Looking back at 2006

Urgent moves to push peace talks
Early January saw efforts by the Ceylon Chamber of Commerce (CCC), led by its then Chairman Deva Rodrigo, to push for an early start to peace talks amidst fears that the LTTE would resolve itself to harming key economic targets in the south of the country, eventually shifting their focus to the capital. The CCC felt it was of utmost importance to bring the LTTE to the negotiating table instead or arguing about the location for the talks.

Old coastal regulations revived
New guidelines were issued by the government for construction on coastal areas following the 2004 tsunami disaster. Construction would be allowed in areas ranging from a low of 35 metres off the beach to a high of 125 metres off the beach in the coastal zone across the affected regions.

3 musketeers battle Harry J at Stassen
The beginning of the year saw the first public signs of the battle between Harry Jayawardena and the three directors at Stassen Group - VP Vittachi, RK Obeysekere and Zacky Alif. The three directors threatened to take Jayawardene to court on "arbitrary and impulsive decision taking" if an out of court settlement cannot be reached. The Sunday Times FT reported that the fallout had been brewing for awhile and had been precipitated by Jayawardena's diminishing political influence after the former President, Chandrika Bandaranaike Kumaratunga, stepped out of the political scene.

Harry flies high at SriLankan Airlines
Harry Jayawardena, Sri Lanka's business leader and Senior Advisor to former President, Chandrika Kumaratunga, was appointed Chairman of SriLankan Airlines (SLA). A potential conflict of interest issue was raised pertaining to this appointment as Jayawardena is Chairman of SLA and Aset Airways (Pvt) Ltd, a subsidiary of Aitken Spence. He is Chairman of Aitken Spence which is the General Sales Agents for Singapore Airlines in Sri Lanka.

Sri Lanka on track to achieve 8% growth
Treasury Secretary, PB Jayasundera says the country's economy can be expected to achieve 8% growth in 2006.

February

Aviva, UK's biggest insurer takes stake in Eagle
The world's oldest insurance group, Aviva, acquired a controlling stake in Eagle Insurance Limited. Aviva and National Development Bank (NDB) became the two major shareholders in the company with Aviva controlling 51% and NDB controlling 27.42%.

New $30 mln JV with MSS Holdings
A $30 million joint venture was entered into on February 2 at the Interfiliere Trade Show in Paris, France between MAS Holdings (Pvt) Ltd, Elastic Fabrics of America (EFA) and Dogi International Fabrics (Dogi) to create a warp knit fabric manufacturing facility in Sri Lanka.

Poultry industry fears
Concerns over bird flu see 15% drop in poultry consumption. Yakooth Naleem, the Managing Director for one of the country's largest producers, Bairaha told The Sunday Times FT that there may be a need to promote chicken consumption and the precaustions that are taken against the threat of bird flu to assure the public that it is safe to consume this meat.

Harry to be sued by director-buddies
VP Vittachi, RK Obeysekere and Zaki Alif, directors at Stassen fail to reach an out of court settlement with Harry Jayawardene and have decided to take their battle inside the courtroom.

March

JKH launches new brand of hotels
John Keells Holdings (JKH) launched its second brand of hotels, mostly in the 3-4 star range which are mainly the company's resort hotels. The new brand makes JKH the largest hotelier in Sri Lanka in terms of inventory.

Commercial Bank retains No. 1 position
Commercial Bank retained its position as the number one bank in Sri Lanka by posting strong growth in all key financial performance indicators, shareholder value indicators and sector-related ratios for 2005.

Trio charged with insider trading
The Securities and Exchange Commission (SEC) of Sri Lanka filed action against Jagoda Arachchige Sunil Piyawardena, a director of Nawaloka Hospitals. In addition, the SEC also filed action against Piyawardena's wife, Chandra, an accountant, and their daughter, Jagoda Arachchige Chamila Wijeyanthi Piwardena who is studying abroad. The SEC said action was filed on offences relating to "conspiracy in the commission of insider dealing."

Ceylinco Insurance Rs .2.2 bln ahead of SLIC
In the ongoing battle over which company is the leader in the Sri Lankan insurance market, Ceylinco Insurance Company Ltd claimed the company was Rs.2.2 billion ahead of its "nearest competitor", Sri Lanka Insurance Company (SLIC).

Biggest ever VAT fraud may involve Rs.10 bln
The Criminal Investigation Division (CID) has been investigating Sri Lanka's biggest ever tax fraud and are yet to question some high level officials at the Inland Revenue and fraudulent beneficiaries of the Value Added Tax (VAT) refund cheques probe.
CID detectives are yet to question officials of the Treasury and more officials of the Inland Revenue Department after they found that there had been a misappropriation of Value Added Tax (VAT) refund money of around three and a half billion rupees,” The Sunday Times reported. ]
The CID arrested Ganasiri Zoysa Jayathilake, a former Deputy Commissioner of the Inland Revenue Department's VAT refund division as he had authorised up to 235 cheques on allegedly fraudulent documents. So far 71 cheques have been detected.

