Interview: Krishan Balendra
What actions should be prioritised to attract more foreign direct investment (FDI) to Sri Lanka?
KRISHAN BALENDRA: We should prioritise creating a policy document that identifies three to four areas where we think Sri Lanka has a competitive advantage and then direct FDI to those industries. The document should make a case for why investing in Sri Lanka, rather than the rest of the region, makes sense. From there, we can strategise ways to market the industries to potential investors and funnel FDI to these specific areas, as opposed to on an ad hoc basis.
In addition, I believe that Sri Lanka’s FDI inflows would significantly benefit from the creation of a one-stop shop – a system in place that has the proper mandates and authority to push through approvals without investors having to go to many different places. Infrastructure, if improved, would also go a long way in attracting more FDI to the country.
How do you expect the period of slow domestic consumption to reverse in the medium term?
BALENDRA: The slowdown in 2017 and 2018 follows the big upturn in spending in 2015 and 2016. A number of factors during those years led to higher disposable incomes and increased consumption, such as lower petrol prices, lower domestic electricity rates and the public sector wage hike that occurred in 2015.
Sri Lanka experienced a bad drought during 2016 and 2017, with the year also seeing the government take measures to reign in spending in response to the widening balance of payments and current account deficit. These events led to some taxes being increased and interests rates going up, which contributed to the slowdown in domestic consumption.
In the short-to-medium term, I believe that the country will once again reach an economic growth rate of approximately 5%. With that kind of expansion taking place, disposable incomes will naturally increase over time and resident consumption will also grow.
How can the public and private sector better equip the youth with educational skills that will aid the country in increasing average incomes?
BALENDRA: Vocational education should be a key area of focus going forward, and I think the government and private sector can collaborate in this arena. The private sector could be incentivised to invest in vocational institutions, if they were assured that the government would provide the necessary support and infrastructure for this type of education to be looked upon favourably and administered successfully.
Initially, a public-private partnership model could be used so that private investors know there will be a guaranteed flow of revenue. This would likely come from student fees, but if there were a shortfall, the government could make up for it. While the public and private sectors can certainly work together, they should also seek to attract experts from abroad to run the local vocational training institutions.
In what ways can Sri Lanka spread inclusive growth beyond the western province?
BALENDRA: The low-hanging fruit, especially for the more rural areas, is tourism development. This includes capturing tourists staying in the informal sector, as well as encouraging new restaurants, boutique hotels and other businesses that can succeed on the back of increased tourism inflows. Growth is anticipated in both ancillary services and hotels, with the annual tourist figure expected to reach 4m-5m over the next five years. Employment in the sector is also set to rise.
Major infrastructure works, such as the next section of the Southern Expressway to Hambantota and the Central Expressway from Colombo to Kandy, should be completed in the next few years, with this improved connectivity paving the way for more tourism. Overall, these projects will promote economic activity in rural areas, as was seen with the opening of the Colombo-to-Matara section of the Southern Expressway.
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