COLOMBO - Singapore and Sri Lanka signed a free trade agreement on Tuesday (Jan 23).
The deal guarantees tariff-free access for Singapore exports to Sri Lanka on 80 per cent of all tariff lines for 15 years, a statement from the Ministry of Trade and Industry (MTI) said.
Singapore already applies a zero tariff rate for 99 per cent of the items listed in the tariff schedule for Sri Lankan exports to Singapore.
With the FTA, tariff savings for Singapore exports are estimated to hit $10 million annually.
The deal also covers services, with the two countries committing to allow greater access in each other's markets for professional, environmental, construction, tourism and travel-related services.
Singapore firms will also be allowed to bid for government procurement projects by selected large government entities and state-owned enterprises.
In the lead-up to the FTA signing, Sri Lankan companies and professional groups have expressed strong concern about the tougher competition and bigger inflow of labour that may result from the deal.
To address these concerns, the Sri Lankan government announced on Monday that it would table two Bills in Parliament to counter sudden surges in imports as well as unfair trade practices such as dumping and illegal subsidies.
It also promised that the approval process for foreign labour entering Sri Lanka will be "transparent and balanced".
The MTI said in a statement that the deal "will position Singapore as an early and supportive partner of Sri Lanka's economic liberalisation plans and development".
Singapore is the seventh-largest foreign investor in Sri Lanka. Between 2005 and 2017, 119 Singapore companies invested US$658 million in Sri Lanka.
MP Liang Eng Hwa, who chairs the Government Parliamentary Committee for Finance and Trade and Industry and is in Sri Lanka for the signing, said: "This FTA further diversifies and strengthens our international connections; and will tangibly help Singapore businesses seeking opportunities in Sri Lanka.
"Against concerns of protectionism in some parts of the world, this FTA is even more significant as we work with like-minded partners like Sri Lanka to proliferate the mutual benefits of open trade."
The signing was witnessed by Prime Minister Lee Hsien Loong and President Maithripala Sirisena. It was signed by Minister for Trade and Industry (Industry) S. Iswaran, and his Sri Lankan counterpart, Minister for Development Strategies and International Trade Malik Samarawickrama.
Also present were Mrs Lee, Foreign Minister Vivian Balakrishnan, MP Saktiandi Supaat and Singapore's Non-Resident High Commissioner to Sri Lanka S. Chandra Das.
In its statement, MTI said the FTA contains "one of the most liberal rules of origin" - which means many goods that originate in other countries but are processed in Singapore will enjoy the tariff reductions under this FTA when they are subsequently exported to Sri Lanka.
Beyond reducing tariffs and removing barriers to services, the FTA protects the investments of Singapore firms by instituting safeguards against expropriation and discriminatory treatment according to nationality.
The deal encourages e-commerce, with clauses to facilitate cross-border transfer of electronic information and data.
It is also Singapore's first FTA to list the Singapore International Arbitration Centre as an avenue to which disputes can be raised. This is expected to boost Singapore's status as an arbitration hub.
The FTA is Singapore's 13th bilateral trade deal to date - the latest after an FTA with Turkey was signed in 2015.
It comes at a time when trade with Sri Lanka is growing. Last year, bilateral trade hit $2.7 billion, up 27 per cent from 2016.
Singapore's top exports to Sri Lanka include petroleum oils and diesel fuel, non-monetary gold and jewellery. Sri Lanka's top exports to Singapore are motor spirit, fuel oils, perfumes, clothing accessories and wheat flour.
Singapore's exports to Sri Lanka exceed its imports from the South Asian country by a ratio of 14 to 1.