Ensuring that a predictable and transparent policy and regulatory framework is in place to promote trade competitiveness and achieve the five-year detailed Plans of Action (PoAs) and implementation of the management framework proposed by the National Export Strategy (NES) is essential to drive forward exports, said Chairman, Exporters Association of Sri Lanka (EASL) Harin de Silva.
However, transparency in policy and regulatory framework is a prerequisite for the private sector before introducing policy or regulatory changes. The setting up of an institutional framework for effective public and private coordination to execute the PoAs and pro-business orientation of Government agencies is necessary, he said.
A country’s ability to maintain its export competitiveness in international trade is reliant on two crucial factors; having access to markets in which the country has a competitive advantage and continuous efforts in promoting products which have a strategic advantage in these markets. In the absence of a centralised, reliable trade information platform and intelligence on offensive interests (i.e. improvement in market access) in strategic export markets, Sri Lankan exports have not been able to realize the full market access potential, he said at an interview with the Business Observer.
Excerpts:
The NES was developed with a vision to make Sri Lanka an export hub, driven by innovation and investment. The strategic objectives of the NES are well aligned to support the economic development strategy spelled out in ‘Vision 2025’ and solidifies an action plan for implementing the export strategy envisioned in the new Trade Policy of Sri Lanka.
Within this context, the NES has identified six focus sectors to lead the way for innovation and diversification of exports ; i) Information Technology–Business Process Management (IT–BPM), ii) Boating Industry, iii) Wellness Tourism, iv) Spices and Concentrates, v) Processed Foods and Beverages and vi) Electrical and Electronic Components.
The three supporting pillars to create an enabling environment for all export sectors to thrive are Trade Information and Promotion, National Quality Infrastructure and Logistics.
These six strategic sectors and the three trade supporting pillars have now been developed into as five-year detailed (PoAs) and implementation management framework.
Full potential
Time and again the EASL has stressed the importance and need for a strong and positive political will and vision to drive the export sector of our country to reach its full potential. But sadly it seems that our pleas have been in vain.
The country as a whole seems to be in political limbo with a wait and see mindset. Communal unrest seems to be making its presence felt again with the communal violence that erupted in Theldeniya in March this year. Daily demonstrations on the streets of Colombo continues to cause great inconvenience to the daily life of the people and businesses.
A looming trade war between the United States and China will not help Sri Lankan exports which are currently struggling to remain competitive in the global marketplace.
The EASL has always been extremely vocal in requesting incumbent governments to include the association in its endeavors to shape export policy through a public – private sector partnership.
Early last year the government of Sri Lanka extended the EASL an opportunity to be a member of the core team that have now concluded the formulation the (NES for Sri Lanka.
It is a collaborative effort between the state sector and the private sectors to provide a detailed and prioritized five-year action-oriented framework for the development of trade and competitiveness particularly for the benefit of the SME sector in Sri Lanka.
The strategy provides a clear direction for sustainable export-led growth in specific sectors to make Sri Lanka a key trade hub in the Indian Ocean.
This gesture has not only highlighted the government’s willingness to work with a reputed stake holder from the export sector it has also gone a long way in making sure that the government realises the importance of a public–private sector partnership in shaping the future of Sri Lanka’s export policy.
The success of this document will depend entirely on the political will and ability of the incumbent government to drive the National Exports Strategy.
It is absolutely imperative that either the President or the Prime Minister personally oversees the implementation process of the recommended policies in the NES. The private sector cannot be called upon to drive this on behalf of the government.
Over the past two years, the EASL on our own have developed two documents under the title Recommendations for a National Export Strategy.
Subsequent committees set about identifying cross cutting issues at a macro level via extensive consultations with our membership and stake holder in the export fraternity along with economist who specialize in the field of exports.
This year is no different and we have proceeded to develop our third document. As we have done with the first two documents, we hope to share the third document with policy makers in the current government. We have also decided to take it a step further this year and have made plans to share our third document with all political and interested parties who are concerned with the developments of exports out of Sri Lanka which is something that we did not do with the first two documents.
Improving export climate
Each of these three documents address the most critical issues challenging the export fraternity in Sri Lanka that need to be addressed at the highest levels of government.
Our third document focuses on five main points that are currently essential in formulating the foundations for the growth of Sri Lankan exports.
