New thinking required for Sri Lankan exports
Apparel exports grew by 15.4% to EU
and (inset) Rohantha Athukorale
By A Special Correspondent
exports industry which nets in a revenue of over US$ 8
billion is under serious challenge with overall exports
declining by 18.4% in the month of February to US$ 524
million and the cumulative export earnings dropping by
15.2% to US$ 1015 million.
overall imports declining it is estimated that the trade
deficit will decline to a value below US$ 2 billion from
the 5.9 billion in 2008. However, an in-depth analysis
reveals that overall economic activity will be slowing
down and the lower imports will have an impact on the
employment levels and livelihoods of people,” said
Economic Strategist, Rohantha Athukorala, speaking last
week at The Rotary Club of Reconnections meeting under
the theme ‘What next for Sri Lanka.’
Athukorala noted that the declining intermediary goods
add to the challenges that the country will have to face
up to as it is an indication of lower export revenue and
manufacturing output that the country will have to face
in the near future, but the good news is that overall
the apparel industry that contributes almost half the
export proceeds of the country was seen growing by 15.4%
to the European Union and 1.5% to the United States to
date this year. It is seen as a positive sign that Sri
Lanka must build on.
on the post war scenario in Germany and the conflicts
that were experienced in Rwanda and South Africa
Athukorala observed that what the country requires is
overall economic policy reform to move the country to a
high performing growth trajectory and if this does not
happen Sri Lanka will not benefit from the investment
made towards eradicating terrorism.
FTA –fast tracking
opening its economy in 1977 Sri Lanka has been pursuing
a multiple approach to integrate with the rest of the
world. Firstly, Sri Lanka was committed to full
participation in the global economy and supported an
open, transparent and a rule-based global trading system
and the Sri Lankan government pursued to improve market
access for Sri Lankan exporters in global markets
through multilateral trade negotiations in the World
Trade Organization (WTO).
Thereafter the Government of Sri Lanka actively engaged
in pursuing the South Asian Free Trade Agreement (SAFTA).
There have been questions raised as to its effectiveness
with the inter regional exports being at a low ebb of
below six percent as against the NFTA where inter
regional trade is as high as 50 percent.
the slow development of these trade partnerships the Sri
Lankan government also undertook to build the Sri Lanka
exports sector by focusing on the bilateral negotiations
with key trading partners through a comprehensive Free
Trade Agreements (FTAs) with India and subsequently
Exports to India-declining
Overall exports between the time periods January -
September 2008 to India declined by 13% while the
processed food industry declined by -74%, pepper by
-0.7% and woven fabrics by -15% whilst in the strategic
sectors of tea and garments the quota utilisation was
been pointed out that this poor performance was mainly
due to the non tariff barriers that have been
implemented by Indian authorities like tariff rate
quantities (TRQs), delays in custom clearance of cargo,
port restrictions, necessity for several tests to be
carried out in India even though certificates are
accompanied by the relevant authorities that resulted in
many Sri Lankan exporters losing confidence on bilateral
agreements which are essentially designed to promote
fair competition and equitable benefits.
poor performance of Sri Lankan exports into India on the
strategic sectors of tea and garments in 2008 was a
repeat of the 2007 and 2006 performance, which means
that there has been no result on the many
representations made by Sri Lankan authorities.
Athukorala said it is time that a proper analysis was
done so that a fresh look at the issues that have taken
place could be had so that at least in the near future,
the huge opportunity that India provides with its 1
billion people will become accessible to Sri Lankan
exporters who are world beaters in their respective
been pointed out that working with the Pakistanis was
easier due to the management culture with the FTA
driving exports from just Rs. 4 billion in 2005 to a
commanding Rs.8 billion in 2008. This is in fact a
record performance for Sri Lanka and now the challenge
is how based on this performance Sri Lanka can make
inroads into Pakistan so that each of the two countries
can mutually benefit where living standards of people
can improve and sustainable peace can be achieved.
the FTA with Pakistan, Sri Lanka received an immediate
100 percent duty concession for 206 products including
coconut products, fish, vegetables, edible nuts, spices,
fruits and fruit juices, graphite, essential oils such
as cinnamon and pepper oils, rubber, leather, wood based
articles. iron and steel, furniture and precious and
semi precious stones.
