Live Mint | 28 July 2008
Sri Lanka develops cold feet on trade pact with India
The agreement had been due to be signed on 1 August on the sidelines of the South Asian Association for Regional Cooperation
New Delhi: An India-Sri Lanka trade and investment agreement billed as a landmark is being delayed, ostensibly because the island nation’s President, Mahinda Rajapaksa, an avowed Sinhala nationalist, doesn’t want to be seen as authoring such a close partnership with New Delhi, diplomats who spoke on condition of anonymity said.
Sri Lanka foreign minister Rohitha Bogollagama wrote to external affairs minister Pranab Mukherjee a few days ago that Colombo needed to bring on board additional stakeholders before the Comprehensive Economic Partnership Agremeent, or Cepa, is signed.
The agreement had been due to be signed on 1 August on the sidelines of the South Asian Association for Regional Cooperation, or Saarc, summit which Prime Minister Manmohan Singh is to attend in the Sri Lankan capital Colombo.
Cepa’s signing would have been the icing on the cake for the economist-Prime Minister, who is travelling to Saarc after being strengthened by the trust vote in Parliament last week over the India-US civilian nuclear deal. Singh has often stated that the economic integration of South Asia can heal its political problems.
Officials in the ministries of external affairs and commerce, who spoke on condition of anonymity, said the idea that Sri Lanka wanted additional stakeholders to look at Cepa was not acceptable because negotiations between the two governments had been concluded on 9 July in Colombo.
Diplomats pointed out that a breakaway faction of the Marxist-nationalist Janatha Vimukhthi Peramuna (JVP), which is supporting Rajapaksa’s government, had said Sri Lanka should not sign Cepa because it benefits India more than Sri Lanka.
Ranil Wickeramasinghe, leader of the opposition United Nationalist Party who has been pushing for better ties with India, is in favour of Cepa.
The India-Sri Lanka Cepa was to be the first bilateral agreement of its kind in South Asia, and comes almost 10 years after the two signed a free trade agreement. The new pact would give Sri Lanka much greater access to the Indian market, opens up the services sector in both countries and enhances Indian investment in Sri lanka.
From $549 million in 1999 when the free trade agreement was signed, bilateral trade between the two sides today has grown to $3.2 billion. Cepa negotiations took 12 rounds and three years to complete, with India stalling talks for the first year and a half because it did not want to open the domestic market to vanaspati, or hydrogenated vegetable oil, pepper and copper exports from Sri Lanka.
Commerce ministry officials said India had recently agreed that Sri Lanka could export eight million pieces of garments to India.
“The failure to sign the Cepa will have a direct fallout on five million pieces of garments, which will not be able to now be exported. The Sri Lankans had more to gain from India from this agreement, but they’ve cut their nose to spite their face,” one official said.