Bidding a good year goodbye

Saturday, 31 December 2011 00:00 - - {{hitsCtrl.values.hits}}

2011 has been a positive year for Sri Lanka, with most of the expected economic returns predicted in 2010 becoming reality. The challenge ahead is to ensure that these positives are carried forward into a year that is likely to pose many hurdles.

Predictions from all quarters have been dire on the economic prospects of the world in 2012. The International Monetary Fund (IMF) cut its forecast for global growth to 4% and warned of “severe repercussions” to the global economy unless euro zone nations strengthen their banking system and the US gets its fiscal affairs in order.

The IMF’s flagship report, the World Economic Outlook, warned that the US and European economies face recession and a “lost decade” of growth — in a kind of replay of Japan in the 1990s — unless governments around the world take concerted actions to revamp economic policies. For the US, that means less dependence on debt; for the euro zone, a resolution of the sovereign-debt crisis; for China, increased reliance on domestic demand; and for Brazil, cooling an overheating economy.

This poses a whole host of demands on Sri Lankan exporters to keep their growth trajectory intact and increase prices as well as volumes. Apparel, Sri Lanka’s largest foreign exchange earner, still depends a great deal on the US and European markets and it is hoped that its current trajectory is maintained. For tea, the continued crisis in the Middle East may mean a shift in focus and greater emphasis on developing value added exports. Rubber, which is bouncing on increased demand from India and China due to high synthetic rubber prices, is a rare winner in the increasing scenario of oil price growth.

The world stage is set for more variety and value addition from Sri Lanka and it is hoped that services will win the day by attracting more foreign direct investment to the country. At present the Government has set a target of US$ 1.75 billion after topping US$ 1 billion in 2011, but this is largely dependent on tourism inflows. Therefore, diversifying Sri Lanka’s attractions for foreign investors would mean major overhauls in the approval process and ensuring that random Government legislation does not undermine the overall business environment.

The recent death of a British tourist has also highlighted loopholes of law and order in the country and for the sake of the people as well as business, it is hoped that the Government works harder at judicial processes by continuously improving transparency and good governance. The opaque political culture and power centralisation must move closer to a sustainable solution to the ethnic question and it is hoped that 2012 will achieve what its predecessor could not in this aspect.

Remittances, which also hit a record high in 2011, is a double-edged sword, where the Government has to make a delicate balance between the brain drain and foreign exchange income. Maintaining macroeconomic stability will be tough given the forecast for the world, but one New Year wish in the hearts of many will be that internal investment will keep the economy ticking for another year of 8% growth.

All in all, Sri Lanka can bid farewell to 2011 with a satisfied smile and take on new battles in 2012 with a fairly stable platform. Many around the world have much less.