Reaching towards aspirations: The emerging ‘Wonder of Asia’

By Cheranka Mendis

Sri Lanka’s enthusiasm to reach the heights of becoming the emerging ‘Wonder of Asia’ is as high as ever. Cushioning on the increasing tourism numbers thanks to the ICC World Cup and the steady inflow of foreign remittance, politicians are on a high, claiming that the outlook is indeed a rosy one.

Minister of International Monetary Cooperation Dr. Sarath Amunugama, also one of the first to see the ‘glass half full,’ painted a pretty picture with no power shortages, abundance of foreign reserves and fast building at Tuesday’s open forum on ‘Becoming the Emerging Wonder of Asia.’

Organised by the Freidrich Ebert Stiftung, the forum outlined what’s being done from the Government sector for inclusive growth to achieve its targets.

Plan spoiler

 Amunugama, who noted that with the current crisis in the Middle East and oil producing countries, all other economies must look at their own best interests, stated that energy deficient countries such as Sri Lanka would have a lot to be afraid of. A matter of great concern, the situation has called for concentration on reviewing plans and projections of the dependent countries, he said.

Of course, one must remember that Sri Lanka is a resilient economy, Amunugama assured, “Even during the worst of times, we maintained an average of six per cent GDP growth; at its worst we plunged down to four per cent but we always managed to maintain six per cent. Sri Lanka has a firmly responsive and resilient economy.”

He stated that throughout the years, the main setback for the local economy has come from external parties and that being a country that depends heavily on oil, tourism and foreign reserves, an upset in the world market would leave heavy impact on the future of the country as well as the carefully laid out plans.

Three steps to success

 There are, however, three factors that must be taken into account for the economy to grow and flourish, he said. They are:

1. End of war and the benefits posed on the economy

2. Government policy on investment in infrastructure and its reactions and impacts on growth of the economy

3.  Attempts to set right or improve the macroeconomic position of the country

The factors are important to Sri Lanka in achieving its growth targets and if necessary attention is given to the factors, the eight per cent GDP growth expectation for 2011 can be realised. The International Monetary Fund (IMF) however only expects the country’s GDP to rise by seven per cent due to reasons which includes inflationary pressures, low foreign direct investment, low private sector investment internally as well as the slow recovery of the world recession.

Amunugama assured that if the factors were properly executed, Sri Lanka would even be able to achieve double digit growth in the very near future.

No war, no fear

 With the war behind it, Sri Lanka is free to plan the course of its growth vehicle. As a former Minister of Finance and Investment, Amunugama stated that Sri Lanka had very little time to think about long term growth without knowing when the next disaster is going to strike.

“Foreign colleagues always told me that Sri Lanka had a wonderful future provided that the issue of war was settled. I am glad that contrary to many beliefs Sri Lanka was able to defeat terrorism. The world is intrigued about how Sri Lanka did it and the country has become a model for getting rid of terrorism world over.”

There is a state of alert in other countries including India now, whereas Sri Lanka is free of terror.

Thanks to the end of war the north and east has been integrated into the economy, giving a tremendous boost. “The north and east growth contribution to GDP is two per cent, something that has been lacking in the country for some time,” he said.

“Due to climate change and the torrential rains in the Eastern Province, we assumed that crop production would undergo disastrous effects. But due to the new products from the newly-liberated areas, we were able to provide for ourselves.”

Management and integration of the north and east is important and the Government is pouring a lot of money for the proper planning and development of the provinces, Amunugama said. “On the tourism front, the south was developed because we couldn’t go to the ideal tourist destination of Arugam Bay, Nilaveli and Passikudah. Now that we can, we must make full use of it.”

Savings from end of the war will also be added to development, giving that extra boost to the country.

High voltage and no power cuts

Amunugama repeated his claims of Sri Lanka having had no power cuts for the past three years, stating that six to seven years ago Sri Lanka was not serious about infrastructural development as war was the raging concern.

“The Norochcholai Power Project was held up for 10 years prior to its recent takeoff. The political party in charge then was scared of many things, including antagonising the Church, and put the important project on hold. However, Trincomalee would have been the ideal point for such a project but due to unrest in the country, the best option was held back again,” Amunugama pointed out.

“The Upper Kotmale Project too was held back for approximately 10 years due to problems concerning estate Tamils and environmental concerns. These projects, however, are now on and would immense benefit to the country.”

Amunugama went on to say: “Sri Lanka is one of the few or the only country in Asia with no power cuts; a huge plus factor for economic development. With Norochcholai, Sampur, Uma Oya, Upper Kotmale and other large scale irrigation and power projects, Sri Lanka can become the only country in Asia with no power shortages in the future as well.”

He asserted that no amount of moralising or proud history would get investors to come in to a country if the Government cannot guarantee an unlimited power supply.

The success story in this regard is the private sector small and medium scale hydro power projects in the country. He asserted that some 1,050 mw of power had been added to the national grid through 60 to 70 small hydro projects.

