Business & Corporate Affairs

Managing an economy under stress and conflict

By Sunil Karunanayake

School children rehearse for opening ceremony of the Cricket World Cup at Sabina Park. Sports is now a lucrative global industry and the focus will be on the World Cup cricket tournament that will commence shortly in West Indies.

It is interesting to note that despite travel adversaries, bad publicity and distorted media reports Sri Lanka is surging ahead against many odds. Generally it’s common to hear of economic crises and its adverse effects but this phobia often heard at social gatherings is not as dangerous as it sounds.

Perhaps life beyond the boundaries of Colombo city takes you to a different world of peaceful existence however much economists talk of the regional disparity. Today risk of terrorism has become a fact of life and no country whether east, west, north south have been left out of its threats.

Fall of the Iron Curtain, Perestroika and 9/11 in USA and to some extent the exit of Saddam Hussain has reshaped the destinies of every nation. Despite threats of global terrorism and instability people are becoming more resolute against all odds to carry on with their lives.

There are also the unfortunate tales of victims of war who are displaced from their homes and spending their lives in refugee camps sans proper food, shelter, education, etc. The world community is doing what they could to improve the well being of these unfortunate people. In Sri Lanka we have also had our fair share of national disasters in tsunami and land slides that caused untold misery to lives.

Corporates’ impressive performance

On the brighter side the Colombo Stock Exchange continues to outperform most of its regional counterparts breaking records. In recent times market capitalization has risen dramatically also reflecting the power of the retail investors. Analysts attribute this great showing to some extent to regional stock exchanges set up in the provinces that are fuelled by indigenous investors. Corporate earnings have improved with very good performance from the financial sector. The health care sector sensing the signals of an ageing population is doing pretty well and new entrants from major business combines are now looking at these options. Sri Lanka’s leading blue chips John Keells and Hayleys have reported strong earnings and shareholders have already reaped results of this performance. The leisure sector however is yet on the bench waiting for their turn to enter the mainstream. But far sighted businesses have not postponed their investments and new capacity has been built among the odds.

Port projects to kick off

JKH has increased its stake in the SAGT which owns and operates the Queen Elizabeth quay of the Colombo port where volumes have increased by record 43 % in 2006. Undoubtedly Keells are taking a long term view of this business segment given the vast potential for growth. The Colombo South harbour project coming within the Colombo Port Expansion Project (CPEP) will get underway in April with the first phase of the breakwater construction with the expected completion being targeted within 39 months. Parallel to this construction of the container Terminal of the Colombo South Harbour will get underway on a BOT basis. Within the year the Galle regional development project and the Hambantota Port project catering to general cargo and bunkering too will commence. Meanwhile SLPA will handle the development of the Trincomalee Integrated Port city development project. For an island economy dependent heavily on import/export business and growing transshipment volumes continuing port development is vital for survival.

The port is a national treasure that should be protected and developed. The southern expressway, the much awaited gateway to the prosperous Ruhuna is slowly emerging opening many new opportunities for people. It is worthwhile to quote the JKH Chairman in his nine months interim report where he said, “The last quarter has been challenging for the country and the group, the conflict has continued to plague the smooth functioning of government and business, bottom line of the leisure industry have been affected by violence. Nevertheless the group is moving forward with its regionalization strategy, in keeping with our bold nature and our positive outlook we plan to grow aggressively using the competencies and skills that we have proactively developed to meeting such challenges”.

Sports to boost leisure industry
Sports is now a lucrative global industry and the focus will be on the World Cup cricket tournament that will commence shortly in West Indies. Sri Lanka managed to host the SAF games last year but was unfortunate to miss the much looked forward 3-nation cricket tournament when South Africa withdrew after a bomb blast in Colombo.

Another unfortunate casualty of the on going conflict was the Rugby Asiad scheduled to have been held in Colombo in November. At the moment prospects for 2007 seems bright with the Rugby Asiad now being planned for November. Additionally a 4-nation cricket tournament with participation from South Africa, India and Pakistan is being scheduled for mid 2007 immediately after the World Cup.

Towards the end of the year England are expected for a test cum one day series. Just a few weeks back international celebrity Cliff Richard performed in Colombo before a packed audience. All these are positive signals amidst strife that will boost the affected leisure industry a great deal.
Email: suvink@eureka.lk