Sri Lanka's opportune moment to develop the country has dawned, says renowned fund manager

"It is an opportune moment in Sri Lanka to put together capital and expertise to develop the country and to reap the economic benefits."

"The fund industry is expecting further relaxation to invest in all forms of unit trusts and funds to invest in overseas markets to attain diversification prospects to local investors."

"It is more evident today that the capital market will become a sought after place to raise long term capital needs of the private sector to position themselves in the ongoing economic expansion."

Well-renowned Sri Lankan fund manager and Chief Executive Officer (CEO) of National Asset Management Limited (NAMAL), S. Jeyavarman, opines that this was an 'opportune moment for Sri Lanka to put together capital and expertise in order to develop the country and to reap the economic benefits'.

This is what he expressed in the article "A Fund Manager’s perspective: Post war Sri Lanka" - his recent-most op-ed authored for news360.lk-
The Sri Lankan story is unique. A small country with a population of around 20 million people witnessed devastating internal war for over 26 years which came to an end in May 2009.

Over the years enormous resources were spent on defence related expenditure by the state to achieve a peaceful environment for the people who had been facing hard financial conditions to do business and maintain their livelihood during this period.

Today after one year from ending the war, the picture is slowly changing and better opportunities are emerging to those who want to focus on business and others seeking employment.

When the country opened the economy in 1977, economic activities expanded where new business opportunities opened up creating a vibrant environment for the capital market and financial services. Many foreign commercial banks were established and active money and foreign exchange market began to develop in the country.

At the same time many hotels were established based on the expectation of growth in tourism. Some of them sought the capital for their hotel and travel related businesses by listing in the stock market. At the same time the Mahawali, a river diversion project was initiated by the then government with large capital investment to develop irrigation and agriculture in the country.

This development process was not able to be sustain due to the armed conflict erupted in the North and East.

In early eighties though old but fragmented stock market formalised itself in to a new phase and took the form of Colombo Stock Exchange and rapidly developed its infrastructure to become a modern institution in the following years.

The market size then was small and even today remains so though the market turnover improved significantly. It is noteworthy that in the last five years the market capitalization of the Colombo Stock Market improved from USD 5 billion to 15 billion. The market capitalization and liquidity is expected to grow in coming years with new listings and other forms of financing by existing listed entities.

It is more evident today that the capital market will become a sought after place to raise long term capital needs of the private sector to position themselves in the ongoing economic expansion.

Far back in the early eighties the country and businesses experienced a growth phase with talented human capital. Hence the current phase after the war is not new to the country or the people.

However the challenges are more today than before and a more pragmatic approach is required to overcome those challenges and to put the country on a sustainable growth path.

Today, people in the country look forward to the future more optimistically seeking better infrastructure facilities to reap the post war benefits.

The economy with the integration of north and eastern parts of the country after the war has a better economic outlook and is expected to achieve in the immediate future a 7-8 percent growth and more in the future.

The agriculture, industry and services sectors are the main drivers of the economy and expected to grow further in the future with more focused policy measurers and infrastructure facilities such as roadways, transportation, power, port facilities and so on.

The political stability and direction is needed to achieve overall economic targets and to create a sustainable economic growth in the country. The ongoing infrastructure development projects are on the right direction. The ruling party obtained a significant voter base in the presidential and parliamentary elections held in early 2010 and commands a strong ruling coalition. With few more seats in the parliament the government can get a two-third majority to make suitable reforms to the constitution to improve the administrative process and to devolve power to where necessary.

Sri Lanka being a neighbour to India with over 1.2 billion population is another significant geographical advantage that can be explored to meet Sri Lanka’s need for capital and market its products and services. A Comprehensive Economic Partnership Agreement is (CEPA) to be signed shortly replacing the existing Free Trade Agreement (FTA) with India to further develop the bilateral trade between the countries.

Sri Lanka and China had various economic partnerships in the past and in the recent past more infrastructure projects are being handled by them in the country. These two countries can bring in expertise and capital to significantly improve the Sri Lankan economy in coming years.

The Sri Lankan stock market has improved by 125% in 2009 and over 50% to date in 2010. The market turnover over the years has been growing very significantly averaging over Rs. 1 billion a day from a low turnover levels in the previous years.

In this background, talking about the fund industry which I am involved in has shown remarkable recovery with attractive returns to the investors. The Unit Trust and portfolio management services are expected to grow and to provide an alternate investment opportunity in the capital market of Sri Lanka.

Today, the unit trust industry is operating with five licensed management companies and eighteen funds. The private portfolio management services is also expanding as large corporate, provident and pension funds seeking similar services in the background of declining interest rates in the country. The interest rates have significantly declined this year.

The capital account in the country was relaxed in 1990 to the foreign investors to invest in listed shares and subsequently in 2002 in growth funds. In more recent years, it was relaxed further to invest in government securities and in bank deposits. The fund industry is expecting further relaxation to invest in all forms of unit trusts and the funds to invest in overseas markets to attain diversification prospects to local investors.

The current outlook for the country is very positive for investors in many sectors. Many forms of direct investment opportunities are opening up in infrastructure projects and industries whereas for portfolio investors the stock market has opened more opportunities though the size of the market remains small.

It is an opportune moment in Sri Lanka to put together capital and expertise to develop the country and to reap the economic benefits.

Note : (National Asset Management Limited, (NAMAL) is a pioneering licensed Unit Trust management Company in Sri Lanka.)

- Asian Tribune -