By: Staff Writer

February 28, Colombo (LNW): The Sri Lankan government is actively working to attract new Japanese investment as it seeks to repair strained diplomatic relations with Japan. In a recent meeting, President Anura Kumara Dissanayake engaged in discussions with Japanese Ambassador Akio Isomata, covering various bilateral interests and future collaboration.

During the meeting, the Ambassador extended an official invitation for President Dissanayake to visit Japan, expressing appreciation for the policy direction of the new administration. Japan is considering including Sri Lanka in its newly launched security cooperation assistance program, signaling a commitment to deeper engagement.

A significant focus of the discussions was the joint reconciliation initiative involving Japan, Switzerland, and South Africa, aimed at supporting northern communities affected by Sri Lanka’s 30-year civil conflict. Additionally, the two sides reviewed the status of Japanese investments in Sri Lanka, with special attention given to the digital economy and airport infrastructure.

Japan reaffirmed its commitment to Sri Lanka’s digital transformation efforts and expressed interest in funding port and aviation-related projects. Currently, around 60 Japanese-invested enterprises operate in Sri Lanka under the Board of Investment (BOI) framework, contributing approximately $350 million in cumulative investment and generating over 12,000 jobs. Beyond these major enterprises, several small-scale Japanese businesses are active in sectors like tourism, apparel, and export trading.

One of the key projects under scrutiny is the Jaya Container Terminal, initially funded by Japan in the 1980s and fully owned by the Sri Lanka Ports Authority. In 2019, India and Japan agreed to jointly invest $500-700 million in developing the East Container Terminal.

However, the Sri Lankan government later decided to keep full state ownership, leading to the project’s suspension. Political instability and economic crises between 2022 and 2023 further delayed several key initiatives, including a Japan International Cooperation Agency (JICA) loan worth $464 million for the expansion of Bandaranaike International Airport.

Despite these setbacks, Sri Lanka has now resumed efforts to rebuild its relationship with Japan. A recent development includes the collaborative effort between Sri Lanka, Japan, and India on the West Container Terminal, which will operate as a public-private partnership. Unlike previous projects, this model is expected to ensure more stability and efficiency, with the Sri Lanka Ports Authority and Japanese and Indian firms taking the lead.

Japan’s foreign direct investment (FDI) in Sri Lanka dates back to the 1970s, with the first major project being a joint venture between Noritake of Japan and the Ceylon Ceramics Corporation in 1972. Over the decades, Japanese investments have played a vital role in Sri Lanka’s industrial growth, particularly in electronics, ceramics, engineering, and metal industries.

Since 1996, major Japanese multinational corporations such as NTT, Mitsui Group, and YKK have invested in large-scale infrastructure and manufacturing ventures. Existing companies in ceramics and electronics, including Noritake Lanka Porcelain, Dankotuwa Porcelain, and FDK Lanka, have also expanded their operations in Sri Lanka through new investments.

 As Sri Lanka’s new government takes steps to stabilize its economy and regain investor confidence, fostering stronger economic ties with Japan remains a priority. With renewed cooperation in key sectors, both nations are set to benefit from enhanced trade, investment, and infrastructure development.

By: Staff Writer

February 28, Colombo (LNW): Top officials from the central banks of India and Sri Lanka recently held discussions to explore the potential of increasing the use of their local currencies, the Indian Rupee (INR) and the Sri Lankan Rupee (LKR), in cross-border transactions.

The discussions took place during a roundtable titled INR-LKR Trade Settlement: Strengthening Bilateral Economic Ties, organized amid India’s efforts to internationalize the INR.

India remains Sri Lanka’s largest trading partner, with annual bilateral trade exceeding $5.5 billion. India exports over $4 billion worth of goods to Sri Lanka, while Sri Lankan exports to India total around $1.5 billion.

 In a bid to enhance trade efficiency, the Central Bank of Sri Lanka designated the INR as an authorized foreign currency in August 2022, facilitating easier banking transactions and reducing costs for small-scale traders.

Aditya Gaiha, Chief General Manager of the Reserve Bank of India (RBI), elaborated on the INR’s internationalization and the INR-LKR trade settlement mechanism at the roundtable.

