Business
Japanese Embassy to follow up on President’s discussions in Tokyo
- Acting Ambassador inspires hope on resuming ODA projects spearheaded by Japan
- Hopes transparency and consistency will be enhanced through reforms
- Urges Sri Lanka to work on rooting out corruption and reforming SOEs
- Says Expo 2025 in Osaka can enhance attractiveness of Sri Lanka to the world
By Sanath Nanayakkare
Kotaro Katsuki, the Acting Ambassador for Japan in Sri Lanka said in Colombo on May 26 that the Japanese Embassy would follow through the bilateral economic cooperation and business discussions President Ranil Wickremesinghe had during his visit to Japan last week.
“President Ranil Wickremesinghe addressed the 28th Nikkei Future of Asia Conference held in Tokyo. During this visit, President Wickremesinghe held bilateral discussions with Japan’s Prime Minister Fumio Kishida, Minister of Finance Suzuki Shunichi, Minister of Foreign Affairs Hayashi Yoshimasa and Minister for Digital Transformation Taro Kono. President Wickremesinghe also exchanged views with the business community at economic events, which we believe will lead to stronger bilateral relations and we will be following through the action items of these business and economic events,” he said.
The Ambassador made these remarks while delivering the keynote speech as Chief Guest at the ceremonial opening of the ‘Build SL’ Housing and Construction International Exhibition 2023, organised by the Chamber of Construction Industry of Sri Lanka.
President Ranil Wickremesinghe during his visit to Japan last week engaged in a pivotal business roundtable on ‘Sri Lanka’s Economic Revival and Opportunities for Japanese Enterprise,’ where he presented the nation’s commitment to stabilising and liberalising the economy while earnestly inviting new Japanese ventures.
The Acting Ambassador further speaking at the Build SL launch ceremony said,” It is my great pleasure to be invited to the Build SL Housing & Construction Expo 2023 of Chamber of Construction Industry Sri Lanka. I congratulate Sri Lanka on obtaining the approval of the IMF Executive Board on March 20th for its Extended Fund Facility. This came after a lot of work done by the Sri Lankan authorities and recognition from the international community on the reforms that have been carried out such as fiscal reform. We welcome this major step towards the revitalization of the Sri Lankan economy. The ‘Build SL’ exhibition comes at a very timely moment, which brings together companies in the construction industry with great potential to stimulate economic growth of this country.”
“Last year, Japan and Sri Lanka celebrated the 70th anniversary of the establishment of diplomatic relations established in 1952, and the construction of the Inginimitiya Irrigation Dam began in 1978 as the first Official Development Assistance (ODA) project.”
“In the 80s, development projects were carried out at the Colombo Port. In the 90s, Baseline Road improvement and Japan-Sri Lanka Friendship Bridge expansion projects were implemented. In the 2000s, the Colombo International Airport improvement project and the construction of the Southern Expressway, the first expressway in Sri Lanka, and Colombo Outer Circular Highway as well as local road improvement and development projects added to the list. In the 2010s, consultations for Phase 2 of the Bandaranaike International Airport Improvement Project began, as well as major bridges construction project of the national road network and the landslide disaster protection project of the national road.”
“It’s a great honour to see some of the Japan’s iconic ODA projects adorning Sri Lanka’s currency notes in circulation blending with other distinct national symbols.”
“After my arrival in Sri Lanka in August 2021, the Golden Gate Kalyani Bridge, was completed in November of that year, This Bridge has become a landmark in the metropolis of Colombo and has contributed significantly to easing traffic congestion on surrounding roads, and is the first ever extradosed engineering design in Sri Lanka. We are delighted to have been able to transfer Japanese state of the art technology to Sri Lanka through this project.”
“The Japanese Embassy building in Gregory’s Road is currently undergoing refurbishing. In all of these projects, Sri Lankan construction companies have been good partners of Japanese companies in its implementation and the construction industry has made a significant contribution to the country’s development. However, we are aware that the entire industry has been severely affected by the current economic crisis, which has led to the suspension of public works projects.”
“Allow me to touch upon some contributions by Japan in response to the economic crisis in Sri Lanka. In order to support Sri Lanka, the Government of Japan has provided up to approximately 93 million USD worth of inundated grant assistance to Sri Lanka since 2022.”
