Sri Lanka Newspapers - 27/12/2011

CB Governor calls Fitch report puzzling
Lanka among highest-risk financial systems, says ratings agency
Central Bank Governor Ajith Nivard Cabraal said the latest report released by Fitch which placed Sri Lanka among the highest-risk financial systems, was puzzling because it failed to acknowledge the good economic gains made by these countries in a world of uncertainty.

"While many advanced economies ‘de-lever’, the speed of credit growth and rising asset prices has led to Asia-Pacific harbouring four of the world’s nine highest-risk financial systems according to Fitch’s macro-prudential risk framework. Hong Kong and China were joined by Indonesia and Sri Lanka in the December 2011 assessment, although Vietnam dropped out as credit growth eased," Fitch said as reported in these pages last Saturday (24).

Cabraal said the countries in this list had recorded vibrant economic growth during the year which saw major Western economies slump.

"All these countries had good economic growth. Sri Lanka’s economy would grow by 8 percent this year and our macroeconomic fundamentals are sound. We are surprised that some of the economies that should have been highlighted with high-risk financial systems have not been mentioned. We find the Fitch report a bit puzzling because of this," Cabraal said.

Fitch upgraded Sri Lanka’s Long-Term Foreign-Currency IDR to ‘BB?’ with a Stable Outlook from ‘B+’/Positive in July 2011, reflecting the stabilisation and recovery of the economy under the authorities’ IMF programme and efforts to consolidate the chronic budget deficit, the ratings agency said.

"However, foreign direct investment has been surprisingly slow to recover after the end of the country’s long civil war in 2009, and the authorities devalued the Sri Lankan rupee by 3% in November 2011. Structural reforms to support longer-term growth prospects combined with further fiscal consolidation efforts would increase Sri Lanka’s chances of moving further up the ratings scale," Fitch said.

"Strong and/or improving external balance sheets buffer most of emerging Asia from ongoing volatility in global investor risk appetite. India and Sri Lanka are the only Fitch-rated emerging Asian countries to run deficits on basic balance (the current account plus net foreign direct investment). This structural weakness may help explain why the Indian rupee fell to a record low against the US dollar in December 2011, while Sri Lanka devalued its currency in November," it said.
http://island.lk/index.php?page_cat=article-details&page=article-details&code_title=41955

The country’s exports sector faced both agony and ecstasy in October, with the month experiencing the first year-on-year on dip as well as overtaking 2010 full year performance.

As per latest data, exports in October dipped by 5% to $ 882 million, a development which the Central Bank said was on account of the higher base a year earlier. However, first 10 months’ performance at $ 8.7 billion had already overtaken 2010’s full year performance of $ 8.3 billion.

Year-to-date performance reflects a healthy 23.4% growth over 2010’s first 10 months. Though suffering a year-on-year dip in October 2011, performance was also better than the September figure of $ 853.8 million.

Imports, which surpassed the 2010 full year figure of $ 13.5 billion in September, saw a second month of $ 1.75 billion (up by 41.4% over October 2010), thereby propelling its first 10 months’ value to $ 16.4 billion, up by 50.7%.

Speeding imports saw the trade deficit ballooning by 100% to $ 7.7 billion in the first 10 months.
Detailing October performance, Central Bank said exports saw contraction in tea, rubber and minor agricultural crops.

Industrial exports recorded a growth of 12.8% in October 2011 compared to the corresponding month of 2010. Earnings from agricultural exports, which accounted for 23% of total exports, declined by 10.3%, mainly due to decline in tea export earnings by 12.1%, year-on-year, in October 2011.

Despite the higher export prices, exports volume of rubber declined by 40.8% in October 2011 as a result of high demand for rubber by domestic industries to produce value added exports. Earnings from minor agricultural exports also declined due to the lower exports of pepper, cocoa, fruits and vegetables.

The growth in industrial exports was led by textile and garments, rubber based products, petroleum products, diamond and jewellery and food, beverages and tobacco. Textiles and garments exports grew by 12%, year-on-year, in October 2011. The rubber based products exports increased by 34.8% in October 2011 compared with the corresponding month of 2010.

