Economic Capsule - September 2020

Economic Capsule
December 2019
276th
Issue
Research & Development Unit
Economic Capsule
September 2020
284th Issue

C O N T E N T S
ECONOMY & BUSINESS
 Sri Lanka improves ranking in Economic Freedom of the World index to 83 from 98
 Index of Industrial Production (IIP) reach pre-pandemic levels in July 2020
 Sri Lanka manufacturing activities reach pre-pandemic levels in July 2020
 Transhipment volumes recover to pre-pandemic levels at Colombo Port
 Sri Lanka’s China backed project puts reclaimed land on the market for services FDI
 Cabinet approves forex-risk-free foreign investments in Govt. bonds
 BOI says USD 1.5bn worth investment agreements signed in first 9 months
 Plans afoot to produce 50 % of country’s pharmaceuticals requirement locally
 Vehicle registrations down in August 2020
 Raw rubber prices set to gain amid import ban
 CEAT ramps up ‘2-wheeler’ tyre production by 85% in 3 months
 Economic/Business news snippets
INTERNATIONAL
 Jack Ma's Ant Group sets aim for world's largest IPO
 China's exports rise the most in nearly 1-1/2 yrs as economies reopen;
imports slip
 U.S. Unemployment rate drops by more than expected, to 8.4%
 Oil price fall hurts major Gulf markets
 Global Economic news snapshot
 Key Global Macroeconomic Indicators
INTERNATIONAL
 ComBank is Sri Lanka’s ‘Most Respected Bank’ for record 16 years
 ComBank launches trilingual multi-channel Integrated Contact Centre
 ComBank and PAYable launch Smart POS-Mini device to promote cashless
payments
 Commercial Bank Bangladesh marks a decade at the top with 10th successive ‘AAA’
rating
 ComBank launches ‘Cash on FD’ facility via linked Credit or Debit Cards
 ComBank IPG services show remarkable growth momentum during the year

ComBank is Sri Lanka’s ‘Most Respected Bank’
for record 16 years
Commercial Bank has been adjudged the ‘Most Respected Bank’ in
Sri Lanka and been ranked number One among all corporates in the
country for ‘Honesty’ and ‘Financial Performance’ in the 2020
edition of the ‘Most Respected Entities in Sri Lanka’ just released by
LMD magazine.
• Sri Lanka’s leading private sector bank not only retained its position at the pinnacle of the Banking
sector for the 16th successive year, it achieved the second place in the overall ranking.
• The 10 attributes by which companies are ranked for the LMD Most Respected Entities ranking are
Financial Performance, Honesty, Quality Consciousness, Management Profile, Dynamism, Corporate
Culture, Vision, Innovation, CSR and Nation-mindedness. Commercial Bank was ranked among the
top five corporate entities in Sri Lanka in 2020 in seven of the 10 attributes.

ComBank launches trilingual multi-channel
Integrated Contact Centre
Commercial Bank has launched a one-stop
trilingual Integrated Contact Centre to serve
its customers and stakeholders 24/7 and
enabling customers to reach the Bank via
multiple channels for inquiries and assistance.
The dedicated team behind the Centre consists of
customer service representatives to handle calls,
written communications, customer requests and
customer feedbacks routed through social media,
team leaders and trainers for better supervision and
monitoring to ensure customers receive a positive
experience in each and every interaction with the
Bank.

ComBank and PAYable launch Smart POS-Mini
device to promote cashless payments
Commercial Bank together with PAYable (Pvt) Ltd.
recently announced the launch of an Android Mini
Point-of-Sale (POS) device to enable merchants
anywhere in Sri Lanka to accept card payments.
The Smart POS-Mini is a fully functional Android terminal, able to process transactions via Mag-stripe, EMV and
Chip readers. The device is also capable of processing Near Field Communication (NFC) transactions and can scan
QR codes at a high speed.
The sleek and convenient device also boasts both SIM and Wi-Fi connectivity and supports a tri-lingual user
interface. The PAYable solution simplifies transactions, making it possible for a transaction to be completed in just
three steps. The solution also includes a tri-lingual user interface that adds to its versatility, boasts an automatic
settlement feature, eliminating the need for cumbersome manual reconciliation, provides the facility to operate
installment payments, and is capable of multi-currency transactions.

