Mr. Arjuna Herath, President, the Institute of Chartered Accountants of Sri Lanka (CA Sri Lanka),
Mr Aruna Alwis, CEO, CA Sri Lanka,
Mr. Heshana Kuruppu, Chairman, National Conference Committee,
Prof. Rajendra Srivastava, LKCSB Chair in Marketing Strategy and International Business at the Singapore Management University and the Keynote Speaker,
Mr. Nandika Buddhipala, Chairman, National Conference Technical Committee,
Mr. Lasantha Wickremasinghe, Vice President, CA Sri Lanka,
1. I consider it an honour and a privilege to be invited to speak at the inauguration of the 36th National Conference of Chartered Accountants organised by the Institute of Chartered Accountants of Sri Lanka. Thank you for inviting me to this prestigious event. The theme of this conference: “Collaborate to Compete” is most apt. In an increasingly globalised world, linkages cutting across ethnicities, national boundaries and professional competencies are being assiduously cultivated and collaborations and partnerships actively pursued and nurtured. Countries are coming together to form bilateral, regional and multilateral arrangements to optimise benefits. Similarly, corporations are joining hands to pool their resources and synergies to operate more efficiently and effectively. In other words, collaboration and cooperation have become mantras for success rather than confrontation and conflict. This is how it should be.
2. India under the leadership of Prime Minister Shri Narendra Modi has been on the move. The new Government has embarked on a path of all round inclusive development in the last one and a half years. To give a few examples, from the flagship ‘Make in India’ initiative to the task of providing public toilets in all schools, no part of the economy has been left untouched. The ‘Jan Dhan’ scheme has targeted financial inclusion through opening of bank accounts, the ‘Swachh Bharat’ Mission has been started to ensure health and hygiene. A Skills Development Ministry has been set up to ensure employability of youth, jobs for whom would come through initiatives such as Make in India. The Government is working with all State Governments in adopting a pan-India GST for simplifying the tax structure. Once implemented this would also positively impact Sri Lankan exports to India. Another important initiative is the 100 Smart Cities project which aims at rejuvenation of the urban landscape in India. The Prime Minister also recently launched an initiative called “Digital India”. Digital connectivity is an area which has immense potential and Sri Lanka could be a partner in this effort and gain from advances made in the digital world.
3. India is pursuing a re-invigorated neighbourhood policy of “Neighbourhood First” which puts a premium on greater connectivity, stronger and mutually beneficial cooperation and deeper ties with its neighbours. There is also recognition that neighbours have a first claim on India and Sri Lanka is amongst our closest and dearest neighbours. India and Sri Lanka have experienced an exhilarating renewal of democracy in recent times. People have reposed their faith in visions that seek to fulfill demands for change and promote social and economic development. This has become the crucible for measuring the success of pluralistic democracies globally, as compared to the ephemeral advances made under authoritarian regimes that do not always represent the aspirations of their citizens.
4. To return to the theme of your conference, ‘Collaborate to Compete’. Countries are increasingly collaborating in regional and multi-lateral fora to protect their interests, optimise their strategies, negotiate from a position of comparative advantage and enjoy the shared benefits of such cooperation.
5. The most recent example of such collaboration in the international fora is the Trans-Pacific Partnership (TPP). In October 2015, 12 countries announced conclusion of their negotiations to arrive at a partnership, that will have a significant impact on global trade and on investments. A diverse group of countries have chosen to collaborate for mutual benefit and thereby enhance their collective competitive advantage. This begets the question: How do countries like India, Sri Lanka, and other countries in the region, who are not part of TPP, compete and safeguard their interests? I am not an economist and hence it would be remiss of me to try and provide a detailed answer. However, common sense would indicate that we need to ensure that our region develops in a cooperative framework. One way would be to energise existing regional organisations such as SAARC, BIMSTEC and IORA in order to build on our strengths and complementarities. Such collaboration would enable us to compete more effectively.
