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Setting up Special Economic Zones in Trincomalee aimed at Providing Job Opportunties for Tamil victims of Ethnic War

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by N Sathiya Moorthy

In a masterly stroke aimed at improving bilateral economic relations on the one hand, and job opportunities for the Tamil victims of the ethnic war, New Delhi and Colombo have agreed to set up Special Economic Zones (SEZ) for Indian engineering, auto components and pharmaceutical industries in the eastern port town of Trincomalee.

Marking Human Rights Day in Trincomalee-file pic, 2008-pic by: Drs. Sarajevo

The decision, taken at a meeting the visiting Indian Commerce Minister Anand Sharma had with Sri Lankan Economic Development Minister Basil Rajapaksa at Colombo, provides for the setting up of ancillaries units for auto-manufacturers and other engineering companies, located in Tamil Nadu and the rest of South India.

In good time, Sri Lanka can expect to have auto manufacturers too setting up shop on the island. The realisation has been there in Colombo for decades now that it could at best replicate the success story of Japan, which did not have any raw materials other than human ingenuity and human resources before it went on to become a top-notch industrialised nation in the world, overcoming the disastrous consequences of the Second World War.

Post-war, Sri Lanka has a ‘peace war’ on its hand, and its war-time developmental initiatives may have to go hand-in-hand with devolution initiatives, given the divergent nature of the conflicts, for Sri Lanka to replicate the Japanese success story, to a greater or lesser degree, in the regional context, for starters.

The India-Sri Lanka initiative now calls for officials from the two countries to produce a report in this regard within three months. Likewise, Indian pharmaceutical manufacturers are expected to send a team to Sri Lanka for discussing the details of setting up a special manufacturing zone for their operations. Translated, this could also mean medicines at a much cheaper price for Sri Lankans, who are now forced to bear the high cost of drugs, imported often from the distant West, where patent costs and transportation levies make them unaffordable for the common man.

It does not stop there. Minister Sharma was accompanied by an investor delegation from India, whose members have reportedly shown a keen interest in investing in existing/sick and new units in Sri Lanka. As is known, Sri Lanka is a global name in ready-made garments, and its dependence on the sector as a forex earner was sought to be exploited by ‘peacenik nations’ at the height of ‘Eelam War IV’, to extend or deny export concessions.

With Southern India, starting with Tamil Nadu, being a hub of high-quality technical education, there is an interest to invest in Sri Lanka, as and when the Colombo Government facilitates the process through required changes to rules and regulations. Such a course could help Sri Lanka’s higher education sector and employability of its youth, where there has been a huge and persistent shortage over the decades. Guided and administered properly, it could become a forex-earner, too.

Irritants on either side

Though the media claimed otherwise earlier, Minister Sharma clarified that he and his team did not discuss the much-delayed Comprehensive Economic Partnership Agreement (CEPA) with their counterparts. Yet, the overall benefits to Sri Lanka and Sri Lankans in terms of job-creation for the locals could be greater, as and when CEPA is cleared. If nothing else, it would clarify areas of investor-interests from the Sri Lankan perspective.

However, for that to happen, Sri Lanka would have to take a holistic view of CEPA, and not adopt just a sector-wise approach, all in a way contributing to balance bilateral trade, which at present is hugely in India’s favour, and for right and acceptable reasons, flowing from the size of economy, manufacturing and agricultural base.

Today, early Sri Lankan clearance for CEPA would boost investor confidence, not on peace and stability, but in the Government’s promises and processes. As may be recalled, the Sri Lankan reservations on CEPA erupted, almost as an after-thought, and many Indian investors in particular were waiting on the wings to view the progress on that score before making their medium and long-term investment decisions.

At the same time, the implementation of an FTA between the two countries since the Nineties has shown up gaps between initial intention and actual implementation. While certain huge gaps that became a serious concern for India could be readily attended to, Sri Lankan exporter’s concerns in terms of customs clearances, which are otherwise a low-priority problem of daily recurrence, need to be fully addressed.

The existence of different and differential regulations and tariffs between Indian States, and also that of a multitude of agencies at different-levels at the Centre and in the States has also been an irritant. Minister Sharma’s visit talked about Customs issues that need to be sorted out, overall.

