By Charminda Rodrigo Courtesy Ceylon Today

Professor Rohan Samarajeewa was a member of the Intergovernmental Joint Study Group on the India-Sri Lanka Comprehensive Economic Partnership Agreement (CEPA) in the year 2003 and chaired the GATS Advisory Committee of the Department of Commerce, Sri Lanka (2002-2004). He expressed his views to Ceylon Today on the proposed Economic and Technical Cooperation Agreement (ETCA).

?: Are we allowing Indian workers to flood our labour market by signing ETCA?

A: The government has announced that MODE 4 is restricted from the proposed ETCA; MODE 4 is the free movement of natural persons. MODE 3 is the free movement of legal persons. By signing the agreement, we can impose restrictions on the intra corporate transferees. The other side is the independent consultants. These are the two extremes. This agreement is not taking away the immigration laws in the country, but it clearly depicts the conditions that one should fulfil in order to get the necessary entry permits. We can take away the discretion when granting visas and impose conditions to fulfil when applying for visas.
How will it flood the labour market, when it restricts unnecessary workers entering the country; the guidelines are clearly in place.

ETCA is not going to take away jobs from Sri Lankans but it would enhance the competitiveness of the corporate.

?: Are we allowing free movement of professionals?

A: Well, there is only one region on the planet where they allow free movement and that is the European Union; that is because it’s a single market region. I can say with much confidence that we would not allow free movement through ETCA.

?: How do you assess the cultural and social effects of ETCA?

A: Well, I remember a time where the culture was such that we were supposed to eat what the government told us to eat; but that has changed over the years. The aspirations of the people have taken a turn; society and the culture changes over time. Nobody can stop it from changing. We should not restrict development based on uncertainty.

?: Why can‘t we enter into trade agreements with developed countries?

A: We cannot enter into agreements with unwilling partners. There are some people going around saying that we should get into an agreement with the Great Britain after Brexit happened. But Britain even negotiated a trade agreement with Canada. Every country gives prominence to their important trade partners. The countries willing to get into an agreement with us at the present time are India, China and Singapore. In fact geographical factors too favour us for this move.

?: What is the growing desire of India to get into an agreement with us? What do you think is the appealing factor?

A: India stays on top in terms of imports, India is on the top five in terms of exports, India is in the top three in terms of investments influx, India is on top in terms of tourist arrivals. It’s the geographical condition or the gravity model. Gravity affects more on the objects which are closer. It’s the norm in trade.

?: Are there any non economical factors behind this urge to enter into an agreement?

A: India is eyeing for its seat at the UN Security Council. They need to maintain good relations with their neighbours in order to do that. India has engaged in endless ruthless fighting with neighbouring Pakistan, There is a tense situation prevaling with China. India maintains strange relations with Bangladesh, also there are tensions with Bhutan, so whom do they have to present to the world as good neighbours? India’s reputation looks horrible at the international level. Therefore they badly need to show that they have managed to build good relations with at least Sri Lanka to make the world believe that they are a good neighbour.

When you think about the market size in Sri Lanka it is close to the entire population of Mumbai alone, the size of the market is not at all important. But India needs to balance the Chinese presence here in Sri Lanka. Therefore it is strategically important to make their presence here. So, the ecta with Sri Lanka is strategically important to India at this juncture. We have to keep that in mind.

?: On top of economic, geographic and strategic reasons do you think there are any other reasons such as modern day imperialism?

A: You may be referring to India’s expansionism as claimed by the JVP sometime back. Does India want to have a degree of authority over us? I think that’s normal, any big and powerful country would like to have a sense of authority over their neighbours. When they see the Chinese submarines docking in the ports of Sri Lanka, yes their tension may rise. India has pulled all their strategic assets to the South. India considers Pakistan as their enemy so they have developed far away South as their safe zone. India doesn’t have proper military bases in the South, because they do not consider it as much vulnerable to any threat. We have to understand these concerns and use it to our advantage.

?: In your opinion how does the ETCA benefit our economy?

A: We are basically focussing on two service sectors under the ETCA, under the World Trade Agreement rules we cannot take everything out from an agreement. We need to keep some sectors in. I would propose that we should include at least 5 service sectors in the agreement. See when it comes to ship building Japan stays on top. It even supplies to the Government of India. But when this agreement comes through our manufactures can supply even to the Government of India. Therefore, this agreement would take away all uncertainties associated in the trade between the two countries. So it might attract more investments.

?: You are a researcher, analyst, an expert in communications and technology. In your opinion what are the flaws in our economy?

