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| Wednesday, 2 March 2005 |
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Indo-Lanka FTA Bristling with business opportunities by Chandani Jayatilleke Doing business with India seems to be encouraging and alluring following the large number of opportunities opened by the Indo/Lanka Free Trade Agreement (FTA) which was implemented in 2000. Five years into the agreement, the FTA has gradually phased out the tariff for hundreds of items which can be exported to India and vice-versa.
In addition to export/import opportunities, the FTA opened new vistas in many business and investment areas in both countries. As a result, business grew further and people of the two countries drew closer with new business and tourism relations. However, the best aspect of the FTA was a growing number of foreign direct investments (FDIs). The FTA is not all about exports and imports - there are long-term investment benefits. "We have to look beyond export/import sector and reap more from these emerging opportunities," President, Sri Lanka-India Business Council, W. Granwille Perera said. Trade relations As a senior member of the Council, Perera is looking forward to improving better trade relations with India in the future. Over the last few years business under the FTA has seen ups and downs. Some areas have done extremely well. On the positive side were the increase in investments, trade and tourism. Besides, certain product categories have been exported and imported in significant volumes while certain other products which Sri Lanka expected to increase in volumes - such as tea and garments - had not done so well. "There had been certain issues for this. Although a quota of these items was allowed in the FTA, India did not want to hurt its own industrialists. Therefore, Sri Lankans couldn't break into these particular markets in a big way," Perera said. In the implementation of the FTA there were administrative problems as well, specially from the Indian side. In certain areas, some officials found excuses due to administration problems. And there had been instances where Sri Lankan businessmen have tried to make false declarations by using the FTA, and export items to India, according to Perera. Referring to the promotion of investment opportunities under the FTA in future, Perera said, Sri Lanka needs more foreign direct investments (FDIs). "We can easily promote more FDIs under the Indo/Lanka FTA. Many foreign investors know that India is a huge market for their products and they are keen to set up plants in India. But only a few would know, their business targets can be easily achieved if they locate their businesses in Sri Lanka targeting the Indian market," Perera said. Given the size of the country and its population, India makes a large consumer market. It has a very strong middle class - with strong buying power and they are as good as the European middle class. They are also open to foreign goods and competition. Therefore, the country needs to aggressively promote this concept throughout the world through our diplomatic mission, he added. For foreign manufacturers Sri Lanka is a better production base as India has more bureaucratic problems. "What we should be doing is to aggressively publicise this fact and get more foreign investors to locate their bases in Sri Lanka," Perera said. At the same time foreign investors would also find many advantages Sri Lanka offers in the setting up of a business. The BOI takes the leadership in promoting investments and provides many facilities to settle issues faced by the foreign investors. Many foreign investors have already found the BOI to be a less bureaucratic institution. "Therefore, Sri Lanka naturally creates an investor-friendly location. Apart from bureaucratic issues, Sri Lanka also has a good labour base and convenient transportation system. For foreign investors it would be cheaper to ship their goods to any port in India from Colombo than transporting them between cities in India," Perera stressed. Perera is of the view, since the FTA is now offering a longer list of exportable items, the concept should be publicised through international media. "We must tell them (investors), Sri Lanka/India are ideally placed as business destinations, with the two countries together making superb locations as a manufacturing base and a huge market. "If we can market this idea successfully, we should be able to bring in more FDIs for the development of the country," Perera said. To do this job efficiently, the country needs efficient commercial attaches in our diplomatic missions abroad. "Many of our present officials are not competent enough to carry out this job in a professional manner," he said. Federations of Chambers of Sri Lanka and India conduct review meetings on the FTA every two years. This Joint Business Council meeting is held in Sri Lanka or India. Since the FTA was signed trade has increased significantly. Many Sri Lankan business houses have set up their outlets, retail shops and manufacturing bases, taking the benefits of the FTA. Likewise, many Indian companies have also set up business houses and joint ventures in Sri Lanka. Two successful Sri Lankan companies now in India include Munchee and Damro. Damro, the furniture manufacturer has set up many outlets in India. "We need more joint ventures and Sri Lankan retail shops in India. Sri Lanka could also be the marketing arm/window for India - like Hong Kong to China. Another main area that Sri Lanka has a great potential is the advertising/publicity and marketing businesses in India. "Either we should set up advertising, marketing houses in India or join Indian groups. The world now is brand minded - to sell a brand you need marketing strategies," he added. Exports from Sri Lanka to India under the FTA in Rs Million 2000 665.11 (Source Department of Commerce) |
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