Economic Capsule - July 2016

1. Economic Capsule
July 2016
Research & Development Unit
235th Issue

2. C O N T E N T S
BANKING AND FINANCE 
 Commercial Bank ranked among World’s Top 1000 Banks for 6th successive year
 Commercial Bank enhances customer convenience with ‘Over the Air PIN’ for credit & debit cards
 Commercial Bank goes for a debenture issue
ECONOMY & BUSINESS 
 Provincial Gross Domestic Product – 2015
 Central Bank raises policy rate by 50 bps
 Sri Lanka goes for its first dual-tranche bond issue
 External sector performance – May 2016
 Sri Lanka: Development Vision by the new Central Bank Governor
 Central Bank releases summary trading statistics on Government Securities Secondary market information
 BOI and EDB partnership
 Colombo Port opens its new warehouse
 Hayleys Advantis unveils ‘Venus’
 UK interest rates cut to 0.25%
 Chinese trade drop adds to global economic woes

3. Condominium Industry
in Sri Lanka
October, 2014
Research & Development Unit
Banking & Finance

4. 4< Research & Development Unit >
Commercial Bank ranked among World’s
Top 1000 Banks for 6th successive year
The Commercial Bank of Ceylon PLC has become the
only Sri Lankan bank to be ranked among the Top 1000
Banks of the World for the sixth year running, setting
yet another benchmark for consistency.
• The Top 1000 Banks of the World are ranked on the basis of Tier I capital,
assets, capital assets ratio, pre-tax profits, return on capital, return on assets,
BIS (Basel) Capital ratio, NPL to total loans, loans to assets ratio, risk weighted
assets (RWA) to total assets (TA) ratio and cost income ratio.
• This prestigious ranking is published annually by
‘The Banker’ magazine of the UK, and the 2016 list is based
on the Bank’s key performance indicators for FY 2015.

5. 5< Research & Development Unit >
Commercial Bank enhances customer
convenience with ‘Over the Air PIN’ for
credit & debit cards
• Commercial Bank completed the upgrade of its
automated teller machine network in Sri Lanka to
EMV Chip capability, significantly enhancing security
against fraud by conforming to the EMV standards of
the various card brands that are accepted by the
Bank’s ATMs.
• Also known as ‘chip cards,’ these smart cards make
cloning infeasible, thereby significantly increasing the
security level of the card when transacting. When ATM
networks of banks become wholly smart card enabled,
it becomes impossible for fraudsters to perform
fraudulent transactions through cloned cards.

6. 6< Research & Development Unit >
Commercial Bank to go for a
debenture issue
Further, Fitch Ratings has assigned Commercial Bank of Ceylon PLC's (CB;
AA(lka)/Stable) proposed subordinated debentures a National Long-Term Rating of
'AA-(lka)(EXP)'. The debentures, which are to have tenors of 5 and 10 years and
carry fixed and floating coupons, are to be listed on the Colombo Stock Exchange.
Commercial Bank expects to use the proceeds to reduce asset and liability maturity
mismatches, and improving its Tier II capital base.
Commercial Bank has decided to issue listed, unsecured rated
redeemable subordinated debentures for Rs. 5 billion with an option to
go up to Rs. 7 billion subject to necessary regulatory approvals and upon
other conditions acceptable to the Bank.

7. Condominium Industry
in Sri Lanka
October, 2014
Research & Development Unit
Economy & Business

8. 8< Research & Development Unit >
Provincial Gross Domestic Product – 2015
Nominal Gross Domestic Product by Provinces
- 2014 and 2015
Share of PGDP in the overall GDP
As in previous years, Western province provided the highest
contribution to GDP in 2015. However, in line with recent
trends, its share in the GDP declined to 41.2 % in 2015 from 41.7
% in 2014, contributing gradually to reduce regional disparities.
Cont…

9. 9< Research & Development Unit >
Provincial Gross Domestic Product – 2015 (cont…)
Provincial GDP Growth Rates Per Capita Income Ratio by province
The North Central and Northern provinces recorded
the highest growth rate of 12.1 %, in nominal terms
in 2015.
The per capita income of the Western province was 1.4 times the
national per capita income in 2015. However, per capita income ratio in
the Western province declined marginally over the period of 2014 to
2015.
Source: CBSL

