Exporting processed food: Sri Lanka's experience in the Asian context

Abstract

In recent decades, there has been a palpable shift in the commodity composition of world agri-food trade away from the traditional primary (unprocessed) products mostly exported from developing countries. However, this structural change in trade patterns and its policy implications have so far received scant attention in policy making in most agricultural-resource rich developing countries. Policy makers are still wedded to the conventional division of primary products and manufactured goods that lumps together processed food with primary (unprocessed) agri-food products. This paper aims to draw attention to this policy oversight by examining the experience of Sri Lankan in processed food exports against the backdrop of the experiences of the other countries is the Asian region. The analysis uses a new dataset that systematically delineate processed food from the traditional primary good products, The analytical narrative of inter-country pattern of export performance shows that, unlike primary commodity dependence, exporting processed food is positively associated with the state of economic advancement of countries. The results of the econometric analysis suggests that export success of a country is determined by a combination of growth of world demand, the domestic agricultural resource endowment and the conduciveness of the policy regime for global economic integration.