Business
Lankan ports need investment and China steps in
By Rathindra Kuruwita
Despite innumerable warnings from the U.S. and its allies that China is the root of Sri Lanka’s economic woes, and that Chinese infrastructure development projects create security dilemmas for India, Colombo went ahead recently to sign an agreement with a China Merchants Port Holdings (CMPH)-led consortium to build a $392 million South Asia Commercial and Logistics Hub (SACL) at the Colombo port.
This project is said to be South Asia’s largest port-related logistics complex. A press release to mark the agreement said that the project “aligns with Sri Lanka’s national development strategy to transform the country into a major logistics center, identified as a key sector and a driving force for economic development in the National Policy Framework (NPF) 2019.”
Sri Lanka Ports Authority (SLPA) and private sector firm Access Engineering each hold 15 percent stakes in the project as well. The logistics hub is an eight-story, 5 million square foot facility with a storage capacity of 530,000 cubic meters (CBM). The construction of the facility is likely to commence in the second half of this year and be completed by the end of 2025.
The SACL is situated next to the Port City, also funded by the Chinese and the CBD Business Centre. It will also be linked to the Bandaranaike International Airport by the Port Access Elevated Highway.
“The five million square foot complex will offer the full gamut of logistics-related facilities and services such as Less than Container Load (LCL), Multi-Country Consolidation (MCC), Container Freight Station (CFS), General warehousing and various other value-added services,” the press release said.
The establishment of the center will improve the Port’s logistic and warehousing facilities and services, thereby boosting its competitiveness and reinforcing its position as a hub.
Sri Lanka aspires to be a regional logistics hub and over the past few decades, successive governments and private sector partners have poured billions of dollars into its ports. However, despite Sri Lanka’s lofty ambitions, its ports lag behind many countries and significant investments are needed to make it competitive.
In April, the World Bank released its Logistics Performance Index (LPI) and Sri Lanka scored an overall LPI score of 2.8. India had a score of 3.4. Sri Lanka also had a Logistics competence and quality score of 2.7 and an Infrastructure score of 2.4. Sri Lankan scores were similar to Rwanda and Solomon Islands and even Namibia has a better overall score.
Sri Lanka’s Sunday Times noted that the country’s port facilities are “nowhere near the top 10 high-caliber performers in world trade logistics services, although a parade of national leaders is continuing to peddle the myth of a global or even regional logistics hub, cargo hub, shipping hub and the like.”
In the World Bank’s Container Terminal Performance Index-2021, Colombo was placed 24th, higher than Jawaharlal Nehru Port (54) and Chennai (79) in India.In the past few decades, a port’s commercial success stems from a productivity advantage in conventional cargo-handling services, the value-added services it offers, or a blend of both.
Thus, the most productive ports are the ones that can handle large volumes of cargo and/or significantly reduce unit costs through efficient management and customers view value-added logistics services as an integral part of the supply chain. Given this trend, it is also obvious that in the future only the ports that have advantages in productivity and value-added service will prosper, while the ports that cannot will fall by the wayside. Therefore, Sri Lanka needs significant investments in its ports to ensure that they remain competitive and emerge as logistics hubs.
However, commercial viability is not the only reality in which Sri Lanka operates. Sri Lankan geopolitical analyst Asanga Abeyagoonasekera, who is a senior fellow at The Millennium Project, told The Diplomat that while the Chinese investments make sense in a commercial sense, they often draw the ire of the U.S. and India because Sri Lanka does not communicate its intent.
Indian journalists obviously see the SLCL as an example of China tightening its grip on Sri Lanka. As noted in a previous post, such reporting feeds into the narrative that China can use its port infrastructure in Sri Lanka and other South Asian nations for military use and that this poses a grave national security threat to India.
Sri Lanka’s strategy for addressing Indian concerns has involved giving Indian companies large-scale projects to counterbalance Chinese-funded ones. However, the Indian projects in Sri Lanka, almost all involving the Adani Group, are not adequate to meet Sri Lanka’s infrastructure investment needs.
