Sri Lanka is undergoing a strategic transformation in its approach to economic diplomacy, with a renewed focus on leveraging its diplomatic missions to boost exports, attract foreign investment, and diversify trade partnerships.
Spearheaded by the Ministry of Foreign Affairs in collaboration with key trade promotion agencies, this initiative aims to streamline export facilitation, enhance digital trade infrastructure, and eliminate bureaucratic inefficiencies that have historically hindered growth.
At the heart of this shift is a new, integrated digital platform being developed in partnership with the Ministry of Digital Economy that will serve as a single-window interface for exporters and foreign investors.
Deputy Minister of Foreign Affairs Arun Hemachandra and Deputy Minister of Industry and Entrepreneurship Development Chathuranga Abeysinghe, speaking to The Sunday Morning, outlined the Government’s vision for a more structured, transparent, and performance-driven trade diplomacy strategy.
A new era
For years, Sri Lanka’s export promotion efforts suffered from fragmentation, with the effectiveness of embassy trade attachés often hampered by poor coordination with domestic trade bodies.
Deputy Minister Hemachandra acknowledged this systemic weakness, stating: “While Sri Lanka has several mechanisms in place to promote exports, what we lacked in the past was a truly synchronised and intensive structure that could bring all relevant agencies together.”
To rectify this, the Foreign Ministry has implemented a comprehensive coordination mechanism that integrates heads of overseas missions, the Export Development Board (EDB), the Board of Investment (BOI), and representatives from key export sectors including tea, apparel, IT, seafood, and spices.
This unified approach ensures diplomatic missions now operate in alignment with national trade objectives rather than working in isolation, marking a significant shift in Sri Lanka’s economic diplomacy strategy.
Reflecting on the recent launch of the coordination mechanism, Deputy Minister Abeysinghe added more insights to the recent developments in the collaboration to achieve export targets.
“Historically, Sri Lanka has lacked a structured approach to driving trade and investment in foreign markets,” he stated. “Our new strategy involves creating detailed country profiles to identify potential export products and partnership opportunities.”
Abeysinghe revealed that Sri Lankan embassies would play a pivotal role in this transformation. “We are positioning our foreign representatives as ‘trade ambassadors,’ supported by both the Foreign Ministry and the Ministry of Industry. Together with the EDB, we are developing country-specific growth plans based on comprehensive product-market profiling,” he added.
Digitising trade
One of the most transformative developments in Sri Lanka’s trade strategy is the eventual creation of a digital trade facilitation platform developed in partnership with the Ministry of Digital Economy.
Hemachandra elaborated on this initiative, explaining: “The aim is to establish a single-window interface where foreign investors and local exporters can interact seamlessly with relevant authorities.
“These systems are being quietly developed but things are happening. It is like the bamboo theory, if you will. You don’t immediately see the growth, but the roots are spreading. Once it matures, the growth will be exponential.”
This innovative platform will seek to serve multiple critical functions such as connecting exporters with foreign buyers, providing real-time updates on trade regulations and market insights, streamlining investment approval processes, and offering efficient dispute resolution mechanisms.
Overcoming past challenges
Hemachandra candidly addressed how political interference previously undermined economic diplomacy.
“Decisions often ended up being made in an ad hoc and sometimes nepotistic manner, sidelining the institutional strengths we had, particularly the talent and capability of our diplomats and career officers. This led to inefficiencies, with foreign investors sometimes bypassing official channels in favour of politically connected intermediaries.
“The new approach seeks to eliminate such practices by enforcing structured, policy-driven decision-making. This will eliminate red tape and bureaucratic hurdles,” he said.
A key step in rebuilding investor confidence was the recent reciprocal investor protection agreement with the UAE. “This was a crucial step to restore confidence among foreign investors, especially after previous missteps, like the controversial exit of Emirates from SriLankan Airlines, which was not handled ethically and left a poor impression internationally,” Hemachandra stated.
The Government is also engaging in high-level discussions with countries such as India, Japan, and Thailand to secure technology transfers and joint ventures, particularly in seafood processing and IT services.
Sector-specific trade expansion
Sri Lanka is strategically shifting from raw commodity exports to high-value-added products across key sectors. In the tea and spices industry, the Government is taking strong measures to protect premium brands like Ceylon Cinnamon, which faces global mislabelling issues where inferior products are falsely marketed as genuine cinnamon.
As Deputy Minister Hemachandra emphasised, embassies now play an active role in enforcing Geographical Indication (GI) protections and promoting authentic Ceylon spices in international markets. “The apparel sector, led by the Joint Apparel Association Forum (JAAF), is capitalising on the growing global demand for sustainable fashion by expanding into European and Australian markets,” he noted.
