Sri Lanka’s rebound: A conversation with leaders

We must, must, stop clamouring about ‘positive tests’ posing as ‘cases’ – Pic by Shehan Gunasekara

I have been thinking about what Sri Lanka practically needs in order to properly rebound and move forward. In dialogue with the Chairperson and Managing Director of Unilever here, Hajar Alafifi, we discussed how transitioning out of lockdown mania ought to leverage that increasing economic viability. Hajar’s global perspective was invaluable, as is Unilever’s as the largest FMCG and Multinational in Sri Lanka. We expanded our discussion to include Rolf Blaser, Group Managing Director and CEO of Baurs, an innovative, multi-faceted Swiss company established here in 1897, and Hiran Cooray, Chairman of Jetwing as well as Chairman of the Minister’s Advisory Committee on Tourism.

Must win battles

The first issue that loomed large was converting the imperative of a robust economic recovery into a series of what, in corporate strategic circles, we call ‘must win battles.’ What would those be for Sri Lanka?

Of course, COVID immediately rears its wearying, over-hyped head. Hiran mentioned that everything seems wired through COVID: fear of COVID, reactions to COVID, we are getting blocked with ‘Covidian’ paralysis. All common sense is abandoned at the mere mention of the pathogen. I have written at length at how we are over-reacting to a viral strain, particularly in South Asia where ‘positive tests’ posing as ‘cases’ are still quite mild (in Lanka, half of one percent of the population!), and mortality has added no excess to annual fatalities (in Lanka, despite dubious death certificates conflating the mere ‘presence’ of a positive test with a COVID fatality, instead of when the death is primarily via acute respiratory distress). We only have registered 270 deaths while car accidents from March to the New Year despite curfews and lockdowns were just under 2,000! 

This cannot be the basis on which to run your economy, determine your educational prospects, or create guidelines for competitiveness. As Hiran pointed out, Government institutions seem unwilling to take or make decisions. Eradicating a virus cannot be a national imperative, even the Spanish Flu which afflicted one third of a less populous humanity didn’t qualify as the overarching reality of the time, this certainly can’t (again, COVID was less than 3% of global mortality for 2020 as mentioned in an earlier article).

With an economic lens on, beyond ‘COVID management,’ the shift has to be to competitiveness. In short, as Rolf Blaser stressed, increasing the international competitiveness of Sri Lankan products and services, and avoiding protecting or promoting uncompetitive products and services. As he poignantly put it, “We don’t learn to swim in our bathtub.”

Related to that is building and winning back the trust and confidence of local and foreign investors, MNCs, rating agencies, tourists. This does of course require some stability in policy, exchange and interest rates in a business promoting environment. Rolf also mentioned that while ‘Made in Lanka’ is a great initiative, it must focus where we have a competitive advantage: for example, rubber, tea, tourism, ‘medical care’ where we can be far more competitive than say ‘pharmaceutical production.’ We have no real competitive advantage in the latter, but can create real ‘added value’ in other key industries where say in rubber we can promote agriculture and manufacturing, in tea where there is an established heritage, tourism where we showcase our national treasures and indigenous hospitality, etc.

Hajar agreed but flagged the dangers of protectionism. ‘Made in Lanka’ must not morph into that ‘monster’ and thereby leech economic vitality. As she advocates, we must open the economy, but truly open it, not piecemeal, as ‘openness’ begets openness, and different parts of the economy reinforce each other, multiplying benefits overall. As Hajar pointed out, the economy is a ‘whole’ not a jigsaw puzzle. Certainly, looking at our fairly lacklustre rating on the World Bank’s Ease of Doing Business Index (99th), suggests we are far from ideally welcoming and facilitating business. This also requires streamlining public sector complexity, making that sector less costly and more competitive. One almost pines for the Singaporean notion of running ministries on the basis of total quality norms where they are benchmarked for outcomes, quality, competitiveness and related indices. 

The lifting of bans on raw materials is a welcome move in the right direction. More has to flow in this vein. The Government is clearly intending to lead in a constructive direction, but actions have to follow proclamations more decisively. And to that end, again, ‘COVID’ cannot be an excuse for non-delivery, or non-performance, or lack of initiative. Those countries like Lanka so mildly impaired by this virus, have to avail of that advantage, and deliver accordingly.

Chief frustrations

Rolf flagged Labour Law reform. Labour Law originally was for the betterment of the employee, but now is clearly outdated, creating a negative chain reaction, making it actually harder to compete or sanely lure investors on this basis. We have to both enable the employer and protect the employee. Performance based compensation with true promotion and demotion is a must. Allowing unproductive jobs to be cut is painfully necessary, but it also stimulates productivity from other jobs that can help contribute to social security. 

Businesses are also often stifled by administrative complexity, red tape, and bureaucracy. Such ‘complexity’ also invites corruption and undermines service levels for business and personal matters. The paradigm shift from ‘government servants’ to ‘public servants’ has to take place, and not just rhetorically.

