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Prime Minister Narendra Modi with his Sri Lankan counterpart Ranil Wickremesinghe. Photo: Reuters
Prime Minister Narendra Modi with his Sri Lankan counterpart Ranil Wickremesinghe. Photo: Reuters

Sri Lankan PM pledges to improve economic ties with India

The island nation is looking to conclude an economic partnership deal by next year, says Ranil Wickremesinghe

Sri Lankan Prime Minister Ranil Wickremesinghe on Tuesday expressed willingness to conclude a comprehensive economic partnership agreement (CEPA) with India by next year, a clear signal of his government’s intent to forge stronger economic ties with India, as opposed to China.

In India on his first visit abroad after taking charge in August, Wickremesinghe said his government has the “mandate" to continue discussions with India on CEPA, a contentious issue in Sri Lanka given the difference in the economic sizes of the two countries.

“We... are looking for permanent agreement on economic affairs, with emphasis on trade and investment and also on technology, which is essential for development," Wickremesinghe told reporters after talks with his Prime Minister Narendra Modi.

“We have been talking on these issues for a very long time; so, we think that by the end of this year, the two sides should at least come to an agreement in principle, (arrive at) a framework document... and by next year, we must have an agreement in place," Wickremesinghe said.

Sri Lanka already has a free trade agreement with India, in place since 2000. A CEPA, on the other hand, would cover trade in services and investment. There are fears in Sri Lanka that such a pact with India will result in a flood of Indian professionals into Sri Lanka—reportedly stoked by supporters of former president Mahinda Rajapaksa, seen as aligned with China.

According to Sri Lankan media reports, the new administration headed by President Maithripala Sirisena and Wickremesinghe is in favour of closer ties with India. These include increased trade links, focusing more on trade than on the trade gap, which is in India’s favour. According to Sri Lankan Customs, bilateral trade in 2014 amounted to $4.6 billion.

Mindful of opinion back home, Wickremesinghe stressed that bilateral trade between India and Sri Lanka was 2,500 years old and that his government aimed to create 1 million jobs in the next five years.

In his remarks, Modi said both sides wanted deeper economic engagement, but India was also of the view that trade should be more balanced.

“We discussed how we can achieve these goals in a more open and competitive Indian market, including bilateral arrangements for trade and investments. I also sought his (Wickremesinghe’s) support for Indian investors, who are keen to participate in Sri Lanka’s economic development, especially in the infrastructure, energy and transport sectors," Modi said.

On security issues, Modi said both nations recognized the “close alignment of security interests and the need to remain sensitive to each other’s concerns".

Both sides have agreed to strengthen cooperation to ensure security and stability in their maritime neighbourhood, Modi said. “Sri Lanka is our largest partner in the defence training programme and we will continue to expand our cooperation in this area," he said. “India and Sri Lanka have a huge stake in each other’s success, and in stability and development in our region."

The comments come against the backdrop of the Rajapaksa administration allowing Chinese nuclear submarines to dock at Colombo port twice. India, which considers the Indian Ocean and Sri Lanka to be under its strategic sphere of influence, was upset by the Rajapaksa government not informing India of the docking and the consequent shutting off of the Colombo port facilities, which impacted India. According to Indian officials, about 40% of India’s trade is handled by Colombo port, given its strategic location along major trading routes in the Indian Ocean region.

New Delhi was also upset that the Rajapaksa government had given a Chinese firm permission to build the Colombo port city project on 265 hectares of land reclaimed from the sea, which would include shopping malls, a mini-golf course, hotels, apartments and marinas.

One-third of the reclaimed land was to be given to the Chinese firm as fees, with China having sovereign rights to a portion of that.

Since coming to power, the Sirisena-Wickremesinghe administration has signalled that it will be taking a fresh look at projects like the Colombo port city project.

Sri Lankan foreign minister Mangala Samaraweera had said in Geneva on Monday that the new government was planning a range of measures to ensure reconciliation, after decades of civil war, between the majority Sinhalese against the minority Tamils. This included creating an office for war reparations and a truth commission. The Sri Lankan government is in favour of a domestic inquiry into war crime allegations.

Modi noted that the polls in January that brought Sirisena to power and the elections last month which installed Wickremesinghe as prime minister were votes for “change, reforms, reconciliation and progress".

The two nations signed four pacts, including one on a South Asian Association for Regional Cooperation satellite proposed by India.

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