As part of the 2024 budget allocation of Rs.3 billion to the Department of Agricultural Development, Agriculture and Plantation Industry Minister Mahinda Amaraweera has directed the allocation of Rs.1 billion toward initiatives aimed at enticing the youth into agricultural pursuits.
The designated sum will target programs intended to lure young individuals toward agriculture and farming activities, with a specific focus on export-oriented farming endeavors. Approximately a thousand youths are slated to benefit from this initiative, each receiving one million rupees to support their engagement in agriculture.
The Minister emphasized the prioritization of four major crops—paddy, maize, chilli, and potatoes—for cultivation in the upcoming year. This strategic focus aims to align with both local agricultural needs and international market demands.
Amaraweera underscored the significance of this step in instilling confidence among the youth in agriculture. By encouraging the cultivation of crops in high demand internationally, the initiative aims to not only support the domestic agricultural sector but also foster a sense of trust and enthusiasm among the younger generation for agricultural pursuits.
Colombo (LNW): After Chinese Research Survey Vessel Shi Yan 6 completed its survey off the coast of Sri Lanka and reached Singapore on December 2, Beijing asked permission from Colombo and Male to allow another Research Survey Vessel to dock at their ports and conduct a deep water exploration of South Indian Ocean from January 5 till late May 2024m Hindustan Times reported.
While India has already raised objections with both Sri Lanka and Maldives and asked them not to allow the Chinese vessel to conduct exploration of the Indian Ocean for future military operations, the vessel Xiang Yang Hong 03 is currently off the coast of Xiamen in the South China Sea and will travel via Malacca to these countries after securing permission.
Made in 2016, Xiang Yang Hong 03 is a 4813-ton vessel equipped with the latest survey and surveillance equipment and is registered at the port of Xiamen.
The previous survey vessel, Shi Yan 6, which was allowed permission by the Ranil Wickremesinghe government despite India’s strong objections exited the Malacca Straits on November 20- after conducting an exploration of the Sri Lankan EEZ and South Indian Ocean.
The ship was also seen 500 nautical miles off Chennai before it entered Colombo port on October 25, 2023.
The Indian concerns over Chinese ballistic missile trackers and Research Surveillance Ships being allowed by Sri Lanka and now with a pro-China government in Maldives are over Beijing using these vessels to spy on India in the name of marine exploration.
Last year, Prime Minister Narendra Modi raised the issue with visiting President Ranil Wickremesinghe on July 21, 2023, that Sri Lanka should respect the strategic concerns of India.
With the PLA Navy rapidly acquiring maritime assets including three aircraft carriers, nuclear submarines and guided missile destroyers, China is expanding its footprint all over the Indian Ocean with a string of naval bases from Cambodia to Djibouti on the mouth of the Red Sea. China has already acquired/invested in ports in Cambodia, Myanmar, Sri Lanka, Pakistan, Iran, and in UAE with an eye towards future naval operations.
In the name of marine exploration, Beijing is actually mapping the Indian Ocean bed from the ninety-degree ridge south of Andamans and Nicobar Islands to the deep South Indian Ocean. Detailed ocean bed maps are prepared for future submarine operations all the way up to the coast of Africa.
With the PLA already operating off the coast of Africa and the Gulf of Aden in the name of anti-piracy operations, it is only a matter of time before Chinese carrier strike forces will be patrolling in international waters of the Indian Ocean. Last month, the Chinese Navy conducted an exercise with the Pakistan Navy off the Makran Coast with a PLA Song class diesel hunter-killer submarine participating in specialized “sea bottoming” operations along with client state Pakistan
The IMF Executive Board after much speculation completed the first review under the 48-month Extended Fund Facility with Sri Lanka, providing the country with access to SDR 254 million (about $ 337 million). This brings the total IMF financial support disbursed so far to SDR 508 million (about $ 670 million) out of the total amount of SDR 2.286 billion (about $ 3 billion). The IMF program according to an IMF statement will continue to support Sri Lanka’s efforts to restore macroeconomic stability and debt sustainability, safeguard financial stability, and enhance growth-oriented structural reforms. This is certainly an endorsement of the President’s firm resolve and commitment to the reform agenda despite being politically very unpopular and gives a huge advantage to the opposition.
