Sri Lanka Newspapers Wednesday 21/03/2012

Malaysian Co. in US$ 600mn metro rail project linking BIA with Fort
*Mulls equity issue to raise funds
By Mario Andree

In order to capitalize on the rapid growth of the tourist industry, a Malaysian company has decided to invest in a Metro Train System, which would connect Colombo Fort with the Bandaranaike International Airport. The project cost is estimated at around US$ 600 million and funds would be raised via an equity issue.

Airport Express Air and Rail Company (AEARC) of Malaysia would invest in the project which would see the distance between the two points being covered in 25 minutes.

AEARC chairman Dr. Parimalan Rajo Isa Michael told The Island Financial Review that the company was investing US$ 600 million to develop a Metropolitan Railway System linking the BIA with Colombo Fort and a multipurpose complex powered by its own power station.

He said that the country was on a rapid development path and transportation was an essential component which needed attention. The AEARC, he said, had negotiated with the Government and the BOI to develop the project on a 15 acre spread of land from Colombo to Katunayaka.

The lease price and period have still not been finalized, but the company hopes to commence construction early next year and complete the project in 3 years. They expect to break even in the seventh year from the construction date.

Dr. Michael said that the feasibility studies, which were undertaken by KPMG were expected to be complete by end April for the company to carry forward on other necessary movements to commence construction.

According to him, the project is expected to be funded through equity sales to both local and foreign investors and the company is expected to expand further given the venture being successful.

Claiming that the CEB would not be able to produce sufficient power to maintain the Metro Rail system, Dr. Michael said the company had also initiated the setting up of a power station to produce the necessary capacity.

Further, the company also would develop a 32 floor multipurpose complex compromising a city hotel, shopping malls, casinos, beauty parlours, massage centres, auditoriums and restaurants to facilitate the fast moving business communities, he said.

The company would also be operating a shuttle bus service linking all major attractions and hotels in Colombo to provide a better service to tourists and local travellers, he said.
http://www.island.lk/index.php?page_cat=article-details&page=article-details&code_title=47925

The rupee gained against the dollar on Tuesday after the Central Bank sold dollars in the foreign exchange market, currency dealers speculated.

The rupee fell to an all time low last Friday only to fall sharply again on Monday after the Central Bank absorbed the huge dollar inflows into the Colombo Stock Exchange, being proceeds obtained by the EPF on recent sales of JKH and Aitken Spence shares to foreign investment funds, currency dealers said.

The rupee closed slightly stronger at Rs. 129.80/130.00 against the greenback after opening at Rs. 130.0/131.0 which was the lowest the currency had ever fallen against the dollar. On Friday, the rupee closed at Rs. 125.60/70.

The exchange rate was all over the place yesterday, before intervention strengthened the rupee, dealers said.

"The market had hoped the dollars from the EPF sales would come into the system, and with dollar liquidity being tight, the exchange rate was also expected to ease as a result. But when it became apparent the Central Bank had absorbed the dollars to build up the depleted reserve position, importers panicked. This resulted in the rupee falling to all time lows against the dollar on Friday which fell sharply again on Monday," a currency dealer said.

Dealers said importers are continuing to demand dollars in view of the festive season next month. Exporters, on the other hand, are hanging around in the sidelines, waiting to see how far the rupee would fall before cashing in their dollars. These factors, and the Central Bank restrictions on forward trading and overnight positions, have tightened dollar liquidity in the foreign exchange market.

"The rupee’s recent fall has been exaggerated because of all this (mentioned above). We expect stronger inflows to the market would have an equal impact on how fast the rupee appreciates," another dealer said.

However, yesterday, the rupee gained slightly against the greenback with foreign banks seen selling dollars in to the system.

Some dealers were not certain whether or not the Central Bank was behind the sales, because when the Central Bank usually intervened by selling or buying dollars, in was through state owned banks. Others however, were convinced the Central Bank was responsible for the sales and had deliberately intervened to prevent the rupee from falling further.

Last February the Central Bank said it would no longer intervene in the foreign exchange market after selling down reserves to the tune of nearly US$ 3 billion to keep the rupee stable despite severe import demand. However, it said it would intervene to absorb large inflows and outflows.

"We have a relatively small foreign exchange market where even US$ 100 million moving in or out could result in wide fluctuations of the exchange rate, and we believe the Central Bank would intervene to prevent this from happening, while leaving the market alone to sort out daily market activities," a currency dealer said.

According to Reuters, Central Bank Governor Ajith Nivard Cabraal on Friday said he will give a fair amount of dollars to the market from an expected inflow of $365 million due by the end of the month. Central bank Chief Economist Swarna Gunaratne said the monetary authority did mop up more than $115 million in dollars from a share sale by the state-run pension fund, the Employees Provident Fund (EPF). However, she said, the central bank will not absorb another $20 million expected later this week from another share sale.
http://www.island.lk/index.php?page_cat=article-details&page=article-details&code_title=47924

Opposition Lawmaker Dr. Harsha De Silva says policy makers should at least now assess the real situation of the economy without trying to mislead the people of this country.

