Exports and the way forward

The revival of the Export Development Council of Ministers (EDCM) by the Government has been highly appreciated by the exporter community. As the EDCM is led by the Executive President, its restoration would undoubtedly aid in terms of resolving the bottlenecks faced by exporters. 

The Council was not convened between 1992 and 2020. Even in 2020 when it was reconvened after a lapse of 28 years, the important mechanism did not continue and remained dormant prior to being revived by the new administration.

The 26th Presidential Export Awards, organised by the Sri Lanka Export Development Board (EDB), which will be held next Friday, offers President Dissanayake the opportunity to address the nation’s broader exporter community and articulate the Government’s vision and policies to boost the nation’s export income. Already, Dissanayake has outlined that his administration envisages realising $ 36 billion from export revenue – both goods and services disregarding tourism receipts – by 2030. The target itself is quite daunting and some would say highly over-ambitious. When setting a goal it needs to appear challenging but it has to be realistic as well and unfortunately the stated ambition fails with regard to the latter.

Over the last decade or so, the value of Sri Lanka’s merchandise exports in particular has been oscillating without taking off. In 1990, Sri Lanka’s exports were $ 2 billion and were on par with that of Vietnam and Bangladesh. However, the two competitors had leapfrogged over the last three decades whereas the South Asian island had languished. In 2023, Vietnam’s exports were $ 355 billion and Bangladesh’s exports were $ 60 billion while Sri Lanka’s corresponding figure was a miserly $ 12 billion. In terms of service exports, one particular sector which demonstrated a considerable potential and progress was the IT/BPO industry. Unfortunately, during the economic crisis, many professionals in the IT sector left the island to explore better opportunities beyond the shores, resulting in a significant dearth of experienced professionals in the industry, dashing the high hopes the nation placed on the industry in terms of raising foreign exchange earnings.

The current Government’s institutional framework with regard to international trade and foreign investments is fraught with oversights. Ideally, the Department of Commerce, EDB, and the BOI need to be under the purview of the same ministry; however, the three vital institutions are currently functioning under separate ministries. The EDB has been gazetted under the Ministry of Industries and Entrepreneurship Development, which is also in charge of the Industrial Development Board (IDB) and many other agencies associated with local SMEs and industrialists. The IDB has a track record of lobbying the Government to restrict imports for the benefit of local industrialists. The isolation of the EDB from other parallel agencies and Industries Minister’s obsession with trade protectionism do not create the requisite ecosystem to drive the export agenda from the standpoint of State involvement.

Many commentators have enthusiastically advocated that the island needs to embark upon a path of industrialisation with a focus on high-end manufacturing to fundamentally transform the landscape of the export sector. Regrettably, our low power generation capacity as well as high energy costs discourage investments moving into high-end manufacturing sectors. Presently, manufacturing exports are dominated by low-end manufacturing segments like apparel, rubber products, and footwear and leather. 

Instead of focusing on conventional forms of industrialisation, it would be more prudent for a country like Sri Lanka, which does not have a large labour pool, to connect with global production networks by leveraging its strategic geographic location and paying attention towards developing a skilled workforce equipped with specialised know-how and technical competencies. The Government also needs to fast track efforts to remove numerous barriers that serve as impediments in attracting foreign direct investments, which would enable to make headway in establishing linkages with global production networks.