By Dilani Hirimuthugodage, Research Economist, Institute of Policy Studies of Sri Lanka (IPS)
Geographical Indications (GIs) have the potential to enhance export revenues by emphasizing the unique values associated with the origins of Sri Lankan tea, spices, and other agricultural products. By employing GIs, Sri Lanka can boost its global visibility, achieve better pricing, and tap into niche markets through effective branding and added value. Implementing targeted reforms related to GIs is crucial for cultivating a more resilient and value-focused export economy.
As Sri Lanka faces a decline in its export competitiveness in key global markets amid economic uncertainties, the urgency to adopt innovative strategies for sustaining export growth has intensified. Enhancing export competitiveness is vital for achieving sustainable economic progress. One significant yet often overlooked asset in this endeavor is the country’s intellectual property rights (IPR) framework.
As the global community observes World Intellectual Property (IP) Day in April, Sri Lanka finds itself at a pivotal moment. In a fiercely competitive international landscape, reliance solely on volume is insufficient. Countries must focus on value, leveraging consumers’ willingness to pay more for products with distinctive features. IPRs are instrumental in this context, with GIs serving as a mechanism to protect the intellectual property of unique export items. They provide assurance to consumers and traders regarding the origin of products, which are characterized by specific qualities, traits, or a reputation associated with that location. By certifying these products, GIs facilitate premium pricing for origin-specific goods like tea and spices while safeguarding their reputation against counterfeiting.
Sri Lanka’s Reputation in Origin-Based Agricultural Exports
Sri Lanka is globally acknowledged for its premium agricultural exports, such as tea, cinnamon, and various spices, along with coffee, king coconut, cashew, and regional fruits like Malwana Rambutan and Karthakolomban Mango. However, many of these products are still shipped as raw commodities with insufficient branding, exposing them to price volatility and escalating competition from similar offerings.
Over the past five years, agricultural exports from Sri Lanka have constituted approximately 20-24% of total export earnings. Tea alone represented 51% of agricultural exports and 10.9% of overall exports in recent years, placing Sri Lanka third globally in tea exports in 2024. The majority of tea exports (43%) are directed towards Middle Eastern countries, including Iraq, the UAE, Turkey, and Iran, with 22% going to the Commonwealth of Independent States (CIS), 4% to China, and 3% to the USA. Additionally, Sri Lanka ranked as the 15th largest spice exporter in 2023, leading the global supply of true cinnamon with a 90% market share, while also holding significant positions in the export of pepper, cloves, nutmeg, and coffee.
Success of GIs and Sri Lanka’s Competitive Advantage
Global examples demonstrate that GI certification can significantly enhance export volumes and broaden market access. For instance, Cambodian Kampot pepper saw its production nearly double and exports increase over 250% after receiving GI status in 2010. Similarly, Indonesian Muntok White Pepper experienced a threefold increase in exports by 2014 following its GI recognition in 2010, underscoring the potential for GIs to strengthen market presence internationally.
Sri Lanka displays a robust comparative advantage in its key agricultural exports, as indicated by Revealed Comparative Advantage (RCA) values that consistently surpass one. Ceylon Cinnamon and Ceylon Tea, among other primary spice exports, exhibit notable specialization and high RCA values.
Market penetration, which measures the extent of a country’s exports for specific products, varies for Ceylon tea and spices across significant markets, reflecting changes in demand and increasing global competition. While countries such as Mexico and Peru maintain high penetration rates for spices, performance in Europe is moderate, and the USA and UAE have seen declines. Conversely, emerging markets like China are increasingly absorbing larger shares, indicating new opportunities for growth.
Looking forward, Sri Lanka has the opportunity to focus on emerging middle-class markets that are inclined to pay premium prices for high-quality, origin-certified products by leveraging GIs to bolster branding, authenticity, traceability, and overall export competitiveness.
Challenges in Utilizing Sri Lanka’s GI Potential
Despite Sri Lanka’s considerable advantages and internationally recognized products, the GI framework is currently underutilized due to various challenges, particularly low awareness among stakeholders in the agricultural value chain and inconsistent practices among smallholders, collectors, processors, and exporters. Enhancing the GI system necessitates improved coordination throughout the value chain, emphasizing effective traceability, monitoring, and control from production to consumer.
Furthermore, Sri Lanka’s GI system encounters significant obstacles, including weak enforcement of intellectual property rights against the misuse of geographical names, institutional fragmentation, insufficient inter-agency coordination, and the lack of a dedicated GI framework in line with international standards. The absence of a specialized GI division within the National Intellectual Property Office (NIPO) results in vague guidelines and product classifications. Additionally, there is no nationally recognized GI logo to facilitate product differentiation and build consumer trust, while a publicly accessible online GI registry is lacking, reducing transparency in the system.
Consequently, Sri Lanka is not yet fully capitalizing on the value associated with the unique origins and reputations of its agricultural products.
Realizing the Economic Potential of GIs: From Legal Reforms to Market-Driven Growth
Currently, global demand prefers traceable and authentic products, providing GIs with a competitive advantage. To strengthen Sri Lanka’s GIs, it is essential to implement targeted awareness and marketing campaigns aimed at educating producers and consumers about their significance and to promote collaborative government-industry marketing efforts. Strengthening the GI system in Sri Lanka could involve creating a dedicated GI unit within NIPO, supported by clear guidelines and product classifications, along with the introduction of a national GI logo to enhance branding, product differentiation, and consumer trust. Moreover, it is vital to enforce stricter penalties and enhance market surveillance to prevent misuse of geographical names.
This moment presents a valuable opportunity to consider the strategic importance of IPRs in bolstering Sri Lanka’s export competitiveness. By effectively harnessing its origin-based advantages through a robust IP system, Sri Lanka can transition towards a high-value, resilient export economy, ensuring that its unique agricultural heritage contributes to sustainable growth and global recognition.
By Dilani Hirimuthugodage, Research Economist, Institute of Policy Studies of Sri Lanka (IPS)
Financial Chronicle Biz English | Sri Lanka Business News.
