Sri Lanka needs manufactured exports and innovation

By

Lloyd

F.

Yapa
The contribution of manufactured exports in 2013 was
disappointing, declining to 20 per cent of total exports from 24 per cent in
2005 (EDB figures). A notable feature of manufactured exports was that
only finished rubber products contributed about 8 per cent to total exports
in 2013 and had grown only at about 4 per cent in 2013; each one of the
others in the sector contributed less than 3 per cent of total exports.
Commodity exports vs. manufactured exports
Sri Lanka still depends on the primary agricultural sector, the
contribution of which was 22 per cent of total exports in 2013. The other
large export sector was textile and apparel which contributed about 41
per cent of total exports. These two sectors grew at 10 per cent and 13
per cent, respectively and contributed to 6 per cent expansion of total
exports in 2013. Output per person vis-a-vis inputs in agriculture by
absorbing the excess (subsistence type of) employment in that sector (30
per cent of total employment too high relative to Malaysias 13 per cent
for instance) with better paid jobs especially for the youth who are not
willing to engage in traditional farming. Improving productivity in this
manner could contribute to economic growth and for raising income
levels.
The most important reason for emphasizing on manufactured
exports is its direct relationship with faster economic growth, The
relationship between rapid non-resource based manufactured export
growth and GDP growth is highly statistically significant (Economic
Growth in Asia, Jeffrey Sachs and others, Harvard Institute for International
Development-HIID-,1997). These writers also attribute this to the fact that
the close links with multinationals in respect of the provision of capital
goods, technology and access to export markets, in the case of electronics
for instance, promote technological progress.
Develop manufactured exports
Sri Lanka must looks to ways and means of developing
manufactured exports. They can in this process gain strength to undertake

innovation to differentiate products and services to earn higher returns by

catering to the unique needs of global customers.
Other ways
Some countries could go further in manufacturing for export and
innovation by attracting investors especially (reputed) Foreign Direct
Investors as the latter possess not only the technologies but also the
management skills and access to global markets as well as the capital,
that local investors find it difficult to command. Perhaps in addition extend
some support like the necessary laboratory services or incentives to the
firms like that presently available, deduction of taxes on profits, treble
deduction of R&D expenditure, etc.
Without unduly emphasizing on investment in R&D, still another way of
acquiring technologies is importing technically advanced machinery and
equipment.
These clarifications could clear the air with regard to the need for
manufactured exports and ways and means of innovation.