Two Muslim men take a selfie after Eid al-Fitr prayers to mark the end of the holy fasting month of Ramadan in Colombo, yesterday (Reuters)
Two Muslim men take a selfie after Eid al-Fitr prayers to mark the end of the holy fasting month of Ramadan in Colombo, yesterday (Reuters)
INCO, the largest engineering related industrial exhibition and trade fair that offers a platform for small and medium (SME) sector industrialists, manufactures, engineering companies, exporters, importers, and service providers to showcase their products and services and to network with potential customers and key industry stakeholders, opened at the BMICH yesterday. Primary Industries Minister Daya Gamage was the Chief Guest on the opening day.
Pic by: Kithsiri de Mel
By Chandeepa Wettasinghe
Sri Lanka’s Central Bank Governor Dr. Indrajit Coomaraswamy is advocating a more measured approach to financial technology (fintech) in the country, despite the significant industry opportunities highlighted by an official from the Singaporean Central Bank.
“What we have been thinking of in the Central Bank is how we respond to fintech. One worry is whether the disruptive aspects of fintech would cause damage to the market, the banking and non banking financial institutions,” he said.
He said that while the Central Bank cannot ignore the potential benefits of fintech, technological progress has to be moderated in order to prevent too much disruption in the financial services sector.
“You can have a modular approach to phase this in,” he said.
Dr. Coomaraswamy noted that resisting change will also not be to the benefit of the market, since the service providers might disappear like dinosaurs, once consumers start using fintech not provided by the traditional market players.
“We shall disappear if we can’t adapt in an environment, which contains spaceships, computers and thermonuclear weapons.
Today, 17 years later, this sentiment is more pertinent and bears greater resonance as we are going through the 4th industrial revolution, characterized with robotics, artificial intelligence and 3D printing,” he said.
Fintech such as virtual currencies, peer-to-peer transactions among consumers and businesses, and more innovations to come could gradually end even the relevance of central banking, according to financial sector analysts.
However, Dr. Coomaraswamy expressed confidence in the Sri Lankan central bankers to grasp fintech better by noting how the Central Bank had set up LankaPay’s parent LankaClear (Pvt) Ltd back
Fiscal policy interferences however have already threatened this position held by the Central Bank.
Former Finance Minister Ravi Karunanayake, during the 2017 budget, proposed to set up a separate national payment gateway under the ICT Agency outside the purview of the Central Bank to facilitate peer-to-peer transactions, which drew widespread criticism.
Ironically, Karunanayake in the same budget proposed to protect the traditional leisure sector from innovative tourism technologies.
Meanwhile, Monetary Authority of Singapore Chief Fintech Officer Sopnendu Mohanty, who briefly touched upon the drawbacks of fintech, however said that the narrative has changed over the past 2-3 years into the situation today where fintech could gain more by collaborating with traditional market players.
He said that Sri Lanka could become a world-class fintech centre based on the demographics of the country.
“I think Sri Lanka could be a world-class centre for fintech to succeed. I truly believe that and I’m surprised at the (level of) fintech in Sri Lanka today. When I go back to Singapore, I will insist my Central Bank Governor to partner with Sri Lanka to work on fintech,” Mohanty said.
He gave a number of policy suggestions for Sri Lanka to develop a fintech environment as complex as in Singapore, which Dr. Coomaraswamy said that Sri Lanka should learn from.
Mohanty heavily stressed that investments in cyber security would be required in order to rely on fintech.
Meanwhile, Governor Coomaraswamy quipped that foreigners have more confidence in Sri Lanka and its economic prospects than the local private sector.
“Foreigners seem to have faith in the future of Sri Lanka, which doesn’t seem to be shared by our local private sector,” he told an audience full of bankers at the recently held LankaPay Technovation Awards 2017 in Colombo.
The Governor was basing his opinion on the fact that the US$ 1.5 billion sovereign bond issued in May was oversubscribed by seven times, while the local firms were seen holdings back their investment, adopting a ‘wait and see’ approach.
