Sri Lanka Tea, Apparel Exports to India Rise after Removal of FTP Controls

25th May 2010, www.lankabusinessonline.com

Sri Lanka's exports of tea and apparel to India rose sharply in 2009 as impediments in a free trade deal between the two neighbours were removed, an Indian diplomat said.

Overall trade between the two countries is also recovering from recession in the first part of this year, said Vikram Misri, Indian deputy high commissioner in Colombo.

Tea and apparel, the island's main agricultural and industrial exports, had faced quota restrictions under the Indo-Lanka free trade agreement signed a decade ago which raised doubts about the trade deal among the island's business community.

"With regard to the quotas, they have been liberalized consistently in a way that Sri Lanka is allowed to self-administer them and they seem to have begun to have a positive impact as can be seen in a 136 percent growth in the export of tea and about 35 percent increase in the export of garments in 2009, both items where quotas exist," said Misri.

"This is happening in a year when there has been an overall decline of 21.53 percent in Sri Lankan exports to India."

With regard to other restrictions, Misri told a seminar on the FTA that there are no Sri Lanka-specific port entry restrictions in India.

Also, a condition of import of fabrics to use the garment quota has been done away with.

"India has also expressed its readiness to implement the “garment model” for the administration of the pepper quota, which is expected to be signed shortly," Misri said.

"Most of the implementation issues that have created this so-called “perception” about the FTA have been resolved and others pertaining to NTBs can be resolved if there is will on the Sri Lankan side to move forward with already negotiated frameworks."

Bilaterally, the FTA has led to the emergence of a "vibrant" economic relationship and a "quantum jump" in trade, investment and economic cooperation between India and Sri Lanka, Misri said.

"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 trend would have continued in 2009 if not for the global economic crisis.

"It should be a cause for satisfaction that early figures for 2010 are already showing a strong revival of trade between the two countries, which only goes to validate the path we are embarked upon."

Misri also said that in the past India and Sri Lanka had been more interdependent than they are now even with a modern free trade arrangement.

"Even as recently as 1938, India accounted for 42.5 percent of Sri Lanka’s imports while in 2008, even with an FTA in place, Indian exports to Sri Lanka were only about 20 percent of Sri Lanka’s global imports."

Related Info :

• Indo-Sri Lanka FTA (ISFTA) - Detailed Information - The Board of Investment of Sri Lanka (BOI)