Sri Lanka hopes to sign FTA with China by Nov.

Sri Lanka is negotiating intensely with China on a Free Trade Agreement (FTA) with hopes to sign it as recently as November, a top minister said here Tuesday despite significant issues yet to be decided.

Discussions on negative lists are a key point that remain to be resolved admitted, Investment Promotion Minister Lakshman Yapa Abeywardana said.

He noted that the government was attempting to promote Sri Lanka's vibrant apparel industry, which is targeting a revenue of 4.1 billion U.S. dollars in 2013, for preferential tariffs. "We are also working on getting a range of items given 100 percent tax exemptions," he told the media but declined to elaborate on what the goods were.

Abeywardana also expressed hope that the FTA would be signed ahead of a landmark Commonwealth Heads of Government Meeting ( CHOGM). which will be held in mid-November.

CHOGM, which is the highest decision making body of the Commonwealth, will be chaired by Sri Lanka and will hold a business council on the sidelines to attract 1 billion U.S. dollars in investment to the island.

China has also been invited to attend CHOGM.

However, experts here have already voiced concern that an FTA would be a massive disadvantage to local manufactures.

Local think tank Institute of Policy Studies (IPS) Executive Director Dr. Saman Kelegama told a gathering of businessmen in Colombo that while Sri Lanka's exports would benefit from access to China's emerging middle classes, imports would decimate the fledgling local manufacturers.

Dr. Kelegama called for a strong negative list to protect local manufacturers. "Chinese imports are far more competitive and would decimate the local manufacturing market. Companies that are now engaged in import substitution products, even those as basic as pens and knickknacks, would find themselves in extremely difficult times. Even India, which as a much stronger manufacturing base than Sri Lanka, has found their toy industry all but destroyed by Chinese imports,"he cautioned.

Unless special provisions are incorporated into the FTA to provide significant protection, Sri Lanka's local businesses would face strong negative impacts, he warned.