10. 10< Research & Development Unit >
Central Bank raises policy rate by 50 bps
• Sri Lanka's central bank raised its
main interest rates by 50 basis
points each on 28 July in a
surprise move aimed at curbing
high credit growth that is adding
to concern about inflationary
pressures.
• The Central Bank of Sri Lanka
raised the standing deposit facility
rate (SDFR) and the standing
lending facility rate (SLFR) to
7.00 % and 8.50 %, respectively.
Previous w.e.f. 28.07.16
SDFR 6.50  7.00
SLFR 8.00  8.50

11. 11< Research & Development Unit >
Sri Lanka goes for its first dual-tranche
bond issue
The Central Bank of Sri Lanka issued USD 500 mn 5.5-year and USD 1 bn 10-year
International Sovereign Bonds on July 11th, 2016.
This marks Sri Lanka’s 10th US Dollar bond issuance and the first dual-tranche
offering.

12. 12< Research & Development Unit >
External sector performance – May 2016
Category
Jan- May
15’
US$ mn
Jan-May
16’
US$ mn
Change
(%)
Exports 4,480.3 4,210.9 (6.0)
Textiles and garments 1,981.0 2,084.5 5.2
Tea 561.0 496.5 (11.5)
Imports 7,868.0 7,645.2 (2.8)
Vehicles 477.9 362.4 (24.2)
Fuel 1,186.0 873.6 (26.3)
Trade Balance (surplus(+)/deficit(-)) -3,387.7 -3,434.3 -1.4
Earnings from Tourism 1,184.4 1,402.5 18.4
Workers’ Remittances 2,803.1 2,968.6 5.9
Inflows to the CSE (Net) (c) 58.2 -37.3 -164.1
Foreign Direct Investment (e) 346.4 164.5 -52.5
(c) Includes secondary and primary market transactions
(e) Data available for the first three months of each period and includes foreign loans to Direct Investment
Enterprises as recorded by the Board of Investment of Sri Lanka.
• The trade deficit in the month of May
widened on account of the decline in
export earnings, mainly due to the
subdued performance in exports of tea,
rubber products and textiles and
garments, amidst the marginal growth in
import expenditure on a year-on-year
basis.
• However, the widening of the trade
deficit on a cumulative basis as of end
May 2016 was offset to some extent by
continuous inflows on account of
tourism, increased workers’ remittances
and moderate inflows to the financial
account during the period. Cont…

13. 13< Research & Development Unit >
External sector performance – May 2016 (cont…)
• BOP: During the first five months of 2016, the overall BOP is estimated to have
recorded a deficit of USD 1,142.3 mn in comparison to a deficit of USD 1,307.4 mn
recorded during the corresponding period in 2015.
• GOR: The GOR position is estimated to have improved significantly with the
Sovereign Bond of USD 1.5 bn and the syndicated loan of USD 300 mn issued in
early July. GOR amounted to USD 6.4 bn as at end July 2016.
Source: CBSL

14. 14< Research & Development Unit >
Sri Lanka: Development Vision by the new
Central Bank Governor
Fiscal consolidation, which is already underway, needs to be
continued;
Enhancing revenue mobilization, rationalizing government
expenditure, implementing prudent debt management policies and
restructuring state owned enterprises.
Trade policy and trade facilitation need to be strengthened
to increase exports and reduce transaction costs for imports;
Diversifying the export base and export markets, promoting global
integration by strengthening bilateral and regional trade and
investment relations, enhancing trade facilitation - easy
documentation, single window system, export finance, guarantees,
and insurance, further rationalization of trade and tariff policies.Dr Indrajit Coomaraswamy
Governor Central Bank of Sri Lanka
Cont…

15. 15< Research & Development Unit >
Sri Lanka: Development Vision by the new
Central Bank Governor (cont…)
Investment climate needs to be enhanced to attract the FDI and portfolio
investment;
Need of attracting targeted investments, review of the investment laws, one stop
shop at the BOI, improving Doing Business Index
Challenges in the labour market also need to be addressed;
With emphasis on enhancing productivity and changing population dynamics - key
challenge is to change incentive structure to move human resources from lower to
higher productivity sectors.
Bridging the gap between tertiary education and industry expectations; industry in
higher productivity areas complain of labour scarcity.
Cont…

