BY S VENKAT NARAYAN
Our Special Correspondent
NEW DELHI, October 15: In 2020, Chinese auto and electronics major BYD, Apple’s largest contract manufacturer of iPads, was looking to shift some of its capacity from China to India. But the move was shelved after geopolitical tensions erupted between the two countries, and India introduced stiff foreign direct investment (FDI) rules for Chinese companies.Now, two years on, BYD has just started rolling out iPads from Vietnam. It has invested $268 million to set up a new factory with a capacity to churn out 4.33 million tablets a year.
Vietnam’s gain is India’s loss. The two Asian countries have been aggressively wooing global companies and their suppliers to shift from China. Growing US-China geopolitical tensions and supply chain disruptions due to sudden closures of factories to combat Covid-19 have impelled many tech players to explore other investment destinations.
India has grabbed one jewel in the crown — Apple Inc. Its vendor Foxconn recently started assembling the latest iPhone 14 within a few days of its global launch. And if everything goes according to script under the production-linked incentive (PLI) scheme, India will account for 12 per cent of the global production value of iPhones, which could go up to 20 per cent by FY26.
The PLI scheme, meant primarily to reduce the cost disadvantage between India and Vietnam for making mobiles, offers an incentive of 4-6 per cent on the production value for five years. But sources in the know clarify that Apple Inc is not shifting manufacture of its AirPods to India.All in all, though, Vietnam is way ahead in the game. Apart from grabbing iPads, The New York Times reported that Google is also shifting the assembly of its latest Pixel 7 mobile phones to Vietnam from China. Reports had said India was also in the reckoning.
Hanoi has also bagged Chinese mobile player Xiaomi, which is contract-manufacturing phones with Chinese DBG in Vietnam for exports to Thailand and Malaysia. Microsoft is manufacturing Xbox consoles there. In the non-electronics space, toy maker Lego, which was scouting for a factory to cater to growing Asian demand (it has a factory in China), opted for Vietnam recently where it has committed an investment of $1 billion.
Vietnam’s crowning glory has been Samsung. Since 2008, the Korean chaebol has invested a staggering $19 billion in the country shifting mobile capacity from China. It recently announced an additional $3.3 billion for semiconductors. As much as 50 per cent of its phones are made in Vietnam and 2021 annual exports were $65.5 billion (three times what Apple promised to manufacture in India in FY26).The new battleground for the two countries is in PCs, laptops and tablets as global brands look to hedge against their over-dependence on China: 75 per cent of all laptops are made in that country.
Vietnam’s share in this space might be just 2 per cent (contract-manufacturing for Dell, Amazon and Google, say reports) but it is furiously licensing contract manufacturers to create capacity and become a hub for the world here, too.To this end, Hanoi has signed an agreement with Foxconn recently to invest $300 million to assemble laptops and tablets, and has given permission to Wistron last year to make computers and peripherals. Nikkei reports that Microsoft might start producing its Surface line, including notebooks and desktops computers.
India’s answer to woo laptop (the bulk of which are imported from China), PC and tablet makers has been through a Production-Linked Incentive (PLI) scheme for IT products, which has failed to take off. Only around four of the 14 eligible players, domestic and global, have succeeded in meeting their production targets, and they say incentives (an average of 2 per cent) are too low and only for four years.
The electronics ministry is now reworking the plan to cater better to the requirements of global players, who have shown interest in shifting capacity from China if the incentives are attractive enough.Yet the big challenge that India faces — which Vietnam does not — is in setting up a supply chain, which both in mobile and IT products is dominated by Chinese manufacturers. But India’s Foreign Direct Investment (FDI) policy has effectively barred them through the automatic approval route, meaning Chinese investment proposals require government scrutiny. Even then, few have been granted permission over the past two years.
For instance, 10 per cent of Apple’s top 200 vendors are based in Vietnam but the bulk of them are from China. In India, Apple has around 12 global suppliers but only three of them are Chinese firms who entered before the FDI restrictions were imposed. As companies like Apple take a big jump in production from this year, higher value addition is possible only if their Chinese vendors are allowed in. India wants value addition upped from 15-20 per cent to 35 per cent in the next four years. Hanoi imposes no such restrictions; locational proximity enhances its attractiveness.
