Sri Lanka Newspapers Sunday 29/01/2012

Colombo bourse expected to re-rate to attractive valuation – analysts
By Duruthu Edirimuni Chandrasekera

With the approaching earnings season coupled with the deep shed in indices, some analysts believe the Colombo bourse would re- rate itself to an even attractive valuation platform.

They say that the stock market has bottomed out and prevails in an attractive investment proposition with a price to earnings (PE) ratio of 14.5 times which has placed foreign investors with an opportunity to bargain hunt. “Towards the latter part of 2011, foreigners indicated their willingness to make a come-back which shows that foreign activity would ascend upward, in the coming months. With another quarter of earnings coming in, the valuations will look more attractive," an analyst said.

Analysts say that what should be looked at right now is at what level of multiples the market feels is attractive to buy again. “Personally I think the valuations are starting to look quite attractive on the blue chip and value shares with most of them having fallen more than 30% in the last 52 weeks. However, market sentiment is such that it tends to overshoot both on its way up and on its way down. So timing the entrance to the market would be the key to earning good returns this year,” Deshan Pushparajah, Head of Capital Markets at Capital Alliance told the Business Times.

He said that amongst the lingering risks to ponder when making the call on the attractiveness of valuations is the current spike in interest rates, which could slow down growth in some sectors towards the latter half of the year.

"Market anticipation of a currency devaluation could delay the return of foreign investors and impact import driven companies/ benefit export driven companies," he said. He also said that the ongoing crises in the Middle East and Europe could impact outward looking industries and those dependent on them.
http://sundaytimes.lk/120129/BusinessTimes/bt15.html

Stockmarket Review
By Elton P. Ebert
Very attractive prices may have drawn some foreign funds to the Colombo bourse this week, foremost of which is JK Holdings in which a massive eight million shares were purchased by these funds. Immediately after this trade was finalized, JKH released superb growth figures.

This transaction coupled with a 3.7 million Commercial Bank share transaction helped to swell the days' turnover in excess of Rs 2 billion, after a very long time. Commercial Bank is also expected to release substantial growth figures. Subsequent to this the market went on the upside especially on Friday, with the ASI gaining around 180 points creating a much welcome sentiment after a long interval. Earlier in the week on Monday and Tuesday the market went into a bad slump wiping off billions in value due to forced selling on margin calls plus a phase of unwarranted panic selling. On Tuesday, the market was catastrophic as it tumbled heavily, the ASI losing almost 211 points mid-day but staged a recovery to lose 127 points at close. Many analysts were at a loss to understand why the market dipped so badly given many factors like the effort by the CSE to promote the Colombo stock market as an ideal market for investments, emphasised by the fact that the London Stock Exchange was seeking to collaborate with Colombo, and that the Qatar State owned Investment Authority seeking a stake in the Colombo Stock Exchange through Qatar Holdings.

Another high powered group, Aitken Spence had a minor upside following its profit of Rs 630 million by the sale of its 30% stake in Colombo International Container Terminals Ltd. Watawala Plantations Ltd are arranging for the sale of its holding in Watawala Marketing Ltd for Rs.741.5 million.

In the books the carrying (value) is Rs.355 million. During the week Free Lanka Capital, Pan Asian Power, and the duo - Waskaduwa Beach and Kalpitiya Beach Resorts were actively traded.
However Asia Asset Finance was the most active for yet another week. On Friday when confidence returned to the market all-round buying was evident, but most pronounced in Commerical Bank Normal and Voting shares, and Nations Trust Bank, in which prices were higher. Commercial Bank voting closed at Rs.104, while NTB closed at Rs.61.50. The other interesting price structures were that of Nuwara Eliya Hotels at Rs.1287.50 and Nestle at Rs.906. Price Bands: It was imposed on Asia Asset Finance from 23rd January to 27th January 2012. Changes in directorates: Nanda Investments & Finance Ltd - Wimal Gamage and Hema Ruklantha Mayadunne resigned from the Board on 20th January 2012 while

Osanda Manjusri Gamage and Ms Chanika Mallawarachchi were appointed Non-Executive Directors on January 20, 2012; Infrastructure Developers PLC - Harsha N.de Silva, Ms Dimanthi L de Silva and H G Sagara Kariyawasam were appointed Directors on 19th January 2012; Sampath Bank - Prof. K A Malik Kumar Ranasinghe was appointed alternate Director to D. Sooriyaarachchi on 15th January 2012, Channa Palansuriya was appointed Deputy Chairman and Sanjiva Senanayake a Senior Director. The turnover of Rs. 6.7 billion was an improvement over last week's figure of Rs. 4.4 billion mainly because of the high level of activity on Thursday and Friday. The All Share Price index was 0.5% or 57.03 points lower to close at 5725.44, while the Milanka was just 5.89 points or 0.05% better at 4921.81.
http://sundaytimes.lk/120129/BusinessTimes/bt28.html

Sri Lanka is the world’s second-best performing economy in the world after China, we are told.
According to Economic Development Minister Basil Rajapaksa, an IMF study has showed that Sri Lanka was the second-best performing economy in the world, growing at a rate of over 8 %. He also told reporters this week that Sri Lanka is growing this year by 8 % when other countries have reduced growth rates.

However many economists, following these comments, have been ‘Googling’ the web but unable to trace any such report or study from the International Monetary Fund. IMF officials here were also unable to provide any clues to this so-called study.

On the face of it however, Sri Lanka’s GDP growth is comparable to the best in the world. According to the tradingeconomics website (www.tradingeconomics.com), China, which by 2050 will overtake the US as the world’s largest economy, grew by 8.9 % in 2011 and India by 6.9 %. Others – mostly Sri Lanka’s main buyers of garments and other products – slowed down considerably with Canada’s growth being 3.4%, Germany-Australia-France in the 2 to 2.5% range while the US grew by 1.5 % and the UK by a marginal 0.7%.

Qatar on the other hand grew by over 30 % average in the first three quarters of 2011 while Argentina’s GDP’s was also over 9 % and Turkey at 8.2 %, slightly lower than Sri Lanka. So would this make Sri Lanka the fourth-best performing economy (after Qatar, Argentina, China and Turkey)?

Figures however can be deceptive since for all its growth statistics proudly touted by the government, there are serious economic management issues, problems that have been raised repeatedly in these columns and also by the Sunday Times’ columnist on economic issues, Dr deleted Sanderatne.
Credit however must be given to Governments during the 30 years of conflict for continuing basic services like health, education and food needs in the North and East even in areas that were controlled by the LTTE. In some countries which also faced similr raging conflicts, supplies were either cut off or reduced to cripple militant groups but which ultimately affected civilians.

