Echelon January 2022 LQ 10 01 2022

SRI LANKA SHOULD NOT USE FOREIGN RESERVES FOR IMPORTS IF IT WANTS TO END ECONOMIC CRISIS
JANUARY 2022
P.38
PORTFOLIO
MANAGEMENT IN AN
ECONOMIC CRISIS
T H E H I G H C O ST O F R E D TA P E, A N D W H AT T O D O A B O U T I T P. 102
DINUSHA BHASKARAN:
VALLIBEL ONE'S
CEO BELIEVES
IN INVESTING
IN PEOPLE
Ultimately, creating opportunities
for employees is what makes
companies great
2 ECHELON.LK JANUARY 2022

JANUARY 2022
I BELIEVE ANY PERSON HAS IT IN

THEM TO BECOME GREAT LEADERS,
Dinusha Bhaskaran
Chief Executive at Vallibel One Plc
EXCEED THE SUCCESSES THEY
ENVISION FOR THEMSELVES OR BE
BETTER VERSIONS OF THEMSELVES
JANUARY 2022 ECHELON.LK 3

60
CONTENTS
JANUARY 2022
P.20
Listed companies set a new
P.30
Sri Lanka should not use
foreign reserves for imports if
record for earnings in Sep 2021
it wants to end economic crisis
Diversified finance overtakes banks, Expolanka
surges ahead, and Laufgs falls low Sterilized currency defence, without an
accompanying rise in rates, spells disaster
P.22
Official forex reserves recover,
still weak
China central bank swap throws a line after
reserves fell perilously low, but forex reserves
remain inadequate
P.24
Dinusha Bhaskaran: Vallibel
One's CEO believes in investing
in people
Ultimately, creating opportunities for
employees is what makes companies great
P.34
IMF or not, reforms are a must
Never let a crisis go to waste. How navigating
out of the debt crisis offers Sri Lanka a once in
a generation opportunity to fix the economy
P.38
Portfolio management during an
economic crisis
Due to interventions, Sri Lanka’s markets
including ones for money, foreign exchange
and commodities were distorted in 2021. Our
panel of investment experts take on asset
allocation in a chaotic economic climate
P.102 P.114
The high cost of red tape, and
what to do about it Innovate or die’ are
Getting rid of pointless rules and regulations can
The Man’s watchwords
help businesses emerge from the shadows and for 2022
grow. Our experts discuss what needs to be done And be first, be smarter—or cheat!

CONTENTS
JANUARY 2022
P.60
How to tackle the
rising menace of
inflation and high
interest rates
CAL’s Kanishke Mannakkara
shares insights into investing
in 2022 and touches on CAL's
global frontier markets thrust
P.56
Nations Trust Bank: fuelling the spirit of
entrepreneurship and industry
The bank is helping its clients rethink not just their cash
flow and financing but also strategy
P.58
Dumith Fernando outlines the outlook
for equities and the CSE in 2022
The Chairman of the Colombo Stock Exchange shares
insights about a record 2021 and what investors can
expect
P.64
Capitol TwinPeaks: unlocking real estate
investment opportunities
The 50-storey residential towers in the heart of
Colombo's Central Business District offers a range of
optimum-sized apartment units and amenities for
modern luxury living, an ideal option for a home or
investment
P.66
NDBIB sets a record Rs75B in capital
raisings in 2021
The investment bank achieved an all-time high in
capital raisings for a given year with Rs50 billion via
debt capital markets, Rs22 billion in public and private
equity transactions, and Rs3 billion from several M&As
P.70
CBH Lands Market Intelligence:
P.68 Understanding investors across
Service that extends beyond demographics and their real estate needs
Mercantile Investments is redefining the financial From Maturists to Gen Zs, everyone has unique
services experience expectations and approaches to real estate

CONTENTS
JANUARY 2022
P.90
Everything you
need to know
about ERP:
mistakes to
avoid and how to
maximise returns
Infomate's Jehan Perinpanayagam
shares insights about unleashing
P.76 the transformative power of ERP
The business case for digital
transformation: making it work
Ramesh Shanmuganathan on building a business
case for digital transformation initiatives; focusing
on the business case with the right cues
P.82
LankaSign: a giant step in Sri Lanka’s
digital economy
An overview of the history and legal framework
of electronic transactions in Sri Lanka shows how
agencies like LankaClear, ICTA and others are
reshaping the future of the country
P.94
Enfection: redefining digital
marketing
By bringing science into digital marketing,
the Sri Lankan startup that counts Malaysia's
Petronas as a client is leading a marketing
revolution with digital technology, education
and advocating for greater collaboration
among agencies
P.98
The transformational powers of
OREL IT
There is a reason why this third-generation
company is the largest IT services exporter in
the country
P.100
Bridging connectivity gaps in Sri
Lanka
Unleashing the potential for economic growth
through increased use of data

Editor’s Desk
Lurking danger of the herd

instinct
H
umans are herd animals more than we care to admit. That instinct has kept
us safe for generations when the lurking dangers were natural disasters and
tribal wars. Now that very instinct, for collective thinking that has kept us
safe, may also hinder us as investors. Those investors will act along with
the herd, but will often buy when others are done buying and remain skittishly on the
sidelines when prices fall.
Even for late bloomers, 2021 was a phenomenal year to be investing in a select group
of stocks. Despite the pandemic, many companies
managed costs and pivoted to maintain profit margins.
Several firms did remarkably well. One analysis
suggested 12-month trailing earnings were up 88% by
“ Even for late bloomers,
2021 was a phenomenal
the end of 2021. The stock market gained 80% during year to be investing in a
2021 with much of the rise due to the performance of
select group of stocks
“
a dozen or so listed companies.
Analysts expect earnings to grow only marginally
in 2022 except for those companies in shipping.
Equity was the asset class for success in 2021, although only a few companies saw
profits and share price increase. Now as Sri Lanka faces an economic crisis, due partly to
its access to international debt markets being shut, investors are wondering what asset
class to bet on. In this guide to investment in 2022, we discuss how investors may go
about crafting a strategy for the new year.
SHAMINDRA KULAMANNAGE, EDITOR-IN-CHIEF
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LISTED COMPANIES
ter, up 116% from a year ago.
Laugfs Gas, hit by price controls and shortage of dollars to
pay for imports, reported the highest loss at Rs1 billion, tumbling
SET A NEW RECORD

340% from an Rs395 million profit a year ago. Hotels suffering
from the after-effects of Covid-19 continued to bleed. John Keells
Hotels reported a loss of Rs827 million but was 40% lower than
FOR EARNINGS IN
Rs1.3 billion a year earlier. Aitken Spence Hotels also saw a con-
traction in losses, down 61% from a year ago to Rs563 million
in the September 2021 quarter.
SEP 2021 Rs111.4Bn

Diversified finance overtakes banks, Combined earnings of listed companies in the
September 2021 quarter (the previous record, Rs111
Expolanka surges ahead, and Laufgs falls low billion, was in the March 2021 quarter)
49%
Combined earnings growth from a year earlier
36%
T
Share of banking and diversified financials sector
earnings to total market earnings in the September
he combined profits 2021 quarter
of companies listed
46%
on the Colombo Stock
Exchange reached an
all-time high of Rs111.4
billion in the September Earnings growth from the June 2021 quarter
2021 quarter, up 46%
from the previous quar-
ter and nearly 50% from
a year earlier, a report published by First Capital
Research showed. Combined profits had declined Top 10 Earners and Poss Makers (Rs.Bn)
31% during the June quarter to Rs76 billion from
a then-record high of Rs111 billion in March 2021. Expolanka
LOLC Holdings'
Unlike in the past, banks no longer domi- Commercial Bank
nated earnings. Diversified financials comprising Dialog Axiata
Ceylon Tobacco
mostly finance companies reported a combined Hatton National Bank
Sri Lanka Telecom
earning of Rs21.2 billion, nearly doubling from a John Keells Holdings
Hayleys
year earlier, while banks saw combined profits Melstacorp
grow 48% to Rs19.5 billion. Laugfs Gas
John Keells Hotels
LOLC Holdings reported a profit of Rs9 bil- Aitken Spence Hotels
Eden Hotels
lion in the quarter (up 164% from a year earlier), Browns Investments
trailed by Commercial Bank at Rs6.6 billion (up First Capital Holdings
Odel
78%), but the quarter belonged to Expolanka Palm Garden Hotels
Asian Hotels and Properties
Holdings. The global logistics solutions provider Taj Lanka Hotels
reported a massive Rs12 billion profit in the quar- -5 0 5 10 15

LISTED COMPANY PROFITS
114%
9%
16
48%
23%
-93%
5%
-31%
24%
35%
20%
118%
-250%
10%
-50%
-50%
-67%
14%
-7%
-15%
Rs.Bn
Consumer Durables and Apparels - 1.6
Retail - 1.4
Consumer Services - (4.7)
Automobiles and Compotents - 0.1
Food, Beverages and Tobacco - 18.1
Fodd and Staples Retail - 1.1
Household and Personal Products - 0.1
Energy - (0.6)
Diversified Financials - 21.2
Banks - 19.5
Insurance - 3.1
Healthcare Equipment and Services - 2.4
Capital Goods - 18.4
Commercial and Professional Services - 0.1
ILLUSTRATIONS BY: BUDDHIKA PIGERA
Transportation - 12.1
Materials - 5
Real Estate - 2.1
Telecommunications - 8.6
Utilities - 1.8
Sep 2020 Sep 2021

NEXT
LOW RESERVES
OFFICIAL FOREX
RESERVES
RECOVER, STILL
WEAK
China central bank swap throws a line after reserves fell
F
perilously low, but forex reserves remain inadequate
explained. However, the swaps did not help. The

Fed lost large volumes of gold reserves in 1971
due to sterilized interventions and eventually
suspended convertibility (floated), thus ending
the Bretton Woods system and a 300-year gold
standard.
Sri Lankan gold reserves were valued at $175.4
million in December 2021, down from $382.2 mil-
lion in November.
After printing money in the late 1980s, India
airlifted her gold reserves in 1991 to safe cus-
tody in the UK to pay international creditors,
as part of floating the Indian rupee and getting
Foreign currency reserves recovered in December 2021 to into an IMF programme with serious reforms.
$3.1 billion, up from $1.6 billion a month earlier, while gold Overnight rates shot up over 25% to reduce credit
reserves have depleted, official data shows. and sterilization.
Gross forex reserves increased after the Central Bank Where Sri Lanka goes from here is anyone's
drew down a swap from the Chinese central bank, the guess. That there will not be a recovery without
People's Bank of China. austerity is inevitable. Reserves at $3.1 billion are
The US Federal Reserve invented central bank swaps after inadequate. Sri Lanka needs to service sovereign
a money printing spree in the 1960s. The Fed endangered its bonds worth $4.5 billion in 2022 while paying for
peg with the US dollar as large volumes of dollar balances critical imports. The trade balance recorded a
accumulated in Germany and Japan; in both countries, deficit of $6.5 billion in the ten months to October
monetary policy had been tight, an EconomyNext column 2021.

Investing in People
Dinusha
Bhaskaran:
Vallibel One's
CEO believes
in investing
in people
Ultimately, creating opportunities
for employees is what makes
companies great
D inusha Bhaskaran, Chief Executive

at Vallibel One Plc, a holding com-
pany of 46 subsidiaries in seven
industry verticals, shares insights
about building a people-centric
company to better navigate through an economic
crisis and unlock growth opportunities along the
way.
as an Alternate Director to Mr Dhammika Perera, Vallibel Power
Erathna Plc and Country Energy (Private) Limited. Bhaskaran
also serves as a non-executive director at LB Finance PLC,
a leading NBFI, where she also heads the audit committee.
Having cut her teeth in finance in Australia, where she was
a financial controller with several Australian companies, her
experience includes serving as the Assistant General Manager,
Finance and Planning at Pan Asia Banking Corporation Plc. A
A financial and accounting professional, she Fellow of the Chartered Institute of Management Accountants
serves on the boards of Delmege Ltd, Dipped UK (FCMA), and Fellow of CPA Australia (FCPA), Bhaskaran is
Products PLC, Haycarb PLC, Hayleys Fabrics PLC also a Fellow Member of the Institute of Bankers, Sri Lanka.

