South Asia needs effective regulation for liberalisation - Dr. Saman Kelegama

South Asia needs effective regulation but historically the region is plagued with over regulation. It is particularly important in the services sector as it cannot be inspected prior to consumption, said Executive Director Institute of Policy Studies (IPS) Dr. Saman Kelegama making the introductory remarks at an International Conference in Colombo.

Themed Trade in Services, in South Asia: Opportunities and risks in liberalisation the conference was organised by the IPS and Fredrich Ebert Stiftung.

He said that regulations are important in services such as health and education which have social impacts and telecommunication and finance which have economic impacts. Therefore an effective but un-cumbersome regulatory regime is an essential pre-requisite for liberalisation.

Dr. Kelegama said that the shortage of data is also a significant constraint on effective liberalisation while research is required to identify the scope for collaboration and cooperation within South Asia.

South Asian countries have already liberalised their service sectors to a certain extent through unilateral, multilateral, regional and bilateral initiatives. But the trade in services is not close to the proportion of services to the GDP.

Under the General Agreement on Trade in Services (GATS) most South Asian nations other than Bhutan have made commitments. Further commitments are expected under BIMST-EC and CEPA.

Trade in services is also expected to find its way into the SAFTA framework. He said that prior to embarking on negotiations a country should have a strong grasp of its own offensive and defensive interests and this responsibility lies with all stakeholders.

Since factor markets are imperfect liberalisation could result in medium and long term unemployment in certain uncompetitive sectors. Therefore it is necessary to strike a balance between the medium term hazards of increased unemployment and the long term benefits of increased competitiveness.

Trade in Services has largely been an offensive interest of developed nations attempting to break into regulated developing country markets. The status quo is shifting with developing nations harnessing significant offensive interests in services as well.

It is important to identify particular sectors where strong offensive interests exist and identify the direct and indirect benefits these could bring.

When considering domestic liberalisation defensive interests need to be considered along with the benefits of liberalisation. Defensive interests include sectors where livelihoods of the poor are affected, emerging sectors require independence from reliance on foreign supply.

Eleven years after services were included in the multilateral trading system, the WTO's GATS remains an unfinished project due to the absence of data, commercial insecurity and a crippling perception of an unfavourably tilted playing field prevailing in development circles throughout the negotiations.

Minister of Export Development and International Trade Prof. G. L. Peiris who was the chief guest said that Sri Lanka is working towards a Free Trade Agreement with Nepal while the country has signed FTAs with India and Pakistan.

At present Sri Lanka and India are negotiating a Comprehensive Economic Partnership Agreement (CEPA) to facilitate the export of services between the two countries which is an extension of the FTA.

He said that export of services has overtaken the export of goods globally and even in Sri Lanka 57% of earnings are through services.

SG