1. CONFIDENTIAL 1
DRAFT
Business Case –
Sri Lanka – A Business Case
Tapping an ocean of opportunities

2. Agenda
Current Status
Business model evaluation
Proposal for change in Business model
Conclusion

3. Demographic Details
Total population 21,675,648 (July
2013 est.)
Area 65,610 sq. km
Languages Sinhalese, English,
Tamil
Life expectancy at
birth m/f (years)
71/78
Probability of dying
under five (per 1000
live births)
12
Probability of dying
between 15 and 60
years m/f (per 1000
population)
191/77

4. Gross Domestic Product
:
Total expenditure
on health as % of
GDP
3.4 (2011)
GDP (PPP) $106.5 billion (2010)
Gross national
income per capita
(PPP international $)
$5,520 (2011);
$5,220 (2010)
Graphs
- Graph 1: Fluctuating GDP = Market Uncertainty
- Graph 2: Depicts increasing GDP despite fluctuations

5. Health Challenges
• Three main challenges/problems:
– Problem due to Prosperity and Lifestyle
– Age chronic illness diseases
– Rise of Non-Communicable Diseases
Cases per 100,000 population
Diseases Year
1980 1985 1990 1995 2000 2005 2010
CVD
117.3 163.9 163.2 263.3 313.2 353.9 510.2
Cancer 128.3 121.3 142.1 190.1 260.2 282.2 510.2
Mental
Disorders 298.0 315.9 337.9 434.0 490.4 465.9 -
Diabetes 65.6 86.6 87.5 78.6 204.8 256.2 380.2

6. Health Sector of Sri Lanka
Indicators 2009 2010 2011
Private Hospitals 220 172 183
Public Hospitals 555 568 592
No. of Beds
(Government)
68,905 69,501 69,731
No. of Doctors
(Government)
13,633 14,125 17,199
No. of Nurses
(Government)
25,549 27,494 29,234

7. Expenditure on Health Services & Other Facilities, 2003-2010

8. World Bank Investment
• Project Title: Sri Lanka - Second Health Sector Development Project
• Project ID: P118806
• Status: Active
• Approval Date: March 27, 2013
• Closing Date: Sept 30, 2018
• Total Project Cost: US$ 5170.00 million
• The development objective of the Second Health Sector Development
Project for Sri Lanka is to upgrade the standards of performance of the
public health system and enable it to better respond to the challenges of
malnutrition and non-communicable diseases.
• The project includes two components.
– 1st- Provide support to priority areas under the National Health Development Plan. This
component covers multiple areas: addressing maternal and child health and nutrition;
improving the prevention and control of non-communicable diseases; health systems
improvement.
– 2nd: Focuse on innovation, results monitoring and capacity-building

9. WHO Investment
• The strategic agenda developed by WHO in close
collaboration with the Ministry of Health and other
partners is to concentrate on six areas of work for the
next six years (2012 to 2017). These are:
– Health Systems
– Communicable diseases
– Non-communicable diseases, injuries and mental health
– Maternal, child and adolescent health including nutrition
and food safety
– Emergency preparedness and response
– Enhanced partnerships and resource mobilization for
health

10. 2013 Budget Outlines (Healthcare Highlights)
Life Expectancy 77.4 (Higher than India and Afghanistan)
Infant mortality rate = 8.5 per 1,000 live births
Maternal mortality rate = 41.6 per 100,000 live births
Proposed Budget for Healthcare = SLR 125 billion (Higher than last year of SLR 74.5 billion)
No. of state run hospitals increased to 592; and private hospitals to 3,183
Total No. of doctors = 17,271; Total Number of Nurses = 29,234
WHO will contribute approx US$ 3 million over the next year
Presently, NCDs accounting for 85% of ill health, disability and early death and is expected to grow further

