‘Lanka’s economy can withstand adversity’ - Ravi K

Sri Lanka went through a period of political uncertainty, with civil strife and political instability in the recent past.

The resilience of the Sri Lankan economy to withstand adversities has been proved, beyond doubt, over the years.

The peace and tranquility that prevails today, will be a catalyst to uplift the economy to reach enhanced growth rates, Minister of Finance Ravi Karunanayake told the South Asian Investment Conference 2015 last week in Colombo.

Extracts from his speech

It could be said that the present economic climate is equally good or better than our climatic conditions – which are envied world over.

The lavish greenery coupled with modern buildings will provide the incomparable backdrop to invest in an economy with a growth rate of 7 percent, striving to improve further, he said.

We are Asia’s centre, South Asia has emerged as the second largest growing region in the world with the predicted growth rate of 6-8 percent expected to continue until 2025.

Confidence in the economy will not be based purely on growth rates, but will also be based on market integrity, good governance and transparency, coupled with political stability and political will to embrace foreign investments in the right spirit.

All the ingredients are in place within the current regime.Although the current structure in Colombo Stock Exchange was set up in 1985, it dates back to over 100 years. Compared to some of the capital markets in Asia, Sri Lanka could be termed as small.

However, the qualitative aspects and investment options far outweigh any limitation relating to size.

Since the end of civil strife in 2009, our market capitalisation has grown, although market capitalisation is lower in comparison to GDP, low figures provide us with ample opportunity to develop the capital market.

Our government is fully committed to strengthen the regulatory aspects of our capital markets to ensure good governance and transparency.

It is hoped that good governance emanating from the highest in the Government will cascade down to all strata of society and all institutions including the Colombo Stock Exchange.

Investors will be the main beneficiaries of such a process and will result in eventual global participation. Sri Lanka is ranked the highest in the South Eastern Region in the Doing Business ranking and improved its ranking this year, in comparison to previous years.

The improvement, provides us with much needed positive inference. We will place greater emphasis on solving solvency issues, obtaining credit and enforcing contracts.

All investors will enjoy the good economic climate that will result from good governance, the Minister said.

Our country is on the verge of attaining middle income status, from the present low-middle income status. We have a manageable population of 20.4 million with a gross national per capita income of Rs. 3,170 – an ideal springboard for our economy to expand further with improved inflows of foreign direct investment.

The foreign direct investments did not grow as expected in the past and the efforts of the present regime to reinvigorate the economy, will bring in better revenue.

Despite such drawbacks, the Colombo Stock Exchange has performed comparatively well in 2014 and according to Bloomberg was ranked the fifth best performing market in the region and the sixth best performing market in the world. These are strengths that must be capitalised on to market Sri Lanka as a primer destination for investment.

The daily average turnover in the market, to date, has been around Rs. 1.1 billion and the foreign contribution to the turnover has roughly been around 27.6 percent in 2014 and increased to 31.4 percent in the first quarter of this year.

We hope to build confidence and change the archaic laws to facilitate the raising of capital.

The Colombo Stock Exchange, despite being a reasonably active debt and equity exchange in the region, still has a long way to go to become a major contributor to economic development.

Its market capitalisation is over Rs. 3 trillion with 297 companies listed on the bourse. Authorities plan to raise market capitalisation to 50 percent of GDP when the local GDP goes up to US$ 100 billion.

- SJ