Sri Lanka Newspapers Tuesday 17/04/2012

Rupee loses little ground, Bourse up slightly

The rupee lost a little ground on Monday (16) closing at Rs. 127.80/128.20 against the greenback on ‘surprising importer demand’ after opening at Rs. 127.00/50, currency dealers said.

During the morning, the rupee had gained to around Rs. 126.80/127.00 levels against the dollar before import demand drove it down to the closing levels.

"Importer demand was surprisingly high today, which was something we had not expected," a currency dealer said.

Treasury and Central Bank officials in recent weeks have said that the rupee would gain to around Rs. 125 levels against the dollar after the festive season with import demand expected to subside.

Meanwhile, both indices on the Colombo Stock Exchange gained on Monday (16) after the long weekend.

The All Share Price Index gained 0.17 percent, up 9.07 points to close at 5,434.80 and the Milanka Price Index of more liquid stocks closed 0.41 percent higher, gaining 20.26 points, to close at 4,929.56.

The Colombo bourse has fallen 10.53 percent year-to-date.

Turnover amounted to Rs. 206 million on a volume of a little more than eight million shares changing hands with 82 counters closing in positive territory and 82 closing in the red.

There was a net foreign outflow amounting to Rs. 33.17 million during the day.

"The indices rose marginally in the first day of trading post the New Year holidays amid below average turnover levels, dominated by trades on diversified counters including a large trade on JKH," John Keells Stockbrokers said.

JKH shares gained 0.14 percent to close at 209.70 with 517,311 shares changing hands during the day.
http://www.island.lk/index.php?page_cat=article-details&page=article-details&code_title=49705

By Shamindra Ferdinando

Sri Lanka intends to substantially curtail the import of Iranian crude, in line with tough new sanctions imposed by the United States, before the June 28 deadline.

"Our efforts to finalize new arrangements ahead of the deadline were on track," Petroleum Minister, Susil Premjayantha said yesterday. "In fact, we have no option, but to act swiftly and decisively to ensure an uninterrupted energy supply," the UPFA General Secretary said in a brief interview with The Island.

Many of the countries that purchase Iranian oil are US allies, including several European countries, India, Japan and South Korea.

The European Union, too, has imposed sanctions as part of the overall US-spearheaded efforts to undermine the Iranian economy, over Teheran’s refusal to suspend its nuclear programme.

The Minister said that all major buyers had been forced to substantially curtail their purchases before the June 28 deadline, or face the consequences.

Minister Premjayantha said that Sri Lanka’s only oil refinery at Sapugaskanda refined 14 tanker loads of crude oil annually. Of them, 13 ship loads were of Iranian origin and the remaining from Saudi Arabia, the parliamentarian said, adding that in line with the US directive, the government now intends to bring down the Iranian supply from 13 tanker loads to 10. Each consignment comprised 135,000 tonnes of crude. Asked whether Sri Lanka would be able to make payments to Iran in US dollars, the minister said that wouldn’t be possible due to the recently imposed sanctions.

"We’ll have to make payments in some other currency. We are working on that in consultation with the Central Bank. At the moment, the issue is how to bridge the shortfall in the supply of crude oil."

Iranian oil imports at the moment cost Sri Lanka $ 1.6 billion. Due to the US directive that payments to Iran couldn’t be made in dollars, the demand for the US currency was likely to go down, the minister said. In the wake of the depreciation of the Sri Lankan rupee against the US dollar, the US move could be beneficial to Sri Lanka, the minister said in response to a query.

He said that the government would have to reach new agreements with suppliers to obtain three tanker loads amounting to 405,000 tonnes (earlier purchased from Iran). Responding to a query, the Colombo District MP said that Sri Lanka had finalized an agreement with Oman to secure 370,000 tonnes of crude oil and was in the process of exploring the possibility of obtaining the remaining stock from Saudi Arabia.

Premjayantha said that the CPC and CEB together would have to explore every opportunity to reduce oil consumption and encourage both the private and public sectors to help save foreign exchange. He said that the conclusion of the conflict in May 2009 had reduced the needs of the armed forces, thereby making a substantial difference in current requirements.

