MARKET STRATEGIES FOR ASIAN REGION

MARKET STRATEGIES FOR ASIAN REGION Prepared By: Market Development Division Sri Lanka Export Development Board June 2017

CONTENT Page No. 1. Introduction 03 2. Major Trading Partners. 05 3. Trade Opportunities. 11 4. Benchmarking Export Promotion Strategies.. 23 5. Constraints to Exporting 26 6. Conclusions and Policy Recommendations 26 7. Annexes 30 8. References.. 32 MARKET STRATEGIES FOR ASIAN REGION 2

1. INTRODUCTION 1.1 Overview of Asia The Economy of Asia comprises more than 4.4 billion people (60% of the world population) living in 49 different states. Asia is the fastest growing economic region and the largest continental economy by GDP, PPP in the world. China and India are currently the first and third largest economies in the world, respectively. Asian Economy can be describing as follows; Population 4.2 billion (60% of the world) GDP Nominal: US$25 trillion (2016) PPP: US$24.077 trillion (2010) GDP growth Per capita: 7.9% (2010) GDP per capita Nominal: US$4,629 (2009) PPP: US$7,041 (2009) Source: International Monetary Fund (IMF) The largest economies in Asia in terms of PPP gross domestic product (GDP) are China, India, Japan, South Korea, Indonesia, Taiwan, Thailand, Pakistan, Malaysia and Philippines and in terms of nominal gross domestic product (GDP) are China, Japan, India, South Korea, Indonesia, Philippines, Taiwan, Thailand, Malaysia, Bangladesh and Singapore. According to the IMF, Asia's economies may have been dragged by a slowdown in China, but they will still power most of the world's growth. Moreover, the IMF is forecasting India will remain the world's fastest-growing large economy, set to grow 7.5 per cent this 2017 and next as it benefits from lower oil prices. Last year, India's economy grew 7.3 per cent. It expects Vietnam will be among the region's fastest growing economies, while domestic demand will remain resilient in the Philippines and Malaysia. The IMF forecasts Vietnam's economy will grow 6.3 present in year 2017, down from 6.7 per cent in last year (2016). It expects Malaysia's growth will slow to 4.4 per cent this year from 5.0 per cent in last year and it forecasts the Philippines' economy will expand 6.0 per cent in year 2017, up from 5.8 per cent last year. MARKET STRATEGIES FOR ASIAN REGION 3

Value (US $ Mn.) Asia is the third largest market region for the Sri Lanka s exports. With this enormous development in Asian economy, there is a potential to expand Sri Lankan exports to the Asian region. Figure 1 Sri Lanka s Exports to the World (by regions) 2012-2016 4,000 Sri Lanka's Exports to the World (2012-2016) 3,500 3,000 2,500 2,000 1,500 1,000 500 0 2012 2013 2014 2015 2016 Year EU USA Asia Africa CIS LA Source: Information Technology Division /Sri Lanka Export Development Board Figure 1 shows Exports from Sri Lanka to the World by regions from year 2012 to 2016. Exports to the European Union (EU) and United States of America (USA) are the highest contributors to the total export revenue in Sri Lanka. Exports to the Asian region show rapid growth from year 2013 to mid- 2014 and thereafter decreasing trend over the years. Table -1: Sri Lanka s Total Exports to the Asia (by sub-region) Description 2012 2013 2014 2015 2016 Value - US$ '000 Total Exports to the World 9,259,638 9,993,176 11,044,145 10,226,217 10,219,898 ASEAN & other Asian 943,091 888,793 1,074,387 1,022,802 1,006,423 Countries South Asia 764,165 772,990 880,971 891,811 824,040 Total Exports to Asia 1,707,256 1,661,783 1,955,358 1,914,613 1,830,463 Source: Information Technology Division /Sri Lanka Export Development Board MARKET STRATEGIES FOR ASIAN REGION 4

Table 1 shows Sri Lanka s Export to the Asia by region. 45% of Asian exports go to the south Asian countries (India, Bangladesh, Pakistan Maldives, Nepal and Afghanistan) while rest (55%) is going to ASEAN (Association of South East Asian Nations) and other countries in Asian region. 2. MAJOR TRADING PARTNERS Table -2: Sri Lanka s Trade with Asian Countries in 2016 Country (Value - US$ '000) Exports Imports Balance of Trade India 551,132 3,826,384 (3,275,252) Japan 200,195 951,101 (750,906) China 199,007 4,270,204 (4,071,197) Hong Kong 152,451 466,185 (313,734) Bangladesh 112,303 29,384 82,919 Singapore 108,171 1,030,687 (922,516) Maldives 95,165 85,822 9,343 Viet Nam 94,644 269,823 (175,179) Korea South 68,830 324,925 (256,095) Pakistan 63,794 304,309 (240,515) Indonesia 39,223 379,282 (340,059) Taiwan, Province of China 38,546 496,106 (457,560) Malaysia 35,868 641,546 (605,678) Thailand 35,342 514,574 (479,232) Philippines 14,780 26,635 (11,855) Cambodia 5,897 9,719 (3,822) Korea North 3,530 9,719 (6,189) Lao PDR 2,148 7,566 (5,418) Other 9,437 35,097 Total 1,830,463 13,679,068 Source: Information Technology Division /Sri Lanka Export Development Board MARKET STRATEGIES FOR ASIAN REGION 5

