Growth revamps

As the third COVID-19 wave spreads relentlessly around the country, Central Bank Governor Prof. W.D. Lakshman has acknowledged the possible need to reassess the 6% growth target set for 2021. But could a reform-led growth actually help support the economy and put in on a more sustainable path for the next few years.  

Recent research undertaken by the Federation of Chamber of Commerce and Industry of Sri Lanka (FCCISL) and PwC found it could take six to 12 months more for Sri Lanka’s economy to recover from the pandemic. Some industries such as tourism could take even longer. This was before the third wave hit. 

However, they were also optimistic that if the Government and other stakeholders followed outlined actions and recommendations, a resurgence in business activity could lead to sustained growth that has eluded Sri Lanka over the past few years.

The respondents had recommended a multi-stakeholder effort to address a broad spectrum of areas that could enable the post-pandemic recovery and growth of local enterprises. These market development initiatives include introducing business support programs to inform and enable businesses to diversify product or service offerings, establish transparent policies and incentive schemes to encourage continuing investment to increase capacity for local sourcing into key industries, and promote export market linkage programs by identifying specific growth markets for high potential industries in Sri Lanka.

The study also backed establishment of industry development and innovation cells through industry and academia collaborations in order to ideate and commercialise new products and solutions and promote domestic business linkages and business matching along with inter-industry and intra-industry collaboration efforts by establishing suitable platforms, multi-sector think tanks, promotional programs and recognition events.

Capacity development initiatives included training programs on areas such as business planning, business continuity planning and financial management for businesses to practice better financial discipline and develop resilience by performing informed scenario planning and cash flow forecasting, develop national policy for retention of skilled local talent as well as strategies for global knowledge transfers, lifetime skills education and competitive workforce development, and provide financial grants, tax relief for expenditure incurred by businesses toward up-skilling or reskilling employees, especially to businesses attempting to refrain from downsizing or pivot into new business segments.

FCCISL also said it would work with the Government and other stakeholders to introduce a government loan guarantee scheme which enables businesses – especially geared towards MSMEs – to access collateral-free credit from financial institutions, further simplify access to low cost financing from financial institutions for working capital requirements and provide financial support and low-cost financing for businesses seeking to adopt new technology or undertake business transformation, in an attempt to position to recover and grow in the post-pandemic environment.

As the post-COVID recovery takes hold it will be an ideal opportunity for the Government to support the resurgence with reforms. Obviously, this will require political will, but this may be easier with no major elections for the next two years. The Government, with its impressive two-thirds majority in Parliament, can break through many bottlenecks that past Governments were either too afraid or unable to do. The question now is whether they have the focus and clarity needed to deliver on the economic pledges they made.