Oxford Business Group (OBG) recently launched ‘The Report: Sri Lanka 2016’. The report drew upon various aspects in which the country could improve and highlighted on the sectors of: Micro economics and transport, banking, capital markets, communications, connectivity and tourism.
OBG Managing Editor Paulius Kuncinas said there is potential of growth in all these sectors and their report on Sri Lanka presents the country as one of the most attractive markets for foreign investment.
Kuncinas stated that the country stands out from other emerging markets because of its steady growth over the past five years. According to the report Sri Lanka has maintained an average GDP growth of 6% over the past five years. Kuncinas stated that in normalized global conditions and with reforms in the fiscal and monetary policies the country will be able to maintain stability.
However it was also stated that on the domestic front Sri Lanka is bound to run-up in household and government credit. This will eventually effect on the financial stability of the country. Kuncinas said Sri Lanka needs to attract investments from overseas. For this, the country’s FDI which is 1 to 2% of the GDP is too low. It was also stated that the country needs a simplified and broader tax system to address the weakness of public finance.
“Above all the country needs to create fiscal space to invest in the much needed infrastructure and education,” he said.
Kuncinas said Sri Lanka is still viewed by investors as a risky country for investment. He said Sri Lanka needs to use proper strategies to tackle inflation.
The fiscal deficit was looked upon as a major concern with regard to budget imbalance. Kuncinas said the tax system was the only way to create budget revenue that will help fund projects as it is unlikely to always wait for foreign countries to pay for the sovereign projects.
According to OBG’s views given the country’s location, Sri Lanka’s way forward should be through exports, however it was said that Sri Lanka should move away from traditional export products to non- manufacturing exports such as: Hospitality, Information Technology, Food Processing and Business process management. According to the report Sri Lanka is heavily reliant on garment exports (45.9% of total exports account to garment exports), this creates a vulnerability in the market given the on and off history of textiles and garments.
Chairman of the Exports Development Board, Indira Malwatte who attended the press briefing in the aftermath of the launch stated that Sri Lanka is currently looking into new industries to develop this sector
Kuncinas also stated that the biggest opportunity Sri Lanka has in terms of diversification is going futher up the value chain and move into transport and logistics.
“Colombo has all the fundamental qualities in to become a transshipment board for India and beyond. Foreign buyers say that the sector is well fermented, however they also say that it needs consolidation,” he said.
It was also mentioned in terms of Capital markets further privatization of the state owned enterprises could help in gaining greater liquidity. In terms of tourism it was mentioned that Sri Lanka as a brad is still quit overshadowed by other markets. Development of this sector according to Kuncinas would be able to account for over 10% of the GDP.
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