As the CEO of Vallibel One, how do you see your purpose? What
aspects of your job excites you the most?
I am extremely excited to be at the helm of an organisation
that spells diversity at every turn. My purpose as the CEO is
to ensure the success of the company by achieving the desired
business results across the group, and importantly, to foster the
growth of its human capital, and make a positive impact in the
community in everything we do. While keeping one eye on the
immediate needs of the company and driving profitability, I also
devote much of my energy and time strategising for the future
looking for expansion and sustainable growth opportunities
by applying research-based tools and strategies. One must be
extremely driven and self-motivated to embrace challenges to
Dinusha Bhaskaran engineer success.
Chief Executive at Vallibel One Plc
I am motivated by a sense of purpose and strive to achieve
breakthrough progress for all the companies, and to align diverse
people, who are part of the Vallibel family to share in this vision.
While leading different teams with varying specialities and job
requirements is both exciting and inspiring, surrounding myself
with smart people energizes me as it ensures that I sharpen
my skills, knowledge, and maintain awareness of the different
market landscapes continuously. I meet a large cross-section of
people, and as a people’s person, I find this extremely rewarding
and stimulating. I am very clear in my mind about my account-
abilities and responsibilities to shareholders and stakeholders
which include my staff who are the backbone of the organisation.
What is your vision for Vallibel One? What kind of legacy do

you want to build for the company?
Vallibel One is a strategically diversified company engaged in
multiple industries. As the parent company of several top-notch
listed companies and household brand names as mentioned
in the first question (LB Finance Plc, Delmege, Rocell, Lanka
Ceramic Plc, Lanka Wall Tiles Plc, Lanka Tiles and Swisstek
Ceylon Plc), it is crucial to be dynamic and indefatigable in
maintaining our expertise and specialisation in each industry
segment we represent. We need to be on our toes always and
be nimble enough to adopt out-of-the-box approaches to solv-
ing problems and creating opportunities. What all this means
Excerpts of the interview follow: is that if Vallibel One is to continue to grow in the long run,
we must develop leaders in all these companies and areas. We
With nearly 46 subsidiaries across seven indus- are investing in leaders and giving them the skills needed to
tries, Vallibel One is a formidable conglomerate make sound judgements, take reasonable risks, and assume the
covering lifestyle, consumer, finance, aluminium, authority to make decisions and be a best in class CEO.
plantations, and leisure. The group comprises sev- Through adaptive and distributed leadership approaches
eral notable companies, including market-leading we ensure that we continuously develop capable people to
and listed entities and household brands such as LB ensure that the company is in safe hands. Previously, CEO’s
Finance Plc, Delmege, Rocell, Lanka Ceramic Plc, used to direct organisational activities, now they facilitate them.
Lanka Wall Tiles Plc, Lanka Tiles, Swisstek Ceylon They used to also provide answers, but now they intelligently
Plc., Swisstek Aluminium, and Horana Plantations. create an environment that fosters collaboration, ideation and

Investing in People
collective responsibility. Whilst most companies display the right attributes, attitudes and values that resonate
in the group have very successfully achieved this with the organisation. And of course, we ensure that we have
status, we hope to achieve it across the board to the right leaders to bind everyone together in shared values
ensure a healthy position across the group. All and galvanise everyone to a common purpose.
these encompass my vision for Vallibel One, which
is to create a successful people-centric organisa- You had an impressive 2020/21 financial year; revenue
tion that delivers profitability, sustainability and increased by 18% from the previous year, and net profit grew
empowers communities. As far as legacy goes, 133%. Can you tell us how the group achieved these results dur-
I hope I will be remembered for my work and ing perhaps the most challenging economic downturn due to
inspire everyone in the Vallibel One to greatness. the global pandemic? How are you leading the group through
As a leader, one must be humble, compassionate the crisis?
and inspirational to everyone they come across, The unprecedented challenges in the global pandemic's wake
that is something that I always try to do. certainly had varying levels of impact on some of the companies
in the group and surely tested our resilience.
When you talk about vision, culture is critical I firmly believe that the strong resilience we displayed
for any organization. What is the culture you together with agile decision-making, prudent judgement and
are building at Vallibel One, and how do you align best-in-class practices helped us to mitigate the effects to a
everyone across the group to a singular vision? great extent.
I believe I've already shed some light on how We were also able to unlock the power of our human capital
important people are to Vallibel One. For us, which was the main force that helped us to not only sustain
culture connotes continuous learning, and that businesses but to perform well and even exceed expectations as
means being industrious and innovative and crisis after crisis swept over the global and domestic economies.
outcome-oriented. Why a culture of continuous Among our employees, several heroes emerged and some of
learning? Because we all need to grow as people them demonstrated extraordinary leadership qualities although
and as an organisation. By focusing on developing they were not necessarily in formal leadership positions. It
and sharpening individual skills, we are ensuring was truly inspiring how everyone came together to ensure
the sustainability of the organisation and a loyal the organisation continued our pursuits and capitalise on the
base of employees. many opportunities that emerged. Once again, the diversity of
Employee turnover of a company is always a the group contributed to wealth creation by acting as a safety
concern because it deals with the loss of talent in net and negating the effects of those companies such as travel
the workforce over time. Businesses often calcu- that were most impacted.
late their rate of employee turnover as a means of
predicting the impact on productivity, customer What are the next steps for Vallibel One? What is the next
service, or even morale. According to the US-based big, exciting thing down the road amidst the challenges con-
Work Institute, career development is identified fronting the economy post-pandemic?
as the number one solution for reducing employee There are several strategic investments in exciting areas. A
turnover, and it has shown that the cost to reskill feasibility study on outsourced semiconductor assembly and
or upskill employees is likely to be lower than packaging is in progress, and the construction of the 500 keys
the cost of turnover. For example, in Sri Lanka luxury beach resort JW Marriot is on schedule. Also, opportuni-
it has been estimated that the cost of employee ties are being explored in expanding our finance arm globally.
turnover for an organisation is as much as 150% Like all crises, the Covid-19 outbreak, no matter how unprece-
of the employee’s salary. dented, also unleashed opportunities and served as an accelerant
According to The Work Institute, the cost of to speed up changes that would have otherwise taken a long
losing one employee in the US was $15,000 in 2019. time. For instance, before Covid, everyone talked about a digital
The US Bureau of Labor Statistics (BLS) calculates economy that would take years to become manifest. However,
employee turnover at a national level since it has the digital journey got a shot in the arm as more people started
a direct effect on not just a company but across buying goods and services, learning, consulting doctors and
a country’s economy as well. doing their banking online or on mobile devices.
To ensure we have cultural alignment, we At Vallibel One, we had invested heavily in AI and digital
strive to always recruit the correct people who tech long before Covid-19. We recognised the opportunities

that digital technology, automation and machine I devote at least 30% of my time to strategy, and creating a
learning could unleash for our group business strategic road map is critical. I also get involved in the execution
segments, including finance, manufacturing, retail of day-to-day tasks and problem-solving at a macro level. This
and transportation. helps provide my teams with a clear direction the company
Our visionary Chairman Mr Dhammika Perera needs to take, and I also diligently analyse the key factors that
leads Vallibel One's digital strategy and this laid define the success of the company and study any gaps that
the foundation for successfully navigating the need to be bridged.
pandemic. I would be failing as a CEO if I did not devote time to my
personal development and strategic thinking. I find time to
Leaders need to keep an eye on the future update myself on the new trends, digitalization, the changing
while managing everyday challenges. How do market landscape and any aspect that will help me develop
you balance these competing demands as a CEO? personally and contribute to the company.
Of course, there are several core elements that Once you have prioritised your tasks, you need to organise
every CEO should work on to steer the company your schedules and thought processes so that you can have a
in the right direction. You need to devote at least healthy work-life balance.
30–40 % of your time to the future and vision
casting where the company needs to be heading. What’s the one leadership lesson you learned the hard way?
Being a CEO of a large conglomerate, which is growing
rapidly, is not a walk in the park. I have learnt a lot of life les-
sons along the way which I gratefully put down to experience.
I have learnt more from my failures than my successes. I cannot
pinpoint one particular lesson, but I must confess that I learned
many lessons throughout my career which made me a stronger
and better person. However, I can say that I have learnt that we
cannot always tread on the tested path to avoid risks, but need to
embrace unconventional methods to achieve success especially
I BELIEVE ANY PERSON in times of adversity when the real test of strength comes to
HAS IT IN THEM TO play. I increasingly find myself becoming humble, recognizing
BECOME GREAT LEADERS, that many people and levels contribute to an organization and
that success cannot be achieved overnight. I must acknowledge
EXCEED THE SUCCESSES that my confident self is the result of working with people, from
THEY ENVISION FOR my superiors to team members and staff reporting to me, who
THEMSELVES OR BE continuously inspired me to become a better version of myself
BETTER VERSIONS OF in my professional, and personal life.
THEMSELVES
What is your advice to other women who strive to become
CEOs of large corperates?
I believe any person has it in them to become great leaders,
exceed the successes they envision for themselves or be better
I can devote this time because we have strong versions of themselves. Women have it in them to take the
leaders who are empowered CEOs managing the initiative and assume leadership roles. Recognise that you are
various group companies. They are driving effi- on par with your male counterparts, even better at certain
ciency improvements and building solutions. attributes, and there is nothing to stop you from exceeding your
We are in constant pursuit of new opportu- expectations if you diligently apply yourself.
nities to deepen our financial reservoir while Build expertise in your profession and don't be afraid to
unleashing its potential. As my background is speak the facts and especially to voice your opinions and sug-
finance, I place great emphasis on the financials gest bold ideas. Work hard on reskilling and upskilling yourself,
of the company as growth will not be possible if continuous development should be just that, continuous! Work
we do not have the means to invest and expand hard towards a healthy work-life balance and a fulfilling family
our portfolio of business. life. Be passionate, be driven but also be content.

ILLUSTRATIONS BY: ASHANTHA RANASINGHE
IG
INVESTOR’S GUIDE
2022
Portfolio strategy in a time of economic upheaval
Markets and the economy don’t always move in

lockstep as Sri Lanka experienced in 2021. The
stock market gained 80% to reach a record high.
Real estate prices went up last year too. At the
Pg. 30
same time, global rating agencies downgraded Sri
Lanka’s credit deeper into junk territory locking
the country out of international markets. The
contrast couldn’t have been starker.
Investors would now be curious if the
divergence of fortunes, between asset markets Sri Lanka should not use
and the economy, will continue into 2022. We try foreign reserves for imports if
to answer that question in our annual Investor’s it wants to end economic crisis
Guide edition for 2022.
Our investors guide coverage extends online
Pg. 34
to www.echelon.lk, our social media and Youtube
channels too.
IMF or not, reforms are a must

Stocks gain 80%
All share index performance over 2021
Pg. 38
14,000
12,000
Portfolio management during

an economic crisis
Values
10,000
8,000
6,000
Apr'21 Jul'21 Oct'21 Jan'22
Pg. 104
The high cost of red tape, and
Source: CSE what to do about it

THE PRICE SIGNAL | BELLWETHER
SRI LANKA SHOULD

NOT USE FOREIGN
RESERVES FOR
IMPORTS IF IT
WANTS TO END
ECONOMIC CRISIS
Sterilized currency defence,
without an accompanying rise
in rates, spells disaster
BY BELLWETHER
ILLUSTRATIONS BY: TREVOR SYLVESTER

S
economist Kurt Schuler, in a report which
sought to educate US congressmen in the
20th century about currency crises.
"Sterilized intervention occurs when the
monetary authority (typically a central bank)
offsets its dealings in the foreign-exchange
market with dealings in domestic securities
that leave the monetary base unchanged."
When the peg is defended and dollars are
sold from reserves, the central bank will also
sell rupees against securities through open
market operations to try and fix the money
base, unlike in a true fixed exchange rate.
Here is how it was explained to US
congressmen which present-day parliamen-
tarians would be well advised to read:
"Under a fixed exchange rate, when the
foreign reserves of the monetary authority
increase as a result of people buying or sell-
ri Lanka should not use foreign ing foreign currency to it, the monetary base
reserves for imports, because increases in a fixed proportion, and when
under a 6% policy rate an equal foreign reserves decrease, the monetary base
amount of money will be printed, decreases in a fixed proportion. The monetary
which will prevent a contraction in base is on autopilot.
credit, encourage imports and perpetuate forex shortages. "Under a “clean” floating exchange rate,
When a pegged exchange rate central bank sells dollars to the central bank does not try to influence the
an importer, it is not the same as an exporter selling a dollar. exchange rate at all. It can stay out of the for-
A central bank dollar sale reduces liquidity in the banking eign-exchange market, which is on autopilot.
system and shrinks the monetary base. A $100 million sale Under a fixed exchange rate, when the foreign
of reserves for fuel by the central bank leads to a Rs20 billion reserves of the monetary authority increase
liquidity shortage in the interbank market. This reduction as a result of people buying or selling foreign
in rupee reserves in the banking system also kills off credit currency to it, the monetary base increases in
that the Rs20 billion would have generated keeping the a fixed proportion, and when foreign reserves
external sector and the exchange rate in balance. decrease, the monetary base decreases in a
However if this rupee short is pumped backed into banks fixed proportion. The monetary base is on
to maintain the policy rate, re-expanding reserve money autopilot.
banks can again lend the money and prevent the correction "Under a (soft) pegged exchange rate, in
in the credit system that is required to stop the currency contrast, neither the foreign-exchange mar-
crisis. If done long enough, it will completely mess up the ket nor the monetary base is on autopilot.
prices in the economy, even if there is no overt excess liquid- "The sterilized intervention characteristic
ity seen in the banking system, like now. of a pegged exchange rate allows the central
In a clean fixed exchange rate, there is no sterilization. bank to control the real supply of money for
An outflow of dollars leads to an equivalent fall in the local a time and to hinder the real supply from
money, just as if the money supply was dollars. In a (soft) adjusting to changes in the real demand.
pegged country, the intervention is sterilized with new "The delay reduces the accuracy of prices
money. as signals for guiding economic activity.
Consider the case where the central bank
SCHULER TO US CONGRE SS prevents the doubloon monetary base from
"The defining feature of a pegged rate is “monetary sterili- falling when real demand for it falls. The cen-
zation,” also known as “sterilized intervention," explained tral bank maintains in circulation 10 billion

