From a mere USD 650 million in 2000, the Indo-Sri Lanka Free Trade Agreement (FTA) is set to take bilateral trade to USD 3 billion next calendar year despite unethical business practices not-conducive to business by the Sri Lankan Government (SLG).
Indian investments in SL has fallen below expectations because of SLG’s continued intransigence to accord level playing fields for businesses when they compete with state owned businesses and allowing political favorites to muscle in on Apollo Hospitals. While the SLG’s Board of Investments ruled in favor of India saying that it would withdraw incentives from the hospital if the investor gains control of the hospital, there is still a bilateral dispute over the level of tariff cuts and the number of products under the FTA. India wants up to 70% cuts on 2700 products covered by the FTA.
Signaling willingness to iron out fundamental differences, the two nations are discussing a Comprehensive Economic Partnership Agreement (CEPA) to open service sectors such as finance, education, tourism, and others. As the second largest investor in SL and largest tourism generator for the island state, India believes that a CEPA will bring in the outstanding 60% of its exported products under a FTA mechanism. Currently, only 40% of products exported by India are covered by the FTA although 90% of SL exports are addressed.
Surpassing all these are the instability brought in by the resurgent civil war between the Buddhist majority and the ethnic Tamil minority in the North and East. India should counsel the right wing SLG to accept peace as the way forward instead of pushing ahead its military operations.
