Sri Lanka beats BRIC, but…

Sometimes I question myself as to why I spend two hours on a Sunday evening to pen this column for the Daily FT, but from the feedback i get from politicians, diplomats, business chambers and the private sector, it has now become my little contribution to society. Technically one can all it personal CSR.

December 2012

December was an interesting month not only because it was Christmas, but also because it was a time where most of us had the opportunity of networking among a cross section of society at the different forums that we usually get invited to.

The one topic that got highest share of voice across all forums was the ongoing tussle between the Executive and the Judiciary. The single-minded thread that was common was that people liked discussing the topic but they never wanted to be quoted on what they said. I guess this is the difference between India and Sri Lanka, given the public outcry we see on the rape and subsequent death of the 23-year-old girl in Delhi.

But, we must not forget that the world is watching us and there can be ramifications for us in the future whilst also noting that Sri Lankans have their own way of reacting too. If one does a behaviour track of Sri Lankans in the last 25 years, we see this. We also see the strong voice of the youth of Sri Lanka on viral mediums like Facebook.

Beat BRIC

Whilst the above maybe the reality, the World Bank ratings of the Doing Business index of 2012 was very interesting, with Sri Lanka pegging up to number 81 ahead of the BRIC countries and South Asia. To be specific China is at 91, Russia 112, India 132 and Brazil trailing at 140.

Hence, post the war the overall ratings picking on Sri Lanka on many fronts is commendable given that almost two-thirds of the economy is the responsibility of the private sector. Let’s me do a deep dive on these numbers.

Going well

On the attributes of ‘Starting a Business,’ Sri Lanka is well ahead of the rest of the 185 countries with a performance of 33, On the area of Getting Credit at number 70, Protecting investors at 49, and trading across borders at a strong rank of 56.

Whilst some can say that this performance was very strong, the fact of the matter is that these are not hard factors that drive a business, in my view, which is the challenge that we must address in 2013.

Issues

The hard aspects that need serious attention in the Doing Business in Sri Lanka are: Registering Property at a low rank of 143, Getting Credit 103, Paying Taxes at questionable rank of 169 given that in the last two years the overall National Budget has been focused on tax reforms, whilst Dealing with Construction Permits is at 112.

My logic in stating that these are hard attributes are namely because each of the above needs structural changes to the working systems in the public sector. Hence, to move up the rank on the above will require serious effort and radical reforms. For instance, the attributes of Protecting Contracts, ranked at 133, means that the support of the Judiciary will be crucial.

If one goes deeper, the above attributes are the ones that will drive private sector FDIs and the slow performance on this front can be attributed to these hard facts that have not been addressed is the private sector view, which is the challenge in 2013.

Key issue

Whilst looking at the Doing Business Index positively, a point that must be noted is that many key critical areas of performance are not taken into account in the index. They are aspects like Governance, country’s proximity to large markets, macroeconomic conditions, and the transparency of Government procurement. Hence, if one takes the above factors which are essentially the nation’s competitiveness, we can see that Sri Lanka is challenged on these aspects.

Next steps

Based on a presentation that was made recently, I picked up some information on the way forward to making Sri Lanka a top 30 country. The actions are very clear and specific. The challenge is the timely delivery and the consistency of performance in a political economy like Sri Lanka.

Conclusion

Whilst we can continue to focus Sri Lanka’s performance on global indexes, some hard facts that need correction in 2013 are the strategies we need to implement of the slowing down of the economy to a 4.8% in the third quarter and the looming trade deficit of $ 9 billion.

Even though the balance of payments looks positive, given that the remittances from people working overseas topped $ 7 billion, that fact of the matter is that exports have declined by 8%, which is very serious.

Whilst this can be attributed to the downturn of the Western economies, we have to find new ways to drive exports globally given that Sri Lanka’s share of exports is around 1-2% annually. Sri Lanka must move away from just highlighting statistics to driving business and trade.

(The author is an award winning marketer and business personality who has a double degree in Marketing, MBA. He is an alumni of Harvard University(Boston). He serves the United Nations(UNOPS) as the Head of National Portfolio Development – Sri Lanka & Maldives. The thoughts are strictly his personal views.)