Amidst the rubble: Moving forward
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There were sombre thoughts and an air of melancholy in the household, and also the neighbourhood. Kussi Amma Sera (KAS) and her friends had returned from the village after their extended Avurudu vacation, sad on one side but eager to find out what was happening in Colombo after the Easter Sunday carnage.“Mahattaya, megollo vanachara saththu wagey hasirune (These people behaved like wild animals),” KAS said, in an expression of anger over the terrorists, while handing over a cup of tea in the sitting area. I nodded in agreement, glad that she had returned.
Minutes later under the Margosa tree, KAS, Serapina and Mabel Rasthiyadu huddled together, discussing the Easter Sunday crisis which has rocked the nation and transported us back to the troubled days of the 30-year conflict where tension, high security and troops on the roads were the order of the day.
“Hari aparadayak (what a crime),” said Serapina, shaking her head in disgust and anger. “Aaanduway, maykata sambanda aya ikmanata ath-adanguwata ganna onay (The government should arrest those involved fast),” said Mabel Rasthiyadu.
“Hari aparadayak,” repeated KAS, nodding her head in a show of resignation.
While they continued their under-the-Margosa tree conversation, which I gladly welcomed after a near three-week absence, the phone rang with my jolly-mood economist friend, Sammiya (short for Samson), on the line. It was a welcome call and a moment to reflect on the economic and business impact of Sunday’s blast.
“Machan, the economy will be in reverse gear at least for the next six months,” he said.
I agreed, adding: “Absolutely and it couldn’t have come at a worst moment like this.”
“Meaning?” he asked. “Why…….this is an election year and already the economy was on election mode and consumer sentiment was down,” I said, adding that the Avurudu celebrations in fact were less than in previous years as people didn’t have money in their pockets.
With the country heading towards elections, no one knows … not even the Elections Commissioner as to when the next election would be held. The situation in 2019 is bleak. There have been to-and-fro arguments between the governing parties and the opposition on elections and everyone was on election watch but the latest crisis exacerbates the situation further with the conduct of any election becoming a security nightmare. Elections to provincial councils, parliament and the presidency are due in the next 6 to 12 months – this time undoubtedly with a larger security presence.
“Machan, the capital and current expenditure of the government will now rise substantially with the purchase of more defence equipment and enhanced security in the country,” Sammiya said, resuming the conversation. “Yes….….we’ll be back to the 1983-2009 kind of security blanket with troops on the streets under a state of emergency,” I said.
While the first casualty of Sunday’s attacks is tourism – hundreds of cancellations have been reported – this sector is also fast to recover and rebound if and when visitors are assured that the situation has returned to normal and travelling to the country and within the country is safe.
The authorities on Thursday announced the suspension of a free, visa-on-arrival scheme from May 1 for nationals of nearly 40 countries.
Tourism authorities were, however, hopeful of a speedy recovery with the security forces taking control of the country and bringing some order — though searches of suspicious vehicles and parcels in the past few days have caused panic. There was less traffic on the roads these days since last Sunday, with residents postponing getting onto the streets for non-priority work.
While the Central Bank Governor Dr. Indrajit Coomaraswamy said macro economic fundamentals are still in place and hoped for the situation to improve in the coming days, sentiment is low and it may take weeks or months for tourism to recover while foreign investor mood faces the same dilemma.
The Central Bank (CB) on Thursday released its 2018 annual report which revealed that economic growth had slowed down to 3.2 per cent last year from 3.4 per cent in 2017. The CB said Sri Lanka can no longer afford to postpone its reforms agenda, “if it is to progress along a high and sustainable growth trajectory over the medium term and catch up with countries that were behind Sri Lanka several decades ago”. Economic growth this year is expected to fall.
“Timely implementation of these reforms will not only improve Sri Lanka’s economic outlook and its prospects as a highly sought after destination for investments given the country’s strategic location in the Indian Ocean, but would also be essential to uplift the overall standard of living and quality of life of its people,” said the report, which was prepared much before Sunday’s terror. In the context of today’s security needs, these words would mean nothing as investor sentiment has now been dampened by a new and longer-term threat: Internationally-linked terrorism. On the flip side, with western capitals having undergone similar attacks in recent times and most countries in Asia also facing similar problems, Sri Lanka is not alone in the realm of international terrorism and this would be a factor in deciding where to invest.
The report revealed that while migrant worker remittances, the highest earner of foreign currency, had dropped in 2018 from 2017 and showed a sharper fall in January 2019, foreign earnings from tourism (the fastest growing sector in Sri Lanka) had risen sharply and so had garments exports, largely due to increased exports under GSP+ to the European Union (EU). How Britain’s exit (Brexit) from the EU will impact on garment exports remains to be seen.
Also how the attacks and its aftermath in a tense security situation will impact on the Sri Lanka rupee and its demand in international markets, remains to be seen. Since January 2919, the rupee has stabilised against the US dollar and, in fact, appreciated after surging depreciation last year.
In the next six months, while tourism recovers slowly – albeit in an environment where foreigners feel safe to travel to the country and within Sri Lanka –, as stated earlier, foreign investment is likely to be the worst hit. With the year being considered an election year and with uncertainty round the corner, an early pickup in foreign investment – just like in 2018 – is very unlikely.
We live in uncertain times and notwithstanding elections, the country needs a statesman-like approach to the security of every citizen and the nation without considering the politics and ethnicity of the individual. All political parties and religious groups must come together in this hour of need and work towards restoring security, peace and democracy; again, irrespective of one’s politics, religion and ethnicity. The people need it; the economy desperately needs it!