Value (US $ '000) Figure -2: Sri Lanka s Exports to Asian Countries (2012-2016) 700 Sri Lanka s Export to the Asia (2012-2016) 600 500 400 300 200 100 0 2012 2013 2014 2015 2016 Source: Information Technology Division /Sri Lanka Export Development Board Figure 2 shows top 10 countries in Asian region for Sri Lanka s export. India, Japan and China are the main three importers of Sri Lankan products followed by Hong Kong, Bangladesh, Singapore, and Maldives etc. Sri Lanka s Main Export Products to Asian Markets Table -3: Sri Lanka s main export products to Asian markets (2012 2016) 2012 2013 2014 2015 2016 Code Description Value - US$ '000 ASEAN & other Asian 943,091 888,793 1,074,387 1,022,802 1,006,423 Countries S.0702 Apparel 113,538 153,688 186,247 195,854 210,489 S.0810 Footwear 1,658 9,539 62,986 59,275 83,497 S.0103 Tea in Bulk 65,503 75,845 87,238 90,452 83,207 S.0602 Gems 30,544 46,765 62,746 28,154 44,472 S.080103 Processed Food 9,319 10,339 10,820 8,604 42,169 S.0101 Tea Packets 35,134 32,884 33,316 31,884 36,709 S.030205 Coco Peat & Fiber Pith 19,114 23,118 21,774 21,986 27,939 S.080502 Pneumatic & Retreated Rubber Tyres & Tubes 22,926 29,035 32,364 25,454 26,742 MARKET STRATEGIES FOR ASIAN REGION 6

S.08090301 Boat Building 26,897 27,312 53,639 118,599 25,498 S.08090199 Other Electrical & 14,112 15,178 20,508 19,086 24,906 Electronic Products S.080104 Rice & Cereals 91,412 32,459 38,886 25,267 22,266 S.030301 Activated Carbon 13,985 13,051 19,861 19,163 21,758 S.09 Petroleum Products 5,242 1,257 18,514 20,152 21,551 S.0701 Woven Fabrics 13,355 10,414 14,141 13,423 16,400 S.95 Products Unclassified 67,380 3,710 28,255 9,430 13,750 Others 412,972 404,201 383,092 336,018 305,071 South Asia 764,165 772,990 880,971 891,811 824,040 S.0701 Woven Fabrics 53,758 67,319 68,446 78,772 75,042 S.080107 Animal Feed 62,438 49,601 47,232 59,419 50,476 S.040101 Pepper 41,852 61,174 52,539 93,775 48,081 S.0702 Apparel 41,171 36,350 36,665 31,887 36,266 S.08090301 Boat Building 26,353 52,917 29,489 57,877 34,533 S.040606 Areca Nuts 3,620 16,591 64,370 69,845 34,033 S.080401 Waste & Scrap of Paper 24,022 26,200 32,729 31,613 31,538 /Paper Boards S.09 Petroleum Products 15,989 11,361 72,951 20,337 30,091 S.08090107 Insulated Wires and 42,294 39,656 32,981 27,963 28,392 Cables S.08090199 Other Electrical & 11,826 10,555 24,637 15,291 27,263 Electronic Products S.080301 Furniture & Seats 12,496 15,137 15,326 15,306 23,638 S.080899 Other Products of Base 6,847 11,416 10,492 11,232 20,571 Metal S.08070201 Worked Monumental 16,554 16,358 17,708 16,182 16,884 Stones S.030102 Desiccated Coconut 4,616 9,843 12,695 8,885 15,114 Others 398,819 342,957 354,532 340,422 338,111 Total : 1,707,256 1,661,783 1,955,358 1,914,613 1,830,463 Source: Information Technology Division /Sri Lanka Export Development Board MARKET STRATEGIES FOR ASIAN REGION 7

Table 2 shows Sri Lanka s main export products to Asian markets from year 2012 to 2016 at 6 digit level. Almost all products show increasing trend in export value compare to previous years. Footwear exports show rapid growth in 2016, and main importers of footwear are Viet Nam (USD 62 Mn.) and China (USD 18 Mn.) It is due the performance of market development and product diversification strategies implemented over the years. Sri Lanka s Main Imports from Asian Markets Table -4: Sri Lanka s Main Import Products from Asian Markets (2015-2017 Jan.) 2015 2016 2017 (January) Code Description Value (US$ 000) South Asia 4,639,704 4,246,157 431,507 S.0809 Electrical & Electronic Products, Parts & 1,212,141 988,641 85,116 Machinery S.95 Products Unclassified 16,561 18,834 57,488 S.0806 Chemicals & Plastic Products 595,347 603,310 53,415 S.0701 Woven Fabrics 408,649 483,362 46,644 S.09 Petroleum Products 580,541 442,439 42,941 S.0807 Non - Metallic Mineral Products 410,959 486,283 28,820 S.0801 Food, Feed, Beverages & Tobacco 349,957 180,344 27,274 S.0808 Base Metal Products 261,140 235,563 23,052 S.0402 Vegetables 230,378 196,835 15,685 S.0702 Apparel 143,871 134,160 10,915 S.0799 Other Textile Articles nes 99,916 103,991 8,741 S.0804 Paper & Paper Products 109,982 115,071 7,555 S.0811 Other Manufactures 23,391 33,406 3,962 S.0805 Rubber Finished Products 34,314 29,734 3,900 S.0501 Edible Fish Products 35,472 43,546 3,410 S.0406 Other of Other Export Crops nes 28,143 35,497 2,693 S.0403 Fruits 5,802 8,246 1,647 S.0703 Made-Up Textile Articles 18,053 23,403 1,566 S.0201 Natural Rubber 15,850 12,638 1,371 S.0810 Footwear 12,749 16,798 1,054 MARKET STRATEGIES FOR ASIAN REGION 8

