With pressure mounting from India to quickly finalise the Comprehensive Economic Partnership Agreement (CEPA), frenetic efforts are being made by Sri Lanka to present a new CEPA draft to Indian authorities as soon as possible.
But Director General of Commerce Gomi Senadhira was unable to say to the Business Times as to when exactly the new draft would be finalized.
These developments in the wake of Foreign Minister G.L. Pieris’ recent visit to Sri Lanka’s powerful neighbour, comes amidst continuing opposition to sections of the draft by a group of Sri Lankan entrepreneurs who say Indian industry and services will swamp ‘us’.
The Director-General of Commerce, who is handling and coordinating the entire process from the Sri Lankan side, had planned to finalise the draft last month (April) but it was delayed due to consultative process with relevant public and private sector organizations in order to revise the schedules of commitments, other trade officials said.
Currently working groups on services, investment, economic cooperation and sub group on financial services are drafting respective chapters of CEPA and finalising schedules of specific commitments, they said.
Mr Senadhira said 13 rounds of technical level negotiations between the two countries have been held so far and the text of the proposed CEPA has been in discussion in all these rounds with some of the chapters are almost finalized, he added. He declined to comment on any of the issues which had been brought to the notice of the authorities by Sri Lankan entrepreneurs and stakeholders as well as the disputed areas in CEPA.
Difficulties associated with implementation of the Indo-Lanka Free Trade Agreement, the negative list there and apprehensions in Sri Lanka about opening the services sector are the three major challenges that need to be addressed before the CEPA can come into force, local industry officials said.
An Inter-Agency-Committee (IAC) has been established by the cabinet to look into the matters pertaining to the preparation of a revised draft text. The task of the IAC is to re-do the proposed CEPA text with consultation of the relevant private and public organizations.
At a recent meeting with relevant public and private sector organizations,Mr Senadhira has said that, out of the 11 Chapters in the CEPA text, Trade in Services (Chapter 3), Movement of Natural Persons (Chapter 4), Investment (Chapter 5) are of great concern to Sri Lankan side, industry officials said.
He has said the IAC is working on these chapters in order to address the concerns of the Sri Lankan stakeholders, adding that the IAC has decided to revise the Chapter on Trade in Services on the basis of SAARC Agreement on Trade in Services (SATIS) and the final chapter would be identical to SATIS to a greater extent.
While the Chamber of Small and Medium Industries tabled a letter expressing their concerns and highlighting dangers in some of the sections, participants also explained how independent professionals could come from India and start small businesses and bring all their dependants to Sri Lanka under employment visas.
They brought to the notice of the Director-General that most multinational companies in Sri Lanka are managed by Indians and they will definitely provide jobs to Indians who come under chapter 4 of CEPA. One of the participants told the Business Times that the Director-General did not respond to many issues, instead mentioned that these will be corrected by the relative ministries in due time.
Several senior government officials involved in the CEPA negotiations, expressing their views, noted that a major complaint heard from Sri Lankan businessmen was that problems in bilateral trade between India and Sri Lanka are not resolved in a timely manner that amounts to an effective denial of business opportunity.
They said CEPA addresses these concerns through multiple measures and in a forthright manner through biannual meetings at the level of Commerce Secretaries and annual meetings at the level of Commerce Ministers.
These government officials pointed out that under CEPA, the incremental opening of new items by Sri Lanka for Indian exporters is proposed at only 32 items (and none of these is an agricultural item as some of these critics allege). Sri Lanka meanwhile has increased its negative lists through some internal adjustments under the Indo- Sri Lanka Free Trade Agreement (ISLFTA) to 1220 items. Therefore, even if it were to cut 32 items from its negative list under CEPA, its eventual negative list at 1198 items would still be larger than it was under the ISLFTA at 1180, these officials said.
Clearly, therefore, there is no new opening being committed under CEPA in the goods sector beyond the level of the ISLFTA.Thus, openings under CEPA do not create any greater risk of ‘invasion’ of Indian goods into the Sri Lankan markets. If anything Sri Lanka benefits from the reduction of Indian negative list under CEPA to 82 out of a total of 5112 items. The argument of ‘invasion’ of Indian goods following CEPA does not stand scrutiny, they added.
Expressing dissatisfaction at the ongoing CEPA negotiations, CEPA Forum, a pressure group formed by seven leading Sri Lankan entrepreneurs has made a written request from the Ministry of Industry and Commerce Secretary Tilak Collure to remove Mr . Senadhira from these discussions alleging that he has ignored concerns of local businessmen, a member of the forum, Multichemi Group /Natures Secret Managing Director Samantha Kumarasinghe, told the Business Times.
He noted that they presented all of their views and suggestions at the first consultative meeting with business chambers and the IAC. He alleged that the Commerce Department head has failed to accommodate the views of the Sri Lankan businessmen, and he is not suitable to head the negotiations with India because of his irresponsible decision-making and adamant attitude, adding that another senior official should be appointed to continue negotiations with India and to finalise the agreement as Mr. Senadhira is due to retire in November this year.
Mr Kumarasinghe, said that under UN pressure pressing for a war crimes probe on Sri Lanka, India is exerting pressure on the Sri Lankan government to immediately finalise and sign CEPA in order to provide India’s support to fight the UN demand. He noted that if the country’s service sector is opened to Indians under CEPA, Sri Lanka would be flooded by Indian labour in all sectors of work due to India’s heavy unemployment numbering some 56 million compared to Sri Lanka’s 470,000.
Expressing an independent observation on the CEPA, Dr. Indrajit Coomaraswamy, a former Director, Economic Affairs Division at the Commonwealth Secretariat, and who has served in the Central Bank and Finance Ministry, told the Business Times that the debate on the merits of the CEPA, as a means of taking advantage of ‘our’ proximity to India, seems to divide the protagonists on the basis of whether India is seen as an “opportunity” or a “threat”. Some of the antipathy to the Indo – Lanka CEPA is based on primordial fears and insecurities which are not evidence based or rational. However, there is also more considered opposition based on the following argumentation which requires careful examination:
- That the asymmetry of the two economies means that the CEPA would inevitably be detrimental to Sri Lanka’s interests resulting in a loss of output (growth) and employment
- That the ISLFTA has been a failure with more costs than benefits for Sri Lanka.
- That the CEPA would inevitably lead to greater Indian intrusion into the domestic affairs of Sri Lanka leading to an erosion of sovereignty.
He said that the CEPA can offer significant benefits for both sides. Sri Lanka can benefit from a larger market that will allow the realization of economies of scale, the ability to integrate into large value chains as well as access to investment. India, for its part, can demonstrate the value of a productive partnership with a neighbour which, if emulated, has the potential to stimulate growth and reduce political friction.
The CEPA would refine the existing disciplinary framework for the trade in goods by addressing major issues that have hitherto constrained benefits from the ISLFTA. These include conformity assessment procedures and product standards. It will also introduce rules-based regimes for trade in services and investment as well as strengthen the dispute – resolution process, he added.
Sri Lanka’s failure to take advantage of Japan’s major capital exporting programme in the 1980’s has resulted in a massive loss in terms of investment, growth and employment. Failure to grasp the opportunities generated by the rise of India will be another major blow to the development prospects of the country. “The ASEAN countries are about to gain an advantage over us. There is little time to be lost,”Dr. Coomaraswamy argued. |
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