Inflation, interest rates bottom-out

Market expects another round of price increases on the back of I.M.F. conditions that the C.E.B. and C.P.C. should break even by 2011, a market source told this newspaper.

Such price increases will bring inflationary pressure on the economy, that was the reason for the Central Bank of Sri Lanka (C.B.S.L.) to reject Monday’s Treasury (T) Bond primary auction offers because the market asked for higher rates than that which C.B.S.L. was prepared to pay, he said.

Meanwhile Tuesday’s T Bill auction saw a nominal decline in rates with T Bills of 91, 182 and 364 day maturities coming down by six, five and two basis points to 10.58%. 11.41% and 11.95% respectively.

However another source said that the reason for this situation was because both inflation and interest rates had bottomed-out. This has nothing to do with I.M.F. loan conditions, the source said.

Markets in Sri Lanka are run on sentiment and not on fundamentals, he said.

When markets were asking for yields of between 19-20% from such auctions in November last year, now they are prepared to agree to 14%, the source said.

Inflation as measured by the point to point change in the Colombo Consumers’ Price Index was 1.1% last month. Its increase over June was 0.2 percentage points.

Meanwhile, its annual average change in the period under review was 10.4%, 2.1 percentage points less than the previous month.

 A Government official said that much of the I.M.F. conditions were negotiable. “That flexibility has been given to us by the Fund,” he said.

Meanwhile, the Government has appointed a committee chaired by Director General Public Enterprises Dr. S.M.S. Batagoda to look into C.E.B./C.P.C.’s problems in the context of I.M.F.’s (standby arrangement) loan conditionalities.

Other members of this committee comprise C.B.S.L.’s Chief Economist Dr. Nandalal Weerasinghe and officers from the C.E.B. and C.P.C.

The source said that the problem connected with the C.P.C. and C.E.B. vis-à-vis I.M.F.’s loan conditions was that the Fund wanted the negative balances of these two institutions which was Rs. 49.8 billion as at December 31, 2008, to be brought down to Rs. 35 billion by the year end.

“But that was an indicative target,” the source said. If there is a drought, or if oil prices go up, then that target could be negotiated with the I.M.F.,” he contended.

No new targets concerning these two Government institutions have been given beyond 2009, the source said. Those will be consequent to I.M.F. reviews.

It does not necessarily mean that prices or rates will have to be increased to meet I.M.F. objectives, the source said. In fact the C.P.C. made a net profit as at end May, he said.

But the problem here lies in C.E.B. having to resort to using the more expensive fossil fuels for power generation in lieu of the cheaper hydro during times of drought, the source said.

Last year 40% of C.E.B.’s power generation was from hydro, which, from a cost perspective is next to nothing as far as generation costs are concerned, the source said.

But this year, because of the drought, in certain months, hydro generation was as low as 20%, he said.

This meant that the C.E.B., generally after buying oil on credit from the C.P.C., used to generate power, an exercise which is far costlier than hydro power generation, he said. 

Power cuts in order to conserve C.E.B. costs are out of the question, he said.

The source said that with the coal powered station coming on stream late next year, that would reduce C.E.B.’s dependence on the more expensive petroleum oils for power generation.

Meanwhile Monday’s T Bond auction was for the issue of T Bonds of two years and six months (2012) and three years and 10 months maturities (2013) respectively.

A source said that those maturities at Monday’s secondary market were trading at 12.90% and 12.95% respectively.

Market may have had asked for yields which were 13% and over to which C.B.S.L. was averse to yield, hence the rejection of those bids, he said.

The source said that at the previous week’s auction C.B.S.L. accepted bids at 12.81% for 2012 maturity and 12.88% for 2013 maturity, when those maturities in the secondary market were trading at the low 12.75% levels.

This led to yields going up, the sources said.

Congestion shaves off 2% G.D.P.

Traffic congestion shaves off 2% of G.D.P., a transport specialist said.

 National Transport Commission (N.T.C.) Chairman Prof. Amal S. Kumarage speaking at a seminar last Saturday said that transport accounts for 75% of Sri Lanka’s fuel bill of which 80% is consumed by private transport.

N.T.C. is the country’s bus regulator.

Speaking at the Chartered Institute of Logistics & Transport Sri Lanka Branch international conference, he said that corporates need a good transport system to bring and take their employees to and from work.

He said that 68% of the passengers are being carried by public transport.

Meanwhile, N.T.C., will, from next month revamp its “Park and Ride” system to reduce the number of cars on the road.

N.T.C., which in conjunction with private bus operators launched this service in March with six air conditioned 20 seater buses, has now found this service reduced to only one bus in operation, carrying a maximum of 17 passengers at peak use.

The service which operates from Moratuwa to Fort, has priced a one way ticket at Rs. 100.

“But this time we have gone direct to big corporates like Unilever, John Keells, Odel, Nestle and Brandix to canvass for business, and that has yielded results,” N.T.C. Consultant M.B.S. Fernando told The Sunday Leader.

They have committed 35 of their employees to travel in these buses, that is excluding the 17 former car passengers who are already using this transport, he said. “If we can up the total number to 60, we shall be breaking even,” said Fernando.

