Face reality, think radical or exports will stagnate: MTI

26 January 2016 06:30 pm - 0 - {{hitsCtrl.values.hits}}

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Delivering the keynote at the 30th anniversary celebrations of the National Chamber of Exporters, MTI CEO Hilmy Cader assessed the contemporary issues related to exports in the international market place, the challenges that Sri Lanka would have to face in this background and approaches that Sri Lanka could adopt to meet such challenges. His keynote on Sri Lanka’s exports addressed four questions – Why? What? How? and Where?.

Referring to the question of ‘Why?’, Cader noted that Sri Lanka had taken 15 years to almost double our exports from US $ 5.5 billion in 2000 to US $ 11.5 billion in 2014, whereas the competing countries like Bangladesh and Vietnam have achieved both higher growth factors of 4.7 percent and 9.4 percent, respectively and also a higher value of exports at US $ 33 billion and US $ 150 billion in 2014.

In addition, with Sri Lanka’s imports growing faster than our exports and exports as a percentage of gross domestic product (GDP) declining, he emphasized that we cannot ‘live’ with this situation as we are in a very alarming state.

He went on to say that what is alarming is not the short-term global challenges but the fact that fundamentally we have some major issues with our exports, which he addressed later through ‘What?’, ‘How?’ and ‘Why?’.

In relation to the question - ‘What are exports?’ - Cader said, “Firstly we should banish the word ‘exports’. Your customer is not looking at just getting a product or service out of your country; your customer is looking for an international or regional supply chain.”

He stated that this in turn called for a relook at our ‘archaic’ definition of exports, which needs to change if we are to meet the global requirements.

According to the current definition, it is an ‘export’ only if ‘the value’ is added ‘on our own soil’. So essentially it is not an export if value is added elsewhere. But now, what global markets demand is ‘in–country’ value addition, which we tend to discourage, instead of encouraging ‘Sri Lankan multi-nationals’.
In terms of measuring our exports, he recommended that focusing on value addition is more important than looking at just top-line measurement.

Moving on, he mentioned, “Before we look at exports and what we are going to do, we should firstly, take stock of what the world requires, and secondly, what is it that we can really export. We need to see where we stand, what resources we currently have, what resources we can acquire or extend, etc., so that we can look at what our exports are going to be.”

Using the MTI model on ‘what Sri Lanka can export?’, Cader went on to explain that there are five areas that we, as a country, can export from, including natural resources, human resources, manufacturing capabilities (leading to industry specialization), geographical advantages and intellectual property. After which Cader looked within each of these five areas to identify the specific opportunities, given the limitations and barriers currently faced.

A few of these suggestions included: higher research and development (R&D) spending and infrastructure investment in niche high value-added agricultural products such as spices, essential oils, tea extracts, etc.; radical improvements and reforms in the educational supply chain in Sri Lanka to develop and improve human resource-based exports such as knowledge process outsourcing (KPO) and professional services; and the geographical advantage Sri Lanka has in being a regional hub as a gateway to India, etc.

Addressing the question of ‘How?’, Cader identified two distinct approaches, namely ‘short-term’ approach (0-three years) and ‘long-term’ approach (three+ years). He also mentioned that the best strategy would be to pick your 80:20, as in the 20 percent of exports that generate 80 percent of the revenue and focus on developing them. This would mean that in the short term, we must focus on the exports that are main earners, stable contributors and aspiring contenders. However, under the long-term approach the focus should be on exports that are ‘potential future stars’ and therefore, have a game-changer focus and evaluate the strategic alternatives available.

Finally, he concluded that if Sri Lanka is to be successful in our exports, our current ‘Ohoma Yan’ approach needs to change and be replaced with a more suitable approach where we align our capabilities to suit what the world needs.

Quoting Albert Einstein’s definition of insanity— “Doing the same thing over and over again and expecting different results”— Cader highlighted the importance in the need for such change.

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Face reality, think radical or exports will stagnate: MTI

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