Sri Lanka’s ability to overcome the current financial crisis depends heavily on export revenue.
Foreign Direct Investments (FDIs), High Value Addition, Business-Friendly regulatory framework, and Research and Development (R & D) initiatives are necessary for Sri Lankan exporters to compete in international markets and establish connections to the Global Value Chain (GVC).
Statistics show that exporters have not properly connected to the GVC despite the country’s inherent comparative advantage in this area of global production due to its geographic advantage, logistics, market access, educated and adaptable workforce, lower cost of manufacturing, precision manufacturing and labour, quality, reliability and trust, low lead time.
Some of the major contributing causes are organisational, legal and regulatory, technical, social and cultural, political and economic challenges.
Over the past five years, the Sri Lankan Electronic and Electrical industry has advanced significantly. Despite the Covid pandemic, economic hardship, and political uncertainty, the sector export revenue grew by 22% between 2015 and 2022. Automobile components, power generation and distribution, telecommunication, medical, construction, consumer electronics, and industrial automation make up the majority of the sector’s exports with over about 100 companies.
EEC
The Sri Lankan Electronic and Electrical Sector (EEC), which employs over 38,000 skilled workers and ranks fifth in terms of merchandise export income earners, generated US$483 million in 2022. Original Equipment Manufacturers (OEMs) and Electronics Manufacturing Service (EMS) providers make up the majority of the businesses.
Global Value Chains have benefited emerging nations by facilitating their diversification away from primary products and towards manufactures and services. In the past, in order to export a manufactured good, a nation had to be capable of producing the entire good.
A nation can specialise in one or more activities where it has a competitive advantage through value chains. GVCs separate the various steps in the creation of a Smartphone, a TV, or a Car so that they can be completed in various countries.
Today, more than two-thirds of all global trade takeplace wherevalue chains crossat least one and frequently several borders during their production process.The EDB has taken some initiatives for the betterment of the sector in connecting to the GVC and to improve the export revenue.
By working with firms that assist with global buyer/importer search, the EDB will develop an International Buyer Search System for all export sectors (like in South Korea) that will enable exporters to easily connect with reliable foreign clients. The EDB is closely collaborating with the Central Bank of Sri Lanka and PayPal for an online payment gateway, that will make it simpler to send and receive payments to and from foreign vendors.
Trustworthy clients
To connect with trustworthy foreign clients, the EDB is also promoting and advising export companies to participate at most prospective international exhibitions and business forums. The EDB continuously promotes and helps to find potential buyers for local export companies in all export sectors through its web portal (srilankabusiness.com) and social media channels.
The EDB is working with the Board of Investment of Sri Lanka to attract multinational corporations to Sri Lanka to encourage Foreign Direct Investments in the electronic and electrical sector. The EDB works closely with International Certification Organisations to help export businesses maintain product quality standards in accordance with customer satisfaction so they can connect to GVCs.
The Government is working to upgrade the logistics infrastructure, which includes updating Ports and Airports, expediting Customs operations, and collaborating with all border agencies to provide a one-stop shop system to expedite and facilitate the export process.
The writer is Deputy Director, Export Development Board