 Further, ticket holders will be eligible to obtain discounts on purchases made from 7-8 partner organisations including Keells Super under the new deal, he said.

Kumarage said that thus far the “park and ride” facility has resulted in 10 cars being taken off the road.

B.o.C., P.B., continue to hike rates

Despite efforts by Central Bank of Sri Lanka (C.B.S.L.) to contain inflation and thereby reduce lending rates in order to kick start the economy, the two state owned commercial banks, Bank of Ceylon (B.o.C.) and People’s Bank (P.B.) which come under the aegis of President Mahinda Rajapaksha in his capacity as Finance Minister, continued to increase their lending rates.

Ironically, Rajapaksha, in a recent meeting with bank heads, urged them to reduce their lending rates. Or, is it that the management of these state banks feel that interest rates and inflation have had bottomed-out, the reason for them raising their rates?

According to C.B.S.L. statistics, B.o.C., in the week ended on the last day of last month, increased their average weighted prime lending rate (a.w.p.r.) by 83 basis points (b.p.s.) to 16.53% week on week (w.o.w.). Similarly, P.B., increased their a.w.p.r. by 184 b.p.s. to 21.15% w.o.w.

However, private commercial banks like Hatton National Bank, Commercial Bank of Ceylon and Sampath Bank reduced their a.w.p.r.s. by 34, 107 and 59 b.p.s. to12.74%, 13.35% and 12.84% respectively in the period under review.

Among the balance 22 commercial banks captured in the survey, Seylan Bank reduced their a.w.p.r. by 14 b.p.s. to 22.19%, Union Bank of Colombo by 468 b.p.s. to 20.32%, Pan Asia Banking Corporation by 100 b.p.s. to 16%, Nations Trust Bank by 19 b.p.s. to 14.56%, DFCC Vardhana Bank by 250 b.p.s. to 19.50%, NDB Bank by 35 b.p.s. to 14.35%, HSBC by 26 b.p.s. to 13%, Standard Chartered Bank by 171 b.p.s. to 14.28%, Citi Bank by 220 b.p.s. to 15.16%, Habib Bank by six b.p.s. to 15.56%, State Bank of India by 146 b.p.s. to 17.13% and ICICI Bank by 28 b.p.s. to 11.15%.

Meanwhile, the a.w.p.r.s of Indian Overseas Bank and Public Bank remained unchanged at 19% and 17.50% respectively in the period under review, while that of Deutsche Bank, Indian Bank and MCB Bank increased by 229, 292 and seven b.p.s. to 17.09%, 20.78% and 20.51% respectively in the period under review.

Frt. rates to go down further

Shipping rates will go down further, a freight forwarder predicted, indicating that the world has not got out of the recession.

Kurt Breinlinger, Managing.Director Panalpina, South Asia, speaking at a Chartered Institute of Logistics & Transport seminar in Colombo last Saturday said that in 2009 and 2010 there will be no market rates but panic rates.

Shipping business will be in turmoil for another 3-4 years, he predicted.

One is offering freight rates at U.S.$ 850, while the other is offering the same at U.S.$ 50, he said.

Lines are aggressively going after market share, it makes one shiver, said Breinlinger.

Most shipping companies and airlines are bankrupt, he said.

“We are having too many shipping lines, too much of capacity,” said Breinlinger.

It would have had been better to have had shipping conferences to bring stability to rates, he said.

However, jurisdictions such as the E.U. have outlawed such cartels. Breinlinger therefore predicted a turnaround in supply chain management in order to bring stability to the market.

There will be a fundamental change in supply chain management, he said.

“But if supply chain is 10% of cost, the supply chain manager reports to the C.F.O. and not to the C.E.O.,” said Breinlinger.

Meanwhile Aitken Spence Maritime Chairman Dr. Parakrama Dissanayake in his speech said that the shipping industry is expected to make a turnaround in 2010/11.

Banks record negative loan growth for 1st time

LENDING RATES

Interest rates and inflation have hit its nadir, says the lead story in today’s business pages of this newspaper, quoting a market source.

And holding costly elections at irregular intervals as is happening now does not help to further bring down interest rates and inflation either.

Though Government of Sri Lanka’s (G.o.S.L.’s) borrowing rates, i.e. Treasury Bill and Bond rates, largely due to the taming of inflation, have fallen sharply during the past couple of months, the same could not be said of market lending rates which still remain high. As a result bank credit growth has either remained flat or has contracted, according to recent statistics.

The reading of such data is that private investments are not growing.

Sri Lanka is a low middle income country, with recruitment to the armed forces seemingly being the only opening available to the youth of this island during the height of the war. That type of employment avenue is good in times of war, but certainly not in times of peace as is prevalent now. The country needs construction workers for infrastructure development, to build roads, airports, ports, bridges, factories, hotels and housing stock to take it forward in this new millennium for which funds are necessary.

But if that’s not happening or is slow in taking place that does not augur well for the economy.

