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Unveiling Trade Potential: An Ex-Ante Analysis of the Sri Lanka – Thailand Free Trade Agreement

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Nilupulee Rathnayake,Dr Asanka Wijesinghe

New IPS Publication

Sri Lanka and Thailand are engaged in expedited negotiations for a free trade agreement (FTA), aiming to conclude the negotiations by early 2024.Both countries share a strong interest in expanding their trade ties, with Sri Lanka seeking preferential access to Thailand’s market and Thailand keen to tap Sri Lanka as a gateway to South Asia and the Middle East.A new IPS study finds substantial gains in bilateral trade from a comprehensive FTA. It highlights navigating the challenges posed by existing tariff structures, trade imbalances, and domestic political considerations will be crucial to ensuring the FTA’s successful implementation.

Sri Lanka and Thailand are engaged in expedited negotiations for a free trade agreement (FTA) to enhance bilateral trade, facilitate trade activities, and promote investments. The two nations aim to complete the discussion rounds by the beginning of 2024. A new publication by the Institute of Policy Studies of Sri Lanka (IPS) delves into the potential benefits and challenges of this proposed FTA.

The study titled “Unveiling Trade Potential: An Ex-Ante Analysis of the Sri Lanka – Thailand Free Trade Agreement” by IPS Research Fellow Dr Asanka Wijesinghe and IPS Research Officer Nilupulee Rathnayake offers valuable insights into current tariff structures, bound tariffs, binding overhangs, and the development of offensive lists for both nations, to provide crucial insights for policymakers, trade negotiators, and businesses. Using a comprehensive analytical framework, simulations were conducted for 47 Global Trade Analysis Projects (GTAP) sectors, incorporating sector-specific Armington elasticities to enhance the accuracy of the estimates.

The study highlights the structural differences in the economies of Sri Lanka and Thailand, which bring opportunities and pose challenges from a bilateral trade deal. The analysis reveals that both countries have relatively high tariffs in sectors where the other country has a comparative advantage. For example, Thailand imposes significant tariffs on Sri Lanka’s wearing apparel and tea exports, while Sri Lanka maintains high tariffs on Thailand’s vehicle and parts, rubber products, and light electronics exports. Additionally, trade policy uncertainty exists, mainly due to Sri Lanka’s lower binding coverage, resulting in a binding overhang of 33.1% in agricultural exports from Thailand.

The partial equilibrium analysis predicts a substantial 38% increase in Sri Lanka’s exports to Thailand if tariffs are eliminated, with the wearing apparel and tea sectors poised to benefit the most. In contrast, Thailand is expected to experience a 27.8% increase in exports, slightly lower than Sri Lanka’s gains. However, due to the existing trade imbalance favouring Thailand, Sri Lanka’s post-FTA trade deficit is projected to rise by 26%. To ensure the success of the FTA, the authors note that it will be imperative to reduce tariffs on products where both countries have a comparative advantage and address trade policy uncertainties.

Sri Lanka’s offensive list includes 154 products, mainly in manufacturing sectors, such as wearing apparel, tea products, rubber and plastic products, and electric equipment. Thailand’s offensive list comprises 147 products, encompassing rubber products, household electric equipment (e.g., refrigerators, air-conditioners), malt extracts, and vehicles and parts. These lists play a pivotal role in securing an FTA with substantial trade effects, given the significance of the industries they protect domestically.

While the FTA has the potential to generate substantial trade gains through reduced tariffs, the authors highlight the short-term challenge that comes from the widening trade deficit for Sri Lanka with Thailand, in the wake of full tariff liberalisation. To mitigate this risk and maximise the FTA’s benefits, the authors suggest that both countries must negotiate diligently, considering phased tariff reductions with binding commitments and comprehensive trade adjustment programmes. Expanding the coverage of the proposed FTA to investment promotion and trade facilitation is also suggested as such a deep trade agreement will further enhance the benefits.

Access the full report here: https://www.ips.lk/unveiling-trade-potential-an-ex-ante-analysis-of-the-sri-lanka-thailand-free-trade-agreement/



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AHK Sri Lanka champions first-ever Sri Lankan delegation at Drupa 2024

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The Delegation of German Industry and Commerce in Sri Lanka (AHK Sri Lanka) proudly facilitated the first-ever Sri Lankan delegation’s participation at Drupa 2024, the world’s largest trade fair for the printing industry and technology. Held after an eight-year hiatus, Drupa 2024 was a landmark event, marking significant advancements and opportunities in the global printing industry.

