Challenges pose opportunity - HSBC's Chief Economist for AP

High oil prices, increasing interest rates, natural disasters, external demand and bird flu are among the challenges Sri Lanka will have to face in the future said HSBC's Chief Economist for Asia Pacific Dr. Peter Morgan delivering the keynote address at the Corporate Leaders' Conference in Colombo last week.

He said that these challenges pose opportunities to the private sector in the country. Energy conservation and alternative energy sources are a solution to the increasing oil prices while innovative financing approaches are an answer to the increasing interest rates.

Developing new products, markets and increasing value addition is a solution to face the external demand. Meanwhile, lobbying for reforms and economic liberalisation and promotion of educational opportunities are a must to face the challenges in the future, he said.

General Manager Global Co-Head Commercial Banking HSBC Margaret Leung said that the Sri Lankan economy has been doing admirably well in recent years. In 2005 Sri Lanka registered a GDP growth of 6.2 per cent, reduced inflation, and a strong stock market-a remarkable performance despite the effects of the tsunami and civil unrest. It may not be the best of times for Sri Lanka, but there are opportunities ahead. The Free Trade Agreement (FTA) between India and Sri Lanka has increased trade between the two countries with India being ranked as the third largest source of investment for Sri Lanka.

She said that the Ministry of Trade, Commerce and Consumer Affairs has been receiving numerous inquiries from foreign companies about entering India via Sri Lanka because of this FTA with its complete or phased elimination of tariffs.

Another promising development is the SAFTA agreement, which came into effect this year. "We are pleased to note that this agreement was finally signed among the members of the South Asian Association for Regional Cooperation, despite the initial reluctance of some members," he said.

The potential for economic growth within South Asia through SAFTA is enormous. The Sri Lankan home market may be larger than Hong Kong's but it is still relatively small. To grow, diversify, expand your brands and business you need the larger markets that India and other SAFTA members offer.

In the same way that Hong Kong companies naturally understand the business culture and consumer preferences of mainland Chinese customers, so too Sri Lankan companies understand the business culture and preferences of customers in India and Pakistan and elsewhere in South Asia. The opportunities offered by SAFTA can also act as a springboard to the larger international market once you've succeeded in your neighbouring markets.

You already have success stories you can point to.

For example Dilmah Tea, one of the leading tea brands worldwide, and Hameedia and Damro. However, SAFTA is still relatively new, and trade within SAARC is still comparatively low at only 4 to 5 per cent. Within the EU, for example, it is 66 per cent; within ASEAN, 38 per cent.

There's obviously room for improvement, but with the lower tariffs under SAFTA I'm sure that you will find many opportunities to form joint ventures with foreign companies. You may also find investors, initially eager to enter the Indian market, who are equally anxious to invest in Sri Lanka.

The free trade zones, well-developed infrastructure, highly literate workforce, and the incentives provided by your government all make investing in Sri Lanka an attractive proposition, especially in areas such as textiles, IT, tourism, ports development and transport. Another avenue for expansion is through technology, and the Internet in particular.

CEO of Dialog Telekom Dr. Hans Wijayasuriya explaining the success of his company said that one has to understand the market and cater to them and value each and every customer as they bring you success. Don't wait for certainty turn uncertainty into an opportunity.

SG