After end of the War, Sri Lanka May Become to India What Hong Kong is to China
HSBC Private Bank is of the opinion that after the end of the civil war fought over 3 decades, the economy of Sri Lanka could bounce back from the growth, which was the weakest in the last six years and while doing so, it could become the busy market for India, as what Hong Kong to China.
Sri Lanka, an island in the Indian Ocean had its economy shattered by the fighting going on for decades. The Sri Lankan economy worth $32 billion grew 1.5 percent in the last quarter, from what it was a year earlier, although the worldwide recession intensified its slowdown. After the defeat of Tamil Eelam Tiger rebels last month, a recovery is made possible for apparel and tea exporters, retailers and Ports.
Arjuna Mahendran, chief investment strategist for Asia at HSBC Private Bank, overseeing $494 billion assets, based at Singapore, said basically the location of Sri Lanka provides a natural advantage to its port and so the rebound from ruin of the economy will be spectacular. Owing to its proximity to India, as in the case of Hong Kong profited as a trade hub for China, Sri Lanka could also benefit. India is the world’s fastest growing economy, ranked second, and Sri Lank is located just 19 miles (31 kilometers) on the southeast end of India.
Mahendran said Sri Lanka’s Colombo port is handling seventy percent of the goods volume, only as trans-shipment cargo imported by India. Because Indian ports are lacking adequate depth, this volume could be increased in future. In this context, Mahendran pointed out the present plan of Sri Lanka, to quadruple the capacity of the Colombo port, within the next three years.
Ending a 26 years’ struggle for having a separate homeland for them within Sri Lanka, the Liberation Tigers of Tamil Eealam (LTTE) were finally defeated on 16th of May. The Sri Lankan military fiercely launched a never-before offensive since January, with a view to wipe out the Tigers, controlling one third of the country once and so the Tigers fell swiftly.
Great Potential:
Otara Gunewardene, owner of Sri Lanka’s biggest department store Odel, commented that the end of war with LTTE is unbelievable as something no one ever expected to happen, particularly when people have lived their life, mostly under the specter of a dreadful war. So he sees things in a different perspective and foresees a lot of growth potential existing.
In the changed circumstances, Odel departmental store is planning to sell a portion of the stakes in the Company to foreign investors. They have plans of spending $20 million towards adding another 70,000 square feet to their primary store in Colombo, as also opening fresh outlets in more other cities of the country.
Malik Fernando, whose family owns the best-known brands of Ceylon tea in the world – Dilmah Tea Company – is of the view, now that the war with terrorism is over another new economic war is to be fought. Because of the war, infrastructure facilities such as roads and power were neglected and so the cost of doing business has been high for manufacturers.
Sri Lanka’s small economy:
Fernando added that their Tea Company Dilmah had to operate a separate bus service in Colombo for picking up the workforce from their homes, as they were aware that if the workers used the public transport, they would be late in attendance, stressed and fagged out.
Fernando said that in view of the small size of Sri Lankan economy the turn around can be quick and Dilmah has been exploring plans of expansion of its business in hotels and tourism sectors. Sri Lanka’s another biggest diversified Company, John Keells Holdings Ltd. said they foresee wider opportunities of growing its business from property development to banking as also insurance.
HSBC’s Mahendran commented that the demand in respect of high-end lingerie and apparels that Sri Lanka sells oversees, has not been sapped by the worldwide recession and exporters of Tea also could benefit, by the 30 percent upward surge in prices of Tea this year.
Dileep Mudadeniya, Sri Lanka Tourism Promotion Bureau’s managing director is optimistic of their global campaign named “Small Miracle”, aimed at increasing the number of about 500,000 tourists visiting Sri Lanka annually, by atleast 20 percent.
More number of Tourists for Sri Lanka:
For years the U.S. and European tourists were discouraged by the ongoing civil war, from visiting this beautiful tropical island of Sri Lanka.
The General Manager of Hilton Colombo, Jerome Auvity, informed that for the past two years, the occupancy rates in five star hotels of Colombo, having a total capacity of 2,000 rooms, have been only 40 percent. He said because of this, they could achieve only $62 as the average room tariff per night.
He is of the opinion that there is no immediate reaction to suggest rising trend in business and another six months period is required to instill confidence, in the minds of visitors of leisure market in Sri Lanka. He apprehended that there is still the “dark cloud, debate and issue” about the displaced people.
Nearly 300,000 people have been displaced and left stranded by the final battles and are put up in over 40 rehabilitation camps, all over the northern part of the Sri Lankan country. President of Sri Lanka, Mahinda Rajapaksa asserted last month of his intention to resettle these people in that region within 180 days.
However the Board of Investment of Sri Lanka anticipates foreign direct investments would quadruple to $4 billon, before the end of 2012 – led by investments in tourism, ports, textiles and telecommunication.
Investment from foreign countries:
The Chairman of the Board of Investment of Sri Lanka, Dhammika Perea, said enthusiastically that they are getting “encouraging responses” from investors in foreign countries and that they anticipate three leading hotel chain businesses, signing an investment agreement with them in the next three months.
An economist at HSBC Holdings Plc. in Singapore, Prakriti Sofat, estimates the economic growth of Sri Lanka to accelerate nearly four times of the current pace to 6 percent before the end of 2010. Another economist of Citygroup Inc., Anushka Shah anticipates the growth to be at 5.7 percent by next year.
The Colombo All-Share Index, which is the benchmark stock index of Sri Lanka, surged upwards by 3.1 percent to reach 2416.02 at the close of trade on 18th June. This is the most ever since the week when the civil war ended, due to local investors snapping up shares.
Top fund managers like George Soros, Mark Mobius and similar others are looked forward upon keenly by the Securities and Exchange Commission, so as to invest in the nation and thereby help the Colombo Stock Exchange to double its market capitalization to $14 billion within a year.
The Director General of the Commission, Channa de Silva, expressed the view that it will take a while for people to realize the end of 30-year civil war in Sri Lanka and what dividends it can bring towards them. He was confident of the vast international interest in Sri Lanka, a country waiting
Did you enjoy this post? Why not leave a comment below and continue the conversation, or subscribe to my feed and get articles like this delivered automatically to your feed reader.
Comments
No comments yet.
Leave a comment