Business

Container throughput at Sri Lanka’s Port of Colombo was up by over 9 % in April this year compared to the same month of 2018. Overall the first four months of this year saw growth in container volumes through the Jaya Container Terminal (JCT), South Asia Gateway Terminal (SAGT) and the Colombo International Container Terminal (CICT) combined rise by 5.9% compared to the January to April 2018 period.

Transhipment activity was particularly buoyant and rose by 8.6% in this four month period.

The Minister of Ports and Shipping, commenting on the increase in volume, welcomed the fact that the Sri Lanka Ports Authority (SLPA) has focused on fast-tracking strategic decisions regarding the expansion of the Colombo’s capacity.

Recent reports have suggested the first phase of the new East Container Terminal (ECT) could be operational by the second half of next year.

The facility will be operated by a new company that will be jointly formed by Sri Lanka Ports Authority (SLPA), and partners nominated by the governments of Japan and India. The first phase is expected to boost capacity at the port by around 0.8 million teu a year. Japan is likely to provide a US$500-800 million soft loan at low interest rates, to enable the project to be completed within the next year.

The Monetary Board of the Central Bank of Sri Lanka (CBSL) at its meeting held on 30.05.2019, having considered the continuous failure to comply with directions applicable to primary dealers, acting in terms of the Regulations made under the Registered Stocks and Securities Ordinance and the Local Treasury Bills Ordinance, has decided to suspend NatWealth Securities Limited (NWSL) from carrying on the business and activities of a Primary Dealer for a period of six months with effect from 31 May 2019.

The CBSL in a statement said that they will take necessary measures to ensure that this regulatory action does not have a disruptive impact on the Government Securities market and added that action will also be taken to facilitate the handling of the interests of the customers and counterparties of NWSL in an orderly manner.

The Board of Investment of Sri Lanka (BOI) signed an Agreement with Putus Brother’s Sustainable Developments (Private) Limited to build, construct and operate a 15 cabana Hotel Project in Palatupana, Yala.

The Agreement was signed on behalf of the Board of Investment of Sri Lanka by Anil Amarasuriya, Board Member and Acting Chairman and Dr. Nihal Samarappuli, Board Member and for the Company Narcis Clavell and Jagath Wickramage, Directors.

The total value of the project is US$ 1.6 Million. The project will consist of 43 luxury cabanas in Yala. Clavell and his partner Jagath Wickramage stated “that initially 15 of these cabanas, which could be considered 4 star luxury, would be built. All cabanas would have an individual swimming pool and also a sea view.

The investor also stated that the project was built taking into consideration all Eco- friendly and sustainability norms.

Clavell who is from Barcelona, Spain, also expressed very strong support and confidence in Sri Lanka.

“I would like to encourage all investors and any other visitor to the Island and tell them that Sri Lanka is indeed a wonderful opportunity for investors worldwide. It is important that this positive message is sent out, so that the true potential of the country is well known to all. I am therefore very confident that Sri Lanka with its open business culture and investor friendly agencies such as BOI, will do well. The recent problems are in my view temporary and in the long term the country will emerge as an attractive hub for tourism and investment.”

Flemingo International, one of the world's premier duty free service providers, has called on both the world of travel retail and the wider world to stand by Sri Lanka.

In the wake of the Easter Sunday bombings that targeted churches and luxury hotels in Colombo, research from Forward Keys said that more than 80% of bookings to Sri Lanka were cancelled.

Flemingo is, however, urging people to still visit a destination that was named by Lonely Planet as the best to visit in 2019.

The retailer used Blue Storks Head of Travel Retail Marine Bemelmans and Head of Inflight Sales & Marketing Jan Simonson Hoefnagels as a positive example. The pair recently started a two-week tour of the island driving a Tuk Tuk.

Bemelmans and Hoefnagels explored Flemingo’s arrivals store after landing before heading to Negombo, where they met up with Flemingo International Directors Paul Topping and P Thimmayya.

