COLOMBO - The new free trade agreement between Singapore and Sri Lanka will benefit Singapore businesses by giving them greater access to the Sri Lankan market, Prime Minister Lee Hsien Loong said on Tuesday (Jan 23).
This access will come in the form of exports and invesments, Mr Lee told Singapore media on the day of the FTA signing.
"There are major investments being planned," he noted, citing established players like flour producer Prima, new ones such as infrastructure companies Hyflux and Sembcorp, as well as smaller players like Food Republic.
These investments all stand to gain from the FTA, he said.
The new FTA guarantees tariff-free access for Singapore exports to Sri Lanka on 80 per cent of all tariff lines for 15 years. Tariff savings for Singapore exports are estimated to reach $10 million annually.
The deal also reduces barriers to services and institutes protection for Singapore investments.
Asked what has changed since 2004 when FTA negotiations between the two countries failed, Mr Lee said the current Sri Lankan government is on a path of economic reform and liberalisation, and is hence looking to increase investments, trade and interdependence with other economies.
He added: "They are negotiating FTAs with several partners, and they're doing it with Singapore too. We are the first one to complete with them.
"Firstly, our trade with them is not so complicated. And secondly, they hope to set an example for their other trading partners. We're very happy to participate and very glad that the negotiations went very smoothly."
The Sri Lankan government is facing domestic pressures from local businesses and professional groups over the FTA, with a number of groups having publicly voiced concerns.
To address their concerns, the Sri Lankan government has promised to table two Bills in Parliament to counter surges in imports and perceived unfair trading practices.
Asked if Singapore should be concerned that these laws may be a way for Sri Lanka to go around some terms in the new FTA, Mr Lee said that any deal signed is considered a binding international agreement, and there are channels to settle disputes over differences in interpretation.
On the protectionist backlash in Sri Lanka, Mr Lee said that in any country, there will always be pressures to preserve the status quo.
When a market is opened to competition, there will be winners - usually the consumers and the general public - and those adversely affected, usually industries and professions, he said.
"And the people who are adversely affected are typically more concentrated and more effective at making some noise," he noted.
He said Singapore relied on the Sri Lankan government to persuade its population that the FTA is a good thing.
"It takes political conviction and is not easy to do. Sometimes it moves forward, sometimes it moves backwards. And if you look at the policy debates in America now, particularly with this administration, you see the pressures which come up and what consequences can follow," he said.
On the FTA's impact on Singapore, he said the Singapore market has always been more open.
He added: "Our companies are much more conscious that they always have to meet international competition. Because if you can't even hold your own in Singapore, you really have no hope holding your own anywhere else in the world."