Economic Capsule - January 2019

Economic Capsule
January 2019
265th Issue
Research & Development Unit

CONTENTS BANKING & FINANCE
 ComBank opens its 266th branch in Embuldeniya
 ComBank issues UnionPay cards for first time in Sri Lanka
 ComBank launches Mastercard Send™ in Sri Lanka
 WeChat Pay’ acceptance launched in Sri Lanka for the first time by Commercial Bank
 ComBank joins with Alipay to facilitate QR Code based payments for Chinese tourists
 Commercial Bank and its MD honoured with prestigious accolades in Singapore
 ComBank receives two awards from International Finance
 ComBank awarded Greenhouse Gas verification statement
ECONOMY & BUSINESS
 Govt. steams ahead to boost exports, FDIs
 External Sector Performance – November 2018
 Cabinet approves Appropriation Bill
 NCE signs MOU with SLINTEC to enhance R&D and innovation
 Apparel cracks USD 5bn target
 Port City
 Colombo voted the ‘must-photograph’ travel destination of 2019
INTERNATIONAL
 Brexit – Latest developments
 Brexit takes toll on Britain’s financial sector, outlook weak

ComBank opens its 266th branch in Embuldeniya
• The Commercial Bank of Ceylon has opened its
newest branch in the bustling suburb of
Embuldeniya in Nugegoda.
• Embuldeniya is a centre of economic activity in
the Western Province with flourishing businesses
in fabrics, agricultural produce, vehicle spare parts
and other trading activities. The Bank will be
providing its versatile products range most
importantly its lending products that comprise of
personal loans, home loans, leasing facilities, SME
banking services and the diverse savings product
portfolio to its residents and upcoming
entrepreneurs.

ComBank issues UnionPay cards for first time
in Sri Lanka
• The Commercial Bank of Ceylon has become the
first Bank in Sri Lanka to issue UnionPay Credit and
Debit Cards, the card brand with the largest
customer base in the world, making Sri Lanka the
51st market in the world to issue UnionPay cards.
• Sri Lanka’s fastest-growing credit card issuer, the
Bank said it will offer UnionPay Gold, Platinum and
Diamond Credit cards and UnionPay Gold Debit
cards, at all Commercial Bank branches
countrywide. Debit Card issuance will commence in
the latter part of January 2019.

ComBank launches Mastercard Send™ in Sri
Lanka
• The Commercial Bank of Ceylon has launched Mastercard Send™, the facility that
leverages Mastercard’s global payment network and card products, to provide Sri
Lankan Mastercard cardholders with a convenient, fast, safe and reliable way to
effect cross-border, person-to-person money transfers.
• The Mastercard Send solution requires receivers in Sri Lanka to only provide the
number of their Commercial Bank Debit or Credit Card and the necessary personal
information to senders outside the country. Senders can then transfer money via
their Mastercard cards to families and friends in Sri Lanka.
• The funds will be remitted to the recipients’ Debit or Credit card accounts on the
same day, and Commercial Bank customers will not be charged any service fee or
currency exchange fees for this facility, the Bank said.

WeChat Pay’ acceptance launched in Sri Lanka
for the first time by Commercial Bank
• Chinese tourists visiting Sri Lanka now have the added
benefit of purchasing goods and services and paying for
them through ‘WeChat Pay’ –one of the leading mobile
payment solutions in China, consequent to a partnership
between the Commercial Bank of Ceylon PLC and Tenpay
Payment Technology Ltd.
• This mobile app solution is brought to the Sri Lankan market
by Commercial Bank in partnership with Wells Digital
Infrastructure (Pvt) Ltd., and SwiftPass Technologies Co. Ltd.,
a leading electronic payments solutions provider which
facilitates Commercial Bank’s acquiring of ‘WeChat Pay’
transactions in Sri Lanka.