Others 46,485 54,057 4,258 ASEAN Countries 2,661,087 2,908,985 251,662 S.09 Petroleum Products 662,918 772,670 80,197 S.0809 Electrical & Electronic Products, Parts & 396,519 465,644 32,165 Machinery S.0806 Chemicals & Plastic Products 343,055 347,102 24,110 S.0602 Gems 2,940 93,251 18,699 S.0807 Non - Metallic Mineral Products 140,386 134,926 14,629 S.0701 Woven Fabrics 160,364 156,200 11,583 S.0801 Food, Feed, Beverages & Tobacco 178,853 174,927 11,164 S.95 Products Unclassified 119,557 93,043 10,693 S.0803 Wooden Products 60,977 73,877 7,290 S.0201 Natural Rubber 86,148 107,727 6,577 S.0808 Base Metal Products 91,387 99,142 6,050 S.0804 Paper & Paper Products 97,876 90,629 5,608 S.0501 Edible Fish Products 56,636 62,831 5,013 S.0811 Other Manufactures 36,199 43,509 4,149 S.0406 Other of Other Export Crops nes 91,684 79,047 3,569 S.0702 Apparel 49,984 46,227 3,499 S.0799 Other Textile Articles nes 23,452 14,479 2,784 S.0805 Rubber Finished Products 23,555 23,021 2,236 S.0401 Spices 144 5,649 561 S.0810 Footwear 3,173 2,721 306 Others 35,280 22,363 781 Source: Information Technology Division /Sri Lanka Export Development Board Sri Lanka s Exports to the Asian Region (Country-Wise) Table -5: Sri Lanka s Exports to the Asian Region (Country-Wise) (2012-2016) Country 2012 2013 2014 2015 2016 Value US $ Thousands India 570,049 543,860 624,649 644,774 551,132 Japan 215,737 223,816 235,973 214,320 200,195 China 107,685 121,384 173,466 295,777 199,007 MARKET STRATEGIES FOR ASIAN REGION 9

Hong Kong 105,000 131,774 139,779 118,028 152,451 Bangladesh 56,499 82,129 90,155 92,697 112,303 Singapore 183,922 99,417 140,132 78,054 108,171 Maldives 52,384 58,801 87,993 77,118 95,165 Viet Nam 20,659 42,750 78,829 73,034 94,644 Korea South (Korea, Republic of) 44,048 78,355 72,830 64,075 68,830 Pakistan 82,736 83,123 74,223 73,059 63,794 Indonesia 87,444 35,429 42,216 32,932 39,223 Taiwan, Province of China 25,031 31,275 39,262 44,199 38,546 Malaysia 67,845 44,823 42,426 35,326 35,868 Thailand 66,163 56,614 54,390 33,367 35,342 Philippines 8,070 8,333 34,530 17,509 14,780 Cambodia 3,768 5,315 7,760 7,082 5,897 Korea North (Korea, Democratic 1,310 274 848 1,353 3,530 People's Republic of) Fiji 3,028 3,634 3,078 3,144 3,349 Lao People's Democratic 87 88 23 4 2,148 Republic Myanmar 591 1,197 5,239 1,660 1,188 Mongolia 1,227 991 1,293 983 1,084 Papua New Guinea 785 2,489 1,464 993 1,043 Nepal 1,120 4,932 3,797 3,662 976 Afghanistan 1,377 124 137 486 627 Macau 480 481 665 678 549 Others 210 375 201 301 621 Total : 1,707,256 1,661,783 1,955,358 1,914,613 1,830,463 Source: Information Technology Division /Sri Lanka Export Development Board MARKET STRATEGIES FOR ASIAN REGION 10

3. TRADE OPPORTUNITIES INDIA India is Sri Lanka s largest trading partner globally, while Sri Lanka is India s second largest trading partner in the SAARC. It is the number one source of supplies accounting for twenty per cent of Sri Lanka s total imports and third largest export destination for Sri Lankan products absorbing six per cent of total exports. Among tourists, Indian visitors make the largest single group having a share of twenty-seven percent of total arrivals. In the investment field, India is among the top five foreign investors in Sri Lanka. Trade between Sri Lanka and India has grown rapidly after the entry into force of the Indo-Sri Lanka Free Trade Agreement in March 2000. Sri Lanka s exports growth has largely been under the ISFTA, whereas India s exports have remained mostly outside the ISFTA. In average, over 70% of Sri Lanka s exports to India continue to be under the ISFTA, while India s exports to Sri Lanka under the ISFTA remains only around 25%. Sri Lanka could export more than 4000 product lines to the Indian market on duty free basis. The noteworthy aspect of the growth of exports under the agreement is the broader product diversification, which took place following the FTA. Major exports from Sri Lanka under the ISFTA includes; apparel, furniture, MDF boards, glass bottles, processed meat products, poultry feed, insulated wires etc. Figure 3: Sri Lanka s Export to India -2016 Source: Sri Lanka Customs MARKET STRATEGIES FOR ASIAN REGION 11

Figure 4: Sri Lanka s Import From India -2016 Sources: Sri Lanka Customs Potential Products to Be Exported from Sri Lanka to India (US$ 000) Product Sri Lanka's exports to India India's imports from world Sri Lanka's exports to world Trade Potential Conveyor, transmission belts and belting, rubber 6295 521362 157439 151144 Petroleum oils, oils from bituminous minerals, crude 15234 3685786 158206 142972 Coconuts, Brazil nuts and cashew nut 2 1209483 124229 124227 Women s, girls anoraks etc. of material, not knit 2787 119866 348158 117079 Pearls cultured worked, not mounted or set 199 18970741 104141 103942 Ice cream and other edible ice 1592 97524 155153 95932 MARKET STRATEGIES FOR ASIAN REGION 12

