Smart reforms could improve Sri Lanka’s exports: World Bank

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Nov 07, 2016 (LBO) – Sri Lanka could grow it exports by encouraging resources to more productive firms through managing urbanization and fostering agglomeration of firms, a World Bank report states.

Firms could also invest more in training their workers and managers, with active measures from the government, the report states.

“Sri Lanka’s leading firms have risen to standards of global excellence, demonstrating that world class levels of operational performance, efficiency, and innovation can be achieved with the right management, technology and worker training,” said Idah Pswarayi-Riddihough, World Bank Country Director for Sri Lanka and the Maldives.

“These flashes of brilliance across a growing number of areas, locations, and leading firms can provide inspiration for reforms and serve as examples for the country and region’s rising firms.”

Overall, however, Sri Lanka can perform better in terms of both the quantity and quality of its exports – fundamentally because many of its firms are not nearly as productive when compared to their potential.

Annual export growth from 2000 to 2013 was five percent, which is lower than that of many of its neighbors.

According to the new report, entitled South Asia’s Turn: Policies to Boost Competitiveness and Create the Next Export Powerhouse, priorities are improving the business environment, connecting firms to global value chains, leveraging agglomeration benefits, and strengthening the capabilities of managers and workers.

To increase its competitiveness, Sri Lanka could take advantage of a confluence of positive factors, such as its geographic location, trade linkages, comparatively high education levels, and growing cities, the report said.

The government has identified the need to transform the economy from one that has been largely inward oriented and led by the public sector, to one that is export oriented and led by private entrepreneurship.

“This recognizes the fact that the sources of growth over the past decade (mainly construction and non-export sectors) are not enough to create the sustainable and inclusive growth that the country needs going forward,” a statement said.

Unleashing the potential of the Sri Lankan private sector to compete and trade is essential to facilitate the creation of more and better jobs that are in line with the aspirations of the Sri Lankan population.

“Sri Lanka has tremendous potential to increase incomes and gain market share in exports through policies that enhance productivity and investment,” said Vincent Palmade, one of the report’s co-authors.

“Policymakers can encourage the flow of resources to more productive firms by actively managing urbanization and reducing congestion constraints through, for example, fostering a productive collection of firms next to pools of qualified workers with easy access to domestic and export markets.”

To better connect and expose Sri Lankan firms to international good practices, the government could consider deepening relevant reforms to improve the capabilities of firms to participate in global value chains, which will require making it much easier for exporters to import what they need, gradually reducing tariffs, while improving trade logistics.

Policymakers can encourage the flow of resources to more productive firms by actively managing urbanization and reducing congestion constraints.

With support from the government, firms can invest more in training their workers and managers, innovate to introduce new products and processes, as well as make greater use of the potential of the Internet to buy, sell, market, or manage their inventory.

Together, these proposed reforms and investments will help Sri Lanka take a turn towards realizing its great competitiveness potential.