Thailand and Sri Lanka set to finalise free trade agreement by year’s end

Thailand and Sri Lanka are on track to finalise a bilateral free trade agreement (FTA) by the close of this year. The chief of trade negotiations has indicated that the signing of the agreement is expected by early February next year. Chotima Iemsawasdikul, the director-general of the Trade Negotiations Department, disclosed that Thai and Sri Lankan officials are set to convene for the eighth round of FTA discussions from November 27 to 29, hosted by Thailand.

Subsequent free trade agreement negotiations are planned for December in Sri Lanka, to reach a substantial conclusion. Chotima further mentioned a final round of talks, to be conducted by Sri Lanka, in alignment with the goal for the FTA to be inked on February 3, next year. This date is significant as it coincides with Sri Lanka’s independence day.

Despite Sri Lanka’s modest size and population, standing at just 22 million, the country is viewed as a key geographic entity in terms of maritime transport due to its position in the Indian Ocean. The island nation is also recognised for its wealth of natural resources, including precious minerals and seafood.

The anticipated Thailand-Sri Lanka FTA is projected to bolster Thailand’s economy by 0.02%, translating to an increase of US$80 million. This encompasses the expansion of investments and the value of Thai exports to Sri Lanka, reported Bangkok Post.

The agreement is expected to favour a range of products, including automobiles and auto components, machinery, electrical appliances, metals, sugar and plastics. Meanwhile, industries that could see Thai investment expansion in Sri Lanka entail processed foods, beverages, textiles, garments and jewellery.

Bilateral trade between Thailand and Sri Lanka stood at US$358 million in 2022, marking a 16.5% drop from 2021. The value of goods exported from Thailand to Sri Lanka totalled US$271 million, while imports from Sri Lanka were valued at US$86.9 million.

Trade figures for the first nine months of this year indicate a 1.79% rise year-on-year, reaching US$285 million. However, Thai exports to Sri Lanka fell by 12.4% to approximately US$188 million.

The idea of establishing an FTA between Sri Lanka and Thailand first arose in 2016 during an official visit to Sri Lanka by Somkid Jatusripitak, the then deputy prime minister of Thailand. During this visit, the nations signed several agreements, including a memorandum of understanding on technical cooperation, a letter of intent on cooperation in small and medium-sized enterprise development, and a joint programme on tourism from 2016 to 2018.

The Thai Cabinet gave the green light for the negotiation framework for FTA conversations with Sri Lanka on May 8, 2018. The framework encompasses trade in goods and services, investment, and comprehensive economic cooperation.