Tsunami and shareholder value
The damage and destruction caused by tsunami waves to Sri Lanka and its economy are immense. To start with we have lost more than 20,000 people and many are missing. We are not used to these kinds of disasters since our nation is not familiar with such natural disasters. The market dropped on Tuesday as information on the scale of the disaster trickled in. I will examine the impact this will have on our economy and shareholder value.

Tourism sector
The beach resorts in the Southern, Eastern and some in the West coast have been severely hit. The immediate impact would be a tremendous drop in earnings since this was the winter season, where occupancy was full. Hotels will have to be reconstructed and this will take a month or two. It is questionable whether all hotels will be able to recover their insurance policies. In this case hotels will have to raise money for reconstruction and this will further increase their financial costs. I also feel that this will have a trickle down impact on the tourism industry as a whole in 2005 since the country's image as a location immune to natural disasters is now lost. If this is the case there could be a poor performance of the sector in the year 2005. Image building and marketing has to be carried out overseas to overcome this drawback to this sector which is a key contributor to the economy.

Construction industry
One man's meat is another man's poison. This will be a tremendous opportunity for the construction industry which will have an increase in business due to reconstruction and rehabilitation work which will commence very shortly. Industries such as cement production and even contract business will benefit in the process.

Banking sector
In terms of infrastructure the impact on banks was quite minimal. Some banks would have experienced damages to their regional branches. The lending portfolios of banks could have been affected since significant property was destroyed and these could have been constructed with debt. Where a bank's exposure becomes high in this regard earnings would tend to dip. At the same time banks would also get opportunities to invest in rehabilitation and reconstruction whereby they would be able to earn higher earnings in the future.

Healthcare sector
Majority of the private hospitals are in Colombo and its suburbs but increasingly many affluent rural individuals are brought and admitted in these hospitals with all sorts of injuries. The hospital sector is likely to experience an increase in earnings. Some of the hospitals such as Apollo and Nawaloka are listed and their earnings increase should fundamentally improve their shareholder value.

Petroleum sector
Last week the market was upbeat about LIOC whose price doubled when the stock started trading. The LIOC IPO was mainly towards raising funds for the Trincomalee oil tank facility. The impact on these is yet not adequately assessed but it may have an impact on LIOC performance in the next year.

Human capital
More than the damage to any sector, the human capital of the country has been lost on a large scale. The individuals dead are those who contribute directly or indirectly to the economy and thus the performance of the market. It is difficult to estimate how long it will take to correct the damage.

Message to the investor
From north to east to the south it is the same story. A story of tragedy filled with human loss, suffering and mass destruction. This is an opportune moment for our leaders to come forward and build a nation by uniting everyone.

It is time for us to pause and think as Sri Lankans and work together in rebuilding a nation without poverty, without war, without human suffering and which is safe from such natural disasters. Only then can we be assured that we have done our best for mother Lanka and that we are working towards sustainable shareholder value.

(The writer could be reached at -

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