2011: Power achievements for Sri Lanka, but...

A survey conducted last week on the health of the Sri Lankan economy revealed that almost 64% said that the Government had done its task but only 43% had said that there had been growth in the economy. Whilst some can say that this data is strange, a similar set of information was shared at the at the FT budget seminar staged on 24 November 2011.

This means that even though Sri Lanka is ranked as the fourth best performing economy globally, only some sections of the country are reaping the benefits, which is peculiar given that all key sectors of the country are performing well as at quarter three financial data, the only exception being the plantations sector which is registering a negative growth due to macro policy issues rather than business-skill related problems.

Political economy

Whilst some can be gaga on the performance, a point that one must note is that even though Sri Lanka is out of the 30-year war that plagued the country, we are working in a political economy. This means that decision making happens based on a political ideology and each decision can spin a positive doctrine to the public rather than a decision on merit.

This again can be debated as a disease that Sri Lanka must come out of, but the reality is different and quicker once one accepts this and learns the skill of working in the system, which can enable one to be part of the success of 2012.

Incidentally, this is how it is many countries in Asia and Africa, which is why Harvard University now offers a programme called ‘Working in a Political Economy’ for the top CEOs globally.

2011 – Power achievements

Given that I have been actively involved for the last seven years in different capacities on Sri Lanka’s economic policy, 2011 can definitely be themed as the ‘Year of Achievements’ for our little nation.

However, these achievements will be meaningless if one does not pick up the insights and address them in 2012. Let me capture some of them.

52 – Competitiveness of nations

The World Economic Forum announced that Sri Lanka had jumped 17 places to be within the top 52 countries in the world in 2011 on competitiveness. Whilst some can feel very strongly on this performance as Sri Lanka can be a top 30 country globally in the near future, we must be insightful that on the pillar ‘Trust in Government Policy,’ Sri Lanka has been downgraded to a rank of 115 from the earlier rank of 59, which is alarming.

The resignation of the SEC Chairperson citing ethical reasons and then the shootings at IDH and the unfolding of the events does not help correct this score. We have to use the ‘Tangalle shooting’ incident to show the world that in 2012, Sri Lanka is working towards correcting this weakness in the system.

89 – Ease of Doing Business

Whilst Sri Lanka can be proud that we have pegged the country nine places and may be even really moving up by 23 places to a commanding rank of 75, the perception is that if a project has to pass the system, a narrow window exists.

Maybe the Rs. 10,000 bonus will spur the public sector to drive in a performance-based work ethic, but this needs to come to play in 2012 if we are to drive the country to a US$ 1.75 billion FDI target and beyond. Sri Lanka must also work on the area of ‘access to credit’ that has deteriorated by three places in the latest ranking.

91 – Corruption Index

This index focuses on corruption in the public sector and is conducted by Transparency International (TI), the global civil society organisation leading the fight against corruption. The CPI Index, though perception based, has been accepted as the most recognised and often quoted international index on corruption.

Sri Lanka once again has pegged itself from a 97 position the year before to be placed 91 in 2010, which is commendable. However the issue is that we are clubbed together with Bosnia, Herzegovina, Djibouti, Gambia, Guatemala, Kiribati and Swaziland, which does not speak well to an outside investor.

This must be addressed in 2012 given that in my view the biggest offenders are the private sector, starting from Ceylinco to be very specific. The point is that the only way this can be addressed is with private-public-people partnerships and not just one entity.

97 – Human Development Index

On a more qualitative aspect, Sri Lanka emerged first in South Asia and 97 in the world in the Human Development Index ranking issued by the United Nations Development Programme.

The closest to Sri Lanka in South Asia was the Maldives, which ranked 109, whilst India comes in at 134th and Pakistan at 145. An important point to note is that Singapore is ranked 26 and Malaysia at 61, which means that there can be parallels one can make on the link to growth and productivity of a country.

