Cost of exporting from Sri Lanka much higher than Vietnam or Thailand
While Sri Lanka is clamouring to achieve international trade and financial hub status, increase the number of FDIs and achieve an export target of US$20 billion by 2025, the challenges are enormous since the cost of exporting products is high.
According to the World Bank’s Logistics Performance Index of 2014, the average cost of exporting for countries like Vietnam or Thailand was half that of Sri Lanka. According to the index, the logistics cost per 40 ft dry container to be exported from Sri Lanka is $579 while from Vietnam it is $237 and Thailand $ 250.
These facts were revealed by Idah Pswarayi-Riddihough, Sri Lanka Country Representative – World Bank, while addressing a 2-day conference ‘Tech for Trade’ on applying new technologies to make Sri Lanka’s international trade more efficient and inclusive on Monday in Colombo.
She said that to export from Sri Lanka it takes two days on average whereas in the case of the two countries referred above it takes only one day. There should be a simplified regulatory framework governing trade and updating the Customs Ordinance and there should be a clear transparent border management to create investor confidence.
“It is critical to reduce the trade process cost paid by the trading community and our team has found that there are 22 agents involving the issue of regulations and approvals affecting trade,” Ms. Pswarayi-Riddihough commented and said that streamlining the approval process and enhancing communications between government agencies and the private sector to increase efficiency is vital.
She said that it is vital to create an investor-friendly environment that would benefit the trading community that would create formal employment opportunities with higher income. In overcoming the barriers for trade and exports, she said that there should be a simplified regulatory framework affecting trade and called on the authorities to reduce the number of institutions interfacing traders and streamline the approval process.
The conference was hosted by the Australian High Commission in partnership with the Ceylon Chamber of Commerce to showcase a range of technologies that can make trade more efficient.
Continuing her guidelines to promote trade, exports and investment, Ms. Pswaryl-Riddihough said that while increased trade in the country would attract FDIs, small and medium entrepreneurs should be encouraged to adopt new technologies to open the export market and compete in the global market while the trade is carried out in an efficient and inclusive manner.
Bryce Huchesson, Australian High Commissioner in Sri Lanka in his opening remarks indicated that Sri Lanka is adopting technologies in trade with the keenness that it could provide a competitive edge in the global market. He said that in a global situation the traditional industries are turned upside down by digital disruption and therefore, there is no option, but to embrace new technologies.
Rajendra Theagarajah, Chairman, Ceylon Chamber of Commerce said that both domestic and international trade is important for the overall economic resurgence of the country and Sri Lanka is blessed with tremendous advantages to facilitate international trade as an island.
He said that such payment instruments like letters of credit in international trade are becoming things in the past as the relationship between the buyers and sellers are getting closer and closer and in terms of payments in trade there lies challenges and opportunities that technology will bring into facilitate trade.
He stressed the importance of domestic trade particularly, the SMEs that have to be plugged into the international trade. Another vital area is local agro-dairy industry to enhance the export potential with new technology, he indicated.
Mangala Samaraweera, Minister of Finance and Media said that Sri Lanka has been known to be an international trading hub since ancient times and the government is pursuing a policy of lifting the country to its earlier glory as a global trading nation as the county is situated in one of the most important sea routes in the Indo-Pacific region.
He said that they have taken the first step to earn this process of reorientation of the economy as market access to nearly 750 million population in the European Union through the re-establishment of the GSP+ concession earlier this year. The results are already showing as total exports in the first eight months of 2017 has grown by 7.6 per cent while seafood exports have showed 82 per cent growth, he said.
He said, “We are negotiating three important free trade agreements with India, China, and Singapore. It will gain market access to our exports and when they are concluded successfully our exports will have duty free access to nearly 2.5 billion people in the region”.
He stressed that in order to realise Sri Lanka’s ambition to become the Indian Ocean trading hub it is essential for them to streamline the trade processes to make sure efficiency, transparency and integrity in rules based environment.
Highlighting the vital importance of SMEs in the economy, he said that they are now in the process of empowering the SME sector which is a major theme in the 2018 budget to be presented next week and said that they hoped that the SME sector would become the driver of exports in the future.