Exports are an important factor in the modern economy as they provide numerous benefits for the growth of an economy. Export performance can contribute to the national economy by creating employment, earning foreign exchange and upgrading general economic conditions. Almost every country, irrespective of the World Bank country classification of GDP per capita, attempts to develop export markets.
President Gotabaya Rajapaksa, realising this salient factor, has revived an Export Development Council under his chairmanship as per his pledge in ‘Vistas of Prosperity’ to develop export trade.
The scope of this institution is to expand exports carried out by the public and private sectors. They will seek new market opportunities for diversified products throughout the world.
Tasks, such as revising and modernising related trade policies, the establishment of export production villages and restricting re-exports will come under the institution. The President is planning to set targets for everyone in this sphere. He has instructed the heads of foreign missions to improve efficiency with immediate effect.
Trade deficit
The trade deficit or negative balance of trade creates critical setbacks in the economy. As per the experts, if the country continues to maintain trade deficit at the current level, other countries can acquire funds to buy capital in the country. In the long run, foreign investors will eventually own a sizeable portion of the country’s economic resources.
Apparels, the largest export product in Sri Lanka that brought in the highest amount of US$ 5 billion in foreign exchange has received a sucker punch and is still struggling to recover from the first few months of the Covid-19 issue. Many small-timers who were compelled to close down, can now breathe a sigh of relief as the large players are gradually recovering with their order books, according to information from industry leaders.
Even though the full revival is likely to be delayed for probably a year or longer, the trend of receiving new orders is slowly taking place. Industry experts revealed that the exporters who supplied to multiple buyers in the USA and Europe are somewhat recovered although single brand exporters are yet to reach normalcy.
The export potential of other products in Sri Lanka needs to be looked at immediately to bridge the gap of lost revenue due to the global recession created by Covid-19. Although the disparity between the revenue of apparels and other products is fairly large, with the advantage of the reputation Sri Lanka has earned for export product quality, a certain market share of the global demand of other exportable products can be captured through effective and vibrant promotion campaigns.
The minor export crops in particular, which are known to be of a higher quality than many other competitors, can be a force to reckon with in the world markets if promoted properly. Export agricultural products, such as pepper, cinnamon, cloves, cardamom, coffee, and cocoa that have a huge demand in the world market are some of the marketable products. Even though these products are exported, research reveals that Sri Lanka supplies a fraction of the world requirement.
To cite an example, Sri Lanka exports around 7,000 metric tons per year when the required world demand is around 400,000 metric tons. Unfortunately, the exports of other similar products are also comparatively lower even when the quality of Sri Lankan products is factually and reputably much higher than other competitive countries, such as Myanmar, Indonesia and Vietnam.
The export of minor crops is exceptionally important.
The opportunities available in the world arena are immense. One of the key factors in this regard is the demand growth for spices in the world. The trend for spicy foods is growing around the world according to experts. Demand created in the markets for value addition of many of these products, such as a variety of essential oils produced through minor crops is also mounting. Food supplements, medicine, other healthcare products and fragrances have an increasing demand in many countries.
Minor crops
The Government is taking action to protect local producers of minor crops, on the directive of President Rajapaksa.
As per the Presidential Media Division, in a recent discussion with stakeholders, Ministers, and members of the economic revival task force, the President has reiterated the importance of creating a positive environment to earn the highest possible income through international markets.
The gesture and the enthusiasm of the Government is a welcome sign to those who are keen to export these minor crops. The Minister of Agriculture and the State Minister seem to be proactive, conscious and genuinely interested in their approach in the matter.
Besides the traditional export products, President Rajapaksa, who has a genuine desire to develop international trade, has appointed capable, young and passionate State Ministers to promote domestic industries, such as ayurvedic products, ceramics and porcelain, batiks and handlooms, ornamental fish, clay, cane and brass.
They are entrusted to develop these rural small scale industries to be in the export market as early as possible.
The country eagerly expects the State Ministers, who were already given timelines to perform will deliver the goods for the nation.
The Export Development Board, spearheaded by a versatile, qualified, well experienced and proven personality with successful private sector exposure is engaged creditably to promote Sri Lanka’s exports. This writer briefly communicated with the present Director General long before she became the DG and remembers the exceptionally cordial assistance provided on a business matter. In interviews conducted on export industry, a few top exporters commended the efficiency and effectiveness of the EDB that is a rare occurrence about government institutions. With the new trend where the domestic non-traditional exports are being promoted on a government initiative, the EDB says they are geared to provide any assistance by way of advice, promotions, facilitation, or providing required knowledge to new exporters.
Factors such as relative competitiveness, quality of products and value additions determine the level of exports of Sri Lanka. To increase this level, the exporters should be offered the best possible incentives to cut costs by which they can be competitive.
The Government must provide side policies such as education and training and do away with unnecessary red tape and delays due to government regulations. The irony is that despite straightforward Presidential instructions, some of the senior bureaucrats tend to disregard them due to poor attitudes.
Tariff barriers
The Government is taking steps to promote private sector productivity concerning exports. New technology and management techniques must be provided to the export trade, particularly to new entrants. Lower tariff barriers can immensely help increase trade.
However, the issue of tariff barriers must be implemented with caution to avoid possible damage to the domestic industry. In theory, competitive advantage will increase overall economic welfare.
If Sri Lanka wishes to be strong in export, the Government should view foreign trade strategically and reduce the country’s dependence on imports.
The Government has rightly imposed restrictions and bans temporarily, aiming to balance foreign exchange reserves. However, some interested parties are still trying to challenge this temporary policy for short term business gains.
A complete study through a panel of experts in economics, trade, and policy planning must be done, and ban or restrict unwanted and non-essential imports.