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Germany presses for lifting Sri Lanka foreign ownership limits in logistics

Aug 30, 2019 10:38 AM GMT+0530 | 0 Comment(s)

ECONOMYNEXT – German logistics companies are keen to invest in Sri Lanka, given its location and transport infrastructure, but want foreign ownership limits removed on shipping agency and freight forwarding businesses, officials said.

Visiting Germany Vice-Minister, Federal Ministry of Transport and Digital Infrastructure, Germany Steffen Bilger said Sri Lanka was strategically located in the Indian Ocean along the Asia – Europe sea route.

“It can be the gateway to south Asia and south east Asia like Germany is to Europe. We should do business with each other instead of imposing reciprocal tariffs,” he told a logistics forum where German companies were represented.

“We are both interested in the further development of co-operation between Germany and Sri Lanka. This is a good basis for co-operation. We can benefit from each other.”

Bilger said Colombo port’s recent growth was impressive and serves as an example of the island’s potential in the logistics sector.

“Colombo port’s expansion is progressing and the country is also blessed with other ports like Trincomalee and Hambantota. This creates much potential. We hope German companies also benefit,” he told the ‘German-Sri Lankan Logistic Conference 2019’ organized by the Delegation of German Industry and Commerce in Sri Lanka.

Andreas Hergenroether, Chief Delegate of German Industry and Commerce in Sri Lanka, said there was a lot of opportunity to set up Colombo and Hambantota ports as regional logistics and future trading hubs.

German logistics firms were keen to invest but restrictions on foreign ownership were needed to draw investments, he said.

Multinational shipping and freight forwarding companies have been pushing for the removal of the 40 percent limit on foreign ownership of shipping agencies and freight forwarders which Sri Lanka’s government has also said it was committed to. .

“A lot of companies are still waiting for liberalization,” Hergenroether said. “It is important for German freight forwarders and shipping lines that the 40 percent foreign shareholding limit in freight forwarding firms and shipping agencies is relaxed.

”The liberalization of these sectors will be definitely conducive for more investment and will increase the importance of port infrastructure in Colombo.”

Logistics have been a priority for Germany for decades and German companies could be strategic partners in Sri Lanka,” Hergenroether said.

“German has been ranked number one in the World Bank’s logistics performance index for many years. There is huge potential for German – Sri Lanka co-operation.”
(COLOMBO, 30 August 2019)

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A new Sri Lanka monetary law may have prevented 2019 tax cuts?

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The bill for the central bank law was ready in 2019 but the then administration ran out of parliamentary time to enact it, he said.

Economists backing the new administration slashed taxes in December 2019 and placed price controls on Treasuries auctions bought new and maturing securities, claiming that there was a ‘persistent output gap’.

Coomaraswamy said he keeps wondering whether “someone sitting in the Treasury would have implemented those tax cuts” if the law had been enacted.

“We would never know,” he told an investor forum organized by CT CLSA Securities, a Colombo-based brokerage.

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A reserve collecting central bank which injects money to push down interest rates as domestic credit recovers triggers forex shortages.

The currency is then depreciated to cover the policy error through what is known as a ‘flexible exchange rate’ which is neither a clean float nor a hard peg.

From 2015 to 2019 two currency crises were triggered mainly through open market operations amid public opposition to direct purchases of Treasury bills, analysts have shown.

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Past deficits can be monetized as long as open market operations are permitted through outright purchases of bill in the hands of banks and other holders.

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Under the new law members of the monetary board will be appointed by the country’s Constitutional Council replacing the current system of the Finance Minister making appointments.

“It will be a bipartisan approach,” Governor Weerasinghe told an investor forum organized by CT CLSA Securities, Colombo-based brokerage.

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The law will also make macro-prudential surveillance formally under the bank.

There will be two governing boards, one for the management of the agency and one to conduct monetary policy.

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