Business

Reform or perish, it’s not too late

Published

4 weeks ago

2021/09/19

Dilshan Nadeera

Sri Lankan economy in historic crisis

By K.D.D.B Vimanga and Naqiya Shiraz

The Sri Lankan economy faces a historical crisis. The root causes are the twin deficits. First, the persistent fiscal deficit – the gap between government expenditure and income. Second, the external current account deficit – the gap between total exports and imports. The problems have been festering for too long. Without urgent reforms, the crisis could easily morph into a full-blown debt crisis.

Sovereign debt workouts are extremely painful for citizens. A mangled debt restructuring can perpetuate the sense of crisis for years or even decades. A return to normal economic activity may be delayed, credit market access frozen, trade finance unavailable.

With the global pandemic, these are unusual and difficult times. The next five years are going to be crucial for the country. The problems can no longer be avoided and should be faced squarely. The journey ahead is going to be painful but the longer these are delayed the worse the problem becomes and the magnitude of the damage compounds.

State of the Economy

The new government inherited a fragile economy, battered by the Easter attacks of 2019, the constitutional crisis of October 2018 and the worst drought in 40 years in 2017. With the pandemic in 2020 Sri Lanka’s economy shrank by 3.6% with all sectors of the economy contracting.

Yet, the pandemic is not the sole cause – it only accelerated the decline of Sri Lanka’s economy that was weak to begin with. The country has long been plagued by structural weaknesses, with growth rates in the last few years even below the average growth rate during the war. Mismanaged government expenditure coupled with a long term decline in revenue have characterised Sri Lanka’s fiscal policy. As of 2020 total tax as a percentage of GDP fell to just 8%, while recurrent expenditure increased.

Borrowing to finance the persistent budget deficits is proving to be unsustainable. Total government debt rose to 101% of GDP in 2020 and has grown since. Sovereign downgrades have shut the country from international debt markets. The foreign reserves declined from US$ 7.6 bn in 2019 to US$ 5.7bn at the end of 2020 and to US$ 2.8 bn by July 2021. This level of reserves is equivalent to less than two months of imports. With future debt obligations also in need of financing, the situation is dire.

The import restrictions placed to combat this foreign exchange crisis have failed to achieve their purpose and are doing more harm than good. imports rose 30% in the first half of 2021 compared to 2020 despite stringent restrictions.

The problem lies not in the trade policy but in loose fiscal and monetary policy that has increased demand pressures within the economy, drawing in imports and leading to the balance of payments crisis and consequently the depreciation of the currency.

Measures by the Central Bank to address this by exchange rate controls and moral suasion have caused a shortage of foreign currency leading to a logjam in imports.

Fundamental and long-running macroeconomic problems were intensified by the pandemic.Import restrictions, price and exchange controls do not address the real causes.

Treating symptoms instead of the underlying causes is a recipe for disaster.

The continuation of such policies will lead to the deterioration of the economy, elevate scarcities, disadvantage the poor who are more vulnerable and in the long run lead to even higher prices and lower output due to lack of investment.

Sri Lanka’s GDP growth over the last decade has been alternating between short periods of high growth and prolonged periods of low growth. This is a result of the state-led, inward looking policies of the last decade.

A comprehensive reform agenda must be built around five fundamental pillars:

i) fiscal consolidation – The need to manage government spending within available resources and to reduce debt are paramount. Revenue mobilization must improve but the control of expenditure cannot be ignored. Budgetary institutions must be strengthened and there must be reviews not only of the scale of spending but also the scope of Government.

ii) Much of government expenditure is rigid – the bulk comprises salaries, pensions and interest so reducing these is a long term process. Reforming State Enterprises, especially in the energy sector and Sri Lankan Airlines is less difficult and could yield substantial savings. Continued operation of inefficient and loss-making SOE’s is untenable under such tight fiscal conditions. Financing SOE’s from state bank borrowings and transfers from government reduces the funds available for vital and underfunded sectors such as healthcare and education. Excessive SOE debt also weakens the financial sector and increases the contingent liabilities of the state. Therefore SOE reforms commencing with improving governance, transparency, establishing cost reflective pricing and privatisation are necessary. This can take a significant weight off the public finances and by fostering competition contribute to improvements in overall economic productivity.

iii) Tighten monetary policy and maintain exchange rate flexibility. Immediate structural reforms include, Inflation targeting, ensuring the independence of the central bank by way of legislation and enabling the functioning of a flexible exchange rate regime. Further significant attention has to be placed on the financial sector stability with a cohesive financial sector consolidation plan, with special emphasis on restructuring of SOE debt.

iv) Supporting trade and investment. Sri Lanka cannot achieve economic growth without international trade which means linking to global production sharing networks. Special focus has to be given to reducing Sri Lanka’s high rates of protection which creates a domestic market bias in the economy along with measures to improve trade facilitation and attract new export oriented FDI.

