ADVERTISING BOOMS IN SRI LANKA, FAR OUTPACING ECONOMIC GROWTH

ADVERTISING BOOMS IN SRI LANKA, FAR OUTPACING ECONOMIC GROWTH

Growth in advertising reflects growth in a country's economy, or so the saying goes. But in Sri Lanka, the performance of the advertising business is leaving the economy behind.

Advertising registered 20 percent growth in the first quarter of 1995

from the year-earlier period, Nimal Gunewardena, managing director of Bates Strategic Alliance, said on Wednesday.Sri Lanka's gross domestic product is generally forecast to grow by about 5 percent to 5.5 percent this year. It grew by 6.9 percent in 1993 and 5.6 percent in 1994.

"Overall, advertising is leading the economy rather than a reflection of or on a parity with the economy," said Mr. Gunewardena, whose company handles Goodman Fielder, an Australian food processor; Eveready's Energizer batteries; and B.A.T Industries' John Player cigarettes.

He put the growth rate down to the heavy competition in developing new products and financial services.

"The more competition there is, the more advertising there is," he said.

Lilamani Benson, who runs LDB Lintas, said advertising of financial services is showing unrestrained growth, with a new company in town every other month pushing a new investment fund or venture-capital or banking service.

Freddy Arumugam, media director for Grant McCann-Erickson, said banks and insurance companies are becoming more and more aggressive and new private radio stations are picking advertising out of a "dead end."

"Advertising has been showing this kind of growth here for the last three or four years, so I can no longer say it's unusual," he said. His company deals with Nestle and food and household-products maker Reckitt & Colman, among others.

Terry Benson, chairman and managing director of Benson Strategy Consultants, said there had been a slight slowdown in the first half of the year because of general uncertainty about the direction of the economy and worries about the war against Tamil rebels in the north and east.

He said a good "rule of thumb" in estimating advertising business was to double GDP.

"In Sri Lanka, 12 percent to 20 percent (annual growth in advertising) would be a fair guess," Mr. Benson said. He argued that advertising levels reflect, rather than stimulate, the economy.

"People spend (on advertising) because they have confidence, not because they want to gain confidence," he said.

Economic analysts said last week that escalating hostilities between the military and Liberation Tigers of Tamil Eelam rebels were expected to take a heavy toll on the economy.

The war would expand the budget deficit, divert funds from the private sector and lead to more imports and inflation, they said.