The Central Bank said expenditure on imports was mainly driven by increases in intermediate and investment goods. The intermediate goods imports increased year-on-year by 42.7% led by petroleum imports. The higher petroleum import expenditure was mainly due to the higher average import price of crude oil of $ 107.2 per barrel in October 2011 compared to $ 81 per barrel for the corresponding month of 2010.

Fertiliser imports grew in terms of both prices and volumes, by 28.9% and 72.6%, year-on-year, respectively, and the sharp increase of volume was mainly due to expansion of fertiliser subsidy to cover all crops.

Imports of investment goods increased by a substantial 58.7% in October 2011, led by higher expenditure on imports of machinery and equipment, transport equipment and building materials. Expenditure on non-food imports increased by 12.7% despite the decline in personal motor vehicle imports by 16.3%, year-on-year, in October 2011.

With regard to the $ 7.7 billion trade deficit, the Central Bank said a significant portion was on account of imports of infrastructure-related projects of the Government that have been funded mainly by foreign loans. In that context, the total inflows to the Government, including the proceeds of the International Sovereign Bond issue, amounted to $ 3,507 million during the first 10 months of 2011.
http://www.ft.lk/2011/12/27/exports-agony-and-ecstasy/

A shocked leisure industry yesterday decried the deadly attack on tourists in Tangalle over the weekend as the biggest setback for the sector which was rebounding following the end of the war.

They urged the Government and law enforcement authorities to ensure harshest punishment against those responsible whilst calling for adequate measures to ensure safety of tourists.

An alleged argument leading to a fracas saw the alleged murder of a British holidaymaker and a brutal attack on his partner, a Russian lady, at a Ceylon Tourist Board registered guesthouse Natures Resort in Tangalle on Saturday.

“Even during the 30-year conflict, we told the world that not a single tourist was harmed. However, it is of serious concern that the first murder of a tourist took place in peaceful times and that too during the winter season. Such incidents can take place anywhere in the world, but the best the Government could do immediately is to punish the culprits and thereby bring back confidence over law enforcement and security,” Tourist Hotels Association President Anura Lokuhetty told the Daily FT yesterday.

“Swift action against those responsible will prove that the Government doesn’t condone such violent acts,” he added.

The main suspect in the deadly incident, Tangalle Pradesheeya Sabha Chairman Sampath Vidanapathirana had surrendered last night after absconding. Earlier three other suspects had surrendered whilst Police and CID found the van in which the suspects fled the area following the incident. The deceased Kuram Shaikah Zaman, a British national of Israeli origin, is an ICRC volunteer working in the Gaza strip. He was 27 years old and his partner Victoria Alexandrovna is 24 years old. They had arrived in Sri Lanka on 17 December. The Russian female partner is receiving urgent treatment for head injuries at Karapitiya Hospital.

Lokuhetty lamented that the incident had tarnished Sri Lanka’s image and failure by law enforcement authorities would make others label the country as unsafe for tourists.

“The Government and the law enforcement authorities must take all necessary action to prevent harm to tourists,” he said, adding that post-war Sri Lanka had seen record tourist arrivals this year, thereby making an enhanced contribution to the country’s socioeconomic development.

“The gruesome incident will have a far-reaching impact on tourism,” warned industry analysts, who pointed to the setback Goa faced a few years ago when a British tourist was raped and murdered.

So far there hasn’t been an official condemnation of the attack or an expression of sympathy or apology to the family of the deceased Briton from the Government.

Partly due to the recession as well as owing to other factors, arrivals from UK have been under stress, though the traditionally strong market remains Sri Lanka’s second biggest source market for the industry after India. In the first 11 months of this year, tourist arrivals from UK amounted to 96,019, up by 0.7% over the corresponding period of last year.

The BBC Sinhala.com reported that journalists in the southern Sri Lankan town of Tangalle had received death threats following their coverage of the attack.

