‘Sri Lanka is on the cusp of a major economic growth’: Ravi K

Finance Minister Ravi Karunanayake

 Sri Lanka is on the cusp of a major economic growth. Sri Lanka has emerged from a conflict that lasted 30 years and is now integrating with the world economy. My objective is to give you an insight in to why you should invest in Asia and why in Sri Lanka. I guess when you look at the US having a growth rate of 1% to 2% Europe having the same of 1%-2%, Africa 3% to 4% and Asia has had a significant growth rate of 5% to 7% growth, I think this answers the question I asked before ‘Why Asia?’ So then why Sri Lanka? That’s the question all of you want answered and why all of you are here today, and thank you very much for the interest showed. 

Sri Lanka is the only country outside the West that has had 10 peaceful – democratic changes of governments. Sri Lanka has had universal suffrage since 1931, the longest recorded in Asia. Since independence power has shifted between the UNP and SLFP. This Government is the first national Government since independence; both main parties have joined hands to lead the country towards prosperity. The President Maithripala Sirisena and Prime Minister Ranil Wickremesinghe have agreed to shed their political differences for the sake of the nation and you will see things happening today. 

Our Government is committed to free enterprise, reconciliation, transparency, business friendly environment and progress with a human touch. We must achieve the above through consistent, coherent and coordinated policies thus helping us to achieve doing business with you. This does not mean Sri Lanka being in an emerging market is immune from global turbulences that we see. This is twofold, one is external and one is internal. External is well beyond our control and when it comes to internal the real problem is not the carry forward but it’s the brought forward. 

There is no point blaming a dead past or acts of the last administration. We as a democratic Government have inherited pluses and the minuses. We have to move forward. So how do we navigate in turbulent times? How do we maximise the opportunities and minimise the threats and that’s how we basically come to the point of what Sri Lanka is doing, some of the economic objectives and aspirations. 

Five year target

Today Sri Lanka is chartering a course where many countries are looking at Sri Lanka seriously. Our next five year target is to have an economic growth of 6% to 9% and in today’s economic turbulences we could see that Sri Lanka is steering through in these difficult times. We would like to create one million jobs; this is the objective set by our Prime Minister and endorsement given by the President. Development of rural and agriculture economy – we got to move away from traditional agriculture to commercial agriculture increasing high wages by expanding our markets entering global value chains and a vibrant financial market. Today there is ideal opportunity to trade on the Colombo stock market. We will also fast track investments in areas of development.

As you know through the Megapolis we would like to see our main city about five six times from what it is today. I must appreciate the assistance, guidance and processional attributes that have been put into the project by the Government of Singapore. You could see that in the next couple of weeks the external environment improving for investors to grab opportunity that has been given. The special economic zones that are already actively pursued, tourism which is a thrust industry at a growth of around 15%- 20%, the development of the logistical centres especially the ports that are there enhancing the opportunities that have been given. 

In infrastructure development we are looking at the BOT’s public private partnerships and we are taking bold political steps to reintegrate Sri Lanka to the world economy and that is why basically you should look at Sri Lanka in a special manner. 

Through fiscal consolidation we are hoping to maintain a fiscal deficit of 3.5% by year 2020 and we will be working towards it on year on year basis and ensure financial discipline is a must and this is the reason why discussion has originated with the IMF. It’s not because there is a requirement but due to the abundance of prudence that we decided that it’s a necessity. The endorsement that comes from IMF that Sri Lanka taking fiscal consolidation seriously is beneficial. 

Giant neighbours

We are also taking advantage of the giant neighbours. We like to see Colombo like what Hong Kong was to China, Sri Lanka is to India, that’s a huge potential for us. Before too long we will have market access where as FTAs with India and China which will ensure favourable access to almost 2.5 billion via our tiny nation. This access is something many countries won’t have. Achieving greater market access is something the Government is very keen on and we have healthy agreements with India, Pakistan and will adding on China, Singapore coming on and Turkey before too long and we also discussed the start of TPP with USA.

We are also taking bold steps when it comes to reforms. State owned enterprises are being managed much better way than what it was, yet still not good enough. You could see a resolute attention has been drawn up to these areas and you could see financial discipline has been brought. Very soon we will be putting on to the stock exchange the non strategic investments that are there. We have to very cautiously handle this due to many political views; however we have the courage of conviction to ensure that the non strategic investments will be on the stock exchange in the next two to three months. Now this does not mean that we are selling our silver but all you got to do is ensure that there is commercialisation in certain projects that have been put there.

Some have been inherited due to previous commitment by the Government owing to the financial difficulties that those institutions have gone into. Many hotels which are non strategic will be put onto the stock exchange to ensure vibrancy. 

The exchange controls that are there, something that has been frightening many in the past are being relaxed. Things are changing in Sri Lanka in a manner you would basically like to see. I see faces here big investors who are the best of ambassadors. It’s better than we talking here as those ambassadors who act as investors in our country can basically give their frank opinion. We are also becoming a diversified export market, the biggest problem we have is the lack of our diversification of our export market and this is one area we are encouraging. Many talk of devaluation and this and that but if we don’t have an economy that doesn’t have diversified exports what on earth is the benefit. 

Economic diplomacy is being pursued and our foreign policy is friends with all and enemies with none and you can see all the benefits. A couple of months ago Sri Lanka was shunned away from the world but today everybody is looking at Sri Lanka. The President and Prime Minister are working together to put Sri Lanka at the forefront and we are seeing early dividends. Ties with India and China are on getting stronger. With regard to latter, the Port City is back on track. Some have inquired as to why there have been delays, but as you know when there are changes taking place there are areas of repositioning and rebalancing ourselves. Today we are back in business. It is incumbent on a new Government that has pledged to root out corruption to ensure we walk the talk.