He also highlighted key RBI policies allowing investments in INR within Sri Lanka and amendments to the Foreign Exchange Management Act (FEMA) aimed at expanding the use of INR in cross-border transactions.

Governor of the Central Bank of Sri Lanka, Nandalal Weerasinghe, emphasized the significance of this mechanism and urged banks to collaborate with policymakers to streamline the process.

This initiative aligns with commitments made during Sri Lankan President Anura Kumara Dissanayake’s recent visit to India, where he and Indian Prime Minister Narendra Modi reaffirmed their focus on strengthening INR-LKR trade settlements to deepen economic ties.

In a significant move, the RBI has further relaxed foreign exchange regulations to promote the use of the INR and other currencies in international transactions.

Indian exporters can now open foreign currency accounts overseas, receive payments in these accounts, and use them for import settlements.

This shift is expected to reduce costs for traders in both countries by eliminating intermediary bank charges and mitigating exchange rate risks.

Several Sri Lankan banks have already established INR-denominated Nostro accounts to facilitate direct transactions with Indian counterparts.

 Additionally, Sri Lankans can now hold up to $10,000 worth of INR in physical form, though it remains a foreign currency rather than legal tender in Sri Lanka. This move provides much-needed liquidity support to the Sri Lankan economy..

The adoption of INR transactions aligns with India’s broader strategy to increase the Rupee’s usage among Asian nations and reduce dependency on the US dollar.

To support this mechanism, Sri Lankan banks are required to sign agreements with Indian banks to open INR Nostro accounts. Additionally, offshore banking units (OBUs) in Sri Lanka have been authorized to accept deposits from non-residents, further facilitating trade and investment.

 While the INR’s growing role in Sri Lanka’s economy has led to speculation that it might replace the LKR in certain sectors, experts believe full currency substitution could impact Sri Lanka’s national sovereignty.

 However, the stability of INR could attract foreign investors and reduce balance of payment risks for Sri Lanka, similar to how Bhutan and Nepal use the INR for trade due to their close economic ties with India.

By: Staff Writer

February 28, Colombo (LNW): Bank of Ceylon (BOC) has reported impressive financial results for 2024, demonstrating resilience and strategic adaptability. The bank saw substantial growth in key financial indicators, including assets, deposits, and profitability, despite economic challenges and market fluctuations.

BOC’s General Manager/CEO, Russel Fonseka, highlighted the bank’s strength and stability in a challenging economic climate, emphasizing its commitment to expanding services, driving digital banking solutions, and maintaining its leadership in Sri Lanka’s banking sector. Chairman Kavinda de Zoysa reaffirmed BOC’s commitment to sustainable growth, risk management, and strong governance, reinforcing its status as the country’s largest financial institution.

Financial Performance and Profitability

BOC demonstrated its financial resilience by strategically adjusting its assets and liabilities, resulting in an 84% increase in net interest income to Rs. 167.6 billion from Rs. 91.2 billion in 2023. Although interest income declined by 12% due to a relaxed monetary policy, the 32% reduction in interest expenses helped bolster net interest income, underscoring improved profitability.

Net fee and commission income rose 17% year-over-year (YoY) to Rs. 20.6 billion, driven by increased card transactions, retail banking services, and digital banking adoption. Trading activities contributed Rs. 3.4 billion in net gains, highlighting the bank’s strong market strategies despite exchange losses due to LKR appreciation.

BOC took proactive measures to mitigate credit risks, implementing targeted management overlays to address sectoral vulnerabilities. Despite recording an impairment charge of Rs. 12.4 billion for loans and advances, a net reversal of Rs. 32.8 billion was recognized following debt restructuring. However, ISB restructuring resulted in a net impact of Rs. 14.1 billion on the bank’s profits.

Operational Efficiency and Growth

Total operating income surged 81% to Rs. 182.0 billion, driven by improvements across all income streams. Operating expenses rose by 28% to Rs. 67.1 billion, primarily due to a 35% increase in personnel costs and 21% higher overhead expenses. Despite this, the cost-to-income ratio improved to 40%, reflecting enhanced efficiency.

