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What has been opened in Services under the Sri Lanka - Singapore Free Trade Agreement (SLSFTA)?

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This is the first article of a series in which Economy.lk provides brief insights from the study on the SLSFTA conducted by the EIU of the Ceylon Chamber of Commerce.

First, let’s have a look at how does a Cross-Border Trade in Service take place;                                               

A service is traded when an economic exchange takes place between a resident and non-resident regardless of the location of the transaction being made.

What are the 4 Modes in which Trade in Service takes place?                                                                                                                         

General Agreement of Trade in Services (GATS) of the World Trade Organization (WTO) defines 04 ways in which a service can be traded, known as "modes of supply"

Mode of Supply

Supplier Presence

 Mode 1 

Cross-border supply of services 

Services are supplied from one country to another without requiring physical movement of either supplier or consumer. Only the service crosses the border, usually delivered through information and telecommunications

Service supplier is not present within the territory of the of the member

 Mode 2

Consumption abroad 

Services are provided to another country’s citizens, who are required to travel to the territory where the services are located in order to benefit from the service.

 Mode 3

Commercial presence 

Company from one country establishes subsidiaries or branches to provide services in another country

Service supplier is present within the territory of the territory of the member

 Mode 4

Movement of natural persons (distinct for legal person)

Requires cross border movement of a natural person. Service providers travel from their own countries to supply services in other countries.

 

Example from the Education Services Sector

  Mode      

Example

 Mode 1

Online education courses provided by foreign universities.

 Mode 2

Sri Lankan students going for higher studies in overseas universities

 Mode 3

Sri Lankan students studying in subsidiaries of foreign universities situated in SL

 Mode 4

Foreign lecturers moving to Sri Lanka to lecture students

 

Example from the Health Services Sector

  Mode    

Example

  Mode 1   

Trade across borders through mail and electronic media

(E.g. air freight of lab samples, internet consultations and medical education etc.)

  Mode 2

Sri Lankan patients traveling to another country to obtain healthcare services.

  Mode 3

Establishment of a foreign company/subsidiary for the provision of health services.

(E.g. health management services, health insurance etc.)

  Mode 4

Doctors and health consultants visiting Sri Lanka for the provision of health services.

 

Mode 4 can be further broken down into 4 categories;                                             

  • Business Visitors (BVs):

They are not engaged in supplying the service or making direct sales to the public and do not receive remuneration from a source in the host country. This cross-border movement often takes place for activities such as to negotiate a sale of a service, establish business contacts, attend business meetings and similar.

  • Intra-Corporate Transferees (ICTs):

An employee of a foreign company who has a commercial presence under Mode 3 crosses the border to supply services in the commercial establishment set up in the host county.

  • Contractual Service Suppliers (CSS):

Self-employed (independent) service supplier or employee of a Foreign Service supplier (who do not have a commercial presence via Mode 3) crosses the border in order to provide a service on the basis of a contract their employer has concluded with a consumer in host country.

  • Independent Professionals (IP):

Self-employed person based from one country crosses the border in order to supply a service on the basis of a services contract with a consumer in the host country.

 

How are Services Commitments Scheduled in the SLSFTA?

Commitments in the services schedule follow a positive list approach. Both Sri Lanka and Singapore have listed specific sectors with reference to sub sectors in respect of which they would like to make commitments.  Any specific sector that is not listed in the schedule will not be governed by the Agreement.

 

Has the SLSFTA Opened Up Domestic Markets for Movement of Independent Professionals (IPs)?

No. In the SLSFTA, Mode 4 has been opened to only two of the four sub-categories, namely to Business Visitors and Intra Corporate Transferees (ICTs), with the latter linked to commercial presence through investment (Mode 3).

The SLSFTA does not permit entry for Singaporean Nationals to work in Sri Lanka under the other two sub-categories of Mode 4 i.e. Contractual Service Suppliers and Independent Professionals.

 

Furthermore, Sri Lanka has put in place guidelines for the two sub-categories of Mode 4 that are open; ICTs and Business Visitors 

Entry of Business Visitors are restricted to 30 days.

In terms of ICTs, they have to:

  1. be a National of Singapore (not a Permanent Resident holder),
  2. be employed in the Singapore Company for no less than 12 months and
  3. have a minimum of five years of relevant industry or professional experience, prior to the date of application.

In addition to the above guidelines, ICTs are further restricted to the following positions:

  1. Manager,
  2. Executives and,
  3. Specialists which are clearly defined in the Agreement.

The definitions of these positions can be understood to be stricter than what we would typically classify in Sri Lanka.

For example, an “Executive” and a “Manager” is defined as an individual with wide decision-making power and one who is:

  1. a member of the board of directors; or
  2. receives only general supervision; or
  3. receives direction from higher level executives; or
  4. receives direction from general body of shareholders.

 

Are Professional Services Categories opened in the SLSFTA?

Yes, but only the following 3 Services:

  • Legal advisory services: Limited to international and third country law (excludes Sri Lankan law).
  • Architectural services: Limited to pre-design advisory services (not architectural practice)
  • Engineering Services: Limited to pre-design advisory services (not engineering practice)

In the above 3 services, Mode 3 and 4 are closed for Singaporean National which means Singaporeans cannot establish companies and provide these Professional Services in Sri Lanka by bringing down any Singapore Nationals to work.

The upside for Sri Lanka is that the guidelines are more stringent in terms of the 10 Professional Services that are listed in Singapore’s schedule. There is greater market access opportunities made available for Sri Lankan firms and professionals[i].

 

 

 

To download the full document of ‘Insights and Findings on the Sri Lanka – Singapore Free Trade Agreement visit TIPS on Economy.lk

 

 

 


[i] Professional Services – i) Legal advisory, ii) Accounting, auditing and bookkeeping, iii) Financial auditing, iv) Taxation services and other tax-related, v) Architectural, vi) Engineering, vii) Landscaping, viii) Medical, ix) Dental, x) Veterinary

 

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