more doubloons than people want. "Some people might be alarmed at the specie leaving the
The cycle continues as long as the central country, and might consider that as a disadvantageous trade
bank refuses to reduce the monetary base. which required us to part with it; indeed the law so considers
The central bank eventually loses so many it by its enactments against the exportation of specie; but
foreign reserves it either must finally reduce a very little reflection will convince us that it is our choice,
the monetary base or it must abandon the and not our necessity, that sends it abroad; and that it is
pegged exchange rate and go to a floating highly beneficial to us to exchange that commodity which
rate. is superfluous, for others which may be made productive."
As long as the bank issued notes only against gold which
DAV I D R I C A R D O T O PA R L I A M E N T was exchangeable on demand there would be no problems.
Here is how David Ricardo wrote in the "The Bank might continue to issue their notes, and the
High Price of Bullion shortly before a Select specie be exported with advantage to the country, while
Committee on High Price of Gold Bullion their notes were payable in specie on demand, because
prepared and issued a report which was to they could never issue more notes than the value of the
be the basis of the restoration of the gold coin which would have circulated had there been no bank."
standard of the Bank of England. If they printed money (issued paper in excess of reserves
In 1797 convertibility was suspended (the of specie) there will be reserve outflow from the bank (and
Pound floated) with UK usury laws prevent- the country) contracting the paper.
ing the discount rate (like policy rate now at "If they attempted to exceed this amount, the excess
6%) from rising above 5%. would be immediately returned to them for specie; because
He explained that people exported gold our currency, being thereby diminished in value, could be
after exchanging for Bank of England notes advantageously exported, and could not be retained in our
(like sending dollars abroad after exchanging circulation. These are the means, as I have already explained,
rupees) for useful purposes and they should by which our currency endeavours to equalize itself with
be allowed to do it. the currencies of other counties"
However, a crisis occurs if the central bank continues to
print money to replace the money it took back in selling
reserves, let us say for imports as is happening now to fix
the monetary base or circulating medium.
"…[B]ut if the Bank assuming, that because a given quan-
tity of circulating medium had been necessary last year,
therefore the same quantity must be necessary this, or for
any other reason, continued to re-issue the returned notes,
the stimulus which a redundant currency first gave to the
exportation of the coin would be again renewed with sim-
ilar effects; gold would be again demanded, the exchange
would become unfavourable, and gold bullion would rise…"
"In this manner, if the Bank persisted in returning their
notes into circulation, every guinea might be drawn out of
The root of the evil is their coffers."
not the exchange rate SUSPENSION OF CONVERTIBILITY

fixing, but the liquidity A float will prevent further erosion of reserves as money not
be taken out of the banking system as the peg is defended,
injections made to fix nor replaced with new money to keep rates down. In a float
the interest rates and money supply is unchanged.
the monetary base

However a float will not work if the interest rates were too
low, and money is printed either to finance the government
through failed bill auctions, or banks are financed through
the reverse repo window due to excessive credit demand.

If interventions are made for imports with reserves, and

they are sterilized, a total currency collapse and an economic
collapse comes closer.
As the foregoing shows, foreign reserves are not collected
by a central bank for imports as claimed by Mercantilists.
Reserves in a peg act as a restraining influence or in Sri Lanka is heading
technical terms to anchor the monetary base and prices by
triggering a tightening of the quantity of money whenever
for more pain. If
there is an outflow, which in turn will trigger a rise in rates the Rs229 billion is
and savings and a reduction in credit.
Any reserve sale for imports therefore should be accom-
printed, and more
panied by a rise in short term rates. money is printed for
However with the credibility of the peg being lost now,
and a very large parallel premium having emerged, the inter-
imports at 6%, and
est rate required to maintain the current exchange rate will prices are distorted as
also be high. seen now with a 12.1 %
inflation
A float can work with a lower rate, and with less of a
disruption in economic activities.
That sterilized interventions are possible was claimed
by the architects of the Bretton Woods and the European
Exchange Rate Mechanisms.
It was mostly Americans like John H Williams, who was
behind the idea of the key currency who led intellectual
support to such a claim originally found in Latin American
central banks. He and others including Arthur Bloomfield
who built the disastrous Bank of Korea also operated on devaluation."
that principle based on the Fed/Latin American orthodoxy "Currency crises can be viewed as the
of the time. foreign-exchange market’s way of forcing an
Sri Lanka's central bank also operates on that principle. adjustment of the real supply of money to the
But John Exter who drew up the law had warned not to do real demand when the monetary authority
that when interest rates are clearly out of line. is trying to prevent it.
The root of the evil is not the exchange rate fixing, but "The absence of sterilized intervention
the liquidity injections made to fix the interest rates and does not mean that adjustment will always
the monetary base. be smooth; it might be painful. However, the
likelihood is that it will be even more pain-
PA I N F U L C O R R E C T I O N ful with sterilized intervention because price
Liquidity injections made to outright finance the deficit signals are likely to become less accurate."
such as 2020 or to mis-target reserve money in both 2015/16 Sri Lanka is heading for more pain. If the
and in 2018 eventually reduces growth when the monetary Rs229 billion is printed, and more money
instability is ended. is printed for imports at 6%, and prices are
"The structure of prices that existed during the period distorted as seen now with a 12.1% inflation.
of sterilized intervention contains mistakes that must now There will be more pain ahead.
be corrected, perhaps at the cost of a recession," explains Earlier the correction, the lesser the pain.
Schuler. If no correction is done a monetary melt-
"Mistakes in targeting the real supply of money create down involving high inflation, problems
opportunities for arbitrage in foreign-currency markets and in the energy sector and goods shortages,
elsewhere: the bigger the mistakes, the bigger the oppor- outmigration and eventual market dollariza-
tunities. Monetary authorities that in effect target the real tion are inevitable consequences as warned
supply of money by maintaining pegged exchange rates before.
encourage speculative pressure to build until it forces a Some of these are already happening.

INVESTOR’S GUIDE 2022
IMF OR NOT,
REFORMS ARE
A MUST
Never let a crisis go to waste.
How navigating out of the debt
crisis offers Sri Lanka a once in a
generation opportunity to fix the
economy
BY CHANUKA WATTEGAMA
ILLUSTRATIONS BY: BUDDHIKA PIGERA

WHO’S AGENDA?
T
pursued internationally assisted ‘peace-
talks’ for years. Thousands of more deaths
later, we realized that was a cul-de-sac.
LTTE was a militant organization that
had mastered guerilla tactics. It was
unwilling to accept a political solution
as most pundits had presumed. Some
pundits said that Pooneryn would be a
Stalingrad. Sri Lanka prevailed because
it ignored them.
We face a different crisis today.
Whether we seek IMF assistance or
not will matter less than the economic
reforms we commit to. Reforming on
our own does not mean we can avoid
the pain. So what are these reforms?
An immediate move necessary would
be - laisse la roupie - to let the Rupee go.
Devaluation is a wrong term, as it would
be nothing but allowing the value of the
Rupee to be determined by the market,
Rs 240 a dollar, as indicated by the bazaar.
This will be an unpopular thing. It would
increase the cost of imports, leading to
There is no painless path for Sri Lanka out of the crisis, the words inflation and particularly foodflation.
of former Central Bank Governor Dr Indrajit Coomaraswamy. Certainly another burden on low-income
He prefers the government choose the least painful path to
emerge out of the current financial crisis – to engage the IMF.
This is in the backdrop of the country’s foreign reserves
plummeting to $1.5 billion while the country requires an
estimated $ 7 billion over the next 12 months to repay its foreign
currency debt capital and interest. This is a challenge because
the country is now unable to rise new debt in global financial
markets at a reasonable rate.
Even mainstream economists now acknowledge the WE FACE A
difficulties and recognise the need to tighten things. Now it’s DIFFERENT CRISIS
important to find workable solutions, especially since those TODAY. WHETHER
are now choices between difficult things. These choices will WE SEEK IMF
impact generations to come. ASSISTANCE
Is there precedence for not seeking IMF assistance in such a OR NOT WILL
difficult situation? Yes, there is. Dr Mahathir Mohamad, as Prime
Minister of Malaysia, refused any multilateral assistance during
MATTER LESS
the Asian Financial crisis of 1997. However, he still reformed, just
THAN THE
like the IMF would have prescribed. Given the circumstances, he ECONOMIC
maintained a stable exchange rate change and cut the reduced REFORMS WE
deficits, among other reforms. That put Malaysia back on track. COMMIT TO
Yes, his personal credibility and strong policy action kept the
IMF away.
If we were to reflect, it’s the attitude that ‘we can’ that
ended the 30-year-old long conflict. Previously Sri Lanka had

AGENDA
GOVERNANCE
families. reforms Sri Lanka has delayed for years fearing unpopularity. Now,
One may even ask the prudent the circumstances are different. What could be more unpopular
question: should the Sri Lankan public, politically, than defaulting on debt?
especially the poor, be penalized for Let us start with SOEs. For decades we have skirted restructuring
something they weren’t responsible or selling loss-making state-owned enterprises. Three SOEs in the
for? But there is no alternative. Sri Lanka transport sector made annual losses of Rs 10 billion, 31 billion and
needs to establish confidence in the 3 billion, a total of Rs 44 billion or roughly Rs 2,000 for each man,
currency market for dollars to flow in. If woman and child. We also have 55 SOEs categorised as strategically
we continue to price the rupee artificially, important that lost between 2006 - 2020 a staggering Rs 1.2 trillion
it risks much worse damage. ($ 6 billion). In other words, a typical Sri Lanka family has paid Rs
With the dollar liquidity problem 150,000 a year to maintain these loss-making entities. As the COPE
satisfactorily addressed, Sri Lanka should chair put it sketchily, millions of those who have never travelled in
look at debt repayments. The immediate an aircraft in their lives are penalized for the losses made by running
requirement are those falling due in 2022. them. This is not fair.
How could Sri Lanka address the issue? An enterprise should ideally make money. If they don’t, their
Are there precedents? public service objectives have to be clear. Monopolies are poor at
Even with IMF assistance, this would serving the public because they are inefficient. This is certainly not
be a complicated process. To meet that the time to tolerate inefficiency.
challenge, many reforms, unprecedented In addition to reducing costs, which will only address the
in history will be needed. This would be problem partially, Sri Lanka should make a paradigm shift in its
the ideal moment to launch all economic development.
Rhetorically how can Sri Lanka achieve a goal it has failed to do
for the last 74 years, now? Let us open our eyes and look around.
Those who have made quantum economic leaps were not always
in favourable economic conditions when they did so.
South Korea was one of the poorest countries in Asia, devastated
by two wars, the last of which split the country in two; when it set
forth on a reformist plan that has elevated it to the eleventh richest
WERE SRI nation in the world, in GDP per capita terms.
LANKA TRULY Similarly, Singapore commenced its journey towards economic
SERIOUS ABOUT prosperity after it was cast out of the Federation of Malaya. If these
OVERCOMING countries reformed with fewer intellectual resources than we
THE OBSTACLES currently have, why can’t Sri Lanka?
IT NOW FACES, In fact, Sri Lanka already has some of the elements to succeed.
KOREA, CHINA Port City Colombo project is already underway. Covering over 250
AND MALAYSIA hectares of reclaimed land, it will be South Asia’s premier residential,
(PERHAPS EVEN retail and business destination, offering unmatched planned city
living along the warm waters of the Indian Ocean. If there is one
INDIA AND project that transforms the future of Sri Lanka, this could be it.
BANGLADESH) Further, the tech industry can be a powerful force that can drive
ARE THE PLACES the Sri Lankan economy in the decade to come. Export earnings of
IT SHOULD IT and IT-enabled services sector is projected to reach $ 3 billion
LOOK FOR, NOT by 2024 from the current $ 1.2 billion. This, of course, is only one
NECESSARILY THE component of the digital economy.
IMF Were Sri Lanka truly serious about overcoming the obstacles
it now faces, Korea, China and Malaysia (perhaps even India and
Bangladesh) are the places it should look for, not necessarily the IMF.
It is time for Sri Lanka to find its own version of the Asian growth
model. That would be the solution, to address the immediate issues
and also secure prosperity for the next generation.

Lakshini Fernando
Asia Securities
Udeeshan Jonas
Capital Alliance

P
PORTFOLIO STRATEGY
Sanjeewa Fernando
CT CLSA
PORTFOLIO
MANAGEMENT
DURING AN
ECONOMIC
CRISIS
Due to interventions, Sri Lanka’s markets
including ones for money, foreign exchange
and commodities were distorted in 2021. Our
panel of investment experts take on asset
allocation in a chaotic economic climate

T
Can we start with opening comments?