“Meanwhile, Sri Lanka’s IT and business services sector is emerging as a new growth engine, with specialised trade missions targeting Japanese and Australian tech firms. The seafood industry is also undergoing transformation, with Thailand and Japan expressing interest in investing in processing facilities to move beyond raw exports and capture higher value in the supply chain,” Hemachandra further explained.
When asked about specific products with strong export potential, Abeysinghe said: “Our electronics sector is performing exceptionally well in Europe, where our products are recognised for their high quality. Beyond this, value-added agriculture – particularly spices like pepper and cinnamon, as well as fruits and cocoa – presents significant untapped opportunities.”
He emphasised the importance of building on existing successes, noting: “Any product already succeeding in advanced markets has proven competitiveness. We are focusing on scaling these rather than discounting their value.”
Market diversification strategy
While the US remains Sri Lanka’s largest export destination, the Government is aggressively pursuing diversification to reduce trade imbalances and tap into emerging opportunities in view of the recent tariff shock originating from the US.
Europe, particularly Germany and France, has been identified as a key market for apparel and premium spices, while Australia and the UK show strong potential for tea, seafood, and IT services exports. The Middle East, especially the UAE and Saudi Arabia, is being targeted for processed foods and logistics partnerships.
Deputy Minister of Industry Abeysinghe also outlined Sri Lanka’s geographic priorities, noting: “We are intensifying efforts in the Middle East and Africa while deepening penetration in Europe. Additionally, we see substantial potential in India, Australia, Japan, and China – four major markets where strategic inroads could significantly boost exports.”
This strategic reorientation aligns with Hemachandra’s vision of comprehensive economic diplomacy, where embassies are actively engaged in identifying niche market opportunities and facilitating business connections. The recent reciprocal investor protection agreement with the UAE exemplifies this approach, creating a more secure environment for cross-border trade and investment, according to Hemachandra.
High-level trade dialogues
The Government has intensified high-level trade discussions to address systemic challenges and create policy alignment. A landmark tariff policy dialogue was convened on 13 March at the Lakshman Kadirgamar Institute, bringing together the Ministry of Finance, the EDB, the BOI, JAAF representatives, and Deputy Ministers Dr. Harshana Suriyapperuma and Prof. Anil Jayantha Fernando.
These institutional engagements, as Hemachandra noted, are part of a broader effort to eliminate ad hoc decision-making and create a synchronised trade promotion framework. Following this, Sri Lankan exporters participated in ‘Expo Japan 2024,’ showcasing products to Japanese buyers and exploring technology transfer opportunities.
Such initiatives demonstrate the Government’s commitment to transforming diplomatic missions into active trade facilitation hubs, moving beyond traditional political functions to drive concrete economic outcomes.
Addressing concerns about the potential expiration of the European Union’s (EU) Generalised Scheme of Preferences Plus (GSP+) scheme in 2027, Abeysinghe explained: “While preferential agreements like GSP+ have been helpful, our long-term goal is to compete without reliance on concessions.”
However, he noted ongoing efforts to maintain trade benefits: “We are actively engaging with the EU and United Nations (UN) to secure continued trade advantages, whether through GSP+ or alternative schemes. Simultaneously, the EDB is negotiating new bilateral and multilateral free trade agreements.”
Strategic focus on economic diplomacy
Deputy Minister Hemachandra underscored the fundamental shift in Sri Lanka’s foreign policy approach, stating: “We are at a pivotal moment. Economic diplomacy is no longer a peripheral function; it is at the heart of our foreign policy.”
This renewed focus manifests in several strategic initiatives, including the development of Port City Colombo as South Asia’s premier financial and trade hub despite initial controversies, according to Hemachandra.
The Government is actively pursuing strengthened partnerships with the UAE, with high-level delegations exploring substantial investments across energy, logistics, and tourism sectors. Concurrently, Sri Lanka is negotiating skills and technology transfer agreements with India and Japan, particularly targeting advancements in maritime operations, IT infrastructure, and manufacturing capabilities – all crucial for enhancing the nation’s competitive edge in global markets.
Abeysinghe also revealed Sri Lanka’s export ambitions: “Our target is $ 18.5 billion, with growth expected from specific sectors and markets. Current performance is on track, but we’re closely monitoring US trade negotiations.”
He highlighted efforts to remove trade barriers, noting: “We are addressing 17 critical bottlenecks identified during the recent 25th ‘Exporters’ Forum.’ These include customs delays, licensing hurdles, certification challenges, and market access barriers.
“A ministerial council meeting in May will fast-track solutions to these issues. This collaborative approach between Government and industry is crucial for maintaining our competitiveness.”
The Ministry of Industry and Entrepreneurship Development plans to release detailed implementation timelines for these initiatives in the coming weeks, with the first country-specific trade plans expected by Q3 2024.