Fundamental shift in Indo-Lanka trade as second Secy talks wrap up in Colombo (Daily Financial Times (Sri Lanka))

In a landmark event in Indo-Lanka trade history, both countries are now moving to ink a pioneering Customs Cooperation Agreement between them, opening the door for much larger trade volumes.
The first-ever Commerce Secretary level talks between both countries in the new Sri Lankan era held in Colombo has revealed that an otherwise routine bilateral trade flow is now gradually being transformed into an unprecedented ‘integrated trade and investment push’ on Sri Lanka.
“We don’t want to give any discomfort to Sri Lanka. When it comes to international trade, things have changed. Investments lead to better trading opportunities. Our EXIM Bank can support projects here with its funding options,” revealed an upbeat Commerce Secretary of India Rajeev Kher on 4 March in Colombo.
Kher, who became a star in global trade circles after his role in negotiations on food security at the highly publicised 2013 WTO talks in Bali, was briefing Minister Bathiudeen on the same afternoon at the Ministry of Industry and Commerce, Colombo 3. The high level three member Indian delegation to Colombo led by Kher includes Indian Ministry of Commerce and Industry Joint Secretary Shri Arvind Mehta.
This is the first-ever bilateral Commerce Secretary level talks to take place in Colombo in the new Lankan era of President Maithripala Sirisena and it also closely follows the historic mid-February meeting between President Sirisena and Indian Prime Minister Narendra Modi in New Delhi. Joining Minister Bathiudeen at the session were Secretary, Ministry of Industry and Commerce S.S. Miyanawela and DG-Department of Commerce R.D.S. Kumararatne.
Kher addressing Bathiudeen said: “Today’s meet in Colombo has primarily been a close follow-up to the recent meeting between Lankan President Maithripala Sirisena and our Prime Minister Narendra Modi. We seek your ideas and input in how to progress further. We discussed the strengthening and implementation of Indo-Lanka Free Trade Agreement (ISFTA) and focused on lots of areas of cooperation on investments and trading with Sri Lanka. When it comes to international trade, things have changed. Our bilateral trade is no more limited to a few commodities and we are present in several places of the value chains at the same time.
“Therefore we need to integrate-in that, an integrated investment and trade approach is the way forward. Investments lead to better trading opportunities and therefore we are very keen on opportunities of investments in Lankan pharmaceuticals, textiles, to integrate in a trade context. We are also keen on Lankan infrastructure projects such as energy and railways. Export Import Bank of India (EXIM Bank) can support these projects with its funding options! And we discussed on ways to better operate the ISFTA-such as the joint consensus on finalising a list of issues which Sri Lanka considers as ‘NTBs’ and building a facilitating mechanism to remove the reasons/NTBs-which we believe are due to different standards and capacities on both sides.
“The Joint Task Force (JTF) which was formed in October 2012 can also take the investment process of pharma and others forward. I am pleased to say that we identified five support areas including textile, foundry industries for our technology transfer. We will facilitate that. We don’t want to give any discomfort to Sri Lanka. Our objective is to see that our economic engagement is enhanced. We also need to look at how to make the ISFTA more productive for which we should continue discussions on it. We are now looking to finalise the Customs Cooperation Agreement (CCA) currently being worked out and at our end, we have to finalise our part. We can even sign it if possible during the forthcoming visit of Prime Minister Narendra Modi to Sri Lanka, provided both sides can finalise and be ready with it. Failing this event, we can sign it thereafter.”
A CCA assists trade facilitation through harmonisation and by being a control instrument to apply international rules on valuation of the goods for custom duty assessment. Sri Lanka has a CCA with the UAE since 2014. Broad consensus with Sri Lanka on working towards CCAs with China and US (under TIFA) is present. As for investments, in 2012, Indian investment to Sri Lanka totalled $ 158 million.
Among the leading Indian investments in Sri Lanka are Bharati Airtel (mobile telecom), Britannia (confectionaries), Lanka IOC (fuel), TATA (steel), Taj Hotels, Ultratech Cements, Ambuja Cement, CEAT, Piramal Glass and Ashok Leyland (automotives). The first meeting of Commerce Secretary level talks were held in June 2013 in Colombo. The first meeting of the JTF was held on 24 June 2013. Interestingly, Lankan investments to India include Brandix, MAS Holdings, Damro, Dankotuwa, Carson Cumberbatch, Aitken Spence, John Keells, Colombo Dockyards, DRH Logistics and Freight Links International.
Minister Bathiudeen, responding to Commerce Secretary Kher, said: “Our new Government is very positive on development of economic cooperation with India. During the recent meeting between Lankan President Maithripala Sirisena and Prime Minister Narendra Modi we requested to formulate a top team to work out pending issues. The post-ISFTA period, bilateral trade increased greatly. Together, we can now formulate a time frame to move to the next phase in bilateral trade and shall continue to strengthen the Joint Task Force as well. We look forward to tech support to enhance our industry sector.
“We believe that projects such as Kankesanturai Cement Industry are well suited projects for Indian investment. I thank the people and the government of India for the continued development and economic support offered to Sri Lanka, including the technical support announced today. I am pleased to note that since the ISFTA began, our trade volumes have increased steadily by eightfold to $ 3.6 billion and with the new Customs Cooperation Agreement, these volumes could further increase in a significant way.” Since ISFTA started in Y2000, Lankan exports to India ballooned almost eightfold by 2013 to $ 3.63 billion. More than 60% of Sri Lanka’s exports to India were under Indo-Sri Lanka Free Trade Agreement (ISFTA) in 2013. In January-June 2014, total trade was at $ 2.12 billion. Exports from Sri Lanka to India during this six month period stood at $ 300 million while total imports from India were at $1.82 billion.