By Shabiya Ali Ahlam
The Oxford Business Group (OBG) in its latest analysis on Sri Lanka sounded upbeat on the nation’s future prospects, but implied the need for stronger and sustainable measures to improve and maintain its competitive stance in the region.
Signalling positive sentiments on the overall economic status, OBG opined that with robust growth figures, improving infrastructure, increasing service dominated economy and a new reform minded government, Sri Lanka is an economic champion that has too often
It made these observations in its latest publication on the island economy ‘The Report: Sri Lanka 2017’ that was launched earlier this week in Colombo.
Whilst calling the government’s goal of doubling the yearly percapita income of US $ 3,800 by 2025, OBG, a global economic intelligence publishing, research and consultancy firm, expressed it is optimistic that Sri Lanka, with its strength as an investment destination becoming more apparent, growing goodwill from international partners and institutions and new momentum for pro-business reform.
“It is achievable,” the group stated confidently.“The land mark IMF deal and agreements that followed provide policy direction and financial support that should stand the government in good stead, while a renewed drive to attract investors and partners is set to increase global engagement with Sri Lanka’s reform agenda,” it said.
It was acknowledged that international and domestic headwinds caused the Sri Lankan economy to slow in the past two years and March 2017 saw reserves at a multi-year low, and yet the government continued to roll out a number of policies to build the foundation for sustainable growth. While tighter monetary and fiscal policy may have an effect on headline growth, it was pointed out that measures taken would lay a firmer foundation for long term economic development heading off debt crunches and inflation.
Noting there has been a ‘wait and see’ approach within Sri Lanka’s private sector, the affirmed long term impact is expected to be positive.
“Building a diverse revenue stream will be vital for the country’s future. This can be achieved with less imports and more exports under the expected reinstatement of the preferential trade concessions,” the report stated.
Meanwhile, it was highlighted that state involvement in large parts of the economy could present stumbling blocks to a number of liberalizing reforms that Sri Lanka was likely to need if it was to increase its competitiveness in international markets.
With regard to regional influence, as the tide of influence undergoes rapid change in Asia, Sri Lanka has an opportunity to position itself to capital on its natural competitive advantage and exert its own influence in the region, the report highlighted while stressing that sorting the country’s fiscal house isthe best way to do so. However, although commending the island nation for becoming the most developed market in South Asia, it cautioned that productivity, efficiencies, labour costs, and lack of scale remain concerns for long term competitiveness.
Observing that a series of initiatives have been taken to further open trade and increase the number of free trade agreements merging with the reinstatement of Generalized System of Preferences (GSP) plus, the OBG pointed out the government’s to-do list remained long.
“Extensive tax reform, improvements to the business climate and investment in infrastructure and public services will need attention, all while paring back spending,” the analysis stated.