Sri Lanka can be a conduit for India-Pakistan trade which is hampered by deep-seated political differences between the two countries, says Dr Saman Kelegama, Executive Director of the Colombo-based Institute of Policy Studies.
"By having preferential access to the two major markets in South Asia — India and Pakistan — Sri Lanka can now position itself as the conduit of India-Pakistan trade that has diminished due to political problems centered around the Most Favoured Nation treatment," Dr Kelegama says in his column "Economic Watch" in the state-owned Daily News.
"Currently, trade between India and Pakistan takes place mostly via Singapore or Dubai. If Sri Lanka can promote Indo-Pakistan trade by encouraging Pakistani investors to open operations in Sri Lanka in order to trade with India using the India-Sri Lanka-Pakistan FTA (ISLPFTA) and vice versa, then Sri Lanka can acquire the hub status in South Asia," he says.
India-Sri Lanka Free Trade Agreement (ISLFTA), which is the earlier of the two, has already proved its usefulness in promoting bilateral trade for mutual benefit.
India-Sri Lanka trade has increased three times in the last four years and Sri Lanka's trade deficit with India has come down by 50 per cent.
{{/usCountry}}India-Sri Lanka trade has increased three times in the last four years and Sri Lanka's trade deficit with India has come down by 50 per cent.
{{/usCountry}}Sri Lanka's FTA with Pakistan, which became operational in June 2005, is already showing positive signs, according to Dr Kelegama.
Indian investors are showing interest in investing in Sri Lanka to export to Pakistan, he adds.
There are 206 items from Sri Lanka, which can now enter Pakistan duty free.
Twenty-one categories of apparels (200,000 pieces) are allowed entry into Pakistan at 35 per cent duty without rules of origin on fabric usage.
"This will enable Sri Lankan apparel exporters to capture a notable proportion of the Pakistani market," Dr Kelegama says.
Great scope for Indo-Pak trade
According to available statistics, legal trade between India and Pakistan is just $415 million a year.
But unofficial trade through third countries like Dubai and Singapore, is almost $2 billion a year, showing the great potential there is for Indo-Pak trade.
By all accounts, Indian and Pakistani businessmen are eager to develop trade and investment ties, but they are held back by their respective governments for political reasons.
According to Abdul Basit, Vice President of the Lahore Chamber of Commerce and Industry, Indian companies could enter into joint ventures with Pakistani companies in the field of software development, telecom, IT, computer engineering, bio-technology, light engineering, foundry machinery, metallurgy, precious and semi precision gem stones and petrochemicals.
For starters, there could be Indian and Pakistani investments in Sri Lanka with export to India or Pakistan as the aim.
There could even be Indo-Pak joint ventures in the island with the aim of exporting to India and Pakistan.