Daily Mirror | 14 June 2018
Sri Lanka–Singapore FTA: An agreement between a giant and a child
by Canishka G. Witharana
A giant entered into an agreement with a child! It happened on January 23, 2018, in Sri Lanka. The true parties were Singapore (giant) and Sri Lanka (child). Why? Both are not of ‘equal status’ to create economic relations. The difference is not pertaining to their respective economic powers but their legal and regulatory frameworks.
Singapore has a strong legal and administrative system that has been directly or indirectly included in the agreement. On the other hand, Sri Lanka has little or no laws regulating the specific areas, especially the services and investments covered in the agreement.
Strangely, we do not have even a national trade policy pertaining to international trading. This inequality places the two countries, their economies and people, at two different levels, when implementing the Sri Lanka–Singapore Free Trade Agreement (SLSFTA).
The SLSFTA covers not only goods and services. It deals with investments, telecommunications, etc. and provides for arbitration too. The SLSFTA is craftily drafted in such a manner that in its implementation, the Sri Lankan economy would be placed in a danger of gradual exploitation. Dozens of practical examples can be demonstrated in this regard. However, I have randomly selected to illustrate how the foreign ‘managers to workers’ of different categories could intrude into the domestic market.
Placement and supply services of personnel
Among several service sectors we opened to Singapore, two are “Placement and Supply Services of Personnel (Executive Search Service) (CPC 87201)” and “Placement and Supply Services of Personnel (CPC 87203, 87204, 87205)”. These are supply services of personnel, means “manpower service suppliers”. In that, the agreement permits Singaporean companies engaged in these services to register in Sri Lanka and do business. These companies are authorised to bring to Sri Lanka the personnel referred to by CPC numbers.
CPC stands for “Provisional Central Product Classification” of the United Nations Statistical Office (1991). Here is the classification of the personnel referred to by such numbers:
87201; Executive search services: Services consisting in the search for, selection and referral of executive personnel for employment by others. Included in this category are services provided by senior administrators and managers, whose functions generally include planning, organising, directing and controlling activities of private or public sector businesses through subordinate administrators. The services may be supplied to the potential employer or to the prospective employee and may involve the formulation of job descriptions, screening and testing of applicants, investigation of references and other research.
87203; Supply services of office support personnel: Services consisting in supplying on a fee or contract basis to the clients, whether on a temporary or long-term basis, office support personnel hired by the supplier, who pays their emoluments. Included are the provision of personnel such as secretaries, clerks, receptionists, book-keepers, data entry operators, typists and word-processor operators.
87204; Supply services of domestic help personnel: Services consisting in supplying on a fee or contract basis to the clients, whether on a temporary or long-term basis, domestic help personnel hired by the supplier, who pays their emoluments. Included are the provisions of maids, nannies, housekeepers, companions, etc.
Exclusions: Supply services of specialized domestic services through employees on the payroll of the supplier are classified according to the services rendered, e.g. as cleaning services, class 8740 or lawn maintenance services, subclass 88110 (services incidental to agriculture).
87205; Supply services of other commercial or industrial workers: Services consisting in supplying on a fee or contract basis to the clients, whether on a temporary or long-term basis, industrial workers hired by the supplier, who pays their emoluments. Included are supply services of construction workers, maintenance workers, drivers, machinists, assemblers, metalworking machine operators, labourers, movers, shippers, etc.
These personnel can be employed in any entity in Sri Lanka. There is no provision restricting these personnel to Singaporeans or Sri Lankans. Therefore, any natural person of any other country (e.g. India, Thailand, China, etc.) may also be employed or utilized by such manpower service providers. The validation period of the SLSFTA is ‘indefinite’. A situation as such would add fuel to the fire of the unemployment crisis. Who is responsible for deciding to expose our market to that extent?
Development Strategies and International Trade Minister Malik Samarawickrama signed this agreement on behalf of Sri Lanka. His ministry is responsible for negotiating the terms and drafting of the SLSFTA. Did he have the authority to sign the agreement? The answer is a mystery.
On December 22, 2017, the prime minister’s secretary issued a letter directing the Secretary of the above ministry (Chandanie Wijayawardhana) to submit the draft agreement (SLSFTA) to the Cabinet of Ministers for approval before the Singapore prime minister’s visit on January 23, 2018. Accordingly, Wijayawardhana submitted a Cabinet Memorandum bearing the same date (December 22, 2017) with a copy of the draft of the SLSFTA. The minister submitted the memorandum to the Cabinet of Ministers on January 9, 2018. Several observations were submitted by 13 ministers and the president on this memorandum.
