25 per cent of dollar reserves possessed by commercial banks in Sri Lanka must be transferred to the Central Bank of Sri Lanka (CBSL), said CBSL Governor Ajith Nivard Cabraal.
The CBSL Governor’s order comes in effect from December 27, 2021 and all commercial banks in Sri Lanka will be able to possess only 75 per cent of their dollar reserves.
The commercial banks in Sri Lanka have restricted the issuance of dollars for imported goods leading to a serious problem suffered by the importers.
Last week it was reported that over 1,500 containers of imported items were stalled in Port warehouses. Following the latest directive by the CBSL, further restrictions will be imposed on the issuance of dollars, driving the importers deeper into the abyss, according to analysts.
The mode in which the foreign reserves amounting to US$ 1.6 billion have surged up to US$ 3.1 billion must be disclosed before the country, urged the Samagi Jana Balawegaya (SJB), following the announcement made by the Central Bank of Sri Lanka (CBSL) this morning.
Speaking to a briefing held in the Opposition Leader’s Office today (29), SJB MP Nalin Bandara pointed out that the people have a right to know about the mode in which these foreign reserves have spontaneously surged.
Foreign reserves were rising in US dollars as well as in other currencies, as well as gold reserves, the MP reminded, stressing that how an additional amount of US$ 1.5 billion was included to the reserves must be explained.
The SJB MP went on saying that if the reserves were surged in gold or yuan, they could not be used to settle dollar expenses or settle foreign debts and that the yuan currency could only be used for goods imported from China.
The ongoing dollar deficit can be resolved temporarily only in an event of a reserve position surge in US dollars, Bandara added.
The Asian Development Bank (ADB) has agreed to pay for the Sinopharm vaccine doses purchased from China, said State Minister of Production, Supply and Regulation of Pharmaceuticals Channa Jayasumana.
Accordingly, Sri Lanka is set to receive an amount of US$ 85 million from the ADB to settle the payments for the Covid vaccine.
The gazette notification issued in connection with the Prohibition of Obscene Publications Bill has been canceled. It is reported that the Secretary to the Ministry of Justice Ali Sabri has instructed to cancel the relevant gazette notification.
The gazette notification was issued on the 24th and it was opposed by many parties. Taking into consideration the objections and proposals, amendments are to be made to the Bill which has been prepared so far and the Ministry of Justice has decided to submit the amended Bill to the Cabinet for approval. The Minister of Justice has instructed the Secretary to cancel the gazette notification issued until then.
The Secretary to the Ministry said in a statement that the purpose of enacting a law to ban Obscene Publications was to protect the welfare of minors and the privacy of abused women, not to impede freedom of speech.
At present Sri Lanka’s official foreign exchange reserves have increased to US $ 3.1 billion. The Governor of the Central Bank Ajith Nivard Cabraal has stated this in a Tweet.
In recent days, foreign reserves have plummeted to close to $ 1 billion, and even the importation of essential goods has been blocked.
However, the Governor of the Central Bank stated that the foreign exchange reserves will exceed 03 billion by the end of the year. Confirming that statement, two days before the end of the year, foreign reserves rose to 3.1 billion.
In keeping with our previous announcements, the official #reserve position of the @CBSL has today reached appox USD 3.1 billion and will remain around that level by end 2021 as well. #RoadMap#SriLanka#GoSL
A two-year-old boy who chain-smoked 40 cigarettes a day now looks unrecognisable after ditching the habit years on.
Ardi Rizal, from Sumatra, Indonesia, was just a tot when he was shown smashing his head against a wall if he couldn’t smoke.
The chubby little boy made global headlines when shocking pictures showing him puffing on cigarettes circulated around the world in 2010.
But despite a sour and dizzying process to get off them, Ardi has successfully quit and shed the pounds by replacing his unhealthy diet with fruit and veg.
Ardi told CNN in 2017: “It was hard for me to stop. If I am not smoking, my mouth taste is sour and my head feel dizzy.”
Shocking pictures of Ardi circled the globe(AFP via Getty Images)Aldi in 2010(Barcroft Media)
He added: “I am happy now. I feel more enthusiastic, and my body is feeling fresh.
