EXPORT SECTOR
OVERSEAS MARKETS
Compiled by Yamini Sequeira
VENTURING BEYOND BORDERS
Asitha Samaraweera believes it is time for local businesses to venture overseas
The COVID-19 pandemic and economic crisis forced many businesses to step out of their comfort zones. Faced with a shrinking local market and scarcity of foreign exchange, businesses – regardless of size – had to summon the courage and resources to venture beyond borders.
BEYOND BORDERS “Local businesses shifted their perceptions about foraying into exports once the market became severely constricted due to the economic crisis. Then came the realisation of the limited scope for expansion given a population base of a mere 22 million,” observes Asitha Samaraweera.
The dire economic situation experienced in 2022 changed mindsets visibly as businesses went beyond lip service to taking a serious dive into exports,” he recaps.
Many businesses adopted augmented export agendas as a result of the economic crisis while some brands such as Spa Ceylon and Dilmah had been exporting for some time. He remarks that already, “some rubber companies are doing phenomenal work in export markets.”
Samaraweera continues: “In the past, moving out of comfort zones and putting disproportionate efforts and resources into exporting, which is a long-term process, seemed cumbersome. Many businesses felt they couldn’t afford the initial costs and preferred to focus on the ‘here and now’ rather than dwell on a doomsday future.”
He acknowledges that many businesses that are thriving locally could be doing so due to first mover status, legal protection or other advantages.
In the export market nevertheless, “none of these matter since you compete on a level playing field where quality, uniqueness, trust, marketing and digital savviness matter the most,” Samaraweera explains.
In Sri Lanka however, some of these factors remain underdeveloped. Moreover, a willingness to upscale also calls for investments in quality certifications and so on, and this creates another roadblock.
Businesses incur substantial sunk costs including establishing distribution networks and locating foreign buyers in their foray into export markets. Resources to build brands are prohibitive in most cases. So the strategy that some Sri Lankan businesses adopt is to cater to the diaspora in developed countries since they provide captive markets.
Samaraweera elaborates: “Our access to raw materials is weak as we don’t have natural advantages except in tea, rubber and spices. The environment for exports is also absent – unlike in Thailand, Vietnam and Cambodia, where ecosystems comprising design houses, packaging, R&D and so on have been established to support exporters.”
Sri Lanka lacks these aspects and has to look for such resources in overseas markets.
CARVING A NICHE “When we have something unique to offer, buyers will consider our prospects favourably. So Sri Lanka must develop exports that are relevant to foreign markets. Achieving quality is not a problem for the country but the risk is more about relevance rather than reputation,” he posits.
This situation is exacerbated by a supply gap in the ICT industry. The Information and Communication Technology Agency of Sri Lanka (ICTA) warned in a 2019 report that “the demand-supply gap for workers in the information and communications technology industry is widening rather than closing.”
Things have only grown worse since then.
Samaraweera maintains that “Sri Lanka has tremendous pockets of talent; but due to migration and a lack of exposure, they remain underutilised. If businesses are unable to find these talent gems, they collaborate with brand building partners in Thailand and Vietnam, to avail themselves of their expertise in marketing, design and brand building.”
Mastering digital marketing will be the next frontier as social media is growing in importance, and changing its form rapidly as a result of influencers, AI and so on. Sri Lanka needs to accelerate skill sharing in these domains as well.
One area where Sri Lanka already enjoys a solid reputation is ethical manufacturing. Having sustainability embedded in one’s business practices is becoming more important by the day.
With traceability to source of origin becoming a unique selling proposition (USP), customers are eager to know about ethical certifications, whether smallholder businesses are being supported, how organic the products are and so on.
The challenge in Sri Lanka lies in moving out of traditional exports.
Admittedly, large apparel manufacturing businesses are investing in value addition with wearable tech, clothes recycled from polyethylene terephthalate (PET) and the like. However, the industry faces challenges due to recession related issues in the US and Europe.
Besides, Sri Lanka is not an inexpensive manufacturing hub since production costs are high, labour isn’t cheap and scale is low.
GROWING DEMANDS The Ceylon Chamber of Commerce notes exporters have stressed that increasing utility prices, and the cost of transport and logistics, posed extensive challenges last year.
Service oriented exporters grappled with a lack of skilled labour, highlighting an industry specific challenge that warrants attention. According to the chamber however, most exporters have identified new business opportunities that are leading to workforce expansion to meet growing production demands.
Exporters plan to implement strategic measures – they include adopting more competitive pricing strategies to boost export orders. The government has unveiled plans to establish free trade agreements (FTAs) with India, Indonesia, Malaysia, Vietnam and China by the end of this year to open up new markets for Sri Lankan businesses that contribute directly to the nation’s economic growth.
The recent FTA with Thailand has provided Sri Lanka access to a US$ 2.2 billion market, which represents a major advancement.
Nevertheless, the island lags behind regional competitors such as Vietnam and Bangladesh. While Vietnam boasts exports of 370 billion dollars and Bangladesh records US$ 60 billion, Sri Lanka is struggling with a mere 12-14 billion dollars.
“However, the country has the potential to grow exports and there’s no reason why it can’t. Infrastructure, affordable tariffs, sensible labour laws and encouraging exports are areas where we can improve,” Samaraweera says.
He concludes: “Sri Lanka will be held back as a country if we don’t grow exports. In the 1990s, exports contributed 30 percent to the nation’s GDP, compared to only 15 percent today.”
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