3 July, 2022


Who Is That Girl In A New Bikini?

By Ravi Perera

Ravi Perera

Ravi Perera

“Pakistan is not alone in its powerlessness. South Asia as a whole is running on empty-insufficient investment, poor planning and corruption dog the regions power sector…. Each country’s factors are different: a massive unresponsive bureaucracy in India, a fast growing population in Bangladesh; war in Afghanistan; old technology in Nepal…” Time Magazine –October 2013

Although the above analysis is particularly in reference to the energy sector, it nevertheless holds good for most sectors of the South Asian economies. Their path towards development is scattered with daunting obstacles some of which like Capital shortages and deep-rooted systemic weaknesses seemingly insurmountable.

Anyone you speak to in Sri Lanka will tell you how important foreign investments are for the country. For decades now policy makers have been   uttering the mantra. Every government has offered various encouragements and incentives in order to attract them. But the truth is, in comparison to other comparable countries in the Asian region, our efforts have borne only modest results.

Obviously, any foreign investor will look at a country’s fundamentals in order to assess the security of his investment as well as the potential for better returns. Nobody likes to lose their money. Equally, if there is a possibility of a better return at home why venture into new and uncharted territories?

One vital form of foreign investments is by way stock markets and other securities like government bonds. Globally, the volume of foreign investments to the stock markets in newly emerging/developing   countries has increased exponentially in recent times. The “BRICS”, the acronym for Brazil, Russia, India, China and South Africa have attracted a major portion of these investments. Being relatively big markets they have the capacity to absorb Billions of dollars. Other large markets like Singapore, Hong Kong, Thailand, Dubai, Turkey, South Korea, Israel etc also receive huge inflows.

A few weeks back Sarath Amunugama, our debonair Deputy Finance Minister, declared in somewhat colourful terms that Sri Lanka could compete for investments in “our own bikini”. With an unerring   eye for beauty the Minister has judged that the right moment for the coming-out party on the beach is now.

Last year Morgan Stanley’s head of the Emerging Markets investments unit Ruchir Sharma  brought out a  book titled “Break Out Nations; In pursuit of the Next Economic Miracles” which attempts to guide investors in the developed world looking for superior returns by investing in such markets.

Sharma says that while in a Developed market the key is for the investor to pick the right industry sector, in emerging markets it is crucial that he finds the “best countries” to invest his money. And these may no longer be the “BRICS” which according to Sharma may be losing their competitive edge.

According to Ruchir Sharma, a potential investor in emerging markets should attempt to answer certain questions about the country before committing himself.

1) A foremost issue in assessing the potential of a country is the size of the economy that is owned or controlled by the State. State institutions by and large fare poorly in comparison to the private sector in terms of efficiency and allocation of resources. Both China and Russia are loaded with State owned enterprises, a reality bound to impact their future progress.

2) The fastest growth rates of emerging countries were registered when cheap labour was a major attraction. As the middle class expands and wages increase   the growth rate diminishes. He points out that actual as well as potential labour/unemployment problems are danger signs for continued growth.  Sharma sees these happening in many of the BRICS.

3) Gaping inequalities in the distribution of wealth is a warning sign to be heeded. While most cannot even afford a bus ticket a few travel about in convoys of gleaming vehicles. In countries like India and Russia the so called Billionaires have made their money mostly on mining, oil, gas and real estate which are more or less based on government patronage than entrepreneurship. Close connections between business and policy makers is a bad omen.

4) The author is enthusiastic on economies with a booming manufacturing sector as opposed to commodities. Sharma cannot praise Thailand, which has marched forward as a major manufacturer, enough.  From a laid back country known for rice paddies and later during the Vietnam War as a rest and recreation centre, Thailand has now become the engine of growth for the entire region. Conversely, Sharma is doubtful about the long term health of economies which are over-dependent on commodities.

5) When businessmen of the country go out or prefer to invest overseas the alarms should ring. Why do Indian businesses invest more in overseas projects than domestic when their country is such a large consumer market asks Sharma? They are finding it tough to do business at home. The notorious bureaucracy and impossible regulatory processes are making it tough going indeed.

Talking about excessive bureaucratic processes, a friend of mine after his retirement decided to set up a small stationery shop with the hope of generating some income. He is not a rich man by any means and his total capital input was only Rs. 300,000.Being somewhat old fashioned he is a stickler for doing things by the book.  He had to register a company which carried both legal costs as well as registering fees. His landlord insisted that he pays, in addition to the rent, the difference in the municipal rates between residential and commercial classifications. Both his electricity and water are metered on commercial assessments. He was then informed that he needs further permits from both the Kotte Urban Council as well as the Urban Development Authority which is purely for the priviledge of doing business in the that sub-urban area . These organizations do not give any services in return. Even to have the garbage collected money has to pass. My friend also employees a female relative as an assistant at the store, more as a family obligation, a financial burden he cannot really afford. On the average his daily turnover has been about Rs 500-1000. You don’t need to be a business guru to know that his prospects as a small businessman are bleak.

