Lanka needs to upscale annual USD 12 bn export volume

Since the start of the open economy in 1977 which is 46 years ago Sri Lanka exports have not made a significant progress averaging around USD 12 billion per annum, Prof. Sirimal Abeyratne told the Business Dialogue event hosted by Advocata Institute on Wednesday at Queens Hotel Kandy.

“However in contrast, countries that opened their economy after Sri Lanka have progressed in leaps and bounds.” For example, Singapore, which is a smaller country than Sri Lanka, annually nets around USD 515 billion even surpassing Indian exports which is around USD 340 billion.”

Thailand’s annual exports are around USD 870 billion, Malaysia USD 352 billion while Vietnams netted USD 371 billion in 2022. Though Sri Lanka boasts of having an open economy other countries have lived up to this term. “If you take Sri Lanka out of its total tax revenue 18% came via trade while in India it was 4.5%, Vietnam 3%, Thailand 2% and in Singapore it’s at 0%.”

He said one reason for Sri Lanka exports to stagnate is the lack of foreign direct investments which had helped all the countries earlier mentioned to increase exports. “In addition to creating more exports, FDIs also help in employment creation, elimination of poverty and increase taxes.”

In addition to revenue generation, FDIs also bring new technology to a country, good administrative, management practices, opens up new supply chains and also opens access to new world markets. He said that 60 years ago countries could survive with a closed economy, few exports and from savings within their countries.

“Due to this thinking, total global FDI was around USD 200 to 300 billion. Another interesting scenario among them was that 75% of these executed FDI projects went from one developed country to another rich country.

“However after 2000, this trend changed and FDI’s started flowing from developed countries to developing countries. The Asian continent was a preferred destination over African or Latin American nations. China, Hong Kong were some of the most preferred countries.”

Due to this the Asian region attracted around USD 1,500 to 2,000 billion FDIs annually and to date the continent has received around USD 1.5 trillion in the last 25 years. This is around 60% of the total world FDI.”

However, despite offering attractive tax holidays and other incentives, Sri Lanka averages only around USD 1 billion FDI annually while Singapore attracts around USD 130 billion. These FDIs were mostly for capacity increases mainly in the Telecom sectors (SLT and Dialog) and very few global companies considered Sri Lanka.

The main reasons for this are red tape and changing policies. Hence to woo more FDI these have to change and steps should be taken to improve the Doing Business Index.”

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