Sri Lanka’s IT BPO spikes amidst waning corporate sector confidence
Amidst growing sentiment of cynicism and slow private sector credit growth, Sri Lanka’s business sector confidence has plunged to very low levels although IT Business Process Outsourcing (BPO) spiked significantly despite political uncertainty, economic analysts say.
Private sector credit growth in February slowed to a low of 13.6 per cent, down from 14.8 per cent a month ago, Central Bank data showed.
A working group appointed by Prime Minister Ranil Wickremasinghe to look into this issue and make recommendations noted that “although no interest rate caps on lending has been proposed by them at this stage, the need for it will be reviewed if the intended reductions do not take place expeditiously.”
They have recommended imposing deposit interest rate caps on banks, and revising the basis for determining the existing caps on finance companies.
Another recommendation was to permit deposits up to Rs. 250 million from SMEs (instead of the present limit of Rs. 50 million), to be treated in a manner that will reduce the liquidity requirements needed under the liquidity coverage ratio.
The working group also recommended banks should design a revolving working capital product for SMEs to replace the Terms on Over Drafts (TODs), and introduce risk-based pricing instead of applying the unauthorised OD rates.
Sri Lanka’s private sector entities including top corporates have taken a beating especially following the prolonged drought and ensuing political tug-of-war and resulting instability during the 52-day political impasse instigated by the President during the end of the last quarter of 2018, an official report revealed.
However four of the largest diversified corporates, two private sector banks, two largest apparel manufacturers, a multinational consumer goods company and a major telecommunications service provider in Sri Lanka have been able to keep their heads above troubled waters during this period.
Sri Lanka corporate performance is reported to have been facing a challenging time, reflecting from bad to worse economic conditions in several of its core sectors, though few companies remained resilient to improve their bottom line, the report indicated.
Sri Lanka is emerging as a global IT Business Process Outsourcing (BPO) destination of choice in a number of key areas despite the country’s not so rosy economic conditions.
The BPO sector includes financial and accounting services, investment research, engineering services, and UK-based legal services.
Several US companies, many small or medium sized, are developing software in Sri Lanka.
The government seeks to further develop Sri Lanka as a base for information technology, call centres, and outsourcing, the official report revealed.