Sri Lankan expats will have to pay duty on household items

Beginning Aug. 1, Sri Lankan expatriates will have to pay a duty on electronic and household goods they ship home, according to an advisory by Customs officials in Colombo.

Members of the Sri Lankan community in Saudi Arabia have lambasted the move, while at least one shipping company in the Kingdom has complained that the government gave neither prior notice of the duty nor a grace period for goods that have already been purchased by Sri Lankans abroad and are on their way to the country.

Some of the items, such as televisions, will face a 20 percent levy upon arrival in Sri Lanka.

The size of the duty is based on the types of products being shipped. Items that will now be taxed include: air conditioners, refrigerators with two or more doors and with capacities over 500 liters, dish washers, deep freezers, four burner cookers with ovens, fully automatic washing machines, CRT televisions exceeding 29 inches and LCD TVs exceeding 32 inches. The cost of the levy depends on the item.

Andrew Sinnen, country manager for Trico International, a shipping agent in the Kingdom, said that the news has come as a shock to the Sri Lankan community.

“The expatriates, including housemaids, purchase these items over a period of time prior to their vacation and store them in our warehouses. Some of these goods are currently aboard cargo vessels,” Sinnen said, pointing out that notice should have been given for such a move in the interest of the poor workers.

Fazli Sameer, an IT consultant working in Riyadh, said it is bad news for all Sri Lankan overseas workers. Previously, they were given baggage allowances that waived import duties on personal goods.

“Removing the duty free concession on several items of household electrical goods under the prevailing passenger baggage allowance is certainly a step backward in the motivation of expatriates who look forward to return home either for their vacation or on completion of their work overseas contracts,” Sameer said.

Most expatriates, especially those living and working in the Middle Eastern region, are used to these household electrical items and would certainly want to continue using them in their own homes in their native land, he added.

“These items are not luxury for those who live abroad and they are essentials for all those who live in Sri Lanka too,” Nihal Gamage, former president of the Sri Lankan Expatriates Society said.

Source: arabnews

E.U. delegation to visit Sri Lanka

A parliamentary delegation of the E.U. will arrive here on July 20 to assess the situation in the eastern part of the country, especially after the recent election to the Eastern Provincial Council (EPC).

The delegation includes a cross-section of political groups and E.U. member-states.

The delegation’s six-day visit would include meetings with key members of the Cabinet, political parties and the media.

The visit assumes importance as the issue of extension of GSP plus concession” to Sri Lanka’s textile sector is coming up for review shortly.

The Foreign Ministry said Sri Lanka’s Ambassador to the E.U., Ravinatha Aryasinha, briefed the delegation in Brussels on Wednesday.

Source: Hindu

Sri Lanka's June tourist arrivals fall 9.3-pct

Sri Lanka attracted fewer holidaymakers in June, the island's main tourism promotion authority said Friday, blaming the drop in the number of visitors on the country's ongoing ethnic conflict.
Arrivals in June fell 9.3 percent to 27,960 from 30,810 reported a year earlier and totalled 224,363 in the first half of 2008, down 0.2 percent from the same period a year earlier, Sri Lanka Tourism said.

The number of visitors from Britain and Germany -- both key markets -- fell five percent each in June to 5,304 and 1,317 respectively over the same period a year earlier.

The number of leisure travellers from neighbouring India declined 28.8 percent in June to 5,664, as against the same period last year.

"It's the conflict that is keeping tourists away. There are frequent bomb attacks and it is natural they would be cautious to travel here," an official from the tourism authority said.

Many countries in the west have cautioned their nationals against travelling to Sri Lanka, where fighting between government troops and Tamil Tiger rebels has escalated since the start of the year.

The rebels, who are fighting for a separate homeland for minority Tamils, have been blamed for a string of bomb attacks in and around the capital, where most of the country's upmarket hotels are situated.

Despite the threat of terrorism, the state-run tourism promotion agency is aiming to attract 600,000 foreign visitors this year, officials said.
Tourism is the fourth biggest revenue generator for Sri Lanka's 27-billion-dollar economy, behind remittances from expatriate workers, clothing and tea exports.

Source: LBO

S.Lanka's budget deficit, foreign debts mounting: Treasury

Sri Lanka's overall budget deficit is growing due to increased public investment and foreign debt is mounting, the country's Treasury department said on Friday.

