Sri Lanka Newspapers Tuesday 27/03/2012

Tourism investment: US$ 1.8bn worth projects approved, another US$ 1.4bn in the pipeline
* Basil to solve all tourism-investor related issues

Economic Development Minister Basil Rajapaksa has introduced an open day each month to solve tourism-investor issues, the Sri Lanka Tourism Promotion Bureau said.

In a statement issued recently the bureau said: "The Unit for National Investment in Tourism (UNIT), also known as the ‘One-stop unit’ at the Sri Lanka Tourism Development Authority was set up one year ago on the advice of Basil Rajapaksa, the Minister of Economic Development. It has played a key role in facilitate approval process of several hotel projects in the island.

"The One Stop Unit is currently processing over 189 applications which cover 10,750 rooms. At this juncture, the total investment on this programme has surpassed US $ 1,785 million. Remarkably, out of these 189 applications, the One Stop Unit has already cleared 99 hotel projects for construction and it is busy with clearing the remaining 90 projects covering 2242 rooms with US $ 1,416.26 million."

"The One Stop Unit – Unit for National Investment in Tourism (UNIT) is a centralized promotion and facilitation centre established to assist potential tourism investors interested in investing in Sri Lanka Tourism Industry. UNIT is a one point of contact for investors Specialist staffs from various government agencies who are part of UNIT help investors to identify feasible projects, obtain information regarding the potential investments, submit applications, and to provide support in obtaining investment promotion privileges, trade licenses and other approvals requested for project clearance. UNIT prevents the need for investors to spend time in search of answers and ensures all queries are handled by its specialist staff. Furthermore, UNIT reduces the time taken on receiving approval from various government agencies and it does the coordinating on behalf of the investor.

Dr. Nalaka Godehewa, the Chairman of Sri Lanka Tourism said, ‘’ it was a challenging task to set up a unit which can coordinate with multiple government entities. Under the guidance of the Minister of Economic Development Hon. Basil Rajapaksa, the task became a reality anyway. With this facility at hand, we can now discuss all the matters pertaining to the investors in the industry of tourism under a one roof".

Explaining the cooperation of the Ministry of Economic Development in this regard, he also said; "The Minister of Economic Development has already allocated a date in every month to have a face to face meeting with the tourism-investors with the view of facilitating a discussion room to come up with their issues and future development plans. The cooperation extended by all state entities and the continued support given by the Ministry of Economic Development was simply praiseworthy."

The proposed one stop unit enables the investors to access Information on potential tourist investments by the provision of a directory of available lands prior to the investment. During the investment process too, it coordinates between the investor and the relevant government authorities in order to obtain the required fast-track approvals for building plans.

One Stop Unit now provides the facilities for the investors to discuss their issues related to the investment in Tourism Sector. It can be contacted via its hotlines077 3 157 688, Nimalka or e-mail to; investment@srilanka.travel.You can also visit its website at www.sltda.lk.
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*Buyer of EPF’s JKH stake has big plans for Lanka
*Fifteen mega investment projects in the pipeline for Sri Lanka
By Ravi Ladduwahetty

Sri Lanka’s investment and capital market development will seale a new horizon with access to the assets and other portfolio of the Royal Bank of Scotland- Asia Pacific region and the imminent acquisition of the Asian arm of the Scottish Bank by Malaysia’s CIMB Bank.

This will also mean that Sri Lanka will also have access to the network of the Royal Bank of Scotland in eleven countries in the Asia Pacific region China, Japan, Australia, New Zealand, India for investments and capital market development from these countries, sources close to the deal told The Island Financial Review in an exclusive interview last night.

This follows the Royal Bank of Scotland’s decision to close its equity capital market and corporate finance division in South Korea and the cash equity business in Indonesia , Korea and Singapore as part of its move to slash the size of its investment bank, they said.