Commercial Bank Bangladesh marks a decade at the top with 10th
successive ‘AAA’ rating
The Bangladesh operations of Commercial Bank of Ceylon PLC achieved another milestone in 2020 with the assignment of an
‘AAA’ (Triple A) long term credit rating for the 10th consecutive year by Credit Rating Information and Services Ltd. (CRISL).
Commercial Bank of Ceylon Bangladesh also received a short term rating of ‘ST-1 – Outlook Stable’ from CRISL, the premier
rating agency in Bangladesh.
ComBank launches ‘Cash on FD’ facility via linked Credit or Debit Cards
Commercial Bank has introduced a ‘Cash on Fixed Deposits’ (FDs) facility which enables depositors to withdraw against their FD
value through an exclusive Debit or Credit Card linked to their accounts.
The Bank said the facility has been especially designed to meet any unforeseen financial requirements of the Bank’s FD
clientele.
ComBank IPG services show remarkable growth momentum during the year
As e-commerce continues to burgeon in Sri Lanka, Commercial Bank has asserted its ascendancy in this sphere, with payment
processing services deployed by the Bank now accounting for approximately two out of every five transactions.
This market share of 40% in value terms is a testament to the role the Bank has played in supporting the country’s retail
industry and promoting online sales for customers, the Bank said. The Bank currently supports the online payment processing
of over 500 merchants through Mastercard Payment Gateway Services (MPGS) and Visa Cybersource, two of the world’s leading
payment gateway platforms which are fully-compliant with Payment Card Industry Data Security Standard (PCI-DSS)
requirements. The third IPG solution of the Bank is ‘ComBank SimplePay’ which is a simplified, Sri Lankan adaptation of the
Mastercard product “Simplified Commerce.”

Sri Lanka improves ranking in Economic
Freedom of theWorld index to 83 from 98
Sri Lanka ranked 83 out of 162 countries and territories included in the Economic Freedom of the
World: 2020 Annual Report (2020 annual report is based on the data for 2018), released by Canada’s
Fraser Institute in association with the Advocata Institute Sri Lanka. In the previous year Sri Lanka’s
rank was 98.
Source: Fraser Institute
The index is based on the
categories:
 Size of Government
 Legal System and Property
Rights
 Sound Money
 Freedom to Trade
 International Regulation.
Top 10 Countries

Index of Industrial Production (IIP) reach
pre-pandemic levels in July 2020
Index of Industrial Production (IIP) Jan2019 - Jul2020
*The Index of Industrial Production (IIP) is an abstract number, the
magnitude of which represents the status of production in the industrial
sector for a given period of time.
The IIP describes changes of the volume of goods and services produced
over time.
Department of Census and Statistics (DCS)
IIP for July 2020 was 111.1 the highest achieved since
October 2019.
Manufacturing activities
Year on Year (%) Change
(July 2019/July 2020)
Beverages 32.4
Chemicals & chemical products 16.6
Food products 13.7
Basic pharmaceutical products and
pharmaceutical preparations
12.9
Textiles 7.5
Tobacco products 5.7
Leather and related products -40.3
Electrical equipment -20.8
Wearing Apparels -17.2
Coke (coal) and refined petroleum products -15.8
Machinery & equipment -2.9
Furniture -2.5
Rubber & plastic products -2.2
Paper and paper products -1.0
Source: DCS
The Index of Industrial Production (IIP) of July of 2020 &
2019 and Year-on-Year changes

Sri Lanka manufacturing activities reach
pre-pandemic levels in July 2020
Purchasing Mangers’ Index (PMI)* for the four months from May through August,
pointed to a expansion of both manufacturing and services activities.
*SL Purchasing Managers’ Index
(PMI) PMI is calculated as a ‘Diffusion
Index’, where it takes values between
0 and 100.
PMI=50 - sector remained neutral on
month-on-month basis;
PMI>50-sector is generally
expanding on month-on-month basis
PMI<50 -sector is generally declining
on month-on-month basis
Central Bank of Sri Lanka

Transhipment volumes recover to pre-pandemic
levels at Colombo Port
The transhipment container volumes at the Port of Colombo
recovered to pre-pandemic levels in July 20, ending the declining
trend recorded since March and leading to an overall recovery of
container volumes, according to Central Bank data.
*TEU - TEU stands for Twenty-Foot Equivalent Unit which can be used to measure a ship's cargo carrying capacity.
The dimensions of one TEU are equal to that of a standard 20′ shipping container. 20 feet long, 8 feet tall.
The container transhipment volumes grew by an impressive 11.4% year-on-year (YOY) in July to
519,116 TEUS*, as the region’s external trade activities picked up with the pandemic-related travel
restrictions easing, particularly in India and Bangladesh.
The Port of Colombo is the second biggest port for Indian containers and with around 70 % of the
port’s transhipment throughput coming from India.
The transhipment throughput started to decline from March, with the escalation of the pandemic
globally.

