South Asia has a vibrant economies and the region is a major market for Sri Lanka. South Asian countries could benefit by facilitating trade when there are trade restrictions among the countries in the bloc, economists and trade experts said.
Pakistan downgraded its diplomatic ties with its nuclear-armed rival India on Wednesday stating that it would expel the Indian envoy and suspend trade, following a deepening row over New Delhi’s unilateral decision to tighten its grip on disputed Kashmir.
Senior Professor in Business Economics, University of Colombo and Vice President, Sri Lanka Economic Association H.D. Karunaratne, said Sri Lanka must grab the opportunity, if it arises, to facilitate trade with India and Pakistan who are embroiled in this dispute. India stripped the Himalayan region of its seven-decade long semi autonomous status early last week through a presidential decree just hours after it imposed a curfew in the valley. Experts are of the view the move will trigger conflict with Pakistan which has made a claim to Muslim majority Kashmir.
“Japan benefited when the Korean war started in the early 1950s by providing facilities to the US army and other countries. If we are strategically prepared we could benefit when such situations arise in the region and elsewhere by making use of Free Trade Agreements (FTAs),” Prof. Karunaratne said.
Sri Lanka has FTAs with India, Pakistan and Singapore, and is negotiating one with China.
The FTAs with India and Pakistan cover only trade in goods and the agreements provide for duty free entry and duty free preference for manufacture and agricultural goods.
Former Central Bank Deputy Governor W.A. Wijewardena said there is potential for Sri Lanka to gain from the escalating tensions between nuclear rivals but it is very unlikely that either country would want to go for an all out war. Tension between India and Pakistan has been growing over its border, and it had escalated on many occasions in the past.
However, analysts of the India-Pakistan border issue said the move by India will have an influence on its neighbours such as Sri Lanka, which is approaching an election.
Sri Lanka’s final tariff liberalisation commitment under ISFTA came into effect in November 2008 and with the completion of the commitment, the ISFTA which came into effect in March 2000 has been fully implemented.
However, Sri Lanka has already got full duty free access to the vast Indian market under the ISFTA since March 2003. Entrepreneurs could export over 4,000 product lines to the Indian market on a duty free basis.
South Asia holds on to its top spot as the world’s fastest growing region according to the World Bank’s figures, with growth set to step up to 7.0 percent per annum in 2019, then 7.1 percent in 2020 and 2021, but the region needs to increase its exports to sustain its high growth and reach its full economic potential.