Recession in 2016 globally; should Sri Lanka do nation brand building?

Whilst the third generation economic reforms is exactly what Sri Lanka requires supported by deeper structural policy reforms, the challenge we are up against is to evaluate the operating environment and the impact it can have on the success of such reforms and strategies that Sri Lanka is currently pursuing.

SL challenge

At the outset, we must commend the Government for the opening up of information that at one time was suppressed. It sure gives a better picture to us in the corporate world on the logic of the decisions that the policymakers are taking but it also rings warning bells.

For instance, the revelation that Sri Lanka’s debt payments in the year 2016 (capital and interest) to be around $4.4 billion whilst the real cash reserves to around $5.4 billion tells us the issue at hand. The exports proceeds being flat this year and remittances declining by 3% from the Middle East do not augur well for the economy in my view.

Tourism revenue growing by 18% to date is the only silver lining I see but the challenge once again is that the corporate leisure sector being flat on growth whilst being subject to the Super Gains Tax and the impending BTT taxing policy has sent negative vibes in the corporate world. The private sector that accounts for around 76% of the economy is now awaiting the Budget to determine what the way forward will be in 2016.

Global challenge

Whilst Sri Lanka is grappling with its internal issues we also see rumblings in the global economic landscape. According to the National Bureau of Economic Research, which tracks recessions on a monthly basis going back to 1854, apparently we are already overdue for another recession hitting the world in 2016.

The logic for such a forecast being from 1854 to 1919, there have been 16 economic cycles, the average recession lasted 22 months, and the average economic expansion being around 27 months. From 1919 to 1945, there have been six cycles whilst recessions lasted an average of 18 months and expansion of the global economy for 35 months. In the period 1945 to 2001 we saw 10 cycles with recessions lasting an average 10 months, whilst expansions an average of 57 months. This means that recessions have got shorter and expansion periods longer over time.

Since the third quarter of 2009, the US economy has expanded for 21 of the past 23 quarters, and it is estimated to continue the trend through 2015. Given that the US economy is once again the engine of growth due to the slowing down of the China economy, outpacing Europe and most other developed economies, there would appear to be little reason to believe that there are two consecutive quarters of negative growth or real GDP are in our near term future (which would constitute the beginning of a recession).

If we assume that the final two quarters of 2015 will see positive growth, the most realistic prospect for the onset of a new recession will be in 2016, meaning that the current period of economic recovery will have lasted a minimum of 72 months (six years). We will have to see how the recent terror attacks in Egypt and France that have led to the closing of the borders in Europe will have on the overall tourism industry and the ramifications it will have on the global forecast of a recession in 2016. Some economists even predict that as early as December 2015 the world will see some recessionary indications which Sri Lanka must carefully monitor.

Way forward for Sri Lanka

In this background, when over 50% of Sri Lanka exports are being consumed by the US and EU, we must be ready to face this impending challenge in 2016, which sure adds to the issues that we are up against. This also gives us clarity to the ruthless focus required to build on the FTA with India and Pakistan and how we have deeper trade linkages with the regional partners.

The technological partnership inked between India and Sri Lanka during the last visit of the Prime Minister to India is a positive development but now it must be cascaded to the private sector so that our IT/BPO exports which are around $ 0.4 billion can be stretched to achieve the targeted one billion dollars and may be even extended to a magical $ 2 billion in the short term provided that the HR issue highlighted by the industry for years can be addressed.

Given that the third generation economic policy statement is essentially an export-led strategy rather than an internal self-generated economic model that the previous thinking was, we must purse the East-Asia economic partnership linkage. Namely the FTA with China and realignment that is taking place on industries moving out of China to Cambodia and Vietnam. Maybe we will have to watch the development in Myanmar post the shift to democracy post last week’s elections. There is a very strong possibility of stronger investment from the west to Myanmar to support the people’s mandate which we in Sri Lanka will have to compete with.

An area of focus that the World Bank Doing Business Index has been continuously recommending to policy has been to maintain consistency in policy. Sadly Sri Lanka keeps losing the war on this front even though the nation can market to the world the peaceful environment that exists in the country post 2009.

Nation brand building?

In this background media reports say that the current destination marketing creative pitch (does not include media buying) has been paused to include a nation brand building campaign which is interesting. The reason why there is some merit for this idea is that countries that have a strong brand have the power to withstand negative hits and recover quicker.

The best case in point is Bangkok. Even after the terror attacks it bounced back strongly to register a million tourists coming into the country within just five days. I guess we will see the same turnaround in France on the tourism front as the brand is a power brand that attracts more visitors into the country beating its own population.

However a point to note in nation brand building is that a strong global proponent Simon Anholt advises governments that nation brand building is process where respect is earned on the global stage with a series of actions over a long period of time rather than just orchestrated activity. In this ethos if we Google Sri Lanka we have a mixed bag from brutal attacks on students to slap bang Super Gains Taxes imposed by the Government dogged by governance issues in the backdrop of a coalition Government that is in play which goes against the very principles of nation brand building that is advocated by its very authors and gurus of the game like Simon Anholt.