Lakshini Fernando: There are both positives
and negatives going into 2022. But it looks
like the negatives outweigh the positives.
We must give credit where it’s due, and
the vaccination drive in Sri Lanka has been
quite good with over 60% of the population
vaccinated and booster shots being admin-
istered. That was the need of the hour during
the pandemic and the government’s taken
that up.
Tourism has picked up faster than
expected and it looks like December 2021 will
end quite strong. Overall, where economic
activity and momentum are concerned, given
where the vaccination drive is and so on,
it’s difficult to see complete lockdowns into
2022. You will see economic momentum on
an upward trend in the first quarter.
But there are dark clouds. First, is the
external debt repayment schedule. There’s
$1.6 billion in reserves and $5.4 billion of
repayments, so where that will come from
is the question. The Central Bank road map
at the end of October forecast $2.6 billion
inflows. Timing is key.
What’s going to happen with repayments?
Is the IMF in or out? I don’t see a default
at play next year but there has to be some
restructuring.
he economy and its stock market Udeeshan Jonas: This year’s biggest concern is
don’t always march in lockstep. In external debt repayments. Sri Lanka is down
2021, stocks broke multiple records to about $1.5 billion in reserves. Debt repay-
despite Sri Lanka’s economic trou- ments are about $4.5 billion, of which roughly
bles. Markets do a far better job at $1.5 billion are sovereign debt repayments. At
price discovery than bureaucrats or the moment, there aren’t sufficient inflows
politicians. While stock prices were to meet this requirement.
market-determined, companies had Although the Central Bank has a road
to deal with interventions in several map in place, we haven’t seen much of it
other crucial markets including those for foreign exchange, interest materializing. The main issue is that it’s not
rates and commodities. a one-off problem. There’s the $4.5-$5 billion
As a result, portfolio managers had to account for several more debt repayment for the next three to four
variables than they have been used to in the past. On top of this Sri years, so a short-term plan is not adequate.
Lanka has been struggling to service its foreign currency debt adding We need structural changes. Now is the time
another possible scenario to consider for 2022. to do that, to put Sri Lanka back on track for
This year’s investment panel discussing portfolio allocation included steady economic growth.
Lakshini Fernando of Asia Securities, Sanjeeva Fernando of CT CLSA From a monetary policy perspective,
and Udeeshan Jonas of Capital Alliance, all equity analysts who closely interest rates have been in the low-sin-
track the economy. This discussion was conducted in late 2021. gle digits. The central bank has printed an

PORTFOLIO STRATEGY
Sanjeewa Fernando
CT CLSA
unprecedented amount of money, around Rs
1.4 trillion. This led to interest rates declining
and inflation rising.
Although supply-side constraints have
raised inflation, the demand side is also
weighing in. Money printing is now con-
tributing to inflation. Inflation was 9.9%
(November 2021). We see inflation continuing
to rise in the next few months.
The Central Bank may tighten monetary
policy and has already started the process. In
August, rates were raised by 100 basis points
and the SRR was increased.
Globally too, that seems to be the phe-
nomenon especially with the US indicating
the Fed will start tapering from November,
lowering its bond-buying program from $120
billion to zero in a couple of months. This
could mean a tighter monetary policy stance
for the next 12-24 months.
Sanjeewa Fernando: We face a challenging

environment; essentially for debt repayments.
There are development bonds to be paid,
immediate near-term and interest payments
coming up, and inflation is on the rise. Money
printing is exerting price pressures.
There isn’t demand pressures right now,
with credit growth falling to around 13% from
as high as 15% in August 2021 after Central
Bank policy tightening. But liquidity of the
financial system is falling. In the first half of
next year, banks will raise deposit rates to
compete for deposits. That may also mean
interest rates continue to rise.
There are three exchange rates right now:
an official rate of 203, a grey market rate of
233, which is 15% down, and a black market
rate, that always existed, but not at these
levels. Because of the dollar shortage, most
companies tap into these markets.
If sovereign debt needs restructuring,
there will be impairments or a requirement
of new capital for some financial institutions.
According to some rating agencies, a restruc-
turing could mean a sovereign default, so
credit rating downgrades may also happen.
If the international sovereign bonds (ISBs)

or commercial debt that Sri Lanka holds

low the fixed income market did not attract

investment. There was a notion that prop-
erty was overvalued relative to prices seen
in 2013 and 2014.
There’s been a lot of money printed,
around Rs 1.4 trillion from the onset of Covid.
In 2021, it’s around Rs 700-800 billion printed.
GDP has not grown above 2018 levels. That
means a lot of money is chasing behind a
smaller production, which will lead to asset
prices increases.
How much of the current asset prices is due

to liquidity do you think? If in a debt workout
there is significant interest rate tightening,
what does that mean for asset prices?
Udeeshan: At the moment, most of the
printed money has flown into inflation, and
inflated equity too. Compared to one-and-a-
half years ago market cap has increased by
needs restructuring, what can it mean for the credit rating? about Rs2.5 trillion, which is equivalent to
Udeeshan: By July 2022, there is a $1 billion ISB to be repaid. So each person in the country having Rs 140,000.
there are two options: default or talk to the IMF. If the IMF feels Top companies have secured a large part
that the debt is sustainable, we might be able able to secure an EFF of the liquidity, which is why they are doing
(Extended Fund Facility) of around $2.5 billion and because of the well.
IMF coming in, the credibility might allow bilateral lenders to give In the next 12 months, if the current sit-
more loans. That is the best possible option right now. uation continues, and the economy starts to
If the IMF does not think that the debt is sustainable and that recommence operations in full force, infla-
the primary deficits cannot be reversed with fiscal reforms, a debt tion can rise. But if the Central Bank starts
restructuring might be required, which means imposing haircuts increasing rates or pulling back the amount
on foreign currency bond holders, or a postponement of payments. of money printing, equity markets might
It could be a mix of both, like what we’ve seen in some countries retreat.
recently. This is the phenomenon that we expect
not only in Sri Lanka but across the world.
When you’re forecasting for 2022, how do you work this in? Even the S&P 500 is overinflated and global
Lakshini: This has been one of the toughest years to forecast, which investment banks are expecting a reversal.
is why we went on a scenario basis. From where we are right now,
the government has two options: go to the IMF or manage on its own. Lakshini: Let’s look at how markets work,
The government seems to want to manage on its own. But some they respond to expected corporate earnings.
funding it had forecast seems delayed. Take the manufacturing sector for example,
How we’ve gone about it is by asking, what will the scenario be where import controls have set the stage. In
if the IMF comes in? Or what will the scenario be if the government the absence of the IMF, at least in the first
tries to manage this entire situation on its own, in six months, half of 2022, you’re looking at certain sectors
which is a harder route to take. continuing that momentum and spilling over
to the equity market, because everyone’s
Liquidity tends to inflate asset prices, so what impact has the looking at how to beat inflation; real returns
level of liquidity seen in the last year had on assets, particularly are what matters.
on equity? Consider the key cycles – rates, inflation
Sanjeewa: There are essentially three investible asset markets in and currency. Positioning is going to be based
Sri Lanka: fixed income, equity and property. Because rates were on that. Equity markets may decline if the

PORTFOLIO STRATEGY
IMF does come in and puts in restrictions,

but at least until it does, there’s more to go
in terms of finding that real return.
Over the last year or so, the market index

has doubled, approximately. What level of
tightening will be required and how will that
impact the index?
Sanjeewa: The stock market will be rebased
from next year to be liquidity adjusted. But
from a monetary tightening point of view,
whether there may be interest rate hikes will
be the question. Liquidity is drying up and
banks will have to offer better deposit rates
to attract liquidity.
Should there be IMF involvement and tight-

ening of government spending, what impact
will that have on assets?
Lakshini: Yes, assets will be impacted purely
because current conditions are unsustaina-
ble. If reserves were stronger, I would say
no, because then the government has some
leeway.
Even if there is no IMF programme rates
will have to rise. At the same time, the Central
Bank has the imperative to support growth
as well, so it can’t raise rates significantly.
We expect rates to rise by at least 100 basis
points in 2022. If the IMF comes in, it’s prob-
ably going to be more than that.
Udeeshan: I agree, but my view on policy

rates might be higher: at least 100-150 basis
Lakshini Fernando points. In terms of withdrawing the printed
Asia Securities
money; it’s impossible to do overnight
because we are funding the budget purely
with domestic sources at the moment. It’s
impossible to wipe off that liquidity even
over six months. It will have to be gradual.
The import bill can also be clawed back
with tighter monetary policy. Given that we
don’t have the reserves in place to defend the
currency, one way to tackle the import bill is
OVER THE PAST COUPLE OF YEARS, BANKS through monetary policy.
HAVE TRADED AT AROUND 0.6 TIMES BOOK.
THAT’S ALSO BECAUSE OF THE MORATORIUMS, What do you think earnings growth was
NPLS, AND ASSET QUALITY IN GENERAL market-wide for in 2021?
Udeeshan: For 2021, last quarter earnings were
- LAKSHINI FERNANDO up by about 45%. On a cumulative basis for

Udeeshan Jonas
the nine months, we’re looking at roughly
Capital Alliance 60-65% earnings growth. But this growth is
not going to continue into 2022. By March
2022, you might see a slowdown. That’s also
because of the higher base and consumers
feeling wallet pressure.
The current earnings growth is also
driven by pent-up demand from the last
12-14 months. People have been using their
savings; they’ve been spending over the last
six months or so.
What’s your earnings growth forecast for

2022?
Udeeshan: Earnings growth will be more or
less flat. It’s difficult to pass on costs in this
environment, so margins are going to take
a beating.
Sanjeewa: Once you exclude the logistics

sector, the best-case scenario will be high-sin-
gle digits, or maybe a maximum of 15%. But
if there’s a scenario of debt restructuring,
impairments will come up, and asset write-
offs and so on will result in earnings being flat.
Lakshini: It’s on a scenario basis. If there

is an IMF agreement, corporate taxes will
rise; you will see some pain, which we didn’t
see in 2021. Without the IMF, there may be
more leeway. If import controls continue,
some local companies would see an upside
including dollar earning companies. There
are positives and negatives. Earnings growth
may be in the mid-single digits.
What is your forecast for earnings expec-

tations in 2022?
Lakshini: More on the lines of it being in sin-
gle digits because there are companies that
will do well but others that will get hit. There
are some winners out there.
EARNINGS GROWTH WILL BE MORE What do you anticipate in terms of the

OR LESS FLAT. IT’S DIFFICULT budget deficit and the rupee?
TO PASS ON COSTS IN THIS Lakshini: Given where we are right now, there
ENVIRONMENT, SO MARGINS ARE has to be a depreciation factored in; it’s diffi-
GOING TO TAKE A BEATING cult to see that not happening. Some of that
depreciation may come in the first quarter
- UDEESHAN JONAS of 2022, with a gradual depreciation taking

PORTFOLIO STRATEGY
place towards the rest of the year.

On that basis, the currency may hit at
least 235 by end of 2022. But many factors
have to be considered. With the IMF involved,
it could be a steeper depreciation.
On the budget, I expected more tightening
measures, especially to increase the revenue
base because that’s where we’re struggling. I
expected more taxation, because going into
2022, it is looking quite tough.
The government has been trying to reduce
its expenditure and that’s a key positive.
From where we are now, we’re forecasting
economic growth of 4.5% for 2022. The budget
deficit is at least going to be 10.5%.
Assuming the debt is restructured, where IF THE GOVERNMENT CONTINUES

do you think the rupee will be?
TO NOT HAVE TIGHT AND DIFFICULT
Udeeshan: Irrespective of whether there’s a
restructure or not, the rupee needs a correc-
POLICIES IMPLEMENTED, LOCAL
tion. In November, remittances were down
INVESTORS WILL REMAIN. IF OTHER
by over $300 million. Worker remittances ASSET CLASSES DON’T OFFER
are the largest component of Sri Lanka’s FX INFLATION-BEATING RETURNS,
income. If you continue to lose that, that THERE WOULD BE CONTINUED
burden itself is about $3 billion. Having this INTEREST IN THE MARKET
parallel market doesn’t work, and we need
to make that adjustment right away. So we’re - LAKSHINI FERNANDO
looking at about 230-240 rupees to the dollar.
Most countries that have gone through a
restructuring or potential default have seen for companies that import their raw materials. Sourcing dollars
significant depreciation of the currency just and opening LCs has been challenging. Until the dollar liquidity
ahead. sorts itself out and banks can open LCs, there will be sectors that
are impacted.
Do you feel there is a credibility gap in the Currency depreciation will impact those who import their raw
budget as it stands right now? materials because they’ll have to take a hit on the currency. I don’t
Udeeshan: The revenue measures were not think it’s an ‘if ’ but a ‘when’ the currency depreciates.
sufficient. There are only two main tax sources
the government will start targeting. It is look- Several extraordinary taxes were introduced in the budget includ-
ing at about an 8.8% deficit to GDP, but that ing a 2.5% tax on revenue. What sort of impact will it have on
was on account of a significant increase in the market?
public investment spending. The government Lakshini: It’s difficult to say because it’s not clear for corporates as
will claw back public investment spending, to who will get taxed. They’re awaiting more details. The government
like in the past. It’s been spending only about expects to collect a colossal amount through this. It’s a one-off tax.
50-60% of what it normally budgets for public
investment. So even though revenue is less, Udeeshan: It’s not stated clearly, but the government is looking to
the deficit will still be about 9.5%. collect about Rs100 billion, as mentioned in the budget. We still
don’t know whether banks have to pay the social security levy of
What sectors or companies are the most 2.5% and the higher VAT. There are grey areas requiring clarifica-
exposed to this macroeconomic challenge? tion. The underlying fact is that it’s still not enough in terms of the
Lakshini: The pain points this year have been amount of money.

