Jun. 7 – Thailand’s Prime Minister Yingluck Shinawatra recently forged a trade deal with Sri Lanka’s President Mahinda Rajapaksa. The two countries agreed to double their bilateral trade within the next three to five years. Investments are specifically intended for infrastructure development projects, small-scale industries and export production.
Trade between Thailand and Sri Lanka has averaged US$536 million over the past three years – the new trade deal is expected to double this number. In addition, Thailand committed to a trade surplus with Sri Lanka worth US$361.5 million.
Following the deal, the Thai Union Manufacturing Company, Thailand’s largest canned fish factory, announced plans to construct a large operation in Sri Lanka.
“It is to function as a joint endeavor between Sri Lanka and Thailand,” the Minister of Fisheries and Aquatic Resources Development said.
Sri Lanka is viewed as a market with high potential due to its large port, South Asian location, and cheap labor costs – Sri Lanka’s cost of labor is US$150 per month. Sri Lanka’s Board of Investment also creates many incentives for investors, including tax holidays spanning 4 to 12 years.
Executive Director of the Board of Investment of Sri Lanka, Duminda Ariyasinghe, predicts investments from Thailand will increase tenfold, up to US$250 million in the near future. Ariyasinghe named tourism, food processing, manufacturing, IT, and infrastructure sectors as primary interests for Thai investors.
Thailand’s current investment in Sri Lanka is relatively low comparative to other ASEAN countries, so this deal would constitute a major shift in the marketplace. Malaysia is currently the largest investor in Sri Lanka, followed by Singapore, with Thailand coming in third.
Also, as part of the agreement, Thailand and Sri Lanka vowed to boost multilateral cooperation in education and religion. Prime Minister Shinawatra named the exchange programs for Sri Lankan and Thai monks for Buddhist pilgrimages as especially beneficial to the countries’ bilateral relations.
Thailand and Sri Lanka have set up a subcommittee to coordinate their trade relationships. The committee’s second meeting is planned for the third quarter of 2013.