In the next five years, Sri Lanka is striding on a economic vision plan to achieve a export target of $20 billion dollars. The country’s export performance had recovered after the slump in the years 2015 and 2016 to US$ 16.4 billion dollars in 2019. The largest contribution to the national exports came from merchandise exports, which surpassed US$ 11.9 billion dollars for the first time. Looking more in detail, US and the European Union remained the nations largest export markets. Furthermore, the other important markets were China and India.
European Union and the US
Looking at foreign relations, today the EU and US are the largest trading partners of Sri Lanka. EU-Sri Lanka relations started as early as in 1975 with the signing of a commercial cooperation agreement between the European Commission (EC) and Sri Lanka. The relationship was further strengthened in 1995 with the agreement on partnership and development. The Island nation has greatly benefited from the Generalised System of Preferences (GSP) plus scheme which provides duty free access to the EU, which is the country’s largest export market. In 2017 alone, Sri Lanka’s exports to the EU were Euro 2.7 billion. On the other hand, it has been seven decades since Sri Lanka entered into formal relations with the US. Moreover, the economic diplomacy between the two nations stands at US $ 3.2 billion.
India and South Asia
In recent years, India and Sri Lanka have deepened their economic cooperation. According to Sri Lankan Customs, bilateral trade in 2017 amounted to $ 5.3 billion dollars with Sri Lanka continuing to be one of the largest trading partners of India in South Asia. It is worthwhile mentioning that the implementation of free trade policies, such as the Indo-Sri Lanka Free Trade Agreement (ISFTA), which has facilitated the growing flow of trade between the two nations since 2000. Sri Lanka, in turn, is India’s largest trade partner in South Asian Association for Regional Cooperation (SAARC). For countries such as Sri Lanka, entering into the South Asian Free Trade Area (SAFTA) agreement in 2004 may have helped overcome the economic disadvantages of being a small nation.
ASEAN and Australia
Since the Bandung Summit of 1955, Indonesia’s relationship with India and Sri Lanka has been strong. Association of Southeast Asian Nations (ASEAN) has played a prominent role in helping this partnership grow further. For Sri Lanka, Singapore forms a major link to gain greater access to the other nine Association of Southeast Asian Nations (ASEAN) countries. Presently Singapore is the third largest investor in Sri Lanka, according to the Board of Investment sources. Currently, the bilateral trade between Sri Lanka and Singapore is around USD 2.7 billion dollars. Recently, Singapore strengthened the bilateral relationship by signing the free trade agreement with Sri Lanka, known as the Singapore-Sri Lanka Free Trade Agreement (SLSFTA) reducing tariffs up to 80 percent. Indonesia, with more than 17,000 islands, occupies a key geopolitical position in the ten-member ASEAN regional bloc. Also, the trade between Indonesia and Sri Lanka has doubled from $400 million in 2011 to around a billion dollars in the recent past.
It might be worth mentioning commercial engagements between Australia and Sri Lanka. Hence, the 109,000 Sri Lankan Australians diaspora (Department of Home Affairs; Immigration and Citizenship) can also be a source of strength, pride that forges these bonds between the two nations. The clearest signs of this bilateral stability doubled in 2017, bringing this two-way trade figure to AUS$ 1.4 billion dollars.
Liberalization and Export Processing Zones (EPZ)
The Island nation has been maintaining a moderate economic growth since its economic liberalization in 1978. The export-oriented- Export processing zones (EPZ)s and the Industrial parks have grown rapidly for the last three decades, providing workers with economic benefits. As an export nation, Sri Lanka has become one of the world's biggest tea and clothing wear exporters. However, the nation also exports electronics, Information Technology Business Process Management, rubber manufactures, fish, and precious stones.
Sri Lanka's Apparel Industry
In Sri Lanka the apparel industry is the largest employer in manufacturing. Given the enormous export potential of Sri Lanka, the apparel industry sector grew from a cottage industry to machine-operated large factories during the past twenty years. The Sri Lankan apparel sector, whose exports to the US and EU markets amounted to over US$ 5.3 billion dollars in 2019. Export figures to the US from Sri Lanka’s garment sector alone stands at US$ 2.2 billion dollars (Sri Lanka Export Development Board, 2019 ).
Tea Industry
Sri Lankan tea has continued to play an instrumental role in Asia and has made significant strides on national, regional and in international fronts. “Ceylon tea" is still considered as a symbol of excellence throughout the world. Currently over one million plantation workers are directly or indirectly engaged in the nations tea industry. The tea sector remains one of the most essential foreign exchange earners that exports over US $ 1.5 billion dollars worth of tea annually.
Information Technology Business Process Management (IT-BPM )
Moreover the Information Technology Business Process Management (IT-BPM) sector has experienced strong and sustained growth in recent years to reach $1.2 billion dollars in exports. According to the Sri Lanka Association of Software and Service Companies (SLASSCOM) expects IT-BPM sector to rise to US $ 5 billion dollars in exports by 2022. {SLASSCOM & PricewaterhouseCoopers (2016)}
Ports and Shipping
The nation known as a mega transshipment location in South Asia and ranked as the 11th best connected shipping port, Sri Lanka’s ports are among the fastest growing ports in the world. Today, Sri Lankan ports are the growth engine of the nation. The South Asian island nation is now one of the world’s largest marine container handling ports with the only deep water terminal in South Asia, capable of handling the largest vessels afloat. With the aim of creating an energy hub surrounding the port of Hambantota, the LAUGFS LPG Transshipment Terminal, the largest of its kind in South Asia was initiated in May 2019. Projected to achieve an annual export value of US $ 500 million dollars, this terminal will also commence coastal shipping services between the ports of Hambantota and Colombo for the very first time. Sri Lanka also has a significant ship and boat building industry, with estimated exports of about US$ 279 million dollars.
Conclusion
Sri Lanka’s geography has gained renewed importance in international affairs in the past few decades. Also from the time when the civil war concluded, led by strong growth in export markets, has resulted in rapid growth for the island nations economy.However, Sri Lanka need to diversify its exports and venture more into services sector.
Pic Courtsey-Srimal Fernando
(Srimal Fernando is a Doctoral Fellow at Jindal School of International Affairs (JSIA), India and Advisor / Global Editor of Diplomatic Society for South Africa. He is the winner of the 2018/2019 ‘Best Journalist of the Year’ award in South Africa, and has been the recipient of GCA Media Award for 2016.In the field of politics, and Policy affairs, Fernando is a specialist, with over ten years of first hand experience in Sri Lanka and the Maldives.The views expressed are personal)
