, Managing Director – Samson Group claimed.
Despite having a FTA, Sri Lankan exports to India have not grown but Sri Lanka’s exports to other countries have grown by 79 per cent over the last 10 years.
In contrast to minimal growth of Sri Lankan exports to India, Indian exports to Sri Lanka have grown by over 280 per cent during the same period.
Even the little exports that Sri Lanka does to India like arecanuts, petroleum products, animal feed ingredients, extruded copper as cables, electrical appliances, lentils and cowpea are mostly brought to Sri Lanka (as raw material) and re-exported by Indian investors in Sri Lanka to their own companies in India, he disclosed.
Sri Lankan exporters should have their own company in India to reap these benefits through the provisions in the FTA, he pointed out. Under this set up Sri Lanka cannot expect to reap benefits by CEPA with India, he added.
CEPA covers the entire economic activities of the country and also many issues related to national security. Therefore, CEPA cannot be taken simply as a trade agreement and must be reviewed extremely carefully by all stakeholders.
If CEPA is signed, any Indian company can come and invest in any commercial industry and start supplying to the local marketed adding that only four sectors are exclusively reserved for Sri Lankans:
These are money lending (banking is open to Indians), pawn brokering, retail trade with a capital of less than US$ 1 million (large retail chains are open to India) and coastal fishing (deep sea fishing is open to Indians).
CEPA is a bilateral agreement that binds Sri Lanka in many ways and cannot be changed without paying penalties to India that may be unaffordable to Sri Lanka, he claimed.
India has 106 times more unemployed people than in Sri Lanka and also speaks over 700 languages across the country. “Hence, how can our professionals find work in India?” Samantha Kumarasinghe, Chairman, Nature’s Beauty Creation Ltd asked the audience.
Sri Lanka should attract significant investments from countries like Switzerland, Brazil or China for the economic development of the country and to continue as an independent country free from Indian domination.
He noted that the need of the hour is not to sign CEPA or similar agreements with India but to explain facts to India and maintain good and fair relations with both India and China.
Signing bilateral agreements is much more dangerous than opening an economy unilaterally, as bilateral agreements cannot be changed without the consent of the other party, especially when the other party is a mighty powerful one with hidden agendas, he added.
Senior Economist Deshan de Mel pointed out thattrade in service liberalisation will not open the floodgates to set up businesses in Sri Lanka.
He noted that greater trade integration with India can generate large gains for the smaller countries in South Asia.
The CEPA can offer benefits for both sides. Sri Lanka can benefit from a larger market that will allow the realisation of economies of scale, the ability to integrate into large value chains as well as access to investment which can bring in technology, markets and know-how, he emphasised.