LMD MARCH 2025 – COVER STORY

SRI LANKA’S EXPORT LEGACY

Echoes of Ceylon – driving economic growth and global recognition

“Exports have long been one of the cornerstones of the national economy, contributing substantially to GDP and safeguarding countless livelihoods”

Sri Lanka has been a land of promise for decades; it tells a story of resilience beyond our shores – one that is woven into just about every product that bears the label ‘Made in Sri Lanka.’ From the finest teas to high end apparel adorning international runways, Sri Lanka has carved out a unique niche in the international marketplace.

Exports have long been one of the cornerstones of the national economy, contributing substantially to GDP and safeguarding countless livelihoods.

From premium lingerie to high-performance sportswear, the apparel industry has positioned the island as a key player in the global fashion supply chain. The tea industry, famed for producing world renowned Ceylon Tea, is a symbol of quality and tradition. And emerging sectors such as IT-BPM services are gaining recognition as new avenues of growth.

Sri Lanka’s merchandise exports witnessed a healthy growth trajectory of 6.67 percent last year, reaching US$ 12.7 billion. Key contributors to this upside include apparel and textiles, which surged to slightly over five billion dollars and tea exports rose to US$ 1.4 billion (an increase of 9.62%).

Additionally, coconut based exports surpassed US$ 856 million while rubber based exports reached one billion dollars.

However, the road ahead is not without numerous daunting challenges.

Global economic uncertainties, intense competition, the prospect of US led trade wars and the increasing emphasis on sustainability demands that Sri Lanka’s export sector continues to adapt.

It is against such a backdrop that LMD’s annual Made in Sri Lanka cover story explores the triumphs, challenges and future prospects of Sri Lankan exports.

– Compiled by Tamara Rebeira

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BREWING BATTLE

The tea export industry faces pressing challenges that threaten its sustainability. Huzefa Akbarally acknowledges that production has witnessed a marked decline over the past decade. In 2013, the country produced 340 million kilogrammes of tea and by 2022, it dropped to 252 million kilogrammes and then recovered slightly to 262 million kilogrammes in 2024.

Akbarally attributes this decline to a series of policy decisions – including the 2015 ban on glyphosate weedicide and the 2021 prohibition of chemical fertiliser.

“Since 75 percent of tea production comes from 480,000 tea smallholder farmers, it is necessary to support them to increase crops. Subsidised fertiliser is a must-have with proper education on infillings and good agricultural practices,” he notes.

Export volumes have also suffered, falling from 320 million kilogrammes in 2014 to 245 million kilogrammes in 2024. Though revenue improved from US$ 1.2 billion in 2022 to 1.4 billion dollars last year due to value additions, Akbarally stresses the need for stronger financial and technical support for smallholders.

He advocates for subsidies on fertilisers, education in agricultural practices and an increase in the replanting subsidy from Rs. 500,000 to two million rupees a hectare to address rising costs. Extreme weather conditions are also adversely affecting production.

Additionally, policy decisions such as the proposed abolition of the Suspended VAT (SVAT) scheme from April could have dire consequences.

“The proposed abolition of SVAT will create cash flow issues for tea exporters; they will be compelled to borrow more money for weekly purchases of tea from auctions,” Akbarally explains, and urges the government to reconsider this decision.

“If we are to position Ceylon Tea as a premium product, its quality should be superior to other competitors”

Sri Lanka’s dependence on Middle Eastern markets, which account for 50 percent of tea exports, means that the industry is vulnerable to geopolitical instability. The Russia-Ukraine conflict has also disrupted trade, as Russia and the Commonwealth of Independent States (CIS) represent 20 percent of our annual volumes.

“Tea exporters are eagerly anticipating the lifting of sanctions on key tea importing countries to enable seamless trade and ensure the smooth receipt of export proceeds,” Akbarally emphasises.

FTAs with India and Pakistan have delivered limited benefits due to market preferences for cheaper teas from other countries. However, the proposed free trade agreement with China presents a promising opportunity, he says: “China’s growing market for premium teas aligns with our positioning of Ceylon Tea as a high quality product.”

Akbarally also calls for streamlining trade processes by introducing a single window system, and expediting the digitisation of Sri Lanka customs and port operations.