Sri Lanka’s China backed project puts
reclaimed land on the market for services FDI
Colombo Port City, a project financed by China-
based business group has placed 13 blocks of
prime land reclaimed from the sea and a
marina in the market for investors in services
exports to kick start post-Covid-19
investments.
The first phase will focus on getting FDIs for services export and 70% of investment into the project will be
commercial.
According to Thulci Aluwihare, there is strong interest in blocks bordering a yacht marina. The yacht marina
area itself has drawn interest from investors in Singapore and India, he said.
Source: economynext
According to Thulci Aluwihare, Head of Strategy &
Business Development, the Port City area will have a
Special Economic Zone law which will have tax
benefits and more business friendly regulations
which will increase the ease of doing business.

Cabinet approves forex-risk-free foreign
investments in Govt. bonds
The Cabinet of Ministers approved the proposal by the Finance Ministry to allow foreign exchange-
risk-free investments into Government securities by non-residents subject to a few conditions.
Foreigners will be allowed to buy Government securities and also sell same at the exchange rate
prevalent at the time of the former if held until maturity.
In the event of selling the Government securities prior to maturity the same exchange rate at the time
of buying will be applicable but subject to a penalty.
This special facility is applicable only if there is foreign exchange inflow to the country and subject to a
minimum investment of USD 25mn and a maximum of USD 1bn.
In the case of depreciation of the exchange rate of the US Dollar against the Sri Lanka Rupee during the
applicable period, the Central Bank will compensate the loss incurred when transferring its dividends
to the Treasury in the future. This is because any loss that could be incurred to the Central Bank is
considered as a cost to the Treasury.

BOI says USD 1.5bn worth investment
agreements signed in first 9 months
Future BOI expectations
 Eravur fabric park (Already initiated)
 Sea cucumber processing factory in Jaffna for exports (Agreements signed)
 Rubber-based manufacturing zone outside Colombo and Gampaha districts. (Proposed)
 Fisheries and aquatic resources projects in the North, East and Northwest coasts. (Proposed)
 IT parks in Colombo, Gampaha, Kandy, Hambantota,Vavuniya and Jaffna districts within next 05
years’ time. (Proposed)
Despite COVID-19 related disruptions, Sri Lanka’s Board of Investment (BOI) said, it
has approved agreements worth USD 1.5bn in the first nine months of this year.
This value includes new investments and expansions of ongoing projects. According
to BOI Director General Sanjaya Mohottala, this number is expected to reach
USD 2-2.5bn by the end of this year.

Plans afoot to produce 50 % of country’s
pharmaceuticals requirement locally
The Government plans to produce 50% of the country’s requirement of
pharmaceuticals locally within the next three years.
The objective is to provide high-quality medicine to the public and the
foreign market as well, at affordable prices. All products are made in
accordance with the recommendations and standards of the World Health
Organization.
85% of the country’s drug requirement is met through imports at an
annual cost of Rs 130 bn. Producing pharmaceuticals locally will pave the
way to save Rs 60 bn annually.
An Investment Zone of 400 acres will be established in the Hambantota Industrial Zone for
manufacturing medicine targeting the global market.
An investment zone for local investors will be established in a 100-acre land at Oyamaduwa,
Anuradhapura. Twenty-five medium scale businessmen are prepared to invest a sum of USD 300mn in
this endeavor.

Vehicle registrations down in August 2020
Total vehicle registrations significantly came down in August to 17,493 units down from 28,572 the
previous month. The slow down was across the board.
Registrations expected to further slowdown in September due to inventory depletions.
The import bans are not applicable to agriculture, service and construction related vehicles which
explains a slightly different trend in these categories.
Source: JB Securities

Raw rubber prices set to gain amid import ban
Sri Lanka’s raw rubber prices, which remained
depressed for many years, could see a rebound from
the current import controls in place for rubber-
based products, enhancing prospects for plantation
companies and smallholders alike.
The government has restricted imports of rubber-
based products, including tyres, as part of its
broader curbs on non-essential imports, to contain
the pressure on foreign exchange.
The import ban on rubber-based products will boost
the demand for domestically produced rubber
products and thereby will attract higher prices for
locally produced rubber.

