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| Tuesday, 17 August 2004 |
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Globalisation and economic trends Globalisation and the integration of economies are two recent trends that Sri Lanka, or for that matter, any other country cannot shy away from. We should move forward with the times if our economy is to prosper. This is the message that the Central Bank Deputy Governor W.A. Wijewardena conveyed to a group of businesspersons at a recent breakfast meeting. "Sri Lanka has to realise and make changes to avoid sliding back on the economic front. Sri Lankan companies should brave competition and move outward to gain economic benefits, as Sri Lanka is not a resource rich nation. Sri Lanka should integrate itself with the globalisation process to gain maximum benefits," Wijewardena told 'Power Breakfast', organised by HSBC Treasury and Capital Markets. The Sri Lankan economy is in good health, though it is being assailed by forces such as currency fluctuations, soaring oil prices in the international market and budgetary constraints. The monetary authorities face the challenge of developing the economy while keeping these forces at bay. As the Central Bank has pointed out in a recent Annual Report, the local economy is at a crossroads, having missed a series of opportunities in the past. The country would be moving backwards if it does not seize the new opportunities available to it in an increasingly globalising world economy, the Bank said. This is why we cannot be oblivious to the developments in the world around us. The international community is moving in the direction of regional economic blocs and free trade. Sri Lanka has already taken steps in this regard with the signing of several free trade agreements and gaining membership of blocs such as BIMST-EC. The private sector too has a major role to play in this endeavour, by seeking a more pro-active approach with the rest of the world. As Wijewardena has pointed out, companies need to move out, build connections with the world economy and adapt themselves to changing situations that throw up new challenges. As much as we welcome foreign investment in Sri Lanka, local companies too must be encouraged to invest abroad, at least in the neighbouring countries. A fine example in this context is Ceylon Biscuit Limited's recent Rs.250 million acquisition of the Bakeman biscuit plant in India. The lesson to be gained from this move is that simply exporting your products is not adequate in the new world trade order - you must have a base in major markets. Local industries must also be ready to face drastic changes in the trading environment. For many years, the Sri Lankan garment industry reaped the benefits of the Multi-Fibre Agreement, which will be abolished from 2005. Sri Lanka will thus have to compete fiercely with several other developing countries for a slice of the US garments market. Quality, not quantity, will decide the winner of this battle. Local businesses and indeed the economy itself, must also be geared to face impending changes to the world economy. Most countries will have to abolish duties and other protectionist measures in the near future. No country can maintain a closed, centralised economy any more. Even many Communist countries have opened their doors to imports and foreign investment. The downside is that it is very difficult to insulate an open economy from external shocks, as we are experiencing right now. This means that no government can completely cushion the public from the impact of international currency and price fluctuations. If this trend continues, developing countries may be compelled to cut down on some subsidies which they have been providing to the public. The harsh reality is that the world economy is getting tough and we must adapt accordingly. |
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