Sri Lanka’s excessive dependence or concentration on a few markets and a few products is a major obstacle to drive export growth through trade diversification, Verite Research has found out.
The scenario of achieving USD 18 billion in export revenue by 2020, is, therefore, an uphill task. Sri Lanka’s export revenue in 2016 was USD 10.5 billion recording a decline from 2011-2016. Exports as a share of the GDP declined from USD 33 billion in 2000 to 12.7 billion last year, according to a Verite Research report.
The study notes that market and product concentration are critical bottlenecks to revive exports through export diversification. The three major markets which account for around 44% of Sri Lanka’s exports are USA, UK and India.
Reliance on a few products and a few markets for exports is not unique to Sri Lanka. Global exports are too heavily reliant on few markets and products, the study reveals.
However, it also notes that a high degree of export concentration does not necessarily result in sluggish export performance as seen in many Asian economies.
World trade moved towards Asia between 2001-2016 and the market composition of Asian countries has shifted in line with the world market trend. However, the report reveals that Sri Lanka’s exports fare poorly in leading Asian markets and continue to be overly dependent on few leading Western markets, the study said.
Sri Lanka along with Vietnam, South Korea and Japan have over 40 percent of its exports concentrated in three markets while Malaysia, Singapore and Thailand have over 30 percent of its exports concentrated in three markets.
USA, UK and India continue to be Sri Lanka’s major export destination. According to the International Trade Centre, in 2016, 228 trading nations imported goods to the combined value of USD 16 trillion of which five countries alone accounted for 38 percent the world imports in 2016 and 20 accounted for 72% of the world market for imports. The remaining 96 percent of trading nations accounted for less than one-third of the world market.
However, despite the skewed nature in global trade which has been the order of the day for some time, certain shifts took place with the urn of the new century. China moved up four slots, to become the second leading importer in 2016 with a market share of 9.9 percent in 2016 while India moved up to be the 14 the largest importer.
While China accounted for over 10 percent of world exports it accounted for only two percent of Sri Lanka’s exports in 2016, the report said.
The report further notes that, Sri Lanka accounts for less exports to Japan, China, South Korea and Hong Kong which are among the top ten markets for exports in the world. However, these three countries accounted for only six percent of Sri Lanka’s exports in 2016.