$ 20 b exports in 2022: Overly optimistic or easily achievable?

By Yakuta Dawood

The Government of Sri Lanka is aiming to double the export revenue for goods sold internationally this year. With reference to the Cabinet paper dated 3 January 2022, the export target for the entire export industry is at $ 20 billion. This is a 100% growth in comparison to the export target achieved in the first 10 months of 2021. 

According to Export Development Board (EDB) statistics, merchandise exports from January to October 2021 raised a total of $ 10,059.4 million following increased exports of almost all the major product sectors such as apparel and textiles, tea, rubber-based products, coconut-based products, electronics and electronic components, spices and concentrates, food and beverages, seafood and ornamental fish, etc. 

This week, The Sunday Morning Business will speak about whether doubling the export target from 2021 to 2022 amidst the present pandemic and the economic challenges is a possibility or not. 

This is an anti-export Government expecting exports to double in one year: Harsha 

Sharing his views on the subject, Samagi Jana Balawegaya (SJB) MP and Economist Dr. Harsha de Silva questioned how the Government can double the exports when it has not taken the necessary reforms for it to happen. 

Explaining further, Dr. de Silva stated that if the Government wants the exports to double, they have to undertake necessary reforms for it to happen. “For instance, Vietnam in 2021 is estimated to have $ 50 billion worth of mobile phone exports. For this, they have done trade reforms, signed multiple Free Trade Agreements with various countries such as the US and Europe, entered into a Trans-Pacific Partnership, broken down massive tariff walls, reformed their trade and investment policies, opened their economy in such a way that massive multinational manufacturing have set up plants in the country, and more importantly, built bridges to the world!”

Continuing, he mentioned that the Government can’t just say that they are going to follow the import substitution industrialisation economy and expect exports to rise.

“What have we done to integrate with the world? We haven’t. We are running away from the world. We are putting our heads in the sand. We are constructing massive tariff walls. We are creating disincentives for exports. We are creating a growling capitalist system whereby certain selected individual companies are making money hand over fist because they are protected by tariff walls and that is no way to increase exports. Existing local exporters are moving out because they are being forced by the Government to surrender their hard-earned dollars. Therefore, trade has to happen both ways.”

In March 2019, the Government banned imports of rice, ornamental fish, alcohol, vinegar, grains, maize, pasta, vegetable oil, black gram, screws, nuts, and bolts, communion wafers, cement paint, batteries, small motors, marble, ceramic tiles, sanitary ware, and essential oils.

Giving the concluding remark, Dr. de Silva questioned: “This is an anti-export Government expecting exports to double in one year. Where can it happen, how can it happen, what have you done to make it happen? It’s absolute nonsense!”

What do the Government officials have to say?

Commenting with regards to the set target, a senior official from EDB highlighted that the target of $ 20 billion is 100% achievable given the 2021 export statistics received, regardless of the pandemic, local economic crisis, and global adverse trade performances. 

Speaking to The Sunday Morning Business, the official said that the EDB has developed and formulated an action plan for each and every export sector in Sri Lanka with the consultation of the private sector, and established an advisory committee to look out for the better along with also constantly meeting sectors in assisting them in resolving whatever the issues they contain. 

“We have not just put the target on our own, but this is in consultation with the industry. Last year we were successful and we hope to continue this year as well. We have done our best in the last two years and we will continue the momentum,” the official emphasised. 

Likewise, expressing similar views, Ministry of Trade Secretary Bhadranie Jayawardhana also voiced out that the Government officials are not just making these figures without any negotiations or factual statistical data to support the set export target.

“Expertise of the export sector, government agencies, EDB, and other officials are not making these figures blindly. They analyse this figure from past and future statistics. They are considering other countries’ demand-supply theory and then, according to their knowledge, they are making the decision,” Jayawardhana expressed. 

Adding further, she mentioned that regardless of the pandemic, the export industry was able to achieve the target for the year 2021, meaning that if worked properly along with all the industries, the Government of Sri Lanka could achieve the target for 2022. 

