Sri Lanka to fast-track Singapore Free Trade Agreement
Sri Lanka plans to expedite the long-delayed Free Trade Agreement (FTA) with Singapore (SLSFTA), ensuring policy continuity, Deputy Finance Minister Harshana Suriyapperuma revealed at a recent parliamentary Committee on Public Finance (COPF) meeting.
The FTA, initially signed in 2018 under a previous administration, had faced several delays, including a temporary suspension by former President Maithripala Sirisena in October 2018 due to concerns over inadequate consultation with key state agencies.
The government has now committed to implementing the agreement, which aims to enhance trade relations by eliminating tariffs on 80 per cent of tariff lines within 15 years.
A Gazette Notification (No. 2377/39), published under the Ports and Airports Development Levy (PAL) Act, was presented to Parliament on January 7, 2025, to facilitate the FTA’s activation.
The amendment reduces the PAL from 10 per cent to 6 per cent on various imported goods from Singapore.
This reduction applies to specific items, including certain types of cement, apples, infant foods (excluding milk foods approved by the Director General of Health Services), medicines, surgical instruments, bathroom fittings, and other products.
Taxes on imports such as electrical equipment, polythene, and aluminum items were also revised under the SLSFTA. However, goods not covered under the agreement remain subject to earlier PAL rates outlined in previous gazette notifications.
The FTA encompasses a broad range of trade and investment activities, including goods and services, intellectual property rights, telecommunications, and e-commerce. It is designed to create a predictable business environment for Singaporean investors while benefiting Sri Lanka through increased trade and economic opportunities.
The agreement also includes a phased reduction of import duties and para-tariffs over five to six years.
Currently, the government has lowered import duties on two sets of goods, aligning with the FTA’s tariff liberalisation programme. This programme affects multiple taxes, including the Customs Import Duty (CID), CESS tax, and PAL.
Despite initial resistance, members of the COPF supported the PAL reduction, with its Chairman Harsha de Silva emphasising the importance of fostering a free trade area with Singapore.
He also highlighted that the FTA aligns with Sri Lanka’s long-term economic goals.
The agreement’s implementation was delayed due to various reasons, including the political instability caused by the 2018 constitutional crisis.
Officials assured the COPF this week that the revised order activating the FTA, approved by the Cabinet in 2018, provides clear guidelines on tariff reductions.
They emphasised the agreement’s potential to strengthen economic ties between the two nations, particularly by liberalising trade in goods and services.
The Singapore FTA is now seen as a critical step toward fostering economic growth and international trade partnerships, marking a significant policy milestone for Sri Lanka’s government.
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