The Nation GAIN

Wednesday, May 2, 2012

Port shift not compulsory - SLPA Chief

By Dilina Kulathunga

The Chairman of Sri Lanka Ports Authority (SLPA), Dr Priyath Bandu Wicrema last week said that the recent directive to shift vessels carrying imported vehicles from Colombo Port to Hambantota with effect from May 31, 2012 is not mandatory and that the clearance at Colombo port would purely depend on space availability.

“Certainly it is up to the vehicle importers to decide between the two ports. But we have made ourselves very clear that we do not allow any vehicle to be parked inside container terminals which has been the practice. So, as long as they can clear their vehicles immediately upon unloading we do not oppose anyone to import vehicles through Colombo port,” the SLPA Chief said in an exclusive interview with The Nation.

The Sri Lanka Ports Authority said in a statement last week the decision to unload motor vehicles imported to Sri Lanka at Hambantota Port remains unchanged despite ‘disparaging remarks by some parties’.

“SLPA would like to state that the ongoing process of handling ships carrying vehicles at Magam Ruhunupura Mahinda Rajapaksa Port from May 31, 2012 will remain as decided,” the statement noted.

Meanwhile, the chairman of Ceylon Motor Traders Association (CMTA), Tilak Gunasekera who in a complete change of stance to which he said a fortnight ago that member companies importing brand new vehicles would not consider importing from the new port, last week said that it will now be up to the individual companies to decide on which port they would use.

“I believe it is up to the individual companies to decide whether they are going to clear their shipments from Colombo or H’tota. But, since the used vehicle importers would shift to the new port we do not expect major crisis in space in Colombo. Sri Lanka Customs is also very efficient that the clearance could be done pretty fast”, Karunarathne added.

He further added that luxury vehicles such as Audi, Mercedezs, BMW, Jaguar and the likes are anyway shipped in containers so that they would anyway continue to be cleared from Colombo while the other cheaper car importers can decide between the two ports.

Vehicle Importers Association of Sri Lanka in a press conference held a fortnight ago expressed positively for the SLPA’s decision to redirect the vessels carrying vehicles to H’tota from June 1, 2012.

Speed breaker on remittances?

The Central Bank says that workers’ remittances, which are estimated to grow substantially in 2012, are expected to moderate its growth in the medium term in line with expanding domestic economic activities.

“With the tight domestic labour market conditions, migration for foreign employment is expected to decline gradually resulting in a deceleration of workers’ remittances in 2013 and beyond in contrast to the substantially high growth rates recorded since 2009,” the Central Bank 2011 Annual Report stated.

Workers’ remittances, which constitute a greater share of private transfers, continued to be the foremost foreign exchange earner in 2011, surpassing the export earnings from textiles and garments for the third consecutive year. Gross workers’ remittances increased notably by 25 per cent to US dollars 5.1 billion, from US dollars 4.1 billion in 2010.

Economic growth to lose pace in 2012

The Sri Lankan economy is projected to grow at a slower rate of 7.2 per cent in 2012 compared to the impressive growth rate of 8.3 per cent recorded in 2011, the Central Bank admits. With the expected revival in the global economy, the economy is however expected to regain pace next year expanding by around 8 per cent and continue to grow over 8 per cent per annum over the medium term.

“The increase in capacity utilisation, improved productivity and diversification supported by continued development of infrastructure facilities, and continued expansion in income generating activities in the Northern and Eastern provinces will provide the basis for sustained growth over the medium term,” the Central Bank highlighted in its 2011 Annual Report released last week.

It noted that in order to sustain the expected high growth, investments are required to be raised gradually to around 32-33 per cent of GDP in the medium term, and this level of investment is mainly expected from domestic savings.

However, in 2011 domestic savings declined from 19.3 per cent in 2010 to 15.4 per cent as domestic consumption (as a percentage of GDP) increased from 80.7 per cent in 2010 to 84.6 per cent. On the other hand, total investment as a percentage of GDP increased from 27.6 per cent in 2010 to 29.9 per cent in 2011 as private investment increased from 21.4 per cent in 2010 to 23.7 per cent in 2011 while public investment increased marginally to 6.3 per cent from 6.2 per cent in 2010.

