North, East to grow 13% p.a. with Rs. 251.5bn investment
‘Inclusive growth, financial inclusiveness needed for the sake of the county’ - CB governor
Central Bank Governor Ajith Nivard Cabraal says the once war-torn regions of the North and East are expected to see their economies grow by more than 13 percent, in nominal terms, with the government expected to pump in more than Rs. 251.5 billion from this year to 2013.
This year alone, the government is planning to spend more than Rs. 50 billion to develop infrastructure in the North and Rs. 26.6 billion in the East. The infrastructure development activities cover roads, railways, power, water and sanitation, ports, healthcare and irrigation.
"We expect that these investments would allow the North and East to grow around 13 percent during the next five years," Cabraal said delivering the 60th anniversary oration of the Central Bank last Friday (20) which was centred round the bank’s experiences in developing the North and East after a thirty-year conflict ended in May 2009.
In 2009, the economy of the Northern province grew 14.1 percent, contributing 3.3 percent to the overall economy, up from a 2.8 percent contribution the previous year. The 14.1 percent growth rate comes from a very low base, but Cabraal said the result for 2010 would be the same, although data was yet to be finalised.
While the North’s growth rate was the highest for any province in 2010, the Eastern province grew 14 percent, the second highest provincial nominal growth rate. Its contribution to the overall economy amounted to 5.8 percent, up from a contribution of 4.9 percent in 2008.
"There is a clear drive towards holistic development in the North and the East to ensure that people sustain their economic achievements and translate them into a way of life."
During the conflict, Cabraal said the government could not even think of developing the North and East. "All that could be done was to ensure basic services were provided," he said.
"There is a reason for the successes we have seen so far. Before the war ended (in May 2009) President Mahinda Rajapaka had summoned a few of us to Temple Trees and told us that the war would soon be over and that we had to be prepared to take-off the economy," Cabraal said.
With the conflict ending, the Central Bank took steps to expedite the opening up of branches and service points of commercial banks and other financial institutions in the North and East, however, its primary concern was to restore normalcy by rebuilding livelihoods.
Through various loan schemes, the Central Bank was able to expedite loans through commercial banks that had begun to enter the North and East in a big way. Rs. 2,170 million was disbursed among 26,577 households in the East and Rs. 4,097 million among 38,277 households in the North.
As at May 2011, 228 bank branches were established in the North and East, 111 banking outlets, 187 ATMs, and 49 branches of registered finance companies and 23 branches of specialised leasing companies were opened up in the two regions.
The thirty-year conflict had sapped the entire economy; lives were lost, resources destroyed and or under-utilised and Sri Lanka could never realise her potential.
Cabraal said the conflict had eroded one to two percent of GDP each year. Military spending averaged 4 percent of GDP from 2006 to 2009, but at US$ 5.5 billion it was a bare minimal compared to the US defence bill of US$ 910 billion.
He said the government was striving to develop the two regions along with the other regions outside the Western province which has always dominated GDP growth.
"We are confident that we can deliver on the promise of inclusive growth and financial inclusiveness. For the sake of our country we must," Cabraal said.
Sri Lanka’s economy grew 8 percent in 2010 to Rs. 5,602 billion, the first full year of peace and the Central Bank believes it would grow 8.5 percent this year.
IMF expects FDI flows to double this year as economists meet to discuss poor showing
Foreign direct investment (FDI) flows into Sri Lanka were disappointing at US$ 516 million in 2010, the first full year of peace since the war ended in May 2009, which was lower than the US$ 601 million achieved in 2009. While top Sri Lankan economists meet tomorrow to discuss this issue, the International Monetary Fund (IMF), revising its prospects for Sri Lanka said FDI flows are expected to double this year, reaching around US$ 900 million.
IMF Resident Representative in Sri Lanka Dr. Koshi Mathai speaking to journalists earlier this year said FDI inflows would pick up and that they took time to materialise. The IMF’s revised forecast for FDIs was US$ 900 million for 2011.
