LMD MAY 2026 COVER STORY

Trade Evolution

Bingumal Thewarathanthri calls for niche positioning and regional integration

Sri Lanka’s manufacturers are being forced to compete in a global marketplace that is changing faster than ever before. Traditional export playbooks are being rewritten as geopolitical tensions, supply chain disruptions and shifting consumer demand reshape how and where business is executed.

“Survival and growth now depend less on long-term forecasting, and more on the ability to identify immediate opportunities and reposition quickly. The focus is more on day-to-day activities and ensuring businesses are identifying opportunities,” says the Vice-Chairperson of the Ceylon Chamber of Commerce Bingumal Thewarathanthri, pointing out how volatility has compressed planning horizons across industries.

NICHE OPPORTUNITIES Amid global dislocation, Sri Lankan businesses are beginning to discover niches where locally manufactured products can compete more effectively, whether by leveraging logistics strengths, tapping regional tourism flows, integrating into Asian supply chains or expanding value added exports.

“Sri Lanka’s port volumes are expected to exceed 10 million twenty-foot equivalent units (TEUs) this year, reaching close to 11 million TEUs. This positions the country at roughly a quarter of the size of Singapore’s throughput, underscoring its strategic relevance in regional shipping networks,” he notes.

“Logistics accounts for over seven percent of GDP in Singapore while Sri Lanka’s contribution is less than three percent, reflecting structural gaps in ecosystem development. Singapore has built massive bunkering, warehousing and storage facilities around the port, whereas here the focus is limited to ground shipment and minimal bunkering activity,” he explains.

VALUE CHAINS Thewarathanthri opines that strengthening this value chain is crucial if locally manufactured products are to become globally competitive. He believes that “efficient logistics, integrated supply chains, and expanded value added services can notably improve export margins and market responsiveness.”

Tourism provides another lens through which global competitiveness can be understood. Economic pressures in certain Western markets are expected to dampen visitor arrivals; however, regional demand particularly from India presents a significant opportunity.

As he points out, “India’s outbound tourism market is estimated at around US$ 40 billion with about 30 million travellers annually. Despite its proximity, Sri Lanka attracts only about half a million Indian visitors, suggesting considerable room for growth.”

The country’s neutral geopolitical stance is also attracting new forms of interest. Early discussions emerged in March about leasing the Mattala Rajapaksa International Airport (MRIA) to Middle Eastern airlines as a contingency strategy while inquiries to establish data centres in Sri Lanka highlight its potential as a secure digital backup hub.

“We are suddenly seeing the location advantage of Sri Lanka, especially because we’re a neutral nation. The world order has changed and powers are gravitating towards the East,” he observes.

STRUCTURAL CONSTRAINTS Yet, competitiveness remains constrained by persistent structural challenges. Sri Lanka’s performance on the world’s business facilitation benchmarks remains modest with rankings close to 100 in certain indices.

A newer global measure – the Business Ready (B-READY) Index – now adopted by over 50 countries places an emphasis on digital government services and regulatory efficiency. “There is a huge weightage on how easy government services are. Sri Lanka should urgently move towards such frameworks,” he urges.

Thewarathanthri recommends reforms such as digital identification systems and a single window trade platform, alongside customs modernisation and a public-private partnership (PPP) law to attract sustainable investment while improving trade facilitation.

Export oriented manufacturers are already responding to global shifts through diversification strategies. Businesses are exploring new product lines, expanding to alternative markets, and reassessing supplier and buyer relationships.

“The mantra now is diversification from the perspective of products, markets, buyers and suppliers,” he emphasises.

ASIA FOCUS This trend is particularly relevant as Sri Lanka recalibrates its export focus from traditional markets towards Asia. Trade engagement with India and ASEAN economies, as well as participation in regional and free trade agreements, is viewed as critical to future growth.

Recent export trends reflect this transition: while traditional sectors remain important, there has been a notable increase in coconut based exports, demonstrating how value addition and niche positioning can enhance competitiveness.

Nevertheless, he cautions that Sri Lanka cannot realistically compete with large economies in mass manufacturing.