Pure economics not practical: Cabraal

By Dilina Kulathunga

Despite the Central Bank being an independent body, Governors of Central Banks cannot act in a tunnel vision purely focusing on economic fundamentals ignoring the political scenario of those countries, the Governor of the Central Bank said last week answering a question on the feasibility of adopting a formula for the revision of petroleum prices reflecting market fluctuations.

“We must realise that we do not live in a pure economics world. This is a world of politics and economics and therefore every economically sound decision may not be politically viable”, CBSL Governor, Ajith Nivard Cabraal pointed out.

Addressing the media following the presentation of the 2011 Annual Report, the Governor further noted that although that as the governor of the CB, he totally endorsed such a formula in place, it was important to understand whether our people were prepared to go to the filling station not knowing how much they would have to pay for a liter of Petrol the following day.

“Unfortunately it doesn’t work that way always everywhere and that is why we need to strike the correct balance between economics and politics in making such policy decisions”, he said illustrating how difficult it was in the neighbouring India to increase price of fuel by as little as Rs. 3 to Rs. 4 as it was strong enough for a regime change.

He further acknowledged that although he himself had so many discussions with the government authorities on matters which are economically significant, these discussions are not shared to the general public always as there was a clear demarcation as to what is and what is not published.

Responding to criticisms levelled against the secretary to the ministry of finance, Dr P. B Jayasundara and himself on mismanaging the economy by several sections of the economy, he asked whether the achievement of the highest growth rate of 8.3% in 2011 in the history of Sri Lanka a crime.

“Last year has been a historic year for Sri Lanka since liberalisation with many achievements in our economy. We had the highest gross official reserves of US $ 8.2 billion by mid August 2011, above 8% growth for two consecutive years, lowest inflation for the past 38 months and the lowest unemployment rate of 4.2% among others”, he added refuting those allegations.

During the latter part of 2011 the 3% Rupee depreciation was criticised as ‘too little too late’ but since last February the criticism of the policies were of ‘too many, too late’ questioning the consistency of the economic policies which creates an uncertain environment for the stakeholders to consider decisions.

Responding to these latest developments the governor said that those were not ad hoc decisions but were judgmental calls which were taken at right times because the CB had a clear vision unlike many others who found fault with everything but could not be held accountable for what they said.

Tackling inflation, a key challenge - CB

By Azhar Razak

The Central Bank of Sri Lanka (CBSL) last week said that given the uncertain outlook for global commodity prices, especially with regard to oil, the key challenge ahead would be to maintain inflation at a low and stable level.

“Although the recently implemented policy measures would moderate growth and ease demand pressures to some extent, monetary policy will need to continue to focus on restraining demand pressures to maintain inflation at a mid-single digit level,” the island’s monetary authority highlighted in the CBSL Annual Report 2011 released last week.

The report noted that managing supply side shocks to ensure an adequate domestic food supply would also be required to complement demand management strategies whilst developing quality seed varieties to suit local conditions, expanding cultivation to different agro climatic zones to ensure uninterrupted supply, increasing storage facilities and improving supply chains to ensure a reasonable price for producers and consumers are some areas that may need to be addressed in this regard.

“The weak recovery in the global economy as well as geopolitical uncertainties in Sri Lanka’s traditional export markets is likely to affect export growth. Demand for exports needs to be improved through diversification of both markets and products. Also, foreign inflows must be strengthened, particularly in the areas of service inflows and FDIs through appropriate policies and macroeconomic environment,” CBSL identified.

It further added that high oil prices in international markets can have a significant impact on an oil dependent economy like Sri Lanka pointing out that policies need to be put in place to mitigate the impact of high oil prices by promoting energy efficient production technologies, increasing the use of renewable energy sources and energy conservation.

“Moreover, a price mechanism that reflects movements in international energy prices may need to be considered to help avoid the need for large adjustments of domestic energy prices while lessening the burden on public enterprises,” the Report suggested.

Meanwhile, the report cautioned that since substantial decline in unemployment is expected to tighten labour market conditions, policies need to be put in place to improve labour productivity and to address structural rigidities in the labour market while increasing capital intensity to deal

with any manpower shortages.

“Attention should also be paid to realign Sri Lanka’s education system to generate a human capital base with the skills necessary to sustain this new growth momentum,” it further pointed out.