Shockingly, Ardi became hooked when his own father passed him a cigarette at 18 months old.
But concerned about how Ardi might hurt himself if he couldn’t get a hit of nicotine, his mum, Diane, sought help from a Government intensive care specialist.
At the time the unhealthy youngster was guzzling three cans of fatty condensed milk a day, weighing a stone over the healthy average for a boy his age.
Ardi now enjoys a healthy diet and lives cigarette free(Barcroft Media via Getty Images)
Diane told the Daily Mail in 2013: “When Ardi first quit smoking he would demand a lot of toys.
“He (would) start to smash his head to the wall. He was crazy, hurting himself if he didn’t get a cigarette.
“That’s why I get him cigarettes in the first place – because of his temper and his crying.
“Now I don’t give him cigarettes but he eats a lot.
“With so many people living in the house it’s hard to stop him from getting food.”
Ardi holds up photos of himself as a tot when he smoked 40 a day(Barcroft Media via Getty Images)
Once his smoking days were behind him, Ardi swapped one addiction for another and developed a love for junk food which led for him parents to recruit a nutritionist.
Now he survives on a healthy diet of fresh fish, fruit and vegetables to help him keep a trimmer shape.
Omicron is “not the same disease we were seeing a year ago” and high Covid death rates in the UK are “now history”, a leading immunologist has said.
Sir John Bell, regius professor of medicine at Oxford University and the government’s life sciences adviser, said that although hospital admissions had increased in recent weeks as Omicron spreads through the population, the disease “appears to be less severe and many people spend a relatively short time in hospital”. Fewer patients were needing high-flow oxygen and the average length of stay was down to three days, he said.
A number of scientists have criticised the government’s decision not to introduce further Covid restrictions in England before New Year’s Eve, with some describing it as “the greatest divergence between scientific advice and legislation” since the start of the pandemic.
They have expressed concern that while the Omicron variant appears to be milder, it is highly transmissible, meaning hospital numbers and deaths could rise rapidly without intervention.
The NHS Providers chief executive, Chris Hopson, said it was still unclear what would happen when infection rates in older people started to rise. “We’ve had a lot of intergenerational mixing over Christmas, so we all are still waiting to see, are we going to see a significant number of increases in terms of the number of patients coming into hospital with serious Omicron-related disease,” he told BBC Breakfast.
NHS staff absences caused by having to isolate over Omicron are also causing strain on the health service, with experts predicting up to 40% of staff in London could be off in a “worst case scenario”.
“We’re now seeing a significant increase in the level of staff absences, and quite a few of our chief executives are saying that they think that that’s probably going to be a bigger problem and a bigger challenge for them than necessarily the number of people coming in who need treatment because of Covid,” said Hopson.
George Eustice, the environment secretary, said the government was keeping the level of Covid hospital admissions under “very close review”.
He acknowledged that infection rates from the new Omicron variant were rising but said there was evidence it was not resulting in the same level of hospital admissions as previous waves.
“There is early encouragement from what we know in South Africa that you have fewer hospitalisations and that the number of days that they stay in hospital if they do go into hospital is also lower than in previous variants,” he told the BBC.
“At the moment we don’t think that the evidence supports any more interventions beyond what we have done. But obviously we have got to keep it under very close review, because if it is the case that we started to see a big increase in hospitalisations then we would need to act further.”
John Bell told BBC Radio 4’s Today programme: “The horrific scenes that we saw a year ago of intensive care units being full, lots of people dying prematurely, that is now history, in my view, and I think we should be reassured that that’s likely to continue.”
He said that over the course of multiple waves of Covid, including Delta and Omicron, “the incidence of severe disease and death from this disease has basically not changed since we all got vaccinated”.
He added that quiet streets over the past couple of weeks showed people had been “pretty responsible” with regard to protecting themselves from the virus.
Speaking after the government’s announcement on Monday that they would not be introducing any more Covid restrictions this year, Simon Clarke, an associate professor in cellular microbiology at the University of Reading, warned that the latest data was incomplete.