The sources also said that the decision to close some of the units comes after the agreement with Malaysia’s second biggest lender- CIMB Group Holdings Bhd which is not buying units according to an internal memo. CIMB also said earlier this month that that it has entered into exclusive talks with Royal Bank of Scotland to acquire some of its Asia Pacific equities and investment banking business. The deal with CIMB came after an auction for the sale of the Asian assets of RBS attracted interests from firms including Bank of China and Japan’s Mizuho Financial Group Inc.

The deal when it goes through will also enable Sri Lanka to access funds for investment banking activities such as mergers and acquisitions, debt financing, investment flows into equity markets and other industrial commercial investments along with cash equities Foreign exchange, interest rates, commodities, Debt capital markets, equity capital markets, equities, bank financing, mergers and acquisitions, financial advisory and transaction banking These sources also said that there were around 15 mega projects n the pipeline running into millions of dollars which will be sealed in the ensuing months.

This is a landmark deal in the context of not only CIMB initiating the entry of the Khazanah Fund into the Colombo Stock Exchange where it brought the 8.4% EPF stake which amounted to 71 million shares in John Keells Holdings for Rs. 14.5 billion in the second largest all time market transaction but also the Royal Bank of Scotland advising the government on the sovereign bond issue last year, these sources said.

The Chairman of the US$ 113 billion worth Khazanah Fund is the Malaysian Prime Minister Najib Razak whose brother Nazir Razak is the Chairman of the CIMB Bank.
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*Depreciation pressure easing

The rupee fell marginally yesterday to close at Rs. 130.10 against the dollar with depreciation pressure showing signs of easing on subdued import demand, and dollar inflows finally trickling in ahead of the festive season, currency dealers said.

The rupee opened the day at Rs. 130 against the greenback after gaining slightly last Friday on low trade volumes.

"Exporters are beginning to convert their dollar holdings to meet financial commitments such as salaries ahead of the festive season next month. Remittances are vibrant as well," a currency dealer said. "Import demand is also easing, with most orders for the festive season already made."

Interbank borrowing rates have also eased to recent lows and the Central Bank was seen absorbing rupee liquidity from the banking system as it may be purchasing the dollar inflows, dealer said.

The overnight call market rate for interbank borrowings, not backed by security, has eased to 9.25 percent, the lowest in almost two months (peaking at 10.11 percent on March 09) while the market repo rate for interbank borrowing backed by security had also eased to its lowest in recent times to 8.29 percent (peaking at 8.98 percent, also on March 09). The Sri Lanka Inter Bank Offered Rate is following the same trend, reaching a new low of 9.34 percent in recent months after peaking at 10.19 percent, also on March 09.

The Central Bank absorbed Rs. 21.4 billion from the banking system yesterday. Since March 19, the bank has absorbed a total of Rs. 94.4 billion from the banking system. It was on this day that the rupee fell to its lowest against the dollar at Rs. 131/60.

Currency dealers said this reflected the lopsided distribution of rupees in the country’s banking system, where banks with excess liquidity cannot easily lend to peers running short positions, with the Central Bank absorbing the excess via the repo cash auction.

"There may have been some big deals which would have increased the excess rupee holding of a few banks. It could have been a bilateral dollar conversion or Treasury instrument maturing without buyers for the rollover," a currency dealer said.

Before the balance of payments crisis manifest itself in June 2011, the Central Bank had been using this window to mop up excess liquidity caused by the purchase of dollars. After June 2011, the bank had pumped in more than Rs. 300 billion as rupee liquidity dried up on the sale of dollars.
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The country’s external trade in the new year began with a near $ 1 billion deficit owing to a mixed performance with exports subdued and imports high, though moderating.

Exports in January was down by $ 5 million or 0.6% to $ 918 million in comparison to a year earlier whilst imports grew by 20% to $ 1.88 billion triggering a deficit of $ 965.5 million, up by 50% as per data released by the Central Bank.

It attributed the marginal dip of exports to the decline in earnings from agricultural exports and higher base in January 2011. Agriculture exports saw a dip of 14% to $ 181.5 million, of which tea exports saw a 20% plunge to $ 104 million.