Tuesday, August 9, 2011

Dabur India sets up new subsidiary in Sri Lanka

Firm plans setting up a manufacturing facility which is expected to start production by the end of this fiscal

FMCG firm Dabur India today said it has formed a new entity, Dabur Lanka Pvt Ltd, as part of a strategy to strengthen its presence in Sri Lanka.

In a filing to the Bombay Stock Exchange (BSE), Dabur said Dabur Lanka has been incorporated under its wholly-owned subsidiary, Dabur International, which manages the company's overseas operations.

"Accordingly, Dabur Lanka Pvt Ltd has become company's step-down subsidiary company," Dabur India said.

As part of its plans for the island nation, Dabur is in the process of setting up a manufacturing facility which is expected to start production by the end of this fiscal.

According to company officials, Dabur currently does not have a significant presence in Sri Lanka. However, it has identified the country as one of its focus markets in the coming years.

Around 22 per cent of the company's sales come from international markets, including African nations, Nepal and Bangladesh.

Dabur, which sells personal care and healthcare products under brands like Dabur and Vatika, registered sales of Rs 4,110 crore last fiscal.

The company's scrips were being quoted at Rs 104.20 per share in afternoon trade on the BSE today, up 1.41 per cent from their previous close.

Moving car imports from Colombo Port to Hambantota Port

Importers claim the move a Trojan Horse

By Azhar Razak

The Ceylon Motor Traders Association (CMTA) last week expressed their anger to a plan mooted by the Sri Lanka Ports Authority (SLPA) Chairman, Dr Priyath Bandu Wickrama to move the clearance facilities of all car imports from Colombo to the Hambantota Harbour claiming that logistically it was not practical.

Their stance is that since the majority of buyers are from the Western Province, such a move would only make the vehicles more expensive to the consumer with additional transport costs to be borne among a series of other logistical issues to be addressed in such an implementation. “It is his (SLPA Chairman’s) own version and nobody has so far discussed this with us. However, such an initiative is not feasible unless solutions are found to a gamut of arising problems,” CMTA Chairman Tilak Dias Gunasekera told The Bottom Line. He cited practical issues such as relocating Pre-Delivery Inspection (PDI) officers from Colombo to Hambantota, extra cost factors involved in the transport of thousands of cars from Hambantota to Colombo, risk of damage in transport among many other issues that would resultantly crop up. The CMTA chairman observed that the Colombo Port is presently only facing a temporary issue with regard to the backlog of vehicles stranded at the port since the government is yet to take a decision on whether or not to clear imported used vehicles over two years. This is because in April 2011, along with tariff revisions the Customs Department relaxed the regulation pertaining to the importation of used petrol cars, from 3.5 years to 2 in a move to encourage the importation of brand new cars and also encourage expatriates to bring in brand new vehicles for private usage, minimising the foreign exchange outflow. “There is a dispute between customs and used car dealers who have imported cars older than three years over the clearance of vehicles. Since the Customs stay put on the new two-year rule, traders cannot clear them. This delay has trickled down to new car imports as well due to space constraints at the Port,” claimed Gunasekera who insisted that if this issue was resolved without much fuss then the shifting vehicles to Hambantota for clearance would not arise. The SLPA Chairman, Dr Wickrama had suggested the plan when he addressed a news conference last week to announce Colombo hosting the 12th Asia/Oceania Regional Meeting and Port Forum on March 8 and 9, 2012 and also the International Air Freight, Shipping and Logistics Expo 2012 from March 8 to 12. “So far we have always had problems because thousands of cars kept at the port awaiting clearance. The cars are kept outside of the port and the clearance delay results in more expense.”

If the cars are instead brought to Hambantota then there is plenty of space and clearance would be faster. Importers would also have the benefit of reduced tariff charges. The only issue is the modality by which they can be transported to Colombo, otherwise the importers are keen,” SLPA Chairman Dr Wickrema is reported to have stated. Meanwhile, the Chief Executive Officer of United Motors Plc, Chanaka Yatawara said that their firm was not ready to a shift in Port idea since majority of its customers came from the Western Province. “Apart from additional costs, this will also create greater congestion on roads while there will be a risk factor that needs to be taken into account,” he noted.

http://www.thebottomline.lk/2011/08/07/page7.html