He cautioned that the latest case figures did not include data for samples taken between Christmas Eve and Boxing Day, and that it would become clear how the virus had moved through the population over the Christmas period in the coming week or so.
Covid: how long are people infectious and how do isolation rules vary?
“While nobody wants to live under tighter controls, the public need to realise that if we end up with a significant problem of hospitalisations and mass sickness, it will be worse than if authorities had acted earlier,” he said.
Speaking on Tuesday, Paul Hunter, a professor in medicine at the University of East Anglia, said people with Covid should eventually be allowed to “go about their normal lives” as they would with a common cold.
“This is a disease that’s not going away. Ultimately, we’re going to have to let people who are positive with Covid go about their normal lives as they would do with any other cold,” he told BBC Breakfast. “If the self-isolation rules are what’s making the pain associated with Covid, then we need to do that perhaps sooner rather than later. Maybe not quite just yet.
“Covid is only one virus of a family of coronaviruses, and the other coronaviruses throw off new variants typically every year or so, and that’s almost certainly what’s going to happen with Covid. It will become effectively just another cause of the common cold. “Once we’re past Easter, perhaps, then maybe we should start to look at scaling back, depending on, of course, what the disease is at that time.”
I was mooted to write a review of the proceedings of the recent webinar that was organised by SLID. The initiative of building a technology hub in Sri Lanka, as I see was an ambitious target. The webinar made a grand finale to showcase Sri Lanka’s intention to be a leader in the South Asian region. As outlined, the forecast was to grow exports to $ 3 billion YoY basis and transform the service sector to an IT enabled industry in Sri Lanka from the current state where there are pockets of transformation with significant interconnectivity and integration issues.
Introduction
While acknowledging the initiative and recognising the necessity to transform an IT enabled integrated system for gaining competitive advantage in most of the sectors that have been spoken of, I sometimes feel that we are chasing a mirage due to lack of foresight of the complexity but to show the grand scheme of things while in the incubator. The digital revolution and digital economy, the ‘fancy’ buzz words widely spoken in this day and age draws a social revolution, it transforms the division of labour, the types of transactions, the ways of coordination of activities, foundations of power and comparable with Neolithic Class and Industrial Revolution.
Hence, before one embarks on such massive development of complexity, a framework needs to be drawn with short to medium term goals, longevity and sustainability with identification of sectors to be improved and harness skills. Despite the blessing of government echelon, the recent events of policy reversals reported and heard in the media, presents a bleak picture of forecasts. The grassroots to this development are the infrastructure, skills-talent and innovation-problem solving that require effective coordination and harmonisation
Keynote addresses
The two ministers, Sri Lanka and India, holding the subject portfolios have expressed their views in a concise manner. The Sri Lankan perspective, is to build a technology hub providing easy access to potential and budding entrepreneurs. Sri Lanka’s geographical location and high literacy are the key factors that are at the forefront to succeed and encourage FDI inflows. The forecast was to build a multi-billion-dollar industry over three years and with an expected YoY revenue in the order of $ 3 billion per year in exports. To promote and make awareness, 2022 has been declared as the digital year of Sri Lanka. However, there are many challenges to overcome, if to be successful and compete with already established platforms in our neighbourhood i.e. India, Dubai, Thailand and Malaysia.
India is an established market for IT and has attracted multinational companies as FDI inflows and many Indians are taking up employment in this sector. India has seen the potential of IT enabled future many years ago and made early inroads to digitisation. Compared to Sri Lanka, a vast number of Indian youths are taking up IT degrees seeking employment in this sector and the overflow migrated to various countries becoming a dominant stakeholder in the ICT industry.
As per the Minister, India has identified the necessary talent to succeed in B2B, namely, tailored tertiary courses to explore and harness soft skills, build think-force and internships incorporating within the curriculum thus encouraging youth to be entrepreneurs even at a very early stage of their life. Also stressed the need to retain talent in a way by balancing Leisure (L), Life-style (L) and Talent (T) and promote self-start-ups and unicorns. The secret to success is innovation, identify synergies, problem solving capability, free thinking and ability to question. It appears that India has vastly progressed in this path and built a solid foundation to drive the business into great heights and to the future.