“In the pandemic period last year, we performed well in comparison to other countries and with the ongoing vaccination programme, etc. we can manage to achieve the export target set,” she concluded. 

Meanwhile, also speaking to The Sunday Morning Business, National Chamber of Commerce President Ravi Jayawardena stated that to accomplish the targets, stakeholders should work towards mitigating the existing challenges rather than focusing on eliminating the problem. 

Explaining, he stated that there are so many challenges faced by Sri Lankan exporters due to the present local and the global situation, for which the solution should be working towards the goal set by addressing the issues at hand. 

“Challenges have to be understood and appropriate decisions should be taken. Therefore, both the Government and exporters have to have continuous dialogue and overcome the hurdles. However, we have submitted lots of proposals to the Government to favour the exporters in Sri Lanka,” Jayawardena said. 

Further, highlighting a solution, he emphasised that the Government should conduct forums including the exporters and the relevant ministries to support, address, discuss, and resolve the problems that are existing in the market. 

Attempts to reach Minister of Trade Dr. Bandula Gunawardana and EDB Chairman Suresh de Mel proved futile on 7 January 2022. 

What do the industries have to say?

Speaking to The Sunday Morning Business, an official from the Lanka Fruit and Vegetable Producers, Processors, and Exporters Association who wished to remain anonymous stated that even though the target is doubled for the upcoming year, it is not as hard as it is due to the increase in world trends and surge in demand for goods internationally. 

Therefore, elaborating the official stated that if Sri Lankan exporters are able to live upto the international demand and cater to the market to its optimum level, then the export target set could definitely be achieved for the year 2022. 

“Given some of the constraints that we are facing at present such as the possibility of a new threat of Covid-19, forex exchange shortage to procure raw material from overseas for manufacturing, and other related issues, it could be a challenge. But, if we can live up to the demand, we can achieve it,” the official highlighted. 

Reflecting on the industry, the official mentioned that the industry has two main extreme challenges. Firstly, it is the shortage of crops and the drop in quality of crops sold, and secondly the high freight rates which have severely impacted the trade, as some consumers have stopped purchasing goods from Sri Lanka due to the accumulated cost of the final crop. 

“With constraints including freight rate with very high prices, it is a hindrance for export markets like vegetables and commodities as they are sensitive to price. So, with the high freight price, consumers do not want to purchase products. Therefore, consumers are waiting for prices to come down, then only we can achieve our export target. Hence, it’s challenging and a dormant task,” the official added. 

Finally, the official said that they can only hope and pray that things will get better and the Government looks for facilitations and not just putting more breaks on foreign exchange and other regulations to the ones that are already existing  because we don’t see them as business friendly. “If there’s free flow of funds, then only we will generate more out of it, so if there’s a freeze on it, it becomes more difficult to achieve the target set for 2022,” the official concluded. 

We also spoke to Sri Lanka Ayurvedic Drugs Corporation (SLADC) Chairman Sagala Abhayawickrame, who also stated that the target set by the Government is not an unrealistic target to achieve as the corporation has nearly doubled their production capacity, upgraded, and modified the production processes in comparison for the first time in 50 years. 

Giving a brief about the export plan, she said that they are expecting to do exceptionally well in the export market, more than what they are doing right now. Accordingly, SLADC plans to commence exports to Japan, China, the UK, Canada. 

“People are saying it’s unrealistic because they don’t want it. It’s not that it’s unrealistic, They want to spread the idea of us not doing anything when the Government is working towards it. So, even before you start doing it, they are telling you it is unrealistic. But to achieve a goal first you have to set a goal so now the Government has given it. Now, it’s with the corporations, Chairman and all the stakeholders involved to achieve the export target set,” Abhayawickrame expressed.

Nevertheless, continuous attempts to reach the Sri Lanka Association of Manufacturers and Exporters of Rubber Products (SLAMERP), Sri Lanka Gem and Jewellery Association, Sri Lanka Boating Industry, and several other export associations, proved futile.