Focus on Sri Lanka
Prepared by Scherzando Karasu
Beaming like a Cheshire cat from billboards across Colombo there has been no stopping the remorseless ascent of Sri Lanka’s President Mahindra Rajapaksa.
Having routed the rebel Liberation Tigers of Tamil Eelam (LTTE) in May 2009, after nearly three decades of civil war. The country is reaping dividends from the defeat of the insurgency. His grateful citizens re-elected him in a landslide victory last January and then his party cantered to victory in a parliamentary poll in April 2010.
His priorities now are to attract foreign investment and increase trade. The economy, buffeted by a slump in garment exports and tourism because of the war, is now perking up and confidence is returning.
September 2010 saw a Sovereign Bond issue that raised $1billion and was six times oversubscribed, with strong capital inflows of some $12 million in the first seven months of 2010 alone and the growing foreign reserves at an all time record high of $6.2 billion. And this year the country is expected to see some 600,000 foreign tourists and with annual remittances, mostly from hardworking Sri Lankans in Arab countries, rebounding from a minor slump to around $3 billion.
And last year the Sri Lankan stock market more than doubled in value, making it one of the best-performing in the world. Food prices remain high, yet inflation is down. With an IMF supported assistance package the economy is expected to continue buzzing along at around 6% growth this year.
Given the favorable macro-economic backdrop the focus now will be to rebuild trust among the Sri Lankan communities, the normalization and economic revitalization of the war-damaged North and East. The resettlement of the Internally displaced People, the reconstruction of infrastructure and the boosting of investment into industries such as rubber, textiles and cement whilst supporting the newer emerging knowledge intensive industries such as ICT and financial services. All designed to ensure that that the country is poised to benefit from its strategic location and huge tourist potential.
However significant challenges to a sound macro-economy remain such as balancing its drive for economic growth with action to reduce its large large fiscal deficit that is weighing on the national accounts. And the administration stands accused of expending its political capital on populist initiatives rather than building a base for sustainable growth—and raising fears of a return to authoritarianism.
With its able people and natural bounties—including clement weather, verdant landscapes and fertile soil—Sri Lanka has every potential to become a regional economic hub and with the return of peace and political stability it could almost be the paradise its travel agents describe.