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Sunday May 26th, 2024

Sri Lanka chamber chief suggests policy reforms

ECONOMYNEXT – For Sri Lanka to move out of its dollar and debt crisis, it needs to attract new investors to the country by portraying as a investor friendly country with returns, a business leader said.

“What we need at this point is export dollars, foreign exchange and get us out of the debt trap that we are in,” VishGovindasamy, the newly elected president of Ceylon Chamber of Commerce said.

“This means SriLanka has to be portrayed around the world for investors to come and invest in Sri Lanka.”

Govindasamy is also the managing Director of Sunshine Holdings PLC, a diversified conglomerate listed in the Colombo Stock.

“While we portray that, we as a nation we must also make sure that we are investor friendly and the people who come here to invest get the benefit of the investment and go forward,” he said.

He made these comments at a virtual press brief held to introduce the new office bearers of Ceylon Chamber of Commerce.

New Finance Minister

The Chamber of Commerce has presented to the newly appointed finance minister key short term and long term structural reforms that needs to be taken up.

Chamber has requested the minister to allow some flexibility in the exchange rates and not hold it at particular levels.

“We requested that there be a greater flexibility in the exchange rate and not to hold it at a particular levels, this way the economic conditions will take care of what happens,” he said.

Chamber also feels that there is a disparity between Sri Lanka rupee interest and the US dollar interest.

“We suggested that the minister to consider increasing the local interest rates by 25 to 50 basis points so that will take away the arbitrage that is going around and get the exporters to bring in their dollars.”

“And suggested that seeking support from IMF will be good.”

Economists and analysts however have pointed out that Sri Lanka has a fundamentally flawed monetary regime coming from a Latin America style central bank with anchor conflicts (targeting a domestic inflation index while collecting reserves by intervening in forex markets either to buy or sell dollars actions which change the monetary base).

Though the rupee has been depreciated from 4.70 to below 200 it has not solved the problem. A so-called ‘flexible exchange’ was depreciated from 131 to 182 from 2015 to 2019 amid liquidity injections apparently to target inflation (flexible inflation targeting).

However the rupee is still falling.

Without reforming the monetary regime, it will not be possible to have free trade analysts and economists have said.

Sri Lanka has been hit by trade and exchange restrictions since the Latin America style central bank was set up in 1950.

Trade Restrictions

The other suggestions they have made to the minister are that to systemically ease restriction on capital and intermediary goods for economic growth, to give priority to tourism and export sector.

To look in to cost of living and make sure there is good distribution of food supply and there is no food shortage and to make available enough foreign exchange for the export sector to bring their raw materials while giving priority to the tourism sector.

Govindasamy says the loan moratoriums given to tourism sector should be extended beyond September.

“We also encouraged the government to have a global tourism promotion by late 2021 to early 2022,” he said.

To implement and speed up the suggested reforms, Chambers want the government to set up a secretariat in the median term.

In addition, chamber wants Sri Lanka to attract FTAs from European countries especially UK.

Chamber says after UK separated from EU they have started many FTAs in African region.

“So what we felt was, UK being of the largest export destinations both for apparel and seafood and many other supplies it would be a good thing.”


Meanwhile chambers has met with the former foreign minister Dinesh Gunawardena to discuss about the GSP plus issue and how Sri Lanka could work around the issues that the EU parliament is raising.

“We asked the minister to separate out the geopolitics that is there and the trade. If we were to separate that out maybe we can focus on the trade and what needs to be done.”

The minister had assured that most of the of these countries who have similar issues tend to keep business relationship separate and continue.

“Which was a positive thing,” Govindaswamy said.

He further added that there are a lot of opportunities with different business parks being created.

“The pharmaceutical and services park that is being created in Hambantota. There will be a lot opportunities there.”

Chamber proposes to set up large export houses in the country while promoting tourism, exports and remittance that bring foreign exchange to Sri Lanka.

“Some of the countries like Vietnam have done that and they are successful so we have to go seek some of these large export houses so that we can have a much more bigger export out of Sri Lanka and because our location, literacy and production we seriously think its possible.”

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Sri Lanka power outages from falling trees worsened by unfilled vacancies: CEB union

HEAVY WINDS: Heavy rains and gusting winds have brought down trees on many location in Sri Lanka.

ECONOMYNEXT – Sri Lanka’s power grid has been hit by 300,000 outages as heavy winds brought down trees, restoring supply has been delayed by unfilled vacancies of breakdown staff, a union statement said.

Despite electricity being declared an essential service, vacancies have not been filled, the CEB Engineers Union said.

“In this already challenging situation, the Acting General Manager of CEB issued a circular on May 21, 2024, abolishing several essential service positions, including the Maintenance Electrical Engineer in the Area Engineer Offices, Construction Units, and Distribution Maintenance Units,” the Union said.

“This decision, made without any scientific basis, significantly reduces our capacity to provide adequate services to the public during this emergency.

“On behalf of all the staff of CEB, we express our deep regret for the inconvenience caused to our valued customers.”

High winds had rains have brought down trees across power lines and transformers, the statement said.

In the past few day over 300,000 power outages have been reported nationwide, with some areas experiencing over 30,000 outages within an hour.

“Our limited technical staff at the Ceylon Electricity Board (CEB) are making extraordinary efforts to restore power as quickly as possible,” the union said.

