The Comprehensive Economic Partnership Agreement (CEPA) between India and Sri Lanka will not be signed on the sidelines of the two-day Saarc (South Asian Association for Regional Cooperation) summit, starting August 2.
Political opposition as well as discontent amongst some companies have been blamed for the delay in the signing of the agreement, talks for which were sealed early this month.
“It is almost certain that the agreement will not be signed during the Saarc summit, as some political parties are not in favour of it. It seems, the Sri Lankan government does not want any controversy to crop up during the Saarc summit and hence wants to delay it. We hope the agreement will be signed later during this year,” said a government official.
India and Sri Lanka have a functional free trade agreement (FTA) covering goods since 1998. The CEPA would have covered goods, services and investments and ensured deeper economic ties between the two nations.
According to experts, most of the industry and the political set-up in the island nation support the agreement, but some Left leaning parties, known for their anti-India stand, are not in favour of it.
“Such political opposition is normally seen when such agreements are finalised. Sri Lanka would have benefited from a deep economic integration with a growing economy like India. This is because such economic engagements have a trickle-down effect. Moreover, asymmetries of both parties are taken care of in such agreements through checks and balances,” said Saman Kalegama, executive director of Institute of Policy Studies, Colombo.
According to a recent analysis by the Federation of Indian Chambers of Commerce and Industry (Ficci), bilateral trade between the two countries increased by four times to reach $2.7 billion in 2006-07, from $865 million in 2000-01. During the same period, Indian exports posted an annual average growth rate of 25 per cent, while Sri Lankan exports increased by 47 per cent.
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Officials maintain that the agreement would have benefited Sri Lanka more than India. For instance, India would have cut more number of items from its existing list of 429 items than the island country, which at present has 1,180 goods in the negative list.
“Moreover, India’s offer on opening up the services sector is better than that of Sri Lanka, which is not comfortable in opening up the sector for Indian companies. But we are not going to push for signing of the agreement. The initiative has to come from Sri Lanka,” the official added.
Sources said some companies in Sri Lanka are also not in favour of the CEPA.
“These companies have had problems while interacting with India on non-tariff barriers as well as other legal issues. Indian companies have also faced similar problems in Sri Lanka but it does not mean that these problems should come in between important economic engagements,” said an observer of India-Sri Lanka relations.