A new export order
View(s):
During the early 1980s when Lalith Athulathmudali was trade minister, the rallying cry was “export or perish”. R. Paskaralingam and Dr. P.B. Jayasundera (at a junior level) were key members of that administration.That cry has come to haunt Sri Lanka and is more relevant today; the need to increase exports and income from services as the country battles the twin effects of high import costs and a huge hole in the balance of payments.
For that matter nothing has changed nowadays with every government professing to promote exports but not doing enough. Likewise, in a recent speech President Ranil Wickremesinghe also spoke of the need to diversify and increase exports. Whether this call remains on paper or is actually followed through remains to be seen.
As I pondered over these issues, the trio was in conversation under the margosa tree. “Hamoma chandeta laesthi wenawa mae davas wala (Everyone is preparing for elections these days),” said Mabel Rasthiyadu.
“Ow. Eth mama hithanawa aandu paksha wediya santhosha nae kiyala. Mama hithanne egollo balaporoththu wenawa chande kal dai kiyala (Yes, but I think government parties are not happy about this and hope it would be postponed),” noted Serapina.
“Thava adahasak thiyenawa chandeta yana viyadama, mae thiyena arthika prashna uda, uhula ganna bae kiyala (There is a view that the cost of the election is too much to bear in today’s economic crisis),” added Kussi Amma Sera.
As I listened to the conversation from the kitchen window, the phone rang. It was Arty, the intrepid entrepreneur on the line.
“Hello…..hello,” I said warmly, greeting him. After exchanging niceties and greetings, he said: “I was listening to the President’s speech in Parliament. He was saying that uncomfortable decisions have to be made to strengthen the economy.”
“On one hand the President is right but on the other hand, the people are struggling at the moment and more burdens won’t help them,” I said.
“The only way out is to increase exports along with services’ exports (like tourism and IT). We need a comprehensive plan to increase these sectors,” he said.
“If tourism can regain lost ground and net US$5 billion in earnings and the Sri Lankan IT industry can move along nicely to $5 billion in exports, this would be a cool $10 billion from these two sectors alone and go a long way in increasing export earnings,” I said.
Sri Lanka needs to move in line with its South Asian neighbours like Bangladesh which saw foreign reserves at over $40 billion.
Now let’s consider some import/export data going back to 50 years on how imports have shot up and export income has not kept pace with import costs. While 50 years ago, Sri Lanka had a trade surplus, today we are trading with a negative balance sheet.
In 2021, exports totalled $12,499 million, while imports were at $20,637 million with the deficit being $8,139 million. Worker remittances were at $5,419 million against $7,104 million in 2020.
In 2020, imports were at $16,055 million, while exports were less than half that figure.
In 2011, exports were $10,559 million and imports $20,269 million while workers remittances were $5,145 million, with the net result being a trade deficit. In 2001, exports were $4,817 million and imports $5,974 million with a trade deficit of $1,157 million
Then more than 50 years ago in 1971, exports were $339 million and imports $290 million, recording a trade surplus – a rare phenomenon today. So where did we go wrong? There are many reasons and while we won’t be discussing this in today’s column, what invariably happened was that consumption grew after the open market reforms in 1977, not keeping pace with earnings.
The call to increase exports (including in the President’s speech) is a hackneyed theory (a call made as far back as the 1980s) without any serious follow-up action. In recent times, services’ earnings have been on the rise in particular from tourism ($4 billion in 2018 but fell sharply after that since tourism suffered from the Easter Sunday bombings, the impact of the COVID-19 pandemic and the economic crisis) and IT exports (targeted to reach an unlikely $5 billion in coming years while reporting $1.25 billion in 2021).
To reach the status of countries like Bangladesh, Vietnam and Cambodia which have accrued more than $20 billion in export earnings, the government must work with the private sector in seeking new markets, develop more high tech products and send a strong message to the international community that Sri Lanka is serious in business. That, however, cannot be done in the current unsettled political and business climate.
The government needs to bring the combined private sector, particularly garment firms and IT industry, to join hands with the state along with the Export Development Board (EDB), the Board of Investment (BOI) and other expert high-net worth sectors like the nano field, for instance. The move to bring the EDB and the BOI under one umbrella is a step in the right direction.
If the government is looking for recommendations to increase the export and services’ earnings base, then here are a few suggestions.
Form a core group of representatives from government and the private sector engaged in exports (including IT sector officials in particular) and come up with a plan on how Sri Lanka can expand its export base with a specific focus on high-tech and knowledge-based sectors and also value-added sectors.
Organise missions to other countries to meet buyers and pitch ideas about the country being an ideal destination for foreign investors involved in exportable products. Let Sri Lankan missions abroad coordinate these visits and be responsible for plans to come to fruition.
Connect with the Sri Lanka diaspora. Expand and re-image the EDB (which is an old term) and the BOI making them more dynamic organisations than what they were when first started in the 1980s. It may be advisable to consider private sector representation on both these state bodies to work and think like the efficient private sector.
As I completed the column, Kussi Amma Sera brought in my second mug of tea saying, “The trade unions are protesting again”. I nodded in acknowledgement, realising that if the government is unable to address at least some of the trade union demands, the conflict between the two would continue until the next parliamentary and presidential elections.
Hitad.lk has you covered with quality used or brand new cars for sale that are budget friendly yet reliable! Now is the time to sell your old ride for something more attractive to today's modern automotive market demands. Browse through our selection of affordable options now on Hitad.lk before deciding on what will work best for you!