Collective effort needed to boost exports

With a new Government in place,  Sri Lanka is onto  a fresh phase of hearing serious commitments from all and sundry in the Government as well as policy makers to deliver results with the right policies. Among many such pronouncements are export development. Last week at the official announcement of Sri Lanka hosting the influential World Export Development Forum in October,  Development Strategies and International Trade Minister Malik Samarawickrama and other officials who spoke sounded very enthusiastic and pragmatic with regard to boosting exports. Several policy initiatives and actions announced were follow up to the challenges listed in Prime Minister Ranil Wickremesinghe’s economic policy statement in November 2015. The 2016 Budget presented in the same month featured a host of new measures too. 

To put it in context, how big is the challenge of boosting exports? As a percentage of GDP, exports have declined from 33% in 2000 to a dismally low 12.8% in 2015. The share in global exports also contracted in a similar manner.  As against a 7.1% growth in 2014, export earnings last year dropped by 5.6% to $ 10.5 billion. Reasons given were the downward movement of international commodity prices and the slower growth in large economies and Sri Lanka’s major export destinations. Marking seven consecutive month of decline, January 2016 also saw exports dip by 2.5% to $ 894 million. 

Whilst exports are key to boost jobs and foreign exchange, like any progressive Government, the current regime too remains ambitious. As per the medium term macro economic framework, exports are projected to increase to $ 10.85 billion this year and to $ 11.5 billion in 2017 and to $ 23.4 billion by 2019. When making forecasts, it is wise to be realistic since global and local impediments to higher exports remain more or less unresolved yet.  

The most touted reason for lagging exports is the fast eroding competitiveness of Sri Lanka and very rightly the current Government is keen to address it. 

What specific actions Sri Lanka can take to address this issue are very much in public domain. The 2015 Annual Report of the Central Bank also listed several problem areas including insufficient investment in research and development, non-existence of financing especially for exports, insufficient market promotion, low quantum of assistance for SMEs, lower productivity due to the dearth of skilled labour and high cost of energy. Experts have also suggested Sri Lanka liberalising further along with reforms to become a trading hub with an emphasis on boosting entrepot trade and Sri Lanka becoming a part of the global value chain. Recently the Daily FT-MTI Forum on Exports called for radical and quantum thinking and strategies with focus on sure-win products and services. Another key factor to boost exports is higher investment, both foreign and local. For this too, the policy setting and the business environment needs to be conducive.

The new Government’s decision to reactivate the Export Council of Ministers is welcome whilst the Export Development Board is being steered to be proactive.  Looming enhanced trade pacts with India,  China and US as well as return of GSP+, resumption of fish exports to Europe; FTAs with Turkey, Singapore, Malaysia and Japan are among major breakthroughs. 

However, the real challenge for Sri Lanka is to build an export-mindset at every level and a can-do attitude. We need a bi-partisan approach for export development so that be it politicians, public servants or trade unions, all need to be champions of export orientation rather than leaving the battle in global markets to private sector alone.