The budget deficit has risen 25.7 percent in the first four months of 2008 compared with last year, the department's mid year fiscal position report said.

"The overall deficit increased to 93.4 billion rupees ($867.4 million) from 74.3 billion rupees due to increased public investments," the treasury said in the report.

The government's external debt totalled $15.3 billion at the end of May, a $180 million increase from end 2007, the report showed, while its total debt rose to 3,328.8 billion rupees by the end of April, up 18.1 percent from a year earlier.

Credit rating agency Standard and Poor's warned Sri Lanka last month it was at risk of a downgrade from its current B+ rating, while Fitch Ratings said it was concerned over Sri Lanka's increasing foreign commercial borrowings.

"The government should curtail its spending," said Chirantha Caldera, a currency dealer at Commercial Bank of Ceylon.

"If your revenue is coming down, and your defence expenditure is escalating, then curtailing spending on capital expenditure like infrastructure should be there," Caldera said, adding the government risked further stoking inflation which was running at an annual 28.2 percent in June.

The government has allocated around 18 percent of its 925.1 billion rupees budget this year to defence spending, after pledging to finally crush Tamil Tiger rebels in a war that has killed more than 70,000 people since 1983.

Sri Lanka has also been struggling to pay high global oil prices, which have hit levels above $145 this month compared with the island's 2008 budget estimate of $85 per barrel.

The central bank this week said the oil price alone would increase the country's trade deficit by $500 million to $4.47 billion this year.

Central Bank Governor Ajith Nivard Cabraal told Reuters on Tuesday that inflation would be no higher than 20 percent at the end of 2008 and stuck with an economic growth forecast of 7 percent. [ID:nCOL98109].

The fiscal report showed revenue increased by 23.5 percent to 210.4 billion rupees, while expenditure rose 24.2 percent to 303.8 billion rupees in the first four months.

Public investment spending increased by 15.1 billion rupees, while current government spending rose by 23.5 percent or 43.6 billion rupees to 229.2 billion rupees.

The treasury said the deficit from its operating activities in the first five months had surged to 23.4 billion rupees ($217.3 million) from last year's 11.62 billion rupees. "The main reason for the deviation was the shortfall of revenue receipts," it said.

Source: reuters

WNS acquires Aviva BPO for $230 mn

Warburg Pincus-controlled WNS Holdings on Tuesday acquired Aviva Global Services, the UK-based insurance giant’s captive BPO in India and Sri Lanka, for $230 million. WNS has beaten Aviva’s other vendors EXL and 24/7 Customer to clinch the deal.

The deal will also see WNS securing Aviva’s committed $1 billion outsourced work over an eight-year period. ET, in its edition dated June 2, had first reported on the impending transaction. WNS is expected to inform the US Securities Exchange Commission on Thursday.

WNS will fund the buyout through a $200 million line of credit from ICICI Bank, while Warburg, which owns 51% stake, will pump in around $30 million as equity contribution. This is one of the largest buyouts of a foreign captive BPO in India.

The buyout will bring over 6,500 employees of Aviva Global Services spread across Bangalore, Pune, Noida, Chennai and Colombo under the WNS fold.

WNS will be subcontracting part of the $1 billion deal with the other two vendors — EXL and 24/7 Customer. WNS, with a revenue of $459 million, has been aggressively looking at inorganic options to shore up its topline.

Meanwhile, 24/7 Customer has announced the transfer of 750 employees from its Aviva 24/7 centre in Chennai to Aviva Global Services as part of its “Build Operate Transfer” (BOT) contract. This is the second BOT contract that 24/7 Customer is executing for Aviva.

The first transfer was at the Bangalore facility, where 1,600 employees were transferred in January 2007. The Chennai centre has 750 employees servicing the Life and Motor insurance businesses of Aviva providing customer service, sales and finance and accounting operations.

Aviva had put its captive BPO operations in India and Sri Lanka on the block quite some time back. The bidding is also believed to have attracted the interest of global giants like Capgemini though this could not be confirmed independently.

Today’s deal also marks the first successful sale of a large BPO captive amidst raging debate on the long-term viability of captive units in view of escalating costs.