Clothing and accessories except gloves, of rubber 529 494998 88349 87820 Diamonds (jewellery) worked but not mounted or set 2942 2052368 89004 86062 Coconut "copra" 1 81929 93982 81928 Footwear 15 76205 84945 76190 Men s, boys trousers & shorts, material, not knit 5010 63799 462483 58789 Rubber hygienic, pharmacy items except contraceptives 9234 61771 176086 52537 Graphite based products 481 52576 74943 52095 Women s, girls trousers, shorts, material, not knit 1299 52986 207456 51687 Womens, girls bathrobe, dressing gowns, knit 2467 51103 451604 48636 Bilateral & Multilateral Trade Agreements Which India Entered With Sri Lanka and Other Countries: Indo- Sri Lanka Free Trade Agreement (ISFTA) Agreement on South Asia Free Trade Area SAFTA SAARC Preferential Trading Arrangement (SAPTA) Agreement on Economic Cooperation between India and Finland Agreement on SAARC Preferential Trading Arrangement SAPTA Asia Pacific Trade Agreement APTA JAPAN Japan is the 5 th largest importer and the 4 th largest exporter in the world. Like many other Asian countries that have experienced rapid economic growth in the past few decades, exports have had a historical significance to the Japanese economy. The belief in the need to promote exports is part of Japan's self-image as a "processing nation." Japan imports raw materials and pays for them by processing the raw materials, thus adding value to them before exporting the output. In recent years, Japan has been the top export market for 15 trading nations worldwide. MARKET STRATEGIES FOR ASIAN REGION 13

Japan is Sri Lanka s 5 th largest source of imports, and Japan s 10 th largest export destination. Sri Lanka s exports to Japan in 2016 were US$ 200Mn. Sri Lanka s imports from Japan are dominated by vehicles, machinery, electronic goods and audio/camera equipment; while Sri Lanka s exports to Japan are dominated by apparel, Tea (bulk & packets) Coco peat & Fiber pith, Prawns, insulated wires & cables, Rubber Tyres & Tubes and Tableware & Kitchenware etc. Figure -6: Sri Lanka s Export to Japan -2016 Source: Sri Lanka Customs Figure -7: Sri Lanka s Import From Japan -2016 Source: Sri Lanka Customs MARKET STRATEGIES FOR ASIAN REGION 14

Potential Products to be exported from Sri Lanka to Japan Products Men s, boys bathrobes, dressing gown etc. fibre, Sri Lanka's exports to Japan Japan's imports from world (US$ 000) Sri Lanka's exports to world Trade Potential knit 4286 608154 606961 602675 Women s, girls garments, material, not knit 1401 852909 566529 565128 Men s, boys trousers & shorts, of material, knit 1249 1390874 480679 479430 Men s, boys trousers & shorts, material, not knit 7808 3289522 462483 454675 Women s, girls bathrobe, dressing gowns, knit 4037 2132501 451604 447567 Women s, girls anoraks etc. of material, not knit 8238 2549393 348158 339920 Hosiery of materials, knit 577 381000 258262 257685 Pullovers, cardigans etc. of material knit 249 245322 208725 208476 Women s, girls trousers, shorts, material, not knit 5506 963651 207456 201950 T-shirts, singlets etc., of material, knit 1422 4323528 198267 196845 Bilateral & Multilateral Trade Agreements which Japan Entered with Other Countries: ASEAN Japan Comprehensive Economic Partnership (AJC Japan-Australia Economic Partnership Agreement Japan-Brunei Free Trade Agreement Japan-Chile Economic Partnership Agreement Japan-India Comprehensive Economic Partnership Agreement CHINA China is Sri Lanka s 3 rd largest importer in Asian Region. Trade between Sri Lanka and china found 297 products with high trade potential to china. These products are currently not exported by Sri Lanka, but are imported by China from the elsewhere in the world presenting new market opportunities to Sri Lanka. Hence, the sooner the proposed FTA with China will provide better opportunities to Sri Lankan Exporters. There are many famous trade fairs/ exhibitions which can Sri Lankan exporters to get export opportunities. Some of them are China International Fashion Fair, Pure Shanghai, Fashion MARKET STRATEGIES FOR ASIAN REGION 15

Guangzhou (Shoe and leather goods, Apparel and Fashion & Lifestyle accessories trade fair), On-time Show, Mode Shanghai etc. China s Emerging trend in Chinese market is e-commerce. In 2014 e- commerce contribution to growth of Chinese GDP is 19.4%.It has forecasted that China e-commerce market will reach 13.91 Trillion of Yuan. In order to succeed in Chinese market, It is needed to fully committed to the market and pursue innovate marketing tactics with brands. Also, they must control and manage their marketing program and pursue more involved forms of market entry. Figure -8: Sri Lanka s Exports to China -2016 Source: Sri Lanka Customs Figure -9: Sri Lanka s Import from China -2016 Source: Sri Lanka Customs MARKET STRATEGIES FOR ASIAN REGION 16

Potential Products to be exported from Sri Lanka to China Products Sri Lanka's exports to China (US$ 000) China's imports from world Sri Lanka's exports to world Potential Products Men s, boys trousers & shorts, material, not knit 5367 853736 462483 457116 Women s, girls bathrobe, dressing gowns, knit 15133 588887 451604 436471 Women s, girls anoraks etc. of material, not knit 5491 787270 348158 342667 Men s, boys trousers & shorts, of material, knit 4360 344959 480679 340599 Women s, girls trousers, shorts, material, not knit 1988 225660 207456 205468 T-shirts, singlets etc., of material, knit 802 614427 198267 197465 Conveyor, transmission belts and belting, rubber 848 706033 157439 156591 Petroleum oils, oils from bituminous minerals, crude 3398 11129884 158206 154808 Ice cream and other edible ice 3406 1489854 155153 151747 Rubber hygienic, pharmacy items except contraceptives 607 143229 176086 142622 Bilateral & Multilateral Trade Agreements which China Entered with Other Countries: ASEAN-People's Republic of China Comprehensive Economic Cooperation Agreement Asia-Pacific Trade Agreement New Zealand-People's Republic of China Free Trade Agreement People's Republic of China-Australia Free Trade Agreement HONG KONG Hong kong is the 16 th export destination for Sri Lanka. Total export value from Sri Lanka to Hong kong was US$ 156 Mn in 2016 and total imports from Hong Kong to Sri Lanka for the same period were US$ 465 Mn. Sri Lanka s exports have increased from US$ 131 Mn to US$ 156 Mn with reference to the 2013 & 2016. Sri Lanka s main export products to Hong Kong 2016 were Precious stones, Food preparations, Tea,, T-shirts, Electrical transformers, Men's suits, Crustaceans.The main import products from Hong Kong were Knit or crochet fabric, Narrow woven fabrics, Tulles and other net fabrics, Telephones, Brassieres and parts thereof, not knit, Paper and paperboard labels. MARKET STRATEGIES FOR ASIAN REGION 17