“However I am also aware that we can do much more in this regard. There are another 200 to 300 projects waiting to happen in Sri Lanka and with that the Government will be able to radically transform the energy situation of the country as well as the region.”

Sri Lanka was previously highly dependent on imported fossil fuel products. But with the above-mentioned projects, Sri Lanka can now start loosening its ties with fossil fuel importation. Even though fossil fuel will be needed in the long run, in the short run with the various irrigation projects, the country will be able to cut down on the quantum of the oil imported, he said.

Glorious Hambantota

 The Government has also invested heavily on expanding the road network in the country. Ports and airports are coming up and the new port and airport that will come up in Hambantota will provide a further base for development of international economic activities within the country. The biggest question, however, is: ‘Why Hambantota?’

“When people ask me this, I recommend that they take a trip down there. We are now sitting 12 km away from the busiest sea lane in the world which is approximately eight km away from Hambantota. We must take use of it and we will, but before that we must ready ourselves.”

Hambantota will have to be reinvented, he said, adding: “So don’t be a petty person and complain; we are trying to do something big here.”

Collaborations and distribution

He expressed that most often the majority does not see the good or “attractive aspects” of what the Government is doing. Public-private partnership is on a good level and even though the private sector could do more at present, big projects are coming up with PPP collaboration. He posed the South Port Project as probably one the biggest PPPs in Asia.

Amunugama, quoting a World Bank study, stated that 50 per cent of Sri Lanka’s wealth or GDP earnings come from the Western Province, creating uneven growth within the island. Equitable sharing is important and would come naturally when the lagging areas are combined and/or integrated with metropolis cities, he said.

Wealth must be much more even-handedly distributed to achieve equitable growth. The Government strategy aims at achieving this in the near future, he said.

Enough to fill the pockets

The Sri Lankan economy has enough money in its pockets and is now comfortable, he said. The economy is so comfortable that the State is now temporarily waiving off the remaining IMF tranche.

Amunugama claimed that institutions such as the IMF Surveillance of Security and other rating agencies had upgraded Sri Lanka’s status and that most large scale trust funds, private sector institutions and banks (such as Import Export Bank of China and India) are looking at Sri Lanka as a plus and growing economy. “We have globally valid standards; we are now on the move.”

Agreeing that the foreign reserves of the country took a backseat and faced difficult times during the 2008/2009 period, Amunugama claimed that US$ 900 million was withdrawn by investors out of the country during the period.

“But today we are in a strong situation as far as our foreign reserves are concerned. We get our IMF tranches on time and things are looking ahead. We are trying to waive off the next tranche as we are in a very comfortable position.”

Tough guys, these Chinese

People say that China is ever ready to loosen its purse strings, but the truth is that they are the toughest guys, Amunugama claimed. “They do not just give money on our feasibility studies. They do their own feasibility study. No Import Export Bank in Asia will give money without a feasibility study of their own and without fully evaluating the projects. We have to pay back; nothing comes free.”

Basic equation to growth is expand asset base, be productive and earn more – and then we grow. “Are we using what we get to increase our wealth? This is the legitimate question. It is not right to criticise projects without knowing how hard it was to get them down,” the Minister said.

“Our foreign remittance is in the region of US$ 3 to 4 billion a year – this is a windfall for the likes of India, Pakistan and Bangladesh, including other Asian countries. Within two to three years we hope to augment it to US$ 6 billion a year.”

Muddled numbers

Amunugama claimed that Sri Lanka could look forward to tourist arrivals topping 600,000 – a bit slow on the numbers as Sri Lanka managed to welcome 654,476 in 2010 and is now looking for 700,000 in 2011, according to Sri Lanka Tourism Chairman Dr. Nalaka Godahewa and 800,000 according to Deputy Minister of Economic Development Lakshman Yapa Abeywardena.

Amunugama pointed out that the sector has potential and the numbers would soon rise to reach record levels.

Food security and the way to go

Along with tourism, Sri Lanka must also secure food security, a worldwide concern since recent times. “Countries will have to look after the food situation on their own as no one wants to dig into their bags to give anyone else. Basic food self sufficiency in Sri Lanka is important. The Government is now set to conduct a women’s empowerment programme with the participation of one and a half million rural women to improve domestic agriculture in the country.”

Sri Lanka must also explore the opportunities of a new economy, one that is governed by service sector with tourism, IT, BPO and financial services at the helm. In terms of location, the massive investment in education and health as well as infrastructure along with the youth population of the country, Sri Lanka could well reap benefits of the new economy and become a hub for the region.

There is, however, a question of having developed collaborations, Amunugama acknowledged. We have to bring tighter economic collaboration between the new and the old economies especially in the regional market.

“The world economic patterns are changing. While consolidating traditional economies, we need to emphasise and build on new economies. We have to move fast into new economies and we need to think about it more. This is the way to go,” Amunugama asserted.