Asked whether it wouldn’t be cheap to obtain refined products through Singapore, the minister said that as Sapugaskanda met CEB requirements, too, it would be necessary to continue with crude oil imports. Otherwise, the CEB requirement for furnace oil would have to be purchased overseas, whereas it was a byproduct at Sapugaskanda.
http://www.island.lk/index.php?page_cat=article-details&page=article-details&code_title=49709

*Economic growth to slowdown to ‘still high’ 7% this year
*Inflation, debt: GDP ratio hit by currency depreciation
*Export growth to fall

2012 will be a tough year for Sri Lanka with the regime of policy uncertainty proving to be an obstacle to attracting much needed investment, with the private sector performing below expectations, a report released by the Asian Development Bank (ADB) says.

"Despite the improved political and economic environment, growth in private investment—domestic and foreign—is falling below planned levels. One reason is that the government has taken only a few steps to reduce red tape and improve the business climate, needed to create the conditions for ramping up private investment," the ADB said in its flagship publication Asian Development Outlook 2012.

"Although Sri Lanka’s position in the World Bank’s Doing Business index has improved in 2012 to 89 (out of 183 countries) from 98 in 2011, some challenges still deter private investment, especially paying taxes," it said.

"Investor confidence is a key factor in attracting investment and this requires a predictable policy environment as articulated and reinforced through the legal, regulatory, and institutional framework. Thus the lack of such an environment for the private sector is a major obstacle to private sector development. Developing that framework will reduce uncertainties in the business environment and avoid unplanned actions that may send mixed signals to potential investors."

The ADB said Sri Lanka’s economy is projected to maintain its strong performance of the last two years (growing 8 percent in 2010 and 8.3 percent in 2011) but growth prospects for 2012 are less favourable than in the past and the pace of expansion is expected to moderate to a "still high" 7 percent.

"This easing is partly due to slower growth in industrial countries and attendant weaker growth in global demand and trade, and partly due to domestic factors: the rebound has largely run its course and with little slack in production capacity signs of overheating have emerged that will require tighter demand-management policies to forestall the buildup of serious economic imbalances.

"Growth is expected to edge down to a still high 7.0 percent in 2012 as trends in investment, exports, tourism, remittances, and consumption remain broadly favorable; agriculture growth should be high, assuming normal weather. With the expected stronger performance of the global economy in 2013, growth is expected to recover to 8.0 percent, driven mainly by domestic and foreign investment," the ADB said.

With growth slowing down, it would be harder for the government to achieve its revenue targets, posing a risk to containing the budget deficit at 6.2 percent of GDP this year.

"Expenditure is slated to rise more slowly than revenue: planned economies in current spending should allow capital outlays to rise to 6.6 percent of GDP, in line with the target in the government’s Development Policy Framework. The government plans to bring the deficit down to 5.8 percent in 2013, by improving income tax and value-added tax collection and further streamlining current expenditure," the ADB said.

The multilateral bank said the debt to GDP ratio, which has been improving in recent times, could worsen this year.

"The public debt ratio has been reduced over the last few years, although it was still very high at an estimated 78.9 percent of GDP at end-November 2011. The impact of currency depreciation on external debt, additional budget borrowing, and slower growth is on course to worsen the debt-to-GDP ratio in 2012," it said.
http://www.island.lk/index.php?page_cat=article-details&page=article-details&code_title=49701

Strengthening its maritime services portfolio, diversified blue-chip Aitken Spence enhanced its venture into maritime education by significantly increasing its shareholding in Colombo International Nautical & Engineering College (CINEC), Sri Lanka’s largest private higher education institution. The company first formed a partnership with CINEC in 2010.

"Consolidating our partnership with CINEC is a part of our strategy to further strengthen our contribution towards positioning Sri Lanka as major regional hub for maritime services. Given an encouraging enabling environment we see tremendous opportunity for the private sector to spearhead the country’s vision to exploit its strategic geographic location and skilled human resources to become the regional maritime hub", said J M S Brito, Deputy Chairman and Managing Director, Aitken Spence PLC.

"The association with CINEC has helped Aitken Spence to further strengthen its maritime portfolio. Through the world-class faculty and teaching facilities, the education and training instilled into the number of men and women who study under this institution results in maritime specialists who are equipped, not only to raise the profile of Sri Lanka’s maritime industry but also to add value to the global maritime industry", said Dr. Parakrama Dissanayake, Chairman of Aitken Spence Maritime and Director of Aitken Spence PLC.

The CINEC Maritime Campus was established in 1990 and is the only campus of its kind in Sri Lanka and the region.

The largest private education campus in Sri Lanka, CINEC’s annual student intake is over 14,000 men and women. The state-of-the-art maritime campus has sophisticated laboratories that house up to date simulators and best in modern technology, which has won them approval by the Directorate of Merchant Shipping in Sri Lanka.

