Sri Lanka’s exports - out of sync with global demand

A frequently cited reason for Sri Lanka’s weak export performance is the heavy concentration of its export earnings in a few products and a few markets. Hence diversifying the product and market portfolio has emerged as a key solution to the problem. This paper investigates the merit of this diagnosis and the proposed solution by analysing the concentration of products and markets of the Asian countries that are among the top 25 exporters in the world and that account for nearly 20% of world’s exports. The analysis finds that these countries demonstrate significantly high levels of concentration in a few markets and a few products in a manner similar to Sri Lanka. However, unlike in the case of Sri Lanka, the products and markets of the selected Asian countries demonstrate strong alignment with the trends in world market demand. Sri Lanka’s markets and products show significant deviation from global demand, and the data reveals this to be more pronounced in products than in markets. The findings infer that, contrary to the popular belief, concentration is not necessarily a hindrance to export success. It can even be considered a strength and not a weakness if its alignment with the emerging global demand patterns is robust. The insights drawn from the analysis highlight the limitations of the current approach to fixing the export problem of Sri Lanka and the importance of revisiting strategies proposed to fix the problem.