By Madhusha Thavapalakumar
[caption id="attachment_83843" align="alignleft" width="300"]
First Capital Holdings PLC CEO Dilshan Wirasekara[/caption]
In order to overcome the impact of the prevailing Covid-19 pandemic, First Capital Holdings PLC CEO Dilshan Wirasekara believes the Government should facilitate domestic investments into high-tech and manufacturing sectors.
In a recent interview with the Oxford Business Group, Wirasekara stated that this would offset the foreign direct investment (FDI) which would be hard to attract as all countries and companies around the world will be more focused on their internal rebuilding, following the hit due to the pandemic.
''The country’s recovery strategy should include a more focused approach to manufacture and get local entrepreneurs to invest in high-tech industries. We have already seen entrepreneurs supporting Covid-19 prevention efforts,'' he stated.
According to him, the ICT sector would be one of the stabilised sectors following the ongoing pandemic, while the food and beverage sector too would quickly rise due to stronger distribution; so would the tourism sector after the normalisation of international travel.
Wirasekara is an investment banker with diversified expertise in financial services, including treasury and investment management, capital market strategy, and corporate finance advisory, in a career spanning over 22 years.
Currently, he serves as a Board Member of the Colombo Stock Exchange.
To support his suggestion of promoting local investment, he noted that it would be difficult for Sri Lanka to raise funds through international sovereign bonds (ISBs) at current levels of international interest rates.
According to the data from the Central Bank of Sri Lanka (CBSL), yield rates of all of Sri Lanka's 14 ISBs have skyrocketed, following the identification of the first Sri Lankan Covid-19 patient and the islandwide curfew imposed subsequently.
Yield rates which usually hover around their coupon rates increased by double digits in mid-April from their early-March levels. Even though yield rates recorded a minor drop in the following week, they shot up gradually in the coming weeks and still remain at higher levels.
Therefore, according to Wirasekara “our best chance” is bilateral loans akin to loans obtained from China with a three-year grace period, while looking at lines of funding from multilateral financial institutions which usually come with a set of conditions, yet lower interest rates.
Further, he noted that there are chances of an early recovery for Sri Lanka's economy if the country could manage to bring the virus under control.
''In this scenario, GDP expansion could reach 1-2% in 2020. However, with the growing number of Covid-19 cases and several extensions to the lockdown, the possibility of this happening is unlikely,'' he added in the interview.
Even though he expects the local spread of Covid-19 to be brought under control by the first week of July, if the situation is under control, the economy would shrink significantly in the second and third quarters of this year by 1% and 2%, respectively.
Nevertheless, in the worst case scenario, where the situation is not under control, normalcy could be expected only around the first week of October, and this prolonged pandemic by then would cause the economy to shrink in the second and third quarters of this year by 5% and 6%, respectively.
First Capital Holdings is a full service investment institution that offers independent advice and transaction execution relating to capital raising and other strategic needs.
First Capital Holdings PLC CEO Dilshan Wirasekara[/caption]
In order to overcome the impact of the prevailing Covid-19 pandemic, First Capital Holdings PLC CEO Dilshan Wirasekara believes the Government should facilitate domestic investments into high-tech and manufacturing sectors.
In a recent interview with the Oxford Business Group, Wirasekara stated that this would offset the foreign direct investment (FDI) which would be hard to attract as all countries and companies around the world will be more focused on their internal rebuilding, following the hit due to the pandemic.
''The country’s recovery strategy should include a more focused approach to manufacture and get local entrepreneurs to invest in high-tech industries. We have already seen entrepreneurs supporting Covid-19 prevention efforts,'' he stated.
According to him, the ICT sector would be one of the stabilised sectors following the ongoing pandemic, while the food and beverage sector too would quickly rise due to stronger distribution; so would the tourism sector after the normalisation of international travel.
Wirasekara is an investment banker with diversified expertise in financial services, including treasury and investment management, capital market strategy, and corporate finance advisory, in a career spanning over 22 years.
Currently, he serves as a Board Member of the Colombo Stock Exchange.
To support his suggestion of promoting local investment, he noted that it would be difficult for Sri Lanka to raise funds through international sovereign bonds (ISBs) at current levels of international interest rates.
According to the data from the Central Bank of Sri Lanka (CBSL), yield rates of all of Sri Lanka's 14 ISBs have skyrocketed, following the identification of the first Sri Lankan Covid-19 patient and the islandwide curfew imposed subsequently.
Yield rates which usually hover around their coupon rates increased by double digits in mid-April from their early-March levels. Even though yield rates recorded a minor drop in the following week, they shot up gradually in the coming weeks and still remain at higher levels.
Therefore, according to Wirasekara “our best chance” is bilateral loans akin to loans obtained from China with a three-year grace period, while looking at lines of funding from multilateral financial institutions which usually come with a set of conditions, yet lower interest rates.
Further, he noted that there are chances of an early recovery for Sri Lanka's economy if the country could manage to bring the virus under control.
''In this scenario, GDP expansion could reach 1-2% in 2020. However, with the growing number of Covid-19 cases and several extensions to the lockdown, the possibility of this happening is unlikely,'' he added in the interview.
Even though he expects the local spread of Covid-19 to be brought under control by the first week of July, if the situation is under control, the economy would shrink significantly in the second and third quarters of this year by 1% and 2%, respectively.
Nevertheless, in the worst case scenario, where the situation is not under control, normalcy could be expected only around the first week of October, and this prolonged pandemic by then would cause the economy to shrink in the second and third quarters of this year by 5% and 6%, respectively.
First Capital Holdings is a full service investment institution that offers independent advice and transaction execution relating to capital raising and other strategic needs.