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Remarks to the 12th CFA Sri Lanka Awards Ceremony – November 29

Thank you for inviting me here today to celebrate with you at the 12th Chartered Financial Analyst-Sri Lanka Awards Ceremony.  I’m honored to be here and to have the chance to meet some of Sri Lanka’s most talented professionals. 

It is a particular honor and pleasure for me to be here because the United States played an important role in getting it started.  In 1992 the U.S. Agency for International Development began a Private Sector Policy Support Project with the goals of developing Sri Lanka’s venture capital industry and its capital markets. Part of the capital markets program entailed the strengthening of the Securities and Exchange Commission and the  Colombo Stock Exchange and looking at how human capital within the industry could be improved.

From that was born the Chartered Financial Analyst (CFA) program to develop the skill base within the industry. In the Fall of 1995 Sri Lanka had its first two CFA charter holders, one of whom Ravi Abeysuriya is here with us tonight.  A round of applause please for Ravi. 

The number of CFA Charter holders has been rising steadily.  And I’m proud that this program has had a positive impact in helping to develop Sri Lanka’s capital markets.  

Ladies and gentlemen, let me take advantage of my bully pulpit here tonight to offer a few thoughts on the relations between the U.S. and Sri Lanka and Sri Lanka’s ability to attract investment in the accounting and finance sector.

Overall, relations between our two countries are excellent.  But when I talk to local business leaders, as I make a point of doing frequently, they tell me that the single most important thing that can be done to enhance the climate for business is for the Government of Sri Lanka and the LTTE to reach a durable peace settlement that meets the aspirations of all communities, where they are Tamil, Sinhala or Muslim. 

That too is the principal interest of the US in Sri Lanka.  I just returned from a meeting in Washington, D.C. last week of the Co-Chairs of the Tokyo Donors’ Conference.  We agreed that the agreement between the Sri Lankan Freedom Party and the United National Party offers a strong potential to result in a power-sharing proposal that could help form the basis for peace talks between the Government and the LTTE and reverse the downward spiral that Sri Lanka is now caught in. 

If the spike of violence and hostilities we have seen over the last six months continues, it could have profound negative effects on your society and economy.  Conversely, if your country is able to seize the opportunity afforded by the SLFP-UNP initiative and enter into lasting peace talks, peace could have a very positive dividend for the business community and the rest of the country.    

Some studies say the opportunity cost of the conflict is at least 2% of Sri Lanka’s GDP, a figure I think underestimates the peace premium. A lasting peace would enable Sri Lanka to significantly boost output and employment all over the country, particularly in the North and East.  Moreover, Sri Lanka’s relatively robust economy has the capacity to quickly absorb former combatants into the workforce, enhancing prospects for a durable peace.  The US stands ready to help, both as a Co-Chair in supporting Norway’s peace facilitation efforts, but also through our programs to help secure the peace.         

America has long been a partner in Sri Lanka’s development. U.S. assistance has totaled more than $1.63 billion since Sri Lanka’s independence, including $134 million to help Sri Lanka recover from the tsunami that struck in 2004.  In addition, we expect the Government and the Millennium Challenge Corporation to soon conclude an agreement enabling the MCC to invest in Sri Lanka.

As we look to the future of Sri Lanka’s economy, you have the advantage of being a diversified, market economy.  I was impressed to learn that Sri Lanka’s large concentration of qualified accountants represents a significant asset for your country.   CIMA UK, one of the world's largest professional accounting bodies, has its second biggest division in Sri Lanka.  Others have accounting qualifications from the Institute of Chartered Accountants of Sri Lanka.  A select few Sri Lankan accountants, such as you, have gone on to obtain even higher CFA qualifications.  Sri Lankan accountants and analysts are performing marvelously in international companies in Australia, New Zealand, the UK and the Middle East in banking, industry, and services.  Their hard work has also contributed to the business success of many companies in Sri Lanka like JKH, Hayleys, and MAS holdings.   