Unfortunately for the public many of the reforms are a bitter pill to swallow. The Government on the other hand needs to up their game and walk the talk when selling these austerity measures to the public. In fact, the IMF statement highlights the difficulty of implementing some of the reforms. The statement noted, “Today’s Board approval recognizes the challenging policy actions implemented by the Sri Lankan people to put the crisis behind them. Sri Lanka’s performance under the program was satisfactory. All quantitative performance criteria for end-June were met, except the one on expenditure arrears. All indicative targets were met, except the one on tax revenues. Most structural benchmarks were either met or implemented with delay by end-October 2023. These macroeconomic policy reforms are starting to bear fruit and the economy is showing signs of stabilization, with rapid disinflation, significant revenue-based fiscal adjustment, and reserves build-up.”
Cost of reforms
The IMF has said repeatedly that the key to transitioning from stabilisation to a full and swift recovery is sustaining the reform momentum amid strong ownership by the authorities and more broadly, the Sri Lankan people. The IMF has urged the authorities to continue to build on these hard-won gains and further advance revenue mobilisation, align energy pricing with costs, strengthen social safety nets, rebuild external buffers, safeguard financial stability, combat corruption and enhance governance.
Fiscal consolidation
As the IMF highlights in their latest statement very clearly, strengthening the revenue-based fiscal consolidation with revenue administration reforms is critical to recover from program slippages and to fund the provision of essential Government services. The IMF also points out that accumulating reserves, supported by exchange rate flexibility, remains an important priority under the EFF. They further highlight that implementing the bank recapitalisation plan and strengthening the financial supervision and crisis management frameworks are crucial to safeguarding financial sector stability to remain steadfast on the reform commitments.
Leadership
Despite all the negativity, Sri Lanka has reached several important milestones in putting debt on the path towards sustainability. Timely resolution with external private creditors is now a must, this should help restore Sri Lanka’s debt sustainability over the medium term. However, the imposition of high income and direct taxes to meet revenue targets causes havoc that overshadows its intended economic benefits to a country. Therefore getting the right mix of indirect taxes and direct taxes can prove potent in driving domestic economic growth, capital formation, and attracting foreign investment and domestic investment.
Excessive taxation
The President has said increased tax revenue was essential for improving the country’s financial situation and addressing the debt crisis. Unfortunately excessive direct and indirect taxes can in many instances place a heavy burden on both individuals and businesses. While these taxes are meant to support governments to deliver on its mandate, it can have unintended consequences. Often excessive tax reduces the disposable income for individuals, reducing their ability to spend and invest. For businesses, high taxes can hamper growth, reducing capital for expansions that then create jobs. Numerous examples exist where third-world economies have been forced to raise taxes to demonstrate fiscal responsibility to multilateral agencies. However, this approach often leads to a vicious cycle. Increasing taxes can stifle economic growth, resulting in less revenue collection than expected, ultimately undermining the very goal it aims to achieve – economic growth and poverty reduction.
Way forward
While fiscal responsibility is crucial, it must be balanced with the need to promote economic growth and not hit the poor hard. We need to look at tax reduction strategies, simplification of tax systems, and increased efforts to combat tax evasion (many people don’t pay any taxes, just a few hundred thousand people pay taxes) and increase the pool of taxpayers. The Government by promoting a favourable tax environment, can prevent economic stagnation, encourage savings and attract new foreign investment. We need to improve revenue collection rather than continue to increase tax rates and squeezing the existing tax payers dry. Otherwise the typical middle-class family that is struggling due to the taxes reducing their overall buying power, will continue to negatively affect businesses and retailers across the country.
Sri Lanka has the lowest Government revenue among South Asian countries, amounting to only 9.1% of its GDP. Therefore in the final analysis heaping taxes on the people who actually pay is certainly not an option anymore. There are several other options that can be pursued with a little bit of common sense with in the Government service that can raise serious revenue for the Government and also strengthen the social safety net and thereby safeguarding the poor and the vulnerable of our country.
Colombo (LNW): The Chamber of Young Lankan Entrepreneurs (COYLE) and The National Chamber of Exporters, partnered with the Busan Economic Promotion Agency of South Koreas to bolster inward industrial investment in Sri Lanka.
They held discussions recently to find ways and means to broaden operational opportunities for Sri Lankan businesses in Busan to stimulate positive returns.