AHK Sri Lanka played a pivotal role in organising and supporting the delegation, which comprised 17 members from the Sri Lanka Association for Printers (SLAP), representing eight companies from the commercial, newspaper, stationery printing, and packaging industries. This pioneering effort by AHK Sri Lanka not only showcased the diverse capabilities of Sri Lanka’s printing sector but also facilitated vital bilateral discussions with key stakeholders from the German printing industry.

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Unveiling Ayugiri: Browns Hotels & Resorts sets the stage for a new era in luxury Ayurveda Wellness

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Kotaro Katsuki, Ambassador for the Embassy of Japan

In a captivating reimagining of luxury wellness tourism, Browns Hotels & Resorts proudly unveiled the exquisite Ayugiri Ayurveda Wellness Resort Sigiriya. This momentous occasion, celebrated amidst a vibrant and serene grand opening on the 6th of June, heralds a new chapter in the Ayurveda wellness tourism landscape in Sri Lanka. Nestled amidst 54 acres of unspoiled natural splendour, Ayugiri features 22 exclusive suites and stands out as the only luxury Ayurveda wellness resort in the country offering plunge pools in every room, rendering it truly one-of-a-kind.

The grand opening of Ayugiri Ayurveda Wellness Resort was an enchanting event, where guests were captivated by the melodies of flutists and violinists resonating through Sigiriya’s lush landscapes. As traditional drummers and dancers infused the air with vibrant energy, Browns Hotels & Resorts’ CEO, Eksath Wijeratne, Kotaro Katsuki, Acting Ambassador for the Embassy of Japan and General Manager, Buwaneka Bandara, unveiled the resort’s new logo, marking a significant moment witnessed by distinguished guests from the French Embassy, Ayurveda and wellness enthusiasts along with officials from the Sigiriya area, LOLC Holdings and Browns Group.

“Our strategic expansion into wellness tourism with Ayugiri Ayurveda Wellness Resort Sigiriya symbolises a significant milestone for Browns Hotels & Resorts. Wellness tourism has consistently outperformed the overall tourism industry for over a decade, reflecting a growing global interest in travel that goes beyond leisure to offer rejuvenation and holistic well-being. By integrating the timeless wisdom of Ayurveda with modern luxury, we aim to set a new standard in luxury wellness tourism in Sri Lanka. Whether your goal is prevention, healing, or a deeper connection to inner harmony, Ayugiri offers a sanctuary for holistic well-being” stated Eksath Wijeratne.

Ayugiri encapsulates the essence of life, inspired by the lotus flower held by the graceful queens of the infamous Sigiriya frescoes. Just as the lotus emerges from the murky depths, untainted and serene,

Ayugiri invites guests on a journey of purity and rejuvenation, harmonised with a balance of mind, body and spirit, the essence of nature, echoes of culture and the wisdom of ancient Ayurvedic healing.

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HNB General Insurance recognized as Best General Bancassurance Provider in Sri Lanka 2024

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HNB General Insurance, one of Sri Lanka’s leading general insurance providers, has been honored as the Best General Bancassurance Provider in Sri Lanka 2024 by the prestigious Global Banking and Finance Review – UK.

The esteemed accolade underscores HNB General Insurance’s unwavering commitment to excellence and its outstanding performance in the field of bancassurance. Through dedication and hard work, the HNB General Insurance team has continuously endeavored to deliver innovative insurance solutions, cultivate strong relationships with banking partners, and provide unparalleled service to customers nationwide. This recognition is a testament to the team’s dedication and relentless pursuit of excellence in the bancassurance business.

“We are honored to receive this prestigious award, which reflects our team’s tireless efforts and dedication to delivering value-added insurance solutions and exceptional service through our bancassurance partnerships,” said Sithumina Jayasundara, CEO of HNB General Insurance. “This recognition reaffirms our position as a trusted insurance provider in Sri Lanka and motivates us to continue striving for excellence in serving our customers and communities.”

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