Source: indiatimes

S.Lankan shares slide to 1-year closing low

Sri Lankan shares fell 1.19 percent to a one-year low on Tuesday as concerns about the impact of high interest rates and inflation on corporate earnings added to worries about the long-running civil war.

The Colombo All-Share index .CSE closed 28.67 points weaker at 2,372.50, a 10th consecutive fall that took it to its lowest close since July 19, 2007. The market has fallen 11.8 percent from an 11-month high on April 23.

"Investor sentiment is very weak, mainly on earning fears," said Geeth Balasuriya, assistant research manager at HNB Stockbrokers.

"High inflation and high interest rates are pressurising profit margins of the companies due to high costs, while some companies are discouraged to go for new investments due to high borrowing cost."

Later this month, companies are due to start releasing their results for the quarter ended on June 30.

Sentiment on the corporate sector has been hit by poor economic data. Annual consumer price inflation rose to a 5-year high of 28.2 percent in June, while annual economic growth in the March quarter slowed to 6.2 percent from 7.6 percent in the previous quarter. See [ID:nCOL109662].

Market heavyweight Dailog Telekom DIAL.CM fell 1.82 percent at 13.50 rupees a share calculated on a weighted average, and leading fixed-line telephone operator Sri Lanka Telecom SLTL.CM fell 2.38 percent to 41 rupees.

Top conglomerate by market capitalisation, John Keells Holdings JKH.CM closed 0.69 percent weaker at 107.25 rupees, and private lender Hatton National Bank HNB.CM fell 1.23 percent to 100 rupees.

Conglomerate Hayleys HAYL.CM closed 0.73 percent firmer at 137.75 rupees. Traders said four block deals in the stock were seen during trade.

Hayleys accounted for more than 32 percent of total turnover of 270.55 million rupees ($2.5 million), which was two-thirds of last year's daily average of 400 million rupees.

The rupee edged up to 107.65/67 per dollar from Monday's close of 107.66/68 on dollar sales by exporters.

The interbank lending rate CLIBOR rose to 14.906 percent, up from Monday's 13.650 percent. ($1=107.65 rupees)

Source: Reuters

India's Cairn to invest 100 mln dlrs to explore oil in Sri Lanka

Cairn India, a unit of British exploration firm Cairn Energy Plc, plans to invest 100 million dollars to explore oil and natural gas deposits off Sri Lanka's coast, officials said Monday.

Spread over three years, the investment includes conducting further seismic studies and drilling three wells off the island's northwestern coast of Mannar, Cairn India's chief financial officer Indrajit Banerjee told reporters here.

"Oil and gas exploration is a risky business and success is not always guaranteed. We plan to do more seismic studies because as of now we don't know what's down there," Banerjee said.

Sri Lanka, which imports all of its oil needs, offered three blocks to investors after seismic surveys showed oil deposits along the Gulf of Mannar close to neighbouring India.

Block two, an area that covers around 3,400 square kilometres (1,360 square miles) off Mannar, was offered to Cairn in June after a competitive bidding process.

"The Mannar basin has not been explored in Sri Lankan waters and as such represents a frontier petroleum province," Banerjee said.

Cairn has been in South Asia for more than a decade and has developed a good understanding of the region's geology, Banerjee said.

Banerjee added the company has made over 40 oil and gas discoveries to date in India, including the Mangala discovery onshore in the deserts of Rajasthan, which has an estimated total oil in place of 3.7 billion barrels.

Sri Lanka's north and east has seen heavy fighting over the past three decades as separatist rebels push to carve out a separate homeland for minority Tamils from the majority Sinhalese community.

Fighting has intensified since January, when the government pulled out of a Norwegian-brokered ceasefire with the Tamil Tigers.

"We have taken the security aspect into consideration in our bid. And the government has told us that the area is out of danger," Banerjee said.

Petroleum minister A.H.M. Fowzie said the government will provide adequate security when Cairn's project gets off the ground in six months.

"We can provide enough security for the project," Fowzie said.

Besides Cairn, India's state-run ONGC Videsh and Canada's Niko Resources bid to explore block two.

Sri Lanka has already allocated two other blocks to the governments of India and China.

Fowzie said Cairn deposited a one-million-dollar cheque with the Sri Lankan government during Monday's signing ceremony.