Funds for such projects may be procured locally and with Central Bank of Sri Lanka (C.B.S.L.) permission from overseas sources, where the cost of funds, because of the recession, is low, much lower than that in Sri Lanka. But, paradoxically, because of the recession, sourcing funds from international capital markets may also be tight, because the availability of easy credit then, was also the case for the current global recession.

Or, otherwise, funds may be available to the island through foreign inflows-such as from remittances from the Tamilian diaspora, over concerns about their families, a headcount of some 280,000 still languishing in refugee camps in Vavuniya and also by way of concessional aid from donor agencies, both traditional and new-such as India and China.

But aid from traditional donors, other than from Japan is slow, possibly due to alleged human rights violations revolving round the prosecution of the war and G.o.S.L.’s own insensitivities and diplomatic blunderings in dealing with this island’s traditional friends, donors who gave this country the Mahaweli project and whose markets are still the country’s single biggest source of foreign exchange revenue by virtue of the fact of those being Sri Lanka’s single biggest export destination in terms of value, not forgetting those markets contribution to Sri Lanka’s tourism.

But tragically, seemingly no attempt is being made by G.o.S.L. to mend fences with the West, Sri Lanka’s longstanding friends since independence.

The country is standing at the threshold of a new era of development, similar to what it was in 1977, but sadly, like Hamlet without the Prince, what is missing this time is the goodwill of the West, which, physically translated means Sri Lanka missing out from that large reservoir of funds.

Such a vacuum has a cost on the country’s development and consequently its progress. If lack of funds retards much needed infrastructure development, it will not only hit job creation in this country, but will also affect its competitiveness in the global marketplace by not having easy access to markets due to infrastructure bottlenecks, leading to loss of market share, and hence more unemployment.

And having a “high cost of fund” regime does not make matters easier either.

Expected development works of G.o.S.L. and the consequent inflationary pressure therewith, has also made the market seemingly reluctant to believe that inflation has not bottomed-out.

Therefore both G.o.S.L. and C.B.S.L. must put their best foot forward and prove the market wrong by bringing down inflation further by cutting down on waste and corruption, thereby helping to bring down lending rates further, therewith assisting the private sector, the engine of growth of the economy, to go forward at full throttle, an action that would help to uplift the living standards of the people of this country by having access to cheap funds for their expansion works and to build new factories.

Recently these pages reported that the European Union has come up with grant aid amounting to a few million euros (several hundred million rupees) to fund consultancy works for cleaner production (c.p.), covering several industries belonging to the S.M.E. sector.

But as pointed out to this newspaper by Dr. M.A.M. Mubarak, the C.E.O./Director, Industrial Technology Institute (I.T.I.), the high interest rate environment in which the economy currently operates makes it difficult for the S.M.E. sector to procure the necessary technology to make c.p. work.

I.T.I. is one of the consultants to this project.

C.p. is increasingly becoming a must in the developed world, for the procurement of goods and services, whether those may be from the Third World or from elsewhere.

In an economy beset by a high interest rate regime, it calls to question the validity of this grant aid scheme, particularly in the context that the target beneficiaries are those in the S.M.E. sector, a category that’s generally not recognized by banks as being their “prime” borrowers, hence not being privy to enjoy concessionary lending rates from banks.

As such it might have had been more appropriate if that grant aid was re-channelled for industries to buy appropriate c.p. technologies after proper assessment at concessionary interest rates, rather than doling out cash free, and not channelling those funds for consultancy works, which, however is the case.

What’s the point in having a knowledge of c.p. if that industry doest not have the necessary funds, or precluded from obtaining the necessary funds to buy the required technology because of the high cost of credit?

Granted, that only a few industries might have had benefited if the scheme was revised as suggested in this column, but is it not better to have a few practical beneficiaries than no beneficiaries at all? Having at the end of this exercise zero practical beneficiaries negates the whole purpose of this grant aid scheme.

Colombo preferred hub

India will never be a hub, Dubai still has to prove itself, to Europe, Colombo Port can be the hub, a freight forwarder said.

 Kurt Breinlinger, Managing.Director Panalpina, South Asia, a Swiss based freight forwarding company, speaking at a Chartered Institute of Logistics & Transport (C.I.L.T.) seminar in Colombo last Saturday, emphasized the importance of building the regulatory infrastructure of a country, instead of only concentrating on its physical infrastructure development.

Breinlinger who is based in India said that lobbying by agencies such as C.I.L.T., instead of companies in their individual capacities making appeals, could bring about this change.

Speaking about Indian Customs, he said that because of inordinate delays in clearing goods, this resulted in losses amounting to billions of dollars to India itself.

He asked why India cannot develop a green channel, instead of examining each and every container.

 Breinlinger said that in their various seminars in India, though other ministers were present, the minister for customs was always absent.

He told this newspaper one cannot blame corruption, when an Indian Customs officer earns only U.S.$ 30 a month.  

P.G. Thyagarajan, Managing Director (M.D.) Sical Multimodal & Rail Transportation Ltd., India, a private rail affreightment, who spoke after Breinlinger, said that Indian Customs is developing a “green” channel through EDI intervention on real time data monitoring which will say which container to be examined while others will be allowed in.

