Solving the dilemma of export diversification

Abstract

Sri Lanka’s exports are flagging in two ways: first, the exports to GDP ratio is on the decline; second, Sri Lanka’s share in world exports is on the decline. The second is important in understanding the problem: it tells us that the difficulties cannot simply be blamed on a general reduction in global trade. This Insight demonstrates that the problem for Sri Lankan exports is with the products Sri Lanka is able to supply, not the markets. The market concentration is a result of product concentration. The solution lies in a strategic focus to expand products, and not on expanding markets. Therefore, international engagements aimed at helping the handful of existing exportable products to diversify into more markets is not a strategy for success. What is required is grass roots domestic strategies that enables Sri Lankan producers to succeed in export product diversification.