Sri Lanka replaces controversial central bank chief

Indrajit Coomaraswamy

Sri Lanka's president on Saturday bowed to pressure from activists and replaced the country's controversial central bank chief, appointing a respected economist to the top job.

President Maithripala Sirisena announced that Indrajit Coomaraswamy, 66, had been appointed as the new governor of the central bank, effective immediately.

Coomaraswamy was previously a director of economic affairs at the Commonwealth Secretariat, an intergovernmental agency of Commonwealth countries in London.

"After consulting all parties concerned, I appointed top economist Dr. Indrajit Coomaraswamy to lead the Central Bank of Sri Lanka," the president posted on Twitter.

The announcement ended any prospect of outgoing governor Arjuna Mahendran being reappointed after his tenure ended on Thursday. He had indicated he was prepared to complete another term. However, he had wanted his name cleared of allegations of corruption before seeking re-appointment.

Sirisena had come under intense pressure not to reappoint Mahendran, who had faced allegations of insider trading.

A group of Sri Lankan academics and professionals had gone to court to demand action against Mahendran, a Singapore national of Sri Lankan origin.

Activists had threatened to take to the streets unless the president replaced him.

He was accused last year of leaking inside information to his son-in-law's firm, allegedly allowing it to make millions of dollars in profits from a central bank bond auction.

Mahendran has consistently maintained his innocence.

Sri Lanka's economy is under stress and last month began receiving the first tranche of a $1.5 billion bailout from the International Monetary Fund.
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Sri Lanka’s ad hoc tax policy boosts Japanese and Indian small cars

Sri Lanka has reduced import tax on Japanese and Indian made 800 and 1000 cc small cars while increasing duty on higher engine capacities, vehicle importers alleged. Issuing a gazette notification, the Finance Ministry has brought down the import duty on 800 and 1000 cc cars. This move will benefit Japanese and Indian made smaller vehicles, an official of Sri Lanka’s Vehicle Importers Association told the Business Times.

The tax for such cars will come down to around Rs. 1.35 million from Rs. 1.5 to 1.6 million, motor traders said adding that the majority of this segment of imports is dominated by the Indian Maruti cars.

Japanese small car imports will also record a boost under this initiative, they added. Pakistan-based auto assemblers have recently been exporting assembled cars to Sri Lanka and other regional markets – a trend which Islamabad plans to encourage, he said pointing out that Pakistan is especially “encouraging the assembly of small cars, including 600 cc and 1,000 cc cars. The government’s move will result in a flood of Japanese, Indian and cheap Pakistani smaller cars in the island, he said. Sri Lanka’s used car sales recorded a new high of 56,000 units in 2015, double the previous year, according to data compiled by JB Securities, a local brokerage. Almost all of those were Japanese-made vehicles.

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Ashok Leyland resumes its bus delivery to Seychelles

By Duruthu Edirimuni Chandrasekera

Lanka Ashok Leyland will re-start its bus delivery to Seychelles after a hiatus of a few years, Umesh Gautam CEO Lanka Ashok Leyland PLC told the Business Times. ”Some time ago we sent them 50 buses and now we’re renegotiating a deal for 12 special buses to Seychelles,” he said. The company also shipped 22 buses to the Maldives on June 16 in a separate US$1 million deal, he added. Against a backdrop of uncertainty due to revisions in import duty structure, depreciation of the rupee and restriction on financing/leasing, Lanka Ashok Leyland saw its sales improve 10 per cent for 2015/16 to Rs. 9.1 billion compared to Rs. 8.2 billion in 2014/15 driven mainly by 12 per cent growth in new vehicle sales.

“The depreciation of the rupee and frequent changes in import duty structure negatively impacted the company, raising the import costs which eroded its gross profit margin down to 8 per cent resulting in an 18 per cent decline in gross profit to Rs. 760.4 million against Rs. 924.4 million in the last period ”, he said. Mr. Gautam, said, “the transport industry operates at the mercy of exchange rate volatility, and 2015/16 saw rapid decrease in the rupee triggered by the devaluation in China in August 2015 increasing our import costs which could not be transferred to our customers who had to contend with rising interest rates and changes in vehicle financing regulations.” Profit after tax for 2015/16 fell to Rs. 314 million owing to the external environment. Lanka Ashok Leyland maintained its payout ratio at 43.6 per cent with a final dividend of Rs. 25 to its shareholders.

