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Singapore FTA – Other than garbage

The Island | 29 August 2018

Singapore FTA – Other than garbage

by Lasantha Wickramasinghe, Secretary, Association of IT Professionals

Many discussions are going on about the threat of Sri Lanka being a garbage dumping yard by Singapore Free Trade Agreement. The purpose of this article is to investigate some other aspects of Singapore FTA.

A few months back, the government ministers claimed that promoting export was its main objective and that is the major reason behind being ebullient to enter into Free Trade Agreements. On 23rd January 2018, two countries inked the Singapore-Sri Lanka Free Trade Agreement. The fresh agreement with Singapore, unlike the previous two bilateral agreements Sri Lanka has had with India and Pakistan, is comprehensive in its scope covering a wide range, including goods, services, movement of natural persons, investments, government procurements, intellectual properties, Electronic commerce, etc.

Neither products nor services of Sri Lanka are benefited- the government says

Though the government claimed that its focus is to improve exports by bilateral preferential trade agreements, a few months after signing the Singapore FTA, the government had to accept the fact that no single product of Sri Lanka would be benefited for exports by the Singapore-Sri Lanka Free Trade agreement. If there is no benefit in the goods sector, is there something for us in the services sector? Would you believe, the answer is no again.

Singapore signed a Free Trade Agreement with India, effective from 2005. The major benefit acquired by India by that agreement is in the information technology sector. The agreement paved the way for Indian Information technology professionals to work in Singapore and they are remitting some dollars each year. Having the same potential in the Sri Lankan IT sector, it is natural that one would expect the same benefit to be obtained for Sri Lanka by the signed FTA with Singapore. However, the Singapore-Sri Lanka Free Trade Agreement has not offered any benefit for its information technology sector. The conditions to fulfill and procedures to follow by a Sri Lankan information technology professional to work in Singapore on temporary basis has not been eased from the conditions and requirements before the agreement. Had there been a stakeholder consultation process before or during the negotiation phase of the FTA, the Sri Lankan negotiation team would have been aware of those potentials of Sri Lanka. It is no difference in other service sectors as well, no benefits or minimal.

Utter lie about Mode-4, movement of persons

On the other hand, while relieving tariffs from 80% of tariff-lines over a period of 15 years for imports from Singapore, Sri Lanka has made commitments to open its service sector for Mode 4 – Movement of natural persons to citizens and permanent residents of Singapore in many sectors namely Telecommunication services, Computer and related services, Insurance brooking and agency services, Banking and other financial services, Transport services by sea-going vessels, Cargo handling services, Storage and warehouse services, Construction-related services, Advertising services, Technical testing and analysis, Hotel and restaurants / catering and Travel agency and tour operator services. The government says that the agreement has not opened the Mode-4, which means movement of natural persons. At the same time, they express that they have open the intra-corporate transfer category. This has been a successful way of fooling people. Intra-corporate transferees is a subcategory of mode-4 and it is the most common way of opening mode-4, movement of natural person. The government clearly lie by saying mode-4 is not open. Mode-4 is opened in the Singapore FTA for the service sectors mentioned above.

Under the category intra-cooperate transferees of Mode 4, either a citizen or a permanent resident who have worked at least one year in a company registered in Singapore can be transferred to a branch, subsidy or an affiliate of that company in Sri Lanka. Though the government explicitly mentions that they can come only with an investment, all that have to do is registering a non-residential company in Sri Lanka as a branch of a registered company in Singapore. Here the agreement is referring to service sectors mentioned above and there are many services which can be started with just a rented place and a few employees brought down under Mode 4 when this is enacted. India and China will demand for the same offer from Sri Lanka which will create huge issues.

Foreigners to bring foreigners to Sri Lanka

Singapore registered man power companies are allowed to establish in Sri Lanka which will be in the business of supplying employees to the other companies. A new immigration act is on the table which will allow foreign employees enter Sri Lanka easily since the new act removes the requirement of obtaining an approval from the line ministry while providing sole authority to the Immigration Controller to expedite bringing in foreigners to Sri Lanka. When this act which is fueled by the Ministry of Development Strategies and International Trade is coupled with the commitments made via the Singapore FTA for Singapore registered companies to establish man power companies in Sri Lanka, there is no obstacle for those companies to bringing people from various other countries like India, China and Bangladesh.

Recently, MP Harsha De Silva denied this claim, but he did not explain what prevents such man power company bringing people from other countries. Singapore agreement has granted a right for foreigners to fetching foreigners to Sri Lanka.

Persuades more pressure from India and China

Though Sri Lanka has not been offered any preferential benefit by the Singapore-Sri Lanka Free Trade Agreement, Sri Lanka has offered substantial preferences to Singapore in both goods and service sectors over other countries. The Singapore biased market access conditions which prevails now in Sri Lanka will persuade more pressure from India and China to sign comprehensive FTAs with them.

The last resort - Foreign Investments

In this context, the Sri Lankan government was left with no arguments to explain the benefits of the Singapore agreement. Then Minister Malik Samarawickrama started saying that Singapore Agreement will bring foreign investments to the country. Theoretically, an FTA might induce foreign direct investment for two reasons. One reason is to get the benefit of import tariff removal when exporting to the other countries abide by the agreement. Since Sri Lanka has not received any such tariff removal benefit, foreign direct investments are not induced for that reason.

The other reason is the dynamism created by the FTA. Due to the reason that Singapore FTA has not bring any benefit to Sri Lanka, it has not created any dynamism as well. The only dynamism as per the government is attracting foreign investments. How can one explain ‘inducing foreign direct investments due to foreign direct investments?’

Provided that no real reasons have been created by the Singapore FTA for real and worthy foreign direct investments, the most probable reasons if an investment take place would be to buy Sri Lanka’s natural resources or national assets when they are sold out. If that is to be done at all, that shouldn’t be done via an FTA making a preference to one country, bypassing the proper tender procedure which prevents the opportunity for Sri Lanka to select the best deal. There might be a chance that Singapore registered service providers to invest in Sri Lanka to get market access to Sri Lankan service sector which will eventually increase the money outflow of the country, further deteriorating the current balance of payment account.

The rationality behind the Singapore FTA is still undiscovered.

 source: The Island