Economic crisis brewing in 2008

Economists and industrialists this week predicted that 2008 will be a difficult year for business given rising fuel costs and other financial burden. Company bottomlines are already reeling from the regular fuel increases, and the experts say the government, which is embroiled in a war, will be unable to do anything about it.

Coupled with poor policies and long term development strategies, it is up to the businesses to bring about a turn around, the experts said inefficient policies, a lack of planning and the absence of a long term development plan have created the current energy and food crisis the country is experiencing.

At an exclusive panel discussion on the food and fuel crisis organised by The Sunday Times FT on Thursday at the newspaper office, Sirimal Abeyratne, an economist from the University of Colombo, said he does not see any relief from the escalating fuel costs and only expects prices to increase further in the future.

The only respite that may arise is a comprehensive global alternative energy solution. He also said the government must stop artificially controlling fuel prices and allow domestic prices to reflect world prices in order to encourage conservation and lower consumption. Dr Abeyratne urged the government to seriously look into curtailing wastage and reducing consumption. Managing Director of Nippolac Paints, Raja Hewabowela, reflecting the views of small industry, said business is being adversely affected by the fuel increases. "We can't bear the costs. We can't increase the price of our finished products everyday."

Mr Hewabowela explained that freight charges have increased by 46 percent and local transport charges from the port to the factories have increased by 52 percent. Foreign suppliers are only willing to sign short term sales agreements based on LC terms due to the situation in the country.

Chairman of the National Chamber of Exporters, Rohan Fernando said that despite efforts to hold discussions with the Ministry and the Treasury Secretary to address the energy crisis, attempts have been futile. Mr Fernando said he does not expect the government to reduce energy costs so businesses should find ways to deal with the escalating costs on their own and not depend on the government to lower prices.

He said the government must stop subsidizing the Ceylon Electricity Board, which he described as one of the biggest messes the country has created which is dragging all of ‘us’ down. (NG)