Economic

While Sri Lanka’s footprint in global boats and shipping sector is small, exports in the sector continue to surge in strong numbers, and as a result Sri Lanka is ambitiously targeting US$ 200 million boats and shipping exports by 2022, Minister of Industry and Commerce Rishad Bathiudeen says.

“Global ship and boat building industry has slowed down with less and less demand Due to global economic pressures. Despite this it is interesting to note that Sri Lankan boat builders and exporters have shown resilience and even increased export revenues,” Minister Bathiudeen said addressing the launch of Boat Show Sri Lanka 2018 at Cinnamon Grand Hotel.

The pioneering web portal for Lankan boating industry at www.srilankaboating.com was also jointly unveiled on this occasion by Ministers Malik Samarawickrama, John Amaratunga and Rishad Bathiudeen with Chairperson of Exports Development Board (EDB) Indira Malwatte, and Chairman of Boat Building Technology Improvement Institute Neil  Fernando.

“This Show will be the first ever marine festival in Sri Lanka organized to showcase the country’s capabilities in marine tourism recreational boating and yachting boat building and related services for export and local markets,” said Minister Bathiudeen. He added that the event is expected to provide ample opportunities to network, shop, connect and get in to know among the best of the Marine Industry of the region.

The National Export Strategy (NES) of the Export Development Board with technical assistance of the International Trade Center Geneva has included the boat and ship building sector as one of the priority sectors to be actively promoted in the export strategy. As a result the Budget 2018 allocated Rs. 100 million for the initial activities of promoting investment in the infrastructure development required for the boating industry.

“Global ship and boat building industry has slowed down with less and less demand Due to global economic pressures. Despite this it is interesting to note that Sri Lankan boat builders and exporters have shown resilience and even increased export revenues. Therefore I am pleased that this event is announced in a background of new reports we receive about increasing export revenues from our Boats & Ships sector,” the Minister said.

He added that last year Sri Lanka’s Boats & Ship Exports increased by 50% to $97 million in comparison to 2016’s $65 million. Many Lankan companies are involved in making boats and ships while 11 identified companies are in exports.

The Minister thanked all the workers and companies involved in the sector for their commitment to develop Sri Lanka’s manufacturing and exports”.
Chairman of Cey-NOr Foundation B.K. Jagath Perera revealed that the government is aiming $100 million boat and ship exports in 2018. He surprised everyone when he said “The 2017 total exports of $97 million does not include our re-exports of ships and boats, which is $ 157 million by such firms as China Harbour Corp.”

Sri Lanka, under its new National Export Strategy targets $200 million exports in this sector by 2022. Global boats and ship building industry, despite its slowdown, is valued $169-$170 Billion annually.

(Eurasia Review)

The country's foremost economic event - "Sri Lanka Economic Summit 2018", organized by the Ceylon Chamber of Commerce, Sri Lanka's premier business chamber, is to take place on 12th - 14th September at Cinnamon Grand Colombo. The theme for this year's Economic Summit is "On the Fast Track to a Turnaround".

Sri Lanka's economy is once again at a crucial juncture in need of a swift and well-strategized turnaround to bring about economic stability and development. This is in the backdrop of weak local economic growth, rising global commodity prices and uncertainty in global trade.

The summit, spanning over the course of 3 days, will be a wholesome opportunity to learn about government plans to develop the Sri Lankan economy (as well as the progress in implementation of plans), to improve business through knowledge enhancement pertaining to relevant sectors, to identify potential sectors and projects for investment in Sri Lanka, to clarify concerns with key government officials/industry leaders, and also to meet and network.

Last year's Economic Summit saw the participation of many Chairpersons, CEOs, Directors, Senior Managers, foreign investors, senior government officials, and academics. Furthermore, over 40 resource persons, consisting of high profile cabinet ministers, policymakers, business leaders and academics shared insights and made recommendations on how Sri Lanka can transform its economy to realize its potential. The outcomes of the discussions held at last year's summit have led to policy strategies such as the Innovation and Entrepreneurship strategy and Digital Economy Strategy. Furthermore, at last year's summit, the discussions around trade policy and in particular the Singapore FTA has moved forward with the signing of the SLSFTA earlier this year with a policy focus on accessing the ASEAN region.