Figure -10: Sri Lanka s Export to Hong Kong -2016 Source: Sri Lanka Customs Figure -11: Sri Lanka s Import from Hong Kong -2016 Source: Sri Lanka Custom MARKET STRATEGIES FOR ASIAN REGION 18

Potential Products to be Exported from Sri Lanka to Hong Kong (US$ 000) Products Sri Lanka's exports to Hong Kong, China Hong Kong, China's imports from world Sri Lanka's exports to world Potential Products Women s, girls garments, material, not knit 3260 915907 566529 563269 Men s, boys trousers & shorts, of material, knit 1538 832473 480679 479141 Men s, boys trousers & shorts, material not knit 2444 2071250 462483 460039 Women s, girls bathrobe, dressing gowns, knit 5241 953183 451604 446363 Men s, boys bathrobes, dressing gown etc. fibre knit 1818 378094 606961 376276 Women s, girls anoraks etc. of material, not knit 4056 998487 348158 344102 Women s, girls trousers, shorts, material not knit 2274 493226 207456 205182 T-shirts, singlets etc., of material, knit 347 2659035 198267 197920 Pullovers, cardigans etc. of material knit 1335 162678 208725 161343 Bilateral & Multilateral Trade Agreements which Entered with Other Countries: Mainland and Hong Kong Closer Economic Partnership Arrangement (CEPA) Hong Kong, China - New Zealand Closer Economic Partnership Agreement FTA between Hong Kong, China and EFTA Member States BANGLADESH Bangladesh is the 19 th export destination for Sri Lanka. Total export value from Sri Lanka to Bangladesh was US$ 118 Mn in 2016 and total imports from Hong Kong to Sri Lanka for the same period were US$ 29 Mn. Sri Lanka s exports have increased from US$ 82 Mn to US$ 118 Mn with reference to the 2013 & 2016. Sri Lanka s main export products to Bangladesh 2016 were Woven fabrics of cotton, Knit or crochet fabric, Plastic parts for office supplies, Cleaning products, Petroleum oils, refined, Enzymes, Artificial MARKET STRATEGIES FOR ASIAN REGION 19

staple fibers. The main import products from Bangladesh were Medicaments, Flat rolled iron or nonalloy steel, Yarn of jute or other textile bast fibers, Electric storage batteries, Plastic parts for office supplies, Parts and accessories of motorcycles, Pepper. Figure -12: Sri Lanka s Export to Bangladesh -2016 Source: Sri Lanka Customs Source: Sri Lanka Customs Figure -13: Sri Lanka s Import from Bangladesh -2016 Source: Sri Lanka Customs MARKET STRATEGIES FOR ASIAN REGION 20

Potential Products to be exported from Sri Lanka to Bangladesh (US$ 000) Products Petroleum oils, oils from bituminous minerals, Sri Lanka's exports to Bangladesh Bangladesh' s imports from world Sri Lanka's exports to world Potential Products crude 5687 1785292 158206 152519 Conveyor, transmission belts and belting, rubber 753 146564 157439 145811 Parts and accessories for the musical instruments 0 97744 97744 Footwear, 0 95394 84945 84945 Women s, girls garments, material, not knit 0 68995 566529 68995 Men s, boys trousers & shorts, material, not knit 0 68816 462483 68816 Flight simulators, parts thereof 0 56648 53574 53574 Parts of electrical machines and apparatus 758 197591 53943 53185 Construction equipment, not self-propelled 0 69242 52061 52061 Ice cream and other edible ice 99 44819 155153 44720 Bilateral & Multilateral Trade Agreements which Bangladesh Entered with Other Countries: Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation (BIMSTEC) Free Trade Area Pakistan-Bangladesh Free Trade Agreement Asia-Pacific Trade Agreement South Asian Free Trade Area SINGAPORE Singapore is the 20 th export destination for Sri Lanka. Total export value from Sri Lanka to Bangladesh was US$ 115 Mn in 2016 and total imports from Singapore to Sri Lanka for the same period were US$ 1,030 Mn. Sri Lanka s exports have increased from US$ 100 Mn to US$ 115 Mn with reference to the 2013 & 2016. Sri Lanka s main export products to Sibgapore 2016 were Cruise ships, similar vessels, Petroleum oils-refined, Tea, Quartz, Precious stones, Jewelry of precious metal. The main import products from MARKET STRATEGIES FOR ASIAN REGION 21

Singapore were Gold, Automatic data processing machines, Organo-sulfur compounds, Semifinished products of iron or nonalloy steel, Sewing machines, Malt extract. Figure -14: Sri Lanka s Export to Singapore -2016 Source: Sri Lanka Customs Figure -15: Sri Lanka s Import from Singapore -2016 Source: Sri Lanka Customs MARKET STRATEGIES FOR ASIAN REGION 22

