Monday Nov 25, 2024
Monday Nov 25, 2024
Monday, 2 December 2013 00:00 - - {{hitsCtrl.values.hits}}
Investment-related achievements and policy issues
Dr. Samarapulli started by highlighting some of the investment-related achievements of Sri Lanka, whilst raising some policy issues in order to focus more on growth. He stated: “The amount of FDI stock the country has received is about 9.5 million dollars. 70% of it has come in the last five to six years, especially after the war. We have to capitalise on that. FDI inflows have changed from the developed West to the Asian countries. Last year about 56% of our FDI was derived from Asian countries. So far in the country, there are about 60 countries investing, with around 1750 projects under BOI law. However, about 60% in WP. Employment distribution is very much similar, as a result, there are over 12,000 vacancies present, and the overall unemployment rate has declined to about 4%.”
Questioning how the country is going to embark on labour-intensive industries in the future, especially with the increasing per capita income and demand for higher wage rates, Dr. Samarapulli explained that the country need to find solutions as to inclusive investment, including the peripherals of the country.
He added: “Colombo has been the main base for export oriented industries. Infrastructure, however helps move development to all parts of the country. Still, our FDI level is much lower than required levels. We need about three billion dollars a year to maintain an 8% growth. We need to look at other sources of income from the private sector, to bridge the savings investment gap and meet the targets.”
Dr. Samarapulli further queried: “What should be our policy priorities? We have to make sure growth is more toward the peripherals and those below the poverty lines. To bring that kind of investment to the country, the international business climate must be improved. Any investor or multinational company needs to look into this. For this reason, we must be mindful about the key indicators such as the Doing Business Index.”
Bridging the timeframe
Dr. Ganeshamoorthy began by explaining that the country needs to start bridging the timeframe between the current situation and the future. He added: “The report says, quite correctly, that when it comes to a discussion of development they highlight the BRIC stories, refer to China for whatever development challenges faced. This report points out that Chinese growth momentum has come down. Even though China has a great population, the domestic market is insufficient. Therefore the downturn in the Western market had a negative impact on growth. No country, even with very high growth rate, can live with simply a domestic market for products. As the report points out, we cannot expect high demand for APEC products in the western region. There is a need to change demand and increase consumption and investment, creating a conducive environment for growth.”
Can this be achieved in the current context? Dr. Ganeshamoorthy explained that the report completely ignores the importance of the political economy nexus in the region, and all economic decisions are dependent on political will and preferences. He added: “The report identifies that without imposing controls or resorting to protectionist policies, the region can benefit. If any country has regional disparities and they are not addressed, thing cannot grow. We cannot neglect a particular region in the discourse. That is inclusive growth. Mere focus on trade and investment will not ensure inclusive growth. The region’s countries must act not as competitors but as partners, to achieve a common good.”
A corporate perspective
Speaking from a corporate perspective, de Mel stated that whilst discussions on larger levels tend to factor in larger players, these are not always the entities that are involved in inclusive trade. He explained: “We have to ensure that our supply and value chains trickle down to a larger extent. At Hayleys, our agricultural sector provides gherkins to McDonalds and Subway in the region. We provide the know-how to farming communities in the North and East Provinces in order to grow gherkins at an exportable standard. In that way, we effectively connect Sri Lankan farmers to global brands – one way to make trade and investment an inclusive system. However, this is contingent on skilled development. This can come from the private entity itself, or the population taking advantage of government other training facilities.”
De Mel explained that another area to consider is the SMEs themselves. Most currently do not have the capability to manufacture a quality product to the expectations of global buyers. Smaller businesses need to create the necessary networks in order to promote their brand. For the broader supply chain to benefit, value addition becomes important. He added that the country has now come to a stage where it can’t rely on labour arbitrage but need to focus on more technology based ventures especially via partnerships.
The role of macroeconomic stability is important in terms of creating the appropriate export environment, and the country currently has a number of constraints – not enough free trade and investment zones to allow people to compete. De Mel discussed the concept of inclusivity and responsibility further, stating: “At Hayleys we have noticed that we get a much better price when you can demonstrate responsible manufacturing and farming processes – both environmentally and labour wise, and this provides incentive.”
