The document provides a summary of economic and business news from Sri Lanka and around the world. Some key points: - In Sri Lanka, the Commercial Bank of Ceylon was named the most innovative customer service banking brand. It also enabled online payments of port authority charges. - Sri Lanka's population is aging rapidly according to a World Bank report. The country will see declines in the working age population and increases in the elderly population over the next few decades. - Several new investment and development projects were approved in Sri Lanka, including tourism hubs and an IT park in Jaffna. - Internationally, Germany narrowly avoided recession, India cut interest rates, and Japan's central bank said

1. Economic Capsule
February 2019
266th Issue
Research & Development Unit

2. CONTENTS BANKING & FINANCE
 ComBank named Sri Lanka’s ‘Most Innovative Customer Service Banking Brand’
 ComBank enables online payment of Ports Authority charges
ECONOMY & BUSINESS
 Demographic Change in Sri Lanka : World Bank Sri Lanka Development Update 2019
 UDA and SLTDA partner to develop master plans for 7 tourism hubs
 India to help set up Information Technology Park in Jaffna with Rs. 250 m grant
 BOI : Latest Developments
 Frontier Capital launches Sri Lanka’s first AI ChatBot to cater to USD 8bn worth tuktuk industry
INTERNATIONAL
 German economy narrowly avoids recession
 India unexpectedly cuts key rate, changes stance to neutral
 Japan's central bank says it's ready to ramp up stimulus if a strong yen derails inflation target

3. Banking & Finance

4. ComBank named Sri Lanka’s ‘Most Innovative
Customer Service Banking Brand’
Research & Development Unit
• The Commercial of Ceylon has been adjudged the
‘Most Innovative Customer Service Banking Brand, Sri
Lanka 2018’ by the UK-based ‘Global Brands’ – a
magazine that provides reviews, opinions, news and
polls on leading brands across the globe.
• Commercial Bank was evaluated alongside more than
7,000 other companies in a study conducted by an
independent external research agency appointed by
the Global Brands and was chosen as the recipient of
this award from Sri Lanka.

5. ComBank enables online payment of Ports
Authority charges
Research & Development Unit
• The Commercial Bank of Ceylon has
added the Sri Lanka Ports Authority
(SLPA) to its Online Banking platform,
enabling customers to pay their Ports
Authority charges in respect to their
shipping requirements from
anywhere, 24 x 7, 365 days of the
year.
• To use this online payment option, customers simply have to key in their 14 digit invoice number
issued by SLPA on Commercial Bank’s Online payment portal to be notified of the amount due.
• Once the payment is successfully completed, an online receipt will be issued.
• This facility is available to both personal and corporate customers. The Bank has also set up a
dedicated client support desk that is accessible 24 hours of the day, for those who use the facility.

6. Economy & Business

7. Demographic Change in Sri Lanka :
World Bank Sri Lanka Development Update 2019
Research & Development Unit
Cont.
• Sri Lanka’s share of working-age population peaked in 2005 and it
is expected to gradually decline over time.
• In addition, the shrinking labor supply is expected to slow down
growth in the medium-term. The dependency ratio (the ratio of
youth and elderly to the working-age population) was 51% in
2015.
• About one-fourth of the population were under 15 years old,
whereas under one-tenth were 65 years or older.
• By 2050, it is projected that the proportion elderly (23%) to
surpass that of the youth (17%).
Sri Lanka is undergoing a gradual aging process of its
population, and compared to peers, it has reached an
advanced stage of this demographic transition. The population
pyramid is already beginning to show signs of aging.

8. Research & Development Unit
Population pyramids
• Such changes in the structure of the
pyramid will translate in a slower
growth rate of its population and a
shrinking labor supply.
• In addition, demographic changes
are expected to have long-lasting
implications for service delivery
(health and education), pensions,
employment, and public finances
that should be taken into account
on policy planning.
Demographic Change in Sri Lanka :
World Bank Sri Lanka Development Update 2019 (cont.)

9. Research & Development Unit
• Several factors can mitigate the impact of demographic factors on growth and labor
markets. Sri Lanka’s labor force participation rate has remained relatively unchanged over
the past 20 years and is low compared to other developing countries.
• This can be partly explained by the large gap in labor force participation rates between
men and women.
• Closing the gender gap in labor force participation would buffer the impact coming
through the reduction in the number of workers and could mitigate the impact of
demographics on growth. Policies that foster women’s entry to labor markets are
important.
• Increases in education attainment can also lift productivity and participation rates of
younger cohorts, in addition to labor reallocation towards more productive sectors that
lead to productivity gains and hence higher growth.
Demographic Change in Sri Lanka :
World Bank Sri Lanka Development Update 2019 (cont.)

10. UDA and SLTDA partner to develop master
plans for 7 tourism hubs
Research & Development Unit
• The Urban Development Authority (UDA) has entered into a
partnership with the Sri Lanka Tourism Development Authority
(SLTDA) to develop a tourism development master plan, to
promote sustainable tourism development activities in seven
existing as well as emerging tourism hubs - Kalpitiya, Arugam
Bay, Ella, Pinnawala, Nuwara Eliya, Beruwala and Hikkaduwa.
• The UDA signed the MoU with the SLTDA to carry out a study in
this regard, to identify tourism development zones in these areas
and to develop specific guidelines for tourism development and
tourist-related activities, to avoid ad hoc tourism development
and to avoid undesirable activities.
• Following the study, the identified tourism development zones in
the areas, along with the specific guidelines, will be gazetted
under the UDA law.

