Port City will add USD 15 billion to GDP in next six years - Ajith Nivard Cabraal | Sunday Observer
Investment Forum 2021

Port City will add USD 15 billion to GDP in next six years - Ajith Nivard Cabraal

20 June, 2021
At least three to four percent of GDP should come from outside as FDI to patch the gap in our investment needs. An artist’s impression of Colombo Port City
At least three to four percent of GDP should come from outside as FDI to patch the gap in our investment needs. An artist’s impression of Colombo Port City

Over a period of time, maybe in the next five or six years, it would generate as much as 15 billion dollars into Sri Lanka’s GDP, said State Minister of Finance Ajith Nivard Cabraal at the Investment Forum 2021 which concluded recently. 

 Excerpts of the speech:

“First, I think “no one is safe until everyone is safe”. That›s something that we need to understand. When we look at the current challenges, it may seem that we are a little selfish in attempting to safeguard ourselves.


State Minister Ajith Nivard Cabraal

“Of course, there›s nothing wrong with that. But at the same time, we got to know that unless everyone is safe and that everyone has protection from the pandemic, none of us will be safe in the final analysis. The pandemic can surface and be a threat to us as well as to our businesses. Hence, doing everything that we can to ensure that all the people are safe all over the world is a vital necessity, not just an obligation. We have to do that in order to ensure that we can be safe, going forward. 

“The second is that “global problems and challenges require and demand global solutions.”  I welcome the move by the International Monetary Fund of proposing a new allocation of Special Drawing Rights to all countries which is valued at around 650 billion dollars.

“That type of global initiative is something that we asked for, since the start of the Pandemic. We regularly called for some overall support for all countries that were affected by the Pandemic. That is the only way that you can give a kind of vaccination to all the economies of the world.

“An across-the-board increase in SDR allocations of all the countries would definitely help, and that has been fortunately now looked at positively by the global community. The last time it was done was in 2008 in response to the global financial crisis, and even at that time, it assisted all countries to face the difficulties and the challenges much better than otherwise, confirming the maxim “global problems need global solutions”.

Loans and investments

“Third, is the fact that we sometimes get confused with the terms of “loans” and “investments”. When people give “loans” to rich countries and to advanced nations, those loans are generally called “investments”. But when people give loans to less developed countries, those “loans” are rightly called “loans”. I think we need to understand that nomenclature. We’ve got to understand that investments and loans are both instruments.

“We all know that the USA is one of the richest countries in the world and therefore “investments” in their treasuries are more than 15 trillion dollars. What does that mean? It means people and institutions from all over the world have granted “loans” of that amount of money to the USA.

“But, if somebody gives a “loan” to Sri Lanka, we do take the view that it’s a “loan”, although in that case too, there is a difference that we need to understand that terminology so that we don’t get mixed up with these terms, which sometimes can confuse us.  

“Fourth, we have to get our basics right.  Here, we can start by getting our macro-fundamentals right. We also have to get our infrastructure right. We have to get our “doing business indicators” right.

“Fifth, I want to talk specifically about the Colombo Port City.  The infrastructure is now taking shape. We need to now ensure that there is a steady inflow of investments that would give a boost to the GDP of our country.

“We would see that Sri Lanka would benefit by at least a new GDP contribution of around four and a half billion dollars that will support our 80 billion dollar economy in the first few years. Over a period of time, maybe in the next five or six years, it would generate as much as 15 billion dollars into Sri Lanka’s GDP. That’s what the analysts have told us.

“If we can get that right, we would see Sri Lanka’s macro fundamentals changing rapidly in a manner that would be very, very significant.

“Overall, I see the Colombo Port City, the Hambantota port, as well as the new developments that we are talking about as being key factors in taking Sri Lanka forward over the next few years. We have an obligation and a great desire to make that happen. It won’t happen unless we really work on that.

