Market diversification crucial to sustain Sri lanka’s export sector : EDB chairman
Over the past decade, Sri Lanka’s economic growth has been driven primarily by growing the domestic demand rather than increasing exports. Sustained export growth is crucial for Sri Lanka’s development, especially considering the country’s modest domestic economy. From a contribution of 32% to GDP in the year 2000, Sri Lanka’s export sector now contributes only 17-18% to the GDP. Since it’s inception, the Export Development Board (EDB), the apex government institution that facilitates the growth in the export sector has taken many initiatives to empower and support new industries. With events such as the Presidential Export Awards, the EDB recognise the outstanding performance of exporters and encourage budding entrepreneurs to establish businesses in the export sector. At the recently concluded 25th Presidential Export Awards, many such companies were recognised for their contributions to Sri Lanka’s economy.
In a candid interview with the Daily Mirror, EDB Chairman Dr. Kingsley Bernard shared his thoughts regarding the country’s export sector amidst the prevailing economic crisis, role of EDB in empowering entrepreneurs, identifying and promoting new industries and what the future holds for Sri Lanka’s export sector.
Excerpts :
Q : Could you give an outline on Sri Lanka’s export sector amidst the prevailing economic crisis?
With regards to the prevailing situation, it is a known fact that we are facing certain difficulties especially because our major markets are not performing very well, namely UK, USA and Germany. They are going through an economic downturn. As a result of that the demand for apparels for instance has come down.
This is the main reason for the drop in export earnings. We are experiencing around 20% of the drop at the moment in apparel exports. During the year 2022 global buyers have bought more quantities than what they wanted during that year. At the moment there’s an additional surplus and this is another challenge. The third challenge is that although we are experiencing a drop, certain suppliers like Bangladesh and India are supplying to the lower end of the market. These are not upmarket products. Whenever there is an economic crisis you cut down on the expensive items. As a result our demand has come down, whereas Bangladesh and India are doing better than what they were doing earlier. This is the scenario with regards to garments. There is a drop in rubber-based products and coconut based products as well. These are the main products which we are exporting from Sri Lanka.
Q : What are your strategies to cover up for the drop in earnings?
What we are trying to do right now is looking at new markets. Africa is going to be the growth market during the next few years. There aren’t many constraints to sell in the African market. There are no real non-tariff barriers at the moment so therefore we are now looking at such markets. Our markets have to be diversified. Since our markets are limited and therefore regional markets such as India, Thailand and Malaysia have similar products to sell. But India is a different kettle of fish because India and China are large markets and therefore we are intensifying our efforts in going ahead and increasing our exports. With regards to the Chinese market, recently we got their consent for our cinnamon portfolio. Earlier although they were buying some cinnamon, it wasn’t branded as Sri Lankan or Ceylon cinnamon. They mixed
them with cassia and they sold to those markets and therefore we didn’t get much of a premium price. But recently as a result of around 10-12 years of hard work, EDB got the Geographical Indication (GI) certification for cinnamon early this year. This is the only country where we received the GI certification for the entire country as it is usually given to certain areas only. When we have the GI certification our products can be sold at a premium price. It has a competitive advantage and its demarcated for that particular geographical area. So at the market place we get a premium price. At the moment EDB is identifying farmers who are having a good product and who can be certified under GI. Therefore, we should be able to fetch a better price for cinnamon in the future. We are also convinced about the strength of brands. At the last Presidential Export Awards we launched an export brand for Sri Lankan products. Therefore, our exporters can use that logo on their products.
What we are trying to do right now is looking at new markets. Africa is going to be the growth market during the next few years. There aren’t many constraints to sell in the African market. There are no real non-tariff barriers at the moment so therefore we are now looking at such markets. Our markets have to be diversified. Since our markets are limited and therefore regional markets such as India, Thailand and Malaysia have similar products to sell. But India is a different kettle of fish because India and China are large markets and therefore we are intensifying our efforts in going ahead and increasing our exports.
Q: How does EDB support the growth in the export sector?