INVESTOR’S GUIDE 2022 PORTFOLIO STRATEGY
Where do you think the impacts of the understands the phenomenon. In challenging times like this, you
current macroeconomic challenges will be can’t expect economies to bear such a large hit overnight. It will
reflected in listed companies? most likely give a target to hit over a couple of years and that will
Sanjeewa: General consumer spending will be gradual. But you have to stick to that plan.
be impacted because of price pressures. Any
company that wants people to spend will Lakshini: The IMF focuses on the fiscal number and government
face an impact. Financial institutions will plan to reach that. Taxes will have to rise and fiscal consolidation
figure out a way to pass this on to consumers. take place if the IMF does come in. The tax increase will be gradual
The exchange rate will experience the big- because the growth momentum needs to be sustained while fiscal
gest impact. If it doesn’t depreciate, there will consolidation takes place.
be an illiquid market forcing companies to
the black market. If it depreciates, the real What will be the trigger point for the government to go to the
impact will come through. IMF? In the absence of a credible plan, why do you think it’s still
resisting this?
Several important market sectors, from Sanjeewa: There’s $1.6 billion worth of reserves and of that, $400
financial services to consumers, are likely million in gold. So how much can you spend? $1.2 billion. But in
to be impacted by the storm clouds now January, the day of the opening of parliament, there will be a $500
gathering. How do you reconcile this with million sovereign bond payment.
earnings growth you are forecasting for Other factors are playing out as well, of remittances, falling and
2022?
Sanjeewa: Two aspects. The general con-
sumer has not been impacted by increasing
personal income taxes. But they will face an
inflation tax. Both are taxes. You’re taxing
corporates who made money, which is ok in
a way. What you need to have is discipline,
which is not there.
What are the chances that with an IMF pro-

gram, VAT rates will have to increase from
the present 8%?
Udeeshan: The turnover tax that was intro-
duced is indirectly trying to achieve that.
Looking at previous IMF programmes, when
Ecuador went into a programme in 2020 for
example, its VAT rates were increased by 3%.
Especially in low middle-income countries,
it’s easier to collect taxes through sales taxes
like VAT.
More than charging direct taxes, if you
want to raise revenue by say Rs 200-300
billion, it is the turnover related taxes like THE EXCHANGE RATE WILL
the VAT and social security levy that should EXPERIENCE THE BIGGEST IMPACT.
be looked at. So these are highly probable. IF IT DOESN’T DEPRECIATE, THERE
So what sort of a rate increase do you antic-
WILL BE AN ILLIQUID MARKET
ipate will be required to be credible for an
FORCING COMPANIES TO THE BLACK
IMF program? MARKET
Udeeshan: VAT should move by at least 5%
but it shouldn’t happen overnight. The IMF - SANJEEWA FERNANDO

exports picking up. Imports will come into play on the other side. over 30% will result in some banks having
Which imports are going to be cut will be the question. capital calls, and having to raise equity and
so on to manage it. But I don’t think we need
Is there the potential that Sri Lanka’s friends – India or China – a 35% haircut on bonds.
will step forward?
Udeeshan: One reason why the government has been delaying going Banks are trading at 0.6 or 0.7 times book.
for an IMF programme or restructuring is that it is counting on Is it possible a haircut has been priced in?
bilateral funding. Second, is that the government also understands If not why banks are trading at a discount?
the consumer pressure with inflation being high. Sanjeewa: If you look at the recovery
There’s also one large source that is still not coming into the achieved, it should have been priced into the
equation, which is tourism. From a longer-term perspective, there financial system, which has not happened.
is a solution where you can take the $5 billion tourist earnings to The reason probably is that investors still
$10 billion. But the issue is short-term liquidity. believe we may have to restructure debt, in
There’s this bunching up of debt repayments, and there needs the absence of a credible plan.
to be market access, which isn’t available right now. To facilitate
market access, you need the likes of the IMF coming in. Lakshini: Over the past couple of years, banks
have traded at around 0.6 times book. That’s
Sanjeewa: The thinking of the government was probably that if it also because of the moratoriums, NPLs, and
goes to the IMF, it would encounter conditions. Although bilateral asset quality in general. There is a concern,
funding is relatively expensive, it won’t involve these conditions, especially about large banks and what they’re
so the government can probably meet its political promises and holding. More than anything, it’s the cau-
keep taxes low. It’s essentially kicking the bucket down the road. tionary stance investors are taking on banks,
If you look at Sri Lanka, every government’s problem has been despite their earnings doing quite well.
the next five years. We’ve not had a mechanism of governments
being responsible for what they do after that. That’s where the What is the overall impact likely to be on
problem lies. After 1978, a budget deficit target set by the govern- consumer stocks?
ment has never been met. It’s a matter of being responsible for Sanjeewa: You have price pressures playing
what you say, which has not happened. out, so there will be wallet pressure contin-
uing into 2022.
Many banks own significant chunks of sovereign dollar debt.
How will they be impacted should there be a restructuring and What are the big consumer stocks that we’re
a haircut on the debt? talking about here?
Lakshini: If the IMF comes in and there is debt restructuring, a Sanjeewa: Retail companies like CCS, super-
haircut is probably on the cards. There are different ways of doing markets, Cargills and so on. The other impact
this. It depends on what the borrower agrees to and puts forward, is pent-up demand; people may still want to
and what the macro fundamentals are at that point. Given where consume certain items that they did not while
we are right now, a haircut is quite possible. working from home. If you look at December
2021 hotel bookings, they’re full of predom-
Sri Lankan bonds in the secondary market are maybe 65 cents inantly local tourists. That demand is going
to the dollar, indicating a 35% haircut. Should there be a 35% to be there on consumption as well.
haircut? How does that translate into the valuations of banks?
Udeeshan: Banking sector valuations have been pricing this in. Hydroelectricity generation is serving the
If you look at the haircuts, 35% is steep. Countries like Ecuador economy well right now. But potentially, the
only had about a 9% haircut on their bonds when it restructured. monsoons will be over in several months and
The problem is not the ISBs with banks but SLDBs (Sri Lanka that’s about the time the bond payments
Development Bonds), which were bought at fair value or face value. become due. Is this a clear and present
Most banks accumulated ISBs over the last two years at a steep danger?
discount. You don’t have to provide for large impairments on them. Udeeshan: There is a danger, but that will be
But the SLDB component will take a larger hit if it comes to haircuts. a key priority for the government. Even if you
Private banks have a reasonable capital buffer, but anything allocate in dollars, the priority is going to be

PORTFOLIO STRATEGY
for energy and essentials. The government will the impacts that will have across the economy. What do you think
likely secure credit lines from the Middle East or will happen with the index?
India for energy. Udeeshan: In terms of the index, if the government and Central
For the long term, renewable energy pro- Bank delay the process of restructuring or sorting out the problem,
jects the government is talking about will come the market is going to be inflated further.
through. Investments to reduce FX pressure will It depends on timing and government action. If action is taken
also come in over the next few years. as soon or fast as possible, the market will retrace. It’ll be multiple
negative factors hitting at one point, which is too much for the
If there were energy-related problems in 2022 market to absorb in one go, especially in an overheated market.
what would be the impact on earnings of listed If some funding line is obtained and the problem is passed
companies? on for another three to four months, the market will continue to
Lakshini: It’s going to have a massive impact. If move for that period.
factories can’t operate, how is a company going
to function? In terms of dollar issues, the govern- By what level do you think it’ll come down or settle down by?
ment has a priority list. Udeeshan: It could even be a steep reduction of 25% or 30%, to also
The rains have been a blessing in 2021 filling reflect the new taxes; that’s the kind of adjustment the market will
the hydro reservoirs and we didn’t have to import need. The index has moved from 6,000 or 7,000, which is a more
much coal. sustainable level, to 12,000. Somewhere around 9,000-10,000 is a
I don’t factor in an energy crisis right now more sustainable level.
because the necessary funds would be allocated. But it depends because you can’t look at the index alone. After
Even if you look at global oil prices, analysts say all, it has been rebased. Where low liquidity shares fall in the future,
prices are declining – and some expect it to come it will not impact the index as much.
to about $66 a barrel levels, compared to the $75
in 2021. Looking at the index today, do you think the market will decline
next year?
Sanjeewa: There are countries where you’re Lakshini: It depends on the scenarios. If the government continues
allowed to only pump 1/3 of a tank at a fuel station to not have tight and difficult policies implemented, local inves-
even if you have the money. I don’t think allowing tors will remain. If other asset classes don’t offer inflation-beating
that kind of scenario will play out well, given the returns, there would be continued interest in the market.
issues and invited crisis we already have with It’s difficult to gauge because the level of volatility in the ASPI
fertilizer, LP gas and so on. It’s a matter of limiting will be less once the rebasing takes place given that all those illiquid
the damage, consolidating and moving forward. stocks won’t impact the index so much. The volatility would be less.
If interest rates rise by 200 basis points, that’s 2% there will be a
It’s difficult to forecast where the stock market correction because the market is sentiment-driven. But it depends
index will land. But do you anticipate the index on what the adjusted ASPI would look like.
declining next year because of the risks?
Sanjeewa: There was a lot of money printed and Is it possible to put a number on it?
it had to go somewhere, and that was not to prop- Lakshini: It is a broad range. It’s difficult to say. Based on the ASPI
erty or fixed income markets. Assuming rational in 2021, there’s got to be a correction. I wouldn’t put a number there
and economically sensible behaviour, there can’t but it’s a correction nonetheless. What’s key is that the volatility
be more money printing. would be less from next year onwards and that is needed in the
Tightening monetary policy and higher inter- market right now.
est rates will impact the stock market.
There’s an earnings slowdown also coming Do you foresee public sector reforms next year that will impact
in. Sentiment is a factor that drives the market asset prices?
and much of it stems from earnings. When these Lakshini: They’ve already spoken about clamping state-owned
slow down, the market will also decline. enterprises. We saw that even in the budget. Public-private part-
nerships have to be encouraged a lot more. If certain state asset
Sentiment is driving the market up these days, sales go through, that would be a key positive.
we have the potential of debt restructuring and There is a positive correlation between inflation and property

INVESTOR’S GUIDE 2022 PORTFOLIO STRATEGY
prices so with elevated inflation expected in the first half of 2022 have to look at the real valuations because
property could be attractive as well. foreigners aren’t coming in right now as
they are going to lose due to the lack of a
In this climate, how do you start crafting portfolio strategy and fair valued currency. If you’re looking at a
mitigate the anticipated risks? 20% or 25% downside for the currency, that
Udeeshan: There are two scenarios and it depends on how fast the means they’re losing that amount in their
government reacts. If the problem is dragged on, irrespective of investment. Until that is fixed, Sri Lanka is
which scenario takes place, the rupee will depreciate, so you still not going to see foreign investors. Offering Rs
have an opportunity in the equity market especially on export 10 is not going to fix the problem. You have
companies. With 15-20% depreciation, companies that have a large to address the issue to get investments in
part of their top line in dollars and costs in rupees will see a huge
improvement in earnings, so export companies will be a good pick If you had to allocate money right now, what
if you’re sticking to equities. are the opportunities in equity?
You can look at more defensive counters if we’re getting close Sanjeewa: A handful of companies rose and
to a cycle of restructuring. I’d also move my portfolio towards the most did not appreciate. There are pending
real-estate investment if there is an opportunity, given that prices risks. If the government understands and
have not increased steeply. Land, completed buildings or any kind fixes the problem, 20222 will be awesome.
of commercial property will generate value given the inflation. It
is a good inflation hedge and in countries that have experienced
similar cycles, has been a segment that has outperformed in this
environment. So investors should look at increasing their exposure
to real estate. But it’s not an accessible asset for everyone.
The other asset class people can look at – and this is also lim-
ited to those who have the capacity – is private equity funds. You
might shift from public to private equity investments, which means
holding on to real investments. In a situation where inflation is
increasing, you need to hold on to real assets. The ones you’re left
with are real estate or private equity, which is a proxy for real estate.
So is there not much potential for fixed income in a portfolio

next year?
Udeeshan: I wouldn’t ask people to lock in funds in fixed income
right now. I will stay short. If I’m on fixed income, I will stay in the
fixed income mutual funds.
That’s not many options. Looks like 2022 is a lean year?

