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Sunday February 25th, 2024

Vietnam signs free trade agreement with UK as Sri Lanka controls imports

ECONOMYNEXT – Vietnam said it has signed a free trade agreement with UK moving beyond an existing deal with the European Union, which will come in to effect on December 31 as Sri Lanka is mired import controls after printing money.

The UK Vietnam Free Trade Agreement (UKVFTA) deal was signed by Vietnamese Ambassador to the United Kingdom (UK) Tran Ngoc An and British Ambassador to Viet Nam Gareth Ward.

The two were authorized to sign the deal after a Minister of Industry and Trade Tran Tuan Anh and UK Secretary of State for International Trade Elizabeth Truss signed the agreed minutes after ending negotiations over the UKVFTA earlier on December 11.

UK is exiting the European Union and has to sign its own agreements to preserve access to exports.

“UKVFTA was negotiated based on principles that were inherited from commitments in the EU-Viet Nam Free Trade Agreement (EVFTA) and were amended in accordance with the bilateral trade framework between Viet Nam and the UK,” a Vietnam government news release said

“Currently, the two sides are rushing to complete domestic procedures in accordance with the laws of each party so as to ensure the agreement can be implemented from 23:00 on December 31.”

Vietnam said the FTA with UK “will create a comprehensive, long-term and stable economic-trade cooperation framework between the two countries, thus contributing to deepening their multifaceted cooperation,” soon after a strategic partnership was extended.

Though tariffs are already minimal under the EU-Vietnam existing deal, the new agreement will have a further tariff elimination schedule.

Under tariff elimination plan, British residents will be freed from about 114 million Sterling in trade taxes on Vietnamese goods and Vietnam citizens will be freed from tariff burden of 36 million Sterling from UK made goods.

Vietnam’s free trade agreement with UK comes as Sri Lanka is mired in import controls after printing money. Sri Lanka is practicing modern monetary theory, and has printed over half a trillion rupees (the equivalent of about 3.2 billion US dollars).

Vietnam recently joined the Regional Comprehensive Economic Partnership where which involves free trade between the Association of South East Asian Nations, China, the world most populous nation, Japan, Korea, Australia and New Zealand,

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In Sri Lanka there is a strong Mercantilist/Keynesian belief that imports contribute to monetary instability involving currency weakness and balance of payments troubles rather than money and credit.

Sri Lanka’s last administration also controlled imports, after the central bank printed money leading to the rupee collapsing from 131 to 182 to the US dollar in two currency crises.

Its free trade agenda was torpedoed after full independence was given to the central bank to conduct unusually discretionary policy under a ‘flexible’ inflation targeting’, flexible exchange rate targeting, real effective exchange rate targeting, yield curve targeting with ‘operation twists’ involving long bond purchases jettisoning a ‘bills only’ rule, and lending and deposit rate targeting with blunt administative price controls, critics say.

The currency was depreciated under false claim spread by US Mercantilists that East Asian currencies were u’ndervalued’.

The US in December falsely labelled Vietnam a ‘currency manipulator’ after it kept the Dong fixed around 23,000 to the US dollar from over 10 years, while Sri Lanka’s rupee fell from 113 to 182 over a similar period.

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After Vietnam opened its economy in 1984 money printing led a series of currency collapses, with the economy imploding from 42 billion US dollars to 6.3 billion dollars until the State Bank of Vietnam was reformed for domestic stability.

The SBV was reformed starting 1989 ending central bank re-financing of commercial bank credit, which was a key trigger of monetary instability.

Several former SBV credit units which were financing agriculture, industry and trade, contributing to monetary instability are now partly foreign owned commercial banks listed in the Ho Chi Minh and Hanoi Stock Exchanges. (Colombo/Dec30/2020)

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Sri Lanka could get US$500mn from ADB in 2024

ECONOMYNEXT – Sri Lanka could receive 500 million US dollars in support from the Asian Development Bank in 2024 based on the progress of policy reforms, Country Director of the Manila-based lender, Takafumi Kadono said.

The ADB expect to go to its Board around March or April with a 100 million US dollar power sector loan subject to the cabinet of ministers of approving a revised electricity reform bill.

A 100 million dollar loan to support SMEs could also be approved in the early part of the year. Sri Lanka is setting up a credit guarantee agency to support credit for small firms.

A 200 million dollar credit for financial sector was also slated for the year. The ADB gave the first tranche of the financial sector policy loan late last year.

A $100mn for the water sector could also be approved later in the year.

Sri Lanka could get around 200 to 300 million US dollars a year at the lowest rate, or concessional ordinary capital resources (COL) rate of 2 percent.

The balance of would come at the ordinary capital resource rate linked to SOFR.

The ADB has also started work on a ‘Country Partnership Strategy’ for Sri Lanka covering the 2024-2028 period, Kadodo said. (Colombo/Feb25/2024)

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Sri Lanka’s multi-aligned foreign policy based on friendship: Min

ECONOMYNEXT – Sri Lanka’s multi-aligned foreign policy is based on friendship to all and enmity to none, its Minister of Foreign Affairs has said.

“Non-alignment means not becoming a bystander. Non-alignment means you are not forced or coerced into a camp to take sovereign decisions… you make your own choices. Whether it is commercial, security, regional or otherwise,” M U M Ali Sabry said on X (twitter).

“I have repeatedly stressed that sovereignty is the right to have your own opinion on what’s right and wrong, and to stand by your principles. Our multi-aligned foreign policy is based on friendship to all and enmity to none,” Sabry was quoting from his speech at the Lakshman Kadirgamar Institute of International Relations and Strategic Studies (LKI) Foreign Policy Forum, on the theme ‘Reassessing Non-Alignment in a Polarised World’.

Sri Lanka is one of the founding members of the Non-Aligned Movement.

The strategically located island has been increasingly walking a fine line between opposing global factions as it seeks to come out of a financial crisis. (Colombo/Feb24/2024)

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Sri Lanka’s Commercial Bank Dec net down on tax provisions

ECONOMYNEXT – Sri Lanka’s Commercial Bank of Ceylon reported profits of 6.9 billion rupees from the December 2023 quarter down 21 percent, despite an improvement in net interest income and lower provisions, amid a change in tax provisions.

Pre-tax profits were 8.89 billion rupees up from 2.4 billion rupees. There was a 6.4 billion tax reversal last year compared to a 1.7 billion rupee tax charge this year.

Commercial Bank reported earnings of 5.26 rupees for the quarter. For the year to December 2023 earnings were 16.07 rupees per share on total profits of 21.1 billion rupees, down 11.3 percent.

Net fee and commission income was down 1.2 percent to 6.1 billion rupees.

Net interest income went up 16.8 percent to 25.5 billion rupees, with interest income rising marginally by 1.3 percent to 73.0 billion rupees and interest expense falling 5.45 percent to 47.5 billion rupees.

Loans and advances to customers grew 4.06 percent to 1.17 billion rupees in the year to December. Debt and other financial instruments fell 10.5 percent to 649 billion rupees.

Financial assets measured and fair value through other comprehensive income was at 287 billion rupees, up from 117 billion rupees.

Impairment charges were 13.1 billion rupees, down from 19.6 billion rupees last year.

Gross assets were up 6.45 percent to 2.36 billion rupees. Net assets were up 5.51 percent to 214 billion rupees. (Colombo/Feb24/2024)

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