The island spent just under three billion dollars in 2007 importing oil and Fowzie expects the fuel bill to climb to four billion dollars this year.

Over 35 years ago, overseas companies explored areas off Sri Lanka's northwest coast, but failed to find any oil and gas reserves worth exploiting commercially.

Source: AFP

Bharti to start Lanka services by year-end

Bharti Airtel hopes to start providing services in Sri Lanka by the end of this year. Besides 2G, the firm is currently testing 3G services in the island.

"We will roll out both 2G and 3G network throughout Sri Lanka. The roll out will replicate the model currently followed in India," a source close to the development said. The company will initially start with Colombo and thereafter move to other towns and rural areas, he added.

Bharti has tied up with Huawei Technologies to build and manage GSM mobile infrastructure in Sri Lanka. Huawei will deploy and manage Airtel's core network, BTS and end-to-end 2G/3G network solutions. About 80% of Sri Lanka's mobile market is controlled by Dialog Telekom, a unit of Telekom Malaysia. "We will soon take a decision on the handset company with which we can tie up for bundled offers," the source said.

Meanwhile, Bharti intends to cover around 85% of India's rural population by the year-end. "We will expand in clusters to reach remote villages," said K Srinivas, Bharti executive director (east hub & Sri Lanka). Bharti currently enjoys 28.5% market share in eastern India. "We have already identified the areas that need to be covered," K Srinivas added.

Source: timesofindia

SriLankan to fly six times a week to Colombo from Doha

SriLankan Airlines yesterday announced it will be increasing its frequencies to Colombo out of Doha to six times a week with effect from July 15. The airline uses Airbus A330 and A340 aircraft on the route.

The flights will depart from Doha daily except Saturday. Three flights a week will be routed via Bahrain, Mohamed Fazeel, SriLankan Airlines Regional Manager (Middle East, Africa and CIS), said yesterday.

The increased frequencies can be attributed in part to the Sri Lankan government's moves to increase tourism from the GCC. A special promotion is also being offered where two children aged 12 and under will be allowed to fly free. Arrangements have been made with certain hotels in Sri Lanka as well as ground services like airport transfers to ensure the package is carried forward there, Fazeel said.

"We have confidence in this (Doha) market. This has been a profitable route for the airline in comparison to points like Dubai, Kuwait, Abu Dhabi and Muscat. Doha and Bahrain are the only routes on which we have increased frequencies," he said.

Bookings for the holiday package have to be completed by July 15 and the promotion runs until August 31. "We hope to attract more Qataris to Sri Lanka. This is the peak time for Arabs in the region to travel. If all goes well, we may even extend the promotion," said Fazeel.

Last year, 800 nationals visited Sri Lanka from Qatar and another 1,800 residents went to the island-nation last year. SriLankan is also touting its easy connections to destinations in the Far East, via Colombo, to points like Kuala Lumpur and Singapore.

The airline, like most others around the world, has been hit by the rising costs of jet fuel, forcing it to raise fares by 10 to 15 percent across the board. "We are trying to cut down costs but not in passenger-related areas. There has been staff cuts and e-ticketing has helped us reduces costs in printing tickets," said Fazeel.

Asked about whether Emirates would sell its 43 percent stake in Sri Lanka's national airline, Fazeel said it was up to the Dubai-based carrier to decide. Although Emirates continues to hold on to SriLankan shares, it has relinquished management control.

After Emirates gave up management control, rumours abounded about other carriers moving in to pick up Emirates' shares, including Qatar Airways, which firmly denied it had any interest. Other names mentioned include India's Jet Airways and Kingfisher Airlines.

SriLankan operates a fleet of 14 all-Airbus aircraft. Although no acquisition of jets is planned, the airline is looking to 're-fleet' its Airbus A320 aircraft through leases of jets.

Source: thepeninsulaqatar

Sri Lanka threatens to nationalise Indian Oil

Sri Lanka has threatened to nationalise the local unit of Indian oil unless it reduces the retail price of diesel, local officials said on Friday.

Petroleum Minister AHM Fowzie said the government will take over the 160 fuel retail depots operated by Lanka IOC, the local subsidiary of India’s state-owned Indian Oil Corporation (IOC), unless it makes the reductions. Diesel is commonly used by public transport. “Steps could be taken to re-vest the filling stations given to the IOC,” the minister was quoted as saying in the state-run Daily News.

