- Will boost debt-stricken local economy
- Signal to Asean that South Asia ready for economic engagement
Sri Lanka’s recent Free Trade Agreement (FTA) with Thailand will help to boost the crisis-stricken nation’s long-term plans to broaden its trade partnerships and strengthen its economy.
Signed in Colombo by President Ranil Wickremesinghe and Thailand Prime Minister Srettha Thavisin early last month, the FTA, which is now in force, offers immediate and phased-out tariff concessions over a 15-year period, the South China Morning Post stated.
In 2022, the total value of exports from Sri Lanka to Thailand was US$57.76 million, while Colombo imported goods to the value of US$302.64 million from the kingdom.
Export and logistics expert Rohan Masakorala said it was important for local businesses to be part of the global supply chain.
“These bilateral agreements are like building blocks of greater trade. They help to look at expanding your horizons in a multilateral framework and provide a more open and conducive environment for such trade to happen,” he said.
With RCEP being one of the world’s biggest trading blocks offering much greater market access, Maskorala said he believed getting these bilateral arrangements with Asean members would help negotiations for RCEP membership in the long run.
According to a research fellow from the Institute of Policy Studies of Sri Lanka, Asanka Wijesinghe, the FTA may not lead to an immediate hike in trade volumes, it provides a window for increased trade over time by removing tariffs on competitively exported products from both countries.
“Technically Sri Lanka should negotiate with the 15 economies in the RCEP. Completion of the Thailand FTA is a milestone in Sri Lanka’s ambition on accession to RCEP,” Wijesinghe said.
Sri Lanka is also negotiation with China for a FTA and interested in entering into trade deals with Malaysia and Indonesia.
According to Ganeshan Wignaraja, a fellow from the UK based think tank ODI, Sri Lanka’s FTA with Thailand could boost trade and investment between the two countries, including cheap Thai food imports for hard-pressed Sri Lankan consumers who face high domestic food prices,.
It could also attract foreign investment to boost Sri Lanka’s foreign exchange earnings and help pay off crippling external debt, he added.
Former deputy governor of the Central Bank, W. A. Wijewardena said: “Sri Lanka needs a comprehensive economic partnership agreement [CEPA] to capture some of the Thai investment flowing out into countries such as Myanmar, Laos, Cambodia, and Vietnam, instead of an FTA.”
He said CEPA would have room for cooperation in more areas.
Wignaraja said a CEPA with Thailand could help Sri Lanka “benefit from hi-tech Thai manufacturing and the practical research and innovation critical for long-term economic growth.”
Colombo should then work to seal CEPAs with other Asean member states, South Korea and Japan, he added.
Political science researcher at the National University of Singapore’s Institute of South Asian Studies, Rajni Gamage said the Sri Lanka-Thailand FTA could serve as a signal to the rest of Asean that South Asian countries other than India and Bangladesh were ready for more connectivity, investment and economic engagement.