Some of the best performing indices of Sri Lanka are ‘Life expectancy at birth’ at 74.9 years and ‘Expected years of schooling’ at 12.7, which brings me to the sticky point of the Advanced Level results that Sri Lanka bungled in 2011.

The logic given was that someone in power had wanted the results released urgently and hence the bungled results. I strongly feel that we as a nation must come done hard on this issue and a few heads must roll given that we are talking of the future generation of Sri Lanka.

What credibility and confidence do we give the youngsters who are studying for the O/L and A/L exams in the future? What credibility do we offer to the scholarships that one can get in the future?

Steep poverty drop

The poverty level in Sri Lanka has dropped to 14 per cent while the poverty level is at a staggering 45 per cent in India. This is one of the greatest achievements in Sri Lanka’s development programme, but the issue is, where do we get the manpower to fuel the new growth agenda of Sri Lanka of making apparel five billion, Tea 2.5 billion, etc., as already there is a war for people?

There are 1.6 million Sri Lankans working around the world and we need to develop a strategy to attract this segment of Sri Lankans or drive technology development or may be have a strategy to attract the Chinese, Bangladeshis or Koreans like what the construction industry currently deploys.

0.8-0.9 m – Tourist arrivals

We see many reports emerging on the tourism front on the outstanding achievements in 2011, including the opening of top brands in Sri Lanka like the Avani Hotel chain being the first new brand to enter the country. However, the issue that needs depth and clarity is, are we attracting the five-star tourist into Sri Lanka?

Industry leaders have mentioned at many forums that we must analyse the numbers and develop a global campaign to create awareness of the product features of Sri Lanka. I strongly feel that in 2012 we must do this.

Having being on the tender committee of the first Sri Lankan Tourism appointment of an international advertising and PR agency in 2008, I was privy to the strategies of Malaysia and Thailand.

The importance of a global strategy will be key; if not negative stories naturally end up in global media, like the Tangalle shooting incident. We must at least now stop playing the statistic game and the industry knows the real numbers. Now we must develop ‘Brand Sri Lanka’ for tourism.

$ 9-10 b – Exports

Once again we see the numbers game at play. Personally I am very positive on the performance in 2011. The key issue is that from a policy perspective, more needs to be done to develop new markets and access new products out of Sri Lanka.

If not, we are just highlighting the success of the private sector, which once again the exporters are very well aware of from their own numbers. Sri Lanka needs strategic thinking and action and not just tactical initiatives, especially given the spiralling trade deficit.

Next seven steps

Against this backdrop, the fact is that Sri Lanka is ranked as the fourth best performing growth economy globally and we are poised to be a wave creator on many fronts. What I mean by this is that most estimated that Sri Lanka’s apparel industry would collapse post the multi fibre agreement and GSP+ withdrawal, but Sri Lanka innovated and not only survived but grew the industry.

Many felt the Sri Lanka’s tea industry will collapse with the many issues globally, but once again we proved the world wrong. Many felt that Sri Lanka could not beat the world’s most ruthless terror organisation, but it did.

However, now it’s about step change growth and this requires a new behaviour in 2012. Below are some of the required strategies:

1.We must create a new wave of development in Sri Lanka focusing on the industrial zones of the country that can be incubators for SME and SMI development in the country.

2. Sri Lanka must pursue new FTAs with key Asian and African countries as mentioned in Budget 2012.

3. One new market must be focused on and developed. I would recommend Russia given that it has just been admitted to the WTO post 18 years of review.

4.Sri Lanka must aggressively develop the traditional industries like handloom with a value chain development agenda, rather than just focusing on the supply chain.

5.Making the apparel industry a hub for Asia by integrating it with the logistics industry must be aggressively pursued.

6.Correcting the private sector financial issue of the tea industry must be high up on the agenda.

7.The rubber industry must move to high end latex under the Lankaprene brand name.

(The author is an award winning Sri Lankan business professional actively involved in the development agenda of Sri Lanka. The thoughts expressed are part of his doctoral research submission and not the view of the organisations he serves in Sri Lanka or globally.)