ComBank joins with Alipay to facilitate QR
Code based payments for Chinese tourists
• Chinese travellers visiting Sri Lanka can now enjoy a host
of goods and services and pay for them through ‘Alipay’ –
China`s leading mobile payment platform, thanks to a
partnership between Commercial Bank of Ceylon PLC and
Ant Financial Services Group.
• The solution is brought to the Sri Lankan market by
Commercial Bank in partnership with Wells Digital
Infrastructure (Pvt) Ltd. and Swiss Pass China, a leading electronic payments solutions
provider which facilitates Commercial Bank’s acquiring of Alipay transactions in Sri Lanka.
• This payment channel will be made available through a special Point-of-Sale (POS) device
that will be provided to merchants such as gem and jewellery retailers, handicraft shops,
tea shops, hotels and restaurants in Sri Lanka, the Bank said.

Commercial Bank and its MD honoured with
prestigious accolades in Singapore
• The Commercial Bank of Ceylon has started 2019 on a
winning note, with the Bank being named one of
“Asia’s Greatest Brands” and its Managing Director
Mr. S. Renganathan being honoured as one of “Asia’s
Greatest Leaders” by the Asian Business & Social
Forum (ABSF).
• The prestigious double accolades were presented to
the Bank at the 3rd edition of ‘Asia’s Greatest Brands
& Leaders’ at Marina Bay Sands, Singapore, as part of
the ‘Pride of Asia’ awards series of Asia One magazine
and URS Consulting.

ComBank receives two awards from
International Finance
The awards for ‘Best Domestic Bank’ and
‘Best SME Bank’ in Sri Lanka in 2018 were
presented to Commercial Bank of Ceylon
recently by International Finance magazine
at an awards ceremony at the Jumeirah
Emirates Towers hotel in Dubai.

ComBank awarded Greenhouse Gas verification
statement
• The Commercial Bank of Ceylon has been
awarded a Greenhouse Gas (GHG) verification
statement by Sri Lanka Climate Fund (Pvt) Ltd.
under the Ministry of Mahaweli Development and
Environment, after verifying that the Bank’s
total Greenhouse Gas emissions for 2017 in
accordance with ISO 14064-1:2006 were at a
“reasonable level of assurance.”
• This certification was awarded following an
organizational level GHG inventory prepared by
Climate Smart Initiatives (Pvt) Ltd. based on
historical data submitted by the Bank.

Govt. steams ahead to boost exports, FDIs
The Government is steaming ahead in developing three
new export processing zones, while introducing
investor-friendly policies to bolster trade and attract
fresh foreign direct investments.
Apart from Hambantota, the government is working
on developing two other zones in Millaniya and
Bingiriya.
According to Minister of Development Strategies and International Trade,
 Rs. 2.5Bn will be allocated from the upcoming Budget to build the new zones.
 Government will soon call for expressions of interest (EoI) from both local and
foreign investors to capitalize on these new zones.
Cont.

Govt. steams ahead to boost exports, FDIs (cont.)
USD 2.2 Mn FDI estimated in 2018
USD 3.0 Mn FDI target in 2019
“We hope to introduce investor-friendly mechanisms to fast-track the approval and
implementation of projects.
The Board of Investment (BOI) has already set up the Single Window Investment
Facilitation Taskforce (SWIFT) to streamline and fast track the investment approval
process by interconnecting the first six line agencies.
We also hope to talk to the existing investors to encourage reinvestment” Minister of
Development Strategies and International Trade Mr Malik Samarawickrama said.

