Export-import business ideas and opportunities of Sri Lanka

Do you believe that after one year of successful international business, your life will be completely changed?  Do you see others enjoyed great success in Sri Lanka after started the exporting business? Or do you want to start exporting to Sri Lanka or importing from this Island country? Maybe you first want to get some business ideas related to Sri Lanka and learn Sri Lanka imports and export products?

We believe that success in business is not easy, but also not impossible. In every stage of business, one needs training, summarizing knowledge and experience.

Maybe your import-export business is small now and you don’t see much potential, but if you are clever and smart, you can grow step by step and then expand your scale. Growth depends on your ability to analyze and organize your resources, discover business opportunities. If you have a detailed business plan and the right direction, you will succeed!

The following article will show you how to start an import-export business with a beautiful island country Sri Lanka. We will also reveal business ideas and opportunities in Sri Lanka. In fact, It sounds not a popular country, but indeed this is a very potential place for you to expand your international business.

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Before we discover business opportunities and ideas in this country, let’s have an overview of this country and its business environment.

1.Overview about Sri Lanka business environment

Sri Lanka is an island country with a 1,340km long coastline located in the Indian Ocean, the southernmost subcontinent of India. Sri Lanka is a country with a very favorable geographical position for international business and trading. Adjacent to the Indian continent, located at the midpoint of connection between East Asia and East Africa. It is a convenient port location on the sea route linking East-West. So, Sri Lanka is not only the most liberalized economy in South Asia but is also being assessed as a land of business opportunities.

Languages and currency:
Sinhala is the main language (74%), a part speaks Tamil (18%), Hindi and other languages ​​(8%). English is widely spoken, accounting for about 10% of the population. The currency is Sri Lankan Rupee (LKR).

Sri Lanka is basically still an agricultural country. However, agriculture occupies an important position in attracting the national labor force, while exports mainly depend on agricultural manufacturing industries.

Sri Lanka trading and Sri Lanka Exports:
Three famous traditional export products: tea, coconut, and rubber. Sri Lanka is the world leader in semi-finished rubber production and exports of black tea and coconut fiber.

Sri Lanka’s traditional import and export markets are the United States, Western countries, the Middle East. But Sri Lanka has now begun to develop trade relations with China, Japan, and Southeast Asian countries.

Although the population is 21 million people, the openness of the Sri Lankan market economy makes the island considered as an attractive market for the services and industries.

Sri Lanka exports (Top products)

1.Tea

Sri Lanka is a leading tea exporting country in the world. In the first 6 months of 2019, the country’s tea output has reached nearly 160,000 tons, bringing into the country about 682 million USD.

Currently, Ceylon tea brands of Sri Lanka have been present in almost all distribution channels such as supermarkets, shopping centers, hypermarkets, hotels, restaurants, bars and tea shops … in many countries in the world. Target export markets include the USA, Australia, Turkey, Saudi Arabia, United Arab Emirates, Iran, Chile, and Germany.

2.Pepper

In 2018, Sri Lanka exported 13,118 tons of pepper, less than the previous years. The number of pepper exports decreased slightly, bringing the total export revenue of pepper to 73.8 million USD.

2018 was also the year when Sri Lanka pepper had the lowest average export price in the past 5 years, down to the US $ 5,633 / ton. India remained the top importer with a total volume of 10,473 tons, while Germany imported 714 tons of Sri Lanka pepper.

3.Rubber

Sri Lanka is one of the top ten rubber producing countries in the world, employing over 250,000 direct and indirect workers throughout the country. Rubber trees are located in the Southwest, South and Central regions of the country, including 15 districts. The main growing districts are Kegalle, Kalutara, Ratnapura and the Colombo region.

Despite significant progress in rubber production, processing and export over the years, Sri Lanka faces issues such as: declining rubber acreage and lack of manpower/ human resources and high production costs.

The main export markets are India, Malaysia, China, Pakistan, USA, Germany, Japan and Singapore.

4.Seafood

In 2019, the total seafood export of Sri Lanka reached about USD 250 million, mainly tuna. Sri Lanka plans to increase white prawn sales because it had previously focused on black tiger prawns mainly.

The country started farming white prawn in 2018. Sri Lanka produced about 5,000 tons of prawn in 2019, of which 2,000 tons were exported.

5.Coconut products

In 2018, Sri Lanka exported pure coconut oil to at least 41 countries. Leading buyers were Germany with 405 tons (24.0%); followed by the United States 303 tons (17.9%), Australia 247 tons (14.6%); and the remaining 38 importing countries ranged from 1 to 68 tons.

