Suchirindia and Starwood Invest in $25mn Airport Hotel in Katunayake, Sri Lanka

01st November 2010, www.island.lk

Suchirindia Lankan Hotels and Resorts (P) Limited and Starwood, a leading international hotel and leisure company, singed a letter of intent to establish a 200 keys airport hotel in the Katunayake Export Processing Zone.

Suchirindia is a diversified business group based in India with Infrastructure and hospitality development at its core.

Hospitality as a business venture to Suchirindia has profound significance as the company believes this is one line of business that integrates nature, creativity, art and architecture, statement said.

With two hotels under operation back in India, Suchirindia is poised to make a humble beginning in Sri Lanka with a 200 keys hotel at Bandaranaike International Airport in the Katunayake Export Processing Zone in a 3.5 acres land awarded by the Board of Investment of Sri Lanka.

Starwood is one of the leading hotel and leisure companies in the world with over 1000 hotels in nearly 100 countries and territories. The letter of intent was signed in the presence of the Indian High Commissioner in Colombo, Ashok K. Kantha yesterday.

Dr. Y. Kiran Kumar, Chairman of Suchirindia Group and Mathew Fry, Senior Vice President of Acquisitions and Development in Starwood Asia Pacific, exchanged the signed letters of intent and together they will bring the pacesetting innovation, lifestyle-focused design, signature services and strong traveler loyalty through this project. Mihindu Keerthiratne Associates would be the Hotel Architects.

The total investment amounts to US$ 25 million and statutory approvals are expected to be in place by the end of November 2010 together with financial closure, which is in the advanced stage of completion. Construction of the project is expected to start in December 2010 with a target to commence commercial operations by April 2013.

Heraymila of Saudi Arabia's Al Mashal Group Invests in Sri Lanka

01st November 2010, www.lankabusinessonline.com

The Sri Lanka unit Heraymila Investments, a part of Saudi Arabia's Al Mashal group will use its global links to channel funds from the Middle East and elsewhere with a strong research backed strategy, the head of its local unit said.

"We will be offering opportunities for Sri Lankan companies to raise funds tapping the relationships we have with international funds," Ravi Abeysuriya, group chief executive of Heraymila's Sri Lankan operations said.

"Our main strength will be our placement capabilities."

Heraymila bought into a licensed stock brokerage, formerly controlled by Amana, a Colombo-based Islamic finance group.

But Heraymila is also setting up divisions to handle investment banking and fund management.

Heraymila has been investing in Sri Lanka's equity market from 2005, and bought strategic stakes in several firms, including a 10 percent stake in Commercial Bank at one time.

"When peace came they were keen to play a more active part in the market, because they felt there were a lot of opportunities to attract foreign funds, including their own money," Abeysuriya said.

In addition to around 260 million dollars it is directly managing, Abeysuriya says the group co-invests around the globe with international finance houses such as JP Morgan and Goldman Sachs.

One of its strengths will be a strong research capacity. Abeysuriya himself at one time headed the Sri Lanka unit of Amba Research, a capital markets research outsourcing firm catering to US and European markets.

"The core of our value proposition is fundamental research, where we will be publishing quarterly research on the macro-economic situation, sectoral analysis and selected coverage of individual companies," he said.

Heraymila will also get into fund management. Abeysuriya says the group will structure funds that will meet the appetite for mutual funds abroad.

Jetair Flies from Brussels to Colombo, One of the Safest Destinations in the World for Tourists

01st November 2010, www.dailynews.lk

The maiden direct flight from Brussels to Colombo departed from the Brussels International Airport on Saturday. “Sri Lanka is today one of the safest destinations in the world a tourist can expect to fly to, Sri Lanka’s Ambassador to Belgium, Luxembourg and the EU Ravinatha Aryasinha said. The Ambassador made this observation when he addressed passengers travelling to Sri Lanka on the maiden direct flight.

The Ambassador noted that tourist arrivals to Sri Lanka from Belgium had increased by 82.8 percent up to September this year, said this compared well with the 50 percent increase recorded from Europe, and the 44 percent recorded from around the world, in the same period.

Commending Jetairfly and Thomas Cook for being one of the first European collaborations to re-commence direct flights to Sri Lanka, he said it will be a huge boost to the marketing of the destination not only in Belgium, but also in the entire Benelux region (Belgium, The Netherlands and Luxembourg) and would result in an exponential growth in tourists to Sri Lanka from these countries.

He urged visitors to Sri Lanka, on their return, share their experience with others, so that more will be encouraged to make the journey, which will strengthen the people-to-people bonds between Europe and Sri Lanka.

Image: Ambassador Aryasinha with Brussels Airport Director Jos Stroobants, Jetairfly Chairman Elie Bruynick and Thomas Cook Belgium Director Marc Van de Wal at the boarding gate to inaugurate the flight.

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Sri Lanka Footwear & Leather Industry Show Remarkable Growth. Trade Show from 5 to 7 November 2010

01st November 2010, www.dailynews.lk, By Indunil Hewage

The Sri Lankan footwear industry has recorded a remarkable growth last year and a positive growth is also expected in the industry during this year. “More new players are coming to the footwear industry and many factories are opening in the face of existing healthy environment in the country.