The Colombo Stock Exchange has been experiencing positives interest from foreigners as well, with net foreign inflows of approximately US$ 125 million for the first 5 months of 2017, up from a net foreign outflow of US$ 37.3 million during the same period in 2016.
Dr. Coomaraswamy said that the situation is not the fault of the local private sector, since government policies have been inconsistent in the past.
“The government has been constraining itself. There was no predictable or consistent policy. That is what I was trying to explain to you. In terms of the framework we’re putting in place, so hopefully, going forward all of you in the private sector will think carefully about recalibrating your risk appetite,” Dr. Coomaraswamy added.
He said that the Central Bank will be trying its best to maintain stable price levels through inflation targeting, while the fiscal policies will aim to reduce the budget deficit and the ‘stop and go’ cycles that led to a heavy debt burden.
Despite Dr. Coomaraswamy’s comments on the confidence of foreigners, foreign direct investments (FDIs) to Sri Lanka over the past 5 months were termed as ‘nothing significant’ by Fitch Lanka Managing Director Maninda Wickramasinghe earlier this month.
The Central Bank in a puzzling move has stopped publishing FDI information in its monthly external sector statistics bulletin.
FDI inflows to Sri Lanka in 2016 amounted to less half a billion dollar, most of which arrived in the latter part of the year.
REUTERS: Sri Lanka’s Central Bank is expected to keep its key interest rates steady at more than three-year highs at a policy meeting tomorrow a Reuters poll showed, to boost faltering growth hit by adverse weather.
Thirteen out of 14 economists surveyed predicted the Central Bank would keep its standing deposit facility rate (SDFR) and standing lending facility rate (SLFR) unchanged at 7.25 percent and 8.75 percent, respectively.
The lone outlier expected a 25-basis-point hike in both rates. All 14 economists predicted the statutory reserve ratio (SRR) to stay at 7.50 percent. “With the slower-than-expected first-quarter growth, the Central Bank would keep the rates steady,” said First Capital Holdings PLC Head of Research Dimantha Mathew.
“With improvement in the reserves, inflation under control and slowing private sector credit growth, they (the Central Bank) might see the current conditions to be appropriate to hold the rates steady.”
The US $ 81 billion economy grew 3.8 percent in the quarter ended March 2017 from a year earlier, slowing from the 5.3 percent growth in the previous quarter and marking its weakest period since the second quarter last year.
The full-year growth is expected to be hit by extreme weather, after the island nation faced its worst drought in 40 years in the first quarter and heavy rains resulting in floods last month, the country’s worst in 14 years.
Sri Lanka’s 2017 growth rate is likely to be significantly lower than the official forecast, private economists have said. The Central Bank tightened monetary policy four times since December 2015 through March this year to fend off pressure on the fragile rupee and curb stubbornly high credit growth that had pushed up inflation.
Analysts said previous policy tightening cooled inflation and private sector credit growth in the last two months. Private sector credit grew 20.4 percent in March from a year earlier, up from February’s 21 percent.
It has eased from a near four-year high of 28.5 percent hit in July. Consumer prices rose 6.0 percent in May from a year earlier, slowing from the previous month’s 6.9 percent. Policy tightening also dragged on the economy, which grew at a slower 4.4 percent annual pace in 2016 compared with the 4.8 percent growth a year earlier.
The Sri Lankan rupee fell 3.9 percent in 2016 and has eased around 2.3 percent so far this year, pressured by dollar demand from importers and withdrawal of foreign investors from government securities in the first three months.
The Central Bank has quit defending the rupee after it missed an end-December reserve target set by the International Monetary Fund for a US $ 1.5 billion loan.
Sri Lanka has the lowest prevalence of teen smoking (1.7 percent) in the world, a recent study by the US Centers for Disease Colombo and Prevention (CDC), revealed. The highest prevalence (35 percent) was in Timor-Leste.
