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Finance minister urged to give fresh impetus to doing business conditions in Sri Lanka

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‘Venora Group lost export orders worth US$ 300,000-400,000 due to foreign exchange issue’

‘Many companies do value addition below 10%, but government is allowing that to happen’

By Sanath Nanayakkare

Venora Group of Companies Chairman and MD – who is also the Chairman of Mechanical-Electrical-Plumbing (MEP) Industry Forum Sri Lanka told The Island Financial Review recently that he was confident the new finance minister Basil Rajapaksa could give visionary leadership to transform Sri Lanka’s ease of doing business ranking to be among the first 50-60 or so in the world.

Venora Group Chief – Engineer Sagara Gunawardana who is wearing two industrial caps said, “New Finance Minister Basil Rajapaksa has a huge task before him in the current challenging context. I am confident that he can rise to the challenges the country is faced with because when he was the minister of economic development from 2010-2015, he did a remarkable job at that time. He was able to attract foreign investors to come here by creating an environment conducive to trade and investment. He is very knowledgeable on what needs to be done to foster strategic relationships with all actors of the economy; namely manufacturers, suppliers, exporters, importers and state institutions related to trade.”

Talking about his group he said,” We are working on six or seven apartment projects in Colombo City limits. They consist of 20 to 30 floors up to 50 floors. In addition, we have undertaken installations at medium and large-scale hotel projects in the South. Although tourism has been hit hard by the pandemic, some investors are still keen on investing in Tourism related businesses. The single digit interest rates introduced by the government could be a main driver for this development. Investors used to borrow at 17%-18% a few years ago and the decision made by the government to get the banks to lend at current rates has encouraged investment, leading to a faster recovery of the economy. Another key reason that has strengthened the confidence of the business community is the government’s accelerated vaccination drive in all parts of the country. It is encouraging to see how the vaccination numbers have increased in the country and I urge everyone to get vaccinated because that is our best hope while other prevention measures must also continue.”

“Venora has been awarded the manufacturing and installation contract of power panels at the new dairy farm project in Ambewela, Pattipola owned by United Dairy Lanka (Pvt.)Ltd., Further, we have undertaken contracts of this nature for a few high-rises coming up in Union Place, Colombo including the iconic TRI-ZEN by John Keells Properties, 447 Luna Tower which is a Japanese investment and we are also working with the new Peoples’ Bank Head office and Akuregoda Ministry of Defence complex.”

“Mainly we are manufacturers of power panels and we export our products under a BOI entity named Venora Lanka Power Panels situated in Free Trade Zone at Biyagama. The COVID-19 pandemic situation opened the doors for us to export power panels to a few projects in Singapore,Bangladesh,Ethiopia and Kenya as the supply chains there were badly disrupted during the time, therefore, I urge Sri Lankan manufacturers to stay resilient and drive ahead their plants and the workforce to export finished goods because that’s where our future is.”

“According to the World Bank, Sri Lanka is ranked 99 among 190 economies in the ease of doing business. The rank of Sri Lanka improved to 99 in 2019 from 100 in 2018. This means foreign investors have almost 100 investment destinations on their radar, when we invite them to invest in Sri Lanka. This is a hard fact and we have to come up with solutions for it.”

“Authorities need to understand why foreign investors would want to come to Sri Lanka and create those conditions to attract them to the country.”

“Chinese investments in Sri Lanka are a lot. But what we need to be mindful about is whether they do enough value addition in Sri Lanka.. I know many companies that do value addition below 10% and the government is allowing that to happen. We should take a cue from late legendary businessman Upali Wijewardena, the founder and chairman of Upali Group which diversified from confectionery to electronics and automobile assembly with greater value addition on the Sri Lankan soil.”

“Today Micro Cars in Peliyagoda and Mahindra -Ideal Lanka facility in Welipenna assemble vehicles and they source some of their components locally. That’s the kind of investment we need to bring into Sri Lanka because the name of the game is ‘greater value addition’ within the country instead of just attracting FDI to the country.”

“We should invite Toyota, BMW and other reputed brands to assemble their cars here. Today a lot of our trained technicians especially those who pass out from the German Training School go to countries like Australia for employment. If we have the right companies here, we can retain this human resource in the country and allow them the opportunity to boost our production economy, taking a holistic approach to growth.”

“In recent past we could see that professional engineers and other skilled workers migrating to foreign countries because there is a high demand for them in those countries.”

