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World Bank gets straight to the point on charting a new FDI path for Sri Lanka



By Sanath Nanayakkare

Faris Hadad-Zervos, World Bank Country Director for Sri Lanka, Maldives and Nepal skipped the usual preliminaries at the recent Sri Lanka Invest Forum (SLIF) and came straight to the point and told the participating global investors that Sri Lanka’s potential for attracting investment and creating an equally attractive business environment for new entrants was very clear, and if and when the right combination of things were in place this would become an ideal time to come and invest in Sri Lanka.

Speaking at the plenary session of SLIF on June 7, 2021 he said: “Let’s remember friends, not to focus today much on what Sri Lanka was, is and what it will be. We care about that but the reality is, the investors don’t. They don’t focus on what Sri Lanka is, what it was and what it will be, but what Sri Lanka is versus other countries from an investment point of view. And that’s the name of the game,”

Further speaking the World Bank Country Director said,”

Covid has likely triggered the biggest economic fallout since the Second World War.. I commend Sri Lanka on the many achievements in containing the pandemic in the past two weeks. The government’s management of the health crisis has been recognised worldwide and the measures it has taken to contain the ongoing wave.”

“The Sri Lankan government is focused on addressing its macro fiscal challenge and creating an enabling environment for investment in the short to medium term. We all agree on that and that’s why we are here. FDI has a huge role to play in helping to leverage the potential and diversity of growth in Sri Lanka.”

“In our analytical work, we have identified that some sectors such as textile/clothing, ICT services, Sri Lankan firms are expanding its global footprint, becoming globally competitive moving up the value curve, to diversify its growth and to offer more sophisticated products in different markets. You are showing the potential in these sectors. They have scaled up with the latest outside technology and experience to drive Sri Lanka for transformation. Where can the policymakers tap into the ecosystem to drive innovation in the large existing manufacture sectors such as apparel, ICT and high-tech products to fully harness Sri Lanka’s competitive advantage and integrate into the global value chain further? “

“Then the Tourism sector is the second largest export earner accounting for close to 55% of GDP before the pandemic. Tourism investments were around 10% of total FDI before the crisis. Now we are looking at the light at the end of the Covid tunnel, let’s build back better and greener. It’s time to address logistics, connectivity and shortage of skills to build a service oriented workforce so critical if Sri Lanka is to attract more high value Tourism services. But Sri Lanka’s distance to the frontier markets [in this regard] remains vast. And this is not me speaking about a shortcoming but rather a massive upward potential for a country with very positive horizons.”

“Sri Lanka’s FDI performance in 2019 was less than we wanted it to be.- at 1% of FDIs while Vietnam, Malaysia were able to attract 6% and 2.5% respectively. Sri Lanka aims to attract $ 5 billion FDI by 2025. We believe that this is entirely doable and is realistic given its rich natural resources, strategic location , highly literate workforce and available opportunities for investment.”

“If and when the right combination of things are in place , this becomes an ideal time to come and invest. This alternatively rests on a collective set of policies and practices that make up an investment ecosystem ranging from the improvement of the investment climate and elimination of unnecessary regulatory burdens and to enhancing responsiveness of bureaucracy in order to deliver effective FDI services. What we have seen in other countries is that investment promotion is the beginning of the story and not the end. The name of the game is attracting and retaining investment.”

“Also for the immediate term, the government will face a challenging balancing act between fiscal sustainability and jump starting the economic recovery. All countries are grappling with this. This is not unique to Sri Lanka. So what is the recommendation here? Use this pandemic to turn challenges into opportunities, to tackle the fundamental core issues that existed before the pandemic to build back better, greener and to be more agile. We are believers in the vast potential of Sri Lanka and that’s why we are here today.”

“We need to recognise that the government is focusing on and is trying to balance between fiscal sustainability supporting economic recovery, saving lives and catering to emerging post- pandemic spending needs. We have to recognise that this is a very difficult balancing act.”

“We have to agree that economy depends on production, labour and capital and optimal productivity. These were all affected by Covid leading to prolonged school closures, unemployment, digital barriers in education, reduction in overall investment etc. These will affect growth everywhere. Public investments are likely to be held back by revenue constraints. Sri Lanka is not unique in the world to this unfortunate thing.”

