Damages payable between Rs. 1 and 5 Billion- NITF shortlists eight reinsurers

By Ishara Gamage

Ceylon Finance Today: Sri Lanka's only reinsurance provider, The National Insurance Trust Fund (NITF), on Friday shortlisted eight reinsurance brokers, backed by some of the world's largest reinsurers.

These eight have submitted bids for the retrocession programme for 2016 and they will be paying reinsurance claims of between Rs. 1 Billion and Rs. 5 Billion, NITF Chairman Manjula de Silva told Ceylon FT, late Friday night.

"The objective of this programme is to obtain protection for the balance sheet of NITF in the event of a major catastrophe, and also it will be a major relief for the Treasury," he said.

The shortlisted eight reinsurance brokers were:
Lockton Reinsurance Brokers ,J.B. Boda & Co(s) Pte Ltd, K.M.Dastur Reinsurance Brokers (pvt) Ltd, Guy Carpenter, JLT Independent Insurance Broker (pvt) Ltd, Aon Reinsurance Brokers , India Insure - The risk Managers (Foresight) and Life & General Insurance & Reinsurance Brokers (Pvt) Ltd

Some of the above companies have their local representatives as well.he added.

NITF is the only organization, State or private which offers reinsurance in Sri Lanka. There is a government ruling and gazette notification that all primary insurance has to cede 30% of their total liability with our reinsurance division which is a compulsory cession and rest of 70% with a foreign reinsurer, NITF Chairman Manjula de Silva told Ceylon FT.

What this effectively means is that we will be transferring our entire reinsurance liability to a foreign party, which will be useful in the event of a major catastrophe such as the 2004 tsunami or the recent earthquakes in Nepal, he said.

We are ready to pay up to one billion rupees as reinsurance claims. But claims above Rs one billion, we have to transfer in to the newly selecting reinsurer effective from 01st January 2016, he added.

The NITF is planning to close this final selection within a few weeks from now on, after a comprehensive evaluation of the NITF's Technical Evaluation Committee and the ministerial level committee.

The National Insurance Trust Fund was established in 2006, as a statutory body to offer Agrahara Insurance policies for public sector. "We have been providing insurance covers for all Strike, Riot, and Civil Commotion and Terrorism through our SRCC and T Fund. We currently manage over Rs 10 billion worth of assets, the NITF Chief remarked.

Currently, NITF serves over 750,000 government servants and their families. Altogether we were serving more than 2.8 million people, he said.
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Singapore’s Temasek model for State enterprises- PM

By Ishara Gamage

Ceylon Finance Today: The government will follow the Singaporean Temasek model for managing all State owned enterprises, Prime Minister Ranil Wickremesinghe said on Thursday night.

"Those State Enterprises will pay taxes and let's hope twenty million people of Sri Lanka will get adequate returns of this benefit within this concept by ensuring a broadbased ownership and the creation of a strong middle class," he predicted.

Prime Minister Wickremesinghe made these remarks at the 50th Anniversary celebrations of CIMA Sri Lanka at the Cinnamon Grand.

"We are going to make our State Enterprises viable on the model of the Singapore Temasek investment company where the commercial enterprises hold by the one holding company responsible for their performances sharing that company with people wealth trust.

So the people will ultimately benefit from this, "he added. He also said that state managed private sector pension's funds, the Employees Provident Fund (EPF) and the Employees'. Trust Fund (ETF) will come under one Council with a proper fund management. It will be a large fund valued at over Rs 1.6 trillion.

"With these two measures Sri Lankan twenty million people will be largest owners of wealth in this country."

The government also has measures to hand over the titles of land to the owners of houses and flats to the people who occupied them, creating a broad basing ownership and to bring them all into the market economy.

"I must say we are living in a country where we don't know what are our national debts and assets were, so the Finance Minister must find out those exact debts and assets."

Mentioning about the role of CIMA, the Prime Minister said that CIMA has a vital role to play in creation of one million jobs of making Sri Lanka in a highly competitive social market economy, while in raising the income and living standard of people of creating strong middle class an uplifting of rural economy.

"We need enough qualified people in this march forward," he added.

