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Export sector: Need for new markets and expansion in FTAs 

06 Nov 2021

  • Exports stagnant, faced with inadequate investment: Experts
  • Political and economic stability, sound policies needed to attract investment
  • Sri Lanka’s failure to secure FTAs is constraining exports
  • PM to attend ‘Sri Lanka Day’ at Dubai Expo in January          
By Skandha Gunasekara Lack of policy consistency, inadequate diversification of exports, and a failure to find newer markets were hindering Sri Lanka’s export potential, experts warned, as the Government scrambled to attract investors at the ongoing Dubai Expo.  The Government is planning to launch “Sri Lanka Day” at the Dubai Expo in early January 2022, with the attendance of the Prime Minister to encourage investors, The Sunday Morning learnt. Despite the Export Development Board (EDB) recently upgrading its annual target for 2021, industry veterans pointed out that Sri Lanka’s export potential was not truly tapped into.  According to Shippers’ Academy Colombo Chief Executive Officer (CEO) and Sri Lanka Association of Manufacturers and Exporters of Rubber Products Director General Rohan Masakorala, Sri Lanka needs to enter new export markets as well as see expansion in free trade agreements (FTAs). “We need to get more market access to countries like the US, and those in the European Union (EU), as those are our main customers; also, Japan and South America. China is a competitor, so it is difficult to get into that market at the moment. “We need to develop FTAs with new markets, as Sri Lanka is one of the weakest countries in that aspect. As a result, we are very poor in our export growth. A look at the real growth figures will show that we have been stagnant for the last decade. “No major manufacturing-based investments came to Sri Lanka due to the lack of policy consistency, and the current economic environment won’t bring in foreign investments. We don’t see a massive interest from anywhere to expand in Sri Lanka; even though we have a geographic advantage, the rest of the export landscape is not investor friendly.”  He said that Sri Lanka needed to immediately focus on exporting new items such as fixed products, which were identified in the national export strategy as far back as 2017.  “We have two strengths – human resources, which can be useful in any kind of production process, and our geographic advantage of connectivity. The reality is that the other areas are not competitive, and the macroeconomic status of the country does not attract investors. The Government brought in controls on how exporters have to convert their money, and there is a concern in the export market that exporters may shift to other countries that have a friendlier environment for the export industry.” He added that Sri Lanka lacked focus to drive exports. He said: “The rubber and garment industries were finding it difficult to be competitive. Other issues include that of productivity, lack of expansion, energy issues, no proper land quality, etc. As a result, the export market has been stagnant at $ 10-12 billion for many years, while our competitors like Vietnam, who started in the 90s with just $ 2 billion, have reached $ 280 billion now.” He said that it is imperative for Sri Lanka to get the basics right to attract investors and expand the export industry, such as ensuring a friendly environment for investors and political and economic stability.  Poor performance at Dubai Expo Masakorala opined that a lack of focus by the Government was the reason for the bad turnout at the ongoing Dubai Expo. “The last Government had a lot of focus. We had allocated about Rs. 500 million (for this), but ultimately, the amount ended up being used for an exposition of sorts of the entire country in terms of tourism, and from what I heard from my personal contacts, Sri Lanka’s pavilion at the Dubai Expo was disastrous. We lost focus and thought that only the country’s tourism should be promoted, and there was not much direct involvement with the export sector.” Joint Apparel Association Forum Chairman Arumugampillai Sukumaran, while noting that garment exports were recovering following the pandemic, said it still needed to reach pre-Covid-19 growth levels. “We are expecting to hit the $ 5 billion export target for the apparel sector. In comparison to last year, we have been doing well. In comparison to 2019, i.e. pre-Covid-19, we are down about 8-10%. Given that the pandemic doesn’t affect us again and we are able to continue operations uninterrupted, by 2022, we should be able to pick up from where we left off in 2019.” Sukumaran said Sri Lanka’s export competitors were at an advantage due to the numerous FTAs they had with other nations, adding that Sri Lanka too was looking into entering more such agreements. “Buyers are always looking to do business with different areas, so we will have to target the niche market. We are working with the Government to see the possibility of entering into FTAs with countries such as Japan, China, and India.” Meanwhile, EDB Chairman Suresh de Mel explained that the Dubai authorities had not allowed Sri Lanka’s pavilion at the Dubai Expo to put up its original designs. De Mel noted that it was a high ask to expect Sri Lanka to go toe to toe with the likes of countries such as India at the Dubai Expo, due to its limited budget. “This is something that was developed over three years, and it was developed first by the Export Development Board and then we transferred it to Sri Lanka Tourism, which is running the show now, because it is not your regular trade fair. “It would be very costly to try to compete with countries like India, and naturally, there would be some countries that have extravagant pavilions. We simply didn’t have the money to do that; in fact, it was given to us free, as a lot of it came from Dubai. We had to meet a lot of the conditions set by Dubai, and so our design also was not adopted. “In fact, some students who designed it had also criticised this. These students won a prize for their design, which was why we were going to implement it at the Lankan pavilion at the Dubai Expo. The design entailed the use of a dumbara mat for the ceiling, but the Dubai authorities said it was a possible fire hazard.” He said that while the initial plans during the Yahapalana Government had been to allocate Rs. 500 million for the Expo, that money had not come through. Nevertheless, de Mel pointed out that Sri Lanka would be conducting a “Sri Lanka Day” at the Expo in January, headed by Prime Minister Mahinda Rajapaksa, in a bid to attract investors as well as to promote tourism. “We will invite business communities, there will be a delegation, and we will focus on business and tourism. However, a lot of these things are not certain due to the Covid-19 situation.”


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