At this year's summit, the emphasis will be on shaping a turnaround for the Sri Lankan economy whilst delving deep into areas such as trade, investment and services that will help drive this. The focus will also be on learning from successful companies and steering the bureaucracy to work more effectively, thus meeting the emerging challenges.

The Ceylon Chamber is pleased to partner with Standard Chartered Bank who is on board as the platinum sponsor for the event, CHEC Port City (Pvt) Ltd. as gold, Sunshine Holdings as silver, Tata Holdings as the strategic sponsor, and Dialog Axiata PLC as the official telecommunication partner. Echowave, Cinnamon Grand Colombo, and Omnicom Media Group are also on board as partners of the summit.

Registration for the event is open until 5th September 2018 on a first-come, first-served basis, therefore register early to avoid disappointment. For further details, contact This email address is being protected from spambots. You need JavaScript enabled to view it. / This email address is being protected from spambots. You need JavaScript enabled to view it. / This email address is being protected from spambots. You need JavaScript enabled to view it. or call 5588882. (Media Release)

(Reuters) - Sri Lanka’s cabinet has approved a proposal for Singapore-based urban planning consultancy Surbana Jurong Pvt Ltd, owned by state investor Temasek Holdings Ltd, to draw up a plan for a Chinese investment zone in the country’s southern port city of Hambantota, a government spokesman said on Wednesday.

The move comes after a delay of more than 18 months in starting the Chinese investment zone around Hambantota port, which is on a long-term lease to Chinese state company.

China has invested billions of dollars building ports, roads and power stations in the island nation just off the southern toe of India as part of its Belt and Road Initiative to increase its trade and other connections across Asia and beyond.

But concerns have grown that such investments could drive the country of 21 million people deeper into debt and undermine its sovereignty, prompting greater scrutiny of deals with China.

Residents clashed with police who used tear gas and water cannon to disperse hundreds of stone-throwing demonstrators protesting against the planned investment zone around Hambantota, when it was launched in January 2017.

The government later said it would look for land in adjoining districts for the 15,000 acre (60.7 square km) zone originally planned, but the deal was delayed by local protests.

Cabinet spokesman Gayantha Karunatileka said “Sri Lanka-China supplies and industries zone” will be established in three stages in Hambantota and the adjoining district of Monaragala.

“It has been proposed simultaneous urban development in Hambantota,” Karunatileka told reporters in Colombo.

An official document showed the government had reduced the size of the zone, managed by the China Harbour Engineering Corporation (CHEC), to 12,500 acres (50.6 square km).

It also showed CHEC had already appointed Surbana Jurong to draw up the plans for the first two phases of the zone which will include social infrastructure such as housing and schools.

Surbana Jurong has already completed two master plans for Sri Lankan government.

Chinese debt-financed infrastructure interest in Sri Lanka has made some countries, including India and the United States, concerned due to Sri Lanka’s proximity to shipping lanes through which much of the world’s trade passes en route to China and Japan. The countries also have raised concerns over the possible presence of Chinese military in Sri Lanka.

The Chinese embassy in Colombo has rejected the claims of a military presence on the island.

Sri Lanka’s foreign debt rose nearly 17 percent to 4.72 trillion rupees ($30 billion) last year, a fifth of that coming from loans from China to finance the construction programme.

Interest in oil and gas exploration in Sri Lanka is showing signs of rebounding, according to oil and gas analysts at BMI Research.

“After years of muted exploration activity amid a global oil price downturn, appetite for oil and gas exploration in Sri Lanka is gradually returning, alongside stronger prices and improving market fundamentals,” the analysts said.

