UAE is Sri Lanka’s biggest trading partner in the Middle East

The United Arab Emirates (UAE) is Sri Lanka's sixth-largest source of Foreign Direct Investment (FDI) inflows. According to a Sri Lankan official in correspondence with gulf media, the UAE is also its largest trading partner in the Middle East. It has bilateral trade representing over half of the country's entire business with the region.

In an interview during his official visit to Abu Dhabi, Sri Lankan Foreign Secretary, Ravinatha P. Aryasinha, said there was a quantum leap in bilateral trade ties between Sri Lanka and the UAE over the past three years.

During 2015-2018, FDI inflows from the UAE to Sri Lanka amounted to $641 million, he said. Sri Lanka earned $593 million in FDI from the UAE during 2015-2017, which accounted for 6.1 percent of the country's total FDI inflows over that span, he said.

"We had 48 million dollars worth of FDI from the UAE in 2018 alone," Aryasinha reported. In 2016, bilateral trade was $1.34 billion, increasing to $2.13 billion in 2018, seeing a rise of 62.92 percent, he said.  Of the $2.13 billion markets in 2018, Sri Lanka's total exports to the UAE amounted to $290 million, and total UAE imports to Sri Lanka amounted to $1.84 billion, the official said. The principal exports from Sri Lanka were tea ($48 million), coffee, apparel, and tobacco, while petroleum and related products were major UAE imports, he explained.

Since most of the oil imports from Sri Lanka come from the Arab Gulf countries, including the UAE, the region plays a crucial role in the energy security of the country, Aryasinha said.

In 2018, Sri Lanka's trade with the UAE accounted for 56.5 percent of the country's total business together with the Middle East, making the UAE its region's largest trading partner, the official said.

In 2018, trade between Sri Lanka and the Middle East (14 countries, including the UAE) accounted for $3.77 billion, of which total exports from Sri Lanka to the Middle East amounted to $1.16 billion, and total Middle East imports reached $2.61 billion, Aryasinha explained.

Approximately 71,636 Middle East tourists visited Sri Lanka in 2018, and, he said, 5,785 were from the UAE. 

In 2018, Sri Lanka also received $3.59 billion worth of foreign remittances from over one million Sri Lankans working in the Middle East, representing 52.2 percent of the country's total,  over the same period, Aryasinha said.

According to Vision 2025, Sri Lanka will take practical steps to move from exporting predominantly low-tech products to high-tech products and attracting knowledge-based transformational investments. Future bilateral relations must form the enormous possibility that exists in the UAE as an export market and as a principal investor in the world.

OSL Take: Sri Lankan authorities are engaged in a global drive to promote trade and investments on the island. The country has also participated in many large scale international exhibitions and initiated bilateral trade discussions with many foreign countries. Meanwhile, the government of Sri Lanka is continuously developing the ease of doing business environment in the country. Also, the country’s geographical positioning in the Indian Ocean, along with the many trade agreements as well as trade concessions enjoyed by the island, makes Sri Lanka the ideal business/investment destination in the South Asian region. In this backdrop, the discussions on trade and investments in the UAE would open up business/investment opportunities for businesses in both countries.

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Sri Lanka-China Political and Economic Ties Strengthen (Part 2)

Its domestic conditions determine foreign policy for Sri Lanka. It is an island country in the Indian Ocean, separated by the Palk Strait from the Indian subcontinent. Its location has given Sri Lanka more strategic freedom to determine its diplomacy independently than other South Asian countries. Though Sri Lanka is not an advanced country, its economic statistics are better than most other economies in South Asia.

His people have every reason to pursue higher economic objectives. The country sits on one of the busiest shipping lanes in the Indian Ocean. The shipping lane is a dynamite location destined to bring enormous wealth to Sri Lanka. Due to its poor infrastructure, however, it was difficult for the country to take advantage of the transport road.

Cooperation with China reflects the desire of Sri Lanka to take advantage of its geographical position and become a transportation hub in the North Indian Ocean. But the ambition of Colombo has made other major regional powers uncomfortable. They're entitled to be concerned. Sri Lanka, however, also has the right to make policies in line with its interests.

OSL Take:    With this new political arrangement, Sri Lanka is in a position to continue to pursue its development projects with a strong ally in China. It is particularly noteworthy that within weeks of signing a similar type of agreement with India, this agreement comes in. It outlines the determination of governments to work with regional leaders and to enable them to support the development of Sri Lanka. Such an arrangement also describes the willingness of the government to maintain an increasing but neutral economic relationship with two of the world's largest leading nations.

A Neutral Stance will go a long way towards ensuring economic stability as well as diversifying the risk dimension of increasing dependency on a more massive nation.

Sri Lankan-based industries will receive a significant boost due to the many infrastructure projects that the Chinese backed investors will be carrying out, and for a potential investor this would mean significantly upgraded, and new operational infrastructure will be in place.

China may enter into a free trade agreement with the Sri Lankan Ambassador to China within the year, sources say. Sri Lanka has stated that the best way to celebrate the 60th anniversary of diplomatic relations with China is through the signing of a free trade agreement.

Such an FTA would further improve the benefits and level of integration achieved by this agreement and would also enable both Chinese investors to invest in Sri Lanka and open up new avenues for Sri Lankan businesses to tap into a much more comprehensive marketplace and investor pool.

Another area that can be included in this arrangement is tourism. The government of Sri Lanka is expanding its search for investors to add significant headwinds to the tourism industry in Sri Lanka. China could be a successful partner in attracting both Chinese tourists and attracting world-renowned hotel chains based in China to operate in Sri Lanka. We can expect the Chinese backed investors in the hotel arena to see Sri Lanka as an attractive option due to both government support and increasingly strengthened relationships. Moreover, with many landmark projects close to completion in Sri Lanka, Sri Lanka will become an attractive option for visitors around the world.

