Koshy Mathai’s reflections on emerging ‘Wonder of Asia’

Monday, 23 December 2013 01:38 -     - {{hitsCtrl.values.hits}}

  •  IMF Resident Representative for Sri Lanka and Maldives Dr. Koshy Mathai ends his term in Sri Lanka
By Sarah Hannan As his term in Sri Lanka came to an end, IMF Resident Representative for Sri Lanka and Maldives Dr. Koshy Mathia reflected on the economic growth in Sri Lanka within the last four years. Dr. Mathai speaking at the 55th Annual General Meeting of the National Chamber of Commerce Sri Lanka last week stated: “There has been tremendous and dramatic improvement in many macro-economic conditions. The growth has been quite rapid in these last three years. There are of course persistent questions about the quality of the statistics put out by the government. Those have to be addressed; the Government needs to do more to publicise the methods they follow to compile these statistics, in order to gain more confidence among the public in the numbers. Notwithstanding debates people might have with the particular numbers.” Positive aspects Observing the positive aspects of the economy of Sri Lanka Dr. Mathai noted that Sri Lanka has been growing at a rate of nearly 8% which gives the country an upper hand in emerging markets. Inflation in these last few years has been lower than the past 15 or 20 years – though the cost of living is high, the inflation rate is reasonably under control for a country at this stage of development with a steady progress in terms of reduction of annual deficit under 6%. “The reserve coverage in the Central Bank is still too low; it needs to be built up further. The current account deficit is still quite large and it is financed through a lot of borrowings as opposed to Foreign Direct Investments (FDI). Those are things that need to change but the indicators in all those areas have improved. The reserve coverage has increased dramatically since 2009, the current account deficit has come down and FDI after a long delay I would say is showing signs to come,” Dr. Mathai stated identifying the weaknesses. ‘Wonder of Asia’ Sri Lanka becoming the next wonder of Asia, an emerging wonder of Asia, US$ 100 billion economy, US$ 4,000 per capita income – all these are slogans being heard. But they are slogans that can be realised with more capital investment from the public and private investments; more revenue to be collected; private sector to be mobilised by establishing Public-Private Partnerships (PPP); the banking sector has much strength; branch penetration is great as many citizens have several bank accounts. But consolidation in the banking sector and the non-bank finance institution sector is needed in order to support the financial sector at large. Focusing on disadvantages in the banking and financial sector Dr. Mathai pointed out: “It is very difficult to get long term finance from the bankers in this country. With access to long term to funds this country can go places. Strong and credible regulation; and strong and credible regulators need to be in place in the stock market to earn the trust of the community and invite and encourage all members of the society to participate in the capital market. This will help the price discovery, will help the financial sector and the overall growth of the economy and dramatically strengthen the stock market of this country.” Indian opportunity “We have to take advantage of the opportunities India has to presents to us. Taking advantage of export markets in the region is something that would help overall export numbers to go up. There has been a steady decline for a long time. We need to talk less about import substitution and more talk about export promotion,” Dr. Mathai further commented. Speak out Aside from all these specifics of economic policies; there is a great reluctance on the part of the people of the society to discuss and debate ideas. It may be difficult for individual firms and individual people to make comments, but that is where the chambers come in to play to collectively voice-out and work. Dr. Mathai ending his speech stated that he considers himself fortunate to see things happen and it has been quite inspiring to witness the progress Sri Lanka has made already and when he returns in 10-15 years from now to see a total difference where the economy of Sri Lanka is not emerging but it is already emerged.