Sri Lanka sold a third of its petroleum distribution network to the IOC in 2003 as part of a move to end the monopoly on retail sales. While the state-owned Ceylon Petroleum Corporation (CPC) sells diesel at Rs110 (1.02 dollars) a litre, the IOC sells it at Rs130. The CPC diesel is subsidised by the state. The government argues more motorists are buying the subsidised diesel and as a result, increasing losses are incurred by the state.

Lanka IOC said they were not able to absorb losses by selling diesel at the same price as CPC. “The minister wrote to us, asking to reduce our diesel prices to the same (level) as CPC or face sanctions,” Lanka IOC MD said.

Source: thenews

Chinese company gets contract for construction at Lanka port

The government of Sri Lanka has offered a leading Chinese company the contract to build a fuel tank farm and bunkering facility at the new harbour at Hambantota in the southern part of the country, a media report said here Thursday.

"The unsolicited project proposal sent by the China Huanqiu Contracting and Engineering Corporation for building the bunkering facility and tank farm at the Hambantota harbour has been approved by the project committee and the cabinet-appointed negotiations committee," the state-run Daily News reported.

According to the agreement, the total value of the project would be $76.5 million and it would be completed by 2010.

A set of fuel tanks, bunkering facilities, aviation fuel storage facilities and liquefied petroleum gas (LPG) storage facilities will be built as part of the project at Hambantota, about 230 km south of Colombo.

The facilities would be constructed in such a way that they would be able to operate independently with separate loading arms and pipelines connecting the oil and gas jetty.

There is a proposal to take a loan for the project from the Exim Bank in China, the newspaper said.

The Hambantota Port Development Project consists of four stages and is expected to be completed within 15 years. Under the first phase of the project, an industrial port with a 1,000 metre jetty and an oil refinery estimated to cost $1 billion would be constructed.

Although the Hambantota port was initially planned as a service and industrial port, it is expected to be developed as a trans-shipment port at a later stage to handle 20 million containers per year.

Source: newkerala

Indian firm plans IT park in Lanka

City-based real estate developer PS Group is setting up an IT park in Sri Lanka with an investment of $80.4 million.
The company has entered into a joint venture with Sri Lanka Institute of Technology and Infinity Parks Ltd, another city-based real estate company, to develop this project.
“This is our first international project and we feel there are lots of such opportunities in neighbouring countries. This IT park project will provide direct and indirect employment to 20,000 and 80,000, respectively,” said Pradip Chopra, chairman and managing director of PS Group.
PS Group will be developing 1.6 million sq ft for the technology park for which the Sri Lanka Institute of Technology will provide 16 acres.
In the first phase, around 500 million sq ft will be developed for the project, which is expected to attract around 20 to 50 companies.
The company has also tied up with a US-based hedge fund, which will be investing in their future projects.
“We have also been approached by Sampath Bank Ltd, one of the largest Sri Lankan banks to help develop their properties through similar joint ventures,” said Chopra.
In Chennai, the PS Group is developing a 4 lakh sq ft residential project. It has also entered into joint ventures to develop 11.5 lakh sq ft of retail space in Coimbatore and nine lakh sq ft of residential complex in the same city.
An IT special economic zone (SEZ) of 2.5 million sq ft is also being planned in Chandigarh.
PS Group is involved in a service sector SEZ, which is being planned in collaboration with farmers at Hinjewadi, Pune. “We are doing this project in collaboration with the farmers who will be stakeholders in the project in various ways. It is very difficult to repeat that model in Bengal as the land holdings are fragmented and the urban and agricultural land ceiling act makes it very difficult to follow such a model,” said Chopra.

