SUNDAY 5 SEPTEMBER 2021 B1
Harry J Warns of Dire Consequences
Email: ceylonft@ceylonnewspapers.lk
June quarter
company
earning
surge 116%
Earnings of companies listed in the
Colombo Stock Exchange during the second
quarter of this year, ended June, surged 116
per cent year-on-year (YOY) to Rs 76.3 billion
compared to Rs 35.3 billion recorded a year
earlier.
According to a report released by First
Capital Research, the Consumer Durable
and Apparel sector rose 1869 per cent YoY
during the second quarter, followed by the
Transportation sector which rose 259 per
cent YOY, Capital Goods Sector which rose
255 per cent YOY, Food, Beverage and
Tobacco rose 94 per cent YOY,
Telecommunication rose 68 per cent YoY)
and Banks rose 65 per cent YoY.
However, earnings of the Diversified
Financials sector declined 50 per cent YOY
during the quarter under review followed by
Insurance which declined 15 per cent YOY.
Most of the listed sectors saw a surge in
profitability, due to lower base effect in the
previous year equivalent quarter amidst the
negative impact by the initial COVID-19
triggered lockdowns and also due to the
rebound in economy in Jun 2021 quarter as
normalcy recovers, First Capital said in its
report.
Capital Goods recorded an impressive
growth of 255 per cent YoY owing to the
rebound in performance in many counters.
John Keells Holdings (JKH) witnessed a
surge in earnings by Rs 3.2 billion led by all
segments except for Consumer Foods, while
the handover process of the residential
apartment units at ‘Cinnamon Life’
commenced, causing the recognition of
revenue and profits from sales for the first
time in the project resulting in property
segment EBITDA increasing by 1978 per cent
YoY. HAYL’s profitability rose by Rs 2.5
billion mainly led by the improvement in
revenue by 46.4 per cent YoY across strong
performance in most of the sectors and
reduction in net finance cost by 21.7 per cent
YoY to Rs 2.4 billion. (MA)
Story Continued on PAGE 2
Union Assurance reports highest
regular new business growth in 1H
Union Assurance PLC
closed the first half of the
financial year achieving a
65% growth in regular new
business premiums among
the top five life insurers in Sri
Lanka amidst a pandemic-
affected business landscape.
The company recorded a
Gross Written Premium
(GWP) of Rs.6.5 billion during
the six months ending 30
June 2021 with an increase
Jude Gomes
in top-line growth of 29%
compared to the corresponding period support such as a 24/7 trilingual call
of last year (2020). centre, online chat bot, WhatsApp,
Commenting on the performance of
the Company, Union Assurance CEO
Clicklife self-service app, and Clicklife
digital product. We honoured over
Rakshaa (Pvt) Ltd signs with
BOI to expand operations
The Board of Investment (BOI) of Sri Lanka recently signed
an agreement with Rakshaa (Pvt) Ltd, for the expansion of
their existing operations, which will now include high quality
ladies fashion garments and sportswear.
Rakshaa (Pvt) Ltd will export to the UK, Holland, USA,
India and Mauritius, and will generate approximately 300
additional employment opportunities with its expansion
that also includes rural geographies in Sri Lanka.
The agreement was signed by Sanjaya Mohottala,
Chairman of the Board of Investment of Sri Lanka and
Chandana Weerasinghe, Managing Director, Rakshaa
(Pvt) Ltd.
Toxic Toddy
Taking Over Market,
Killing People
Calls for better tax system so people can have better quality liquor
By Mario Andree
Pointing out that Sri Lanka was
witnessing a sharp increase in
illegally-produced and smuggled
liquor, owing to issues with
affordability, a senior
businessman warned of dire
consequences to human life.
“It is disheartening to note that
despite our many warnings the
illegal toddy industry continues to
thrive and flourish,” said
Chairman of listed conglomerate,
Melstacorp – the holding company
of Distilleries Company of Sri
Lanka (DCSP) – and Periceyl (Pvt)
Ltd., Harry Jayawardena.
Artificial toddy is produced
from various toxic substances
making it unfit for human
consumption, in many cases
resulting in blindness and other
Excessive price
controls will worsen
shortages – Advocata
New measures treating
symptoms rather than disease
Harsh enforcement of price
controls may worsen food
shortages. The Commissioner of
Essential Services has been
granted the power to seize food
stocks held by traders and
retailers and regulate prices.
There is serious concern with
the steep rise in the price of
essentials which has taken place
over the past two years.
Advocata’s Bath Curry Indicator
(BCI), which tracks commonly
consumed items, shows a 30%
increase in retail food prices in
August 2021 compared to
August 2020.
The reasons for the increase in
prices include import
restrictions and tariffs that have
disrupted markets. The classic
Jude Gomes stated, “The
results recorded by Union
Assurance from January to
June 2021 are underpinned
by the strong performance
and strategic drive to become
the fastest growing life
insurer among the top five
players in the industry. Our
