Indo-Sri Lanka Free Trade Agreement favourable to Lanka and exports to India increased in many folds
Asian Tribune, 2005-07-15
Indo-Sri Lanka Free Trade Agreement favourable to Lanka and exports to India increased in many folds
By Q Perera - Our Business Correspondent
”Respective governments, India and Sri Lanka have agreed to extend the Indo Lanka Free Trade Agreement to a Comprehensive Economic Partnership Agreement (CEPA) with the scope of furthering the 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,” said Dr H N Thenuwara, Director Economic Research, Central bank speaking on Trade in Financial Services with India at the Seminar on "CEPA with India Opportunities for Trade and Investment" held last week at the Ceylon Chamber of Commerce Auditorium.
Dr Thenuwara, pointed out that there is 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. Foreign banks can transfer their capabilities of monitoring credit risk or managing balance sheets. He said that similarly, a country may benefit from the experience of foreign insurers on how to assess insurance risk or how to tap larger wholesale markets for insurance, possibly leading to lower premiums for consumers.
Director Economic Research, Central bank 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.
He said that commitments have to be made with respect to all four modes of supplying services. As per existing exchange control regulations, residents of Sri Lanka are not permitted to freely purchase the financial services using the first two modes of cross border supply and consumption abroad.
Dr. 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.
Consequent to the signing of the Free Trade Agreement between Sri Lanka and India, Sri Lankan exports to India increased in many folds said K J Weerasinghe, Director General of Commerce, Department of Commerce, speaking on Trade in Goods Phase ll.
The purpose of CEPA is to widen and deepen the FTA and he said that the agreement has covered goods and investment but services aspect could be dealt with further. They needed inputs 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.
K. J. Weerasinghe, said that US (United States) comes first in trade relations with Sri Lanka followed by EC (European Commission) and then comes 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 by 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.
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.
In the Indo-Sri Lanka FTA additional areas could be tourism, engineering, 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 lots of problems in many areas which have to be sorted out.
The programme was sponsored by the Ceylon Chamber of Commerce and its Chairman, Deva Rodrigo made the opening remarks.
Dr Nihal Samarappuli, Executive Director (Research) Board of Investment spoke on Enhancing Investment Opportunities with India and Sanjay Sudhir, First Secretary, Indian High Commission spoke on CEPA Indian Perspective.
