export capacity

Improving the export capacity of Srilankan Small And Medium Enterprises – The way forward

In 2017, Sri Lanka’s exports achieved 15.15 billion US Dollars in merchandise and services exports. Sri Lanka on track to achieve the target of 17.2 billion in total exports for 2018. However, Sri Lanka’s export depends too much on a few large businesses and too little on its small and medium enterprises (SMEs).

Sri Lankan SMEs are contributing less than 5 % of total exports of the country. As per Ecovis-Beijing (2017) records, in China, over 68 % contributed by SMEs and the average in Asia is 45 %. srilankan SMEs offers poor contribution to export income in Sri Lanka compared to other countries. In other words, the export contribution of Sri Lankan SMEs is unusually low.

Sri Lanka exports mostly textiles and garments (52% of total exports) and tea (17%). Others include: spices, gems, coconut products, rubber and fish. Main export partners are United States, United Kingdom, Germany, Belgium and Italy. – TradingEconomics.com

If our country shifts toward a more export-oriented strategy, 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 the growth model to Sri Lanka. By improving SME participation in exports drive, country’s trade competitiveness will increase, local employment will increase and in social development perspective, poverty alleviation will take place.

Related Read: Depreciating rupee, what are the opportunities we have?

Green signals to Srilankan SMEs to participate in exports drive

  • The Sri Lankan rupee against U.S. dollar hit historic lows (Sharp exports decline also a reason for rupee decline)
  • Liberalized Economy of Sri Lanka
  • 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 and increase export capacity.

Monthly Export figures – Aug 2017 – July 2018 source: tradingeconomics.com 

These factors encourage the Srilankan SME sector to cater to the 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 capacity to conduct trade negotiations.

Solution to overcome challenges and increase export capacity

  • To reach out potential buyers, Srilankan SMEs 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 policies, Srilankan SMEs 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. 
  • Partnership with Banks for export financing solutions – Receiving the diversified and complete range of trade financing services can help Srilankan SMEs to effectively manage risks and secure opportunity to grow. 

This article is contributed by Mr LesoKumar Sureshkumar, An experienced banker with more than 10 years of experience and specialized in Retail, Small & Medium Enterprises Credit and International Trade, he can be reached via lishokumar@gmail.com

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