Potential Products to be exported from Sri Lanka to Singapore (US$ 000) Products Sri Lanka's exports to Singapore Singapore's imports from world Sri Lanka's exports to world Trade Potential Women s, girls bathrobe, dressing gowns, knit 1168 254409 451604 253241 Men s, boys trousers & shorts, material not knit 1471 229827 462483 228356 T-shirts, singlets etc., of material, knit 484 206756 198267 197783 Conveyor, transmission belts and belting, rubber 2126 238749 157439 155313 Ice cream and other edible ice 642 406247 155153 154511 Women s, girls anoraks etc. of material, not knit 218 142616 348158 142398 Men s, boys trousers & shorts, of material, knit 1047 142288 480679 141241 Petroleum oils, oils from bituminous minerals, crude 18243 33090183 158206 139963 Pearls cultured worked, not mounted or set 0 1731840 104141 104141 Parts and accessories for the musical instruments 0 97744 97744 Bilateral & Multilateral Trade Agreements which Singapore Entered with Other Countries: China-Singapore Free Trade Agreement (CSFTA) India-Singapore Comprehensive Economic Cooperation Agreement (CECA) ASEAN-Australia-New Zealand Free Trade Area (AANZFTA) ASEAN-India Free Trade Area (AIFTA) 7. BENCHMARKING EXPORT PROMOTION STRATEGIES Competing in international markets requires exporters to have sufficient resources to gather the knowledge, skills and expertise to market and distribute their product in foreign markets. Moreover, the transactional costs associated with expanding the distribution and marketing value chain to foreign markets can deter potential companies from exporting. Together, these barriers can make exporting a high risk activity for businesses, for small to medium size companies. MARKET STRATEGIES FOR ASIAN REGION 23

To overcome these problems, governments around the world assist domestic companies through a myriad of export promotion initiatives. Indeed, until export subsidies were prohibited by the WTO, governments also provided generous financial assistance to support the production process of their export orientated industries. Export promotion strategies generally comprise of a number of elements. These include: Educational components targeted at training exporters or potential exporters around trading in global markets. Information and research services aimed at providing exporters with information, research and sometimes leads on export markers. Trade missions and related instruments - focused on providing an entry point as well as exposure for exporters in international markets. Financial assistance schemes targeted at assisting exporters with marketing their products in foreign countries. This section reviews the export promotion strategies adopted by the comparator countries and examines how they are structured. In particular, the review seeks to understand whether the competitive countries have successfully implemented export promotion activities at their markets. Whereas information from some countries, like Australia and Malaysia and Thailand; is widely available, others are less transparent. 1. Australia The Australian trade promotion strategy is based on two key principles: Disseminating accurate information in an easily accessible manner to exporters. Using appropriate export promotion tools to support business in exporting products and services. Austrade is Australia s primary trade promotion agency and is funded by the federal government. It offers a comprehensive basket of services and products for exporters. Though it s TradeStart Programme, Austrade offers assistance to small and medium size businesses to enter export markets and or to convert from irregular exporters into regular and sustainable exporting firms. The TradeStart Programme places considerable emphasis on educating firms on matters relevant to import and export. Austrade also uses its website extensively as a tool for disseminating information. From the website, potential and current exporters are able to easily access (free of charge): Information on getting ready to export. Information on networking events and matching opportunities. Research on export markets. Industry analysis and market intelligence. MARKET STRATEGIES FOR ASIAN REGION 24

Trade related publications. Registration on the Australian suppliers directory. 2. Malaysia Malaysia s External Trade Development Corporation (MATRADE) is the official export promotion agency of the Malaysian government. As an export orientated economy, Malaysia offers an extensive menu of trade promotion services, including: Trade information services such as trade publications, online directories and newsletters. Trade promotion events for example, trade missions, fairs and exhibitions. Trade matching services - such as tender notifications, leads and buying missions. Export development initiatives such as training potential exporters and briefing services. Financial assistance schemes targeted at different types of products. (MATRADE, 2009) The construct of MATRADE s financial assistance provides some insight into the country s approach to export promotion. There are broadly four types of financial assistance schemes administered by MATRADE: The Market Development Grant, Brand Promotion Scheme, Services Export Fund and tax incentives schemes. Excluding the tax incentive schemes, which are available to all exporters, the other three schemes target specific kinds of activities: The Market Development Grant (MDG) is loosely based on the Australian Export Market Development Grant and is the main form of financial assistance for exporters in Malaysia. The MDG provides a matching grant to SMEs, which can be used to defray the transactional costs associated with exporting. The MDG scheme can be used to reimburse up to 50 per cent of the expenses incurred by the SME. Eligible companies are defined as those businesses incorporated under Malaysian company law and in which 60 per cent of equity is owned by Malaysians. SMEs are further defined as those companies whose annual turnover do not exceed RM 25 million or not does not employ more than 150 full time staff. Specific criteria and limits are set for different kinds of activities. The Brand Promotion Scheme (BDS) is a highly specialized form of assistance. It can be used to defray expenses associated with promoting Malaysian brands in export markets. Non-SME companies can be reimbursed up to 50 per cent of their marketing expenses whilst SME companies are eligible to receive a full refund under this scheme. The Services Export Fund (STF) provides grants to Malaysian service providers to defray the costs of preparing and submitting tenders in foreign countries. Under this scheme, companies can claim up to 50 per cent reimbursement for eligible expenses. A list of eligible expenses is published by MATRADE and updated on a regular basis. MARKET STRATEGIES FOR ASIAN REGION 25

