Company heads positive of 2012 boom

Tuesday, 24 January 2012 00:00 - - {{hitsCtrl.values.hits}}

TOP business leaders are bullish about Sri Lanka even though they see a lacklustre year globally, which is an interesting paradox that makes the country unique as it battles on post-war optimism. Sri Lankan businesses and their leaders are optimistic of prospects for 2012, whilst they are also confident the country will progress in the New Year, according to key findings of a CEO survey done by MTI Market Research.

The report notes that despite concerns about the global economic outlook, Sri Lankan businesses seem confident that the local economy and their own businesses will perform even better in 2012. Around 75% of the respondents feel that in 2012 the global economy will either remain depressed (66%) or further slide (9%).

The Euro Zone and North America, which together represent 58% of the global economy still represents 46% of Sri Lanka’s exports, therefore reduced consumption levels in these markets is likely to impact Sri Lanka. In this regard, Sri Lanka’s strategy of export diversification to Asia and other emerging markets is a prudent move, but requires significant market development to convert the intent to export earnings.

Tea, which is Sri Lanka’s second highest export earner (US$ 1.4 billion), depends significantly on the Middle East, Russia and the neighbouring former Soviet states. Most of these markets are likely to see a continuation of the socio-political challenges, the only consolation being that tea is an integral part of the staple diet.

Above all, another 2008 style global financial crisis remains the biggest short-term threat to the global economy. By contrast, almost 90% of the respondents feel that the Sri Lankan economy will either stabilise (65%) or even accelerate (24%).This certainly is an encouraging sign of optimism and comes on the back of two and a half years of exceptionally high economic growth, the tangible results of this has been experienced across most sectors.

The fact that 75% expect the global economy to remain depressed or slide further, yet almost 90% feel that the Sri Lankan economy will stabilise or accelerate, is an interesting paradox! While the optimism of the local business community (even in the face of global challenges) needs to be commended, we should not lose touch with global ‘ground reality’.

The silver lining for Sri Lanka would be the strength of our apparel industry (that caters to some of the world’s top brands, while making remarkable progress in moving further on the value chain) and the tourism industry that benefits from the end of the war, the relatively undiscovered product (in Sri Lanka) and relatively low expectations from the first time traveller to the island.

Interestingly, 58% expect their business to do better in 2012 compared to their performance in 2011, while another 31% expect the same level of performance as in 2011. Only a minority of 11% expect a slide in 2012.

It is therefore clear that the post-war economic growth is not only doing well but still has the power to galvanise the private sector. Government and policy makers need to get the basics right and stick to clear policies as well as aggressively promoting good governance and rule of law. This would more than anything else result in stronger foreign direct investment as well as provide a positive business environment for companies.