Addressing the gathering CIMA President Myriam Madden said that CIMA global is ready to be partner Sri Lanka's economic development and also said that the UK Government's confidence over the new Sri Lankan Government was also a very high.

" A well run State sector was vital for Sri Lanka's economic development and we as a CIMA global body, is ready to partner with Sri Lanka's economic progress," she remarked.
CIMA CEO Charles Tilley also addressed the occasion.
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Today is World Tourism Day -Important aspects of Hotel Revenue Management

By Sujeewa Gunaratne

Hotel Revenue Management is about making the right room available for the right guest at the right price at the right time via the right distribution channel.

The fundamental focus of any business is to obtain profits. In this process, Revenue Management concepts have become popular methods in the business world. Revenue Management is combination of market research, competitor benchmarking and customer relationship management that categorizes customers into price bands based on various services to optimize revenue. It is the science of optimizing profits through market demand by forecasting and maximizing rates and availability. If applied correctly hotels should be able to expand their market size and increase revenues.Today's complex multi-channel distribution landscape requires hotels to match the needs of diverse customer segments with a fixed supply of rooms, thereby driving the increased adoption of advanced Revenue Management technology.

Market Segmentation in hotel Industry: Market segmentation is a crucial element in hotel Revenue Management. It allows you to target and market to a variety of consumer groups with different behaviour with offers that match their needs and budget levels. Market segmentation in hotel industry begins with the identification of the purpose of the trip: whether it is for business or leisure. The price does not decide the market segmentation. Clear distinction must also be achieved between individual and group business. The market segmentation will help to identify the trends of the business: Length of Stay, Day of Weeks stays, Total Revenue per room, Total Revenue per client, Booking Lead Time, Cancellation %, No Show ratio and etc.

Here is an example of hotel market segmentation:
Public: BAR Website, BAR Direct, BAR Indirect Commissionable, BAR Indirect Net
Promotions: Opaque; hidden hotel discount programmes, Flash Sales; promotional website offering membership discounts, Mobile; mobile websites offering same day or last minute discounts, Online Campaigns; internet publication offers and packages, Offline campaigns; print publication offers and packages, Special Event; packages and offers during holidays, festivals, concerts

Negotiated Rates: Corporate Dynamic Rates, Corporate Flat Rates, Government, Crew
Groups: Leisure, Business, Conference / Banquet, Incentive, Wedding, Events, Crew
Wholesale: FIT, Tour Operators, Wholesalers,

Other: Complimentary, Barter, Walk-In, Overflow (from another hotel), House Use, Time Share

The above segmentation is a general guideline. Each hotel has to decide what segmentation best fits their market and property.

Building a Revenue Management Culturein the organizations is the primary and most important part of this process. Revenue Management is becoming more complex, but at the same time more rewarding. Revenue Management in some shape or form plays a role in many strategies and tactics deployed in most companies in the modern business world. 

The relationship between the teams within an organization that set the strategies and the teams that deploy the tactics are extremely important. Without a defined link, strategies and tactics may conflict, leading to neither being successful. Many hotels have seen double-digit revenue improvement by employing Revenue Management techniques. This is especially true with the GM's support. By staying proactive about Revenue Management within their hotels, GMs can help their teams drive toward top-of-the-line revenues for the hotel and stand out as true revenue drivers within their organizations.

Setting Revenue Management Goals and Objectives: The proper goal of a Revenue Management programme is not to increase average room rates. Neither is it to increase average occupancy rates. Revenue Management programmes must focus on optimizing Revenue through right pricing strategies.

Forecasting demand, optimizing demand,controlling demand and monitoring demand are the four main components that form the Revenue Management cycle.

Forecasting Demand and Occupancy: Good demand forecasting is a key aspect of revenue management. Improvements in the demand forecasts used as inputs to the inventory allocation process translate directly into increased revenue in the form of higher average rates per customer and better utilization of the demand without losing a reservation that should have been accepted.

Optimizing Demand: Once the analysts have a forecast, analysts can determine on which days it is likely that analysts will have to turn down or up demand to decide the right price for rooms.

