IndexIntroductionDiscussionTradeForeign Direct Investment (FDI)Public ExpenditurePublic RevenueConclusionIntroductionFree Trade Agreements (FTAs) are covered between two or more economies to reduce or remove trade barriers and bring about economic integration. Being an open economy country, Sri Lanka has also engaged in FTAs ​​in line with economic developments, especially in international trade. More recently, Sri Lanka Singapore signed a bilateral free trade agreement, “The Sri Lanka-Singapore Free Trade Agreement (SLSFTA)” which allows regular trade between two nations. Say no to plagiarism. Get a tailor-made essay on "Why Violent Video Games Shouldn't Be Banned"? Get an Original Essay In the case of SLSFTA, it shows that Sri Lanka is now open for business, including investment, integrating Sri Lanka as a South Asia hub and Singapore as a Southeast Asia hub. Although Sri Lanka has entered into free trade agreements with some countries in South Asia and Europe, SLSFTA is Sri Lanka's first free trade agreement with a Southeast Asian country. Regionally, the agreement serves Sri Lanka's broader engagement with one of the fastest growing regions in the world, the Association of Southeast Asian Nations (ASEAN). Investments (FDI) in telecommunications, services, e-commerce, intellectual property and public procurement, etc.; facilitates tariff liberalization with a relatively long adjustment period; determines product of Singapore origin; consists of limited liberalization of services, broader coverage of Singapore's offerings and a clear process for resolving disputes; ensures that public procurement markets are open to international competition, provides a platform to further improve trade relations between the parties and in terms of the article on amendments. Generally, free trade agreements play a vital role in international trade in an economy and can impact the economic conditions of the country positively or negatively or interactively. Under the SLSFTA, its impact on international trade and the economy at the macro level can be discussed in several aspects. DiscussionTradeTrade between Sri Lanka and Singapore has grown steadily, with bilateral trade crossing the $1 billion mark since 2006. In 2016, Singapore was Sri Lanka's seventh largest trading partner, with total trade in goods of 1, $14 billion, equivalent to 4% of Sri Lanka's total trade. As shown in Figure 2.1, the value of exports to Singapore increased gradually from 2013 to 2017 and a significant growth of 66% was recorded in 2017 compared to the year 2016. When considering imports from Singapore it shows a moderate decline to period 2013-2015 while a slight positive inclination in the last two years. This increase is not very significant compared to the exports to Singapore reported in the corresponding period. Therefore, lowering trade barriers helps industries access new markets, increasing their presence and customer base. From Sri Lanka's perspective, since the growth rate of exports is higher than the growth rate of imports, it will have a positive impact on trade. Additionally, SLSFTA enables market diversification benefits by eliminating over-reliance on European and American markets. Diversification in terms of both export markets and export basket is therefore vital toposition Sri Lanka's economy on a more sustainable basis. Foreign Direct Investment (FDI) According to Central Bank statistics, Singapore was one of the top five source countries of FDI in 2017. Furthermore, as Figure 2.3 indicates, the improvement in FDI inflows from Singapore in 2017 compared to inflows of FDI in 2016 is significant and, in terms of percentage growth, is equal to 402%. In view of the balance of payments (BOP), FDI inflows positively influence the foreign sector and especially to reduce the balance of payments deficit of a country. Under the SLSFTA, foreign direct investment is expected to flow primarily into sectors such as manufacturing, tourism, technology and healthcare. According to the Board of Investment (BOI) of Sri Lanka, the projects with a total investment value of over $16 billion in the manufacturing sector, mainly for export, are the first projects implemented since the SLSFTA came into force on 1 ° May 2018. The largest of these is a $14.8 billion export-oriented oil refinery in Hambanthota. The second is a $1 billion investment in a steel manufacturing plant in Trincomalee. The other two projects will both be in Hambanthota as a $200 million sugar refinery and a $50 million flour bill, both for local and export markets. Therefore, with SLSFTA, FDI inflows will improve and strengthen the external sector of the economy in Sri Lanka. Expertise and technology transfer Global companies have more experience than local companies in terms of technical know-how accompanied by sophisticated technology. Free trade agreements allow global companies to access these business opportunities. This develops local companies on best practices. Additionally, local companies receive access to the latest technologies from their multinational partners. Government spendingIn general, governments subsidize