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Sri Lanka transforming the private sector into the main domestic engine of growthTuesday, April 11, 2017 > 09:34:54
The Sri Lankan government is encouraging the private sector and forming regulations to promote public-private partnerships aiming to turn the private sector into the main engine of growth.
The Government is forming a public-private partnerships unit aimed at channeling more capital into infrastructure and the state aims to privatize non-strategic assets, turning the private sector into the main engine of growth, Sri Lanka's Finance Minister Ravi Karunanayake has stated during a debate with Euromoney on the financial sector.
"We are improving financial discipline, growth is on the rise and we are tackling the debt we incurred in recent years and bringing our finances into a more healthy state of affairs," Minister Karunanayake said.
"We are transforming the private sector into the main domestic engine of growth and transforming government into a regulator."
Participating in the debate chief economist of the Ceylon Chamber of Commerce Anushka Wijesinha said under this government, a timely shift has been made toward more FDI, more international trade and more private sector-driven growth. "We are boosting investment in infrastructure by bringing private capital into major new projects, with the government launching a specialist PPP unit."
Director General and CEO of the Board of Investment Duminda Ariyasinghe said the government will focus on encouraging the private sector and on creating an environment where local and foreign investors feel they are part of an environment conducive to investments.
"From a foreign direct investment [FDI] standpoint, we have seen serious inquiries rise as we move away from an incentives-driven growth model based on tax holidays. If you invest more in capital and technology, Sri Lanka is an increasingly great place to invest. We feel 2017 will be a strong year and 2018 stronger still. From an FDI standpoint I am optimistic about the positive momentum," Ariyasinghe said.
Mark Prothero, an international manager with HSBC said one of the keys to growth is trade and Sri Lanka is finalizing or extending free trade agreements with China, Singapore and India.
He pointed out that Sri Lanka occupies a strategic maritime location and is fortunate with three viable port facilities and a great launchpad to India.
"Half of the world's merchant fleet capacity passes just to the south of our shores each year. The country is in a good place right now, with strong international relationships with key trading partners, such as the US and the EU, and ongoing discussions on free trade agreements [FTAs] with the likes of Singapore, Bangladesh, Thailand and Turkey," Prothero commented.
Nayana Mawilmada, head of investments at the Western Region Megapolis Planning Project said the key port and infrastructure projects are transforming Sri Lanka into an Indian Ocean power.
"Large structural pieces are being configured and put in place, from new business zones to the introduction of a mass transit system in Colombo. Five years from now, you will find a fundamentally different capital city. We are electrifying our rail system, building new metro lines, expanding our main port and airport - all big changes that will alter how we all live and work. We do need to deal with our housing problem, and the new PPP unit will help us channel fresh private capital into much needed infrastructure projects," Mawilmada said.
According to K D Ranasinghe, assistant governor of Sri Lanka Central Bank investment as a share of GDP, which is around 30% at present needs to increase to around 35% to achieve full growth potential of 7% to 8% growth in the medium to long term.
"We definitely need to encourage far more overall investment. At the same time, as well as rising investment, we need to improve productivity, so the government is improving the country's soft infrastructure, including skills development," he said.
Chairman of the Colombo Stock Exchange Vajira Kulatilaka said Sri Lanka is shifting its economic model so it is geared toward creating exports, boosting trade and generating more private-sector investment and growth. He said Sri Lanka is promoting itself as a destination for fund managers, with the aim of marketing Colombo as a regional securities trading hub.
"Our macroeconomic setup isn't perfect - currency instability remains a problem. From a capital markets point of view, we want more listings to take place on the Colombo Stock Exchange. In the long term we would like to see more state-owned enterprises being listed on the bourse, which will encourage more fund managers to come here. The big local family-run firms need to list too.