Sri Lanka’s share of global tea production has declined from 10 to five percent, and transformed Ceylon Tea into a niche product. Akbarally believes this shift is an opportunity to position it as a premium brand.

“If we are to position Ceylon Tea as a premium product, its quality should be superior to other competitors. The government and regulators must address the tea crop shortage and quality issues to enhance our position in the global market,” he urges.

Since 2010, tea exporters have contributed to a Tea Promotion Fund managed by the Sri Lanka Tea Board but restrictive government regulations have limited its impact.

Akbarally calls for more effective global campaigns to promote Ceylon Tea and greater support from Sri Lankan missions abroad to increase market visibility. There should also be a comprehensive approach to rejuvenating the tea industry.

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FASHION FORWARD

The apparel industry has evolved strategically to maintain its position as a leading exporter. Speaking about the industry’s transformation, Suren Fernando explains how continuous innovation, strategic partnerships and sustainability initiatives have shaped its trajectory.

“Sri Lanka’s apparel industry has moved beyond basic manufacturing, and into high value categories such as activewear, sportswear, intimate apparel, swimwear and high end fashion. Collaboration with global brands such as Victoria’s Secret, Nike, Lululemon and Calvin Klein have integrated Sri Lankan manufacturers into sophisticated supply chains, and strengthened our position in the [global] industry,” Fernando says.

The industry’s investment in R&D has been instrumental in staying ahead of shifting consumer preferences and global fashion trends. He notes: “By adopting advanced technologies including automated systems and digital design tools, we have improved efficiency, reduced costs and met shorter lead times.”

A key factor contributing to the industry’s resilience is its unwavering commitment to sustainability. “Manufacturers have embedded sustainable practices such as renewable energy usage, water recycling, and the adoption of organic and recycled fabrics. Ethical labour practices and worker welfare are also priorities; they reinforce our reputation in markets where social responsibility is a crucial buying factor,” Fernando points out.

Sri Lanka’s skilled workforce remains a major competitive advantage, he adds: “This includes experienced and trained individuals, who are supported by continuous training and development programmes to stay ahead. Our strategic location along major shipping routes and efficient logistics infrastructure, have reduced transportation time and costs, and enhanced global competitiveness.”

Despite facing external challenges, apparel exports have registered steady growth, driven by a commitment to sustainability, infrastructure support and market diversification. “The global apparel and fashion industry is increasingly focussed on ethical and environmental best practices, and our commitment to sustainability has differentiated Sri Lanka significantly,” Fernando reiterates.

“Manufacturers have embedded sustainable practices such as renewable energy usage, water recycling, and the adoption of organic and recycled fabrics”

Sri Lanka has strategically expanded into emerging markets across Asia, the Middle East and Africa, and reduced its dependence on the traditional markets of Europe and the US.

Looking ahead, apparel must focus on technological advancements, consumer driven strategies and forward-thinking initiatives to facilitate growth.

To this end, Fernando emphasises that “the integration of AI, robotics and smart manufacturing will significantly enhance productivity, reduce costs and lead times, and improve product quality.”

“Investing in green technologies such as water and energy efficient systems, waste reduction techniques and sustainable fabric innovations will further strengthen our eco-friendly credentials,” he adds.

Workforce development remains critical to future success, he asserts: “Continuous training programmes will ensure that our workforce is equipped with the skills to operate new machinery, utilise digital tools and implement sustainable production techniques.”

Consumer preferences will also play a vital role in shaping the industry’s direction, as Fernando observes: “Adopting circular economy models such as garment recycling, sustainable fabric sourcing and upcycling will align with global sustainability trends and enhance our reputation.”

Diversity and inclusivity within the industry will consolidate Sri Lanka’s position as a responsible manufacturing hub. Ultimately, the apparel industry must adopt a forward-thinking approach with an innovation first mindset.

“Investing in research and development to create new fabrics, product features and value added designs will help us stay ahead of price competition. By modernising our end-to-end operations and embracing cutting-edge sustainability initiatives, Sri Lanka can continue to be a global leader in ethical and sustainable manufacturing,” he concludes.

