Top global auditors urge Sri Lanka to actively capitalise on China’s BRI
China’s Belt and Road Initiative (BRI) is by far the most aspiring project in the modern era and the top global auditors have urged Sri Lanka to actively get on board to witness a leap in its growth story, rather than missing the bus once again.
While Sri Lanka has harped on its strategic position and acknowledged the opportunities prevailing in promoting the island nation as a trading hub in the Indian Ocean, the progress achieved by capitalizing on that factor is nowhere close to what it could have been.
Stressing the need for Sri Lanka to be on par with its regional peers to remain relevant in the ever evolving economic environment, KMPG yesterday implied the need for the country to put its best foot forward and hold on to the opportunities that are within reach with regard to the BRI.
“Location alone is not enough. Measures need to be taken to optimize this factor. Similarly, if actions are not taken to benefit from the BRI, we will still be left behind,” said KPMG Partner and Head of Audit Suren Rajakarier while speaking to business heads and industry leaders on the economics of modern Silk Route and its benefits to Sri Lanka.
Reiterating the BRI is fulfilling a global demand for investment and development that can spur increased economic growth for both China and many other nations “stuck” in the development paths like Sri Lanka, the international agency assured the initiative has great potential for the island nation.
The BRI essentially promotes distribution of global wealth where it brings marginalized developing nations and emerging economies into the heart of globalization. It seeks to develop new areas of the global economy and share the benefits of globalization with more countries along the BRI, thereby addressing the shortcoming and inherent contradiction of the traditional model of globalization.
Although a section of the country has voiced their concerned on Sri Lanka deepening its economic and political ties with China, the business community is observed to be ready to capitalize on the BRI.
An online survey conducted by KPMG along with ACCA, to assess the awareness level in Sri Lanka about the BRI and if companies have benefits arising from these investments, revealed that over 50 percent of local companies have plans to capitalize on the BRI and said will consider a strategic change in the next one to five years.
However, it was highlighted that there is a need for additional skills and knowledge to operate successfully in the BRI. Skills considered required to deal with the changes and challenges arising due to the BRI are in the areas of communication, taxation, business analysis, financial analysis, leadership and forensic audit.
If the Special Economic Zones (SEZS) are created under the BRI, 78 percent of the respondents said their organisation would consider either expanding to such a SEZ or shifting to any such SEZ to obtain the benefits related to the BRI schemes.
However, about 60 percent of respondents opined that an increasing flow of infrastructure development due to the BRI and goods and services from China poses an increased direct threat to locally manufactured products in Sri Lanka.
About 82 percent of the respondents have stressed that owing to the changes related to the BRI, there is a need to change the governance structure in their respective organisations.
According to KPMG, the board of directors should consider the larger market place and competitor position under its five-year plan and formulate strategies to address and maintain market share.
It stresses organisations must ensure they are in a position to comply with the local investment and sustainability and employment policies.
While organisations must investigate which Chinese projects have been approved, projects must be reviewed to understand where the opportunities lie in integrating into the BRI.
According to data from Minsheng Securities, Sri Lanka ranks 18th in the BRI investor list with a total investment of US $ 3.6 billion (2005 – 2016).
The top three investors are Russia with US$ 28.1 billion (13.7 percent), Kazakhstan with US $ 18.1 billion (8.8 percent) and Malaysia with US $ 17.2 billion (8.4 percent).