“In May 2018, Sri Lanka's Petroleum Resources Development Secretariat announced the signing of several 2D and 3D seismic acquisition deals with Total and Schlumberger to assess the commercial potential of its offshore blocks along the east coast and in the Mannar basin,” the analysts added. 

“Any commercial discoveries would take Sri Lanka a step closer to commencing its first oil and gas production,” they continued.

BMI said Sri Lanka’s desire to produce its own oil and gas “largely” stems from the need to improve energy security and manage a “hefty” fuel import bill.

“The country spent $3.5 billion on crude oil and refined fuels imports in 2017, an increase of 40 percent year-on-year, and equivalent to 4 percent of the GDP,” the analysts said.

Government efforts to attract more upstream investment have been “stymied” to date by a combination of low oil prices, regulatory issues, limited availability of seismic data and competition from other upstream markets in the region, according to BMI.

Sri Lanka's tourist arrivals rose 6.2 percent in May this year compared to the same period last year, surpassing one million arrivals in the first five months of 2018, the data released by the Sri Lanka Tourism Development Authority (SLTDA) showed.
 
The month recorded 129,466 tourists arriving in the country compared to the 121,891arrived in May 2017.
 
As at 31st May, 1,017,819 tourists had visited Sri Lanka for this year. It is a 14.7 percent growth over last year when 887,093 tourists had visited the country during the same period.

Excerpts from : Colombo Page

Reuters - Sri Lanka on Wednesday signed an agreement with a subsidiary of U.S. firm Schlumberger for a $50 million seismic study off the country’s east coast to evaluate any prospective oil resources, a senior government official said.

Sri Lanka signed the agreement with Eastern Echo DMCC, a subsidiary of Schlumberger, to carry out seismic data acquisition surveys, advance data processing and interpretation work or modeling of petroleum systems.

“The main objective of entering into this agreement is to acquire more petroleum data using modern acquisition and processing techniques,” Arjuna Ranatunga, Minister of Petroleum Resources Development told reporters after signing the agreement in the Sri Lankan capital Colombo.

Ranatunga also said that the company would invest at least $50 million for several data acquisition projects, including 2D and 3D seismic, in selected offshore areas around Sri Lanka and would recover the investment from sales proceeds to multiple investors.

This agreement follows comments on May 4 from the Director general at Petroleum Resources Development Secretariat (PRDS) Vajira Dassanayake, who said Sri Lanka would sign agreements with French oil company Total and Eastern Echo DMCC for a seismic study off its east coast.Sri Lanka first signed a deal with Total in 2016 to conduct a study off the eastern coast but this did not take place.

Total had earlier signed a two-year agreement with PRDS to survey around 50,000 sq km off the east coast from the air, at a cost of $25 million to acquire data on unexplored areas.

Dassanayake earlier in May said Total would invest $3 million to $10 million for the seismic study, while Eastern Echo DMCC would carry out the marine survey.

Officials from Total and Schlumberger did not immediately respond to requests for comment.

Sri Lanka produces no oil and is dependent on imports for all of its fuel requirements, despite trying to reinvigorate oil and gas exploration after its 25-year civil war with Tamil separatists ended nine years ago.

Importing oil cost the island $3.2 billion in 2017.

Ranel Tissa Wijesinha was appointed as the Chairman of the Securities and Exchange Commission of Sri Lanka (SEC) with effect from today (24), by the Minister of Finance, the Ministry of Finance said. 

Wijesinha serves as an Independent International Consultant to the Asian Development Bank and has over 31 years of national and international professional work experience in accounting, auditing and consulting. He also served as Director, Business Development of the John Keells Holdings Group and as Manager of Deloitte, Bahamas. He was a Partner and Head of Consulting and Financial Advisory Services of PricewaterhouseCoopers, Sri Lanka  as well as serving as an Independent International Management Consultant to multilateral and bi-lateral development banks and institutions providing advisory services to overseas Governments. 

The following persons were appointed to the Board of Directors of the SEC.