Mr. Jin Yang Hyun, President and CEO of The Busan Economic Promotion Agency who joined the discussion online, acknowledged Sri Lanka’s potential with financial incentives, strategic presence and access to raw materials.
However, concerns were raised about the barriers to entry, particularly with regard to inefficiencies on the part of local authorities, impacting investment timelines.
It was pointed out that addressing these concerns requires a comprehensive examination of Sri Lanka’s investment processes.
The Board of Investment (BOI) plays a crucial role and its efficiency is key to facilitating foreign investment into the country.
Accordingly, Sri Lanka needs to streamline its processes, as the bureaucratic complexities are adverse oppose to countries like Vietnam and Thailand who are dominating the region.
Furthermore, initiating operations within an Export Processing Zone (EPZ) in Sri Lanka demands a closer look, and the Island needs to match other competitive nations whilst also exhibiting economic and political stability.
The discussion also touched on Busan’s economy, and the advantages it presents for Sri Lankan businesses.
For example, setting up operations in Busan provides an opportunity for Sri Lankan companies to tap into the significant buying power of the South Korean market, enhancing their export potential.
Companies establishing operations in Busan can also contribute to inward remittances for Sri Lanka, strengthening the economic ties between the two nations.
It was revealed that identifying sectors currently exporting to South Korea and encouraging them to set up operations in Busan could further augment the bottom line for Sri Lankan businesses.
Overall, the dialogue ended on a strongly positive note, with COYLE, empowered by speaker Mahinda Yapa Abeywardana and MP Dayasiri Jayasekara, who is also the President of the Sri Lanka Korea Association, pledging assistance to companies from Busan interested in exploring industrial and commercial operations in Sri Lanka.
Ultimately, the discussion made clear the need for Sri Lanka to quickly enhance its accessibility, efficiency, and ease of doing business in order to compete on a global scale and benefit from foreign investment on a larger scale.
Colombo (LNW): Sri Lanka Board of Investment has embarked on an ambitious initiative to attract green and digital foreign direct investments FDIs’ into the country on collaboration with the Chinese Academy of Sciences (CAS).
The Chinese Academy of Sciences (CAS) and the BOI recently concluded a series of meetings and fact-finding visits to the BOI zones and find new opportunities for fruitful long-term bilateral relationships.
The NetZero commitment of the nations and industries and sustainable strategic planning of the BOI has paved the way to develop its zones management to attract green and digital FDIs’ to the country hence it is evident that Sri Lanka needs world-class collaborators to reach these significant strategically important key measurements.
Therefore, the Chinese Academy of Sciences’ world view and vision of collaboration with the nation and its mission of research and innovation and further developing a merit-based learning ecosystem will enable the BOI to leapfrog the process of developing a greener and sustainable zones management system.
In the context of the near future, both parties are looking forward to working together and developing a synergistic relationship.
The Chinese Academy of Science has a mandate to explore and harness high technology and the natural sciences for the benefit of China and the world.
Comprising a comprehensive research and development network, a merit-based learned society, and a system of higher education, CAS brings together scientists and engineers from China and around the world to address both theoretical and applied problems using world-class scientific and management approaches.
CAS has further defined its development strategy by emphasizing greater reliance on democratic management, openness, and talent in the promotion of innovative research. The academy aims for a bright future as one of the world’s top S&T research and development organizations.
Drawing from the BOI’s previous insightful discussions with CAS, it has identified several pivotal activities that will constitute the foundation of fruitful collaboration.
These activities hold inherent advantages that align harmoniously with our shared goals and finally reach a Memorandum of Understanding (MoU) between CAS and BOI During the meeting CAS will support the BOI in fulfilling the undermentioned projects.
Following the National Determined Contributions (NDCs), BOI is committed to consulting with CAS to craft an integrated eco-industrial park concept. By aligning our strategies with sustainable practices, we will bolster the park’s environmental footprint and play an active role in fulfilling national sustainability objectives.
Colombo (LNW):With global economic challenges impacting Sri Lanka’s apparel sector, small and medium enterprises (SMEs) are moving from the drawing board into realization of envisaged plans with numerous options to weather the cascading impacts of declining orders.
Several SME apparel exporters are seeing potential opportunities especially in the Indian market. The majority of Sri Lankan apparel SMEs primarily export to the United States, United Kingdom, EU and India, reflecting the industry’s regional partnerships.
