Permitting foreign investors to enter retail and wholesale trade with a minimum investment of only US $ 150,000 was part of a strategy to make Sri Lanka an international shopping centre like Singapore or Bangkok, the BOI has said.
"The policy initiatives announced under the budget proposals for 1998 encompasses a deliberate and well conceived strategy to position Sri Lanka as a regional centre for shopping," BOI Director General Thilan Wijesinghe said in a statement said.
"During the 1970's a similar strategy was implemented successfully by countries such as Singapore and Hong Kong and more recently Philippines and Indonesia," he added.
The Exchange Control Act had already permitted the setting up of 100 per cent foreign owned retail and wholesale trading centres with a minimum investment of US $ I million since 1992 to limit the facility to only large scale investment in retailing.
"However due to the low level of purchasing power in Sri Lanka and low tourist arrivals, this policy has failed to attract even a single reputed international retail company to Sri Lanka," Mr. Wijesinghe said.
"In fact today supermarkets and shopping malls have been successfully set up by local investors."
Though some fear that the relatively low level of initial investment may attract undesirable retailers Mr.Wijesinghe said safeguards have already been provided.
"It is important to note that the budget proposals state that foreign investment entry "shall only be granted to internationally reputed companies and franchises capable of retailing international brands of products."
This will be administratively controlled by the BOI."
"Sri Lanka has the potential to become a major retailing hub," Mr. Wijesinghe said later speaking at the South Asian Foreign Exchange Dealers Congress.
"We have no yet fully leveraged on our locational advantages."
He said the BOI would focus on developing the services sector in the future capitalizing on locational advantages as well as promoting certain niche sectors and tourist related activities.
By promoting the country as a retail centre, benefits would accrue from increased tourist arrivals, increased demand for floor space by retailers which would boost the construction sector and increase government revenue through indirect taxes from he retail sector.
"Note that the budget proposal did not envisage income tax concessions to this sector," Mr. Wijesinghe said.
The budget for 1998 has proposed the elimination of customs duties and other levies applicable to gems, jewelry, textiles and garments, computer and communication equipment to create the fiscal policy framework to encourage retailing and trading.
"I believe this would make Sri Lanka to become a major centre for retailing."
In the meantime the government was setting up the necessary infrastructure.
"The government is in the process of evaluating BOT proposals for expanding the Colombo Airport not only in terms of attracting more passengers but developing the airport as a regional distribution point and a regional centre of aircraft maintenance," he said.
Mr. Wijesinghe said the BOI did not given special concessions only to foreign investors. Any company whether local or foreign owned was entitled to the same benefits if the qualification criteria were met.
"100 per cent foreign owned company engaged in an activity approved by the BOI will be subject to the same fiscal incentives as a 100 per cent locally owned company engaged I the same activity."
The ice cream vendors who started with a bang are now with their backs to the wall.
Sales have not been encouraging lately and company executives are not sure whether the slump is due to a rival brand or because the novelty of the product has waned.
After much deliberation, they however agreed to resort to media advertisements for the first time....
The turnover taxes will be replaced by the long awaited GST on April Fools day, next year.
Among the sectors where there will be a major impact is the now highly competitive telecommunication industry, where call charges will fall.
And, we know at least one network is planning to announce a reduction in call charges before April, just so it could lure new customers....
It is true that insurance companies did not grumble about paying up when claims were made following the October 15 bomb blast.
But now comes the sequel - most companies want to raise the premium - for terrorism cover from next year.
No final decision has been taken but, even rivals in the trade are agreed on this, sources say....
The Sunday Times Business called on the new Chief Executive Officer of Celltel Lanka Ltd., Serge Guevel to discuss the company's future plans. Here, he elucidates his perception of the cellular industry in Sri Lanka in an interview with Mel Gunasekera.
What is the background of Celltel, is it a BOI (Board of Investment) company?
Yes, we are a BOI company, nearly 100 per cent owned by Millicom Technology USA, and have been operating in Sri Lanka for the last 7 years.
How much is Celltelís investment in Sri Lanka, what are your future investment plans?
Our total investment in Sri Lanka is Rs. 3 bn. In 1998, we hope to invest a further Rs. 1.2 bn. We started in Sri Lanka with a customer base of 3,000 which has now grown to 48,000.
We understand that you were stationed in Sri Lanka for a while, what is your perception of the cellular industry?