key enablers were the digital
transformation efforts and
customer-centric initiatives
facilitating multiple platforms
for contactless customer
Harry Jayawardena
example is turmeric that retailed
at Rs 650 per kg prior to the
import ban, but now retails at
Rs 3,500 per kg according to the
DCS and at around Rs 4,400 to
Rs 6,900 on online retailers .
Other products are similarly
affected.
Story Continued on PAGE 2
Rs.1.7 Bn in claims, including those
related to COVID-19, fast-tracked
through digitisation. As we continued
to exercise utmost caution for
employee safety through the continuity
of COVID protocols, we ensured an
inspired, inclusive and engaged team
to deliver on the commitment to our
stakeholders.”
Upholding sustainable growth, the
Company recorded a 5-year Compound
Annual Growth Rate (CAGR) of 13%
Gross Written Premium. Moreover, the
Company's Profit After Tax (PAT)
increased significantly by 19% during
the first half to Rs 402 million, while
the Profit Before Tax (PBT) stands at Rs
462 million.
Story Continued on PAGE 2
Story Continued on PAGE 2
serious complications, sometimes
even death, he said.
“People are drinking toddy
because of the big price difference,
but they are not aware that they
are drinking poison,” he said.
This industry is run by a few
unscrupulous individuals and is
prevalent throughout the Island,
he said.
“Over the years we have done
our best to alert the authorities
that unethically prepared,
duplicated, adulterated and
artificial toddy is on the rise.
However, it has proved fruitless,
as when one operation is shut
down, it reopens under another
name,” he said.
The nation’s healthcare system
is already stretched thin by the
COVID-19 pandemic, but this
proliferation or adulterated toddy
Global Tourism Promotion Programme
SL should include
non-traditional markets
By Mario Andree
Highlighting the importance of
engaging in meaningful
marketing strategies with
consensus from all stakeholders
to revive the tourism industry,
Mahaweli Reach Hotel Chairman
M. U. Maniku said that
authorities should consider the
emerging trend witnessed during
the pandemic times.
Given the everchanging nature
of this pandemic, it is difficult to
predict when international travel
may resume and return to pre-
pandemic levels, he said.
Building consumer confidence
will take time and in the
medium-term intense
competition will no doubt have a
detrimental effect on applicable
rates, he said
Government revenue
up 7.5%, expenditure
up 6.7% Jan-June
By Mario Andree
During the first six months of
this year, ended June,
Government revenue and grants
increased 7.5 per cent, while
expenditure and lending
increased 6.7 per cent according
to data released by Central Bank
of Sri Lanka.
The Bank pointed out that
during the first six months of
this year, Government revenue
and grants reached Rs 715.3
billion, up 7.5 per cent
compared to Rs 665.5 billion
recorded a year earlier.
During the period under
review, State expenditure
increased 6.4 per cent to
Rs 1,495.5 billion from
will result in an even greater
burden to the State, he said.
According to him, the regulator
continues to remain silent.
The excessive taxes and levies
on coconut arrack continues to
result in shrinking sales. Pure
coconut products are now out of
reach of most consumers, he said.
It is high time that the
authorities reconsider the level of
these taxes and levies to ensure
that the nation’s ethnic coconut
products remain economically
available to all consumers, he
said.
Unless such action is taken, it
is probable that Sri Lankan
coconut arrack will soon be the
sole privilege of the wealthy.
Further, the existing retail
licensing system is another
anomaly, he said.
Story Continued on PAGE 2
This will exacerbate an already
difficult scenario. However, with
prudence and innovation these
challenges can be overcome, he
said.
Engaging in meaningful
marketing strategies with
consensus from all stakeholders
will also be vital to revive the
industry as seen during the
pandemic, he said.
Exploring new markets and
using new and innovative
strategies may be the key to
attracting travellers who will be
spoiled for choice in a highly
competitive Asian region, he said
Price pressure too, will
inevitably have its effect on an
already intensely competitive
market and will need to be
considered in future planning, he
said.
Story Continued on PAGE 2
Rs 1,401.2 billion a year earlier.
According to the report,
revenue generated by the
Government during the first six
months stood at Rs 714.5
billion, up 7.7 per cent
compared to Rs 663.4 billion
generated last year.
Tax revenue during the period
increased 10 per cent to
Rs 641.2 billion from Rs 580.8
billion a year earlier.
Non-tax revenue on the other
hand declined 11.15 per cent to
Rs 73.3 billion from Rs 82.5
billion last year.
Grants received by the
Government during the first six
months stood at Rs 0.7 billion,
down 66.6 per cent compared to
Rs 2.1 billion received last year.
Story Continued on PAGE 2
B2 ceylon ft sunday 5 september 2021 Insight/News