 He further said that Sri Lanka will remain a hub for South Indian ports, but the island needs to develop its rail system.

Thyagarajan said that Sri Lanka rail will have to develop for heavier axle loads.

It was said that while Sri Lanka’s axle load was 20 tonnes, in India it could take upto 22 tonnes. 

Haniz heads Mindshare

Mindshare recently promoted Sabry Haniz to replace Nelson Monteiro as the head of its Sri Lanka office.

Prior to Haniz’s promotion, he was a Partner in the Client Leadership division. Clients he has previously handled include HSBC, Pepsi, ICI/AkzoNobel, Nokia, Singapore Airlines, Asian Paints, Ceat, Holcim, Ferrero Rocher, Fuji, Union Assurance and Sony Ericsson. Besides handling client relationship, he was also responsible for new business development, media owner relationships and channel negotiations. Haniz’s is a member of the Chartered Institute of Marketing (UK) and has spent the past 13 years in the media industry, including JWT and subsequently Mindshare. He has immensely contributed to the growth & reputation of Mindshare Sri Lanka and has been instrumental in some of the award winning work which was recognized both internationally and locally.  Two such examples are the HSBC Lifestyle Show and the Reborn (a T-shirt brand)  “Get Stolen” campaigns.

“My appointment is to help the team achieve the goal of maintaining the lead position of Mindshare in Sri Lanka and to broaden the high value add services to our clients to become their true strategic partner,” said Haniz.

Commenting on the changes, Mindshare South Asia Head Ragothaman Gowthaman said: “I am delighted that we are able to promote from within and to have Haniz as the new leader for our Sri Lanka office. He has built a successful, thriving business since joining us and I have no doubt that he is the right leader to help us in maintaining our leading position in Sri Lanka and bring more value added services to our clients”

HNB Group p.a.t. up 31%

Hatton National Bank (HNB) in first half (1H) 2009 saw profit after tax (p.a.t.) grow by 13% to Rs. 1.77 bn. The Bank was also recognised recently as the “Best Bank in Sri Lanka” by Euromoney Magazine for its financial stability and consistent performance.

The Bank recorded a top line growth of 12 % to Rs 19.8 bn., with main contribution coming from interest income. Interest income for the period under review grew by 16% which was driven mainly by interest from investments in fixed income securities.  Interest expenses also witnessed a 15% increase mainly from the growth witnessed in customer deposits. Bank’s net interest income amounted to Rs. 7.09 bn., reflecting an 18% year on year (y.o.y.) growth.

A drop of 18%was witnessed in income from foreign exchange as a result of the decline witnessed in foreign trade as well as stringent regulations imposed for booking forward exchange which resulted in a significant drop in forward booking of currencies.

Income from investments also depicted a marginal drop of 9% compared to 2008, due to the absence of the one off dividend amounting to Rs.225 mn., paid by HNB Securities Ltd., in the second quarter of last year as part of the restructuring process that took place with the establishment of the new joint venture investment bank.

The cost management initiatives that were put in place continued to payoff with operating expenses increasing by 14% y.o.y. The Bank will continue to focus on improving productivity and managing cost in its efforts to reduce the cost to income ratio.

The Bank made Rs. 381 mn. as specific provisions during the period which is a 11% y.o.y. increase. However a decline in general provisions was witnessed compared to 2008 as the loan book contracted during the period under consideration decreasing the general provisioning requirement, while last year the Bank accelerated its general provisioning to meet the 1% Central Bank regulation prior to the March 31, 2009. Bank’s  Gross NPA ratio increased to 8.7% which was reflective of the country’s banking industry experiencing a drop in asset quality in the recent past due to slowdown in economic activity.  However, HNB continues to maintain a high provisioning cover of 56%, well above the industry average, as a result of prudent provisioning policies which has enabled the Bank to maintain net NPA ratio at 3.86%.

 The Bank’s total tax provision continued to rise this year with value added tax increasing by 22% and corporate tax rising by 34% compared to the corresponding period last year. As a result the effective tax rate (including financial VAT) of the Bank surged to 53% compared to 50% in 2008.

The slowdown in economic activities in the Country has significantly reduced the demand for private sector credit, this coupled with the Bank’s stringent risk management policies contracted the net loans and advances portfolio by 6% to Rs 165 bn. in 1H 2009.  However with curtains coming down on the three decade old war the prospects for the 2H seems much brighter. The Bank has already started to leverage on it existing presence of 16 customer centres in the North and East provinces to participate in post war development activities. The Bank has obtained approval to further expand its presence in these regions over the next 12 months. The deposit base continued to grow by over 6% enabling the Bank to boast of surpassing Rs. 200 Bn mark in customer deposits by end June 2009.  Furthermore, Fitch Ratings Lanka recently affirmed HNB’s long term rating at AA- (lka), which is reflective of the Bank’s sustained profile in terms of good profitability, asset quality and capitalization among local commercial banks.

