SL could use its geo-strategic location for economic prosperity

Sanjeevi Jayasuriya

Sri Lanka has been a standard bearer in South Asia, being one of the first countries to initiate economic reforms and has some of the best human development indicators in the region. As Sri Lanka emerged from the conflict we could expect country leveraging its geo- strategic location for economic benefit, Deloitte Consulting LLP Senior Economic Adviser Dr. Jayanta Roy said.

The country is at the heart of the shipping lanes connecting Asia to the Europe and the Colombo Port is one of the most efficient ports in the region, he said at the Ceylon Chamber of Commerce members’ forum delivering the keynote address on ‘The Impact of Global Downturn and the Strategies and Actions for South Asian Economies to Remain Competitive’ held last week in Colombo.

The Ceylon Chamber of Commerce (CCC), the pioneering business chamber in the country, celebrated 173 years yesterday. In celebration of this significant milestone, the CCC held a members’ forum on March 22 , 2012 at the Golden Pond, Hotel Taj Samudra, Colombo. Speaking of the global downturn, Dr. Roy pointed out that the economic downturn that started in 2008-09 was not a brief shock, but a structural and systemic crisis of the global financial network centered around financial hubs in advanced industrialized economies.

The immediate impact of the global crisis on countries such as India and Sri Lanka was a large short-term capital outflow as international investors moved short-term capital into safer havens. This first round effect quickly gave way to a liquidity shortage amid the international credit crunch and access to capital for South Asian entrepreneurs became more difficult and expensive.

Dr. Roy emphasized that there is need to aggressively diversify the export markets, look to greater regional integration and to markets with large emergent middle-classes in Asia, Latin America and Africa.

The need to diversify the export basket and focusing on developing integrated regional production networks will create greater product diversity and competitiveness. Developing long-term procurement relationships, increasing regional integration in commodity trade and investing in alternative fuel technologies were the way to curb the escalating commodity prices, he said.

South Asian economies, especially Sri Lanka and Bangladesh, were dependent on exports, and their major export destinations were the high-income OECD economies that were in the middle of the crisis.

He pointed out that while exports constituted a fifth of India’s GDP in 2007, it was less dependent on just merchandise exports, and had a high share of services exports. Service exports were much more resilient in the economic downturn, allowing India to weather the storm more effectively than some other South Asian economies. It is vital to link remittance flows to entrepreneurial opportunities in the region.

South Asian economies are highly dependent on imported fuel.

This increased their vulnerability during the crisis of oil and other raw material prices continued to remain high, creating inflationary trends in South Asian economies. South Asia as a whole is a net importer of minerals, fuels, and other raw materials and increasing global demand and therefore prices of such raw materials will continue to remain a source of concern for South Asia, he said.