EASL AGM - Speech by Mr. H E Yashvardhan Kumar Sinha, Indian High Commissioner
Hon'ble Anura Siriwardena, Secretary, Ministry of Industry and Commerce, Hon'ble Rohan V. Daluwatte, Chairman, Exporters' Association of Sri Lanka (EASL), Members of the Managing Committee of EASL, Distinguished Guests,
It gives me great pleasure to participate in the 17th Annual General Meeting of Exporters' Association of Sri Lanka. I understand the Exporters' Association of Sri Lanka came into being on August 22, 1997 with the merger of the Export Section of Ceylon Chamber of Commerce and the Federation of Exporters Association of Sri Lanka, and has done commendable work towards increasing and diversifying Sri Lankan exports. I am honoured to be invited to deliver the keynote address this evening.
Exports are an important component of the Sri Lankan economy and its salience in contributing further to the consolidation and growth of the economy must be recognized. This is because the economy grew at 7.3 % in 2013 and is expected to grow at 7.8% in 2014. In so far as the performance of exports is concerned, the Annual Report of the Central Bank states that the export performance of Sri Lanka, recovered in 2013 and export earnings grew by 6.4% to USD 10.3 billion in contrast to a decline of 7.4% in 2012. The export performance continues to be strong in the first half of 2014 with the total exports of Sri Lanka amounting to approximately USD 5.4 billion, an increase of 22.1% as compared to the same period last year.
Bilaterally, as you are aware, the cornerstone of our economic and commercial ties is the India Sri Lanka Free Trade Agreement (ISLFTA). It was in view of the synergy and complementarities that exists between the two countries, India and Sri Lanka took the initiative of signing the first bilateral trade agreement with each other. The benefits that have accrued from this 14 year old Agreement are well documented. The ISLFTA led to the emergence of a genuinely vibrant economic relationship and resulted in a quantum jump in trade, investment and economic cooperation between India and Sri Lanka. Within two years of its coming into force, we saw a doubling of our trade turnover. In another three years, that is, by 2005, we doubled the trade turnover again. Between 2000 and 2008, the turnover grew five times. The trade reached its highest level to date in 2011 when it amounted to nearly USD 5 billion. The total trade in 2013 was USD 3.76 billion.
Since the entry into force of the ISLFTA Sri Lankan exports to India have seen a more than 10 fold increase from USD 49 million in 1999 to USD 543 million in 2013. Bilateral trade is again looking up in the in the first six months of 2014 and exports to India from January-July 2014 have amounted to nearly USD 300 million, an increase of 7.42% as compared to the same period last year
In line with the basic spirit of the ISLFTA, some of the benefits available to exporters from Sri Lanka under the ISLFTA include:
Garments: 8 million pieces are allowed at zero duty with no fabric sourcing conditions [Prior to this only 3 million pieces were allowed].
Textiles Quota: A tariff reduction of 25% given for 528 textile items.
Pepper Quota: India enabled import of 2500 MT of pepper per annum from Sri Lanka through import authorization issued by DGFT, India.
We have also extended the validity period of the licences for processed meat from six months to one year. The quarantine restrictions on Rambutan and Mangosteen have been dispensed with.
Tea Quota: India provides 50% tariff preference on 5 tea items subject to a quota of 15 million kilograms per year.
I would also like to highlight that among all the major trade partners of Sri Lanka, India has the most balanced trade with Sri Lanka. India is the largest source of imports for Sri Lanka, but was also the third largest export destination after USA and UK accounting for 5.2 % of the total exports of the country. India has also attracted investment from Sri Lanka and firms like Brandix and MAS Holdings, among others, have chosen to set up companies there for manufacture and export of apparel.
We are aware that it is often stated that the FTA did not address Non-Tariff Barriers (NTBs) which restrict market access to India. These issues have been regularly discussed between our authorities and both sides are working towards harmonization of standards and cooperation between the Customs departments of the two countries – the draft Agreement on Cooperation and Mutual Assistance in Customs Matters as proposed by the Indian authorities is under consideration of the Sri Lankan authorities. Further, India is making genuine efforts for better trade facilitation. A proposal for a Goods and Services Tax (GST) is in an advanced stage of consideration by the Government of India and, when implemented, will lead to one tax for the entire country replacing the multitude of state taxes. With regard to quotas, they have been liberalized consistently in a way that Sri Lanka is allowed to self-administer them. Tackling NTBs was also discussed in detail during the visit of Commerce Secretary of India to Sri Lanka in June 2013 and it was decided that the Department of Commerce on both sides would be the focal point to coordinate and resolve problems arising from NTBs, by appointing suitable nodal officers from both sides. The issue was also taken up during the India visit of Secretary, Treasury accompanied by Secretary, Ministry of Industry and Commerce in January 2014. So, there is forward movement and engagement in all matters.