The sustenance of basic public services and Sri Lankans being resilient enough to sustain an economy and quickly adjust to a post-war situation is what led to the conflict-areas being able to grow faster than in any other country that recovered from a conflict. The same applies to the national economy where the service sector, particularly services (telecommunications and tourism) responded quickly.
Yet in terms of growth, are we just papering the economic cracks and lulling the population into a false sense of belief that everything is hunky-dory?

Take for example the main conditions on which the IMF’s $2.6 billion bail-out package was given in July 2009: reducing public debt to GDP ratio, the Ceylon Petroleum Corporation and the Ceylon Electricity Board breaking even by end 2011, and a flexible exchange rate policy. None of these has been fulfilled, according to economists. Exchange rates are managed by the Central Bank and not pegged to the market leading to President Mahinda Rajapaksa announcing 3 % devaluation in the last budget following concerns raised by exporters. While this was relief to exporters, it has caused uncertainty in the money markets with a ‘will-the-Treasury-intervene-again’ kind of perception. Interest rates are also not in line with market trends.

Problems persist. The spat between the Treasury chief Dr P.B. Jayasundera and Central Bank Governor Ajith Nivard Cabraal, sometimes spilling out in public, has unnerved investors. Both institutions need to work together not against each other as seen with figures on the national economy being contested by either party.

The disastrous expropriation bill, the deadly pension bill and the conduct of examinations were all issues. Badgering the media for not reporting their views (Government) and those views alone without objectivity is not the answer to an economy that is best-performing where many of the underlying problems are either covered up or hidden from the glare of the public.

Government deals are repeatedly under question and unconvincing answers bordering on arrogance, provided. The main growth sectors are services and construction and dependence on remittances from Middle East migrant workers while agriculture (although production has improved in the North and the East) and industries are yet to take off.

In the real economy, people are not feeling the benefits of this growth. Cost of living is rising.
Opposition legislator Eran Wickremaratne raised a valid point, recently. Speaking at a Colombo discussion on the ‘economic perspective in post-war reconciliation’, he said while there should have been a grand recovery plan for the conflict areas, a Marshall (like) Plan happened in the South with a new cricket stadium convention centre, airport and seaport.

“Such a development should have taken place in the North or at least in both regions,” he said, adding that the ‘Feel Good factor’ is being promoted vigorously while oil pricing are going up and debts (national and people’s) are rising. There are huge challenges in law and order, governance, transparency and accountability.

Militarization of the economy, he says is similar to what happens in China and Pakistan.
That’s true - the Army in setting up a commercial company to handle private contracts, the Navy is ferrying tourists on whale and dolphin watching tours and the Air Force has a commercial flying service to Jaffna.

An economy must take in all these social, economic and political factors into consideration in its growth path. Being pleased and, on the other, complacent by positive growth figures is not going to help anyone, mainly the people of Sri Lanka.
http://sundaytimes.lk/120129/BusinessTimes/bt07.html

By Duruthu Edirimuni Chandrasekera
Sri Lankan businesses should step up their investments and shouldn't wait for foreigners to do it first, the Central Bank (CB) chief. "We mustn't wait for foreigners to come. They will come, but they'll do so after us," Ajith Nivard Cabraal, Governor CB said, addressing an eminent gathering at a seminar on the role of the business community in reconciliation at the Kadirgamar Institute on Tuesday. He was delivering the keynote on "The National Conference on the Role of the Business Community in Reconciliation".

He added that Sri Lankan businesses have contributed appreciably to the reconciliation process by investing in the country's Northern and Eastern provinces. "We saw more than 60,000 loans granted to businesses in these areas, which show that businesses ae starting," he said, adding that the members of the business community and experts on reconciliation should contribute to the national reconciliation process.

Professor Rohan Gunaratna from the International Centre for Political Violence and Terrorism Research, Singapore said that the private sector, rightly touted as the "engine for growth", can make a vital contribution to the national reconciliation process by providing commercial investment in areas that were affected by the conflict, and thereby bring in 'economic multipliers' to such underdeveloped areas which provide momentum for future development. "This could be distribution networks, financing mechanisms, access to markets, and training and human resource development."

Other speakers also said that organizations can also employ conflict - affected people, including former combatants, enabling social re-integration of such individuals and contribute to their economic well-being, which is an essential social re-integration of such individuals. They also said that collaboration with the government and NGOs may allow a balance between business and development objectives, while the government can provide the right combination of incentives to encourage private sector investment. Additionally, it is indeed in the long-term interest of the private sector to achieve a sustainable peace in Sri Lanka, and a strategic partnership can be forged between the government, private sector and community organizations for post-conflict reconciliation and reconstruction.

Imelda Sukumar, GA, Jaffna noted that businesses can also play a crucial role in pursuing sustainable development by investing in local communities and industries, supporting local education, health, and enterprise development programs, and funding activities that promote education, diversity, and tolerance. The first step in this path is attaining peace. Permanent peace can truly be brought about if all members of a society embrace and sustain it. The reconciliation process should lead to political, social, psychological, and economic fulfillment. Thus, reconciliation cannot be achieved by the directives of the state alone, she said.
http://sundaytimes.lk/120129/BusinessTimes/bt10.html

Nation Lanka Finance PLC’s second “RIGHTS ISSUE” in less than a year has been oversubscribed, the company said. The confidence placed in the company, by their share holders especially when market sentiment is at low ebb is indeed a significant achievement, it said in a statement.

Subsequent to the takeover of the company in April 2011 by a consortium of investors led by Asanga Seneviratne’s Investor Access and including Jayantha Dharamadasa as Chairman and J. Rudra, the organization has taken giant strides in the financial services sector. They have raised over Rs. 1.3 billion in new equity and consolidated Nation Lanka.

“Envisaging this positive response to the Rights Issue and taking a cue from the rapid strides in the national economic revival, particularly in the rural sector the company’s entire branch network which is spread across the island, has been given a facelift and in some instances relocated to cater to the growing clientele. The addition of micro finance and pawning to its portfolio of products has seen a tremendous increase in its customer base,” it said.

Starting the year 2012 on a winning note and with more innovative products and services lined up to be unveiled in the near future the company is heading in the right direction and signs have already appeared that Nation Lanka Finance PLC will be a much sought after financial institution in the future, the statement added.
http://sundaytimes.lk/120129/BusinessTimes/bt16.html

Auro Holdings (Pvt) Ltd is investing in two new properties, Colombo Courtyard, Colombo 03 opening in February 2012 while Ranna212, Tangalle has already begun welcoming its first guests, the company said this week.

