Tuesday Nov 26, 2024
Tuesday Nov 26, 2024
Friday, 8 February 2013 01:25 - - {{hitsCtrl.values.hits}}
By Uditha Jayasinghe
Q: What is the purpose of your visit?
A: Sri Lanka is one of our priorities in Asia and since assuming my position in October I always wanted to come to South Asia, particularly Sri Lanka. So this is to come here and meet our clients, Government officials and team to demonstrate our commitment to developing the economy, particularly regarding the private sector to achieve goal for eight per cent growth under the ‘Mahinda Chinthana’ policy programme.
Q: Why specifically Sri Lanka?
A:I think Sri Lanka is at a very important point. Peace has come and the micro situation is stable, the economy has been growing but because of the global situation Sri Lanka has faced some challenges so we are keen to see how we can be helpful to promote inclusive growth that would benefit the poor and also help Sri Lanka’s economy become more integrated with the global market because in our view for the long term competitiveness of the economy this will be critical. If you look at it from that angle there are quite a few areas such as infrastructure, becoming competitive in agriculture and manufacturing are all very much on our minds. In the end it’s really our aim to be the catalyst to bring more private investment and expertise to help the economy provide more jobs.
Q: What are the future programs that you have planned?
A: When you look at the country, the overall investment in domestic savings is not sufficient so we are actively looking for ways, either through our own balance sheets or through mobilising additional capital to support financial institutions to bring in more capital to invest. That is really our overarching objective. In doing that we emphasise the inclusive growth part of the lending and some of the medium enterprises, consumer financing that covers the financial services area. We also try to work with local players in the agriculture space to become more competitive and achieve scale. We are looking at several potential clients either though investing or providing expertise to improve productivity and competitiveness. On the tourism angle we have been very much involved in advising different players in the sector to improve the overall infrastructure to become competitive and draw larger numbers of tourists to Sri Lanka. We actually have one of our most experienced experts on tourism coming to live in Sri Lanka for a few years to really understand the ground situation and provide very practical advice. Through his presence we hope can move the needle to a bigger degree to achieve better outcome.
Q: There is a lot of concern that tourism is not environmentally sustainable in Sri Lanka. Is that an area IFC is working on?
A: That is exactly the area that we are focused on. Our expert is working in this area. Tourism has to be absolutely sustainable and has to be able to support local business. Tourism is not just a group of people visiting; we want to develop the industry along the value chain so that there are local suppliers and service providers. This is our priority. We feel there is huge room for this sector but it has to be sustainable, it has to benefit the local population and protect the environment. Local businesses are passionate about sustainability and inclusive growth. These people actually have better stories than we do sometimes. Very inspiring.
Q: What are the key challenges for the private sector?
A: I think there are several fronts. First of all I want to say Sri Lanka has made great progress in embracing the private sector. When we look at the ‘Ease of Doing Business’ rankings Sri Lanka has done well and in terms of overall improvement Sri Lanka is the second best country. One major constraint in our view is the infrastructure, particularly if you want to grow the economy at eight per cent on consecutive years. We need power, transportation, water and waste treatment. These are critical for what I term ‘support infrastructure’. We still have room to go and IFC would like to be involved in that process. In our discussions with the Economic Development Ministry we have voiced the same view and everyone recognises the importance of creating a welcoming environment for the private investors. Access to finance is also very important. When we talk about private sector it’s not just international, frankly the local private sector needs to be complimentary to the international counterpart. In that regard the capital market area needs to be improved. That is why we are so focused on working with local banks to support SMEs.
Q: As one of the few Asian CEOs of IFC how do you see your influence on the organisation?
A: It’s not one person. All the staff is committed to development goals and we work as a team. If there is any difference it is that I keep telling the team that I grew up in a developing country, China. I have witnessed firsthand the transformation made in one generation in my home country. From a very poor country to a much more advanced economy in spite of all the challenges that they continue to face, I do believe that if we mobilise the private sector we can achieve the goal of development. With the ‘can do’ attitude I believe it can be done. We can bring the best out of IFC to help our clients.
Q: How will global challenges impact Sri Lanka?
A: There is no question of post-financial crisis. The developed world is still facing challenges in terms of making adjustments, clearly in the financial sector because of the deleveraging of international banks will have consequences on a lot of developing countries, especially in those countries where capital markets are not developed. But fundamentals of these developing countries are sound and future growth will stem from them. So from the World Bank perspective we strive to be the catalyst in recognising the potential challenge in financing this growth and become even more effective in helping facilitate capital flow to developing countries such as Sri Lanka. This is necessary to overcome universal issues such as infrastructure and capital markets for SME growth, which in turn create jobs.
Q: Despite four years of peace Sri Lanka’s FDI levels have remained low. What are your thoughts?
A: Look we all have room for improvement. I think Sri Lanka has made good progress but recent events can certainly create a question among investors. My own view is that transparency is important to facilitate private investors, not only global but also domestic investors. I understand that the Sri Lankan Government continues to emphasise the importance of transparency to improve the business investment climate. So I hope they will continue to make good progress.
Q: Given that there is a lot of competition for global investment. What is Sri Lanka’s value proposition?
A: Sri Lanka is a beautiful country and quite a lot of natural assets that are measured by tourism, agriculture and a young population. Geographically it is very strategically located. So these are the key success factors to provide a value proposition to investors. Not to mention that a 21 million young population is an important market for any investor as well.
Q: But we are also one of the fastest ageing populations in Asia.
A:Well you know all developing countries have the same issue, when you look at European countries or even China if you think about it. But the structure of age can change rapidly over one or two generations.
Q: What are the top three things that the Government can concentrate on?
A: How to develop a capital allocation mechanism or capital market, to be able to channel capital into SMEs. Infrastructure is the second. I think the Government has been able to manage the macro situation reasonably well but to ensure long term growth Sri Lanka has to identify its competitive strength to be part of the global economy – to use trade to its own advantage.
Q: Given your extensive experience in financial services what do local banks need to do to push development?
A: Several things need to be done. Regulation is necessary, also capital markets; particularly bond market needs to be developed. This is quite a common problem for Asian countries. Banks don’t provide long term loans due to a variety of reasons; long term finance is a very big challenge. Clearly we have to make sure that the overall macro environment is maintained well. Inflation, Budget deficit – all those key fiscal and monetary policies have to be managed in such a way as to be conducive to economic growth. These are the two critical areas for the Government to manage well.
Q: You mentioned lack of a capital market as undermining long term loans but the Philippine banks are also in the same situation but give extended loans. Therefore do you think there should be a change of attitude among local banks?
A: There is a clear need for more competition in the banking sector, even in the scale of banks. Sometimes it is easier to say about the commitment thing but in the end it is the regulatory environment and savings as well as other factors that contribute to loans.
Q: Future plans?
A: As I said we are very focused on a couple of areas. One is the financial services to private sector, primarily to SMEs. Second is very much on developing what I call the ability to integrate Sri Lanka’s economy to the world, especially in area of infrastructure and we are actually looking at the possibility of working with the Government on private-public partnerships on some of the key infrastructure sections.
Q: You say that Sri Lanka needs to integrate with the rest of the world but the Government also has a lot of protectionist policies. How can the Government balance out these opposites and still integrate with the global economy?
A: Let me put it this way, my own experience not only as a Chinese but elsewhere, it is more likely to have a high income society by being part of the world. I think that is critical because without being able to leverage the strengths in each of the economies and being able to trade it is very hard to be successful in today’s interconnected world.