In this respect, a lot needs to be said about the Sri Lankan officials’ approach to bilateral projects that are proposed/cleared at the political-level. The 50,000 free houses project that India has funded is a case in point. Most of those houses are planned for the Northern Province, which took the brunt of the ethnic war.

So is the Sampur thermal power project, also in the Eastern Province as Trincomalee. Delays of the kind as the Government of India and its public sector undertakings had faced on these projects has the inherent potential to put off private sector investors, most of whom in the engineering and auto components SMZs could be supplying ancillaries to American and Japanese manufacturers, who are testy about deadlines and project commencements. In a way, it will be a message for the investor community in India, too, but more importantly to their counterparts from the rest of the world.

It is too early to say what shape the proposed SEZs would take. Yet, sustainable development of the East, as also of investor interest could involve creating a pool of skilled and semi-skilled labour force with adequate academic exposure. The investors would be aware of the needs, and may not be unwilling to promote the cause, locally, if only over a period.

Peace, political stability and sustainability would become the password then. In return, Sri Lanka would be able to exploit its human resources availability at the mid-level of services sector, by providing them with job opportunities nearer home. Over time, this could benefit the local economy and transform the nation’s face all-round. For this to happen, Trinco already has the only natural harbour in the region. The port’s capacities would have to be increased over time, but whose inherent advantages were exploited the wrong way during the decades-old ethnic war.

Historic contexts

India already has an economic presence at Trincomalee, where it took on long lease the Second World War oil storage farm, for storing imported petroleum products for Lanka-IOC, under an existing bilateral arrangement. The agreement purportedly flowed from the India-Sri Lanka Accord, though as an Annexure letter from then Indian Prime Minister Rajiv Gandhi to Sri Lankan President J R Jayewardene.

According to Sri Lankan strategic analysts, the Annexure had its origins in the efforts of the Sri Lankan Government to lease out the oil farm to a US company, at the height of the ‘Cold War’ era.

In the perception of some, the American reasoning may have flowed from the inability of the US Seventh Fleet, based not far away at Diego Garcia, to sail into the Indian waters before the surrender of close to a 100,000 Pakistani soldiers in what had by then been recognised by New Delhi and Moscow as ‘Bangladesh’. The rest, as they say, is history.

In the post-war Sri Lanka, Trincomalee may be at the centre of a re-merger demand of the Tamil National Alliance (TNA). Citing pre-war demands of the moderate Tamil polity in the country, TNA leader R Sampanthan has also recently spoken about a realignment of the Provinces structure in the country by merging the ‘Tamil districts’ of Batticaloa and Trincomalee with the North, and forming a new South-Eastern Province for the Tamil-speaking Muslim community.

The current TNA call has its origins in the demand for a merged North-Eastern Province, and the promise of the late S J V Chelvanayagam, the ‘father’ of the ‘Tamil nationalist movement’ and founder of the ‘Illankai Tamil Arasu Kadchi’, loosely translated as the ‘Federal Party’ by the founders themselves, to make Trincomalee the capital of the merged entity.

Despite the focus of the Tamil militancy being in the North, particularly the ‘cultural capital’ of Jaffna, particularly after the LTTE had annihilated other groups, Trincomalee became the official capital of the merged North-East, created under the Indo-Sri Lanka Accord, 25 years back. Post-war, the demand for merger does not involve Trincomalee as yet.

If anything, the revival of any such demand, whatever be the fate and context of the one for re-merger after the Supreme Court of Sri Lanka had annulled the merger in 2006, could complicate pan-Tamil politics more than solving any real problem that the post-war Tamils face in the country.

In context, it could also mean that the pan-Tamil polity in Sri Lanka and the south Indian State of Tamil Nadu too may have little much to talk about the ‘China factor’ in bilateral relations with Sri Lanka, particularly after former Chief Minister M Karunanidhi, whose DMK is a partner in the ruling Congress-UPA at the Centre, had flagged it in recent times, that too in the context of the ‘TESO conference’ that he is hosting later in the month, at Chennai.

It is in this regard, Sri Lanka and Sri Lankans, starting with the Tamils of the East in this particular context, have to decide, what is good for them in the twin-topic discourse on development and/or devolution, before they can expect full investor-participation, from across the Palk Strait to begin with, and the rest of the world in subsequent phases.

(The writer is a Senior Fellow at Observer Research Foundation for which this paper was written)

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