"Now that the ‘strong’ rupee has lost its bearings and touching 130 to the dollar levels while interest rates are soaring we only hope that at least now the economic decision makers of the government would sit down to assess the real situation of the economy. There is no point in again attempting to fool the people by ridiculing the messenger or name calling. As a responsible government what is required is a frank evaluation of the policies in play and a determination of what has to change. The deleted has never found fault with the professionals at the Central Bank but only the completely politicized decision making process adopted by the top," Dr. De Silva, a trained economist said in a statement.

"On 4 January this year we issued a statement on the state of the economy. Referring to that the ‘Road Map of Monetary and Financial Sector Policy for 2012’ unveiled by Governor Nivard Cabraal the previous day we said it was ‘a nauseatingly one-sided propaganda attempt’. The statement issued under my name specifically stated "It has no analyses of the possible scenarios for exchange rates and interest rates given the current rupee defense strategy, but says it has more than sufficient reserves to intervene in the foreign exchange market, presumably to hold the currency at the current level." We pointed out that the three words ‘balance of payments’ which was absolutely the most important issue of the day was not even mentioned once in the entire 140 slide presentation and said it was like Hamlet without the Prince of Denmark! We concluded by warning "one would shudder to think what would happen when the veil over the propaganda material, presented in so-called professional presentations like this, is removed". We said so because that was how we saw the unfolding events. We warned on numerous occasions throughout the last year that the policies adopted by the completely politicized Central Bank were detrimental to the sustained progress of the economy. We agreed with other independent economists that a crisis in the external account was brewing and that immediate corrective action had to be taken with interest rates and exchange rate policies to reduce the blow to the people of this country.

"However, in response to our statement the Governor released to the press his own statement, published inter alia in the Sunday Observer of 8 January, saying "I believe it is my duty to pen these few lines". In it, instead of addressing the points that were raised he attacked me personally by saying "as usual, Dr. Silva’s (sic) highly political comments couched in a few economic terms carry a vituperative attack against the Central Bank". He went on to say "the credibility of his so-called economic analysis has taken a severe beating and those are no longer taken seriously". Mr Cabraal concluded by saying that it was clear that the attitude practiced by me was a confirmation of the old saying that "there is none so blind as those who will not see".

"It is now very clear who did not comprehend even a few economic terms and also who was so blind. The result of the decision making by those who call themselves wise is that millions of innocent people are suffering unable to make ends meet and when they protest the government is using deadly force against them. Clearly, this is not what was promised in the Mahinda Chintana."
http://www.island.lk/index.php?page_cat=article-details&page=article-details&code_title=47928

*Turnover and indices down

The Colombo Stock Exchange lost steam yesterday after the mega deals in JKH and Aitken Spence primarily on EPF selling had been concluded.

Turnover dropped to Rs.627.5 million, down from the previous day’s Rs.3.1 billion, and both indices were down – the All Share by 35.44 points (0.65%) and the Milanka 13.16 points (0.27%) with 62 gainers trailing 139 losers.

"The market was a bit quiet with activity centered on JKH and the Commercial Bank," a broker said.

JKH where nearly 0.5 million shares were done closed flat at Rs.200 edging up slightly beyond that level in intra-day trading while Commercial Bank closed flat at Rs.99.90 on nearly 0.6 million shares traded.

Brokers said that a foreign fund that had been recently selling Commercial Bank in quantity continued on the sell side.

Other stocks showing volume but declining in price at close of trading included ERI, HNB non-voting and Aitken Spence.

ERI closed 90 cents down at Rs.15 on over 2.5 million shares, HNB X was down 70 cents to close at Rs.92 on over 0.2 million shares and Spence lost 50 cents to close at Rs.115.50 on over 0.1 million shares.

Guardian gained Rs.10 to close at Rs.225 on 75,831 shares while Dialog was up 10 cents to close at Rs.7.20 on nearly 1.6 million shares.

Kegalle Plantations announced a dividend of Rs.7.50 per share for 2011/12 XD from March 29 and with payment on March 30 while Namunukula announced a dividend of Rs.4.50 per share for 2011/12 XD from March 29 and with payment on March 30.
http://www.island.lk/index.php?page_cat=article-details&page=article-details&code_title=47930

Ramani Kangaraarachchi
'Today, the global foreign exchange market has become the largest financial markets in the world with a average daily turnover of more than $ 3 trillion. Centre for Banking Studies Director Udeni Alawattage said. Speaking at the inauguration of a five day international seminar on Treasury and Foreign Exchange Operations commenced at the CBS yesterday he said according to 2010 Triennial Central Bank survey, coordinated by the Bank for International Settlements , average daily turnover was US $ 3.98 trillion in April 2010 against US $ 1.7 trillion in 1998 indicating 134% increase during the last 12 years.