“On the macro fiscal perspective, Covid has aggravated Sri Lanka’s long standing debt vulnerability which pre-existed.. So it is not that Covid created all these problems. Covid exacerbated them and brought to the surface some structural issues that existed, and we have seen sharp contractions in export activities, the largest in recent times.”

“So it is not an easy task contraction in output, lower revenue collection have led to rapid deterioration of fiscal deficits and GDP ratios across the world. No country is immune, so what are the priorities?.First, from a World Bank’s perspective, a policy dialogue is important. When we talk to the policymakers here, it’s agreed that let’s get the debt thing tackled to give more space in the future.”

“Sri Lanka has high debt services obligations that obviously constraints fiscal growth moving forward. We have to focus on this. The government is tackling it. Opportunities for debt financing is limited. Domestic revenue mobilisation is very important which must be central to addressing pressure on public expenditure in the future. I would say, let us keep the momentum on global integration. The government is focused on it and that is commendable. Let us put the export earnings as a key measure over GDP, to follow. Export earnings over GDP – let us follow that over time and see what happens. It would require constant touch-ups to policies. When it comes to import trade regime, I know the government’s policy. I respect it. Let’s address tariffs, para tariffs and barriers to ensure predictability in this regime. While there is no right or wrong policy, look at the role of imports; when does it help exports and domestic industry. Let’s get them in”,: he said.






Sri Lanka’s Ceylon tea prices weak, output fall expected



ECONOMYNEXT – Sri Lanka tea prices remained weak in the third week of July amid with slightly lower volume being sold from a week earlier, and industry expecting crop intake to fall, as rains ease and fertilizer problem starting to be felt, industry officials said.

Preliminary information from estates indicated that crop volumes may fall in the coming weeks, market participants said. There had also been quality issue in recent auctions brokers said.

There are anecdotal evidence of tea farmers experiencing problems in getting fertilizer on time after Sri Lanka banned chemical fertilizer.

On the buying side, currency problems in Turkey has also hit purchasing power.

Sri Lanka sold 6.8 million kilograms of tea in the auction of July 19 and 20, down from 7.1 million kilograms a week earlier.

It was made up of 0.95million kilograms of Ex-Estate teas (mainly high grown teas sold while in the factory itself to retain quality) and 2.8 million kilograms in Low Grown (Leafy/Tippy) teas.

Low Growns

Last week the Low Grown tea sale average was 630.10 rupees up by 7.77 rupees from a week earlier. BOPF teas maintained prices from last week.

This week, a few select BOP bests gained while the rest maintained last week’s prices.

Select best FBOP/FBOP1were firm and then eased marginally as the sale progressed. Bests and cleaner below bests gained while the rest maintained prices.

Well-made varieties and cleaner below bests FBOPF/FBOP1’s in general maintained steady prices while others declined following lower quality.

High Growns

Last week, the High Grown auction average was tea sale average of 545.47 rupees.

This week in BOP teas, select best and best westerns dropped 20-30 rupees a kilogram.

Brighter below bests declined by 10-20 rupees a kilogram while the balance along with the plainer varieties held firm prices from last week.

BOP Nuwara Eliya prices were irregular following lower quality.

Better Udapussellawa’s declined 20 rupees per kilogram whereas the balance were firm towards the end of the auction. Uva’s maintained last week prices.

In BOPF category, a few best westerns went up by 50 rupees a kilogram while the others gained to a lesser extent.

Brighter sorts in the below best category went up by 30-50 rupees a kilogram while the balance teas along with plainer varieties were irregular. BOPF Nuwara Eliya’s followed a similar trajectory to the BOP teas.

Better Udapussellawa’s were irregular while the rest together with the Uva’s maintained.

Medium Growns

Last week, the Medium Grown auction average was 520.13 rupees up 2.37 rupees from a week before. This week well-made OP/OPA’s gained 10-20 rupees while the balance were firm and as the sale progressed, gained marginally.

BOPF better sorts were lower, brokers said, while well made BOP teas maintained and the rest declined by 20-30 rupees a kilogram.