It said the company’s Managing Director, Arun Thapar, holds business interests spread across a range of industries from leading apparel firms in Singapore and Sri Lanka to hotels in the Maldives and Canada. “The tourism industry can finally reap the benefits of the islands natural, historical and cultural beauty,” he said.

The 33-key (room) boutique hotel in Colombo situated at Alfred House Avenue, has an initial investment of US$5 million whilst the property in Ranna, Tangalle is a 124 key property with an investment in excess of US$15 million.

The statement said that Colombo Courtyard, designed by environmental architect Sunela Jayawardene, is crafted around the concept of a series of open spaces and the use of recycled elements in its artful décor. With a choice of two unit suites equipped with modern facilities including 42 inch LED screens and iMac computers, as well as Deluxe rooms with heightened comfort, Colombo Courtyard will breath freshness into the city’s accommodation options.

Ranna212, Tangalle is spread across 11 acres of land with over 150 metres beach frontage. Plans are also underway for three more properties to be built in Ahungalla, Kalpitiya and Vakarai.
http://sundaytimes.lk/120129/BusinessTimes/bt26.html

ICRA Lanka Limited, a wholly owned subsidiary of ICRA Ltd., an associate of Moody’s Investors Service, has assigned a credit risk rating of ‘[SL] AAAmf’ to NDB Aviva Wealth Managements Eagle Gilt Edged Fund. The rating indicates that the underlying portfolio has the lowest credit risk and the highest degree of safety from credit losses. This rating scale ranks the relative default risk associated with issuers / debt / schemes in Sri Lanka, which is a first in the growing Sri Lankan financial landscape.

The Eagle Gilt Edged Fund is part of the "myeaglefunds" family of mutual funds, and is managed and marketed by NDB AVIVA Wealth Management. Launched in December 1997, the Eagle Gilt Edged Fund has a track record of 15 years and is focused on maximising returns from investments in government securities and government guaranteed securities. "The fund has been very popular with clients and has captured substantial amount of deposits which was around LKR 4,552 million as at December 2011," said Pabodha Samarasekera, the CEO of NDB Aviva Wealth Management.

He further went on to say that the fund was ideally suited for persons who would consider keeping their savings in bank savings accounts and did not like to take risks. Also, the fund pays out income to depositors quarterly, making it ideally suited for persons planning on having an attractive and regular retirement income. Income from Eagle Gilt Edged fund is tax free and this has been a factor for the high level of demand for it by the corporate sector, which pays high rates of taxes on their income from bank deposits. The savers can enter and leave the Eagle Gilt Edged fund anytime.

The NDB Aviva Wealth Management is a joint venture between National Development Bank Plc, the only true universal bank in Sri Lanka, and Aviva group, the sixth largest insurance group in the world. The NDB Aviva Wealth Management is the largest private sector fund management company in Sri Lanka with around LKR 50 billion of assets under management as at December 2011 and is licensed with and regulated by the Securities and Exchange Commission of Sri Lanka (SEC) as a Unit Trust Management Company.
http://island.lk/index.php?page_cat=article-details&page=article-details&code_title=44154

With imports poised to go up
By Hiran H. Senewiratne

The government is confident of collecting of Rs 241 billion as import taxes/ tariffs during 2012 because imports would likely go up during the year due to high economic development activities, says says K. M. M. Siriwardana, the Director General of the Department of Fiscal Policy, Ministry of Finance and Planning.

"The prevailing forecast had indicated that Sri Lanka’s imports will go up during this year due to enhanced economic activities. Therefore, many investment and intermediary goods would be imported on a large scale into the country, he predicted.

Siriwardena said that fiscal policy will continue to support growth. The revenue growth target of 20.1% in 2012 is optimistic given external headwinds, and the ambitious deficit target of 6.2% of GDP may be overshot, as increased spending may be needed to support growth.

With the widening of the trade gap to nearly US$ 2 billion, Sri Lanka’s expenditure on imports grew 78 percent in November 2011 compared to the previous year, the Central Bank reported last week in its External Sector Performance Reviews.

In November 2011, earnings from exports grew by 11.6 percent to US$ 879 million, while the expenditure on imports increased by 78 percent to US$ 1.981 billion compared to that of November 2010.

However, in the first 11 months of 2011, the country’s exports grew 22.2 percent to US$ 9.58 billion and expenditure on imports grew by 53.2 percent to US$ 18.42 billion to widen the trade gap by 111.3 percent to US$8.84 billion.

By end November 2011, gross official reserves stood at US$ 6.2 billion sufficient for 3.8 months of imports. The reserves have dropped from a record reserve of US$ 8.1 billion the Bank had at the end of July 2011.

The Central Bank’s decision to defend the rupee currency in the latter half of 2011 at a cost of US$2.6 billion in foreign exchange reserves since July, has raised concerns in the International Monetary Fund (IMF) which has sent a mission to Sri Lanka this week to discuss the US$ 2.6 billion Stand-By Agreement.

The increased demand for investment goods by the government’s infrastructure projects, a majority of which were funded by foreign loans, and higher intermediate and investment goods import by the private sector have contributed to the staggering trade deficit in November, the Central Bank reported.
http://island.lk/index.php?page_cat=article-details&page=article-details&code_title=44162

Unidentified director’s share dealing causes unexpected complications
Highest price per share paid by director not disclosed

Distilleries Company’s 100% subsidiary, Melstacorp Limited, has in an announcement made to the CSE last week expressed willingness to increase their mandatory offer price for approximately 70% of Aitken Spence PLC to Rs.112.83 increasing the previous offer price of Rs.110.

However, Melstacorp has said that if the SEC determines that the price should be higher than the Rs.112.83 offered, they have sought the Commissions’s concurrence to divest a quantity of Aitken Spence shares to render them not liable to continued with the mandatory offer.

The filing, through an announcement to the CSE, said that any higher price will not be financially viable to Melstacorp.

Although Melstacorp announcement said that its officials have had a preliminary meeting on Jan. 18 with officials of the SEC, SEC’s Chairman Tilak Karunaratne said yesterday that this matter has not yet been formally communicated to the members of the SEC.

