By Jithendra Antonio

Sri Lanka’s economy feels like it’s stuck in a time loop. For decades, the same cycle has repeated—export raw materials, import finished goods, rely on tourism, and hope domestic spending plugs the gaps. But here’s the hard truth: this model is running on fumes.

With $8 billion trade deficits, soaring inflation, and rising debt, the cracks in our consumption-driven economy are no longer subtle—they’re glaring. We cannot continue to play by the same old rules while the world races ahead. Nations that once faced similar economic hurdles—like Singapore, Vietnam, and Israel—chose a different path. They shifted from being mere consumers to innovation-driven economies. It’s time Sri Lanka does the same.

This isn’t just about surviving the next financial crisis. It’s about redefining the very DNA of Sri Lanka’s growth, from tea leaves to tech exports, from garments to green energy.

A Nation Living Beyond Its Means

The consumption trap is not unique to Sri Lanka, but few countries embody it as visibly. Consumption contributes to a staggering 70% of GDP. Meanwhile, exports—mostly low-value commodities—struggle to keep pace with soaring imports.

Take 2022, for example:

• $5 billion was spent on fuel imports.
• $4 billion on machinery and vehicles.
• Meanwhile, tea and apparel exports barely scraped together $7 billion combined.

To make matters worse, Sri Lanka imports essentials it could produce locally—$500 million worth of rice in 2022 alone.

It’s a vicious cycle. The more we consume, the more we borrow. By the end of 2022, public debt ballooned to 119% of GDP, tightening the noose around future growth.

The History Lesson We’ve Ignored

Sri Lanka’s golden age wasn’t built on consumption. It thrived on trade and innovation. Ports like Mantai and Galle didn’t just move goods—they shaped global trade routes. Cinnamon, gemstones, and textiles weren’t sold raw; they were processed and reimagined into high-value commodities that fetched premium prices from traders across Asia, the Middle East, and Europe.

At the heart of this economic prowess was Sri Lanka’s strategic maritime location—right along the busiest shipping lanes connecting East and West. This advantage still exists, but today, ships pass us by. Ports like Singapore and Dubai claim the lion’s share of transshipment traffic that should be flowing through Sri Lanka.

The lesson from history is clear: economic power comes not from what we consume but from what we create.

Lessons from Global Innovation Powerhouses

If Sri Lanka is serious about escaping the consumption trap, there’s no need to reinvent the wheel. The playbook already exists.

1. Singapore – From Fishing Village to Innovation Powerhouse

In the 1960s, Singapore’s GDP per capita was $500—identical to Sri Lanka’s at the time. Today, Singapore’s GDP per capita exceeds $72,000. The difference? Singapore pivoted early to innovation-driven growth.

• 30% of Singapore’s GDP now stems from technology, biotech, and fintech.
• Strategic investments in R&D hubs like Fusionopolis helped incubate cutting-edge industries.

What Sri Lanka Can Do:

• Create Tech Innovation Free Zones in Hambantota and Colombo targeting AI, fintech, and digital services.
• Attract global tech firms with tax holidays and subsidized infrastructure.

2. Israel – Building Innovation from Scarcity

With few natural resources and geopolitical instability, Israel turned to technology. Today, 50% of Israel’s exports come from high-tech industries.

• Over 6,000 tech startups thrive, fueled by 4.5% of GDP invested in R&D—the highest globally.
• Government-matched venture capital through the Yozma Program turbocharged Israel’s tech ecosystem.

What Sri Lanka Can Do:

• Launch a National Innovation Fund that co-invests in startups working on AI, blockchain, and renewable energy.
• Partner with universities to create innovation labs that transform academic research into marketable products.

3. Vietnam – Digitizing Its Way to Economic Growth

Vietnam’s digital economy is projected to hit $52 billion by 2025. The secret? Heavy investment in e-commerce, tech infrastructure, and manufacturing automation.

• Vietnam’s National Digital Economy Plan integrates SMEs into global supply chains and expands export capacities.

What Sri Lanka Can Do:

• Develop e-commerce export hubs for local manufacturers and agribusinesses to access international markets.
• Introduce tax incentives for SMEs investing in digital payment systems and online trade platforms.

Where Should Sri Lanka Focus Its Innovation Energy?

1. Tech and Digital Services
   Sri Lanka can tap into Asia’s surging demand for IT services, AI, and software development. Currently, Sri Lanka’s digital exports sit at $1 billion annually—far below potential.

• Target: Increase to $5 billion by 2030 by creating tech hubs and STEM education pipelines.

1. Agri-Tech and Value-Added Agriculture
   Agriculture employs 27% of the workforce, but raw exports generate low margins. A pivot to agri-tech and agro-processing could add billions to export revenue.

• Develop processing plants for tea, cinnamon, and essential oils—high-value exports that can fetch 40% higher profits.

1. Renewable Energy
   With sunlight 365 days a year and abundant coastal winds, Sri Lanka’s renewable potential is massive. Exporting green energy technology could unlock a $500 million export market by 2030.

• Policy Move: Launch a National Renewable Incubator to attract green energy startups and FDI.

Policy Actions to Drive Innovation

• Sovereign Innovation Fund: A $500 million public-private fund to finance high-risk, high-reward tech projects.
• Tax Breaks for R&D: Offer 50% tax rebates for companies investing in R&D.
• Startup Visa Program: Invite global entrepreneurs to launch startups in Sri Lanka with 5-year or 10-year visa incentives.
• Coding Academies: Establish coding schools in each District’s major cities to train 300,000 youth in AI, blockchain, and software development by 2035.

The Economic Impact of Innovation-Led Growth

• $20 billion in additional GDP by 2035.
• 1 million new tech and renewable energy jobs by 2030.
• Increase in high-value exports from 10% to 40% of total exports.

The Clock is Ticking

Sri Lanka’s transformation from consumption to innovation isn’t just a choice—it’s survival. The world isn’t waiting. If we fail to act, our neighbours will outpace us, and our debt will deepen. But if we seize this moment, Sri Lanka can reclaim its place as a hub of global trade and innovation—anchored by history but driven by the future.

(The writer is a Consultant specialised in Data Analytics with a Special Focus on Sri Lanka’s Future Direction, and in the fields of Sustainable Energy, ESG, Investments and telecommunications. He can be reached at jithendra.antonio@gmail.com.)