BOC’s operating profit before taxes on financial services soared by 155% to Rs. 135.3 billion. After taxes, profit before tax (PBT) stood at Rs. 106.9 billion, marking a 165% increase from 2023. The bank contributed significantly to the national economy, paying Rs. 70.9 billion in taxes, leading to an effective tax rate of 52% and a net profit of Rs. 64.4 billion.

Strengthening Assets and Deposits

As of December 31, 2024, BOC’s total assets reached Rs. 4,985.1 billion, with the group’s assets totaling Rs. 5,048.7 billion, a 13% YoY growth. The bank’s deposits grew 8% to Rs. 4,208.6 billion, reflecting strong customer confidence. Despite a 1% drop in gross loans to Rs. 2,436.2 billion due to LKR appreciation and subdued credit demand, the bank remained well-positioned for future growth.

The bank also raised Rs. 15.0 billion through Basel III-compliant Tier II capital issuance to strengthen its capital base. Key financial ratios showcased improved performance, with Return on Assets (ROA) before tax increasing to 2.28% from 0.92% and Return on Equity (ROE) after tax rising to 23.23% from 10.55%. The bank maintained a strong capital adequacy position with a Common Equity Tier 1 ratio of 11.97% and a Total Capital Ratio of 16.55%, well above regulatory requirements.

Social Impact and Recognition

BOC continued to support economic development through various initiatives. The ‘BOC Youth Loan Scheme’ facilitated employment and innovation, while the ‘BOC Ranliya Loan Scheme’ empowered women entrepreneurs with loans up to Rs. 100 million. Other initiatives focused on MSMEs, rural development, and financial inclusion, particularly through digital banking services for vulnerable groups.

Additionally, BOC partnered with Sri Lanka Post to expand financial services across underserved communities. These efforts contributed to the bank being named ‘Bank of the Year Sri Lanka 2024’ by The Banker magazine and securing a position in the Top 1,000 World Banks list.

Future Outlook

As Sri Lanka’s largest financial institution, BOC remains committed to leveraging technology, driving economic stability, and fostering sustainable growth. With a focus on enhancing customer experiences and strengthening governance, the bank is strategically positioned to navigate evolving economic conditions while maintaining its leadership in the financial sector.

February 28, Colombo (LNW): Sri Lanka is poised to become an even more enticing destination for Indian travellers, offering a wealth of attractions in a compact and easily accessible location, alongside the opening of a new casino in Colombo by mid-2025.

According to tourism experts, these developments are expected to significantly boost the island’s appeal to Indian tourists.

Rajiv Mehra, President of the Indian Association of Tour Operators (IATO), emphasised that Sri Lanka’s proximity to India, along with shared cultural ties and a wide range of attractions, makes it a top destination for Indian travellers.

He further highlighted that although India boasts a strong gaming tourism market, many travellers are limited by the domestic offerings, primarily in Goa and Sikkim.

In this regard, Sri Lanka’s luxury options and proximity to India make it an attractive alternative for those seeking new experiences.

Sri Lanka has long been a popular destination for Indian visitors, with India being the island nation’s largest source market. In 2024, Sri Lanka welcomed 416,974 Indian visitors, which made up a significant portion of the country’s total two million tourist arrivals, outpacing second-placed Russia, which recorded 201,920 visitors.

Amitabh Kant, the architect behind India’s celebrated tourism campaigns such as “Incredible India” and the branding of Kerala as “God’s Own Country,” recently visited Colombo and praised Sri Lanka for its unique tourism offerings, which he believes have yet to be fully discovered by the majority of Indian travellers.

Kant, a former Indian bureaucrat and the former CEO of NITI Aayog, a policy think tank of the Government of India, noted that India has an outbound tourism market of 20 million people, presenting a significant opportunity for Sri Lanka to capture a larger share of this demographic.

Kant also urged Indian tourists to explore Sri Lanka’s rich heritage, vibrant culture, and stunning architecture, encouraging them to venture beyond traditional destinations to uncover the unique charm of the island nation.

With the new casino in Colombo set to open in mid-2025, Sri Lanka is positioning itself as not only a cultural and natural haven but also an emerging hotspot for gaming tourism.