After a morning spent learning how to drive a Tuk Tuk in Negombo, Bemelmans and Hoefnagels headed on to Sigiriya to spend the next two days exploring the cultural triangle.

A statement from Flemingo said: “It is great to see the two travellers supporting the country, demonstrating their passion to see the island and drive their Tuk Tuk themselves. We recommend you follow in the footsteps of Marine and Jan.

“While they cannot compensate for the slowdown in tourism, they understand that every little bit goes a long way. Several countries including India and China have relaxed the travel restriction against Sri Lanka this week.

“So, go out there and give them a wave, a clap, a shout of “well done” as their branded Tuk goes rolling down the highways. The country needs more of them coming here. And no, you don’t have to drive a Tuk Tuk. Just come and enjoy what is on offer, we promise you won’t be disappointed.”

A leading Japanese investor - President of Tosslec Co. Ltd, Kyoto, Japan Jitsuo Mikasa - reaffirmed that his company would continue to invest in Sri Lanka without any break or disruption of the company’s customer network.

Tosslec Co. Ltd’s subsidiary Tos Lanka Co. (Pvt) Ltd has been in operation in the Biyagama Export Processing Zone since 1995. Tos Lanka has created a niche market position as a supplier of ‘low volume high value’ electronic components to sophisticated markets of Japan, North America and Europe.

Mikasa who was in Colombo this week told BOI representative in an interview, as part of an expansion program, he hoped to play an important role by supplying the Set Top Box when Digital TV is introduced to Sri Lanka hopefully under the Japanese standard.

“We are also since 2016 working on an Electronics Solution for moth repellents to control the loss to Sri Lanka’s agriculture due to plethora of moths specially nocturnal moths. Our product is also targeted towards controlling the fall army moth which was a plague on Sri Lankan agriculture in the recent past. We are working closely with state institutions such as Horticultural Crop Research and Development Institute and privately owned organic farms. Already our innovative LED Lamp is being used successfully to repel moths on some organic farms concentrating on fruits and vegetables.”

He added, “we are also strengthening our efficiencies in our ongoing operations related to automotive safety harnessing and air bag assembly which we pioneered in Sri Lanka in 2002. We are also consolidating our operations in coil assemblies.”

Tos Lanka Factory Manager Noboyuki Tanaka, Jitsuo Mikasa and Tos Lanka CEO Merrick Gooneratne inspect manufacture of printed circuit boards at Biyagama plant

Under his leadership Tos Lanka is committed to taking Sri Lankan electronics into its villages and hinterland. “With this in view I set up an outsource centre in Mulativu with the assistance of a Swiss NGO. Unfortunately this could not be sustained due to the reluctance of the youth in that area to work in manufacturing environment and also the logistics issues involved. We were also involved in employing several displaced youth in the Eastern Province in the aftermath of the war. My CEO Merrick Gooneratne is dedicated towards National Reconciliation and has always endeavoured to employ a multi ethnic workforce.”

“The company’s outsourcing centres at Kegalle and Mawanella are working successfully. We are now in discussion with a few Entrepreneurs in setting up outsource centres in other parts of Sri Lanka’s hinterland.”

Mikasa first decided to invest in Sri Lanka based on a friendship with Merrick Gooneratne who has done his Post Graduate Studies in Kyoto University, who speaks fluent Japanese and who was awarded the Emperor’s Order of the Rising Sun in 2014. Gooneratne has been Mikasa’s business partner for the past 24 years as the CEO of Tos Lanka.

The Institute of Chartered Accountants of Sri Lanka (CA Sri Lanka) commenced the post implementation review of SLFRS 9 Financial instruments with the engagement of key stakeholders. CA Sri Lanka has adopted the full version of SLFRS 9 in 2014 with an effective date of financial periods beginning on or after 01st January 2018.

Consequently, CA Sri Lanka organised a series of training programmes and workshops to raise awareness and also provide application level training on the adoption of SLFRS 9.