“Sri Lanka has been going through difficult times due to a series of adversities such as the Easter Sunday terror attacks in 2019, the outbreak of COVID-19 and the ongoing economic and social crisis. However, now is a great opportunity to recover from this situation. To that end, based on the IMF agreement, we would be delighted to see Sri Lanka assiduously work on a series of reforms such as rooting out corruption and reforming state-owned enterprises.”
“Moreover, in order to make the economy more export-oriented and competitive as mentioned in the 2023 budget, it should entail further strengthening of the manufacturing industry across the board and promotion of the export industry by connecting it to the global supply chain. In considering future assistance to Sri Lanka, Japan would like to support Sri Lanka’s effort to make its economy more resilient.”
“In addition, it is essential to attract foreign investment in order to achieve sustainable and stable economic growth by way of improving the investment environment. We hope that transparency, efficiency and consistency will be enhanced through the reforms, which are taking place.”
“Now, I would like to catch up on future-oriented initiatives spearheaded by Japan that will lead to further development of both Japanese and Sri Lankan companies and collaboration between our respective companies.”
“The first initiative is related to climate change and decarbonisation. In October 2022, our two countries signed an agreement on a Joint Crediting Mechanism (JCM). With the collaboration between Japanese and Sri Lankan companies and the support from the Japanese government, this Joint Crediting Mechanism will allow for reducing greenhouse gas emissions by harnessing decarbonisation and renewable energy technologies to Sri Lanka. With this program, it is hoped that Japanese companies will find it more attractive to invest in the field of renewable energies or decarbonization projects in Sri Lanka with their innovative technologies and solutions.”
“Japan is going to hold Expo 2025 in Osaka in April 2025. This event will present another great opportunity to attract attention and investment from Japan to Sri Lanka, in the field of trade, investment and tourism. The Sri Lankan government has already expressed its intention to participate in this event. I hope that both the private and public sectors of Sri Lanka will jointly make the most out of this Expo 2025 to promote the attractiveness of Sri Lanka to the world. I hope that these initiatives will bring about new business opportunities for both Sri Lankan and Japanese businesses.”
“In the future, the development of the construction industry in Sri Lanka will become increasingly important for the country to overcome the current economic crisis and achieve sustainable development. Japan will continue to be involved in the resumption of ODA projects, including the Bandaranaike International Airport expansion project, which is currently suspended due to the situation in this country and in order to move forward, it’s important for the Sri Lankan Government to work on restructuring its debt and to improve the economic and financial situation in a transparent manner working closely with the IMF, Paris Club and other entities.”
The Acting Japanese Ambassador concluded his remarks by expressing Japan’s determination to continue to stand by Sri Lanka as its partner, and to support Sri Lanka to reach its full potential towards building a strong and vibrant economy.
by Sanath Nanayakkare
International Monetary Fund (IMF) staff concluding their visit to Sri Lanka yesterday reaffirmed their support to Sri Lanka to move out of the ongoing economic crisis, but did not specify an exact timeline for releasing the second tranche of its Extended Fund Faculty (EFF) arrangement to Sri Lanka.
The IMF mission team led by Peter Breuer and Katsiaryna Svirydzenka that visited Colombo from September 14 to 27, is yet to be convinced that it has received a robust programme from the Sri Lankan authorities where they indicate how they would be addressing the persistent revenue shortfall besides outlining progress in foreign debt restructuring which would give Sri Lanka a breather to balance its financing requirements as it starts to repay its foreign debt.
“We had constructive and productive discussions with the Sri Lankan authorities on economic performance and policies underpinning the first review under the IMF Extended Fund Facility (EFF) arrangement. The people of Sri Lanka have shown remarkable resilience and the authorities have made significant progress on important reforms. The discussions will continue towards reaching a staff-level agreement in the near term that will maintain the reform momentum needed to allow Sri Lanka to emerge from its deep economic crisis, Peter Breuer said.
“The objectives of the IMF-supported program will continue to focus on restoring macroeconomic stability and debt sustainability, while protecting the poor and vulnerable, safeguarding financial stability and stepping up structural reforms to address corruption vulnerabilities and unlock Sri Lanka’s growth potential, he said.
However, the press briefing given by the IMF team yesterday signaled that they needed to see more economic and financial policies to support the approval of the First Review of the program under the EFF arrangement.