The Sri Lanka Chamber of Garment Exporters (SLCGE) yesterday commended the remarkable resilience of its apparel SME membership for rapidly adapting to tough global market conditions and ending the year with zero closures.
As the apex body for SMEs in the apparel sector, the SLCGE comprises 76 members – all of which operate outside of Sri Lanka’s Free Trade Zones (FTZ).
“Over the past year, our industry has been hit hard with a 20% reduction in orders,” stated SLCGE Chairman Bandula Fernando. “SME apparel producers are among the worst impacted. However, they have also been among the first and fastest to respond to market contractions.
Hence, even as the order book contracted, they have ensured that all existing orders have been completely fulfilled to the highest quality standards.”
“Their success in these trying times is a phenomenal achievement and a testament to their resilience and adaptability. But it is now imperative that our industry, the Government and all stakeholders work together to support a rapid recovery in the SME apparel sector.”
He added that the industry’s priority was to double-down on trade facilitation in order to strengthen market access for these SMEs to at least get to the same level their regional competitors currently enjoy.
“Sri Lanka’s largest apparel firms have already set their sights on high-value niches in new and emerging markets across the globe.
Responding to concerns over a reported 20% reduction in apparel sector jobs over the past 12 months, Fernando explained how the SLCGE’s members had successfully mitigated the worst impacts on jobs and livelihoods by avoiding retrenchment. “Instead, we placed a freeze on new hires,” he explained.
“The majority of the 20% reduction in employment from the apparel sector was contained to natural attrition, which in turn prevented the mass job losses that had been the cause of much speculation over the past year.
Some companies did request employees to stay at home, but these decisions are made in discussion with the individuals involved and responsible authorities, ensuring arrangements are in place to minimize impact on their livelihoods.
To address these challenges, the SLCGE has taken proactive measures, engaging in direct market access initiatives through buyer and consumer engagement. In particular, the Chamber is focused on strategic exploration of untapped markets in East Europe, the Middle East and East Asia.
Colombo (LNW): Sri Lankan banks topped a list of lenders in the Asia-Pacific region with the best total stock returns, as stakes grow that the worst for the South Asian nation’s economy may have passed, banking sector reports revealed.
Hatton National Bank PLC, Sampath Bank PLC and Commercial Bank of Ceylon PLC logged the highest total stock returns among peers in the region this year according to a list compiled by S&P Global Market Intelligence.
Hatton National and Sampath posted total returns of more than 50%, albeit on the back of equally sharp declines earlier.
Sector looks past peak non-performing loans as rates ease, gradually re-opens lending taps Central Bank report highlighted.
The banking sector asset quality weakness held steady between June and September this year, but the industry is confident that the worst is over for them as they said they are seeing a slight moderation in the non-performing loans at present as the economy shows signs of some level of stabilization.
According to the latest quarterly data made available on banks by the Central Bank through September, banks saw their ‘stage 3 loans to total loans and advances’, the new accounting term for the traditionally called non-performing loans, holding steady at 13.4 percent, same as in the June quarter.
Sri Lanka’s banking sector was on a rollercoaster ride during the last four years or so as they were hit by multiple crises from the pandemic related business disruptions to the economic crisis which triggered mass scale defaults to the prospects of likely implications from the domestic debt optimisation.
Their stage 3 loans ratio which was at 8.4 percent at the onset of the economic crisis last year in the first quarter of 2022 steadily rose to 12.9 percent a year later before peaking at 13.4 percent by mid-year in 2023.
The breakdown of the status of the stage 3 loans between the licensed commercial banks and specialized banks however diverge somewhat.
While commercial banks improved their asset quality only modestly from 13.9 percent at its peak in June to 13.7 percent by September, the specialized banks saw its ratio rising from 9.3 percent to 10.1 percent in the same two periods.
Commercial banks have however begun to see further moderation in their non-performing loans coming into the ongoing fourth quarter as the easing interest rates are helping both the borrowers and the lenders alike in getting back into their activity.
While recent private sector credit data have shown that banks have clearly begun to reopen their lending spigots only gradually and cautiously, the borrowers are also showing some inclination as rates have come off their recent peaks.
Further, the language from the commentary by the banking sector chief executives which accompanied their September quarterly reports also showed growing willingness by them to lend more and also less concerns by them on the non-performing loans than a year ago.