Other coir products also contribute to the increase of Sri Lanka’s exports such as: mattresses, hard fibers, twisted threads, rubber-only mattresses, woven carpets/mats, and floor mats.

In addition, Sri Lanka’s activated carbon products were also imported by 9 countries with output ranging from 104 to 197 tons, reaching 21.0%; including Korea, Estonia, France, Finland, South Africa, UK, Ukraine, Hong Kong, and Singapore. And 20 other countries reached a 10.4% market share with a low import volume of 2 tons and 97 tons.

Sri Lanka imports (top products)

1.Rice

Sri Lanka still has to buy a lot of rice from Pakistan and India to serve its domestic needs. In 2016, Sri Lanka imported 280 tons of rice from Thailand. In addition, Sri Lanka has also increased the demand for higher quality cereals and rice, such as Sona masuri rice.

In 2017, the Sri Lanka Trade ministry announced the opening of an international bid to buy 200,000 tons of rice. In particular, 90,000 tons are Nadu parboiled rice, 60,000 tons are Samba parboiled rice and 50,000 tons of raw white rice

2.Cotton, thread, and fabric

Sri Lanka imports about 500 million tons of cotton (raw cotton, thread, fabric) each year. Hong Kong, India, Indonesia, and South Korea are the main cotton suppliers for Sri Lanka.

3.Animal feed (Corn)

About 150,000 tons of corn is being imported into Sri Lanka every year to provide additional to the domestic industry (only about 30,000 – 40,000 tons).

Corn is one of the main raw materials used for the animal feed industry, forming 500,000 tons of animal feed per year.

4.Lentils

Sri Lanka is one of the major importers of red lentils with an annual import of about 45 million USD. India is a major exporter of lentils for Sri Lanka.

5.Paperboard

The total import of paper and paper products was approximately USD 380 million in 2013. The demand for paper and paper products has been reached about 330,000 tons per year in 2015, with most of these were imported products.

Local demand for publications, magazines, and books continue to grow significantly. This created a great business opportunities in Sri Lanka for exporting wood pulp and paper there.

6.Mechanical equipment and machinery

Mechanical equipment and machinery imported into Sri Lanka each year in value about 2 billion USD. The government’s infrastructure development programs, along with a significant increase in areas such as tourism, construction, telecommunications, transportation, manufacturing and IT, creates great business opportunities in Sri lanka for overseas suppliers. Importing equipment and machinery for investment projects is exempt from purchasing taxes, which can help companies be more competitive if they can supply to government projects.

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2. Start an export business to Sri Lanka

To help you learn how to start an export business, we have listed the following basic steps. Each step is an explanation for you to better understand the process. But the article only encapsulates the basic knowledge, to understand the best way to export, please register to join our online import-export business course. There you will find more materials and secret keys to exporting.

2.1.Market penetration strategy

Things you can do to enter into Sri Lanka market

  • Marketing and advertising: There are many forms of marketing in Sri Lanka before and after you ship goods to this country. Sometimes you do not need to do this step, because the importers will be in charge of local marketing. But in case you are both an exporter and a retailer, it is very important to choose a suitable marketing method, which is less expensive and has long-term effectiveness and brings you buyers.
  • Use local representatives to penetrate Sri Lanka’s market: Using local distributors is an easy way to enter the Sri Lankan market. Many foreign companies choose local representatives due to financial stability and technical competence. Local small and medium-sized distributors are able to meet your costs, they are knowledgeable in the target customer segment, while the largest shopping malls often have higher demands for the overseas suppliers.
  • Joint venture / licensing business: The joint venture is entitled to tax incentives and exemptions like domestic companies. There are no restrictions on the ownership of foreign companies, except for some special areas.
  • Use local representatives to sell government: Many government acquisitions are usually made public by local contractors, who have been advertising in local news.
  • E-commerce: E-commerce is not yet very popular but is growing fast in Sri Lanka. All commercial banks have electronic banking services. Travel agencies, hotels and many retailers also offer online trading.

Read more: Export marketing- Step by step system to get orders.

2.2. Select suitable products

Based on the results of market research, you will make an informed decision in choosing the right product.

The most common products for export to Sri Lanka are: lime, cement, and similar construction materials, non-woven textiles, electrical and electronic equipment, and plastic and plastic products

Notes: Sri Lanka banned the import of chicken meat to protect the local chicken industry. For the genetically modified (GM) product, the law restricts the import of products which have a genetic modification. Other health requirements for agricultural products also limit imports.