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previous Article

Sri Lanka-China Political and Economic Ties Strengthen (Part 1)

On Monday, after winning the weekend election, Sri Lanka's former defense chief Gotabaya Rajapaksa was sworn in as the country's new president. Since the world perceives Rajapaksa as "pro-China," his inauguration is considered the start of Sri Lanka's tilt towards the world's second-largest economy.

The shared relationship between China and Sri Lanka dates back to the Northern and Southern Empires (386-589). Faxian, a Chinese Buddhist monk who, after his foreign trip, took a large number of Buddhist books back to China, lived in Sri Lanka for a long time, and became a key figure in Sri Lankan Buddhism's history. Zheng landed many times in Sri Lanka in the legendary Chinese navigator Zheng He's journey during the Ming Dynasty (1368-1644). Sri Lanka also sent officials to China at that time.

Before China and Sri Lanka established diplomatic ties in 1952, the two countries inked the Rubber-Rice Pact agreement. At the time, China was facing a foreign-exchange crisis under sanctions from the West and Sri Lanka. China agreed to supply rice for Sri Lankan rubber mid-signing of the agreement.

In both countries, the deal resolved the urgency and showed both as reliable partners.

The relations between China and Sri Lanka have gone through some twists and turns, putting some big cooperation projects on hold. The former has been so since Maithripala Sirisena, former President of Sri Lanka, took office on January 9, 2015.

There are three main reasons for this. First, opposition stems from electoral politics' nature. Second, the international community's pressure and temptation gave Sirisena the impression that he could use relations with China to trade more help from other countries. Third, given the contradictions within the nation between different interest groups, only change can lead to new government winning opportunities. Sri Lanka, however, eventually failed to get more help from other countries.

Yes, ties between China and Sri Lanka are deeply rooted in the island country's public opinion. In Sri Lanka, China has built quite a few major infrastructure projects, including Hambantota Port, Mattala Rajapaksa International Airport, Colombo Expressway, Norochcholai Power Plant, and Colombo International Financial City.

Changes in government can not undo these accomplishments. As Rajapaksa has begun his term in office, China and Sri Lanka will have more opportunities to develop relationships. Rajapaksa's counselor, Palitha Kohona, said in September, "If Gotabaya Rajapaksa becomes the president... he will set the record straight" and restore the association to where it was with China.

However, not everyone is pleased to see closer ties develop between China and Sri Lanka.

Some are concerned that the island country would rely heavily on China economically, politically, and militarily, thereby boosting the influence of China on Sri Lanka, affecting the power structure around the Indian Ocean.

If the goal of a country is to achieve a strategic monopoly in South Asia and the North Indian Ocean, it can be considered a threat to the rapid development of cooperation of any other nation with major powers outside the region.

But if the primary goal of a country is regional peace and prosperity, Chinese investment and cooperation with countries in the region would be welcomed. Rajapaksa is believed to be writing his foreign policy based on his interpretation of the interests of Sri Lanka. Rajapaksa is not "pro-China" nor pro-Sri Lanka.

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 To be continued ...

Alibaba’s Daraz and Wow.lk sign strategic partnership to grow digital commerce in Sri Lanka

Daraz Sri Lanka and Dialog Axiata Group have entered into a collaborative strategic partnership on digital trade. Daraz Sri Lanka is merging wOw.lk's management and business activities, the online retail platform owned by Dialog Axiata Group, as the first step in this relationship. The integration will help Daraz expand its e-commerce presence in Sri Lanka further and grow it. Visitors to wOw.lk will be redirected to Daraz.lk with effect from 1 December, allowing greater access to products and services through Daraz.lk, the fast-growing online retail site.

That said, current wOw.lk customers who purchased items from their platform will continue to enjoy their purchasing point's guarantee arrangement. WOw.lk has been instrumental in building Sri Lanka's e-commerce presence over the past seven years. With this new partnership in the making, customers of Dialog will benefit from Daraz as an exclusive online shopping platform.

"Integrating the e-commerce service of Dialog gives Daraz a secure marketplace and allows us to drive growth more vigorously while offering our customers the best in online shopping. Wow.lk is one of Sri Lanka's pioneers of e-commerce, and we plan to build on this legacy through Daraz.lk," said Rakhi Fernando, Managing Director of Daraz.

Daraz's marketplace model has proven itself successful for both shoppers and seller partners. It has given brands more visibility and a more extensive range of products from which to shop.

Daraz's affiliation with the global cynosure of success in e-commerce - Alibaba, has ensured that timely and proven technology gets transferred to an online market as young as Sri Lanka.

Daraz.lk has created a leveling ground for international brands as well as SMEs over the three years of operations on the island to be part of their journey to expand the online retail market. The latest development will result in a merger of more brands, adding to Daraz's current 800,000 plus product range. Dialog Axiata PLC Chief Digital Services Officer, Dr. Nushad Perera, has commented on the partnership:

"Our two organizations are strongly committed to building the digital infrastructure of our country, and this partnership will further improve access for every Sri Lankan to affordable digital trade."

OSL Take: Such an acquisition has paved the way for other interested parties to consider such a venture as well. With the government’s focus on steering the country towards a digitized economy, such investments are bound to prove fruitful. On the other hand, the availability of cutting edge Financial Technology in the country would be an added advantage for possible investors to the country. Also, the passage of the Electronic Transactions Amendment Bill has further enabled Sri Lanka to engage in cross border transactions.

