An Echelon Media Company
Tuesday April 23rd, 2024

Sri Lanka’s Atlas Axillia overcomes boycotts, eyes exports

ECONOMYNEXT- Atlas Axillia, a top stationery maker in Sri Lanka, says it has overcome a revenue impact from the anti-Muslim boycotts which followed Easter Sunday bombings and is also looking to boost exports.

Immediately after the Easter Sunday bombings, when radical Islamists bombed three churches and three luxury hotels, multiple Muslim-owned businesses being attacked and destroyed destroyed by mobs.

Diamond Pasta’s factory, the largest pasta maker in Sri Lanka that is owned by a Muslim but employs 70 percent Sinhalese, was burned to the ground.

Students at two schools had been ridiculed and punished for using Atlas products, and a grassroot-level hate campaign was forming, to boycott the purchase of Atlas stationery amid a social media storm.


However, Atlas Axillia, controlled Sri Lanka’s Esufally family’s Hemas Group, a public listed group, since 2018, had worked to combat a a hate campaign which was building up in June and July 2019.

The firm’s Managing Director Asitha Samaraweera said Atlas kept its ears to the ground, and responded with transparency.

“We went out and engaged heavily,” he said. “We met teachers, principals, clergy of all faiths and other community leaders and asked them to visit our factory to see how transparent we are, and explained our core values, and we believed that the truth will prevail.”

“The main pushback ended fast, but the effects lingered for a while.”

“There are still some small pockets here and there who are persisting, but I would say we have managed to address concerns of 95 percent of those who initially resisted” he said.

The firm, which has a 50 percent market share across all the products categories it is active in, managed to avoid any perceptable fall in revenue due to timely intervention, Samaraweera said.

“It’s hard to say if there was a fall in revenue from the boycott because in some other areas we managed to grow our business,” he said.

Administration at social media networks such as Facebook had taken down hate posts targeting Atlas, while the state Computer Emergency Response Team had also supported the firm, Samaraweera said.

Legal action had been taken against some of the more serious attacks on the brand, but the offenders had later come to an understanding with Atlas.

“Sri Lankans are fundamentally decent people except for a few bad apples. Initially, it was emotional and they were in shock, but later they came to a realisation about what they were doing and they forgot about it.”

The firm was also fortunate that the boycotts had taken place during the low-season.

Even sales of some of the firm’s lower value products such as books, which were hit initially, grew compared to a year earlier as the peak season approached.

Stationery shopping peaks in December, ahead of the start of the school year in January, and retailers fill their stocks from Atlas starting from September.

“As the season got closer, the retailers realised the quality, reputation and the popularity of the brand, and sales were normal,” Samaraweera said.

High Ambitions

Leaving the Easter saga behind, Atlas is now focus on its regional expansion to countries such as Bangladesh and Myanmmar.

Samaraweera said the firm is also experimenting with the differences in tastes and expectations of quality in the markets Atlas is now expanding into.

“Export sales are very small now but in two to three years it should become significant.”

Once exports become high enough, Atlas will build factories in countries it is expanding into, Samaraweera said.

“We believe we can be a global company,” he said. (Colombo/Jan27/2020)

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Sri Lanka single borrower limits cut to 25-pct of bank capital, SOEs also included

ECONOMYNEXT – Sri Lanka’s central bank has issued directions limiting loans to a singe borrower or a group of connected customers to 25 percent of Tier I capital, with state enterprises which turned out to be the biggest borrowers, also included.

In a 2007 direction, banks were allowed to give loans up to 30 percent of capital for a single customer and 33 percent for a group but the rules were widely violated in the case of state enterprises, which were used as off-budget vehicles to give energy and other subsidies.

Banks will have to limit exposures to 25 percent starting from January 2026.

According to transitional provisions published in the direction seems to indicate that some banks may have single borrower exposures of 85 percent or more.

They will be required to bring exposures down to 60 percent by 2027 and 25 percent by 2028.

Download the direction from here Sri-Lanka-single-borrow-limit-direction-2024

Energy utilities were made to borrow from state banks to run off-budget subsidies under plan avoid a price formula during the Rajapaksa regimes.

Sri Lanka’s state banks ended up with large debts to Ceylon Petroleum Corporation partly due to flexible inflation targeting (printing money to cut rates as soon as inflation fall triggering forex shortages) even when fuel was market priced in 2018, analysts have shown.