CEAT ramps up ‘2-wheeler’ tyre production by
85% in 3 months
CEAT Kelani Holdings has announced the achievement of an 85%
increase in the production of tyres for the ‘two-wheeler’ segment over
just three months, as a full-bodied response to the needs of the local
market consequent to the temporary import restrictions introduced by
the Government.
Maximising capacity utilisation at its manufacturing plants at Kelaniya and Kalutara, the company
pushed production of tyres for motorcycles and scooters from 27,000 units a month in June to 41,000
per month in July and August, and is on target to produce 50,000 tyres in September, increasing volumes
by 52% in the first step and by an incremental 22% thereafter.
CEAT Kelani Holdings is an India-Sri Lanka joint venture. The joint venture’s cumulative investment in
Sri Lanka to date totals Rs. 8 billion, inclusive of Rs. 3 billion committed in January 2018 for expansion of
volumes, technology upgrades and new product development.

Economic/Business news snippets
Pirate Life Brewing Partners with Dilmah Tea to Launch Tea Beer in
Australia
Two of Australia’s most beloved rituals have been combined in one
ground-breaking beer thanks to Port Adelaide Pirate Life Brewing and
family tea company Dilmah.
The Australian-first collaboration has produced Tea and Biccies Brown
Ale, combining fresh beer with Sri Lankan black tea.
John Keells Hotels and Indra Traders to build
160-room hotel in Kandy
The Board of Investment (BOI) of Sri Lanka has
signed an agreement with Indra Hotels and Resorts
Kandy (Pvt) Ltd, a joint venture between John
Keells Hotels PLC and Indra Traders (Pvt) Ltd, to
build a 160-room, 3-star, lean luxury hotel in
Kandy.
Atlas has introduced Sri Lanka’s first ever
range of Anti-Bacterial Stationery
This product range has been developed by
Atlas in partnership with SLINTEC (Sri Lanka
Institute of Nanotechnology) and
incorporates cutting-edge antibacterial
technology, developed in Sri Lanka and
proven to kill 99.9 % of bacteria on the
surfaces of these specialised books and pens.
63% increase in CDS Account openings since the Digitalization
The CSE has noted a significant increase of over 63% in Central Depository System (CDS)
account openings since the digitalization of the end-to-end operations of the market on
17th September 2020.
The latest LMD-Nielsen Business Confidence Index (BCI) survey has
nudged up by three basis points from the previous month to reach 120 in
September 20.
SLASSCOM sets $ 500 m export revenue target with newly launched CSCx
The Sri Lanka Association of Software and Services Companies (SLASSCOM), has given birth to an ambitious new initiative with
the launch of the Cybersecurity Centre of Excellence (CSCx), which aims to position Sri Lanka as a global cybersecurity hub.
SLASSCOM which has been forging ahead as the catalyst of growth for the Sri Lankan IT and BPM industry, believes CSCx can
play a dominant role towards achieving an impressive goal of USD 500 mn in export revenue by 2025, by positioning Sri Lanka as
a cybersecurity hub, while also looking at producing 10,000 to 20,000 new cybersecurity professionals to cater to the global
demand for cybersecurity products and services.

Jack Ma's Ant Group sets aim for world's
largest *IPO
Source: Nikkei
Ant Group, Alibaba's financial technology affiliate and operator of
China's largest digital payment network, has filed to sell shares on
the Hong Kong Stock Exchange and Shanghai's STAR Market in
what is shaping up to be the world's largest-ever initial public
offering.
Ant, which carries a valuation of USD 200bn and is the world's
most valuable fintech company, will sell at least a 10% stake, split
between the two markets.
While the IPO applications did not specify Ant's fundraising target, two people familiar with the transaction
said it was looking to sell about USD 30bn worth of shares depending on market conditions. At that level, the
listing would top state oil producer Saudi Aramco's record-setting USD 29.4bn IPO at the end of 2019.
*IPO – Initial Public Offering An initial public offering (IPO) refers to the process of offering shares of a private corporation to the public in a new stock issuance. Public share issuance
allows a company to raise capital from public investors.

