Hindu devotees participate in an annual festival of the Vishnu temple in Colombo, Sri Lanka on August 2, 2023. (PHOTO / AFP)

Sri Lanka is making the right moves with its plans to ink new regional and bilateral trade accords in the Asia-Pacific, as such efforts can generate new momentum for recovery of the island’s crisis-hit economy, experts said.

Sri Lanka will join the Regional Comprehensive Economic Partnership Agreement (RCEP) and enter Free Trade Agreements (FTAs) with Association of Southeast Asian Nations (ASEAN) countries after debt restructuring is complete, the South Asian nation announced on Aug 10.

During the meetings, significance of economies of the ASEAN and other RCEP members, and opportunities generated within the trade bloc for further economic integration for developing countries, were highlighted

“At this most critical time towards 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 global financial and investment capital,” Lawrence Loh, director of the Centre for Governance and Sustainability at the National University of Singapore, told China Daily.

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“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,” he said.

The Sri Lankan president’s media division said in a press release that President Ranil Wickremesinghe, who took part in events to celebrate the ASEAN Day in Colombo on Aug 8, expressed his support for ASEAN's vision for the Indo-Pacific region.

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

Rajiv Biswas, Asia-Pacific chief economist at S&P Global Market Intelligence, said, "If Sri Lanka  successfully concludes negotiations to join RCEP, it will become part of the world’s largest free trade area which accounts for 30 percent of world GDP. This will give Sri Lanka improved market access to 15 Asia-Pacific economies." 

Joining 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 very 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 the RCEP member nations, Biswas said.

However, Biswas pointed out that joining RCEP will also create challenges for Sri Lanka, as it will need to pursue further reforms and open its economy to greater competition from RCEP member economies.

Sri Lanka launched a fact-finding mission to explore avenues for an early entry into the RCEP free trade agreement, the Sri Lankan foreign ministry said in a statement on June 27

James Chin, a professor of Asian Studies at the University of Tasmania, agrees that joining the RCEP will benefit Sri Lanka as it will help the nation gain increased market access for its export products and rebuild the economy. 

“Probably the main the reason they want to join the treaty is to (rebuild) their economy,” he said. “Signing a lot of FTAs with different countries is normal part of the process as well.”

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

Sri Lanka wants to become the first South Asian country to join RCEP, which is the largest trade bloc in history, following the completion of debt restructuring, the president said, according to the statement issued by his office.

"We must join RCEP. There is no reason not to join it," he was quoted as saying.

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

Professor Chin, however, said that Sri Lanka may not find it easy to fulfil all its plans, as other nations will be reluctant to ink accords at present as they believe the Sri Lankan economy is still weak and in recovery mode as it takes loans from the IMF. 

Some parties are of the view that Sri Lanka should wait a little longer and further stabilize itself before it joins the RCEP, he added.

Sri Lanka launched a fact-finding mission to explore avenues for an early entry into the RCEP free trade agreement, the Sri Lankan foreign ministry said in a statement on June 27.

A team of senior officials of the Sri Lankan government concluded the mission to Jakarta, Indonesia, from June 12-14, and Sri Lanka's strong interest to join the RCEP was well received by ASEAN Secretary-General Kao Kim Hourn, as well as a number of ambassadors of RCEP members in Jakarta, the statement said, Xinhua News Agency reported at that time.

During the meetings, significance of economies of the ASEAN and other RCEP members, and opportunities generated within the trade bloc for further economic integration for developing countries, were highlighted.

The parties were also said to have discussed formalities of the accession procedure and way forward for an early agreement.

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It has been reported that it was the first ever fact-finding mission to RCEP by any country after it entered into force on Jan 1, 2022.

The RCEP agreement, signed in November 2020 by 15 Asia-Pacific countries after eight years of negotiations, took effect on the first day of 2022, creating the world's largest trade bloc.

RCEP comprises 15 members, namely the 10 ASEAN member states, plus China, Japan, South Korea, Australia and New Zealand. 

Xinhua contributed to this story.

Contact the writer at vivienxu@chinadailyapac.com