Sri Lanka’s Macroeconomic Policy

Setting: Cohesion or Confusion?
By Dr. Dushni Weerakoon
The hike in policy interest rates by
the Central Bank of Sri Lanka (CBSL)
in August 2021 marks a shift from
stimulus to exit strategies in the
pandemic era. Such recalibrations
globally are focused on how to tackle
the historically large debt-to-GDP
ratios that the COVID-19 pandemic
leaves in its wake.
At end 2020, advanced economies
(AEs) on average had amassed debt to
the tune of 120% of their GDP with
emerging markets economies (EMEs)
trailing some distance behind at 65%
of GDP. As the spotlight moves, the
full impacts of the macroeconomic
policy measures, hitherto obscured by
the urgency to deal with the health
crisis, are now coming under greater
scrutiny.
SL debt metrics make
orderly exit difficult
Many countries, especially AEs,
exercised their ‘monetary sovereignty’
to create and print their own money to
support stimulus efforts. They have
done so through coordinated
monetary/fiscal policies – i.e. using
monetary policy to keeping borrowing
costs low while fiscal authorities
provide back-stop assurance. Some
are better positioned to manage the
inherent risks and conflicts of interest
that are involved in this exercise. AEs
have an advantage as issuers of
reserve currencies with global demand
and historically low interest rates;
EMEs with limited exposure to foreign
currency-denominated debt and
holding comfortable stockpiles of
reserves are less exposed to disruptive
tail events.
Such countries can bring down their
debt ratios if they are able to maintain
nominal GDP growth persistently
above the average interest rates that
they pay on their debt – i.e. the
growth-corrected interest rate (r-g)
whereby countries can run modest
primary deficits and still have a stable
or falling debt-to-GDP ratio.
Sri Lanka is not similarly positioned.
Its debt metrics point to high
vulnerabilities – a high debt-to-GDP
ratio of 101% of GDP, large exposure
to foreign currency-denominated debt,
and a hefty foreign debt repayment
schedule. Under these conditions, the
threat from exercising monetary
sovereignty was always self-evident. A
depreciating currency,
notwithstanding distortionary controls
on imports and capital flows, worsens
the debt vulnerabilities.
Domestic and foreign debts are
hardly similar. Given Sri Lanka’s debt
metrics and the fundamental
economic imbalances that have
generated them, simple accounting
identities do not always offer very
plausible solutions. If the exchange
rate depreciates, it adds to the real
value of outstanding debt, relative to
the size of the economy, even if
interest rates remain modest. Further,
shocks like COVID-19 raise risk
premia, and marginal borrowing costs
can rise suddenly and sharply, cutting
countries abruptly out of financial
markets.
Crucial to instill and
retain macroeconomic
policy credibility
Short of distortionary measures
such as inflating debt away or
maintaining an overvalued currency, a
primary surplus is needed to stop the
public debt-to-GDP ratio from rising
and an even larger surplus is needed
to reduce it. Improving the primary
budget balance calls for tax increases
or public spending cuts that are
unpopular and have upfront costs.
Given the government’s unwillingness
to go down this path, households and
firms will be required instead to bear
the cost through higher interest rates
that will affect their consumption and
investments.
Higher interest rates in this instance
will also not ‘pull in’ foreign capital to
firm up the exchange rate given the
risk premia on the currency front as
depreciating pressure deepens. With
reserves in hand to cover barely two
months of imports, the forex market
will continue to face volatility and
instability until a steady stream of
capital inflows, beyond short-term
swaps, emerge. Until such time, a
depreciating domestic currency will
increase the interest burden as
calculated in that currency. If debt
servicing interest rate costs are
pushed persistently above the
economic growth rate, Sri Lanka’s
debt burden will grow steadily even in
the absence of new borrowing – a
context sometimes called a ‘debt
spiral’.
Without a clearly spelt-out debt
sustainability path, Sri Lanka seems
to be placing all its bets on foreign
direct investment (FDI) to ease
external pressures and revive
economic growth. For a successful
outcome – i.e. productivity gains to
drive long-term growth – the type of
FDI matters. The more desirable is
efficiency-seeking FDI, but this is also
harder to attract. For now, a policy
environment of import curbs and
capital controls is more likely to see
strategic-seeking infrastructure-led
FDI. The latter runs the risk of
switching resources to non-tradable
sectors – reducing the availability of
external financing over the longer term
– and the prospect of a short-lived
growth burst as before in the post-war
years. Crucially too, the sole reliance
on FDI leaves Sri Lanka at the mercy
of developments beyond its control.
Rather, efforts to attract FDI should
be coupled with building effective
policy strategies that instill and
maintain credibility. Indeed, this is all
the more important as Sri Lanka
appears to be firmly against an
International Monetary Fund (IMF)
bailout. IMF loan amounts are small
and it no longer has much sway on
debt relief with much of EME foreign
debt held by private institutional
investors and China. An IMF
programme is mostly useful in firming
up sovereign credit ratings and
reviving the sentiments of investors.
But investor sentiments can also
improve if governments put forward
and implement credible policy
strategies. By contrast, the CBSL’s
policy rate adjustment to anchor
expectations, for instance, will not
stick if direct financing of fiscal
spending is to continue under yield
control measures. Instead, market
convictions on the credibility of the
policy mix will drive economic
fundamentals. As Sri Lanka readies to
transition out of pandemic-related
emergency support, some notion of
fiscal and debt sustainability to
anchor confidence should be the
priority in Budget 2022 preparations.
Dr. Dushni Weerakoon is IPS’
Executive Director and Head of its
Macroeconomic Policy research.
She has nearly three decades of
experience at IPS, and functioned
as its Deputy Director from 2005 to
2017. Since joining IPS in 1994,
her research and publications have
covered areas related to regional
trade integration, macroeconomic
policy and international
economics. She has extensive
experience working in policy
development committees and
official delegations of the
Government of Sri Lanka. She
holds a PhD in Economics from the
University of Manchester.
* This blog is based on the
comprehensive chapter
on “Economic Performance and
Outlook: Managing the Crisis and
Promoting Recovery” in IPS’
forthcoming annual flagship
publication ‘Sri Lanka: State of
Economy 2021’.

Continued from page 1

Toxic Toddy taking... Union Assurance reports...

A handful of people own
more than 75 per cent of the
total FL4 licences and the
remaining licences are also
being snapped up by
unscrupulous elements keen
to sell both legal and tax
unpaid illegal products with
ease, costing colossal tax
revenue losses to the State, he
said.
Finally, he called for the
replacement of an Ordinance
which saw the light of day
more than a hundred years
ago to suit modern day
requirements so that everyone
engaged in the industry could
work on a level playing field,
under regulations which suit
the 21st century.
The Company also
continues to maintain a
healthy Capital Adequacy
Ratio of 300%, which is
significantly higher than the
regulatory requirement of
120%. In addition to its
strategic performance goals,
Union Assurance continued
to make progress in key areas
related to the Community and
People. The Company made
significant contributions
towards the Community by
supporting displaced flood
victims with over 3,000 meals,
and provided much-needed
medical equipment to
hospitals for COVID care.
Among its People initiatives
are Diversity and Inclusion at
the workplace to ensure equal
opportunity for all through
expanding hiring
commitments and education.
Union Assurance was certified
as a Great Place to Work for
the ninth year, and
recognised among the Best
Places to Work in Asia.

Excessive Price Controls...

The recent ban on fertilizer
is likely to result in even
further increases in the prices
of vegetables and cereals over
the forthcoming harvests.
These restrictive policies
have been compounded by
the acute shortage of foreign
currency caused by the
ongoing balance of payments
(BOP) crisis. Lack of foreign
contributed towards excess
import demand.
This is evident in the trade
data: despite the stringent
import restrictions imposed
after April 2020, import
demand for the six months to
June 2021 have surged by
30% over the same period in
2020. While exports in the
period have also risen, it is
economic efficiency, hence
growth and productivity and
also leads to issues with
economic distribution.
Harsh enforcement of price
controls could in turn create
black markets resulting in
significant welfare losses in
the form of a deterioration in
product quality, elevate
scarcities, disadvantage the
Rakshaa (Pvt) Ltd...
At the signing ceremony,
Mohottala commended the
company’s decision to invest
in a manufacturing unit in
rural Sri Lanka and
contribute positively towards
the economic empowerment
of these communities. He
further congratulated the
organisation’s leadership for
expanding its capacity and
venturing into new markets,
by adapting to global
production trends and moving
swiftly to capitalise on global
trade shifts – all, while
coming up as a home-grown
company.

