Despite the visit this week of high-profile, fund manager Dr Mark Mobius, following on the heels of investment guru Jim Rogers some weeks back, investment and business uncertainty lingers on.
With an election on the cards probably in January (presidential and parliamentary) and thereafter – before April 2010 – most investment managers and business firms have put their plans on hold. In fact, many companies have showed a reluctance to invest afresh or plough back profits even soon after the war in a decision unconnected to any political developments but to the continuing global financial crisis and slow consumer demand in Sri Lanka.
The move to cut interest rates is essentially aimed at encouraging the private sector to invest more and kick-start the post-conflict development phase but that isn’t happening and with elections now on the horizon, the process would get further delayed.
However an investment forum in Colombo this week by a new fund, Leopard that seeks to invest in Sri Lanka and enthuse foreign investors could garner interest for long term investment.
While the uncertainty will continue for at least the next five to six months (around March/April) till a new government (whether President Mahinda Rajapaksa and the ruling coalition returns to power or in the event of the main opposition United National Party (UNP)-led alliance pulling off victory) announces its development and investment policies, objectives and goals, it is clear that Sri Lanka is poised for exponential growth and long-term prosperity with the conflict ending.
Having said that, it is also imperative that the governing party prepares a political framework for action or after consultations with all stakeholders on solving the ethnic crisis, an issue that continues to affect the country and its potential.
Dr Mobius has also suggested the need for a clear plan from the government for foreign investments while saying a final decision on investments would ‘wait and see’ till elections are over.
Nevertheless visits like these are encouraging to the Sri Lankan economy and brings back a smile to the stockmarket, the private sector and government policy makers.
In the meantime, the work-to-rule campaign this week by trade unions attached to the petroleum, water, electricity and ports sectors didn’t go as planned for the unions. Apart from a rush to fill up their tanks on the day before the protest, there was no serious disruption of essential services and the military didn’t need to move in, although placed on standby if a crisis emerged.
While everyone is struggling with the cost of living and a wage hike is what wage earners desperately need, the public at large is fed up with possible disruption of their basic needs – fuel, water, electricity – and judging by public views on newspaper websites and media interviews, there is absolutely no support for the unions over their protest action. “Mala Karadarayak (bloody nuisance),” exclaimed one angry motorist as he waited in a queue outside a fuel shed.
The General (Sarath Fonseka) factor has got entrenched into the political, economic and social fabric of the country. The stock market has slumped to between Rs 300-to-500 million from the Rs 1 billion a day turnover a few weeks back with the Raj Rajaratnam issue not an influencing factor anymore as against the uncertainty of elections and General Fonseka entering the fray as a candidate at the presidential poll. The stock market, controlled by the pro-UNP, Colombo-centric business community, would be hoping for a UNP victory and market developments would be influenced by these factors.
The expected announcement today by President Mahinda Rajapaksa at the SLFP national convention on the date for presidential or parliamentary polls is being watched by the business community with interest and also concern, given that political uncertainty is always bad for business.
However on the positive side while the country will face a few ups and downs in coming months over elections, the long term path for Sri Lanka is clearly one of progress, development and prosperity – whichever party is in power. |
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