-By A Special Correspondent
(Lanka-e-News -25.June.2025, 5.55 AM) In a bold and potentially historic initiative, policymakers in Colombo and Malé are in quiet discussions over what may become the most transformative bilateral agreement in South Asian history: a Maldives–Sri Lanka Free Economic and Free Movement Zone, effectively a regional economic union modelled on the European Economic Area.
The proposed agreement—if realised—would allow citizens of both countries to live, work, study, own property, operate businesses, and access public services in each other’s territory without the need for visas or work permits. Maldivians could register businesses in Sri Lanka as if they were citizens; Sri Lankans could enter Maldivian markets without bureaucratic or legal friction. The integration would extend to customs, education, healthcare, and even banking rights, forging a comprehensive economic and social union across the Indian Ocean.
In essence, the initiative envisions free movement of people, goods, services, and capital, mirroring the freedoms enjoyed within the European Union. It would be the first such experiment in South Asia, a region long plagued by rigid borders, mutual suspicion, and nationalistic protectionism.
In a part of the world where even visa-on-arrival schemes are treated with bureaucratic suspicion, the vision of two sovereign states effectively merging their economic and social systems is, to say the least, audacious.
But both Sri Lanka and the Maldives have compelling reasons to embrace the idea.
For Sri Lanka, struggling with post-crisis economic rehabilitation and looking to diversify its diplomatic and commercial engagements, the free movement agreement could inject new energy into tourism, higher education, port services, and financial services. With a population of 22 million, Sri Lanka offers Maldivian businesses a ready-made market, strong logistics networks, and a wider talent pool.
For the Maldives—a nation of just over half a million people dispersed across 200 inhabited islands—the economic union would serve as a gateway to scale. Maldivian companies could expand operations into Sri Lanka without legal encumbrances. Maldivian citizens would gain access to high-quality, low-cost education and healthcare. And most crucially, it would allow the Maldives to diversify beyond its tourism-heavy economy by tapping into Sri Lanka’s manufacturing and export ecosystems.
Officials from both countries have reportedly discussed the formation of a bilateral Free Economic Zone (FEZ) and a Common Customs Union, which would remove all duties and taxes on goods exchanged between the two nations. The agreement, if enacted, would also create a common employment area, allowing businesses to recruit freely across the two territories.
Sources close to the discussions suggest that the FEZ would cover:
• Full labour mobility: No work permits required; citizens can seek employment or launch enterprises in either country.
• Property rights: Full right to own, lease, and develop real estate.
• Public service access: Maldivians in Sri Lanka would receive state education, healthcare, and local services. Sri Lankans in the Maldives would enjoy equivalent rights.
• Financial integration: Citizens can open and operate local bank accounts, apply for credit, and invest in financial markets.
• Tax harmonisation: Mechanisms to avoid double taxation and align corporate tax regimes.
• Student and research exchange: Free movement for students, researchers, and academic staff.
A joint commission, likely headquartered in Colombo, would regulate and oversee the integration process, including dispute resolution, monitoring of compliance, and joint policy setting.
One of the most transformative aspects of the proposed pact is the creation of a Sri Lanka–Maldives Customs Union—a move that could boost bilateral trade by as much as 300% in the first year alone, according to independent trade economists in Colombo.
At present, trade between the two nations is modest—amounting to under USD 100 million annually—hampered by high logistical costs, customs duties, and regulatory inconsistencies. A common customs area would eliminate tariffs, border inspections, and trade barriers, allowing seamless movement of apparel, seafood, manufactured goods, and raw materials.
Moreover, the proposal includes customs pre-clearance mechanisms and port linkages, meaning Maldivian exporters could ship goods through Colombo or Hambantota ports without incurring additional costs or bureaucratic delay. The Maldivian fishing sector—one of the country’s top earners—could particularly benefit, gaining direct access to Sri Lankan processing and packaging infrastructure.
Tourism, the Maldives’ primary economic pillar, also stands to gain significantly. Under the proposed agreement, tourists arriving in Sri Lanka could travel to the Maldives without separate visas, effectively creating a dual-island destination across the Indian Ocean.