I have been in Sri Lanka for nearly one and a half years as a Financial Director for Celltel Lanka Ltd. The cellular industry is very competitive at the moment, but we are the market leaders.
Can you elaborate further on your market leadership, and how do you keep the competition at bay?
We have been the market leader since day one. We have maintained our position through innovation and constant investment. The leadership has been maintained particularly with the introduction of the Cellcard and the Tele One shop. At the Tele One shop, customers can buy mobile accessories and pay their Celltel bills.
There is a lot of speculation about free incoming calls on cellular phones, can you give a definite date as to when it will materialise?
We have been talking to the regulator (Sri Lanka Telecom), to allow free incoming calls for a while now. We believe that it will be a reality in the near future, definitely during the first half of 1998.
All the cellular operators are for it (free incoming calls). Like in other countries, the consumer (cellular user) will not have to pay for the calls. They can instead leave their phone switched on, thereby the money spent on incoming calls can be spent on outgoing calls.
In some countries, though incoming calls are free for mobile users, the person calling from a land-phone has to bear the cost of the call, will something similar take place in Sri Lanka?
We have to work that out with Sri Lanka Telecom (SLT) to sort out the cost of a call from a land-line to a cellular phone. The detailed pricing of how it would affect the consumer calling from a land-phone to a mobile, is left to the SLT to work out.
Many Asian countries have been de-regulating their telecommunication sectors. In your opinion, how has Sri Lanka fared so far in this respect?
The issue of regulation and de-regulation is very important. The cellular industry is very competitive. In terms of regulation, we are hoping that the way the government has embarked on it, there will be no special favours for anybody, that there will be a level playing field for all cellular operators. People on the regulatory body acting in a fair and square manner is crucial to the industry. We can work together (with the new owners, NTT of Japan), and Iím sure the government is keen to act in a fair and square manner.
What is Celltelís expansion programmes, what areas do you plan to cover (network) in the future?
We cover about 80 per cent of the island. We cover nearly everywhere, from the north of Anuradhapura to virtually everywhere in the south. As soon as the authorities allow us to go islandwide, we will be happy to go to the north and east.
Your predecessor brought out the Cellcard package, do you have any new offers for cellular users, keeping in mind the existing competition?
The cellcard itself, is a revolutionary thing. It is yet to be developed. We are working on it, to give new offers (to the consumer) to make the product more attractive. The card is prepaid. Incoming calls are Rs. 10 (peak time) and Rs. 5 (off peak). About 75 per cent of our customers have switched on to it.
Have there been customers who have switched back from Cellcard?
Yes there have been a few. It is because some consumers who have high usage find it inconvenient to go out and buy a replacement often. But the percentage of those wanting to switch back is very low.
Some countries who use similar systems (like the pre-paid Cellcard), permit their customers to use their credit cards to extend their credit on cell cards by telephone. Do you also intend introducing a similar system in Sri Lanka?
Yes, we are thinking about using this method, but its too early to say anything.
There is speculation that the analogue technology used by Celltel will be phased out in the coming years, what are your views on it?
There are more than one million subscribers using analogue world-over. The analogue system costs much less than the digital. For consumers there is not much difference, they want something affordable. So with the same investment with analogue, you can get more subscribers than digital.
We use state-of-the-art analogue technology which provides higher sound quality than digital. It is the same system used by Cellnet and Vodafone in Britain. Analogue provides a better sound quality and wider coverage. I am not saying that digital is bad, from an engineering point of view, analogue provides a threshold for better coverage.
We provide entry point to the market which is lower compared to digital. We can find an international market for analogue phones.
Do you find the new land phone operators, Suntel and Lanka Bell, a threat to your industry?
We welcome competition. But, their's is a completely different package to us. Their's is fixed phone, ours is mobile. However, we offer the widest coverage in Sri Lanka.
Do you think there is room for another cellular operator to enter the Sri Lankan market?
The Sri Lankan market is very competitive at the moment. There is no room for another operator. That is why the question of a regulator is very important.
Do you think the recent bomb blast would effect investment flowing into Sri Lanka?
No, I donít think so, because the Sri Lankans seem quite used to it, and they have picked up the pieces and carried on with their lives since then.
Continue to Business page 3 * Growth not by Budget alone * Strengthening the framework for financial stability
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