Rupee devaluation: Tourism will benefit but exports will not surge

Thursday, 1 March 2012 00:00 -     - {{hitsCtrl.values.hits}}

The first Government University of Australia that has set up in the country, the Ballarat University, staged an interesting evening last week under the banner ‘The Ballarat Debate,’ to a select club of professionals at the City Campus that discussed some interesting ideas on Sri Lanka’s economy.

One of Sri Lanka’s award-winning marketers and former Head of the Government Economic Council (NCED) Rohantha Athukorala in his keynote oration said: “With the devaluation of the rupee, Sri Lanka will become more popular as a value-for-money tourism destination but the export industry will not necessary surge.”

The logic for his argument was that with 100 dollars, the products and services that one can buy inside the country will be more as now a tourist would receive Rs. 121 odd as against the Rs. 114 one received a few months back.

Even with the price hike spiral taking form in the country, inflation will be at single digit, which means that the net impact is that a tourist will find Sri Lanka a strong value-for-money destination. This means that Sri Lanka must develop activities outside the immediate vicinity of a hotel property for the economy to really benefit from this key policy decision, he asserted.

It may be nature treks, elephant rides, visits to butterfly or bee farms, village visits, handloom shops, etc., which is what happens when one takes cruise holidays to Alaska, he noted.

Athukorala, who is currently a member of the 2012 Sovereign Rating Team at the Central Bank of Sri Lanka, went on to say that another option would be to start charging tourists in dollars, similar to what happens in Kenya when a tourist takes an excursion inside the country. This is being done by many other countries and not in Kenya alone, he said.

In his view, the same ethos does not hold ground on the exports front even though the devaluation touches double digits. The logic for his argument was that it would take time for a typical factory to ramp up export production even if the market opportunity exists.

He commented that most competitive countries had devalued their currencies by as much as 20 per cent in the last two to three years, which made their country exports very competitive, hence for Sri Lanka to take advantage of the current policy change, it needs to have some careful deliberations that can be done only on a public-private partnership arrangement.

This must include a detailed study of the marketing opportunity in relation to a typical industries and the competitive framework, said the Harvard Alumnus of 2011, who was the eighth Chairman of the Sri Lanka Export Development Board.

The case in point cited was the Sri Lankan tea industry, where Kenya, Thailand and Vietnam together with India had made inroads with cheap quality teas, resulting in markets like Russia Ceylon Tea losing market share.

The University of Ballarat Sri Lanka Campus Director Bhajwa in his concluding remarks said that the university was honored to host such an intellectually stimulating debate and noted that a new culture must be created where universities link up stronger to policymaking and the business world.