Leg Up

The Sri Lankan rupee is on course for a firmer footing against the US dollar, despite recent political cross currents that have shaken the currency.
After appreciating some two percent against the dollar, the currency has hit some rough weather due to the ongoing political tussle.rn

rnThe rupee closed weaker at 96.00 against the greenback on Monday on thin volumes and little import demand for dollars. rn

rnldblquote I think there is room for the rupee to appreciate further against the US dollar, its a trend we are seeing throughout other Asian currencies at the moment,
dblquote says Geoffrey Barker, Chief Economist at HSBC.rn

rnHis comments echoed Central Bank Governor, A S Jayawardene
quote s views that he was lquote quiet happy with the rupee in the current context
quote .rn

rnBarker says appetite for foreign investment will continue to flow lquote so long as economic fundamentals are strong and things are moving on an upward trajectory.

rnAsian economies are picking up, offering attractive returns for their equity and bond markets.rn

rnldblquote Competition is tough. But the key thing is to give a perception that Sri Lanka is tackling economic reform, allocating capital wisely, showing stability and diversifying growth,
dblquote Barker told a cross section of HSBC
quote s top corporate customers on Monday.rn

rnForeign investors he says are quite tolerant of shocks in local markets. But the key thing, is to sell the story that Sri Lanka is doing her bit to tackle labour reforms, bad debts in banks, widening the tax base, reduce costs of investment and so forth, he said.rn

rnldblquote FDI
quote s [foreign direct investment] will flow in so long as there is peace and stability. There needs to be a clear milestone based reform agenda,
dblquote he said.rn

rnSri Lanka
quote s chief competitors, China and India, are serving up diversified opportunities for foreign investments.rn

rnChina is keen to attract the low-end capital, while India has taken big steps to develop its services industry to lure foreign investments. rn

rnCall centres are flourishing in India and there is a trickle down effect with more money flowing into people
quote s hands. ldblquote Sri Lanka should do more to tap that Indian tourist market, who shop a lot in Thailand spending some US$ 100 per day,
dblquote he said.rn

rnOn a final note, Barker said: ldblquote Get your fundamentals on a sound footing, there is lot of room for interest rates to come down further and at the sametime keep inflation under control.


-Mel Gunasekera: melg@vanguardlanka.comrn