When rates were cut with inflationary open market operations, triggering forex shortages, CPC was barred from buying dollars and forced to get suppliers’ credit denominated in dollars.

The suppliers’ credits were later converted to dollar loans from state bank loans, usually after the currency collapsed from the inflationary rate cuts or inflationary open market operations to sterilize interventions or both, analysts have shown.

The CPC loans have since been taken over by the government.

Banks have also funded roads and other state projects.

“Licensed banks shall gradually reduce the exposures to Public Corporations to meet the maximum limit,” by December 2030 according to the direction.

“Public corporation shall mean any corporation, board or other body which was or is established by or under any written law other than the Companies Act, with funds or capital wholly or partly provided by the Government.”

Many of the newer state enterprises however have been suddenly set up under the Companies Act, unlike earlier where a specific act was passed by the parliament to set up corporation or a statutory authority.

Borrowings of CPC and CEB eventually hit the financial stability of state banks while actual bad loans were under-reported. Now the bad loans are being covered with a state capital injection.

Under an International Monetary Fund and World Bank backed program, the so-called ‘sovereign bank nexus’ is being severed to protect the banking system.

Government securities, central bank sterilization securities, loans guaranteed by multilateral lenders or high rated foreign banks are excluded. (Colombo/Apr23/2024)

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Sri Lanka exceeds tax revenue target by 6% in first quarter

ECONOMYNEXT – Sri Lanka’s revenue collecting bodies have outperformed and exceeded tax revenue target by 6 percent for the first quarter ended on March 31, State Revenue Minister Ranjith Siyambalapitiya said.

“After many years of difficult challenges, it has been possible to exceed the expected state revenue in the first quarter of 2024,” he said in a statement.

The government expects a revenue collection of 4,106 billion rupees in 2024.

“The reason for the economic crisis in the past period was the reduction in the level of government revenue. Considering the achievement of higher than the target in the first quarter of this year and the revenue pattern, the 2024 will become a year in which the revenue targets can be achieved,” he said.

The three tax revenue collecting bodies – Sri Lankan Customs, Excise Department, and Inland Revenue Department have collected 834 billion Sri Lanka rupees in the first quarter.

“It is a 6% higher than the expected revenue target of 787 billion rupees,” Siyambalapitiya said.

He said the Inland Revenue Department exceeded its target by 13 percent to 430 billion rupees compared to the target of 381 billion rupees in the first quarter of 2024.

He also said Customs Department has managed to reach the target of 353 billion rupees and the Excise Department has also achieved 96% of the revenue requests and earned 51 billion rupees in the first quarter.

The island nation has raised Value Added Tax (VAT), imposed new taxes, and increased personal income taxes to boost the revenue under an International Monetary Fund-backed reforms in return of a $3 billion External Fund Facility.

People have started to grumble over the government’s higher taxes without reducing some of the state expenditures. The government has been in the process to privatize some key state-owned enterprises. However, that process faced delays amid gradually rising protests against the move. (Colombo/April 22/2024)

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Sri Lanka rupee closes stronger at 300.50/301.00 to US dollar

ECONOMYNEXT – Sri Lanka’s rupee closed stronger at 300.50/301.00 to the US dollar with the spot market becoming active in the second half of Monday, dealers said.

The rupee closed at 302.00/50 to the US dollar on Friday amid moral suasion.

On Monday a foreign bank sold dollars to the central bank around 302 levels, following by more sales, dealers said after trading started without proper spot market quotes.

On Friday a 302 level was indicated by some dollar sales, dealers said.

Sri Lanka’s rupee came under pressure over the last week, despite broadly deflationary policy, after the central bank collected large volumes of dollars in March.

Bond yields were flat as buyers awaited the next development in sovereign bond re-structuring, market participants said. There were both positive and negative sentiments among bond investors, dealers said.

A bond maturing on 15.12.2026 closed flat at 11.30/40 percent

A bond maturing on 15.09.2027 closed flat at 11.95/05 percent.

A bond maturing on 15.12.2028 closed flat at 12.15/25 percent.

A bond maturing on 15.09.2029 closed marginally higher at 12.25/35 percent from 12.30/40 percent.

A bond maturing on 01.10.2032 also closed flat at 12.40.50 percent. (Colombo/Apr19/2024)

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