Address:
No.400, Deans Road, Colombo 10, Sri Lanka.
Telephone:
+94 11 2696331
Email:
info@cau.hayleys.com
Web:
https://www.hayleys.com/
Q: What is your take of Sri Lanka’s economic policy?
A: One of the country’s major advantages is its strategic global maritime location. We’re at the centre of global trade routes from Asia to Europe, and between Dubai and Singapore. A large number of ships pass the island every day.
South Asia is home to approximately two billion people or a quarter of the world’s population, according to official estimates. And the region has recorded among the highest GDP growth rates in the world. Establishing Sri Lanka as a hub for maritime trade here should be a priority in any of our economic plans.
Our policies should focus on positioning Colombo as a trade centre for South Asia, capitalising on growth opportunities in the region quite like Singapore and Dubai have.
Q: So what is your assessment of the state of business in the country?
A: Today’s business environment poses multiple challenges ranging from low consumer sentiment to high interest costs.
The impact of two major crises that took place in the past 12 months – viz. the constitutional crisis last year and 4/21 this year – is apparent in many sectors ranging from consumer goods to tourism. If the authorities had acted promptly to cushion the impact, the negative performance could have been mitigated to an extent.
This soft patch has been augmented by the slow growth in agriculture, which provides employment for nearly 25 percent of the country’s labour force.
Q: Could you describe Sri Lanka’s country risk profile?
A: Maintaining a sound macroeconomic environment is paramount for sustainable business growth. Domestic interest rates are higher compared to peer groups; they should ideally be in mid-single digits.
To maintain a low interest rate regime, the Central Bank of Sri Lanka and government should work together to reduce the fiscal deficit and control domestic inflation. Consistent policies are important; key macroeconomic policies should be consistent for at least five years.
Q: How has Hayleys fared over the past 12 months?
A: Despite the headwinds, Hayleys’ business portfolio has been able to maintain double digit revenue growth in the first half of fiscal year 2019/20 compared to the same period last year. Needless to say, profit margins are under severe pressure as a result of the escalation in costs, increase in bad debts and hefty finance costs.
However, reiterating our commitment to the country, the Hayleys group’s investments have amounted to Rs. 1.6 billion following 4/21.
Q: In your opinion, should organisational performance and environmental sustainability go hand in hand?
A: In keeping with the Hayleys group’s philosophy, we emphasise sustainable environmental practices in any business we undertake. All our manufacturing businesses continue to explore means of reducing the use of scarce resources such as energy and water, thereby limiting the impact on the environment and our carbon footprint.
Q: Do you feel that the value of the rupee is reasonable? If not, where would you like to see it heading?
A: A stable and predictable exchange rate is desirable. While we understand that real value of an exchange rate is important to maintain a country’s competitiveness, stability is also important. We believe that complementary monetary and exchange rates are more business friendly.
Q: And are prevailing interest rates conducive to business expansion?
A: Not at all. If the country aspires to increase GDP growth to seven or eight percent, interest rates should be at mid-single digit levels. The interest cost is a major competitive disadvantage faced by local businesses today.
Q: What is your assessment of the world economy?
A: The world’s economic power is shifting from the West to the East. Asia’s economic importance should grow further and intra-regional trade is likely to multiply. Sri Lanka’s long-term economic policy framework should consider these trends.
In the near term, there are a number of risks on the horizon. The slowdown in developed economies and escalation in trade tensions have taken centre stage. The Central Bank’s actions are far from sufficient to negate the impact.
Any ongoing tension in the Middle East may cause spikes in oil prices. Furthermore, the uncertainty surrounding Brexit and recessions or deflationary conditions in developed economies are also major risks to our external environment.