11. Additional Information
2011 Budget: Government allocated SLR 308 million for NCD prevention in the country
[Central Bank report 2011]
Allocation Provided by Treasury under Budgetary Support Services and Contingent Liability Project [Jan-Sept 2012]: Grant of SLR
695,000 given for improvement of Maternal and Child Health Units in Hospitals, Infrastructure and Human Resource Development of the
National Drugs Quality Assurance Laboratory (NDQAL). Equipment to improve the capacity of Triposha production, Rehabilitation of
existing buildings in Provincial Hospitals and basic equipment under the Island Hospital Development Programme. [Ministry of Health]
Free Trade Agreement: Duty free or low import tax bilateral agreement with India, Pakistan
and other Asian countries
2012 tax reform: Benefits like tax holidays, classified into SME/Large scale or strategic
investments
Exemption from Port and Airpot Levy (PAL): Medical equipment to be donated to an institution which provides free
healthcare services with the approval of Ministry of Health [Amendment to PAL Act no. 18 of 2011]

12. Regulatory Scenario
Cosmetics, Devices and Drugs Regulatory Authority (CDDA)
- Ensure that the Medical devices available to public meet the required standards of quality and
are within the existing legislative framework
- Only products registered to CDDA can be manufactured, Imported, transported, and sold in the
country.
- Every foreign manufacturer/Exporter has to appoint a Local for registration and other activities
related to their products
- Registration of Medical Equipment to the CDDA Sri Lanka is a two phase process. In the 1st
phase a temporary license is issued for a period of one year. In the 2nd phase a permanent license
is issued
Phase License Timeline Issued for
NOC Testing 1 week 1 month
First Temporary 4 months 1 year
Second Permanent 6 months 5 years

13. Regulatory Scenario Continued…
• Develop a system
to determine the
quality of Medical
Devices
• Procures, stores, distribute and monitor
medical supplies to all government health
institutions and private sector in Sri Lanka.
• Donation distribution from WHO,
UNICEF, GAVI, and others
• Distribution of medical items directly to
the 26 Regional Medical Supplies
Divisions and 50 major
hospitals/institutions administered by
Central Government
• Responsible for all the
procurement, maintena
nce and management
activities related to
medical equipment, in
most of the
government hospitals
in the country
•Is a statutory Body empowered
by the Act, to regulate
use, transport, import, expor
t and dispose of radioactive
sources
•Application for authorization
process is filed only after
completion of registration to
CDDA
•The entire process takes
around two months.
Atomic
Energy
Authority
(AEA)
Biomedical
Engineering
Services
(BES)
National
Drug Quality
Assurance
Laboratory
(NDQAL)
Medical
Supplies
Division
(MSD)

14. Agenda
Current Status
Business model evaluation
Proposal for change in Business model
Conclusion

15. Current Model

16. Opportunities for Philips Healthcare – Next 18 months
Customer Equipment
Approx.
value
(USD)
Chinese Project 16 slice CT – 4, 1.5 T MRI – 2, Cathlab -1 3.5M USD
Israel Project Brilliance Big Bore - 8 5.2M USD
BES 3T MRI - 1 No. 1.5M USD
Navaloka Bi Plane Cathlab – 1 1 M USD
Epilepsy Project
PET CT – 1, SPECT – 1, 3T MRI – 1, Angio
System - 1
3.2M USD
Browns Multi Modality 1M USD
Durdans Cathlab - 1 600K USD
Lanka 64 slice CT - 1 800K USD
Hemas 16 slice CT – 2, 1.5 T MRI - 1 1.3M USD
Navy 128 slice CT – 1, 3T MRI – 1, DR - 1 2.1M USD
National Cathlab - 1 600K USD
Approx. IS business value
23M USD

17. Customer’s Feedback
Customer’s Voice
- GE and Siemens providing good after sales
services compared to Philips
- Sri Lankan market bombarded with cheap
products with same specifications
- Application engineers unable to explain use
of advanced features in Philips products
- Then Why Philips? Durable and Efficient
products lasting for more than 20 years
- Suggestions:
- Reach remote areas with better facilities
like telecom ICUs
- Train nurses to use advanced medical
devices
- Conduct workshops and conferences
- Make devices more user-friendly
- Work a bit on prices
0
2
4
6
8
10
Yes Maybe No
Philips Local
Presence
requirement?
Need of the hour: Quick support and short downtime

