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Sunday January 29th, 2023

Sri Lanka eyes post-Coronavirus tourism with tighter visa, health rules

FILE PHOTO – Tourists on the Southern coastline

ECONOMYNEXT – Sri Lanka is making plans draw tourists after a Coronavirus crisis, with a raft of new operating rules for hotels, transport and visa to cut changes of the virus being transmitted and protect workers and their families, a tourism official said.

“The visa process will be changed. When you turn up you will not be able to have visa,’ Kimarli Fernando, Chairperson, Sri Lanka Tourism told an online forum organized by Advocata Institute, a Colombo-based think tank.

“Everyone will need to apply for visa two weeks before arrival and all will be requested to undergo a test which will be selected at the discretion of the Health Ministry.

“We will ask the tourists’ to book their accommodations. It has not been finalized yet but we are suggesting that all tourists adhere to this.”

Sri Lanka’s tourist arrivals had dropped 70.8 percent from a year earlier to 71,370 in March 2020, amid a Coronavirus crisis, with borders closed for arrivals from March 19.

Industry officials said it may take about a year to recover but they are already getting bookings for January.

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Sri Lanka hotels brace for 12-month slump on Covid-19 hit

Digital Track

An app is being developed to track and provide situational information on Sri Lanka’s Covid-19sitution to tourists.

This app would be available for download at the Sri Lanka tourism official website. Fernando said that the software would not be used to reference or market any hotel or service provider but to simply act as a mode of getting information..

“When tourists arrive in the airport we will know all the information about them, where they have traveled and so on and so forth,” Fernando said. “And then on arrival they will be subjected to enter the medical tests which will happen at our cost.”

“After this process, tourists who are tested healthy will proceed onto immigration where all normal procedures will take place and they will be given an app which when registered in gives all the information on Sri Lanka and all the certified hotels in regard to Covid-19.”

“We will also have certified transport too which we will look into and after that when they enter their hotels there will be a detailed protocol to be followed,” she said.

“There will be strict guidelines given to hotels on how housekeeping should be done while adhering to all Covid-19 preventive methods.

“If in any case we are not happy with the health status of a guest we will have army commanded 4star or 5star quarantine hotels which would charge whatever the dollar price you would charge and get them quarantined.”

Any tourist who tests negative to Coronavirus can develop the disease within the next 14 days.

Premium Quarantine

Until Vietnam closed borders to take the pressure off contact tracers in the current Coronavirus crisis, tourist who arrived in the country could choose between military run free quarantine centres or ‘premium’ private quarantine from budget to 5-star.

Around 270 hotels signed up for the scheme, though not all were approved at the time inbound arrivals were halted. At some hotels food was served by robot waiters.

Of the 268 Coronavirus cases discovered up to April 17 and treated about 160 were foreigners. Many have been released from hospital.

Meanwhile Fernando said hotel staff will be quarantined prior to returning to their villages in order to prevent any risks.

“A separate guideline for hotel staff is being drawn up, where we will specify whether there should be an approved doctor present and other processes like full quarantine process before the staff go back home,” she said.

“The last thing we need is a hotel staff returning to their villages and infecting the entire area,” she said.

Fernando said that the tourist board has looked at Singapore models on this regard.

Singapore however has some community transmission and had 9,125 cases so far and 11 deaths.

Vietnam, which had aggressive contact tracing and completely eradicated the disease during the Wave I influx from China in January and February. In the last five days zero new cases had been found and 216 are in hospital. None had died.

Vietnam’s neigbhour, Cambodia, is also contact tracing. (Colombo/Apr22/2020)

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Sri Lanka operators seek higher renewable tariffs, amid exchange rate expectations

ECONOMYNEXT – Sri Lanka’s renewable companies say they need tariff of 40 to 45 rupees a unit to sell power to the Ceylon Electricity Board and the agency owes them tens of billions of rupees for power sold in the past.

The association has strong exchange rate expectations based on the country’s dual anchor conflicting monetary regimes involving flexible inflation targeting with a reserve collecting target.

“In the coming year of course because of the rupee devaluation, I think the solar energy sector might require tariffs closer to RS 40 or RS 45, hydropower will also require tariffs on that scale,” Prabath Wickremasinghe President of the Small hydropower Developers Association told reporters.

“I think right now what they pay us is averaging around RS 15 to RS 20.”

Some of the earlier plants are paid only 9 rupees a unit, he said. The association there is potential to develop around 200 Mega Watts of mini hydros, 700 to 1000MW of ground mounted soar and about 1,000 rooftop solar.

In addition to the rupee collapse, global renewable energy costs are also up, in the wake of higher oil prices in the recent past and energy disruption in Europe.

The US Fed and the ECB have tightened monetary policy and global energy and food commodity price are now easing.

However in a few years the 40 to 45 rupee tariffs will look cheap, Wickremesinghe pointed out, given the country’s monetary policy involving steep depreciation.

From 2012 to 2015 the rupee collapsed from 113 to 131 to the US dollar. From 2015 to 2019 the rupee collapsed from 131 to 182 under flexible inflation targeting cum exchange rate as the first line of defence where the currency is deprecated instead of hiking rates and halting liquidity injections.

From 2020 to 2022 the rupee collapsed from 182 to 360 under output gap targeting (over stimulus) and exchange rate as the first line of defence.

