Sri Lankan Small and Medium Enterprises Should Improve Exports Capacity — The Way Forward To Sri Lanka
Sri Lanka’s exports in 2019, achieved 16.4 billion US Dollars in merchandise and services exports. Initially in 2020, Sri Lanka fix the target of USD 18.5 billion in total exports for year 2020. However, due to COVID-19 worries revised export target as USD 10.75 billion. Given the current COVID-19 pandemic, global economy is disrupted.
Given the current global situation, drop in Sri Lanka’s export earnings around USD 5.39 billion expected from the actual exports of last year. Merchandise, tourism and worker remittances and service exports are highest contribution. Sri Lanka’s largest export markets are USA and Europe.
Sri Lanka Exports Development Board, predict tea, rubber (surgical gloves, tyres), coconut, spices, food and beverage, seafood and fruits would do well during this year given the pandemic globally, while major export sectors such as apparel, rubber-based products (except industrial, surgical gloves and Agri tyres), diamonds, gems and jewellery, electronic and electrical components, ornamental fish, and boat building sectors would perform marginally or poorly.
This crisis situation had opened up new opportunities in the areas of apparel, particularly to manufacture face masks, medical wear, personal protection gear, ventilators, hospital beds and medical bed linen, peripheral equipment for ventilators, soap, sanitizer, disinfectant and pharmaceutical exports. However Sri Lanka is not focus on these new areas to push exports. When searching reason, it’s noticed Sri Lanka’s export depends too much on a few large firms and too little on its small and medium enterprises (SMEs) sector.
Sri Lanka’s (SL) SMEs are contributing less than 5 percent of Sri Lanka’s exports. As per Ecovis-Beijing (2019) records, China exports has over 68 percent contribution by SMEs and the average in Asia is 45 percent. SMEs offer a poor contribution to export income of Sri Lanka compared to other countries. In other words, the export contribution of Sri Lankan SMEs is unusually low.
If our country shift towards a more export-oriented strategy in economy, we can witness prosperity, economic growth and job creation. Our peer countries displayed this results. Example Vietnam earns 250 billion US Dollars as exports income. Adopting export-oriented, friendly economic policies is an important move in the right direction, which will assure growth model to Sri Lanka. By improving participation from SL SMEs on exports drive, country’s trade competitiveness will increase, creation of local employments will increase and in social development perspective poverty alleviation will take place.
Green signals to SL SMEs to participate in exports drive
- The Sri Lankan rupee against U.S. dollar hit historic lows (Sharp exports decline also reason for rupee decline)
- Liberalized Economy of SL
- Anti-dumping law to protect domestic industries from unfair competition from abroad
- More restriction taken placed on imports such as 100% to 200% cash margin, prior clearance from customs and increased taxes
- Present Sri Lanka’s Government is engaged in trade agreements like GSP+ and Indo-Sri Lanka Free Trade Agreement (ISFTA)
- Currently negotiating various multilateral, regional and bilateral Free Trade Agreements such as SAARC and Free Trade Agreement with Singapore
- ‘Enterprise Sri Lanka’ loan schemes, exports can get highly concessionary financing to expansion, technology upgrading, and working capital to win new export orders.
These factors encourage the new SL SME exporters to cater to export market. Even though new market opportunities are open, still SMEs face many difficulties in exporting due to lack of information about cross-border procedures, awareness on international trade and capacities to conduct trade negotiations.
Every additional dollar that the export sector can earn at this crucial time can save the Sri Lankan economy.
Solution to overcome challenges to participate in Exports Drive
- To reach out potential buyers, SL SME should register with Sri Lanka Export Development Board (EDB) — The Exporters Directory compiled by EDB offers a wealth of information for importers all over the world who look for potential suppliers from Sri Lanka. Sri Lankan SME product and services exporters should get listed on exporters’ directory. This gives tremendous opportunity to discover the potential buyers from all over the world.
- To reach out information about free trade agreement and polices, SL SME can approach various government organizations such as National Institute of Exports, Ceylon Chamber of Commerce, Government Ministries (Ministry of Industry & Commerce, Ministry of Small Enterprise Development, Ministry of Economic development, Ministry of finance and planning, Ministry of Technology & Research and Ministry of Development Strategies and International Trade) and Export Development Board. In order to support this cause, I do some advocacy work. If you are a SME owner who is willing to take your product/service into global market, please feel free to contact me through digital platforms if required.
- Partnership with Banks for export financing solutions — Receiving the diversified and complete range of trade financing services can help SL SMEs effectively manage risks and opportunity to grow. Being banker by profession, I believe partnership with right business banking is significance for the SL SMEs to continue the growth.
SL SMEs should showcase exports drive to positive outcome of country’s economy..