Eran moots greater export finance insurance

Calls for a contemporary export structure evolving from the 

plantation based economy

Only 3% of exports insured below recommended levels of 12%

SME involvement in export sector critically low as a middle income country

Expressing concern on the declining external sector Deputy Minister State Enterprise Development Eran Wickramaratne yesterday said that the insurance Industry should gear exporters with proactive proposals to achieve high socio economic growth.

 He made these remarks delivering his keynote speech during the inaugural day of the International Cooperative and Mutual Insurance Federation’s two- day symposium yesterday. 

Wickramartane outlined that the decline of the country’s exports are mainly due to the orthodox structure and low level of insurance in exports finance.

 “Between 2000 and 2014 the exports from Sri Lanka to the world market has declined from 32% to 15% from our GDP. If you look at the export structure of the country its largely still very much what we got from the colonial masters. It’s still a dependent on plantation based economy, where big players still lead our exports. We are now called a middle income country, however our exports structure is of a poor country.”

He went on to say: “Less than 5% of all our exports go out of SME’s typically a middle income country 40% of exports are from SME’s. So we have a long way to go. In Sri Lanka only 3% of exports have some kind of insurance which falls behind the expected middle income country level of 12%.”

While stating that the forthcoming Budget had proposed an Export Import Bank (EXIM) he however noted that the establishment of such a corporate institution was not solely sufficient to drive the country’s exports.

According to Verite Research, a local research company; exports finance instruments reduce the risk faced by exporters. One such risk is buyers may default on their payments as increasingly buyers are willing to only pay when the goods are in their hands and sometimes only after the goods are actually sold.  Financial instruments will attract buyers by offering different terms and will provide SME’s with financial ability to sustain exports.

“Having insurance lowers risk for people unlocks credit, it stimulates economic activity,” the Minister opined.

Pix by Upul Abayasekara