Controlling Demand: Historically analysts may be able to determine that the demand accepted has only really been controlled by the capacity of the hotel, that is, reservations have only been denied when a night was full. Alternatively,analyst may know that in some cases, length-of-stay and rate controls were put in place to control the amount and type of demand that analysts accepted.

Monitoring Demand: This stage of the process is when analysts look at what is happening and compare it to what analysts expected to happen based on your forecasts.

Choosing an Automated Revenue Management Solution: Hotels can achieve a greater market share by using an intelligent Revenue Management System. It bases room rates on real-time changes in the marketplace. Managing prices by demand allow hotels to fill rooms that would otherwise remain empty. Through dynamic pricing models hotels can gain a competitive advantage by basing rates on a calculation of occupancy, competitors and season.

Star Class Hotels have to adopt technological advancements in order to optimize revenue. 

Revenue Management system enable hotels to process all the booking data more systematically, effectively and efficiently. These systems use mathematical calculations to forecast guests and revenue demand at different times. The systems perform micro analysis to give high accuracy outputs and eliminate human errors and inefficiencies.

Selecting right Distribution Channels: There have been many changes in the technology over the last few decades within the Revenue Management field. In the past, guests chose a hotel by looking for the glowing vacancy sign in the window. Now, guests spend hours on their iPod looking for the best deal. As we move into the digital revolution, we must constantly update and monitor our online distribution channel strategies. Online Travel Agencies (OTAs) are a blessing and a curse for hotels. They're a blessing because they give additional exposure to potential customers, but a curse due to the high commission rates. 

As with any business, it's a good idea to diversify the channels. If become too reliant on a few and one isn't direct bookings, then hotels could become a slave to those few revenue generating channels. Many hotels find themselves in this situation with OTA's, and it becomes obvious that the hotel is not making as much money as they should be with every OTA booking. Most guests will now check guest reviews, compare pricing and find exactly what they are looking for. Management should evaluate performance of distribution partners and contracted rates (OTA, FIT, tour operator, corporate, consortia, crew, groups, etc...) which will help to manage the operation.

Choosing the Best Fit Technology: Deciding the right price for rooms at different times through Dynamic Pricing is the biggest challenge for hotel management. Maintaining right Revenue Management practices will help hotel management to optimize revenue from its inventories. Experienced and knowledgeable Managers in Revenue Management field could help hotels to achieve this task. By deploying automated Revenue Management tools could keep on a track of the continuously fluctuating data that make up a hotel's 24-hour cycle of supply and demand. Automated systems are eliminating the day-to-day manual data-crunching tasks. With integrated software in place, hotels gain visibility on niche travel sites, major OTAs and outshine competitors by beating their rate offerings. Online channel management technology is giving hoteliers the chance to gain control of extensive markets and global audiences.

Future for Hoteliers in Sri Lanka is Revenue Management
With the development of peace in the country, number of tourist arrivals into Sri Lanka is increasing rapidly. Hotels shouldn't slash prices especially during high season where there is a demand. Most of the good hotels get filled in advance through slashing room rates where they miss opportunities to sell at a higher rate later. They tempt to fill the rooms in advance by undercutting rates of its competitors instead of taking a calculative risk to sell at a higher rate later during the high season. Also during the low season hotels miss business opportunities by quoting higher room rates when similar hotels sell rooms at lower rates due to the market competition. In Sri Lanka, whilst some hotels enjoy profits and others run at losses. The loss making hotels should review their People-System-process Cycle. If it is not in order they should go through Business Process Reengineering (BPR) to reduce cost wherever possible and restructure their daily operation whilst optimizing revenue through right Revenue Management practices. Also they should focus that right sales strategies are in please and right sales channels are approached. Even the hotels that make profits should analyse further to ensure that their People-System-Process in order and that Right Revenue Management Practices are in place. After all, any business has unseen areas that can be ventured into or existing sectors that can be developed further. Top Management should oversees the Revenue Management and distribution strategy of the hotel and manage day to day yield operations.

