Sri Lanka’s Central Bank allows foreign investors full control: CIFL

(LBO) – Sri Lanka’s troubled Central Investment and Finance Company says the Monetary Board has assured that investors would get 100 percent control once the proposed investment materializes.

Clarifying a newspaper report, CIFL said that such intervention would be subject to other circumstances of the mechanism of proposed investment.

The investors have already expressed their requirement of acquiring 100 percent ownership of the company.

“We sought advice from the Central Bank by our letter dated 20 September,” CIFL said.

“The CB has responded indicating that the Monetary Board is empowered under Finance Business Act to ensure that investors would get 100% control in the event of the proposed investment is materialized satisfactorily.”

Central Investment and Finance Company earlier said they are awaiting a response from a prospective German investor indicating their future plan of action to revive CIFL.

The company said they submitted all clarifications to the investor delegation who visited the island recently.

A high level delegation from Vandell Financial Services arrived in Sri Lanka recently to discuss opportunities of investing in the troubled finance company.

Govt. expects to raise Rs.100bn through revised VAT this year

By Chandeepa Wettasinghe

The government expects to raise as much as Rs.100 billion through the revised Value Added Tax (VAT) law this year, Finance Minister Ravi Karunanayake said yesterday, while shooting down allegations the Joint Opposition made against him for circumventing the due process again in his attempt to legislate the VAT Bill’s latest iteration.

“We’re expecting to collect even more,” Karunanayake said in response to a question by Mirror Business whether the Rs.100 billion revenue target from the revised VAT rates is still realistic given the time restriction for the year.

The claim could have some merit, given the large reductions of the VAT liability threshold, even though VAT will only be collected from VAT liable goods, compared to a blanket charge on the revenue in the past on all goods and services sold by a supplier liable for VAT. Karunanayake had this May set a Rs. 100 billion revenue target to be collected from raising the VAT rates from 11 percent to 15 percent.

However, against the then hopes of having the VAT in effect for 8 months of 2016, the Supreme Court in July had halted the rate hike due to a petition made by the Joint Opposition which claimed that the revised Bill had not followed the parliamentary standing orders of gaining parliamentary and Cabinet approval.

In August, the Supreme Court ruled that the process pursued by the government raising the tax rate was unconstitutional and was against the parliamentary standing orders.

When the next draft of the revised VAT Bill was gazetted last week, the Joint Opposition said that the document was gazetted on September 9, even though Cabinet approval was given on September 13, and that it would go to courts again to stop it from being legislated.

However, Karunanayake refuted the allegation by providing a letter written by the Government Printer Gangani Liyanage, where she had stated the revised VAT Bill was published on the September 13 Extraordinary Gazette, which was a part of the September 9 Gazette.

The increased rates of the VAT Bill, if implemented, is likely to come into effect retrospectively for the two months from May to July as most suppliers had already collected increased rates from consumers.

Meanwhile, Karunanayake said that other forms of revenue had surpassed expectations this year, helping to reach the budget targets.

Cabinet decides to impose 15% VAT on cigarettes

The government has decided to impose the proposed 15 percent VAT on cigarettes and increase the current production tax by Rs.5 for any size cigarette, it was revealed during the Cabinet media briefing yesterday.

The Cabinet of Ministers also has agreed to increase the cess on the import of beedi leaves by Rs.1000 to Rs.3000.

The revised VAT Bill is likely to be presented to parliament for approval in October.

The moves come in the wake of a survey finding that shows 15 percent of people between 18-69 years are engaged in smoking and about 30,000 die annually due to tobacco related diseases.

It has been calculated that government spends about Rs.72 billion annually to treat such patients.

VAT was relegated into excise duty in 2014 on tobacco, liquor and several other products in an attempt to cut back on the plethora of taxes levied on these products.

A re-imposition of VAT on cigarettes could thus create a scenario of ‘VAT on VAT’, as a VAT component is already present in excise duties.