was given quotas at zero duty for 10,000 MT of tea per
year and 1200 MT of betel leaves and three million
pieces of apparels at a reduced rate of 35%
respectively. Ceramics and cosmetic products of Sri
Lankan origin are not subject to quota but a reduced
duty of 20% and 50% respectively from the applicable
rate was granted.
are another 4000 products where duties will was phased
out this year and in the first year, there would be a
duty reduction of 34 percent and after two years, the
reduction in duty would be 67% of applicable duty whilst
after three years all products in this phasing-out
category will come under zero duty which opportunity
should be grabbed by Sri Lankan exporters who aspire to
drive business with Pakistan.
However, the issue at hand is that even though this
opportunity exists a key area of focus should be to
evaluate the Reveal Comparative Advantage (RCA) Index
which indicates if merchandise of a country is actually
required by a country producing that same item in the
local market. Athukorala said that on this premise we
see that Sri Lanka enjoys a strong RCA in products such
as coffee, tea, spices, vegetable planting material,
vegetable textile fibres, knitted apparel, clothing
accessories and apparel clothing accessories and the
challenge is how Sri Lanka is to drive exports into
case of tea the quota utilisation is only 7-10% which
needs to be addressed as in 2006 this figure was as high
as 35% and the country earned 8.05 million dollars but
today this business has crashed and it needs a re-look
at the overall FTA arrangement.
though exports have doubled in value from Sri Lanka into
Pakistan the trade balance that stood at US dollars 69
in 2004 has increased to 122 million dollars in 2007
which means that one can question if the FTA has really
benefited the country. This needs to be strategically
looked at a time when Sri Lanka needs to manage its
Balance of Payments (BOP). Import-to-Export in relation
to Pakistan has widened from 2.7:1 in 2004 to 3.2:1 in
2007 which needs to be corrected, said Athukorala.
Whilst the overall export numbers are encouraging in
absolute terms Sri Lanka must press for diversification
of the export items which carry preferential tariffs
into Pakistan and India rather than these items being
confined to commodities. Sri Lanka must also invest on
building at least five brands in each market in the
strategic sectors together with the support of the
policy makers of India so that the spirit of the FTA can
be maintained, said Athukorala.
time that Sri Lanka evaluates in a similar manner the
markets of EU and US that account for almost 60 percent
of exports so that obstacles are identified and a new
strategic direction developed so that together with the
specific industry-led plans we develop market based
strategies so that Sri Lankan exports cross the 12
billion dollar mark within the next three years.
Vital water for IDPs in northern Sri
World Vision bowsers distributing water
Asanga Warnakulasuriya Water is an essential requirement
for everyday life. This need is often heightened when
one is displaced and dependent on others for the
provision of daily needs. World Vision Lanka is
providing thousands of Internally Displaced Persons (IDPs)
in northern Sri Lanka with a daily supply of water.
arrival of the World Vision water bowser at the camps is
accompanied by a flurry of activity as IDPs rush to join
one of the queues at a water tank.
World Vision trucks are distributing over 100,000 litres
of water every day, making several rounds to the IDP
camps in Manik Farm Zone 3, Muslim Maha Vidayala and
Cheddikulam in the Vavuniya District.
year long conflict in Sri Lanka is nearing its end as
Sri Lanka’s armed forces are engaged in what is expected
to be the final thrust to flush out the remaining LTTE
cadres holed up in a shrinking ‘no-fire zone’ in
200,000 civilians have fled the conflict zone and
crossed over into government controlled areas since the
beginning of the year and are now housed in IDP camps in
the districts of Vavuniya, Mannar and Jaffna in the
north and Trincomalee in the east.
recent weeks, World Vision has distributed packets of
cooked food to more than 50,000 newly arrived IDPs but
as more people arrive, the need for more food grows.
100,000 litres of water is being distributed in three
camp locations and World Vision plans to deploy
additional bowsers to truck more water into the camps.
Vision has also set up special enclosures in 23
campsites across the Vavuniya District to provide a
private space for nursing mothers. A daily supplementary
feeding programme is reaching 1500 children under five,
and 127 pregnant and nursing mothers.
Vision has been in Sri Lanka since 1977 and has invested
more than USD 350 million in development projects across
22 districts in the country.