Sri Lanka is still making simple product such as tea and garments and very little hi-tech complex products for export, W A Wijewardene, former deputy governor of Sri Lanka's central bank told the annual sessions of the Sri Lanka Economic Association.
Wijewardene said Sri Lanka could be caught in a 'middle income trap' like Malaysia and some Latin American countries unless the direction of exports was changed.
He said Ricardo Hausmann from Harvard University and Cesar Hidalgo from the Massachusetts Institute of Technology (MIT) had developed an Economic Complexity Index, which shows the types of products made by a country.
Germany and USA were among the countries that made the most complex goods.
Wijewardene recalled the example of Jack Welch, who became head of General Electric a US based industrial company, when it was in trouble. At the time Japanese electric goods were competing against the firm.
"He could have gone to the government and asked to stop Japanese imports," Wijewardene said.
"But he focused on three types of high tech items instead."
Wijewardene said Welch turned around General Electric by focusing on aero engines where only Britain's Rolls-Royce was its only real competitor, medical equipment where Germany' Siemens and power turbines.
By moving to complex products through innovation, a country could stop worrying about competition from Bangladesh or Vietnam, he said.
Sri Lanka's export composition has not changed much over the past decade or so, he said.
The share of tea had increased mainly due to price increases.
Wijewardene said Sri Lanka needed to produce more engineers or scientists to come up with new technology or create conditions for others to come to the country in a 'reverse brain drain' process.
He said the government's program of a 'Green Colombo' would help by creating 'oases' for people to live and work.
Wijewardene said Sri Lanka also needed to provide rule of law and property rights and an independent judiciary to protect the rights of the people.
Sri Lanka has however produced the world's fastest stock exchange software.