Commendably, textile and garments exports had managed to grow by 1.6% to $ 366.6 million whilst overall industrial exports which contribute about 80% to the total exports improved by 3.3% to $ 732.6 million.

It was the first year-on-year dip in exports since October last year. Whilst the Export Development Board said the dip was marginal and awaiting February data to make a proper assessment, other analysts expressed concern that January could signal the depressing times for exports.

The EDB is targeting an export performance of $ 13 billion whilst the Treasury Secretary Dr. P.B. Jayasundera last week said the forecast was $ 12 billion, up from $ 10.5 billion in 2010.

The rise in trade deficit driven by high imports remains a concern though the Government forecasts both to moderate in the next few months. Central Bank said growth in imports decelerated to 20.1% in January 2012 compared to year-on-year increases of 78.5% and 31.3% recorded in November and December of 2011.

The $ 10 billion trade deficit last year was the key reason among others why the Government opted to devalue the rupee from mid-November and more sharply in February this year.

Detailing exports performance in January, the Central Bank said exports of petroleum products grew by 106.2% to $45 million mainly due to increased bunkering exports. Earnings from rubber based products increased by 20.7% due to the increased demand from major export destinations, particularly from USA.

Export earnings from gems, diamonds and jewellery increased by 44.6% and earning from machinery and equipment increased by 28% in January 2012 compared with the corresponding month of 2011.
Among industrial exports, earnings from transport equipment, food, beverages and tobacco, printing and leather products, travel goods and footwear, which contributed to about 11% of total exports, declined by 32.1% in January 2012.

Earnings from agricultural exports declined in January 2012, as a result of lower performance recorded in traditional agricultural exports of tea and rubber. Earnings from tea exports declined by 19.1%, year-on-year, to $ 104 million mainly due to geopolitical uncertainties in major tea importing destinations.

Rubber exports declined as the demand from local rubber manufacturing industries remained elevated. Apart from traditional agricultural exports, exports of spices, vegetables and minor agricultural exports also recorded declines in January 2012.

However, coconut exports increased in January 2012 mainly due to higher production resulting from favourable weather conditions and the fertiliser subsidy scheme of the government. Agricultural exports of unmanufactured tobacco and seafood also performed well in January 2012. Earnings from seafood exports were propelled by increased exports of frozen fish and crustaceans.

With regard to imports, Central Bank said the deceleration in expenditure on imports was mainly driven by mineral products and diamonds and precious stones in the intermediate goods category and vehicle imports in the consumer goods category.

Nevertheless, reflecting the continuous expansion in economic activities, investment goods imports grew by 72.4% in January 2012. All the three major categories of investment goods; transport equipment, building materials and machinery and equipment recorded healthy growth of 100.3%, 71.1% and 60.2%, respectively.

Meanwhile, expenditure on intermediate goods increased by 8.6% to $ 1,065 million, mainly due to higher petroleum imports. Expenditure on petroleum imports increased by 18.9% to $484 million in January 2012 compared to that of January 2011, reflecting a substantial increase in prices. The average price of crude oil imports increased by 21.3% to $ 115.62 per barrel in January 2012 from $ 95.33 per barrel in January 2011.

Higher petroleum prices in the international market were due to rising geopolitical tensions in number of oil producing countries and higher demand emanating from extremely cold weather in Europe. Expenditure on fertiliser imports also increased owing to both higher prices and increased volume of imports. Within intermediate goods, base metals, diamond and precious stones, vehicle and machinery parts, food preparations and wheat and maize imports declined in January 2012.

Expenditure on imports of consumer goods increased marginally by 3% in January 2012 led by non-food consumer goods, particularly, clothing and accessories, home appliances and medical and pharmaceuticals. Import expenditure on food and beverages declined with the lower prices of major imported food items such as sugar, lentils, onions and potatoes in the international market.

Increased duty rates and the introduction of Special Commodity Levy (SCL) on new categories of food and beverages in Budget 2012 also contributed to reduce the expenditure on food imports.
http://www.ft.lk/2012/03/27/2012-starts-with-near-1-b-trade-deficit/