Sanjeewa: The economic clock dictates that once the equity mar-
ket crashes, the property market would pick up. So the thinking
cannot be challenged.
In 2021, 60-70% of the market was driven by five to six stocks.
When we refer to a correction, it shouldn’t happen to these artifi-
cially inflated assets. Except for one or two companies that had real
fundamentals playing out, certain companies appreciated based
TIGHTENING
on rumours, and once the minority shareholders get to know the MONETARY POLICY
reality of these companies, corrections will happen. AND HIGHER
Whether it declines by 20% or 10% will depend on the liquidity INTEREST RATES
adjusted factor on the new ASPI, which we don’t know. Now that WILL IMPACT THE
it’s going to be adjusted for liquidity, these companies are illiquid, STOCK MARKET
so once they crash, the market may not decline significantly.
It’s a smart move to not reduce the market index. But you may - SANJEEWA FERNANDO

INVESTOR'S GUIDE 2022
But they love to kick the bucket down the road. That has been There are companies in Sri Lanka – telcos
the case concerning delaying IMF involvement. The IMF coming or even conglomerates – that have foreign
in will entail currency depreciation, having a more autonomous currency liabilities without significant for-
monetary policy and halting money printing, adopting a fuel pricing eign currency income, thus carrying a large
formula and an energy pricing strategy. forex risk. Do you anticipate telcos and even
The IMF will support a plan, which will require the government conglomerates taking a beating in earnings?
to have more discipline. It will erode its political capital as it will Udeeshan: Listed telcos have significantly
essentially go against political promises. reduced their FX liability over the last 24
months, anticipating this. So the depreci-
Lakshini: I wouldn’t lock in my money but would go short-term. ation impact of the recent past is not going
If you look at mutual funds and money market funds, some are to be there with telcos because they’ve built
quite attractive. in dollar reserves to manage that situation.
I would invest some in the market because there are oppor- Most conglomerates are in positive ter-
tunities in and undervalued companies with potential. I would ritory when it comes to rupee depreciation.
put very little on fixed income. If there is an opportunity to buy Many of them have foreign assets. They have
physical commodities like gold, I would go in there. If you’re giving exposure to tourism for example, which is a
me enough money to buy property, I’ll do that as well. sector that will do well.
Especially if there’s 15-20% depreciation,
If property were a difficult asset class to access for most people, Sri Lanka will be a cheap destination, and
which areas in equity have the potential to deploy capital right that’s going to bring in a lot of money. The
now? numbers coming in right now are encourag-
Lakshini: Those that are going to do well in the middle of currency ing. January to March forward bookings are
depreciation, so export-oriented stocks and companies that have at least 50% of the pre-Covid level. Tourism is
rupee costs. Given that it’s an inflationary cycle, you would go into a sector that can change Sri Lanka’s outlook
stocks that do well during high inflation times. in the long term.
You would go into certain stocks that are defensive as well. No
matter what happens in the economy, some stocks are solid and Sanjeewa: Conglomerates with a tourism
fundamentally strong. I would look at the long-term trajectory angle will recover. Casinos are also likely com-
as well and lock in funds given their cheap valuations right now. ing into play in 2022. That will be a positive
for tourism-related companies and conglom-
erates as well.
Most telco companies have been reducing
their external debt exposures. It has been the
government that was not allowed them to
repay their dollar liabilities in full, although
they wanted to. There will be capex delays if
there is a dollar crisis, which is out of these
companies’ control.
Economic recovery will be positively cor-
related with the financial sector, especially
the banks. Interest rate hikes may also mean
their margins improve, so there will be a pos-
itive impact.
I WOULDN’T LOCK IN MY MONEY All this depends on how taxes are applied.
BUT WOULD GO SHORT-TERM. IF We believe that the social security levy will
YOU LOOK AT MUTUAL FUNDS AND be applied on the value-added, but if it is
MONEY MARKET FUNDS, SOME ARE applied on revenue, it will be a completely
QUITE ATTRACTIVE different scenario. It won’t make economic
sense. From a rational point of view, the sec-
- LAKSHINI FERNANDO tors indicated will benefit.

INVESTOR'S GUIDE 2022
Isn’t the absence of a credible macroeco-

nomic recovery plan a big risk factor?
Udeeshan: It can buy some time through
bilateral borrowings or swaps, which are all
short-term in nature. But you can’t postpone
it for a long time. Even tourism kicking in is
not going to be overnight; it might be 2023-
24. So short-term liquidity is a concern and
we don’t see anything material happening.
From a government perspective, there is
nothing much it can do at the moment. It is
doing whatever it can in terms of allowing
market forces to determine prices. It might
allow areas like gaming to come into opera-
tion, private parties setting up terminals and
bringing foreign partners in for PPP projects.
But the problem is the short term.
Sri Lanka’s problem can be solved. If we
get through the next 12-24 months, we’ll be
on a sound footing. With tourism and the
ports kicking in, if we can put SOEs back into
place by selling a few non-strategic ones, we THE 1.5% NEGATIVE GROWTH IN 3Q
will be in a good position. 2021 IS ALSO BECAUSE OF THE BASE
Our economy is small; the potential that EFFECT FROM THE THIRD QUARTER
Sri Lanka has to grow is enormous. It just OF THE PREVIOUS YEAR, WHICH WAS
needs a corrective decision for the short A GOOD QUARTER
term. We’ve seen countries going through
this phase and 24 months down the line, - UDEESHAN JONAS
they turn around. This is possible with Sri
Lanka as well.
Lakshini: We expected 3Q 2021 earnings to

be flat or even negative, but 4Q is where twin deficit and everything piled up, with tourism not continuing,
the numbers are going to be. You saw the which came from the Easter Sunday bombing. So it was many
resumption of activity and tourism pick up. things that unravelled in the past two years.
Manufacturing and services sectors did quite It’s a matter of relooking at everything, tightening belts for
well in the fourth quarter. The third quarter what’s to come next year and looking further on to the long-term
did have many restrictions on travel and tour- positives for Sri Lanka.
ism was badly hit, and that’s probably where
the negative number came from. Udeeshan: The 1.5% negative growth in 3Q 2021 is also because of
The next 12-24 months are crucial. Short- the base effect from the third quarter of the previous year, which
term funding needs to be sorted out, in the was a good quarter. That’s also a reason why the numbers are
absence of which, going to the IMF is inev- not reflecting the improvements, but corporate earnings have
itable. Could the government have done it been good for the third quarter.
without the IMF? If these funding lines came
in and there wasn’t a further downgrade, yes. Sanjeewa: If Omicron does not play a massive role and we are
But given where we are, it’s very difficult. headed for recovery, tourism will take the baton. Until that time,
That being said, the longer-term trajectory the government may have to manage. That’s the silver lining.
of Sri Lanka remains. It’s just that Covid hit, Managing the next 12 months, especially the major issues, will
we couldn’t go to international markets, had a be key.

Businesses and investors shrugged off any apprehensions about
the economy in 2021, raising a record Rs120 billion in new capital
through the Colombo Stock Exchange, much of it by 13 companies
that went public.
However, investment opportunities were broader than those
presented in the equity market. They extended to alternative assets
and real estate. Investors now want to know what awaits them
in 2022. In a series of partner content pieces, we explore those
investment options and also highlight the successes in this Investor’s
Guide 2022 branded content.

IG Portfolio strategy in a time of
economic upheaval
Pg. 56
Nations Trust Bank: fuelling the spirit of
entrepreneurship and industry
Pg. 58
Dumith Fernando outlines the outlook for
equities and the CSE in 2022
Pg. 60
How to tackle the rising menace of
inflation and high interest rates
Pg. 64
Capitol TwinPeaks: unlocking real estate
investment opportunities
INVESTOR’S
GUIDE 2022
Pg. 66
NDBIB sets a record Rs75B in capital
raisings in 2021
Pg. 68
Service that extends beyond
Pg. 70
CBH Lands Market Intelligence:
Understanding investors across
demographics and their real estate needs

INVESTOR'S GUIDE
NATIONS TRUST
BANK: FUELLING
THE SPIRIT OF
ENTREPRENEURSHIP
AND INDUSTRY
The bank is helping its clients rethink
not just their cash flow and financing
but also strategy
Priyantha Talwatte
CEO at Nations Trust
Bank
ations Trust Bank is helping its banking trigger further rating downgrades and
clients to unleash their potential and trigger a chain reaction. Encouragingly,
unlock opportunities amidst a global we do see some green shoots. Tourism
pandemic and the unprecedented receipts are recovering well, and we see
economic crises in its wake, explains some tangible improvements because
Priyantha Talwatte in this interview it is a sector that Nations Trust Bank
with Echelon. As Chief Executive supports. The vaccination drive is pro-
Officer at Nations Trust Bank Plc, he gressing well, promising fewer lock-
was instrumental in steering the bank downs and pressures on the domestic
out of the turbulent early months of economy.
the outbreak and recharting its course The pandemic brought with it
towards sustainability and growth. multiple challenges unprecedented in
form and scale. No country escaped
What is your reading of the macro- unscathed, but developing economies
economic situation and outlook for were, and remain, the most affected.
the economy heading into 2022? So, Sri Lanka is not alone. Some of the
At this point, everyone is speculating. issues confronting us, like increasing
No one has a crystal ball to predict how commodity prices and food prices and
2022 will pan out. But we have to steer logistic bottlenecks, are universal. For
forward prepared for different scenar- instance, in early 2021, a barrel of crude
ios. I believe it will be a volatile year, oil was $47, and it doubled by the end
particularly in the first half. The three of the year, while the worst of the pan-
headwinds we see in 2022 will be the demic may be behind us, the economic
debt and forex crisis, rising inflation fallout will outlast it. These are the real-
and the long tail of the pandemic. ities with which every nation will need
There are concerns that these could to cope with.

BANKING FOR GROWTH
Often crises present an opportunity for a How has 2021 been for Nations Trust Bank, and what
renaissance. People come out of these crises are your plans for 2022?
with a lot of new thinking, and by embrac- 2021 could be considered as the best of years, and the
ing change, they unlock new opportunities. worst of the years. Nations Trust Bank was in a position
As a financial partner to our clients, that of strength to create a positive influence on our customers
is what we do. during some of the most challenging periods. In early
The universal disruption in status quos 2020 we took an early call the impact of the pandemic
caused by the pandemic has resulted in a was unequal and took a view that the recovery would be a
new normal and unleashed new opportu- K-shaped path. Our strategy was to work with businesses
nities. Early in the pandemic, we at Nations already on an upward trajectory while supporting the
Trust bank engineered a mindset shift and most challenged and hard-hit. We conducted an extensive
vowed not to waste a good crisis! While reprofiling and resetting of all our banking functions to be
the tide may lift all boats, we took steps to relevant to our customers and unleash opportunities for
stay focused on our core values and avoid them and the bank. This strategy was followed through-
the herd. We continue to work very closely out the pandemic and will help us in the post-Covid era.
with our clients. We remain inspired by With the knowledge we have gained in the last two years
many of our clients who epitomise the of operating in a pandemic era, we will leverage digital
spirit of entrepreneurship by going to technology and innovation throughout the value chain
extraordinary lengths to create opportu- of our business.
nities for themselves during the pandemic Nations Trust Bank has been involved in building dig-
unlocking new markets and developing ital capabilities for a while now. We believe we have now
new supply chains. We supported them achieved maturity to rake in returns and benefits.
and facilitated their financial needs in a We have digital platforms that are scaling. Our corpo-
more structured way. rate banking has a new cash management platform that
As a bank with strong and deep relationships with our clients supports Corporate clients managing all their banking
and global partner networks we evolved fast suitable responses functions digitally. Our consumer mobile banking and
that were needed to navigate these turbulent times. online banking platforms, along with Frimi are some of
the best in class capabilities in the market. Additionally,
How does Nation Trust Bank help its clients navigate uncertainty we have mastered the payments and credit cards market
and cater to their investment and financing needs? in Sri Lanka with our long-standing American Express
Although we might seem a mass-market bank, we were very selec- franchise. We have learnt a lot on the payment side, and
tive about the segments we serve. We have distinct and unique now we will leverage those capabilities to reach beyond
propositions for consumer and business clients. Our plans for traditional segments.
growth and expansion revolves around that core strategy, and that,
importantly, has resulted in holistic relationships with our clients So, how important are innovation and technology to the
build and natured over the years. We have a diverse portfolio that bank? Can you tell us about their central role in the bank?
caters to the different needs of the consumer and business clients. Nations Trust Bank was born to an already crowded
In the consumer offering, we have segmented propositions for banking market, so we had to differentiate ourselves
payments, investments, financing, and borrowings. Similarly, our to be competitive and grow. We did this by investing in
approach to SME and Midmarket propositions are very different technology from day one and placing innovation as a
to the bespoke offering we provide our corporate clients. core value in our DNA.
We have been part of the government’s support mechanism Today, we operate more like a technology company than
to provide debt moratoriums for businesses and individuals a bank, and it is both a rewarding and exciting area of focus
impacted by the Covid-19 outbreak. However, Nations Trust Bank for us. The digital drive, augmented with data capabilities,
went beyond that. We allocated Rs25 billion toward a fund from is helping us to invent a new kind of banking proposition.
our internal funding sources to provide support to industries. At Nations Trust Bank, digital channels account for 80 to
This was branded as Nations Diriya Fund. We also supported 85% of our total banking transactions. We will continue
our clients restructure their loans, provided grace periods for to build on our strengths. That is the journey we are now
repayment, considering their cashflows and continue to support on, and we have got into a very interesting rhythm, and
them to get back to business. the results are very encouraging.

