Sri Lanka to become hub if reforms are made with South Asia in mind

ECONOMYNEXT – Sri Lanka could become a key logistics reforms are made with South Asia in mind, an economist has said at an investment conference in Singapore targeting South Asia.

“Sri Lanka has every possibility to become the South Asia hub in shipping and logistics, if it can get some simple reforms through,” Razeen Sally Associate Professor, Lee Kuan Yew School of Public Policy, National University of Singapore said.

“The geography is just right, placed between Singapore and Dubai along the Asian trade route.

“By opening the market to shippers, shipping agents, and building the connectivity around it, Sri Lanka could attract the ancillary services needed to create an eco-system of logistics in quick time.

“This should be done not with the Sri Lankan market in mind but with the bigger South Asian market in mind.”

He was speaking at a South Asia Investment Conference (SAIC), held for the second year jointly organized by Capital Alliance Securities (Pvt) Ltd (CAL), AKD Securities of Pakistan and Lanka Bangla Securities Ltd in Singapore.

Sri Lanka also has to stabilize the economy, have better debt management, improve the ease of doing business and reducing tariffs were needed to boost growth.

“I think that these reforms would be enough to deliver a significant boost to growth,” Sally said. “The political question is whether Sri Lanka can go from ‘no reform’ to some reform?”

Analysts have also pointed out that Sri Lanka needs monetary discipline to bring stability to the economy.

Sri Lanka runs into severe currency crises with increasing frequency, with East Asia crisis style results, of liquidity shortages, high interest rates, a steep currency collapse, output shock, credit contraction and bad loans, due to monetary indiscipline and contradictory money and exchange policies.

India also ran into currency trouble in 2018 and is suffering a similar hangover with the rupee sharply down.

Bangladesh’s central bank however has been able to deliver over 10 years of stability, outwardly seen by its Taka at around 80/81 to the US dollar since the last period of major instability, though the credit system liquidity also tightened in 2018 as the currency came under pressure.

Bangladesh is expected to be the fastest-growing economy in South Asia in 2019 and most its growth was achieved in the last decade taking gross domestic product to 300 billion US dollars.

“If growth continues in the same phase in the next five years it will be half a trillion USD,” Dhaka Stock Exchange Managing Director, Majedur Rahman told the forum which was attended by around 100 participants.

Rahman expressed that recent issues in liquidity has caused a reduction in volume and value traded in its exchange and non-performing loans in the banking industry had risen.

Bangladesh private sector has grown faster than regulators can catch up with, he said.

In the keynote presentation on Pakistan,

Sulaiman Mehdi, Chairman of the Pakistan Stock Exchange Limited said the country’s benchmark index Karachi Stock Exchange 100, provided a higher US dollar return that the MSCI emerging market index.

He said with Interantional Monetary Fund stipulated fiscal reforms, and due to inversion of the yield curve, investors have now started reverting into the Pakistan stock exchange.

Pakistan’s central bank went to the IMF before 2018, as it was hit by an earlier currency crisis. Sri Lanka had been hit by two successive currency crisis. (Colombo/Nov11/2019)