COLOMBO: Singapore and Sri Lanka on Tuesday (January 23rd) signed a free trade agreement that will deepen economic relations and allow for greater trade flows between the two countries. In order to strengthen economic relations, Sri Lanka and Singapore signed a bilateral free trade agreement on 23 January 2018. Despite decades of cordial diplomatic relations between the two islands, only 1.1% of Sri Lanka`s exports and 5.3% of imports in 2016. A closer look at an important agreement between the two parties. The ministry said the deal also contains one of the most liberal rules of origin, which will allow more exports from Singapore to qualify for the lower tariffs negotiated. Singapore, which will take over the ASEAN presidency in 2018, is expected to support Sri Lanka`s possible participation in the Regional Economic Partnership (RCEP). RCEP promises to become the largest free trade agreement in the world: the 16 participating countries account for 31% of global GDP, including the ten ASEAN countries of China, India and Japan. RCEP membership offers Sri Lanka the price of simultaneous access to a vast regional market and dynamic Asian 1DIs. Participation in RCEP is arguably simpler and weighs less on Sri Lanka`s restricted negotiating capacity than on the separate negotiation of 16 bilateral free trade agreements. Increasing FDI from Singapore to Sri Lanka is also a priority: only 5.3% of Sri Lanka`s foreign direct investment in the period 2014-17 came from Singapore. Singapore`s business investment climate has improved: the free trade agreement rightly contains safeguards against expropriation and discrimination against Singaporean investments.
Singaporean companies can apply for major public procurement projects in Sri Lanka and the Sri Lanka Board of Directors targets Singaporean foreign direct investment in infrastructure, IT services, tourism and education. The agreement underscores Singapore`s serious search for trading partners and investment outside of East Asia and shows Singapore`s recognition of Sri Lanka`s potential as a trading centre in the fast-growing Indian Ocean region. The agreement is also the result of Sri Lanka`s trade policy following conflictual conflicts, in order to stimulate weakening growth and strengthen relations with East Asia. . . .