Who Is That Girl In A New Bikini?
Ravi Perera
“Pakistan is not alone in its powerlessness. South Asia as a whole is running on empty-insufficient investment, poor planning and corruption dog the regions power sector…. Each country’s factors are different: a massive unresponsive bureaucracy in India, a fast growing population in Bangladesh; war in Afghanistan; old technology in Nepal…” Time Magazine –October 2013
Although the above analysis is particularly in reference to the energy sector, it nevertheless holds good for most sectors of the South Asian economies. Their path towards development is scattered with daunting obstacles some of which like Capital shortages and deep-rooted systemic weaknesses seemingly insurmountable.
Anyone you speak to in Sri Lanka will tell you how important foreign investments are for the country. For decades now policy makers have been uttering the mantra. Every government has offered various encouragements and incentives in order to attract them. But the truth is, in comparison to other comparable countries in the Asian region, our efforts have borne only modest results.
Obviously, any foreign investor will look at a country’s fundamentals in order to assess the security of his investment as well as the potential for better returns. Nobody likes to lose their money. Equally, if there is a possibility of a better return at home why venture into new and uncharted territories?
One vital form of foreign investments is by way stock markets and other securities like government bonds. Globally, the volume of foreign investments to the stock markets in newly emerging/developing countries has increased exponentially in recent times. The “BRICS”, the acronym for Brazil, Russia, India, China and South Africa have attracted a major portion of these investments. Being relatively big markets they have the capacity to absorb Billions of dollars. Other large markets like Singapore, Hong Kong, Thailand, Dubai, Turkey, South Korea, Israel etc also receive huge inflows.
A few weeks back Sarath Amunugama, our debonair Deputy Finance Minister, declared in somewhat colourful terms that Sri Lanka could compete for investments in “our own bikini”. With an unerring eye for beauty the Minister has judged that the right moment for the coming-out party on the beach is now.
Last year Morgan Stanley’s head of the Emerging Markets investments unit Ruchir Sharma brought out a book titled “Break Out Nations; In pursuit of the Next Economic Miracles” which attempts to guide investors in the developed world looking for superior returns by investing in such markets.
Sharma says that while in a Developed market the key is for the investor to pick the right industry sector, in emerging markets it is crucial that he finds the “best countries” to invest his money. And these may no longer be the “BRICS” which according to Sharma may be losing their competitive edge.
According to Ruchir Sharma, a potential investor in emerging markets should attempt to answer certain questions about the country before committing himself.
1) A foremost issue in assessing the potential of a country is the size of the economy that is owned or controlled by the State. State institutions by and large fare poorly in comparison to the private sector in terms of efficiency and allocation of resources. Both China and Russia are loaded with State owned enterprises, a reality bound to impact their future progress. Read More
