Financial Times

Weekly Roundup
Govt. hopes for 6-8 pct growth
Treasury Secretary Dr. P.B. Jayasundera told the Ceylon Chamber of Commerce last week that the UPFA government is aiming for a GDP growth rate of 6 to 8 percent from next year.

The government will focus on poverty reduction and developing outstation regions that had hitherto been neglected, he told a discussion on government economic policy.

The main aim of monetary policy would be to prevent demand-fuelled inflationary pressure while the government would also strive to maintain a liberal foreign exchange policy regime but with the required regulatory controls to ensure stability in the market.

Loopholes in the law that arose from tax amnesties and exploited by tax dodgers would also be closed while the financial performance of state-owned enterprises would be improved to increase government revenue from non-tax sources.

The government aims to contain the fiscal deficit below five percent of GDP over the medium term and is targeting a revenue of 20 percent of GDP.

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PERC to handle post-privatisation issues
The Public Enterprises Reform Commission will tackle the post-privatisation issues that have arisen with regard to the over 100 state enterprises that have been privatized since the early 1990s.

This was revealed by Presidential Advisor and Strategic Enterprises Management Agency (SEMA) chairman Mano Tittawella at the Ceylon Chamber of Commerce discussion on the government economic framework. He was clarifying PERC's role following the establishment of SEMA.

SEMA will oversee the operation of 12 important state enterprises and its immediate task would be to supervise the preparation of business plans for these entities and the revamping of their organisational structures to improve their functioning.

Tittawella said these enterprises will have to have a commercially viable corporate structure, adopt internationally accepted accounting and auditing practices to ensure they have balance sheets that are internationally acceptable, and also get a credit rating from a reputed rating agency.

These planned changes would make these enterprises better able to compete with the private sector. Tittawella pointed out that the state-run Jaye Container Terminal in Colombo port was competing effectively with the privatize Queen Elizabeth Quay terminal run by SAGT while the four state banks were already competing well with the private sector.

Furthermore, the Ceylon Electricity Board was also facing competition from the growing number of private power producers.

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Nawaloka Hospitals IPO oversubscribed
The Rs 300 million Initial Public Offer from Nawaloka Hospitals was heavily oversubscribed on the opening day last week.

The company offered 15 million ordinary shares at 10-rupee premium priced at Rs 20 with the aim of raising Rs 300 million.

The money will be used to build a 50,000 square-foot, five-story complex at an estimated cost of Rs 100 million to provide more privacy for indoor patients by relocating the outdoor patient services.

The proceeds will also be used to retire a part of the company's outstanding debt to Hatton National Bank amounting to Rs 200 million.

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No further Ceypetco privatisation
The government has assured Ceylon Petroleum Corporation labour unions that the corporation would not be privatized and that it is still holding talks with foreign companies with regard to the third player in the petroleum retail sector.

The assurance was given by President Chandrika Kumaratunga when she met leaders of Ceypetco labour unions who staged a sudden strike the week before last creating a shortage of fuel and panic among consumers.

She assured the unions that no final decision would be taken regarding the third player without consulting the unions, a Presidential Secretariat statement said.

It said that although the corporation would not be privatized, the government would have to take what it called "innovative" steps to improve its efficiency.

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Foreign investors exempt from 100 pct land transfer tax
The government could give exemptions on the 100 percent tax on land transfers to foreign investors involved in new ventures either under the BOI or elsewhere, Finance Minister Sarath Amunugama said.

The government wants to re-impose the tax to help local people buy land at fair prices, he told parliament. The purchase of land by foreigners for residential areas in the Southern Province, especially in Galle and other coastal areas, had caused difficulties for locals after land values soared to unrealistic levels.

There are restrictions on foreigners buying land even in other countries, Amunugama said. The tax was not a new law but had been promulgated in 1963 and abolished by the previous UNF government.

There were no restrictions on distinguished people like science fiction author Arthur C. Clarke buying land here. M. M. Premasiri, UPFA member for Galle district, said 60 percent of the land on the southern coast had been bought by foreigners. This included 43 properties in the UNESCO World Heritage site of Galle Fort.

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PM wants expats to play bigger role
Sri Lankan expatriates should play a bigger role in the country's economic development, Prime Minister Mahinda Rajapakse said last week. Sri Lanka needs to make better use of the technical and financial resources of Sri Lankan expatriates living abroad, he said in a speech at the launch of Accounting and Financial Services Ltd., a financial support services provider.

The company does outsourcing work such as preparing financial reports, payroll services, accounting and book keeping, and preparation of tax returns for clients in the UK and USA. Rajapakse said the company was a good example of the manner in which Sri Lankan expatriates could contribute to the economy.

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