Melstacorp has fallen into trouble over the mandatory offer as a result of one of its non-executive directs having during the 12 months preceding the date on which the obligation of making the mandatory offer arose traded in shares of Aitken Spence paying a price higher than the Rs.110 paid by the mandatory offeror (Melstacorp and parties in concert).

As a director of Melstacorp will be legally considered a party acting in concert for the purpose of the offer, the liability of increasing the offer price had therefore arisen, analysts explained.

The announcement did not identify the non-executive director concerned nor disclose the highest price that he had paid for an Aitken Spence share during the relevant period.

Melstacorp has explained that the Spence shares in question had been acquired by the broker of the director concerned with whom he had maintained what was called "a discretionary account."

This permitted the broker to deal in the shares without any instructions given by the principal (the director concerned) who had therefore no knowledge of the purchases.

Melstacorp said that at the time of acquisition of shares by Melstacorp triggering the mandatory offer requirement, this director had zero shares in Aitken Spence.

The announcement said that the director concerned had owned immediately prior to the relevant 12-month period a brought forward balance of 30,000 Spence shares. In January 2011 his broker had sold 14,300 of these shares and purchased 15,600 shares. In April the same year the broker had purchased a further 4,600 shares.

Melstacorp stressed that during November and December 2011 he had purchased no shares but had sold 35,900 ending with a zero balance by December 6, 2011.

On the other hand Melstacorp had purchased Spence shares from December 2, 2011 from a zero balance to December 22, 2011.

"None of the other four parties in concert, namely Distilleries Co. of Sri Lanka PLC, Milford Exports (Ceylon) Limited, Stassen Exports Limited and Periceyl (Pvt) Limited have had any purchases during the relevant period except their brought forward balance from prior to the relevant period and a few sales made," the announcement said.

Melstacorp has said that it has computed what it called the "adjusted price" based on the Volume Weighted Average Price (VWAP) using a formula previously accepted by the SEC.

The VWAP has been computed by dividing the total value of shares traded during the period divided by the total volume of shares traded in the same period.

The total value of purchases by the director and Melstacorp was Rs.59.9 million while the total volume purchased 530,000 shares and by making the division the

the VWAP of Rs.112.83 arrived at.

This is the level to which Melstacorp is willing to go up to pursue its mandatory offer. Going higher would be unviable, the company has said and asked the SEC for authority to divest a sufficient number of shares to go below the level that obligates a mandatory offer if it cannot agree with the VWAP price formula.

However, analysts say that usually mandatories are made on the basis of the highest price paid per share during the relevant 12-month period. The Melstacorp announcement does not disclose the highest price per share paid by the director during the relevant period.
http://island.lk/index.php?page_cat=article-details&page=article-details&code_title=44169

The president’s sons, Namal and Yoshitha, have sold the shares of Ascot Holdings PLC they had acquired last year, well informed sources said yesterday.

According to Ascot’s financials for the period ending Sept. 30, 2011, the two Rajapaksa’s were listed as being among the company’s top 20 shareholders respectively owning 100,000 (1.25%) and 92,000 (1.15%) shares each.

"These have been subsequently sold and they are no longer shareholders,’’ the sources said.
http://island.lk/index.php?page_cat=article-details&page=article-details&code_title=44170

The Colombo bourse rallied last week as high net worth investors traded large blocks of blue chip shares boosting retail investor confidence, Acuity Stockbrokers said in a research report yesterday.

The All Share Price Index gained 133 points (2.38%) while the Milanka was up 163.35 points (3.43%) on Friday on top of a less spectacular gain of 36.11 points (0.65%) on the All Share and 21.53 points (0.45%) on the Milanka the previous day.

Acuity said that the rally had been led by the banking and finance and diversified sectors which contributed 78.2% on Friday’s market turnover.

"We expect the positive market sentiment to gather momentum in the week ahead, supported by strong fourth quarter corporate earnings," the report said.

The big trades on Thursday comprised sales of large blocks of John Keells Holdings (JKH) by Mr. Sohli Captain and connected parties to foreign shareholders.

The Captains, who remain the biggest shareholders of JKH, were buying into Commercial Bank which also saw substantial blocks being sold by foreign shareholders to local buyers.

JKH last week posted a strong third quarter result for the current financial year with group attributable profit after-tax up 55% to Rs.2.73 billion. It was up 46% to Rs.5.68 billion in the nine months ended September 30, 2011.

Both revenue and profitability were up substantially with group revenues for the first nine months up 28% to Rs.54.27 billion.

The September financials indicated that JKH had done best in the leisure and transportation segments with leisure earnings topping Rs.1 billion before-tax during the nine months under review and transportation earning Rs.879 million pre-tax.

Financial services too had done well earning Rs.605 pre-tax during the 9-month period while consumer food and retail earned Rs.532 million with all segments doing substantially better than during the comparative period the previous year.
http://island.lk/index.php?page_cat=article-details&page=article-details&code_title=44172

Finance company license on February 15
By Ravi Ladduwahetty

The Rs. 500 million Nation Lanka Finance PLC rights issue has been fully subscribed and the company will be issued its finance company license on February 15, the company announced.

"This is indeed gratifying as our second Rs. 500 million rights issue in less than a year has been oversubscribed. The confidence placed in the company by its shareholders, especially when market sentiment is low, is indeed significant,’’ Nation Lanka Finance Director / CEO Asanga Seneviratne said yesterday.

The company will also be moving to a Dickman’s Road office next month from the present Guildford Crescent address to cater to increasing business volumes.Subsequent to the takeover of the company in April 2011 by a consortium of investors led by Asanga Seneviratne’s Investor Access and including Jayantha Dharmadasa as Chairman and J. Rudra, the organization has taken giant strides in the financial services sector. They have risen over Rs. 1.3 Billion in new equity and consolidated Nation Lanka.

The success of this rights issue, apart from enhancing the company’s working capital also contributes to satisfy the Central Bank’s core capital requirement and improves the company’s standing.

Envisaging this positive response to the Rights Issue and taking a cue from the rapid strides in the national economic revival, particularly in the rural sector the company’s entire branch network which is spread across the island, has been given a facelift and in some instances relocated to cater to the growing clientele.

The addition of "micro finance" and pawning to its portfolio of products has seen a tremendous increase in its customer base, Seneviratne said.

