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Taking the Economy from Slow to Fast Track

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This is the second in a series of articles on the key insights from the recently concluded Sri Lanka Economic Summit 2018 on the theme ‘On the fast track to a turnaround’.

 

1. Sri Lanka’s post-civil conflict growth has been rapid – but just not good enough.

Sri Lanka’s economic growth since 2009 has been rapid but has not been sustainable, as manufacturing activities have seen slow growth. In comparison to similar economies such as Vietnam and Thailand, Sri Lanka’s export growth has been almost insignificant. Furthermore, Sri Lanka has seen little diversification in export products since 1990, with traditional low complex products being key exports even in 2015. Meanwhile countries such as Vietnam have monumentally diversified their export basket to include complex products in electronics and IT, with original low complex exports becoming almost insignificant. These countries have reaped the benefits of diversifying their products during the last fifteen years.

According to the State Minister of National Policies and Economic Affairs (at the time of the SLES 2018), Hon. Dr. Harsha De Silva, stated  “even though the economy is expanding, unless you’re able to get the trade to GDP ratio, to something significant, we’re going to lose the battle. If we are our exports to GDP is falling from almost 35% to 13%, and our share of global exports from 0.08% – 0.05%, you know certainly that something is wrong and you got to turn this around.”

2. Fast-tracking turnaround is all about diversification and value addition, and Sri Lanka is on the right track.

Coming out of this cycle requires moving from a buyer driven, to a producer driven production network. Today’s world trade is dynamic and has intra-industry value chains, with intermediate goods being traded the most. Sri Lanka needs to move away from competing only on price, and needs better value addition to goods being exported. Certain policy measures taken appear to be on the right track and intend on taking steps to make Sri Lanka a vibrant trading economy. New Visa regulations are expected to ease hiring consultants for technology transfer; Bingiriya, Charile Mount, Trincomalee, and various other special economic zones are to be developed; the National Export Strategy, has been launched and has identified IT/BPM services, electrical and electronic components, boating, wellness tourism, processed food and beverages, spices and concentrates as key export sectors.

Commenting on this, Dr. Harsha De Silva stated “We need the investments to come in, we need to lower the border taxes so that the production networks can become a reality in this country. We need to lower the barriers that we have erected at the borders. If we have erected the barriers at the border, it becomes less conducive to be part of the network.”

“Where infrastructure was needed, where supply chains were needed, we went and built them. Where perceptions were not right we went and changed them. We needed to build what was required to propel the brand forward. We went and did it ourselves. And being in a small country it allows you to do it, with a little more effort.”

– Mr. Shalin Balasuriya, Director and Co-Founder, Spa Ceylon

 

3. Opportunities for SMEs galore, but they need to build their brand and know their customer.

For diversification to happen effectively SMEs have to come and play that part. Sri Lanka has a lot of opportunities for SMEs, but what’s important is to start identifying and understanding who our consumer is, who the global consumer is, and then ensure that our product makes sense to the global consumer. SMEs can use the domestic market as an incubator for their product and service prior to launching it overseas.

Furthermore, there is a need to focus on our branding. This will allow SMEs to position themselves better, stand out and be unique. And only when we stand out and be unique, can we start demanding premiums. This in turn will help us become robust and resilient to changes in the global economic landscape.

4. Developing a resilient economy, a thriving IT/BPM industry, and an internationally acclaimed port all require one thing – a skilled workforce.

Capacity building is essential to building a thriving IT/BPM industry as well as an international port. The country’s IT sector has an ambitious target of reaching US $ 5 billion by 2022 with a clear focus on Data Science and Artificial Intelligence (AI). In order to reach these targets, the country needs to increase its graduate pool in the sector from seven thousand to sixteen thousand by 2022.

The lack of skilled employees are not unique to the IT sector alone, Capt. Ravindra Jayawickrema of Hambantota International Port Services commented on the gap stating that “The level of education and skill has been a drawback. The people are not capable of meeting the expectations of employment at the port. When the port was leased out - the Magampura Port-  had 400 employees under them, and when we offered them jobs, hardly anyone took the offer, most of them wanted public sector jobs (SLPA) – Out of 450 only 17 opted to join the company”.

 

Results from Audience Poll Question: What will be the most crucial factor in shifting from Slow to Fast Track?

 

 

 

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