18. Need a trained
team of
application
specialists in Sri
Lanka
Insights from Dr. Nirmala Wejesinghe
GE and Siemens
provide really good
after sales services
of MRI and CT
machine
Out of order machine
– Wasn’t getting
service done
Problem with the local
presence of Philips
Prices of Philips
products are too high
Always have to
call in India to
Babu or John
(Head of
Application
Specialist Unit)
for servicing
Suggestion: So many hospitals
are opening up in Sri Lanka.
Philips should pep into other
healthcare equipment as well
Dr. Nirmala
Wejesinghe
(Senior
Consultant
Radiologist)

19. Suggestion: Make
the machine more
customer friendly
Insights from Dr. Duminda Samarasinghe
GE machines have
better controls and
more user –friendly
compared to Philips
Have been using
Philips products since
2004 but not 100%
happy
Installers took 3 months
to repair the machine
Software improvement
is required – 3D
software needs to be
there
Pricing has to be competitive –
Justify Pricing
Dr. Duminda
Samarasinghe
(Consultant
Cardiologist)

20. In-house Feedback
V. P. Thirumalai
(Regional Manager – South
India & Sri Lanka)
Krishan Wickramasinghe
(Consultant – Sri Lanka)
Siby Jose
(Customer Service – Sri
Lanka)
Hemantha Ekanayake
(Manager Regulaotry
Affairs, Technomedics)
(Distributor – Sri Lanka)
- Demand growth by 35-45%
in 2013
- Requirement of a dedicated
team in Sri Lanka
- Setting up a company would
remove the big doubt from
customer’s mind
- Will help us gain
government’s confidence
- Technology dependence
- With 21 million people in Sri
Lanka, not enough facilities by
government and private sector
- Post was situation - Demand
Increasing
- Demand is high in General,
Provincial and District
hospitals
- New hospitals opening in
other parts of Sri Lanka as well
- Need for better
infrastructure in Government
hospitals
- Need for cancer therapy
equipment, Ventilators and
Incubators
- Total Healthcare Market =
70-75 M USD
- Market Uncertainty –
Demands will increase for the
next 3 years but will gradually
drop
- Customers have comforts
dealing with the principle
company rather than with
distributors
- Small Office is a good option
- Initial investment in setting
up an office in Sri Lanka would
be huge
- 1 or 2 local sales persons are
required
- Requirement for good
service engineers
- No warehouse requirement
for Sri Lanka office
- Government procurements
vary according to the funding
availability and priorities
change.
- Significant increase in
demand since 2009 -2011, and
decline in government
spending since 2012-13 in
medical equipment. However,
the private sector is steadily
growing.
- Demands
MOH and BME- US$ 20m;
Provincial Directorates- US$
10m; Grants/ Loan Projects-
US$ 20m; Private sector- US$
20m; Total- US$ 70m
- Drawback - Philips has
launched only a limited range
of products here.
- Major competition from
Seimens, GE, Toshiba,
Shimatzu, Drager

21. SWOT Analysis
Strengths
- Growing healthcare scenario in Sri
Lanka
- Low manpower cost
- Established distribution channel
- Unmet clinical need being satisfied by
our existing product line
- Tax holidays (2011 tax reforms)
Weaknesses
- Siemens operating since past 10 years
with direct sales in Sri Lanka
- GE also has direct sales in Sri Lanka
- Time required to establish trust among
customers
Opportunities
- Increased government expenditure on
healthcare
- With improved sales and market,
Philips can establish a branch office
‘Philips – Sri Lanka’ along with Lighting
and CL division
- E-health integration
Threats
- Major competition from
GE, Siemens, Toshiba, Mindray
- Threats from government’s attitude to
promote local manufacturers
- Larger market potential can attract more
competitors
- More prone to natural disasters like
tsunami and earthquakes