Vietnam has two other key advantages — far lower input tariffs than India, and the ability to leverage its plethora of free trade agreements (FTAs) that allow zero duty entry for exports.A preliminary study being undertaken by global companies points out that average most favoured nation tariffs for mobile phones and its supply chain and selected electronics products for 122 products is at around 9.9 per cent in India compared to 5.7 per cent in Vietnam.
The other problem, say companies, is that unlike Vietnam there is constant fear of differing interpretations and wrong classifications, with the revenue department suddenly raising demands or even accusing global players of round tripping. “There is no pre-consultation and advance authorisation like in Vietnam. Once demands have been made, the only way out is litigation,” said a senior executive of a global electronics company.
Critically, Vietnam has also leveraged its FTAs with over 56 economies that have helped suppress tariff barriers and make it a potential supply chain strategic hub. For instance, its recent FTA with the European Union has lifted tariffs on 85 per cent of Vietnamese goods. India, meanwhile, has abstained from the most consequential of FTAs — the Regional Comprehensive Economic Partnership (RCEP).
Of course, India has the advantage of an abundance of skilled labour available at still lower wages. Vietnam’s wage for workers is half of that of China, where rising wages have become a barrier to investment. But India’s worker wages are still a third of that of China, says an executive of a contract manufacturing company. That apart, Vietnam’s much smaller population has a limited number of skilled workers.But most global players say that this one advantage is not enough. Vietnam has much more flexible labour laws that partly neutralise the advantage. Clearly, India will need much more than cheap labour to leverage global corporations’ China Plus-One strategy.
Softlogic Life’s FY22 results grows to LKR 23 Bn GWP amidst tough macroeconomic challenges
Softlogic Life recorded a superior full year performance in a crisis-affected business landscape, posting Gross Written Premium (GWP) of Rs. 23,083 million for the year ended 31 December 2022 with an increase in top-line growth of 15% compared to the corresponding period of last year. The Company has stood firmly with its policyholders in the face of the tough macroeconomic conditions, paying claims of Rs 8,264 million for the period.
During the period in review, Softlogic Life’s market share is at 16.87%, in comparison to 16.08% as of 31 December 2021. The market share increase continues to rank Softlogic Life as the second-largest in the life insurance market, overtaking much older players to establish strong growth momentum. Compared to the estimated Industry GWP growth, which was 9.6% during 2022, Softlogic Life recorded GWP growth of 15%.
The company reported a 10-year Compound Annual Growth Rate (CAGR) of 28% of GWP, while the industry 10-year GWP CAGR growth was at 14%. Softlogic Life also notes that its contribution to increasing insurance penetration in the country has increased during the period in review with 133,872 policies issued, insuring more than 1.5 million Sri Lankan lives.
Profit after tax (PAT) for the period in review rose to Rs. 2,683 million, an increase of 27% YoY. Profit before tax (PBT) grew by 36% compared to last year at growth of Rs. 1,065 million. The company’s operating expense ratio remained at 22% irrespective of the inflation hike during 2022 as a result of prudent and efficient expense management initiatives adopted. Furthermore, Softlogic Life maintained a healthy Capital Adequacy Ratio (CAR) of 287%, well above the regulatory CAR requirement of 120%.
The company recorded impressive Return on Equity of 25% and Earning per share of LKR 7.15 after providing one off provision for impairment. Recurring Earning per share for the year 2022 increased to LKR 12.85 from LKR 5.61 per share.
Commenting on the financial performance of the Company, Ashok Pathirage, Chairman of Softlogic Life Insurance PLC, stated, “Despite numerous challenges in a tough business landscape, we have performed well to maintain our position as the second-largest life insurance company in Sri Lanka, growing our market share further to 16.87% by the end of 2022. These accomplishments were facilitated by the strategies we deployed and the strong execution of those strategies that have enabled the Company to sustain momentum in spite of the prevailing macro challenges.”
Since its inception, Softlogic Life has been striving to improve the quality of life of Sri Lankans through relevant disruptive innovations and digitalization. Industry-first innovations such as one-day automated claims settlement, hospitalization claim settlement, 100% digitalized sales platform, automatic policy issuance and mobile based micro products has helped the company to deliver a superior customer experience, which has been instrumental in enhancing its competitive position.
Foreign investors bullish and local counterparts bearish at CSE; year-to-date net foreign inflows hit Rs. 2 billion
By Hiran H. Senewiratne
Foreigners remained bullish on Sri Lanka’s listed equities as year-to-date net foreign inflows crossed the Rs. 2 billion mark, while local investors appeared bearish at the CSE yesterday.
