The visit of the Prime Minister (PM) of the Kingdom of Thailand, Srettha Thavisin to Sri Lanka from 3-4 February 2024 signifies growing ties between the two nations. Sri Lanka, which is trying to overcome the impact of the economic crisis since 2022, is looking to expand its trade relations with countries in the Southeast Asian region, including Thailand given the historical and cultural ties cultivated by Theravada Buddhism. Shared economic and security interests at the regional level are also important aspect in Sri Lanka-Thailand bilateral ties. Both the countries are members of the Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation (BIMSTEC), the Indian Ocean Rim Association (IORA) and the Association of Southeast Asian Nations (ASEAN) Regional Forum (ARF). During the visit, the PM of Thailand participated as a guest of honour at the 76th anniversary celebrations of Sri Lanka’s independence.
Sri Lanka is in the midst of economic restructuring and reform, with the help of multilateral and bilateral donors. Thailand has supported Sri Lanka through bilateral channels as well as through the United Nations (UN) agencies to overcome the economic crisis. It supplied medicines, food and financial support, as well as 14.5 Metric Tons of hybrid seeds for farmers, through the UN joint Humanitarian Needs and Priorities (HNP) Plan.[i] On the other hand, for Thailand the FTA with Sri Lanka provides an opportunity, to enhance its trade and investment cooperation with countries in South Asia. In this context, the visit assumes importance.
The Outcome
At the bilateral level, an important outcome of the visit has been the signing of the Sri Lanka - Thailand Free Trade Agreement (SLTFTA). The negotiations on FTA began in 2018, and since then, nine rounds of negotiations took place between the officials of both the nations. At the end of negotiations, both sides agreed to liberalise tariffs on a sensitive list of goods for a period of 16 years.[ii] The FTA is likely to boost trade and investment ties between the two nations. In 2022, ‘bilateral trade stood at $352 million and through the trade agreement, both the countries are hoping to boost the trade volume to $1.5 billion in the future’.[iii] Sri Lanka is also eager to address the trade imbalance with Thailand. For instance, the value of total imports from Thailand ($302.64 million) to Sri Lanka is much more than the total exports from Sri Lanka to Thailand ($57.76 million).[iv] Sri Lanka’s exports to Thailand mainly consisted of diamonds, gems & jewellery, apparel & textile, engineering products etc.[v] Investments from Thailand to Sri Lanka is also currently negligible ($0.74 million in 2022).[vi]
Both the countries have also ‘renewed the Air Services Agreement which was originally signed in 1950. The renewed Air Services Agreement is expected to expand the air services between the two nations, thereby enhancing people to people connectivity, particularly Buddhist tourism. Sri Lanka received nearly 5000 tourists from Thailand in 2023.[vii] The two countries, entered into a Memorandum of Understanding (MoU) on cooperation in the gems and jewellery sector’.[viii] The other areas where both sides agreed to enhance investment cooperation are ‘fisheries, agriculture, renewable energy, green energy, tourism, hospitality and food processing etc’.[ix] After the visit, the President of Sri Lanka, Ranil Wickramasinghe’s policy statement made in the Parliament on 7th February 2024, also mentioned about Thailand’s ‘agricultural revolution and how his government is keen to follow the model to enhance productivity in agriculture by using modern technology’[x].
Thailand is also looking to benefit from the business opportunities the agreement can provide. After signing the FTA with Sri Lanka, the PM of Thailand, said it will encourage the “private sector in both the countries to explore the potential of two way trade and investment”.[xi] Another important aspect of the visit is enhancing connectivity. Thailand’s proposed new land bridge project (via railways and motorways) which can connect the Andaman Sea to the Gulf of Thailand (i.e Eastern and Western coasts of Thailand) by providing an alternative route to Strait of Malacca attracted regional and global interest in recent months. In this context, during the visit both the leaders discussed the possible logistics and connectivity between the land bridge and Colombo Port[xii].
Conclusion
For long, Sri Lanka looked at the ASEAN as a model to emulate in terms of economic integration and engaged actively with member countries. It also expressed interest in becoming a sectoral dialogue partner of the ASEAN, especially in maritime outlook and blue economy.[xiii] Sri Lanka also supports the vision of the ASEAN for the Indo-Pacific, and looking forward to greater connectivity and economic, maritime and security cooperation in the region.
Sri Lanka’s new economic approach to address the crisis also emphasises on strengthening relations with ASEAN nations through FTAs[xiv]. According to the Foreign Minister, Sri Lanka is keen to expand its trade agreements with countries in the Southeast Asian region, such as Indonesia, Malaysia and Vietnam by the end of 2024.[xv] It signed a comprehensive FTA with Singapore in 2018, covering goods and services which is fully operational[xvi]. Through multiple FTAs, Sri Lanka is hoping to boost its chances of becoming a member of the Regional Comprehensive Economic Partnership (RCEP). It already submitted a letter of intent to join the regional partnership.