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PRECIOUS HERITAGE

Sri Lanka’s gemstones, particularly Ceylon Sapphires, hold a unique place in the global gemstone market. Known for their extraordinary quality and captivating beauty, they have become synonymous with luxury and sophistication.

According to Anura Hemachandra, several factors make Sri Lankan gemstones, especially the renowned blue sapphires, stand out. “Ceylon Sapphires are celebrated worldwide for their exceptional colour, clarity and durability,” he explains.

The vivid hues of Ceylon Sapphires, especially the prized cornflower blue with its subtle violet undertone, are unmatched in their brilliance. Their high clarity with minimal inclusions enhances the ability of these gemstones to reflect light and create a mesmerising sparkle. In addition to their aesthetic appeal, these gemstones are durable, which makes them ideal for everyday wear while maintaining their timeless beauty.

Sri Lanka’s gem industry is also underpinned by ethical mining practices and a strong heritage of responsible sourcing.

“Our focus on environmental sustainability and ethical practices adds significant value to Ceylon Sapphires, especially in today’s market where ethical sourcing is a priority,” Hemachandra notes.

Indeed, this ethical legacy combined with Sri Lanka’s historical significance as a gem trading hub has elevated the allure of these gemstones.

The country has traditionally exported its gems to key markets such as the US, Europe and Japan. However, Hemachandra highlights a shift in recent years as new markets have emerged: “The Chinese clientele has developed a strong appetite for luxury goods including gemstones, making China a crucial market for Sri Lankan exports.”

“Promoting the Ceylon Sapphire brand and its unique qualities through targeted campaigns will help preserve its desirability”

India also remains a vital market due to its longstanding tradition of gem appreciation and robust jewellery sector. Additionally, the Middle East has become an increasingly important destination, driven by its demand for high end jewellery featuring Sri Lankan gemstones.

While Sri Lanka’s reputation for producing quality gems remains strong, Hemachandra emphasises that the sector faces several challenges in maintaining its competitive edge: “Global competition is one of the biggest issues with countries such as Madagascar and Mozambique offering similar gemstones at competitive prices.”

Furthermore, illegal mining and smuggling pose significant threats to the sustainability and credibility of Sri Lanka’s gem industry. Hemachandra stresses the need for stricter regulations and enforcement to address these issues. A critical area for growth is value addition. “To maximise returns, we need to focus on cutting, polishing and jewellery manufacturing. This will not only create higher value products but also generate more revenue locally,” he asserts.

Marketing and branding are also essential to maintain the prestige of Ceylon Sapphires. “Promoting the Ceylon Sapphire brand and its unique qualities through targeted campaigns will help preserve its desirability in the global market.”

Investing in skills development is another priority. Hemachandra highlights the importance of training gem cutters, polishers and jewellery designers to meet international standards and the evolving demands of the market. By addressing these challenges and leveraging Sri Lanka’s rich heritage, the gem industry can continue to thrive and consolidate its position on the world stage.

With its extraordinary gemstones, ethical practices and centuries old legacy, Sri Lanka remains a leader in the global gemstone industry. However, as Hemachandra notes, “sustained growth requires innovation, strategic marketing and a commitment to preserving the industry’s heritage while meeting modern demands.”

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SUPREME QUALITY

The tea industry is poised to solidify its position in global markets – especially emerging markets. “Currently, Sri Lanka is the fourth largest tea producer and contributes around 3.8 percent to the global tea market,” Rajpal Obeyesekere notes.

However, he says that “we can truly leverage our strength through the unparalleled quality of our Orthodox Black Tea.” Known as the bastion of original Orthodox Black Tea production, Sri Lanka offers a unique labour-intensive process that produces a wide variety of tea grades.

“Emerging markets are becoming more discerning. Consumers are paying close attention to quality and production methods before making purchases. The reputation of Ceylon Tea plays a significant role in their decision making, even at a higher price point. Our legacy as the world’s leading producer of Orthodox Black Tea is key to capitalising on these markets,” Obeyesekere adds.

In addition to product quality, he points out that Ceylon Tea is also recognised as the world’s most ozone-friendly tea. He elaborates: “Sri Lanka’s tea industry with its 150 year old heritage combines agro climatic features in seven unique regions, each contributing distinct qualities to the tea.”