More opportunities will be created in the Northern and Eastern areas in the future with the further developments in the industry,” Footwear Advisory Chairman Ranjith Hettiarachchi said. He said the Sri Lankan footwear industry has reached international level and is capable of fulfilling the local footwear requirements now.

Sri Lanka has a limited market and identifies new markets and foreign buyers for exporting Sri Lankan footwear products.

Arrangements have been made by authorities to have a safety net to protect the industry from cheap imported footwear coming from various countries to Sri Lanka.

“The lack of operating staff and leather has hampered the growth of the industry. The current workforce in the footwear sector is around 30,000 and the industry is engaged in importing leather from Chennai, India. In addition to that, raw material and machinery can be imported duty free to Sri Lanka now. This shows the platform has been made to develop the footwear industry similar to the international footwear market,” Hettiarachchi said.

A Sri Lankan delegation was sent to China recently with the assistance of the Export Development Board to obtain an idea about technical improvements in the footwear industry in China.

Earlier, two batches comprising Sri Lankan footwear designers and technicians underwent training at the Footwear Design and Development Institute in India with the assistance of the Industry and Commerce Ministry. “We are at the discussion level to set up training centres in the country and are in the planning stage to draw a five year master plan for the industry.

Having understood the commercial value of the footwear industry, ‘Footwear and Leather Fair 2010’ from November 5 to 7, will be held at the BMICH.

Industry and Commerce Ministry, Industrial Development Board and Sri Lanka Footwear and Leather Products Manufactures Association are organizing this. A special area has been reserved at the fair to display footwear and leather merchandise in terms of quality and designs capability.

Tea Earns Rs 113bn during First Nine Months of 2010 for Sri Lanka

31st October 2010, www.island.lk, By Steve A. Morrell

Earning from tea surged to Rs. 113 billion during the first nine months of this year, which is an all time high. So too dollar earnings at US$ 995 million being the highest ever figure for the ten month period. These are quoted facts from the weekly tea market report of Asia Siyaka Tea Brokers.

Russia/ CIS and Middle East continue to support Ceylon Tea, except Egypt. We have yet to re-capture the Pakistan market lost to Kenya, and UK, also lost to Kenya. All well and good but what of the rest of the world? The question could be asked ‘Have their taste acquisitions no included Ceylon Tea?’ and ‘Why?’ Tea shippers are collectively on record to have said ‘We buy and sell’. And our responsibility would end there.’

Seemingly the main reason for EU countries to shun Ceylons was price. The exclusivity of a Ceylon Tea Cuppa does not hold that degree of clout any more; but given such negativity and Ministerial innovation we hopefully could look forward to more positive times when budgetary proposals emerge.

The Minister of Plantation Industries, Mahinda Samarasinghe, said about ten days ago that he was concerned with the standard of green leaf from small holder origins and would bring to bear effective legislation to correct the retrograde trend that gradually became accepted norm. ‘This would have to stop’ he said.

Also reported by Asia Siyaka, bulk tea exports had shrunk to 26%. Packeted tea exports rose to 61%. ‘Good marker to this changing trend’, given value addition positive shift in marketing was encouraging, tea sources said.

As reported by us about one month ago resurgence of automation at the auctions again surfaced recently. Indian auction centers have had incessant problems and the switch had not been received well.

Colombo is still reputedly the best tea auction center in the world usually handling about 7 million kilos each week in just two days. An extremely efficient system, and more so totally transparent in its dealings. ‘The question was asked ‘Why mess with something well organized merely for the sake of change’. Director Lanka Commodity Brokers (LCBL) Brian Baptist who visited India at the time is reported to have said, (These columns carried what he had to say), that although Indian auction centers had changed to automation, it was not working smoothly.

However according to the LCBL Tea market report last week this subject surfaced again. Their comment was, ‘We are watching and most probably will introduce automation to pre and post auction operations.’

We also have had some suggestive comment that the Sri Lanka Tea Board and Sri Lanka Tourism pool their options for mutual benefit. That there should now be greater coordination to promote interest in tea and combine such with the exclusive scenic beauty of the hills. Private companies have already combined their visitor destinations to project quite that image. They did this when times were bad. But now that tourist traffic is steadily increasing the ‘Tea and Tourism’, tag line could have effective prominence.

Sri Lanka Budget Deficit Contracts by 9.25pct for the First Eight Months of 2010

31st October 2010, www.island.lk

According to data released by the Central Bank last Friday, the budget deficit for the first eight months of this year as contracted by 9.25 percent to Rs. 314.6 billion from a deficit of Rs. 346.7 recorded during the corresponding period of 2009.

Total revenue, including grants, increased 17.94 percent to Rs. 502.9 billion from Rs. 426.4 billion a year ago. Tax revenue increased 18.04 percent to Rs. 441 billion from Rs. 373.6 billion a year ago while non-tax revenue increased 52.95 percent to Rs. 54.3 billion. Grants declined by 56.81 percent from Rs. 17.6 billion a year ago to Rs. 7.6 billion.