Attempts to build local champions supported by high levels of protection have

(a) diverted resources away from competitive businesses,

(b) created a hostile environment for foreign investment,

(d) dragged down growth

v) Structural reforms to increase productivity and attract FDI – Productivity levels in Sri Lanka have not matched pace with the rest of the growing economies. The reforms mentioned above are extensively discussed in Advocata’s latest publication “Framework for Economic Recovery”.

Sri Lanka stumbled into the coronavirus crisis in bad shape,with weak finances; high debt and widening fiscal deficits. It no longer has the luxury to delay painful reforms. Failure to do so will not only jeopardize the economy; it could even spawn social and humanitarian crises.

Naqiya Shiraz is the Research Analyst at the Advocata Institute and can be contacted at naqiya@advocata.org.K.D.D.B. Vimanga is a Policy Analyst at the Advocata Institute. He can be contacted at kdvimanga@advocata.org.

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Business

Sri Lanka Insurance holds “Minimuthulanthaya” for Children’s Day 2021

Published

22 hours ago

2021/10/17

Dilshan Nadeera

Sri Lanka Insurance holds “Minimuthulanthaya” an exclusive series of informative and entertaining sessions for children and their parents commemorating the World Children’s Day 2021. The programme was held from 01st to 3rd of October 2021 via Sri Lanka Insurance official Facebook page attracting thousands of enthusiastic children across the country.

The programme was conducted with the support of Sri Lanka Insurance Minimuthu Education Plans to inspire the younger generation to achieve their dreams. The Minimuthu Education Plan provides financial assistance for children to pursue their dreams setting a strong foundation for child’s future.

The first session of the series “Super Parents”, an informative discussion on child education, mental health and nutrition was held for parents on 1st of October with the participation of Ms.Christine Jayakody Psychologist, Mr.Upali Ginasekara former Principal of Royal College Colombo and Principal of Polymath College, Dr.Sujeewa Wickramasinghe Nutritionist and Mr.Amintha De Silva Visionary Guru. The programme was well received by parents participated and the programme was followed by a Q & A session where many important issues were discussed regarding the education, health and wellness of children.

The other sessions of Minimuthulanthaya was held during the weekend allowing children as well as their parents to enjoy a quality time together. “The Artist” session and “The Entertainer” session was conducted live in both Sinhala and Tamil mediums teaching and allowing children to express their talents in drawing and creativeness.

The Mastermind session was conducted to interact with masterminds with knowledge about mathematics, science, history, general knowledge and various other fields.

The Computer Wizard session was the main attraction of the whole series as many kids with avid interest towards computer programming joined the session to learn programming.

The sessions were concluded asking the participants to submit their own creative work to stand a chance to win valuable gifts from Sri Lanka Insurance and is receiving tremendous response in return.

Business

BoardPAC certified one of Asia’s Best Workplaces by Great Place to Work

Published

22 hours ago

2021/10/17

Dilshan Nadeera

BoardPAC Chief Operating Officer Mr Rajitha Kuruppumulle (right) and Head of Operations & Systems Mr Buddhika Abeygooneratne with the Great Places to Work award and certificate

BoardPAC, the Sri Lanka-based multinational board meeting automation solutions company, reached another milestone recently when it was featured for the first time in the prestigious Best Workplaces in Asia 2021 list – Small and Medium category, published by Great Place to Work.

A company news release said this recognition came hot on the heels of BoardPAC being certified as a ‘Great Workplace’ by Great Place to Work in Sri Lanka for the third consecutive year in 2021.

“The internationally acclaimed list follows strict criteria in acknowledging the best of the best in terms of workplaces in the Asia region. BoardPAC’s recognition is based on extensive ratings provided by its employees in an anonymous survey and a culture assessment conducted by the Great Place to Work organisation, and upon having achieved the globally accredited cut-off scores,” the release added..

Commenting on being placed on this esteemed list, BoardPAC’s Chief Executive Officer, Ms Lakmini Wijesundera stated: “We are honored to be selected into the Asia’s Best Workplaces List. Our team’s happiness is key to our success. The well-crafted GPTW Survey helps us with an accurate analysis of employees’ sentiments. The emphasis by GPTW on Trust, Pride, Camaraderie, and Care has been valuable in our efforts to improve continuously. GPTW has become a hallmark of our positive work culture. A big thank you to our team for the contribution to this great culture.”

Great Place to Work provides the benchmarks, framework, and expertise needed to create, sustain, and recognise outstanding workplace cultures, and is the global authority on high-trust and high-performance workplace cultures. This process is carried out via proprietary assessment tools, advisory services, and certification programmes, including a list of best workplaces and workplace reviews. The Best Workplaces in Asia 2021 list can be viewed at

BoardPAC is recognised for driving simple, secure, sustainable, and experiential communications for Board and Executive members. BoardPAC serves a host of fortune 500 companies worldwide, with over 50,000 users globally and a presence in over 40 countries.