In distinguishing the features of Ceylon Tea from other tea producing nations, Obeyesekere emphasises that Ceylon Tea is an embodiment of national pride. “Ceylon Tea is not simply a product; it’s a symbol of our heritage. The lion, which graces our national flag, has been synonymous with Ceylon Tea for decades,” he explains.

The lion logo is the official trademark of Ceylon Tea. It is owned by the Sri Lanka Tea Board and serves as a mark of authenticity.

He notes that this branding is vital in differentiating Ceylon Tea from others in the market, as the logo signifies the premium quality of Sri Lankan tea and promises consumers that they’re buying the finest product.

“Consumers are paying close attention to quality and production methods before making purchases”

Moreover, the Sri Lanka Tea Board has undertaken several initiatives to ensure that Ceylon Tea is recognised as a premium product in the global market.

Obeyesekere explains: “Our role as the custodian of Ceylon Tea includes implementing a strict monitoring mechanism that spans the entire industry from leaf to cup. We have tea inspectors in every region to ensure quality and integrity of the tea production process, from cultivation to manufacturing and packing.”

To reinforce this commitment to premium quality, the Sri Lanka Tea Board is in the process of securing geographical indication (GI) status for Ceylon Tea, starting with the EU.

He adds: “This will protect the integrity of Ceylon Tea, prevent violations or infringements in overseas packers and ensure that connoisseurs worldwide continue to enjoy authentic Pure Ceylon Tea.”

Obeyesekere also highlights the board’s efforts in promoting value addition to the tea industry: “We offer incentives to encourage brand promotion campaigns whereby 50 percent of the cost is reimbursed. In addition, we have a five percent incentive scheme for value added tea exports, which rewards better performance in export markets.”

The Sri Lanka Tea Board also runs the ‘Ceylon Speciality Estate Tea of the Year’ competition to encourage exceptional teas to be produced.

Obeyesekere remains confident that with these measures in place, Ceylon Tea will continue to shine as one of the world’s most revered and sought after beverages.

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CUTTING-EDGE SUSTAINABILITY

The apparel industry finds itself in a unique position vis-à-vis a window of opportunity in the world export market. In the eyes of Ashroff Omar, the country’s current standing is bolstered by several external factors including challenges faced by competitors such as Bangladesh.

“While Bangladesh continues to function reasonably well, concerns over potential supply chain disruptions have made customers cautious. Many have taken proactive steps to mitigate their exposure to Bangladesh with some even exploring options in Sri Lanka,” Omar explains.

Additionally, the tariffs instigated trade war between the US and China has positioned Sri Lanka as a more attractive destination for buyers.

He maintains that this environment presents a unique opportunity for growth, even if it is modest.

“Despite being relatively small in the global apparel market, Sri Lanka has immense potential to expand under these circumstances. We are seeing interest not only from international buyers but also companies in Bangladesh and India, which are considering setting up factories here,” he reveals.

Despite these opportunities, Sri Lanka’s apparel industry faces significant challenges, particularly in the aftermath of the economic crisis. One key issue is the impact of currency fluctuations. “The currency depreciation initially benefited exporters but it also led to a sharp rise in costs – including salaries and other expenses,” Omar notes.

Another critical challenge lies in increasing local fabric production. Currently, Sri Lanka relies heavily on imported fabrics with local mills meeting only 30-40 percent of total requirements.

“Growing global demand, coupled with our strengths in sustainability and quality, provide us with an excellent opportunity to thrive”

He emphasises: “More investment is needed to boost domestic fabric production. If we can reduce the reliance on imports and respond faster, it will significantly improve our competitiveness.”

Omar also highlights the importance of investing in high poverty regions to establish industrial zones: “According to Sri Lanka’s poverty map, these areas can greatly benefit from such zones. This initiative should ideally be led by the government with private sector involvement.”

Stability in the broader economy, supported by the ongoing IMF programme, is also crucial. Omar observes that “the programme has brought greater economic stability and limits risky decision making. And if this stability continues, I believe most other challenges can be mitigated.”

Sustainability remains a cornerstone of the apparel industry and a critical factor in its export strategy; and as Omar notes, “Sri Lanka has long been a leader in sustainability and this remains a key priority.”

