The Covid-19 pandemic has become an unprecedented crisis to international commerce and has caused extraordinary hardships to the economies of every country. The social impact due to the economic downturn is worse than the financial crisis. Therefore, the situation requires a coordinated response and cohesion of the Government and the private sector of the country. The private sector the world over, including Sri Lanka, holds more capacity to provide short-term and long-term solutions to the prevailing catastrophic economic situation. The usually vibrant private sector in Sri Lanka possesses the capability, expertise, and resources to mitigate and control the impact of the virus.
Unseen enemy
Sri Lanka is in the midst of perhaps the most damaging crisis in recent history with minimum capability to counter the unknown and unseen enemy. The prevailing rapid spread shows no signs of receding. The daily detection number has risen from 500s to 700s during the past month. With the limited capacity of testing, it is hard to determine exactly how many infected persons are there in society.
The country must be economically sound and individuals must be financially satisfied to battle the pandemic. Hence, it is important to take immediate remedial steps to bring the economy back to normalcy instead of waiting for the pandemic to disappear. The involvement of the private sector that can make the highest contribution to this matter is a mandatory need.
The majority of the business entities are in deep trouble due to low revenues while hundreds of thousands of job losses in the country are rapidly turning part of the society into poverty. The Government on the other hand is in a distressed position due to diminishing foreign exchange reserves, negative GDP growth, loss of revenues, and an escalating debt pile. Therefore, the Government can offer very little relief to the masses. On the contrary, the private sector can offer much more to society if the Government can set up more favourable conditions to improve the existing business environment.
In a timely move, President Gotabaya Rajapaksa, in a discussion with business leaders recently said that new approaches of the private sector is urgently needed to achieve a balanced growth of the economy. He suggested that the private sector must come up with measures that would help to reach economic goals. Addressing the prevailing issues such as shortage of skilled manpower, the inefficiency of institutions, shortage of material, and employee productivity, the President has assured that he will provide solutions after a thorough study.
Productivity is the magic elixir of business success. Although some organisations have already switched to the ‘Work From Home’ model to perform their official duties, the service, retail manufacturing and other similar sectors need the physical presence of workers. Sri Lankan private sector labour force is currently facing a major setback in productivity with the various ongoing health restrictions. Due to the stringent health guidelines, travelling to workplaces, space management in offices, and even obtaining meals, etc. are currently done with caution to avoid possible health issues. The result of all these limitations experienced by average workers hinders the normal output.
Role of the private sector
The role of the private sector is an important factor in the societal growth and economic development of a country and Sri Lanka is no exception. Private enterprises are the chief agents of providing employment. Besides, these organisations provide funds to the Government by way of taxes and livelihood to the majority of the citizenry, particularly, the SME sector which contributes the largest portion of the economy.
Since independence, several times Sri Lanka has displayed strong resilience in the face of crisis and volatile economic conditions. The private sector played a pivotal role during this whole duration. However, the unprecedented Covid-19 catastrophe has made an enormous impact on private sector organisations taking a toll on over eight million private sector employees and their families. Hence, the situation must be addressed promptly to avoid further damage.
Unlike public sector employees, the private sector cannot wait until the pandemic is over to perform. The current scenario does not seem bright in the small and medium sector business enterprises. Most of the businesses are more focused on mere survival than taking bold steps to treat the situation as an opportunity and maximise activities. For example, the Government has declared that they will provide maximum assistance to the commercial agriculture sector with the total abolition of taxes for five years, technology support if required, and many other facilities. Despite the Government’s pledges, the response from the private sector SMEs seems lacklustre in this regard.
Priorities on financing jobs and income generation through private businesses have to be considered by the relevant authorities. Short and long-term credit lines to boost micro, small and medium-sized enterprises (MSME) should be made available to withstand the growing pressure. With the mounting burden on finances due to portfolio deterioration, the Government is in serious difficulty at present concerning financial assistance to the business community. However, it is laudable that the Government seems to be doing its best to mitigate MSMEs even amid the crisis.
Trade situation
According to experts, the present Government’s focus on the promotion and development of indigenous industries, services, and trade is an essential short-term remedy to emerge from the existing complex situation. Most of the country’s MSME sector is involved in business based on native commodities except the businesses engaged in imports. However, the prevailing import bans and restrictions have compelled most of the importers to concentrate on finding alternatives locally.
Due to the present uncertain and volatile global trade situation, the full recovery of Sri Lanka’s three major earnings, foreign employment, apparel, and tourism is gloomy and unpredictable. Even when permanent treatments for the virus are on hand, the negative impacts of the pandemic could prevail in the country for several years. Even though the apparel sector has shown an improvement, recovery of the other two segments is still a long way off. Therefore, encouraging investments and engagements in native industries is a timely move by the Government, offering concessions and financial assistance.
Most of the activities in commercial enterprises, irrespective of the size or the nature of the business, have been hard hit by the stringent but compulsory health guidelines such as social distancing and confinement. To mitigate the risks, the Government should introduce new policies on whatever existing constraints against the private sector as they may be the best response to the crisis. Especially, the MSME sector must be strengthened by facilitating access to finances, offering technological guidance, and easing tax burdens. Also, encouraging and accelerating digitalisation of the private organisations will boost the growth of these organisations.
Covid-19
Speedy decision making in crises must become more active. Covid-19, unlike previous pandemics, may exist in the world longer than anticipated. Hence, decision making by the authorities in both policy and functionality concerning the private sector is important at this juncture. Fortunately, Sri Lanka has a strong leadership with the comprehensive backing of the citizenry to carry out any and all important decisions.
Along with the full involvement of the task force on economic revival that consists of the cream of the private sector, Sri Lanka stands a better chance than many other countries in the region to recover. Basil Rajapaksa, the versatile taskmaster heading the task force recently declared this fact in no uncertain terms. The country needs such confidence and commitment to overcome the biggest economic challenge in recent history.