India-Sri Lanka Economic Partnership: from ‘Comprehensive’ to ‘Special’?

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The recent Joint Statement by the Indian and Sri Lankan governments following the recent meeting between their two foreign ministers I found to be quite curious, especially in the section referring to economic partnership between the two countries.

As many are familiar with already, Sri Lanka and India have been struggling to complete negotiations on a proposed ‘Comprehensive Economic Partnership Agreement’ or CEPA, which would expand the current India-Sri Lanka Bilateral Free Trade Agreement to include services, investment, and economic cooperation chapters. The agreement was to take in to account the massive assymetry between the two countries (economic size, population, etc), and afforded Sri Lanka a more than disproportionate advantage. Following heavy lobbying by narrow nationalist business leaders with close political affiliations, there was an eruption of uninformed and exaggerated sentiments against greater commerce with India. These groups successfully scuttled efforts at completing the the CEPA deal,  and the government has said it is no longer looking to rekindle it either.

However, what is really interesting in this latest Joint Statement is the reference to building a ‘special economic partnership framework’ between the two countries. Here is the relevant extract (item number 4) from the Statement:

“4. Recognising the need to build a special economic partnership framework to achieve the shared goals of poverty alleviation, job creation and economic development for the people of the two countries, the two sides decided to take several steps to further deepen trade, tourism and investment relations. In this regard, it was agreed to encourage closer economic and trade linkages between all stakeholders with a view to doubling bilateral trade to US $ 10 billion in the next three years . In this context it was also agreed to initiate a dialogue between the Commerce Secretary of India and the Secretary of the Ministry of Finance and Economic Development of Sri Lanka at an early date to evolve a framework for a special economic partnership between the two countries(emphasis mine)

This entire paragraph could have been summed up in one sentence – “kick start the CEPA discussions once more”. But it seems “CEPA” is now an ugly word. It stirs up too many emotions among the protectionist factions of the Lankan biz community, and triggers too much nervousness within the government, especially the President. So I guess we will have to wait and see what this ‘special economic partnership’ as referred to in this Joint Statement really means – whether the Sri Lankan government bites the bullet and provides Sri Lanka with an opportunity to tap into a huge market, with a middle class set to be 10 times our entire population – or whether we will continue to amble along, making joint statement after joint statement, and never actually get down to business, frittering away this huge economic opportunity. Meanwhile India is signing CEPAs and CECAs left, right, and centre with countries all around us. For India, this is just a 20 million population – a tiny market. But for Sri Lanka, latching on to India’s growth and just tapping in to India’s growing middle class alone – set to be 267 million by 2015 –  can be transformative. That, will be truly special.

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One thought on “India-Sri Lanka Economic Partnership: from ‘Comprehensive’ to ‘Special’?

  1. India has always been a hair trigger issue over here, historically speaking. One can always ratchet up mass support for paranoid invasionist theories anyone can dream up, à la the JVP. The ‘protectionist’ business lobby here is hand in glove with extremist nationalists. And the government will really have to tread softly here, perhaps disbursing even ‘special-er’ benefits to these potentially antagonistic groups.

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