Diversify exports, drop tariff barriers to push growth, say experts
Sri Lanka has obtained the services of a 2-member team of US experts to restructure exports to ensure improved growth. This would among others involve the facilitation of trade agreements, remove road blocks, and increase travellers to the destination.
The country’s uniqueness is in its location that shows viability of the logistics and ports sectors but “politics, regulation are messy but not as messy as India,” Director of Harvard’s Centre for International Development Prof. Ricardo Hausmann, said at the discussion held at the Export Development Board auditorium in Colombo with government officials on how to generate increased investments.
He noted that in view of the export of services Sri Lanka had quite a few unique aspects which he believed was vital as those spelled out above.
Prof. Hausmann explained that with exports having to pay for the imports, most inputs were brought into the country and used for re-export in manufactured products.
But notably the lowest paid workers were found in the exporting products like tea, rubber and coconut except for apparel, tyre and electric firms. He pointed out that while some companies were expanding their production capacity by moving into other countries it was hard to find local firms that had diversified their product portfolio.
As a result in terms of Foreign Direct Investments (FDI) the country was weak and in view of the migration policy, Sri Lanka – when compared with other nations – had a lesser number of diaspora compared to others.
Explaining the importance of immigration, he said that having a strong diaspora was imperative as it was found that when countries like China opened up it was their own nationals resident overseas that were the first to go back and invest. In this respect, Prof. Hausmann observed that the diaspora plays a bigger role.
Investors would find increasing complications due to the fact that lands in Sri Lanka were mostly state property which was not the case in most other developed countries.
Seeking out investments would mean looking for what’s ideal for Sri Lanka and in this respect, diversification and the manufacture of certain components of a larger product, Prof. Hausmann said.
Sri Lanka must seek investors without waiting for them to knock at your door, the expert noted adding that in this respect, they had formed teams like investment team, climate team, export team, among others that would study and work out ways to attract FDIs to the country.
The second expert, Prof. Robert Z Lawrence, Professor of International Trade and Investment addressing officials outlined the complexities within the state bureaucracy.
He explained that too many ministries and the complex process would make it difficult for foreigners to get established in this country in addition to the change in policies.
To ensure stability, he pointed out that there should be a lock-in in the trade agreements with the three countries namely India, China and Singapore that Sri Lanka is currently working on.
In addition, Prof. Lawrence wanted Sri Lanka to deal with non- tariff barriers by bringing down firms from those countries that Sri Lanka would be trading with.
Sri Lanka is currently levying a significant charge on imports which he believes should be brought down in order to enhance exports. “Countries that take off barriers on imports find that they can export better,” he said.
Responding to a question in the export of services in the ICT sector, which was concerned over the possible US policy of protectionism in future under a Donald Trump presidency, Prof. Lawrence explained that Sri Lanka should not stop its plans on going ahead based on these concerns.
These experts have been in the country for over a year and have been looking at ways to improve growth through the Export Development Board (EDB), Board of Investment (BOI), Sri Lanka Tourism Development Authority (SLTDA), Ministry of Development Strategies and International Trade (MODSIT) and the Agency for International Trade and the Agency for International Development.