The Sri Lanka Land Reclamation and Development Corporation (SLLRDC), under the Ministry of Megapolis and Western Development, has called for tenders for the first leg of the proposed ferry transport system in Colombo.
The project will be implemented as a public-private partnership.
As detailed in the 2016 Megapolis transport master plan, several of Colombo’s inland waterways will be utilized for passenger ferries whereby commuters and recreational users may travel across various parts of Colombo, avoiding the traffic and enjoying the scenic views.
The first phase will be a service from Wellawatte to Battaramulla.
A ferry service from Colombo Fort to Union Place in the Beira Lake, as well as from Mattakkuliya to Hanwella, along the Kelani River, is also in the pipeline, as are potential other routes such as the Hamilton Canal towards Negombo.
The tender process—which is open to both international and local investors—is being supported by PPP advisors from the Netherlands government, under a government-to-government technical assistance initiative.
SLLRDC will be the lead agency for the project.
The service along the Wellawatte-Battaramulla canal is expected to be operational in early 2018, and the Beira Lake ferry to be operational within the year as well.
The highly sought after higher education and career exhibition by the Sri Lankan student community, ‘Future Minds 2017’ opened at the BMICH yesterday. The expo was declared opened by Minister of Skills Development & Vocational Training Chandima Weerakkody. Pic by Kithsiri de Mel
J.L. Morison Son & Jones (Ceylon) PLC Independent Non-Executive Director Aruni Rajakarier, Hemas Holdings PLC Chairman Husein Esufally and JL Morison Son & Jones (Ceylon) PLC Managing Director Trihan Perera laying the foundation stone for the new manufacturing facility
The foundation laying ceremony of pharmaceutical manufacturer JL Morison Son & Jones (Ceylon) PLC’s US $ 13.5 million research and manufacturing facility located within the Sri Lanka Institute of Nano Technology (SLINTEC) in Homagama took place, yesterday.
JL Morison is a subsidiary of Hemas group, which has interests in fast moving consumer goods, healthcare, transportation, and leisure. The plant will be the first European Union Good Manufacturing Practices (GMP) compliant facility in the country. The state-of-the-art facility is expected to be in operation by March 2019 and will further augment the manufacturing capacity of JL Morison.
“The new research and manufacturing facility marks an exciting new era for JL Morison and is also significantly, a key milestone for the industry,” JL Morison Managing Director Trihan Perera said,“The facility will create employment for over 200 skilled and semi-skilled persons.
It will enhance the use of new technology in the industry and facilitate a modern and technologically-advanced workplace for our employees.
Most importantly, the establishment will focus on increasing the availability of an even wider range of high quality, efficacious pharmaceuticals in the country, thereby enhancing our self-sufficiency. This will help save valuable foreign exchange over the years and help bolster our nation’s foreign exchange earnings through exports,“ he added. Perera also stated that the new facility will contribute significantly in achieving a near self-sufficiency towards pharmaceuticals, while creating a stronger footprint in exports. A globally significant pharmaceutical manufacturing industry in Sri Lanka will be able to better support a robust national health policy that will benefit all Sri Lankans.
J L Morison commenced operations in Sri Lanka in 1939 and was listed on the Colombo Stock Exchange in 1964. In May 2013, the Hemas group acquired a controlling stake of the company. Today, it is a fully Sri Lankan owned company with over seven decades of experience in pharmaceutical manufacturing and renowned over-the-counter brands such as Morison’s Gripe Mixture, Lacto Calamine, and Valmelix, amongst others. The manufacturing process maintains stringent quality standards and is in compliance with the recognised pharmacopeia specifications and good manufacturing practices, in line with World Health Organisation (WHO) guidelines. The global Pharmaceutical industry is one of the fastest growing industries, which over the last decade, has grown steadily at a compound annual growth rate of 5.8 percent. The stable growth trajectory is expected to continue and reach US $ 1.4 trillion by 2020. The rise of ‘pharmerging markets’ which is expected to reach US $ 350 billion by 2020 is one key trend seen abetting this growth.
