Financial Times

Lankan exports to India have risen sharply
Sri Lankan exports to India have increased many times after the signing of the Free Trade Agreement between Sri Lanka and India, according to K. J. Weerasinghe, Director General of Commerce, Department of Commerce.

Speaking at a seminar on "CEPA (Comprehensive Economic Partnership Agreement) with India Opportunities for Trade and Investment" held recently in Colombo, he said the purpose of CEPA is to widen and deepen the FTA.
The agreement has covered goods and investment but the services aspect could be dealt with further. He said input was required from the business community to make representations to the Indian side to request to remove the items from the negative list that are disadvantageous to Sri Lanka.
He said that the US comes first in trade relations with Sri Lanka followed by EC (European Commission) and then India. A joint study was undertaken during the earlier government by two prime ministers of India and Sri Lanka which made some valuable recommendations but due to the government change the policy was not clear. He said that the study could be useful as a reference document.

Dr Saman Kelegama, Executive Director, Institute of Policy Studies speaking on 'Trade in Goods Phase II' said that the negotiations were restarted and CEPA would go into operation in January 2006.

In most countries 60 percent average is services and even in Sri Lanka it is 55 percent and looking at the global trade in goods and services, the percentage of services is 25 and the service trade is very important. Within the World Trade Organization (WTO) framework to cover the trading and services in the world it was decided that there should be specific means to identify the transfer of goods and services in the cross border supply. Persons going abroad for education covers 50 percent of global services, patients going to another country for treatment constitutes 20 percent and 5 percent move on less significant purposes.

WTO has defined how to conduct these trading services and it said that if the services took place between countries or among countries there are rules and regulations and limitations to market access for a country to make profits. Basically GATTS (General Agreement on Tariffs and Trades) is flexible and voluntary and the respective countries would decide. GATTS came into operation in 1995 but it was launched in 2000.

He said some countries are reluctant because they fear they would lose national sovereignty, like if foreign education is opened up. Then, only certain segments of the community would have that education and there would be the fear of the country losing national sovereignty. Due to these reasons the developed countries are very reluctant to open up, he said.

In the Indo-Sri Lanka FTA additional areas could be tourism, engineering and knowledge based services. With regard to the conditions between the two countries there are some problems like licensing. Both Sri Lanka and India unilaterally have liberalized and there are lot of problems in many areas which have to be sorted out.

Dr H N Thenuwara, Director Economic Research, Central Bank said that the agreed scope on CEPA between the two countries were based on furthering free and preferential trade in goods by incorporating economic cooperation in areas of preferential trade in services and enhancing cooperation in investment and to take up specific issues.

There is further potential for further liberalization of financial services and to facilitate the discussions under CEPA several working groups were set up on goods, services, investments and MRAs.

He said that the international trade in financial services could play an important role in promoting efficient financial markets leading to expansion of credit, lower costs of borrowing and better risk sharing. In 1999, Sri Lanka made a series of commitments on several sectors of services including financial services. He said that unlike a product which is supplied using the only mode of cross border, a service can be supplied in four different modes, like Cross Border Supply, consumption Abroad, Commercial Presence and Presence of Natural Persons.

Thenuwara said that trade in financial services falls broadly within the definition of capital account transactions, which are restricted to a certain degree in India and Sri Lanka. They were unilaterally liberalized and have notified the WTO. Liberalization involves relaxing restrictions placed on Sri Lankans by Sri Lankan authorities and request Indian authorities to relax restrictions placed on market access in India.

Back to Business