The choice of CEPA

Friday, 8 April 2011 00:13 - - {{hitsCtrl.values.hits}}

Cricket and the Comprehensive Partnership Agreement (CEPA) may at first glance seem completely unconnected, but there is one overriding thread of political and economic relationships with India that make a strong connection.

Suspicion and distrust rather than trade have been the cornerstone of discussions regarding CEPA. The faction against it points out the challenge of dealing with India’s fast growing economy and the inability of Sri Lanka to compete against this juggernaut rules out CEPA. The Free Trade Agreement (FTA) that was signed over a decade ago between the two nations have not helped with many focusing on its shortcomings as a reason not to go ahead with CEPA.

The detriments of the FTA can be considered in several lights. It was the first signed in South Asia and the first for India, which meant that there would be loopholes of inexperience. India has moved on to sign trade agreements with a number of countries since then including Japan and CEPA with ASEAN countries. The latter is particularly of interest since there are several countries such as Laos, Cambodia and Myanmar that are economically less robust than Sri Lanka, but they have agreed to the CEPA showing that the concerns against CEPA can be addressed through negotiations. If Sri Lanka continues to disregard CEPA, it may well be that these countries will gain a march on us for doing business with India.

Politically, there can be little doubt that India has and will continue to play a significant role in Sri Lanka. As an emerging super power, possessing the second-fastest growing economy in the world, a member of the G20 and possibly a member of the UN Security Council in the future there is little preventing India from intervening in Sri Lanka without CEPA. However, recently relations have been largely positive with WikiLeaks revealing how India kept off foreign pressure during the last phase of the war.

There have been several Sri Lankan success stories in India. MAS has managed to successfully launch and maintain a brand, even winning consumer awards for it, Damro and even saloons such as Nayana have had positive results from their investments in the subcontinent. Therefore, if CEPA is negotiated properly and due consideration is given to negative lists and other instruments that are used to protect the less powerful economy, chances are that a win-win solution can be the result. For the private sector to continue to refuse CEPA is in a sense saying to the world that it cannot perform competitively in the world market.

On a more pragmatic note, having access to a market of one billion people will also help attract Foreign Direct Investment (FDI) to Sri Lanka. The Asian Development Bank (ADB) has underscored the challenge Sri Lanka has hitherto faced in attracting FDI and anticipated that when it does come, it will be more focused on services that will cater to a foreign market. What better market can Sri Lanka offer than easy access to India?

Working on synergies with India will take Sri Lanka closer to its development goals. The challenge is to make the right choices at the right time.