While global enthusiasm for sustainability may fluctuate due to political shifts, the demand for sustainable practices continues to grow.

However, Omar believes that sustainability must be approached pragmatically. “True sustainability aligns with business principles – i.e. producing more with less energy, minimising waste and maximising efficiency. It’s not simply about ticking boxes or adopting overly activist measures that hinder operations,” he cautions.

Though sustainable practices may require higher initial investments, there are international funding opportunities available to support such efforts. Addressing issues such as waste and pollution is essential for meeting customer demands, and contributing to a cleaner and more responsible industry.

Despite these hurdles, Omar remains optimistic about Sri Lanka’s future in the apparel export market: “Sri Lanka is in a sweet spot at the moment. Growing global demand coupled with our strengths in sustainability and quality provide us with an excellent opportunity to thrive.”

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EXPORT ENGINE

The export sector has long been recognised for its focus on premium quality and sustainability – factors that have positioned the country as a key player in the global trade arena.

Shiham Marikar highlights these attributes as being the foundation of the nation’s export success. “Iconic products such as Ceylon Tea, cinnamon and natural rubber are glo-bally renowned for their exceptional standards,” he affirms.

“Certified by labels such as Fair Trade and organic certifications, these products have consistently appealed to environmentally and socially conscious markets. Sri Lanka’s commitment to ethical business practices and sustainability, particularly in industries such as apparel and agriculture, adds further value to exports,” Marikar adds.

The country’s strategic location along major international shipping routes provides a logistical edge. Reduced ship-ping costs and improved delivery times position Sri Lanka as a trade hub linking Europe, Asia and the Middle East.

This advantage is bolstered by a highly skilled English-speaking workforce with expertise in sectors and industries such as textiles, gem cutting and IT.

Marikar asserts: “Trade agreements such as GSP+ and FTAs provide preferential market access, and keep Sri Lanka competitive on the global stage. By embracing global trends such as digital transformation and green practices, our export sector will continue to adapt and thrive.”

He identifies agriculture, apparel, rubber, gems and IT-BPM services as the leading contributors to export growth. Products such as Ceylon Tea, cinnamon and coconut based goods dominate the agriculture sector, with immense potential for growth through value addition and organic certifications.

“We need to focus on targeted global marketing efforts for these products to maximise their reach and potential,” he recommends.

“By embracing global trends such as digital transformation and green practices, our export sector will continue to adapt and thrive”

In the apparel industry, Sri Lanka’s reputation for sustainability and innovation offers opportunities to expand into high value segments, including luxury fashion and technical textiles. The rubber industry also stands to benefit from increased investments in R&D and enables the production of high value goods for healthcare and automobile manufacture.

“Our IT industry’s skilled and cost competitive workforce can capitalise on global opportunities, in areas such as AI, blockchain and fintech. Marine exports, including shrimp and tuna, have similar potential through sustainable fishing practices and value added processing. And the gem and jewellery sector can maximise its potential through modernisation and branding,” Marikar emphasises.

And he adds: “To fully realise these opportunities, Sri Lanka must diversify its exports, advance up the value chain, and strategically invest in innovation and sustainability.”

Marikar believes that emerging markets in Africa, Latin America, Eastern Europe and parts of Asia represent promising opportunities for Sri Lankan exports, as they’re driven by expanding consumer bases and rising demand for high quality sustainable products.

The path forward for Sri Lanka’s export sector lies in diversifying target destinations and aligning strategies with the dynamics of emerging markets. Marikar ex-plains: “By positioning our products as being premium, sustainable and unique, we can significantly expand our global footprint.”

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GOLDEN INFUSION

The tea industry stands at a critical juncture as global competition intensifies and strategies are needed to sustain its presence in traditional markets. Almas Marikkar attributes this to Sri Lanka’s unique terroir, which includes diverse altitudes, microclimates and fertile soils – they contribute to the distinctive flavours and aromas of its teas.

“Unlike competitors in India, China and Kenya, our seven tea growing regions each have a specific season that imparts unique characteristics to the produce, and creates a wide spectrum of characteristics such as colour, taste and aroma,” he explains.