In case you have the product that Sri Lanka has never imported, don’t be too desperate. Always give yourself more opportunities by conducting promotions or introducing to local importers. Pay special attention to the price that local people can afford, the quality of the product and the accompanying services.

2.3 Get an export license

This step needs to be done early, maybe even before negotiating or signing an export contract with a foreign buyer(s). If you are a trading company, be sure to check the government policy about the encourage, restrict, or ban exports of the goods you wish to export into Sri Lanka.

In case of restriction, export according to quotas, or permits – these procedures must be studied before proceeding to sign export contracts.

Naturally, without a permit or a quota application, it is impossible to do export customs in your country. In addition, as an export goods owner, you also need to find out if the item is subject to an export tax in your country. Under export promotion policies, the number of goods taxed are much less than imported goods. However, there are still items subject to export duties.

Once you understand the relevant policies as mentioned above, you can proceed to negotiate and sign foreign trade contracts with Sri Lankan buyers.

2.4 Negotiate and sign the contracts

Principles in negotiations

  1. Principle: The mutual interests of both parties in foreign trade contracts must be given the highest priority, must focus on common interest.
  2. Principle: Negotiating foreign trade contracts should be open and fair.

Notes when drafting import and export contracts

  • Contracting parties must be legal business entities.
  • Persons signing the contract must have legal rights to do so.
  •  All the important terms must be described and stated in the contract (payments, price, the documentation provided, delivery terms, warranties, product specification, etc)
  • Contract goods should be allowed to be traded under the provisions of law, of both countries.
  • The currency used for payment is usually in the common foreign currency (USD)

International business includes also risks and threats, we advise reading: Bigest risks and how to avoid these in export-import business.

2.5 Check the export documents

For regular goods that do not require specialized inspection, the necessary documents are quite simple. Most of the documents you need to send to foreign buyers are as follows:

  1. Foreign Trade Contract (Sale Contract)
  2. Commercial Invoice
  3. Packing List
  4. Bill of landing

For specific commodities, specialized inspection is required, exporters must prepare separate documents in accordance with current regulations. Actually, there are a lot of different export-import documents out there.

2.6 Track the shipment and receive payment before exporting

Payment of imported goods can be made by Letter of Credit (LC), collection (DP or DA), or prepayment (AP). Goods can be imported into Sri Lanka on a deposit basis when imported goods are books and magazines, or ornamental fish imported for re-export.

Letters of credit are limited to 365 days. Import with Advance Payment is allowed when the total value of goods does not exceed 10,000 USD. Payment of imports made in accordance with this clause may be made by bank draft or telegraphic transfer. Pre-paid goods can be received by the importer within 90 days after payment.

3. Start importing business from Sri Lanka

Importing goods from Sri Lanka has advantages over other countries because of the low cost and location (very convenient if you are importer from India, Bangladesh.) at least you can save more than 20% for the total cost compared to importing from other countries.

However, the disadvantage of importing from Sri Lanka is that the goods are not diverse, and small quantities, you will have difficulty in choosing the products and competing in buying with other international buyers.

For people who are first time importing from Sri Lanka, here are steps to follow and execute.

3.1.Determine the beneficial products from Sri Lanka

Sri Lankan products are generally not branded and not widely known to consumers in the world market, with a relatively small share of imports, even with some branded Sri Lanka tea. In fact, tea companies like Lipton or Dilmah are quite famous for importing most of their ingredients from Sri Lanka.

The majority of the international importer,s focus on the following products: footwear (HS 64), seafood (HS 03), pearls and precious stones (HS 71), processed animal feed (HS 23), rubber (HS 40), and tea – coffee – spices (HS 09). These are outstanding import products from Sri Lanka. (Mostly they are raw materials which are not yet finished products)

 3.2.Sourcing your suppliers from Sri Lanka

A common way how international importers want to find a source of their products is to draft the buying request or RFQ (Request for quotation). It includes the consignment, prices, payment methods, requirements of quality specifications. With it, they then go to local forums, online marketplaces or contact local suppliers.

For example, to draft your  advertisment, you can use following template:

“Currently we need …(number).. of …(products)…. from Sri Lanka, if the supplier meets the specifications and requirements we require, we are ready to become a long-term partner. We are looking forward to cooperating with Sri Lankan suppliers, which can supply following and meet the requirements:

– Product’s name

– Quantity

– Amount of money (your target price)

– Packing method

– Delivery conditions (e.g. CIF or FOB)

– Payment method (for example 20% of the advance payment, the remaining 80% of the CAD payment ..)

