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| Tuesday, 28 December 2004 |
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Economic catastrophe Just as Sri Lankans were getting ready to usher in yet another New Year, tragedy struck in the form of a massive tsunami wave. More than 5,000 Sri Lankans perished in this unprecedented catastrophe, triggered by an earthquake. Relief efforts are now under way, but it will be a Herculean task that will take several more weeks. The lives lost can never be counted in terms of money, but there is no doubt that this is also an economic catastrophe of the highest magnitude. We should not lose sight of the fact that the economic outlook was improving and the tourism boom was continuing when the calamity intervened. The disaster could be a major setback for the overall development process and the tourism industry. Restoring the infrastructure network damaged by the tidal waves will take months, if not years. Roads, rail tracks, power transformers and telephone links in the coastal areas have been severely damaged. Among the damaged buildings are several leading hotels on the Southern coast's golden beaches. At least 70 tourists are among the dead. This calamity will adversely affect tourism, considering that the majority of Western tourists prefer beach destinations. Many business ventures along the coast have literally been washed away. Major commercial establishments, shops and factories were among them. The fisheries industry will take years to recover. It is still to early to give a definite estimate on the economic loss suffered by Sri Lanka, but it is likely to run into billions of rupees. The tragedy will reduce the country's economic growth rate, which has earlier been forecast at the 5 to 6 per cent mark. In retrospect, the year began on a positive note. The ceasefire was in place and economic prospects were bright. There was a change of Government in April, which saw the United People's Freedom Alliance (UPFA) taking over the country's reins. Although many in the private sector feared that the new Government would not be pro-business, they were proved wrong. The new Government pledged to continue the many positive aspects of the open economy, with adjustments where necessary. One such example is the abolition of the earlier Government's Tax Amnesty Act, which deprived the country's coffers of billions of rupees. The Government proved its economic finesse again with the presentation of Budget 2005, the first-ever home-grown budget. In a pragmatic move, Finance Minister Dr. Sarath Amunugama invited business chambers and individuals to submit their proposals for the budget. Many of these suggestions were incorporated into the budget, acclaimed by the private sector as one of the best in recent years. The performance of the Colombo Stock Exchange (CSE) reflected the country's economic progress. Last week, with the entry of Lanka IOC to the trading floor, the CSE reached its peak for the year. It is now among the best performing stock markets in Asia. Nevertheless, even before Sunday's cataclysmic events, the country faced a long drought that impacted upon economic activity. Agriculture and power generation were the hardest hit. The drought ended with dry zone floods that lasted several days. This also affected several sectors of the economy. But the worst economic crisis of the year was the unprecedented escalation of crude oil prices. Being a net importer of oil and a developing economy, the oil price hike hit us particularly hard. The Government was compelled to slash subsidies and raise prices of nearly all petroleum products, which inevitably led to a rise in many other commodities and transport fees. The tidal wave disaster will compound these economic worries. But we can seek strength in the fact that Sri Lanka is not the only affected country. All affected countries must get together at this moment to help each other. We also hope that the rest of the international community will help the region. The local private sector too should help the Government to rebuild the country. This should be a united effort sans all differences. |
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