The president in his observations dated January 8, 2018, stated, “I suggest there are few considerations kept in mind when signing and implementing the SLSFTA. These are: (i) while some trade agreements are necessary, give precedence to unilateral reforms (ii) make all future trade agreements consistent with the national trade policy that was agreed with the Cabinet in July 2017 (iii) reduce trade protection rates and reduce their variance on the defined path (iv) given the challenge of increasing exports rapidly, existing barriers to private sector’s adjustment and access to needed inputs must be assured (v) trade policymaking institutions must be strengthened with competent and sufficient staff”.
(With respect to the president, may I state that there is no national trade policy in Sri Lanka to date.)
Such observations were submitted to the Cabinet held on January 9. Most of the ministers emphasized that the prior approval of the Cabinet should be obtained by the relevant minister (Malik Samarawickrama) before the signing of the agreement. Foreign Affairs Minister Thilak Marapone, in his observations dated December 27, 2017, categorically stated – inter alia – that, “I wish to inform that the text of the FTA has not been cleared by the Foreign Affairs Ministry in accordance with the accepted treaty practice of Sri Lanka.”
The Cabinet of Ministers considered the memorandum with the observations submitted by the president and the ministries and after discussions, the Cabinet directed Wijayawardhana:
I. “To take a note of the matters highlighted in the observations made by the president and other ministers and to take the necessary action to amend the draft agreement (FTA) where found necessary.
II. To take action to obtain the clearance of the Attorney General for the said draft agreement amended as per (i) above, drawing his attention particularly to arbitration matters therein.
III. To submit the finalized draft agreement to the Cabinet through the minister for consideration.”
The above directions of the Cabinet of Ministers (taken on January 9) were communicated by the Cabinet secretary to the relevant ministries and Wijayawardana by letter dated January 17, 2018 (Ref; Cabinet Paper No.17/2982/752/044).
No Cabinet meeting was held between January 17 and 23, 2018. Hence, there was no possibility to resubmit to the Cabinet the amended SLFTA with the clearance of the Attorney General, prior to January 23. The SLSFTA consists of over 1050 pages. Then how did Minister Malik Samarawickrama sign the SLSFTA on January 23?
Very strangely, the Cabinet website states that the minister was given the authority at a Cabinet meeting held on January 16. If this was correct, why didn’t the secretary to the Cabinet refer to such a purported incident on January 16, in his letter of January 17?
On the other hand, if the authority was given on January 16, why did the secretary inform in his letter to resubmit the amended SLSFTA to the Cabinet with Attorney General’s clearance? The sequence of the stated events is unintelligible and should have been fabricated. Obviously even the president’s observations (in addition to those of the other ministers) were blatantly disregarded by the minister (Malik Samarawikrama) and his secretary (Wijeyawardana). Their actions are totally arbitrary.
The legality of the SLSFTA is now questioned before the Supreme Court. However, unauthorized attempts are being made to implement the SLSFTA, initially through the Customs. Can this be implemented without the sanction of Parliament?
Clause 17.11 makes it mandatory for the parties to have the approval in accordance with their respective legal procedures. The same clause also provides that the SLSFTA will enter into force only after the “Parties exchange written notifications certifying that they have completed their respective applicable legal requirements and procedures for the entry into force of this agreement”.
As mentioned above, the SLSFTA apparently had not obtained the approval of the Cabinet. According to the Foreign Affairs Minister, the SLSFTA had not followed the “accepted treaty practice”.
The constitution of Sri Lanka provides as follows: Article 148 of the constitution provides: “Parliament shall have full control over public finance: No tax, rate or any other levy shall be imposed by any local authority or any other public authority, except by or under the authority of a law passed by parliament or of any existing law.”
The SLSFTA also deals with ‘investments’, which is an aspect covered by Article 157 of the Constitution. Therefore, without the sanction of parliament, the SFLFTA cannot be implemented.
This article touches only the tip of the iceberg. There are several other aspects in the SLSFTA that should be brought to the attention of the president, parliament and people. Therefore, all are invited to study the SLSFTA further and take the appropriate measures prior to its implementation, as this agreement would adversely affect the economy and lives of every citizen of Sri Lanka.