16. 16< Research & Development Unit >
Sri Lanka: Development Vision by the new
Central Bank Governor (cont…)
Financial deepening is necessary, but stability of the financial system needs
to be ensured
Promoting financial inclusion, Looking for cutting-edge technological solutions from
the globe in order to have efficient and cost-effective transactions, Strengthening
Macro prudential policies, Enhancing the supervision of the financial institutions.
Achieving regional balance in the development process;
Western Region Megapolis Plan, Hambantota (China), Master Plan for Trincomalee
(Singapore), Master Plan for Kandy (Japan), Wayamba development and creating
Industrial, agricultural and fisheries zones.
Source: Presentation by Dr Indrajit Coomaraswamy at the Sri Lanka Economic Summit 2016

17. 17< Research & Development Unit >
Central Bank releases summary trading statistics
on government securities secondary market
information
Further, all primary dealers will report all
outright sales of government securities of value
in excess of Rs. 50 mn to investors to this
platform within 30 minutes of each transaction.
Accordingly, the Central Bank will monitor these
transactions on an on-going basis and summary
of trading information consisting of yield rates
and volume by each series of securities traded
will be published in the Central Bank website in
the format as shown.
The Central Bank has commenced releasing summary trading statistics on actual trading
of government securities in the secondary market. From August 1, 2016, all primary
dealers have been required to undertake inter-primary dealer trades in the trading
platform arranged by the Central Bank through the Bloomberg.
Source: CBSL

18. 18< Research & Development Unit >
BOI and EDB partnership
There have been recent talks between the BOI and EDB, to
explore areas of co-operation between the two key economic
agencies.
Both institutions now come under the Ministry of
Development strategies and International Trade headed by
Minister Hon. Malik Samarawickrama.
 The new emphasis is on Manufacturing.
Areas of cooperation between the two economic agencies
 Boat and yacht building
− Sri Lanka Boat Show at the World Economic Forum
− Infrastructure around Yacht Building to be developed
− Build several marinas to make Sri Lanka a yachting destination
 Automobile components manufacturing
 Build up pharmaceutical manufacturing capacity
 Approach leading research institutions in Sri Lanka with the view of developing value added
products particularly in areas such as tea, rice and other foods products.

19. 19< Research & Development Unit >
Colombo Port opens its new warehouse
• Advantis Free Zone (AFZ) recently launched their second and
brand new international distribution centre ‘Venus’, one of the
most sophisticated international distribution centres to be
established in the country to date.
• The facility which caters to all green channel free zone
operations with absolute convenience, is the largest facility of its
kind in Sri Lanka, with Ground +7 high racking capabilities.
Hayleys Advantis unveils ‘Venus’
• Sri Lanka Ports Authority extending the warehouse facilities of
the ports, declared open the newly built CFS 01 warehouse in the
Port of Colombo on 10th August.
• The new warehouse, 5,400 square meters large in extent was
built focusing on the container missions, and the reshipment
missions in the Colombo port.

20. Condominium Industry
in Sri Lanka
October, 2014
Research & Development Unit
International

21. 21< Research & Development Unit >
UK interest rates cut to 0.25%
• UK interest rates have been cut from
0.5% to 0.25% - a record low and the first
cut since 2009.
• The Bank of England has also signalled
that rates could go lower if the economy
worsens.
• The Bank announced additional measures
to stimulate the UK economy, including a
£100bn scheme to force banks to pass on
the low interest rate to households and
businesses.

22. 22< Research & Development Unit >
Chinese trade drop adds to global
economic woes
• Chinese exports have seen a further decline
in July, adding to concerns over the global
economic outlook.
• Exports fell by 4.4% compared to a year
earlier, which was a slight improvement over
June's 4.8% drop but still worse than what
analysts had been expecting. Imports were
also weaker than estimated, down by 12.5%.
• As China is a crucial driver of the worldwide economy, the data is seen as a snapshot of
the global outlook. The country's exports have fallen for 12 out of the past 13 months.
• Global uncertainty ranging from low commodity prices to the EU debt crisis and the UK
leaving the bloc continues to mute economic activity around the world.

23. The views expressed in Economic Capsule are not necessarily those of the Management of Commercial Bank of Ceylon PLC
The information contained in this presentation has been drawn from sources that we believe to be reliable. However, while we have taken reasonable care to maintain accuracy/completeness of the information,
it should be noted that Commercial Bank of Ceylon PLC and/or its employees should not be held responsible, for providing the information or for losses or damages, financial or otherwise, suffered in consequence
of using such information for whatever purpose. < Research & Development Unit >
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