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A petition against CEPA is handed over to the President
The prominent economist and the Vice President of the Sri Lanka Economic Association R.M.B. Senanayake says if Sri Lanka does not sign the CEPA agreement with India, it will definitely be a lost opportunity for the country.
He says despite the protest by the local business community, Sri Lanka should go ahead with this agreement which according to Senanayake will bring in enormous economic benefits to the country.
Speaking exclusively to www.news360.lk Senanayake perhaps the first Sri Lankan economist to come forward strongly supporting the proposed “CEPA” agreement, also cautioned that if India enters into FTA’s with the Asean and SL does not sign the CEPA agreement, the country will permanently miss the boat.
Senanayake who is also a member of the “Monetary policy consultative committee” of the Central Bank and the General Manager of SKM Lanka, a Stock brokering firm points out that the fear exposed by the local business community over the CEPA agreement is “unfounded”.
He doubted whether any of the protesting businessmen have read the agreement.
Senanayake also said competition from Indian service sector is good for the local consumers who otherwise is being exploited by some of the local service providers such as architects, lawyers, engineers and accountants
He notes that by entering into a CEPA agreement, Sri Lanka can gain faster economic growth by accessing India which he says is having much higher growth.
The prominent economist points out that “this is important as our traditional markets in the West are going through a recession from which they have still not emerged fully.”
Following is the full interview we had with Economist R.M.B Senanayake
Q: Currently a huge protest is being launched by the Sri Lankan business community, demanding the government of SL, not to go ahead with the “CEPA” agreement, what is your view in this regard?
A: I think it is a big mistake to let go of this opportunity to gain access to the large Indian market which is several times larger than our own. We are too small a market to provide for economies of scale without which we cannot compete in industrial products. Economic theory points out the advantages of Free trade in goods & services, free capital movements which all go to increase both the GDP as well as the economic growth rate. Economic growth alleviates poverty, enables industrialization and improves every ones living standards. Our present economic growth is lop- sided. Our GDP is 60% from Services. This is excessively unbalanced. We can redress the economic imbalance in our present structure of GDP. We can also get faster economic growth by accessing India which is having much higher growth. Our traditional markets in the West are going through a recession from which they have still not emerged fully. Our present growth is based on government spending which will have to be curtailed to bring the budget deficit down to acceptable limits to the IMF.
Q: It is the “Trade in services” issue in the agreement which the local business community is protesting; do you see it as a rational protest?
A: Trade in Services is free from competition at present because there is no liberalization of Services. So our architects, lawyers, engineers, accountants are able to exploit the local consumer freely. But where lies the interest of the consumers? Don’t they like a competitive service sector which will benefit them? All protection helps those who want to exploit the public. Fifty years of budget deficits funded by money printing has permanently raised our domestic price level above that of India and the rest of the world. But with regular devaluations and depreciations we have managed to correct for it and still export goods. The same applies to services. The suppliers of services have to become competitive. Any case there is only limited liberalization of Services. There are the different modes such as free entry for service suppliers from abroad through movement of personnel. Openings on various modes of supply, including Mode 4 that pertains to movement of natural persons is much more limited in Sri Lanka’s schedule of commitments than India’s. According to the Indian website “India will allow unlimited number of visas to executives, managers and specialists to work in India. Sri Lanka has not reciprocated and allowed restricted concessions in this regard. Only in two sectors, Computer and related services and maritime services, where Sri Lanka has shortages, Indians will be able to work in Sri Lanka and this concession too is linked to investments by India and limited to a small percentage of jobs involving high-level of skills. The fear of influx of Indian professionals into Sri Lanka as a result of CEPA, therefore, is unfounded.
Q: If you say, it will not, then why is the local business community protesting against the “CEPA” agreement?
A: Why is the local business community protesting you ask? You should ask the question from them. How many of them have read the CEPA I don’t know because the Sri Lanka government has not to my knowledge disclosed the terms of the CEPA. I think the Government should do so immediately.
Q: Don’t you see any disadvantage SL will face by entering into CEPA? In the past there have been complains about difficulties faced by the local exporters when exporting to India even under the FTA?
A: Yes there are problems because the state Governments create obstacles. But these are matters for negotiation since the Indian central government is the party we deal with.
To quote from the Indian High Commission website again “In the goods sector, India would reduce its negative lists by another 114 items while Sri Lanka would be reducing only 32 items. This is despite the fact that under FTA Sri Lanka was allowed to have a larger negative list (1180 tariff lines) than India (429 tariff lines).