For Sri Lanka to sustain an economic growth at 8 percent or more, FDI flows would be crucial. Reducing poverty and regional income disparities would also hinge on FDI inflows.The Sri Lanka Economic Association and Friedrich Ebert Stiftung are organising an open forum tomorrow (24) to discuss the challenges, risks and opportunities for attracting a greater level of FDIs in to the country.
"Sri Lanka needs a higher rate of investment than in the recent past. As access to international and bilateral donor funds is becoming limited, FDI inflows will become all the more important to enhance national savings to undertake a higher level of investment. However, until now Sri Lanka has not been able to attract high levels of FDI compared to other Asian countries," a joint statement said.
Some of the country’s top economists will be sharing their views at this forum. They include, Prof. A. D. V. De S. Indraratne, President Sri Lanka Economic Assocation, Sarath Rajapatirana, Former Economic Advisor to the World Bank, Dr. Anura Ekanayake, Chairman Ceylon Chamber of Commerce, Prof. Anoma Abhayaratne, Professor in Economics and Dean Faculty of Arts, University of Peradeniya.
SriLankan Airlines gets first brand new aircraft since year 2000
SriLankan Airlines began a new chapter in its long history with the arrival of its first brand new aircraft in more than a decade – a state of the art Airbus A320-200. The aircraft touched down at Bandaranaike International Airport on May 19, straight from Airbus Industrie in Toulouse, France. Civil Aviation Minister Piyankara Jayaratne, MPs P.H. Piyasena, Hunais Farook and Indika Jamindra, and Nishantha Wickremasinghe, Chairman of SriLankan Airlines, were among the VIP delegation which arrived with the aircraft.
The new aircraft was blessed by members of the clergy of Sri Lanka’s four main religions, watched by thousands of members of the staff of the airline, together with a large number of Government officials who included Members of Parliament.
This is the first of three brand new A320 aircraft to be acquired in 2011, the second and third of which are scheduled to arrive in the last quarter of the year. The last brand new aircraft arrived as far back as the year 2000, the airline said in a news release.
SriLankan Airlines Chairman Nishantha Wickremasinghe said: "The modernization of our fleet is proceeding at a rapid pace in support of the long term vision of His Excellency the President, Mahinda Rajapaksa, whose goals for the development of our country include transforming Sri Lanka into a hub for tourism and aviation."
The national carrier will acquire at least six aircraft this year in its rapid expansion programme to support the country’s tourism industry which the Government has identified as a catalyst for the post-war economic boom. An A320 and a Twin Otter Floatplane arrived last month. A wide-body A340 aircraft is also scheduled for arrival in May.
The airline this year expanded its global route network to 51 destinations in 32 countries by launching new services to Guangzhou and Kochi, and has announced that it will commence flights to Moscow in September. It has also greatly increased the number of flights and passenger capacity to most of its existing destinations.
Manoj Gunawardena, Chief Executive Officer of the Airline, said: "With the arrival of this aircraft and two more later in the year, SriLankan Airlines will provide our passengers with the highest standards in comfort, convenience, and reliability. These aircraft will greatly reduce the average age of our fleet and will bring about vastly improved performance, fuel efficiency, and safeguard the environment by significantly reducing engine emissions."
Among the sophisticated aspects of this aircraft are plush leather seating throughout the Business Class and Economy Class cabins; Airbus Industrie’s new ‘Cool Concept Interior’; and Panasonic’s latest eFX Audio Video On Demand (AVOD) entertainment system.
The AVOD system features touch screens at every seat – 9-inch in Business Class and 7-inch in Economy – with 25 movies, 10 shorter variety programmes, 25 audio channels, and 15 games. Every one of these is available on an ‘on-demand’ basis, which means that passengers can choose to watch their favourite movies - Hollywood, Bollywood and others – at any time of their convenience during the flight, rather than having to wait for the movie to be screened at a particular time.
The selection of songs include Sri Lankan, Arabic, Hindi, Tamil, Malayalam, Urdu, Thai, Cantonese, Mandarin, Japanese, European, Jazz, Country and Classic.