What is nation brand building and Brand Index?

Very simply, the Nation Brand Index measures the power and the appeal of a country globally. Conducted annually, it uses the work of a top policy advisor and consultant to many governments, Simon Anholt. The Nation Branding Index examines the image of 50 nations each year, with approximately 20,000 adults aged 18 and up interviewed in 20 core panel countries.

The Anholt-Roper Nation Brands Index looks at a country’s image by examining six dimensions of national competence, all of which are treated equally with no weighting. This gives an overall sense of a country’s reputation as a whole. The six dimensions are:

1. Exports: Examines respondent’s image of products and services from each country and the extent to which consumers proactively seek or avoid products from each country of origin.

2. Governance: Considers public opinion regarding the level of national government competency and fairness and describes individuals’ beliefs about each country’s government, as well as its perceived commitment to global issues such as democracy, justice, poverty and the environment.

3. Culture: Reveals global perceptions of each nation’s heritage and appreciation for its contemporary culture, including film, music, art, sport and literature.

4. People: Explores the population’s reputation for competence, education, openness and friendliness and other qualities, as well as perceived levels of potential hostility and discrimination.

5. Tourism: Captures the level of interest in visiting a country and the draw of natural and man-made tourist attractions.

6. Immigration and Investment: Looks to attract people to live, work or study in each country and reveals how people perceive a country’s economic and social situation.

A key point to note is that a country must not attempt to paint a picture on these six attributes but must only share information on this front so that the global community is aware of Sri Lanka as a country which leads to the country becoming a top of the mind destination among the other countries in the competitive landscape. This results in stronger exports, better quality tourists and stronger investments coming into the country. This is why the great Simon Anholt says it’s a process rather than just an ‘advertising campaign’.

SL – Earning a reputation globally

New research reveals that if one is to develop a strong nation brand globally, the foundation must be on a strong partnership between the policymakers in the ministry and the private sector so that the private sector takes the message to the world on the positive aspects of working in Sri Lanka.

Especially for a country like Sri Lanka, where 75% of the economy is accounted for by the private sector, if the private sector keeps generating messages to the world in its formal and informal communication questioning the Government’s consistency of policies and governance issues that it gave a mandate on 8 January it defeats the very purpose of ‘nation brand building’.

Another key principle in a strong nation brand is that people in the home country must be satisfied and talk positive before a country beyond its shores to build a brand. What it in essence this means is that Sri Lankans must appreciate what the Government is trying to do so that credibility is earned inside the country before any brand building happens outside the country. In this respect we must monitor the digital media space and the impact that the diaspora can have in the key markets of US, UK, Germany, France, Italy and Scandinavia which we will have strong business interests in the future. The only markets which are free of the diaspora influence is India and China in my view from a strictly nation brand building perspective though in India we have the Tamil Nadu factor.

Best practices: Singapore

Given that the third generation economic reforms mention the Singapore model let me take a quick cut on this country. When Singapore began its journey of building a strong nation brand, the first task was to identify what people currently thought of them as a nation. Thereafter they evaluated it against competitors on what position was engaged by other countries. In the case of Singapore it was decided that the key strength was the efficiency and pragmatism of the people in the backdrop of political and economic stability, hence the proposition ‘Uniquely Singapore!’ May be we can take a cue from Singapore on this front too.

Next steps

1. Due to the complexity of nation brand building many countries opt for ‘Destination Marketing’ as the first step to nation branding. Maybe Sri Lanka can evaluate same on the backdrop of the hypothesis of the recession coming to play in 2016.

2.    Given that the currently ‘paused’ tourism campaign is only a ‘creative pitch’ (no media proposals that takes the focus away), where almost half the marks are allocated for understanding global trends and where the positioning opportunities are there for ‘Sri Lanka Tourism’ the top seven global agencies can be asked to present. As there are no financial obligations it will be opportune to see what the best brains in the world propose Sri Lanka positioning strategy should be on tourism – which is the first step in nation brand building.

3. A national marketing committee can be set up to understand on the merits of these recommendations and what implications it will have to the other five elements of the nation brand building parameters based in the works of Simon Anholt as explained above.

4. If Sri Lanka is serious, maybe we will have to bite the bullet and understand how the world perceives Sri Lanka on these six dimensions and what ramifications it will have on the decision to cut down the Europe touch points of SriLankan Airlines as mentioned in the weekend media.

5.Based on the above a ‘nation brand building campaign’ can be architectured which can be linked to the third generation economic reforms policy statement on the restructuring of BOI, EDB and Sri Lanka Tourism. I would add SriLankan Airlines to this agenda.

6. A separate ministry or an entity can be formed to take the ‘ Marketing Committee proposals’ in consultation with the proposed agency for International trade that has been also recommended in the economic reforms policy statement.

7. The private sector and key civil society members must be part of the implementation process to support the Government vision post the Budget presentation on Friday.

(The thoughts are strictly the author’s personal views. He can be reached on [email protected].)