India has also offered additional concessions on garment quota of 8 million pieces that was granted under the FTA. Besides the 3 million pieces granted at zero duty earlier, India has agreed to allow another 3 million pieces more at zero duty and remaining 2 million at 75% margin of preference. Port entry restrictions and conditions of sourcing fabrics from India have also been removed
Q: Media reported that Ceylon Biscuits had a bad experience when they tried to do business in India?
A: I don’t know about the Ceylon Biscuits case. But investments were not liberalized under previous Agreements and if someone wants to invest in India they have to follow the laid down procedures. Do you think any foreigner can buy a company here freely? They can’t even buy land. The CEPA allows for investments to be liberalized and Ceylon Biscuits should take up the issue under CEPA
Q: Do you think we have gained enough advantage via the FTA
A: About the FTA yes we have gained enormously judging by the increased volume of exports. But of course there are problems and these should be taken up and negotiated. The problem is that those in the public service who negotiate are ignorant of the practical problems and they should co-opt those from the private sector who are involved in the trade not some officials of the Chambers who are remote from actual trade relationships.
Q: If we don’t sign the CEPA agreement will it be a “lost opportunity”
A: Definitely it will be a lost opportunity. Remember that India is protectionist and will not relax without obtaining benefits and relaxations in return. In Sri Lanka’s they have been willing to be asymmetric not insisting balancing of concessions. So when India enters FTAs with ASEAN we would have missed the boat permanently for then there is no chance at all of our export of goods or services. I am surprised at India’s magnanimity perhaps due to desire to cultivate us politically and woo us away from China. But we should not look gift horse in the mouth
Q: How do you see both India and Sri Lanka should work together to build better trade relationship which is mutual for both parties?
A: Definitely for there is no more scope for a small country to go it alone in the world of globalization. We should integrate more closely and benefit from the larger regional economy just as ASEAN and the EU did.
By: Prasanna C.
Contact the Reporter: news360@sltnet.lk
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Mr. Senanayake,
What u are saying and trying to explain are perfectly right. The pertinent question is – why those documents have made available for the exporters – so they can mutually iron out their issues. Playing ‘hide & seek’ has created this suspicion among the locals.
We all know how Indians (some) do businesses. I personally think “suspicion and fear” among the exporters is acceptable and the officials should talk to them to ensure fair play.
All previous trade agreements were formulated and implemented during the period when Sri Lanka was going through a really bad patch in history. Then we were not in a position to bargain better terms. Now we are going through a period of unprecedented confidence in our country and opportunity for development. We are going to attract more investments and growth in industry and particularly high yield from the service sector. Therefore all trade agreements including CEPA should be reviewed in the light of the regenerated business environment. The past experiences of the business community and particularly that of several leading players are not very encouraging with regard to FTA. Though trade volumes appears to grow, Sri Lanka is in a relatively significantly less advantageous position. Therefore it is reasonable to expect a fresh look at CEPA by going beyond desk bound research. Quite appropriate at this stage to give the task to weather-beaten business leaders who criss-cross the shore lines on business and have acquired the real sense of where the bottle necks arise. Chandra Embuldeniya (Vice Chancellor and Past President National Chamber of Commerce of Sri Lanka)
One of the main reason is JVP & UNP are very much behind this lobby group. As usual majority of people are unaware about the agreement but politician who love to get publicity even it will harm to business sector. It is high time people should research before they go protesting on the road. JVP IS VERY GOOD AT THIS AS WELL AS UNP TOO. Therefore, the government should dicuss this matter with the business sector rather than with JVP MEMEBRS AFTER ALL THEY DON’T GIVE DAME OF SRI LANKA.
If Sri Lanka implements CEPA as is, the island will lose short term but will gain in the long run. I can give you an example, European member state, France used to have regulated with the protectionism yet mixed trade policies during the Pre – European Era. But with the formation of Europe, France has lost its quality of living as it has become a greener pasture to those who are earning much less than French from former Eastern European countries, and invaded the French labor market. In the other hand, countries like Switzerland, Norway, and Sweden at some extent do not wish to be a member of the EU as well as European Monetary Union ( EMU ) because of this disparity. We, in Sri Lanka, maintained an appropriate quality within the overall labor market. You just imagine if you open the door to the Indian labor and trade mass .. No need to have a phobia but we have got to carve a W I N – W I N agreement with India. Thus, we should review CEPA meticulously before implementing ..
