In a candid discussion with the Sunday Observer, Buwanekabahu Perera, CEO of the Ceylon Chamber of Commerce, shared his perspectives on Sri Lanka’s recent economic reforms and the political landscape. He said that compared to where the country was, Sri Lanka is definitely seeing light at the end of the tunnel. Perera also said that the upcoming elections are crucial, as citizens must choose between two factions: those who have done the work and those who say they will do the work.
Q: What are your thoughts on the recent economic reforms introduced by the Government? Do you believe these policies will lead to sustainable economic growth in the long term?
A: Recent economic reforms in Sri Lanka are aimed at stabilising the economy and addressing the financial challenges the country has been facing. Some of the key reforms and action taken by the Government include the IMF-backed Economic Program. Sri Lanka has been implementing a comprehensive reform program supported by the IMF under a $3 billion Extended Fund Facility. The program focuses on fiscal consolidation, improving tax collection, and reducing public debt. This has led to some positive outcomes, including a reduction in inflation and an increase in foreign exchange reserves. We hardly had anything in our barrels, even to scratch; therefore, compared to where we were, we have definitely come to see light at the end of the tunnel.
The Government is also engaged in restructuring its external debt as part of the IMF program. This is crucial for improving the country’s financial situation and regaining access to international capital markets. The Central Bank of Sri Lanka has taken steps to tighten monetary policy to control inflation. Interest rates have been managed carefully to stabilise the currency and control inflation, which has seen a significant decline from the highs of the past year. In addition, the Government is also focusing on public sector reforms, including restructuring state-owned enterprises. We have to think about the number in our tri-forces as well, because we do not have a war in place. While progress has been made, continued efforts and broader structural reforms will be necessary to fully overcome the economic challenges.
Q: Do you think the present administration should continue until full economic stability is ensured?
A: Basically, we are looking at two factions here. One faction is the current President, who has proven that economic stability can be achieved, while the other faction says they will achieve it. Therefore, it is a choice between these two. If this Government is to continue, it must be assured that the current policies are continued and the reforms implemented without disruption.
I also believe that the ongoing negotiations with international creditors and multilateral organisations like the IMF require a stable and predictable Government. A change in leadership could introduce uncertainty, potentially undermining the confidence of international partners and delaying economic recovery efforts.
I believe that whatever Government comes in will have to follow the IMF conditions, and now very few are criticising the IMF compared to the objections we had in the beginning. I am not sure whether any other leader will have the stamina to continue these discussions. Winning international confidence is a major part of this, and I recently saw news that Bangladesh has asked President Wickremesinghe for help.
Despite some progress, public dissatisfaction with economic conditions remains high. There are concerns about corruption and the ability of the current Government to manage the economy effectively, especially since tax rates remain high. In a democratic context, it’s important that the government reflects the will of the people. So this election will decide the broader national needs.
Q: What steps should be taken to diversify Sri Lanka’s economy beyond traditional sectors such as agriculture and tourism? Are there emerging industries that show particular promise?
A: Diversification is essential for building a more resilient and sustainable economy. Sri Lanka has a growing IT and BPO sector with a skilled, English-speaking workforce. Investing in IT parks and digital infrastructure and offering incentives for tech startups can position Sri Lanka as a hub for software development, data analytics, and IT services in South Asia.
Apart from that, moving up the value chain in manufacturing by focusing on high-tech and precision industries, such as electronics, automotive components, and medical devices, can open up new export markets. Policies that support investment in technology and machinery are essential.
Agri-business and agro-processing are also untapped aspects in our country. Diversifying from raw agricultural exports to value-added products, such as processed foods, beverages, and bio-based products, can significantly enhance export revenues and create jobs. The President has taken steps to develop these, and the Chamber is also very much involved in the modernisation of agriculture. Sri Lanka has significant potential in renewable energy, particularly in solar, wind, and hydroelectric power. The capacity we have in Mannar is huge, and we are not taking full advantage of it.
We need to expand our education system and allow foreign universities to establish themselves here. I am not sure whether some parties will allow that, but we can definitely become an education pit stop for Asia.
Q: How is Sri Lanka positioning itself in the global market, particularly in light of recent changes in international trade policies? What steps can be taken to improve our trade balance?
A: The main thing is our strategic positioning. We should capitalise on our strategic location along major shipping routes in the Indian Ocean. The Government has been promoting the country as a maritime and logistics hub, with investments in port infrastructure, such as the Colombo Port City project, aimed at attracting global shipping and logistics companies. Our proximity to India demands a strategy that recognises the significance of our largest neighbour. Ignoring India would be a grave mistake, especially now, when regional dynamics are more critical than ever. Historically, anti-India sentiments have existed within various political factions in Sri Lanka. Currently, our relationship with India is strong, and they have been a crucial ally during our recent challenges. As we move forward, it is essential to align ourselves with global trade policies and standards. Export diversification is another critical area that requires attention. Countries like Vietnam have successfully integrated into the global market, with exports constituting 70 percent of their GDP. In contrast, Sri Lanka’s exports account for only 20 percent of our GDP, which is around $75 billion, compared to India’s $1.4 trillion economy. To catch up, we must implement consistent policies, streamline processes, and improve institutions like the Board of Investment (BOI) and the Export Development Board (EDB).