Both the ministers have reiterated the importance of plugging the loopholes and to build confidence in the e-commerce sector with necessary reforms to legal and regulatory frameworks to prevent exploitation, enhancing cyber-security and data protection to block and intercept malicious attacks for early detection and prevention and most importantly preserve Right to Information.
Sri Lanka eGovernment Strategy 2013 – ICTA/AFC/IC/IC03/58
The project ‘ICTA/AFC/ C/IC03/58 eGovernment Strategy Dec 2013’, initiated by the then President, guaranteeing citizen-friendly, cost-effective and converged service delivery of information of all types and mix to all via economies of network and to be implemented by 2020. The Government’s strong commitment had shown the dedication of then Sri Lanka leadership to partake in the global INS, that’s extremely vital to benefit optimally from synergies of networking economy and the emerging AI-driven telecommuting services and ‘Fintech’ the cashless economy.
Unfortunately, little has been done since then by the successive governments and has come back nearly a decade later to talk fresh and re-inventing the recommendations therein. In my opinion, investments in solutions is a key to fast-track rather than investing on ‘building blocks’ with clear goals and targets and realising benefits seamlessly and not leapfrogging.
Although some have expressed that Sri Lanka has the established institutions that is capable of handling all aspects of taking integrated e-commerce to a reality, I rather have concerns of the capability and ability to make changes without external interferences.
Panel discussion
Several eminent professionals in the field of ICT and T have been interviewed during the course of the webinar, from academia, vendors, service providers and regulators for inputs in building the Sri Lanka technology platform.
Predominantly, vendors are of the view that the infrastructure is crucial for the development of this sector for interconnectivity. This is understandable from their view point to sell their products and build on turn-key type arrangements and to support the network within the life-spectrum and thereafter propose upgrade to align with the demand and needs. However, for the vendors it is a win situation as they are not at all bothered about the network economy irrespective of the optimum use of assets but to be in business.
Academia believes that the most important part is to reform the tertiary education and argues that the gestation period shouldn’t be too long for reforms. This requires to harness talent and build a think-force to fit wherever in the value chain catering for a wide range of skills. Over the past few decades, the traditional university education has been pushed and pulled by the industry and also due to high demand and emerged several institutions to satisfy the demand in profitable business setting.
This has negatively affected the quality of students passing from the tertiary education system and resulted in building substandard talent and think-force. The regulatory system should also cater in developing the framework to satisfy the demand of skills and perform Quality Assurance of degrees. The need to re-skill the workforce was also highlighted to harness new challenges in the digital age.
Service providers have expressed multiple views to take this initiative forward, primarily, targeting the better use of skilled talent and for handsome ROI. This will not only be promoting wide band access to customers but increase the penetration and use of digital paraphernalia amongst people of all walks of life, especially the older generation and women who are sole traders, working in cottage industries, and less users of e-commerce.
The advantage and benefit of Venture Capitalist (VC) was discussed and brought multiple success stories in Vietnam. This form of equity financing for start-ups, and emerging companies that have high growth potential need to be identified with assistance of Government sponsorships or underwriting and exploring feasible options. I believe the VC scheme has the potential to attract Sri Lankans domiciled in foreign countries who are still keen for Sri Lanka to prosper.
The current trend of virtualisation and XaaS where storage and computing power and connectivity are provided without owning and maintaining networks or any platforms, an example, SaaS (Software as a Service). This will provide financial benefits in terms of tax where companies could offset the leasing costs against operational expenditure and reduce the tax payable. This is worth exploring in the context of start-ups and emerging companies.
End notes
It was spelt out that the proposed Government plan is to develop through 4G and 5G extending the footprint to cover the population and taking fibre optic connections to 10,000 schools across the country by year 2023. As per the statistics, it was also revealed that the affordability of Sri Lanka for internet and mobile ranks substantially high, Internet 20th and Mobile 30th. in the world. Nevertheless, it is questionable, how these figures were derived as majority population are not earning more than $ 2 per day.