One promising pathway lies in integrating more deeply into India’s industrial ecosystem. With substantial Japanese and South Korean investment underpinning India’s automotive sector, Sri Lankan businesses could position themselves as specialised suppliers.

“Can we become part of India’s supply chain, producing sensors, airbags and other components?” he asks, noting that local companies already manufacture parts for the automotive and aircraft industries.

Small and medium-size enterprises (SMEs) are central to this transformation: the sector accounts for close to 50 percent of the labour force, employing approximately four million workers. Yet, they continue to face challenges related to technology adoption, market access, governance standards and financing.

Although digitalisation is reshaping commercial practices, particularly in banking and transactions, the sizeable cash economy presents governance and tax compliance with numerous challenges.

He explains: “Currency in circulation is estimated at around Rs. 1.5 trillion compared to roughly Rs. 300 billion in the interbank liquidity market, illustrating the scale of informal economic activity.”

“Despite these challenges, the long-term outlook for trade and investment climate remains optimistic. The country’s history of resilience – navigating decades of conflict, economic crises and a global pandemic – suggests an ability to adapt to changing global realities,” Thewarathanthri affirms.

– Compiled by Yamini Sequeira

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Island Jewels 

Q: How does the gems and jewellery industry contribute to strengthening the Made in Sri Lanka brand?

A: The industry has a heritage spanning over 2,500 years. The beauty of our gemstones has been recognised throughout history – from the accounts of Marco Polo in the 13^th century to modern icons such as Princess Diana and the Princess of Wales, who wears her famous engagement ring featuring a Ceylon blue sapphire.

Over the decades, the industry has built on this legacy by developing exceptional expertise in sourcing some of the world’s finest sapphires and a wide variety of coloured gemstones, cut and polished to high standards. Sri Lankan jewellers combine these with skilled craftsmanship and elegant designs, to create pieces that reflect both tradition and contemporary style.

Offering these rare gemstones and exquisite jewellery to a global clientele elevates the Made in Sri Lanka brand, positioning the island as a destination for luxury and artistry.

Q: Retail purchases by international visitors represent an important revenue stream for the industry. How significant are these sales to overseas clients visiting Sri Lanka?

A: It is extremely significant to both the gems and jewellery industry, and to the broader economy.

With over 2.3 million tourists visiting the country last year, sales to foreign clients were a valuable source of foreign currency earnings. Rising tourist arrivals and higher average spending per visitor present strong opportunities for future growth.

These purchases also maximise value addition: rather than exporting gemstones, retailers sell finished jewellery directly to international customers, supporting livelihoods across the value chain – i.e. from miners and cutters to designers, goldsmiths and retail professionals.

Q: Many tourists view jewellery as a meaningful and lasting purchase. What factors influence buying decisions when selecting gemstones and jewellery?

A: Most tourists are drawn to Sri Lanka’s historic lore and reputation as a premier source of sapphires and a variety of coloured gemstones. As a source destination, buyers can access a wider selection of fine gems and well-crafted jewellery at excellent value.

Today’s travellers are also well informed with the ability to research online. They often visit established Sri Lankan jewellers and rely on knowledgeable experts to guide them in making the perfect purchase.

Q: The jewellery sector combines natural gemstone resources with skilled craftsmanship. How important is design and craftsmanship in creating pieces that appeal globally?

A: Design and craftsmanship are critical to moving up the value chain. Both the private and public sectors recognise that foreign exchange earnings can be increased by maximising value addition.

This requires maintaining the highest standards in gem cutting and ‘goldsmithing’ while developing innovative, contemporary designs for the international luxury market.

Given Sri Lanka’s access to some of the world’s finest gemstones, its jewellery should be positioned as a premium offering. Strong design capability and exceptional craftsmanship are key to achieving this.

Q: Looking ahead, what steps should industry stakeholders take to further position Sri Lanka as a global destination for gemstone and jewellery retail?

A: The private sector continues to engage with the government to position Sri Lanka as a leading jewellery hub. Recent measures such as VAT refunds for tourists and reduced taxes on rough gemstone imports are positive steps.

