Sri Lanka’s export problem is not concentration but composition: Verité

Sept 13, 2017 (LBO) –  Sri Lanka’s export product composition is heavily concentrated in the United States and the United Kingdom while having very limited success in terms of Asian markets, particularly Japan, a new study says.

In terms of product composition, Sri Lanka’s two leading exports are not among the top ten product categories traded in the world, a Verité Research report on the island’s exports said.

Sri Lanka’s two key export product categories that accounted for 44 percent of the country’s exports in 2016 constituted only 2 percent of the world market.

In contrast, the two leading exports of the other selected Asian economies belonged to product categories that accounted for over 20 percent  of the world market, the report says.

“The heavy reliance of Sri Lanka’s export products on Western markets such as the USA and the UK is mainly the result of the Sri Lanka’s product composition.”

These two markets accounted for 36.5 percent of Sri Lanka’s total exports in 2016. Out of total exports to these two countries, 75 percent to the USA and 79 percent to the UK comprised of apparel exports.

These markets together accounted for 64 percent of Sri Lanka’s total apparel exports in 2016.

The value of the world market for apparel in 2016 was US 396 billion dollars. The UK and the USA are among the five leading destinations for apparel exports, accounting for 27.4 percent of the world market.

The data clearly shows that the heavy reliance on the USA and the UK is driven by Sri Lanka’s export composition, Subhashini Abeysinghe, senior analyst and head of Economics at Verité Research said.

“Exports to Japan however, demonstrate that Sri Lankan exports have faced challenges in Asia, even when there is a large market for the country’s key export products.”

“For example, Japan is one of the top five markets in the world for apparel. However, the country accounted for only 0.9 percent of Sri Lanka’s total apparel exports in 2016.”

China accounted for 1.4 percent of Sri Lanka’s total apparel exports in the same year and remains a relatively small market for apparel, both in terms of share and value.

Unlike in the case of export markets, where a significant portion of Sri Lanka’s exports end up in leading world markets, only a small portion of the country’s exports belongs to the top five product categories traded in the world.

While the five leading product categories account for 43 percent of the total world market, only 7 percent of Sri Lanka’s exports belong to the top five traded in the world.