Marikkar emphasises that “Ceylon Tea’s ethical practices extend to the welfare of plantation communities, social upliftment of workers and unwavering environmental stewardship. Together, these elements transform local tea into more than simply a beverage; it becomes a symbol of responsibility and excellence, and sets our tea apart from offerings by other major exporting nations.”

Sri Lanka must adopt a multifaceted strategy to maintain and grow its presence across the globe. Marikkar highlights several key areas for focus, beginning with restoring the superior leaf standard that has long defined Ceylon Tea.

“By emphasising these traditional strengths, Sri Lanka can reaffirm its reputation for producing teas of unparalleled quality,” he maintains.

Strengthening ethical practices and enhancing traceability will further build consumer trust, and position Sri Lanka as a global leader in sustainable tea cultivation. And as he says, brand storytelling is another critical component: “We must share the compelling narrative of Ceylon Tea by highlighting the heritage, innovation and sustainability efforts of each estate.”

Digital transformation plays a significant role in this effort with e-commerce, social media engagement and content marketing becoming vital tools for reaching modern consumers.

“We must share the compelling narrative of Ceylon tea by highlighting the heritage, innovation and sustainability efforts of each estate”

Innovation is also necessary to meet evolving consumer preferences.

“We need to develop unique blends and wellness focussed teas – such as organic and functional beverages. The availability of Eurofins standard labs in Sri Lanka or the region will support this effort and help us stay aligned with changing consumer behaviour, especially with regard to young consumers,” he suggests.

To ensure the tea industry’s continued global success, Marikkar stresses the importance of strong government support.

“Sri Lanka must position itself as a global tea hub and free zone, directly connecting buyers with tea growers and exporters through an online platform,” he proposes. This move will enable Sri Lanka to retain its status as a premier tea destination, and avoid the risk of losing ground to emerging hubs such as the UAE, Poland and Germany.

Marikkar also advocates for a world tea destination exhibition hosted in Sri Lanka, showcasing the country’s tea growing capabilities. Sustainability incentives are another crucial area where government support is needed.

“Providing tax benefits and subsidies for eco-friendly and climate smart practices will reinforce Sri Lanka’s image as a sustainable tea producer,” he asserts. Additionally, facilitating preferential trade agreements to reduce tariffs will enhance competitiveness in key export markets.

R&D must also be prioritised. “Investing in climate resilient tea varieties, sustainable farming techniques and innovative products will ensure that we stay ahead of global trends,” he posits. And government collaboration with the private sector is essential for global branding campaigns.

As Marikkar sums up, “the future of Ceylon Tea lies in differentiation. We must capitalise on our strengths to secure a place as a global leader in premium and sustainable tea.”

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STRATEGIC ROUTE

According to Rohan Masakorala, efficient logistics is essential for maintaining competitiveness in international markets. And it goes without saying that logistics has always been a cornerstone of successful global trade and Sri Lanka’s export sector is no exception.

“Timely delivery is one of the most critical aspects for products with a shelf life and retail market reach. As consumer patterns and supply bases evolve amid increasing competition, speed to market has become a key element of effective supply chain management,” he explains.

Sri Lanka’s strategic location along major international shipping routes provides a significant advantage; it enables quick access to key markets in the US, Europe and emerging regions.

However, Masakorala says that connectivity is as critical as geographical positioning.

He notes: “Connectivity plays a vital role in ensuring the seamless inward supply of raw materials and the outward delivery of finished goods. Efficient logistics not only impacts pricing but also accelerates supply chain processes and helps customers better manage their inventories.”

The COVID-19 pandemic, economic crises and geopolitical conflicts have underscored the importance of robust logistics systems. Masakorala points out that these challenges have created both hurdles and opportunities for Sri Lanka’s export sector, particularly in industries such as apparel where efficient logistics offset high domestic costs.

Sri Lankan exporters face a range of logistical challenges that threaten to undermine their global competitiveness.

“Border protection authorities play a critical role in the clearance of imported raw materials, particularly for industries such as apparel, which is our largest export segment. Inefficiencies in these processes significantly add to input costs for value added products,” he explains.

