Singapore's newly signed free trade agreement (FTA) with Sri Lanka will bring significant benefits to Singapore companies that want to export to and invest in Sri Lanka.

Under the FTA, Singapore enjoys lower tariffs, more access to services markets, a green light to bid on large government procurement deals and better protection for investments, among other things.

While Sri Lanka is not a huge economy - its GDP is just over a quarter of Singapore's - it has potential for growth. The country's population is more than three times as big as Singapore's, and it has a new government that is determined to liberalise.

Since its civil war ended in 2009, its economy has been growing at 6.2 per cent per annum on average. And it is also a key destination for billions in Chinese money under the Belt and Road Initiative - some of which is likely to trickle down to Singapore companies, thanks to this FTA.

A concession Singapore did not get is a tariff reduction on petroleum products. Sri Lanka had impending foreign investments that may have been jeopardised if they had cut tariffs for Singapore. Nonetheless, the FTA did include a "most favoured nation" clause, so if Sri Lanka signs an FTA with another country, terms that are more favourable than the FTA with Singapore will automatically be extended to Singapore.

For Sri Lanka, the deal could mean that more Singapore money will flow into the country, to help in their rebuilding.The inflow will create jobs and result in a transfer of technology and expertise.

Sri Lanka is also hoping that the FTA will provide a fillip to ongoing trade talks with China and India.

With the global political mood not favouring free trade at the moment, the deal is welcome news.

But an FTA that companies do not take advantage of is just a piece of paper. The ball is now in the court of Singapore firms, which should act fast to gain a foothold in the country before the opportunities are snapped up by others.