Department of Commerce Sri Lanka

The Agreement on South Asian Free Trade was finalized and signed by the Council of Ministers of the member states of SAARC on 6th January 2004 in Islamabad , Pakistan . The preliminary substantive work towards finalization of SAFTA was entrusted with the Committee of Experts (COE), which was established drawing expertise from the member states.

SAFTA aims at further enhancing the programme of regional economic integration through promotion of preferential trade, which commenced with the establishment South Asian Preferential Trading Arrangement (SAPTA) in 1995.

For the purpose of developing comprehensive parameters for the implementation of SAFTA, the Council of Ministers at its 24th Session, held on 2 - 3 January 2004 in Islamabad directed the COE to continue its work to negotiate on 4 key elements, which form an integral part of the Agreement:

. Sensitive Lists
. Rules of Origin
. Technical Assistance to Least Developed member states (LDCs)
. Mechanism of Compensation for Revenue Loss for LDCs

The COE has so far met eight times and deliberated at great length on all aspects relating to the said areas and achieved substantial progress.

The Sri Lanka 's Sensitive List (Negative List), finalized in consultation with the line Ministries and the private sector stakeholders, has already been circulated among the member states as per the requirement.

The COE has also held detailed discussions on the matters pertaining to the SAFTA Rules of Origin and the negotiations are still underway.

In terms of the directives given to the COE by the Heads of States, Technical Assistance by the Developing member states ( India , Pakistan and Sri Lanka ) to Least Developed member states ( Bangladesh , Bhutan , Maldives and Nepal ) has been discussed and Sri Lanka has proposed to offer technical assistance under the following four areas.

. Customs Procedures
. Product Standards
. Taxation
. Export Promotion

Any Technical Assistance programme would involve cost to the government, either implicitly or explicitly. However, Sri Lanka could take a long-term view in providing technical assistance, whereby the country would benefit exceeding the initial cost. A programme of technical assistance would help Sri Lanka build its capacity for delivering training, human resource skills and a host of other related services and help become a recognized center for provision of international training. In this context, committing some funds for technical assistance earmarked for LDCs in South Asia will form the initial investment, of which long-term return will far exceed the initial cost.

In terms of the directives given by the Heads of States, the COE is continuing to negotiate a mechanism for payment of compensation for the anticipated revenue loss by the LDC member states. Developing member states are expected to pay some share of the losses, which may result in by pursuing a tariff reduction programme , being a the key undertaking by under the SAFTA.

As such, the approval is sought from the Cabinet of Ministers;

(a) To earmark provisionally a sum of Rs. 5.0 million per year for the purpose of providing technical assistance to LDCs once the SAFTA enters into force.
(b) Take note of the fact that some share of compensation on account of revenue loss has to be paid to LDCs member states, once the agreement enters into force.

It was agreed to inform the Cabinet of Ministers of any future developments in regard to the four areas stated above as the negotiations progress further on SAFTA.