ISSN: 1391 - 0531
Sunday, May 13, 2007
Vol. 41 - No 50
Financial Times  

Sri Lanka and India soon to open up service markets

By Bandula Sirimanna

Sri Lanka and India are to open up service markets in the current year under the upcoming Comprehensive Economic Partnership Agreement (CEPA). Under this agreement the two countries are expected to liberalize service investments in areas other than those on which the FTA operates. However expressing reservation in some aspects of the proposed agreement, the President of the Federation of Chambers of Commerce and Industry in Sri Lanka Nawaz Rajabdeen said that some of the sectors such as shipping, education, construction and insurance outlined in the CEPA are particularly small in comparison to India. The relaxation of current controls may lead to a creation of problems to existing local businesses in those fields. Indeed, a saturation point has already been reached on account of the market limitations in Sri Lanka, he told The Sunday Times FT.

“We need to study carefully and in depth some of these areas and examine whether liberalizing them would result in further saturation of markets,” Rajabdeen said.

He added that continuing and unabated imbalance of trade between the two countries is heavily in favour of India. Whilst Sri Lanka imports 10% of its total imports from India, India buys only 1.1% of Sri Lanka’s exports to the world. India is the island's third largest export market, with just under two billion dollars in bilateral trade. India is also the island's fourth largest investor, with investments of over US$ 450 million in the island Rajabdeen emphasized the need to focus attention on the identification of markets in India. He said, “though there is ability to export eight million pieces of garments, until recent times, Sri Lanka has not been able to ship more than a few thousand pieces on account of the need to import all fabric from India to manufacture such garments”. The Indian government has recognized Sri Lanka’s ability to manufacture two large passenger vessels and a contract was awarded for US $32 million. This is indeed a significant new development for Sri Lanka and is also a tribute to local engineering skills. Yet in another area there is every possibility of developing cashew plantations. Kerala the home of cashew in India could help Sri Lanka in improving its yields.

Rajabdeen said Sri Balasubramanium, Minister of Tourism in Kerala was keen on a tie up with Sri Lanka and showed keen interest in visiting the cultural triangle and to visit Hindu temples in Sri Lanka which are of great significance to Keralites. The minister had pointed out that the tourist traffic has dropped from 13,000 to 5,300 to Colombo over last two years.

Rajabdeen noted that Sri Lankan Airlines should take more interest in promoting regional tourism rather than bringing cheap labour traffic to India from the Middle East via Colombo and vice versa. This will only have a commercial benefit to the airlines and country will not benefit at all. He said that if the airlines bring “20% passengers from India we will have more than 250,000 visitors.”

 
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