Select Best FBOP’s eased in general.


FF1’s declined 10-20 rupees a kilogram,.


High grown BP1s were irregular while PF1 better teas gained 20 rupees a kilogram.

Mid grown BP1s declined 10-20 rupees a kilogram while PF1s followed a similar trend to their BP1 teas. Low grown BPIs better sorts gained 20 rupees a kilogram, while better PF1 teas gained 10 rupees while the rest were irregular.

Crop and weather

Westerns and Nuwara Eliyas recorded a slight decline in crop whilst the Uva/Udapussellawa and Low grown districts maintained, Ceylon Tea Brokers said.

A general decrease in crops were seen in the previous weeks, leading to low volumes at this week’s auction.

The Department of Meteorology forecasts heavy showers with strong winds in the Nuwara Eliya region, eavy showers are expected in the Ruhuna and Sabaragumwa, in the coming week.

The Western planting districts including Nuwara Eliyas reported bright mornings with scattered evening showers. The Low grown region had bright mornings with scattered evening showers.



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Some Sri Lanka firms could be hit on import controls as reserves fall: Fitch



ECONOMYNEXT – Some Sri Lankan firms could be hit while firms in essential goods may be less affected and import substitution firms could benefit if import controls are tightened on weak external finances, Fitch, a rating agency said.

“Sri Lanka sovereign’s weak external finances will affect corporates importing non-essential finished goods such as consumer durables more than corporates importing essential finished goods such as pharmaceuticals, food or clothing,” Fitch said.

“At the same time, we believe restrictions are less likely in the near term on the importation of raw materials for the domestic manufacture of essential products such as personal care, or for those industries serving as import-substitutes such as tyre and footwear manufacturers.”

Inflated Reserve Money

Sri Lanka’s central bank has been injecting liquidity (inflating reserve money supply in excess of the external monetary anchor or peg) keeping interest rates and credit out of line with the balance of payments and triggering forex shortages.

The central bank has lost foreign reserves as the liquidity was used in state salaries and later in cascading bank credit, and the news money redeemed against foreign reserves for imports or debt payments at a non-credible peg (convertibility undertaking).

The convertibility undertaking has far shifted from around 185 to 203 to the US dollar since early 2020. After convertibility was restricted for trade transactions, as well as some capital transfers banks started to ration dollars.

Parallel exchange rates have also risen as a result.

Due to Mercantilist beliefs – which are also taught in Keynesian universities – monetary instability has been blamed on imports, and authorities tried to control imports.

In Sri Lanka oil often is blamed for currency falls, though liquidity injections in 2015 created a currency crisis as global oil prices collapsed.

However as credit driven by the new liquidity shifted to permitted areas, the trade deficit had exceeded the 2019 levels by May 2021.

In June some import restrictions were relaxed.


Among Fitch Rated firms, consumer durables sellers were likely to be most affected.

“Singer (Sri Lanka) PLC (AA(lka)/Stable) and Abans PLC (AA(lka)/Stable) are the most exposed among Fitch-rated corporates to tighter import controls, due to the discretionary nature of their products,” the rating agency said.

“A tightening in import controls may exert pressure on both entities’ ratings, owing to low headroom. However, the availability of buffer inventories, a degree of local manufacturing, and potential group synergies in the case of Singer, could help mitigate the impact in the near term.”

Meanwhile firms that critics call crony import substitution firms which have actively lobbied politicians for protection in the past to create a domestic ‘black market’ at high prices could benefit.

“We expect sales volumes for domestic manufacturers to rise in the near term as they attempt to fill shortages created by import restrictions,” Fitch said.

“Therefore, corporates such as the domestic tyre manufacturer Ceat Kelani Holdings (Private) Limited (CKH, AA+(lka)/Stable), footwear manufacture and retailer DSI Samson Group (Private) Limited (DSG, AA(lka)/Stable), as well as electric cable producer Sierra Cables PLC (AA-(lka)/Negative), may be long-term beneficiaries as their products serve as import substitutes.”


The impact on alcohol, beverage and phamarceuticals may be neutral.