For students pursuing hotel management courses in Sri Lanka, it is important to focus on Revenue Management and online distribution aspects. This will help them excel in this field and ensure they have an idea of how technology can help them achieve quicker and smarter results in the long run.
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Seven bills to raise revenue through mega taxes

By Chandani Kirinde

Finance Minister Ravi Karunanayaka has reintroduced the Finance Act (Amendment) Bill which seeks to impose the Mansion Tax and Migration Tax and the Super Gains Tax on a company or individual whose profit before tax exceeds Rs. 2,000 million.

This and six other bills aimed at raising state revenue were presented to Parliament by the Finance Minister this week amid opposition protests.

The bill was earlier presented in parliament consequent to the interim budget in January. The amendment to the Finance Act provides for the imposition of Bars and Taverns Levy, Casino Industry Levy, Super Gains Tax, Mobile Telephone Operator Levy, Direct-to-Home Satellite Services Levy, Satellite Location Levy, Dedicated Sports Channel Levy, Mansion Tax, Migrating Tax and the Motor Vehicles Importer Licence Fee.

The Direct-to-Home Satellite service levy of Rs 1,000 milllion will be imposed on every person in the business of providing Direct-to-Home services through satellite having more than 50,000 subscribers in Sri Lanka. The Migrating Tax will be charged from any citizen of Sri Lanka who permanently leaves Sri Lanka, at the rate of 20% of the foreign exchange released to be taken out of the country by such citizens.

This tax will be collected by the Controller of Exchange at the point of outward remittance of foreign currency, in accordance with the provisions of the directions and regulations made under the Exchange Control Act, and the money will be remitted to the Consolidated Fund within 15 days from the date of collection.

The Mansion tax will be imposed on every owner of a mansion constructed on or after April 1, 2000, at the rate of Rs 1 million per year, in addition to the rates and taxes charged and levied by any local authority, and shall be paid in four equal installments.

A Mansion has been described as “any building constructed on or after April 1, 2000, for residential purposes, of which the floor area is not less than 10,000 square feet as per the building plan approved by the local authority of the local authority area wherein such building is situated, or the value of such building, as at the first day of April of any relevant year, is not less than Rs 150 million, as determined by the Government Chief Valuer, or by an officer authorized by him, after making any adjustment as may be prescribed, and in the case of a condominium property , a condominium unit of such property shall be deemed to be a building for the purposes of part.

The other Bills presented by the Minister were the Inland Revenue (Amendment) Bill, Value Added Tax (Amendment) Bill , Nation Building Tax (Amendment) Bill, Economic Service Charge (Amendment) Bill, Telecommunication Levy (Amendment) Bill and the Betting and Gaming Levy (Amendment)Bill.
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Nawaloka Group eyes managing a Dubai hospital

By Duruthu Edirimuni Chandrasekera

The Nawaloka Group, primarily in private healthcare, plans to take its core competencies international in a bid to beat shrinking margins here. The group is in talks with a hospital in Dubai to manage and operate it, a top official told the Business Time.

He said this is a skill/expertise the company wants to capitalise on in terms of going international. He added that in this respect, the group is eyeing similar opportunities in the region. “We want to take this core competency to the region mainly because it is more ‘manageable’ in terms of controlling costs and general efficiency as its closer in terms of travel time,” he said. He said plans will materialise by next year on the Dubai hospital.

The doctor-centric nature of the Sri Lankan healthcare industry suggests that patient volume depends on the quality of the visiting consultants, healthcare analysts say, adding that the lack of skilled medical personnel and the high negotiating power of consultants press margins by increasing personnel costs.

According to the Nawaloka official, this is the primary reason that Nawaloka wants to expand to Dubai. He said that the low margins earned on services can be attributed to the high bargaining power of doctors in the industry. “This dominance (doctors’) enables hospitals to absorb about 55 per cent of the charges made for surgical interventions and nearly 20 per cent of the charges made for medicinal treatments. We are left with only a small portion to cover the hospitals costs.”

He added that shortage of medical personnel is more distinct in private hospitals which are dependent on visiting specialists to attract patients, given the doctor-centric nature of the Sri Lankan healthcare industry.