INVESTOR'S GUIDE
DUMITH FERNANDO OUTLINES

THE OUTLOOK FOR EQUITIES
AND THE CSE IN 2022
The Chairman of the Colombo Stock
Exchange shares insights about a record
2021 and what investors can expect
umith Fernando,
Chairman of the
Colombo Stock
Exchange (CSE), dis-
cusses equities' stellar
performance in 2021 Dumith Fernando
and the exciting pros- Chairman of the
Colombo Stock
pects for the capital Exchange
market in 2022.
How has 2021 been for the equities market, and recorded. We also had record numbers of investor participants at
how has the CSE performed in 2021? the CSE.
We are very fortunate that 2021 has been a Despite the market having risen so much, our valuations are
record-shattering year for the Colombo Stock still attractive. It is below historical averages - at least 10-12% below
Exchange (CSE). With corporate earnings at the 10-year average. But more interestingly, it is about 30% lower
record levels and unprecedented investor interest than during previous depressed interest rate periods. Additionally,
in the stock market as negative real interest rates the Sri Lankan stock market is undervalued in relative terms by
prevailed, the CSE surpassed several milestones 20-25% compared to other emerging or frontier markets.
in 2021. Firstly, we saw record capital raising by
companies at the CSE. Secondly, performance How have equities performed against other asset classes?
indicators of the CSE such as market capital- Like most markets worldwide, Sri Lanka was in a low-interest-rate
isation, and total and daily average turnover regime. The environment of very low real interest rates made alter-
recorded the highest ever values in 2021. The native investments such as fixed-income much less attractive than
benchmark All Share Price Index (ASPI) recorded equities to investors. Many of them gravitated to the stock market
a market return of 80%, which is the highest in 2020/21, leading to a record number of investors participating
return recorded since 2010. Compared with the in the equities market now. Two years ago, we had about 12,000
market indices of the Asia-Pacific region, the ASPI investors in the stock market from Sri Lanka. This year we have
consistently maintained its status as the highest quintupled that to over 60,000. The overall market activity also
yielding index. The S&P SL20 index also recorded accelerated, and total trades per day increased significantly. In 2021,
a return of over 60%, which is the highest ever we recorded an extraordinary average of over 32,000 trades daily!

CAPITAL MARKET DEVELOPMENT
Tell us about some of the capital market develop- issues while equity listing experienced a lean period. That changed
ment initiatives, products and strategies, their pro- in 2021. As of November 2021, we have raised capital worth Rs124
gress thus far and plans for the future? billion via 47 listings. We have raised over Rs12 billion via equity IPO
For the longest time, the CSE had been a market listings, the highest ever capital raised via equity listings since 2011.
for shares and debentures only. But in 2020, we Every single equity listing had been oversubscribed on opening day.
put a strategic plan in place where we wanted to We have also seen listings from companies of different sizes and
increase options for investors so that you could diverse industries entering the market. That proved that the value
invest across asset classes while also managing proposition of the CSE to private sector businesses is broad-based
risk better. and not limited to a privileged few.
We introduced dollar listings or multi-cur-
rency listings, so now local companies, particu- There is a strong case for companies to list on the CSE, but are there
larly exporters and Sri Lankan multinationals who reasons it would be especially so this year/2022?
require foreign currency capital can access that Increasing the number of companies listed on the exchange was one
through the CSE. We also introduced REPO trading of the CSE’s key strategic objectives for 2021, and we have made steady
on debt securities, which has already started. progress on this front. In 2021, we made improvements to expedite
Another significant market infrastructure devel- the listing approval process and established a single window within
opment in 2021 was the introduction of Delivery vs the CSE for companies wishing to list. Had we not done this, it would
Payment (DVP) which puts us on par with global have been practically impossible to facilitate all the listings by the end
exchange best practice and mitigates settlement of 2021. As discussed before, we are introducing diverse avenues to
risk. list, catering to different companies and requirements, such as mul-
Over the next few months, we hope to intro- ti-currency listing, the listing of shares by special-purpose acquisition
duce some exciting new products, including stock companies, green bonds, and more. We also made strong representa-
borrowing, lending, and short-selling. We will also tions, with the support of the SEC, to bring about tax incentives for
launch gold-based traded investment products, companies wishing to list, in the government budget of November
ETFs (Exchange Traded Funds) and structured war- 2020. That prompted several companies to come to market in 2021.
rants. We are keen to complete the demutualisation As companies revive from the Covid pandemic and are searching
of the CSE by 2023 and hope the government will for avenues to grow with new objectives, companies must turn to
fast track the necessary legislation. viable sources for long term capital raising. So, with the growing
Another significant development has been the number of investors and funds available at the CSE and the global
Digitalization Drive of the stock market, initiated and Sri Lankan recognition that listed companies are gaining, this is
by the Securities and Exchange Commission of Sri an ideal time to join the stock exchange for companies to meet capital
Lanka (SEC) and the CSE. The second phase of the requirements and leverage all the benefits, including the recognition,
digitalization of the stock market was launched of being listed.
in 2021, adding a wealth of new technological
advancements in terms of the CSE web, social Will equities still be a compelling asset class in 2022? How should inves-
media, and mobile app. The latest features of the tors approach investing in stocks?
mobile app include CDS eConnect and MYCSE, We now have a stock market that is a real marketplace with large
benefiting a wide range of stakeholders in the stock numbers of capital and investors. As we continue to experience a
market, enabling a productive user experience negative real interest rate environment in 2022, there are few better
with increased efficiency. Our digitalisation efforts performing asset classes than listed equities that deliver a balance
have brought a new generation of investors into of returns and value appreciation while also being liquid. With the
Sri Lanka’s capital market, infrastructural, technological and legislative improvements, CSE has
become a venue where all stakeholders can conduct business with
The CSE had several IPOs during the past year. Can convenience and ease. With diverse companies still expecting to list
you tell us about these? on the CSE, the market offers opportunities for investors of all inter-
Providing a venue for efficiently channelling excess ests and scales. At the same time, investors need to place a premium
savings into companies that require capital is one on investing with knowledge. Investors need to acquire credible and
of the most critical economic functions of a stock reliable information and market awareness from trusted and expe-
exchange. Over the last few years, the CSE saw vig- rienced sources while understanding their investment capacity and
orous debt capital raising via corporate debenture return expectations.

INVESTOR'S GUIDE
HOW TO TACKLE THE

RISING MENACE OF
INFLATION AND HIGH
INTEREST RATES
CAL’s Kanishke Mannakkara shares insights into
investing in 2022 and touches on CAL's global
K
frontier markets thrust
anishke Mannakkara, Managing

Director at Capital Alliance
Investments Limited, discusses the
twin threats of inflation and rising
interest rates in 2022 and what inves-
tors and businesses need to do.
With a career spanning 18 years
working across multiple countries
and cultures from asset management
and corporate finance to design and product
innovation, Mannakkara shares insights on how
to navigate potentially another challenging year
and how CAL has the means to help investors
and businesses. He also paints a picture of CAL's
bold plan to develop and scale-up frontier capital
markets.

INVESTMENT STRATEGY
Can you give us a brief overview of the economy and capital

Kanishke Mannakkara,
Managing Director of Capital
markets in 2021 and the outlook for 2022?
Alliance Investments Limited One of the defining features of the investment landscape globally over
the last 18 months has been the post-Covid expansion of money supply.
Although justifiable to a degree, it is unprecedented in magnitude. And
that expansion in money supply has driven up asset prices significantly.
Let's put this into context from a Sri Lankan perspective: in January
2019, banks and other top-rated issuers were offering 16% on five-year
debt instruments like bonds or fixed deposits. Two years later, the
offered rate on the same tenure was around 6-7%. The loose monetary
conditions had a big impact in bolstering capital markets.
Another key feature has been the increasing influence of retail inves-
tors in stock markets and exchanges globally. A new set of investors have
become very active in stocks and other asset classes like cryptocurrency,
and you see them taking a very different approach compared to ‘tradi-
tional’ investors. Ideas are widely shared and to an extent, crowdsourced
via social media, and you see a much more aggressive trading style.
Rapid advances in digital technology and cryptocurrency, and working
from home have contributed to this cultural shift worldwide, and we
are seeing the same thing in Sri Lanka on the CSE. Retail investors are
much more dynamic and demanding than they ever were, and they
are playing a big role in determining share prices.
However, we are looking at a very high likelihood of this loose mone-
tary policy tapering off over the course of 2022. In my view, we are very
likely to see markedly higher interest rates over the next six to eight
months in Sri Lanka coupled with a significant increase in inflation. You
could argue that inflation will be the precursor to rising interest rates.
WITH THE It will be a situation where if you want to avoid unsustainable infla-
INCREASE tion, then interest rates will need to go up very significantly, very fast.
IN INTEREST With the increase in interest rates and inflation, you may see a
once-in-a-decade opportunity on fixed-income assets where you can
RATES AND potentially lock in investments at very high yields. There is a caveat
INFLATION, because, in the short term, we are likely to endure very high inflation
YOU MAY SEE and low real interest rates. In this context, there could also be oppor-
tunity in 'real' assets which give some protection against inflation.
A ONCE-IN- And when you're thinking about capital markets in Sri Lanka in
A-DECADE 2022, you cannot ignore the serious headwinds the economy is fac-
OPPORTUNITY ing right now. Investors need to be prepared for a potential systemic
ON FIXED- shock, driven by external pressure on the economy at some point next
year-potentially in Q2 or Q3.
INCOME
ASSETS WHERE Where do you see interest rates and inflation heading and their
YOU CAN impact on the economy?
We believe interest rates will reach the high teens, and investors willing
POTENTIALLY to go along may be able to see yields closer to 20%. Inflation, already at
LOCK IN 10%, will most likely reach the mid-to-high teens. The thing about infla-
INVESTMENTS tion is once it starts picking up and building steam, it's extraordinarily
difficult to contain. And it takes time. With inflation in the mid-teens,
AT VERY HIGH interest rates will also have to get into the high teens. If that doesn’t
YIELDS happen-if interest rates don't go up that high, we could see dramatically

INVESTOR'S GUIDE
higher inflation. possibility of further supply chain disruptions. To sum up, businesses need
to stock up on cash and stocks heading into 2022.
For investors considering their asset
allocation strategy, providing protection for Is a stock exchange listing viable to raise capital at this stage?
portfolios, and guarding against inflation, how Going public with a listing is a big decision for any business and should
should they approach investing in the year not be driven by short term capital needs. Listing is about more than that.
ahead? It is about understanding what is right for the business in the long term.
In investing, crisis equals opportunity. However, if a business is ready to go public, now is a good time because
Sometime in 2022, I think there will be an the market is ready, and you can get a decent valuation. If a company
opportunity to profit from the volatility we is on the fence about listing, say they are 50/50 about going public, my
are likely to see. recommendation is to go for it! However, a listing would be ideal before
One could be buying government securities the second quarter of 2022. Beyond that, we will have to wait and see how
with a 20% yield, hold, and book profits as and the economy and markets unravel.
when interest rates start to cool and get back to I'm not saying there will not be an opportunity even after that, but it's
where they should be. Equities could experience too early to call that. Opportunities to raise debt capital will also emerge
a short sharp decline when interest rates spike, by then. There is a lot of money in the system, and that money is looking
but that could unleash buying opportunities for a home. I think there is an opportunity for corporates to structure debt
that result in attractive gains down the line. We in a manner that appeals to different types of investors. Obviously, in the
saw this soon after the Covid outbreak when current context, raising long-term debt with a fixed rate would be ideal,
stocks fell but quickly recovered. Similarly, but companies need to be attuned to market appetite as well. I don't think
there could be opportunities in real estate and there will be too many people today looking for long term investments
private equity. From an investor’s perspective, with fixed rates.
one needs to maintain sufficient liquidity and As a corporate, I would prioritize cash flow over P&L for the next year
have the ability to jump into the opportunities or two. This may mean taking floating rate loans to bolster cash reserves.
that will present themselves. Don't be nervous, to go for floating rate options if that's what the market
Just as importantly, you also need to be men- is demanding. Having cash in your balance sheet during a time of crisis
tally prepared to make the mindset shift from is more important than worrying about your finance costs on that debt.
being defensive to extremely aggressive, really It is not as if you will take debt from zero to 200. It will be that you had
fast. When approaching an investment strat- 100, and now you're going to take it up to 150-160 to maintain that slightly
egy for 2022, it will be crucial for investors to larger cash-or stock-balance.
switch from risk-off to risk-on at the right time Many will talk about the economic risks next year, but I think it's
and have exposure to multiple asset classes. I also crucial to focus on the opportunity that comes after that. And that
don't think there will be one single asset class opportunity is going to be huge. There'll be a huge opportunity to capture
solution to wealth management over the next market share and acquire competitors. Having the cash and balance sheet
three years. Investing should be approached strength to seize those opportunities as they manifest themselves when
from multiple angles of listed equities, fixed everybody else is running for the hills, could set the foundation for your
income, private equity, and real estate. All four growth over the next five years.
will play a key role, I believe.
Looking at the big picture, tell us about CAL's suite of solutions
How should businesses approach invest- and services and how CAL can help its clients navigate the emerging
ing or raising capital? What are their options? macroeconomic storm?
The circumstances facing each business is dif- As an investment bank, we have operations in bond trading, stockbroking,
ferent. The obvious move is to raise as much corporate finance, asset management and private equity.
capital as possible before interest rates escalate. What we offer through this is a suite of products that feed off each
From a liquidity perspective, it's not dissimilar other whilst maintaining strict compliance, client confidentiality and
to individuals. Businesses need to be liquid as Chinese Walls. We bring high-level capability and expertise to the table
much as possible and maintain healthy balance with a regional/international focus and a Sri Lankan flavour. Our culture
sheets. Build up liabilities in such a way that and values differentiate us from our peers. We never offer any service or
does not compromise short term cash availa- solution to a client that we would not to our own families. Creating great
bility. They will also need to be mindful of the customer experiences, giving them good returns, and honouring their