“Addressing self-inflicted challenges is essential for enhancing the competitiveness of Sri Lanka’s logistics sector”

Another key challenge is the outdated infrastructure and operations in Sri Lankan ports. Masakorala notes: “The Port of Colombo is approximately 15 years behind in capacity development. Haphazard and unplanned development has sent mixed signals to international shipping lines, resulting in some services being relocated to other ports.”

Delays caused by domestic inefficiencies exacerbate these issues. Sri Lanka’s Logistics Performance Index (LPI) ranking also reflects these shortcomings. While India has advanced to 38^th position globally, Sri Lanka lags between 70 and 90.

“Addressing self-inflicted challenges is essential for enhancing the competitiveness of Sri Lanka’s logistics sector,” Masakorala declares.

Meanwhile, rising shipping costs and global supply chain disruptions have created additional challenges for Sri Lankan exporters.

He explains: “Exporters cannot simply recover the additional costs that arise from disruptions in the industry. Freight uncertainties and increased costs trickle down through buyers, retailers and consumers, potentially leading to demand disruptions in the long term.”

One of the root causes of high shipping costs is the inadequate capacity of the Port of Colombo. Compared to regional peers such as India, which have better plans and are offering favourable freight rates at present, Sri Lanka’s exporters face major disadvantages with the capacity crunch at the port.

He emphasises the need for reforms in trade facilitation and infrastructure development to enhance the island’s competitiveness. But despite these challenges, he remains optimistic about the potential of Sri Lanka’s port and logistics sector.

“Exports have been widely discussed as a solution to Sri Lanka’s economic challenges but little progress has been made in terms of focussed strategies and implementation. The National Export Strategy (NES) has been completely overlooked until now,” Masakorala laments.

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CEYLON’S LEGACY

The tea industry faces a crossroads amid intensifying global competition and shifting consumer preferences. On this score, Dr. Roshan Rajadurai believes that Sri Lanka’s position as a leading tea exporter is under significant pressure due to changing global dynamics.

“Global demand is shifting towards tea bags, infusions and herbal blends, which are cheaper and easier to manufacture. This shift challenges Sri Lanka’s reliance on traditional orthodox leafy teas but presents opportunities to highlight the quality and uniqueness of our products,” Rajadurai asserts.

Meanwhile, the global demand for tea is declining while oversupply from highly productive African countries is intensifying competition. These countries benefit from much higher labour productivity, which leads to lower costs.

“For instance, Assam in India produces almost three times our national tea output with harvesters plucking 34 kilogrammes daily while earning the equivalent of around Rs. 800. In contrast, Sri Lankan tea harvesters pluck an average of only 18 kilogrammes a day for a wage of 1,350 rupees,” he points out.

He laments that Sri Lanka’s labour productivity is the lowest in the world, despite our tea fields being superior to other tea producing nations. He notes that “low land productivity, outdated practices and labour migration have added to the strain.” And Rajadurai charges that political interference and inconsistent government policies are adversely impacting progress of the tea industry.

Smallholders, who pick green leaf for Rs. 40-50 per kilogramme without statutory and other traditional benefits, remain more productive than corporate sector plantation workers. However, these smallholders also face challenges.

“A balanced approach to wages, productivity and sharing gains from the tea supply chain is urgently needed,” he urges

“We need informed policy-making based on scientific and rational realities, facts, less barriers and a focus on promoting the unique qualities of Sri Lankan tea”

Despite these challenges, the industry remains uniquely positioned to maintain its global identity. Rajadurai explains: “Ours is the most sustainable and ethically produced tea, with a strong focus on conservation and good agricultural practices. Unlike Kenya’s vast plantations where tea is homogenous, Sri Lanka’s varied elevations, soil and microclimates contribute to distinct flavours and qualities.”

Moreover, tea’s health benefits provide an opportunity to appeal to modern health conscious consumers. Trade fairs and international expos also provide a platform to reintroduce tea to global consumers.

However, the perception of tea in some markets, particularly Europe and the UK, is in need of a transformation. “In these markets, tea is often viewed as a dull uninspiring drink, largely due to how it’s consumed – blended into weak flavourless concoctions,” he says.

To combat this, producers must showcase the richness of looseleaf tea and its versatility. “Trade fairs can help consumers experience authentic Ceylon Tea but profitability challenges hinder progress,” he concedes.

