welcome benefits, wary of implementation
By Akhry Ameer
Venture Capital (VC) companies have welcomed recent budget incentives
being accorded to them, as recognizing the significant role played
by the VC's in economic development by promoting entrepreneurial
spirit and innovation.
However, they expressed the need to work together with the authorities
to overcome ambiguities that may be caused in the interpretation
of the Inland Revenue Act during the implementation stage.
has been a major break through in the understanding of the venture
capital concept which is to promote businesses. These businesses
would invariably bring in revenue by means of taxes to the government,"
said Nissanka Weerasekera, Managing Director/Chief Executive Officer
of Nextventures Lt, who is also the President of the Venture Capital
Association in Sri Lanka.
The VC's feel
that their involvement in the implementation stage will highlight
issues relating to Venture Capital investing to the relevant authorities
and therefore clear or avoid any misunderstandings that prevailed
in the past. Elaborating on this, Weerasekera, said that a VC should
be allowed to invest immobilized funds in other instruments such
as Treasury Bills and Call Deposits to maintain the time value of
money. However, the Department of Inland Revenue in the past has
cited this as being a different business and charged taxes.
capital industry in Sri Lanka was kick-started by the introduction
of relevant sections in the Inland Revenue Act in the early 1990's.
These sections state that venture capital is "
or equity featured capital seeking investments in companies which
promote new products, new processes or new markets" and continued
that Venture Capital "
means a chance for total loss of
capital invested as well as a chance to participate fully in the
budget proposals offer existing VC's a concessionary corporate tax
of 20 percent and a five year tax holiday for VC's established on
or after April 1, 2003. In addition the investors will be offered
a qualifying payment relief. Yet another incentive is the relaxing
of exchange control procedures on a case-by-case basis for new VC's
to be allowed to invest 20 percent of the fund in global activities
of a local company which has foreign subsidiaries or branches.
pointed out that this is an antithesis as most companies resort
to a practice of establishing the holding company abroad and the
subsidiary in Sri Lanka. These are some of the other ambiguities
that may not tap the full potential of the budget if there is no
close cooperation during implementation. "We hope to be able
to assist the government achieve its objectives in providing this
relief," he said.
Products Ltd does strategic business audit
Dipped Products Ltd., one of Sri Lanka's biggest value added exporters
and a leading player in the global rubber gloves market, has concluded
a Strategic Business Audit.
It was based
on the '8S' model developed by Marketing Technologies International
out the strategic audit, MTI's Bahrain based CEO and international
consultant, Hilmy Cader, identified several key success factor of
the DPL: company leadership, staff commitment, investment in technology
at the right time and the decision to add value compared with a
MTI's 8S is
a broad spectrum strategic planning process that starts with the
scope of the business and works its way down to systems in a sequential
and flexible manner.
to expand in Lanka's north and east
Hatton National Bank plans to expand its operations in the
north and east after its selection to handle the region under government
efforts to help small and medium enterprises by dividing the island
into five industrial zones.
Five banks have
been assigned to develop small and medium enterprises in the five
regional zones. This is being undertaken as part of the initiative
to restructure the Board of Investment.
The major areas
that would be of interest in the north are ice factories, brick
making, transportation and cultivation of paddy, vegetable and fruits.
A team of high-ranking officers of HNB visited the north and east
after the A9 highway was re-opened.
HNB has decided to provide loans to farmers who are already engaged
in the cultivation of fruits and vegetables to develop their business.
to five million rupees have been granted to farmers in Jaffna as
cultivation loans so far. Speaking about the success of HNB in rural
banking, I. H. A. Wickramasinghe, Senior Manager- Industrial Credit
said, "Everyone thinks that the small man defaults. But that
concept has been proven wrong."
HNB has eight
branches in Jaffna, Trincomalee, Mannar, Vavuniya, Batticoloa, Kalmunai,
Akkaraipattu, and Ampara. The SMEs will be given loans at 14 percent
interest with a repayment time of ten years and a two-year grace
The HNB also hopes to extend its Forward Sales Agreements, already
in use in the Southern region, to other regions.
of HNB's Project Finance Division said that the Forward Sales Agreement
plays a major role in the paddy market where prices fluctuate.