When it comes to exporters we don’t look at how big or small they are. In fact we want to give everyone an opportunity. But there are certain characteristics which are relevant to the small and medium category. Therefore we identify them and then coach and train them with regards to the export procedures and other relevant subject areas. We have two different programmes for experienced exporters and amateurs. When it comes to sustainability the Europeans are very strict and they implement certain rules and regulations from time to time. So we get that information and invite the experts to come here and conduct workshops. Some of the main tasks of the EDB includes providing policy advice to the government, monitoring the export performance, promoting Sri Lankan products and services in the overseas markets and facilitation of the export process.
Q
Even though we had ambitious turnover targets, we are experiencing a drop compared to 2022 at present. However, with regards to new exporter development we have identified new exporters where they promote their products in overseas markets and other trade
: What are the opportunities in store for new exporters?
fairs. We are imparting them knowledge and support to improve their products and the process. We also receive a lot of donor assistance from organisations such as GIZ, JICA, USAID, ITC, IFS, IFC, SIPPO, IPD and other organisation and we transfer knowledge to the new exporters. There is a lot of due diligence that we have to comply with when we are exporting to European countries and we conduct workshops, programmes with their assistance to educate new exporters on these criteria.
Q : Let’s talk about the 25th Presidential Export Awards.
We held this event after two years and we evaluated the export performance during the years 2021/2022 and 2022/2023. There is some overlap between companies who won the awards for both years. Altogether we had 26 main awards and another 157 sectorial awards. This is the highest level of recognition received by the exporters. There is a strict evaluation system with three judge panels including the screening panel, final judge panel and the audit evaluating the entire process of the selection of organisations. During the evaluation process we find out whether the company has generated revenue, paid EPF and ETF, whether there are any complaints from Customs and all these aspects are being looked into before selecting the winners. If they are being awarded and then they aren’t good corporate citizens then we are not right in what we do. A lot of time and effort was put into evaluate these companies and we have multiple criteria to evaluate. Irrespective of whether they are small, medium or large scale we put everybody on a level playing field using those criteria. We also have special awards for the highest turnover etc., and we also look at new innovations and sustainability. Some of the new industries identified this year include pharmaceutical, boat and leisure craft building, marine and offshore services. We also have awarded the best performing exporter in emerging markets, best contributor from the region, innovative export product of the year and several other special awards.
Q : How does this award ceremony help new industries?
This award symbol can be used on their products for a period of three years. As it is given from the apex government body in Sri Lanka and therefore there’s a lot of value in promoting their products. I think that is one of the most important ways in which exporters could make use of it.
Q : Are there avenues for entrepreneurs in the export sector to be self sufficient?
We have been giving grants earlier but with the prevailing economic crisis we have not been able to do it in the way we did it earlier. Anyway when small and medium exporters are selected for trade fairs we give them certain assistance where EDB re-imburse about 50% of their stall cost. For large scale exporters we reserve the space for stalls but they have to pay the entire cost of their participation.
Q : What are the provisions from the recent budget to improve the export sector?
The government is planning to restructure certain organisations. According to the cabinet paper there are number of organisations to be amalgamated. One objective of amalgamating is to reduce the number of organisations and improve productivity and effectiveness. The government is pursuing an export-led investment policy and to create a more conducive environment for promoting investment and exports.
Q : How does the future look like in terms of the export sector?
I don’t think this economic downturn will last for a long time. By around late next year this economic downturn will not be very serious. With that we will be able to improve our exports and a lot of efforts are being made. So we can reap the benefits accordingly. The taxes and cost of energy are going to be challenges but if the infrastructure is improved then there issue will be mitigated. What I have to say is that new exporters should not be discouraged because these are short term phenomena. There are many ways in which they can get inputs and the EDB is always available to assist them. We have already seen an interest among new exporters and we plan to empower them further.
We held this event after two years and we evaluated the export performance during the years 2021/2022 and 2022/2023. There is some overlap between companies who won the awards for both years. Altogether we had 26 main awards and another 157 sectorial awards. This is the highest level of recognition received by the exporters. There is a strict evaluation system with three judge panels including the screening panel, final judge panel and the audit evaluating the entire process of the selection of organisations. During the evaluation process we find out whether the company has generated revenue, paid EPF and ETF, whether there are any complaints from Customs and all these aspects are being looked into before selecting the winners. If they are being awarded and then they aren’t good corporate citizens then we are not right in what we do.