JKH was the major driver for foreign inflows to reach more than Rs two billion, without any specific reason, since last week, market analysts said. However, shares fell in mid-day trade over the need for further positivity on the International Monetary Fund loan being secured, an analyst said.
Both indices moved downwards. The ASPI fell by 125.28 points, while the most liquid S&P SL20 fell 43.82 points. Turnover stood at Rs 2.2 billion with four crossings. Those crossings reported in Lanka Tiles, which crossed 1.2 million shares to the tune of Rs 54 million, its shares traded at Rs 45, JKH 300,000 shares crossed for Rs 43.65 million, its shares traded at Rs 145.50, HNB 468,000 shares crossed to the tune of Rs 43.3 million, its shares traded at Rs. 92.50 and Chevron Lubricants 200,000 shares crossed for Rs 24.1 million, its shares fetched Rs 107.
In the retail market, seven companies that mainly contributed to the turnover were, JKH Rs 721 million (4.9 million shares traded), Aitken Spence Rs 302 million (two million shares traded), Expolanka Holdings Rs 126 million (664,000 shares traded), Softlogic Capital PLC Rs 91 million (5.6 million shares traded), Browns Investments Rs 82.1 million (13.5 million shares traded), Softlogic Life Insurance Rs 63.3 million (512,000 shares traded) and Tokyo Cement (Non- Voting) Rs 49.1 million (1.45 million shares traded). During the day 56.2 million share volumes changed hands in 14000 transactions.
“The overall market was pulled down because the market ran on banking shares in the past sessions, but news on domestic debt restructuring moved the market into the red yesterday, an analyst said.
Any domestic debt restructuring will be part of a negotiation process with creditors, which will take place after a program with the International Monetary Fund is in place, Central Bank Governor Dr. Nandalal Weerasinghe said.
First, financial assurances from bi-lateral creditors have to be received to qualify for the IMF program.
It is said high net worth and institutional investor participation was noted in Expolanka Holdings, JKH and Sampath Bank. Mixed interest was observed in Aitken Spence, Sri Lanka Telecom and Lanka IOC, while retail interest was noted in Browns Investments, LOLC Finance and Ex-Pack Corrugated Cartons.
It said the Capital Goods sector was the top contributor to the market turnover (due to JKH and Aitken Spence), while the sector index gained 0.19 per cent. The share price of JKH gained 75 cents to reach Rs. 145.50. The share price of Aitken Spence closed flat at Rs. 150.
The Transportation sector was the second highest contributor to the market turnover (due to Expolanka Holdings), while the sector index increased by 1.02 per cent. The share price of Expolanka Holdings increased by Rs. 2 to Rs. 194.
Yesterday, the Central Bank announced the US dollar buying rate as Rs 359.99 and selling rate as Rs 370.18.
Japanese State Minister of Foreign Affairs visits Port of Colombo
Japanese State Minister of Foreign Affairs TAKEI Shunsuke visited the Port of Colombo to learn about the ongoing developments in the Port of Colombo. The visit took place on 03rd February 2023. During the visit the Japanese State Minister of Foreign Affairs also met with the Chairman of Sri Lanka Ports Authority (SLPA) – Keith D. Bernard and other higher officials at the main control tower of the Port.
The Chairman of SLPA explained to the Japanese state minister of foreign affairs of the progress of the developments of the East Container Terminal (ECT), the West Container Terminal and the North Port Development Project. The SLPA Chairman thanked the Japanese Government and the people of Japan for the invaluable support extended by them for development of Port sector in Sri Lanka, particularly towards the Jaya Container Terminal and the developments at the Port of Trincomalee.
The high level Japanese delegation at the Port of Colombo also comprised MIZUKOSHI Hideaki – Japanese Ambassador to Sri Lanka, TUTSUMI Tarou – Director, Southwest Asian Division, ANDO Toshiaki – Executive Assistant to the state minister of foreign affairs, TOKITA Yuji – director, second country assistance planning department, IWASE Kichiro – assistant to minister /director-general Southeast and Southwest Asian Affairs Department, MATSUYAMA Miina – third secretary, Embassy of Japan in India, KATSUKI Kotaro – Minister Embassy of Japan in Sri Lanka and OZAKI Takeshi, first secretary – Embassy of Japan in Sri Lanka.
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