Efforts are already underway to combine the BOI and EDB under Government and IMF guidance. We are also enhancing facilitation with other countries by setting up Free Trade Agreements (FTAs) and Economic and Technological Agreements (ETAs). Agreements with India, Pakistan, Bangladesh, and Thailand are in place or in progress, with more on the horizon, including Indonesia and Singapore. However, we must make better use of these opportunities and aspire to join ASEAN—a long-standing goal that requires us to qualify in various areas before we can knock on that door.
Finally, managing our geopolitics and international relations is a delicate task. In a world where allies and adversaries are constantly shifting, we must navigate these complexities carefully. It is not easy, but we cannot afford to align with one side at the expense of another.
Q: What measures can be implemented to attract more FDI into Sri Lanka, especially in key sectors such as technology and infrastructure?
A: Policy reforms are essential to attract FDI. While we’ve made some progress, achieving about 10 to 20 percent of the necessary changes, there’s still a long way to go. A key aspect of this journey involves creating attractive incentives for investors to choose Sri Lanka over other options in the region. For investors, Sri Lanka must present a clear advantage compared to countries like Bangladesh, Vietnam, and Cambodia. To do this, we need a consistent and transparent set of policies that highlight the benefits we can offer, including competitive tax incentives.
Moreover, a stable political environment is crucial. Investors need assurance that the policies they rely on won’t change unexpectedly. Consistency in governance and policy is a significant factor in attracting and retaining investment.
In addition to these incentives, we should consider the role of specialised export promotion zones. We currently have a few, but there’s potential to innovate further. For instance, we could explore the idea of dedicating specific zones to particular countries or industries, offering a tailored approach that meets the unique needs of different investors.
Q: How does the Chamber support new entrepreneurs and startups in Sri Lanka? Are there any specific programs or initiatives that have proven successful?
A: The Ceylon Chamber of Commerce (CCC) actively supports new entrepreneurs and startups through a variety of initiatives. One of our key programs is the “SPARK Youth Entrepreneurship Competition,” which provides young entrepreneurs with a platform to pitch their business ideas and receive mentorship, training, access to finance, and other essential resources. The competition is closely linked with the Know About Business (KAB) and Start and Improve Your Business (SIYB) programs under the SALE project, targeting high achievers from these programs as well as other aspiring entrepreneurs.
In addition to SPARK, the Chamber collaborates with the International Labour Organization (ILO) under the South Asia Leadership in Entrepreneurship (SALE) program. This partnership aims to create a more enabling environment for young entrepreneurs by offering customised training modules, mentorship, and by establishing Entrepreneurship Clubs in schools to foster an entrepreneurial mindset from an early age (15-24).
Q: What role do you see young entrepreneurs playing in the future of Sri Lanka’s economy? How can the Chamber help foster an environment that encourages innovation and risk-taking among the youth?
A: Young entrepreneurs bring more than just new businesses; they introduce a fresh culture to the market. When they take risks and succeed, they set an example that others observe, admire, and eventually replicate. This not only builds confidence among other young people but also helps to advance the entire entrepreneurial ecosystem.
Another significant contribution they make is through innovation. True innovation isn’t something that can be taught in a classroom; it’s an inherent quality that comes from their unique way of thinking and problem-solving. These entrepreneurs think outside the box, bringing new ideas and solutions that others might not have considered.
As these entrepreneurs grow, they create jobs. Entrepreneurship isn’t a solo journey; it requires expansion and collaboration. By generating employment and introducing innovative products, they contribute to the economy in ways that might not have been possible otherwise. Collectively, the impact of these young entrepreneurs is substantial, driving forward not just their own ventures but the broader economic landscape as well. The Chamber can empower young entrepreneurs by providing education, resources, and financial support while advocating for policies that encourage innovation and risk-taking. This will drive Sri Lanka’s economic growth by fostering a culture of entrepreneurship.
Q: What are the main barriers that entrepreneurs face when seeking funding in Sri Lanka, and how can these be addressed to create a more robust entrepreneurial ecosystem?
A: One of the main barriers entrepreneurs face in Sri Lanka is the limited access to venture capital and other forms of startup funding. Traditional financial institutions often require stringent collateral, which many startups cannot provide. To address this, the CCC has been working to enhance the venture funding ecosystem by attracting more investors and encouraging the establishment of venture capital funds in Sri Lanka.
The CCC also advocates for more flexible lending practices and works to increase awareness about alternative funding sources such as crowd funding and Government grants. Through the Council for Startups and the Centre for SME unit, the CCC is actively involved in showcasing the potential of local tech and innovation to both domestic and international investors, which helps in gradually building a more robust entrepreneurial ecosystem.