CINEC is affiliated to the University of Wolverhampton in the UK as well as to the University of South Australia in Adelaide. In June 2009, CINEC signed up with Dalian Maritime University of China to conduct BSc and MBA degree programmes in the fields of Information Technology, International Transportation Management, Planning and Logistics Management and Supply Chain Management. This was the first branch of its kind opened by the Dalian Maritime University.

Dalian Maritime University (DMU) is one of the largest and best maritime universities in the world and is the only key maritime institution under the Ministry of Communications, People’s Republic of China. DMU has over 100 year tradition of excellence in teaching, learning & research.

It enjoys a high reputation internationally & has been recognized by the International Maritime Organization (IMO) as being an excellent centre for maritime education & training.

Ship handling, imports and exports are the businesses Aitken Spence Maritime was founded on. The Company acquired its first agency, the Scottish owned ‘Clan Line’ in 1873, when it was still known as Clark Spence & Company. With the new Aitken Spence partnership in 1876 the Company moved its headquarters to Colombo. Back then Aitken Spence Shipping was the only operator along with E. Coates who helped maintain the day to day operations of the Colombo harbour through the supply of labour and the handling of general administration.
http://www.island.lk/index.php?page_cat=article-details&page=article-details&code_title=49703

China and the United States will experience more trade friction in the high-end manufacturing sector, as Washington protects its domestic industries, officials said yesterday.

Friction will "surely increase" as China and the US both focus on high-end and emerging industries, including new energy and materials, Zhang Xiangchen, director for trade policy research at the Ministry of Commerce, said.

Another official from the ministry also said that a developing trend sees US protectionism shifting from traditional sectors to emerging ones.

"We can forecast that the US will intensify trade investigations against Chinese new-energy exports," said Yu Benlin, deputy director of the ministry’s bureau of fair trade for imports and exports.

Both officials made the remarks on Sunday at a forum marking the opening of the Canton Fair in Guangzhou. The fair, also known as the China Import and Export Fair, is a barometer of the trade sector.

The US used to accuse China of giving unfair support to traditional exports such as steel and chemical products. But in the past two years Washington has launched a slew of trade investigations targeting China’s new-energy products.

The US launched an investigation against China’s new-energy policies in 2010 and then started anti-dumping and countervailing investigations against Chinese solar panels and wind towers over the following 16 months, Yu said. This affected exports worth about US$3 billion.

US protectionism hurts Chinese exporters and industries, Yu said.

The US, China’s second-largest trade partner, has launched 73 trade investigations against China since 2007. This represents about 16 per cent of investigations brought against China by other countries, Yu said. Cases launched by the US covered a combined export value of about $10.3 billion.

In a fresh sign of rising trade protectionism, the US set up the Interagency Trade Enforcement Center in February to investigate what it called "unfair trade practices" from its major trading partners, including China, Yu said.

Trade investigations from the US sometimes prompted other nations to follow suit, Yu said. For example, when the US imposed anti-dumping duties on Chinese- coated paper in 2006, Brazil, Argentina and Thailand launched similar investigations, which "severely hurt Chinese exporters".

Disputes targeting China will become more frequent, Yu said.

William Zarit, minister counselor for commercial affairs at the US embassy in Beijing, said that the world’s top two economies "need to build trust" to resolve friction, especially in high-end manufacturing.

Rising trade protectionism in China’s major exporting destinations has dealt a hard blow to exporters already suffering from slowing global demand.

China reported GDP growth of 8.1 per cent in the first quarter, the slowest in almost three years as exports and domestic demand cooled, according to data issued on Friday by the National Bureau of Statistics. The government set a goal of 10 per cent growth in foreign trade this year.

Zhong Shan, deputy minister of commerce, called for supporting policies on Thursday to increase foreign trade while reducing exporters’ burdens and improving the business environment.

(ANN)
http://www.island.lk/index.php?page_cat=article-details&page=article-details&code_title=49707

Ramani KANGARAARACHCHI
Sri Lanka would increase its per capita income from the current US $ 2,399 in 2012 to US $ 4,400 in 2015. The country would also develop fast and would have a growth rate of around 9% during the period said Dr. T. Lalitha Gunaruwan, Senior Lecturer (Economics), University of Colombo, Speaking at the 'Railways for Our Future' seminar organized by the Institute of Supply and Material Management (ISMM) at the OPA Auditorium he said that the demand for logistics and transport would experience enormous pressure. Doubling of per-capita income by 2015 will lead to parallel increase of value of time.