By Chandeepa Wettasinghe
Sri Lanka’s luxury apartment segment, which has been drawing negative sentiments from the state and private sectors alike, is not built on shaky fundamentals and there are avenues to mitigate the potential risks, according to the Fortune 500 company, Jones Lang Lasalle (JLL), which specializes in real estate.
“The kind of supply that has been announced and is being constructed is simply higher than what the average rate of absorption is, which is why the gap. The concern over the current situation probably means that the absorption could take slightly longer than what it is right now. We see no major concern,” JLL Lanka (Private) Limited Transactions Head Sunil Subramanian said.
Speaking at a JLL report launch in Colombo, he pointed out that the average absorption rate of luxury apartments has been growing consistently year-on-year and that he would not term the current situation of 3,740 units in the pipeline as “oversupply”.
Subramanian said that while 714 luxury apartment units were sold in 2015 and 2016, JLL is not aware of how many remain unsold since it is difficult to get data out of the developers. According to JLL, Sri Lanka’s ranking in the JLL Global Real Estate Transparency Index is 69 out of 109 countries.
However, JLL remains positive over the overall real estate development scene of Sri Lanka.
“The title of our report is ‘Sri Lanka – Land of Real Estate Opportunities’. We stand by that. We accept that there are challenges and trips along the way, but the outlook is positive for the potential in the market here,” JLL Lanka (Private) Limited Managing Director Steven Mayes said.
Subramanian expressed some worry over the rising land and construction costs and the rate of development of common infrastructure such as sewerage and waste disposal. He also noted that the immediate vicinity of the main business district is saturated with luxury apartments.
“Colombo 1, 2, 3 are not big (enough) to take more development. There’s a need for developments to happen in other places. We’re seeing some activity but it has to happen more,” he added.
The Central Bank recently expressed caution over the formation of a possible property bubble. The statement drew strong criticism from an apartment developer, who said that if a bubble exists, it is in the luxury apartment segment.
Ratings agency Fitch Ratings too hinted about concerns in the luxury apartment segment.
Unfortunately, the debate over the existence of a possible bubble is dominated by parties closely linked to the real estate sector with differing agendas and the lack of transparency in the market precludes a clear assessment.
However, most agree that a possible bubble bursting in the luxury segment will spill over into other sectors of the economy. Mayes noted that Sri Lankan banks have a relatively low exposure to the apartment industry.
“Ninety percent of the (apartment) buyers are not leveraged,” he said.
Subramanian added that apartment developers too are not highly leveraged and at most borrow around 20 percent of the project value, since they usually purchase land with equity, then go on to construct once around 40 percent of the apartments are pre-sold, which give them adequate liquidity.
Although he said that the number of individuals in Sri Lanka who could afford luxury housing is low, he said he was not willing to comment on whether the funds being used as development equity or to purchase apartments were acquired legally or illegally.
Mayes said that 95 percent of the luxury apartment buyers are Sri Lankans and 60 percent are local residents.
He added that if a major gap in demand arises, apartments could be sold to foreigners—such as Indians and Chinese who are becoming heavily involved in the Sri Lankan economy—under the funding scheme proposed in the 2017 budget.
“That is the catalyst to open the market to foreigners,” he said.
Mayes opined that Sri Lanka is on the “precipice of a new golden era” in foreign direct investment (FDIs despite the recent poor performance of FDI to Sri Lanka, by stating that all the steps have been taken by the country.
He noted that mega projects such as the Megapolis project and China’s One Belt One Road initiative will serve to absorb luxury apartment supply; a view shared by the construction industry.
Unrestrained safari jeeps continue to play mayhem in the Yala National Park with authorities failing to take any action against the errant drivers. Currently, there is no limit to the number of jeeps allowed in the park and the jeep drivers have their own jungle law within the sanctuary. It is high time the authorities do a comprehensive study to measure the recreational carrying capacity of Yala National Park and take necessary regulatory actions to preserve this invaluable national resource for the future generation
Pic by Srilal Miththapala