22. Model-1
(Earlier Model)
Distributors Customers
Business models
Distributors
Philips
people from
India and Sri
Lanka
Customers
Model-2
(Current Model)
Small office
of Philips in
Sri Lanka
Distributors Customers
Model-3
(Liaison Office)
Philips - Sri
Lanka
(Healthcare;
Lighting; CL)
Distributors Customers
Model-4
(Branch Office)

23. Justification for Model 3 & 4
• To gain customer confidence by providing quick
service and high uptime commitment
• To address fast growth in healthcare demand
– Opening of several hospitals across the country
– Government is pushing for further investment in
enhancing infrastructure
• To address query that Philips does not have local
presence whereas competition has
• Future plan of lighting sector to open up local
office

24. Predictability

25. Agenda
Current Status
Business model evaluation
Proposal for change in Business model
Conclusion

26. Registration of a company – Step#1
Board of Investment (BOI)
• Foreign Investments require approval under Board of Investment law
Type of Investment approval
Under Section-17
- Grants special concessions (like
Inland Revenue; Customs;
Exchange Control; Import Control)
to companies satisfying specific
criteria
Under Section-16
- Operate only under ‘normal laws’
- No exemption or waiver to any
law

27. Registration of a company
No. Procedure Time to Complete Associated Costs
1 Apply for approval name 2 days LKR 500
2
The company Secretary signs
a consent
1 day
There is no specific fee
schedule company
secretaries. The fees vary
from firm to firm, and is
generally based on a
quarterly retainer
3
Register at the Companies
Registry
2 days
LKR 10000 as the
registration fee for Form
1 and LKR 500+ for
Forms 18 and 19 and the
articles of association.
4
Register with tax authorities to
obtain a TIN
1 day no charge

28. Taxes
S. No. Tax Rate of Tax Time frame
1. Corporate Income Tax 35% of taxable income - 1 year (from 1st April to
31st March of succeeding
year)
2. Nation Building Tax 3% - Every time an article is
imported into Sri Lanka
- Carries on the business
of providing a service of
any description
3. Value Added Tax (VAT) Normal rate of VAT = 12%
VAT on Luxury goods =
20%
- Every time a good is
imported into Sri Lanka
4. Business Turnover Tax - - Every quarter in respect
of any business, if the
turnover for that quarter
is not less than SLR
25,000
5. Property Transfer Tax ranges between 4% and
100% for non-residents
-

29. Taxation (Possible Exemption)
• According to the New Incentive Regime introduced with 2012 Budget, Philips
can acquire tax holidays by entering into one of the following categories:
S. No. Category Qualifying Criteria
(Minimum
Investment – SLR
Mn)
Tax Incentive
1. Medium Scale – New Enterprise
(For Healthcare only)
Investment of 50 and
above
Upto 6 years
2. Large Scale – New Enterprise
(For Healthcare and Lighting
division both)
300 – 500 6
500 – 700 7
700 - 1,000 8
1,000 - 1,500 9
1,500 – 2,500 10
Above 2,500 12
3. Strategic Development Project
(For Healthcare, Lighting and CL
division)
Any investment capable
of altering the
economic landscape of
Sri Lanka
Full or partial exemptions (depending on the type and the
level of investment) of the following taxes.
(i) Value Added Tax (VAT); (ii) Income Tax; (iii) Economic
Service Charge (ESC); (iv) Customs Duty; (v) Excise Duty; (vi)
Nation Building Tax (NBT); (vii) Ports and Airports
Development Levy (PAL); (viii) Taxes under the Finance Acts