With these positive indicators and the new management’s emphasis on taking our services to the rural masses plans are underway to further expand the branch network, he said

Starting the new year on a winning note with more innovative products and services lined up to be unveiled in the near future, the company is heading in the right direction and there are signs that they will be a highly sought financial service provider in the future, Seneviratne said.
http://island.lk/index.php?page_cat=article-details&page=article-details&code_title=44173

EPF equity investments bring low returns:

ETF on a better footing

ETF has made a return of 26 percent on equity investments while EPF returns stand below 4 percent an Analysis by Verité Research shows that Employee’s Provident Fund’s (EPF)management of equity investments have made low returns in comparison to stock market growth for the corresponding period and in comparison to returns made by the Employees Trust Fund (ETF).

EPF’s investments in the stock exchange has underperformed the All Share Price Index (ASPI), and earned only one-fourth of what it would have earned if the same investment had been placed with the usual no-risk-low-return government securities, where 95percent of the EPF funds are placed.

The investment of the EPF funds is under the supervision of the Monetary Board of the Central Bank.

Historically, the main investments by the Fund have been in Government Securities. This is not without its problems as the EPF has been used as a cheap source of borrowing for the government, at the expense of reasonable returns for the workers.

A study by the Institute of Policy Studies titled “Designing Retirement-Income-Security Arrangements:

Theory, Issues and Applications to Sri Lanka” (de Mel, 2000)showed that the EPF returns had been negative in real terms over a workers career.In 2009, the Monetary Board invested 97.1 percent of the EPF Fund in Government Securities, with a return of 15.70percent, while in 2010, it invested 94.1percent with a return of 14.60 percent. At the same time there was a move to increase the investment in the stock exchange.

In 2009, only 1.3% of the Fund (Rs.9.8 billion), was invested in equities; but in 2010, there was a four-fold increase with 5% of the fund (Rs.43.7 billion) being invested in equities.

The Central Bank has explained this increased investment in equities on the basis that there was a need to diversify investments as returns to government securities were on the decline. The explanation, however, is contradicted by the outcome: the return to the EPF’s investment in equities in 2009 was 3.53percent and in 2010 it was 3.81percent.

If the same investments had been kept in short and long term government securities at the average yield, the EPF would have earned almost 4 times as much it did by investing in equities. In 2009 post civil war, the Sri Lankan stock exchange boomed, and in 2010 it became the best performing stock exchange in the world. The percentage increase of the ASPI in these two years was 125percent and96percent. In that light, how the EPF managed to garner returns of just 3.53percent and 3.81 percentis puzzling in the extreme, and should require a public accounting.

The Employees Trust Fund (ETF), which is managed by the Commissioner of Labour, has also made investments in equities. In contrast to the EPF’s return of 3.81percent the ETF made a return of 26percent on their investment in 2010.The loss to workers as a result of mismanagement of the fund’s investments in equities can be calculated at Rs. 71.2 billion in 2010 alone. More than the absolute amount, the scale of loss is a cause of concern. Where the quantum of investment had an expected market return 73.9 billion based on the ASPI of the stock exchange in 2010, the EPF earned only 1.7 billion: an adverse ratio of 43:1 (that is, if EPF had simply distributed its investment proportionately across all shares in the stock market without any thought or analysis, it would have earned 43 times more than it actually earned with its expert investment decisions).

The stock market is what economists call a “constant sum game”.

That is,the total long term benefits available from the stock market are equal to the actual increase in dividends fromthe underlying stocks. All deviations from this underlying increase in value are “zero sum”: that is, one person’s loss is another person’s gain. Therefore, the huge underperformance of the EFP investment is not without beneficiaries.

http://www.sundayobserver.lk/2012/01/29/fin01.asp

Lanka to woo one million visitors this year

Lalin FERNANDOPULLE

Sri Lanka will attract around one million tourists by the end of this year which in international terms will be very good as the percentage increase will be over 15percent said Jetwing Group of Hotels and Pacific Asia Travel Association Chairman, Hiran Cooray

He said that Sri Lanka tourism is progressing well by adding new hotels improving the existing infrastructure. "I feel we will come close to the target of 2.5 million by 2016.Sri Lanka recorded 855,975 tourist arrivals last year compaired to 654,476 in 2010." Arrivals from Western Europe were 315,210 accounting for a 36.8 percent of total arrivals.

Most of the European visitors were from Britain.Another 237,647 or 27.8 percent arrived from South Asia, mainly from India. Tourist arrivals hit a record high in December 2011 with 97,517, Sri Lanka Tourism Development Authority (SLTDA) data revealed.

“The eonomic recession in the west, Passanger levy introduced in the United Kingdom, increasing fuel prices, lack of adequate human resources, natural disasters continue to impact tourism”,Cooray said.Sri Lanka needs to be marketed and promoted continuously.

Many of the Travellers are not aware of the continuous improvement of the hotel product in Sri Lanka. Due to this unawareness many guests feel that we have overpriced ourselves.

“PATA is working on a strategic plan, which is focusing mainly on being relevant to our members. As an Association that has membership from Government Industry and the carriers, we are doing our best to help them grow their business.

It is also important for us to increase our membership base”, the Association Chief said. PATA will also be providing an opportunity to Bhutan to host its first international Adventure Mart and Eco Tourism Conference in February 2012.

http://www.sundayobserver.lk/2012/01/29/fin02.asp

Apparel exports, a leading foreign exchange earner

By Lalin FERNANDOPULLE

Revenue from apparel exports last year was $3.8 b which shows that Sri Lanka has not only sustained but also maintained growth in the United States and European markets and increase market share by 57percent in other countries, said Orit Group Chairman and Image Building Committee-Joint Apparel Association Forum (JAAF) Chaiman, Channa Palansuriya.

He said during the last financial year apparel exports had increased by 34 percent to European countries and 22 percent to the United States. Other than US and European markets, countries such as Russia, Australia and those in Asia have imported Sri Lankan apparel which generated over $340 m from January to November 2011.

Apparel export revenue has superseded income from tea, rubber and other agribased products to be a leading foreign exchange earner to the country.

With over one million people directly benefiting from the sector theapparel industry is one of the largest contributors to the GDP. Palansuriya said that apparel export revenue will be around $ four billion by the end of this year despite the global economic crisis, he said"

The decade- long relationships built with our customers have helped move us from mere transactional to more strategic partnerships.

By adding more value we are likely to grow with existing customers and attract more customers. H & M the largest and fastest growing European apparel retain chain has over 2,300 stores in 43 countries and has an annual revenue of 127 billion Euros.

This year H & M has set up a sourcing office in Sri Lanka in addition to current large buyers such as M & S and NEXT which emphasizes the level of confidence placed in our industry.