The seating configuration provides 20 seats in Business Class and 120 in Economy.
Source: The Island
Asian economy fastest growing in 2011
Total world oil consumption is likely to grow by an annual average of 1.5 million bbl/d in 2011 and 2012
As the summer of 2011 sets in it may be interesting to note that the performance of major developing countries in the first quarter of 2011 has been better than expected and currently the global market recovery is driven by continued strong economic growth in emerging markets. There are signs of sustainable increase in output in the Organisation for Economic Co-operation and Development (OECD), as well. The world economic recovery is reflected in the significant expansion of international trade.
According to the World Trade Organization (WTO), trade volumes are expected to grow by more than 6.5% in 2011 after strong growth of 12.7% in 2010. The emerging economies have all benefited from the growing global trade but South East Asian countries including Sri Lanka, Indonesia, Malaysia, the Philippines, Thailand, Singapore and Vietnam have benefitted. The Asian economy is expected to remain the fastest growing in 2011. However there are a number of obstacles to the longer-term growth outlook in these economies.
Growth and oil demands
World trade is forecast to grow in the next couple of years, driven by sustained growth in developing countries. As consumers and companies in the developed world monitor costs closely, low cost producers from emerging markets will continue to gain market share.
Although historically economic growth in most Asian economies has been export driven, in recent years the economic recovery in many Asian countries has been driven by large fiscal stimulus backed by soft monetary policies. Rapid expansion of economic activities together with loose monetary policies on the one hand and rising commodity prices on the other is fuelling inflation in major developing countries. With the US Dollar’s continued weakening against all major currencies in the first quarter of the year, oil prices were seen to be on the rise. According to the U.S. Energy Information Administration (EIA) the forecast for total world oil consumption is likely to grow by an annual average of 1.5 million bbl/d in 2011 and 2012. The world economy is expected to grow by 3.9% in 2011. This represents a downward revision of 0.1% from the previous report due to the impact of the tragic events in Japan, which is now forecast to decline by 0.1%, compared to growth of 1.5% in the previous report. The global oil demand is forecast to grow by 1.4 mb/d in 2011, following an increase of 2.0 mb/d in the previous year.
The OECD is a group of 32 member countries that discuss and develop economic and social policy. According to a study the energy demand in the non-OECD countries is expected to grow rapidly, while oil demand in the OECD countries is expected to contract. This is already evident in terms of the shift in refining capacity from the OECD countries to the non-OECD countries.
In South Asia, the third quarter is anticipated to see more oil usage as a result of enhanced economic activities, higher temperatures and the start of the agricultural season.
Geo-political risks
EIA predicts that among the major uncertainties that could push oil prices above or below our current forecast are: the continued unrest in producing countries and its potential impact on supply; decisions by key OPEC member countries regarding their production response to the global increase in oil demand; the rate of economic growth, both domestically and globally; fiscal issues facing national and sub national governments; and China’s efforts to address concerns regarding its growth and inflation rates.
Geopolitical uncertainty brings in risks related to access to hydrocarbon reserves. According to the March market report from OPEC, “In addition to fears of a supply shortage, Middle Eastern crudes were supported by robust Asian demand as well as very strong fuel oil and gasoil cracks, which encouraged refiners to secure more supply.”
The chronic tensions in the Middle East; continued tensions between Russia and its former republics; political tensions in Nigeria; and the general unpredictability of political changes in Latin America will have significant impact on the oil prices and supplies.
The strong price levels may lead to a reduction in the use of transportation fuel, especially in the summer driving season and impact economic growth. This effect will spread not only throughout the OECD but also into the non-OECD. The economic recovery across Asia and the rest of the world is fragile and any setback could dampen the party.
Way forward for Sri Lanka
Keeping in mind the supply concerns, the associated risk premium and the later dampened to some degree by the triple catastrophe in Japan of the earthquake, tsunami and nuclear problems that has led to a persistent disruption in the Japanese energy complex. The overall impact of the tragic events in Japan on oil consumption is far from clear. Knowing the level of uncertainty that revolves around the global oil prices it is important that Asian countries focus on securing its reserves through local exploration programmes.