6. India and Sri Lanka have a rich history of cooperation and collaboration. Our relationship that predates recorded history has been built on a legacy of intellectual, cultural, religious, linguistic and commercial interaction. In recent years, the relationship has been marked by close contacts at the highest political level, growing trade and investment, cooperation in areas including development, health, agriculture, education, culture etc. Some recent instances of India-Sri Lanka collaboration include the bilateral free trade agreement that was signed in 1988 and came into effect in 2000. Bilateral trade has increased more than 10 times since the coming into force of the FTA. In addition, India has a development partnership with Sri Lanka amounting to around US$ 2.6 billion, of which around US$ 436 million are outright grants. India has focused on a consultative and responsive model of cooperation aimed at livelihood restoration, capacity building, human resource development as well as infrastructure development. In this respect we are guided by the Government and people of Sri Lanka. This is a collaboration that has achieved excellent results as it is based on and dovetailed with the priorities of the Government of Sri Lanka.
7. Collaboration in other areas is also envisaged. During the visit of President Sirisena to India in February this year, an agreement was signed on cooperation in peaceful uses of nuclear energy, which is an area with immense potential for cooperation, particularly in the field of medicine. Prime Minister Modi during his visit to Sri Lanka in March 2015 announced a new Line of Credit amounting to US$ 318 million for the railway sector in Sri Lanka. When Prime Minister Ranil Wickremesinghe visited India in September 2015, both countries signed an agreement for a satellite for the SAARC region. Sri Lanka was the first country in the SAARC region to sign this agreement.
8. Collaboration on connectivity, both virtual and physical, between our two countries, would be of mutual benefit. We are working towards resumption of ferry services between Colombo and Tuticorin and between Talaimannar and Rameshwaram, which will make travel easier. There is also a proposal to operate a cruise/ferry service between Colombo and Kochi in Kerala. Already India and Sri Lanka enjoy close connectivity by air with 150 flights a week from Colombo to eight destinations in India. I look forward to a time when a passenger can board a train in Kataragama in southern Sri Lanka and travel to Srinagar, a city founded by Emperor Ashoka, in the northern Indian state of Jammu and Kashmir by train and ferry. With the aim of further increasing tourism between the two countries, the first meeting of the JWG on Tourism was held in April 2015 at New Delhi where developing a Ramayana Trail in Sri Lanka and a Buddhist Circuit in India was discussed. India also stands ready to assist Sri Lanka in the upgradation of infrastructure, particularly in the North and the East. This could serve as a platform for enhancing connectivity in the future.
9. The India-Sri Lanka relationship is vibrant and robust and is poised for a quantum leap by building on the rich legacy of historical linkages and a strong economic and commercial underpinning that provides a platform for enhanced engagement.
10. Given our mutual synergies, our economic ties should be upgraded to the next level to go beyond trade in goods. The services sector is increasingly accounting for a significant portion of the GDP of both our countries and needs to be tapped. Another area with immense potential is education. In recent years, India has been attracting a growing number of Sri Lankan students for tertiary education, and offers a more affordable alternative to other countries without compromising on quality. Prominent Indian institutions of excellence are interested in investing in Sri Lanka, provided the necessary legislative framework is put in place.
11. Leading Indian companies have established a strong investment presence in Sri Lanka with FDI flows from India to Sri Lanka standing at nearly US$ 1 billion since 2003.The total FDI commitment by Indian firms for the next three to five years is more than US$ 1.2 billion. During his visit to Sri Lanka in August 2012, the then Commerce and Industry Minister of India had put forward a proposal to address the trade imbalance between India and Sri Lanka through creation of additional export capacity in Sri Lanka. Setting up a Special Economic Zone (SEZ) with focus on light engineering and automobile components through joint ventures were envisaged. The establishment of a manufacturing hub for pharmaceuticals was also discussed. In this era of closer economic integration Sri Lanka needs to plug into the supply chains in a rapidly developing economy next door. Today’s papers quote the Deputy Governor of the Central Bank of Sri Lanka as stating that India’s growth is a bright spot for the Sri Lankan economy. It is important that Sri Lanka takes advantage of its inherent advantages of proximity and entrepreneurial zeal and becomes a partner in the India growth story.
12. Some years ago, the largest car manufacturer in India had expressed interest in establishing a vehicle assembly plant in Sri Lanka. The proposal also envisaged the establishment of ancillary automobile component manufacturing units. The setting up of such a plant would have resulted in creation of jobs as well as saving of precious foreign exchange for Sri Lanka. I understand that in the period January – August 2015, Sri Lanka imported nearly US$ 350 million worth of vehicles and auto-components from India, almost 15.5% of the total Sri Lankan imports from India. Had the proposal been approved, the picture could have been different. We look forward to new policy initiatives that the Government of Sri Lanka plans to undertake. The Prime Minister’s speech in Parliament tomorrow and the budget later in the month will hopefully pave the way for greater trade and investments.
