The freshly-signed Sri Lanka-Singapore Free Trade Agreement (SLSFTA), which provides a strong signal to the rest of the world that Sri Lanka is serious about economic liberalisation and global integration, will woo potential investors, opines a top economist.
Speaking at the Sri Lanka-Singapore Business Forum held recently, Economic Advisor at the Ministry of Finance, Deshal de Mel said the chapter on investment in the SLSFTA provides the required protection, certainty and policy environment sought after by serious investors.
“This agreement provides that required transparency and policy certainty from investment perspective. It will also enhance bilateral trade, improve the economic and investment relationship, and provide more secure and open access for goods, services and investments between Sri Lanka and Singapore,” de Mel pointed out.
The SLSFTA, Sri Lanka’s first FTA with a South East Asian country covers a wide range of areas including goods and services, investment, e-commerce, government procurement, intellectual property rights, telecommunication, etc. Analysts also point out that stronger relations with Singapore can help Sri Lanka’s standing in South-East Asia and participation in global value chains.
“The FTA is expected to encourage greater investment flows between the two countries. Singapore sees potential in Sri Lanka as a destination for Singaporean investments and a gateway to the rest of South Asia, given the proximity to and trade agreements with countries in the South Asian region,” researchers at the Institute of Policy Studies of Sri Lanka (IPS), Sri Lanka’s apex socio-economic policy think tank said.
They point out that the SLSFTA could act as a catalyst towards more proactive engagement with fast growing economies in East Asia, through exports and investments, given that the diversification of both export markets and the basket of exports are vital to position the Sri Lankan economy on a more sustainable footing.
“Sri Lanka’s over-dependence on European and American export markets increases the economy’s vulnerability to external shocks, such as the economic recession in 2008 and the loss of GSP+ concessions in 2010,” the IPS officers highlighted in analysis.
Apart from Singapore, Sri Lanka has already expressed interest in pursuing trade deals with other South East Asian nations like Malaysia, Thailand, and Indonesia in the near future. The move is to improve economic linkages with ASEAN and potentially join the Regional Comprehensive Economic Partnership (RCEP) trade agreement.
“The Singapore-Sri Lanka FTA is part of a broader strategy of looking East to renew our trade relationships. While we focus on growing and sustaining in our traditional markets of the US and Europe, we have begun to diversify our markets towards Asia and focus on plugging in to Asian supply chains,” Minister of Development Strategies and International Trade, Malik Samarawickrama said at the Sri Lanka-Singapore Business Forum.
Meanwhile, according to a joint statement issued by Sri Lanka and Singapore following the signing of the FTA, Singaporean Prime Minister Lee Hsien Loong also urged Sri Lanka to engage with the Association of East Asian Nations. “For Sri Lanka the opportunity to access the ASEAN market is important. Their businesses are keen on that, working with Singapore partners. And likewise for our companies, accessing Sri Lanka - but through Sri Lanka, accessing the South Asia market,” Singapore’s Minister of Trade and Industry, S. Iswaran told Singaporean media in Colombo a day after signing the trade pact.