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$3 billion liquefied natural gas projects lined up at BOI

By Duruthu Edirimuni Chandrasekera

Four liquefied natural gas (LNG) projects totalling 2,040 Mega Watts (MW) of power are before the Board of Investment (BOI) and will soon be approved, officials said. “They are British, Indian and two US companies,” an official told the Business Times adding that together these will fetch some US$3 billion. Energy World International Ltd, a British owned company based in Hong Kong specialising in property investment and development, oil and gas exploration, infrastructure and power projects has applied to set up and operate LNG Power Plants with LNG Terminal and Storage Tank (capacity 80,000 cm) complete with offloading facility at Kerawalapitiya total 140MW at Katunayake Export Processing Zone (EPZ) which will be at a 50MW capacity, also at Biyagama EPZ (50MW) and Seethawaka EPZ (40MW) – all totalling an estimated Investment $325 million. Shapoorji Pallonji Group which is a leading engineering, construction and services conglomerate in India, having a footprint in four subcontinents, has submitted a proposal in February to establish three filling stations/ infrastructures with 200 MW capacity.

“They have proposed to establish a 0.5 million Metric Tons Per Annum (MMPTA) processing, storage and regasification terminal, supply natural gas for Power Plants and gas stations for automobiles and also to establish a 200 MW (100 MW each in two phases) gas based power plants near Colombo Port,” the official said. Venture Global Power LLC, a US firm currently developing LNG imports and power projects in the Caribbean, Africa and South Asia has proposed to privately finance, develop, design, engineer, construction, commission, insure, own, operate and maintain offshore LNG terminal, storage, degasification terminal facility and a gas-fired combined cycle power plant (500 MW) and under water electrical transmission line and underwater natural gas pipeline at Kerawalapitiya with an investment of $795 million, he said.

The official said that Sithe Global Power Ventures (SGPV) a wholly owned subsidiary of Sithe Global Power LLC of the US developing finances and operating large independent power generating facilities of a variety of fuel types throughout the world has proposed to develop an integrated LNG storage and regasification terminal together with a 500 MW natural gas fired combined cycle power generating station (expandable to 1,000 MW). “They also want to develop a natural gas pipeline from Hambantota to Kerawalapitiya along the corridor of the Southern Highway and has identified the Hambantota Port for this operation,” he said adding it’s a $1 billion project.
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Lanka Tiles PLC to set up a fibre cement plant

By Duruthu Edirimuni Chandrasekera

Lanka Tiles PLC (Tiles) is to set up a fibre cement plant in a 100 acre land in Divulapitiya in a bid to diversify its operations, officials said. The company invested in Beyond Paradise Collection (Pvt) Ltd in FY 2016 which owns this property, they said adding this firm was bought to solely develop the land. “We will sell all production in the local market,” an official said. He said that the company’s focus continues to be on the local market with local sales as the core revenue generator with a contribution of 96 per cent during the last quarter and 97 per cent for FY 2016. Local sales grew 4 per cent year on year (YoY) to Rs. 5.93 billion in FY 2016 aided by the overall growth in the local tile market.

“A reduction in capacity to produce bigger tiles caused a dip in local sales revenue during the quarter. But local demand picked up substantially in 2015 owing to higher demand for housing and urban infrastructure,” he said. He said that the company would be expanding its capacity in FY 2017E to cater to the growing demand for larger format tiles. Medium-term price estimates for construction materials such as steel, copper, aluminum, iron indicate only moderate growth, implying that the costs of construction are likely to remain low, according to industry analysts who said that in this scenario,

Tiles will benefit in terms of projects initiated by the previous Government (namely the Colombo Port City Project, the extension of the Southern Expressway to Hambantota, the extension of railways from Beliatta to Kataragama) re-launched in late 2015/early 2016 while these projects are likely to stimulate the overall construction industry once implementation begins. They also said that new infrastructure development plans such as the Western Province Megapolis Development and the 1000-acre industrial zone in Hambantota are likely to boost the domestic construction industry further. “Tiles will benefit from these future prospects in long term infrastructure projects and the potential spillovers into construction-related activities,” an analyst said. The bottom line of the company fell 43 per cent YoY to Rs.174 million due to a 115 per cent rise in tax charge to Rs. 221 million.

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