13. The Government of Sri Lanka wants to develop Trincomalee into a regional petroleum hub. India will be happy to partner Sri Lanka in this regard. India and Sri Lanka have also been discussing the possibility of trading in energy taking into account availability of power in both countries as well as patterns of consumption. Trade in electricity would also help bridge the trade deficit. India and Sri Lanka have enjoyed strong historical maritime links. At present, Colombo Port is a leading container trans-shipment hub for India. It has been estimated that almost 30% of India’s transshipment cargo passes through Colombo Port, which accounts for nearly 70% of the total transshipment business handled by Colombo Port. In view of the importance of Colombo Port to India, Indian companies need to become stakeholders in the expansion of Colombo Port.
14. Let me also point out that India is aware of the concerns raised by Sri Lankan businessmen regarding problems of access to Indian markets, which are seen as impediments to expansion of trade ties. Concerns regarding NTBs being faced by Sri Lankan exporters have been taken up in bilateral discussions including at the third Commerce Secretary level talks which took place in Colombo in March 2015. These issues are under examination and both sides are striving to resolve them. An Agreement on Cooperation and Mutual Assistance in Customs Matters was signed by both countries in March 2015. This would increase coordination between the customs authorities of both countries.
15. While India wants to expand cooperation with Sri Lanka, we are sensitive to the need to move at a pace at which Sri Lanka is comfortable with in terms of opening new areas. Asymmetric arrangements that preclude strict reciprocity, are already in place and will be further expanded as India grows at a rapid pace. The Comprehensive Economic Partnership Agreement (CEPA) between India and Sri Lanka was negotiated in a manner that meets these objectives. CEPA sought to go beyond the FTA and extend coverage to areas such as trade in services, investment, deepen coverage of trade in goods and enhance economic cooperation in other areas of mutual interest. The proposed agreement recognized asymmetries of the two economies and accordingly, differential treatment was built into the draft. Thus, under the Agreement, India had committed to a bigger reduction in its negative list, larger and deeper opening in the service sector, and larger schedule of commitments in investment. Under Mode 4, which pertains to movement of natural persons, Sri Lanka was to open only two sectors, computer and related services for expert trainees and related staff and maintenance and repairs of seagoing vessels, for naval architects, skilled welders and fitters etc., whereas India was to open many more sectors (twelve sectors and eighty sub-sectors) upfront and grant more concessions in each of these areas. The idea was to allow Sri Lanka sufficient time to gain experience and confidence before venturing into wider openings. CEPA also had provisions to address perceived problems of Sri Lankan exporters to India. A Mutual Recognition Agreement (MRA) formed part of the CEPA. Some agreements that formed part of the CEPA such as the Revised Double Taxation Avoidance Agreement and the Customs Cooperation Agreement have already been concluded separately.
16. I would like to once again stress that despite what naysayers might profess, in view of our complementarities, enhanced economic cooperation between India and Sri Lanka has distinct advantages and would strengthen the competitiveness of both countries. However, opportunities need to be seized when they arise, and not squandered due to misperceptions and narrow political agendas.
17. During his visit to India last month, Prime Minister Ranil Wickremesinghe proposed concluding a bilateral Economic and Technology Cooperation Agreement by next year. We welcome the stress laid by the Prime Minister in boosting cooperation in technology which reflects the importance Sri Lanka attaches to further cooperation and collaboration with India in this important field. Both sides need to engage intensively to realize the vision of our leaders.
18. We need to take full advantage of our mutual synergies. We require a neighbourhood where trade, investment, ideas and people move easily across borders. Markets need to be more integrated. As Prime Minister Shri Narendra Modi stated while addressing the business community in Colombo in March 2015, India’s progress gives us the ability to create opportunities for our neighbours. We will be supportive in advancing Sri Lanka’s commercial interests. We believe in Sri Lanka’s capabilities. We should move boldly to enhance our economic and commercial engagement. India and Sri Lanka should wholeheartedly collaborate to fulfill the potential of our bilateral relations and the aspirations of our peoples.
19. I once again thank CA Sri Lanka for giving me an opportunity to speak on this occasion and wish all the participants in the 36th National Conference of Chartered Accountants all the very best.