Sri Lanka’s protectionist policies are holding back economic growth: Expert

Shippers’ Academy Colombo CEO Rohan Masakorala - Pic by Sameera Wijesinghe  

By Divya Thotawatte 

Sri Lanka has a unique opportunity to tap into a rapidly growing global market in shipping, logistics, and free zones, projected to hit $ 18 trillion by 2030, but its protectionist stance is restricting economic growth, said an 

expert recently. 

This discussion took place during an evening of in-depth analysis and networking, organised by the Sri Lanka-Korea Business Council of the Ceylon Chamber of Commerce. The discussion was themed ‘Sri Lanka’s Future Export Prospects? Challenges. Opportunities. Reforms.’ where Shippers’ Academy Colombo CEO Rohan Masakorala spoke on the subject. 

“Protectionism isn’t patriotism. This is to guard a few people’s interests, but we cannot grow exports if the industry minister’s position is this,” said Masakorala, highlighting how despite Sri Lanka’s head start as South Asia’s first open economy, it now remained stuck at $12 billion in annual exports while Bangladesh, Vietnam and India surged ahead.

Sri Lanka’s...

“We are protectionist. We don’t want foreign shipping companies having 100% ownership here. India, Pakistan, Dubai, Singapore, Malaysia, Philippines, and even Communist China have opened it. But we talk of how we don’t want them to have 100% office here. We want them to be minority partners here.”

He explained that while Sri Lanka liberalised in 1977, decades later, it still clung to para-tariffs, complex regulations, and a “closed-shop” mentality that deterred investors. With its archaic labour laws, inefficient customs procedures, and sudden VAT changes and red-tape that blindsides exporters, it was inevitable that the country would lose investors. Therefore, tea, rubber and apparel still dominated the country’s exports, with little diversification into other high-value sectors. 

While in 2010, the then President Mahinda Rajapaksa had set a goal of reaching $ 20 billion by 2020, the country had been nowhere closer to the goal that year. “Sad thing is we ended the war in 2010, and 15 years later, we are just over $ 2 billion from where we were at the time. But the world has moved very fast,” Masakorala noted.

Policy inconsistencies and leadership failures 

He pointed out that Sri Lankan Governments had continually failed the country, failing to deliver promises and lacking consistency in their policies. He pointed out how BOI’s Commercial Hub Act in 2013 was designed to be a game changer for exports and logistics, which was never properly implemented. Most people were not even aware of the Act’s existence because it was not marketed or executed properly, he said. 

Even the 2018 National Export Strategy, developed with the support of the European Union and over 150 industry leaders, had aimed for $ 28 billion by 2022. After two years of work and the approval of two cabinets, the plan gathered dust. Today, the Government secretaries have not read or even seen it, he said. 

“For the last 25 years I have seen this terrible policy inconsistency, monetary barriers, and so many restrictions for exporters. Whether you come from month to month, year to year, this story is repetitive. Consecutive governments talk a lot, but I don’t see them doing anything to support exports. If I were an investor, I would look at these things and problems in the country; regulatory barriers, tax policy.”

Growth out of this economic stagnation was possible, Masakorala highlighted. While the global economy was forecasted to be $ 200 trillion by 2050 and Asia was already having a $ 35 trillion economy, there were significant opportunities and space that Sri Lanka could also occupy within that growth and economy. 

It was most important to remove para tariffs while fast tracking FTAs that would allow Sri Lanka to enter markets in ASEAN and African countries. He also urged that the country needed to provide more support for exporters. “Can tell me what the Government has done to support exports, whether it is this Government or last Government? So who is the export champion? We need a champion to talk to the exporters every day if you want to be an export nation and bring the investors in.”

Another path forward was integration with India’s economy which, among the world’s major economies, was predicted to be the world’s fastest growing economy. He explained that India’s growth was highly advantageous to Sri Lanka because its neighbour’s growth would consequently grow the latter’s tourism, trade shipment, logistics, and export market while inviting more investors to the country. 

“If we do not capture this market, something is completely wrong with these islanders. Because India is V shaped logistically, sometimes it is a nightmare to connect to India. It is better and much faster to connect from Sri Lanka. But we do not have marketing. Have you seen Sri Lanka being marketed outside very much?”

Drawing attention to Dubai’s success, he noted that Jebel Ali Free Zone model, which also inspired Sri Lanka’s BOI free zone concepts, generated about $ 120 billion in turnover, contributing 33% to Dubai’s GDP. In contrast, Sri Lanka had failed to fully develop similar initiatives, he said. 

Masakorala argued that if Sri Lanka created an open, investor-friendly environment for logistics, warehousing, and simple value addition, it was also possible for the country to reach $ 36 billion in exports. 

However, he noted that Sri Lanka was also not keeping up with global trends, especially with the emerging ‘Gen Beta’ generation that is being born into a world shaped by AI and robotics. Everyone would be living in this AI and robotics trend, but if Sri Lanka unplugged itself from it, the result would be a stagnated exports sector, Masakorala explained. 

Additionally, the country’s education system was outdated and unprepared for Industry 4.0, let alone 5.0. Therefore, it was essential to align the education system with Industry 4.0 and 5.0 to attract high-tech investment, he stressed. “You need to invest in education from Grade 1. Sri Lanka’s education system is again many, many years behind. To be a competitive export destination, we will need the best talent, best brains, and the best technology. Otherwise investors also won’t come because the human resources have to be upgraded.”

We needed to fix our policies yesterday, he stressed, highlighting that Sri Lanka had no time to debate where our competitors and neighbours had already raced ahead.