Saturday, December 14

New era for Sri Lankan economy, says CIMB

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NEW OPPORTUNITIES: (From left) Cabraal, Nazir and Balendra answering questions during a press conference after the Invest Sri Lanka conference held at Mandarin Oriental Hotel, Kuala Lumpur. The investor forum conference aims to share the opportunity of investment destination in Sri Lanka.

KUALA LUMPUR: After nearly three decades of conflict, Sri Lanka is now growing into a high growth emerging market on the back of political will and stability in the new era.

The new phase of accelerated development and growth is underpinned by political stability, a favourable investment platform – especially for foreign investment and strong socio-economic fundamentals. CIMB and the Colombo Stock Exchange (CSE) yesterday jointly conducted a Sri Lanka Corporate Day in Kuala Lumpur.

Themed ‘Invest Sri Lanka: Opportunities in an New Era’, the conference aimed to provide a snapshot of what lies ahead for the Sri Lankan economy and why Sri Lanka is one of the most exciting investment destinations currently in the world.

“We believe that Sri Lanka is on the cusp of tremendous growth, and has the potential to provide significant returns to investors. Many of our Asean clients are already present there and we would like to encourage more to look towards this dynamic nation as a positive long term investment destination,” group chief executive Datuk Seri Nazir Tun Razak said.

“CIMB wants to be part of Sri Lanka’s South Asian hub for commerce. As the first international investment bank to open a local office in Sri Lanka, we are uniquely positioned to help not just our Malaysian clients but also our ASEAN clients to take advantage of the investment opportunity presented in this new and exciting emerging economy,” Nazir added.

Sri Lanka’s economy has been a resilient one with an average GDP growth of 4.8 per cent over the past 30 years despite the tolls of unrest.

In the last five years, GDP per capita has doubled to US$2,863 from US$1,244 in 2005 which is more than twice that of India and Pakistan, and four times that of Bangladesh.

Sri Lankan government was targeting to double GDP per capita to US$4,000 by 2016 and reach US$6,000 per capita in 10 to 12 years – equivalent to Malaysia’s GDP per capita in 2009.

As this economic prosperity trickles down to the masses, private consumption was expected to benefit from rising incomes while increased access to credit would boost purchasing power.

In the first full year, post-war average GDP growth rose to eight per cent (2010), the highest in three decades while maintaining single digit inflation over the last three years and lowering unemployment to 4.3 per cent (2010).

In addition to that, Sri Lanka was poised to maintain seven to eight per cent real GDP growth over the next five years.

Nonetheless, Sri Lanka’s budget deficit was estimated to decline to 6.8 per cent of GDP in 2011 from eight per cent in 2010 due to improved revenue collection and expenditure containment policies. Also its debt to GDP ratio was expected to decline to 79 per cent in 2011 and further decline to 60 per cent in 2016.

“The end of the conflict and the consequent improvement in the economy and corporate performance saw the All Share Price Index of the CSE achieving remarkable heights in the years 2009 and 2010, with the CSE being ranked as the second best performing market in the world in both years,” Colombo Stock Exchange chairman Krishan Balendra said during the event.

“The positive market activity reflects the new trajectory that has been forged for economic growth in Sri Lanka,” Balendra added.

“With the near and medium term outlook strong for our economy, the timing could not be better for the CSE, the Sri Lankan capital markets and for investors. We believe that this is just the beginning and we invite you to share in our progress,” Balendra concluded.

CSE would drive and facilitate transformation along four key themes namely capital markets as an attractive source of funds, building world class infrastructure and capabilities within CSE, elevating quality and performance of key market intermediaries as well as attracting new retail and institutional flows.

Ajith Nivard Cabraal, Governer, Central Bank of Sri Lanka was also upbeat about the future of Sri Lanka as an investment destination in his keynote address at the conference.

“Sri Lanka is on a high growth trajectory supported by sound macro-economic fundamentals. In spite of the challenges posed by the global uncertainty such as the Eurozone debt crisis, we have managed to maintain high and broad based economic growth, low interest rates, a declining unemployment rate and control inflationary pressures,” Cabraal stressed.

“Sri Lanka is strategically located on the major East and West shipping route and serves as the point of entry to South Asia. In keeping with President Mahinda Rajapaksa’s vision, Sri Lanka is poised to emerge as a major global hub in the South Asian region for trade, logistics, investment, communications and financial services,” Cabraal ended.

Nonetheless, Sri Lanka’s budget deficit was estimated to decline to 6.8 per cent of GDP in 2011 from eight per cent in 2010 due to improved revenue collection and expenditure containment policies. Also its debt to GDP ratio was expected to decline to 79 per cent in 2011 and further decline to 60 per cent in 2016.

Incentives for investors would continue namely the foreign ownership permitted across almost all areas of the economy, no restrictions on repatriation of earnings, fees and capital. Safety of foreign investment is also guaranteed by Constitution.