We need to inject a sense of urgency as well Hajar urged. Ease of doing business needs to go up, cost of doing business needs to come down. And beyond tourism, we have to understand that people need business travel, and if we make that impractical, it has a real effect and impact on our own growth prospects. I agree with Hajar. At some point, this PCR superstition, excessively long quarantining, has to fade. Again, below 60, without comorbidities, 99%+ recovery rate globally…at what point, do we pluck up our sanity and courage and decide, enough is enough? 

Hiran mentioned his frustration with the fact we are ‘Ceylon’ in some industries and ‘Sri Lanka’ in others. He mentioned that when he flags this, it provokes some ire. But from a branding perspective, it is hard to disagree with him. Of course, ‘Ceylon Tea’ is an established badge of national pride and rightly so. And there are those avidly partial to the ‘Sri Lanka’ denomination. For a small country, wishing to be more visible and better known and to establish its business appeal, it is a fascinating meditation: should we not decide who we are? Globally, for any properly emerging or established economy, can we think of a parallel ‘dual identity’ that has actually been advantageous?

Another shared frustration is the lack of coordination among regional leaders. Again, South Asian leaders could at least collaboratively set policies, synchronise key decisions. As it is right now, everyone is running their own inscrutable trade, travel, COVID and other regimes, which makes harmonising or leveraging very difficult.

GDP

Despite politically motivated spasms of ‘socialist’ evangel, any serious rebound has to focus on growing our GDP, period. With limited resources, capitalism is key, based on high performance, transparency, and a trustworthy rule of law. Only then are we even eligible say for loans from the World Bank and others as Hajar mentioned. A developing country with high debt simply cannot opt out of this.

Sri Lankan GDP has actually plateaued for some time, in the vicinity of 4-5%, even exempting the Easter attack impact. To go to 7 and 8% we really need to stimulate and facilitate local business as well. Hiran mentioned his passion for the 3 P’s: People, Planet and Profit. And clearly the most important, initially, is ‘Profit.’ That’s the only way to endow compassionate capitalism. How else can you look after the planet or its people? Of course, our hearts are with the downtrodden, of course we wish to share education and support, but for that to be viable, real development is inescapable, so everyone flourishes with you. If there is a real success to the Chinese model versus the Indian, it is the largest wholescale lifting of people from poverty to the middle class in history. That is a real metric, and a crucial one.

Years ago, for all their other ills, the Chinese Communist Party clarified they are dedicated to ‘maximising the productive capacity of the nation.’ In the COVID debates, this was the annoying false dichotomy, ‘lives or economy.’ Utter bosh. You had to point out, ‘economy’ IS lives too, someone who dies from poverty is still dead, and that is far more certain than death from a virus with an overwhelmingly high recovery rate. Once more, economic bankruptcy cannot be a medical strategy. You cannot ‘afford’ public health that way, or anything else. 

Rolf pointed out you can distribute, but you have to generate it first. Sweden, Norway, Switzerland are all prime examples of highly caring societies with a robust safety net, but all highly competitive and productive. So, we drive our performance to enable our compassion.

Tourism

First, just a look back at 2018. Vietnam was attracting 16 million tourists, Thailand 38 million, Malaysia 26 million, Sri Lanka 2.3 million. Let’s realise we were, even pre-Easter bombing and COVID, far away from our potential.

Hiran pointed out that at the end of the conflict in 2009, about 400,000 tourists came into the country, and we weren’t ready for it. As he recalls, the industry even stopped taking bookings at one point in 2010 as the volume was too much in terms of rooms, transport, certainly infrastructure. So, Lanka has to be repositioned as a five-star destination, with five-star products, that can truly do justice to the range of what can be offered. Those who visit, realise the sheer beauty of the island, and the astonishing range of stimuli available – virtually everything other than say alpine adventures, skiing and the like. 

The hotel sector needs development, nor was there a proper marketing campaign to speak of. Most of the promotion was ‘viral,’ via social media and Instagram, leading to the Lonely Planet ‘favourite designation’. But private bungalows, houses, cobbled together experiences cannot carry or lead the tourism we need Hiran points out, though there is certainly a role for them, but that split should ideally be 80/20. As we gear up for future tourism, we have to target the right kind of high spenders who will come to relish and love the treasures of the island, its people, its food, the plethora of captivating experiences. That still leaves options for those who want to put their own experiences together for climbing or biking or other passions.

Rolf pointed out that despite hospitality being natural to the culture, service standards need to be as five-star as the product, the culture and experiences on offer. His company has brought the Swiss Hotel School from Lausanne (Ecole Hotelerie de Lausanne) here to participate in and further that aim. 

Hajar gave voice to a shared sentiment among us that the current new ‘tourist guidelines’ are more likely to drive people away, than attract them though unfortunately. There are indeed infrastructure challenges like roads, this mesmerising destination does still require too many hours on bumpy roads and poor airport and other travel connections to get to various points of interest. 

But beyond that, we have to crack this overall. Travel and tourism together account for roughly 12.5% of national GDP, a major contributor to foreign exchange, and we have to get it right.

