economic capsule -january 2017

Economic CapsuleJanuary 2017

Research & Development Unit

241st Issue

C O N T E N T S

ECONOMY & BUSINESS CPI base year revised

Trademark registration bottlenecks block local brands going global - Verité Research

GSP+: Gearing to reap its benefits amidst huge shortage of labour

Hemas and GAC break ground for integrated logistics facility

Ante LECO Smart metering declared open

Central Expressway Project-2 commenced

Finishing touches to Lotus Tower by 2018: TRCSL

Jetwing launches newest star hotel in Colombo

INTERNATIONAL

IMF World Economic Outlook Update 2017

Britain's Brexit bill clears first legislative hurdle

Federal Reserve upbeat on US economy as it holds rates

What has President Trump done so far?

Condominium Industry in Sri Lanka

October, 2014


Economy & Business

< Research & Development Unit >

CPI base year revised• The Department of Census and Statistics has revised the

base year and the composition of the market basket of the Colombo Consumer Price Index (CCPI) with effect from January 2017 to reflect changes in the market.

• The Department revised the base year to 2013 from the previous 2006/7 introduced in 2008, while increasing the non-food composition to 72% of the market basket from the earlier 59%.

The CCPI (Base: 2013 =100) basket has more than doubled the total consumption expenditure to Rs. 60,364.73 from Rs. 27,972.11.

New basket includes alcoholic beverages, tobacco and narcotics as a new expenditure item.

In the old basket Restaurants and Hotels was included under the food group. But in the new basket it is included as a separate group.

Under the new index, the annual inflation rose to 5.5% in January, accelerating from the previous month’s 4.5%.

CCPI - Colombo Consumer Price Index, NCPI - National Consumer Price Index Core - Excluding Volatile Food, Energy and Transport


Trademark registration bottlenecks block local brands going global - Verité Research• Delays in local trademark registration process could undermine the massive benefits

deriving from Sri Lanka’s decision to comply with the Madrid Protocol, according to Verité Research.

• The Madrid Protocol administered by the World Intellectual Property Organization (WIPO) is a centralized global system for registering and maintaining trademarks in foreign countries.

• Registering trademarks locally is an important first step for any company that seeks to register its brand abroad to reap benefits from the global system. But it appears major bottlenecks exist within the local trademark registration process. Verité Research revealed that the National Intellectual Property Office (NIPO) of Sri Lanka takes approximately three to five years to process a trademark registration application, whereas the ideal processing period should be no more than 18 months.

• When Sri Lanka’s position with regional peers is compared; Singapore processes applications within 8 -12 months, India and Pakistan within 12 plus months, and Bangladesh within 18 -24 months.

• With Sri Lanka still not being a signatory of the Madrid Protocol, to go global, companies are required to register in each of their target markets with separate applications, making the process a time-consuming and a costly exercise.


GSP+: Gearing to reap its benefits amidst huge shortage of labour Looking at the apparel industry as it stands today there are important questions for which answers have to be found if the industry is to reap the benefits from the decision to reintroduce the GSP+.

• If the benefits are to come to Sri Lanka due to the reintroduction of the GSP+, the factories must be geared to accept increased orders. Today, due to the lack of labour, factories are operating below 65% efficiency.

• According to the Foreign Employment Ministry each month over 13,000 female workers seek foreign jobs. This has compelled the factories to request the government to grant permission to import labour from India and even China.

• The garment industry in Sri Lanka is highly labour intensive. It still remains basically a cutting room-to-sewing machine operation. But other countries such as Hong Kong have gone digital. This is one way of cutting costs and also increasing productivity. Faced with these adverse conditions some factories have switched their operations to countries such as Ethiopia, Kenya, Vietnam and even Nigeria. Labour in these countries are not disciplined at all and the factory owners risk even their lives when operating in such environments. Cont…


GSP+: Gearing to reap its benefits amidst huge shortage of labour (cont..)

• Given the present situation whatever happens the big 15 stakeholders will survive.

• Virtually they perform the dual role of being the producer and the buyer also. Others are in a serious dilemma. Are they geared to meet the increased demand? It must be remembered that with the industrial revolution it was the textile industry that thrived first.

• But it is equally a fact that it was also the textile industry that faced the exit first. Countries such as Britain, Germany and Japan are no longer depending on themselves for textiles and they all import. Will history repeat itself?

By Cassian M. Fernando, Founder Chairman of the Chamber of Apparel Exporters


Hemas and GAC break ground for integrated logistics facilityHemas together with the GAC Group Sri Lanka are to build a modern integrated logistics facility in the Muthurajawela Industrial Zone, with a state-of-the-art distribution centre, container yard and a warehouse facility that spreads across 15 acres.

• The project is the first phase of a ‘Logistics City’ designed to provide the latest facilities and higher levels of efficiency related to technology, transportation and logistics in the process of national development by the Megapolis and Western Development Ministry.

• The facility is expected to be in operation by early June 2017 and the Distribution Centre will be operational in February 2018


Ante LECO Smart metering declared open

• Sri Lanka's Prime Minister Ranil Wickramesinghe declared open a state enterprise as a joint venture with a Chinese company to produce electricity metres for two state run power utilities.

• The factory, Ante LECO Metering Company (Pvt) Ltd, is a 70 % subsidiary of Lanka Electricity Company (Pvt) Ltd, Sri Lanka's second grid operator. The joint venture partner is Ante Metering Company Ltd of China.