Thanks for a great post, I never thought of it like that before.
I have to say, you picked your words well. The thoughts you wrote on your encounters are well placed. This is a superb blog!
You can definitely see your enthusiasm in the work you write. The world hopes for more passionate writers like you who aren¡¯t afraid to say how they believe. Always go after your heart.
Great post!
Fantastic read, I just passed this onto a colleague who was doing a little homework on that. And he in fact bought me lunch because I found it for him…. smile.. So let me rephrase that: Thanks for lunch!But yeah Thank you for taking the time to discuss this, I feel strongly about it and like learning more on this topic. If possible, as you gain expertise, would you mind updating your blog with more information? It is extremely helpful for me.
Thanks for bringing up the debate, since it is only through a meaningful objective debate, we can identify the pros and cons.
While everybody agrees that india is a BIG market, to me that does not mean ours is a very small one which cannot sustain itself. Afterall ours is a 22million live and kicking population which is slightly larger than that of AUSTRALIA. Australia is a well developed country and during its development phases nobody pointed out it to be a small market. This fact needs to be taken into account as i have heard some people say, “Ohh..ours is a very small market and therefore we can’t do large scale industrial productions and sustain it in the long term”. This is a fundamental error in our mindset. I can argue on this matter. Let’s move to some other points.
Since the end of the War (which undoubtedly india used as a tool to keep SL in check), india is anxious that SL may align with an other power than itself. This is a fact (there are quite a few examples to prove this). Having understood this, my point is that we should not agitate india by aligning ourselve to others and at the SAME TIME should not over-align ourselve to india as well, which would make us dependent and thus vulnerable (as happened during the war-era where we could not initiate and finish any war operation without the blessing of india – we often saw how a High-Level panel often flew to india to keep them in loop). While india would make every effort to take us to their side (in other words, ‘make us dependent’), we should be able to determine that fine line of “Sufficient-Alignment” in the interest of SL (No-one in SL wants to see SL becoming another state of india).
SL government should without further delay make the full CEPA proposal available to the public for their viewing and support a meaningful debate within the society. This is not to say to make every person of 22million people happy, but to formulate a better-deal keeping SL interests in the core. Let the intellectuals, the learned, the academics argue and put forward their insights, so that we would be better informed and positioned to decide what’s best for us.
I’m sure india is acting fast and is lobbying for the quick implementation of the CEPA agreement, as we speak.
Its obvious. Which Indian company will worry over a tine market on its doorstep that charges a high entrance fee in the form of gifts to you know who…
It is Sri Lankan businesses that stand to gain by entering the massive Indian markets.
It is very strange that so few Sri Lankan business people seem to see this.
If we want economic growth the best bet is the Indian market. Anyone ready to try? There,s all the help you need. Just ten million smackers for the old boy next door will do the trick if you are in the know…
Thats their chinthana you see…
As for the Ceylon Biscuits case all that is required is that their chairman wash his brains – if he has any – stop shooting off his mouth with all his prejudices, and stick to business and all will be smooth. India does not need Sri Lankan businessmen with their penny capital trying to dictate her foreign policy…
I am extremely disturbed at the brash statement made by Senanayake that the Indian service sector is good for local consumers who are being exploited by Local service providers.
Sri Lanka has over the years developed a quality of architecture that is acknowledged as the finest in Asia, An architecture that is vigorously copied and emulated by the whole of Monsoon Asia, including the more enlightened architects in India, who are known to visit this island to pay homage to it.
The over all quality of modern architecture in India is poor and delusion with the Indian product will lead to a drastic downward turn that is seen in countries as far away as Oman where Indian Architects entering the housing market have introduced bastardized styles that have no relation or consideration for the Culture or the Climate, but popular at the lower end of the market because it portrays the poor taste of the worst of Bollywood.
The Architecture of Sri Lanka from the Anuradhapura, to the Puranagama-s and even to that of today is highly sophisticated and unfortunately not readily understood by some Economists including Senanayake.
The choice for Sri Lanka is, do we continue with a chain of evolution, a tradition that is 2500 years or abdicate it to the worst of Bollywood? The CEPA if appropriate and after careful study, check what happened in Nepal, should stay with business and keep the Indian Professionals out.
Is GDP the only development index available to man?
Ashley de Vos, Chartered Architect.