Enjoying this article? Click here to subscribe for full access. Just $5 a month.The World Bank and the IMF have been moving away from infrastructure development for decades. Therefore, despite what their ideological beliefs are, Sri Lankan leaders ultimately end up turning to China for investments.
China was closed for almost three years due to their zero-covid policy and since lifting restrictions, Chinese companies, state-affiliated and private, have been traveling across the world for new business opportunities.
In recent months several such delegations have arrived in Sri Lanka and Chinese investments will probably spike leading to mass hysteria in Indian media. It is up to Sri Lanka to ensure that India and the U.S. understand that these investments are indeed commercial in nature.
Business
Industry and Entrepreneurship Development Minister Handunneththi’s visit to Lumala highlights key industrial concerns
With the aim of assesing the current challenges faced by local industrialists and explore avenues for government support, Minister of Industry and Entrepreneurship Development Hon. Sunil Handunneththi visited City Cycle Industries Manufacturing (Pvt.) Ltd., widely known as Lumala, on March 24 at its factory in Panadura.
During the visit, Minister Handunneththi engaged with senior officials and employees to understand their concerns and operational difficulties. In a statement shared on social media, the Minister acknowledged the pressing challenges affecting Sri Lanka’s manufacturing sector and emphasized the government’s commitment to providing swift and effective solutions.
Minister Handunneththi further reiterated the government’s intent to position local manufacturers as key stakeholders in Sri Lanka’s economy by addressing regulatory hurdles, market imbalances, and supply chain constraints.
The visit comes amid growing concerns from Lumala employees and management regarding the state of Sri Lanka’s bicycle manufacturing industry, in the backdrop of facing significant challenges, including an influx of imported bicycles and components that circumvent regulatory checks. In addition, the high taxes on raw materials used in local manufacturing has further exacerbated production costs, making it difficult for domestic manufacturers to remain competitive.
Earlier this year, Lumala employees called for urgent government intervention to address these challenges, warning that ongoing financial strain could lead to further shutdowns of critical production units, job losses, and setbacks to the broader industrial ecosystem. With a local value addition of 50-70 percent verified by the Ministry, its workforce remains hopeful that government action will help achieve an ethical manufacturing industry.
Lumala, a household name in Sri Lanka’s bicycle industry, has been a key player in sustainable mobility solutions for over 35 years. The company was recently honored with the Best National Industry Brand award under the Large-Scale Other Industry Sector category at the National Industry Brand Excellence Awards 2024.
With a production capacity of 2,000 bicycles per day and a workforce of 200, Lumala continues to cater to both domestic and international markets, producing a diverse range of bicycles, electric bikes and light electric vehicles. In line with Sri Lanka’s goal to expand forest cover to 32 percent by 2030 and cut GHG emissions by 14.5%, Lumala is actively contributing to this mission—both as a company and through its diverse range of products.
As Sri Lanka works towards strengthening its local manufacturing sector, Minister Handunneththi’s visit signals a crucial step toward addressing industrial concerns and reinforcing government support for sustainable and competitive domestic production.
Sri Lanka’s country rating was upgraded from ‘Restricted Default’ to ‘CCC’ following the successful exchange for the new International Sovreign Bonds (SL ISBs) during December 2024. The three types (03) of exciting new sovereign bonds have restored foreign investor confidence.
The Central Bank of Sri Lanka (CBSL) has performed a remarkable role in guiding the economy out of default status and restored economic stability, and gained Sri Lanka a non-default Country Rating of ‘CCC’. Among the key achievements of CBSL, have been to reduce treasury interest rates under 9% and stabilize the currency while rebuilding foreign reserves to $ 6Bn.
SL offers four Macro Linked Bonds (MLBs) linked to GDP growth, a Governance Linked Bond (GLB) and a short term, Fixed Coupon Bond for unpaid Past Due Interest (PDI). The MLBs offer variable returns depending on SL’s GDP growth from 2024 to 2027, (e.g. haircuts can vary between 16% to 39%). The GLB interest can vary depending on meeting 15.3% and 15.4% of Total Revenue/ GDP thresholds in 2026 and 2027 respectively. The PDI bond offers a fixed coupon of 4% until 2028 and trades at around $94.
