The latest LMD-Nielsen survey: 55% say economy will get worse
- The recent LMD-Nielsen report stating that 55% are saying the economy will get worse does not augur well for the Yahapalana Government
The Sri Lankan economy is worth around $ 93 billion with the per capital income at $ 4,310 and the country achieving most of the Millennium Development Goals. However, the country is going through some tough times with questions on governance stemming from the Central Bank fiasco to the recent power cuts that have taken the Government’s popularity to the wire.
The latest update on the 2019 economic growth is being forecasted at 4% GDP growth for the year in the backdrop of a 1.8% GDP registered in Q4 of 2018 which does not augur well for the country where its neighbours are growing between 6-7%. We expected the Yahapalana Government to bring us in step with the South Asian region but looks like the domestic issues have overpowered the hope of the nation that we voted in 2015.
2019 to date
In this backdrop Budget 2019 was presented, which further fuelled the expectations of the average customer. The pre-poll expectation was that 90% of the people wanted the prices of essentials reduced whilst over 50% wanted a reduction of the price of fuel and gas which did not become a reality except an increased burden due to the power and water issues.
The recent LMD-Nielsen business confidence report stating that over 55% of the corporate community is stating that economic conditions will get worse whilst 57% is stating that sales have declined over last year does not give much confidence to the negativity that exists in society due to the water/power issues. What is more worrying is that the powers in rule are not understanding the reality.
SL losing out regionally?
Global research done on Sri Lanka reveals that apart from the GDP performance of a country, a country’s image tends to have a positive correlation on inward investment, adding value to exports of a country and attracting quality tourists whilst having a positive impact on skilled migrants.
Whilst Sri Lanka is becoming strongly linked to the world post 8 January 2015, it’s also important to understand the reality of the country from a global image perspective. As per Brand Finance, Sri Lanka as a nation is valued at $ 74 billion and ranked 55 globally up from the 76 ranking way back in 2011. In South Asia it is at number four as against powerful brands like India at $ 2,066 with a rating of A+. The report states that whilst Sri Lanka is weak on the area of reforms for economic growth, the problem is that it is also very weak on the area of brand equity building which is a very serious issue as normally the ‘Greens’ are known for strong economic growth and very close engagement with the private sector.
Technically, this can be conceptualised with the rating for the reputation of a country as a society, rather than an economy. In other words it is the political and social reputation of the country globally which we thought would be addressed by the IMF. But sadly this perspective has been coloured with only financial stability being the focus which will push the growth agenda of Sri Lanka by over 100 years. This was mentioned by business tycoon Dammika Perera at the ‘Fireside Chat’ that was staged recently attended by the Prime Minister.
Brand value – Sri Lanka?
A point to note is that Sri Lanka has grown 221% on brand value since 2011, but if we benchmark against Bangladesh which was considered a lower performance country 10 years back, it has beaten us to register a 261% growth and a commanding 170 billion dollar economy. This is very sad given that we were the blue-eyed country to the great Lee Kuan Yew way back in 1960.
The reforms done by Bangladesh on the export front is a lesson for Sri Lanka that we are yet grappling to take control of. Sri Lanka on the export front is more a supplies issue than demand driven but the reality is that in 2018 the growth is just 4.7%. If one does a deep dive the volume growth is by 0.5% whilst the export unit value growth is at 4.1% which does not augur well in the back drop of stellar performance by Bangladesh and India on exports with all its economic and weather issues
Pakistan – Strong in reforms
Believe it or not Pakistan is the trailblazing nation that has grown its brand value from a mere 93 billion in 2015 to 128 billion dollars during the test period up to 2016, at around 38%, which is rooted to the deep cutting-edge reforms that the country has implemented.
The country is implementing the IMF reforms though it is hurting the people which is a key pick up to Sri Lanka in my view. Sadly the other issues on governance and the workings of a political economy is marring this vision in Sri Lanka. For Pakistan, the lower oil prices and improving security situation despite the issue with India on Kashmir is working for the country.
So Sri Lanka
Even after four years Sri Lanka has failed to position the country on the tourism front with the industry struggling to make the P&L look pleasing to an investor. As much as 1,500 properties are up for sale, including two hotels in the city whilst we see March tourist arrivals hitting single digit to achieve a cumulative performance of 4.7%. Research reveals that there is a positive correlation between nation brand building and quality of tourism coming into a country.
The global nation brand policy expert and advisor to many governments globally Simon Anholt advocates from his experience that manipulating the imagery with strong marketing techniques does not help build a strong nation brand. Reputation must be earned over time by the actions that governments implement and people inside the country emanate to the world, which is the exact problem in Sri Lanka.
Even today we see many governance issues that have made it to viral media that is globally accessible – the CBSL bond issue, the resignation of the Bribery Commission DG and the many other arrests that are made of high profile individuals from the earlier regime which affect brand imagery globally even though as a policy we must do these course corrections.
Whilst advocating strong campaigns on tourism and tea, Simon Anholt goes on to say that building brand imagery with diplomacy and marketing campaigns are a waste of taxpayers’ money and must not be done. His logic is that a product sells a promise and hence advertising will help communicate this promise and make the consumer surrender some money to purchase the product (brand).
But, in the case of a country, it is different as with the advertising you are asking someone to ‘change the way they think towards a country’. This cannot be done via sexy advertising. You have to get people to experience the change with actions. On this front the continuous demonstrations we see in Colombo do not augur well for the country. In fact a typical demonstration costs the country Rs. 100 million is the latest research from the think tanks.
Countries like Singapore and Malaysia have shown the world that image can be corrected if it is channelled from the Central Government, not by way of brand marketing but by actions that have earned the respect of the people in the country which has garnered a positive image globally.
Malaysia in particular realised that first impressions count. Many people globally purchase brands by first understanding from where the brand originated. Malaysia also realised that to attract the top end tourist into the country, one must have a strong reputation globally which is conducive. If not, a country cannot garner the best return for the assets they possess.
Much needs to be done and many are saying it but sadly implementation lacks passion and attention to details which leads to inaction. The only remedy is for the people to be more vocal and it is fast becoming a way of life in Sri Lanka.
(The thoughts are strictly the writer’s personal views and not the views of the organisations he serves.)