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Wednesday February 1st, 2023

Sri Lanka auto garages lobby regulations for domestic protection

ECONOMYNEXT – Sri Lanka should bring regulations to control the fixing of cars with spares and body parts by dealers instead of repairing and repainting, which results in job losses to service workers, an industry official has said.

“Car dealers doesn’t provide the tinkering or other repair services because even for a small repair what they do is replacing the parts,” Sri Lanka Automobile Services Providers Association President, Amal Piyatilake said at group’s annual general meeting.

“The tinkering craft is no longer there in foreign countries. That is why they sell their vehicles if they get damaged after using it for several years. It is much cheaper than repairing it.”

“This has affected the livelihood of the laborers that are working in this industry.

“Sri Lanka is still a developing country and we still need this craft, there are still people who are depending on it.”

Piyatilake claimed that parts imports were depreciating the rupee.

However economists and analysts have called for central bank reforms to stop rapid depreciation which began in 1951 with the setting up of a so-called soft-peg where the exchange rate and interest rate is simultaneously targeted.

Changing World

In the last two decades, small garages started to fix cars using second hand parts brought from Japan, instead of using brand new parts saving time but reducing the time spent on repairing individual parts by mechanics.

In Sri Lanka especially during import controls of the 1970s, it was the practice to turn out parts at lathe machines which take time, leaving cars idle at garages for long periods.

A car owner whose bumper had been damaged in a mishap with a three wheeler said he had no problems with parts being replaced instead of repainted.

“The insurance company was willing to pay for it,” he said. “It looks completely new, so I have no problem with it.

Auto repairers say they are losing business to the main agents and wants regulations to maintain their position.

Another official said from the total accident cases of private vehicles, 80 to 88 percent come to the individual garages and workshops but from the total insurance claim value 60 percent will be acquired by the car agents in Sri Lanka.

Regulations to save tinkers

Meanwhile Piyatilake said the SLASPA will discuss with the state Motor Traffic Department to bring new regulations.

“There are 17 different industries related to the automobile services. We are planning to get every sector under one regulated industry,” he said.

Sri Lanka Motor Traffic Department, Assistant Commissioner, J.A.S. Jayaweera said the regulating of the industry will be done in the near future as soon as the new laws pass.

“There was no regulation for this industry from 1951,” Jayaweera said. “There for we decided to do that now. The rules and regulations were too narrow to do that earlier.”

Many people are leaving the mechanic and tinker business. Jayaweera blamed this on lack of regulations.

“Because there is no job recognition in the industry,” he claimed. “To get that recognition we should regulate under someone.”

Jayaweera said within the next two month the industry will be regulated under the Motor Traffic Department.

It is not known whether an opinion survey had been done to find why people are leaving the industry, whether it is due to lack of regulation or there are also other reasons, which cannot be solved by regulations.

In Sri Lanka many sectors including construction and factories are finding it hard to find workers, with young people no longer wanting to engage in blue collar jobs, either due to pay, working conditions, or different aspirations.

It is not clear whether regulations will change the outlook of job seekers.

Regulatory Capture

It is also not clear whether the regulations, lobbied for by a section of the regulated will benefit the consumer or whether it will simply benefit a section of the auto industry by reducing competition.

Due to lack of a permanent and independent public service, many agencies in Sri Lanka have been subject to regulatory capture – serving special interests – and had ended up backfiring on consumers, critics have said.

Similar situations have occurred in other countries, requiring de-regulation to promote change, innovation, lower costs, and efficiency.

“The regulatory capture means that the regulations imposed by governments for the benefit of the public are being captured by those who are to be regulated or by others who stand to gain out of regulatory mechanisms,” economist W A Wijewardene explains.

“Since the regulations now serve not the public but those who are supposed to be regulated, the whole regulatory mechanism has been captured by them and that process is termed regulatory capture.

“Hence, by allowing these groups to run an economy, societies lose on two counts. Count number one is that the objectives of the regulatory mechanism are not realized and they simply become a waste of public funds.

“Count number two is the more stressful development: It says that the regulatory mechanisms, however much they are well-intentioned, create a class of people who prey as predators on the honest work of the members of the society.

“This class consists of politicians who are paid for by groups intending to capture the regulators, people on the regulatory agencies themselves and businesses and people who capture the regulators. (Colombo/ Mar01/2020)

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Sri Lanka shares edge up at close

ECONOMYNEXT- Sri Lanka’s shares edged up on Wednesday pushed as investors bought in to beaten down shares following the previous session’s drop, market analyst said.“

At this price level what we are seeing is a lot of confidence from the investors to collect when the prices drop. So, the market is not falling sharply,” a market analyst said.

Market had also seen buying in Expolanka shares on speculation that the parent company of SG Holdings was buying back into the shares.

All Share Price Index (ASPI) edged up by 0.96 percent or 84.96 points to 8,950.01.

The most liquid index S&P SL20 gained 1.27 percent or 35.02 points to 2,799.53.

Banking and Insurance counters had seen interest on the back of positive sentiments from the IMF.

The central bank has said it could cut interest rates in future when the the country sees fall in inflation, which has already started decelerating.

The market saw a turnover of 1.5 billion rupees today,lower than the month’s daily average of 1.8 billion rupees and nearly half of 2022 average turnover of 2.9 billion rupees.

The bourse saw a flow of net foreign inflow of 45 million rupees extending the net offshore buying to 1.9 billion so far this year.

Top gainers of the day were Commercial Bank, Expolanka, and Ceylinco Insurance. (Colombo/Feb01/2023)

 

 

 

 

 

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Sri Lanka bond yields down at close

ECONOMYNEXT – Sri Lanka’s bond yields were down at close following a bond auction on Wednesday, dealers said while a guidance peg for interbank transactions remained unchanged.

“The rates were steady at the auction,” a dealer said.

“This can be a signal to the market saying the rates will go down in the future.”

A bond maturing on 01.07.2025 closed at 32.40/60 percent, down from yesterday’s 32.60/85 percent.

A bond maturing on 01.05.2027 closed at 29.10/35 marginally down from yesterday’s 29.20/75 percent.

The Central Bank’s guidance peg for interbank US dollar transactions remained unchanged at 362.14 rupees against the US dollar.

Commercial banks offered dollars for telegraphic transfers at 371.38 rupees on Friday, data showed. (Colombo/Feb 01/2022)

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Sri Lanka bill auction hits pothole after 2025 bond spike

ECONOMYNEXT – Sri Lanka sold only 45 billion rupees in Treasury bills at Wednesday’s auction after offering 120 billion rupees, data from the state debt office showed, amid market confusion over a spike in a two year bond at an earlier action.

30.1 billion rupees of 3-month bills were sold at 29.91 percent, unchanged from a week earlier after offering 60 billion rupees for auction.

5.1 billion rupees of 6-month bills were sold at 28.72 percent, flat after offering 30 billion.

10.3 billion rupees of 12-month bills were sold at 27.72 percent after offering 30 billion.

Phase II subscriptions have been opened.

The market was foxed after the 2025 bonds were accepted at sharply higher yield than market on January 30, dealer said.

There was further confusion as the there was an outright purchase of 2025 at around 29 percent earlier in January.

Some investors speculated that the authorities were trying to drive more buyers towards short end bonds as bill volumes were getting larger. (Colombo/Feb01/2023)

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