India must fast-track trade with Lanka

M. RAMESH | Updated on November 15, 2017 Published on April 09, 2012

Ties with Sri Lanka are set to roll along, despite India’s vote against the island nation.


India has a head start when it comes to trade with Sri Lanka. This should not be lost.

During a visit to Sri Lanka last week, this writer caught up with a diplomat and the conversation ran as follows:

How are the Sri Lankans taking India voting against them in the US-sponsored resolution at the United Nations Human Rights Commission?

Well, they feel India has back-stabbed them, but they also understand India's political compulsions.

It was backstabbing indeed, wasn't it?

Well, India had to vote in favour of the resolution because Sri Lanka has not kept its promises.

Is voting in favour of a resolution, and raising rhetoric, the way of holding Sri Lanka to its promises? Won't raising a noise make Sri Lanka dig its heels in, because it wouldn't want to be seen as capitulating?

India tried these means for three years but to no avail. Have to try something else, no?

But why do you say that Sri Lanka has not made good its promises? Isn't it true that a lot of work has been done in terms of rehabilitation, laying roads, opening schools, etc?

Yes, all that is true, but the fundamental issue still remains.

Which is?

Ethnic discrimination.

To continue on from this point would have turned the conversation into a debate as to whether or not India voting against Sri Lanka will help end ethnic discrimination. The outcome of such a debate would achieve nothing. But the key takeaway from the conversation, and with general chats with many others, is that there is at least a perception of ethnic discrimination in Sri Lanka.

Devolution issues

The Sri Lankan government today is in a mood of triumphalism, notes Dr Harsha de Silva, a Member of Parliament, in the opposition. “There are people in the Parliament who are not even willing to a discussion (on devolution of powers),” Dr de Silva says.

Very tellingly, Dr de Silva, a Sinhala Buddhist, says: “Building roads is good; but building trust is more important. But that has not been done.”

Really, most of these “devolution issues” are something that we in India would take for granted — control of land with the state government, police force with the state government and not with the federal government and fiscal autonomy. Some demands, such as the merger of North and East may be difficult, but there are enough low hanging fruits waiting to be plucked.

Sri Lanka's desire to stamp out separatism is more than understandable, it is welcome. But the approach that the country seems to take towards that end is to maintain a strict vigil on the people, rather than address their demands. This has undesirable, though unintended, side effects. For instance, it is said that people travelling from one town to another in the Northern region, are interrogated for hours. People feel insulted. This has not been independently verified, but the point is, the perception of discrimination still exists.

More importantly, the issue of ‘psychological reconciliation' — people wanting to know of the fate of their missing family members — hasn't been sufficiently addressed.

Instead, the government seems to be diverting all its energy and resources to economic development. This, from India's perspective, is great, because 20 million prosperous people in the neighbourhood is a big market for India.

Sri Lanka doesn't compete much with India. Tourism, logistics services and stuff such as tea and gemstones can provide prosperity to its people, who can then come to India for all goods and services.

So, economic development is good, but India cannot afford to overlook any discrimination against its ethnic population there. There is only way for India to make use of Sri Lanka's economic development and also exert influence over it to end any ethnic discrimination – deepen its economic engagement. This time around, luckily India's critical vote against Sri Lanka does not appear to have caused any major damage.

Sri Lankans understand India's political compulsions. They acknowledge that India tried not to vote in favour of the resolution. But it did, only because a Sri Lankan official let it slip that India would not vote in favour, leaving India with no option but to take the opposite position. And even then India did bring down the stridency of the tone of the resolution — which has been well appreciated in Sri Lanka. So, no major damage.

Headstart for India

But really, influence comes from engagement. India has a good head start and it needs to capitalise on it. The view that India has done little in Sri Lanka, whereas the Chinese have walked away with everything is quite not true. India's engagement with Sri Lanka is, today, much broader and deeper than China's. For example:

35 per cent of Sri Lanka's auto fuels market is with Indian Oil Corporation

A fifth of Sri Lanka's cement needs are met by Ultratech; this will rise to a fourth when Ultratech completes its expansion programme

One in every four calls that go out of Sri Lanka goes over the network of Tata Communications

India is the largest foreign investor in Sri Lanka, accounting for a third of the $1.5 billion the country received since the end of the war, in 2009.

India accounts for a fifth of Sri Lanka's imports. In 2011, Sri Lanka's imports from India were worth $4.4 billion (against exports of $519 million). Comparatively, China's is much smaller. In the first half of 2011, Sri Lanka's imports from China were $1.2 billion. Exports were $68 million.

India accounts for a fifth of tourist arrivals into Sri Lanka. In 2011, Sri Lanka attracted 8,55,000 tourists.

While China is rising in Sri Lanka, India has everything going to arrest its influence. Just look at the proposed Indian investments in Sri Lanka — it's mind boggling. Renuka Sugars: $220 million in a sugar refinery in Hambantota; IRCON: several railways projects backed by $800-million line of credit (at terms far easier than what the Chinese have given for the Hambantota port project); NTPC's Sampur power project; a clutch of hotel projects with investments of over $250 million.

Fast-track issues

But in order to build up on this, India needs to fast-track a few issues:

Clearing projects such as that of NTPC;

Sri Lanka's peeve that even with the FTA it is not able to make use of the 1.2-billion-people market needs to be addressed by eliminating the non-tariff barriers that Sri Lankan exporters face;

The Comprehensive Economic Partnership Agreement should be quickly concluded. India will inevitably enjoy a trade surplus with Sri Lanka, but can we do something under CEPA to reciprocate? Why not allow LTA benefits to government/PSU employees to cover travel to Sri Lanka? This will raise the number of Indian tourists to Sri Lanka.

We need to do all these even if in our own self-interest, bearing in mind the 20 million prosperous people in the neighbourhood.

Published on April 09, 2012
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