It will improve Sri Lanka’s ability to trade with these countries using digital platforms. Hence, businesses in Sri Lanka, as well as any new entrants to the country’s economy, would be benefited when carrying out business with other countries. The Sri Lankan government has also offered incentives for companies engaged in the development of digital infrastructure. Foreign businesses/investors could, therefore, explore opportunities in Sri Lanka’s digital infrastructure sector.

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Water Sector Opportunities

Over the past decade, some remarkable achievements have made in Sri Lanka's water supply and sanitation sector. Continued efforts by the government to improve national indicators of social development have put the country ahead of most other South Asian countries.

The provision of drinking water supply and sanitation is a government priority. The proportion of the population that should have access to safe drinking water and improved sanitation services have set periodic targets.

Water resource management has become an important discussion point and is vital for economic development. Only 45% of the population has access to the pipe-borne water supply. Waterways have also been polluted, thereby compounding the problem of providing safe drinking water to all. The state intends to meet this challenge and ensure 100% of the population supplied with clean and safe drinking and pipe-borne water. The newly elected government have a range of upcoming tenders in the water sector:

·         There will be a tender to introduce a water storage mechanism for all new houses located in water-scarce areas to ensure groundwater is not misused.

·         The government will ensure that all water resources are managed and utilized efficiently for agriculture by adopting drip irrigation and other modern techniques. To facilitate this process, we will introduce low-cost interest rate loans and tax relief.

·         They will take necessary actions to create an environment where rivers, lakes, and reservoirs/tanks are free from chemicals, pesticides, and other harmful chemicals.

·         The government ensures that all citizens of this country will have access to pure drinking water around the clock contained by the next three years. They will do this by expanding and improving the efficiency of the current projects carried out by the Sri Lanka Water Board and Community Water Projects. They will also introduce new legislation to establish accurate water recycling processes for all industrial and commercial constructions.

·         Sri Lankan government spends billions of money every year to manage water-related disasters.  Such disasters include those due to the flooding in the areas of Kelani, Kalu, Gin, and Nilwala rivers and the droughts in the dry regions of the country.

Therefore, they will utilize this money to proactively manage these situations by developing a flood control mechanism with prevention and forewarning systems and water storage and pumping methods to dry areas through drainage and canals systems. They will form a committee consists of experts to execute this project by 2025.

The National Water Supply and Drainage Board (NWSDB), Sri Lanka's primary water supply and sanitation service, had an estimated 840,000 total water connexions in 2004.

It doubled this number by the end of 2013.

Another feature of the development of the water supply sector in Sri Lanka is the increased use of water supply systems operated by the government. In the 1980s, apart from a few urban pipe-borne water-supply networks, small gravity systems and deep wells represented the majority of the rural population.

A series of projects were initiated at the beginning of 1990 to extend district-level agricultural water supply systems to be run by the local communities themselves — so-called community-based organizational schemes. These systems provided an additional 500,000 connexions to the water supply.

OSL Take:  The interest shown by the Sri Lankan government at modern technology to address the issued faced by the country due to droughts has created new opportunities. Sri Lanka’s development program that covers the entire island includes projects of different levels covering all vital economic sectors. Therefore, foreign businesses/investors could explorebusiness/investment opportunities in Sri Lanka’s development program.
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Sri Lankan Government ready for an Economic Turnaround (Part 4)

Abolishing of the advance tax collection system

It is also proposed to play a similar game concerning personal income taxes. The current early tax collection scheme “pay-as-you-earn” tax – is to be abolished for employees in both the private and corporate sectors. The government will also reduce the marginal tax rate currently at 24% to 15%.

At the similar time, in the case of employment income around Rs. 700,000, the tax-free limit will be raised to provide extra relief for workers who are filing annual tax returns. This portion will also reduce the monthly cash inflow to the Treasury, close to the cut in corporate income tax.

But, after the elimination of the PAYE tax, all responsible workers and others will have to file annual tax returns and pay taxes not only on income from employment but also on other income types. If this occurs, despite the low tax base, it will undoubtedly increase the total tax revenue. If not, the government will again face an expanded gap in the budget.

Scrapping out offensive taxes

Other types of ancillary fees are also being abolished or reduced. The government will abolish the Nation Building Tax or NBT, Economic Service Charge, or ESC and Tax or WHT withholding, and will reduce the added value of tax or VAT from 15% to 8%.

Two other tax proposals aimed at encouraging companies appear to be non-working. One is the five-year holiday for small and medium-sized enterprises and agriculture. As these companies are not currently in the tax net, the specific tax holiday is irrelevant for the purpose.

The other is the zero VAT rate given to tourism businesses as long as they use 60% of local inputs when providing tourists with their services. Since it is the common practice that VAT is passed on to tourists in the sector, this particular vacation does not leave a surplus to businesses in the cash-strapped tourism sector.

 OSL Take: The assumption of office by President Gotabaya Rajapaksa and the stability brought about the appointment has given a boost to the country’s business sector. Following Rajapaksa’s swearing into the office, the country’s stock market recorded an increase. All this along with the confidence expressed by the country’s business chambers indicate the growth potential for Sri Lanka’s business sector.

The present focus of the government of Sri Lanka is on increasing the inflow of foreign direct investments to the country. Contemplating the need to modernize the country’s laws to attract more foreign investments to Sri Lanka is a positive sign for international businesses/investors looking at doing business with the state.