The government must ensure that a predictable and transparent policy and regulatory framework is in place to promote trade competitiveness. This will go a long way in achieving the five-year detailed plan of action and implementation of the management framework proposed by NES.
The establishment of an institutional framework for effective public and private sector coordination for the execution of these plans of action and pro–business orientation of Government agencies is necessary. Updating the regulatory framework by incorporating amendments to outdated legislation and bringing in new regulations to suit the requirements of modern trading practices is also a nessacity.
Digitising the Land Bank in Sri Lanka -a key difficulty for both foreign and local investors is the availability of data concerning the availability of land for investment purposes.
While steps are being taken to implement the digitisation of the land bank, it will need to be expedited to ensure that this does not continue to be a key drawback for investment.
It is important to Introducte a scheme similar to the Export Development and Investment Support Scheme (EDISS) that was introduced in the 1980s taking into account the current developments and the tax framework.
This is for the promotion and development of both traditional and non-traditional exports with a focus on both value addition and the service oriented exports. Policy initiatives should be driven to encourage investments by addressing the increasing labour shortages for many industries.
It is vital to develop an export promotion portal by leveraging on existing institutional set up of the Government and the private sectors to provide up to date market information on opportunities available in strategic export markets for Sri Lanka.
Addressing quality infrastructure deficiencies to resolve compliance issues and promote market access will boost the potential of exports. Country branding initiatives to be coordinated and complimented with a supportive trade finance regime.
Develop a structured mechanism with a robust communication strategy for obtaining timely feedback from the export sector stakeholders concerning ongoing FTA negotiations, especially on offensive interests. There is a need to develop a trade adjustment package in consultation with the relevant stakeholders.
Prioritize the establishment of a National Single Window (NSW), under Sri Lanka’s TFA commitments to gain trade facilitation efficiencies which have the potential to bring substantial cost savings and predictability for traders.
Innovation
It is important to convert the current Coordinating Secretariat for Science, Technology and Innovation (COSTI) to the National Science Technology and Innovation Coordinating Authority (NASTICA) where the focus will be on commercial ventures.
The implementation of this strategy will need to be dynamic with a strong institutional framework for effective public and private sector coordination. The success of the strategy will be on re-orienting the present mindset in research institutions.
Transparency, accountability and implementation is what the EASL is requesting from the current and future government and policymakers. These expectations are paramount in taking the above recommendations forward and ensuring that initiatives such as the National Single Window, Trade Information Portal and the revision of the Customs Ordinance will bring the desired benefits to the export industry of Sri Lanka.
Private sector
All line ministries and different agencies must work in a coordinated manner with the private sector to achieve NES PoAs within the stipulated timelines.
These institutions often deal with a certain functional aspect related to these POAs (such as environmental standards, quality standards, licensing, fees and charges, labour, and taxation). Therefore, it is important to establish an institutional framework for managing NES implementation and have a reorientation process in Government agencies to enable a business-friendly mind-set and work in a coordinated manner with fellow Government agencies.
Updating regulatory framework by the way of incorporating amendments to outdated legislation and bringing in new regulations to suit requirements of modern trading practices are necessary. Some of priority policy interventions that require immediate attention are:
Replacing outdated customs ordinance with a New Customs Act;
Amendments to the Land Alienation Act;
Amendments to the Quarantine Law; Regulations governing importation of input material for processing and re-exporting of food and beverage products.
2. Improving the investment climate for exports
Foreign Direct Investment rose to an all-time high in 2017 led by investments from key land mark projects such as the investment in the Hambantota port and the Colombo Port City. While there was investment into export manufacturing and services, it is important to maintain this momentum moving forward given the potential FDI that Sri Lanka could attain on a consistent basis with the level of foreign investor interest that the county witnesses.
Digitising the Land Bank - a key difficulty for both foreign and local investors is the data over the availability of land for investment purposes. While steps are being taken to implement the digitisation of the land bank, it will need to be expedited to ensure that this does not continue to be a key drawback for investment.
Improve on Ease of Doing Business – while recognising that there are task forces working to improve Sri Lanka’s rank in the World Bank Ease of Doing Business index, it is important for the business community to be practically benefited from the initiatives being carried out. It is also pertinent that the task forces and policy initiatives go beyond just this index but improve the ease of doing business as a whole.
