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INTEGRATING SRI LANKAN INDUSTRIES TO INDIAN SUPPLY CHAINS.

A Public Seminar on Integrating Sri Lankan Firms To Indian Supply Chains was Organized by the Pathfinder Foundation on the 11th of December at the BMICH

 

Word2007IconDr. Sirimal Abeyratne, full length paper          PowerPoint-IconPresentation


Last Updated on Wednesday, 12 December 2012 13:00

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Research Project with India - Sri Lanka Foundation


Rationale
The Government of Sri Lanka (GOSL) has set a target of sustained 8% growth.  A significant increase in private investment and an improvement in export performance are essential to achieve this.

Sri Lanka has an incremental capital ratio (ICOR) of 4.2. Hence the investment ratio has to increase from  the current 28% of GDP to 35%. The incremental 7% has to originate from the private sector (domestic and foreign) as the GOSL has capped public investment at the current 6.5% of GDP.

Furthermore, given the size of the local economy, Sri Lanka cannot rely on a domestic demand driven strategy for achieving its growth target. Improving export performance must, therefore, be given the highest priority. In this connection, full cognizance should be taken of Sri Lanka’s extremely favourable economic geography. It is located in the dynamic Asian region and it is in very close proximity to the rapidly expanding Indian market.

The current global environment provides significant incentives for focusing on Asia, particularly India, as sources of investment and destinations for exports. At present, almost 60% of Sri Lanka’s exports are directed to the sluggish markets in Europe and the US, only 6% is exported to India. The proposed study seeks to identify ways and means of taking advantage of Sri Lanka’s favourable economic geography.

Objective

At present, intra-firm trade in Asia is the most dynamic element of the international trading system. This entails the supply chains around the vertical integration of manufactures and horizontal integration of services in the production processes in the region. Sri Lanka currently has a negligible presence in these supply chains. This suggests there should be considerable scope for Sri Lankan companies to identify niches where they are competitive in the dynamic Asian supply chains, particularly those of companies operating in India.

Located a mere 20 miles away, Sri Lanka has an unparalleled opportunity to hook into the fast-growing supply chains in India, particularly Southern India. In this connection, it must be noted that for India to record its current accelerated growth, the four Southern states (Andhra Pradesh, Karnataka, Kerala and Tamil Nadu) must be achieving double digit growth to offset the lesser performance of the “lagging” states. As a result, there is rapid growth in the middle class and disposable incomes in the four Southern states, which constitute a market of over 250 million people, located just across the Palk Strait. The proposed study would seek to identify competitive niches in the supply chains of both Indian companies as well as those of multinationals operating there, particularly in the Southern sub-region.

The study would seek to identify sub sectors/industries which are competitive enough to break into these supply chains, tapping into Indian investment, including joint-ventures where necessary.

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