Government revenue up...

exchange has imposed
additional restrictions on
imports resulting in
shortages causing prices to
spike.
While the increases in
prices is a real concern, the
causes are complex and are
largely due to poor policies.
The balance of payments
crisis arises not due to trade
policy but due to the levels of
aggregate demand in the
economy, principally through
consumption and investment
influenced by the prevailing
fiscal and monetary policy.
The tax cuts towards the end
of 2019, fiscal dominance of
monetary policy and non-
pass through of global
commodity prices through
price controls and
administered prices have
the rapid rise in imports that
have caused the negative
trade balance.
Price controls and
administered prices have led
to shortages and hoarding.
Instead of addressing the
problem at the root, the
Government is trying to
control the symptoms.
Previous attempts at price
controls have not succeeded
as Advocata’s research in
2018 has shown but better
enforcement is not the
solution. Instead, the
Government should address
the policy weaknesses that
are the cause of the problem.
Trying to negate policy
missteps in fiscal and
monetary policy through
trade policy in an untenable
exercise for it impacts
poor who are less
sophisticated and in the long
run lead to higher prices,
lower output due to lower
investment.
Advocata Institute urges
policy makers to urgently
address the root cause of the
current crisis by increasing
tax revenues via more
progressive tax policies - by
increasing the tax base for
both direct and indirect taxes
and reducing the tax gap
through greater tax effort.
Further, it is best where
possible to use well targeted
cash transfers to vulnerable
segments of the population to
improve affordability instead
of cutting taxing, imposing
price control or using
administered prices on
utilities.
On the expenditure front,
recurrent expenditure
increased 5.9 per cent
during the first six months
SL should include...
The main source markets
for Sri Lanka in the past have
been China, India, Germany,
United Kingdom and France,
he said.
However, this scenario
however has changed during
the pandemic, he said
When the airports opened
up, Sri Lanka witnessed a
shift to new markets with the
to Rs 1,311 billion from Rs
1,237.4 billion a year earlier.
Capita and net lending by
the Government increased
main source markets
becoming India, the Russian
Federation, Ukraine, United
Arab Emirates and Germany,
he said. While the dynamics
of this shift were under
extraordinary circumstances,
it has opened up new
horizons with the country
gaining recognition in hitherto
unexplored markets, he said.
12.4 per cent to Rs 184.5
billion from Rs 163.7 billion
recorded during the same
period of last year.
It will be prudent to
consider these new markets
when mapping a strategy for
the revival of the industry, he
said.
Sri Lanka has welcomed
more than 19,337 visitors
during the first seven months
of this year, with 2,429
travellers visiting the country
in July this year.

June quarter Company...

In the Banking sector, three of the
largest banks Commercial Bank,
Hatton National Bank and Sampath
Bank registered enhanced
profitability due to improved Net
Interest Income despite increase in
impairment provision and
conservative loan book growth. Food,
Beverage and Tobacco earnings
recorded an increase led by the
rebound in consumer recovery while
Consumer Durable and Apparel
sector profitability surge was led by
Ambeon Holdings due to the capital
gain from the sale of South Asia
Textiles. Transportation sector
earnings improved dominated by
Expolanka while Telecommunication
sector earnings rose with the strong
performance in Dialog and Sri Lanka
Telecom due to robust performance in
data segment with the working from
home arrangements.
Diversified Financials sector
earnings recorded a decline of 50 per
cent YoY led by LOLC Holdings due to
the higher base effect in 1QFY21 as a
result of gain of Rs 42.9 billion with
the disposal of 49 per cent stake in
PRASAC Microfinance in Cambodia.
Moreover, insurance sector
earnings declined by 15 per cent YoY
led by higher provision to Life
insurance fund amidst prevailed
lower interest rate environment.
focus sunday 5 september 2021 Ceylon FT b3