Sri Lanka’s exports to Europe continued to grow in spite of the recession and the withdrawal of GSP + benefits in August 2010 in 2005, when the country gained duty-free status to Europe, apparel exports posted US$1billion revenues in the year.

In 2009 at the height of the recession, Sri Lanka’s exports to the EU stood at US$1.65 billion and in 2010, despite the negative sentiment created with the removal of the duty free concession, our exports maintained a higher growth level of 34% in the 1st 12 months of 2011, compared with the previous year.

“The main challenge is to retain people while attracting people to the industry. To do this we have implemented special programs to educate people about the importance and benefits of the apparel industry.

The Small and Medium sector has huge potential to cater to speed, flexibility and cost”, Palansuriya said. With regard to the Erozone crisis he said that the turmoil in the region will affect exports toa certain extent though not on a large scale..

There could be drop in the buying power due to low sales in Europe. However, there will be a slight growth in the US sector from sales which will immensely help us to balance our exports. The euro zone economy would contract 0.5 percent this year before returning to meager growth of 0.8 percent in 2013.

Growth in developing economies was also expected to moderate due to “the worsening external environment and a weakening of internal demand., the International Monetary Fund (IMF) said.

“The global recovery is threatened by intensifying strains in the euro area and fragilities elsewhere.” the IMF said in an update of its World Economic Outlook (WEO) report.

http://www.sundayobserver.lk/2012/01/29/fin03.asp

Economic chiefs perturbed over slowing growth

(Asia Pulse) A group of economic leaders from across the world, including chiefs of the IMF and the World Bank, have called for immediate steps to safeguard the global economy from challenges like decelerating growth, high unemployment and protectionist government policies.

The group has also called for the need to support the “economic transformation under way in the emerging world” to help revive the global growth momentum, but stopped short of naming any emerging economies.India and China are among the major economies that have managed to retain a decent growth momentum despite global upheavals in the world.As per a ‘Call for Action’ report published by Geneva-based World Economic Forum (WEF) ahead of its annual summit in Davos, Switzerland, next week,

“The world faces significant and urgent challenges that weigh heavily on prospects for future growth and on the cohesion of our societies.”

The call to tackle these challenges has been made by the 11-member Global Issues Group (GIG) of the WEF, which comprises of IMF Chief Christine Lagarde, World Bank President Robert Zoellick, WTO Director-General Pascal Lamy, OECD Secretary- General Angel Gurria, among others. The WEF, however, said that the ideas expressed by the GIG members reflect their individual views, not necessarily those of their respective institutions. The group said that its “shared objective is the strengthening of growth, employment and the quality of life in every part of the world.

http://www.sundayobserver.lk/2012/01/29/fin04.asp

Huge potential for e commerce to expand

By Gamini WARUSHAMANA

With the continued growth momentum in the economy and fast expansion of internet penetration, broadband coverage and overall development in the ICT and IT literacy in the country e-commerce sector has huge potential to expand, said the CEO of Redgcrest Financial Sanath Fernando. He said that there are vast opportunities for the businesses to expand while providing better and convenient service to the customers.

Essential infrastructure for the service sector businesses is now available on the linklk platform which enables businesses to sell their services and it is user friendly, convenient and secure on the point of view of the customers. The linklk.com platform which serve the customers with ticketslk.com, sportslk.com, financelk.com and cablelk.com websites and more to come, Fernando said.

Explaining the success of the ticketslk, the one stop ticket shop, Fernando said that online tickets booking in cinema, dramas and other special entertainment events is fast growing. ticketslk offers to consumers the facility of reserving and purchasing tickets for movies and numerous events featured on the site.

The service is rich with user-friendly interface, secure payment system, 24/7 offline support which helps and safeguards its customers. Customers can see the seating arrangements of the theater and available seats for the show that they are planning to go.

In addition to ticket booking facility, ticketslk provides information about movies screening in all partner theaters, details of the movies as well as trailers of the films. It gives a choice to the users. The platform has also provides tickets booking facility via telephone for risk averse persons who are reluctant to pay via credit cards. Almost all of telecom operators are partnered with linklk.

At the moment 10 leading cinema theaters are partnered with us and with the increasing demand for leasure and entertainment in the country in the post conflict situation new theaters are being opened in Colombo and other main towns and the partners are increasing. In this year three new theaters will be opened in majestic city including one 3D theater, Fernando said.

Financelk provides consolidated financial solution to the customers which manages all savings, checking and investment accounts in one place. Users dealing with many financial institutions are strongly benefited by the exceptional features provided by financelk.

It also offers a facility to pay all the bills. The module that analyse bills ranging from mobile to electricity meters, is a good value addition to track anomalies and guide users to harness the benefits of features that are bestowed by the service providers. Service offered by financelk targets corporate and individual customers.

SportsLK offers a bundled service which serves dual purpose to sports enthusiasts and sports centres to manipulate sports facilities via internet at their convenience. SportsLK members are privileged with an opportunity to reserve sports facilities featured on the website. Conversely, the member Sports centres have advanced access to publish facilities, manage user reservations, manage special events & tournaments etc. The main idea driving behind SportsLK is to make all sports facilities available for online reservations. Linklk won eSwabhimani 2011 award of the ICTA for e-business and commerce sector recognisiing its s*upport for the optimization of business processes; creation of new business models in e-commerce.

Market analysts said that e commerce has already expanded to railway, busservices, hotels and many other areas. However, the volume of the transaction is still low and there is a huge potential for expansion.

http://www.sundayobserver.lk/2012/01/29/fin05.asp

Promoting Lanka as legal outsourcing hub
The Bar Association of Sri Lanka, (BASL) in collaboration with the International Association of Young Lawyers (AIJA) will hold an international conference on Legal Process Outsourcing in partnership with the ICT Agency of Sri Lanka (ICTA).

"The Conference on the theme 'Outsourcing versus Restructuring' is scheduled to take place on February 9 and 10, 2012 at the Cinnamon Grand Hotel and is intended to create awareness about Sri Lanka as a preferred destination of choice for Legal Process Outsourcing (LPO), which is one of the objectives of the Forum called the legal Solutions Forum (LSF), established in 2011" BASL President Shibly Aziz, PC said. He was speaking at a recent media briefing held in Colombo BASL and the young lawyers' largest international association AIJA (Association Internationale des Jeunes Avocats).

"The AIJA with the support of ICTA approached us wanting to have an international conference to popularise Sri Lanka as an outsourcing hub for legal services and we grabbed the opportunity", the BASL President confirmed.