China's exports rise the most in nearly 1-1/2
yrs as economies reopen; imports slip
Source Reuters
China’s exports rose for the third consecutive month in August, eclipsing an extended fall in
imports, as more of its trading partners relaxed coronavirus lockdowns in a further boost to the
recovery in the world’s second-biggest economy.
Exports in August rose a solid 9.5% from a year earlier, customs data showed, marking the
strongest gain since March 2019.
Imports however slumped 2.1%, compared with market expectations for a 0.1% increase and
extending a 1.4% fall in July.
The strong exports suggest a faster and more balanced recovery for the Chinese economy, which is
rebounding from a record first-quarter slump thanks largely to domestic stimulus measures

U.S. Unemployment rate drops by more than
expected, to 8.4%
Source: Bloomberg
The U.S. labor-market rebound extended for a fourth month in August, offering hope that the
economy can continue to recover despite a persistent pandemic and Washington’s standoff
over further government aid to jobless Americans and small businesses.
The unemployment rate fell by more than expected, by almost 2 percentage points, to 8.4%.
The drop in the unemployment rate to single digits, with two months before the November
election, could give a boost to President Donald Trump, who has often polled better than
Democratic opponent Joe Biden on economic issues and is counting on such sentiment to help
him win a second term.

Oil price fall hurts major Gulf markets
Source: Bloomberg
Major Middle Eastern markets ended lower
on 28.09.20, after oil prices slid on the
possible return of Libyan production and as
rising COVID-19 cases around the world
stoked demand concerns.
Global oil refiners are cutting fuel
production into the autumn as the recovery
in demand from the impact of coronavirus
has stalled, according to executives, refinery
workers and industry analysts.
Lower prices and disruptions to crude
exports could impact fiscal balances in
countries reliant on oil income.

Global economic news snippets
Source: The Economist
Thailand became the first South-East
Asian country to loosen tourism
restrictions introduced during the
pandemic. Visitors who agree to a
14-day quarantine and a minimum
stay will be allowed to enter.
Malaysia’s prime minister, by
contrast, said he would tighten
controls at borders.
Singapore will give all adult residents
vouchers worth SGD 100(USD 73) to
spend on local hotels and sights.
Suga
Yoshihide became
Japan’s 99th prime
minister.
He won the leadership of
the Liberal Democratic Party
with 377 votes of a possible
535, following Abe Shinzo’s
resignation due to ill health
in August.
The Federal Reserve announced
it will keep interest rates pinned
near zero.
In a policy statement, the central
bank also said it would keep them
there until inflation is on track to
“moderately exceed” its target of 2%
“for some time”.
Jay Powell, the chairman of the Fed,
commented that America’s economic
recovery is expected to slow and that
the economy will require continued
support from the central bank as well
as from extra government spending.
Worries that Britain is at risk of deflation grew
after the annual rate of inflation fell to 0.2% in
August, down from 1% the previous month.
The effect of the government’s discount scheme for
restaurants in August may have contributed up to 0.5
percentage points of the drop.
Deutsche Bank is preparing to close a fifth of its
branches in Germany, according to reports, leaving it
with 400 branches.
The German lender thinks the pandemic has shifted
many customers permanently towards digital banking.

Key Global Macroeconomic Indicators
Country GDP % (Q2) Inflation % (YoY) Aug Unemployment rate %
USA -9.1 1.3 8.4 (Aug)
China 3.2 2.4 3.8 (Q2)
Japan -9.9 0.2 2.9 (Jul)
Euro Area -14.7 0.2 7.9 (Jul)
Britain -21.7 0.2 4.1 (Jun)
India -23.9 6.7 8.4 (Aug)
Malaysia -17.1 -1.4 4.7(Jul)
Singapore -13.2 -0.4 2.8 (Q2)
Source: The Economist

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 >

Economic Capsule - September 2020

Recomendados

Recomendados

Mais conteúdo relacionado

Mais procurados

Mais procurados (20)

Semelhante a Economic Capsule - September 2020

Semelhante a Economic Capsule - September 2020 (20)

Mais de Commercial Bank of Ceylon PLC

Mais de Commercial Bank of Ceylon PLC (20)

Último

Último (20)

Economic Capsule - September 2020