Sri Lanka’s geographical positioning in the Indian Ocean, the ease of doing business environment in the country and the many trade agreements, as well as trade concessions enjoyed by the state, have made it an attractive business destination in the South Asian region. Given the strength and growth of the country’s private sector, foreign businesses/investors could explore business/investment opportunities in Sri Lanka. Also, international businesses could look at possibilities of forming partnerships with local companies and expand their businesses to other countries.

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Technology Sector Opportunities

Telecommunications, software, and data technology are a crucial component of growth within the services sector, producing steady growth in 2018. In 2018, gross ICT earnings amounted to $995 million, about an 8.9% rise over the previous year. In 2018, the country launched the fifth generation (5 G) technology adoption process. Software providers in the United States have been successful in selling solutions to private customers and some agencies in the public sector. (Data Source: Sri Lanka Export Development Board). 

The newly elected government plans to invest strategically in new technologies and integrate such innovations with the education system, manufacturing sector, and the economy.

·         Plans to make Sri Lanka as a Global Innovation Hub – Sri Lanka will maximize the practice of the Internet of Things (IoT), Artificial Intelligence (AI), Biotechnology, Robotics, Augmented Reality, Cloud Computing, Nanotechnology, and 3D Printing and through these innovative measures establish Sri Lanka as a Global Innovation Hub.

·         Digital Government - Using new methodologies and adopting new Internet-based technologies, public services such as obtaining National Identity Cards, Passports, Birth Certificates, Death Certificates, Driving Licenses, copies of deeds, etc., could be speedily and efficiently handled through nine (09) Citizen Service Centers to be established, one in each Province.

·         A Digital and Electronic Payment System will be established for citizens to pay traffic fines with ease and without any hassle.

·         A new e-Procurement system would be introduced, thereby ensuring that bribery and corruption would eliminate.

·         Establish a countrywide High-Speed Optical Transmission System and high speed 5G Mobile Broadband System to facilitate data transmission.

·         Digital Cities with digital monitoring and administrative centers will be established to address water and electricity usage, traffic congestion, and disaster situations.

·         The government will introduce mobile and digital payment system along with the necessary physical infrastructure and legal provisions to handle all local and international financial transactions.

·         Cross border e-Commerce and International e-Payment system will be put in place to handle all international trade and financial transactions electronically, along with the required legal provisions.

·         Business Process Outsourcing (BPO) industry and the Knowledge Process Outsourcing (KPO) industry would be developed to make export earnings of USD 3 billion by 2025. To realize this, we will set up IT centers and BPO centers in our connecting cities.

·          Maximum support will be given to local and foreign entrepreneurs to develop software for the international market in Sri Lanka.

OSL Take: Sri Lanka is emerging as a destination of choice in a variety of main areas as a regional IT Business Process Outsourcing (BPO). In 2017, AT Kearney ranked Sri Lanka 11th among the world's top 50 outsourcing destinations, moving up three slots from 2016. The computer industry in Sri Lanka produces world-class products and has expanded significantly over the past decade. Telecommunications, banking, financial, and insurance (BFSI) and software testing included in the software services sector.

Sri Lanka’s ICT and digital infrastructure sectors are on a growth path creating many business/investment opportunities in the two industries. The government of Sri Lanka has also given priority to digital infrastructure development and widening the ICT education sector and offered many incentives, thereby increasing the connectivity while eliminating interferences and enhancing data services to both enterprise and consumer users. Such technology will help optimize business efficiency, which is an attractive infrastructure commodity to investors. OSL also sees the possibility for investors to lease spectrum resources for the further expansion of the telco sector.

Sri Lankan Government ready for an Economic Turnaround (Part 3)

Proposal for a simple tax system

The newly elected government has introduced a simple low-rate tax system and a broader tax net to ease the burden on the existing taxpayers. The current tax system in Sri Lanka is like the scheme of Hindu deities. According to reports, there are 330 million deities, and the number is increasing every day when a new god is created to address a new human issue. Some of them overlap the functions of old ones since there is no rational basis for new deities to be created.

Similarly, a multitude of taxes to generate income from any tax base made it a very complex one that forced taxpayers to evade taxes, resulting in a low tax yield. Therefore, a prominent feature in the newly elected government is the abolition of several offshoot taxes and the reduction of the current tax rate. The new tax regime is a considerable gamble that President Gotabaya Rajapaksa takes as the Head of State. Both measures will reduce the ongoing cash inflow into the Treasury, which will require it to raise more liquid cash by issuing Treasury bills.

The challenge is to restrict this practice to a short period and decide on an exit. The gamble is if the tax net does not expand as expected, resulting in a permanent cash shortage. Then, instead of a blessing, the proposed strategy becomes a curse.

Implementing new technology

The measures to introduce new technology are an essential aspect of the newly elected government. It will prepare the country for the Fourth Industrial Revolution or Industry 4.0, although not expressed explicitly. The advent of more technology is a good step as it helps, on the one hand, to reduce the distrust of technology and, on the other, to accustom people to new technologies.

But the full responsibility of capacity-building has been shifted to the state university system because of the government's current cash position. The current status does not allow it to increase the capacity of the state university system instantly. The newly elected government will need to enable the higher learning network operated by the private sector to meet the demand.

Inviting high-ranked Indian universities to Sri Lanka

The government had an agreement with the Indian government in 2004 to have a few Technology Institutes on the model of the famous Indian Technology Institutes or IITs. The idea mentioned above was abandoned halfway through with that year's change in government.

Sri Lanka now is about to reopen this route. Sri Lanka will, therefore, benefit if President Gotabaya Rajapaksa resumes the abandoned dialogue by meeting Indian Premier Narendra Modi by the end of this month. Without higher learning institutions operated by the quality-minded private sector, it is unlikely that Sri Lanka will have the crucial pool of scientists and engineers needed to help it achieve its main economic goals.

