Sad times-Part 2
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Kussi Amma Sera was angry. I hadn’t seen her like this before.
Seated under the Margosa tree with friends-for-life Serapina and Mabel Rasthiyadu, she said: “Balanna … apey manthrivarun hasirena vidiya. Ee-gollanta meka loku vihiluwak waa-ge (See how our parliamentarians are behaving. It’s like a big joke for them).”
She was referring to the special session in Parliament discussing the Easter Sunday bombings, particularly scenes of a few MPs amused and laughing when former army commander Sarath Fonseka spoke.
“Owunge aarakshawa gena vitharie vadime unandu-wenne (They are more interested in their own security),” said Serapina.
Their conversation occurred in the backdrop of a sombre neighbourhood, for the second week, after the Easter Sunday incidents. Except for the loud ‘choon-paan karaya’ driving down the lane in his three-wheeler, there was silence and even the usual blaring of music from the radios was missing.
The trio then discussed everything under the sun including the cost of living, the difficulty in some of their sons getting jobs and other issues.
As I sat down in the sitting room, sipping a hot cup of Kussi Amma Sera’s tea, the morning silence was broken by the ringing of the landline. It was Pedris Appo, short for Appuhamy, a retired agriculture expert who does farming. I hadn’t spoken to him for a while and thus was glad he was calling.
“Hi … the Easter Sunday attacks were very demoralising to all of us,” he said, to which I replied, “Absolutely”.
“The impact will be devastating,” Appo, who also likes to discuss economic issues, said, adding: “Tourism will be the worst hit.”
“Would we be able to recover from this crisis?” he asked. “We have to. We have had similar crises like this before and recovered though the recovery will be slow,” I said.
We then discussed the cancellations by tourists as reported by several hotels, the postponement or cancellations of tourists coming for conferences and incentive trips, the losses that would be incurred by SriLankan Airlines due to the drop in traffic, among other matters.
As our stories last week and today reflect, tourism is the first casualty from the current scenario, more so because of travel warnings by several countries including India, China, the UK, the US and Canada, urging their nationals to avoid non-essential travel to Sri Lanka. There is no way Sri Lanka can achieve the ambitious target of three million tourists this year (compared to 2.3 million in 2018) with conservative estimates showing that there would be a 30 per cent drop in arrivals. Tourism is the fastest growing economic sector and the third largest earner of foreign currency after worker remittances and garments exports, and the authorities were banking on a good year in 2019. Not anymore.
While the macro-economic fundamentals are strong, according to the Central Bank, lower earnings from tourism and more subdued FDI (foreign direct investment) would be the biggest hits to the economy. Until potential investors are convinced that the security situation is under control along with consistent policies, they wouldn’t choose to invest in Sri Lanka.
Sri Lanka’s debt is also likely to rise with an increase in government spending on the military particularly in the procurement of equipment necessary to meet the new threat from terrorism and rebellious religious fundamentalists.
The cost to purchase metal detectors and other security equipment by hotels to ensure the safety of guests would also hit the bottom line of hotel companies.
Slower-than-expected tourist arrivals and foreign investment would affect economic growth which was set to grow by four per cent in 2019 from 3.2 per cent in 2018.
Tea prices are likely to fall, the import bill would rise owing to increased spending for the security forces, which is needed of course, and urgent structural reforms are likely to be put on hold. These are some of the issues that the economy would face in the coming months. Whether elections – provincial, presidential and parliamentary – would be held in the next six to 12 months remains to be seen given the current security crisis though any postponement would depend on an interpretation of the Constitution.
(PS: As I write this the choon-paan karaya’s tune can be heard blaring down the lane)
The latest Central Bank 2018 annual report released last week also focuses on many challenges facing the economy. Primarily it speaks of the impact on the economy owing to delayed structural reforms.
It said for Sri Lanka to succeed as a higher income economy and improve the well-being of its people, it is essential that the root causes for the continued low economic growth are addressed.
While the postponement of much needed structural reforms has moved the Sri Lankan economy to a modest growth path, delays in “addressing barriers to growth and introducing growth enhancing reforms in the areas of export promotion, attracting FDI, reducing budget deficits and debt levels, reforming factor markets, strengthening public administration and ensuring the rule of law have largely contributed to Sri Lanka’s economic stagnation”, the report said.
A key point that it makes is that Sri Lanka is unable to succeed despite being blessed with plenty of natural resources and the potential to support a high economic growth path.
The lack of coherent policies is clearly seen during the reign of the Maithripala-Ranil administration, with both ruling parties working at cross-purposes, often one party proposing a policy only to find the other party dismantling it. The government also falls short in resolute and firm decision-making with the recent example of the President’s call to the Defence Secretary and the Inspector General of Police to resign, initially being ignored by the parties concerned.
Sri Lanka has so much more to offer more than economies like Vietnam. FDI in 2018 was a record US$2 billion with expectations of raising $3 billion in 2019, though that is most unlikely owing to the current security situation.
In contrast, FDI in Vietnam, which has much less attractions than Sri Lanka particularly in the case of a skilled labour force with a good knowledge of the English language, rose to $19.1 billion in 2018, up by nine per cent from 2017.
Vietnam’s success is also owing to increased foreign investment in high-tech industries, rather than labour-intensive sectors and much needed structural reforms in the economy.
As I prepare to wind up today’s column with the usual parting shot, Kussi Amma Sera walks in with another cup of tea (which I had requested), saying (with a sad face): “Mokak-da wunay apey rata-ta (What has happened to our country?).”
“Dukai … hari dukai (Sad……very sad),” I reply, reflecting on a nation that was touted as the most peaceful nation on earth for tourists to visit, after the end of the 1980-2009 civil conflict.