Highways and Investment Promotion Deputy Minister Eran Wickramaratne said that the Government was considering setting up an Exim Bank to turnaround exports.

“At this point Sri Lanka should look at an Exim Bank. Sometimes you need focus when you’re taking bold decisions. The bank can be jointly owned by the private sector and the government but it has to have a very specific focus. The Exim Bank must want to see exporters succeed,” he asserted.

“Many countries have tried the Exim Bank option, from US to China to India. Another is government-led credit lines on South East Asian routes. Therefore, if the institution runs its risks, if they are properly crafted and independently managed, then the Government needs to put its rupees behind it.

Depending on the export earnings, 15% of that needs to finance credits and we need about $ 150 million probably as the capital outlay if you really need to see exports grow, he said, delivering the final session’s keynote address on ‘Challenges in and Opportunities for Financing of Exports’. 

“I think we need to take a serious look at setting up an Exim Bank to help exports grow,” he emphasised.

Noting key issues faced by the country’s exports,Wickramaratne said low participation of small and medium enterprises had resulted in a gradual decline in exports. “We have a big issue on our hands right now on how we are going to reverse this trend.” 

$50 billion target unrealistic

The Deputy Minister also said that although the summit had a theme of ‘Towards exports of $50 billion’, this target was unrealistic.

“I’m happy that there is no date on it because most of the numbers are unrealistic. When you put unrealistic numbers, people try to manipulate eventually. I think the $50 billion is a little unrealistic from where we are presently and I think we need to look at things in a more realistic framework. I am all for long-term thinking, but it has to be realistic targets.”

Export diversification

Highlighting the main problem the country was facing at present, he said: “Sri Lanka has now become a middle income country, which has an export strategy of a low income country. We now have to look at how we are going to grow out of the traditional products and bring in export diversification, which is needed for a middle income country. We are no more a low income country and there are no more incentives. We have been fighting for our GSP+, but as our per capita income begins to grow, that won’t really help. Sri Lanka needs to find new export strategies via diversification.”

Research done by Verité Research and also by the Commonwealth Secretariat showed that export finance currently plays an insignificant role in our exports, he noted.

The Deputy Minister also pointed out that Sri Lanka has not looked at how the country should play a broader strategic role in terms of financing the exports. Although there are export development agencies and policy documents, there is no detailed strategy. 

 

What do we need?

“Sri Lanka needs to diversify the markets for sure and it’s not about traditional products in new markets, but beyond that. We need to find new markets; high-tech products must be brought through new exporters and that I think is the challenge. When you shift from traditional markets to new markets, there is always high risk attached to it. 

“Exports are inherently a risky business because there are additional risks to start with – country risk, buyer default risk, exchange rate risk and logistical risk. Traditionally if you go to the bank, higher risks, higher interest rate and your costs are going to be higher. This is where the Government’s policy and strategy comes into play.

“Other complications in today’s world are the buyer dictates, not the exporters – even in traditional businesses. Export finance instruments are required to help exporters get out of this problem. We need new exporters and working capital requirements are a challenge, especially for SMEs, thus support will have to be given – facilitating payments, LCs, buyers’ credits and managing the default risk, guarantees, export insurance.

There has to be risk sharing and this government policy must be in that direction, he noted.

“Now these instruments can be floated in the market with government assistance. According to the research reports I referred above, there are three key challenges: information, number of instruments, institutional framework.We have to go after new buyers and export markets and products. We need bold exporters willing to take higher risks and we need to provide them with more instruments to manage the risks. 

“Sri Lanka needs aggressive and dynamic strategies with more instruments to cater to new sectors like ship building, KPOs/BPOs. The other thing we need to look at is value chain financing. We need to use the largest diplomatic networks overseas.”