Source: telegraphindia

Lanka's largest IT Park to be set up in Malabe

Sri Lanka's largest Information Technology Park is to be set up at Malabe by two Indian companies, Infinite Infotec Park Company and G.S. Group.
The Sri Lanka Information Technology Institute and India's Ernst and Young Company will assist the BoI in the implementation of this project involving an Investment of US $ 80 million, the Department of Government Information said yesterday quoting BoI Chairman Dhammika Perera.
The BoI handed over the approval letters to the two Indian companies. They are due to sign the agreements with the BoI within 45 days and construction work would begin early next year, Perera said.
The new Information Technology Park is part of Enterprise Development and Investment Promotion Minister Dr. Sarath Amunugama's mission of setting up a national IT industry.
The IT Park to be set up in a 15-acre block adjoining the IT University at Malabe will have uninterrupted electricity and water facilities and a vehicle park.
It is expected to generate 20,000 direct employment opportunities and indirect employment to nearly 80,000 others.

Source: dailynews

Lankan oil exploring license given to Indian comapny

Sri Lanka has granted a license to explore oil to India’s Cairn Energy PLC in an offshore block off the country’s North West Mannar basin. The Indian Oil Company is promoted by Cairn Energy PLC, a crude oil and natural gas exploration and production firm listed in the market of London stock exchange. Cairn Energy PLC currently holds 69% interest in Cairn India.
The company said Sri Lanka granted them Block SL 2007-01-001 is offshore North West Sri Lanka and covers approximately 3,400 Km2 in water depths of 200 metres to 1800 metres.
As soon as the license was granted shares of the company gained Rs. 1.85 or 0.71%to settle at 263.95 Thompson Financial Agency reported.
The energy company announced that the petroleum resources agreement between the company and the government will be signed very soon.
Cairn India currently operates 11 offshore platforms, approximately 200 KM of sub-sea pipelines, and two processing plants.
Company sources revealed Cairn India is at present focused on exploration and production in India, where it has a working interest in 14 blocks, two of which are producing gas and oil. The company made major oil discovery (Mangala) in Rajasthan at the beginning of 2004. More than 20 discoveries have been made in Rajasthan block RJ-ON-90/1.

Source: asiantribune

Sri Lanka EPF suffers billions in real losses

Sri Lanka's main private sector retirement fund has made billions real losses in in 2007 as the state used the monetary system to inflate away debt at the expense of the private sector workers in the country, the latest data shows.

In 2007, Sri Lanka's main private sector retirement fund, the Employees Provident Fund (EPF) lost 23 billion rupees in real terms as inflation shot up and interest rates lagged behind.

Inflation measured by the Colombo Consumer Price Index (CCPI) was 16.5 percent in 2007, against an effective rate of return declared to members of the EPF of 11.40 percent indicating a real loss of 5.00 percent for the year, according to information disclosed in the 2007 annual report of the Central Bank, which manages the fund.



Even conservatively taking the beginning-of-the-year balance of the fund portfolio of 477.6 billion rupees, the EPF has lost 23.8 billion rupees in real terms with an effective rate declared of 11.4 percent in 2007.

The EPF is made up by contributions deducted from the salaries of private sector workers and the bulk of the funds are invested in government securities.

Debt market participants routinely refer to the fund as a 'captive' source indicating that it is mis-used by the state to keep rates down against the interests of its own beneficiaries.

The International Monetary Fund has already called for independent governance for the EPF. The ETF, another private sector retirement fund, is also managed by the state.

Critics have pointed out that the Central Bank is faced with conflicts of interest in managing the EPF.

On one hand it is responsible for containing inflation and has the power to decide interest rates. It also runs the public debt department which raises money for the government and has a responsibility to find money at the lowest rates.

The EPF on the other hand has to get the highest rates for its members. These goals are incompatible with each other.

In a Financial Sector Stability Assessment, the IMF said a "sound, robust, and independent governance structure" was needed for the EPF with a "clear objective of seeking the best investment returns for members."

Critics have also pointed out that the managers of the EPF who are central bank employees have inflation protected pensions which are topped up each year with billions of rupees from central bank funds.

The rate of return declared for members of the Central Bank provident funds were not disclosed in the annual report.

The EPF on the other hand is taxed. This year the fund paid 4.4 billion rupees in taxes.

Last year another controversy blew up after it was revealed that trained fund mangers and analysts who were recruited to help improve returns had been effectively sacked due to internal employment politics within the monetary authority.

In 2007 however the monetary authority allowed market rates to move up which analysts say will help increase returns to the EPF in the future. In 2006 the fund lost 37 billion rupees in real terms when compared to the CCPI index.

