Lanka includes services in FTA with Pakistan, but not in pacts with India

Sri Lanka has agreed to the inclusion of “services” in its Free Trade Agreement (FTA) with Pakistan, while opposing the inclusion of this sector in the Comprehensive Economic Partnership Agreement (CEPA) and the Economic and Technical Cooperation Agreement (ETCA) with India.

Pakistani Prime Minister Nawaz Sharif said here on Tuesday that Pakistan and Lanka have agreed to the inclusion of Services and Investments in their bilateral FTA.

Lankans fear that Indian professionals, including “barbers”, will flood Lanka in case services are included in bilateral economic agreements. But apparently, there is no fear of Pakistanis flooding the Lankan services market.

The reason for this is that while India’s economic presence in Lanka is widespread and heavy, the Pakistani presence is negligible. The India-Lanka bilateral trade amounts to US$ 4.6 billion with Lanka being a much smaller partner accounting for US$ 720 million. In the case of Pakistan, the total bilateral trade is itself only US$ 354 million with Pakistani exports accounting for US$ 280 million. While India has US$ 2 billion worth of investments in Lanka, Pakistan has virtually none.

The existence of an FTA with Pakistan since 2005 has only had a very limited impact. Lanka is not able to export much because its main items of export – tea, rubber, apparel and textiles – are in Pakistan’s negative list. Lanka also does not exploit the available market and quotas. Lanka exports only 36 items in a list of 156 items listed in the FTA.

While Pakistan has shown some interest in promoting trade and investment, Lankans have not responded enthusiastically. Pakistani interest in investing in sugar and cement industries has been evident since President Asif Zardari’s visit to Lanka in December 2010. But no investment came. Sharif has reiterated this interest during his current visit. Zardari had suggested barter trade and offered US$ 200 million buyers’ credit to Lankan businessmen, but to no effect.

Dr.Saman Kalegama of the Institute of Policy Studies attributes this to a lack of interaction between the businessmen of the two countries and absence of people to people contact. While Indians are the single largest group of visitors to Lanka  year after year, few Pakistanis visit Lanka and vice versa. (The New Indian Express)