External Sector (January - November 2018)
Category Jan- Nov 2017 Jan-Nov 2018 Change (%)
Exports 10,341 10,856 5.0
Imports 18,931 20,498 8.3
Trade Balance (8,590) (9,642) (12.2)
Earnings from Tourism 3,471 3,905 12.5
Workers’ remittances 6,493 6,431 (0.9)
Inflows to the CSE (net) 267 (29) (110.9)
Inflows to T-bills and T-bonds 324 (701) (316.4)
IMF-EFF receipts 167 252 50.9
Foreign Direct Investment 693 1,801 159.8
Overall Balance 2,005 (807) (140.2)
Summary of External Sector USD mn

Summary of Export Performance (Jan-Nov’ 18)
Category Jan- Nov 2017 (USD Mn) Jan-Nov 2018 (USD Mn) Change (%)
Industrial Exports 7,745.6 8,444.9 9.0
Textiles and garments 4,562.0 4,824.3 5.7
Rubber products 760.8 798.9 5.0
Machinery and mechanical appliances 340.8 401.6 17.8
Petroleum products 371.9 569.2 53.0
Agricultural Exports 2,547.5 2,362.7 (7.3)
Tea 1,402.9 1,311.4 (6.5)
Rubber 35.7 29.7 (16.7)
Coconut 329.0 287.1 (12.7)
Spices 373.6 330.3 (11.6)
Mineral and other 47.8 48.6 1.6
Total Exports 10,340.9 10,856.2 5.0

Category Jan- Nov 2017 (USD Mn) Jan-Nov 2018 (USD Mn) Change (%)
Consumer Goods 4,069.0 4,622.7 13.6
Food and Beverages 1,659.5 1,471.4 (11.3)
Non-food consumer goods 2,409.4 3,151.2 30.8
Personal vehicles 677.4 1,496.2 120.9
Medical and pharmaceuticals 474.4 488.6 3.0
Clothing and accessories 344.9 283.4 (17.8)
Intermediate goods 10,242.0 11,504.9 12.3
Fuel 2,994.6 3,834.6 28.0
Gold 570.7 438.7 (23.1)
Textiles and textile articles 2,491.7 2,617.0 5.0
Investment goods 4,475.9 4,296.4 (4.0)
Machinery and equipment 2,391.0 2,291.6 (4.2)
Building material 1,460.5 1,383.2 (5.3)
Transport equipment 617.0 615.9 (0.2)
Unclassified imports 144.4 74.2 (48.6)
Total Imports 18,931.3 20,498.1 8.3
Summary of Import Performance (Jan-Nov’ 18)

Cabinet approves Appropriation Bill
 Rs.2.2 trillion allocated for debt repayments,
highest in Sri Lanka history
 State revenue target for 2019 – Rs. 2.4 Tn
 State expenditure target for 2019 – Rs. 4.47 Tn
(13.2% YoY increase of government expenditure)
State revenue as a % of GDP
2014 – 11.5%
2019 – 15.12% (target)
2021 – 17.0% (target) Cont.

Cabinet approves Appropriation Bill (cont.)
2019 Budget Targets
Debt to GDP ratio 70% (current - 78%)
Recurrent expenditure as a % GDP 15%
Capital expenditure as a % GDP 3.5%
However, the Government has failed to hit deficit targets on numerous occasions
with the 2018 deficit likely to have recorded 5.0%, which is above the targeted
4.6% according to the Central Bank.
The deficit target for 2018 was missed largely due to weather problems and the
International Monetary Fund (IMF) had indicated that it would accept the revised
target.

NCE signs MOU with SLINTEC to enhance
R&D and innovation
The National Chamber of Exporters of Sri Lanka (NCE),
the only private sector chamber which exclusively
serves Sri Lankan exporters, has entered into a
collaborative MOU with the Sri Lankan Institute of
Nanotechnology (SLINTEC).
• It has been discerned that SLINTEC has the expertise and capacity to assist Sri Lankan
exporters to use nano and advanced technologies to come up with innovative
products and services with enhanced ‘value addition’ to compete in the international
market place.
• The objective of the MOU is to utilize the scientific and technological inputs of
SLINTEC which is an advanced technology research institution with the capacity to
provide state-of-the-art nano and advanced technologies, for the development of
products of member exporters of the chamber. Cont.