An increasingly sedentary lifestyle, rapid urbanisation and an ageing population have amplified the pervasiveness of non-communicable diseases (NCDs) in the world and especially in Middle Eastern countries, according to healthcare analysts. The official added that this is intensified by the fact that NCDs typically require specialised treatments which entail longer hospital stays. “The private sector in the Middle East is, therefore, poised to benefit from the resulting anticipated demand for treatment of NCDs.”
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Sri Lanka considering removing old vehicles off roads

Sri Lanka is seriously considering the possibility of removing old 15 years and over unroadworthy vehicles numbering around 1.2 million from the roads to meet more efficient transportation needs of urban areas, Transport Ministry sources said. Old vehicles have been one of the major causes for road traffic accidents, vehicular congestion and air pollution.

The Motor Traffic Department (MTD) has been directed to devise legislation providing regulations to prohibit the use of old vehicles on roads and empowering the traffic police to seize un-roadworthy vehicles, a senior department official said. This is one of the measures suggested in the Urban Transport Master Plan for Greater Colombo prepared with Japanese funding, he said, adding that the new Transport Minister Nimal Siripala de Silva is keen to implement the plan.

Welcoming the move, Past Chairman, Ceylon Motor Traders Association (CMTA), Tilak Gunasekera told the Business Times that the government should devise a scheme to persuade franchised motor vehicle importers to buy old vehicles for scrap so that they could be removed from the roads or to exchange the old one with a new model.

He said that there should be a mechanism to encourage consumers to opt for brand new vehicles and increase duty/tax band for reconditioned vehicles. Sri Lanka opened the floodgates to re-conditioned vehicle imports from Japan and some other countries, regardless of the age of the vehicles in the late 1970s.
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Suspects in CIFL case bailed out

Chulaka Gunawardena alias Deepthi Perera, former chairman of the failed Central Investment and Finance (CIFL) and two other suspects in the CIFL fraud case were allowed bail on Friday by the Colombo Chief Magistrate Gihan Pilapitiya. The other two suspects are J.K. Wickramaratne, former CIFL CEO and S.B. Kondadeniya, a former CIFL director.

At Friday’s hearing both the Central Bank (CB) and the CIFL Depositors Association (CIFLDA) rejected the revival plan submitted by the first suspect. After the submissions of the counsel for the accused, CB, CID and CIFLDA the magistrate ordered the suspects to be released on bail and directed Mr. Perera to submit to court within three months a scheme that offers satisfactory relief to depositors. The case was postponed to 22 October.

The suspect better known as Deepthi Perera had been on the run and hiding in Cambodia since after 2009 when the finance company began to collapse and shocked depositors stopping receiving interest payments or were unable to withdraw their money.
Earlier the CIFL depositors received a major blow when the case instituted by the CIFLDA against the CB in the Appeal Court and the stay order granted in September 2013 by court was vacated without hearing the case.

In mid 2014, CIFLDA monitoring the stock market found one individual, believed to be a politically powerful government advisor, to be continuously buying CIFL shares in large numbers worth Rs. 250,000 for a few days. The CIFLDA appealed to the Supreme Court against the Appeal Court order, but the CB asked the depositors to get the Supreme Court case withdrawn on the undertaking that the CB would find a suitable investor to revive the failed CIFL but never found an investor.

(Quintus)
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5-pronged strategy including tax hike to curb rising vehicle imports

By Bandula Sirimanna

Sri Lankan authorities, tackling an acute case of depleting foreign exchange reserves and a rising vehicle population, is resorting to a 5-pronged approach to cut imports and make vehicles costly to the population resulting in a likely 20 per cent cut in vehicle imports.

While a depreciating rupee in which the US dollar traded in the Rs.140-142 range this week from Rs. 134 flat a few weeks ago has made car imports costlier and restricted leasing facilities made it even more difficult to potential owners, an impending 100 percent cash margin for letters of credit (LCs), proposed hike in taxes and suspending car permits is seen plugging a hole in foreign exchange reserves.

The special facility of car permits given to taxpayers whose income tax liability in respect of any period of five years of assessment of not less than Rs. 250,000 a year has also been suspended to curb vehicle imports. Economists say the country’s total debt has skyrocketed to Rs. 8.2 trillion ($58.7 billion), almost half of which is foreign debt.

