Sri Lanka debate: Sri Lanka looks to a brighter future

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With a can-do attitude, the island nation is working hard to move up the league tables by improving domestic conditions for business and inward investment and prompting its international ambitions by signing free-trade agreements with its neighbours.

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EXECUTIVE SUMMARY

• Sri Lanka is aiming for a sustainable, long-term growth rate of 7% to 8% 

• Private companies are flocking in, attracted by a business-friendly government and a low corporate tax rate

• New cities, special economic zones and logistics zones are springing up 

• Colombo is building a new financial centre that will operate under UK law

• FTAs with China, India and Pakistan can turn the country into a regional logistics and manufacturing hub

• Sri Lanka can be to India what Hong Kong is to China: a provider of financial services to the south Asia region

• The government wants to see more consolidation in domestic banking, and deeper and broader local capital markets

Euromoney Sri Lanka’s economy is booming, benefiting from the peace dividend and its role as a gateway to Asia. Where will new growth come from? And how can the country generate a higher, sustainable pace of economic output? 

Ravindra Karunanayake-39

RK Sri Lanka’s economy is resilient. Even during the period of conflict, GDP growth averaged 5%. So achieving an annualized and sustainable growth rate of 7% to 8% should not be a major challenge, so long as things are done properly. Most growth is created in the private sector, so we need to create a business environment conducive to supporting private-sector investment and growth, and to ensure that the public sector works to support the needs of the private sector.

Aravinda Perera-39

AP, Sampath Last year was one of the best in our history, with the bulk of new growth at Sampath Bank emanating not from corporate side but from retail and SME lending. And I see 2016 being a reflection of 2015: it will be a challenging year, but our aim is to secure adequate deposits to match our lending portfolios and to continue to boost retail lending. Our non-performing loan situation is one of best in the country, and we hope to cut bad loans further in 2016.

Indrajit Coomaraswamy-39

IC, CBS Two vital sectors to future growth are business-process outsourcing and ICT. Both are key future export drivers. From a short-, medium- and long-term perspective, it is vital to ensure that we move to a more sustainable growth model. For a long time, we have had a stop-go economy. Now, if you look at the budget, there is a real effort to build a truly sustainable growth model, giving Sri Lanka a GDP growth rate of 7% to 8% over the next 10 to 15 years, rather than pursuing sugar-highs through unsustainable macroeconomic policies. There is a lot of buoyancy in the domestic sector, and better incentives are now in place to attract more foreign investment. When the Soros Foundation organised a summit in January, bringing with it several stellar global economists, their view was clear: they see a world buffeted by headwinds, and within that maelstrom, a potential bright spot in the form of the Sri Lankan economy.

Anushka Wijesinha-39

AW, CCC In the past, a lot of inward investment was in the form of portfolio investment, but we are now seeing a distinct move to more capital arriving in the form of foreign direct investment. At the Ceylon Chamber of Commerce, we see potential investors making genuine contact every week: enquiring how to structure projects and move forward with real inward investment.  Sri Lanka, we remind everyone, is an integral part of Asia’s dynamic economy, and more investors and corporates from Asia, Africa and Latin America are now seeing Sri Lanka as a gateway to south Asia. 

Duminda Ariyasinghe-39

DA, BOI When an individual looks at products and brands, they see first its functional superiority and second the perception of superiority. For years we had to work heavily on both, because of the domestic civil war. Now our message is far simpler and clearer: that Sri Lanka is at an inflection point. Peace is here to stay and we can now pursue a sustainable growth model. Our earlier inward investment model was based on offering tax holidays and incentives. We need to get to the point where investors come for sustainable long-term reasons, and that can be achieved by improving our business environment, driving better connectivity between government agencies and ensuring that we offer investors a one-stop shop inside government, where they can expedite licences and approvals. We need to be able to grant approvals quickly – preferably in a day or two. Investors need to be able to trust us: when they have a question, they need to be confident that they can approach us any time and that we can find a solution to their needs. 

Aswin De Silva-39

ADS, NSB Two sectors in particular are key to future growth. One is construction. A few years back it accounted for just 7% to 8% of GDP and currently it is at 12%. There is a big opportunity to take this forward even further. Then there is the push to build special economic zones (SEZs) across the country, targeting sectors such as tea, rubber, gems and the garment industry. This will also help increase our level of urbanization, which remains relatively low. The banking sector could play an important role in this regard, and the sky is the limit if we can get this business model right.

Ranjith Samaranayake-39

RS, Sampath Sri Lanka’s economy is resilient. Most growth is created in the private sector, so we need to create a business environment conducive to supporting private-sector investment and growth, and to ensure that the public sector works to support the needs of the private industry.