Where is J-Biz?
2008 is certainly going to be a crunch time for corporates. In many ways it is similar to the year 2000-2001 when businesses got so badly hit that the chambers woke up and got involved in the peace process.
The situation this time though similar in the context of a crisis is somewhat more complicated. This time a global fuel crisis and the battle for food supply from man, animal and machine (production of bio-fuels for motor cars) is triggering unprecedented increases in the prices of both commodities and complicating a process that is already affected by the conflict.
Not that the conflict has deterred growth. It hasn’t, as economist Dr Sirimal Abeyratne pointed out at a special panel discussion organized by The Sunday Times FT on Thursday on the fuel and food crisis. “We are not moving fast; we are moving slowly; nevertheless we are moving,” he contends, arguing that unlike most countries at war, the Sri Lankan economy has been chugging along nicely at an average five percent growth rate.
Yet profits are falling as seen in the annual results of big corporates like Dialog while first quarter results of others are also affected and hurting as high energy costs and the chain reaction from high fuel prices take its toll.
The cost of production is rising and this is being passed onto consumers just like Dankotuwa Porcelain which said this week that its energy bill has risen by Rs 6 million a month and that it was forced to raise prices. Ceremics is not an essential product but very soon other essential goods producers will also hike prices.
They have little choice anyway. The cost of doing business is clearly rising. Inflation and interest rates are up and wage demands are growing as workers struggle to cope with income levels.
There is divided opinion on external factors being the main reason for rising costs. The Central Bank and the IMF have slugged it out over the causes of inflation; the Bank says it’s mainly due to external factors like fuel, etc while the IMF believes external issues are not the main reason.
Most business leaders tend to agree the IMF view and point out to other South Asian economies where inflation levels, though rising in line with the fuel hike, are much lower than Sri Lanka. “Thus if inflation is mainly triggered by external factors, why isn’t the rate of inflation in Sri Lanka as low as India or Bangladesh?” one business leader asked.
Many – even Dr Abeyratne - point to government expenditure as the culprit and say there is an urgent need to trim spending. Revenue doesn’t match spending and the community – business and the people – continue to be taxed to meet these costs, in most cases which are unproductive.
The other issue on which business is divided is the level of involvement in joining civil society and the international community to halt the cycle of violence, abductions and harassment of the media. This week, the Ceylon Chamber of Commerce (CCC) came out strongly and urged the government to stop suppressing the media while condemning the barbaric attack on Nation Associate Editor Keith Noyahr.
In that sense, the chamber must be lauded but is this enough or just scrapping the surface? The cycle of violence has gone on unabated over many months, the battle to destroy the LTTE is going on longer than expected and the cost of doing business is hitting a bottomless pit.
Shouldn’t the chamber and other chambers for that matter be more deeply involved in stemming this violence because it is costing dearly to business in terms of foreign investment sentiment and possible detrimental trade effects like the GSP+ benefits?
On the other hand where is J-Biz; what has happened to the Joint Business Forum, the once powerful body of chambers which got together on crisis issues and jointly and “gently” brought pressure on the government? It was active in the mid 2000s but in recent times has’t made any serious attempt to come together and discuss these crises. Does it even exist? No one knows. The same applies to SriLanka First, the peace body driven by the Chamber of Commerce.
Nevertheless the conflict and dismal human rights record doesn’t appear to be an issue for international corporations and multinationals to do business in the country, as we found out. Multinational corporations are more preoccupied about the global crisis in food and fuel than worry about human rights concerns in the world.
Sri Lanka, despite its human rights record, continues to draw investments but from countries like Malaysia or Korea. Malaysia was Sri Lanka's biggest foreign investor in 2007, the third year running, ousting countries like the UK and Japan. India is also a major investor in Sri Lanka.
Some business leaders are urging more involvement by the chamber movement in attempts to bring some stability to the country – war or no war – and say they have a powerful role to play, if chamber leaders have the guts to do so or if they can come together for a common, a-political cause.
At the moment many chambers will baulk at the idea of raising these issues with the government fearing repercussions in the form of lost contracts, deals and losing friends in government who can make ‘nice’ things happen in a business. While the economy will run along and again record 6 percent or more growth this year, the deteriorating law and order situation will impact on business even more this year. The corporate sector needs a wake up call and a fearless leader to lead so that others will follow.
Do we have a candidate?