SL must shift towards services-led exports: Hulangamuwa
Senior Adviser to the President on Economic Affairs and Finance Duminda Hulangamuwa said Sri Lanka should make a strategic pivot towards high-value service exports, citing deep-rooted structural constraints that limit the country’s ability to scale up manufacturing exports despite decades of incentives and free trade agreements (FTAs).
Highlighting the persistent challenges facing Sri Lanka’s export sector at the 2026 post-Budget Forum organised by the Daily FT, in partnership with the University of Colombo MBA Alumni Association and sponsored by Standard Chartered Bank last week, Hulangamuwa said export diversification and growth are not merely Government issues but broader structural challenges within the economy.
“When it comes to exports or attracting foreign direct investments (FDIs), the question is: why should an investor choose Sri Lanka? We lack supply chains, raw material access, and links to large labour markets like Vietnam. Even with trade agreements, we struggle to benefit,” he said.
He pointed out that while the India-Sri Lanka FTA led to modest gains, the Thailand FTA could not be implemented for various reasons, and even existing trade pacts are undermined by high domestic costs. “It’s not just about signing FTAs or creating zones, it’s about fixing the fundamentals at home,” he stressed.
According to Hulangamuwa, Sri Lanka’s comparative advantage lies in services such as tourism, IT/BPM, logistics, and shipping, rather than manufacturing. “For 30 years, we’ve offered export tax incentives, yet exports remain stagnant at around 8-9% of GDP. Manufacturing exports will continue to face structural constraints because we can’t provide the scale global manufacturers demand,” he explained.
Citing an example, he said global apparel giant Uniqlo had considered investing in Sri Lanka but required a factory employing 10,000 workers, a scale the country could not provide. “Even if we manufacture locally, about 70% of inputs are imported, limiting domestic value addition. By contrast, service exports like digital and IT services or tourism generate higher foreign currency inflows,” he added.
On the logistics sector, Hulangamuwa said efforts are underway to operationalise the Colombo Port Western Terminal II breakwater project by next year, with terminal operations expected within a year thereafter. Plans are also advancing to establish an international logistics centre, with tenders to be called soon. “These initiatives may not yield massive revenue immediately, but they are part of a broader export and investment strategy,” he said.
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