ECONOMIC SUSTAINABILITY

Compiled by Yamini Sequeira

EVOLVING BUSINESS MODELS

Gahanath Pandithage makes a case in favour of creating a catalytic environment

The corporate sector faced a particularly challenging period at the height of the economic crisis last year, which was marked by a foreign currency shortage, import restrictions, and fuel and power crises.

Despite these difficulties however, many organisations were able to navigate the turbulence by adopting diverse strategies. They included focussing on local value additions, diversifying into businesses that generate revenue beyond Sri Lanka and concentrating on enterprises that offer solutions tor broader sustainability issues.

“All these approaches helped reduce our dependence on imports and strengthen resilience to economic challenges. Additionally, automation and business process reengineering were key factors that enabled organisations to weather the challenging times,” explains Gahanath Pandithage.

INNOVATION Commenting on the key export industries that managed to perform amid the stressed environment, he asserts that “the apparel industry played a significant role in improving export earnings during the challenging times; but recently, its contribution has declined due to recessions in major export markets.”

Pandithage adds: “Therefore, it is imperative for the apparel industry to shift its focus to new markets while emphasising the importance of sustainability.”

“Agriculture-based product exports have also contributed to boosting export earnings and I believe that this sector has potential – especially in the value added products sphere,” he observes, urging the corporate sector to “work towards transforming local farmers into ‘agripreneurs’ (agricultural entrepreneurs) to reap real benefits in the global arena.”

He adds: “In today’s volatile economic climate, it is essential for organisations to build resilience to potential shocks. Diversified groups have more opportunities to tolerate economic shocks due to their diverse and balanced business portfolios. However, their diversification strategies should prioritise sustainable business solutions and local value addition. In anticipation of the downside risks, businesses must pursue diversification as a strategy to mitigate these risks.”

Businesses should venture into industries with a higher component of local value addition as “this will reduce dependency on imports and increase the resilience of [their] product portfolios,” Pandithage notes.

Diversification strategies have also helped enterprises to go beyond Sri Lanka to generate revenue in foreign currency through exports or operate businesses abroad and generate profits in dollars.

“Connecting business models through sustainability can positively impact people, business and the environment since it helps organisations to navigate any challenges. It is crucial to prioritise sustainable business practices that not only protect the environment but also contribute to social and economic development,” he maintains.

LIMITATIONS Pandithage observes that “the forex crunch had a severe negative impact on almost every sector.”

He explains: “For example, exporters were unable to source the required forex to import essential items such as raw materials and equipment for their production processes. Importers were helpless; they were unable to find sufficient foreign exchange for their imports.”

“This shortage also affected banks and caused delays in endorsing documents to clear goods, leading to additional demurrages and an increase in the cost of imports,” he elaborates.

Import regulations drastically impacted the motor industry, resulting in mass scale layoffs. The lack of forex also severely impacted the transport sector since fuel imports were affected. Fuel shortages led to additional power cuts, and this hampered the day-to-day operations of every industry and sector. Pandithage notes: “The forex crunch had a ripple effect on the entire economy, and its impact was felt by every sector and industry. It is crucial for the government and private sector to work together to mitigate the effects of such situations in the future by taking proactive measures to build resilience against external shocks.”

OPPORTUNITIES “Sustainability linked industries and sectors such as agriculture and renewable energy hold immense potential for Sri Lanka,” he says, regarding future thrust areas.

Pandithage adds: “Additionally, the digital arena is also a promising area for growth. Three crucial factors of technology that are likely to dominate the future world are predicting demand, tracking supply and analysing data. The digital sphere will play a pivotal role in facilitating these capabilities.”

There is also a strong demand for agricultural products that can be supplied to the international market. A well planned and progressive shift to sustainable agricultural practices can supplement earnings from the industry, which is currently struggling to support large local farming communities.

According to The Economist, global energy prices are projected to trend upward, driven by increasing Asian demand and supply constraints due to the ongoing war in Ukraine. This will lead to increased demand for renewable energy worldwide.

Sri Lanka can capitalise on this trend by investing in renewable energy infrastructure and positioning itself as a potential supplier of such resources.

BRAIN DRAIN Talent migration is a growing concern in Sri Lanka as more skilled and semiskilled workers migrate in search of better opportunities.

This trend can have a severe negative effect on the country’s economy as there will soon be a shortage of highly skilled workers, which in turn will hinder innovation and the transfer of technology in the years ahead.

“This can delay an economic recovery and undermine the country’s ability to handle health crises, especially in mission critical fields such as engineering and healthcare. Policy makers must address this issue by assessing the level and composition of migration from the country to determine whether it is harmful or beneficial,” Pandithage suggests.

He notes: “In today’s dynamic corporate landscape, retaining skilled workers has become a critical strategic imperative. One effective approach is to develop an internal training and development programme that enables businesses to build a pipeline of skilled workers while improving their standards to meet the demands of the current job market.”

WISH LIST His wish list on behalf of the corporate sector this year includes political stability; proper mechanisms to restructure government debt; reforms to improve the efficiency and productivity of loss making state owned enterprises (SOEs); sustainable economic policies; a transparent system to utilise tax monies; and a solid programme to mitigate the brain drain.

Looking ahead, Pandithage surmises: “Sri Lanka’s economic outlook has improved in recent months with positive signs such as increasing consumer confidence, a boost in tourism, a rise in foreign reserves and the strengthening of the Sri Lankan Rupee.

“However, it is crucial for the government to implement the proposed reforms that will create a supportive environment for sustainable growth,” he concludes.

The interviewee is the Group Chief Executive Officer of DIMO.

Sustainability linked industries and sectors such as agriculture and renewable energy hold immense potential for Sri Lanka