Interested suppliers can contact us as follows:

-Name of your company and yourself

– Phone number/email contact

3.3.Import documents

A dossier of import of goods from Sri Lanka includes the following trade documents.

  • Sample products
  • Announcement of the standard conformity certification form
  • Copy of Business Registration Certificate
  • Certificate Of Analysis: 2 originals or certified copies (about the main quality criteria, quality indicators, and related hygiene indicators).
  • Certificate of Free Sales issued by the exporting country
  • Product labels or photos of product labels and draft content of secondary labels
  • Bill of lading, Commercial Invoice, Packing List, Catalog of goods, CO – Certificate of Origin.

3.4.Customs declaration (if importing into Sri Lanka)

The import procedure and documentation in Sri Lanka is relatively strict, compared to Europe or the USA. In order to free the goods from the customs, the importer needs to submit the relevant shipping documents certified by the commercial bank along with the customs declaration form to the Sri Lankan Customs Department.

If the imported goods purchased under the AP prepayment method, the goods will be released upon submission of documents from payment, for example, the bank statement. In the case of import by depositing account, the goods will be released by customs after customs clearance.

Sri Lankan Customs believes that devaluing goods is a common tactic of importers, to lower their import duty tax obligations and is putting more effort to determine the real prices of the goods.
The Sri Lankan government is also implementing a comprehensive electronic process to accelerate customs clearance.

Customs dossier set as well as common goods, including:

  • Declaration of imported goods
  • Commercial invoice
  • Bill of lading
  • Other documents: CO, CQ …

3.5.Taxes and fees on imported goods

VAT tax

Sri Lanka imposes a value-added tax (VAT) on goods sold by manufacturers, service providers, and importers. There are two levels of VAT, 0% and 12%. Exports are not subject to VAT. Retailers and wholesalers earning more than Rs 500 million per quarter are also subject to VAT.

Other fees for imported goods

– Port and airport development fee (PAL) 5%.

– Consumption fee for many products such as carbonated water, alcohol, beer, motorbike, and car. When calculating excise charges, a 15% profit rate is added to the import price.

 This type of fee applies to both domestically produced products.

– The port cleaning fee varies depending on the size of the container.

– National construction tax of 2%

Special fees

Special consumer goods taxes are charged for a variety of foods such as oranges, tangerines, grapes, and apples. Products subject to this special tax will be exempted from any other charges.

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4.How to start an online export-import business in Sri Lanka

If you are looking for exciting business opportunities and business ideas in Sri Lanka to start a small business, then online export-import business (selling products online) is increasingly popular and most of the business startups who do not have capital, nor company office, choose to implement this option.

For traditional import and export companies, it requires capital, and good management skills to maintain profitable trading. But online business is a playground for beginners who don’t know about business, but still want to try and take effort on. Online export-import business means selling your products, services globally trough your online store or website.

Of course, there will also be disadvantages, but in general, if you do not have a lot of capital, the online model is the most favorable, if you are loyal to the traditional business, then it is considered as a useful reference.

Some advantages of an online import-export business

Low capital, fewer risks, less competition

With traditional import and export, you need to prepare a large amount of capital, because suppliers only give priority to those who buy in bulk with a professional business style. This is not fair for import and export newbies, you will have hard times to get the deals. The minimum capital you need to have for a traditional export-import business is about $50 000- $100 000. If you don’t have enough capital, consider another way of business.

Trend leading

Why is the trend leading? Because Sri Lanka is still a place where online business is not yet popular, it is a developing country, this means that you can be the early adopter to exploit the online market, which is less competitive now. You can take your share before this market is saturated. Saturation is when there are too many people doing the same business as you, more supply, less demand, resulting in a lack of customers, or the low prices, which leads to low margins.

Flexible in time and place to work

If you are a business owner or a traditional salesperson, you have to be at the company on time, even when you’re done work, you still can’t go home early. For active young people, the corporate environment is strict with many rules that prevent them from developing their creativity and outstanding abilities. If you are a travel enthusiast, you like to work anytime, anywhere without having to ask for a day off from your boss, online import and export is the best model for you. You can still work and travel at the same time, without making the work postpone.

We advise to learn more, read: Advantages and disadvantages of exporting.

Learn how to start an export/import business.

If you want to learn how to start export-import business online or offline, then we have online courses and programs which will give you the best guide to start export import business from online to offline. We have also tools and resources which help you to grow and expand your business and get more customers and raise profitability.

By the way, the fees for our online courses are much lower than for the formal, offline course in the centers but still convey the full amount of practical knowledge.

You are advised to take courses and use the resources ad tools listed below: