Colombo vows to join RCEP, but needs to overcome its debt restructuring first

Membership in regional free trade agreements will generate new momentum for Sri Lanka to reinvigorate its economy through additional market access, experts have said.

Sri Lanka will join the Regional Comprehensive Economic Partnership, or RCEP, and enter free trade agreements with Association of Southeast Asian Nations members after debt restructuring is complete, the President's Media Division said in a statement on Thursday.

According to the statement, President Ranil Wickremesinghe, who took part in events to celebrate ASEAN Day in Colombo, expressed his support for ASEAN's vision for the Asia-Pacific region.

Wickremesinghe said Sri Lanka will work closely with ASEAN nations in the coming years.

"At this most critical time toward a new era of economic development, joining RCEP is a logical move for Sri Lanka. The opening of Sri Lanka will allow it to tap on global financial and investment capitals," Lawrence Loh, director of the National University of Singapore's Centre for Governance and Sustainability, told China Daily.

"On a more strategic level, it is sensible for Sri Lanka to strengthen ties in the region, particularly countries in East Asia and Southeast Asia."

Rajiv Biswas, Asia-Pacific chief economist from S&P Global Market Intelligence, said Sri Lanka joining the RCEP will give Sri Lanka improved market access to 15 Asia-Pacific economies, becoming part of the world's largest free trade area that accounts for 30 percent of the world's GDP.

Joining the RCEP will also improve the competitiveness of Sri Lanka to attract foreign direct investment inflows, he added. One important advantage of the RCEP is its favorable rules of origin treatment, which provide cumulative benefits that will help to build manufacturing supply chains within the RCEP region across different countries. This will help to attract foreign direct investment flows for a wide range of manufacturing and infrastructure projects into RCEP member nations.

However, Biswas pointed out that joining the RCEP will also create challenges for Sri Lanka to pursue further economic reforms as there will be greater competition from other RCEP member economies.

James Chin, a professor of Asian Studies at the University of Tasmania, agrees that joining the RCEP will give Sri Lanka benefits, as this means it will be easier for the country to gain market access to help rebuild its economy.

Economic recovery

"Probably the main reason they want to join the treaty is to recover their economy," he said. "So signing up for a lot of FTAs with different countries is a normal part of the process as well. In fact, they are trying to join ASEAN as well."

Sri Lanka has an FTA with Singapore and is holding discussions to sign one with Thailand next year, Wickremesinghe said.

He said Sri Lanka wants to become the first South Asian country to join the RCEP, which is the largest trade bloc in history, following the completion of debt restructuring.

"We must join RCEP. There is no reason not to join it," he said.

Sri Lanka also plans to sign trade agreements with India and Bangladesh.

Chin said the challenge for Sri Lanka is that not all member countries want it to join at present, as they find that Sri Lanka's economy is still in recovery mode and is considered weak as it takes loans from the International Monetary Fund.

So some hope the country can wait a little while to further stabilize itself before it joins the RCEP, he added.

Xinhua contributed to the story.

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