Our economy is an import-driven one, which basically means that we import more goods than the quantity of goods that we export. In simple terms, there is a net outflow of Dollars from Sri Lanka as we have to spend foreign exchange for those goods and certain services. This also creates pressure on the Rupee, which has unfortunately been in a freefall for the last several months. One of the ways through which we can meet these challenges is to increase exports so that we receive valuable foreign exchange.
There is good news on the export front. Sri Lanka has recorded the highest ever export income of US$ 17 billion in 2018 which however falls short from the initial target set for the year, which is US$ 17.4 billion. Nevertheless, as Sri Lanka Export Development Board (EDB) Chairperson and Chief Executive Officer Indira Malwatte pointed out at a press briefing in Colombo, this is an impressive achievement and lays the groundwork for reaching the US$ 20 billion target in 2020. This still falls far short of the annual export figures of some of our competing regional countries, but a start has to be made somewhere.
Malwatte has rightly congratulated Sri Lankan exporters for their continued achievements last year in the global market despite various economic and political headwinds. Moreover, this has been a combined effort of Government and private sector institutions which augurs well for such partnerships in the future.
In parallel to this development, Minister of Development Strategies and International Trade Malik Samarawickrema has announced that Sri Lanka is on track to achieve Foreign Direct Investment (FDI) worth US$ 2.2 billion in 2018 and US$ 3 billion in 2019. FDI is also a critical component of the economy and all efforts must be made to enhance our reputation as a good investment destination, now that the 51 days of political instability are firmly behind us. Our missions in overseas capitals must disseminate this message to the investor community in the respective countries.
Cabinet approval has also been obtained for another initiative, named the ‘Enterprise Innovation Scheme’, which will get underway soon. Part of the ‘Innovation and Entrepreneurship Strategy 2018-2022’ approved last year, the EDB has also been a lead partner in this initiative. These transformational initiatives will change the export landscape in the country and even take it beyond the US$ 20 billion envisaged for the short term.
There are two other critical factors that will help our exporters achieve even better figures: export diversification and new markets. For far too long, we have depended heavily on traditional agricultural exports such as tea, rubber and coconut and non-agricultural products such as garments. But the problem is that Sri Lanka is not the only pebble on the beach – other countries in the region, from Vietnam to Bangladesh have caught up and are now competing head-to-head with us in a variety of spheres.
Thus quality and value for money have become even more important parameters to gain success in the crowded export market. One way of mitigating this pain is to encourage major Sri Lanka-based companies to venture into competing countries, so that we also gain a share of the export incomes. In fact, many Sri Lankan garment manufacturers have set up factories in Asia and Africa.
We cannot continue to depend on a few traditional markets any more as our competitors are constantly looking for new markets to sell their products. As countries become more prosperous with a middle class that can afford to spend on high quality imported products, new markets have emerged for our exports. It is therefore vital to make our presence felt in trade fairs especially in emerging regions such as Eastern Europe, Africa and South America. This will help our exporter community to score better and bigger deals with the importers and investors in those countries.
The Government must assist any promising exporters who cannot attend such fairs on their own by providing them with the necessary incentives and assistance. This is especially so for the Small and Medium Enterprises sector, an increasingly visible and valuable component on the overall exports structure. The SME sector can play a bigger role in the expansion of exports, given the necessary encouragement and assistance.
Sri Lanka must also strive to attract more cargo airlines to Colombo for the convenience of exporters of perishable and other time-bound goods. Six cargo-only services including those by Cathay Pacific and Etihad already operate out of the Bandaranaike International Airport (BIA) to various destinations, but this is not adequate given the potential for the export of more perishable goods. Airlines must also be encouraged to operate passenger aircraft with a bigger cargo capacity in the meantime.
The other side of the coin is that we should strive to reduce imports. For example, there are some fruits and vegetables which are grown locally but imported in large quantities. This is an unnecessary wastage of precious foreign exchange. If certain items can be sourced completely locally, there is no need to import them at all, giving some respite to the import-export gap.
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