Happy weekend everyone! I just got back from a work trip to Sri Lanka with my boss. My last visit was over 10 years ago, so it was also great to catch up with some old friends in Colombo. The country has been through a very challenging few years, with the 2019 Easter bombings followed soon after by the Covid-19 pandemic. These events, along with several poor policy decisions, eventually led to an unprecedent economic and political crisis in 2022. The longer term consequences of the crisis remain unclear; for example, many younger, skilled Sri Lankans have left the country for opportunities abroad, which has eroded the country’s talent base. They might return eventually, but this is certainly a concern for public and private sector employers at the moment.

Our visit came just ahead of a scheduled IMF visit, as part of a first review of the country’s loan program. I suspect they will be impressed by the remarkable progress that has been made over the past year, including how quickly inflation has been tamed. Without understating the hardships many people are still facing, the situation on the ground in Colombo feels pretty normal from the perspective of a visitor. In fact, the travel advisories maintained by the foreign ministries of many countries seem totally out of date, probably part of the reason tourism hasn’t bounced back quicker. Any readers looking for their next regional holiday, skip Bali and consider Sri Lanka instead!

In terms of investment opportunities, it is probably still too early to consider getting involved in equities, despite some encouraging signs that inflation and the currency have been stabilized. The main challenge for institutional investors, however, is limited liquidity. The old joke is you know the foreigners are back when JKH goes up! Still, we met some interesting companies and came away generally impressed with the quality of management teams and how well they have navigated the recent adversity. If anyone has been to Sri Lanka recently and wants to exchange notes, I would be glad to do so. Finally, in case of interest, I am including a couple of photos from my trip below.

My reading links for the week:

• Nikkei Asia: Sri Lanka hit by record brain drain, but some stay to rebuild.
• Anna Porter: George Soros’s legacy will be his ideas – and they will outlive him.
• NYT: China’s nickel plants in Indonesia created needed jobs, and pollution (paywall).
• FT Alphaville: China’s Japanifaction – the good, bad and ugly, according to JP Morgan.
• LARB: A century of frustration and failure: Philip Bowring’s “The Making of the Modern Philippines.”

View from the Galle Face Hotel:

Lanka Premier League (Galle Titans vs. Jaffna Kings):

Galle Face Green, looking towards Port City:

Geoffrey Bawa’s Number 11: