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Select News Clips From Sri Lanka In December 2012

|Includes:iShares MSCI Frontier 100 Index ETF (FM), FRN, VRTU

Economic News

Sri Lanka's prosperity has increased 4.1 percent in 2011 improving on two earlier years, according to an index which tracks well-being, economic infrastructure and the business climate, the Central Bank said.

The Sri Lanka Prosperity Index has risen 4.1 percent to 60.6 point in 2011 showing a steady increase from 2009 when it was 56.5, the Central Bank said.


Sri Lanka's rupee currency gained 0.63 percent to hit a seven-month high on Thursday led by exporter dollar conversion and remittances ahead of holidays, while stocks ended firmer on falling interest rates.

Corporate Governance News

The Government is to amend the Administrative Regulations [AR] and Financial Regulations [FR] in line with modern needs.
The present public sector AR was introduced in 1968 and FR was introduced in 1962...

The Government has already started to compile a set of new AR and FR, which are much simpler, and they are expected to enhance the productivity of the public sector.

The new AR and FR are to be introduced within three months.


Sri Lanka's financial regulators will monitor banks connected to conglomerates closely in the future as firms and the financial sector becomes bigger in the future, Central Bank Governor Nivard Cabraal said.

"I know many of you are not only looking at the banking sector but you have other businesses as well," Cabraal told directors of banks in a forum called by the Central Bank Wednesday.

"In good times if the other sectors are doing well it can supplement your bank. It will give the necessary impetus to the bank as well. And he bank can also provide support to the other sectors

"But in difficult times you need to concentrate on ensuring that conglomerate risks are also taken care of."

Cabraal said an inter-regulatory committee made up of the Central Bank, the Securities and Exchange Commission, the Insurance Board and the Stock Exchange will be looking more closely at conglomerate risk.

Central Bank News

The Central Bank has revised the island nation's 2012 economic growth target to 6.5% on Wednesday from an earlier 6.8% due to its tight monetary and fiscal policies, the bank's Deputy Governor said...

Sri Lanka implemented sweeping policy measures to avert a balance-of-payments crisis in 2012 by raising key policy rates twice since February and floating the rupee currency.

The Central Bank also kept a lid on credit growth while the government raised fuel and electricity prices as part of an effort to contain the fiscal deficit...

The Central Bank last week surprised markets by cutting key policy rates for the first time in nearly two years... to boost economic growth.

"We wanted to take some policy measures in advance to ensure growth," Weerasinghe said. "In 2013, we will have 7.5% growth..."...

Inflation has risen due to a supply shortage mainly in foods, and notched three-month high of 9.5% year-on-year in November... still below the 42-month high of 9.8% struck in July due to an extended drought that hit the farm sector during the preceding months.

"Right now what I see is there is some space for us to ease monetary policy. There is no question about it," he said...


Sri Lanka should be careful to have suitable policies to allow economic growth to take off after reaching a target of 4,000 US dollar per person income in 2016, a senior central banker has said.

Assistant Governor C P J Siriwardene told a forum of bankers that Sri Lanka was aiming to reach the '$4K' target as quickly as possible in order to go beyond the 'magic number'...

Siriwardene said the United States was the first country to reach a 4,000 US dollar per capita income threshold in 1967...

Siriwardene said from 2000 to 2011, 40 countries reached the 4,000 dollar threshold with Maldives and Thailand among the Asian countries.


Sri Lanka has cut its main policy rate at which money injected to banks by 25 basis points to 9.50 percent to boost loans and the Central Bank said a credit ceiling would expire by the end of this month.

Authorities imposed a credit ceiling of 18 percent for banks for 2012 after Sri Lanka's monetary system ran into a balance of payments crisis largely due to excessive bank credit taken by state entities to manipulate energy prices.

"The growth of credit obtained by the private sector from commercial banks continued to decelerate, reaching 23.5 per cent (y-o-y), by October, from a high of over 35 per cent prior to March 2012," the Central Bank said.

"This growth is expected to decelerate further to around 19 per cent by end 2012."...

"However, as per current projections, inflation is expected to moderate towards the second quarter of 2013 and stabilise thereafter benefiting from the strong demand management policies introduced at the beginning of this year," the Central Bank said.


Sri Lanka has decided not to sell a sovereign bond in 2013, Central Bank Governor Nivard Cabraal said, urging commercial banks to tap the international capital market more.


Sri Lanka's 2013 monetary policies will be weighted more towards loosening after the success of tightening in turning around a trade deficit this year, Central Bank Governor Ajith Nivard Cabraal said...

Tourism News

A Chinese investor has come forward to build Sri Lanka's first township development project on a reclaimed land in the sea. The project would be built next to the ongoing Colombo South Harbour Development Project and a total of 575 acres would be filled. Dr. Priyath Wickrama, Chairman Sri Lanka Ports Authority said that the unique feature of this investment would be that Sri Lanka would not have to pay a 'single cent' for this. He said that currently there is a delay in obtaining sand clearance permits and when this is overcome the project would get underway next year. He said that the investor would be offered 57.5 acres... The total project is valued to be over US $ 950 million...

A mini-golf course, a Formula One race track, a small yacht marina and areas for water sports will be created. "Events like night races, musical shows and other similar events could be held here which would attract additional tourist arrivals to the country and generate more revenue," he said. Dr. Wickrama said that Sri Lanka being an island nation, maritime activities play a vital role in her socio economic status...


Tourist arrivals for the first 11 months of this year increased 16.5 percent to 883,353 from 758,458 a year earlier, while arrivals in the month of November increased 20.1 percent to 109,202 from 90,889 the previous year, data released by Tourism Development Authority showed.

The arrival figure for November is the highest on record for any given month. Last Tuesday, the country also welcomed its 950,000th visitor.

How you can invest in Sri Lanka

Currently iShares Frontier Markets has two Sri Lankan holdings.

Outside of Sri Lanka, there are two publicly traded companies.

  • John Keells, the largest single conglomerate in Sri Lanka, trades in Luxembourg as well as in Sri Lanka.
  • Virtusa (NASDAQ:VRTU) is a Sri Lankan based information technology firm that trades on the NASDAQ.

Interested investors can also refer to my instablogs linked from my Sri Lanka Investing Blog home page:

There are notes on currency risk as well as other things to consider in each of these blogs.

Stocks: FM, FRN, VRTU