Online edition of Daily News

The scope of the Pakistan-Sri Lanka Free Trade Agreement should be broadened and deepened to move towards a Comprehensive Economic Partnership Agreement (CEPA), President Chandrika Bandaranaike Kumaratunga said on Wednesday. "We have taken a number of positive steps in that direction and our vision for a CEPA will become a reality in the not-so-distant future," President Kumaratunga said.

President Chandrika Bandaranaike Kumaratunga with Pakistan (left) and Sri Lankan (right)Business Communities at Business Forum at Marriott Hotel, Islamabad on Wednesday.

Addressing Sri Lankan and Pakistani business communities at a Business Forum at the Marriott Hotel in Islamabad, the President said Pakistan and Sri Lanka could now take their economic relations to a higher plane, opening new trade and investment opportunities for the business communities of both countries.

She said the FTA is the first important step that the two countries have taken to facilitate the expansion of trade between the two countries. "This contains many positive features which will create a win-win situation for Pakistan and Sri Lanka," the President said.

The President observed that the negotiators have done well to keep the respective negative lists to minimum level. They have also agreed to grant tariff rate quotas and higher margins of tariff preferences to each other on a number of products that are on the negative lists but are of vital export interest.

"The elimination of tariff alone will not lead to the expansion of trade, unless we apply flexible rules of origin to the products. Both countries have agreed to a 35% domestic value addition which will provide flexibility for Lanka-Pakistan entrepreneurs to source their inputs from third countries and export manufactured products to each other," she said.

She expressed hope that the FTA would lead to enhanced trade-led investment between the two nations.

The FTA will create an environment for entrepreneurs to form strategic alliances for their benefit.

The President suggested that the FTA be expanded to cover the liberalisation of the goods sector, since trade should encompass activities in both goods and services sectors.

"We have provision to identify specific service sectors that will contribute to the expansion of trade and the development of economic relations. Both sides will meet every six months for identifying specific service sectors and conclude such negotiations expeditiously."

She said that specific measures should be adopted to promote investments and stimulate the flow of capital between the two economies.

"Investment agencies in the two countries should consult each other regularly to work out modalities for direct private sector cooperation.

The FTA is for the benefit of the business community as it remove barriers to trade and provide a legal framework to conduct and expand business. The business community should work closely with the public sector to translate opportunities created by the FTA into tangible business transactions," she added.

She urged the Pakistani business community to take advantage of the liberal economic climate and the investor friendly environment in Sri Lanka. She reminded the audience that Sri Lanka was one of the first countries in the region to liberalise its economy.

"The FTA is consistent with our commitment to multilateral trade, our collective initiatives within the ambit of SAARC. Regional initiatives such as he SAFTA will co-exist with bilateral trade arrangements such as ours."

The President stressed that the FTA would serve as a launching pad for an era of vibrant business activity between the two economies, building upon their solid bilateral, historic and political ties.

Board of Investment Chairman Saliya Wickramasuriya also addressed the gathering.

The following are some of the main features of the Sri Lanka Pakistan Free Trade Agreement, signed on Wednesday in Islamabad

* Sri Lanka will eliminate customs duty on 4,527 tariff lines of 5,224 at six-digit level over three years

* Elimination of Customs Duty to cover around 69% of traded goods between the two countries

* Lanka will enjoy duty free benefits on exports of natural rubber, coconut products, spices, natural graphite, paper and paper products, copper and aluminium products

* Pakistan will enjoy duty free benefits on exports to Sri Lanka of oranges, chickpeas, cumin seeds, fennel seed, motorcycles and accessories, tangerine apples

* Special Tariff Rate Quotas (TRQ) granted on tea and betel leaf exports from Lanka to Pakistan: 10,000 MT of tea per annum at zero duty and 1,200 tons of betel per annum at a preferential margin of 35%

* Special Tariff Rate Quota for three million pieces of Sri Lankan apparel products, covering 20 categories without restriction on country of origin of fabrics.

* Twenty per cent preferential tariff margin for ceramic tiles and tableware from Sri Lanka

* TRQ from Sri Lanka for 6,000 MT of long-grain Basmati rice and 1,000 MT of potatoes per annum on duty free basis.