By Krishmal Fernando –
Ancient history articulates self-sufficient economies or autarkies. But in the world we live now, ‘International Business’ has become an essential part of the day to day lives. Cross-border transactions of goods, services, technology, capital, and knowledge now have become essential for an economy to function smoothly and advance further. This ultimately results in substantial interdependencies among economies. This being more notable when economies comprise more international businesses. Thus even a minor incident in one economy can quickly convert to a global crisis.
During the past two decades, Sri Lanka’s uncompetitive trade position had continuously resulted in negative trade balances. Sri Lankan economy was negatively affected as its two main export destinations, the European Union and the USA had a severe outbreak of COVID-19 during the first wave. Swift measures enacted by the SL government helped the nation to control the first wave of COVID-19. However, these measures had a particularly negative effect on tourism, manufacturing, and transportation, while collapsing global demand had a negative impact on the textile industry. World Bank reported a 3.6 percent contraction in the Sri Lankan economy in 2020. According to CBSL, Sri Lanka recorded a trade deficit of 840.30 USD Million in April of 2020 which is closer to the highest trade deficit record low of -1100.70 USD Million in November of 2011. During the past few months, Sri Lanka was able to successfully narrow down the record-breaking trade deficits due to a larger decline in imports compared to the decline in exports. On a cumulative basis, the trade deficit of US$ 7.997 billion in 2019 had decreased to US$ 5.978 billion in 2020.
After the ‘Third Wave’ and the outbreak of Delta variant, will there be a ‘Fourth Wave’?, How long can Sri Lanka maintain the current import barriers? What are the strategies of Sri Lanka to face pressure from global trade? How effectively can Sri Lanka boost its exports and tourism? Most importantly, how can Sri Lankan healthcare professionals maintain their renowned control over the COVID-19 spread? As a nation, these are few challenges we should overcome strategically.
In order to overcome this vital and challenging period, first and foremost the Sri Lankan healthcare professionals collaboratively with the general public should adhere to the health guidelines which are necessary to flatten the curve. If the pandemic goes out of control, Sri Lanka will have to experience the tragic stage which India struggles to overcome at present. Secondly, Sri Lankan policymakers should design policies to acquire a competitive advantage rather than the natural advantage in the export and tourism industries. The nations who achieve high economic growth, have adopted different approaches and strategized their trade policies according to the environmental reforms. Thirdly, Sri Lanka should create a sound internal cushion in order to face the external shocks and to reduce the vulnerability. Minimizing the degree of dependency by strengthening the local production and demand would divert the Sri Lankan economy from dependency to interdependency in international trade to a greater extent. Furthermore, to maintain the import barriers Sri Lankan policymakers need to come up with creative strategies to promote import substitution while carefully reading and critically analyzing the current import structure. The fate of the Sri Lankan economy will be determined by the aforesaid questions and the solutions.
*Krishmal Fernando – Assistant Lecturer, Department of International Business – Faculty of Management and Finance – University of Colombo