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Saturday March 2nd, 2024

Sri Lanka monetary and fiscal policies for export industry, but businesses not ready: de Zilwa

ECONOMYNEXT – Sri Lanka now has fiscal and monetary policies directed towards industry and exports like never before but businesses are not ready and are not thinking big, Kenneth de Zilwa, Chairman of Lanka Clear said.

“To compete globally for once we have a very aligned macro-economic framework in place,” de Zilwa told an online forum co-hosted by EconomyNext and Friedrich Naumann Foundation.

“Why I say that it is aligned is if we want to compete, your cost structures need to be properly looked at.

“You can’t compete otherwise. And for that you have to have your fiscal policy in place and the monetary policy targeting towards the export and industrial policy and also our export policy and industrial policy.

“We have never had this before.”

Comparative Advantage

In Sri Lanka many people were taught the theory of comparative advantage, which was not correct, he said.

“The doctrine of comparative advantage which we have been taught in school and also in our marketing textbooks,” he said.

“Now that is an absolutely rubbish theory. If you go and see what the US has done you will see empirical evidence to say that it is rubbish.

“You can definitely look it up and do a comparative analysis. The sad thing is in Sri Lanka we do not do a lot of reading and look at what history has done.”

Business Cycle and Technology

De Zilwa, who is a business cycle analyst, said the world was now in a Kondratieff cycle.

The fourth such cycle ranged from the 1930 to 1970s involving automobiles and petrochemicals.

The fifth involved information technology and communications technology. Now economies were recovering from Covid-19.

With economies being shut due to Covid-19 Sri Lanka had an opportunity in the new cycle he said.

“Their economies were shut there was no big advantage where we are in the positioning structure.

“Therefore Sri Lanka has a good platform now with part of the bigger business cycle that is unfolding,” he said.

“And this bigger business cycle is unfolding with technology, green technology, energy efficiencies.

“We sit on a huge resource base of minerals. Sad to say we have done absolutely nothing about it.”

“If we look at bank asset allocation it is all consumer. And we keep talking about a production economy. “So it is a laughing stock.

Production Economy

No economy had developed without a production base; de Zilwa said naming several countries that had made gains in industry.

“If you look at empirically, empirical evidence is very clear,” he said. “No economy has developed without a production base. From US to Germany to Japan to Taiwan to Korea to Malaysia, even to Singapore and now China.

“So it is clearly evident. Somehow we have been distracted we keep fighting for the smaller pie, why we feel that economies of scale are only in Sri Lanka.

But Sri Lankan businesses were not ready and did not have a mindset he said despite Sri Lanka now having an aligned macro-economic framework in place and policies.

He said economies of scale were not in Sri Lanka and companies had to look at the region and world using the policy framework provided.

“But I do not think we are thinking big,” de Zilwa said. “I mean if you look at what we are doing its absolute garbage.

“Right now our corporate leaders are not ready, our businesses are not ready, business models are not ready. We cannot compete globally.”

“So it is absolutely essential for Sri Lanka to pull their minds out of wherever they are keeping it.” (Colombo/July18/2021)

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Sri Lanka eyes SOE law by May 2024 for better governance

ECONOMYNEXT – Sri Lanka is planning to pass a Public Commercial Business (PCB) Act improve governance of state-owned enterprise by May 2024 as part of an anti-corruption efforts following an International Monetary Fund assessment.

Sri Lanka’s state enterprises have been used by politicians to give ‘jobs of the boys’, appropriate vehicles for personal use, fill board of directors and key positions with henchmen and relatives, according to critics.

Meanwhile macro-economists working for the state also used them to give off-budget subsides or made energy utilities in particular borrow through supplier’s credits and state banks after forex shortages are triggered through inflationary rate cuts.

The government has taken billons of dollars of loans given to Ceylon Petroleum Corporation from state banks.

There have also been high profile procurement scandals connected to SOEs.

An SOE Reform Policy was approved by Sri Lanka’s cabinet of ministers in May 2023.

The Public Commercial Business (PCB) Act has now been drafted.

A holding company to own the SOEs will be incorporated and an Advisory Committee and Board of Directors will be appointed after the PCB law is approved, the statement said. (Colombo/Mar01/2024)

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Sri Lanka rupee closes at 308.80/90 to the US dollar

ECONOMYNEXT – Sri Lanka’s rupee closed at 308.80/90 to the US dollar Friday, from 309.50/70 on Thursday, dealers said.

Bond yields were broadly steady.

A bond maturing on 01.02.2026 closed at 10.65/75 percent up from 10.50/70 percent.

A bond maturing on 15.09.2027 closed at 11.90/12.05 percent from 11.90/12.10 percent.

A bond maturing on 01.07.2028 closed at 12.15/35 percent down from 12.20/25 percent.

A bond maturing on 15.07.2029 closed at 12.25/40 percent up from 12.30/45 percent.

A bond maturing on 15.05.2030 closed at 12.30/45 percent down from 12.35/50 percent.

A bond maturing on 01.07.2032 closed at 12.50/13.00 percent from 12.55/13.00 percent. (Colombo/Mar1/2024)

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Sri Lanka stocks close up 0.37-pct, Expo to de-list

ECONOMYNEXT – The Colombo Stock Exchange closed up 0.37 percent on Friday, and SG Holdings, the parent company of Expolanka Holdings Plc, said it was taking the company private.

Expolanka is the largest listed company on the Colombo Stock Exchange.

“Expolanka Holdings PLC has, at the Board Meeting held on 1st March 2024, considered a request from its principal shareholder and resolved to initiate the de-listing of the Company’s shares from the Official List of the Colombo Stock Exchange subject to obtaining necessary shareholder approval and regulatory approvals,” the company said in a stock exchange filing.

As per arrangements with SG Holdings Global Pte Ltd, the Company’s majority shareholder, it will purchase its shares from shareholders who may wish to divest their shareholding in the Company at a purchase price of Rs 185.00 per share. The share closed up at 150.50.

The broader All Share Index closed up 0.37 percent, or 39.47 points, at 10,691; while the S&P SL20 Index closed down 0.64 percent, or 19.59 points, at 3,037.

Turnover stayed above the 1 billion mark for the sixth consecutive day, registering 1.4 billion.

Crossings in Melstarcorp Plc (135mn) up at 89.50, Hatton National Bank Plc (64mn) up at 158.00, Hemas Holdings Plc (53mn) up at 75.00 and Central Finance Company Plc (26mn) up at 103.50, added significantly to the day’s turnover.

“The upward trend is continuing, with more retail buying also coming in, the number of trades was more than 10,000 today,” a market participant said. “Investors are looking for undervalued stocks and buying in quantities.” (Colombo/Mar1/2024).

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