The issue of Sri Lanka's trade deficit vis-à-vis India has been raised often. The way forward in this respect is for both countries to diversify and do so while moving out of their respective comfort zones. There is agreement among authorities of both countries that the economic engagement needs to be upgraded. In this context, it is to be noted that the services sector is increasingly accounting for a larger portion of the GDP of both our countries and needs to be tapped. The potential for tourism is self evident. India has consistently been the largest source of tourists to Sri Lanka. External tourism is linked to the growth of tourism-related infrastructure. There are opportunities with immense potential like the Ramayana trail development, which, if pursued, has the potential of exponentially increasing tourism revenue and reducing the trade deficit.
Another area with immense potential is education. In recent years, India has been attracting a growing number of Sri Lankan students for tertiary education, and offers a much more affordable alternative to other countries without compromising on quality. Many Indian institutions of excellence, such as the Manipal group, Symboisis and others, are interested in investing in Sri Lanka. Quality educational institutions in Sri Lanka would aid in capacity building and to some extent mitigate problems associated with the so-called “brain-drain”, that many developing countries are confronted with.
There is also scope for collaboration in the area of construction services such as project management, engineering and architectural consultancy and maintenance services. The Indian hospitality giant ITC has committed USD 140 million to build a hotel just next to the Taj Samudra. In May this year, the ground breaking ceremony of the USD 430 million Slave Island Re-Development Project being implemented by Tata Housing in partnership with the UDA was held. Indocean's Altair is another big project.
It is also pertinent to mention the following proposals that were offered during the visit of Shri. Anand Sharma, the then Minister for Commerce, Industry and Textiles, to Sri Lanka in August 2012, which aim to achieve the shared goals of poverty alleviation, job creation and economic development for the people of the two countries:
bringing in Indian investments in some key areas where we have acknowledged strengths;
Setting up a special economic zone for manufacture of automotive components and engineering goods and another exclusive economic zone for manufacture of pharmaceutical products.
We also offered help to set up an industrial training institute, to equip local youth with the necessary skills for jobs at these zones.
We continue to await a favourable response from our Sri Lankan friends on these offers. Further, during the Eighth meeting of the India-Sri Lanka Joint Commission held in January 2013 in New Delhi, both sides recognized the need to build a special economic partnership framework and it was decided to take several steps to further deepen trade, tourism and investment relations.
The new government in India has been voted to power with a clear economic mandate. The government has pledged to revive economic growth through, inter-alia, re-visiting the policy framework for investments both foreign and domestic to make them more conducive, rationalization and simplification of the tax regime, bringing on board all State Governments in adopting GST, allowing FDI in sectors wherever needed for job and asset creation, infrastructure and acquisition of niche technology and specialized expertise, and a conducive, enabling environment to make ‘doing business' in India easy.
Another area stressed by the new Government is closer economic cooperation and consolidation of the SAARC region. Given our shared history, closer economic engagement between our two countries will be mutually beneficial. We have laid stress on increased connectivity between India and Sri Lanka. Both the countries enjoy close connectivity by air with 113 weekly flights from Colombo to eight destinations in India. We are working for resumption of the ferry services between Colombo and Tuticorin and Talaimannar and Rameshwaram. With the rehabilitation and extension of the railway network in Sri Lanka and the resumption of ferry services, greater people to people contact will be facilitated. India and Sri Lanka have also been discussing the possibility of trading in energy taking into account availability of power in both countries as well as patterns of consumption. Export of power to India would help bridge the trade deficit.
I have sought to highlight present and emerging opportunities for enhancement of economic engagement between India and Sri Lanka. Both countries need to work together to explore new avenues of cooperation, keeping in mind our inherent strengths and complementarities. The emergence of India as an engine for robust growth in the region provides manifold opportunities to its neighbours, particularly Sri Lanka, to be part of a shared success story. Greater economic integration will ensure optimum utilization of resources and synergies leading to a win win situation for all countries in South Asia.
India and Sri Lanka share a dynamic and multi-faceted relationship which is rooted in civilisational ties of history, language, culture, religion and trade and I am sanguine that Sri Lanka, which till recently was India's largest trading partner in South Asia, will reclaim that status in the near future provided we are able to take our special economic partnership to the next level.
I once again thank the Exporters' Association of Sri Lanka for inviting me and wish all of you all the very best on the occasion of your 17th AGM and assure you of our unstinted cooperation in the furtherance of our shared goals and aspirations.