Bridging the Gaps: The

COVID-19 Crisis and Sri Lanka’s
Healthcare Response
By Priyanka Jayawardena
(IPS/Talking Economics)
Like many other countries, Sri Lanka
faces numerous challenges in the battle
against COVID-19. The pandemic has
caused deep uncertainty and presented
a colossal challenge for the country’s
healthcare system. With the rapid
increase in cases and the emergence of
new variants, Sri Lanka began to face
shortages of medical resources,
including hospital beds and medical
equipment. The vaccination programme
was beset with a host of problems early
on due to the irregular and inconsistent
supply of vaccines, disorganised
deployment and deviation from the
scientifically agreed prioritisation.
There was also alleged misreporting of
COVID-19 daily statistics in the
Gampaha District and Eastern
Province. The absence of real-time data
acted as a hindrance to obtain a reliable
risk assessment in the country. Against
this backdrop, this blog examines the
gaps in the ongoing pandemic control
programme and outlines ways to bridge
these gaps so that more lives could be
saved from COVID-19.
COVID-19 Vaccination
Programme
 By mid-August 2021, more than 12
million Sri Lankans (55% of the
population) had been vaccinated with
at least the first dose. Other than the
delayed supply of vaccines, there were
issues related to getting approval for
vaccine use and the vaccination
prioritisation process. Moreover, many
people were seen queuing up at
vaccination centres aggravating health
risks due to the lack of a properly
planned system for vaccine deployment
and the lack of an online appointment
system. More recently, the Government
has taken several measures to improve
the rollout, including expediting the
procurement process and improving
administration with the support of the
defence services.
 Gaps in Pandemic Control
 Sri Lanka’s rate of COVID-19
screening has remained inadequate to
prevent the spread of the virus.
Systematic surveillance is crucial for
the rapid identification and detection of
suspected COVID-19 cases. With newer
variants found to be more transmissible
and deadlier, there is a need to identify
mutants and track the nature of
transmission. Currently, the University
of Sri Jayewardenepura is the only
institution equipped with laboratory
facilities to conduct genomic
sequencing to identify new variants.
 Countries like Singapore, New
Zealand and Australia systematically
monitor the pandemic through
extensive testing and contact tracing.
These countries are conducting 10-100
times more tests than other countries
with a similar number of new confirmed
cases. Sri Lanka’s extent of testing
relative to the scale of the outbreak
(positive rate was around 10%), is on par
with Thailand and Malaysia, but lower
than India, Vietnam and Cambodia
where the positive rate is below 5%.
 Further, a major challenge to the
existing healthcare system is inadequate
ICU beds, ventilators, oxygen supplies
and other necessities required to care for
patients with severe respiratory failure.
The availability of ICU capacity plays a
crucial role in critical cases, and
constant and uninterrupted availability
of oxygen supplied beds is needed to
avert a disaster. Currently, less than
200 ICU beds are in isolation units for
patients with severe COVID-19
symptoms, whereas just around 700
ICU beds are available in the hospital
system of the entire country.
Equally, it is vital to have timely
access to real-time data so that
meaningful insights can be drawn but
due to capacity constraints and
administrative issues, PCR test results
are reported to be delayed. In some
districts, the delays are said to be longer
than one week. Thus, delays in
generating test results are a grave
concern and represent a major obstacle
in the COVID-19 control process. There
is a growing need for immediate and
accessible healthcare and digital
healthcare resources to effectively
respond to the challenges posed by
COVID-19. However, Sri Lanka’s health
information systems are weak and
under-funded and the lack of an
adequate central health database and IT
infrastructure has hampered digital
health services.
Towards a Stronger
Healthcare Response
 The healthcare system has to be
streamlined to ensure a successful
vaccination deployment and a smooth
inoculation programme with online
appointments including over the phone
appointment facilities. Parallel to an
efficient vaccination programme, an
enhanced screening capacity is needed
for the rapid identification of COVID-19
cases. Sri Lanka’s overall COVID-19
screening capacity remains low;
therefore, expanding testing and
increasing the health sector’s capacity to
identify new mutants is vital to curb the
pandemic. Random PCR testing too
must be carried out in densely
populated areas which are prone to be
contagious, thereby taking additional
precautionary measures.
 There is a growing concern about the
availability of medical supplies in
emergency contexts. Sri Lanka has to
effectively leverage its limited resources
in response to the pandemic. The crisis
response has seen local innovation in
the manufacturing of ICU beds and lab
consumables and there is further scope
to encourage local enterprise and
innovation for this purpose. For
instance, a team of Sri Lankan scientists
recently invented a new PCR test kit
using NANO technology, which is said to
drastically reduce the testing time from
two hours to half an hour. There is now
an opportunity to encourage local
innovation and local production through
such efforts, where they contribute to
efficiency gains.
 Furthermore, a robust laboratory
strategy, which includes laboratory
networking, communicating real-time
information on COVID-19, quality
assurance and adequate workforce
capacity is important for rapid detection
and case management. South Korea, for
example, practised the disclosure of
real-time information on COVID-19 by
the government via
dedicated websites, mass media,
phone messages and mobile apps.
Digitalisation of healthcare and
effective use of technology for sharing
real-time data, contact tracing and
surveillance and coordinating the
efficient use of clinical resources are
vital for successful pandemic control.
It is also necessary to improve
systems to manage real-time data and
decision-support systems. Improved
functional integration and
coordination in treatment centres and
laboratory services bring in many
benefits.
Priyanka Jayawardena is a
Research Economist with research
interests in skills and education,
demographics, health, and labour
markets. Priyanka has around 15
years of research experience at
IPS. She has worked as a
consultant to international
organisations including World
Bank, ADB and UNICEF. She holds
a BSc (Hons) specialised in
Statistics and an MA in Economics,
both from the University of
Colombo.

By Sathya Karunarathne To Leave or to Stay country- last month the

Central Bank issued a new
Overseas migration for work order under the Foreign

Years of Bad Economic Policy

or study seems a popular Exchange Act declaring limits
option for Sri Lanka’s youth. on migration allowances.
Central Bank data shows that Social Media is swamped with
in 2019 alone the age group infuriated complaints on price