“We believe pharmaceutical manufacturers and distributors such as Hemas Holdings PLC (AAA(lka)/Stable) and Sunshine Holdings PLC (AA+(lka)/Stable) are less likely to see tighter import restrictions despite significant import exposure,” Fitch said.

“This is because of the essential nature of their goods, and limited availability of their products in the local market.

“Hemas and Sunshine have limited domestic manufacturing capabilities for certain generic drugs, while around 90% of the pharmaceutical products they sell are imported.

“This is because domestic pharmaceutical manufacturing is at a nascent stage, with producers lacking the technological know-how and infrastructure near term as they attempt to fill shortages created by import restrictions.”



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Sri Lanka Insurance holds Annual General Meeting via Zoom online platform



Sri Lanka Insurance holds its Annual General Meeting via Zoom online platform on 7th July 2021. The Chairman and Board of Directors were participated for the meeting from their respective locations adhering to the Covid 19 health and safety standards issued by Health authorities.

During the Annual General Meeting, it was declared that the company has closed year 2020 in a positive note recording phenomenal growth with exceptional service innovations.

Sri Lanka Insurance the premier insurer to the nation recorded stellar performance in 2020 to record a Profit before taxation of Rs. 7.9 billion for the year2020 , with a strong improvement in combined Gross Written Premium (GWP) of Rs. 39.4 billion denoting growth of 16.65%.

In the year of 2020 Sri Lanka Insurance reported 29.9 % growth in life insurance premium increasing to Rs.19.8 from 14.8 billion whilst Sri Lanka Insurance General reported 6.27% premium growth increasing to Rs.20.1 billion. General insurance contributed 51% towards the total GWP whilst Life Insurance contributed 49 %.

In continuing with its tradition of leadership, Sri Lanka insurance in 2020, surpassed its own record to declare a sum of Rs.8.6 billion as bonus to policyholders. The cumulative life insurance bonus paid out during the past 15 years tops a massive Rs.73.2 billion making the SLIC bonus payout unmatchable.

“Inclusive insurance or as I like to call it “Insurance for All” is something I have consistently reiterated, for it is without a doubt one of the best ways to safeguard the quality of life for every Sri Lankan. Insurance helps everyone, even those at the base of the economic pyramid . A majority of Sri Lankans are unaware that Insurance acts as a safety net in times of crisis and can provide people and businesses with lifeline to help them recover from unforeseen events to re-establish their livelihoods. What is more disconcerting is that the lack of awareness has given rise to the misconceptions that insurance is a product for a privileged few. The task of delivering “Insurance for All” is no easy feat. However, with over 59 years of expertise in serving the Sri Lankan market, I am convinced SLIC is best equipped to lead the movement to make insurance accessible to all.” noted Mr.Jagath Wellawatta, Chairman of SLIC.

Notwithstanding the challenging macroeconomic environment and large-scale disruptions due to the COVID-19 outbreak, SLIC delivered an excellent performance in 2020, even outperforming the industry on many fronts. With our perceptions and outlook coloured by the pandemic, we embarked on a new strategic planning exercise aimed at mapping out SLIC’s growth trajectory for the next 3 years. Eager to put our plan into action, we advanced the first phase of our agenda and undertook a broad based restructuring initiative to embed a greater degree of management oversight across the General business and the Life business, which we felt will pave the way for SLIC to systematically improve the scalability of each business, based on specific opportunities in the market.” noted Mr. Chandana L. Aluthgama, Chief Executive Officer of SLIC.

Established in 1962, Sri Lanka Insurance Corporation is the largest government-owned insurance company in Sri Lanka, with a managed asset base of over Rs.235 billion and a Life fund of Rs. 134 billion, the largest in the local insurance industry. Sri Lanka Insurance ranked as the ‘Most Loved Insurance Brand’ and the ‘Most Valuable General Insurance Brand’ in the country by Brand Finance for the fourth consecutive year. Further Sri Lanka Insurance recognized as a “Great Place to Work” in Sri Lanka by Great Place to Work. The company is on the mission of being a customer focused company which constantly innovates in providing insurance services to customers and is now serves customers through an extensive network of 158 branches.

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