NCE signs MOU with SLINTEC to enhance R&D and
innovation (cont.)
• It is understood that SLINTEC is focusing on nano and advanced technologies for
product development in the areas of advanced materials, agriculture, textile and
apparel, natural medicine and healthcare, which have much potential for
development, and expansion of exports.
• The NCE and SLINTEC will form an alliance to provide local industries with greater
access to scientific and engineering technology expertise to enable local enterprises
to develop products with greater value and differentiation.

Apparel cracks USD 5bn target
• Sri Lanka’s apparel industry has
benchmarked itself at new heights,
surpassing USD 5bn in export earnings in
2018, and is setting its eyes on hitting USD
8bn by 2025.
• The total earnings from export of apparel
products amounted to USD 5,050mn in 2018,
registering an increase of 4.79% compared to
the export turnover of USD 4,819mn in 2017
• The USA and the EU continued to be the two largest buyers of Sri Lankan garments,
in both volume and value terms, the Joint Apparel Association Forum (JAAF) said.
Cont.

Apparel cracks USD 5bn target (cont.)
• The USA and the EU continued to be the two largest buyers of Sri Lankan garments,
in both volume and value terms, the Joint Apparel Association Forum (JAAF) said.
• The Sri Lankan Textile and Apparel industry employs nearly 350,000 workers
directly and twice as many indirectly. Total employment (direct + indirect) is
estimated to be in the region of 12% of the country’s workforce.
• The contribution of the textile and apparel industry to the GDP is in the region of
6%, based on re-based GDP estimates. Given the development of the other sectors,
it is very unlikely that any other manufactured export sector will come up to this
level of performance in the short to mid-term.

Port City
• The reclamation of the 269 hectares of the Port City was officially completed on
16th January, setting the stage for the next phase of seeking investment with
officials, saying they would redouble efforts to restart talks stalled during the
recent political turmoil to achieve the target of USD 15bn in fresh ventures.
• Out of the 269 hectares of land that is reclaimed, 62 hectares of land will be leased
out by the Government of Sri Lanka, proceeds of which will come to the
Government and 91 hectares of common land, such as beaches and green spaces
which will not be commercial spaces will also be managed by the government.

Source: www.thesun.co.uk
Colombo voted the ‘must-photograph’
travel destination of 2019
• Colombo in Sri Lanka has been named the ‘must-
photograph’ travel destination of 2019, in a study,
according to a report in the UK’s Sun newspaper.
• Research of more than 1.3mn social media posts found
the Asian city is the location travellers most want to take
a picture of, followed by Yokohama in Japan and
Mgahinga Gorilla National Park in Uganda.

Brexit – Latest developments
• Theresa May’s Brexit deal suffered a crushing
defeat in the British Parliament. Leavers who
think the deal does not go far enough in
disentangling Britain from the European Union
joined Remainers in voting against the
government by a majority of 230, the largest
defeat of a government on record.
• No plan by any modern British government has been so soundly thrashed as the
Brexit deal thrown out by Parliament on 15th January, 2019.
• Hoping to trigger an election that it thinks it can win, the opposition Labour Party
called for a motion of no confidence in the government, which it survived as Tory
rebels returned to the fold.
Source: The Economist

Brexit takes toll on Britain’s financial sector
- outlook weak
• Uncertainty over Brexit and the economy have
led demand for Britain’s financial services to
shrink for the first time in five years, with no
immediate sign of an improvement, a survey by
business group CBI and PwC showed.
• And profitability in the sector which raises most
tax in Britain was flat for the third quarter in a
row in the three months to December 2018.
• “A combination of macroeconomic and Brexit uncertainty, regulatory compliance and global market
volatility are taking a toll on the UK’s financial services sector,” CBI Chief Economist Rain Newton-
Smith said.
• “The persistent weakness in optimism and the deterioration in expectations sound a warning for
the outlook” he said. Source: Reuters

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 >
A good head and
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always a formidable
combination.
Nelson Mandela

Economic Capsule - January 2019

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