Strengthening Sri Lanka’s export sector: Call for strategic Government support

The bureaucratic hurdles associated with customs clearance, export documentation, and 

regulatory approvals have long been a challenge for Sri Lankan exporters

Sri Lanka’s export sector is a critical pillar of our economy, contributing significantly to foreign exchange earnings, employment, and overall economic growth. However, despite the immense potential, Sri Lankan exporters continue to face a series of challenges that are threatening their competitiveness on the global stage. As the Association of Professional Bankers Sri Lanka (APB), we feel a deep responsibility to address these challenges and highlight how the Government can play a crucial role in supporting the exporters who are vital to our economy.

High export costs: Navigating financial hurdles

One of the primary challenges faced by Sri Lankan exporters is the high cost of production, shipping, and logistics. The cost of raw materials, labour, energy, and shipping has been steadily increasing, which has made it difficult for local products to remain price-competitive in international markets. Rising port charges and logistical bottlenecks further exacerbate the situation.

To help alleviate this burden, the Government should consider introducing subsidies or tax incentives aimed at reducing the cost of production for exporters. Additionally, reducing port charges and improving shipping logistics would significantly lower overall export costs. Working on better trade agreements that reduce shipping fees can provide immediate relief, allowing Sri Lankan products to better compete globally.

Access to international markets: Breaking down trade barriers

Sri Lankan exporters are often restricted in their access to international markets due to trade barriers, tariffs, and a lack of market intelligence. While the quality of Sri Lankan products is often on par with international standards, our exporters struggle with the complexities of entering foreign markets where high tariffs and stringent regulations exist.

To address these issues, the Government must prioritise the negotiation of free trade agreements (FTAs) and preferential trade deals with key markets, reducing or eliminating tariffs and non-tariff barriers. In addition, the Government should provide exporters with comprehensive market research and guidance on global trade trends, helping them navigate changing regulations and identify new growth opportunities.

Currency depreciation: Mitigating risks

Currency fluctuations, particularly the devaluation of the Sri Lankan rupee, pose a significant risk for exporters. A weaker rupee impacts profitability by increasing the cost of imported raw materials and reducing the value of export earnings when converted back to the local currency. For exporters who deal in foreign currencies, this unpredictability can be a serious challenge.

The government could step in by offering hedging solutions or establishing stabilisation funds to help exporters manage currency risks more effectively. Such tools would enable exporters to plan better and protect themselves from adverse currency fluctuations, helping to maintain profitability and ensure continued competitiveness.

Access to financing: Overcoming financial barriers

Many exporters, especially small and medium-sized enterprises (SMEs), face difficulty accessing affordable financing for expansion and working capital. High-interest rates, limited credit access, and complex financing procedures make it challenging for exporters to scale their operations or expand into new markets.

The Government can address this issue by working with financial institutions to provide low-interest loans, trade credit facilities, and export financing options. Special export financing schemes, such as trade credit and export insurance, could provide the necessary financial support, empowering exporters to grow their businesses and expand globally.

Bureaucratic red tape: Streamlining export processes

The bureaucratic hurdles associated with customs clearance, export documentation, and regulatory approvals have long been a challenge for Sri Lankan exporters. Lengthy procedures and complicated paperwork not only delay shipments but also increase operational costs, which reduce the overall competitiveness of Sri Lankan goods in international markets.

The Government must make an effort to streamline these processes by digitising export documentation, implementing one-window clearance systems, and reducing the time required for customs approvals. By simplifying these procedures, exporters can more efficiently meet delivery deadlines and lower their operating costs, allowing them to better compete in the global marketplace.

Infrastructure challenges: Modernising to stay competitive

Infrastructure, or rather the lack of adequate infrastructure, is another key barrier to the growth of Sri Lanka’s export sector. Poor roads, inefficient port facilities, and inadequate warehousing all contribute to delays and increased costs for exporters. These challenges often lead to lost opportunities and can result in damaged goods, further eroding Sri Lanka’s reputation as a reliable exporter.

The Government should invest in modernising Sri Lanka’s infrastructure, particularly in the areas of ports, transportation networks, and warehousing facilities. By improving these systems, Sri Lanka can reduce logistical costs and improve its position as a global export hub.

Quality and standards compliance: Navigating global demands

In today’s global marketplace, meeting international quality standards and certifications is essential for success. However, many Sri Lankan exporters face significant challenges in obtaining the necessary certifications, especially for niche or specialised products. This is often due to limited access to quality assurance training, certification programs, and the financial burden of compliance.

