ECONOMIC AFFAIRS
THE GROWTH CURVE
GATEWAY TO SOUTH ASIA
Dr. Kumudu Gunasekera urges Sri Lanka to leverage its strategic geolocation
“One of the critical steps for Sri Lanka to return to a long-term growth plan, which will help achieve its potential, is to hold the presidential and general elections soon. Providing medium-term clarity for the next five years on the governance and economic policies of the government will generate confidence among both local and international investors, who will then initiate projects and catalyse long-term growth,” surmises Dr. Kumudu Gunasekera.
Listing policies that will attract global businesses to invest in the island, he cites “a stable currency, ease of dollar inflows and outflows, and being the gateway to South Asia” as the top priorities.
“A stable currency doesn’t necessarily mean an absence of depreciation – but rather, predictable depreciation over time. This is critical for global businesses as currency depreciation is a key element for ROI calculations on any initiative,” Gunasekera notes.
Regarding the ease of dollar inflows and outflows, he observes: “Over the past three years, Sri Lanka has lost its credibility as a destination where businesses and individuals can repatriate their profits or earnings with ease. This has resulted in global entities resizing their operations in Sri Lanka and choosing other destinations for new projects.”
GATEWAY Gunasekera believes that the island can be a gateway to South Asia since the region – with about two billion consumers – represents around 25 percent of the global market. And global businesses are actively looking to better understand and engage with their stakeholders.
“Geopolitically, Sri Lanka is a friend to all of South Asia and that bodes well for global businesses to set up regional headquarters in the country. However, having favourable bilateral trade agreements with other South Asian countries is important and should be a governmental priority,” he urges.
PROSPECTS Expressing optimism about Sri Lanka’s growth prospects, Gunasekera attributes this to underlying historical growth drivers such as the island’s maritime location, tourism, liveability and human capital.
He affirms: “These historical growth drivers, along with becoming a gateway to South Asia, can propel Sri Lanka along its developmental journey. However, stable and forward-thinking governance is a prerequisite for such progress.”
Gunasekera opines that Sri Lanka should position itself across multiple fronts rather than restricting itself to one or a few. “Tourism, logistics, tech, business process outsourcing (BPO) and knowledge process outsourcing (KPO) along with manufacturing are the thrust sectors that have the greatest potential for growth,” he states.
EXPORTS Sri Lanka has the potential to be and do many things but it hasn’t been able to carve out a niche for itself as it once did decades ago for tea and apparel.
Gunasekara avers: “As the private sector is best placed to carve out distinct niches in diverse industries and sectors, it’s not the government’s role to identify and drive initiatives. At the macro level however, the government should help ease bottlenecks and constraints wherever these are identified by industrial or sectoral bodies.”
For instance, the government can play a role in alleviating the constraints affecting tourism by enabling a seamless cost-effective entry or an exit visa mechanism for visitors; helping to address the acute labour shortages and turnover across all employee categories; and implementing a standardised certification programme for adventure activities and excursions.
Acknowledging that the brain drain is a result of economic shocks that occur from time to time, Gunasekera says that “the spike we are currently seeing is a result of the balance of payments crisis in 2022. With the economy stabilising, the uptick in the brain drain will subside and return to more sustainable levels. The only solution to stemming a future brain drain is sustained economic growth.” he declares.
An improved gender balance in the workforce could also improve Sri Lanka’s prospects, according to Gunasekera.
He elaborates: “Given that 52 percent of the local population are females and a majority of the brain drain relates to males, mobilising the female labour force is critical to Sri Lanka’s success. Plenty of work needs to be done in this regard by the private sector by way of providing conducive work environments and flexible hours. The government should enact laws and establish regulations that reflect the demands of the existing labour force.”
Alleviating fears about a downturn, he explains that this is not solely a Sri Lankan problem but a global phenomenon instead. All major global economies such as the US, Europe and China are experiencing economic downturns; only India is seeing high growth projections over the next decade, according to him.
GROWTH Evaluating the potential sectors that Sri Lanka should prioritise to accelerate growth, Gunasekera asserts: “The four sectors that I’m optimistic about are tourism; manufacturing; logistics; and tech, BPO and KPO.”
He continues: “Of these, tourism is Sri Lanka’s bellwether industry, given its localised trickle-down economic impact. As such, it’s important for the government to facilitate the industry and provide the support it needs.”
Global businesses are adapting ‘nearshoring’ as a strategy and “this enables businesses to reduce costs, improve communications and collaboration, and reduce risks.” As a nearshoring destination to India, Sri Lanka should explore the possibilities that accompany its strategic geolocation.
However, Gunasekera cautions that “geopolitical tensions are on the rise in multiple hotspots across the globe. This is now the ‘new normal’ and as such, Sri Lanka should build resilient economic systems that can withstand sudden spikes in tensions around the world.”
“The resilience of the Sri Lankan people can’t be underestimated. In spite of the many disappointments and setbacks over the years, I am optimistic about Sri Lanka’s growth prospects,” he enthuses.
Gunasekera adds: “Given the size of the economy and its relative debt, a decade of unfettered growth will propel Sri Lanka back into a strong economic position. In the coming decade moreover, it can be a beneficiary of India’s growth tailwind.”
Looking ahead, he posits: “In the next five years – following elections in 2024/25 and 2030 – the economy is positioned to reach stabilisation mode. Thereafter in the next five years, which will be the following election cycle (2030-35), the economy will be positioned for takeoff.”
“Of course, all this depends on the implementation of economic policies that are focussed on a 20 year vision and good governance,” he concludes.
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