Corporate chiefs, economists urge ‘tough’ decisions
Even as a new government takes office with the promise of economic reforms that would last the next five years, Sri Lankan economists and corporate leaders are urging ‘tough’ economic decisions, overhauling the bureaucracy and trimming the fat at state enterprises to take the country forward.
Dr. Sirimal Abeyratne, noted economist and Lecturer, Department of Economics, University of Colombo told the Business Times that ‘hard and difficult changes’ need to be implemented to reach 10 per cent GDP growth, which according to him isn’t a challenging target in the medium term. “Building business confidence is a top priority for the new government in the short term which will require a series of policy reforms,” he said, highlighting policy as well as political stability as an immediate requirement.
According to Suresh Shah, past President Ceylon Chamber of Commerce (CCC), a serious review of the country’s agriculture policy in which 30 per cent of the population are involved in an activity that contributes less than 10 per cent of GDP, tackling youth unemployment and increasing household incomes are three key priority issues. Tourism industry’s Hiran Cooray said the UNP-led government had in the first six months of the year done well to improve strained relations with the West and India which had bolstered arrivals. “Now the focus should be on a proper brand and destination promotion strategy,” Mr. Cooray, Chairman Jetwing Group said.
Another corporate sector leader, who declined to be named, said the plan to create 46 economic zones across the country was a good one. “The government needs to invite the private sector to invest in setting up these zones as a lot of capital is required.”
Success at this week’s poll by the private sector-friendly UNP was however not unexpected and thus didn’t generate any excitement particularly in the stock market where analysts called for quick reforms to invigorate the capital markets.The January to August 2015 period was seen as a transition for Sri Lanka under a mixed SLFP President and a UNP administration which saw little investment activity as the private sector resorted to a ‘wait and see’ for long-term signals on reforms which were held back due to polls.
The administration is confronted with daunting economic challenges particularly in managing debt and negotiating new debt servicing schedules. Already advisors of the Prime Minister are informally tapping the private sector for views on driving forward various sectors and preparing the necessary strategies. Samantha Ranatunga, CCC President, says the private sector has to regain confidence in order to trail blaze new investments and growth.
“This confidence is brought in mainly by the government showing that projects are supported (by them) on merit,” he told the Business Times. He added that there is a need for greater understanding of government policies by the private sector. Economist Dr. Abeyratne said in terms of the balance of payment crisis, Sri Lanka should replace remittances growth with export growth while foreign borrowing should be replaced with foreign investment.
Managing the exchange rate will be difficult in the short term, he said, adding that this must be done gradually.
The country’s debt burden, he added, is 700 per cent of its tax revenue. “This means Sri Lanka cannot waste public money anymore,” he noted while calling for the 300 state-owned enterprises to trim the fat and enhance its competitiveness. Former CCC President Shah believes the government should initiate a dialogue with the private sector on its proposed second generation reforms plan. “One of the biggest problems has been inconsistent policies (in the past) and this I believe is a priority to resolve in the next six months”.
He said the bureaucracy needs to be re-motivated to play a facilitation role. Earlier officials were either not empowered, lacked skills, not motivated or incapable. “They just didn’t move fast enough,” he said.There is also a need for government facilitation for Sri Lanka to quickly move up the World Bank’s Ease of Doing Business Index from the current 99th position. “For example registering a company takes days when it could be done in a day with the right technology while construction permits take far too long,” he said citing an instance where the chamber sought-permit to expand its space at the same premises took a whole year to approve.
He also believes another priority is providing project-based credit and not security-based credit for SMEs and small companies which will strongly stimulate the economy. Among long term challenges were improving infrastructure like power where problems include ‘brownouts (cuts)” in areas outside Colombo and telecom broadband speeds slowing down in many areas outside the capital.