Sri Lanka which imports most of its crude from the middle-east from a mix bag of crude basket comprising of Iranian Light, Oman Crude, Dubai Crude, Arabian light and Miri light, needs to plan for securing its energy requirement going forward. The first half of 2010 saw an import of 5,433,219 barrels.
The country’s economic growth projected at 8% - 9% over the next few years, with all sectors contributing to this growth, rapid development in agriculture with increased productivity and mechanisation and significant expansion in service sector - consumption of crude oil is set to increase in Sri Lanka. While the country’s first offshore drilling programme is scheduled for the second half of this year, the country’s think tank has started work on promoting its offshore potential, as it prepares to launch another licensing round for exploration blocks in the Mannar and Cauvery basins. According to industry watchers Sri Lanka is likely to launch its next licensing round in the second half of the year post August.
SEC has a large heart, market moves up
The Securities Exchange Commission of Sri Lanka (SEC), charged with the mandate of policing the activities of the members and companies of the Colombo Stock Exchange has shown itself to be a lenient parent. Or an apologetic one. On Thursday, when the market players came back to work after two days of holiday, the SEC told them it had an additional six months to settle their dues to their brokers. In last November the SEC pushed back the deadline from December to March and June whereby it expected to ensure that debt was reduced by 50% and 50% respectively from what it was on at the end of December. Now that the March deadline is over, the market participants and their clients have been given a deadline of September 2011 and December 2011 to close the books on the balance by 25% for each deadline.
There have been various forms of lobbying using both formal and informal channels for many revisions to the settlement and credit policies in a bid to boost market turnover. Though this was unexpected, many feel that the primary reason for SEC to revise its policy of curbing asset bubbles is to make up for the loss revenue to the government and also to itself.
The body which had made a mess of the “banning” process, including in it stocks that had legitimate reasons for price volatility and then leaving out many that had shown volatility also wanted to show that it was acting in good faith rather than arbitrarily or under any undue influence. Two examples where the list of banned stocks were laughable were when Kotmale Holdings and Pelwatte Sugar Industries which were taken over by larger firms, saw their share prices shoot up after the announcement, being included in the list. On the other hand, many stocks moved arbitrarily and were not included. Many brokers and investors have requested for the formula or basis on which the decision to ban was made, whilst others have requested for an explanation, none of which the SEC has provided. So many investors have gone on to monitor the SEC’s activities more than they have spent time studying company results. With quarterly results showing massive improvements, price movements have been small comparatively. This is also one of the reasons that foreign investment tends to flow out of the Colombo market. Why would an investor take a long term view of the market when the fiscal and the regulatory policies change over night without any warning or consultation?
The three (3) day working week saw high turnover with the total business for the week at Rs 8.2 billion, a daily average of Rs 2.7 billion. The previous five (5) day week saw a daily average of Rs 1.7 billion. Foreign investors continued to sell out with outflow at Rs 1.4 billion and inflow of Rs 1.1 billion, and net loss of Rs 291 million. The previous week the net outflow was Rs 60 million. The banks and finance sector gained 2.8%, whilst the smaller and illiquid Plantations and power and energy sectors also gained 8.5% and 9% respectively. The telecoms sector gained 2.4% though Dialog moved up 10 cents to close the week at Rs 10.00 while Sri Lanka Telecom gained Rs 2.00 to close at Rs 58.50. The diversified holdings sector closed up by a mere 0.3%, weighed down by Carsons and Hayleys which closed down by Rs 1.10 and Rs 9.00 to close at Rs 646.00 and Rs 390.00 respectively. John Keells Holdings which announced a four (4) for three (3) split failed to excite the market which was expecting something more substantial given the two (3) for one (1) splits announced by Asian Hotels, Trans-Asia and Union Assurance, all of which are JKH subsidiaries. The share closed up Rs 2.30 to end at Rs 297.80.