Total expenditure increased by 5.74 percent during the first eight months of this year to Rs. 817.5 billion from Rs. 773.1 billion a year ago.

Recurrent expenditure increased 3.33 percent to Rs. 635.3 billion from Rs. 614.8 billion while capital expenditure, usually on infrastructure and long term public works, increased 15.09 percent to Rs. 182.2 billion from Rs. 158.3 billion a year ago.

Our calculations show that the budget deficit as a percentage of GDP is estimated at around 5.7 percent, a welcome improvement from 7.18 percent a year ago.

Economists point out that the rise in revenue is a result of natural growth spurred by post-conflict economic activity and this has contributed towards contracting the deficit from the previous year. For this favourable fiscal performance to be sustainable, hard reforms to revenue and expenditure management would have to be introduced sooner or later.

The much awaited reforms of the tax system would only be announced later this month when the budget for 2011 is presented in parliament. Here again, we would probably hear the recommendations of the Presidential Taxation Commission the government would choose to accept.

On the expenditure side, the government is committed to rationalise its expenditure. Recurrent expenditure growth has slowed down but needs to be better controlled over the next few years if the budget deficit, which ballooned to 9.9 percent last year, is to be brought down to 5.2 percent by 2012.

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Sri Lanka Attracts US and Indian Foreign Investment

31st October 2010, www.sundaytimes.lk

A top US multinational has invested its pension fund in the Colombo bourse while top investment delegations from India, China and Germany are due to visit the island next month as Sri Lanka draws foreign investor interest at the end of the conflict.

“There was no point in time in history when the country received so much interest. This is solely due to these two reasons,” External Affairs Minister, Professor G.L. Peiris told an eminent gathering in his address as the Chief Guest at the inauguration of the 31st annual conference of the Institute of Chartered Accountants of Sri Lanka (ICASL), on Thursday.

He said the recent past saw US-based General Electric (GE) deciding to invest its pension funds in the Colombo Stock Exchange (CSE) while Janus Fund has already bought large holdings in blue chips. “Shangri-La Chairman Ian Koch spent 3-days on invitation to Sri Lanka and has decided to build a hotel in Colombo and another in the deep South. Ananda Mahindra of the Indian Mahindra and Mahindra Group will come into the leisure sector in a very significant way,” he said. He said other top delegations from India, China and Germany are also due to visit Sri Lanka.

He said that in this regard, the removal of road blocks by the government this week was a conscious decision to improve the ‘optics of this situation (to attract more investment)’ and also in the reduction of emergency rule.

He said that a report on the modalities for simplifying the tax structure is out now and asserted that this will make the tax structure predictable, which in turn will facilitate foreign investment. Delivering the keynote address, Attorney General Mohan Peiris noted that Sri Lanka is on the springboard of development and prosperity. “We are witnessing a resurgence of foreign direct investment from all parts of the world. The 31st ICASL National Conference is taking place at a time when reconstruction, rebuilding and the march towards peace, brotherhood and economic prosperity have become the clarion call of all citizens of the country. We have promising signs of development emerging in all parts of the country that tell us how resilient we are in moving towards economic prosperity and millennium development goals,” he said.

He also noted that the CSE became the second best performing bourse in the world, while development has commenced in the areas of ports, shipping and aviation. “The indicators of development are manifest today when one notes the drop in inflation, interest rates, the existence of forex reserves of almost $6.5 billion which is equivalent to six months of imports.

These factors coupled with a stable government in place sans an election for the next six years gives Sri Lanka the potential for its growth in investment and makes it the cynosure of all eyes,” he noted.

Mr. Peiris noted that the accounting profession comes into contact with the drivers of economy – namely the multinational companies and foreign investors at various stages. “When a year draws to a close, annual reporting is a mandatory requirement and the corporate world looks to you for the proper preparation and presentation of financial statements. The auditors, in the auditors’ report, express their opinion on the truth and fairness of the financial statements and an investor would be looking at your unqualified opinion in order to make his investment,” he asserted, adding that it’s this statement that the

investor will use as a monitory mechanism of the buoyancy or of the company.

Some pertinent questions were also posed by Mr. Peiris to the accountants. “What happens if those investors claim that they have relied on your opinion to make a decision and they suffer loss owing to wrong opinion given by the auditors in the auditors’ report? Are the auditors liable to third parties for negligent misstatements in the auditors’ report? For example, the auditors express the opinion that the financial statements truly and fairly present the financial position and results of the operation of the client company but in fact the financial statements contain material misstatements.

Of course there would be sanctions imposed by regulatory bodies such as the Accounting and Auditing Standards Board and impaired professional reputation. But could there be litigation by the investors? How does the legal liability of the Accountants for misstatements stand at the moment? These are the questions I would like to look at as the world sees opportunity in Sri Lanka,” he said.

Image: Seen here former BOI Chief and now a Singapore - based investment banker, Arjuna Mahendran (right) in conversation with local businessmen at the conference.

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