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India, Lanka sign up for free trade area

In a path-breaking development, India and Sri Lanka tonight signed an agreement establishing a free trade area, or FTA, between them and initialled a memorandum of understanding to set up an India-Sri Lanka Foundation to promote multi-faceted bilateral exchanges.

The agreement was signed by Prime Minister Atal Bihari Vajpayee and Sri Lanka President Chandrika Kumaratunga, who arrived in New Delhi on Sunday on a three-day state visit.

It will have far-reaching consequences on the South Asian Association for Regional Co-operation, or SAARC, as it could hasten establishment of the proposed South Asian Free Trade Area.

The MoU was signed by External Affairs Minister Jaswant Singh and Sri Lanka Foreign Minister Laxman Kadirgamar.

While the FTA will encourage growth and diversification of trade, investment, and other economic exchanges following the removal of barriers, the India-Sri Lanka Foundation will seek to enhance bilateral co-operation in art, culture, trade, commerce and science and technology.

The foundation will have an initial corpus of Rs 40 million, to be shared equally by the two countries, and will finance its activities from the interest accruing to it.

Jaswant Singh described the free trade agreement as historic. He appreciated the "great leadership" shown by the prime minister and the Sri Lankan president in the matter.

He said the agreement was a step towards economic equality through economic integration.

Kadirgamar, reciprocating Singh's sentiments, said that with this agreement, the two countries have moved into a new era of economic co-operation.

It reaffirms the confidence shown by both in SAARC. "We are looking forward to its implementation in coming days," he added.

Commerce Minister Ramakrishna Hegde, who was present on the occasion, said it was a "great day". This agreement is a "model for SAARC countries". He suggested greater interaction between the member-states so that the SAARC region benefits.

"It is a great gesture by the two leaders," he added.

The free trade agreement provides for elimination of customs duties completely within a stipulated time period. India will end tariff duties within three years while Sri Lanka, a much developed and industrialised country, will complete the process in eight.

After the completion of formalities, the agreement is expected to come into force from March 1, 1999, Commerce Secretary P Prabhu told reporters.

During the next 60 days, the negative list will be drawn up. India's preferential list for zero tariff will include 700 to 1,000 items, while it will be 300 items for Sri Lanka.

India has offered 50 per cent customs duty concession in the first phase on all items barring some textile items on which it will be 25 per cent.

This will be a benchmark for other SAARC countries. The negative list is likely to include items like rubber, tea, textiles, and coconuts.

India's exports to Sri Lanka at present are to the tune of Rs 2.5 billion while imports stand at Rs 1.5 billion.

EARLIER REPORT:
Lanka all for trade pact with India

UNI

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