By Dulindra Fernando, Managing Director at Ceylon Asset Management.
Sri Lankan voters elected a new President and government while the Pope blessed the island with his visit to begin the new-year with hope. The shock defeat of President Rajapaksa proved that minorities held the balance in Sri Lanka’s democratic process, in an election with the cleanest polling day in history. It has brought relief to the former war zone in the North of the island who resent the continued military presence despite an infrastructure drive and the establishment of a Provincial government after 25 years of war.
Sri Lanka’s economy was already cruising with 7% growth and a infrastructure boom in ports, freeways and two former war zones joining the economy. The island also registered low inflation and unemployment rates of under 5% during 2014. Tourism has increased 3 fold to 1.5 million over the last 4 years, led by Indian tourists visiting Colombo, which has been redeveloped into a beautiful city with colonial buildings, lakes, gardens and walkways.
Having called the Presidential election two years early, the seemingly invincible former President Rajapakse humoured voters claiming he was in the boxing ring and shadow boxing by himself in the reluctance of an opposition candidate to step in. The opposition coalition responded announcing the General Secretary of the ruling party, Maithripala Sirisena as the “common candidate”. The voters elected him as the new President on the promise of good governance and the appointment of Independent commissions for Judiciary, Police, Elections and Bribery investigations under a 100 day program to reform Sri Lanka’s constitution. The Rajapakse government paid the price for waste, corruption and offending Muslims by sponsoring a militant Buddhist organization.
The new Prime Minister Ranil Wickramasinghe rescued the economy in 2002 when faced with negative growth of 1.5%. Now the PM has the opportunity to manage the economy during peace times to open the myriad of opportunities available to Sri Lanka as the potential service centre for South Asia. Colombo ports already accounts for over 15% of India’s transshipments, and is fast emerging as a favourite holiday destination for Indians.
However, what is special about Ranil managing the economy? By conviction he believes in Free market economics, for Sri Lanka to reach its potential. His first appointment was Arjuna Mahendran, a Singapore based economist as the governor of the Central Bank along with a relatively young cabinet. He also has the confidence of India, Europe and the US.
With increased transparency and reduced red-tape, the new government is encouraging responsible foreign investments, efficient administration and fostering healthy market competition – a signal to foreign investors seeking opportunities in the future service centre of South Asia.”
Sri Lanka is currently rated with a BB- rating of its sovereign debt. Ranil brings the sophistication of market economics and international relationships to take Sri Lanka to investment grade. Foreign investors are now re-evaluating Sri Lanka with interest as the next promising investment destination.
