Sri Lanka trade competitiveness remains constrained by weak policy coordination, slow reforms, and a lack of strategic urgency at a time when competing Asian economies are aggressively strengthening exports and attracting investment, according to economic policy think tank Centre for a Smart Future (CSF).
Sri Lanka trade competitiveness reforms face delays amid rising global pressure
The think tank warned that Sri Lanka risks falling further behind regional peers unless the Government accelerates reforms related to exports, trade negotiations, and foreign direct investment.
In a statement issued yesterday, CSF said progress has remained slow across most areas identified in its policy recommendations published a year ago. The organisation noted that worsening global economic uncertainty and persistent trade volatility are increasing pressure on Sri Lanka’s foreign earnings and economic recovery efforts.
According to the think tank, the country’s trade and export reform agenda continues to suffer from limited ambition and insufficient implementation despite widespread recognition of the underlying structural challenges.
“Other Asian economies are adopting very coordinated institutional measures and a very sophisticated policy approach to drive trade resilience and competitiveness,” CSF said, urging Sri Lanka to adopt stronger and more integrated mechanisms.
The organisation stressed that improving Sri Lanka trade competitiveness requires more aggressive efforts to open new export markets through modern commercial diplomacy and strategic trade negotiations. However, it pointed out that critical institutional gaps remain unresolved.
Among the concerns highlighted was the continued absence of a Chief Trade Negotiator and a dedicated office responsible for driving international trade policy and negotiations.
CSF acknowledged that Sri Lanka’s planned National Export Development Plan for 2026–2030 is a positive step, but cautioned that announcing policy frameworks alone would not guarantee meaningful outcomes.
The think tank noted that Sri Lanka’s previous National Export Strategy covering 2018–2022 had been considered credible but ultimately failed to deliver expected results because of weak institutions and inadequate budgetary support.
It warned that repeating similar implementation failures could further weaken the country’s export sector at a time when international competition is intensifying.
CSF also said Sri Lanka’s export structure has seen only limited diversification, with many firms continuing to struggle in global markets despite the success of a small number of leading exporters.
The organisation argued that exporters require stronger policy support, innovation-focused incentives, and assistance to move up the value chain in order to compete effectively in evolving international markets.
The think tank further expressed concern over the country’s approach to foreign direct investment, stating that Sri Lanka lacks a coherent long-term strategy for attracting investors and identifying priority sectors.
It described the country’s foreign direct investment performance over the past decade as disappointing compared to regional competitors and well below potential.
Recent discussions involving the Board of Investment (BOI) and the Committee on Public Finance in Parliament were cited as evidence of broader institutional weaknesses. According to CSF, questions raised over the logic behind investment-related tax incentives exposed the absence of a clear national strategy for investment attraction.
“The widely circulated exchange exposed what CSF has long argued: that Sri Lanka lacks a clear strategic vision of what kind of FDI it is seeking,” the think tank stated.
CSF said Sri Lanka needs an evidence-based and forward-looking framework capable of identifying sectors with strong investment potential while targeting investors aligned with national economic priorities.
The think tank also renewed calls for the Government to operationalise the Economic Commission proposed under the 2024 Economic Transformation Act.
According to CSF, establishing an Economic Commission with adequate authority and resources has become essential for countries competing seriously for global investment flows. The body, it said, would help coordinate investor facilitation efforts and strengthen the link between trade and investment policy.
“The concept of a high-powered, well-resourced body with a genuine mandate to coordinate across Government on investor facilitation is now the minimum institutional infrastructure countries competing seriously for FDI have found necessary,” CSF noted.
The organisation further recommended that even if the Government decides not to implement the Economic Transformation Act in full, authorities should still move forward with establishing the Economic Commission, Invest Sri Lanka, and a dedicated Zones Authority as priority reforms.
Economists say Sri Lanka trade competitiveness will remain under pressure unless policymakers move beyond policy discussions and deliver faster institutional reforms capable of supporting exports, attracting quality investment, and improving long-term economic resilience.