09 January 2009
We had just landed in Columbo, Sri Lanka’s capital, and these were practically the first words we heard.
We were coming from Bangalore, the Silicon Valley of India, where the effects — and potential effects — of the credit crisis were front and center.
Would the Wall Street layoffs hurt the technology outsourcing firms that have proliferated here, they had asked.
Would corporate America’s need to control costs help the booming business process outsourcing industry, they had wondered.
Everywhere I went, people expected me to opine about the credit crisis.
But in Sri Lanka, a small, lush, tropical island of 20 million people that neighbors India, and where we had come for holiday, I didn’t expect to hear the same fears.
After all, this is a place where the economy is still largely agrarian; its largest export, by far, is tea.
And this is also a place that has been consumed by a decades-old civil war. Yet the economic crisis found its way into almost every conversation we had over the next week.
Because I was on vacation, I didn’t interview people in their offices. Instead, my conversations were over tea in the afternoon and drinks at sunset. I met people in Sri Lanka’s newly emerging resort business.
They had survived the tsunami; now, they felt threatened by this new economic tsunami. Indeed, they could mark the exact moment when business fell of the cliff: it was September, when Lehman Brothers defaulted.
The country’s cricket association — by far the biggest spectator sport in Sri Lanka — was essentially broke; the big, upcoming Test Series between Sri Lanka and Pakistan had not been able to find a single sponsor.
Land development was largely on hold because financing was impossible to get.
Oh, and on my second day in Sri Lanka, I picked up the local newspaper to discover that a large bank, Seylan, had been taken over by the country’s central bank.
My new Sri Lankan friends told me the backstory: the bank was run by a businessman who was offering 25 percent interest to attract deposits, which he was then using to finance development projects that were unraveling because of the credit crisis. When the depositors found out, they raced to pull out their money, creating a run.
After the central bank took over, its governor, Ajith Nivaad Cabral, gave a news conference in which he played down the bank’s mistakes, and chalked up the problem to an inexplicable crisis of confidence. It turns out the bank’s owner was politically connected.
A few days later, we were in the south, having drinks with a friend, a British ex-pat who runs a small, high-end property. He had spent an anxious afternoon in nearby Galle, where the Seylan Bank had a branch, because he wanted to get his money out. He was worried. The bank told him to come back in seven days. That made him even more worried.
For all the talk of the interconnectedness of world trade and global markets, it is still striking to see how events in America in 2008 have created turmoil in this small country. You shake your head in wonder. Sri Lankans, however, understand that interconnectedness all too well. Or at least some do.
We made friends in Sri Lanka with Dominique and Rohini Nordmann — he runs a boutique resort company; she is the sales director for the Aman Resorts — and we spent time at their home, which looks out over the Indian Ocean.
Gazing out at the water, Dominique told me about his own economic indicator.
“See out there?” he said pointing to the distance. “A few years ago, you would have seen shipping containers from China, one after another, all day long.”
I looked out at the empty ocean. “Now we see maybe one or two a day,” he said. The Nordmanns didn’t need to read the newspaper to know the world was in recession. They could see it from their lawn.
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