Police Spokesman SP Ajith Rohana told BBC Sandeshaya that the post-mortem conducted at Matara Hospital revealed that the victim had died as a result of being attacked with a sharp weapon and that he had also been shot at.

“It was the assault by the sharp weapon that has caused his death,” said SP Rohana.
Eyewitness said Tangalle Pradesheeya Sabha Chairman Sampath Vidanapathirana was seen having a row with the couple prior to the attack at Natures Resort in Medilla.

“Police will arrest all suspects who have been identified,” said SP Rohana, who declined to reveal the names of suspects.

Free Media Movement Convenor Sunil Jayasekara told BBC Sandeshaya that journalists in the area had received threats after reporting the incident.
http://www.ft.lk/2011/12/27/tourism-decries-tangalle-tragedy-as-biggest-setback/

Dec 26, Colombo: Sri Lanka's Treasury is in the process of identifying investors for the 37 state institutions taken over by the government under the Revival of Underperforming Enterprises and Underutilized Assets Act.

The government has appointed Competent Authorities to manage these institutions, 27 of which are currently closed or non-opeartional. The Board of Investment will identify investors for institutions coming under it.

The Director General of the State Ventures Department of the Treasury S R Atigala has said that reports about 6 institutions have been directed to Officials Committee and subsequently they will be presented to the Cabinet Sub Committee, state-run radio SLBC reported.

The Government Agents of Hambantota and Moneragala function as Competent Authorities for the Pelawatte and Sevenagala Sugar Factories respectively. Two Chief Executive Officers have also been appointed to these Institutions and the payment of salaries for employees of the Institution is also being carried out.
http://www.colombopage.com/archive_11B/Dec26_1324841546CH.php

Dec 27, Colombo: Sri Lanka's state-run Ceylon Petroleum Corporation(CPC) has invited bids to build an aviation fuel terminal at the second international airport being constructed in Mattala, in the Hambantota district of the Southern Province , the government announced today.

According to a government report, the Chairman of the Standing Cabinet Appointed (Special) Procurement Committee (SCAPC) on behalf of Ceylon Petroleum Corporation has invited sealed bids from eligible international bidders.

The government is seeking bids from turnkey contractors who have experience in projects at

international airports and have revenues of US$ 20 million in the past five years for the "design, procurement, construction, testing and commissioning works" for the aviation fuel terminal to be constructed at the Hambantota International Airport at Mattala.

Under the 'Aviation Fuel Storage Facility and Hydrant System Project' the terminal is expected to be built in a year time. The expected cost for the terminal is around 3.6 billion rupees (US$31 million).

The bids are to be closed on February 02.

The first aircraft is expected to land at the new international airport by the end of 2012.
http://www.colombopage.com/archive_11B/Dec27_1324958361CH.php

Dec 27, 2011 (LBO) - Newly listed primary dealer Entrust Securities said net profit for the six months ended September 30, 2011 fell 80 percent to 26.8 million rupees from a year ago.

Earnings per share of the firm, the first non-bank primary dealer to be listed, slipped to 81 cents from 4.10 rupees the year before, a stock exchange filing said.
The company part of the Entrust Ltd. group, was listed through an introduction process on the second board of the Colombo Stock Exchange on November 29, 2011.

Interest income of the firm, which deals in government securities like treasury bills and bonds, fell 9.6 percent to 265.7 million rupees in the half-year to September 2011 from the previous year.

Interest expenses fell at a faster 12.4 percent to 208.6 million rupees over the same period enabling net interest income to rise 2.3 percent to 57 million rupees.

Entrust Securities said it had provided 10.7 million rupees for the six month ended September 2011 as fall in value of trading securities.

Capital gains on securities fell 46 percent to 38 million rupees during the period while income from trading activities fell sharply to 75 million rupees from 176 million rupees the year before.

Entrust Securities made a net profit of 149 million rupees in the year to March 31, 2011, up 325 percent from the year before, mainly due to an increase in income by 26 percent and reduction in costs.
http://lbo.lk/fullstory.php?nid=611760129