In addition to these general support schemes, Malaysia implements the Bumiputra Exporters Development Programme (BEDP) to build export capacity in enterprises owned by Bumiputra ethnic groups. In order to participate in this export development programme, qualifying enterprises must produce a product with clear export potential as well as demonstrate capacity to build supply capabilities for export markets. 3. Thailand The Export Promotion Strategy Plan developed by Thai trade outlines the country s approach to export promotion. There is a clear focus on continuing to increase exports to the ASEAN market, China, India, Middle East, East Europe and Africa. From an export promotion perspective, Thailand provides information, education and intermediary services to its exporters. No evidence of financial assistance schemes to exporters could be found. 4. CONSTRAINTS TO EXPORTING There are a number of potential barriers that firms face when they engage in exporting. The first type relate to the sunk costs associated with entry. These are costs that cannot be recovered and include: making contact with potential buyers; securing the correct type of documentation for exporting; acquiring trade credit; and changing the product for the export market. Especially, making contact with potential buyers and the costs of transport were most problematic. The volatility of the exchange rate, securing the correct documentation and marketing costs and volatility of the exchange rate; costs of transport; and then jointly the costs of marketing the product and customs, securing the correct type of documentation; the costs of transport; customs; costs of marketing the product; and volatility of the exchange rate. Making contact with potential buyers and language barriers are the perceived constraints. These reflect areas where the EDB can play a role to reduce these barriers through activities such as trade missions. 6. CONCLUSION AND RECOMMENDATIONS Sri Lanka has huge potential in Asian region as India, Japan and China are Sri Lanka s top 3 export destinations and the other countries such as Hong Kong, Viet Nam, South Korea Singapore and Malaysia are the emerging markets in the Asian region. Therefore, a well-designed export promotion strategy will definitely improve the export performance of Sri Lanka which leads to reach its export target of US$ 20 Bn. by year 2020. To formulating the EDB s export promotion strategy towards the MARKET STRATEGIES FOR ASIAN REGION 26

Asian region, three analytical tools trade analysis, benchmarking and country profiles- were use in this report. There are many policy options available to EDB to increase the number of exporters to the Asian region and the volume of exports as well. It can focus its efforts on: seeking to increase the number of firms that become exporters; increasing the volumes exported by companies that already export to Asia; increasing exports from companies that export to the rest of the world but not to potential destinations in Asia, or adopting a combination of these policy options. However, whatever option the EDB chooses to adopt, the overarching consideration should be that their export promotion strategies are effective in achieving improved export performance whilst still delivering value for money. To achieve the above mentions targets; it is recommended to improve the current approach of EDB towards the export promotion. Even though these recommendations are especially made for the Asian region, most of them are more general. 1: Increase Trade Facilitation and Avoid/Reduce Non-Trade Barriers in Trade It is necessary to strengthen exiting tare agreements such as ISFTA (India- Sri Lanka Free Trade Agreement), PSFTA (Pakistan - Sri Lanka Free Trade Agreement). Further it is necessary to provide industry views and requests with regards to the proposed FTA to the negotiation bodies such as DOC for negotiation and also joint working committee while preparing FTA with other Asian countries; especially in upcoming agreement with China. Strengthen collaboration with diplomatic mission in China and Sri Lanka and also with trade chambers in both sides will facilitate and expand two way trade and investments in which will ultimately benefitted to Sri Lankan exporters. Further, it is needed to reduce or avoid non-trade barriers and facilitate companies with close relationships/mous/ discussions with Chambers, Foreign Missions and other local stakeholders such as Customs, Ports, Air freighters etc. to facilitate hassle free export businesses. 2: Identification of Top Potential Export Products/Services to Asian Markets The trade analysis and export benchmarking provide considerable insight into the trade patterns between Sri Lanka and Asian countries.it highlights a number of products within each of these commodity groups where Sri Lanka has both limited penetration or does not export certain products at all. Therefore, it is necessary to conduct market analyses regular basis on potential markets and potential products/services as well. Moreover, it is needed to disseminate those findings to exporters by conducting Seminars and awareness programs. MARKET STRATEGIES FOR ASIAN REGION 27

2: Higher Participation in Trade Promotion activities in Asian Region Successful exporters to the Asian region are larger, more productive, more capital intensive and more likely to produce value-added goods. To deal exclusively with export promotion and development matters pertaining to the Asia region; it is necessary the EDB to take following actions organizing fairs/exhibitions as a tool of market development Organizing Buyer-Seller Meets (BSMs). Special promotion and publicity such as web- promotion in web-sites, in main commercial cities and in business magazines. Promotion of Sri Lankan consumer products in Departmental Stores Promotion by Sri Lankan Missions by organizing catalogue/brochure exhibitions. Awards to leading exporters to the Asian region. To carry out market surveys for the items with export potential in the Asian countries and disseminate information to through their publications. To bring out promotional literature according to export destination such as use Japanese language for Japan & mandarin for China To hold commodity specific seminars in selected industrial centers. Organizing trade and investment promotion programs; including road show, single country exhibitions and trade and investment forum 3: Improve Access, and the increase Quality of Information Provided to Exporters Successful export promotion strategies are built on reliable, accurate and up to date information. In deciding on whether or not to export, firms are likely to search for information on potential markets and international demand for their product. Developing an electronic (web-based) system that houses information on Asia country profiles, customs and tax information, contact details of Embassy representatives in Asian countries and market intelligence. Publishing regular bulletins highlighting all trade related issues and events that occur in Asia. Reporting and monitoring trade statistics between Sri Lanka and Asian countries. Market research publications, General sector and Firm level information, such as market surveys, online information of export markets, information KIOSK, Market briefs, and product-wise market reports, Publications encouraging firms to exports, Exporter/importers contact data base Online market surveys MARKET STRATEGIES FOR ASIAN REGION 28

