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January 9, 2016

Deals with Sri Lanka


January 9, 2016

Prime Minister Nawaz Sharif’s three-day visit to Sri Lanka has borne fruit. The key agreement between the countries is Sri Lanka’s decision to purchase eight JF-17 jet fighters from Pakistan. Despite pressure from India which still seeks to isolate Pakistan, especially in terms of military hardware sales, the agreement signals that Pakistan has been able to convert its strong relationship with Sri Lanka into a commercially beneficial one. There were reports that Sri Lanka had been under pressure of India cancelling investment and loans for the country if it went ahead with the purchase. With eight other agreements inked to further regional cooperation on matters ranging from health and education to science and technology, Nawaz’s visit can be considered quite a success. The two countries have agreed to push bilateral trade to over $1 billion with Nawaz extending an invitation to Sri Lankan businessmen to visit Pakistan and explore opportunities for investment in the country.

Sri Lanka’s decision to go ahead with the purchase of the JF-17s is a significant one for Pakistan since we had been looking to market the locally manufactured military aircraft. This nod to the Pakistani airplane will open up the possibility of Pakistan becoming an exporter of military hardware. Pakistan has long helped Sri Lanka without being able to convert its military support into tangible benefits for our economy. The agreements in Sri Lanka after the PM’s visit also signify a different method to pursue regional cooperation. Pakistan and Sri Lanka are now looking to sign a Free Trade Agreement (FTA), which would include service provision. A currency swap agreement is also under consideration. While this would be a big deal, talk of FTAs has been going on in the region for over two decades. It is probably best to wait for such an agreement to be actually inked before celebrating. The only deal with concrete implications yet is the JF-17 one, while the other agreements are still mere agreements. And even the JF-17 has now had questions raised over it after a report in the Indian newspaper, The Hindu, quoted Sri Lankan officials, including the defence secretary, denying that the deals ever took place. This confusion will need to be clarified by the Pakistan government at the earliest; any retraction of the deal would be both highly embarrassing and devastating to relations between the two countries. In principle, though, it is good to see Pakistan open to pursuing dialogue and trade across Saarc countries. If the JF-17 agreement goes through, then there will – and should – be more to follow.

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