He said out of this US $ 3.98 trillion US $ 1.5 trillion was spot foreign exchange transactions and US $ 2.5 trillion was traded in outright forwards, FX swaps and other currency derivatives. The global balance sheet which represents international investment positions of all countries increase from 50 percent to 150 percent of GDP over a period of 15 years. The rise is even more dramatic making it US $ 15 trillion to nearly US $ 100 trillion in absolute dollar terms.

Alawattage said the message here is that financial globalization has been even more profound than trade globalization accounting much more higher gross financial flows than trade flows and the international balance sheet growth has far outpaced economic growth. In this scenario Forex business is a profitable business for financial institutions and this contain a considerable portion of its business portfolios. As these phenomena grew more quickly than any other business, the instability of the global financial infrastructure was dramatically increased, as evidenced by micro level financial scandals and risky exposures in the individual financial institutions.

He said at macro level, the global financial crisis experienced during 2007-10 and recent European sovereign debt crisis is a derivative of these kinds of risky exposures. As the main aim of most foreign exchange traders is to maximize earnings at the least time frame and cost by simply taking advantage of the dynamics in the foreign exchange market it can be concluded that, the foreign exchange operations work as a double edge sward which can create either stability of instability through financial disasters.
http://www.dailynews.lk/2012/03/21/bus04.asp

Mar 20, 2012 (LBO) - Sri Lanka's business chambers have opposed a resolution in the United Nations Human Rights Council against alleged war crimes in the campaign that crushed Tamil Tiger separatists.

"The joint Chambers of Commerce of Sri Lanka express concern over the resolution to be tabled at the UNHRC against Sri Lanka," they said in a statement signed by eight chambers.

It noted that the government of Sri Lanka has promised to fully implement the proposals of a government committee that examined the campaign and suggested reconciliation measures.

"The business community will fully support the development and reconciliation activities that will be undertaken by the government," the statement said.

"The business community would also like to remind the international community that this is an internal matter and that the proposed resolution at this juncture would not be in the interest of the reconciliation process."

The United Nations Human Rights Council is debating alleged war crimes in the island with the resolution against the Sri Lankan government being moved by the US, Norway and France.

The United Nations Human Rights Council will vote Friday on the resolution, aimed at getting Sri Lanka to investigate alleged abuses by its soldiers and Tamil Tigers during the ethnic war that ended in 2009.
The business statement was signed by the National Chamber of Commerce, National Chamber of Exporters, Chamber of Young Lankan Entrepreneurs, Joint Apparel Association Forum, Ceylon National Chamber of Industries, Federation of Chambers of Commerce and Industry of Sri Lanka, Free Trade Zone Manufacturers' Association, and Ceylon Chamber of Commerce.
http://lbo.lk/fullstory.php?nid=1978129949

There are times when making ridiculous statements seems to have become a profession among Sri Lanka’s politicians, but the latest crack by Education Minister Bandula Gunawardana takes the cake. The assumption that a measly sum of Rs. 7,500 is enough for a family of three to survive on is not just a gross understatement, but shows the complete lack of knowledge and empathy politicians have about the plight of the common man.

The fact that such a nonsensical statement can be made by the Education Minister of all people, and a former tuition master at that, makes one turn grey with worry over the state of the education sector in the country. That fact that politicians are a few apples short of a barrel is obvious to everyone, but the insensitivity of the comment from a person that was elected to office to serve the people makes this statement all the more unforgivable.

It is perhaps strange that Sri Lanka’s brand of democracy elects people to serve the common man and then immediately distances him from the very public he is meant to serve through a complicated, and one might say wholly unnecessary, set of perks and privileges. Ministers who whizz by in their motorcades complete with multiple flunkies, fat salaries and a plethora of other benefits can hardly appreciate the day-to-day struggle of the masses.

Yet, where this ignorance becomes harmful is that these are the same people who are part of the Cabinet and therefore the highest policymaking body of this country. If the Government exists to regulate society and provide fairness and inclusivity to the average man, then its members must know what existence is eked out by them. Without this knowledge, they cannot make intelligent and empathic decisions that impact the daily lives of millions of people in this country.

Moreover, as a Minister who has the responsibility of educating the future generation of this country, such a statement borders on empty-headed rhetoric that the public should not be subjected to. Not only should there be a public apology, there must be steps to ensure that the Minister in question takes a lesson by living like the people he claims to represent.

Sri Lanka’s public has taken too many silly statements lying down. Whether they be election promises or random statements made at public events, the situation has gone far enough. There must be some level of probing the truth behind these statements and an attempt to make top public officials responsible for the remarks that they make. If not it would make far more sense not to listen to them in the first place.

At a time when people are protesting for higher salaries and the economy is struggling to maintain its post-war momentum, what Sri Lanka and the three-member family the Minister mentioned need are pragmatic and realistic policies. Politicians in the country are already responsible for much of the wastage and corruption that plagues it; let at least their words serve where their actions do not.
http://www.ft.lk/2012/03/21/watch-your-words/