"Thanks to this initiative, not only lawyers but also business people and the Government will benefit from the inflow of foreign exchange", the BASL President explained. Thanking the ICT Agency of Sri Lanka (ICTA) for its guidance and support for the up-coming seminar the BASL President introduced ICTA Director /Legal Advisor Jayantha Fernando "as one of the leading world authorities on the subject of ICT Law". BASL Secretary Mahinda Lokuge, Representative of AIJA Attorney John Wilson and Javed Mansoor were present at the Press conference.

Speaking briefly at the press briefing Jayantha Fernando said, "As the apex ICT entity of the country, ICTA's main objective here is to come and provide strategic partnership support not only for this specific event - SL's first international LPO seminar in February - but also to provide continued support to promote the country as a destination for legal outsourcing, in the same way we have done in the past. We are pleased that the Legal Solutions Forum (LSF) has recently been established with the support of BASL.
http://www.sundayobserver.lk/2012/01/29/fin06.asp

SLTB to host FAO's 20th session
SLTB to host FAO's 20th session Sri Lanka Tea Board (SLTB), the apex authority of the tea industry in Sri Lanka will host the United Nation's Food and Agriculture Organization's (FAO) 20th Session of the Inter-Governmental Group (IGG) on tea from January 30 to February 1 in Colombo.

At the 19th session held in May 2010 in New Delhi, Sri Lanka took the opportunity of bidding to host the 20th session in 2012 along with Indonesia and Malawi.

Through a consensus members unanimously offered Sri Lanka the opportunity, giving the country further recognition in the global tea industry. The event creates added significance since 2012 celebrates 145 years after commencement of the tea industry in the country on a commercial scale. We are proud to be hosting the 20th FAO/IGG session. It is a very prestigious event and this will definitely bring international mileage to Sri Lanka and the heritage of Ceylon tea. Further, this is the first international event for the tea industry in the country after the dawn of peace and therefore it is a great opportunity for us to showcase our products and our country as a whole. Today, there is political uncertainty in some of our key markets and added to this is the global financial crisis which will affect any industry whose main focus is export.

Being the host of the foremost technical sessions on the tea industry at this crucial time gives the Sri Lankan experts an ideal opportunity to share our knowledge as well as learn from other leading tea industries in the world", said Janaki Kuruppu, Chairperson of the Sri Lanka Tea Board.

Delegates from over 25 countries will participate in this year's FAO/IGG sessions. Some of the countries include India, China, Kenya, Indonesia, Bangladesh, Vietnam, Africa, Argentina representing tea producing countries whilst USA, Canada, UK,

Pakistan, Russia and UAE will be representing their nation as tea consuming or importing countries. The focus of the FAO/IGG sessions which are held biannually is to discuss and resolve issues related to production, marketing, pricing and consumption of tea faced by the international tea industry in a single platform and discuss the way forward for the next 10 years. Promotions Director SLTB Hasitha De Alwis said, "It is a very crucial time that we are holding the FAO IGG 20th

session in Colombo, a period where the industry is facing many challenges. Sri Lanka is a high cost, high quality producer therefore we are changing our strategy rom production based model to a more market based model this will allow us to create more visibility on our strategies."

http://www.sundayobserver.lk/2012/01/29/fin07.asp

Thread Works opens factory in Moratuwa
by Senani WASANA THENUWARA

Chairman/CEO Gehan De Soysa, Director Operations COO, Ramani Seresinhe and Nilakshi De Soysa of Thread Works at the factory. Pic: Sumanachandra Ariyawansa

"I always had faith in the local market and have a passion to build our own brand to hit the local and the international market", Chairman/ CEO Thread Works (Pvt) Ltd Gehan De Soysa said at the factory opening ceremony at Lakshapathiya, Moratuwa last week.

The factory was opened with an investment exceeding Rs. 75 million. Thread Works continue to be a manufacturer, retailer and a distributor, providing employment opportunities to many Sri Lankans and expects to generate more opportunities in the future.

It caters mainly to local needs while exporting (around 5 percent) to international markets while Ghana, Australia and the Maldives being their top buyers. Since its official acquisition of the renowned brand Velona in 2008, Thread Works has continued to recreate Velona with a modern outlook refreshing the minds of Sri Lankans of the decades-old Velona brand together with its popular brands Body Fit, Top Gear, Superknit, Arista and upcoming latest Velona cuddles.

The company is a leader in the apparel industry through its diversified portfolio of products ranging from men's underwear, lady's petty coats to children's wear and nappies. "We are a company with high moral standards and take the best effort to fulfill our social responsibility.

We are more interested in volume growth than in value growth", he said. Currently the company produces half a million pieces per month and hopes to increase production further. The success story behind Thread Works is their ever continuing effort to provide quality garments at an affordable price. In the months to come the company will launch its newest product, a baby diaper which would revolutionise the Sri Lankan diaper market.

http://www.sundayobserver.lk/2012/01/29/fin10.asp

HSBC launches Visa Signature card


HSBC CEO Nick Nicolaou presents the first card to former Sri Lankan cricketer Aravinda de Silva. Pic: Kavindra Perera

HSBC launched the HSBC Visa Signature card that denotes many lifestyle benefits.

The credit card focuses on providing the most discerning travel needs to its elite circle of cardholders with enticing and exclusive travel, dining and lodging privileges, offered locally and globally.Chief Executive Officer of HSBC Sri Lanka and Maldives Nick Nicolaou said,

“As a leading international Bank, we constantly strive at exceeding our customers’ expectations. As such, it is our endeavour to introduce innovative products and services from time to time, for the benefit of our customers.

http://www.sundayobserver.lk/2012/01/29/fin11.asp

WHO GMP certification for Lina Manufacturing

Sri Lanka's centre for respiratory care formulation and manufacturing, Lina Manufacturing, received World Health Organisation GMP certification. "Good manufacturing practice" or "GMP" are practices and systems of manufacturing, quality control, and quality systems covering the manufacture and testing of pharmaceuticals or drugs including active pharmaceutical ingredients.

"GMPs comprise 23 different aspects of production and testing that can impact the quality of a product.

Many countries have introduced legislation to ensure pharmaceutical and medical device companies follow GMP guidelines and procedures" said Rohan Wettasinghe.

http://www.sundayobserver.lk/2012/01/29/fin12.asp

Trade and investment promotion mission to Vietnam
The Sri Lanka-Vietnam Business Council (SLVBC) of the Ceylon Chamber of Commerce will organise a Trade and Investment promotion mission to Hanoi and Ho Chi Minh in Vietnam from March 4-8.

