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Chapter | Energy from The Report: Sri Lanka 2019

The energy sector has made noteworthy progress in a number of respects in recent years. Despite political turbulence in Sri Lanka, key strategic measures were enacted in 2018 to encourage growth, including increasing renewable energy generation capacity; opening the hydrocarbons sector to greater overseas investment; and forming joint working groups to expedite the construction of liquefied natural gas power plants following a string of agreements with foreign governments. Given Sri Lanka’s expanding fiscal and trade deficits, developing an efficient energy market has been cited as one of the key factors that could facilitate a stable macroeconomic environment. However, while recent developments signal the intent of policymakers to promote energy security, disagreements between technocrats regarding a long-term generation expansion plan have hindered development. Aside from a collection of small renewable energy initiatives, the country has not commissioned a major power plant since 2014. This chapter contains interviews with Damitha Kumarasinghe, Director-General, Public Utilities Commission of Sri Lanka; and Allard Nooy, CEO, InfraCo Asia.

Chapter | Insurance from The Report: Sri Lanka 2019

Major changes are on the horizon in the Sri Lankan insurance industry, with much of the groundwork laid for future growth in recent years. A government focus on regulatory improvements, the modernisation of processes, consolidation and further investment in human resources point to continued opportunities for expansion in the sector. While the performance of the life insurance segment has been bumpy, the sector as a whole continues to thrive. Double-digit growth is expected for both general and life insurance in the short term as many lines of business expand in a market known for its low penetration rates. Campaigns to promote insurance and build awareness of the benefits of coverage have been rolled out, contributing to the sector’s improved performance. This chapter contains an interview with R Renganathan, Chairman, Ceylinco Life Insurance.

Chapter | Capital Markets from The Report: Sri Lanka 2019

After a positive second half of 2017 Sri Lanka’s capital markets experienced considerable headwinds in 2018, with a variety of external and internal factors behind the buffeting. The impacts of macroeconomic issues, increasing competition in terms of investment options, political uncertainty, turbulence in global energy prices and moves by the US Federal Reserve could be seen in both equity and bond markets. As 2019 got under way foreign outflows continued, while bond spreads widened – both signs of challenges ahead. This left many key companies undervalued and demand for long-term bonds high, as investors looked for more secure havens in the country’s debt market. As the year progresses, many see prospects for a turnaround, particularly if moves to expand and deepen the market begin to take hold, and the overall economy grows within the government’s structural reform agenda. This chapter contains an interview with Dilshan Wirasekara, CEO, First Capital Holdings.

Chapter | Banking from The Report: Sri Lanka 2019

Sri Lanka’s banks are currently experiencing considerable change. Regulatory matters are a prominent concern, alongside the ups and downs of loan growth and economic policy. A careful balancing act is being performed as a result, with those able to tread the narrow path recording healthy bottom lines and continued service expansion in 2018. The year ahead will likely see this trend continue. There is an expectation that an election year may see some fiscal loosening overall, to the benefit of credit growth – particularly in the consumer segment. Meanwhile, meeting the new regulatory standards accompanying the rollout of Basel III and International Financial Reporting Standard 9 requires some significant changes in the way lenders do business. Following a global trend, digitalisation and financial technology are changing the industry, and the next few years look set to be transformative. This chapter contains an interview with Indrajit Coomaraswamy, Governor, Central Bank of Sri Lanka.

Chapter | Economy from The Report: Sri Lanka 2019

Sri Lanka’s economy has been making progress in recent years, which should stand it in good stead during the potentially difficult times ahead. Major efforts have been made to instil greater fiscal discipline, and modernise monetary and exchange rate policy, while steps have also been taken in the management of government expenditure and the maximising of public sector revenue. Meanwhile, trade and foreign direct investment have continued to rise, and infrastructure development is gradually moving Sri Lanka towards realising its long-term goal of becoming an essential transportation and trans-shipment centre for the Indian Ocean and South Asia. There has also been positive progress in establishing the island as a tourism destination and in mobilising the population to help cultivate a more entrepreneurial, gender-balanced and inclusive economy. This chapter contains interviews with Rajendra Theagarajah, Chairman, Ceylon Chamber of Commerce; and Krishan Balendra, Chairman, John Keells Holdings.

Chapter | Trade & Investment from The Report: Sri Lanka 2019

Trade and investment activities in Sri Lanka benefit from the country’s location along busy Indian Ocean trade routes, abundant agricultural and industrial exports, and a young, skilled workforce. Just 19 km separate its southern-most port from a global shipping lane carrying two-thirds of the world’s oil and half of its container shipments. This makes local ports a natural staging post for cargo destined for India and Pakistan, with some 30% of the former’s container traffic currently trans-shipped through Sri Lanka. The country has also been making strides in attracting international stakeholders to develop trade, transport and logistics infrastructure, becoming a major destination for foreign direct investment (FDI) in the process. Higher inflows have benefitted the broader economy; 2018 was the highest year on record for FDI, with $2.3bn worth of investments made. This chapter contains interviews with Parag Khanna, Founder and Managing Partner, FutureMap; Champika Malalgoda, Director-General, Board of Investments; and Thilan Wijesinghe, Chairman, National Agency for Public-Private Partnership.