Capacity improvement in the Government sector

The newly elected government is a new strategy of central government action involving the course of the economy. Can it turn the country's ailing economy into a turnaround? It may have worked successfully in Taiwan, Singapore, South Korea, and even Japan after the war. In these countries, the secret of success was the central government's ability to act with foresight. The newly elected government will, therefore, work if the same machinery of the central government is set up in Sri Lanka.

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Sri Lankan Government ready for an Economic Turnaround (Part 2)

It is up to the NPPC to review it in consultation with the Central Bank, as I have pointed out above, and to convert the final product into detailed work programs to be implemented by various government agencies.

Full Stop to Privatisation

The newly elected government, several other features, would strengthen the role of the government. It has made it very clear that no state-owned company will be privatized and even gone as far as proposing law implementation to ban it. In reality, these are very poor proposals as no one can bind a future parliament to uphold them. Even concerning those already privatized, the government must issue directives, and all investors in the private sector are required to comply with them.

Alleged corruption charges and the absence of clear efficiency-based changeover plans have marred many past privatization activities. Therefore, political logic is behind these three movements. However, political logic has subsumed economic philosophy based on requirements for efficiency and the need to change business strategies in line with emerging global developments. It is unlikely that a management agency that works under a dictator can act swiftly and with the foresight to save a company from an unexpected external shock.

Hiring competent managers

By implementing two steps, The newly elected government plans to resolve this problem. One is a rebellious measure that should be supported by all. In this step, the management of these companies is recommended to be turned over to professional and qualified managers who would be paying market wages and are subject to regular quality audits. When they struggle, they have to resign as they do in a private company. Hence, it was the template Singapore used for state-owned enterprises. A possible barrier to the successful implementation of this model is the lack of a sufficient number of talented managers to operate these companies.

Singapore resolved this by hiring foreign executives on competitive salaries while setting them time-bound goals. The newly elected government is quiet about this possibility, so it is NPPC's responsibility to analyze it and make appropriate changes.

Another bureaucracy

The other step is to put these businesses under the control of a newly created National Enterprises Authority or NEA to reform them under state ownership to ensure their competitiveness and viability. The aim is to liberate taxpayers from the burden of bailing them out if they fail. The current model adopted by Sri Lanka is to submit these undertakings to ongoing review by a group of technocrats housed in the Ministry of Finance's Public Enterprise Department and assist the Parliamentary Committee on Public Enterprises or COPE in making a final recommendation.

The previous COPE reports focused too much on a financial audit to exclude the necessary 'enterprise audit.' A company audit examines whether a program conducted by a state-owned company is consistent with its mission to mitigate emerging global and local risks. When the financial review focuses on financial irregularities and the media advertises them as widely as possible, managers in these companies will become extra-cautious and refrain from making the right decisions. Such events are the main reason for widespread state-owned inefficiency. The hope is that there will be no such risks under the new NEA scheme.

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Sri Lankan Government ready for an Economic Turnaround (Part 1)

The newly elected government comes from a series of open consultations undertaken by a think tank that branded itself for about two years as ' Viyathmaga ' or the Erudite's Path. Therefore, the exercise involving Malaysia's policy capsule has already been completed, saving the president a lot of time at a time when the critical buzzwords were urgency and swift action. Nevertheless, in the light of emerging global as well as local trends, it is now essential to reassess the main components of the newly elected government. Besides, a Manifesto is merely a blueprint outlining only the significant policies pursued.

Each such strategy must formulate into a comprehensive plan of research that removes inconsistencies, shedding that is irrelevant today and concentrating on the future rather than the present. The development of these work programs requires the Central Bank's inputs to prevent The newly elected government from conflicting with the policies of the bank. Once approved, the government, the private sector, and political leaders will sign it off. Hence it is the only way the newly elected government can become the country's political ideology.

Modest economic goals in The newly elected government

The newly elected government has some small financial goals to achieve in 2020-5 relative to those set by previous governments over-ambitious goals. Economic growth should lower from the current 3% to 6.5%. Per capita income currently at $4,000 will raise to $6,500, a midpoint on Sri Lanka's journey to a high-income country. There are three main macro variables to be held below certain thresholds that are not far from these numbers at the moment. It is necessary to keep unemployment below 4 percent, which is the current rate in that amount. Inflation is going to be below five percentage points, one percentage point above the current maximum. The predictions are that the government’s budget deficit will be below 5% of GDP, a dramatic reduction from the present 6% plus.

Often targeted were too difficult, if not impossible, targets. One concerns the loan rates of commercial banks where The newly elected government plans to bring them below 10%, compared to the current 11% to 20% loan rates. The other is the exchange rate. The newly elected government plans to stabilize the exchange rates by not falling below the current  LKR 182/USD. Both are determined on the market and are, therefore, beyond the president's proclamations.

Any attempt to subvert the market would have immediate and long-term economic growth disastrous consequences for the other goals. Therefore, working closely with the Central Bank, which is the authority for both policies, is necessary.

The return of Central Government

The newly elected government's main feature is the central role that the government would play in controlling the economy. Under the President, a National Policy and Planning Commission or NPPC is to be set up. Most definitely, the seasoned economist Dr. P.B. Jayasundera or just PB, the president's advisor, will lead it. He has proven himself, as Finance Advisor earlier, to be a competent policy director and on-time deliverer.