“The tariffs are paid in rupees,” Wickremasinghe said. With the rupee continuing to devalue in other 5 years 40 rupees will look like 20 rupees.”

Sri Lanka has the worst central bank in South Asia after Pakistan. Both central banks started with the rupee at 4.70 to the US dollars, derived from the Reserve Bank of India, which was set up as a private bank like the Bank of England.

India started to run into forex shortages after the RBI was nationalized and interventionist economic bureaucrats started to run the agency. Sri Lanka’s and Pakistan’s central bank were run on discretionary principles by economic bureaucrats from the beginning.

The Central Bank of Sri Lanka was set up with a peg with gold acting as the final restraint on economic bureaucrats, but it started to depreciated steeply from 1980 as the restraint was taken away.

Now under so-called ‘exchange rate as the first line of defence’ whenever the currency comes under pressure due to inflationary policy (liquidity injections to target an artificially low policy rate or Treasuries yields) the currency is depreciated instead of allowing rates to normalize.

Eventually rates also shoot up, as attempts are made to stabilize the currency which collapses from ‘first line of defence’ triggering downgrades along the way.

After the currency collapse, the Ceylon Electricity Board, finances are shattered and it is unable to pay renewable operators.

Unlike the petroleum, which has to stop delivery as it runs out of power, renewable operators continue to deliver as their domestic value added is higher.

However they also have expenses including salaries of staff to pay.

The CEB which is also running higher losses after the central bank printed money and triggered a currency collapse, has not settled renewable producers.

“In the meantime, we have financial issues with the investors and CEB owns more than 45 million rupees in the industry,” Warna Dahanayaka, Secretary of Mini Hydro Association, said at the conference.

“We can’t sustain because we can’t pay the salaries and we can’t sustain also because of the bank loans. Therefore, we are requesting the government to take the appropriate action for this matter.”

Sri Lanka and Pakistan have identical issues in the power sector including large losses, circular debt, subsidies due to depreciating currencies.

In Sri Lanka there is strong support from the economists outside government for inflationary policy and monetary instability.

The country’s exporters, expatriate workers, users of unofficial gross settlement systems, budget deficits and interbank forex dealers in previous crises have been blamed for monetary instability rather than the unworkable impossible trinity regime involving conflicting domestic (inflation target) and external targets (foreign reserves).

The country has no doctrinal foundation in sound money and there is both fear of floating and hard peg phobia among opinion leaders on both sides of the spectrum regardless of whether they are state or private sector like any Latin American country, critics say.

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South Asia, Sri Lanka currency crises; only 2-pct know monetary cause: World Bank survey

A World Bank survey last year found that only 2 percent of ‘experts’ surveyed by the agency knew that external monetary instability was generated by the central bank. Most blamed trade in severe knee jerk reaction. (Colombo/Jan29/2023)

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Sri Lanka top chamber less pessimistic on 2023 GDP contraction

ECONOMYNEXT – Sri Lanka’s top business chamber said it was expecting an economic contraction of up to 2 percent in 2023, which is much lower than projected by international agencies.

“The forecast of 2023 is quite negative in terms of the international forecasters,” Shiran Fernando Chief Economist of Ceylon Chamber of Commerce told a business forum in Colombo.

“Our view is that there will be some level of contraction, may be zero to two percent. But I think as the year progresses in particular the second half, we will see consumption picking up.”

The World Bank is projecting a 4.2 percent contraction in 2023.

In 2022 Sri Lanka’s economy is expected to contract around 8 to 9 percent with gross domestic product shrinking 7.1 percent up to September.

Most businesses have seen a consumption hit, but not as much as indicated, Fernando said.

“Consumption is not falling as much as GDP in sense and we are seeing much more resilient consumer,” he said.

Sri Lanka’s economy usually starts to recover around 15 to 20 months after each currency crisis triggered by the island’s soft-pegged central bank in its oft repeated action of mis-targeting rates through aggressive open market operation or rejecting real bids at Treasuries auctions. (Colombo/Jan28/2023)

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Acuity Knowledge Partners with Sri Lanka office to be bought by Permira

ECONOMYNEXT – Permira, an investment fund with operations in Europe, US and Asia is buying a majority stake in Acuity Knowledge Partners, which has a 500 seat center in Sri Lanka for a undisclosed sum.

Equistone Partners Europe, from which Permira is buying the stake will remain a minority investor, the statement said.

In 2019, Equistone backed a management buyout of Acuity from Moody’s Corporation.

Acuity Knowledge Partners says it serves a global client base of over 500 financial services firms, including banks, asset managers, advisory firms, private equity houses and consultants.

“Despite the current challenges for the financial services sector, we have experienced continued growth and a strong demand for our solutions and services,” Robert King, CEO of Acuity Knowledge Partners, said.

“Given the significant demand within the financial services sector for value-added research and analytics, and the need for operational efficiency, with Permira’s deep experience in tech-enabled services and its global network, I am confident the business will continue to flourish.”

London headquartered Acuity has offices in the UK, USA, India, Sri Lanka, Costa Rica, China and Dubai, UAE.

Equistone was advised on the transaction by Rothschild & Co and DC Advisory, and Latham & Watkins acted as legal counsel. Robert W. Baird Limited served as financial advisers to Permira, and Clifford Chance is acting as legal counsel.

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