The current effective tax rate on cigarettes is around 81 percent. Additional taxes means the cigarette monopoly in the country, Ceylon Tobacco PLC (CTC) will have to raise the cigarette prices.

CTC in 2015 paid over Rs.90 billion taxes to the government, and this year the tax payment is estimated at Rs.100 billion.

www.dailymirror.lk

Sri Lanka heading for ‘significant’ tea production shortfall

ECONOMYNEXT – Sri Lanka is heading for a ‘significant’ shortfall in tea production this year with the crop down 12% up to August while reduced offerings at the Colombo auctions have pushed up prices, brokers said.

Tea production in August 2016 was down 13% or 3.4 million kilos to 23.01 million kilos from a year ago with all elevations affected, they said.

“If the current extreme weather pattern continues, Sri Lanka’s tea crop is poised to show a significant negative variance by the end of the year,” Forbes & Walker Tea Brokers said.

At this week’s auction, only 5.4 million kilos were offered in contrast to the corresponding sale of last year which had on offer a quantity of 6.8 million kilos.

The August 2016 crop was the lowest in 10 years, the brokers said.

Sri Lanka’s tea production in the first eight months of this year was down 12% to 198.6 million kilos, with low grown teas which make up the bulk of the crop showing the biggest deficit, brokers John Keells Ltd. said.

Prices perked up at this week’s auction owing to the limited quantity on offer, they said.

Sri Lanka IOC unit erodes Chevron dominance in lube market

ECONOMYNEXT – Indian Oil Corporation’s Sri Lanka subsidiary has gained market share from the dominant Chevron unit and state-owned Ceylon Petroleum Corporation in the lubricant market, a new study by the regulator shows.

The Public Utilities Commission of Sri Lanka (PUCSL) said in its lubricant market report 2015 that competition was increasing in island’s lubricant industry.

Sri Lanka's lube market grew at 6.8 percent to 23.4 billion rupees in 2015, with 10.1 percent growth in automotive lube and 7.7 percent increase in industrial lube, the report said.

Currently, 13 operators compete in Sri Lanka's lubricant market and are authorized to import, export and sell lubricants, with only three authorized to blend lubricants.

Chevron Ceylon’s lubricant market share narrowed to 47.58 percent in 2015 from 49.30% in 2014 with its nearest competitor, Lanka Indian Oil Corporation seizing 14.86 percent of market share, up from 12.59 percent in 2014, the report said.

The PUCSL said the market share of Ceylon Petroleum Corporation also decreased to 9.19 percent in 2015 from 10.54 percent in 2014.

Sri Lankan shares end at near one-month closing high

Reuters: Sri Lankan stocks on Thursday posted a third straight session of gains to end at a near one-month closing high, led by gains in financial stocks, a day after yields in T-bills dropped.

The benchmark index of the Colombo Stock Exchange ended up 0.25 percent, or 15.98 points, at 6,528.30, its highest close since Sept. 2.

The central bank's widely expected decision on Wednesday to hold the rates steady suggested that policy makers were keen to support a slowing economy even as they kept a tight leash on rampant credit growth.

Treasury bill yields fell between 16 basis points and 33 basis points after the rate decision.

Analysts said they expected the stock index to rise this week due to the fall in the return on fixed income assets.

The bank has tightened policy three times since December.

After four consecutive weekly losses, the index had posted a weekly gain of 0.1 percent last week.

"The market is poised to move up. We see retail buying coming into the market," said Reshan Kurukulasuriya, chief operating officer, Richard Pieris Securities (Pvt) Ltd.

"All economic indicators are also helping the market to move up. Market will move further up after the budget," he said referring to 2017 budget, scheduled to be presented in the parliament on Nov. 10.

Foreign investors bought a net 6.9 million rupees worth of shares on Thursday. But they have been net sellers of 2.95 billion rupees worth of equities so far this year.

Turnover stood at 479.4 million rupees ($3.27 million), less than this year's daily average of 753.2 million rupees.

