SL must make FTA work and improve

Rohantha N. A. Athukorala

Continued from yesterday

A point to note is that the knowledge economy is not about been high tech, but it's about how a country is strong on creating disseminating knowledge to the users to enhance growth and development in a country.

Sri Lanka's Knowledge Economy Pillars -Little improvement since 1995

(Source; The Knowledge Economy Report, World Bank-2008)

Key danger of CEPA

The danger of CEPA is that it focuses on the liberalization of the service sector which is very dynamic. Hence, if Sri Lanka does not keep the cycle of innovation linked to the business world there is a good chance that Sri Lanka can get swamped by the strong Indian company's that are well webbed to the University system and product development houses which are actually in-house in many instances.

Recent reports emerging out of India reveal that corporate India is on the cutting edge of technology with innovations flooding the market daily wooing a typical Indian housewife to be more modern, more efficient and more confident to face the challenges of day to day life.

The launch of the 1st Nano car in the world and the 1st refrigerator with PN technology are some classic examples. The latest report from World Bank is not that encouraging when it rightly states that there has been very little improvement in the last ten years in Sri Lanka's Knowledge Economy which is alarming.

Sri Lanka must do it's homework and prepare the structural template at the ground end, before opening up its doors to competitors purely on the basis of comparative advantage or in economic terms the asymmetry that exist between the two countries.

Involve the chambers

As I mentioned at the Indo Lanka seminar on CEPA, I strongly suggest that we agree a set of targets at the time of signing when ever it may be. But by the end of three years we must make sure that a 10 billion dollars of trade will happen.

In 2007 it was 3.2 billion dollars. If this robustness is not prevalent there is no point in entering into free trade agreements due to the social ramifications that it creates.

However, its important to state that arriving at the target should be a bottom up exercise so that it forces the private and public sectors to work together with the trade chambers facilitating the process.

This is an important process so that social ramifications are taken into account whilst suggesting domestic legislation for protection of a given industry. The current agitation is that the CEPA agreement has not been passed through the chambers' which is justifiable, given that it is the private sector that will drive business and not the policy makers.

Correct FTA issues

We must foster an entrepreneurial spirit in the country and I consider the launch of this controversial CEPA agreement to be one of them. However, we must understand that this is an extension of the existing FTA agreement between the two countries.

It's important to accept the issues that Sri Lankan entrepreneurs have faced in the last 7 years of trade and take the corrective action so that confidence of the different actors in the system can be maintained.

We must have a proactive Indo-Lanka Trade Secretariat so that all issues can be solved as a matter of urgency than having to be made a political issue where higher authorities have to get involved which is time consuming and some times ineffective when it comes to implementation at the ground end.

My view that rather than driving for deeper tariff cuts like the one introduced last week of increasing, the TQR from 3 million pieces of garments to 6 million pieces of garments should not have happened.

May be first we need do get access to India on current 3 million pieces. Thereafter on this success to move deepening the trade with India. If not free trade arrangements with India remains at a rhetoric that an actual increase of trade.

Let's accept it, the culture of business in Sri Lanka or for that matter, life in general is different to India. Like I mentioned at the Indo Lanka seminar last week If Indians are coming to do business in Sri Lanka its best that an orientation programme be done before coming over to our beautiful island than creating social issues due to the domineering nature that has been talked and written by many on 'Doing business with Indians'.

The policy holders must take into account the issues that Sri Lankan multinational companies have had when Indians started heading operations.

Conclusion - CECA?

Sri Lanka must sign the CEPA agreements when the ground conditions are right.

This needs to be agreed between the trade chambers and the policy makers of the country. We need to make this happen even with all the resistance as the benefits will out way the social and local business issues that can crop up.

Concluded