local industries. The SLSFTA will enhance bilateral trade, improve economic and investment relations, and ensure greater security and openness for goods, services and investments. In this way, local export-oriented industries aim to grow, resulting in less burden on public spending. Furthermore, because the SLSFTA allows for more competitive public procurement, bargaining power in terms of quoting low prices is another source of reduction in government spending. Ultimately, stronger relations with Singapore can help Sri Lanka's position in Southeast Asia and participation in global value chains. The biggest criticism of the SLSFTA is that they urge outsourcing of work. Reducing tariffs on imports allows companies to expand into other countries. Without tariffs, imports from countries with a low cost of living cost less. This makes it difficult for companies in those same sectors to compete, which could therefore reduce their workforce. On the other hand, multinational companies can outsource jobs to emerging market countries without adequate labor protections. As a result, women and children are often subjected to grueling factory work in sub-standard conditions. Intellectual property theft is also a problem that occurs with free trade agreements. Many developing countries do not have laws to protect patents, inventions and new processes. The law they have is not always strictly enforced. As a result, companies often have their ideas stolen. They must therefore compete with low-priced domestic imitations. The degradation of natural resources and the destruction of native cultures are also two factorssignificant ones that could impact economic and political sustainability at the macro level. Emerging market countries often lack environmental protections. Free trade leads to the depletion of timber, minerals and other natural resources. Deforestation and mining reduce jungles and fields to wastelands. As development moves into isolated areas, indigenous cultures may be destroyed. Local populations are uprooted. Many suffer from diseases and die when their resources are polluted. Government Revenue Many smaller countries struggle to replace revenue lost due to tariffs and import taxes. Since 50% of the tariff lines (3,719 items) are already duty-free, there will be little to no impact of the immediate listing. Data on products imported from Singapore will show that, of a total of $1,293 million imported in 2017, $750 million was oil and related products (equal to 60% of Singapore's imports) and $228 million was gold. Even if gold comes under the duty-free list, imposition of excise duty will protect revenue. Since tariffs on petroleum products, tobacco, spirits and alcohol represent an important source of revenue for the government, these items have been kept on the negative list (products that will not be subject to liberalization), thus protecting revenue. It should be noted that since tariff liberalization will take place over a 12-15 year period, any revenue loss should be calculated on an annual basis and not as if tariffs on all items were reduced immediately. According to the Ministry of Finance, the total customs revenue collection from imports from Singapore in 2017 was Rs. 35 billion and the revenue loss consequent to tariff liberalization under the Singapore Agreement for the entire period of 15 years amounts to Rs 733 million. Therefore, the average annual revenue loss is 49 million. The best solution is regulation within the agreements that protects against disadvantages. For example, environmental protection can prevent the destruction of natural resources and cultures, while labor laws prevent poor working conditions. Furthermore, the success of such an agreement would also depend on sustained political will and domestic political, institutional and economic reforms aimed at facilitating better growth and investment in the export sector. For example, Sri Lanka's complex para-tariff structures and the existence of other non-tariff barriers could seriously undermine the success of the SLSFTA. Economic liberalization efforts often create pockets of sub-industries that lose ground. Therefore, the government should also create adequate safeguards through trade adjustment assistance programs and ensure that the broader economy does not miss out on potential benefits due to resistance from special interests. Indeed, Sri Lanka could learn from Singapore's previous experiences by integrating a network of strategically located free trade agreements with domestic economic reforms. Therefore, the SLSFTA should be considered, not just in isolation, but as part of a broader strategy to create an economy driven by private sector growth and well integrated into regional and global value chains. According to government policies and economic reforms, Sri Lanka plans to create a knowledge-based social market economy and export-oriented economy, as well as the Western Region Megacity, a megacity in the Western Province to promote growth economical. The creation of numerous businesses and areas of technological development are also being planned throughout.