6) Sharma says corruption is endemic in emerging markets but in some countries like India despite the bribe the desired result is not achieved. Another aspect of such corruption is that to get a public servant to do even what he is legally expected to do palms must be greased. Politicized and as a result demoralized , the public sector is bereft of any real self esteem, finding an outlet only in creating obtuse systems for the innocent.  As a rule, less corruption, healthier the economy says Sharma urging investors to look for indexes showing  decreasing corruption levels in a country.

7) Sharma is also high on countries emerging out of long periods of crisis with fresh leaders focused on sound economic management. He is optimistic on leaders like Jonathan Goodluck of Nigeria “It is a long time since Nigeria has had a leader who is not looting the country” Sharma also doesn’t like leaders who stay for too long either. “They start with fresh ideas, but after a while they are mostly interested in staying in power.” This could apply to top policy makers as well. A man whose ideas were relevant in the 1990’s is not necessarily the answer to issues of the second decade of the 21 Century.

Sharma looks at investments in emerging markets from the perspective of the investors. But it will be useful for policy makers in emerging countries to look at some of his primary concerns.   Minister Amunugama, who is well intended, thinks that our girl in the locally turned out bikini is a sure head turner. But the good Minister would readily acknowledge she is not the only beauty on the beach and   beauty is in the eyes of the beholder.

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Latest comments

  • 5

    Sri Lanka is sure to have the highest number of politicians and public servants per 1000 people. Most of the politicians are corrupt. These corrupt politicians make it impossible for any foreign investor to invest anywhere in Sri Lanka other than in a free trade zone or after bribing the relevant politicians. In addition we have a business takeover act and an over valued currency to drive away investors.

    • 2

      Ravi Perera you are living in cloud cuckoo land. Sarath Amunugama is a DODO turned giggalo at 70+ Sri Lanka will soon be on listed as a county with trade sanctions and a tourists will be warned to stay away once Lanka is placed on the US watch list.. Think POLITICAL ECONOMY man – the Rajapassa regime is in major hot water in the international community and the economic impacts of its political crimes are about to manifest!
      Warnings about impending SANCTIONS against the Rajapassa regime in Sri Lanka are coming in thick! From Cameron to Akashi, the Pope to EU and of course the UN and US – Rajapassa will have to come clean or face the music. Gota is being read the riot act on no uncertain terms.. The US is systematic and slow and moving ahead on the matter.

      Rajapassa will not be able to play ball with the International Community for much longer.. MR Dallying meanwhile with African dictators who also have war crimes on their hands – Uganda’s Museveni and Kenyas’s Uhuru Kenyata and China to counter the gathering international storm over Sri Lanka will go nowhere this time. Rajapassa will be a scapegoat – caught in the great game between the west and China – let us watch the fun!

      Question is, is the frigging MORONIC Sri Lanka opposition political formation preparing Sri Lankans for the coming storm and international sanctions – to get rid of Rajapassa dictatorship before it destroys Lanka from within and without – since the sanctions are NOT against Sri Lankan people BUT the JARAPASSA corrupt and criminal regime.

      • 1

        Amunugama is a doddering SEXIST clown! Like Dimu Jayaratne he belongs in the home of aged clowns whose shelf life expired a couple of decades ago!

  • 1

    “It is a long time since Nigeria has had a leader who is not looting the country” – Jonathan Goodluck
    Do we have leaders who are NOT looting the country – of its resources,for the betterment of a few in power?
    All losing State Enterprises are allowed to go on loosing the peoples’ money,especially to prop up megalomaniac projects – eg. in Hambantota.
    The two airlines,managed by a former planter who has no expertise in the field are allowed to lose billions each month for no reason at all.

  • 0

    Sri Lanka is a feudal country and, except for a handful of well managed private companies, the rest of the economy, largely state controlled, is run on feudal lines. The Central Bank is politicized, and cannot respond to the needs of the economy. The recent legislation to acquire under-performing enterprises, and the absence of the rule of law and good governance are major hindrances to economic activity. At the end of the war, the regime dreamed of foreign direct investment, but that has not materialized. The only increase, which is modest, is in tourism, but as the government’s reputation sinks deeper and deeper, tourism is bound to be affected. Murdering a tourist and raping his girl friend are not exactly advertisements for tourism.The SL Embassy in Washington sends regular news bulletins, replete with a Rajapaksa like permanently grinning ambassador, about entertaining potential investors, but the only result of that seems to be expenditure of poor tax payer money. The foreign service is ideally a major instrument in economic development, but it is stuffed with military and other political appointees with no clue about either the economy or diplomacy. A sound economy needs to be based on a rational ordering of society, methodical work, and above all freedom from corruption and nepotism. Press freedom and a reduction in white van operations are helpful, but feudalism allows none of these.

  • 0

    Don Stanley What is your IQ?
    It is clear to me that this article is damning indictement of our leaders including Amunugama!

  • 0

    This is an excellent review of a book published in America but very helpful for those who want to see Sri lanka do well.How do we attract invesments so badly needed here ? Thank you Mr Ravi Perera for reviewing this book so intelligently and thereby giving the usually narrow minded sri lankan policy makers an opportunity to see the problems from the other-side.Are we an attractive country to invest in ? I suppose this question is answered by the paltry amount of investments we have attracted.

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