HNB’s Group profits too witnessed significant growth of 31% for 1H amounting to Rs 1.71 bn., driven by the robust performance shown by the Bank as well as its insurance subsidiary HNB Assurance Ltd. HNB Assurance profits grew by 37% Y.o.Y. showing its emergence as a strong force in the insurance industry. With the recent resurgence in the country’s capital markets, the newly formed investment Bank, Acuity Partners is likely to make a bigger contribution towards Group performance in the latter half of the year. The Exchange Houses opened by the Bank in Oman and Abu Dhabi during late last year and early part of this year are yet to make a positive contribution towards Group profits. The Bank in July this year started commercial operations of its third Exchange House named Delma Exchange in Toronto.

Ten years & growing

Ogilvy Action recently celebrated its 10th anniversary.

Ogilvy rural as it was known back then, comprised four individuals bought together by their shared vision, respect they had for each other, a general disregard for what the industry considered its modus operandi and a level of passion that can only be described as infectious.

The sole purpose of Ogilvy rural was to go where no organisation had gone before; engage new audiences in novel ways and in doing so set the precedent. To help with this task, Ogilvy rural initially engaged 29 district coordinators, linked to a network of over 5,000 youth clubs islandwide.

Soon Ogilvy rural had transformed itself into a communications agency with over 20 employees and an ever expanding portfolio. A name change followed and Ogilvy rural was renamed Ogilvy outreach.

 A few years later, in 2007 another name change was initiated and now with a staff of over 70 permanent employees the company was named Ogilvy Action.

Behind every transformation was a readiness to embrace change, take on new challenges “and because we are unwilling to wait for opportunity to knock, we often go out and seek it.”

Over the years we’ve helped clients get what they wanted, won awards for it and worked hard, no matter what the odds were, or how daunting the task, “we just went ahead and did what needed to be done. Ten years since, the passion for what we do has continued to gather, we’ve gained momentum and now there is no stopping this ride.”

Promotion extended

HSBC Cardholder Stays Free promotion which began in February with John Keells Hotels, was extended to a number of star class hotels and ends this month.

The promotion targets HSBC Premier, Platinum and Gold credit cardholders, offering discounts and complimentary stays at some of the finest hotels in the country.

Customers can enjoy an overnight stay with discounts on full board and half board rates at the following hotels; Hotel Tree of Life Kandy, Elephant Reach Hotel Yala, Mount Lavinia Hotel, Club Palm Garden Beruwela, Giritale Hotel Polonnaruwa, Riverina Hotel Beruwela, Peagusus Reef Hotel Wattala and Eden Report and Spa Beruwela.

“We are happy to partner with several star class hotels located down south, up country and in the north western province, to offer our customers a retreat at popular tourist destinations. The promotion has thus far been a huge success since its launch in February, and this led us to extend it to more hotels, giving customers a wider range of places to select from.” said HSBC Cards Head James Rebert.

Cardholders will be entitled to a 50% discount when they book a double room on full or half board basis, whereas cardholders who book a triple room would be entitled to a 33% discount on the full local rate per night. This offer will be made available for bookings of one room, and additional rooms booked by the cardholder for accompanying guests, would be entitled to a special 20% discount on full and half board rates.

The Cardholder Stays Free promotion is one of the three most popular credit card promotions introduced by HSBC in the recent past. Others include ‘Cardholder Dines Free’ and ‘Cardholder Flies free’ which enables credit cardholders to make cost savings without compromising on the good things of life. 

Tea shortfall impacts globally

Ceylon Tea is a blessing.” but we need public-private partnerships (P.P.P.s), says former Tea Board Chairman.

Van Rees Ceylon Managing Director Niraj de Mel told Benchmark last Sunday: “Pricewise, Sri Lanka is earning some of the highest prices one could ever imagine. However, that’s only the surface. Beneath [this], there are lots of problems”. He was commenting on the current state of the tea industry.

de Mel added, “The industry consists of growers, manufacturers, exporters and brokers. From the producers’ side, our bushes are ageing and replanting is lagging behind. When it comes to promotions, which have to be driven by the Sri Lanka Tea Board, monies are not trickling down from the state authorities. As a result a lot of promotion work has slowed down or even stalled. As for production, prices are high because production is low. Right now, there is a global shortage of around 80 million kilogrammes. Sri Lanka’s dent, which contributes something like 18% to global supplies is being severely felt.”

Elaborating on the drop in production, de Mel said: “Tea being an agriculture crop, it’s weather related. Right now there is too much water and not enough sunlight. In the first part of the year we had the drought and therefore there was no crop. Now there is too much rain and a lack of sunlight and therefore there is no growth. So half the year has gone and we are 30% behind. This does not augur well. There is demand for Ceylon Tea, but there isn’t enough to go around, appeasing the thirst of all the consuming countries.”

Asked for his predictions for Ceylon Tea against the backdrop of more and more countries entering the lucrative tea industry, de Mel told the show’s Special Correspondent Ms. Savithri Rodrigo that at this point in time “Ceylon Tea is a blessing we have received and has a great future”.