“Everyone is aware that we have a US dollar shortage in the country. Due to this, we encounter difficulties in opening letters of credit (LCs) to import intermediary goods for our export orders. This has badly affected our export orders. Our local customers know about the restrictions and difficulties and they remain patient, but that’s not the case with our foreign customers. Sometimes banks take as long as a month to open an LC which leads to long lags in purchase order lead times. And this makes it impossible for us to deliver the orders on time, so we don’t accept such time-bound orders. In the past few months due to this issue. Venora Group lost export orders worth about US$ 300,000-400,000.”

“A key strategy to have our foreign reserves improved is to have foreign direct investments (FDIs) that earn foreign exchange for us. I know that between 2010 and 2015, the BOI invited a lot of investors from Japan and other countries. In fact, they came here, but now with the current situation of issues with LC opening and labour issues, some of them relocated their operations in Vietnam, Bangladesh and other countries. Investment authorities in Bangladesh and Ethiopia offer a one-stop-shop for investors. In Sri Lanka, the procedure is still cumbersome.”

“The Greater Colombo Economic Commission (GCEC) in the 1980s helped set up various industries in the country by offering favourable investment conditions for reputed investors with free-hold land, tax holidays etc. Today Sri Lanka offers little for such investors. And on the top of it, there is no consistent and cohesive investment policy in the country.”

“Policies on investment tend to change when governments change. From the standpoint of investors, this affects the predictability of their investments in important respects. What we need to put in place are ‘openings’ in the investment promotion process, not ‘barriers’.

“Foreign investors have almost 100 investment destinations on their radar when we invite them to come and invest in Sri Lanka. These are the cold hard facts that we need to address as we try to promote Sri Lanka as an investment destination.”

“Minister Basil Rajapaksa has the ability to streamline the affairs effectively to boost our exports and increase our foreign exchange earnings. I am confident that he will come up with a strategy for this and implement it. I am also confident that he can make reforms to upgrade Sri Lanka’s ease of doing business ranking to be among the first 50-60 or so in the world. Such an improved assessment of business conditions in Sri Lanka will be well-received by investors and private corporations across the world,” he said.



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Eravur Fabric Park could transform sustainable textile manufacture in Sri Lanka

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Since the first announcement in June 2020, expectations have been high on the potential of the Eravur Fabric Processing Park to catalyze a new era for Sri Lankan textile and apparel manufacture.

Supported through the Ministry of Industry and Commerce and the Board of Investment (BOI) of Sri Lanka, working in close collaboration with the Joint Apparel Association Forum (JAAF), the apex body of the apparel industry in Sri Lanka, the vision for Eravur is beginning to take shape.

Of the allocated approx 300 acres of land, fifty have been allocated for the Park’s maiden investment of US$ 35 million to establish a state-of-the-art fabric mill. Negotiations are also underway with two international companies to infuse mega investments for the remainder. The Park is estimated to attract a cumulative investment of US$ 300 million. The zone is also seeking further investments towards Dyeing, Washing, Knitting, Weaving, and other associated and ancillary activities.

Cabinet approval for the Zone’s classification under the Strategic Development Projects Act was also secured, enabling the extension of tax and other relief and incentives to investors.

Rapid progress towards vertical integration

“We would like to see the first company commence commercial operations in the next 6 months to 1 year,” stated BOI Chairman Sanjaya Mohottala. “We have been very aggressive on timelines because of the clear consensus on the nationally significant value that the Park can generate. At present, all land has been demarcated, and water and electricity supply are being finalized. In excess of half the commercial land has been allocated or reserved, and we are seeing great demand. There is clear recognition locally and internationally as to the immediate potential. If necessary, we are able to expand the zone even further.”

Leveraged in support of Sri Lanka’s highly developed apparel manufacturing sector, which has steadily benchmarked itself on global standards for ethical, sustainable production and high levels of technical and technological expertise, Eravur’s promoters also see the project as an opportunity for Sri Lankan-made apparel to take global leadership on sustainability in its most holistic sense.

Mohottala explained further that the most immediate benefit from the Park’s establishment will be in the cost advantages and enhanced economies of scale gained through capacity expansion and vertical integration of domestic supply chains.

Currently, Sri Lanka has approximately 300 apparel manufacturing facilities across the country. By contrast, it has only 7 textile and raw material factories capable of producing fabric for export, and for conversion into garments for export. At its peak, Sri Lanka imported over 250,000 MT of fabric both for export-oriented apparel manufacturing and for local consumption in 2019, at a cost of US $ 2.2 billion.

In the context of unprecedented disruptions across global supply chains in particular and persistent commodity and currency volatility, increased availability of high quality raw materials will enable an immediate and drastic reduction in raw material costs, while also conserving foreign currency.

