ISSN: 1391 - 0531
Sunday December 30, 2007
Vol. 42 - No 31
Financial Times  

Missing – the feel good factor

A year ago, when we assessed the future and what would be in 2007, the issues were – high interest rates, high inflation, ‘high’ economic growth, rising cost of living and so on.

Our editorial commentary on January 4 said, “A more war/less peace scenario as expected this year would deter investments, see less industrial expansion and focus more on the services sector leading to an expansion in credit. Businesses should be prepared for a period of war and less reconciliation between the government and the LTTE.”

As we move into 2008, that forecast of more war and less reconciliation between the government and the LTTE has been proved right with the next six to eight months also seeing continuing hostilities and a possibility of the military even wresting control of LTTE-held territory in the Wanni region.

Given the military advances in recent months and the war rhetoric, it’s only a matter of time before government forces take on the Tigers on the ground in the Wanni, triggering another prolonged period of intense battles.

In a crop of features that we carry in this section this week that range from topics like ‘export or perish’, ‘budget realities’, ‘protectionism’, and ‘war on the economy’, there is also an interesting analysis on “Brand Peace vs Brand War” which according to the writer raises the question as to why the business sector has not played a significant role in influencing policy making and national governance.

Amidst the gloom and doom scenario, most banks and some of the big, listed companies are doing well, showing good profits in 2007. Similar trends are expected to continue during 2008 even if the war reaches its peak with the battle for the Wanni. The economy however is dominated by small and medium-sized businesses who are struggling to barely keep their heads above water and 2008 will see them getting deeper into debt in the bid to survive and ensure their employees keep their jobs.

On employment, a common spectacle was the number of Board of Investment (BOI) agreements that were signed and the number of jobs it would create. “700 new jobs as BOI signs agreements for eight new projects,” ran a newspaper headline on Friday in a routine feature seen during the year.

To what extent these thousands of promised jobs will materialize remains to be seen. On the other hand, the BOI under its new chairman Dhammika Perera changed the rules – signing the ‘temporary’ agreement first before companies ventured into the more difficult area of seeking land, power and other local council approvals. Earlier many of these projects didn’t take off since the agreements were signed only after these cumbersome procedures were taken care of.

That the government shouldn’t be in business, is a well accepted position today but in 2008, the state gets back into the wholesale and retail trade through a Sathosa-type organization to import food and essentials whenever prices escalate.

Even though there is need for an intervention of this sort due to the cost of living which is unbearable for most segments of the population, the return to Sathosa-type trade is unlikely to work given the level of corruption that takes places in state organizations of this nature.

Interest, rates, inflation, low investment, cost of borrowings, recoveries (credit card debt is rising), living beyond our means (for which the government alone cannot be blamed) … are all issues that will confront the people once again next year.

For young parents, the admission of children to Grade one at national schools which begins on January 17 will be a tough hurdle to overcome while powerful business tycoon Harry Jayawardena must be licking his wounds after a rare failure in the planned take over of the Asiri Hospitals Group. Ashok Pathirage, a powerful, new investor on the block, wrested the takeover bid and in addition also added Asha Central Hospitals to his bag of acquisitions in 2007.

As we get into another year of survival for many and success for a few, what would most be missing is the ‘feel good factor’ which as one analyst said is clearly enjoyed only by the politicians given their demand (Rs 5 million to Rs 50 million for crossovers) whenever a political crisis blows up and political parties need to add to their parliamentary strength!


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