Travel agents envision a single tourist visa regime, where travellers could land in Colombo, explore Sri Lanka’s cultural and wildlife offerings, and then fly or cruise to a Maldivian resort—all under a unified system.
For the Maldives, this opens the door to higher tourist volumes, particularly from European and Asian travellers who often favour Sri Lanka for its affordability but are intrigued by the allure of Maldivian waters. For Sri Lanka, it means access to premium tourists who might have otherwise skipped the island.
If implemented, this arrangement could create a shared tourism corridor—a powerful regional brand marketed as “Two Nations, One Destination.”
Critics have raised eyebrows about potential social and labour implications of the agreement, particularly in the Maldives, where fears persist of being “overwhelmed” by Sri Lankan labour migration.
But experts dismiss these concerns as politically exaggerated. Sri Lankans are unlikely to flood Maldivian atolls, say analysts, given the high cost of living, transportation, and limited infrastructure. Most economic migrants will remain concentrated around Malé, Hulhumalé, and resort zones, contributing to sectors like construction, hospitality, and healthcare.
Moreover, Maldivian officials are keen to point out that reciprocity is key: thousands of Maldivians could now access affordable university degrees, medical treatment, and even retirement options in Sri Lanka—a major step toward social equity.
“Sri Lanka offers a scale and stability that the Maldives currently lacks,” says Farzana Saleem, a Malé-based economist. “But the Maldives offers capital, ambition, and investment appetite. Together, they could create something uniquely powerful in South Asia.”
Among the most immediate winners of the integration would be Maldivian students.
Each year, hundreds of Maldivians enrol in Sri Lankan private and public universities, paying high international fees and navigating arduous visa regimes. Under the free movement agreement, they would be entitled to domestic tuition rates, public scholarships, and access to national libraries and research institutions.
Sri Lankan higher education institutions, facing budget constraints and demographic stagnation, are likely to welcome this influx with open arms. Meanwhile, Maldivian entrepreneurs could leverage Sri Lanka’s legal frameworks, financial services, and skilled labour to establish regional headquarters, particularly in sectors like:
• Apparel manufacturing
• Fish canning and export
• Renewable energy
• Fintech and digital services
• Real estate and infrastructure development
Beyond economics, the proposed agreement sends a clear diplomatic message. In an increasingly polarised Indian Ocean region—where China, India, the US, and Gulf powers compete for influence—Sri Lanka and the Maldives are attempting something different: a regional partnership based on equality, pragmatism, and common identity.
Rather than entrenching dependency on foreign creditors or military patrons, both nations are signalling a pivot toward regionalism—building strength through integration rather than isolation.
If successful, the agreement could serve as a model for mini-lateralism in South Asia—smaller nations banding together for mutual benefit rather than waiting for larger regional blocs like SAARC to awaken from their diplomatic comas.
Still, there will be hurdles and hard conversations. The Maldives is a constitutionally Islamic republic. Sri Lanka is a multi-religious, secular democracy. Reconciling cultural norms, legal systems, and public expectations will require delicate diplomacy.
Questions remain:
• Will Maldivians be subject to Sri Lankan civil law or Islamic personal law?
• Will Sri Lankans be allowed to openly practice non-Islamic religions in Maldivian territory?
• How will disputes over land rights and business ownership be adjudicated?
Yet proponents argue that Europe overcame greater differences—linguistic, legal, religious—and managed to establish a workable model of shared sovereignty. “If 31 European countries could pull it off, surely two nations with shared histories, geography, and mutual need can manage,” says Dr Ashan de Soysa, an international law expert in Colombo.
In the end, the idea of a Sri Lanka–Maldives Free Economic and Movement Zone is both practical and symbolic. It is a chance to demonstrate that small states can think big; that integration can be a form of sovereignty, not a threat to it.
If both governments muster the political will, the rewards could be immense: faster GDP growth, better public services, stronger regional identity, and a roadmap for the rest of South Asia.
It will not be easy. But then again, no milestone ever is.
-By A Special Correspondent
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by (2025-06-25 00:28:36)
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