Pointing out that the private sector is doing its part, he noted that this alone is not enough. “There needs to be a P.P.P. We need more support coming in, more understanding and more awareness about the strong product we have. With adequate Government support, which is inadequate right now, and the private sector gaining so much ground through brand marketing, advertising and appropriate promotion strategies, I think this product is what will take Sri Lanka forward,” de Mel said.

The widely-watched business TV programme is presented by LMD and produced by the wrap factory.

Wins $ 40,000

Twenty one civil society organizations from across South Asia recently won grants from a $840,000 award pool funded by the World Bank’s South Asia Region Development Marketplace (DM).

The winners received up to $40,000 each to implement innovative ideas on how to improve nutrition in their respective countries.

A proposal from Sri Lanka to address the root cause of undernutrition in young children was one of the winners.

Sri Lanka Green Friends Environmental Organization’s to change the complementary feeding practices and nutrition of expectant and nursing mothers through rural radio networks was one of the winners.

India was the most represented country among winners, with nine out of the 21 winning proposals.

Bangladesh and Nepal tied at second place with four winners each.

71% increase in reserves

Sri Lanka’s gross official reserves is estimated to have reached US$ 2,180 million as at end of last month, showing a 71% increase from the US$ 1,272 million foreign reserve levels as reported in end March 2009.

Reserves increase to the current level has been mainly due to the receipt of the first tranche of the IMF Standby Arrangement (S.B.A.) and the significant absorption of foreign exchange (forex) from the domestic market during the past four month period.  Current estimated reserve level is well-above the level expected by end September 2009 under the IMF S.B.A.

Central Bank expects foreign reserves to increase further in the coming months with continued forex receipts from foreign investors and the Sri Lanka Diaspora.

Rupee to fluctuate to meet reserves’ target

By Mandana Ismail Abeywickrema

The pressure for rupee appreciation currently experienced may see a reversal by next year if the government is to meet the targets projected in the International Monetary Fund (IMF) agreement.

The government by undertaking a reserve target through the IMF facility has agreed to allow the rupee to fluctuate to meet the reserve targets.

Economist, Dr. Harsha De Silva says that although the IMF has not put in place any exchange rate target for Sri Lanka, there are conditions laid down on the reserves which implies the exchange rate would be the equilibrator for the government to meet the reserve position.

Therefore, the implied exchange rate for next year in the background of the IMF’s reserve targets could be a depreciated rupee.

De Silva explains that according to the table released as “economic indicators” by the IMF on July 24, soon after granting the US$ 2.6 billion stand by facility to the country, GDP growth for 2009 is estimated at Rs. 4,913 billion and Rs. 5,905 billion in 2010. “This is a 20.2% increase,” he said.

Meanwhile, according to statistics, the US dollar denominated GDP is estimated to fall from US$ 41.3 billion to US$ 38.3 billion, which is a decrease of 7.2% in nominal terms.

The real GDP growth is estimated to be 5% in 2010, which also indicates a significant level of inflation as well. 

De Silva observed that the situation where a GDP growth in rupee terms could record an increase and on the other hand a decrease in GDP in dollar terms is possible only if the rupee depreciates dramatically in 2010. Referring to the available data, he notes that the rupee is projected to fall from Rs. 119 per dollar at end 2009 to Rs. 154.2 by end 2010, which would be a 29.6% depreciation for 2010. “This could be the reason for the movement of nominal GDP in two directions,” he noted.

The reconstruction effort and the development work that would boost imports to the country are expected to create a huge demand for dollars in 2010.

The government would at such a point be faced with a dilemma given its undertaking to the IMF on reserve targets.

On the one hand, the Central Bank of Sri Lanka (C.B.S.L.) would be prohibited from providing the required dollars in order to meet reserve money targets. The rupee would be under pressure at such a time.

C.B.S.L. in 2008 tried to peg the rupee by issuing dollars to the market. The Bank’s reserves fell from US$ 3.6 billion to US$ 900 million pushing the country into a huge balance of payment (BOP) crisis. Eventually, the government had to seek help from the IMF to shore up its depleted reserves.

On the other hand, the government would also be unable to depend on external borrowings given the restrictions placed on such borrowings in the IMF programme.

The government has pledged not to borrow more than US$ 1.75 billion during the course of the programme.

Therefore the exchange rate would act as the equilibrator in controlling the government’s reserve position.

The government has now been forced to veer away from its former policy of using the reserves to defend the exchange rate to one where the exchange rate is allowed to fluctuate to protect the reserves.

IMF’s Mission Chief for Sri Lanka has said that the IMF could not target both the reserves and the exchange rate. He said, “The programme targets reserves. And, depending on the supply and demand for foreign exchange to meet those reserve targets, then the exchange rate will be the one factor that equilibrates the supply and demand, but the reserve targets are the foundation of the programme.”

World is watching

The economy is relatively stable, you just got over your problem and the world is waiting and watching, Len Harper, Chartered Institute of Logistics and Transport (C.I.L.T.) International President said last Saturday.

Speaking at a C.I.L.T. Sri Lanka international conference, he said that logistics and transport comprise 12-15% of a country’s G.D.P. and employs 23-25% of its workforce. Harper said that if there is an increase in the workforce, that points out to inefficiency.