Massive opportunities

“In the next few years, the Colombo Port City would provide massive opportunities to increase employment, increase investment, and to showcase Sri Lanka. I invite all of you, especially our friends from abroad, to take a strong look at this opportunity and to take a position in the Port City. I believe they would see the tremendous value that is being generated for them so that they could come in and take early positions.  “There was also a fallacy that investments in the Port City were reserved only for investors of a particular country. That is not so.  

“Sixth is about “locking down”. Sometimes the public call for locking down is very strong because of the fact that we see the medical authorities calling for it. I understand that it is an important message that they are giving. At the same time, we all got to reflect on the massive cost of lockdown on an economy.

“Economies are not designed for locking down. Economies are designed for continuous motion. There’s no way that you can stop and restart. When you stop and restart it would lead to a massive loss that we have to suffer. Everyone had to suffer that loss in the last one and a half years. 

“Seventh, I want to make the point that leaders have to make tough decisions. Fortunately, we have one who can make decisions of that nature. Today, President Gotabaya Rajapaksa wants to have organic agriculture. In that regard, let’s ensure that we do so  and have sustainable development. These are tough challenges. It’s like having the challenge of “water for all”, or developing 100,000 kilometers of roads. Those need solid leadership, we have that now.

Growth

“Eighth, My dear friends, what are we aiming for? I’m sure you have thought about this. We need to have at least 6.5% growth, for the next few years. It’s a tough call.  

“I remember when we originally said in 2005 that we want to have 8% growth, many people thought it cannot be done. “No, it can’t be done”, Sri Lanka used to have about three percent growth, they said. But we changed that. We recommended 8% growth. People said we can’t have single digit inflation in this country. But we changed that also. For the last 10 years, we’ve had single digit inflation. People said, “we cannot have single digit interest rates”.

“We all need to have an interest in ensuring that the country’s macro fundamentals are at stable levels. I, therefore, urge all of you to support the government and for the governmental authorities to ensure that happens.

“Ninth, we also need to ensure that there is a continuous flow of inward foreign investment. At least three to four percent of GDP should come from outside as FDI to patch the gap that we have in our investment needs. If we wish to have six and a half to seven percent growth, we need to have the corresponding investment to support that.

Turbo-boost

“To achieve that goal, we’ve got to work towards that. Infrastructure development will need to be something that the government will have to give very close attention to. Poverty alleviation will be another very important goal. 

Tenth, all people must benefit from the development activities that are taking place. We need to have the GDP per capita increased to at least $ 7,500 as soon as possible. Our per capita GDP has been stagnating at around the $ 4,000 level for too long now. For seven years, we have been around that range. We need to break free. We need to have a turbo-boost to take us forward: a new anti-gravitational reaction that can take us beyond that range, fast. 

“Our “doing business” indicators should also be improved. We are looking at achieving the 25th position in the world by the year 2025.  

“People also said we cannot have a stable rupee because since the year 2005, our rupee has been used to a depreciation of around 10 percent per year. But, we managed to contain the depreciation of the Rupee to about 2% per year in our nine-year period. That meant it could be done. 

“Eleventh, we need to give ourselves some new goals to aim for. The administration of President Gotabaya Rajapaksa and Prime Minister Mahinda Rajapaksa have very clearly enunciated those goals in the President’s manifesto.

“We said we would bring in SWAPs from different countries. That has happened. By such instruments, we have been able to manage the shortfall that we had in foreign exchange as a result of the big beating that tourism took in the last two years.

“We have been able to mitigate such shortage to a great extent by ensuring that we have new inflows that support our external account. Going forward, we can face the future with a lot more confidence.

South-South cooperation

“Twelveth, we must develop South-South cooperation a lot more. We are now developing partnerships with India, with Bangladesh and hopefully with more countries in our region.We should also increase our trading partnerships, andour financial transactions. We must not only be dependent on dealing with advanced countries.

“I would like to conclude by saying that, sometimes doing challenging times, certain windows close. That may discourage us, and we may say that window has closed, and hence how on earth are we going to get the wind to blow into our room?” I can only tell you that when one window closes, there’s always another door that will open.

“Sri Lanka is opening a few new doors. Those new doors will provide us with the ability and opportunity of making new investments.”

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