Leading Indian corporations such as the Bombay Stock Exchange, Power Grid Corporation of India, IDBI Bank, Container Corporation of India, and LIC Housing Finance Limited are already users of BoardPAC. It has also been deployed by some of the strongest brands across the world such as the Axiata Group of companies, Deloitte and Maxis among others. BoardPAC clientele span the largest banks and sector leaders in the Asia Pacific region such as Prudential, Petronas, Maybank, Hong Leong Group, MSIG, BSN, Bumi Armada, RHB Banking Group, Affin Bank, and Bursa Malaysia – the stock exchange of Malaysia.

In Sri Lanka over 150 of the top corporate entities including John Keells, SriLankan Airlines, MAS Holdings, Bank of Ceylon, Commercial Bank, Hemas, Carsons, Softlogic, Sri Lanka Telecom, Sampath Bank, National Savings Bank, Nations Trust Bank and Merchant Bank of Sri Lanka as well as the SEC and Colombo Stock Exchange use BoardPAC.

Business

UN-recognized pioneer leads Hayley’s Fabric’s greening thrust

Published

22 hours ago

2021/10/17

Dilshan Nadeera

Leonie Vaas, a chemical engineer who’s the Manager of Sustainability and Innovation at Hayley’s Fabrics made history last June when she was selected from thousands across the globe to be designated as one of just 10 Sustainable Development Goal (SDG) Pioneers by the United Nations (UN) Global Compact for 2021.

With an extensive range of experience in green house gas (GHG) reduction and ensuring carbon neutrality, life cycle perspective of products, plant and process improvements with sustainable technologies and textile chemical management, Leonie has paved the path for local sustainability champions to be recognized on a global platform, a news release from Hayley’s Fabrics said.

She primarily focuses on five key areas at Hayleys Fabric, including driving efforts in reducing GHG emissions, water preservation, improving efficiency with sustainable solutions for effluent treatment plants, building and training sustainability teams, as well as developing and applying new processes for ‘better and greener’ products, the release said.

Sustainable business starts with a sustainable culture

“I’ve always had a passion for the environment, and so from the start, I gravitated towards work in sustainability. Once I joined Hayleys Fabric, I was challenged and supported to link sustainability with innovation properly. Here, the opportunity to have a continuous learning experience, to be at the very forefront of sustainable innovation and part of shaping a greener future – is tremendous.

“We have a strong leadership commitment that all employees evenly match, and ultimately, that culture and enthusiasm to take the lead on sustainability are what drives our success. Sustainability at its core is driven by the higher management and we were able to come this far with the support and guidance of our CEO and Managing Director Rohan Goonetilleke. Because of this unique dynamic, we were able to rapidly commercialise our sustainable innovations, which gave me a chance to showcase what Hayleys and Sri Lanka have to offer the world. When you build the right culture, everything else flows from there,” Vaas said.

A team committed to sustainable innovation

True sustainability is about more than a single innovation. Leonie cites a host of extraordinary initiatives implemented by the Hayleys Fabric team collectively aimed at securing global leadership in sustainable textile manufacturing.

“We treat 100% of the water used for production to maintain strict compliance with certified and audited commitments on Zero Discharge of Hazardous Chemicals. This standard is recognised globally, beyond Sri Lanka’s strict national regulations,” Leonie noted.

As a signatory to the Science-Based Targets initiative (SBTi) to reduce greenhouse gas emissions and limit global warming at 1.5°C, Hayleys Fabric has already cut its carbon footprint by 15%. This was achieved by installing the largest private sector rooftop solar power system in Sri Lanka at the company’s state-of-the-art manufacturing facility in Horana. With 9,000 solar panels installed across 18,000 square metres, the system has contributed 4.5 Mw to the National Grid since June 2021.

Leonie finds the company’s future focus on re-engineering its value chain truly inspirational. “Our team is looking at substituting production supplies with recycled polyester, organic cotton, and other bio-degradable materials as well as augmenting production capabilities to create textiles from yarn comprised of recycled plastic.”

The innovation team recently launched an app to enable end-to-end traceability for its recycled PET fabrics, mostly supplied locally to Sri Lanka’s largest apparel manufacturers. This will allow local producers and global retailers to tag individual pieces of clothing with a QR code, which customers can scan to learn exactly how many discarded PET bottles were used to create the item and exactly which part of Sri Lanka, the bottles were collected from.

Hayleys Fabric also connects employees with key sustainability issues through culture building, webinars, and training and awareness building workshops.

“Keeping key issues like waste segregation, pollution, and energy efficiency top of mind, ensures that the entire workforce stays engaged with the company’s quest to become a global leader in sustainable textile production. As local leaders, we must always continue to find ways to become global pioneers.”