A resource person makes a point at a workshop organized by CA Sri Lanka for stakeholders on SLFRS 9

In early April 2019, CA Sri Lanka represented the meeting organised for the bankers with Hon. Prime Minister Ranil Wickremesinghe on the impact of lending to the SME sector which was one of the subject areas. The Institute also contributed to compile a report on Reduction in Market Interest Rates and Enhancing Lending to the SMEs together with the representatives of bankers and the Central Bank of Sri Lanka. At the meeting with Hon. Prime Minister, it was agreed to assess the impact to the Financial Services Industry due to the SLFRS 9, Basel III and Regulatory Changes.

Accordingly, CA Sri Lanka conducted a post implementation review of SLFRS 9 with series of forums with the CEOs and the representatives of Sri Lanka Banks' Association, Finance Houses Association of Sri Lanka, and Leasing Association of Sri Lanka. Further, a separate discussion was held with the panel of auditors. In addition, written comments were obtained from the financial services industry as well as Chartered Accountants in Public Practice.

CA Sri Lanka gathered further observations and comments with regard to practical concerns encountered with the financial services industry in relation to the SLFRS 9, Basel III and other related regulations issued by Central Bank of Sri Lanka from all stakeholders. Subsequent to the forums, discussions and written submissions; the technical committee of CA Sri Lanka developed a draft report with the insights on the way forward. CA Sri Lanka submitted this draft report to the Central Bank of Sri Lanka for further consideration on the areas that are under their purview. CA Sri Lanka intends to issue additional interpretation guidance on the SLFRS 9 in due course.

This draft report includes areas such as Temporary Overdrafts (TD); Non-Performing Loans; restructured and rescheduled loans; exposures denominated in foreign currencies; threshold of the SME loans and consideration on registered partner organisations; impact on the capital adequacy, profitability and other operational matters and special concessions on the industries which are affected due to the prevailing conditions in the country.

In response to the global financial crisis in 2008, this standard emerged, and it prudently replaces the existing Incurred Loss Model with a forward-looking Expected Credit Loss model (ECL) which considers historic, current and forward-looking data which is in line with the recognition of revenue. Accordingly, the financial services industry is required to establish a robust credit risk management framework within their enterprises which enables them to absorb any external intrusions.

Mobitel (Pvt) Ltd, the National Mobile Service Provider in Sri Lanka successfully reached the highest mobile 5G speeds for the first time in South Asia exceeding speeds of 1.55Gbps using a commercial 5G mobile smartphone on 7th June 2019.

Following the demonstration of 5G Speed tests using a commercial 5G smartphone for the first time in South Asia on 4th June 2019, Mobitel went on to achieve a new speed record of 1.55Gbps for South Asia, making a momentous landmark on the 5G deployment across the globe.

As a result of these mobile 5G speed achievements, Ookla, the global leader for speed test benchmarking has recognized Mobitel as the First Mobile 5G Network in South Asia, which is a proud achievement to all Sri Lankans.

These Mobile 5G services were demonstrated using Huawei 5G network equipment in 3.6GHz trial spectrum allocation from the Telecommunications Regulatory Commission of Sri Lanka (TRCSL), which always encourage and strengthen the evolving ICT transformation in Sri Lanka. Mobitel finds it encouraging to work with a progressive regulatory body in broadening the vistas of the Sri Lankan Mobile Broadband market.

The next generation of 5G services will not only provide Giga bit speeds, but also will revolutionize the industries across the globe with inherent ultra-reliable and low latency capabilities of 5G technology.

Mobitel (Pvt) Ltd, the National Mobile Service Provider, successfully showcased South Asia’s first 5G deployment over a Mobile Network on 5th April 2019 which was hot on the heels of the 5G deployments in the U.S.A (2nd April 2019) and South Korea (4th April 2019), connecting a commercial Mobile smartphone to its 5G network.

