December 07, Colombo (LNW): Cabinet approval will soon be sought to remove the Value-Added Tax (VAT) on brown sugar produced by Lanka Sugar, a state-owned enterprise. The move aims to address the growing stockpile of unsold brown sugar at the Pelwatte and Sevenagala plants, according to Deputy Minister R. M. Jayawardhana, who raised the issue in Parliament.

Industries Minister Sunil Handunnetti highlighted that Lanka Sugar’s brown sugar faces an 18% VAT, alongside a 2.5% Social Security Levy, whereas imported white sugar is exempt from VAT. This discrepancy results in higher production costs for brown sugar, pricing it at approximately Rs.300 per kilogram at the factory, compared to Rs.220 for imported white sugar.

“The VAT on brown sugar must be removed urgently to clear the stockpile and ensure the sustainability of factory operations. Without this concession, the factories face significant operational challenges,” Minister Handunnetti stated.

Lanka Sugar was established in 2011 following the expropriation of Pelwatte Sugar and other firms. The factories, previously under private ownership, were brought under state control during the Rajapaksa administration, with substantial taxpayer funding used to sustain operations.

Deputy Minister Jayawardhana further noted that the Pelwatte Sugar facility currently holds 1.5 million liters of ethanol, adding another layer of operational and logistical challenges for the enterprise.

Under Sri Lanka’s Special Commodity Levy Act, essential food items like white sugar are subject to a simplified single tax structure. A similar approach for brown sugar is expected to provide the necessary relief to reduce production costs and boost the competitiveness of Lanka Sugar in the domestic market.

The proposal to remove VAT is seen as a critical step to revive the struggling state enterprise and ensure its continued contribution to Sri Lanka’s economy.

Twenty-seven Sri Lankans stranded in Lebanon due to the ongoing Lebanon-Israel conflict arrived safely at Katunayake Airport on Wednesday (4) night. Among them were five children, three women, and 19 men.

The repatriation was facilitated by the International Organization for Migration (IOM), in coordination with the Sri Lankan Embassy in Lebanon and the Ministry of Foreign Affairs.

Efforts to bring Sri Lankans back home from Lebanon have been ongoing, with flights scheduled on November 6, November 12, November 28, and December 1. So far, a total of 53 Sri Lankans have returned through these arrangements.

The latest group arrived at 11:30 p.m. on Emirates Airlines flight EK-648 from Dubai, marking another step in the government’s efforts to ensure the safety and well-being of its citizens abroad during the crisis.

In a pivotal moment for Sri Lanka’s ongoing sovereign debt restructuring, the U.S. District Court for the Southern District of New York is considering a 45-day stay request filed by the Democratic Socialist Republic of Sri Lanka. 

The stay, sought by the Government, is critical to finalizing a complex debt exchange necessary to stabilize the nation’s economy and meet the requirements of an International Monetary Fund (IMF)-supported recovery program.

The dispute revolves around Hamilton Reserve Bank Ltd.’s (HRB) claim for $250 million in Sri Lankan International Sovereign Bonds (ISBs) that matured in 2022. 

Sri Lanka defaulted on these bonds amid a severe economic and humanitarian crisis. While HRB has pursued legal action, Sri Lanka argues that an additional stay would facilitate the debt restructuring process and prevent disruption to its recovery efforts. 

Judge Denise L. Cote has ordered HRB to file its opposition by 11 December 2024, with Sri Lanka’s reply due by 16 December 2024.

Sri Lanka’s debt restructuring is at a critical juncture. The country has achieved key milestones, including agreements with bilateral creditors in mid-2024 and private bondholder groups later in the year. 

These agreements addressed contentious issues such as aligning creditor terms with IMF program requirements and ensuring equitable treatment for all stakeholders. Most recently, on 25 November 2024, Sri Lanka initiated a debt exchange program that allows bondholders to swap their existing securities for restructured bonds. 

This exchange has garnered substantial support from major creditors and international financial institutions, reinforcing its potential to stabilize the economy.

However, HRB’s refusal to participate in restructuring negotiations poses a significant challenge. The bank has opted to pursue litigation, a move critics argue undermines collaborative efforts and prioritizes individual claims over collective recovery.

 HRB has also been accused of threatening to obstruct IMF funding, which could jeopardize Sri Lanka’s fragile recovery framework.

 If the Court denies the stay and rules in HRB’s favor, it could prompt other creditors to file lawsuits, leading to legal chaos and derailing the restructuring process.

Sri Lanka’s legal team emphasizes that granting the stay aligns with international principles and U.S. policy, which traditionally support sovereign nations’ good-faith negotiations in debt disputes. 

The Government contends that delaying HRB’s claim would not harm the bank, as accrued interest would compensate any postponement. Moreover, a stay would uphold the comparability of treatment principle, ensuring all creditors are treated equitably under the IMF-supported program.

While the Government’s restructuring efforts have earned support internationally, domestically, President Anura Kumara Dissanayake’s administration faces criticism. Allegations of corruption and inefficiency in State institutions have fueled doubts about the Government’s ability to deliver on its promises.

Sri Lanka’s local automobile assembly industry is set to expand significantly, with projections to increase exports of vehicles, two-wheelers, and components from the current $800 million to $2 billion within five years. 

This growth is expected to create 45,000 direct jobs, according to a senior member of the Local Assemblers’ Association.

Drawing inspiration from nations like Morocco, Thailand, and South Africa, the industry leverages strategic advantages such as location, skilled labor, and government incentives. 

Sri Lanka’s Standard Operating Procedure (SOP) under the Ministry of Industries oversees over 17 assembly plants producing motorcars, SUVs, motorcycles, electric three-wheelers, and heavy trucks. 