"It will certainly boost economic ties between Sri Lanka and Vietnam", said, ambassador for Vietnam Ton Sinh Thanh at the networking session held on January 18, 2012 at the embassy of Vietnam in Colombo.

The newly appointed Committee of the Sri Lanka-Vietnam Business Council (SLVBC) of the Ceylon Chamber of Commerce paid a courtesy call to ambassador Thanh to renew the strong ties established between the Council and the embassy of Vietnam in Colombo. Recalling the numerous activities successfully concluded by the Council, the ambassador assured his fullest co-operation for the proposed trade and investment promotion mission. The objectives of the mission are enhancing trade, tourism and investment promotion between Sri Lanka and Vietnam.

The delegates would be provided with an opportunity to meet key Government officials in Vietnam and visits have already been planned to various high-tech industrial parks in Ho Chi Minh.

It was also emphasised that many opportunities are in the pipeline to attract investment from Vietnam to Sri Lanka in areas such as manufacturing of machinery for agro industry, food processing, fisheries and oil exploration.

However, due to inadequate publicity and awareness among potential business partners in Vietnam, the present investment is remarkably low compared to total Vietnamese investment overseas amounts to US$ 10 billion.

President of the Council Anton Godfrey, assured that SLVBC in association with the Embassy of Vietnam, will launch regular awareness programs for the benefit of the business community encouraging more inbound and outbound travel between the two countries.

The Ambassador and three key business personalities who have already established successful businesses in Vietnam will address the gathering at the seminar scheduled to be held in early May. In addition, the Council is exploring the possibility of organising a Single Country Trade Fair in Vietnam during 2012.

Ambassador Thanh assured the issue of necessary travel documents within a short time span.
http://www.sundayobserver.lk/2012/01/29/fin15.asp

CSE.SAS wrote:Sri Lanka is the world’s second-best performing economy in the world after China, we are told.
According to Economic Development Minister Basil Rajapaksa, an IMF study has showed that Sri Lanka was the second-best performing economy in the world, growing at a rate of over 8 %. He also told reporters this week that Sri Lanka is growing this year by 8 % when other countries have reduced growth rates.

However many economists, following these comments, have been ‘Googling’ the web but unable to trace any such report or study from the International Monetary Fund. IMF officials here were also unable to provide any clues to this so-called study.

On the face of it however, Sri Lanka’s GDP growth is comparable to the best in the world. According to the tradingeconomics website (www.tradingeconomics.com), China, which by 2050 will overtake the US as the world’s largest economy, grew by 8.9 % in 2011 and India by 6.9 %. Others – mostly Sri Lanka’s main buyers of garments and other products – slowed down considerably with Canada’s growth being 3.4%, Germany-Australia-France in the 2 to 2.5% range while the US grew by 1.5 % and the UK by a marginal 0.7%.

Qatar on the other hand grew by over 30 % average in the first three quarters of 2011 while Argentina’s GDP’s was also over 9 % and Turkey at 8.2 %, slightly lower than Sri Lanka. So would this make Sri Lanka the fourth-best performing economy (after Qatar, Argentina, China and Turkey)?

Figures however can be deceptive since for all its growth statistics proudly touted by the government, there are serious economic management issues, problems that have been raised repeatedly in these columns and also by the Sunday Times’ columnist on economic issues, Dr deleted Sanderatne.
Credit however must be given to Governments during the 30 years of conflict for continuing basic services like health, education and food needs in the North and East even in areas that were controlled by the LTTE. In some countries which also faced similr raging conflicts, supplies were either cut off or reduced to cripple militant groups but which ultimately affected civilians.

The sustenance of basic public services and Sri Lankans being resilient enough to sustain an economy and quickly adjust to a post-war situation is what led to the conflict-areas being able to grow faster than in any other country that recovered from a conflict. The same applies to the national economy where the service sector, particularly services (telecommunications and tourism) responded quickly.
Yet in terms of growth, are we just papering the economic cracks and lulling the population into a false sense of belief that everything is hunky-dory?

Take for example the main conditions on which the IMF’s $2.6 billion bail-out package was given in July 2009: reducing public debt to GDP ratio, the Ceylon Petroleum Corporation and the Ceylon Electricity Board breaking even by end 2011, and a flexible exchange rate policy. None of these has been fulfilled, according to economists. Exchange rates are managed by the Central Bank and not pegged to the market leading to President Mahinda Rajapaksa announcing 3 % devaluation in the last budget following concerns raised by exporters. While this was relief to exporters, it has caused uncertainty in the money markets with a ‘will-the-Treasury-intervene-again’ kind of perception. Interest rates are also not in line with market trends.

Problems persist. The spat between the Treasury chief Dr P.B. Jayasundera and Central Bank Governor Ajith Nivard Cabraal, sometimes spilling out in public, has unnerved investors. Both institutions need to work together not against each other as seen with figures on the national economy being contested by either party.

The disastrous expropriation bill, the deadly pension bill and the conduct of examinations were all issues. Badgering the media for not reporting their views (Government) and those views alone without objectivity is not the answer to an economy that is best-performing where many of the underlying problems are either covered up or hidden from the glare of the public.

Government deals are repeatedly under question and unconvincing answers bordering on arrogance, provided. The main growth sectors are services and construction and dependence on remittances from Middle East migrant workers while agriculture (although production has improved in the North and the East) and industries are yet to take off.

In the real economy, people are not feeling the benefits of this growth. Cost of living is rising.
Opposition legislator Eran Wickremaratne raised a valid point, recently. Speaking at a Colombo discussion on the ‘economic perspective in post-war reconciliation’, he said while there should have been a grand recovery plan for the conflict areas, a Marshall (like) Plan happened in the South with a new cricket stadium convention centre, airport and seaport.

“Such a development should have taken place in the North or at least in both regions,” he said, adding that the ‘Feel Good factor’ is being promoted vigorously while oil pricing are going up and debts (national and people’s) are rising. There are huge challenges in law and order, governance, transparency and accountability.

Militarization of the economy, he says is similar to what happens in China and Pakistan.
That’s true - the Army in setting up a commercial company to handle private contracts, the Navy is ferrying tourists on whale and dolphin watching tours and the Air Force has a commercial flying service to Jaffna.

An economy must take in all these social, economic and political factors into consideration in its growth path. Being pleased and, on the other, complacent by positive growth figures is not going to help anyone, mainly the people of Sri Lanka.
http://sundaytimes.lk/120129/BusinessTimes/bt07.html