Harim Peiris

Political and Reconciliation perspectives from Sri Lanka

  • March 2016
    M T W T F S S

Archive for March, 2016

ETCA – Turning India from threat to opportunity By Harim Peiris MBA (Published in the Island of 2nd March 2016)

Posted by harimpeiris on March 4, 2016

A section of Sri Lankan society, instinctively reacts to India in a manner it does not, with regard to any other nation in the world. While Sri Lankans, like any island people are generally outward looking, well-travelled and open to the world, when it comes to our giant neighbor, the response amongst some of us, is mildly xenophobic. Perhaps the political association of India with Sri Lanka’s ethnic problem and its longstanding principled position that devolution of power is a political solution to the ethnic conflict, which must be found, irritates those that are opposed to such an arrangement. It cannot be the historic memory of the pre-colonial Cholas invasions, since we have post-independence had very friendly relations with our former colonial powers, especially Britain.

The proposed Economic and Technology Cooperation Agreement (ETCA) with India has not entirely unexpectedly faced some resistance, not only from the political joint opposition, which seeks to oppose just about anything the government does, but from some professional groups and associations, including the GMOA, representing the nation’s doctors. Now Sri Lankan doctors have been fairly jealously guarding their home turf, ever since they succeeded in turning back the clock on the advent of the prestigious Apollo Hospitals into Colombo. The prospect of lower remunerated Indian professionals entering the local market, is a genuine concern of various professional bodies and one that policy makers need to take cognizance of and find solutions for the same. However, the rather obvious antidote is for the Indian market to be opened up for Sri Lankan doctors and other professionals.

Firstly Sri Lanka in 1998, during the Administration of President Chandrika Bandaranaike Kumaratunga entered into the Indo Sri Lanka Free Trade Agreement (ISFTA) and this resulted in a huge expansion of bi lateral trade, where today India is the largest source of Sri Lankan imports and the third largest market for Sri Lankan exports. Indians account for the largest group of tourist arrivals into Sri Lanka with about 27% of all arrivals, while the Indian air traffic market, accounts for a bulk of passengers for Sri Lankan Airline’s long haul destinations. Accordingly the ETCA was seen as the next step, after nearly two decades to further expand the economic ties, trade, investment, technological transfer and commercial activities between the two neighboring countries, for the mutual benefits of both economies.

It was former President Mahinda Rajapakse, who in his address to Parliament after the war ended in May 2009, stated that now Sri Lankan governments no longer have the war as an excuse for slow economic growth and development and would need to develop the economy to meet the aspirations of our people. However economic growth fundamentally requires investment and trade and a relatively small economy such as ours, requires significantly more foreign investment and trade to have economic growth which exceeds the limits of our own domestic resources. Towards this end the Rajapakse’s solution was to turn to China for huge projects of dubious utility value at allegedly highly inflated costs with high commercial interest rates. Sri Lanka is yet to start repayments for the Hambanthota port and airport and they were not cheap or concessionary, like the BMICH was.

The policy of the Sirisena / Wickramasinghe Administration has been to more rebalance the relationship with China by correspondingly expanding the ties and relationship with India, the traditional Asian regional power rival of China. Even during the Rajapakse years, the Indians had been quite involved especially in rebuilding the former conflict areas, with a 50,000 unit housing scheme entirely as a grant to the recipients and the rehabilitation of railroads and other infrastructure on very concessionary terms.  The current government, when in opposition only challenged the Chinese projects on its details, such as the grant of sovereignty to China for the Port City’s reclaimed land and the exorbitantly high borrowing costs of the Chinese loan.

However, the real lesson for Sri Lanka, is China itself or rather Hong Kong. Little Hong Kong prospered over the years, as a financial and services center for the vast and growing manufacturing and agricultural based Chinese economy. Hong Kong did not really compete with China in the area of low cost manufacturing or agricultural production but rather a complimentary service economy, profited from its proximity and association with China’s massive agricultural and manufacturing economy.

That is surely the opportunity for Sri Lanka, to create a post war services based economy which seeks to leverage off and enjoy massive benefits from the proximity to one of the largest and most exciting growth markets in the world. The matured and developed Western countries and their corporates are all eying India and indeed China as the places they must do business in, during the coming decades. Sri Lanka is well positioned to benefit from this pattern of Asian region driven global economic growth. Rather than solely trying to protect our own small domestic market, which will just protect the status quo, we should instead be using the ETCA process with India, to reduce the non-tariff barriers to our exports and open up the vast Indian market to Sri Lankan services, goods, professionals and corporates. A win-win solution for both countries’ economies and consequent benefits to the people of both India and Sri Lanka.



Posted in Uncategorized | Comments Off on ETCA – Turning India from threat to opportunity By Harim Peiris MBA (Published in the Island of 2nd March 2016)

%d bloggers like this: