CONSUMER DEMAND

Compiled by Yamini Sequeira

UNLOCKING POSSIBILITIES

Rohana Dissanayake takes a peek at where Sri Lanka Inc. is heading today

Sri Lanka’s economy has demonstrated remarkable resilience over the past year or so, stabilising after a crippling crisis. Businesses are adapting to the new landscape and investor confidence is gradually returning – however, several challenges remain.

“The swift return to stability has been a relief but disposable incomes have yet to recover fully. Many Sri Lankans continue to seek opportunities overseas, resulting in a shortage of skilled labour in key sectors,” notes Rohana Dissanayake.

At the same time, he avers that the government is making progress in improving the ease of doing business.

“Digitalisation of state services is a welcome initiative. However, delays in investment approvals remain a major hurdle. On a global scale, concerns about a potential trade war loom, though it is too early to assess its full impact,” he adds.

PENT-UP DEMAND The motor vehicle industry has faced immense challenges over the past year. Import restrictions over the last five years forced companies to adapt with many turning to the secondhand market. What’s more, individuals employed by the industry experienced job losses during this period.

Dissanayake explains that “a few players successfully introduced new vehicles through domestic value addition schemes, integrating 20-25 percent local content. With full-scale imports resuming in February, the industry is expected to witness renewed activity.”

Despite this, challenges remain.

“Taxation on vehicles is notably higher than before. Given the prevailing disposable income levels, demand may take time to recover. Higher vehicle prices call for larger financing requirements, making leasing a major financial commitment for consumers. With increased costs, we expect demand to shift towards smaller vehicles with better fuel economy,” Dissanayake asserts.

Disposable incomes – a crucial factor in consumer spending – have yet to return to their pre-crisis levels. But inflation, which peaked at record highs in 2022, has moderated.

“The deflationary trend of recent months is offering some relief, particularly due to lower energy costs. Having said that, a full recovery will take time. The Central Bank of Sri Lanka projects inflation to stabilise at around five percent in the latter half of this year. If sustained, this will help balance business growth with consumer purchasing power,” he adds.

Stability in inflation is expected to encourage spending and investment, both of which are vital for long-term economic growth. However, as Sri Lanka looks ahead, certain structural challenges may prevent the country from reaching its full potential.

He elaborates: “Improving the ease of doing business could unlock greater growth than projected. Infrastructure improvements and consistent economic policies are also crucial for sustaining momentum. With the right reforms, Sri Lanka can attract more foreign direct investments (FDI), which would strengthen the economy.”

GOING GREEN Sustainability has become a key priority for many companies as stakeholders increasingly recognise the environmental impacts of various sectors, and the urgent need to address these issues for the wellbeing of present and future generations.

“Manufacturing must prioritise decarbonisation, energy efficiency and a transition to renewable energy. Efficient water and waste management, circular economy practices and ethical sourcing will also be critical,” he opines.

Dissanayake also claims that “high capex projects such as renewable energy can be further expedited with favourable financing options from banks and financial institutions. Social responsibility and employee wellbeing are equally important components of sustainability efforts.”

The financial services industry, a key driver of economic stability, has demonstrated strong resilience in financial year 2024/25. Stabilising macroeconomic conditions, falling inflation and easing interest rates have boosted credit demand.

“Sectors such as small and medium-sized enterprises (SMEs), leasing and working capital finance are experiencing renewed growth. Digital transformation has also played a crucial role in strengthening the industry,” he notes.

DIGITALISATION Looking ahead to year 2025/26, Dissanayake remains optimistic: “With the economy growing steadily and import restrictions easing, financial pro­ducts and services will see higher demand. Leasing and digital banking are expected to expand, driven by a growing middle class and rising financial inclusion.”

“We also see strong potential in green finance and sustainable investments, aligning with global trends and Sri Lanka’s sustainability goals. The sector’s ability to adapt to shifting market dynamics will be key to sustaining growth,” he muses.

And tourism, one of Sri Lanka’s strongest industries, is experiencing a welcome resurgence.

BRAND CONFUSION Dissanayake states: “Tourist arrivals in 2024 were impressive with the highest ever January arrivals recorded this year. However, there is room for improvement. Attracting more high spending tourists should be a priority. Adopting minimum standards across the industry would enhance the quality and consistency of Sri Lanka’s tourism product.”

Moreover, he highlights a longstanding gap in destination marketing, adding that “Sri Lanka has not run a comprehensive promotional campaign since the end of the civil war. A well-executed effort could improve awareness in key markets.”

Dissanayake continues: “Brand confusion also exists with different industries using either ‘Ceylon’ or ‘Sri Lanka.’ A unified branding strategy would strengthen our identity. Infrastructure upgrades, especially airport capacity, are another critical need. Streamlined law enforcement is also necessary to reduce incidents that negatively impact visitor experiences.”

He emphasises that renewable energy and digitalisation could be transformative for Sri Lanka.

“To attract FDI and accelerate growth, energy costs must be reduced through renewables. Digitalisation is also crucial – broadband and 5G investments will support the IT industry while improved e-governance can enhance state efficiency. Digital skills development, cybersecurity and data protection must also be prioritised for sustainable progress,” he asserts.

A holistic approach considering the requirements and concerns of all stakeholders is essential to ensure the success of key projects such as digitalisation.

Dissanayake emphasises the need to position Sri Lanka’s strategic location in the Indian Ocean so the island can aspire to become a maritime hub: “Beyond port services, we have strong potential for multi country consolidation and assembly operations. Developing logistics distribution centres and free trade zones (FTZ) could reduce costs and transit times.”

In his view, Sri Lanka can become a key assembly hub, where components from different countries are brought together, assembled and shipped out as finished products.

“Becoming a regional assembly hub could attract global manufacturers seeking cost-effective locations. However, for this vision to materialise, substantial foreign investments are needed. Improving the ease of doing business will be crucial to unlocking this potential,” he concludes.

The interviewee is the Group Chairman and Managing Director of David Pieris Holdings.