Source : Lakbima news
‘Inclusive growth, financial inclusiveness needed for the sake of the county’ - CB governor
Central Bank Governor Ajith Nivard Cabraal says the once war-torn regions of the North and East are expected to see their economies grow by more than 13 percent, in nominal terms, with the government expected to pump in more than Rs. 251.5 billion from this year to 2013.
This year alone, the government is planning to spend more than Rs. 50 billion to develop infrastructure in the North and Rs. 26.6 billion in the East. The infrastructure development activities cover roads, railways, power, water and sanitation, ports, healthcare and irrigation.
"We expect that these investments would allow the North and East to grow around 13 percent during the next five years," Cabraal said delivering the 60th anniversary oration of the Central Bank last Friday (20) which was centred round the bank’s experiences in developing the North and East after a thirty-year conflict ended in May 2009.
In 2009, the economy of the Northern province grew 14.1 percent, contributing 3.3 percent to the overall economy, up from a 2.8 percent contribution the previous year. The 14.1 percent growth rate comes from a very low base, but Cabraal said the result for 2010 would be the same, although data was yet to be finalised.
While the North’s growth rate was the highest for any province in 2010, the Eastern province grew 14 percent, the second highest provincial nominal growth rate. Its contribution to the overall economy amounted to 5.8 percent, up from a contribution of 4.9 percent in 2008.
"There is a clear drive towards holistic development in the North and the East to ensure that people sustain their economic achievements and translate them into a way of life."
During the conflict, Cabraal said the government could not even think of developing the North and East. "All that could be done was to ensure basic services were provided," he said.
"There is a reason for the successes we have seen so far. Before the war ended (in May 2009) President Mahinda Rajapaka had summoned a few of us to Temple Trees and told us that the war would soon be over and that we had to be prepared to take-off the economy," Cabraal said.
With the conflict ending, the Central Bank took steps to expedite the opening up of branches and service points of commercial banks and other financial institutions in the North and East, however, its primary concern was to restore normalcy by rebuilding livelihoods.
Through various loan schemes, the Central Bank was able to expedite loans through commercial banks that had begun to enter the North and East in a big way. Rs. 2,170 million was disbursed among 26,577 households in the East and Rs. 4,097 million among 38,277 households in the North.
As at May 2011, 228 bank branches were established in the North and East, 111 banking outlets, 187 ATMs, and 49 branches of registered finance companies and 23 branches of specialised leasing companies were opened up in the two regions.
The thirty-year conflict had sapped the entire economy; lives were lost, resources destroyed and or under-utilised and Sri Lanka could never realise her potential.
Cabraal said the conflict had eroded one to two percent of GDP each year. Military spending averaged 4 percent of GDP from 2006 to 2009, but at US$ 5.5 billion it was a bare minimal compared to the US defence bill of US$ 910 billion.
He said the government was striving to develop the two regions along with the other regions outside the Western province which has always dominated GDP growth.
"We are confident that we can deliver on the promise of inclusive growth and financial inclusiveness. For the sake of our country we must," Cabraal said.
Sri Lanka’s economy grew 8 percent in 2010 to Rs. 5,602 billion, the first full year of peace and the Central Bank believes it would grow 8.5 percent this year.
IMF expects FDI flows to double this year as economists meet to discuss poor showing
Foreign direct investment (FDI) flows into Sri Lanka were disappointing at US$ 516 million in 2010, the first full year of peace since the war ended in May 2009, which was lower than the US$ 601 million achieved in 2009. While top Sri Lankan economists meet tomorrow to discuss this issue, the International Monetary Fund (IMF), revising its prospects for Sri Lanka said FDI flows are expected to double this year, reaching around US$ 900 million.
IMF Resident Representative in Sri Lanka Dr. Koshi Mathai speaking to journalists earlier this year said FDI inflows would pick up and that they took time to materialise. The IMF’s revised forecast for FDIs was US$ 900 million for 2011.
