Private sector mirrors macro

Last week I had the privilege of delivering a keynote address at an annual sales and marketing conference of one of the largest multinational companies in the country, which recorded a turnover of around Rs. 65 billion and a contribution of 1.5% of GDP to Sri Lanka. The event gave me amazing insights that motivated me.

Given that I get exposed to diverse macro level economic development initiatives, the information that was being highlighted at the conference on sales, customer growth, profits and shareholder value mirrored the macroeconomic highlights of the country that we see in media daily. Let me throw more light to this.

Top 50

With the second quarter of 2011 registering an impressive 8.2% GDP growth and the year to end at almost a eight per cent, poverty at single digit level, unemployment at 5.2% and exports growing by 40% plus are numbers that sure demonstrate a top 50 country of the world, even though we are up against some issues internationally that need to be managed carefully.

However, just like any other country, we have our fair share of issues like the ballooning trade deficit that has touched US$ 5 billion as at end July 2011, exports tapering out at nine per cent in July and the tea industry being in the red.

Despite this, from a qualitative aspect on attributes like infant mortality rate, underweight children and immunisation of children, Sri Lanka’s performance beats global performance and is in line with the Millennium Development Goals (MDGs) – something we must be proud about. This makes Sri Lanka a very healthy country and in good stead for the future from a qualitative perspective.

 North

Whilst the Government focuses on the resettlement of IDPs and livelihood development in the Jaffna peninsula, some say this is rhetoric and political mantra, but what I saw last Friday was that the private sector has worked in tandem.

The said company has appointed 10 distributors to drive retail penetration in the peninsula post May 2009, whilst another set has been appointed in Mullaitivu and Kilinochchi, which were once ravaged by the war, which means that real peace dividends are coming to play. In fact the sales growth was at double digit level from these districts.

The private sector which works on a profit and customer base developmental model would not have increased operations if it did not made financial sense. Separately, the strong growth seen in the 2010/2011 performance nationally further justifies the thought that the private sector performance mirrors the macroeconomic numbers flashed of the Northern Province.

Rural drive

In the recent past we have seen policy makers working on projects like ‘Divi Neguma,’ which is focused on developing 1.5 million economic units across the country to uplift the micro SME sector.

The said company on this same ethos has developed a branded bread operation instead of the usual ‘pan karaya’ modality. Separately the company has developed brand boards at kotthu roti outlets and hopper outlets, which is in sync with the macro strategies of the country to drive economic growth at the bottom of the pyramid.

The sales increase seen at these segments of the consumers also reflects the macroeconomic strategies that are being pursued, which once again mirrors the private sector/macro numbers synergy.

Increased credit to the private sector in the recent past by 33% further justifies this thought of resurgence in Sri Lanka’s economic landscape. A point to also note is that local companies have borrowed internationally US$ 197 million as at mid September, which gives a positive buzz in the market place. However, we need to investigate why the corporate sector is holding on to Rs. 168 billion in the kitty as at end March 2011.

New products

Another strategy that caught my eye last Friday evening of the said company conference was the range of products that have been developed to cater to the emerging lifestyle of the consumer, backed up with technical expertise. This was similar to the lifestyle development that we have seen with the brand Singer, which won the ‘Youthful Brand of the Year’ at People’s Awards 2011.

The product portfolio/new products launched by the said company reflect the macro development trends flashed in the media. This again mirrors the private sector to the macroeconomic performance of the company. But a point to watch is the surging import bill, which has reached US$ 11 billion. This has to be managed given the tipping point that the world economy is in post the Greek debacle.

TOM

The company had increased its visibility with strong point of sale material and above-the-line advertising has made the company secure a 93% share in the country and a top of the mind brand when it comes to bread, noodles and chicken, which I guess indicates the post-war brand building at play.

This also demonstrates that companies which are marketing-oriented, especially in sectors that are dynamic, can bolster economic activity that will result in profits to the private sector and the economic development to the country. The challenge is for Sri Lanka to have a master plan just like in countries like Hawaii where there are zero name boards so that the touristy picture can be protected.

 People

A particular aspect that caught my mind was the emphasis the company made towards skill development. Even the conference was themed ‘Synergy through Teamwork,’ on how through strategic development of the sales force, business growth can be catapulted.

This once again links to the broader national agenda of skill development of the Sri Lankan workers, given that unemployment numbers are at a low ebb of 7.6%. Whilst this may sound positive, the fact is that Sri Lanka has a serious worker shortage. One way out is to increase productivity and automation, bringing in a higher output. For this to happen, having quality labour is a must, which is the same ethos of the private sector company that I witnessed was working on, which is very interesting.

But a point to note is that rather than having just numbers to achieve US$ 15 billion in exports with tea targeting 2.5 billion, apparel five billion and cinnamon one billion, what is required is for the nuts and bolts to be understood and detailed action plans drawn on the human resources perspective.

Conclusion

In conclusion we can infer that from just one sample of the private sector that accounts for 1.5% of the GDP, many parallels can be drawn to the macroeconomic numbers that we have seen getting flashed via the media. Now the challenge is to diversify the business agenda and attract more FDI and improve the Doing Business indicators, which is at a low ebb of 105 as per the global report on competitiveness of nations.

Next steps

The next steps is to identify the immediate challenges that Sri Lanka is up against in case the euro zone splits and the emerging recession looming in the US, the consumer of almost 60% of the export we market globally.

However, the reality is that Sri Lanka is poised to be a 100 billion dollar economy by 2015 and if the said company continues its aggressive competitive strategies, it can become a Rs. 120 billion company.

The big question that everyone will ask is when the impact of the political economy will take a backseat so that business will have the freedom to work on the dynamism of competition, in turn making Sri Lanka a top 30 country globally.

(The author is an award winning marketer/business personality who was the eighth Chairman of the Sri Lanka Export Development Board and the first Executive Director of the National Council For Economic Development under the Presidential Secretariat. He is a doctoral candidate and alumnus of Harvard University – Boston. The thoughts expressed are his own and do not reflect the organisations that he serves in Sri Lanka or internationally.)