1st February 1998

East Asians stay away

Tourist arrivals from East Asia had fallen sharply in the last quarter of 1997, with arrivals from India and Pakistan also following a similar trend.

“The declining trend of the Asian market continued for the third month in succession reflecting the sensitive nature of traffic from the region,” the Ceylon Tourist Board said in its monthly report.

December arrivals from East Asia had plunged by 32 per cent to 3,198. Arrivals from South Asia fell 27 per cent with Indian tourists falling to 3,063 from 4,623.

In December arrivals from Indonesia fell 85 per cent, Hong Kong 27 per cent, Singapore 20 per cent, Thailand 74 per cent and Taiwan 35 per cent. However due to better arrivals in the early part of the year most Asian markets ended the year above last year’s figure.

Currencies of most East Asian countries except Singapore had crashed during the past few months, putting foreign travel beyond the reach of millions of East Asian residents. Indonesia had been particularly affected by the falling Rupiah.

Arrivals from Western Europe remained strong with a growth of 29 per cent in December to 25,253. Topmarkets such as UK and Germany continued to perform well.

Interest rates edge upwards again

By Mel Gunasekera

Key short term interests rates have started moving up, with the Central Bank raising overnight discount rates.

Reverse repurchase rates have risen from 9 per cent in early December to 11 per cent last week.

This has already exercised upward pressure on T-Bill and inter bank call rates.

Last week a 12 month treasury bills rose from 10.24 per annum (beginning January) to 10.58 (end January); a 6 month bill rose from 9.95 to 10.46; and a 3 month bill rose from 9.97 to 10.44.

“This is a strong signal to push the interest rates up further,” a Central Bank official said.

Dealers say T-Bill cut-off rates are edging close to 11 per cent.

Currency dealers say Central Bank may be pushing rates up to persuade exporters who are hoarding dollars abroad in the hope of a devaluation to convert dollars to rupees to benefit from a higher yield.

Financial analysts however say exporters would only start converting when rupee overdraft rates start to rise.

With the Central Bank still keen to bring down lending rates, analysts do not see high overnight rates persuading exporters to convert dollars.

Meanwhile the Bank of Ceylon announced last week that it would be bringing down their lending rates by 50 to 100 basis points as a gesture of goodwill to mark the golden jubilee of independence.

There is also speculation that higher than normal forex outflows are occurring due to increased foreign travel to bargain East Asian destinations. The stock market has also been recording net outflows in the last few months.

However Central Bank officials say there is so far no evidence of unusual outflows up to November for which data is available.

They say interest rates have been raised primarily because of rising inflation, to give a positive real return to savers.

MIND YOUR BUSINESS

By Business Bug

Dimmed Again

So, just when prospects were looking bright for the tourist industry the bomb went off in Kandy.

Though optimists talk of occupancy rates, hotel trade insiders say the Kandy bomb, with the huge publicity it gained, may have won sympathies for Sri Lanka but not tourists.

It will also almost certainly reduce charter flights to Sri Lanka.

That, then is why the trade now expects only 350,000 and not 450,000 this year. "And that estimate" trade veterans say "is also valid only till the next bomb....."

Different Sauce?

The recent decision to liberalise wheat flour imports - though the monopoly awarded to one company was valid past the turn of the century - raised many eyebrows.

Among them was one company which also enjoys a monopoly on a product for which they raised prices recently. Will their product also be liberalised, anxious company officials wanted to know from the boys at the Board that invests.

No, said the Boys, " Not for now anyway".

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