For Sri Lanka to sustain an economic growth at 8 percent or more, FDI flows would be crucial. Reducing poverty and regional income disparities would also hinge on FDI inflows.The Sri Lanka Economic Association and Friedrich Ebert Stiftung are organising an open forum tomorrow (24) to discuss the challenges, risks and opportunities for attracting a greater level of FDIs in to the country.
"Sri Lanka needs a higher rate of investment than in the recent past. As access to international and bilateral donor funds is becoming limited, FDI inflows will become all the more important to enhance national savings to undertake a higher level of investment. However, until now Sri Lanka has not been able to attract high levels of FDI compared to other Asian countries," a joint statement said.
Some of the country’s top economists will be sharing their views at this forum. They include, Prof. A. D. V. De S. Indraratne, President Sri Lanka Economic Assocation, Sarath Rajapatirana, Former Economic Advisor to the World Bank, Dr. Anura Ekanayake, Chairman Ceylon Chamber of Commerce, Prof. Anoma Abhayaratne, Professor in Economics and Dean Faculty of Arts, University of Peradeniya.
SriLankan Airlines gets first brand new aircraft since year 2000
SriLankan Airlines began a new chapter in its long history with the arrival of its first brand new aircraft in more than a decade – a state of the art Airbus A320-200. The aircraft touched down at Bandaranaike International Airport on May 19, straight from Airbus Industrie in Toulouse, France. Civil Aviation Minister Piyankara Jayaratne, MPs P.H. Piyasena, Hunais Farook and Indika Jamindra, and Nishantha Wickremasinghe, Chairman of SriLankan Airlines, were among the VIP delegation which arrived with the aircraft.
The new aircraft was blessed by members of the clergy of Sri Lanka’s four main religions, watched by thousands of members of the staff of the airline, together with a large number of Government officials who included Members of Parliament.
This is the first of three brand new A320 aircraft to be acquired in 2011, the second and third of which are scheduled to arrive in the last quarter of the year. The last brand new aircraft arrived as far back as the year 2000, the airline said in a news release.
SriLankan Airlines Chairman Nishantha Wickremasinghe said: "The modernization of our fleet is proceeding at a rapid pace in support of the long term vision of His Excellency the President, Mahinda Rajapaksa, whose goals for the development of our country include transforming Sri Lanka into a hub for tourism and aviation."
The national carrier will acquire at least six aircraft this year in its rapid expansion programme to support the country’s tourism industry which the Government has identified as a catalyst for the post-war economic boom. An A320 and a Twin Otter Floatplane arrived last month. A wide-body A340 aircraft is also scheduled for arrival in May.
The airline this year expanded its global route network to 51 destinations in 32 countries by launching new services to Guangzhou and Kochi, and has announced that it will commence flights to Moscow in September. It has also greatly increased the number of flights and passenger capacity to most of its existing destinations.
Manoj Gunawardena, Chief Executive Officer of the Airline, said: "With the arrival of this aircraft and two more later in the year, SriLankan Airlines will provide our passengers with the highest standards in comfort, convenience, and reliability. These aircraft will greatly reduce the average age of our fleet and will bring about vastly improved performance, fuel efficiency, and safeguard the environment by significantly reducing engine emissions."
Among the sophisticated aspects of this aircraft are plush leather seating throughout the Business Class and Economy Class cabins; Airbus Industrie’s new ‘Cool Concept Interior’; and Panasonic’s latest eFX Audio Video On Demand (AVOD) entertainment system.
The AVOD system features touch screens at every seat – 9-inch in Business Class and 7-inch in Economy – with 25 movies, 10 shorter variety programmes, 25 audio channels, and 15 games. Every one of these is available on an ‘on-demand’ basis, which means that passengers can choose to watch their favourite movies - Hollywood, Bollywood and others – at any time of their convenience during the flight, rather than having to wait for the movie to be screened at a particular time.
The selection of songs include Sri Lankan, Arabic, Hindi, Tamil, Malayalam, Urdu, Thai, Cantonese, Mandarin, Japanese, European, Jazz, Country and Classic.
