Lanka to benefit from global re-balancing

Ramani KANGARAARACHCHI

Sri Lanka is well positioned to benefit from the current global rebalancing of power and it could become one of the top places in Asia for investment, Ceylon Asset Management, Economic Advisor and Director Michael Preiss told Daily News Business.

Michel Preiss

He said Sri Lanka’s ports, tourism and technology development (specially Information technology) has created a strong competitive advantage.

“Its well educated and young English speaking population will benefit from global opportunities,” he added. Preiss said in December 2009 when he predicted that Sri Lanka’s economy would grow by 6 to 8 percent by 2010 giving an interview to an English newspaper no body believed it, when even the Central Bank expected only 4.5 percent growth and today it has become a reality with 8 percent GDP growth.

Sri Lanka will immensely benefit from global rebalancing as people look for safer areas for investments.

The recent over subscription of the US$ one billion Sri Lanka sovereign bond issue by seven and half time is clear evidence for this.

The money in the West will increasingly flow to Asia because of the economic vulnerability the West faces today and Sri Lanka is well positioned to benefit from this major shift taking place.

He said previously the super cycle of the global economy was mostly focused on the US, Japan and Europe. Now however it is emerging and frontier markets like Sri Lanka are the bright spots of the global economy.

Riots and youth unrest in London and unemployment along with increased life expectancy is imposing huge pension costs, and straining government deficits in western countries.

The United States defaulting on its debt obligations and suffering a rating downgrade is the new reality of where investors, reconsider what is safe and what is risky.

As China and India are expected to become the largest economies in the world by 2030 and the US and Europe will decline in relative importance.

“I came to Sri Lanka after one year recently and witnessed a huge difference from the Katunayake airport itself as well as Colombo city. Tourists who visited Sri Lanka in the recent past have also conveyed a very positive message to the world about the country and its people. All these points count in favour of Sri Lanka,” he said.

The current political stability in Sri Lanka and the Country Rating upgrade to BB- by Fitch has inspired confidence among foreign investors to over subscribe for the Sovereign Bond issue and to increase allocations to Sri Lankan assets.

The Colombo Stock Exchange has more than tripled in value during 2009 and 2010. However, the market has declined recently, despite strong earnings growth offering compelling valuations. Preiss said in the global context Sri Lanka offers strong earnings momentum as well as GDP growth, compared to many western economies with subpar growth therefore this is a perfect time to invest in Sri Lanka,” he said.