The International Monetary Fund approving to release their second program tranche this week after holding back for more than two months would also help the country and the sector to look past the worst of the economic crisis going into 2024.
The banks have also begun to ramp up their capital as seen from the recent announcement for debenture issuances in a sign that they are gearing up for a high lending season from next year as the rates are expected to be further moderate after back-to-back policy rate cuts.
The rising loans and improving financial health of borrowers would help the sector to further see their non-performing loans ratios moderate next year.
State Rural Road Development Minister Sivanesathurai Chandrakanthan issued a pressing directive to promptly resume and expedite the completion of rural road development projects in the Eastern Province, originally halted midway under the Integrated Road Development Programme (I Road Project) supported by the Asian Development Bank (ADB).
Speaking on the status of ongoing projects and the challenges faced during their implementation, the State Minister convened a discussion at the State Rural Roads Development Ministry in Sethsiripaya, emphasizing the need for resolution.
During the meeting, the State Minister urged the Project Director overseeing the I Road Project to prioritize the completion of rural road development initiatives in Ampara, Trincomalee, and Batticaloa districts, emphasizing the immediate need to expedite these endeavors.
Furthermore, the project engineer received directives to accelerate the installation of essential road infrastructure such as signboards, white lines, and pedestrian crossing markings on completed roads.
The progress review meeting witnessed the participation of several officials, including MPs D. Weerasinghe and Kapila Athukorala, alongside Rural Road Development State Ministry Additional Secretary B. Ranaweera, and the Project Director of the Integrated Road Development Programme, collectively strategizing to overcome obstacles and propel the swift completion of vital rural infrastructure projects in the region.
Health Minister Dr. Ramesh Pathirana underscored the critical need for revitalizing Sri Lanka’s primary, secondary, and tertiary healthcare services, emphasizing the significance of restoring credibility within the population. Speaking to the media following an inspection tour of Maharagama Apesksha Hospital, the Minister highlighted key insights into the current state of healthcare in the country.
Addressing the country’s abundant human resources within the healthcare system and its robust infrastructure, the Minister emphasized the need for a structured network to efficiently deliver health services. He expressed concern over the escalating number of children affected by cancer in Sri Lanka, stressing the urgency of implementing awareness programs to combat both communicable and non-communicable diseases effectively.
Dr. Pathirana acknowledged Sri Lanka’s unique healthcare landscape, extending from basic medication like Paracetamol to advanced treatments such as radiation therapy, alongside provisions for food and drink, all without the necessity of insurance coverage.
During the visit, the Minister inspected the ongoing construction of a four-story ward complex, funded by the Ruhunu Maha Kataragama Temple at a cost of Rs. 150 million, demonstrating collaborative efforts to enhance healthcare infrastructure.
Recognizing the challenges faced by hospital staff, Minister Pathirana emphasized the continuous maintenance of adequate medicine stocks within the hospital premises.
The event saw the presence of Hospital Director Dr. Aruna Jayasekara, Basnayake Nilame of Ruhunu Kataragama Temple Dishan Gunasekara, Deputy Director of the Hospital, administrative officers, doctors, and dedicated hospital staff, collectively engaging in discussions aimed at advancing healthcare services in the region.
The Agriculture Department has issued a crucial warning to farmers regarding three destructive insect pests currently ravaging paddy cultivation across multiple districts of the island. With approximately 22,000 hectares of paddy fields affected by the White Back Plant Hopper, Gray Plant Hopper, and Leaf Curl worm, Agriculture Director General Malathi Parasuraman stressed the urgency for farmers to be vigilant.
Parasuraman urged farmers to promptly notify Agriculture Department officials upon detecting these insects in their fields and to strictly adhere to the guidance provided by agriculture consultants.
Asserting that preventive measures can mitigate these insect damages, Parasuraman highlighted that agricultural consultants and officials across all areas have been duly notified. Furthermore, Parasuraman disclosed the deployment of specialized agriculture teams for comprehensive field inspections.
In a cautionary advisory, Parasuraman warned against the use of substandard insecticides or following recommendations from sources lacking expertise in handling these pests. Mixing insecticides with other substances was discouraged, emphasizing that ineffectual application of chemicals could prove futile due to the pests’ resistance to harmful compounds.
The Director General stressed the significance of employing only the pesticides recommended by the Agriculture Department, emphasizing the importance of strategic steps to combat these resilient pests effectively.