A: We have to look at all economic problems from the perspective of the people, which we express in common terms “development must be felt”. One may feel the development when they are strong enough to meet their expectations. If you look at the young generation, what we have is an odd picture. Overall unemployment rate of this country is about 4 per cent. It seems good when taken merely as a number. One element, out of a number of elements attached to it is our labour force participation is very low, compared to countries like Vietnam and Cambodia; which means a large number of people are simply not coming into the labour market. You could say that we Sri Lankans value leisure than a real commitment to work. That hampers their status of disposable income. Our women participation in labour force is comparatively low; it is around 30 per cent of the labour market. So we need to ask the questions, what will it take to become a middle income country? What will it take to absorb these unutilized elements into our labour force?

There’s another peculiar significance where unemployment is concerned, especially when age groups are considered. The 20 to 30 age group has an extremely high unemployment rate. It’s like they are looking for work but they can’t get the employment they aspire for; in other words, the jobs that are on offer are not interesting to them. So, it is in my mind, it’s the salary factor. A person should at least get Rs.45,000 per month.

We cannot afford it unless we have a vibrant economy. We have to have a large vibrant economy to find solutions to all these problems. If we compare our case to the situation in Vietnam, the amount of foreign direct investments each country received during the last 14 years, we actually received more. However, the difference is that the FDIs they got were related to export oriented ventures. In contrast ours have mainly focussed on ventures related to the telecom industry. Telecom is a service industry where it focuses on the local market unlike exports which bring more foreign exchange into the country. It’s not that I totally criticize the decision but had we focussed on the export sector we could have earned more revenue to our economy. Vietnam enhanced their exports nine fold creating a bigger market; whereas we increased our market only two fold. How can we go on like that?

?: What really made the change in Vietnam?

A: Amongst many other reasons Vietnam has expanded their market by entering into Free Trade Agreements (FTA) with many countries across the globe; with both leftist and rightist countries. Even with their rivals China. They went to the extreme of signing an FTA with the USA; the country that bombed them. But in contrast we have only one proper FTA signed, and that is with India. We have an FTA with Pakistan but that is more symbolic than active. We should always enter into FTAs with trading partners. Our trading partners are Europe, US, India, China and Singapore; these countries are on the top of the list; and those are the countries that we should be signing agreements with.

We had basically halted discussions on FTAs during the former government. The government had let the Ministry of Trade go into a deep sleep. They have framed those who stood for FTAs as traitors.

?: What is an ideal trade agreement?

A: My contention is a trade agreement in this day and age gives the certainty needed. It is not about increasing exports or minimizing the trade deficit.

When making the investment decision in Vietnam’s case, the investors exactly knew the rules of the game. In our case investors would know the rules only after visiting the Greater Colombo Economic Commission or the Board of Investment (BOI). Sometimes what they say is not what is exactly happening on the ground. Now, the BOI has become just another government organization, like a cop at an intersection where the traffic lights are placed to divert the traffic. What’s the point having the traffic light if it is manually overridden by the cop? Likewise we have an ambiguity in facilitating investments. The Ministry of Economic Development says ‘X’ when the BOI says ‘Y’. So the investors are completely confused. Tax structure changes; taxes with retrospective effect comes into effect.

?: How do we change the nature of the investments influx?

A: We do not get investments which are a part of a complex value chain. Value chains are important in creating revenues. One may think the best value addition is to find the raw materials locally, manufacturing an end product and export it to an end user overseas. That is not a complex value chain. Complex value chains are such that the inputs are acquired from overseas, they are put together with the local resources and later sent to another country as inputs to some other processors. The entire value chain should work for it to be rally beneficial. In order to run such complex system, the certainty is a virtue.

?: Do you think the prevailing system facilitates local entrepreneurs in the light of promoting industrialization?

A: Entrepreneurship is all about taking risks. The real question is can a business sustain and survive in this situation? The next obstacle is the regulatory risk in the country. It clearly shows when imposing a large fee on closing down a company. See an entrepreneur starts a venture and after sometime they may close it down and move on to another industry. Investors would think twice when making the investment decision when a large fee is imposed when closing down a venture. It’s not a crime changing the business plan when the going gets tough. Also nobody can expect an investor to confine himself to one particular industry. There is no human explanation to this. How can we expect them to go for new investments when there is an entry and exit fee? We have to think on broader lines when addressing these issues.

?: How do you see the commitment of the government towards the economy in Sri Lanka?

A: President Sirisena during the extended 100-day programme had achieved many of the set objectives. But nothing much has changed since the UNP came into power after the general election. They are basically killing time rather than undertaking some drastic economic reforms. It is close to two years but nothing has been delivered. Had they got their plans in place by now, the government could have taken up the time to strengthen the economy. But unfortunately we do not see that happening. People must feel the change. Just imagine with the amount of money invested in Hambantota, do the people feel development? In fact, the lives of the people in Anuradhapura have changed more compared to that of the people in Hambantota; it is shown in the available statistics.

We need to create jobs that are felt by the people. We need to create jobs that can uplift the standard of living. We need to be connected to the global economy. In order to do that, we need to enter into more and more trade agreements covering goods, investments and services.