“We deeply regret that due to the high volume of calls, there are times when we are unable to respond to all customer inquiries.

“We kindly ask consumers to support our restoration teams and to report any fallen live electrical wires or devices to the Electricity Board immediately without attempting to handle them.

The union said there were not enough workers to restore power quickly when such a large volume of breakdowns happens.

“We want to clarify that the additional groups mentioned by the minister have not yet been received by the CEB,” the union said.

“Despite the government’s designation of electricity as an essential service, neither the government, the minister in charge, nor the CEB board of directors have taken adequate steps to fill the relevant vacancies or retain current employees.

“We believe they should be held directly responsible for the delays in addressing the power outages due to the shortage of staff.”

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Melco’s Nuwa hotel to open in Sri Lanka in mid-2025

ECONOMYNEXT – A Nuwa branded hotel run by Melco Resorts and Entertainment linked to their gaming operation in Colombo will open in mid 2025, its Sri Lanka partner John Keells Holdings said.

The group’s integrated resort is being re-branded as a ‘City of Dreams’, a brand of Melco.

The resort will have a 687-room Cinnamon Life hotel and the Nuwa hotel described as “ultra-high end”.

“The 113-key exclusive hotel, situated on the top five floors of the integrated resort, will be managed by Melco under its ultra high-end luxury-standard hotel brand ‘Nuwa’, which has presence in Macau and the Philippines,” JKH told shareholders in the annual report.

“Melco’s ultra high-end luxury-standard hotel and casino, together with its global brand and footprint, will strongly complement the MICE, entertainment, shopping, dining and leisure offerings in the ‘City of Dreams Sri Lanka’ integrated resort, establishing it as a one-of-a-kind destination in South Asia and the region.”

Melco is investing 125 million dollars in fitting out its casino.

“The collaboration with Melco, including access to the technical, marketing, branding and loyalty programmes, expertise and governance structures, will be a boost for not only the integrated resort of the Group but a strong show of confidence in the tourism potential of the country,” JKH said.

The Cinnamon Life hotel has already started marketing.

Related Sri Lanka’s Cinnamon Life begins marketing, accepts bookings


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Sri Lanka to find investors by ‘competitive system’ after revoking plantations privatizations

ECONOMYNEXT – Sri Lanka will revoke the privatization of plantation companies that do not pay government dictated wages, by cancelling land leases and find new investors under a ‘competitive system’, State Minister for Finance Ranjith Siyambalapitiya has said.

Sri Lanka privatized the ownership of 22 plantations companies in the 1990s through long term leases after initially giving only management to private firms.

Management companies that made profits (mostly those with more rubber) were given the firms under a valuation and those that made losses (mostly ones with more tea) were sold on the stock market.

The privatized firms then made annual lease payments and paid taxes when profits were made.

In 2024 the government decreed a wage hike announced a mandated wage after President Ranil Wickremesinghe made the announcement in the presence of several politicians representing plantations workers.

The land leases of privatized plantations, which do not pay the mandated wages would be cancelled, Minister Siyambalapitiya was quoted as saying at a ceremony in Deraniyagala.

The re-expropriated plantations would be given to new investors through “special transparency”

The new ‘privatization’ will be done in a ‘competitive process’ taking into account export orientation, worker welfare, infrastructure, new technology, Minister Siyambalapitiya said.

It is not clear whether paying government-dictated wages was a clause in the privatization agreement.

Then President J R Jayewardene put constitutional guarantee against expropriation as the original nationalization of foreign and domestic owned companies were blamed for Sri Lanka becoming a backward nation after getting independence with indicators ‘only behind Japan’ according to many commentators.

However, in 2011 a series of companies were expropriation without recourse to judicial review, again delivering a blow to the country’s investment framework.

Ironically plantations that were privatized in the 1990s were in the original wave of nationalizations.

Minister Bandula Gunawardana said the cabinet approval had been given to set up a committee to examine wage and cancel the leases of plantations that were unable to pay the dictated wages.


Sri Lanka state interference in plantation wages escalates into land grab threat

From the time the firms were privatized unions and the companies had bargained through collective agreements, striking in some cases as macro-economists printed money and triggered high inflation.

Under President Gotabaya, mandating wages through gazettes began in January 2020, and the wage bargaining process was put aside.

Sri Lanka’s macro-economists advising President Rajapaksa the printed money and triggered a collapse of the rupee from 184 to 370 to the US dollar from 2020 to 2020 in the course of targeting ‘potential output’ which was taught by the International Monetary Fund.

In 2024, the current central bank governor had allowed the exchange rate to appreciate to 300 to the US dollar, amid deflationary policy, recouping some of the lost wages of plantations workers.

The plantations have not given an official increase to account for what macro-economists did to the unit of account of their wages. With salaries under ‘wages boards’ from the 2020 through gazettes, neither employees not workers have engaged in the traditional wage negotiations.

The threat to re-exproriate plantations is coming as the government is trying to privatize several state enterprises, including SriLankan Airlines.

It is not clear now the impending reversal of plantations privatization will affect the prices of bids by investors for upcoming privatizations.

The firms were privatized to stop monthly transfers from the Treasury to pay salaries under state ownership. (Colombo/May25/2024)

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