At a time when Sri Lanka is looking to leverage its economic potential, to find sustainable solutions to the economic crisis, the outcome of the visit of the Thailand PM to Sri Lanka is important, as it can create greater opportunities for enhancing connectivity linkages and economic cooperation with the ASEAN region, for the island nation.
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*Dr. Samatha Mallempati, Research Fellow, Indian Council of World Affairs, New Delhi.
The views expressed are personal.
End Notes
[i] The UNDP, “Royal Thai Embassy and UN work together to support vulnerable Sri Lankan farmers during the Maha season”, 22 November 2022, https://www.undp.org/srilanka/press-releases/royal-thai-embassy-and-un-work-together-support-vulnerable-sri-lankan-farmers-during-maha-season. Accessed February 2, 2024.
[ii] Economy Next, “Sri Lanka concludes free trade talks with Thailand”, 3 January 2024, https://economynext.com/sri-lanka-concludes-free-trade-talks-with-thailand-145615/. Accessed February 3, 2024.
[iii] ‘Talking Economics, “Overcoming Obstacles: The Economic Case for a Sri Lanka-Thailand FTA”, 11 May 2023, https://www.ips.lk/talkingeconomics/2023/05/11/overcoming-obstacles-the-economic-case-for-a-sri-lanka-thailand-fta/. Accessed February 1, 2024.
[iv] Sri Lanka Export Development Board, “Market and Country Brief on Thailand, 2023”, https://www.srilankabusiness.com/pdfs/market-profiles/2023/thailand-2023.pdf. Accessed February 3, 2024.
[v] Ibid
[vi] Ministry of Foreign Affairs, Sri Lanka, “08th Round of Sri Lanka-Thailand Free Trade Agreement Negotiations was successfully concluded in Bangkok”, 14 December 2023, https://mfa.gov.lk/08th-round-of-sri-lanka-thailand-free-trade-agreement-negotiations-was-successfully-concluded-in-bangkok/. Accessed February 2, 2024.
[vii] Sri Lanka Tourism Development Authority, https://www.sltda.gov.lk/en/tourist-arrivals-from-all-countries. Accessed February 2, 2024.
[viii] Ministry of Foreign Affairs-Sri Lanka, “Prime Minister Srettha Thavisin successfully concludes Official Visit to Sri Lanka, 3-4 February 2024”, https://mfa.gov.lk/pm-srettha-thavisin-successfully-concludes-official-visit-to-sl/. Accessed February 6, 2024.
[ix] Ibid
[x] The Department of Government Information, Government of Sri Lanka, “Policy Statement by Honourable Ranil Wickremesinghe President of the Democratic Socialist Republic of Sri Lanka At the inauguration of the 5th session of the 9th Parliament of Sri Lanka 07-02-2024”, https://www.dgi.gov.lk/media/attachments/2024/02/07/throne-speech---final-final.pdf. Accessed February 8, 2024.
[xi] “Thailand and Sri Lanka sign trade pact”, Bangkok post, 3 February 2024, link:https://www.bangkokpost.com/business/general/2735730/thailand-and-sri-lanka-sign-trade-pact. View our policies at http://goo.gl/9HgTd and http://goo.gl/ou6Ip.
[xii] Ministry of Foreign Affairs, Kingdom of Thailand, “Deputy Minister of Foreign Affairs accompanied the Prime Minister on an official visit to the Democratic Socialist Republic of Sri Lanka, during 3-4 February 2024”, 6 February 2024, https://www.mfa.go.th/en/content/pmofficialvisitlkeng?cate=5d5bcb4e15e39c306000683c. Accessed February 7, 2024.
[xiii] Colombo Gazette, “ASEAN has appreciated the efforts taken by Sri Lanka to overcome the economic challenges”, 27 July 2023, https://colombogazette.com/2023/07/27/asean-appreciates-efforts-taken-by-sri-lanka/. Accessed February 4, 2024.
[xiv] Presidential Secretariat, Sri Lanka, “Sri Lanka Aims for RCEP Membership and Free Trade Agreements with ASEAN”, August 2023, https://www.presidentsoffice.gov.lk/index.php/2023/08/10/sri-lanka-aims-for-rcep-membership-and-free-trade-agreements-with-asean/. Accessed February 4, 2024.
[xv] Business Standard, “Free trade agreement with India by year-end: Sri Lankan foreign minister”, 6 February 2014, https://www.business-standard.com/economy/news/free-trade-agreement-with-india-by-year-end-sri-lankan-foreign-minister-124020601566_1.html.
[xvi] The Department of Government Information, Government of Sri Lanka, “Policy Statement by Honourable Ranil Wickremesinghe President of the Democratic Socialist Republic of Sri Lanka At the inauguration of the 5th session of the 9th Parliament of Sri Lanka 07-02-2024”, https://www.dgi.gov.lk/media/attachments/2024/02/07/throne-speech---final-final.pdf. Accessed February 8, 2024.