Sri Lanka New Free Trade Agreement

Sri Lanka New Free Trade Agreement

The Ministry of Development Strategies and International Trade (MODSIT) and the Ministry of Industry and Trade (MIC) are the main public bodies responsible for trade and investment growth. They cooperate to implement support programmes, develop strategies for foreign direct and private sector investment, and work to expand international market opportunities for Sri Lankan products. The Board of Investment (BOI), the Export Development Board (EDB) and the Department of Commerce (DoC) operate as part of MODSIT. At the same time, SAFTA is undergoing a transformation. The 2004 agreement brings together Sri Lanka, Afghanistan, Bangladesh, Bhutan, India, Maldives, Nepal and Pakistan to remove tariff and non-tariff barriers. However, according to CBSL Governor Indrajit Coomaraswamy, more than a third of intra-regional trade under SAFTA is on the sensitive list, while border restrictions between Pakistan and India hinder merchandise trade and prevent regional integration. Sri Lanka`s trade relations with India marked a historic milestone when the India-Sri Lanka Free Trade Agreement (ISFTA) was signed on 28 December 1998 as Sri Lanka`s first bilateral free trade agreement. The ISFTA came into force on March 1, 2000. The ISFTA is now fully implemented, with both parties fulfilling their progressive obligations under the Tariff Liberalisation Programme (TLP), as explained below. The country has also made progress in creating international actors for the development of commercial, transport and logistics infrastructure, with an important objective for foreign direct investment (FDI). The increase in capital flows benefited the economy as a whole, with 2018 being the strongest year since direct investment began and investment increased by $2.3 billion. The growing trade deficit shows no signs of slowing down and is growing by 2.88 billion euros.

$4.75 billion at the end of June 2017 and $5.7 billion in the first half of 2018. Preliminary data from the Central Bank of Sri Lanka (CBSL) for November 2018 showed that the trade deficit had increased from $999 million in November 2017 to $785 million in October 2018. Despite its proximity to India, Pakistan, Bangladesh and Nepal, intra-regional trade accounts for less than 5% of total trade in South Asia. This is partly due to limited logistics, major regulatory barriers and protectionist policies, as well as disproportionate trade costs in the region. According to the World Bank, South Asian trade costs 20% more than in the Association of Southeast Asian Nations.

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