Increased domestic production of textiles also translates to a higher percentage of domestic value. If that threshold increases from its current 52% to 65%, it qualifies for a larger proportion of Sri Lankan exports for zero-duty benefits under GSP Plus1.

The culmination of a pioneering national journey in sustainability

The economic argument in favour of investing in Eravur is bolstered by its potential to also be the most sustainable venture of its kind in the entire Asian region, with local stakeholders having already committed to establishing extensive renewable energy facilities, water recycling facilities, science-based targets, and circular business models.

At a macro-level, increased local production capacity will contribute significantly to all these targets by reducing the end-to-end length of Sri Lanka’s apparel supply chains. This in turn enables tighter backward integration and lower carbon emissions.

Taking a cue from the Sri Lankan textile and apparel’s industry’s outstanding achievements on environmental sustainability to date, the Zone is being designed from the ground-up to facilitate and incentivize sustainability in every facet of its operations. In terms of fabric processing, the main focus is on wastewater treatment.

Mohottala continues: “Sri Lanka’s environmental standards for industries are quite stringent, especially compared with regional competitors. A key feature of the Zone will be its central wastewater treatment facility with a sea outfall, which will require a high standard of treatment. Fortunately, we already have strong expertise available locally, with many of Sri Lanka’s textile producers having established facilities on par with global best practices on wastewater treatment. We have used this to our advantage by calling in the local industry’s technical experts and drawing on their pioneering experiences to optimize wastewater treatment protocols at Eravur.”

Adding that this will be one of many positive attributes all stakeholders downstream of the textiles produced at the Zone can lay claim to, Mohottala says, “With the greater localization of production, we also gain improved oversight and control over environmental standards within the Zone. This also enables greater transparency, traceability, and accountability across the supply chain, which in turn will confer preferable competitive advantages to Sri Lankan apparel exporters. In addition, this will empower brands and retailers to make clear and credible claims to genuine sustainable sourcing.”

An end-to-end opportunity

Another significant advantage for Eravur is that it is purpose-built with the most advanced environmentally friendly technology available. This will also promote efficiency in energy and water consumption, as well as additional infrastructure for recycling and recovery of water used in production, for which the BOI aims to provide investors with additional incentives.

Notably, Eravur also enjoys a high level of solar irradiance and consistent high-wind conditions, making any manufacturing facility established in the area, ideally suited for solar and potentially, wind turbine power generation.

“Augmentation of the Zone’s energy requirements with plentiful renewable energy will enable cost savings on the energy-intensive aspects of wastewater recycling. Given the consistent annual reduction in the cost of solar and wind energy, the conditions at Eravur are another unique attraction for investment into the Zone, and potentially enables the entire supply chain to utilize global incentivizes around responsible and sustainable production,” Mohottala said.

In addition to the wastewater treatment protocols, the Zone will also include a sludge treatment facility, with further trials already underway for responsible disposal. These include tests using micro-algae to breakdown sludge, as well as utilizing sludge to fuel furnaces and as bricks with a bio-mat mask.

The final and potentially most vital contribution which the Eravur Fabric Processing Zone is the empowering impact it will have on the lives of Sri Lankans in Batticaloa. At present, the district has an estimated population of 621,887, of which, an estimated 60,912 individuals are below the poverty line. As at 2019 – prior to the pandemic – unemployment in the region stood at 6.4%

“With the development of the Zone, we will be able to create thousands of stable, well-paying direct and in-direct jobs. This could prove to be one of the most transformative developments to take place in the Eastern Province in recent history,” Mohottala concluded.

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‘The insurance industry continues to drive the message of safety and optimism’

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The Insurance Association of Sri Lanka has been working overtime to ensure the smooth operation of the insurance industry with the objective of spreading awareness and inculcating knowledge on the importance of insurance. Similar to multiple other industries, in global and local contexts, the insurance industry has experienced its share of fluctuations with the onset of the pandemic and displayed its resilience to the resultant challenges.

Dinesh Yogaratnam, the Chairman of the Marketing and Sales Forum (MSF) of the Insurance Association of Sri Lanka (IASL), shared his perspectives on the marketing of insurance during these tumultuous times. He expounded on the ways in which the MSF of the IASL adapted to overcome the hurdles of the circumstances that arose during 2021, while promoting insurance penetration.