A group of 12 tour operators from St. Petersburg, Russia is currently in Sri Lanka for a familiarization tour with Aitken Spence Travels.The group leader Gorodenskiy Dmitry stated that he along with his other colleagues are very happy to be in Sri Lanka, which incidentally is their first visit although they have been promoting destination Sri Lanka.

“We are very happy about the security provided and felt everything is very normal. We love the Sri Lankan people and they are so friendly and helpful,” said Gorodenskiy.

He was confident that his Russian colleagues in the group will promote destination Sri Lanka and drive the much-needed tourists to the island.

The group visited Sigiriya and climbed the 660 ft tall rock capitol of King Kasyapa which is a UNESCO World Heritage Site. Sigiriya is considered one of the best-preserved examples of ancient urban planning.

The group would also make their way to the Dambulla cave temple, the Kandy Temple, experience a tea plantation, visit the gentle giants at the Pinnawela elephant orphanage and sum the tour by spending some time to enjoy the beach prior to departure.

Fitch Ratings has upgraded Sri Lanka Insurance Corporation Limited's (SLIC) Insurer Financial Strength (IFS) Rating to 'B+' from 'B'. The Outlook is Stable. The Under Criteria Observation status on the IFS Rating has also been removed.

Fitch has simultaneously upgraded SLIC's National IFS Rating to 'AAA(lka)' from 'AA+(lka)' with a Stable Outlook.

KEY RATING DRIVERS

The upgrade follows the revision of Fitch's global Insurance Rating Criteria in January 2019. SLIC's IFS rating was previously capped by the sovereign constraint set at 'B', which is the Long-Term Local-Currency Issuer Default Rating of Sri Lanka. The new criteria remove the top-down sovereign constraint and Fitch assesses SLIC's country risk in each criteria factor under a bottom-up analysis. The agency has assessed that the positive impact from the removal of the top-down sovereign constraint exceeds the negative pressure from the revised bottom-up country-risk assessment.

The rating action takes into account SLIC's favourable business profile and 'Good' financial performance and capitalisation, which more than offset the company's high investment and asset risks.

Fitch's assesses SLIC's business profile as favourable compared with other Sri Lankan insurance companies due to its leading business franchise, well-diversified participation in business lines across life and non-life insurance sectors, stable business focus on established product lines and its favourable domestic operating scale. Fitch scores SLIC's business profile at 'bb-' under its credit-factor scoring guidelines in light of the ranking. SLIC was Sri Lanka's second-largest life insurer and third-largest non-life insurer based on gross written premiums in 2018. Nevertheless, Fitch expects the growth in industry premiums to moderate in the near term due partly to a slowdown in motor premiums fuelled by a continuous increase in taxes on imported vehicles and slower recovery in the country's economic activity.

SLIC's life and non-life risk-based capital (RBC) ratios, a measure of its capitalisation, were 437% and 200%, respectively, at end-2018 (2017: 432%, 200%), significantly above the industry average and the 120% regulatory minimum. Fitch expects the company will maintain its capitalisation above 350% for life and 200% for non-life operations in the medium term.

The insurer has consistently maintained its non-life combined ratio below 100% for the previous four years (last three-year average: 96%) buoyed by its scale advantages as a large entity, which helps SLIC keep its expense ratios well below that of the industry, as well as prudent underwriting practices. However, Fitch expects the weakening of the rupee against the majority of hard currencies to increase claim costs in 2019, mainly due to the higher costs involved in importing replacement automotive components.

SLIC's exposure to Sri Lankan sovereign investments was 140% of its capital at end-2018, which continues to restrict Fitch's assessment on SLIC's investment and asset risk to 'b-' under our credit-factor scoring guidelines. SLIC has relatively high exposure to non-core subsidiaries, which underscores its high investment and asset risks, although that is balanced by the insurer's favourable business profile, healthy financial performance and consistent above-industry capitalisation.