Killing Youth Aspirations

25-29 recorded the highest
number of departures abroad
for skilled, semi-skilled, and
unskilled employment. This
age group also recorded the
second-highest number of
departures for professional,
middle, and clerical level jobs.
UNESCO’s Eurostat data
collection on education for
2020 states that the total
number of Sri Lankan students
overseas is 24,118.
A significant segment of the
youth population seems
dissatisfied with the available
opportunities and choices
within Sri Lanka. The above
numbers reflect their lack of
faith in a better and safer
society in the years to come.
For decades this lack of
opportunity was blamed on the
war. However, even twelve
years after the conclusion of
the war little has changed. It is
worthy to explore why.
How did we get here?
The island nation’s
predicament was in the making
for almost 70 years.
Consecutive Governments
since independence have failed
to successfully implement
policies to deliver economic
growth and better living
standards.
Trade is the engine of growth,
but over the last fifteen years
Sri Lanka has shied away from
trade led growth. Although Sri
Lanka was South Asia’s first to
embark on economic
liberalisation in 1977 and
despite the relatively robust
economic performance that
resulted even during the war
years, Sri Lanka began to move
away from international trade
and investment.
Starting in 2004, import
tariffs were raised in an ad hoc
fashion to finance a growing
Defence Budget. By 2009, Sri
Lanka had one of the world’s
most complex import tax
regimes made up of para tariffs,
(taxes above custom duties)
and customs duties. By 2009,
the overall protection more
than doubled from 13.4 per
cent to 27.9 per cent Sri
Lanka’s import policies by this
time were as protective as they
had been 20 years ago. While
Sri Lanka continued to miss
the boat of economic
globalisation our East Asian
neighbours such as Vietnam
and Thailand have risen to
prosperity by successfully
integrating with global value
chains.
This was compounded by an
increase in state spending and
increased State involvement in
the economy. Much of it is
financed by debt. Sri Lanka’s
State expenditure has
ballooned. Due to excessive
borrowing, the Central
Government’s highest
recurrent expenditure is on
interest payments which were
at 36 per cent in 2020. The
country boasts a bloated public
sector. The Ministry of Finance
states that 30 per cent or the
second largest of the Central
Government’s recurrent
expenditure is spent on
salaries and wages. This
amounted to a staggering 794.2
billion in 2020 an increase of
15.7 per cent from 2019.
The Economy Next reported
in June that 86 per cent of tax
revenue went into salaries and
pensions in 2020. Moreover,
these salaries are only a part of
the problem; much expenditure
is wasted sustaining
mismanagement, corruption,
and negligence within some
527 SOEs whose cumulative
losses outweigh profits.
Tax revenues have not kept
pace with expenditure and the
tax system is weighted towards
indirect taxes. In 2020, of the
share of Sri Lanka’s tax
revenue only 22.1 per cent was
direct taxes with 77.9 per cent
being indirect. This is highly
regressive as a large component
of indirect taxes end up on
goods and services consumed
by the average Sri Lankan
imposing a higher burden on
low income earners.
Consecutive Government’s
reluctance to rectify these
economic miscalculations
through hard reforms have
brought the island to a
precarious state of high levels
of accumulated debt with
exponentially growing interest
payments. The country now
has a debt to GDP ratio of over
101 per cent, while foreign
reserves have declined to 2.8
billion- sufficient for less than
two months of imports.
Fitch ratings have estimated
that Sri Lanka’s foreign
currency debt service
obligations until 2026 amount
to USD 29 billion. Sri Lanka’s
debt is on an unsustainable
path.
So what’s at stake for
young people in this?
Sri Lanka’s youth sit
helplessly as bungled policy
results in the economy tanking,
taking them further away from
their aspirations, hopes and
dreams. Labour force survey
for the fourth quarter (Q4) of
2020 reported a startling youth
unemployment (15-25 years)
rate of 25.7 per cent. In terms
of education level, the highest
unemployment rate is reported
from the GCE A/L and above
group. Although the labour
force is educated their main
source of employment remains
Sathya Karunaratne
in the informal sector.
Nevertheless, skills gap and
mismatches have been
identified as a major obstacle
preventing employment. For
example, a 2019 survey
estimated a shortage of 12,140
ICT graduates. A World Bank
study recognised poor English
language skills as another
impediment.
In addition to this, COVID-19
exacerbated Sri Lanka’s
challenge of providing
employment. Unemployment
as a percentage of the total
labour force increased from 4.5
per cent to 5.2 per cent
between 2019 Q4 - 2020 Q4.
This coupled with the country’s
poor economic conditions will
lead to more job losses in the
coming months. For instance,
with banks rationing letters of
credit those employed in the
import sector are in panic.
Additionally, with prices of
essential items increasing the
demand for other products and
services will decline as people
are forced to deprive
themselves of small luxuries
such as ordering a meal from a
restaurant to survive. This
poses a threat to business
operations and employment.
To curb the outflow of dollars
the country has resorted to
increased import restrictions.
These unsustainable policy
responses have robbed the Sri
Lankan youth of the luxury to
dream and to aspire.
Purchasing a car and
housing are two such
aspirations that are slipping
through the fingers of the
average Sri Lankan. Vehicle
Importers Association of Sri
Lanka (VIASL) stated that the
price of certain vehicles in the
local market has increased by
around Rs10 million due to
import restrictions. A
2017/2018 Wagon R which
was sold at Rs 3.5 million is
now being sold at Rs 6 million.
Those building or repairing
houses face difficulty as
cement importers have limited
the release of cement to the
market due to partial
suspension of imports and
price controls resulting in
severe shortages. This coupled
with high tariffs on
construction material will
further contribute to making
the construction of a house an
illusion to the middle-class Sri
Lankan.
Even the escape routes of Sri
Lanka are closing. Students
aspiring to leave the country for
higher education fear banks
may not issue dollars to finance
their stay. Migrants are unable
to take their savings with them
meaning they face a much
harder start in another
hikes and scarcity of essentials
such as medicine in midst of a
pandemic.
It is safe to conclude that
young people have found
themselves in a perilous socio
economic fabric with looming
uncertainty.
To leave or to stay?
If the Government is to retain
young people they must be
provided with indications of
stability and hope. Excessive
reliance on import restrictions
as a policy solution to the
foreign exchange crisis at hand
exhibits the Government’s
reluctance to implement
painful, but necessary reforms.
Stability and hope lie in
reforms the politicians are
resistant to.
Increasing sources of
Government revenue,
re-prioritising Government
expenditure, limiting
intervention, relying on
markets and recognising the
vitality of trade in a globalised
economy is Sri Lanka’s road to
prosperity. It will not be easy or
painless, the accumulated
policy mistakes of the past two
decades require some very hard
reforms but it is the only
sustainable way out of the
current mess.
Sri Lanka faces a serious crisis
but it presents an opportunity to
learn from the mistakes of the
past and to rebuild the island’s
institutions along with the hopes
and dreams of the young.
Sathya Karunarathne is the
Research Analyst at the
Advocata Institute and can be
contacted at sathya@
advocata.org. Learn more
about Advocata’s work at
www.advocata.org. The
opinions expressed are the
author’s own views. They may
not necessarily reflect the
views of the Advocata
Institute, or anyone affiliated
with the institute.
B4 CEYLON FT SUNDAY 5 SEPTEMBER 2021 NEWS

