IMG 0916IMG 0521

India is Sri Lanka’s largest trading partner&largest source of imports. India-Sri Lanka bilateral trade stood at US$ 5 billion in 2015 with Indian exports to Sri Lanka amounting to US$ 4.35 billion and Sri Lankan exports to India amounting to US$ 650 million. India ranks high as a trading partner of Sri Lanka both in terms of imports and exports. In 2015,Indiaaccounts more than 20 per cent of Sri Lankan imports and more than 6 per cent of Sri Lankan exports. These achievements were mainly due to the India-Sri Lanka FTA that has now been in operation for 15 years. The India-Sri Lanka FTA had some spillover benefits for both countries. First, the investment between both countries have increased during the last decade. The Indian cumulative investment in Sri Lanka is close to US$ 1 billion while Sri Lankan cumulative investment in India is close to US$ 300 million.Secondly, the services trade between the two countries has been growing over the last decade. For example, India is the largest tourist supplier to Sri Lanka while Sri Lanka is the fourth largest tourist supplier to India. It is to build on these positive achievements that the Economic and Technology Cooperation Agreement (ETCA) was suggested by both Prime Ministers of India and Sri Lanka when they met in Delhi in September 2015. ETCA is intended to be drawn economic benefits in following aspects. First, it will have a Chapter on an Early Harvest for trade in goods. The current Indo – Sri Lanka FTA on goods has yielded some benefits, particularly as in any given year 65% - 80% of Sri Lanka’s exports enter the Indian market on a preferential basis, while only 20% - 30% of Indian exports enter the Sri Lankan domestic market under the FTA. Despite this, some Sri Lankan exporters have experienced a number of Non-Tariff Barriers (NTBs), which have curtailed their capacity to penetrate the Indian market. The government is, therefore, attaching very high priority to an Early Harvest Program, which addresses these barriers. This Early Harvest is designed to enable Sri Lankan enterprises to benefit from the proposed ETCA early and boost confidence in the negotiating process. Secondly, the ETCA will exclude Mode 4 (Movement of Natural Persons). The government will contemplate opening up any segment of domestic professional services only at the request of the business sector concerned and in full consultation with all relevant stakeholders.

 

 

Thirdly, Sri Lanka has proposed that the ETCA includes new Chapters on the following: • Technology cooperation, which will consider the following: o Scaling up of research based innovative processes and technologies to pilot and commercialize sales. o Encourage research institutions to place greater emphasis on high-tech innovations, technology transfer and commercialization. o Facilitate entrepreneurship and foresight activities among scientists, technologists, researchers and inventors. o Ensure quality standards of institutions, products and services to achieve national and international recognition. • Training o Recognizing the importance of developing a strong human resource base to support the advancement of their economies, the governments of Sri Lanka and India will explore specific modalities for strengthening bilateral cooperation in training activity.

The ETCA will also seek to deepen the current FTA in Goods. The major thrust on this front will be negotiations on reducing India’s negative list. In addition, the ETCA will extend the current FTA to include services and investment. Liberalization of the trade in services will take place in sectors mutually agreed upon while taking account of the considerable asymmetry between the two economies. The Port of Colombo is already India’s number one harbour with 70% of the cargo handled being transshipment to Sri Lanka’s northern neighbor. More than 40% of the revenue of Sri Lankan Airlines comes from flights to India. Similarly as mentioned earlier, India accounts for largest tourist arrivals in Sri Lanka. India is expected to be the fastest growing large economy in the world in the coming years. The ETCA provides an opportunity to explore how Sri Lanka’s shipping, aviation, and tourism interests can be advanced further. In addition, the inclusion of services in the proposed agreement also provides, inter alia, an opportunity to negotiate for an increased share of the rapidly growing Indian middle income class-led services market. The Chapter on Investment will include, but not be limited to the following: a. Establishing an investment protection mechanism. b. Increasing transparency of investment – related regulations. c. Gradually reducing restrictions on mutual investment between the two countries. d. Promoting investment facilitation.

Also included will be a Chapter on Economic Cooperation, which will seek to increase the benefits of the ETCA through strengthening cooperation in the following areas: a. Protection of intellectual property rights. b. Financial matters. c. Trade promotion and facilitation. d. Investment promotion and facilitation. e. Tourism. f. Customs. g. E - commerce. h. Industry. i. Promotion of SMEs and enhancement of their competitiveness.

It must be highlighted that the ETCAwould enable a significant proportion of Sri Lanka’s economic relations with its very large neighbour to be based upon a rules- based framework. This becomes even more pertinent as both countries have accepted that the ETCA should be based on the principles of non – reciprocity and special and differential treatment to take account of the substantial asymmetry between the two countries. It is always in the interests of smaller countries to deal with a much larger neighbor within rules – based framework. The government is fully committed to ensuring that the ETCA is based on rules, which advance Sri Lanka’s National interest.