Export outlook positive
*SL exports grow 14 percent last year
*All sectors bounce back in record
time
Sanjeevi JAYASURIYA
The country's export sector is performing well and targets US $ nine billion
revenue this year. The Sri Lankan export sector has performed creditably
in 2010, closing the year with revenue of USD 8.173 billion based on
provisional Export Development Board (EDB) figures. This is an
encouraging 14 percent growth on the previous year, Exporters
Association Sri Lanka Chairperson Nirmali Samaratunga told Daily News
Business.
It is noteworthy that exports have regained the 2008 levels which was
the benchmark set, following the downturn in 2009, she said.
Excerpts of the interview:
The sound macroeconomic conditions in the country have contributed to
achieving this result. The economy registered a strong growth of 8
percent in 2010 accompanied by low interest, low and stable inflation,
revived credit flows, fiscal consolidation and stable exchange rates.
Nirmali Samaratunga |
The recent release of the sixth tranch of USD 216 million by IMF as
part of the USD 2.6 bn loan, signifies the confidence in the economy.
Meanwhile the economic outlook for 2011 is healthy with 8.5 percent
growth estimated.
Globally too, Exporters benefited due to the recession easing, and
improvement in world trading conditions compared to the year before,
with world trade registering a 4.8 percent growth.
However, this is expected to slow down in 2011 with IMF estimating
world trade to grow by 4.2 percent and advanced economies slowing down
to 2.2 percent and emerging economies to 6.4 percent.
The key challenge for exports in 2011 will be, this slow pace of
global economic recovery, particularly in our major markets, coupled
with rising competition in international markets. Remaining globally
competitive is therefore critical.
The prevailing concerns of food security, in the light of rising food
and commodity prices globally, accompanied by the effects of climate
change leading to destruction of crops, could impact the export sector,
in terms of availability of supplies as well as the possible
inflationary effect on cost of production.
Sufficient fiscal space would have to be created by the Government to
address these issues so as to prevent macroeconomic stability getting
affected. The export sector also needs to gear itself to address
concerns of high energy costs, and ward off possible impact of the
appreciating rupee, although appreciation has been gradual. This calls
for strategies to mitigate the effect of these developments, and
maintain competitiveness.
In this scenario, the recent five-year strategy launched by EDB is
timely. The strategy which outlines the role of EDB as the key driver of
exports, also addresses key needs in the product sectors and ways of
addressing this, with a view to achieving the target of USD 15 bn by
2015.
The EDB in its mission, identifies achieving global competitiveness
as a key element which is welcome, as export growth depends on achieving
this.
We also welcome the appointment of the several Advisory Committees
drawn from the Private Sector, which closely interact with the EDB
officials in planning and implementation of Sector strategy, thus
facilitating a close public private partnership to drive the Sector
forward.
We look forward to the finalization of the National Export Plan which
will set the direction and plan for the strong resurgence of exports
aimed at US$ 20bn by 2020.
Looking ahead, with a target of US $ 9 billion set for 2011, the
Export Sector is well placed to achieve this, following the healthy
performance in 2010, an indication of the resilience of the sector.
Despite the many challenges, with careful planning and speedy
implementation of focused strategies, coupled with strong Government
support, this target for 2011 could be exceeded, whilst also
facilitating the medium term target of USD 15 billion by 2015.
It is noteworthy that exports have regained the 2008 levels
which was the benchmark set, following the downturn in 2009. |
Amongst the several measures called for, is the need to immediately
broadbase our present export product range and markets, and spread the
risk so as to avoid over-dependence on a few products and markets,
especially in view of current global conditions.
This is illustrated by our top two exports, tea and garments, which
account for 61 percent of total exports, whilst USA and EU the top
export destinations account for 59 percent of total exports. Whilst
these will continue to be key products and markets, and should therefore
be maintained, the need is to build up other products and markets to
offset this imbalance.