4: Expand Export Facilitation Activities and Provide Advisory Services Countries like Australia, Malaysia and Thailand have dedicated trade help desks, which are the first port of call for exporters seeking information. The role of their call center agents is to provide the information required by exporters, place them in contact with representatives in foreign markets or direct them to right person to address specific queries. Australia also employs export advisors, which have specialist knowledge of all aspects of exporting. They provide information on trade leads, country specific problems, logistical issues, customs procedures and facilitate communication between the exporter and the Austrade local representatives in foreign markets. Therefore; it is recommended the EDB, To maintain newly stated EDB kiosk Center in state of the art manner. Facilitate specific number of exporters who focus on Asian Market, under 2000 Exporters Programme. Establish EDB representative officer in main Asian markets to facilitate/advise exporters. Moreover, it is considered the inward trade missions (held in Sri Lanka) and outward missions are more successful mechanism for linking potential importers and local firms. Therefore, EDB needs to conduct inward/outward missions more regularly as an export facilitator. 5: Monitoring and Evaluating the Results of Export Promotion Activities All trade promotion activities should be monitored regularly. For those targeted at Asian markets, this report provides baseline information on challenges and constraints faced by exporters as well as insights into the type of support they require. It is recommended that the effectiveness of trade promotion activities is monitored through; Annual Exporter survey to gauge the response of exporters to EDB services Programmes to assess EDBs effectiveness in terms of improving export performance. MARKET STRATEGIES FOR ASIAN REGION 29

7. ANNEXES ANNEXURE I - TRADE FAIRS OF THE REGION India GUJARAT JEWELLERY AND GEM FAIR - KOLKATA Professional B2B trade show for the Gem & Jewellery Industry. Gujarat Jewellery and Gem Fair showcases Fine Finished Gold Jewellery, Gemstones, Pearls, Diamonds, Silver Jewellery, Machinery & Equipment, Packaging & Display, Ancillary Services Provide China GUANGZHOU INTERNATIONAL AQUARIUM SHOW - GIAS Professional Trade Show dedicated to Aquarium Fishes, Aquarium Supplies and related products CIEETE GUANGZHOU China International Education Exhibition Tour QINGDAO RUBBER & TYRE EXPO Qingdao (China) International Rubber & Tire Industry Exhibition CHINA INTERNATIONAL GREEN FOOD & ORGANIC FOOD EXHIBITION Japan JAPAN IT WEEK SPRING Japan's largest IT Trade Show. Japan IT Week is where you can find any kinds of latest IT technologies/solutions, the absolute meeting point for both IT solution providers and IT system managers (once a year) Hong Kong SEAFOOD EXPO ASIA Seafood trade event - SEAFOOD EXPO ASIA puts your company in front of owners, proprietors, executives, purchasing managers (including purchasers of seafood, ingredients, retail, foodservice, equipment, services & packaging), and more (once a year) Bangladesh DHAKA AUTO PARTS SHOW International Automotive Parts Exhibition in Bangladesh MARKET STRATEGIES FOR ASIAN REGION 30

ANNEXURE II - TOP 30 PRODUCTS EXPORTED FROM SRI LANKA TO ASIA (US Dollars Mn) 2012 2013 2014 2015 2016 Code Description Value Value Value Value Value S.0702 Apparel 96 111 123 105 114 S.0701 Woven Fabrics 61 72 77 88 85 S.0810 Footwear 1 7 43 37 63 S.08090301 Boat Building 53 80 83 58 60 S.080107 Animal Feed 81 57 55 66 55 S.040101 Pepper 42 75 54 98 49 S.09 Petroleum Products 21 13 88 38 48 S.0103 Tea in Bulk 55 46 53 65 42 S.08090199 Other Electrical & 20 19 35 23 38 Electronic Products S.08090107 Insulated Wires and 47 45 41 36 36 Cables S.040606 Areca Nuts 4 17 65 70 34 S.080401 Waste & Scrap of Paper 25 26 33 32 32 /Paper Boards S.080899 Other Products of Base 8 13 13 14 27 Metal S.0101 Tea Packets 27 22 22 21 25 S.080502 Pneumatic & Retreated 31 29 34 28 25 Rubber Tyres & Tubes S.080301 Furniture & Seats 13 15 16 16 24 S.080103 Processed Food 16 17 22 17 23 S.080104 Rice & Cereals 90 33 38 29 22 S.0602 Gems 15 19 37 16 19 S.030102 Desiccated Coconut 5 10 13 11 18 S.080105 Beverages 2 6 9 15 17 S.08070201 Worked Monumental Stones 17 16 18 16 17 MARKET STRATEGIES FOR ASIAN REGION 31

S.95 Products Unclassified 70 9 32 12 16 S.0799 Other Textile Articles 12 11 16 14 16 S.080503 Industrial & Surgical 15 14 16 16 15 Gloves of Rubber S.08060204 Other Products of 6 9 10 8 15 Plastics S.030205 Coco Peat & Fiber Pith 9 12 10 12 14 S.050103 Prawns 11 17 20 12 14 S.08040302 Cartoons, Boxes & Bags 9 10 9 8 13 S.080305 MDF Boards 20 19 17 15 13 S.08060107 Soap, Washing Preparations, Waxes, Candles etc. 3 3 6 8 12 Source: Information Technology Division /Sri Lanka Export Development Board 8. REFERENCES 1. http://www.cnbc.com/2016/05/02/imf-says-asian-economies-will-account-for-most-ofglobal-growth.html 2. http://www.trademap.org/index.aspx?aspxautodetectcookiesupport=1 3. https://www.wto.org/english/res_e/statis_e/statis_e.htm 4. http://atlas.media.mit.edu/en/profile/country Prepared by: Name : Marketing Development Division, Sri Lanka Export Development Board (SLEDB) Disclaimer: Sri Lanka Export Development Board (SLEDB) has taken every care in the preparation of the content of this report, but the SLEDB cannot be held responsible for any errors, defects, lost profits, or other consequential damages arising from the use of any information obtained either directly or indirectly from this report. The SLEDB accepts no liability whatsoever. MARKET STRATEGIES FOR ASIAN REGION 32