The seating configuration provides 20 seats in Business Class and 120 in Economy.
Source: The Island
Asian economy fastest growing in 2011
Total world oil consumption is likely to grow by an annual average of 1.5 million bbl/d in 2011 and 2012
As the summer of 2011 sets in it may be interesting to note that the performance of major developing countries in the first quarter of 2011 has been better than expected and currently the global market recovery is driven by continued strong economic growth in emerging markets. There are signs of sustainable increase in output in the Organisation for Economic Co-operation and Development (OECD), as well. The world economic recovery is reflected in the significant expansion of international trade.
According to the World Trade Organization (WTO), trade volumes are expected to grow by more than 6.5% in 2011 after strong growth of 12.7% in 2010. The emerging economies have all benefited from the growing global trade but South East Asian countries including Sri Lanka, Indonesia, Malaysia, the Philippines, Thailand, Singapore and Vietnam have benefitted. The Asian economy is expected to remain the fastest growing in 2011. However there are a number of obstacles to the longer-term growth outlook in these economies.
Growth and oil demands
World trade is forecast to grow in the next couple of years, driven by sustained growth in developing countries. As consumers and companies in the developed world monitor costs closely, low cost producers from emerging markets will continue to gain market share.
Although historically economic growth in most Asian economies has been export driven, in recent years the economic recovery in many Asian countries has been driven by large fiscal stimulus backed by soft monetary policies. Rapid expansion of economic activities together with loose monetary policies on the one hand and rising commodity prices on the other is fuelling inflation in major developing countries. With the US Dollar’s continued weakening against all major currencies in the first quarter of the year, oil prices were seen to be on the rise. According to the U.S. Energy Information Administration (EIA) the forecast for total world oil consumption is likely to grow by an annual average of 1.5 million bbl/d in 2011 and 2012. The world economy is expected to grow by 3.9% in 2011. This represents a downward revision of 0.1% from the previous report due to the impact of the tragic events in Japan, which is now forecast to decline by 0.1%, compared to growth of 1.5% in the previous report. The global oil demand is forecast to grow by 1.4 mb/d in 2011, following an increase of 2.0 mb/d in the previous year.
The OECD is a group of 32 member countries that discuss and develop economic and social policy. According to a study the energy demand in the non-OECD countries is expected to grow rapidly, while oil demand in the OECD countries is expected to contract. This is already evident in terms of the shift in refining capacity from the OECD countries to the non-OECD countries.
In South Asia, the third quarter is anticipated to see more oil usage as a result of enhanced economic activities, higher temperatures and the start of the agricultural season.
Geo-political risks
EIA predicts that among the major uncertainties that could push oil prices above or below our current forecast are: the continued unrest in producing countries and its potential impact on supply; decisions by key OPEC member countries regarding their production response to the global increase in oil demand; the rate of economic growth, both domestically and globally; fiscal issues facing national and sub national governments; and China’s efforts to address concerns regarding its growth and inflation rates.
Geopolitical uncertainty brings in risks related to access to hydrocarbon reserves. According to the March market report from OPEC, “In addition to fears of a supply shortage, Middle Eastern crudes were supported by robust Asian demand as well as very strong fuel oil and gasoil cracks, which encouraged refiners to secure more supply.”
The chronic tensions in the Middle East; continued tensions between Russia and its former republics; political tensions in Nigeria; and the general unpredictability of political changes in Latin America will have significant impact on the oil prices and supplies.
The strong price levels may lead to a reduction in the use of transportation fuel, especially in the summer driving season and impact economic growth. This effect will spread not only throughout the OECD but also into the non-OECD. The economic recovery across Asia and the rest of the world is fragile and any setback could dampen the party.
Way forward for Sri Lanka
Keeping in mind the supply concerns, the associated risk premium and the later dampened to some degree by the triple catastrophe in Japan of the earthquake, tsunami and nuclear problems that has led to a persistent disruption in the Japanese energy complex. The overall impact of the tragic events in Japan on oil consumption is far from clear. Knowing the level of uncertainty that revolves around the global oil prices it is important that Asian countries focus on securing its reserves through local exploration programmes.