IASL – Uplifting the Insurance

Industry of Sri Lanka
The Insurance Association of Sri
Lanka celebrated National Insurance
Day on 1 September. Insurance
Month will be commemorated to
spread awareness about the
importance of insurance and its
present relevance. As all industries in
the country undergo continuous
challenges and changes during the
global pandemic, the insurance
industry too, has been dynamic in its
approach to customers in providing
timely policy solutions.
Iftikar Ahamed, the President of
IASL, provided a look inside the
insurance industry, detailing the
changes in the industry landscape
and IASL’s role during this time.
“The pandemic has had mixed
effects on the insurance industry in
the past year. The Life Insurance
Industry Gross Written Premium
(GWP) grew by 16% to cross the LKR
100 billion threshold in 2020, and the
first six months of 2021 saw a growth
of 30%, which is a remarkable figure
despite the effects of the previous
year. The import of motor vehicles
had a detrimental effect of the
General Insurance sector, which had
a negative growth of 1.3% towards
GWP of LKR 99.5 billion in 2020. The
first half of 2021 too, recorded a
negative growth of 0.3%.
“As the apex body of the industry,
insurance awareness month is
utilised to spread awareness of the
relevance and importance of
insurance to every Sri Lankan. We
have seen many insurance providers
explore new avenues that would be
timely solutions for our customers as
they push the traditional limits in
solutions and selling by transitioning
into the digital sphere, reducing
overall turnaround times. These have
to be taken to the public in quick and
efficient ways, where aggressive
Iftikar Ahamed
marketing and sales becomes key.
The Insurance Awareness month
therefore, becomes more crucial this
year.”
Speaking on how the pandemic has
affected the industry and the steps
taken to ease the burden of those
affected as well as the Government,
Iftikar continued, “The insurance
industry has stood by its
policyholders by coming forward to
meet their COVID claims despite the
pandemic, which is usually an
exclusion. Especially during the third
and fourth waves, honouring claims
has been a moment of truth for many
customers and a true testimony to the
fact that we are there for Sri Lanka.
“In addition, rewarding and
recognising efforts, especially at times
such as these, is important for the
industry given that their role has been
extremely challenging during this
period. The National insurance
awards took place on 1 September as
a virtual event where the brightest
and the best talent in the industry
received awards for both 2019 and
2020, since we could not have this
event last year.”
When asked his opinion on how
insurance companies might
successfully maintain customer
interest, Iftikar further added, “The
attention and interest of the public on
insurance and the protection that it
affords is now quite evident. The
industry needs to capture this
moment and maintain engagement
with meaningful benefits whilst
ensuring that all policyholders are
treated fairly and equitably.”
It is hoped that the message of
insurance will be further
disseminated following Insurance
Month 2021, and that it will result in
increased awareness and
understanding among the people of
Sri Lanka. A subject that can be
embedded into the daily life of an
individual from dawn to dusk, it is
vital that the public can access their
preferred insurance solution at the
time, place, price and in the manner
they want.

SriLankan Airlines celebrates 42 years People’s Bank Buddhist Society

of fortitude soaring in the skies.
SriLankan Airlines, the National
Carrier of Sri Lanka and a member
of the oneworld alliance, celebrated
42 years of flying across the globe.
Since its inception on 1 September
1947, as Air Ceylon, later as Air
Lanka, SriLankan Airlines has
elevated the identity of Sri Lanka
across the world. This year’s
celebrations were held virtually in
keeping with the health and safety
guidelines of the country. A multi-
religious blessing was live streamed,
and employees joined the
observations remotely. In addition, a
pre-recorded Pirith chanting was
played at the Airline’s premises in
Katunayake to invoke blessings in
absence of the regular, customary
overnight Pirith ceremony held in the
past.
SriLankan Airlines has prevailed
through times of turbulence both in
the air and on ground. The Airline
has persisted through a destructive
war against terrorism, countless
political and economic upheavals;
undulations in trade; and now the
devastating effects of an ongoing
pandemic. In challenging times, the
Airline has always drawn strength
from the resilience and commitment
of its dedicated workforce.
SriLankan Airlines’ Chairman,
Ashok Pathirage said, “As the Flag
Carrier, SriLankan is a significant
contributor to the national economy
and a catalyst for our country’s
tourism industry. We are grateful to
our shareholder, the Government of
Sri Lanka, for the financial support
extended towards the Airline despite
the heavy macro-economic
challenges the country is facing at
present. We are a very resilient
organisation, and I am confident
that together we will steer the Airline
through these challenging times. I
would like to thank my Board of
Directors, Management team and
each staff member of the Airline for
their commitment especially during
this daunting period. Thus, we are
looking to a future where the
National Carrier is empowered to
continue its mission of taking Sri
Lanka to the world.”
Despite the adversity faced by the
Airline, the year 2021 has brought
international visibility and
recognition to SriLankan Airlines, by
claiming the Diamond standard in
the APEX global audit conducted by
APEX and SimpliFlying.
Additionally, winning the Best in
maintaining Health at Workplace at
the Asian Business Leadership
Awards. SriLankan Airlines was also
awarded a ‘Four-star rating for
Major Official Airline’ for 2021 by
APEX at the Future Travel
Experience (FTE) Virtual Expo
Award ceremony and was also
named the ‘World’s Leading Airline
to the Indian Ocean’ at the World
Travel Awards Grand Final held in
Moscow for the fifth consecutive
year. The Airline also added two new
destinations - Nairobi (Kenya) and
Moscow (Russia) to its global
footprint.
Chief Executive Officer of
SriLankan Airlines, Vipula
Gunatilleka stated, “The aviation
industry has been adversely affected
by the global pandemic.
Nevertheless, compared with many
other airlines, we have been able to
steer the business successfully
during these unprecedented times.
The collective effort of our employees
was a contributing factor to keep the
Airline flying despite adversity. We
continue to serve our motherland
during this crisis by repatriating
stranded citizens and supporting the
national vaccination drive.”
Throughout the existence of the
National Carrier, the Airline
courageously shouldered the
additional responsibility of
providing smooth air services
during the country’s many
humanitarian efforts. While many
Airlines have ceased operations to
Colombo, SriLankan Airlines has
continued to persevere to provide a
solid air travel network for the
country to depend on. The Airline is
especially focused on driving the
tourism industry, and has
continuously marketed Sri Lanka
as an ideal destination for leisure
and business travel.
gifts a brand-new house
To underprivileged, low-income
family in Vavuniya
Marking the occasion of People’s
Bank’s 60th Anniversary and as part of
the Bank’s ongoing housing project,
the People’s Bank Buddhist Society
presented a brand new home to
Deepika Sanjeewani, a resident of
Mundimuruppu in Vavuniya.
The house was officially handed over
by Ranjith Kodituwakku, Chief
Executive Officer/General Manager of
People’s Bank and Major General
D.M.H.D. Bandara, Commander
Security Force Headquarters (Vanni)
recently.
Based on the request made by the
562 Infantry Brigade in
Echchankulam, Vavuniya, the People’s
Bank Buddhist Society provided
financial support and coordinated the
construction of the new house, while
the troops of the 562 Infantry Brigade
in Vavuniya provided the manpower.
Major General A.A.D.N.S.P.
Dunuwila, General Officer
Commanding Infantry 56 Division,
Brigadier A.M.S. Premawansa,
Brigade Commander 562 Infantry
Brigade, Major H. K. Kumarasiri,
Commanding Officer 17 (V) Sri Lanka
Sinha Regiment of the Sri Lanka
Army, together with Mahinda
Premanath, Deputy General Manager
(Channel Management) of People’s
Bank, V. Kanagasabai, Vanni
Regional Manager, Retired Major
D.M.T.B. Dassanayake, Assistant
Security Superintendent, Army
officials and officials of the People’s
Bank Buddhist Society also
participated in the event.