"By doubling the per capita income people will look forward to more quality and comfort and also be more competitive, with wider choice, efficient and quick access," he said.

Dr Gunaruwan predicted that local ports would have to handle double the number of container movements.

"Therefore demand on logistics can expect to double and pressure on the entire supply chain would double. Domestic trade also would have an up-word pressure," he said.

Export value of tea will increase from US $1.3 billion to US $ 2.5 billion doubling its volumes. Rubber and cinnamon and spices too would increase from US $ 600 million to US $1.2 billion which would also double the volumes.

"Apparels and allied industry too would increase from US $ 3.5 billion to five billion US dollars," he predicted.

Commenting on the tourism industry he said that it is expected to grow by three folds from US $ 600 million to US $ 2 billion. "This will force the necessity for travel facility expansion and number of vehicles on the roads will increase," he said.

"Therefore government needs to shift away from its implicit 'cars first' policy to 'trains first' policy.

"It is important to identify competitive advantage in sub-urban passenger transportation, long distance fast express passenger services, long distance freight transportation and hazardous risky goods transportation," he said.

A Malaysian company has already planned to build Sri Lanka's first speed rail link from the Colombo airport to Fort and plans are under way to extend this up to Gampaha.

Thus needy areas and investment should be determined in a prioritized basis identifying the productivity of the system.

Also focus on structural issues, avoid interference and take economic decisions, and performance-based management structure is imperative, while safeguards are kept intact.
http://www.dailynews.lk/2012/04/17/bus01.asp

Reuters: Sri Lanka will face a challenge in meeting this year’s budget deficit target as the recent monetary and fiscal tightening measures may hurt revenue growth, the island nation’s central bank chief told Reuters on Monday.

The $59 billion economy has agreed with the International Monetary Fund (IMF) to target a budget deficit of 6.2 per cent of the gross domestic product, the lowest since 1992 and down from last year’s 6.9 per cent, to continue a $2.6 billion loan.

“The challenge now is to ensure that the fiscal deficit of the Government is in line with what was budgeted for and that the Government’s borrowings were budgeted for,” Central Bank Governor Ajith Nivard Cabraal said in an interview.

“The Government needs to work out carefully as to what internal adjustment they carry out..whether some expenditure is reduced or revenue is increased or the both.”

Sri Lanka has taken some drastic policy decisions to avert a balance-of-payment crisis after the IMF withheld disbursement of a loan following the monetary authority’s failure to heed its repeated request for a flexible exchange rate.

On the monetary front, the central bank stopped intervening in the currency market, raised policy rates to two-year highs and limited commercial banks’ credit to 18 per cent from last year’s 34 per cent.

The Government, on its part, also has raised fuel, electricity, and transport prices and taxes on vehicle imports. aimed at reducing the trade deficit to $9.1 billion this year.

Following these moves, the IMF approved the disbursement of $426.8 million from the total $2.6 billion loan on April 3 with waivers.

The island nation’s balance-of-payments swung into a deficit of $1 billion in 2011 as trade deficit for the year ballooned to a record $9.7 billion and the central bank spent more than $2.6 billion to stave off depreciation in the second half of 2011.

The recent measures are expected to cool the economic growth, which the central bank has already revised down to 7.2 per cent from its original estimation of 8 per cent and they are also expected to hit Government revenue, making it harder for the Government to meet the 6.2 per cent fiscal deficit target.

“Certainly, delivering that number in today’s context is not an easy one and we would like see them (Government) taking necessary actions that is on line.”

The central bank raised key policy rates on April 5 for the second time since February to curb credit growth, which it said was expanding at an “undesired pace”, which would in turn control the trade deficit by reducing imports.

The island nation’s monetary authority raised the repurchase rate by 25 basis points to 7.75 per cent and the repurchase rate by a much higher 75 basis points to 9.75 per cent. Economists had expected only a 25 basis point increase in the both rates.

“We increased the rates because we were not satisfied with the initial imports data we were receiving,” Cabraal said.

However, the bank deliberately raised reverse repurchase rate more than expected, he added.
“In order to reduce the speculation, we decided to go little further by raising it by 75 basis points, which will take any expectation of regular rate hikes out of the equation. Current interest rates are sufficient to curb import demand,” he said.
http://www.ft.lk/2012/04/17/2012-budget-deficit-goal-challenging-says-cb-chief/