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Hegde stresses trade ties with Lanka, hints at common currency for south Asia

India plans to pull all plugs to strengthen bilateral economic and trade ties with Sri Lanka and cement the existing cordial relations between the two countries, Commerce Minister Ramakrishna Hegde said today.

Hegde, who is on a two-day visit to the island-nation, said the two countries were exploring the possibility of introducing free trade between them well ahead of 2005, when the South Asian Free Trade Agreement or the SAFTA is expected to come into force.

He told Colombo-based Indian correspondents that the Sri Lankan president Kumaratunga had suggested the setting up of a working committee to study this and other issues related to bilateral trade.

He said the constitution of the working committee would be announced soon and it would consist of three members from each country, representing the governments, private trade and experts.

He said the move was part of sub-regional cooperation envisaged under the South Asian Association for Regional Cooperation and added that Pakistan could not object to it on the ground that New Delhi was trying to isolate it in the SAARC. Pakistan's argument would be valid only if it reciprocated India's unilateral action in giving the most favoured nation status to that country.

''We are prepared to supply whatever goods Pakistan wants, but they are not prepared to buy it officially and would rather have it through unofficial trade,'' Hegde said.

He said Kumaratunga also urged the reduction of the 50 per cent requirement of local components under the rules of origin of goods imported from the SAARC countries to India.

She said this would facilitate Sri Lanka to take advantage of Prime Minister Atal Bihari Vajpayee's announcement, lifting quantitative restrictions on some 2,000 items of import from SAARC countries to India, he added.

Referring to the fear expressed by tea and rubber lobbies in India over the import of these commodities from Sri Lanka, he said there was no ground for entertaining such fears.

He noted that India was the largest producer of tea, and even if Sri Lanka entered the Indian tea market, it would be catering to only a small section of the consumers.

He referred to his proposal for joint marketing compaigns for tea by India and Sri Lanka and said there was no question of competition in such a situation.

''Even if the import of Sri Lankan tea affected our tea market, we should not hesitate in facing that kind of competition because of our desire to sustain our relationship which has been very cordial,'' Hegde said.

He noted that Sri Lanka was concerned about the balance of trade with India which was very much in favour of New Delhi. Last year alone Indian exports to the island amounted to over $ 600 million as against only $ 50 million worth of imports by India from Sri Lanka.

''From this point of view also this form of accommodation is necessary, unless we accommodate each other, what is the use of having good relations?'' he asked.

Hegde said India should give the same status of Sri Lanka in trade matters as given to Nepal, Bhutan, Maldives and Bangladesh as the ''least developed'' nations in the SAARC, though Sri Lanka and Pakistan were considered ''developing countries.''

Referring to the region's battered currencies, he described the termination of the Asian Clearing Union as a 'mistake'.

''Counter-trade appears to be, in the present circumstances, the best solution and that will perhaps stabilise the currencies in the region,'' he said.

He said it would be ideal to have a common currency for south and southeast Asia, but that was still an ideal.

''It may take maybe ten years. It is a distant goal,'' he said.

He said it was a ''mistake'' on the part of ACU -- comprising India, Bangladesh, Burma, Iran, Nepal, Pakistan and Sri Lanka -- to do away with the practice of conducting trade transactions in their respective national currencies under the ACU in 1995. At that time, the countries agreed to dealing in dollars as all of them held comfortable foreign reserves at that time.

It was felt that while the arrangement helped individual countries, it did not help boost trade.

Hegde noted that India had rupee trade with Russia and it had been working very well.

''Every year we had to export Rs 30 billion worth of goods in dollar terms. Why can't we have that kind of arrangement among the SAARC countries?'' he asked.

He said India and Indonesia had started barter trade after an Indian trade team visited Jakarta recently. India exported rice and pharmaceuticals to Indonesia in exchange for fertilisers from that country, he added.

UNI