As we move on …

As we move into 2007… the elusive peace, the high cost of living and burgeoning state costs would be uppermost in the minds of the people.

The past year will be remembered for many things foremost among being controversial businessman Harry Jayawardena’s unconventional methods to get rid of his main business partner and expanding his growing empire, the shaky peace process and a war-affected economy nevertheless buoyed by high economic growth.

The debate over ‘ecstatic’ GDP growth and what it means to ordinary people and their cost of goods will continue into the New Year.

2006 will be remembered for the decision by the IMF to close its near 30-year old Colombo office from February and put an end to the eternal confrontation between leftwing parties, peasants and pro-poor groups against the tough conditions of the Fund.

The IMF has been opposing subsidies, a huge state budget, state pensions and anything that costs the government dearly.

Thankfully the war didn’t come to the south as anticipated at the beginning of the year. The Sunday Times FT editorial in its first editorial for the year on January 1, 2006, said: “The Tigers are bound to raise the stakes and we had better be prepared for a few spectacular attacks in Colombo designed to maximise their media impact. While most informed observers of the situation believe that neither the terrorists nor the government can afford to start an all out war again because of international pressure, the shadow war that has been started by the Tigers could intensify in the months ahead.”

Apart from attacks on established targets including the Defence Secretary and the Army commander, the public was not a direct target with the security apparatus also ready to prevent such attacks.

The services sector – particularly telecommunications – showed phenomenal growth in 2006 and is expected to dominate the economy this year too with other sectors expected to see lower growth.

According to the Central Bank, the services sector recorded the highest growth rate, contributing 63 percent to the overall growth in the third quarter of 2006. This growth was largely driven by the performance in post and telecommunication, cargo handling and storage. A lot of money is also expected to be ploughed into real estate with interest rates not attractive enough for investors – both developers as well as buyers of condos and apartments. The condo market is drawing lots of interest from Sri Lankan expatriates who find it a good investment for short stays rather than residing in a hotel when returning to see family and friends. It also helps to overcome the traffic chaos in the city.

Though market rates are seen rising with some penthouses now selling at over a million US dollars, investment in this sector would still be attractive even as supply outstrips demand in the next two years. Stockbrokers say that with interest rates unattractive to investors, real estate is becoming a favourable option.

Another new area of activity in the services sector is building management which George Steuarts, the old plantation management group, is eying in a big way – also as an avenue to export skills. The high intensity war in the northeast is expected to continue in 2007 with the government touting its duel policy of combating terrorism while keeping the doors open for peace talks.

At least 3,000 people have died this year in fighting between government troops and the LTTE. The conflict has badly impacted on tourism with hotels particularly in the south lamenting about poor occupancy.

Tourism authorities are looking at new avenues of enticing tourists but continue to go about it the wrong way by denying that there are problems in the country. What impression for example do tourists get when they drive into Colombo with tense armed soldiers all over and roadblocks in every nook and corner?

More strikes are also expected in the New Year as unions flex their muscles over COL and other issues. However Sri Lankans are a resilient lot and as we have shown in 2006, the coming year too would bring out the best in the ability of the people to combat the negatives of the war and its impact on all sectors of the economy.