Sri Lanka which imports most of its crude from the middle-east from a mix bag of crude basket comprising of Iranian Light, Oman Crude, Dubai Crude, Arabian light and Miri light, needs to plan for securing its energy requirement going forward. The first half of 2010 saw an import of 5,433,219 barrels.
The country’s economic growth projected at 8% - 9% over the next few years, with all sectors contributing to this growth, rapid development in agriculture with increased productivity and mechanisation and significant expansion in service sector - consumption of crude oil is set to increase in Sri Lanka. While the country’s first offshore drilling programme is scheduled for the second half of this year, the country’s think tank has started work on promoting its offshore potential, as it prepares to launch another licensing round for exploration blocks in the Mannar and Cauvery basins. According to industry watchers Sri Lanka is likely to launch its next licensing round in the second half of the year post August.
SEC has a large heart, market moves up
The Securities Exchange Commission of Sri Lanka (SEC), charged with the mandate of policing the activities of the members and companies of the Colombo Stock Exchange has shown itself to be a lenient parent. Or an apologetic one. On Thursday, when the market players came back to work after two days of holiday, the SEC told them it had an additional six months to settle their dues to their brokers. In last November the SEC pushed back the deadline from December to March and June whereby it expected to ensure that debt was reduced by 50% and 50% respectively from what it was on at the end of December. Now that the March deadline is over, the market participants and their clients have been given a deadline of September 2011 and December 2011 to close the books on the balance by 25% for each deadline.
There have been various forms of lobbying using both formal and informal channels for many revisions to the settlement and credit policies in a bid to boost market turnover. Though this was unexpected, many feel that the primary reason for SEC to revise its policy of curbing asset bubbles is to make up for the loss revenue to the government and also to itself.
The body which had made a mess of the “banning” process, including in it stocks that had legitimate reasons for price volatility and then leaving out many that had shown volatility also wanted to show that it was acting in good faith rather than arbitrarily or under any undue influence. Two examples where the list of banned stocks were laughable were when Kotmale Holdings and Pelwatte Sugar Industries which were taken over by larger firms, saw their share prices shoot up after the announcement, being included in the list. On the other hand, many stocks moved arbitrarily and were not included. Many brokers and investors have requested for the formula or basis on which the decision to ban was made, whilst others have requested for an explanation, none of which the SEC has provided. So many investors have gone on to monitor the SEC’s activities more than they have spent time studying company results. With quarterly results showing massive improvements, price movements have been small comparatively. This is also one of the reasons that foreign investment tends to flow out of the Colombo market. Why would an investor take a long term view of the market when the fiscal and the regulatory policies change over night without any warning or consultation?
The three (3) day working week saw high turnover with the total business for the week at Rs 8.2 billion, a daily average of Rs 2.7 billion. The previous five (5) day week saw a daily average of Rs 1.7 billion. Foreign investors continued to sell out with outflow at Rs 1.4 billion and inflow of Rs 1.1 billion, and net loss of Rs 291 million. The previous week the net outflow was Rs 60 million. The banks and finance sector gained 2.8%, whilst the smaller and illiquid Plantations and power and energy sectors also gained 8.5% and 9% respectively. The telecoms sector gained 2.4% though Dialog moved up 10 cents to close the week at Rs 10.00 while Sri Lanka Telecom gained Rs 2.00 to close at Rs 58.50. The diversified holdings sector closed up by a mere 0.3%, weighed down by Carsons and Hayleys which closed down by Rs 1.10 and Rs 9.00 to close at Rs 646.00 and Rs 390.00 respectively. John Keells Holdings which announced a four (4) for three (3) split failed to excite the market which was expecting something more substantial given the two (3) for one (1) splits announced by Asian Hotels, Trans-Asia and Union Assurance, all of which are JKH subsidiaries. The share closed up Rs 2.30 to end at Rs 297.80.
Source : Lakbima news
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