30. Manpower
Proposal for 2014-15
Following is the minimum manpower requirement for a liaison
office in Sri Lanka:
- 2 customer service (1 already present in Sri Lanka)
- 2 Sales Person (1 already present in Sri Lanka) All
preferably Sri Lakans
- 1 Regulatory/Operations Manager
- 1 Supply Chain Manager
Total Manpower Requirement: 6 people
Already Present
- Distributors
- 1 sales person
- 1 customer service person
Customer’s Take (On Present Situation)
Require for better and quick customer service and application
engineers.
Rules in Sri Lanka
- Minimum age for recruitment is 18 years and the
normal age of retirement is 55 years, however can be
extended
- Difficult to retrench labour under the Termination of
Employment Act of Sri Lanka
- Should be no discrimination between male and female
workers in terms of remuneration and facilities
- A written contract of employment embodying terms
and conditions of service including the designation or
category of the employee, normal hours of work, rate
of pay, period of training if any, probationary period,
leave, holidays and superannuation contribution, has to
be issued to every worker including trainees, and
acknowledgement of receipt obtained by the employer
- On termination or resignation any certificates in the
custody of the management should be returned to the
worker at least within 30 days from the date of
termination/resignation.

31. Cost Structure Revenue Streams
Key Partners Key Activities
Key Resources
Value Proposition Customer Relationship
Channels
Customer Segments
Business Model Canvas Sri Lanka – A Business Case
12-Aug-2013
Iteration #1

32. Agenda
Current Status
Business model evaluation
Proposal for change in Business model
Conclusion

33. Updated Sri Lanka Model

34. Work plan template – with traffic light indicator
Task
Owne
r
Sep
05-
09
Sep
12-
16
Sep
19-
23
Sep
26-
30
Oct
03-
07
Oct
10-
14
Oct
17-
21
Oct
24-
28
Nov
01-
04
Nov
07-
11
Nov
14-
18
Market Overview Team
Segmentation
Analysis
Team
Competition
Analysis
Team
Portfolio GAP
Analysis
Team
Relevance &
Attractiveness of
New Categories
Team
Risk & Mitigation
Strategies
Team
Sources of
Advantage
Team
Levers to seize
avantage
Team
Build a Business
Model for Sri
Lanka
Team
Second
Review
Final
update
BACKUP

35. Steps required to open a company in Sri Lanka
• Purchase of land by Non-citizen
• Obtaining a Telecom Services
• Obtaining an Electricity connection
• Obtaining Water Supply connection
• Filing Annual Return
• Obtaining Visas

36. Purchase of Land by Non-Citizens
S. No. Sector Investment
requirement
1. A project for the construction of not less than hundred residential housing units, each
constructed on individual allotments of land not exceeding ten perches or a condominium
property within the meaning of the apartment Ownership Law, No. 11 of 1973 comprising
not less than hundred units for residential or non-residential accommodation.
-
2. Construction and operation of hospitals or hotels. US$ 10 Mn.
3. Infrastructure Development or any other development determined by the Minister of
Finance as being essential for the economic progress of Sri Lanka.
US$ 50 Mn.
4. A project solely for the manufacture of non-traditional goods for export for the
establishment of its manufacturing plant, office, storage facilities, dormitories for
workers.
US$ 1 Mn.
5. Any condominium unit of a condominium property situated on or above the fourth floor
of such condominium property, the ownership of which is transferred to a person who is
not a citizen of Sri Lanka if the value of such unit is met by inward remittances of foreign
currency. (This applies to any condominium property, BOI or otherwise)
-
• Can purchase land in Sri Lanka subject to paying Property Transfer Tax at 100% of the purchase
price of such land
• Company approved by BOI, purchasing land under the following will be exempted from this
payment provided the total cost of land is met by inward remittance of foreign currency

37. Obtaining a Telecom Services
S. No. Procedures
1. Obtain an application from any Regional Telecom
Office/Teleshop or download application from Sri
Lanka Telecom corporate web site www.slt.lk
2. Submit completed application with a photocopy
of NIC/Passport.
For Business Use
a. For Public Companies or the registered
business with two or more owners, at least two
directors should sign the application and the
company seal to be embossed.
b. Business Registration Certification / Certificate
of incorporation.
c. Form 20.
d. If tax exempted, documentary proof.
3. Collect / Receive the invoice
4. Pay Installation Cost – at any Regional Telecom
Office or Teleshop.
Telecom
Companies
Websites
Lanka Bell www.lankabell.net
Suntel www.suntel.lk
Dialog www.dialog.lk
Mobitel www.mobitel.lk
Hutch www.hutch.lk
Etisalat www.etisalat.lk
Airtel www.airtel.lk
Provide Landline facilities
Provide Mobile
connection facilities

