📈 Sri Lanka’s Innovation Gap: Execution & Institutions Hold Back Growth

• Key Trade & Economic Data: - Merchandise exports rose from US$ 8.6 Bn (2010) to US$ 12.8 Bn (2024), averaging just 3.4% annual growth. - Integration into global value chains stands at 8.1%, far behind India (26%) and Vietnam (34%). - R&D expenditure accounted for a minimal 0.11% of GDP in 2022. - Sri Lanka ranks 93rd out of 139 economies in the Global Innovation Index. • Sector Breakdown & Export Risks: - Export revenues remain heavily concentrated in traditional industries including apparel, tea, coconut, and rubber. - ICT/BPM has emerged as the second-largest export sector, but faces automation risks from rapid AI adoption. - Despite high-grade natural resources like graphite, Sri Lanka misses downstream high-value manufacturing due to weak commercialization mechanisms. • Institutional Bottlenecks: - Experts highlight that institutional weaknesses, anti-export bias, and policy fragmentation—not lack of talent—are the primary barriers. - Growth is hindered by accelerating brain drain, limited venture capital, slow legal reforms, and weak university-industry collaboration. - Economic recovery requires simultaneous alignment of trade openness, intellectual property rights, digital infrastructure, and private-sector-led innovation.