ECONOMYNEXT – Sri Lanka’s Cabinet Spokesman Bandula Gunawardena backed a ling dragged Free Trade Agreement (FTA) with China as a way to move away from the ongoing unprecedented economic crisis which has started to haunt millions of the island nation’s people.
Sri Lanka is proceeding with multiple free trade agreements including with China and Singapore five years after talks with Beijing on the FTA were suspended following concerns over upper hand by China.
“We can get countries like China, Vietnam, Singapore, and Malaysia as examples which have entered free trade agreements,” Gunawardena told a weekly cabinet media briefing on Tuesday (03) when asked about the progress of Chinese FTA talks.
“If we do not enter the agreement, the consequences are when other countries get the goods with the tax relief our country’s producers will not be able to compete with them,” he said.
“The export number, currently around $12 billion, has to be increased to around $20-25 billion, so that we will be able to overcome this crisis.”
Sri Lanka is caught in a geopolitical cold war between China and India with the backing of the United States, analysts say. That cold war has led Sri Lanka to be extremely cautious in dealing with both Asian powers and even to forego some investment opportunities.
However, the economic crisis and sovereign debt default have compelled the island nation to look into all available avenues to ensure more foreign inflows to move away from the crisis.
Sri Lanka had to temporarily stop FTA talks with China in 2018 under the last administration because Beijing disagreed with Colombo’s demand for a review of the deal after 10 years.
“The solution for this (crisis) is to improve the forex earnings and to cease the forex flowing out of the country and improve the number of foreign reserves we own,” Gunawardena said.
“There is a risk in bringing down essential items such as fuel, chemical fertilizer, raw materials to run factories, medicine, and other machines. The debt restructuring and a plan to repay the debts have to be done.”
“Whether we like it or not, we have to enter the foreign market as soon as possible, and to increase export income, we have to sign many free trade agreements as much as possible.”(Colombo/Jan03/2023)