Historical and cultural ties between India and Sri Lanka can be traced back to the 4th Century BC. Despite this, bilateral trade between the two nations is yet reach its potential. The Dollar Business caught up with the High Commissioner of Sri Lanka to India, H.E. Chitranganee Wagiswara, to understand the state of affairs of Indo-Sri Lankan trade ties and how the neighbours can do bigger, better things together.
Interview by Ahmad Shariq Khan | February 2018 Issue | The Dollar Business
TDB: How has the relationship between India and Sri Lanka evolved over the centuries?
H.E. Chitranganee Wagiswara (CW): The two countries share a legacy of intellectual, cultural, religious and linguistic interactions. Historically and culturally, the two nations have been considerably close, with over 70% Sri Lankans continuing to follow Theravada Buddhism which was introduced in Sri Lanka in the 4th Century BC by Mahinda, the son of Indian emperor Ashoka. From that time, both countries have worked towards strengthening bilateral ties and today we share a broad understanding on major bilateral, regional and international issues.
TDB: How do you envision the future of Indo-Sri Lankan economic ties?
CW: Economic engagements form the core of Indo-Sri Lankan ties. Trade between the two nations has grown rapidly, particularly after the India-Sri Lanka Free Trade Agreement (ISFTA).Leaders of both countries have proactively taken steps to bolster trade and investment ties. According to Sri Lankan Customs, bilateral trade in CY2015 amounted to $4.9 billion. Imports from India in CY2015 were $4.3 billion (up by 7.4%), while exports from Sri Lanka to India were $645 million (up by 3.2%). In CY2016, the bilateral trade was $4.4 billion; Imports from India to Sri Lanka were $3.8 billion while exports from Sri Lanka to India were $551 million.
India has always been rated amongst the top four investors in Sri Lanka. We have many Indian players operating in diverse areas such as real estate, telecommunication, hospitality, etc. Under the new leadership in New Delhi and Colombo, both sides have taken concrete steps aimed at increasing bilateral trade across various sectors. Today, you can see a number of new investments from Indian companies dotted all across our country.
The last few years have also witnessed an increasing trend of Sri Lankan investments in India. There are quite a few success stories here. Major examples include the investment by Sri Lankan apparel conglomerate Brandix Lanka in Brandix India Apparel City (BIAC) at Vishakhapatnam, which employs more than 17,000 people.
From the BIAC facility, the company now exports huge volumes of garments to numerous worldwide destinations. This is in addition to significant investments in the freight and logistics sector. These investments will only bring more win-wins for both sides in the future.
TDB: What are the two countries doing to strengthen their relationship?
CW: The Sri Lankan leadership appreciates its relationship with Indian Prime Minister Narendra Modi. During his last visit, PM Modi attended Vesak Day celebrations in Sri Lanka. He along with our Prime Minister Ranil Wickremesinghe, visited the Gangaramaya Buddhist temple in Colombo. There was a feeling of bonhomie and goodwill about the trip. That was the time when Prime Minister Modi also announced a direct flight by Air India between Colombo and Varanasi. This bolstered people to people interaction between the countries. We look forward to more such measures aimed at reinforcing the links between the two countries.
TDB: Despite a strong economic foundation, bilateral trade has not yet realised its full potential. Do you agree?
CW: There is some truth to that. However, of late, the two sides have been working on this. The ISFTA, in effect since 2000, allows Sri Lanka to export over 4,000 items to India at zero duty with a negative list and quota systems in place to manage the inequality in the size of the economies. Since the agreement was enacted, the results have been positive. Sri Lanka’s total exports to India has grown from $70.1 million in 2001 to $551 million in 2016. While India’s exports to Sri Lanka in 2001 was $601.5 million, in 2016 it was recorded at $3.8 billion. Bilateral trade, in terms of volume, has also increased. Having said that, there exists a significant imbalance in terms of balance of trade. Discussions under the Economic Technology Cooperation Agreement (ECTA) are aimed at addressing such anomalies.
Besides, quantitative restrictions, stringent standards and labelling requirements, trade and licensing regulations are matters of concern to us. Joint Expert committees are working to address these concerns.
TDB: Are you happy with ISFTA as it currently stands?
CW: Though post-implementation of ISFTA the bilateral trade has increased manifold, the balance of trade continues to be in favour of India. But Sri Lanka has been taking steps to change this situation. We are trying to diversify our export basket. And now, taking a cue from the past, we plan to go beyond the existing FTA so that the two sides could soon attain the next level of growth when it comes trade and investments.
With this in mind, the two countries have commenced discussions to expand the existing ISFTA to an Economic and Technology Co-operation Agreement (ETCA). The ETCA will expand the scope of existing ISFTA by inclusion of services, investment, capacity building initiatives and technical collaboration betweeen the two nations. Six rounds of talks have already taken place. Sri Lanka is looking for greater market access for products such as readymade garments, pepper, tea, coconut products and industrial products among others. We are keen to finalise it at the earliest.
TDB: Due to its strategic location, Colombo can act as an excellent service hub for Indian investments into Sri Lanka and beyond. Your thoughts.
CW: If you look at the map of the subcontinent, we are between Singapore and Dubai, which are currently major commercial hubs catering to this part of the world. So, geographically, we are very well placed and want to capitalise on this advantage. We are working on hub status for Sri Lanka. Our focus is not only on the ocean front, we are also strengthening aviation facilities. Projects are coming up to transform Colombo into a major commercial hub. Several government-to-government MoUs are currently being signed that include collaboration in railways too.
We value all our trading and logistics partners who have shown a willingness to develop infrastructure and connectivity projects in the the Bay of Bengal region. We also laud India’s engagement in Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation (BIMSTEC) in which we are also a member. I am confident that these developments will result in numerous win-win situations for all stakeholders in the near future.
TDB: Which sectors can reap rich dividends for companies on both sides?
CW: Hospitality and tourism is one sector that has huge growth potential. In fact, Indian conglomerate ITC Ltd. is coming up with a venture in Sri Lanka and a luxury apartment complex is being built by WelcomeHotels Lanka, a 100% subsidiary of ITC. Many other Indian tourism and hospitality companies too have started exploring opportunities not just in Colombo but across the country. It’s important to note that India remains Sri Lanka’s top source of tourists – India is home to a large middle-class population with huge disposable income and we offer them the best leisure experience at an affordable price.