He said that transport and logistics is the driving force in an economy.

C.I.L.T. International CEO/Director General Bernard Auton in his speech said that an average Australian, because of living in an airconditioned environment and travelling about in a car, emits 25 tonnes of greenhouse gases annually. But an Indian emits less than two tonnes a year. So whom shall we ask to reduce greenhouse gases? He asked.

Auton further said that 12% of emissions are from land transport.

Ceylon Tea in China

HVA Group, a Sri Lankan tea company, opened three exclusive tea boutiques in Fujian Province & Beijing China recently.

 Huichen Group’s Beijing Pure Ceylon Tea Company is the joint venture partner. 

Virtusa takes 100,000 sq. ft. at Orion’s

By Ranee Mohamed 

Jeevan Gnanam is proof that success, innovation and leadership run in the family. Grandson of late Deshamanya A.Y.S. Gnanam, founder Chairman of St. Anthony’s Consolidated who made history with his business successes in a different era, Jeevan Gnanam has sprung forth to the future with his brainchild Orion City.

 “Orion City is the first operational IT park in Sri Lanka. The whole land is 14 acres and we have already developed 100,000 square feet and given it to Virtusa. This was phase one. At the end of phase two will be the development of 308,000 square fee-purpose build for IT, BPO and service sectors,” said its Marketing Manager Mario Offen.

“It is a need that had not been addressed,” said Orion City C.E.O. Jeevan Gnanam.

Understanding the need to provide the right workplace for a service organization, Gnanam has gone a step further in delivering the latest technology, infrastructure and services to help its corporate occupants to be on par with other global IT players.

‘We will give the infrastructure to set up your operations and run the operations at the lowest costs possible,’ said Gnanam.

 “My family has supported me every step of the way and my grandfather was alive when the project began, and I remember how enthusiastic he was about this whole exercise,” said Gnanam.

The idea was conceived at a time when together with his brother Dr. Vaz Gnanam, they began a small IT company called Providence. It was during this time that the duo saw the dark clouds in Sri Lanka’s IT climate.

It is an unusual exercise-and it took courage, determination and innovation to set it in motion. Orion City today has great plans-three million square feet of which they have developed over 308,000 today.

“We have broken the whole project to be led by different teams-marketing, finance and such like, and all the processes are in place today with strong teams to back them all. We are constantly looking at new products and new ideas. And have studied the consumer insights provided through development teams,” said  Offen.

He said, “Orion City is Jeevan’s brainchild. It was set up because he felt the vacuum in the whole system.The group has made a prudent decision in investing.”

The IT Park will also have its own food court, gymnasium, mini mall and banking centres which will service the needs of the inhabitants of the park.

The power needs will be met by a 32 MB substation built therein by the CEB.

Virtuso, Medigain and Sabre technologies  are currently in operation here at the IT park.

With three development projects currently in progress, it is but natural for  Gnanam to see the brighter side of life. “Life is full of opportunities. Whoever you are, wherever you come from-look at things positively. I Strongly believe that anything is possible,’ says the upbeat Gnanam.

“The future of Sri Lanka is bright. We as a group, believe in Sri Lanka, especially in the service sector. We see success in the horizon and appreciate what the government is trying to do to bring up the industry. We will work with supporting organisations and meet the needs in bringing in investment. We will find out what the needs are-and we will continue to support the industry and work towards the progress of our country,’ said Gnanam.

Orion City situated at Dr. Danister De Silva Mawatha, Colombo gives one a flavour of the future. Situated in an area which gives one free access due to travelling against traffic at any given time, Orion City is on the road to success.

Hassle free money transfer 

LB Finance has just launched the first-ever instant inland money transfer system that doesn’t require a bank or any other account types. A first-of-its-kind in Sri Lanka, LB Finance Money Transfer let you transfer money anywhere in the country through its islandwide branches and pawning centres.

“The service has been designed to be simple and quick,” said a Company spokesperson. “One only has to handover an amount of money to any LB Finance branch or pawning centre and fill-in a brief form. The transferring process is computerized and takes only a few minutes. The money can be immediately collected by another party from any LB Finance branch or pawning centre specified by the customer.”

What makes the product unique is that no other bank or financial services provider offers the service of transferring money instantly without some sort of account. The LB Finance Money Transfer service is available on Sundays too and there is no set limit to the amount transferable. Only a minimal amount is charged for the service, making it affordable to everyone.

“The Company laid focus on microfinancing and leasing during  recent years and this new service is part of our initiatives to take affordable and most-needed financial solutions to all levels of society – especially small and medium scale entrepreneurs,” says Managing Director Sumith Adhihetty.

LB Finance Money Transfer is expected to serve as a convenient and useful financial tool to a wide market; from companies to businessmen to families and individuals. Affording safety in taking cash from one place to another and affording the facility in the most convenient and simple of ways will be the products real promise.