Countries with fiat (paper) money can use the monetary system to print money and drive up inflation while keeping interest rates low or negative in real terms.

This reduces the real debt burden of the government at the expense of savers, especially older people who have saved for a lifetime.

Most ordinary people who find savings of a lifetime destroyed by inflation, or the loss of purchasing power of fiat paper currency, find the concept of real losses difficult to grasp, allowing governments to create inflation through central banking without attracting serious criticism.

Fiat money and central banking has been mis-used spectacularly in monetary history, in well documented cases, especially in France both during the French revolution and in the early part of the 18th century when John Law created a paper money central bank.

But central banking came to be widely abused as a method of 'secret taxation' to finance governments only after the United States went off the gold standard after World War II.

The current sub-prime bubble is also blamed on loose monetary policy of the Federal Reserve.

Source: LBO

SuchirIndia to build twin towers in Lanka

Suchirindia, a Hyderabad-based real estate business group, has ventured into construction of twin towers of 30 floors and 70 floors at Colombo in Sri Lanka.

The tower complex, to be undertaken in collaboration with NEB Rapid Infrastructure and the Government of Sri Lanka, will be developed at a cost of $ 255 million, of which which debt funding will be $ 102 million and equity funding $ 18 million. The balance would be mobolised from various institutions.

The project is scheduled to be completed by March 2012. Speaking to the media here on Monday, CEO of Suchirindia Y Kiron said that the complex would comprise a 30-floor commercial tower and a 70-floor residential tower and the total builtup area of the twin towers would be three million square feet.

He said that Metro Rail in Colombo was being developed by a joint venture partner, NEB Rapid Infrastructure Project Private Limited. Suchirindia was planning more such projects overseas, especially in the African continent, he said.

“We expanded our operations to Karnataka and are now going to enter Madya Pradesh and Bihar soon,” he claimed.

Source: siasat

Sri Lanka delays two oil exploration blocks-oil min

Sri Lanka has delayed evaluating bids for two oil exploration blocks in its northwestern offshore Mannar basin and is to evaluate one with the most competition first, the island's petroleum resource minister said on Wednesday.

"We decide only to evaluate where there is a competition of three ... once that is over we will consider the other two," Minister A.H.M. Fowzie told Reuters.

In January Sri Lanka received six tenders from Cairn India (CAIL.BO), ONGC Videsh (ONGC.BO) from India and Nico Resources from Cyprus for the offered three blocks.

All three companies bid for the first block, while Cairn India and Nico Resources bid for the second block. The third block has only received a bid from Nico Resources.

The first block is the smallest out of the three with 3,338.1 square kilometres, while the third block is the largest with an area of 4,126.5 square kilometres.

Sri Lanka has eight exploration blocks in the Mannar basin, three of which are to be given for exploration once the government decides on a successful bidder.

Two have been assigned to China and India on a nomination basis. The government earlier said it plans to delay bidding on the last three blocks to get higher revenue.

Oil and Natural Gas Corp (ONGC), which was offered the block nominated to India, said in September it was not interested in the assigned block, citing low prospectivity and the fact that Sri Lanka was asking for a big signature bonus.

The Sri Lankan government later said it would negotiate with ONGC for a new oil block. The outcome of the negotiation has not yet been revealed.

The bidding process was closed in January and the government expects to select the best bidder soon. The government had earlier said it aimed to select the three highest bidders by April 2008 and start the oil exploration process by August.

"The bids are before the technical evaluation committee and once they study and submit a report to the cabinet negotiating committee we will decide," Fowzie said.

"The committee has sat already and very soon they will submit a report."

A non-oil producing nation, Sri Lanka expects its first commercial crude oil production by 2010.

Prior to the bidding, the government had said exploration licences would be awarded to firms that can provide most advanced technological and economic benefit to Sri Lanka.

A 35 percent tax from net profit, a 10 percent royalty on annual production revenue and allowing the planned National Oil Exploration Company to invest 10 percent in exploration activities were the conditions put forward by the government.

Signature bonds, production bonds and profit-sharing ratio are to be considered in selecting the best three bidders.

Roadshows to attract investors were held in London, Houston and Kuala Lumpur in September last year.

The government says seismic data shows more than a billion barrels of oil lie off Sri Lanka's northwest coast, though no reserves have yet been proven.