These plants are supported by local manufacturers producing components like tyres, batteries, exhausts, and wiring systems.

The temporary ban on vehicle imports catalyzed the industry’s growth, creating over 10,000 indirect jobs and hiring over 5,000 technically skilled workers, including students and trainees. 

However, stakeholders warn that this progress is at risk due to potential unregulated imports of completely built units (CBUs), which could undermine local assemblies and their ecosystems.

Currently, over 20 global automotive brands, including Hyundai, Mahindra & Mahindra, TATA, and Hero, have partnered with local assemblers, contributing to a thriving below-250cc motorcycle market and bolstering Sri Lanka’s industrial reputation. 

The component manufacturing sector, which emerged from scratch, now meets international standards and attracts foreign investment, showcasing Sri Lanka’s growing technical capabilities.

The industry emphasizes its economic contributions, from boosting GDP and exports to creating jobs and fostering technological growth. 

Assemblers urge the government to ensure a fair and competitive tax policy between locally assembled units and CBU imports when the temporary suspension is lifted, safeguarding the sector’s progress and future potential.

Additionally, this industry has indirectly created more than 10,000 jobs over the past five years, establishing a complete ecosystem that risks being threatened if unregulated imports are allowed. They risk losing all the advancements made over this period. 

Although the SOP is a government policy to promote local industry, the new decision to open up completely built unit (CBU) imports will discourage more than 20 local assemblies of international brands operating in Sri Lanka.

Another crucial aspect is the component manufacturing sector, which has grown from nothing to one capable of developing components, scaling down manufacturing processes, and meeting international standards.

 “This growth has enabled major brands to set up operations in Sri Lanka, promoting the country’s technical capability on the world stage.”

 This has led to significant economic benefits, including job creation, GDP growth, and increased exports. Moreover, a thriving local assembly industry not only contributes to GDP and job creation but also enhances the country’s industrial image, attracts further foreign investments, and fosters technological and economic growth.

December 06, Colombo (LNW): The Ceylon Electricity Board (CEB) has confirmed that it will submit its proposal for revising electricity tariffs to the Public Utilities Commission of Sri Lanka (PUCSL) today (06).

CEB Chairman Dr. Thilak Siyambalapitiya assured that the submission would proceed as planned. This proposal aims to revise tariffs for the first half of 2025, with implementation expected from the third week of January.

Under the former government, electricity tariffs were revised quarterly. However, in 2023, three revisions were made, while the current government has limited these changes to twice annually.

The submission follows an earlier tariff revision proposal in October for implementation in December. This included a proposed reduction of approximately 6% in electricity tariffs. However, PUCSL flagged significant errors in the document and requested corrections.

Despite granting multiple extensions—from November 8 to November 22, and finally to today—the PUCSL has warned that it will independently proceed with the tariff revision if the corrected proposal is not submitted on time.

The UK-Sri Lanka Trade Mission, held from December 2-6 under the UK-funded SheTrades Commonwealth+ Program, is strengthening economic ties between the two nations while spotlighting women-led businesses. 

Co-organized by the International Trade Centre (ITC) and the Sri Lanka Export Development Board (EDB), the mission aims to enhance bilateral trade and expand UK market access for Sri Lankan women entrepreneurs in textiles, apparel, and processed agrifood sectors.

The initiative brings together 13 UK companies and 45 Sri Lankan women entrepreneurs, facilitating business-to-business (B2B) interactions and field visits across Colombo, Kurunegala, and Jaffna. 

The UK, Sri Lanka’s second-largest export market, saw an 8% rise in exports to $765.67 million during the first 10 months of 2024, highlighting the growing trade relationship.

The event’s opening in Colombo featured remarks by key figures, including British High Commissioner Andrew Patrick, Deputy Minister Chathuranga Abeysinghe, EDB Chairman Mangala Wijesinghe, and UN Resident Coordinator Marc-André Franche. 

High Commissioner Patrick emphasized the role of trade in empowering women and called for collective efforts to support women-led small and medium enterprises (SMEs) in global markets. Deputy Minister Abeysinghe lauded the initiative’s focus on geographic inclusivity, particularly in the northern region, and its potential to transform Sri Lanka’s economy.

EDB Chairman Wijesinghe highlighted the vital role of women entrepreneurs in fostering innovation and growth, stressing the need to address their underrepresentation in international trade. UN Resident Coordinator Franche echoed this sentiment, stating that achieving Sri Lanka’s export goals is impossible without prioritizing women entrepreneurs.

A panel discussion titled “Unlocking Sri Lanka’s Untapped Export Potential” featured experts from the UK Foreign Commonwealth and Development Office (FCDO), EDB, and private-sector leaders. The session explored strategies to enhance Sri Lankan exports, particularly from women-led businesses.

Preceding the B2B meetings, participants attended information sessions on sector overviews and export landscapes. Presentations covered the UK’s trade preferences, market entry requirements, and opportunities under the UK Developing Country Trading Scheme (DCTS).

Participants praised the initiative for fostering networking and knowledge-sharing. Khushnood Ahmed, Director of Hometex, described the mission as a positive step for women’s economic empowerment. Tayub Amjad of Zouk Group noted the value of the program in connecting with potential business partners.

The SheTrades Commonwealth+ Program, funded by the UK Government, promotes a gender-inclusive business ecosystem through policy advocacy, data insights, and partnerships with private and public sectors in Commonwealth countries and beyond. This mission underscores its commitment to empowering women entrepreneurs and driving inclusive economic growth.