• The firm was set up in Bandaragama.


Central Expressway Project-2 commenced

• The second stage of the construction of the Central Expressway Project (CEP Project-2) from Meerigama to Kurunegala was launched recently.

• The CEP- Project-2 covers from Meerigama to Kurunegala completing a distance of 39.7 km.

• The first phase of the Central Expressway, from Kadawatha to Meerigama, is now under construction.

• The fourth stage covers from Kurunegala to Dambulla - a distance of 60.3 km.

• The third stage covers from Pothuhera to Galagedara – a distance of 32.5 km.


Finishing touches to Lotus Tower by 2018: TRCSL

• With construction work of the Lotus Tower drawing to an end, the finishing touches on the interior of the structure would be completed by 2018, according to the Telecommunications Regulatory Commission of Sri Lanka (TRCSL).

Jetwing launches newest star hotel in Colombo• Jetwing Colombo Seven is the first city hotel to be built by Jetwing

in the cosmopolitan city of Colombo. The property consists of 80 deluxe rooms and 28 serviced apartments.

• Spread over 80 perches, Jetwing Colombo Seven, a five star city hotel, houses a restaurant Fifty7, a rooftop bar Ward7 and an infinity pool offering a panoramic view of Colombo.

Condominium Industry in Sri Lanka

October, 2014


International

IMF World Economic Outlook Update 2017

• After a lackluster outturn in 2016, economic activity is projected to pick up pace in 2017 and 2018, especially in emerging market and developing economies.

• However, there is a wide dispersion of possible outcomes around the projections, given uncertainty surrounding the policy stance of the incoming U.S. administration and its global ramifications. Cont…

Disclaimer: This presentation has been issued for the information of the customers of Commercial Bank of Ceylon PLC only. The Bank and its employees do not accept any responsibility for the accuracy or completeness of the contents and any losses arising from any us of this material.


IMF World Economic Outlook Update 2017 (cont..)

• The outlook for advanced economies has improved for 2017–18, reflecting somewhat stronger activity in the second half of 2016 as well as a projected fiscal stimulus in the United States.

• Growth prospects have marginally worsened for emerging market and developing economies, where financial conditions have generally tightened.

• Near-term growth prospects were revised up for China, due to expected policy stimulus, but were revised down for a number of other large economies most notably India, Brazil, and Mexico.

• The forecast is based on the assumption of a changing policy mix under a new administration in the United States and its global spillovers.

Source: IMF World Economic Outlook (WEO) Update – January 2017



• Prime Minister Theresa May's plan to take Britain out of the European Union easily cleared its first legislative hurdle, paving the way for the government to launch divorce talks by the end of March.

• May's government is seeking approval for a new law giving her the right to trigger Article 50 of the EU's Lisbon Treaty - the legal process for leaving the bloc - after the Supreme Court ruled she could not take that decision unilaterally.

• The bill could complete the legislative process by March 7. May wants to begin exit negotiations with the EU by March 31, starting two years of talks that will define Britain's economic and political future and test the unity of the EU's 27 remaining members. (Reuters)

Britain's Brexit bill clears first legislative hurdle

Federal Reserve upbeat on US economy as it holds rates• The US central bank remained positive on the

economy, as it kept interest rates on hold in its first meeting since President Donald Trump took office.

• The Federal Reserve ruled unanimously to keep its benchmark interest rate in a range of 0.5% to 0.75%.

• The jobs market and economic activity had continued to strengthen, it said.

• The Fed had raised its benchmark interest rate by 0.25% in December, only the second increase in a decade.

• President Trump has promised to boost growth through tax cuts, spending and deregulation, raising the prospect of higher inflation. (BBC)


Minimizing the Economic Burden of the Patient Protection and Affordable Care Act Pending Repeal

Withdrew the United States from the Trans Pacific Partnership, a 12-nation trade deal

Renegotiate existing trade agreements including the North American Free Trade Agreement (NAFTA)

Expediting environmental reviews and approvals for high-profile infrastructure projects

Streamlining Permitting and Reducing Regulatory Burdens for Domestic Manufacturing

Cut the number of regulations affecting US businesses. A "very major" border tax on companies that move jobs outside the U.S.

What has President Trump done so far?

Cont…


Freeze on federal hiring other than for military, public safety and public health jobs.

Pharmaceutical executives told to cut drug prices

Beginning construction on a wall along the U.S. border with Mexico. Trump has said Mexico will pay for the wall, and he would get reimbursement after building the wall with federal funds.

Suspend the entry of any immigrants from Syria, Sudan, Somalia, Iraq, Iran, Libya and Yemen while permanent rules are studied.

Tough action toward the roughly 11 mn illegal immigrants already in the US, mostly from Latin America, whom he already has threatened to deport.

What has President Trump done so far? (cont…)

Cont…


Plan to Defeat the Islamic State of Iraq and Syria. This memorandum calls for the Secretary of Defense, in consultation with other national security officials, to develop a plan within 30 days to defeat the Islamic State.

What has President Trump done so far? (cont…)

Trump's so-called "one in, two out" executive order would require agencies to rescind two existing regulations for every one new regulation — and that the regulatory costs of those new regulations balance out.

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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economic capsule -january 2017

Economy & Finance