Further liberalisation of imports for raw materials, machinery and packaging would enhance global competitiveness.

Equally important is human capital development: establishing internationally accredited goldsmith training institutes and jewellery design schools will strengthen the talent pipeline.

And finally, greater investment in international branding and marketing is essential to promote Sri Lanka as a premier destination for fine gemstones and jewellery – and attract discerning global consumers.

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Apparel Engine

Q: The apparel industry has long been the country’s largest export segment. What role does the industry continue to play in strengthening the ‘Made in Sri Lanka’ proposition globally?

A: Sri Lanka’s apparel industry has been a cornerstone of exports since the late 1980s, now contributing around 40 percent of total exports of goods.

Unlike products such as Ceylon Tea or cinnamon, apparel is not origin branded. Instead, Sri Lanka has built its reputation as a trusted manufacturing partner for leading global brands.

While the absence of strong local labels is noted at times, the industry has successfully integrated into global value chains, producing for many of the world’s top apparel names.

Made in Sri Lanka is synonymous with quality and reliability, built on consistent delivery, high standards and strong buyer relationships. This reputation continues to drive global demand.

The onus should be on expanding markets, enhancing quality and innovation, and strengthening Sri Lanka’s positioning as a source of high value apparel.

Q: Global apparel supply chains are evolving rapidly with an increased emphasis on speed, sustainability and resilience. How is Sri Lanka positioning itself in this changing landscape?

A: Internationally, the competition has intensified, which in turn has contributed to Sri Lanka’s slower growth compared to countries such as Bangladesh.

However, in areas such as sustainability and resilience, we perform strongly and often outpace our competitors. Speed remains a challenge due to reliance on imported raw materials.

With limited local fabric production, meeting only part of domestic demand, sourcing delays can affect time to market compared to countries like Vietnam. That said, the industry has demonstrated strong resilience, particularly during the COVID-19 pandemic and economic crisis, maintaining operations and buyer confidence.

On sustainability, Sri Lanka has made solid progress, though rising global requirements – especially from the EU – will demand further improvements.

While larger exporters are adapting, smaller players will need greater support to meet these standards. Despite speed constraints, we remain well positioned to strengthen competitiveness through sustainability and resilience.

Q: How is Sri Lanka’s apparel industry moving beyond traditional manufacturing to offer higher value solutions such as design, innovation and product development?

A: Sri Lanka’s apparel industry has moved beyond its traditional cut, make and trim (CMT) model, with larger manufacturers adding value through design, product development and innovation.

Companies increasingly present their own seasonal collections, reflecting a more proactive approach with buyers.

While international design capabilities are still evolving, apparel manufacturers are investing in innovation and strengthening backward integration, to improve efficiency and value addition. The industry is also shifting towards higher value, technically complex garments that offer better returns.

Future growth will depend on strengthening these capabilities, addressing labour constraints and adopting hybrid models that combine local value addition with regional scale.

Q: What trade policy priorities and collective actions are needed to strengthen market access and ensure the continued growth of Sri Lanka’s apparel exports?

A: Trade policy and market access are critical to Sri Lanka’s apparel exports, especially amid rising global competition and new US tariffs. Competitors such as Bangladesh and Vietnam benefit from broader trade agreements, which provide them duty advantages in key markets.

While Sri Lanka has Generalised System of Preferences Plus (GSP+) access to the EU, its use is limited by strict rules of origin, making alternative sourcing often more cost effective. This places the country at a relative disadvantage.

To remain competitive, Sri Lanka must pursue new trade agreements (for example, with Japan, Australia, South Korea, Canada and China), strengthen existing arrangements (e.g. with India) and diversify beyond traditional markets.

At the same time, a stable policy environment, efficient regulations and improved investment conditions are essential to gaining manufacturing growth. Equally important is adopting an export driven mindset, encouraging more businesses to enter world markets. Strengthening infrastructure, logistics and digitalisation will also enhance competitiveness, and support the industry’s continued growth.