Mr. N.G. Wickremeratne, head of Hayleys PLC which he calls "a perfect barometer of Sri Lanka’s economic performance," has expressed "extreme concern" on the management of inflation, interest rates and exchange rates that have serious concerns for all producers here of value added goods and services required to be competitive in export markets.
"Global markets will not allow manufacturers the privilege of recovering cost increases fuelled by local inflation beyond the levels of inflation in competing countries, and exchange rates must move to accommodate this reality," he said in the annual report of his company.
"Productivity enhancements, though indeed necessary, cannot address this problem if these circumstances continue."
Wickremeratne made the point that if Hayleys under-performed, "it is most likely that important sectors and indeed the country as a whole is doing poorly."
"In our view that is the case at present," he said.
He made the point that the Hayleys group has the potential to be at the forefront of development in all parts of the country provided there is an enabling environment with normal business risks which allows them to participate on an equal footing
"Our pedigree of integrity in business practices sometimes loses us business but we are standing tall and hopefully we are not alone in this stance," he said.
Inflation, interest rates and the appreciation of the rupee had impacted the Hayleys group substantially and there is no clear end at sight, Wickremeratne stressed.
"I have said that this must cost our group at least a billion rupees in profit. These would be earnings which we would re-invest and reward those who invest in our shares in preference to Treasury Bills."
He argued that normally currency depreciation will occur with a widening trade deficit. It is an open secret that Sri Lanka is surviving through the efforts of the country’s migrant labour – a large proportion of whom are our present and future mothers, sent to work as housemaids.
"Their remittances are what lends support to the current account of the balance of payments and keeps the rupee from depreciating and making it possible for urban populations to afford a variety of goods and services with high import content."
Wickremeratne said that while these emigrant workers on an average remits slightly over Rs.165,000 a year per person, this compared with the present value addition to the country of Rs.500,000 per person from employment in industry.
Admitting that this was over-simplification but arguing that the "numbers are telling," Wickremeratne made the point that these figures were indicative of the opportunity which exists.
"We know that the problem is inflation and not the exchange rate. We are aware that the challenge for the country is to develop its infrastructure as the government is attempting to do. We are mindful also that the country is engaged in a war of insurrection and must deal with it," he said.
"But these goals require a sustainable economy, with inflation under control. It does not make sense to destroy the country’s productive base as the present policies are doing. That is what we are saying is happening, being the first to notice as we are at the forefront of the economy."
He made the further point that while the economy is reported to have grown a 6.8%, a relatively small part of this growth comes from the primary sectors of the economy – agriculture and industry which impacts the hinterland of the country.
"A significant portion of the growth comes from telecommunications, financial services and construction, which while admirable is unlikely to be able to support Sri Lanka’s growth at its present stage of development without a strong impetus from agriculture and industry."
He stressed that a lack of focus on agriculture may soon have horrendous consequences with the world confronted with food shortages and made the point that support for those industries that can employ and train our youth and retain some of our migrant labour will also add greater value within our shores.