Sri Lankan tea producers often face a stark imbalance in the value chain, as Rajadurai explains: “While producers receive Rs. 1,200 a kilogramme at auctions, the same tea retails for US$ 40-50 overseas. Producers retain less than one percent of the profit, making it almost impossible to reinvest in improvements.”

Another challenge is the burden of certifications and compliance requirements by European and UK markets – without any measurable and quantifiable financial benefits to producers, who spend considerable sums on certifications and allied processes.

Addressing these challenges requires coordinated efforts by the government, industry stakeholders and trade bodies. “We need informed policy-making based on scientific and rational realities, facts, less barriers and a focus on promoting the unique qualities of Sri Lankan tea,” he concludes.

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INVESTOR MAGNET

Sri Lanka’s export oriented industries continue to evolve and attract foreign investments (FDI) across multiple sectors. Manufacturing remains a dominant force, driven by a skilled workforce, strategic location and trade agreements, Renuka Weerakone asserts.

“The trainability of our workforce and their proficiency in English make Sri Lanka an attractive destination for investors. Many foreign companies have operated here for over 40 years, and cite our skilled and loyal workforce as a major factor when continuing to invest in Sri Lanka,” she explains.

Sri Lanka’s FTAs with India, Pakistan, Singapore and Thailand – along with preferential trade schemes such as the EU’s GSP+ and the UK’s Developing Countries Trading Scheme (DCTS) – offer identified sectors with zero duty access to key markets.

She notes that “Sri Lanka’s apparel industry has transformed from small tailoring operations into a hub for high end niche products. Today, 96 percent of apparel exports come from Board of Investment (BOI) companies, and they contributed nearly US$ 4.5 billion to the industry’s 4.7 billion dollar cumulative revenue in 2024.”

The BOI is also fostering investment in auto component manufacturing and pharmaceutical production.

A dedicated pharmaceutical zone in the south is being developed to attract manufacturers, including those producing Active Pharmaceutical Ingredients (API). Similarly, a fabric park established by the BOI in the east will serve as a catalyst in the supply chain for apparel manufacturers.

Tourism is another industry with strong investor confidence. To this end, she points out that “with tourism rebounding and projecting annual revenues of US$ 5 billion this year, there is room for capacity expansion especially outside Colombo.”

“The trainability of our workforce and their proficiency in English make Sri Lanka an attractive destination for investors”

“We are also looking at entertainment and adventure related attractions, such as theme parks, cable cars and marinas to diversify the tourism experience,” she adds.

To mitigate risks for foreign investors, the BOI encourages manufacturers to set up within its export processing zones.

Weerakone explains: “The Board of Investment is not simply a facilitation arm; it also establishes and manages these zones. And within them, the BOI provides building approvals, environmental clearances and Certificates of Conformity (COC), and reduces the complexities of dealing with multiple agencies.”

“Frequent changes in tax policies, levies and trade regulations create uncertainty. To address this, we are advocating for a lock in period of at least five years to ensure that investors operate under consistent conditions,” she reveals.

Policy reforms have long been a focus of the BOI to enhance the ease of doing business in Sri Lanka. Weerakone concedes that “around five years ago, we worked with various agencies to streamline processes; yet, we still face challenges. The BOI was originally a true one-stop shop but after legislative changes in 1992, we lost the authority to grant all approvals under one roof.”

She continues: “Now we rely on multiple agencies, which can slow things down. Investors understand that approvals take time but they expect predictable timelines, which we’re working to improve.”

The BOI has been moving towards digitisation with the introduction of online visa facilitation, customs declarations – including automation of functions at the Central Verification Terminal (CVT) in Orugodawatta – to strengthen transparency and boost efficiency.

“The goal of the board is full digitisation, where applications can reach all relevant agencies simultaneously and receive parallel processing,” Weerakone states.

Despite the challenges, investor confidence remains strong. She reveals: “In January alone, we received 16 applications totalling US$ 189 million. Even during COVID-19, BOI companies continued their operations, exports weren’t interrupted and we made sure that workers received priority vaccinations.”

Looking ahead, Weerakone remains optimistic: “With stability, transparency and a clear road map, we are poised to make Sri Lanka a more attractive investment destination.”