Samsung conducts NTB’s American Express

virtual ‘Student Ambassador’
induction programme
Samsung Sri Lanka recently conducted a
virtual induction programme of their
initiative, ‘Samsung Student Ambassador
Programme’. The programme, designed for
talented local State and private university
students, aims to provide knowledge-driven
opportunities and a plethora of other benefits.
With spokespersons Kevin Sungsu You,
Managing Director of Samsung Sri Lanka,
Sabry Ansar, Head of Consumer Electronics
Division, Samsung Sri Lanka and Thushara
Rathnaweera, Chief Product Manager of IM
Division (Smartphone, Tab and Accessory),
Samsung Sri Lanka, the group of Samsung
Student Ambassadors had their first insight
into a journey of new discoveries for them.
“We, at Samsung, are proud to initiate the
Student Ambassador Programme and it was
exciting to see the energy of the young
university students of Sri Lanka. We hope
that our Student Ambassadors received a
complete and detailed firsthand experience
through this programme and we strive to give
students more resources to excel. Also, we
hope that this programme allows Student
Ambassadors to be their best self while
bettering themselves in their respective fields
and we are looking forward to creating more
student ambassadors and programmes”, said
Kevin Sungsu You.
The students were introduced to the latest
technology and products of Samsung, while
the goals, aims and objectives of the Student
Ambassador Programme were also introduced
to them. They were each assigned roles and
responsibilities as Ambassadors and given an
introduction into the activities that they can
look forward to.
Furthermore, the students expressed
enthusiasm in all the activities assigned to
them at the induction programme. They
engaged excitedly in their exposure to new
technologies and stated that they look forward
to their journey forward with Samsung Sri
Lanka. The Student Ambassadors also gave
valuable feedback with regards to the
induction programme and the activities which
are planned ahead. Meanwhile, a discussion of
further developments, such as how the
students could contribute to bringing down
more cutting-edge innovations to Sri Lanka,
was also discussed amidst the activities that
they would like to see happening in the coming
months.
offers extended settlement
plans on MyFees.lk
Nations Trust Bank American Express recently
announced its tie up with MyFees.lk making it
convenient for American Express Cardmembers to
settle any educational fee online at a range of
leading educational institutions in Sri Lanka with
the added advantage of an extended settlement
plan. All payments made on the platform can be
converted to installment plans. Furthermore, every
Nations Trust Bank American Express Platinum
and Gold Cardmembers will earn 3X Membership
Rewards for each transaction.
Commenting on the initiative was Niluka
Gunatilake, Senior Vice President - Cards and
Consumer Assets of Nations Trust Bank,
“Cardmembers’ convenience is a primary focus for
Nations Trust Bank and our partnership with a
unique service such as MyFees.lk provides them
with both, safety and convenience. Parents are
able to settle their children’s school, college and
higher educational fees from the safety of their
home. It also builds on our offer of providing
Cardmembers the flexibility of payment with
instalment plans, reemphasising our commitment
to providing financial flexibility and
convenience. Nations Trust Bank American
Express stands out as a reliable partner for
Cardmembers to plan their finances and manage
expenses, assuring Cardmembers support and
rewards in multiple fronts.”
MyFees.lk from Convenienza Solutions was
developed to provide convenience for working
people to pay educational fees without visiting a
bank or the institute, while the institute itself
benefits from the elimination of the hassle of
manual reconciliation of payments.
Mr. Faiq Faaiz, CEO of MyFees.lk highlighted,
“As a service born in response to a genuine
customer requirement, MyFees.lk is delighted to
partner with the globally renowned American
Express payment option with Nations Trust
Bank. Having now established ourselves as a
leading platform for education fee payments in
the country, this partnership will add value to
the experience of American Express
Cardmembers, combining convenience with an
easy-to-use interface and a secure payment
mechanism. MyFees.lk also enables educational
institutes to receive their funds in a timely
manner and seamlessly reconcile such
payments.”

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