And the strictures are pseudo-science. Here is just a brief listing of where they backfire, are inimical, and make scant sense:

How many times can people be PCR tested and why? The tests are not definitive. If people have no symptoms, there is no medical corroboration of more than a nominal danger of contagiousness. And anyway, what are the guidelines for? Either they protect you, or they don’t. If they don’t protect you, we should get rid of them, and just ban people from various locations.

Why not one simple Antigen test on arrival, or two or three in week one, they are quick, and they catch contagiousness. Otherwise, why keep persecuting people? And how could they catch it, if following MoH guidelines and going to vetted destinations? No such requirement in Maldives, which is flourishing and no surge of mortality at all, less than ours (which is unnecessarily inflated as mentioned anyway).

Why would you keep tourists apart from locals? Who wants to visit and never meet any of the locals, who are one of the chief attractions here? Transmissibility is the same, local or overseas, it doesn’t suddenly enter through your pores if overseas people are around.

Why would you shut down sites, when tourists are visiting, to locals, whose tourism and patronage has been providing blessed relief to the hospitality sector while borders have been closed? If your group and a foreign group are going around Polonnaruwa, how are they going to ‘afflict’ each other? Surely, they will keep suitable distance, their entrance timings can be staggered. Are they going to leap into each other’s arms, leave droppings on stones, lick each other if they get too close? I’m being absurd, but it’s as absurd as the guideline. I would love someone to answer, ‘How does it keep anyone safer to do this?’ 

Again, below 60, no pre-existing conditions, virtually everyone recovers and survives, so anyway treating the virus as an alien invader is absurd. 

Asking hotels to ‘either’ be for tourists or locals will destroy the industry, and it is quackery. Again, guidelines work or they don’t. How does where you hail from make transmissibility waft across distances and infiltrate all defences? 

And who cares about ‘new strains?’ We know now they are no more lethal, likely less lethal, and viruses mutate, and this is neither news, nor the basis for policy. Imagine if all of human history had been governed by ‘breaking news’ of viruses! 

And except for those wishing to come and stay for long periods to avoid the cold, our prescriptions will drive away conventional tourism (people don’t wish to be jabbed, isolated, and hounded and call it a ‘holiday’). Hotels that have to ‘choose’ will not be able to stay viable most likely without local tourism, in between the current trickle of those from overseas. 

Let’s be rational. A country with 12,000 deaths per month normally, with dubiously asserted 270 COVID ‘deaths’ is hardly being over-run such that it needs to keep undermining a vital industry. And we must, must, stop clamouring about ‘positive tests’ posing as ‘cases.’

Local and foreign investment

Rolf reminded us the private sector has not asked for corporate tax relief, nor do we need to be the most competitive tax haven. The 68% who work in the informal sector however need attention. They are not protected by law or insurance or Provident fund, and dealings with them are more prone to corruption. If we can make all of this more transparent, so much the better. Also, we have to make sure duties are not so high they protect substandard local production. Established industries don’t need high duties, low duties will stimulate competitiveness. The prolonged import ban seems, beyond an initial period, to primarily protect substandard local production.

We have to drive more investment here as Hajar emphasised. If you look again at 2018, Malaysia (a good comparison case in size and otherwise) received 15% of the investment from China, Lanka got 2.8%. Policies also have to stay consistent. Our economic ethos has to be essentially consistent through various elections as Hiran also emphasised, otherwise foreign investors cannot strategically plan, multinationals cannot sensibly expand. 

The legal framework is a challenge, it can take anywhere from 3-12 months to register a business. In New Zealand, it takes half a day. And when legal frameworks are such a barrier, ‘informal’ business flourishes and that’s not the basis for a growing economy. Yes, there has been a strain on liquidity. But as Hajar mentioned all the countries of the world are aiming to bounce back. So perhaps we have to get past say limiting imports. We get materials in, and this strengthens our ability to export as well. A clear policy on both imports and exports will be necessary to manage liquidity.

A way forward

Decisive, sustained action, not using COVID as an ‘excuse’ for delaying implementation or reform or moving forward. So much is being ‘said’ that is right, and our actions have to be as decisive and passionate and timely. We need more pace. A vision for development is certainly needed Hajar rightly affirmed, a way to grow past the debts accumulated which otherwise we will just saddle the citizens of the country with. So, unromantically let’s look at the levers of growth and competitiveness and act with due speed.

Hiran expressed his confidence that Sri Lankan business can compete with the best in the world if we can get some consistency and clarity of policies. And each leading company, supported by our government and political leaders, that succeeds, lifts everyone up. We are all carriers of progress. Or, as the US President JFK timelessly suggested, we are either part of the solution or the problem.

Once more, no more COVID rationalising. It’s a proven influenza, not planetary apocalypse. Rolf also reaffirmed his belief that we should focus now on what we do well and make it better and more competitive and defer untested ventures to the other side of that. So, let’s target our investment and promotion to where the ROI is greatest, and the capabilities are clearly there. 

It was a heady conversation, passionate for Lanka’s success, candid, with some ‘tough love,’ fact based, looking to deliver progress the only way it can really come, through concerted, focused leadership that maximises assets and capabilities.