Already seven key product sectors have been identified by the EDB,
each having the potential to contribute US $ 1 billion to the total
export target, and making up 80 percent of total exports.
Meanwhile greater focus on service exports is needed in this
scenario. IT and Offshore Outsourcing services where Sri Lanka enjoys a
significant comparative advantage needs to be expanded.
The IT, software, and particularly offshore outsourcing services has
the potential to be a US $ 1 billion industry in view of the
comparatively low costs and where a quality service can be offered, not
just Business Process outsourcing, but also at a higher level, Knowledge
Process Outsourcing extending to fields such as healthcare, finance,
legal and ICT.
In fact it has been reported that Sri Lanka has, in 2010 - 2011, been
identified amongst the top nine countries in the Asia-Pacific region for
globally outsourced activities.
With advanced economies facing rising costs in the wake of the
recession, this provides a very viable opportunity for Sri Lanka to
position itself as a low cost source for these processes, also
supporting our effort to position ourselves as a knowledge hub.
Furthermore, in view of the country's strategic location, services
such as cargo handling and transshipment could be developed as a key
foreign exchange earner, especially with Sri Lanka positioning itself as
a maritime hub.
Surviving and growing in the present, fiercely competitive global
market, and looking at the future, we need to differentiate our products
through specialization and strong branding, exporting goods where we can
demand a premium rather than be a supplier of intermediate goods.
The present need is to enhance the image and consumer perception of
Sri Lankan exports, globally, as high quality and reliable, and
conforming to laid down standards.
This may call for re-positioning our exports, such as the strategy
adopted by the garments industry - marketing their products under the
label "Garments without Guilt" whilst also moving into the high- end of
the market for designer clothing, through the recent initiatives to
promote 'Ethical Fashion'.
Moving up the value chain, with increased value addition, innovation,
specialization and technological improvements is essential, whilst
focusing on high end niche markets, wherever possible where a premium
can be gained. The proposals in the 2011 Budget to support this drive to
upgrade and add value is welcome, and is an indication of the
recognition by the Government of the need to support Exports.
Accompanying such product related strategies, markets too need to be
immediately re-examined and broad based. With Asia emerging as the
economic powerhouse of the future, Sri Lankan exports need to target the
region and focus on greater regional trade to achieve higher growth.
This would involve expanding Sri Lanka's trade through both bilateral
and multi lateral agreements. Focusing on trade expansion with China and
India would be to Sri Lanka's benefit, in view of their high consumption
patterns, and economic strength, and appropriate strategies need to be
developed to capitalize on the concessions granted by the Trade
Agreements such as the Indo Lanka FTA, Asia Pacific FTA and other Free
Trade Agreements. For example, present exports to India account for just
five percent of Sri Lanka's total exports, despite the existing Trade
Agreement.
Other key areas to address to achieve a sustainable growth in
exports, would be, improving productivity, development of human capital,
whilst also addressing the growing trend of scarcity of labour, not only
in the apparel sector but several other industries.
Underlying all this, is the need for an enabling environment for
exporters, with greater ease of doing business. We are happy to note
that this vital area is receiving attention by the Authorities.
We look forward to the Single Electronic Window at an early date,
which will facilitate documentation of imports and exports speedily and
efficiently. Meanwhile, integrating the Sri Lankan economy with the
global economy by promoting financing and facilitating international
trade and investment is necessary.
In addition to the existing trading models, channels and the
traditional banking sectors with bank loans as the main source of
funding, a whole gamut of innovative enabling infrastructure such as
corporate bonds, debt markets, financial instruments, commodity futures
and auctions etc need to be in place to assist exporters to have easy
access to cheaper and more competitive trading and financing options.
In this regard we also welcome the proposed Exim Bank dedicated to
support exports and imports.
As a trade dependant economy with low resources and small domestic
market, the vital role played by exports need to be borne in mind at all
times, being the key foreign exchange earner, also providing employment
and facilitating greater inclusive growth for the country. |