11. India to help set up Information Technology Park in
Jaffna with Rs. 250 m grant
Research & Development Unit
• India and Sri Lanka signed a Memorandum of Understanding (MoU) to establish
a Business Centre for ICT incubators/accelerators in Jaffna through a grant of
Rs. 250 million from the Government of India.
• This project is part of the Government of India’s continued efforts to assist and
cooperate with the Government of Sri Lanka in people-oriented development
projects. The Business Centre would provide opportunities and enhance the
enabling environment for Information Communication Technology (ICT) and
other professional services in the northern region.

12. BOI: Latest Developments
Research & Development Unit
BOI approves USD 15.4mn
Bellevue Residencies in Ja-
Ela
The BOI signed an
agreement with Bellevue
Residencies Limited, which is
a mixed development
project for a 35-storey tower
and shopping complex.
This project will be
constructed in Ja-Ela, and it
is the first time that such a
high-rise tower is built
outside the city of Colombo.
In fact, the Bellevue Tower
will be the tallest building
outside the Colombo
District.
BOI signs deals for hotel,
fabric plant and warehouse
and logistics centre
BOI recently signed
agreements for four new
projects with a combined
investment of USD 4.35mn.
One of the agreements
signed was with Arihara
Lanka Dream Company Ltd.,
to set up, construct and
operate a 36-room hotel
which will be located in
Dambulla. When completed it
will create 80 employment
opportunities and the total
value of the investment will
be USD 3.8bn.
Indian firm to manufacture aluminium food
containers, aluminium wrap under new BOI deal
BOI signed an agreement with ARD Aluminium Ltd. to
set up a factory to manufacture aluminium food
containers with lids and aluminium homefoil wrap for
food.
Currently these products which are popularly used by
the catering industry are largely imported from other
countries, notably China. This company already
manufactures 15 variants of this container and also
barbeque trays used for roasting food.
The company has a capacity to manufacture 250 tons
of aluminium containers per month which is the
equivalent of 25 forty foot containers. Their products
will be exported to India, the United Arab Emirates
and Western Europe, notably the United Kingdom. A
total of 20% can be sold on the local market.

13. BOI: Latest Developments (cont.)
Research & Development Unit
BOI projects in the Northern Province
Among the existing investments under BOI in the Northern Province are six apparel manufacturers and 15 other
projects. When these are all operational the total investment will be Rs 16,293 mn and the total employment
generation will be for 837 workers.
In addition to the existing projects in the Jaffna District, five new projects have been established in the province
recently.

14. Research & Development Unit
Frontier Capital launches Sri Lanka’s first AI
ChatBot to cater to USD 8bn worth tuktuk industry
• Sri Lanka’s Frontier Capital Partners has
recently released a newly developed
advanced Artificial Intelligence (AI)
ChatBot assistant titled ‘TukBoy’.
• According to the company officials the
‘TukBoy’ Chatbot has been developed
using world’s leading Artificial
Intelligence (AI) based Super Computer
IBM Watson’s technology along with
the support of English, Sinhala and
Tamil languages. (Read More)

15. International

16. German economy narrowly avoids recession
Research & Development Unit
Source: BBC
• Germany's economy just about avoided falling
into recession during the final three months of
2018.
• Europe's largest economy registered zero growth
during the fourth quarter of 2018, the country’s
federal statistic office said.
• That means it avoided two consecutive quarters
of contraction, which is the usual definition of a
recession.
• A weak trade performance dragged on the economy, and consumer spending remained
subdued.
• The zero growth recorded in the October-to-December period followed a 0.2% contraction
in the previous quarter.

17. India unexpectedly cuts key rate, changes
stance to neutral
Research & Development Unit
• India’s central bank on 07th February 2019
unexpectedly lowered interest rates and, as
anticipated, shifted its stance to “neutral” to
boost a slowing economy after a sharp slide in
the inflation rate.
• The cut is welcome news for Prime Minister
Narendra Modi’s government, which wants to
boost lending and lift growth as it faces elections
by May.
• The Reserve Bank of India’s monetary policy
committee (MPC) cut the repo rate by 25 basis
points to 6.25%.

18. Japan's central bank says it's ready to ramp up
stimulus if a strong yen derails inflation target
Research & Development Unit
Source: CNBC
• Bank of Japan Governor Haruhiko
Kuroda said, the central bank was
ready to ramp up stimulus if sharp
yen rises hurt the economy and
derail the path towards achieving its
2% inflation target.
• But he said the BOJ would carefully
weigh the benefits and costs of any
further policy easing, suggesting that
the hurdle for topping up stimulus
would be high given how financial
institutions' profits have been hurt
by years of near-zero interest rates.
Movement of Japanese inflation rate %

19. 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.
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John Wooden