Peace, stability lead to economic growth

By Sureka GALAGODA

The year 2010 ushered in peace and prosperity to the nation with President Mahinda Rajapaksa winning the election with a two-third majority. It was just months after winning the war against the most ruthless terrorists in the world. His able guidance and leadership as well as his strong will enabled all of us to stand under one flag and proudly say that we are Sri Lankans.

The political and economic stability created in the country overflowed to other areas with all sectors recording growth as never before. The Colombo Stock Exchange (CSE) created history with the All Share Price Index (ASPI) closing above the 5,000 level for the first time in history on July 28. The ASPI closed the day at 5,138.9, gaining 139.8 points (2.8%). The Milanka Price Index (MPI) gained 159.5 points (2.8%) to close the day at 5,828.7, also recording the highest in history. The total turnover recorded during the day was Rs. 3.2 billion.

The market capitalisation at the end of the trading day was Rs. 1.68 trillion, the highest market capitalisation recorded in the history of the CSE.The ASPI has gained 1,753.3 points (51.8%) for 2010 to date while the MPI gained 1,979.3 points (51.4%). According to Bloomberg News, the performance of the ASPI has led to the CSE being ranked the second best performing stock exchange in the world for the year to date. The CSE was named the second best performing Stock Exchange globally as well.

Though the CSE is creating history, elsewhere in Asia the situation is very different. According to analysts, the main reasons are the economic and political stability as well as the peaceful situation in the country which attracts investors to the stock market.

The CSE has become a booming stock exchange following the restoration of political stability with the end to the 30-year conflict in the country. The two public issues of Namal Acuity Value Fund and Hemas Power were oversubscribed within the first day of the issue. Hemas Power offered the IPO to raise Rs.600 million or more and was oversubscribed at Rs. 20 per share by 10.30 am. It subscribed 84,221,100 shares valued at Rs. 1, 683,788,500.

Market analysts said that the strong performance in infrastructure development and the growth potential in the economy in the post-conflict situation reflect this interest of investors.

Peace and stability are key to the growth of any economy, though the country enjoyed political stability under the leadership of President Rajapaksa exploring our full potential was not possible due to the conflict which continued for over two decades and the negative publicity given to all incidents in the country. Winning the war pumped in confidence to all sectors as well as the international community and proved that the island nation is capable of many a feat under the able leadership and guidance of President Rajapaksa.

Global crisis

Sri Lankans didn't feel the pinch of the global crisis seriously due to the far-reaching policies of the President and his team including the Api Wawamu Rata Nagamu campaign which has instilled a culture of self-sufficiency.

As predicted, even if the world undergoes a food crisis, Sri Lankans will have food as the President believes that our prosperity lies in agriculture.

In a speech after the historic win, President Rajapaksa said that our country will develop its own model of economic development based on a strong agricultural sector and not follow the existing Western models in which industrial growth gets precedence. "If you can be self-sufficient in food, then the industries will come," said President Rajapaksa in an interview with the Forbes magazine. "Without development, there won't be peace; we must develop the economy," he stressed.

President Rajapaksa said that even during the conflict, the Lankan economy grew by at least six percent each year (though global recession cut that to 3.5 percent to 4.5 percent in 2009). Inflation is now down to 1.1 percent, from 11 percent four years ago, according to Central Bank figures. He noted that per capita income had risen from $1,200 to $2,000.

The reduction of lending rates by the State banks under a directive of the President will help the businessman to expand his business and also a person who wants to build a house or purchase a car.

This initiative will pave the way for rapid development in the country be it in infrastructure, manufacturing or services.

As the North and the East have been liberated from the LTTE, several programs to uplift the living conditions, generate employment and growth have been initiated by the people-friendly President who has learnt to address the people of the North and the East in their language which bridges the gap and changes their mindset to think as Sri Lankans.

Infrastructure development

The Government has concluded the first phase of the Hambantota Port construction and the first ship will sail mid-November. This project will not only bring revenue but also convenience and time savings for the factories in the Free Trade Zone in Koggala and outside the zone as they could transport the goods in double quick time and win the confidence of investors. President Rajapaksa won support for three major development projects in Sri Lanka during his visit to China. Among them are the Norochcholai Coal Power Plant, Hambantota Port and the construction of a fully-equipped cultural centre.

Within six months of the visit. Chinese President, Hu Jintao took steps to grant US $ 400 million for construction work of the Norochcholai Coal Power Plant and the construction work of the cultural centre was also initiated with a grant of US $ 100 million.

These development projects will provide new career opportunities for 20 million Sri Lankans and would be a boost to the Government's efforts to reach its economic targets.

The initial work on the Mattala airport considered to be one of the largest development projects in the Southern Province has also started under the guidance of President Rajapaksa. Work on the US$125 million project is scheduled to be completed soon.

The port, airport and the southern expressway will help improve the living standards of the people in the Southern region and correct the imbalance of the Colombo-centric development. Today people have hopes of a better tomorrow under President Rajapaksa's stewardship. He has attracted investments to the country and among them are the MAS Fabric Park (MFP), the world's first environmental sustainable apparel and Fabric park which accommodates the first warp knit project in South Asia and offers shared services such as plug and play which is located at Thulhiriya.

After the President took office, Foreign Direct Investment (FDI) has seen a continuous rise and it is estimated that the Country will get US$ 1000 million as FDI this year and the Board of Investment (BOI) is confident of reaching the target by December while it is estimated the country will get US$ 1200 mln as FDI next year.

The Government is set to attract more investment from Japan and recently President Rajapaksa met Corporate President of Noritake Group of Companies Hitoshi Tanemura. He thanked President Rajapaksa for the unstinted support and cooperation extended to Noritake Lanka by the President in 1994 during his tenure as the Labour Minister at a time the company faced a severe labour unrest.

The "Jetliner", earlier used by the Sri Lanka Navy, now docked at the Colombo Port, is designed to accommodate 600 passengers and 160 vehicles at a time. The vessel has undergone complete refurbishment, providing facilities for events such as weddings, corporate functions, meetings and social gatherings.

SAs the global economy would emerge in the recession, it is envisaged that Sri Lanka would record a 6.3 percent GDP growth rate that is second only to China, which will record an 8.6 percent growth in the Asian region.

The opening of the North and the East has helped Sri Lanka become a popular year round tourist destination. The season for the South and South West is from November to April and the season for the East and North East is May to October.

The air of confidence has attracted many airlines to restart or commence flights to and from Sri Lanka. Among them are Gulf Air, Spicejet and Fly Dubai. Fly Dubai, Dubai's first low cost airline, started its flights from June and operates four times a week to Sri Lanka.Gulf Air, the largest Middle East international network re-launched its services to Sri Lanka, after a lapse of five years. Gulf Air will operate five times a week making a historic re-entry.

Spice Jet, the low cost carrier from India, also launched its services as the second international destination and is scheduled to increase the number of flights as well as the destinations it flies to in the coming months.

Budget

The Mahinda Chinthana policy of the Government has identified certain sectors to be developed for the country to become a knowledge and financial hub.

To achieve this target the Budget will lay special emphasis on the IT BPO sector and the telecommunication sector. Another thrust area is agriculture and livestock, to be self-sufficient in food and liquid milk as well as other dairy products. The Government is encouraging people to have large farms.

Any product with local value addition will be protected from undue international competition by way of incentives. As the Government's vision is to make Sri Lanka an international trade hub certain tax revisions will be carried out to make it a reality. He said that the Government is looking at many options.

The government will take steps to protect local industries but in the event there is no comparative advantage in manufacturing the product locally, the Government will have to import such items. In this instance too there will be a mechanism to protect them.