Interview: Rajendra Theagarajah
How can the CCC and other private sector players rebuild market confidence in Sri Lanka?
RAJENDRA THEAGARAJAH: The political uncertainty and resulting economic impact were significant concerns in 2018. Despite this, businesses supported the economy. We provided leadership in the form of a joint chamber forum, which allowed stakeholders to voice their concerns. Such a forum provides confidence to the private sector that their views are being heard and addressed. The CCC will continue to provide leadership and urge policymakers to persist with the reforms required for Sri Lanka to fulfil its economic potential and ensure that its people enjoy the benefits of development.
What will be the most important economic issues for the private sector in 2019?
THEAGARAJAH: I think the critical issue for economic growth will be political stability, particularly in the first half of the year. We need to see policy certainty and clarity so that businesses will be able to plan successfully. On the economic front, there are several challenges, such as debt refinancing. However, we are confident that the Central Bank of Sri Lanka will take the necessary steps to meet the near-term debt maturities and ensure that the country borrows successfully to roll over some of these maturities.
External factors could present more of a risk. In 2018 the global financial markets were not in favour of emerging markets like Sri Lanka due to several reasons, such as a stronger US dollar and trade war concerns. Furthermore, global growth is expected to ease, which could have implications not only for the country’s financial market but also its key export partners. The movement of global oil prices will also be key. We saw how it put pressure on the balance of payments in 2018, with fuel imports being a leading driver of import growth. Beyond global uncertainties, policymakers must focus on establishing an upwards trend for economic growth of 4% or above. This must be done not through fiscal stimulus but reforms which ensure sustainable development.
How can the country improve in the World Bank’s ease of doing business index?
THEAGARAJAH: Policymakers must be commended for the recent improvement to our ranking in the ease of doing business index. This has been achieved through a steering committee and specialist task forces designated to specific sub-indices. A top-70 ranking is ambitious yet achievable. It will require further coordination between these line agencies and discussions with the private sector. One sub-index in which Sri Lanka does not perform well is enforcing contracts. The CCC has identified this gap and, together with the Institute for the Development of Commercial Law and Practice, offers mediation services to settle disputes arising from commercial contracts. In the next few years Sri Lanka could also see notable gains in other areas, including the simplification of the process for paying taxes and registering property. Beyond the index, it is key that steps are taken to ease the cost of doing business, while also improving the competitive environment for the private sector. This will ensure that amendments at the policy level show tangible benefits.
Should deepening economic integration within the South Asian Association for Regional Cooperation (SAARC) be a priority for officials?
THEAGARAJAH: It is a well-known fact that intra-regional trade between SAARC countries is substantially below its potential. Sri Lanka’s exports to South Asia only constitute approximately 11% of its total global exports. As the World Bank report “A Glass Half Full: The Promise of Regional Trade in South Asia” shows, there is potential for Sri Lanka to double its exports to the region. Such a move could provide numerous benefits to the consumer and even provide increased investment and much-needed export diversification.