Chandrakumar Ramachandra


Jayantha Fernando
Arjuna Herath
Rajeev Amarasuriya and
Manjula Hiranya de Silva4

India’s soaring fuel prices despite relatively stable crude rates is a direct result of more than 50 percent tax levied on petrol and diesel. After the Centre introduced daily revision of fuel rates from June 16 last year to absorb sudden shocks, retail rates have gone up by Rs 11.09 per litre as on May 21 in New Delhi in less than a year.

As on May 21, while the refineries produced petrol at Rs 37.19 a litre, state and central government together made Rs 35.76 for every litre of petrol sold. 

According to the price buildup mechanism used by Indian Oil Corp. Ltd, the price of petrol charged to dealers as on May 21 was Rs 37.19 a litre. The rate finally swells to double its value when 25.44 percent excise duty, 4.72 percent dealer commission and 21.26 percent VAT gets added. The final retail price of Rs 76.57 a litre is a sum of 51.44 percent tax addition.

Petrol price in New Delhi is used for all calculations. However, rates in Mumbai and most other state capitals are predominantly higher as these taxes do not fall under Goods and Services Tax (GST) and are subject to revision by state governments. Retail price of petrol in Mumbai on May 21 reached an all-time high of Rs 84.40 per litre.

The same tax rate when compared to other developed economies and South-Asian countries emerges as one of the highest. The US levies a tax of 17 percent in its fuel while India’s immediate neighbour Pakistan taxes petrol at 23.5 percent. 

India’s high tax rate also comes in sharp contrast to Bangladesh, Sri Lanka and European countries. Sharing Eastern borders with India, Bangladesh levies 25 percent corporate tax along with 15 percent on fuel while the average tax rate on petrol in the European nations approximates to 21 percent.

Retail prices of petrol, when compared to its neighbours, topped the charts. Save China, which has an average petrol rate of Rs 80.83, India has the highest petrol price in all of South East Asia. Pakistan charges Rs 51.64 a litre for petrol with Bangladesh selling a litre of petrol at Rs 71.54 and and Sri Lanka at Rs 63.91.

The International Finance Corporation (IFC), a member of the World Bank Group, is looking to provide a loan of up to $50 million (LKR 7.9 billion) to Sri Lanka’s National Development Bank (NDB) to support financial access to agriculture-related micro, small and medium enterprises, according to IFC filing. 

The loan will be in Sri Lanka rupees to facilitate local currency financing. 

“The proposed project will involve advisory support to PFIs (participating financial institutions) to develop capacity to lend to agri-finance projects, a segment currently under-served by the banks and largely neglected. It will also demonstrate to other Sri Lankan financial institutions that commercial lending to agriculture related MSMEs is both a profitable and sustainable business proposition,” as per the disclosure. 

NDB expects to provide access to finance to agriculture-related MSMEs in Sri Lanka over the next five years. Other contributions will include climate resilience via climate smart agriculture, sustainable agri-finance to help address food security, job creation, and overall economic growth. 

IFC had earlier extended USD 75 million in the form of long-tenor financing to NDB. In the previous year, IFC extended a USD 24 million loan to NDB to support the bank’s growth plans and long term funding for small businesses. 

In Sri Lanka, nearly 91 per cent corporate entities operate in the SME segment, which is seen as one of key growth drivers for the country’s economy. The remittance space occupies a major part of the commercial banking business, contributing about 8.5 per cent of the country’s GDP. 

The country has been receiving support from the World Bank to support SMEs. Back in 2011, National Development Bank was among the eight financial institutions to participate in the World Bank’s USD 57.4 million project in supporting the government’s efforts to improve SMEs affected by the global financial crisis. 

