ECONOMYNEXT – Sri Lanka’s government will help develop new export finance instruments as part of an initiative to rapidly raise export earnings to 50 billion US dollars, Deputy Minister of Highways & Investment Promotion Eran Wickremaratne said.
Two major problems faced by the island was the falling share of exports in economic output and the low participation of small and medium enterprises, he told an economic policy forum organised by the Ceylon Chamber of Commerce.
“Our exports’ share of world trade and of gross domestic product has come down,” Wickremaratne said. “So we really have a big problem on our hands and we need to try to see how we are going to reverse it.”
Exporters need a new export finance instruments to help them increase exports, and diversify their products and markets.
The government was ready to support export financing where necessary, Wickremaratne said.
“The number of instruments we have in our market is very, very few. In the local market there’s factoring and buyers’ credit. But export markets don’t have them.”
The government can provide export credit guarantees but these were not widely used as small businesses lacked awareness of the facilities and also saw the as expensive.
“Credit lines are generally used by banks but it’s necessary to create credit lines to promote exports. We have to have a focus like in other countries,” Wickremaratne said.
The incremental growth in exports Sri Lanka has had so far is not enough and the island needs “a bold initiative – an aggressive, dynamic export strategy,” Wickremaratne said.
“We need bold exporters willing to take higher risks and provide them with more instruments to manage the risks.”
The government is also looking at creating an ‘Exim’ (export-import) bank as in other countries as well as improving existing export credit guarantee and insurance schemes, Wickremaratne said.
“An Exim Bank could be jointly owned by the private sector and government but with a very specific focus. They must want to see exporters succeed,” he said.
He estimated it would need a capital outlay of about 150 million US dollars.
Sri Lanka’s export products have not changed much in recent decades with only garments being added and more recently information communications technology.
“The contribution of small and medium enterprises to exports is shockingly low,” he said, noting that in Sri Lanka it was less than five percent compared with 30-40 percent in Thailand.
“If we’re actually going to get out of our problems we have to expand the number of firms in exports.” (Colombo/August 4 2015)