To encourage people of low income to bracket in taking up these services, the Government needs to subsidise where possible without defeating the purpose of progressive transformation to digital economy. Just to put in perspective, Sri Lanka’s internet penetration is 33% and the lowest among the South Asian bloc. Hence to invest and to reach at least India (62%), our closest neighbour is a monumental task to complete by 2023.
Quoting the report constituted at South Asian Telecommunications Regulator’s Council (STARC) of 2016, Sri Lankans’ appetite for Internet was 20th, beating India and Bangladesh. This potential need to be rightly explored to compete strongly among the countries in the region, gaining a significant market share in e-commerce, including cross border transactions and digital warehousing.
The yearly A/L drop-outs as reported, approx. 80% need to be given vocational training for finding gainful employment in all sectors of the digital economy as of developed countries. Investment on vocational training institutions should be in the master plan for youths to find employment and contribute anywhere in the value chain of this digital era.
At the end of the session each panel member has been asked to provide final comments on the mega development plan. In brief:
To think differently and outside the box
Necessity of high bandwidth – access and trunk
Data protection and usage. This is most vulnerable area of concerns
Encourage of 5G Industrial apps for communications
Skill development and close disparity and skill gaps
The writer believes the most important aspects from Sri Lanka’s perspective is to reform the legal and regulatory systems to encourage start-ups and prevent exploitation of IPs/innovations by the wealthy businesses. The exploitations of IPs have been witnessed in the past worldwide, hence tightening them is crucial to bring more entrepreneurs to this sector and innovation should be combined with high ethical, social and environmental standards. It is also to be understood that there is a strong nexus between e-commerce and network economy where new products and services are developed with the collaboration of individuals and business in virtual settings, hence the requisite reforms should cater not in isolation but with a holistic view.
Conclusion
Despite the delay to commence the project upon constituting the national project strategy back in 2013, the new momentum is welcomed even with a delayed start. A technology hub is an area or location where high density of start-ups cluster together and form an economic infrastructure. Facilitation of such hubs makes things move faster and fast-track product creation.
Building a distributed hub architecture providing reachability across many parts of Sri Lanka with remote technology parks, I see is preferable and efficient with no commuting time between ends. In the era of virtualisation, retaining talent in one country is irrelevant, talent from anywhere in the world could be easily pooled through an ecosystem.
As concerns have been raised whether the investments should be targeted to achieve solutions as opposed to building infrastructure to showcase the capacity should be discouraged. The utilisation of capacity to optimum level shall be the norm and must be realised balancing the resources in progressive manner. Looking at the past history of Sri Lanka, the capacity utilisation even after gestation period was insignificant and affects significantly ROIs. This is the key lessons to be learnt in embarking on such massive transformation projects, legacy to digitisation.
Government policies should be geared to promote high take-up levels of usage of information technology making awareness of the advantages as opposed to the traditional methods hitherto followed. I am sure, the generations X, Y and Z will embrace the change immediately, however, also need to encourage senior citizens to use digitised services which constitute 13% of population.
Reachability to digitised service is another challenge; this could be achieved jointly through the development of infrastructure, affordability, use applications and digital paraphernalia, storage and archiving data, driving success and maintain economy of scale. From the financial terms how could we attract customers and FDI inflows. Financial incentives and ease borrowing are critical to grow market share and persuade start-ups with high earning potential through venture capital as opposed to debt servicing.
It is advantageous to learn from the experiences of India where the Minster assured support and cooperation be extended wherever need arises and should not be hesitant to seek assistance, re-inventing what others have gone through is a waste.
My assessment is that, this is a highly ambitious target to create an industry of the size of billion dollars in a matter of two-three years and $ 3 billion/year exports thereof, is pessimistic and should be monitored with caution. Before launching one of this magnitude and complexity, a well-crafted plan needs to be prepared in coordination with all stakeholders identifying work breakdown, resource structures and implement in stages with clear goals for short to medium terms. As Sri Lanka is currently facing a big challenge of foreign reserves and to continue into the foreseeable future, the preferable approach is to consider Private Public Partnerships or other options like BOT. These options together with other financial instruments should be explored.