Also, under the previous administration, there were two related bodies: a Cabinet Committee on Economic Management or CCEM under the Premier in the first three years and a National Economic Council or NEC under the President in the two years. Both of these organizations focused on fire-fighting and economy-related micro-problems and failed to develop a coherent national plan. The current NPPC should avoid this drawback. It already has a relatively comprehensive economic policy that covers all sectors as initially designed by the Viyathmaga 
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Road & Transport Network Opportunities

Sri Lanka has an approximately 120,000-kilometer road network sufficient to meet 90% of transportation demand. The Road Development Authority (RDA) is responsible for the maintenance and development of national roads of the A and B classes and 4,480 bridges over the total length of highways. 

The regional councils were responsible for about another 15,000 kilometers of C and D-class highways. Local governments and other government and private institutions maintain and develop the balance.  The newly elected government aims to improve the following:

• Colombo-Kandy Expressway and the Port city elevated highway project will be extended and finished without further delays. The network will also connect Kottawa, Battaramulla, and Peliyagoda.
•  The government will also complete the Northern and Ratnapura expressway, while feasibility studies will be conducted to explore the possibility of having an elevated highway at 1000 feet connecting Kandy to Nuwara Eliya.
•  They will also incorporate an overtaking lane at intervals of 3-5KM to ease the traffic congestion in areas identified as bottlenecks.
•  The island-wide network of roads amounting to 120,000 KM, which includes all rural roads, has neither been developed nor maintained. Therefore, the entire road network that has fallen into a state of disrepair and neglect will be resurfaced and modernized to conform to international standards.
•  They will develop 100,000 KM alternative road system to facilitate a higher level of access to main roads and expressways, while all internal and rural access roads will be improved to facilitate access to the alternative road system.
•  They will modernize the Ceylon Transport Board (CTB) and make it a world-class transport service on par with any other developed country. The bus stands, located on prime land, will be developed alongside servicing and maintenance depots of such bus routes and networks for commercial purposes of generating revenue to the CTB.
•  They also intend to re-fleet the current bus stock and introduce environmentally friendly buses (electric and hybrid buses) to ply within the city limits of the New Colombo. All public and private transport providers will adopt this ‘Green Transport’ concept.
•  The government will introduce a single transport e-ticket system, i.e. multi-modal ticket, day tickets, etc.along with a process, and they will also implement an e-ticketing mechanism for all public and private transport services.
•  Develop and upgrade all train compartments, carriages, and clean and repair them and make them available to the public.
•  Colombo-Panadura-Veyangoda, Ragama-Katunayake-Negombo, and Maradana-Homagama rail lines will be converted into electric train routes and thereby ensure the provision of a luxury transport service similar to that planned for the buses, for the public.
•  E-ticketing system will be provided and introduced for all train transportation.
•  The railway will also be used to transport goods since it will help to minimize the traffic situation aggravated by container transportation via roads. They will provide assistance to import required locomotives and will establish a method to build trailers locally - trailers needed for cargo transportation. They will expand facilities necessary to transport cargo via trains to Colombo, Hambantota, Trincomalee, and Kankasanthurai ports.
• They will develop all key train stations, converting them into a functional, recreational, meeting, greeting and eating places, with malls and shops needed to provide consumers with a total travel experience

OSL Take: OSL, as the pro-active FDI generator to the island, now calls upon Chinese investors to partner with OSL to bid for Road network-related Projects open for investment through the PPP model. Have a free consultation with the biz-friendly OSL Team today to learn more about the scope available and the way to move forward.

VBS/AT/19122019/Z_TB3

New Approach in National Spatial System (Part 2)

• A9 with C9: Nine ‘C’ shaped Economic Corridors - The C shaped Economic corridor is undoubtedly a vital link in our economic planning process, as it entails creating essential market access points for our local and foreign investors. These commercial corridors will be developed integrating Colombo port, and Katunayake Airport, Hambantota port and Mattala airport, Kankasanthurai port, and the airport, as these are fundamental and core to making the “agro industrialization” growth strategy a reality as envisioned by our government.
• Re-engineering Townships - The urbanization process in Sri Lanka is uneven with distinct disparities between districts in the same province and between cities in the same area. We have been mindful of these disparities and their implications on overall development. Therefore, we propose an integrated physical spatial system to address these disparities in urbanization and change the structural pattern of our cities. 
• Four Multi-dimensional Commercial Cities - We will develop the leading commercial cities of Colombo, Hambantota, Jaffna, and Trincomalee, and establish them to be connecting centers of the national and international network, as they consist of ports and airports. 
• National Cities - Kandy, Anuradhapura, Gampaha, Ratnapura, Galle, Badulla, Mannar, Batticaloa, and Kurunegala have identified as cities that will develop as imperial cities in the master plan mainly because of their historical, social and economic value and their interconnectedness with the C zone. 
• Connecting Cities - Cities such as Puttalam, Negambo, Pothuvil, Dambulla, Matara, Nuwara Eliya, and Buttala will develop as connecting cities to the four multi-dimensional commercial national towns and cities. 
• Cluster Cities - The development of the four multi-dimensional commercial cities and the national cities will be accompanied by a program to develop cluster cities with information technology, knowledge, and tourism services that will also serve as conducive locations for urban living. 
• Development of a Metro Rail system to link the satellite cities in the Colombo district, including Port City: We intend to develop a Light Rail Transit (LRT) system, thereby enabling a mixed choice of transport, which would ease congestion in traffic and commuting. 
• The New Colombo beautification project would be undertaken by introducing beautiful urban forests, water gardens, and green eco belts on either side of the highways, thereby eliminating the visible concrete facades. We will also ensure that New Colombo will have an efficient garbage management system, a sewage and liquid waste management system as well as a water purification system. 
• Comfortable Travel  Nature-Friendly Transportation Network - Our government had assigned a high priority to the transport network in the country. The objective was to facilitate commuting and establish a road network that supported economic growth. However, public transport remains neglected, and much remains to be done to upgrade and develop the road network as well as the railway network. Our government will assign a high priority to improve the transport network and to provide an efficient and environmentally-friendly system to the public.