“The Insurance Association of Sri Lanka (IASL) is the industry body comprised of all the Life and General Insurance companies that operate in the market. The Marketing and Sales Forum (MSF) is a subcommittee thereof and as the name implies, addresses matters pertaining to the sales and marketing of insurance products and services. Further, the MSF also carries out various initiatives to increase insurance penetration in the country via education and knowledge-sharing. One of the major efforts of the MSF this year is to help the public better appreciate what insurance is. In addition, helping them understand how, when, and why they should purchase a policy, so that they may provide themselves, their loved ones, their assets, as well as their enterprises with the financial protection required, are key objectives.

“The MSF has resorted to using mainly digital and print media for its insurance promotion activities. Employing a two-pronged approach, whereby, the MSF under the IASL banner is carrying various pieces of communications on social media channels and is working with the country’s print houses and their digital arms to disseminate information and educate the public, the individual companies too have been encouraged to promote their products and services, as well as to carry knowledge building pieces of communication on their own platforms. Through this, we are witnessing a heightened level of activity and dialogue across social media channels.”

Giving further insight into the current insurance marketing landscape prevalent in the country, Dinesh Yogaratnam stated, “The insurance industry has grown in 2021 by approximately 14% in terms of Gross Written Premium as of the end of the 1st quarter; while long term insurance has seen significant growth, general insurance has contacted very marginally. As an industry, we are confident that the growth trajectory we have witnessed in the first half will continue to the end of the year.

“With the pandemic impeding movement, insurers had to very quickly realign themselves to front the customer both for new business acquisition as well as for premium collection, equipping themselves with various digital assets and recalibrating their sales teams to embrace a new hybrid model of interacting with and engaging the customer. From a servicing perspective; industry players have infused many digital interventions as part of their customer touchpoint strategy so that customers are able to seamlessly interact with them and obtain whatever services they require, regarding their policies. On the customer’s side, the pandemic has made people appreciate the need for a meaningful health insurance plan and they have also begun to appreciate the need for long-term insurance. The Sri Lankan insurance industry has always stood by society not only during times of normalcy but more so during times of widespread calamity and dire need. In this respect, the industry has come forward to pay COVID-related claims, irrespective of the fact that pandemics are excluded as part of insurance contracts.”

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SL’s Kithul-based treacle and jaggery for Gulf markets

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By Hiran H.Senewiratne

A local company is now in the process of venturing into the lucrative export Gulf market through its flagship product, Kithul based treacle and jaggery. Initially, the company will target the UAE market and afterwards other Arab countries.

“Both our products were introduced to the local market as niche products one year ago and are already exporting to Australia and several other countries, chairman, C-lon Kitchen & Healthy Foods, Rohan Wijeweera told The Island Financial Review.

‘The Gulf region is a lucrative market and there is a big demand for pure Kithul treacle among Arabs, which could be harnessed if we supply quality products, he said.

Wijeweera adds: “Now we have secured an order from a Gulf online sales company to market these products under the tag, ‘Made in Sri Lanka’ under the “Deegayush” brand and initially two containers will be exported to Dubai most probably next month. After that we will be targeting Canada and the UK markets.

“Kithul treacle and jaggery are made from the sap harvested directly by tappers living in border areas of the Sinharaja forest in the Rathnapura district. We have come to a forward buying agreement with around 250 tappers in this region, whom we also support by paying a premium price and also by some other CSR initiatives.

“The sap is then brought to our processing plant in Piliyandala where we process it. Kithul treacle is known to contain polyphenols, which are antioxidants, organic acids which are bioactive, amino acids that have many functions, beta carotenes that produce vitamin A and ascorbic acid or vitamin C that improves immunity.

“Thus, it is known to yield as many health benefits as Kithul jaggery. It prevents arthritis, improves complexion, alleviates constipation, aids weight loss and combats blood sugar. For nearly the same reasons as Kithul jaggery, Kithul treacle or syrup is witnessing massive demand locally as well as internationally.

“Today the demand for pure and natural Kithul products far outstrips the supply and due to lack of sap many local manufactures add sugar and other artificial sweeteners to the products thereby diluting the health benefits of it. However, we ensure not to add artificial ingredients and due to this our products are sold at a premium price from leading super markets under the brand name, “Deegayush”.

“Behind the scarcity of Kithul products there are several reasons, such as the shortage of tappable jaggery palms, fewer people being engaged in this industry due to the inherent risks and the profession not being accepted among the youth.

“Also less numbers are involved in jaggery palm planting since the tree takes around 7 years to mature before being fit for tapping.

“I am also looking at making Kithul treacle and jaggery from sugarcane, once again, targeting the export market as well.

“We are also manufacturing several immune boosters from locally sourced material. We next plan to introduce a curd to the market. More details could be obtained from, ceykitchen@gmail.com”

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