As mentioned in my preamble, showcasing provides instant impetus and must be actively pursued for results. Also, this should not be evolved like another white elephant where future governments are left with debt burdens without options of paying back. As everyone knows, Huawei China, has been banned to sell their 4G and 5G due to insecurity. In mindset, there is a risk of getting FDI inflows to Sri Lanka which will wipe out the anticipated, forecasted export revenue.
Finally, it also must be understood the primary scope of telecommunication, the foundation that synergises the power of digitisation of information and economies of any to any networking, engendering the fourth industrial revolution. This change permeates global Information Networked Services (INS), facilitating ease of, acquisition and processing data for exchange/dissemination of information of all types and their mix, availing Fully Integrated Information System (FIIS). By partaking the global INS, that’s extremely vital to benefit optimally from synergies of networking economy and the emerging AI-driven telecommuting services and ‘Fintech’ the cashless economy.
Glossary of terms
Network Economy: Business environment that has emerged as a result from ubiquitous information technology allowing access to information anytime and anywhere, irrespective of time and location
[2]Hugo VELTHUIJSEN and Frank Jan de GRAAF, Entrepreneurship in the Network Economy, Netherlands, [email protected]
[3]Elena Ustyuzhanina, Sergey Evsukov, Irina Komarova Network Economy as a New Economic System. European Research Studies Journal, Volume XXI, Issue 3, 2018 pp 77-89
Sri Lanka is to go ahead with a decision to temporarily close three overseas missions from Friday, 31 December 2021.
The Foreign Ministry said that following careful consideration, a decision has been taken to temporarily close three of its Missions / Posts overseas, i.e., the Sri Lanka High Commission in Abuja, Nigeria; the Consulate General of Sri Lanka in Frankfurt, Germany; and the Consulate General of Sri Lanka in Nicosia, Cyprus; with effect from 31 December 2021.
The decision, which has received the approval of the Cabinet of Ministers, is part of a restructuring process of Sri Lanka’s network of Missions and Posts overseas carried out by the Foreign Ministry.
The restructuring is undertaken with a view to conserving the country’s much-needed foreign reserves and minimizing expenditure related to maintenance of Sri Lanka’s Missions / Posts overseas, while ensuring the effective conduct of bilateral relations, in the backdrop of the grave economic challenges posed by the global pandemic.
Upon closure of the three identified Missions / Posts, their functions, including maintenance of bilateral political, economic, cultural relations as well as consular functions as relevant, will come under the purview of accredited, and in the case of Abuja and Nicosia, non-resident High Commissions / Embassies of Sri Lanka.
In this regard, action is in process to concurrently accredit Nigeria through Sri Lanka’s High Commission in Nairobi, Kenya; and the other countries in Africa concurrently accredited through the Sri Lankan Mission in Abuja, through Sri Lanka’s Embassy in Cairo, Egypt and High Commission in Nairobi, respectively.
The functions of Sri Lanka’s Consulate General in Frankfurt, including trade, investment and tourism promotion, as well as consular matters of Sri Lankan nationals living and working in and around Frankfurt, will come under the purview of Sri Lanka’s Embassy in Berlin, Germany.
The concurrent accreditation of Cyprus through the Sri Lanka Embassy in Rome, Italy will continue, with the latter handling Sri Lanka’s bilateral relations with Cyprus as per current practice.
The consular functions handled by the Consulate General in Nicosia will be brought under the purview of the Sri Lanka Embassy in Rome.
However, considering the significant consular and welfare requirements of the approximately 6,000-strong Sri Lankan employee community living and working in Cyprus, which need to be addressed on a regular basis, action is being taken by the Foreign Ministry to appoint forthwith a suitably qualified Honorary Consul based in Nicosia.
The Honorary Consul thus appointed will function under the direction of the Sri Lanka Embassy in Rome and the Foreign Ministry, in close coordination with the State Ministry of Foreign Employment Promotions & Market Diversification and the Sri Lanka Bureau of Foreign Employment.
The Foreign Ministry will closely monitor the transition process in Cyprus in order to address issues, if any, and provide further solutions if deemed relevant and necessary in the foreseeable future.