If proven, the reserves would be a major boost for the war-torn country, which imported oil worth $2.2 billion in the first 11 months of 2007.

Source: Reuters

Pakistan, S Lanka to strengthen trade relations

Both Pakistan and Sri Lanka are lucrative investment locations for each other’s exporters as Pakistan is a gateway to resource-rich Central Asian States while on the other hand Sri Lanka enjoys duty-free access to huge European and Indian markets.

This was the consensus developed at a meeting between Sri Lankan High Commissioner Dr Wijeratne Bandara Dorakumbure and Lahore Chamber of Commerce and Industry (LCCI) President Mohammad Ali Mian here at LCCI on Wednesday.

The Sri Lankan High Commissioner said that under Generalised System of Preference (GSP) Sri Lanka has a free access to huge European market and under the regional pact it enjoys same facility with India that could be availed by Pakistani exporters for re-export to these markets.

He said both Pakistan and Sri Lanka had signed Free Trade Agreement (FTA) and the accord should be utilised to the maximum for the promotion of two-way trade.

Sri Lanka has secured duty-free access for as many as 7,200 products to the European Union Market under the EU’s GSP Plus Scheme. The main product categories which have vast potential in Sri Lanka under the GSP Plus Scheme include apparel and textiles, clothing accessories, sea foods, activated carbon, artificial flowers, foliage plants, rubber-based products tableware and bicycles.

Source: dailytimes

Reliance Communications makes Sri Lanka foray

Reliance Communications (RCom) in its effort to enter the Sri Lankan telecom market has formed a JV, named Reliance Mobile Lanka with a local firm, Electroteks which will begin GSM mobile services in Sri Lanka followed by other telecom services by this year.

RCom will reportedly invest Rs 1200 crore in the JV in the next three years to establish a next generation integrated network.

The new venture is expected to establish a network of about 5 million lines covering nearly 40 percent of the population.

Source:telecomtiger.com

Inflation hits a record 28%

By Mandana Ismail Abeywickrema

The Census and Statistics Department has stated that the Colombo Consumer Price Index (N) hit 23.8% in March, while the previous CCPI index recorded a 28.1% rate of inflation.

The Cost of Living Index for March was posted at 6441.7 points, which is an increase of 96.3 index points from February. The index was posted at 6345.4 points in February. This is an increase of Rs. 194.74 in the expenditure value of the market basket when compared to the previous month.

The CCPI-N, which has dropped an entire expenditure group, yet showed a price increase of 1.7% in March.

The CCPI-N has increased to 23.8% in March compared to 21.6% in February, which is also the highest level to be recorded by the new index.

Ironically, the former CCPI has shown a lower increase in consumer prices in March. The CCPI has seen a 1.5% increase in March recording a 28.1% rate of inflation from 24% in February.

Meanwhile, Fitch Ratings when downgrading Sri Lanka's rating outlook last week has said that high and volatile inflation increases the risk of macroeconomic instability and discourages investment.

The government however has palmed the blame of the high inflation level squarely on high global oil prices and food prices.

A special study paper prepared by the IMF titled Pass-through Of External Shocks To Inflation In Sri Lanka, states that most of the country's inflation was not 'imported' or caused by oil.

According to the study, "Since late 2006, Sri Lanka's inflation has increased sharply relative to other economies in the region," and "the sharp increase in inflation compared to other countries in Asia points out that increases in oil prices in the recent past (a common shock to most economies in the region) cannot explain most of the increase in inflation in Sri Lanka."

The study has shown that oil prices explained only 6% of the inflation in 2006 and 2007 when measured by the CCPI(N). "With external shocks not playing a major role in influencing domestic inflation, domestic policies can be very important in containing inflation," the study paper has further stated.

"External shocks appear to explain about 25 percent of the variation in consumer prices and about 32 percent of the variation in core inflation, suggesting that other shocks that are likely to be more domestic in nature explain most of the variation in inflation in Sri Lanka."

To add to the economic woes of the country, the Central Bank has predicted high inflation for the first half of this year, saying inflation would be between 16 and 20%.

The Central Bank prediction in February has cast serious doubts over the bank's ability to achieve the initially set inflation target for 2008 of 10 to 11%.

Source: sundayleader