02 | JANUARY 2013 | FOCUS SRI LANKA SRI LANKA’S Sri Lanka: ECONOMIC PROSPECTS ARE a breakout nation EXCITING process of healing is under way, and visiting HSBC top official Ruchir Sharma there is every chance that Sri Lanka I first visited Sri Lanka in 1997, short- will become a breakout nation. De- ly after a rebel bombing of the central spite slowing sharply during the war bank headquarters had thrown the years, the economy continued to grow financial system into chaos. Military at an average pace of nearly 5% even checkpoints made travelling around though it was running on one engine: Colombo rather punishing, but the the prosperous Western province overwhelming impression was of a where Colombo is located, and where charming island and talented people the well-educated young population Sri Lanka’s economic prospects are exciting and trapped inside a seemingly endless was producing strong growth in in- the HSBC’s business has grown each year since dustries and services. 2009 with top corporates increasing their trade civil war. in 2012, a visiting top official of the HSBC said. When I returned in 2011, the civil The North and East Provinces, which The Global Trade and Receivables Finance di- war had ended with surprising final- account for 30% of Sri Lanka’s land vision of HSBC Sri Lanka has seen phenom- ity, and I took an extra day to see the and 15% of its population, were large- enal growth since 2009, with growth rates three country, including the huge territory ly war zones. With the nation whole times higher than the country’s GDP growth for that had been behind the lines of the again, achieving 7% growth over the 2010 and 2011; and despite trade falling as Sri Tamil rebels. next decade should be well within Lanka countered a balance of payments prob- lem, HSBC Colombo had a better year in 2012. This should have been easy enough: reach. the Tamil capital at Trincomalee is “The team here in Colombo has done a fantas- just 160 miles from Colombo - but Since taking office in 2005, President tic job and we have seen strong growth in trade. the new highways were still being Mahinda Rajapaksa has been consoli- I am here to see how this fantastic performance built, and the helicopter on offer was dating power in ways that critics see as came about. Sri Lanka is in a new era of eco- the start of a family dynasty. For now, nomic growth and I am here to assess the op- a single-engine job of the kind that portunities for HSBC going forward,” HSBC routinely crashes in India. My accom- however, he is deploying his growing powers to ends that suggest he under- Head of Asia Pacific International Global Trade modating hosts arranged for the air and Receivables Finance Huynh Buu Quang force to take me up in a twin-engined stands the fundamentals of growth, if not of democracy. said, speaking to The Island Financial Review at helicopter. HSBC Colombo upon his arrival to the country for a four day visit. I’ve taken helicopters in many emerg- Rajapaksa’s regime is working to ing markets when the road network is trim the fat left over from the social- The economy which grew at 8 percent in 2010 inefficient, normally a bad sign for the ist experiments of the 1970s, includ- and 8.3 percent in 2011, slowed down to 6.5 economy. But the aerial views of the ing high taxes and government debts percent last year, still impressive considering the multiple expressways under construc- that still equal 80% of GDP. It is also global economic slump. tion, the lush green plantations of the bringing the vast swaths of formerly The bank has provided S$ 3.5 billion worth of interior, and the new resorts facing the rebel-held territory back into play; the financing for various projects in the country turquoise waters that drape the island government has established vocational ranging from aviation, maritime and infra- helped convince me that Sri Lanka is training centres and low-interest loan structure development. Until 2009 HSBC Co- no longer a land in waiting. programmes, distributed boats and lombo’s trade finance division had seen “very” livestock, and begun building roads static growth. After 2009, growth “jumped very high”. 2010 and 2011 were very good for trade in In the 1960s, Sri Lanka was billed as and bridges in the former war zone. Colombo, but 2012 was better. the next Asian growth miracle, only to be stymied by a tryst with socialism Banks are returning, big retail chains “This must have come from our existing cus- that played a direct role in igniting the are setting up shop, and domestic air- tomer base. They may have captured more mar- civil war. During the war, Sri Lanka lines are flying to Jaffna and Trinco- ket share. Our clients in Colombo our industry malee again. The flood of state spend- leaders so they definitely sustained themselves grew half as fast as South Korea and despite changes in the macro-economy last Taiwan and became another country ing drove growth in North and East year,” Quang. Garments and tea have been tra- in the long line of emerging-market provinces up to 14% in 2009 and ditional sectors serviced by the bank; but, since disappointments. 2010, and they are expected to grow 2009, tourism, telecommunication, infrastruc- at above 13% for several more years, ture development and oil bunkering sectors Today, it seems that Sri Lanka’s time making them the fastest-growing areas have increasingly accessed HSBC Colombo for has come. The civil war is over, the of the country. trade finance.