This combination of unique, variable returns offers global investors an exciting opportunity to capitalize on SL’s economic revival and US interest rate movements. Sri Lanka’s economic resurgence in 2024 was promising, with a 5% GDP growth rate. With improving investor confidence, SL ISB daily turnover now exceeds $10mn.
The Ceylon Dollar Bond Fund (CDBF) is the only USD Sovereign Bond Fund that is exclusively invested in SL ISBs with Deutsche Bank acting as the Trustee and Custodian Bank. The Fund reported returns of 53% in 2023 and 39% in 2024.
We invite foreign investors to enter CDBF while Sri Lanka is rated at ‘CCC’ and consider realizing their investment upon SL reaching a Country Rating of ‘B- ‘. Other advantages of CDBF are, the ability to withdraw anytime and being tax exempted.
Ceylon Asset Management (CAM), the Fund Manager, has commenced an advertising campaign to promote the CDBF to the Sri Lankan Diaspora, South Asian, Middle Eastern and Australian Investors. CAM is an Associate Company of Sri Lanka Insurance Corporation (SLIC) and licensed under the Securities and Exchange Commission of Sri Lanka Act, No. 19 of 2021.
Meanwhile, the Ceylon Financial Sector Fund managed by CAM emerged as the top performing rupee fund in Sri Lanka during 2024, with a return of 64%. Investors can find out more on www.ceylonassetmanagement.com or write to us on info@ceylonam.com.
Past performance is not an indicator of the future performance. Investors are advised to read and understand the contents of the KIID on www.ceylonam.com before investing. Among others investors shall consider the fees and charges involved.(CAM)
CSE plunged at open, falling for the second consecutive day yesterday, down over 300 points in mid- morning trade.US President Donald Trump has imposed a 44 percent tax on Sri Lanka’s exports in an executive order which he claimed, spelt out discounted reciprocal rates for about half the taxes and barriers imposed by the island on America.
As a result both indices showed a downward trend. The All Share Price Index dropped 300 points, or 2.32 percent, to 15,294.94, while the S&P SL20 dropped 101 points, or 2.71 percent, to 4,517.37.
Turnover stood at Rs 3.1 billion with six crossings. Those crossings were reported in Sampath Bank which crossed 1.6 million shares to the tune of Rs 181 million and its shares traded at 109, JKH 4.1 million shares crossed to the tune of 80.5 million and its shares sold at Rs 19.5.
Hemas Holdings 400,000 shares crossed for Rs 45.6 million; its shares traded at Rs 114, CTC 25000 shares crossed to the tune of Rs 32.2 million; its shares traded at Rs 1330, Commercial Bank 200,000 shares crossed for 27 million; its shares traded at Rs 135 and TJ Lanka 157,000 shares crossed for Rs 20 million; its shares traded at Rs 46.
In the retail market top six companies that have mainly contributed to the turnover were; Sampath Bank Rs 296 million (2.9 million shares traded), JKH Rs 220 million (11.2 million shares traded), Haylays Rs 195 million (142,000 shares traded), HNB Rs 151 million (519,000 shares traded), Commercial Bank Rs 138 million (1 million shares traded) and Central Finance Rs 129 million (735,000 shares traded). During the day 218 million shares volumes changed hands in 22000 transactions.
It is said the banking sector was the main contributor to the turnover, especially Sampath Bank, while manufacturing sector, especially JKH, was the second largest contributor.
Yesterday, the rupee opened at Rs 296.75/90 to the US dollar in the spot market, stronger from Rs 296.90/297.20 on the previous day, dealers said, while bond yields were up.
A bond maturing on 15.10.2028 was quoted at 10.35/40 percent, up from 10.25/30 percent.
A bond maturing on 15.09.2029 was quoted at 10.50/60 percent, up from 10.45/55 percent.
A bond maturing on 15.10.2030 was quoted at 10.60/70 percent, up from 10.30/65 percent.
By Hiran H Senewiratne
Industry and Entrepreneurship Development Minister Handunneththi’s visit to Lumala highlights key industrial concerns
Wakunugoda, Dewthusa guide Joes to safety
New SL Sovereign Bonds win foreign investor confidence
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