Can change in guard help boost Sri Lanka’s trade with India?

The change in the leadership of Sri Lanka and the openness shown by PM Modi, trade and friendly relations can be given a big boost. Sri Lanka gives a great opportunity and scope for Indian companies to offer their products and services, particularly in northern part of the country

 

It may be recalled that when the then Sri Lankan President Mahinda Rajapaksa called for an election, two years before they were due, and hoped to win a record third term, he did not foresee the possibility that he may lose. That precisely happened and he had to concede defeat.
 
The new President, Maithripala Sirisena was sworn in a peaceful transfer of power, though, today's press reports indicate that a military coup may have been planned! Details of such a coup are likely to be made public after an investigation.
 
One of the first acts of President Sirisena, in response to the congratulatory messages received from all over the world, including US President Barack Obama and Indian Prime Minister Narendra Modi, was to reaffirm, in a press meet, that  his Government "recognized the importance of having India on its side".  Earlier, it may be recalled, that erstwhile President Rajapaksa had stated that India is a "relative" while China is a "friend"; and yet, there were clear indications of his tilt towards China!  
 
President Sirisena's first overseas trip is planned for next month, according to the press, and he is expected to visit India to meet Prime Minister Modi, and looking forward to giving top priority in having close relations with India.  This augurs well for a start and both the nations can benefit by mutual trust and cooperation.
 
The Free Trade Agreement (FTA) between India and Sri Lanka has been in operation for a little over 12 years now and focus to reach $16 billion by 2016, which is the target agreed in 2013. The bilateral trade improved from $536 million in 2012 to $748.2 million in 2013.
 
India became the largest product supplier to Sri Lanka, followed closely by China. It is of interest to note that an independent study team led by Prof Binay Kumar Pattnaik, Director, Institute of Social and Economic Change (ISEC), based in Bengaluru, with his 7-member team visited Sri Lanka recently. Their main focus, promoted by the Asian Foundation, hopes to map the Non-Tariff-Barriers in the history Indo-Lanka Free Trade Agreement. The then Sri Lankan Commerce Minister Baithudeen welcomed the team and is reported to have said that after the FTA was signed, trade between the two countries has increased, as stated above.
 
ISEC are an independent, semi-government and Asia Foundation promoted team and they would be working on specific issues, rather than talking of broad trade policy issues. First they hope to focus on non-tariff-barriers so that these could be listed, rectified and a workable solution devised. The first round study is expected to be published in early 2015, after which they shall select a few focal areas to study in depth, in the second round.
 
Indian cumulative investment in Sri Lanka is above $1 billion and Indian companies have committed $ 2 billion of investment in Sri Lanka over the next five years. Bulk of the investments are in service sectors such as telecoms (Bharti Airtel), energy (Indian Oil Corp),  banking (ICICI) and tourism (Taj hotels), amounting to  60% of the Indian investments.
 
As against this, India is the main destinations for Sri Lankan foreign investment of companies like Carson Cumberbath, Brandix ($1 billion in "apparel city", Vizag), MAS holdings, John Keels, Hayleys, Aitken Spence, Damro Dankotuwa Porcelain, Ceylon Biscuits and Atlas Stationery are some who have already invested in India. Joint ventures, with a buy-back arrangement of Ceat with Kilani tyres, which export tires produced in Sri Lanka and are exported to India!  Thus there are opportunities galore for both. In fact, the geographic and cultural proximity is so close that given the opportunity, relations should actually flourish.
 
In a recent paper submitted by S Kalegama on Indo-Sri Lanka Free Trade Agreement and the proposed Comprehensive Economic Partnership Agreement (see ADBI working paper 458, Asian Development Bank Institute, Tokyo), the author has correctly and forcefully stated that:"Sri Lanka should view India as an opportunity and not a threat, and strive towards a more meaningful cooperation in facilitating sustainable development."
 
It is hoped that with the change in the leadership of Sri Lanka and the openness shown by PM Modi, trade and friendly relations can be given a big boost. Sri Lanka gives a great opportunity and scope for Indian companies to offer their products and services, particularly in northern Sri Lanka, which is now recovering from war-like conditions of the past.
 
(AK Ramdas has worked with the Engineering Export Promotion Council of the ministry of commerce. He was also associated with various committees of the Council. His international career took him to places like Beirut, Kuwait and Dubai at a time when these were small trading outposts; and later to the US.)
 
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