Sri Lanka promises dramatic growth potential

by Charmaine FERNANDO

Asia shows collapse but optimism rises as Asia hits the bottom of the sharp V downtrend. Turn around is imminent as Asian trade centres around the region itself are not directly linked to the US recession. Sri Lankan industrial dip is showing. Shopping has slowed down. Sri Lanka has the option of dramatic growth potential provided corruption is curbed said Prakriti Sofat, Economist, HSBC Singapore Branch, at a breakfast meeting at Hilton Colombo recently.

Speaking on her insights in to the global financial crisis, she insisted that a dramatic shift is taking place in the US. The government’s focus is on saving more and spending less. Balance sheets are being adjusted, production slashed and buying curbed. She pronounced that the US downtrend is short-lived and recovery potential is strong; despite the fact that the US consumer is spending.

The recovery though slow is happening in the US. The trend showed in research points that once you hit the peak the turn around is imminent. Household spending is curbed in Asia that you don’t get shoppers on shop till you drop sprees, anymore. Nevertheless US consumers are indifferent to new adjustments and are continuing with spending.; but not as they would like to, it was said.

An optimistic shift towards stabilization Net wealth to disposable income and household balance sheets are running almost parallel. Consumer stabilization depends on asset prices, she said. In the 3rd and 4th Quarter, consumer buying was driven below average in to minus figures hitting a peek in recession. Real consumer spending in the US reverted sharply from the depths, starting an upward trend. Change is taking place. The shift brings optimism that the crunch is lifting.

Real estate price is an economic status indicator Real estate prices in US dropped to a shocking minimum that California home-owners have reverted to selling and are practically going cheap. Affordability wears a new face now.

Investments in US real estate are happening from an unexpected third quarter, from offshore rich investors in Malaysia, China, India and Asia, grabbing a fair deal; literally picking hay while the sun shines. Since 2001, the investment cost in real estate has dipped beyond belief till it hit a peak in home ownership shift in 2008. Presently the drastic home sales are stabilizing showing a slow but steady upward trend she said. Industrial production focus on new stock in US and Europe the hardest hit and the crunch was magnified in the industrial production arena with a sharp decline hitting the bottom.

With the new order on stocks standing at an optimistic level the curve has upturned sharply. Pace in manufacturing contraction has slowed down it was said. The services sector shows the highest spirit in turnaround. Corporate sector is invigorated and moving, depicting stability countering the plaguing recession, somewhat. Expectations are pitched at a new high, all round.

The banks have begun lending with a new founded faith and hope. With new interest rates and cut-rates encouraging lending the corporate sector is heaving a sigh of relief, despite being overtly cautious. The light at the end of the tunnel is no more a vision. It’s happening for real. Households have reverted to loans to bring back new confidence and find financial stability it was noted.

The after effects of the employee related markets are still to come and hold fears that it would be negative. With retrenchments and employee VRS systems to relieve the burden of overheads the employers have reacted drastically to the financial crisis.

This has resulted in sudden loss of employment, benefits, perks and sustenance of employee lifestyle. This has also resulted in a brain drain where the employees critical to the industry disciplines have left companies. Retention of good employees have been overlooked or went without alternative solutions. The negative effects of this change in the labour markets are yet to impact and burden the governments in the future.

Global growth is imminent. It is evident that Japan felt the impact of the recession sooner than other developed nations. US, Europe and the UK were hit in 2009 while Japan hit the pit. It is remarkable that China and India, the Asian giants remained stable in the face of a global crisis. India felt the pinch mildly in the current year 2009 while China showed marked come down but remained stable and strong. The strength in these two countries lie in their manufacturing prowess.

2010 holds much promise as the world recovers from the plaguing financial meltdown to revamp and forge ahead with deeper understanding of avoiding any kind of financial catastrophe in the future.

China’s new direction is worthy of mention. China is trying to move away from being branded as a mere manufacturing entity and is looking seriously at engineering a reputation synonymous with quality output.

The government has ear-marked an action plan to steer a campaign on `Made in China’ to establish this powerful branding for sealing the quality of Chinese goods.Sri Lanka has potential for stability in this context, Sri Lanka has a whole new field of potentialities awaiting development and there is a ready market out there.

With the liberation from terror and war the world’s eye is on Sri Lanka. With cleaning out process in place the North and East holds a world of market opportunities. There is a wealth of tourist attractions that need to be harnessed. The industrial sector has all the potential to find new markets in the Asian region.

Sri Lanka need not look far. What’s critical to its growth is in the hands of the government and its people. Best practices from successful nations can set guidelines. With corruption under control Sri Lanka can become a leading power among the emerging countries of the region she said.