Financial Times

Young business leaders plea
Peace, stability to do business
By Feizal Samath
Despite hectic efforts by Sri Lanka's senior business leadership to resolve the current political crisis, the country is heading for a turbulent period in the next three to six months, according to private sector economists and young business leaders.

There are indications that even if the spat between President Chandrika Kumaratunga and Prime Minister Ranil Wickremesinghe is resolved, the uncertainties will continue given that 2004 is an election year with provincial polls due on a staggered basis. Kishu Gomes, managing director at Caltex Lubricants Lanka, says the economy and industry is unlikely to grow in the first six months of the new year. "That's my reading of the situation. It would be turbulent and there would be some kind of disarray," said the young corporate chief and winner of the young director of the year award.

Gomes, also president of the American Chamber of Commerce in Sri Lanka, says his argument is based on the fact that for the first four months of 2003, there was a good growth which was not maintained through out the rest of the year. Most industries in the second half have shown flat growth while the real impact of the current political crisis could only be seen next year.

"I cannot see the trend (industries showing flat growth) changing in the short term," he noted, however adding that a permanent solution to the cohabitation crisis is likely to emerge in the first half of the year - due to pressure from civil society and the business community.

Pravir Samarasinghe, director at Richard Peiris & Co and CIMA president, said he wished for peace and political stability in the country which unfortunately may not happen in the short term. "Before the present political crisis we (RPC) were bullish on the economy and looking at investments in real estate and leisure. These are now on hold."

He said elections would send interest rates and government borrowings up and hurt macro economic targets. "There would be a two-three month period of stagnation (after polls)." Jeremy Carter, the IMF senior representative in Colombo however believes that the economy would grow as long as the peace process continues. Asked about uncertainty over clashes between the two governing leaders, he said: "Well that's an issue that Sri Lankans need to decide (sort out)."

He also rejected reports and statements made by government ministers that disbursements of the $4.5 billion pledged at the Tokyo donor meeting have got stuck in the political quagmire. This year at least $1 billion in donor money would have been received by the government, he said adding: "The ADB is disbursing funds, the World Bank is disbursing money, the IMF is disbursing money and even the Japanese government is providing funds." However he said disbursements would be faster if the tempo of the peace process rose.

Central Bank Economic Research Director Dr. A.G. Karunasena said the economy was expected to grow by six percent but such growth would also depend on progress in the peace process. GDP growth this year is expected at 5.5 percent.

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