Shares in Lanka ORIX Leasing Company Plc climbed 2.5 percent while the biggest-listed lender Commercial Bank of Ceylon Plc edged up 0.7 percent. 

($1 = 146.0000 Sri Lankan rupees) 

(Reporting by Ranga Sirilal and Shihar Aneez; Editing by Sherry Jacob-Phillips)

Pegasus Reef goes for Rs 215 mn refurbishment

Pegasus Reef Hotel Wattala, the first five star hotel in Sri Lanka is investing over Rs. 215million to refurbish the hotel after a lapse of a decade.

The refurbishment is currently underway and the owning company, Carsons Management Services, which also own and operate the Giritale Hotel, will add 78 deluxe rooms and four suites with jaquzies and other modern facilities under this investment.

The suites are also offered to both local and foreign honeymoon couples. With the current 42 rooms that are in operation, the hotel inventory will increase to 124 keys. It will be maintained as a four star hotel.

Hotel's General Manager Harsha Jayasinghe said that with several famed international players opening up hotels in the city they too wanted to compete with them.

"This is why we are investing and refurbishing the hotel to offer five star standard to guests and be the best hotel in Colombo.."

He said that the hotels' main income was from banquets for which the hotel has made a reputation for the past four decades.

"We can accommodate over 500 guests and could even offer facilities to cater to two functions of 200 to 300 guests in each venue. In addition there are conference facilities with multimedia for another 100 guests."

The hotel is one of the largest hotels in Sri Lanka boasting of 11 acres and there are plenty of recreation facilities including two synthetic tennis courts, squash courts, modern gym and indoor sports.

"This is the only tennis court after Colombo upto Negombo and we offer them to school children and visitors as well."

Due to the demand of their Sunday buffet which is almost sold over every Sunday, the hotel has also introduced 'The Fishery', an outdoor restaurant overlooking the sea where one could see two harbours. (Colombo and Fisheries harbor) This has been built to cater to 200 guests and with the large garden and live cooking; it's very popular for private functions.

The hotel also boasts of a large garden which can accommodate over 4,000 visitors and is a popular pick for host 'mega' outdoor events in the beach. Mrs. World and Miss World and similar high profile events were hosted at Pegasus Reef Hotel, Wattala.

The hotel currently being operated with 42 rooms is maintaining over 60% occupancy and with the new wing to be ready by November this year both revenue and occupancy will further increase.

"We see a growing market from Indian, Japanese and Chinese markets and also a very big response form online bookings. The hotel has also been winning several international awards including the Trip Advisor and Holiday Check award. Pegasus is among the exclusive holders of ISO 14001:2004 and OHSAS 18001:2007 certifications.

The General Manager counts over two decades in the hospitality field having started in the F&B department in Cyprus and Holland and moving out to Germany, Austria, Luxemburg and Asia.

Chief Accountant Kapila Gunatilleke said the investment is made from profits generated with the hotel. "We don't have any borrowings." The current refurbishment programme commenced last June and will be ready for the 2016 winter season.
(SS)

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Fitch affirms Alliance Finance at ‘BB+(lka)’

Fitch Ratings Lanka has today affirmed Alliance Finance Company’s National Long-Term Rating at ‘BB+(lka)’ with a Stable Outlook.

At the same time Fitch affirmed AFC’s outstanding senior unsecured debentures at ‘BB+(lka)’ and outstanding subordinated debentures at ‘BB(lka)’. AFC’s rating reflects its established but modest franchise and weaker capitalisation given its growth track record. This is balanced against recent improvements in risk controls. Execution of management’s strategic plan to expand its loan book and adherence to sustainable growth targets underpin the Stable Outlook, and meaningful deviation from the plan may place downward pressure on AFC’s ratings.

Fitch expects AFC to expand at a pace commensurate with its current capitalisation levels over the medium term, led by growth in vehicle financing and other term loans. Consequently, Fitch expects AFC’s capital ratios to remain at current levels, with capital being supported by gains from planned asset disposals and a planned Rs 72 m rights issue.

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