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Sri Lanka develops cold feet on CEPA

Economic Times (India) | 17 Oct 2008

Sri Lanka develops cold feet on CEPA

NEW DELHI: Even as the Centre grapples with the domestic fallout of the war in Lanka, concerns are growing that an economic pact between India and Sri Lanka has been indefinitely put off.

Officials here said that the Lankan government has developed cold feet on signing the Comprehensive Economic Partnership Agreement due to resistance from its Leftist allies and businesses. At the same time, the Indian establishment believes that the Rajapakse government wants to complete the military offensive against LTTE before tackling any other issue, particularly one that is mired in domestic politics.

The two countries concluded negotiations on CEPA, India’s second such agreement after Singapore, as early as July, but since then there has been no movement on signing the agreement. India has been waiting for the Rajapakse government to get Cabinet approval for CEPA before it approaches its own Cabinet.

New Delhi was eager to sign CEPA on the sidelines of the Saarc summit in August, but Colombo had asked for more time. Two months down the line, there has been no movement on the Lankan side even as sources said that the `political process’ is still on.

A breakaway group of the Janatha Vimukhthi Peramuna (JVP), which is supporting the Rajapakse government, argues that CEPA benefits India more then Sri Lanka and would adversely affect Lankan businesses. Lankan businesses argue that the country cannot implement CEPA due to monitoring and regulatory inadequacies in the system.

The Lankan discomfort with the economic agreement, particularly the opening up of the services sector, is nothing new. Similar sentiments were expressed when New Delhi and Colombo finalised FTA in 1998.

However, the Lankan government is convinced that CEPA will provide benefits to the Lankan economy but is looking for support of all sections of society before signing the agreement with India. The main opposition party UNP has also supported the agreement.

India, which is keen on pushing investments in Sri Lanka, has in its own way been trying to convince Lankan businesses about the benefits of CEPA. A factsheet put out by the Indian high commission in Sri Lanka lists all concessions provided by India.

Under CEPA, Sri Lanka will open 32 new tariff lines, while India has agreed to open 114 items. In the area of services, India will open around 80 sub-sectors, while Sri Lanka will open sectors in a `more gradual approach’ with about 20 sub-sectors.

India will also allow unlimited number of visas to executives, managers and specialists to work in India, but Sri Lanka has not reciprocated and allowed restricted concessions, according to the fact sheet.

India has also expanded on the concessions it had given under FTA of 8 million garment pieces and is willing to extend concessions in the textile sector beyond FTA, the factsheet added. It said that the area of investments, too, the Indian schedule of commitments is much larger and wider than that of Sri Lanka. CEPA, which was finalised on July 9 after 13 rounds of negotiations, is expected to increase India’s economic presence in Sri Lanka especially in the backdrop of the growing Chinese presence in Sri Lanka.

 source: Economic Times