RATING SENSITIVITIES

An upgrade for SLIC's National IFS is not possible as its 'AAA(lka)' National IFS Rating is already the highest score on the National Rating scale.

Downgrade sensitivities include:
- Significant weakening in SLIC's business profile
- Deterioration in the RBC ratio to below 350% for the life and 200% for the non-life businesses for a sustained period or a significant increase in non-core investments
- Significant increase in SLIC's sovereign investment concentration risk
- Deterioration in the non-life combined ratio to well above 100% for a sustained period
- A downgrade of the local-currency sovereign rating of Sri Lanka by more than one notch

Upgrade sensitivities include:
- Maintenance of SLIC's favourable business profile while significantly reducing its investment and asset risks on a sustained basis.

The Monetary Board of the Central Bank of Sri Lanka (CBSL) has decided to extent by another three months from May 15, recent actions taken in connection with the troubled The Finance Company PLC (TFC). 

"The Monetary Board of the Central Bank of Sri Lanka (CBSL) initiated a number of regulatory actions, as temporary measures, under the provisions of FBA, on The Finance Company PLC (TFC) with effect from 15th February 2019, with a view to safeguard the interests of the depositors and other stakeholders of the company," the CBSL said in a press release today.

Regulatory measures include suspension of accepting new deposits, withdrawal of deposits and disbursement of loans and advances to facilitate the restructuring process of TFC.

CBSL stated that the Monetary Board decided to extend the said regulatory actions in order to consider the business restructuring proposal submitted by the company and added that interest due on deposits will be paid continuously.

The Board of Investment (BoI) has recently signed a USD 4.5 million investment project with Sundara (Pvt) Ltd, to develop a luxury hotel on Sri Lanka's south coast. The project is expected to be completed by 2020.

Speaking at the event the BoI Chairman Mangala Yapa said that this investment will be a great step in order to build up confidence among investors to invest more in Sri Lanka.

Meanwhile speaking at the event, Sundara (Pvt) Ltd Co-Founder Dale Rennie said the main purpose of investing in Sri Lanka is due to Sri Lanka's long-term tourism prospective.

“We are interested in bringing a lot of these green initiatives to Sri Lanka” he further noted.

The property, named The Plantation Koggala, will have 14 residency villas.

Rennie and his wife and Co-Founder Sabrina Van Cleef Ault are the major investors of the project who owns 80% of the shares in Sundara (Pvt) Ltd.

The hotel will be built on a former cinnamon plantation and will start its construction work in a month.

Investors in the villas have the option of living in them or allowing the hotel management to rent them out and receive a 7% annual return.

The property was marketed to investors in the Singapore, Hong Kong, Australia, Germany, Switzerland, Holland and the US.

Minister of Tourism John Amaratunga has appointed Johanne Jayaratne as the Chairman of the Sri Lanka Tourism Development Authority (SLTDA), today (14).

Jayaratne had been serving as Managing Director of the Sri Lanka Tourism Promotion Board (SLTPB) Prior to his appointment at the SLTDA, Jayaratna was serving as the Managing Director of the Sri Lanka Tourism Promotion Bureau (SLTPB).

Jayaratna previously served as an Executive Director of the Airport and Aviation Authority of Sri Lanka. 

Jayaratna also served on the Tourism Advisory Board and was the Chairman of the AASL organising committees for the CHOGM, SAARC and IIFA conferences. During his tenure at AASL, Jayaratne actively collaborated with Sri Lanka Tourism in achieving the country’s tourism development strategies, and actively took part in promotional activities of the tourism industry.

He was immersed in tourism for several years during a brief spell at Walker Tours prior to emigrating to the USA to attend university and to obtain his pilot licenses.

He is a founding partner of a biometric company in Southern CA and led the organisation successfully as its CEO for many years. He also held a Board Director position at DCS America that provided identification solutions to public sector organisations worldwide and is the holder of international patents in biometric technologies that are used extensively at international airports worldwide.