The Company continues to expand its branch and pawning network keeping to its constant growth momentum: During the last financial year new branches were opened in Kuliyapitiya, Balangoda, Kegalle, Avissawella, Polonnaruwa and Nuwara Eliya, while new pawning centres were opened in Embilipitiya, Thihariya, Welimada, Wennappuwa, Kandy, Matale, Mahiyangana, Badulla, Monaragala, Grandpass and Kribathgoda. LB Finance pawning services have spread further across the island, now available through 37 pawning centres, 21 branches and head office.

Headed by respected industry veteran Adhihetty and backed by a dynamic team of young but experienced professionals, LB Finance is engaged in the acceptance of deposits, mortgage loans and other credit facilities, real estate development and related services. Leasing, Hire Purchase and Pawning have remained the Company’s key revenue drivers and the management has leveraged on its expertise in the automotive business by the trading of vehicles. The Company offers leasing solutions to a range of vehicles/equipment, including, private vehicles, commercial vehicles, machinery, three wheelers and motor bikes, agricultural equipment, trucks and trailers and construction.

Cheaper milk to all

Maliban Milk Products [ Pvt.] Ltd., whose genesis is attributed to an outstanding local entrepreneur whose reputation lies in the provision of offering the highest quality in all their brands of nutritionally sound foods at realistically affordable prices to all consumers alike, joined hands with Bank of Ceylon (B.o.C.), the leading financial Institution in the country with 450 branches & extended offices and a customer account base of over seven million countrywide, to offer their customers an opportunity to receive an appreciation for being a loyal Maliban milk consumer & B.o.C. accountholder.

B.o.C. will announce & issue to all their accountholders; on a monthly basis, for a period of one year; “ Kiri Upahara” discount coupons for purchases of Maliban kiri. Maliban Milk Products [ Pvt.] Ltd., will provide all the branches & extended offices as per bank instructions, adequate quantities of “ Kiri Upahara” discount coupons; and make all arrangements in at least 2-3 wholesale/retail outlets closely located to each respective branch for the convenience of B.o.C clients to buy Maliban Milk under this special programme.

Today B.o,C. together with Maliban Milk share the pride of launching this gigantic programme and a promotional campaign at national level in order to announce, encourage & persuade more & more people to take part in this programme & enjoy the benefits that are mutual.

Head hunter

Fayaz Saleem, the “ pioneer” headhunter and Principal Consultant and MD  Executive Search Ltd and AIMS, has  sourced and  identified a suitable candidate, Ganesan Subramanyam as the Chief Executive Officer for the Bank of Maldives, Maldives’ premier bank. ”The Bank had been on the look out for a CEO for almost six months, they gave us 10 days to handle this assignment,” said Saleem. “We thought a candidate from the South Asian region would be most suitable, although the previous candidate was a Singaporean,”’ said Saleem, who started  an in depth search for suitable candidates from Srilanka, India and Pakistan.

After conducting one to one interviews with local candidates and on  the phone with  overseas candidates, resulted in Subramaiyam being selected. According to Saleem he was a CEO of a bank in Mozambique.Having been in the “people consultancy” business for a little over 30 years, Saleem “pioneered” the concept of head hunting in the country. He has had the distinction of placing several top managers in the likes of CEOs, COO, GMs, CFOs, heads of various functional disciplines in many multinational and Sri Lankan blue chips. “We are fortunate to have had our services retained by several leading organisations from not only in the south Asian region, but also those in the Gulf, Africa,Vietnam, Singapore, Malaysia, Pacific Islands, Hong Kong and occasionally from the West too,” said Saleem.

Targeting senior citizens

Sampath Bank is launching a special savings account for senior citizens under Sanhinda Saver, creating another revolution in the banking industry.

The new “Sampath Sanhinda Saver” account can be operated in Sri Lankan Rupees or foreign currency as per the choice of the accountholder. A unique and attractive feature of the new account scheme is that interest will be paid twice monthly for this account!

If the average balance is or below Rs. 9,999; the applicable interest rate will be 4.25% per annum while average balances above Rs. 10,001 will gain an 8.25%  interest rate annually. And the additional interest rate for foreign currency account is 0.5% (US$).

Sampath Sanhinda Saver Account can be opened by any Sri Lankan citizen over 50 years of age, by making an initial deposit of Rs. 1,000 or US$ 100 for foreign currency accounts. Accountholders will be eligible to a host of special discounts, offers and benefits from a large number of merchant outlets who have partnered with Sampath Bank.

All Sampath Sanhinda Saver account holders will be given priority service at any Sampath Bank branch. And a 50% discount is offered for “Door Step Banking Facility”.

Under the Sampath Sanhinda Saver benefit scheme, accountholders who maintain an average balance of Rs. 50,000 are entitled to a free annual medical checkup done at Asiri Hospitals Ltd. And special foreign and local tours will be arranged for selected customers annually.

Sampath Sanhinda Saver account holders are issued a special branded  pass book and branded Visa Debit/ ATM card. The Visa Debit/ ATM card will allow the accountholder to make payments for purchases and withdraw cash with a single card, while making use of the special discounts and benefits offered for Visa debit cardholders.

Sampath Sanhinda Saver is an ideal savings scheme for senior citizens who wish to spend their retirement in comfort without having to worry about financial security.