38. Obtaining an Electricity connection
S. No. Procedure
Time to
Complete Associated Costs
1
Submit application to Ceylon
Electricity Board and await external
site inspection
14 calendar
days
LKR 2,000.0
2
Ceylon Electricity Board conducts
site inspection and provides
estimate to customer
37 calendar
days
no charge
3
Request and receive Internal wiring
inspection from Colombo Municipal
Commission.
14 calendar
days
LKR 15,000.0
4
Customer signs supply contract with
Ceylon Electricity Board, and Ceylon
Electricity Board conducts external
connection works, installs the meter
and electricity starts flowing
67 calendar
days
LKR 3,882,737.6

39. Obtaining Water Supply connection
S. No. Procedure
1. Obtain an application from the relevant Area Engineer’s Office/
Local Area Office or download the form from the web site
(www.waterboard.lk).
2. Complete the application form provided by NWSDB and
hand over to the nearest office with Gramasevaka certificate or
assessment or Certificate of Conformity (COC) of the premises.
3. Obtain consent from the local authorities for damage to road
(If there is damage to the road in installing the water connection,
applicant should be required to pay a fee for this to the relevant
Road Authority).
4. On-site examination by NWSDB for clearance.
5. Pay the estimated cost for the connection to NWSDB.
6. Enter into a service agreement with the NWSDB.
7. The connection would be given after 3 working days from signing
of the service agreement.

40. Filing Annual Return
S. No. Procedure
1. Obtain the relevant form from the Registrar General of Companies or
download the same from their web site www.drec.gov.lk.
a. Form 15 – Companies other than a Company Limited by Guarantee
b. Form 15A - Companies Limited by Guarantee
2. File the duly completed form within 30 working days from the date of Annual
General Meeting/Resolution.
3. Pay a fee of Rs. 3,000 plus VAT of 12% to file the annual return to ROC.

41. Obtaining Visas
S. No. Procedure
1. Obtain an application form from Department of Immigration and
Emigration, Sri Lanka Mission abroad or download an application from the
website. (www.immigration.gov.lk)
2. Hand over Application to the relevant Department or Mission.
3. Documentation required: Recommendation of line Ministry or BOI for a
foreign national who desires to invest monetary capital or to engage in
business activities in Sri Lanka
4. Issued for: 1 year

43. Other Ministries – An Opportunity
Medical Supplies Division (MSD)
- Main functions are estimating, indenting, procuring, storing, distributing and monitoring of medical supplies
(including vaccines, Surgical items, Laboratory Items, Radioactive Items and Printed materials) to all government
health institutions in Sri Lanka.
- In addition MSD responsible for supplying the private sector with all dangerous drugs and essential medical items
which are not available in the open market.
- Procure total requirements of medical items mainly through State Pharmaceutical Corporation (SPC) which is the
procurement agent for Ministry of Health.
- Receive and distribute donations from donor agencies such as WHO/UNICEF (including GAVI) and others.
- Has 18 Bulk warehouses to receipt, store and issue these items
- Responsible for the distribution of medical items directly to the 26 Regional Medical Supplies Divisions RMSD) and
50 major hospitals /institutions administered by Central Government
- 26 RMSD are responsible for the supply of medical items to small hospitals under the purview of Provincial Councils
National Drug Quality Assurance Laboratory (NDQAL)
Develop a system to determine the quality of Medical Devices
Biomedical Engineering Services (BES)
- Responsible for all the procurement, maintenance and management activities related to medical equipment, in most of
the government hospitals in the country
- Provincial councils also procure equipment but their maintenance capabilities are not in par with the required level
- Updates: Medical Equipment management improvement(as of March 2008), Japanese collaboration
Total asset maintained worth Rs 12,000 million
1 technician per 750 hospital beds
50% of medical equipment in government hospitals not in working condition