Interpol alerted for VAT Mafia
Two high ranking tax officers and three other suspects arrested in the largest tax fraud the country has ever seen. However, it was reported that the ringleaders of the scam have fled Sri Lanka while being hunted by Interpol. Mohamed Ashraff, one of the men arrested is the brother-in-law of M. Murshid, one of the alleged heads of the scam. Murshid was also said to have invested in a 200-room luxury hotel in Dubai with the money that was scammed.
Among the other alleged brains behind the scandal is shipping tycoon Kamil Kuthubdeen. The other suspects include Mohamed Cassim Shaffik, M. Subayara, Bakir Mohamed Riyaz, R. Murshid, S.L. Abdul Kareem, Mira Sahib Liyakath Ali, S.L Abdul Kareem, and A.K. Kularathna.

Blows to Tourist Board chairman
Tourist Board Chairman, Udaya Nanayakkara came under intense scrutiny when anti-bribery officials seized documents and files on construction-related issues. The Director Investigations of the Bribery Commission said the files were removed for an investigation but did not elaborate further. The investigations are related to matters concerning construction. Nanayakkara and other Board members had been criticized by the Tourism Ministry and the Treasury for a lavish Rs.40 million renovation plan, overseas trips, high entertainment costs and unlimited spending.

Janashakthi sells 10% NDB stake
Janashakthi Insurance Company Limited sold 10% of its 12% stake of National Development Bank (NDB) to a foreign party, conforming to the insurance regulator's firmness that it reduces its excessive shareholding
Lankan economy grows by 5.9% in 2005
Central Bank says Sri Lanka 's economy grew by 5.9% in 2005, up from 5.4% in 2004. The growth was achieved in an environment of high international oil prices and rising global competition for exports, particularly garments.

Chaos, confusion at Commercial Bank AGM
Commercial Bank's Annual General Meeting (AGM) and subsequent Extraordinary General Meeting (EGM) dragged on for five tense hours as DFCC Bank, controlled by Harry Jayawardene, refrained from attending the EGM. However, representatives from Distilleries Company of Sri Lanka (DCSL), Sri Lanka Insurance Corporation (SLIC) and Lanka Milk Foods (LMF) called for a vote to elect Ernst & Young as auditors in a move which some had labeled as "unnecessary".

Two GoldQuest dealers bailed
Two youngsters out of seven people who were arrested promoting the controversial GoldQuest network marketing scheme in Karandeniya in Galle district were given bail recently to enable them to sit the Advanced Level examinations, according to Central Bank (CB) authorities. A CB official said, "Many promoters are very young and the recently arrested promoters are between the ages of 18 and 21 years."

Hayleys announces succession at the top
Rajan Yatawara, Chairman of the Hayleys Group will hand over the Chairmanship to Deputy Chairman, Nirmala Gihan Wickremeratne from January 10, 2007 after 40 years of service to the company. Mohan Pandithage will take over as Deputy Chairman.

Dialog in new Rs 15 bln telecom investment
Dialog Telekom signs a hallmark investment with the Board of Investment (BOI) to invest a further Rs.15 billion over the coming two years in Sri Lanka's telecommunications sector, bringing the total investment to Rs.45 billion.

Frustrated Hayleys Chairman speaks out
The Hayleys Group, among Colombo’s largest conglomerates, in a rare move, calls for more clarity and a proper policy framework on foreign investment saying current policies were unclear and inconsistent. In the past, concerns on inconsistencies in regulations and problems with the exchange rate policy were expressed through the chairman’s review in the annual report; rarely directly through the newspapers.

Oil prices up
Petrol and kerosene prices raised by Rs. 5 a litre and diesel by Rs. 3.

GoldQuest dumps coin business
The Central Bank alerts the public over reports of network marketer GoldQuest cottoning on to a new marketing trick by introducing an international direct dialling (IDD) dial-up facility as an investment tool.

After LIOC, now CPC subsidy to end
CPC and LIOC fuel subsidies come to an end. The government allows Lanka Indian Oil Company (LIOC) to determine selling prices of fuel products including petrol and diesel with effect from July 01.

Impressive first quarter 2006 growth
Sri Lanka’s economy expands by an impressive 8.1 per cent in real terms in the first quarter of 2006.

GoldQuest bulldozing Lankan firms
Suntex International Holdings Limited, owned by the controversial GoldQuest group, ousts Jayantha Fernando, Chairman and Managing Director of Ferntea Ltd as the head of the company in a swift move after raising its stake in the local firm to 56 percent and claiming Fernando was interfering in the business.

Lanka’s first private apparel, fabric industrial zone
Sri Lanka’s first privately managed industrial zone dedicated to producing apparel and fabric is initiated. The BOI signs over infrastructure management rights of the Thulhiriya textile facility to MAS Holdings Pvt Ltd.

Harry J now eyes Apollo
Harry Jayawardena increases his stake to 36.07 percent from 20 percent earlier in the Indian-managed entity.