The government’s annual debt servicing costs have now surpassed total government revenue, aggravating the country’s balance of payments problems. The trade deficit has increased to US$4 billion during the first six months of the year, a 15.6 per cent increase compared to last year.

The Government is to also re-impose a 100 per cent margin deposit requirement against the LCs opened with the commercial banks for vehicle imports, official sources said. “Accordingly, LCs for the importation of vehicles cannot be opened in commercial banks without a minimum cash margin of 100 per cent and this will affect motor traders badly specially small scale dealers,” Ashok L. Ganwani, Director Lekhraj Automobiles (Pvt) Ltd told the Business Times.

Small players will be affected greatly as they have to pay upfront the value of the vehicle which is a huge burden to them, he said, adding that they are being already battered with the currency depreciation. The high import bill is the main concern of the Central Bank (CB) with declining currency other than fuel cost (though it is low in current market) and exceeding traffic congestion, he said.

Whatever policy issues to be brought up in the near future for the interest of national economy only is to be shouldered at the expense of the community, he pointed out.He noted that vehicle importers will have to block large amounts of their money for LC’s till the landing of vehicles.

Earlier they had the facility of opening the LC with a part payment and the balance could be settled after the arrival of the vehicle, he added. Tilak Gunasekara, Managing Director of Sathosa Motors Plc, said the new margin facility should apply only for cars, not for commercial vehicles and buses. He said transport and logistics sector is important for the Sri Lankan economy as it impacts on the country’s transportation of agricultural produce from the fields to retail shops.

On leasing facility constraints, the CB imposed limits on banks and finance companies in which loans and leases of vehicles should not excess 70 per cent of the value of the vehicle compared to 100 per cent earlier. This was welcomed by Rajiv Gunawardena, Chief Executive Officer, Asia Asset Finance Plc, who said the move would have a positive impact on the finance industry as well as on the overall economy.

He noted that it will mainly affect first-time buyers and those who are looking for their second vehicle. It should not have an impact on those replacing their vehicles. Leasing and hire purchase loans of motor vehicles have been one of the biggest product portfolios for the finance industry; therefore in terms of business activity there will be an immediate impact until the market adjusts for the change.

However this will help to improve the quality of the vehicle loan portfolio in the longer term, he pointed out. Abans Finance Plc Managing Director Kithsiri Wanigasekera was of the view that this move could restrain future credit growth of Sri Lankan leasing and finance companies and also reduce bad loans and defaulters.

He noted that most of the finance companies are not allowing 100 per cent vehicle leasing facilities, therefore its impact will not threaten the industry. www.sundaytimes.lk

Scrip issue from DCSL will be considered says Harry

The Distilleries Company of Sri Lanka PLC (DCSL), one of the country’s wealthiest conglomerates, will consider a bonus share issue, the company’s chairman, Mr. D.H.S. Jayawardena, said in response to a shareholder’s request at its annual general meeting last Monday.

The shareholder pointed out that DCSL carries very large reserves – Rs. 22.75 billion reserves and Rs. 37.95 billion retained earnings in its books as at March 31, 2015, and suggested a scrip issue.

Jayawardena responded the matter would be considered.

In response to another question on what the government owes the company on account of profits earned by the Insurance Corporation of Sri Lanka when DCSL was in control, Jayawardena did not give the figure of the sum owed but said that the "government auditor" was sitting on the matter and there had been no progress since "Mayadunne (a previous Auditor General C. Mayadunne) left."

The Supreme Court ordered that the Insurance Corporation which was sold to DCSL be taken back by government but profits earned during DCSL’s tenure be paid back to the company.

"With regard to the Sri Lanka Insurance Corporation Ltd. (SLIC), even after a lapse of six years, we still await the payment of profit earned during DCSL group’s tenure at the helm of SLIC," Jayawardena said in his chairman’s message in the company’s latest annual report.

"We are hopeful that the profit earned, which has to be paid back to us as per the Supreme Court directive, will be reimbursed to us as early as possible."
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