Biz prefers consistent bad policies to inconsistent good policies, says top private sector executive

Businesses tend to prefer consistent bad policies to inconsistent good policies, as such provides predictability when taking business decisions including expansions and new investments, a top private sector executive says.
According to Lanka Wall Tiles PLC and Lanka Tiles Managing Director Mahendra Jayasekara, the choice between the two remains the challenge for the businesses. 

“Generally investors prefer consistent bad policies to inconsistent good policies,” Jayasekara said in an interview with Softlogic Stockbrokers last week. 

Jayasekara, a well respected executive in the country and a heavyweight in the tile and ceramic industry for decades made this remark while talking about the vast potential that lies with the industry for expansion as the demand for high quality tiles surpasses the current supply and the 
manufacturing capacity. 

Among challenges typically confronted when transitioning an industry from a pure manufacturer to an exporter, he cited things such as working with multicultural partners and operating factories as 
key challenges. 

Commenting specifically on the latter he said operating a factory becomes a bigger challenge, “because successive governments haven’t had consistent policies vis-a-vis tariff and duty structure”. 

“That is a big challenge. That is a scary thing because to expand capacity in the industry, you need to spend Rs.4.0 to Rs.5.0 billion. Before you put Rs.4.0 - Rs.5.0 billion into an investment, there should be clarity as to the long-term continuity of the fiscal policy of the government,” he explained. 

Local business community has cheered the current government’s economic policies in a broader context. The government has shown determination to maintain its tax and broader fiscal management policies while keeping the interest rates low. 

While many expected the government to reverse course on the tax policy in the November 2020 budget after the pandemic struck State revenues, the consistency in the tax policy, which they set off since December 2019 was a cornerstone in their overall fiscal policy. 

The fiscal data have already shown that the current fiscal and monetary policy have propelled businesses and the broader economic recovery, faster than many expected. 

The listed entities reported their highest-ever earrings quarter in December 2020. They were supported by the pent-up demand, import restrictions, low interest rates and low taxes resulting in higher after tax profits. 

The tile and the ceramic sector, which is captured under the broader capital goods sector earnings, shot up by 66 percent in the December quarter from the same quarter in 2019m and was also up by 62 percent from the September quarter “on the back of import protectionism, US$ depreciation, and revival in activity levels, despite the dip of JKH,” Softlogic Stockbrokers said.