Consider introducing a scheme such as the Export Development and Investment Support Scheme (EDISS) that was introduced in the 1980s taking into account the current developments and the tax framework.
This is for the promotion and development of both traditional and non-traditional exports with a focus on both value addition and the services exports.
The formulated EDISS scheme will need to be carefully designed so as to avoid commitments made by Sri Lanka in terms of subsidies and countervailing measures under the WTO and the recently enacted domestic legislation on Anti-Dumping and Countervailing Duties.
Policy initiatives should be driven to encourage investments by addressing the increasing labour shortages for many industries. Further recommendations highlighted by NEDVS 2 in terms of PPP for exports and the hub strategy for Sri Lanka should be synchronised with the investment policy initiatives.
Develop an export promotion portal by leveraging on existing institutional set up of the Government and private sector input to provide up to date market information on opportunities available in strategic export markets for Sri Lanka.
Market intelligence
Exporters could reduce cost of gathering market intelligence by leveraging on information gathered and validated by Sri Lankan diplomatic missions abroad (by strengthening existing commercial sections in missions) and market intelligence support tools developed with the intervention of the Export Development Board (EDB).
Addressing quality infrastructure deficiencies to resolve compliance issues and promote market access potential of exports will facilitate the export drive of the country.
The facilitating accreditation of private conformity assessment bodies and proficiency testing scheme providers will impact positively for exports.
The facilitating of institutions engaged in providing measurement and calibration services and broadening the scope of these institutions improves their capacity in areas such as chemical metrology and product traceability.
Country branding initiatives to be coordinated and complimented with a supportive trade finance regime. For this, there is a need to develop a country branding initiative with strategic promotional tools to meet specific industrial requirements.
It is necessary to strengthen the intellectual property registration regime by fast-tracking Sri Lanka’s accession to the Madrid protocol and make available special financing facilities to support market penetration activities such as access to innovative technology and new projects.
Trade liberalisation
The Government has embarked on a series of trade liberalisation efforts, guided by the overall policy objective of achieving a trade led growth trajectory for Sri Lanka. Commitments made at the multilateral level is also complimenting this reform process with the adoption of the Trade Facilitation Agreement (TFA).
Trade liberalisation efforts often draw down on protectionism. Therefore, a robust communication strategy needs to be in place highlighting possible impact for both consumers and producers.
These Trade liberalisation efforts of the Government requires an effective engagement with the business community for designing an effective policy framework that will aid in sequencing policy implementation.
Recommendations
Develop a structured mechanism with a robust communication strategy for obtaining timely feedback from the export sector stakeholders for ongoing FTA negotiations, especially on offensive interests. Develop a trade adjustment package in consultation with the relevant stakeholders for addressing three important aspects of the adjustment process:
Support for firms that are likely to benefit immediately from opportunities arising,
Support for firms that need to restructure and upgrade to benefit from opportunities arising,
Support for firms that are likely to have a negative fallout.
Prioritise the setting up of a National Single Window (NSW), under Sri Lanka’s TFA commitments to gain trade facilitation efficiencies which has the potential for bringing substantial cost savings and predictability for traders.
Innovation will be a key requisite for Sri Lanka to avoid a middle-income trap. The lack of spending on R&D in the country coupled with limited resources have hindered the development of new products and services that will be able to cater to an evolving global market.
In this context, the proposed Innovation and Entrepreneurship Strategy 2018-2022 is welcomed as it identifies some of the present gaps in the ecosystem. The strategy also aims to support SMEs that would be developing higher value-added products and services for exports.
Implementation of National Budget 2018 proposals that will convert the current Coordinating Secretariat for Science, Technology and Innovation (COSTI) to the National Science Technology and Innovation Coordinating Authority (NASTICA). With this the focus is expected to be on commercial ventures.
The implementation process of the strategy will need to be dynamic with a strong institutional framework for effective public and private coordination.
The success of the strategy will be on reorienting the present mind set in research institutions. As such in this process of re-alignment with the latest trends and technology, a closely guided collaboration with the private sector is required. Transparency, accountability and implementation in short is what the EASL is requesting from the current and future governments and policymakers.
These three expectations are paramount in taking the above recommendations forwards and ensuring that initiatives such as the National Single Window, Trade Information Portal and the revision of the Customs Ordinance will bring the desired benefits to the trade in Sri Lanka.