“Sri Lanka has made commendable progress in implementing difficult but much-needed reforms. These efforts are bearing fruit as the economy is showing tentative signs of stabilization. Inflation is down from a peak of 70 percent in September 2022 to below 2 percent in September 2023, gross international reserves increased by $1.5 billion during March-June this year, and shortages of essentials have eased. Despite early signs of stabilization, full economic recovery is not yet assured. Growth momentum remains subdued, with real GDP contracting by 3.1 percent in the second quarter on a year-on-year basis and high-frequency economic indicators continuing to provide mixed signals. Reserve accumulation has slowed in recent months, he said.
Speaking further Peter Breuer said: “Sustaining the reform momentum is critical to put the economy on a path towards lasting recovery and stable and inclusive economic growth. The authorities have met the program’s primary balance targets and remain committed to this important pillar of the program so as to support their efforts to restore debt sustainability. However, revenue mobilization gains – while improved relative to last year – are expected to fall short of initial projections by nearly 15 percent by year end, in part due to economic factors.
“The onus of fiscal adjustment would fall on public expenditure if there were no efforts to recoup this shortfall. This could weaken the government’s ability to provide essential public services and undermine the path to debt sustainability. To increase revenues and signal better governance, it is important to strengthen tax administration, remove tax exemptions, and actively eliminate tax evasion.
“Against continued uncertainty, it also remains important to rebuild external buffers through strong reserves accumulation. Building on the Central Bank of Sri Lanka’s success in controlling inflation, refraining from monetary financing will help keep inflation in check. Other challenges include maintaining cost recovery in electricity pricing.
“The government has made steady progress on structural reforms. Key legislations passed in Parliament, including the new Central Bank Act and the Anti-Corruption Act, could improve governance if implemented effectively. The IMF Governance Diagnostic report would inform future reform measures to strengthen governance when published.
“A new welfare benefit payment scheme was enacted with new eligibility criteria that aims to improve targeting, adequacy, and coverage of social safety nets. To ensure financial stability, steps were taken on conducting bank diagnostics, developing a roadmap for addressing banking system capital and liquidity shortfalls and improving the bank resolution framework.
“The authorities have also made headway on regaining debt sustainability through the execution of the domestic debt restructuring and advancing discussions with external creditors. As Sri Lanka is restructuring its public debt which is in arrears.
“Executive Board approval of the first program review requires the completion of financing assurances reviews. These financing assurances reviews will focus on whether adequate progress has been made with debt restructuring to give confidence that it will be concluded in a timely manner and in line with the program’s debt targets.
“Discussions are on-going, and the authorities are continuing to make progress on their plans for revenue mobilization targets, anti-corruption efforts, and other important structural reforms.”
The IMF team held meetings with President and Finance Minister Ranil Wickremesinghe, Central Bank of Sri Lanka Governor Dr. P. Nandalal Weerasinghe, State Minister Shehan Semasinghe, Chief of Staff to the President Sagala Ratnayaka, Secretary to the Treasury K M Mahinda Siriwardana, and other senior government and CBSL officials, during the visit. The IMF team also met with parliamentarians, representatives from the private sector, civil society organizations, and development partners.
By Hiran H.Senewiratne
The imposing of a minimum room rate on five star hotels on the basis of a recent gazette notification is actually killing the industry. Room rates, accordingly, could henceforth rise to between 80 percent and 100 percent, top travel and tourism industry expert Chandana Amaradasa said.
“The minimum room rate of a five star hotel currently comes to about US $ 65 but with the new gazette notification it would go up to US $ 170 per day. But our competitors, such as, Thailand, Malaysia and Vietnam are maintaining a minimum room rate of US$ 80 to US$ 85, Amaradasa told The Island Financial Review.
Amaradasa said that the tourism industry is just picking- up and ‘this type of move is detrimental to the entire sector because these room rates are normally determined by demand and supply and not by gazette notifications.
Amaradasa added: ‘At present, Colombo five star hotels are mainly patronized by Indian tourists, corporate clients and MICE tourists. This will not only impact hotel revenue but the outside supply chain as well. Nowhere in the world is the tourism industry regulated in this manner and this would enable our competitors, such as, Vietnam and Thailand to attract tourists.
“As a long term consequence, some of the airlines could also pull out of Sri Lanka and hotels will halt recruiting new staff and training them with the limiting of their revenue sources.’
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