OSL Take: The aggressive development program that covers all vital economic sectors islandwide undertaken by the government of Sri Lanka has created many business/investment opportunities in the country. Infrastructure development projects have been given much prominence, while multilateral donor agencies have come forward to provide funding for these programs. Foreign businesses could, therefore, explore business opportunities in Sri Lanka’s development program.

VBS/AT/19122019/Z_TB2

Energy Sector Opportunities

The government of Sri Lanka strives for a country that is self-sufficient in electricity by 2030. The target is to raise the country's power generation capacity from the current 4,000 MW to 7,000 MW by 2025 with a substantial renewable energy increase.

Sri Lanka has already achieved a 98 percent grid coverage, which is relatively high according to South Asian standards.  There are three primary sources of electricity generated in Sri Lanka: thermal power (including coal and fuel oil), hydropower, and other non-conventional renewable energy (solar power and wind power). (Data Source: Ministry of Power and energy). The newly elected government aims to expand the following areas in the power sector:

Expedite the exploration of natural gas identified in the three zones of the geological survey, to ensure that the people of this country would reap the benefits in the next three years.

The oil refinery located in Kolonnawa, which is 40 years old, will be modernized. The oil storage tanks in Trincomalee will also be re-constructed and developed to enable them to contribute to the economic progression of the country.

According to the current plan, we will take action to add 230MW of power to the national grid by installing the Broadland hydropower station by 2020, Uma Oya by 2021, Moragolla by 2023, Talapitigala and Seethwaka by 2024.

Immediate actions will be taken to convert the Kelanitissa plant to a natural gas turbine plant, where similar two plants will establish in Kerawalapitiya and Hambantota before 2023. As part of the environmental-friendly policy, they will convert the fuel-powered plants located around the Colombo area to natural gas turbine plants within the next year.

They will develop a Smart Grid to ensure that all power plants operate at maximum efficiency and utilization.

They will add 100MW of wind energy in Mannar by 2021. Additionally, we expect to add 800MW of solar energy to the national grid by executing a wind and solar power project with a public-private partnership in potential locations around the country, including Mannar, Poonareyn and Monaragala.

Rooftop solar systems will be encouraged so that households and small businesses would have access to low-cost energy, a possible feat in the course of the next five years. The total cost of such investments would be made available through bank loans with low/concessional interest rates. The government will also introduce a new method to release excess power generation to the national grid in improving solar energy utilization.

They will remove all impediments and incentivize the private sector and entrepreneurs interested in setting up renewable energy projects, i.e., solar and wind, and to this end, the government will assist.

They will also introduce an efficient energy generation program using industrial waste in each city.

They will introduce new policies and legislation to ensure the efficient use of energy in the construction sector.

OSL Take: The looming power crisis in Sri Lanka has resulted in the opening up of many business/investment opportunities in the country’s power and energy sector. The government of Sri Lanka is continuously exploring solutions to address the rapidly increasing demand for electricity. The government is also focusing on sustainable energy generation methods. Therefore, Sri Lanka’s power and energy sector is a hotbed for business/investment opportunities.

VBS/AT/19122019/Z_TB1

New Approach in National Spatial System (Part 1)

The C shaped Economic corridor is undoubtedly a vital link in our economic planning process, as it entails creating essential market access points for our local and foreign investors.

 These commercial corridors will develop integrating Colombo port and Katunayake Airport, Hambantota port, and Mattala airport, Kankasanthurai port, as these are fundamental and core to making the “agro industrialization” growth strategy a reality as envisioned by the newly elected government. Foreign investors could explore opportunities in:

• Four Multidimensional Commercial Cities – The newly elected government will develop the leading commercial cities of Colombo, Hambantota, Jaffna, and Trincomalee and link them with the airports and ports as an economic corridor that will establish an internal and international network. 
• New Colombo  Commercial and Financial Hub - The new landmass added by the Port City Project has given new hope and is now the “New Colombo” of the 21st century. It is now a center for global commerce, trade finance, and banking. We will expedite the stalled development of this new city and fast track the introduction of legal and financial provisions to make it a commercial and business center.
• Renewable Energy - Renewable energy has now become a widely discussed subject. It is needed as part of the overall energy mix of a country, which consists of Hydro, Thermal, Coal, and alternative renewable energies. It will ensure that the country has access to low-cost energy needed for rapid economic acceleration.
• Water-Water resource management has become an important discussion point and is vital for economic development. Only 45% of the population has access to the water supply. Waterways have also been polluted, thereby compounding the problem of providing safe drinking water to all. The newly elected government intends to meet this challenge and thus ensure the supply of clean, safe pipe-borne water to 100% of the population.
• Train Transport Services - The newly elected government will repair existing rail tracks in line with the program of adding value to train services; the Sri Lanka Railway Authority will be given adequate powers to ensure that they provide an efficient, clean, and reliable train service to the general public and tourists. 
• Integrated Road Network - The newly elected government will continue to build on their development plans to ensure that all road networks that remain unfinished are completed and connected to the respective economic corridors.
• Hambantota Port - The newly elected government will develop the port, making it an international Industrial and Services Port port for technical services, ship maintenance, and repair, ship handling, etc., thereby catering to all vessels. 
• Developing Airports - Mattala airport facilities will be upgraded further, including adding a new taxiway; we will also discuss with international airlines and commence commercial operations. 
• Disaster Management - Privative measures and early warning systems must be in place to minimize the loss of lives to property and economic damage. The internal system must function in a synchronized manner in such times of disaster to ease the distress of the people affected by such events.