Unnecessary panic over dormant accounts
Monetary authorities decide to consider deposits in savings accounts including Residential Foreign Currency Accounts and Non-Resident Foreign Currency Accounts that have been inactive for 10 years (since December 31, 1995) as disowned property. This causes panic among Sri Lankans abroad.

Computed tax loss – staggering Rs. 389 bln
Auditor General’s Department says the computable value of the loss in government tax revenue and non collection of taxes in the past four years amounts to a staggering Rs. 389 billion.

Crisis over Apollo takeover bid
The Board of Investment (BOI’s) intervention in a legitimate stock market move where Sri Lanka Insurance (SLI) made a mandatory offer to buy shares in Apollo hospital triggers major controversy including the unhealthy practice of government interference in the market.

Customs probe over DCSL spirits scam
The Customs Department discovers a scam by the Distilleries Corporation of Sri Lanka (DCSL) in under invoicing documents in the import of spirits resulting in defrauding the state in the past 10 years to the tune of more than Rs.1.5 billion in taxes.

LIOC, CPC raise fuel prices
The Lanka Indian Oil Company raises the price of petrol to Rs 105 a litre and diesel to Rs. 73.
Ceylon Petroleum Corporation increases petrol prices to Rs. 101 a litre and diesel to Rs. 67 a litre.

Court bars Jacobi’s access to charcoal
Jacobi Carbons Lanka (Pvt) Ltd a foreign investor involved in the activated carbon industry, is barred for two weeks by the Supreme Court from buying local charcoal and raw material.

Colombo Port expansion
The Sri Lanka government signs a MoU with the Asian Development Bank for the financing of the Colombo Port Expansion Project.

Harry does it again
Harry Jayawardena acquires Apollo Hospitals.

UNP to support Govt. for two years
The Sri Freedom Party and the United National Party come together on the Common National Agenda worked out between the two to collaborate on six areas of national priority.

CPC drops fuel prices, first time in 3-years
The Ceylon Petroleum Corporation (CPC) reduces fuel prices for the first time in some three years, bringing down the price of a litre of petrol by two rupees to 99 rupees and diesel to 64.50 rupees.

Colombo irked by Aussie travel advisory
Australia issues a travel advisory, asking its nationals to reconsider their need to travel to Sri Lanka, not travel at all to the north and east and, if they decide to travel, to exercise extreme caution.

Mihin Lanka airline under Mahinda Chinthanaya
Civil Aviation Authority (CAA) says the government plans to launch a budget airline, Mihin Lanka, in the coming months to reduce dependence on the Emirates-managed SriLankan Airlines.

Another pyramid scam stuns Lankans
Gullible Sri Lankans once again fall prey to schemers, this time two Indians. An estimated 18,000 people, including students and undergraduates, lose their money amounting to millions of rupees, in spite of the Central Bank issuing repeated warnings to the public alerting them about the GoldQuest scam that hit the road a few years ago.

Budget
Sri Lanka’s budget for 2007 focuses on a 10-year development plan mainly on agricultural and rural resurgence. The budget deficit is forecast to fall to 7.2 per cent of GDP from a forecast 7.9 percent in 2006. Government revenue will total Rs.599.8 billion in 2007 as against 482.1 billion in 2006 while spending is at Rs.834.8 billion in 2007 against Rs.700.3 billion in 2006.

Central Bank to change bank shareholdings
Present shareholdings in banks are expected to change with the Central Bank looking at bringing in more ‘clarity’ to the law. The Central Bank warns the public against Internet-based scams and its investment.

Issue over overseas investments by insurance firms
The insurance industry raises concerns about the delay in pushing necessary regulations through to let them invest abroad despite the Insurance Board of Sri Lanka (IBSL) having talks with the Central Bank to liberalise the directives.

Anura slams Udaya over overspending
Tourism Minister Anura Bandaranaike fires an unusual broadside at the Tourist Board chairman accusing the latter of overspending.

Harry sacks Vittachi
Harry Jayawardena sacks V.P. Vittachi from his position as Chairman Distilleries Company of Sri Lanka (DCSL).

Harry seeks to install his wife
Harry Jayawardena removes Vittachi from the chairmanship of both Stassen Exports Ltd (SEL) and Mel together with other companies in the group, saying that the founder chairman is unfit for office as he is over 70 years of age under the Companies’ Act. He plans to appoint his wife to the board.

Vittachi in courtroom victory over Harry J
Court issues enjoining order to VP Vittachi permitting him to resume his duties as Chairman of Stassen Exports Ltd.

Tough import rules from Jan 1
The Consumer Affairs Authority (CAA) issues a virtually impossible directive to follow, coming into effect from January 1, demanding that all imported packed goods must be price marked at the ‘entry point’.

Change of Guard at Hayleys
Hayleys Chairman and CEO Rajan Yatawara retires at the end of the month, making way for N. G. Wickremeratne to fill in the seat vacated by him.