As Sri Lanka’s economy grows, the demand for accounting and financial analyst services is also growing.  To meet these demands, Sri Lanka needs a constant supply of fresh, talented graduates.  That’s where exceptional professional certification programs, like the CFA, have played an important role.  Since 2001, CFA registrations in Sri Lanka have more than doubled, and registration in other professional programs has risen steadily. 

Sri Lanka’s strong talented pool of accountants and financial analysts makes the country uniquely positioned to attract new investors in these sectors.  One industry that will benefit from the growing number of CFAs and accountants is business process outsourcing.  Sri Lanka has the potential to attract BPO clients that need high-end specialized financial services and attract investment that might otherwise go to India.  A few companies are already providing these services, but there is considerable scope for the industry to expand. 

One success story is a U.S. company called Amba Research.  Amba Research was founded in 2003 by four former equity research managing directors.  The company is a dedicated investment research outsourcer catering to top global investment banks and asset managers. Since October 2003, the Sri Lankan operation has grown rapidly, employing over 160 finance professionals and quantitative mathematicians. Today Amba is working with more than half of the world’s top 15 global investment banks.  In Sri Lanka, Amba found an eager pool of young accountants and finance professionals seeking international exposure and opportunity to train in global best practices. This provided a good match with the ongoing efforts of global investment banks to tap in to the analytical talent pool of emerging markets in a cost-effective manner.

For the BPO industry to grow and attract more investors like Amba, Sri Lanka will need to address a variety of challenges:

One challenge is the talent pool constraint.  The growth in the number of high caliber, educated finance professionals is limited by Sri Lanka’s education system bottlenecks.  The higher education system in Sri Lanka is dominated by the public sector that cannot provide the education that Sri Lanka’s youth will need to compete in the 21st century.  Approximately 85% of Sri Lanka’s youth who qualify to enter local universities  are not admitted because the state-run institutions don’t have the capacity to admit them.  This means that more than 100,000 students will not have the opportunity to achieve their potential, unless they pursue professional studies or go abroad.

There is an alternative which is to expand education opportunities by allowing private universities to exist alongside public universities.  If the Government were to allow private universities in Sri Lanka, I know that American universities would be interested to establish campuses here in partnership with local universities

A second challenge is English fluency.  Companies like Amba demand international standard English communication and writing skills.    The inability of Sri Lanka to develop English language communication skills has created “missed opportunities” for many talented young men and women in Sri Lanka.  USAID also is investing $368,000 to train 150 teachers in computer-based English learning at eight computer centers across the island.  More recently we provided a $16,000 grant to educate 60 English teachers, all of whom just passed the Cambridge Teaching Knowledge Test.  They, in turn, will train other teachers, creating a cascade of English teaching that will have a real impact on the future of English in Sri Lankan schools. 

A third challenge is physical infrastructure.   IT communication facilities on average cost more than 40% compared to India.  IT professionals also tell me there also is a lack of bandwidth for a price.  Small investments in this area could have big dividends.  If a center of educational excellence such as Kandy had sufficient and secure broadband capabilities, its population has enough educated English speakers for some BPOs to consider expanding there.  But they don’t seriously consider Kandy simply because of lack of sufficient broadband availability.

These challenges sound daunting, but Sri Lankans have faced economic challenges before and come out ahead.  Sri Lankans are, and should be, proud of the resilience of their economy and their country. Your challenge, as you move forward with your career, is not just to be successful, productive financial analysts.  You also have a responsibility to help address these challenges, build up the accounting sector, and create opportunities for other bright, talented Sri Lankans. 

All of you have an important role to play in encouraging the Government of Sri Lanka to make the business climate here as favorable as possible by allowing private university education, improving infrastructure, forming sound economic policies, and of course finding a peaceful resolution to this destructive and wasteful conflict as soon as possible.  Only through your initiative and creativity will Sri Lanka realize its promise and potential.  

Thank you for the opportunity to speak to you tonight.  Congratulations on this important achievement and best of luck in your careers.