The Government can support exporters by facilitating access to international certification programs and providing training to ensure compliance with global quality standards. By assisting exporters in meeting international benchmarks, the Government can help open new markets and position Sri Lanka as a trusted supplier of quality goods.

Skilled labour: Building capacity for growth

A shortage of skilled labour in key export sectors such as product development, packaging, and quality control continues to be a significant obstacle for Sri Lankan exporters. Without a workforce with the necessary skills and expertise, it becomes increasingly difficult to meet international market demands and maintain high standards of production.

The Government should prioritise the development of vocational training programs and skill development initiatives aimed at equipping the workforce with the specialised knowledge needed for the export sector. Creating a pool of skilled workers will not only boost export performance but will also increase the overall productivity and innovation within Sri Lanka’s export industries.

Limited product diversification: Encouraging innovation

Many Sri Lankan exporters are overly reliant on a limited range of products, which makes them vulnerable to shifts in demand and global market trends. If demand for a particular product wanes, these exporters face significant challenges in maintaining revenue streams.

The Government can encourage product diversification by providing incentives for research and development (R&D) and offering assistance in exploring new markets. Facilitating access to export markets for a wider range of products would help exporters reduce their dependency on a narrow set of goods, enabling them to weather fluctuations in demand and capitalise on new opportunities.

Trade finance and insurance: Addressing export risks

Exporters face significant challenges when securing trade finance, such as letters of credit (L/C) and export insurance. These challenges create risks when dealing with unfamiliar buyers or international markets, potentially leading to payment delays or defaults.

The Government can play an important role by establishing export credit agencies or supporting the development of better export insurance schemes. These measures would mitigate risks and provide greater security for exporters, allowing them to confidently engage in international trade without the fear of financial loss.

Market information and networking: Expanding export horizons

In a rapidly evolving global marketplace, access to current market information and international networking opportunities is essential for success. Sri Lankan exporters often struggle with a lack of market intelligence, limiting their ability to spot new trends, meet potential buyers, and expand into new regions.

The Government can address this by providing exporters with up-to-date information on global market trends and access to international trade fairs and networking events. By collaborating with international trade organisations and chambers of commerce, the Government can help exporters establish valuable connections and identify new business opportunities.

Political instability and policy changes: Fostering stability

Sri Lankan exporters are also impacted by political instability, frequent policy changes, and inconsistent trade policies. Such an unpredictable environment undermines the confidence of exporters and creates uncertainty, which can have long-term negative effects on their ability to plan and invest in new markets.

To promote a stable export environment, the Government must ensure that trade policies remain consistent and predictable, with clear and strategic export promotion goals. A stable political climate will instil confidence in exporters, encouraging investment and expanding Sri Lanka’s footprint in global markets.

Restrictions on overseas investments: Enhancing flexibility

Exporters are often restricted in their ability to use repatriated funds for overseas investments, limiting their flexibility and operational capacity. This constraint reduces their ability to reinvest in global operations and expand their businesses abroad.

The Government should consider relaxing these restrictions, providing exporters with greater freedom to use repatriated funds for investment purposes. This would enable exporters to expand their operations, improve productivity, and remain competitive in global markets.

Mandatory conversion of residual proceeds: Easing financial burdens

The current policy requiring exporters to convert residual export proceeds into Sri Lankan Rupees (LKR) within three months imposes significant challenges on cash flow management. This policy creates additional bank charges and disrupts the financial planning of exporters, especially those who are managing foreign commitments.

To address this, the Government could extend the timeframe for the mandatory conversion of residual proceeds or relax the policy altogether. Offering greater flexibility in managing foreign earnings would reduce the financial burden on exporters and improve their overall cash flow management.

Delays in documentation processes: Streamlining export procedures

Delays in the submission of export-related documents to banks often result in operational inefficiencies and delays in the release of funds. These manual processes slow down the export transaction cycle and hinder cash flow management for exporters.

The Government can streamline these processes by automating export documentation procedures and creating more efficient systems for processing payments. By reducing the manual handling of documents and improving the overall documentation flow, exporters will experience fewer delays, resulting in improved operational efficiency and cash flow.

In conclusion, the challenges faced by Sri Lankan exporters are significant, but not insurmountable. By implementing targeted policies, improving infrastructure, and providing exporters with the financial and operational support they need, the Government can play a transformative role in boosting the export sector. With strong, strategic partnerships between the Government, financial institutions, and exporters, Sri Lanka can overcome these obstacles and emerge as a competitive force in the global market.

(The writer is President, Association of Professional Bankers Sri Lanka (APB).)