‘Aggressive vaccination drive’, vital element in Sri Lankan economic revival

‘An economic revival in Sri Lanka will be aided by an aggressive vaccination drive, initiatives aimed at strengthening the country’s reserve position through the attraction of foreign investment, strong expatriate earnings, better worker remittances coupled with fiscal support and an accommodative monetary policy stance to increase domestic activity, John Keells Holdings PLC Chairman Krishan Balendra said.

On the challenge faced by the state of reviving the economy while containing the pandemic, an economic and healthcare response based on a balanced and evidence-based analysis and a participatory and consultative approach, particularly with healthcare officials will prove beneficial, Balendra said in an interview with The Island Financial Review.

The interview:

By Lynn Ockersz

What are the main business challenges faced by JKH in these economically volatile times?

The continued impacts of the COVID-19 pandemic on consumer behaviour, is currently the biggest challenge being faced by economies and businesses worldwide, to which JKH is no exception. Subdued sentiment and periodic disruptions and challenges to business activity in the short-term to contain the pandemic is envisaged until a critical mass of Sri Lanka’s population is vaccinated, particularly in high-risk areas. The Government’s aggressive ramp up of the vaccination drive across the country in view of its target of vaccinating 13 million people by September 2021, which covers the population of adults over the age of 30 years in the country is expected to drive recovery, as witnessed in other countries.

The experience with the previous outbreaks and the subsequent recovery post easing of restrictions has resulted in the Group better navigating the ongoing outbreak. Although our businesses, excluding Leisure, continue to recover and better navigate through these volatile times, the performance of the Leisure businesses continue to be significantly impacted.

Do you expect the current decline in the per capita income of Sri Lankans to negatively impact sales growth in your supermarkets?

Although a decline in per capita income of Sri Lanka will have a bearing on overall spending patterns and purchasing power of individuals, the impact on sales growth in the Supermarket business is somewhat insulated given the nature of operations, as consumer baskets primarily consist of essential goods, personal and other daily household items. In addition, the growing popularity of modern trade due to the convenient shopping experience and access to diverse product categories at attractive prices is expected to off-set this current decline in per capita income, to an extent.

There has been a net foreign outflow of Rs. 63.5 billion from our stock market in recent times. What are the main reasons for this development and how could it be curbed?

Although the Government has honoured its debt servicing obligations to-date, the country has witnessed multiple downgrades in Sri Lanka’s sovereign rating in the recent past on the back of a sharp rise in the sovereign debt-to-GDP ratio, increasing challenges in lieu of external debt repayment, weakening local currency and liquidity constraints. Such macroeconomic challenges have also raised concerns surrounding a potential depreciation of the local currency which continue to be a primary concern for foreign investors. An increase in the number of COVID-19 infected cases and related deaths, especially with the onset of the Delta variant in the country, as witnessed in other countries, have also exacerbated this situation thereby impacting doing business and dampening investor sentiment.

In addition to continuing the aggressive vaccination drive, initiatives aimed at strengthening the country’s reserves position through the attraction of foreign investment, strong export earnings, better worker remittances coupled with fiscal support and an accommodative monetary policy stance to increase domestic activity will aid revival.

Currently, the state is facing the challenge of reviving the economy while containing the pandemic and its ill consequences. How best could this be achieved?

The twin imperatives of safety versus the economy is a conundrum that is common to all nations. Striking a balance between public safety and economic viability, has various practical complexities. We have witnessed varying responses from developed as well as developing nations from across the globe; Sri Lanka must leverage on such learnings and experiences in addressing these challenges. Sri Lanka is well geared with access to various expertise both on the economic front and the healthcare front, which the country should leverage on to implement and explore innovative and wider range of policy interventions.

As such, I believe an economic and healthcare response based on a balanced and evidence-based analysis and a participatory and consultative approach, particularly with healthcare officials, will aid the Government in reviving the economy while containing the pandemic.

In what main ways could the fortunes of the hotel and leisure sectors be turned around?

The hotel and leisure sectors continue to be significantly impacted by the COVID-19 pandemic, particularly in response to new outbreaks and increased travel health and safety protocols such as mandatory testing and quarantine requirements. Whilst we have witnessed rapid vaccination drives in countries such as the USA and UK, the relatively slower pace of the vaccination roll out in many other countries continues to hinder a full resumption of international travel.

The performance of Sri Lankan tourism will also largely depend on the revival of regional and global travel when travellers regain confidence. We expect Sri Lankan leisure market will recover with the aggressive ramp up of the COVID-19 vaccination programme in the country similar to the recovery trends we witnessed in the Group’s hotels in the Maldives, where the occupancies at our hotels are higher than anticipated and the continuous momentum of forward bookings in the Maldives is also encouraging. This also reflects a significant ‘pent up’ demand for leisure travel once revival commences.

Focused destination marketing efforts by the SLTDA and the Government coupled with a plethora of initiatives aimed at reviving the industry is also expected to aid a turn around. The destination’s close proximity to two of the largest outbound travel markets, India and China, coupled with improving flight connectivity and investment in infrastructure will spearhead growth beyond the pandemic. In this regard, ‘Cinnamon Life’ is also uniquely positioning to aid Colombo and Sri Lanka, in positioning itself as a tourism hub given its multi-use facilities and iconic design.