Banks like Commercial Bank of Ceylon have also received support of USD 65 million from IFC to help improve the operation in the SME sector through the securitization of remittances. “There is a clear role for IFC in providing a large amount of longer-tenor, fixed interest rate local currency funding, not readily available from the market,” as stated by IFC on the latest loan support to NDB. On of the difficulties SMEs face in accessing credit in Sri Lanka is the shortcomings within the SMEs as well as shortcomings in the financial system. The country face a lack of understanding of genuine SME oriented banking practices, as mentioned in an ADB report. However, the Credit Information Bureau of Sri Lanka has already introduced a state-of-the-art ‘Secured Transaction Registry’ to help banks evaluate the repayment capacity of entrepreneurs.

Global crude oil prices are rising, and so do the petrol and diesel prices in India. After a relief of 19 days, fuel prices have again started moving up in line with international crude oil prices, as oil marketing companies have decided to pass on the burden to consumers after a freeze of 19 days, which started from April 24. According to the website of Indian Oil Corporation, petrol price in Delhi is at INR 75.10 (LKR 175) per litre on Wednesday and INR 82.94 (LKR 193) per litre in Mumbai. Diesel prices in Delhi have accordingly moved upwards at INR 66.57 (LKR 155) per litre and INR 70.88 per litre in Mumbai.

Similarly, petrol prices are at INR 77.79 (LKR 181) per litre in Kolkata and INR 77.93 (LKR 182) per litre in Chennai. Diesel prices are at 69.11 (LKR 169) in Kolkata and INR 70.25 (LKR 164) in Chennai.

Meanwhile, the increased demand and restricted supply have caused global oil prices to soar with Brent crude oil reaching USD 79 (INR 5364) per barrel which is the highest since November 2014. 

After the plans for the US to pull out of the Iran nuclear deal became known, oil prices surged over the uncertainty of what would happen to Iran's oil industry if the US reimposed sanctions, limiting Iran's production.

Refuting allegations levelled on the Free Trade Agreement (FTA) with Singapore for not following proper procedures among others, a highly placed International Trade Ministry official said the FTA was approved by the Cabinet and was cleared by the Attorney General’s Department.

According to legal sources, Cabinet approval was sufficient prior to signing the FTA. However, the advice required that Sri Lanka should have completed domestic legal requirements which included the passing of the Anti-dumping and Countervailing Act. Passing this Bill ensured that certain fortifications were laid before going into the FTA, and this has been a reason for the delay in signing the FTA, the official explained.

Meanwhile, the Ministry has also assured that through the latest FTA, individuals from India, Malaysia or any other country will not be able to gain employment in Sri Lanka. 

According to the Ministry, only citizens of Singapore will be able to be a service provider in Sri Lanka, barring those from other countries. Even a Singapore national will only be able to do so for five years the Ministry clarified. 

Some excerpts from : Sunday Observer

Sri Lanka’s central bank kept monetary policy on hold after a deceleration in inflation allowed room for a pause.Sri Lanka’s central bank kept monetary policy on hold after a deceleration in inflation allowed room for a pause.

Governor Indrajit Coomaraswamy held the standing lending facility rate at 8.50 percent and the standing deposit facility rate at 7.25 percent, the Central Bank of Sri Lanka said in a statement in Colombo on Friday. The move to hold the deposit rate was predicted by six out of seven economists surveyed by Bloomberg, while one forecast a 25 basis point increase. All seven expected the central bank to hold the lending rate.

Favorable domestic supply conditions helped headline inflation decelerate to low single digit levels, the central bank said in a statement.

Inflation is projected to remain within the 4-6 percent target range over the medium term and a moderate economic recovery is seen due to improved global and domestic conditions, it said.

Sri Lanka’s economy is expected to expand 4 percent and inflation is seen below 5 percent in 2018, even as the island nation remains vulnerable to adverse shocks due to sizable public debt, large refinancing needs, and low external buffers, the International Monetary Fund said last month.

Coomaraswamy, who described the central bank’s policy outlook as neutral on April 20, cut lending rate by 25 basis points in the previous policy, the first easing in three years, to boost an economy that expanded at the slowest pace since 2001.

(Bloomberg)