Notwithstanding cost-cutting measures, the Foreign Ministry continues to attach highest priority to maintenance of bilateral relations with all countries at optimum level, to meet the foreign policy objectives of the Government with special focus on economic diplomacy, which entails the promotion of exports, foreign direct investment, tourism and foreign employment generation.
The Ministry said it pays high attention to its mandate of safeguarding the welfare and effective functioning of Sri Lankan employees overseas with due regard to their direct and significant contribution to the nation’s economy in terms of foreign remittances.
A continuous evaluation of Mission / Post requirements vis-à-vis achievement of targets is being undertaken by the Foreign Ministry through a consultative process, internal and external, involving senior representation of the Foreign Ministry and Sri Lanka’s Heads of Mission / Post overseas, as well as relevant line institutions of Government
The decision to temporarily close the three identified Missions / Posts is subject to continuous review, and action will be taken in due course to consider reinstatement of relevant resident Missions / Posts as deemed necessary
The Securities and Exchange Commission of Sri Lanka (SEC) has taken a key initiative in taking the Capital Market of Sri Lanka to the next phase of growth and harness its.benefits.
The Commission has taken measures towards this end as early as possible and decided that the task be undertaken by a joint Committee comprising of members of the SEC and the Colombo Stock exchange (CSE).
A Central Counterparty Mechanism will be set up under this initiative to achive this objective of taking the Capital Market of Sri Lanka to the next phase of growth.
It was also decided to have a close dialogue with the Central Bank of Sri Lanka (CBSL) since the CBSL is in the process of setting up of a CCP mechanism for government securities which is also one of the policy actions under the Capital Market Development Project of the Asian Development Bank (ADB).
The new Securities and Exchange Commission of Sri Lanka (SEC) Act which came into force from 19th September 2021 contains provisions which enable the setting up of a Central Counterparty (CCP).
Further, the need for setting up a CCP in order to enhance the efficiency of post trade risk management had been spoken of for a long period of time and as the first step towards this end, the launch of Delivery vs Payment (DvP) mechanism was successfully completed on 16th August 2021.
Accordingly the SEC and the Colombo Stock Exchange (CSE) engaged in several rounds of discussions to determine how such a project could be taken forward, CSE sources said.
Accordingly, the Chairman of the SEC Viraj Dayaratne PC has nominated Commission Member Sunil Lankatilaka to head the Joint Committee which will include Director General, Chinthaka Mendis and Acting Director Capital Market Development and. Prabash Wanigatunga from the SEC.
The CSE has nominated other committee members Dilshan Wirasekera Director Suren De Silva Director, .Rajeeva Bandaranaike CEO, .Renuke Wijayawardhane CRO, Dulani Warnakulasooriya Head ERM and.Lankesha Molligoda Head Compliance and Regulatory Policy.
The Committee’s key mandate will be to identify the manner of implementation of a CCP and to recommend the entire procedure including matters pertaining to procurement. The expectation is that it could be completed before the end of next year. The first meeting of the Committee will be held during the first week of January 2022.
A CCP can offer significant benefits to the Financial Market in Sri Lanka and can be considered as part of the critical Financial Market Infrastructure that is needed and is of national interest.
The effectiveness of CCPs in acting as firewalls have been proven in other markets especially during the global financial crisis in 2008 where they successfully contained the contagion of losses resulting as consequences of default by certain financial institutions spreading to other financial institutions active in markets cleared by those CCPs.
In order to complete the transitioning of the market towards adopting a full-blown CCP mechanism for clearing and settlement that would not only enhance the post trade risk management but also unlock the potential for the launch of other complex and new instruments such as derivatives, for which provision is made in the SEC Act.
Further, having a robust post trade management mechanism in place is one of the requirements considered by foreign portfolio investors in identifying the most suited investment destinations. As such, upon implementing a CCP mechanism, Sri Lanka would be able to lure much needed foreign investment flows to the country.
Moreover, as per the MSCI Market Classification Framework, having a well-functioning clearing and settlement system based on the broad framework published by the Bank for International Settlements including a DVP will positively contribute towards in the efforts of elevating the CSE to “emerging market” status from the current frontier market status.