Lackadaisical approach

Logistics is another strong area of opportunity. Singapore and Fujairah have basically been taking advantage of the lackadaisical approach taken by Sri Lanka of our strategic geographical location. I call upon international investors to come and take advantage of this situation.

This does not mean that Sri Lanka is immune from problems and we have to take some decisive actions to mitigate those problems. We have to ensure that we try to increase the revenue to GDP which was 11% last year has been looked at and brought up to 15% this year. 

We have brought in financial discipline, we are modernising the economy as to how we should record them, digitisation of the economy is a must and we have invested heavily in this process. We like to see those benefits trickling down in this financial year and at this particular moment what I can say is in the next two months we will have a fully computerised Inland Revenue Department (IRD) and each person in the country will have a unique digital ID number. 

I’m sure many who have visited Sri Lanka in the last couple of months have seen the difference, we believe in walking the talk. We are having access to the political decision makers that are there, we are a Government who want to work with the people not above or behind them, learning from the mistakes and correct our selves.

We are looking at increasing certain hard steps taken on the basis of revenue collection which has been in headlines in the last couple of weeks. After the last Budget that was presented many economic turbulences have taken place and corrective action has to take place. We are increasing VAT without affecting common people and ensuring that it doesn’t burden businesses. Collecting revenue has to be essential; taking loan after loan is not going to solve any problem we have to take fiscal disciplinary action required. Now that is the hard course of action instead of taking the short cuts. 

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We are investing in the long run and that is what’s starting to make Sri Lanka a shining point. All of you are looking at Sri Lanka as to how we give political leadership. Winning the election is one, running the economy is another thing but ensuring that we run the economy and be able to get re-elected is the dream of a politician. So we put both in place with foremost attention. We are looking at reducing public debt and how will be doing it? Debt reduction is going to surplus any revenue intended to be collected. 

Reducing unwanted expenditure plus putting those saving into the reduction of public debt. We are looking at non strategic investments being privatised and use it to reduce public debt rather than use it to expand the economy. So we want to ensure that revenue gains will be used to the reduction of public debt.

Entering discussion with IMF is something very important and a step towards the right direction. As you know there is no necessity but before the world runs into turbulences and before little Sri Lanka gets caught in many perceived problems it’s better to arm ourselves with such endorsements. When China devalues by 11% when India follows by 15% how can Sri Lanka resist the international market? So these are temporary economic turbulences which we have to navigate properly. We have done so by devaluing by 8-9%.  

Many ask us are we selling our reserves away but you could see that we stepping in at the right moment and I must commend the Central Bank for its timely actions. We are taking bold political decisions to modernise our management. You can see that the state owned enterprises are given freedom to run and running does not mean you have political protection. There are many enterprises that have been then running in that style which has been corrected now. We have three institutions which amount to 75%-80% of our public debt, these entities being SriLankan Airlines, Ports Authority and Petroleum Corporation. All of them are being targeted to improve financial discipline.

Not a single cent added to public debt

I must say that despite the fact that we had a lot of political decisions to carry out not a single cent was added on to the public debt. Thus I said it’s not a problem about a carry forward but a brought forward. So how do we ensure that we basically contain, and manage it is before us so that the people will know that we are managing the economy. That is why the team led by the Prime Minister himself once week meet so that the economic activities are been spearheaded by them and all of you are privy to some of the decisions that are been taken. I would like to see the bureaucracy working faster than what it is at the moment but we will ensure that decision making is quicker before too long.

All I would like to say is that Sri Lanka is back in business we would like you to know that the vibrancy that you expect from us will be delivered and, in any areas that you would find aren’t working properly come forward and give us those ideas.

When it comes to the Board of investments (BOI) we are trying to unify all the bodies that are working in different ways so that we can bring it under one roof that can make decisions on a quick basis. I’m sure that we have targeted the BOI to give investment approvals in 50 days. Some of you may think we have been languishing for the past three to four years and how on earth can the new Government assure this? But we will assure that this will happen. We are bringing in a new Authority where the three institutions will be brought under one head and will be put into place and you could see the investment application will come in the next three months. 

All I want to say is there is no start up cost anymore and it’s a thing of the past. Those days when investments were looked into Sri Lanka fact remained that cost of entry was prohibitive. Today the only factor is time taken for approving investment applications. We are improving the level of transparency and efficiency. In the past there was a plethora of unsolicited proposals lacking transparency. We will accept unsolicited proposals but relevant ones we will bring it in and solicit and make it a transparent process. 

The present investors I must say have been the backbone of our economy. We must salute them for walking with us during our difficult times. We will never forget the attention and effort they put in; they will be speaking here and telling how easy it was to do business now in Sri Lanka.

We would like to say competition is the way forward to reform markets not just ensuring political views and in criticising policy making. We would like to see how we could help to integrate ourselves in a rapidly changing world. The market access that I mentioned before will be utilised to ensure that you are able to come into a small market but work in a big environment. When coming to Sri Lanka you will have access to FTAs with India and China and before coming here we had some discussions with Japanese people who are looking at a FTA and this why we say little Sri Lanka is shining example today.

The President and Prime Minister have decided that decision making has to be quick and this why I said the bureaucracy that is slow today will be forced to make their decision making faster. These are the changes that we want to take place, in the area of financial markets you can see major changes taking place and the banks here will bear testimony for that. Interference is not there anymore. It’s the consensual approach that we are prepared to take. I have given an insight to what Sri Lanka is doing and want to do. We want to ensure fiscal consolidation and improve financial discipline and transparency and decision making efficiency.  We want to give leadership and ensure that Sri Lanka is cutting edge among the rest. Sri Lanka is moving fast in the right direction.