The world economy is in partial paralysis. The COVID-19 ripple effect is more than just a recession, it’s causing a global economic shutdown. The virus that initially triggered a supply and demand shock in China spread throughout the world creating shocks that amplified the impact; not just in the flows of trade and tourists, but also in global financial markets.
Trade dependent economies like Sri Lanka with weak external financial reserves are being badly affected. Domestic exports are facing an inhospitable world market, compounded by trade conflicts, and restrictions. The exportable product volume is also reducing given the short supply of raw materials, and the disruption to global value chains. Yet, despite the disruptions in global trade certain export sectors still depicted a growth in the first quarter of 2020, namely: rubber-based products, spices, and processed food products.
Despite the prevailing crisis, an unravelling silver lining is a demand for new products due to changes in consumption patterns. While it is imperative that Sri Lanka increases exports of its existing products, the country should also seize the opportunity to diversify.
While the Government of Sri Lanka has established proactive fiscal measures, a discussion has been reignited among the export community – the need for diversification is no stranger to Sri Lanka’s National Export Strategy (NES). Fashioned with a vision to expand our export product basket and markets, the strategy has been gradually implemented for nearly two years. In this time of global crisis, it is imperative that the NES continues to be utilised as a springboard by policymakers and industry partners to guide export growth and recovery in a post-COVID-19 context.
A longstanding structural constraint of our country has been limited export diversification, accompanied by an over-reliance on buyers from developed countries; predominantly the US and EU. Hence, in an active effort to diversify the export basket and to penetrate new markets, through higher value-added tradable products and services, the NES has been realigning the export strategy in the direction Sri Lanka needs to go. The six NES sectors include processed food and beverages, wellness tourism, spices and concentrates, boat building, electronic and electrical components, and IT-BPM.
Supporting all sectors are the cross-cutting trade support functions endorsed and strategised by the NES stakeholders: logistics, national quality infrastructure, trade information and promotion, and innovation and entrepreneurship.
The NES as a living document and process is simultaneously responding to the COVID pandemic effects while building our future resilience. The NES interventions were designed through public-private dialogues to address supply and demand-side bottlenecks. For instance, National quality infrastructure (NQI) is one such essential supply-side intervention against the COVID-19 setting. The NES endorses strengthening the broader NQI ecosystems to formalise domestic and internationally accredited standards for smallholders to export value-added products globally. Improved quality of inputs and products will become ever more important in a post-COVID world where consumers will seek to consume safe products.
The Export Development Board and its Advisory Committees (AC) are active to steer the NES implementation to success. Most importantly, these committees bridge an essential connection between the Government of Sri Lanka (GoSL) and the industry. The ACs are a formal engine facilitating public-private dialogue to strategise and monitor industry development, while guiding trade policymakers to implement initiatives that in-return will enhance the industry competitiveness and growth.
Going forward in a COVID world, the ACs will play a proactive role in setting realistic yet ambitious export goals and targets. The EDB and the ACs are working actively to strengthen the country’s competitive position and enhance Sri Lanka’s overall capacity to meet post-COVID market requirements. At present global MNCs are actively reassessing their supply chain. Multinationals are now – more than ever – looking to diversify regionally; this suggests a manufacturing shift from China is structural and long term in nature. For example, Japan has earmarked $ 2.2 billion for manufactures to shift production off China1. This backdrop should be exploited as a positive windfall for Sri Lanka. The BOI and the EDB, jointly with the ACs are now presented with an opportunity to proactively collaborate on upcoming investment promotion campaigns to fast track growth of export-oriented industries.
This collaboration is already ongoing with the Multinational Corporate Outreach Programme for the electronics and electrical sector. The program implemented jointly between EDB and BOI aims to global MNCs through G2G or G2B programs, so that Sri Lankan electronic and electrical companies can take a greater role in the global electronic value chains.
As normalcy returns, the Export Development Board will work closely with its public-private partners to anchor the export revitalisation at the centre of economic recovery and resilience. With the newly appointed Presidential Task Force for Economic Revival and Poverty Eradication in motion, it’s vital that all export revival measures – including the NES – are synergised among all stakeholders.