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Ports and Air Services Opportunities

The newly elected government aims to develop Colombo-Katunayake and Hambantota Mattala air and seaports as commercial and passenger ports. 

We will also convert these locations into free ports to encourage local entrepreneurs and overseas channel investments into these areas. Foreign investors could explore investment opportunities in the following areas:

• The Port of Colombo is a national asset, and it must be upgraded to handle transshipment business volumes, thereby doubling the TEU capacity. Priority will be given to the East Terminal development project by our government. We will conduct a feasibility study to construct a new cross berth terminal between East Container Terminal and SAGT. The West Container Terminal, too, would be developed with private sector participation.
• They will also use rail transportation to its full potential for the transporting of containers, as this is important given that it would reduce the congestion around the city limits. A network of three Container Depots would be developed in Peliyagoda, Veyangoda, and Ratmalana immediately with the participation of the private sector.
•  Hambantota port is a state-owned asset and is regarded as a tactical asset. The intention was never to offer or lease the port for 99 years. The newly elected government will make it an urgency to revisit the already signed contract with the Chinese authority and explore ways as to how best we could bring about a win-win for the two countries.
• They will develop Hambantota port as a Worldwide, Industrial, and Services Port and establish facilities for regional companies to provide services such as Ship maintenance and repair, ship handling, etc., to cater to all vessels.
• All physical infrastructure requirements of the Hambantota Free Trade Zone will be provided by the government to facilitate the commencement of operations.
•  The government will develop Kankasanthurai and Trincomalee ports according to the requirements of each region and to facilitate the needs of national economic corridors.
•  The government will develop the second runway and passenger terminal without any further delay. A new Domestic passenger terminal will be designed to facilitate internal/ domestic flights.
•  They will upgrade Mattala airport facilities while adding a new Taxiway and Cargo Terminal. We will also hold discussions with international airlines to commence commercial operations.
•  They will develop all other domestic airports and passenger terminals, enabling internal transportation, tourism, and movement of people. Coverage will also include Nuwara Eliya.

OSL Take: The focus of the government of Sri Lanka is on making the country a maritime hub in the Indian Ocean region. The latest achievements of the Colombo and Hambantota Ports indicate that the country is closing in on achieving the target. The port already has an industrial zone on the premises, which provides an ideal business space for companies engaged in exports and logistics.

All these developments would help Sri Lanka engage in trade activities with other countries. On the other hand, Sri Lanka could attract more cruise liners to the state by developing other harbors around the country and developing the required infrastructure facilities. Foreign businesses/investors should explore the increasing investment opportunities in Sri Lanka's ports and shipping sector.

VBS/AT/17122019/Z_TB1 

Sri Lankan business confidence rises amidst appointment of the newly elected President

The business community of Sri Lanka has expressed hope that the new president of the country will move forward with open market reforms, create a favourable environment for local industries, and attract foreign direct investment. On Sunday afternoon, Sri Lankan Election Chief Mahinda Deshapriya confirmed opposition candidate Gotabaya Rajapaksa winning Saturday's presidential election.

Kosala Wickramanayake, Current President of the International Business Council, commented that the business community hoped that Rajapaksa would accelerate the growth of infrastructure projects, attract more foreign direct investment, and provide a stable policy climate. "The international business community welcomes the change," Wickramanayake said.

Meanwhile, Kantha Karunaratne, Chairman and Managing Director of Imperial Teas Group and Chairman of Colombo Tea Traders Association, commented that exporters would look to new leadership to reduce operating costs, increase access to credit, eliminate unfair taxes and provide policy assistance to make local exports competitive on the international market.

"The business community recognises people's choice, and we are ready to work with the new leadership to grow the country's economy," said Karunaratne. According to Siri Hettige, University of Colombo's emeritus professor of sociology, the new president "will have to bridge the widening inequality between communities and bring about economic reforms to industrialise the country."

Rajapaksa won more than 6.9 million, or 52 per cent of the vote, beating his ruling party rival Sajith Premadasa, who won more than 5.5 million, or 42 per cent of the vote. Rajapaksa promised to serve all groups irrespective of their ethnicity and religious identity after the final election results announced, declaring him the winner.  The Business Chambers congratulated Gotabaya Rajapaksa, Sri Lanka's 7th-elected Executive President, and expressed confidence that he would work towards the nation's prosperity.

OSL Take: The Colombo Stock Exchange (CSE) experienced a bullish sentiment for the second consecutive day after the presidential election, which was primarily contributed by JKH and CCS. The All Share Price Index (ASPI) benchmark index closed for the day at the peak of 6,129, adding 107 points throughout the year. Parcel trades made in JKH, CARG, COMB, and HNB reflect a 10 per cent increase in turnover above a 2-month average. Net sellers amid intense international activity tended to be foreigners.

The secondary bond market encountered a bullish feeling with intense buying pressure across the board, resulting in the yield curve turning downwards with the results of the presidential election. The Sri Lankan rupee ended at 179.50/60 higher, while the gold yields eased pushed by buying, brokers, and dealers. The rupee closed on Friday to the greenback at 180.25/30 on the spot market.

The fact that the CSE has achieved a daily turnover crossed Rs.2.4 billion mark in the Sri Lankan stock market– a new record for the first month of any given year, indicates the growing foreign investments in the country. Foreign investors who have not yet invested in Sri Lanka could take a look at the performance of the country’s economy and its international relations to invest in the Sri Lankan economy.