INVESTMENT STRATEGY
trust are our priorities.

CAL has an established track record of innovation and dynamism, being
the first to introduce a range of different products. We have launched
private equity products and real estate solutions, something other asset
management businesses in Sri Lanka do not traditionally cover. CAL has
already adjusted its value proposition to meet precisely those emerging
portfolio diversification needs that I spoke of earlier.
BY OPERATING IN
We have invested heavily in technology. The innovative front-end plat- MULTIPLE COUNTRIES
forms we have developed are the most visible elements of this, but there AND FEEDING THOSE
is also a lot of back-end data gathering and analysis that helps differenti-
ate our decision making from our competitors. The CAL Portal is already
FRONTIER MARKETS
helping us democratize capital markets in this country, and we are seeing AS A SINGLE UNIT,
some great results. A prime example is the IPO portal which has been a YOU SUDDENLY BUILD
big hit with retail investors.
While all these things set us apart, we are also building CAL into a
THE SCALE THAT WILL
multinational frontier market investment bank. That gives us rich per- ATTRACT GLOBAL
spectives from the different countries that we operate in, including deeper INVESTMENTS
connections and much more scale, which is one of the things that frontier
markets lack.
By operating in multiple countries and feeding those frontier mar-
kets as a single unit, you suddenly build the scale that will attract global ourselves being the connect between multiple
investments. Fund managers out of international global financial hubs frontier markets in this equation. If you were to
may not be interested in Sri Lanka and it’s $80 billion economy as a put five frontier markets together and create a
standalone investment destination. But things become very interesting $1 trillion market, you suddenly create one of
if we can include Sri Lanka within a portfolio of frontier markets with the 20 largest economies in the world, and that
a combined GDP of $1 trillion. Having already commenced this journey, opportunity is very exciting. With that comes
we believe we can create a presence in economies with a combined GDP the capability to transform the capital markets
of over $1 trillion in the next four to five years. Our focus right now is to landscape in these countries.
consolidate our presence in Bangladesh and perfect the model of creating Capital markets are about matching demand
profitable overseas operations. Our plan is to be present in five countries for capital in supply. On the demand side, there
in five years’ time. is no lack of it in the frontier markets we are
talking about, but that demand is too fragmented.
What do you want to achieve? What is the purpose of CAL? You are talking about ticket sizes that are not
So capital markets, in our view, are a necessary element of prosperity. You attractive or economical for a fund manager sit-
cannot have prosperity or sustainable economic growth without capital ting in New York, London, Tokyo or Singapore
markets. And frontier economies don't have developed capital markets because they are used to dealing in multiples of
by their very definition. We enjoy an advantage having built a successful $100 million. That is where CAL steps in. We will
investment bank out of Sri Lanka, which has a relatively developed capital package multiple projects and say, look, here's a
market for a frontier economy. The stock market is over 100 years old, and billion-dollar portfolio. But within that portfolio,
the bond market is solid. We now have REIT legislation which is very rare there are many different things that each needs
for frontier markets. So we are ahead compared to peer economies. That small amounts of money that we can evaluate
gives us an edge in technical capabilities over somebody operating in, for on the ground, something the existing global
example, Laos, Bangladesh or Myanmar. At the same time, we understand frontier market funds aren’t currently able to
the nuances and frustrations of working in a Frontier market the way do. We want to create that boots-on-the-ground
somebody operating out of London or Singapore may not. capability across all these frontier markets to
We have created a profitable business in this $80 billion economy, and curate and structure innovative products, and
we know how to unlock value out of the smaller ticket sized transactions then market them as a whole to funds managed
you see in Frontier markets. We are working on building the scale neces- from global financial centres. In doing so, we are
sary to attract global investment inflows, so that we can become a conduit fulfilling our purpose as CAL, to better the lives
between those funds and investment opportunities over here. We see of people living in Frontier economies.

INVESTOR'S GUIDE
CAPITOL TWINPEAKS:
UNLOCKING REAL
ESTATE INVESTMENT
OPPORTUNITIES
The 50-storey residential
towers in the heart
of Colombo's Central
Business District offers a
range of optimum-sized
apartment units and
amenities for modern
luxury living, an ideal
option for a home or
investment
M
Mahen Weerasekera, Chairman of Sanken
Group, the company behind the iconic
50-storeyed residential towers, Capitol
TwinPeaks, shares insights about the
evolving real estate market and what
makes Capitol TwinPeaks a compelling
Mahen Weerasekera
Chairman of Sanken Group
As we head into 2022, it is likely to be another challenging year. How do

you see the Sri Lankan property sector shaping up in the year ahead, particu-
larly in the luxury segment?
Various challenging decisions confronted us as we moved towards the
completion of Capitol TwinPeaks. While Covid-19 has spawned a profu-
sion of unprecedented challenges, the opportunities unleashed by the
investment in Capitol TwinPeaks is considered unique and unmatched in
Sri Lanka. The future of real estate is positive and is among the best asset
option to investors and homemakers. classes to invest in over the next five years, yielding returns far above what

REAL ESTATE OPPORTUNITY
banks offer on savings or fixed deposits. For this years of experience, and Capitol TwinPeaks is one of three fruit-
reason, we see investors increasingly looking for ful collaborations with them. They introduced optimum-sized
opportunities in real estate. Where else would apartments beneficial to investors because there is less energy
people put their money? consumption, resulting in lower living costs and less harmful to
There are several more reasons why real estate the environment. Capitol TwinPeaks is also home to the highest
is a compelling investment. The constricting effects Sky Lounge in Sri Lanka and the highest Sky Bridge in South Asia,
of the 2019 Easter bombings and Covid-19 mean both at Level 50.
that Sri Lanka has an untapped tourist destina-
tion, so there is potential for tremendous tourism
growth. The Colombo Port City will also open new
and transformative opportunities by attracting
big-ticket investors. For both these reasons, real
estate will boom. The demand will push prices
up, compounding the effect of rising construction
costs. Buying land and building a home will be
inhibitive. So, anyone wanting to live in the city
LOCATED AT THE HEART OF THE
will find Capitol TwinPeaks presents a compelling CENTRAL BUSINESS DISTRICT, JUST
option in terms of affordability and lifestyle. 2KM AWAY FROM THE COLOMBO PORT
Generally, all over the world, people move CITY, CAPITOL TWINPEAKS PRESENTS
from old apartments to new apartments that have A COMPELLING OFFERING TO
higher rentability while the older ones drop in INVESTORS AND HOMEMAKERS ALIKE
value. Developments such as Capitol TwinPeaks
will experience value appreciation for years
to come. That is because we have created and What makes Capitol Twin Peaks a compelling investment?
designed innovative, futuristic, and sustainable Located at the heart of the Central Business District, just 2km away
living spaces that cater to the evolving needs of from the Colombo Port City, Capitol TwinPeaks presents a compel-
discerning people who always want more in life. ling offering to investors and homemakers alike. Being a project
by Sanken Group is an advantage due to the reputation and trust
With over 80% of the 475 apartments of the our brand enjoys. The property has everything for a wholesome
50-storeyed Capitol TwinPeaks complex sold out, can modern lifestyle within its towers, neighbouring a leading hos-
you tell us about this project and what sets it apart? pital, the entertainment district, cinemas, restaurants and malls,
Capitol TwinPeaks is a lifestyle complex that and within walking distance from leading schools, the beach, and
delivers futuristic living in downtown Colombo. Colombo Fort.
It offers 40,000 square feet of luxury facilities and
amenities for residents to live, work and play. What excites you the most when you look at the emerging trends
While it is a mixed development, with commercial in the property segment of Sri Lanka?
services available at the entrance level and on It is always exciting to see new developments and innovative con-
level 50, Capitol TwinPeaks strictly maintains the cepts featured in new projects. We are starting to see new ideas
privacy of its residents. It has a grand entrance and best practices from foreign markets, and that is great because
lobby exuding the comforts of space and maintains it demonstrates the market is growing, evolving, and maturing. The
a separate service entrance. Sanken Group is also introducing some new concepts and inno-
The Sanken Group, with diverse business inter- vations at Capitol TwinPeaks, and we will announce these soon.
ests in nine countries across three continents, is
responsible for the majority of high rise develop- How are you planning to unleash opportunities for the company
ments in Sri Lanka. We have successfully used this and investors looking at property opportunities in the year ahead
experience and wealth of knowledge to understand and beyond?
our customers and their evolving needs and wants, As a long term investor in this space, the Sanken Group believes in
aply manifested in Capitol TwinPeaks. the value proposition of Capitol TwinPeaks in the years to come. And
The architect, P&T Group Singapore, is an with this belief, the Sanken Group has a good portfolio of invest-
award-winning global design firm with over 150 ment properties in the pipeline for development in the future.

INVESTOR'S GUIDE
NDBIB SETS A
RECORD Rs75B IN
CAPITAL RAISINGS
IN 2021
The investment bank achieved an all-time
high in capital raisings for a given year
with Rs50 billion via debt capital markets,
Rs22 billion in public and private equity
transactions, and Rs3 billion from several
M&As
NDB Investment Bank (NDBIB) has asserted

its dominance as the market leader for invest-
ment banking in Sri Lanka through a momen-
tous year in the country’s capital markets.
NDBIB advised on a record Rs75 billion in
capital market transactions, including nearly
Rs50 billion via debt capital markets, Rs22
billion in public and private equity transac-
tions and a host of M&A transactions valued
at Rs3 billion.

INVESTMENT BANKING
NDBIB’s ability to successfully execute stake of 9.99%. This was also incidentally
record volumes of transactions through Norfund’s first equity investment in the
multiple lockdowns, numerous other country.
pandemic related hindrances and vol- NDBIB also recently announced the sign-
atile macro-economic conditions bear ing of an SSPA to divest 100% of the shares
testament to its market leadership. of SLT Campus Pvt Ltd, a fully owned sub-
NDBIB acted as Financial Advisor to a sidiary of Sri Lanka Telecom PLC, the 5th
record-breaking five public equity offer- M&A deal executed by the team for the year.
ings (four IPOs and the only Secondary NDBIB reaffirmed its market leadership in
Public Offering this year) raising nearly the M&A space with deals completed across
Rs8 billion, the largest number of trans- the renewable energy, consumer staples
actions amongst Sri Lankan investment and education sectors during the year, in
banks. These transactions included the addition to numerous ongoing transactions
Initial Public Offering of hSenid Business in a range of sectors which are expected
Solutions Limited IPO, which witnessed to be completed in early 2022.
the highest level of oversubscription in Sri Lanka’s debt capital markets thrived
recent times of 13.5x and three oversub- in 2021, with the historically low interest
scribed public equity offerings in the rate environment providing companies
banks and diversified financials sectors, with the opportunity to raise extraordinary
despite the challenging macro-economic amounts of capital. NDBIB was responsible
environment. It is worth noting that for several of the largest debt raises of the
NDBIB used tactical placement and dis- year and created opportunities for both
tribution strategies to cater to the nuances the issuers of debt and investors to enjoy
of each public equity offering, resulting in exceptional returns via exemplary struc-
healthy demand from the target investor turing. These included an Rs10 billion listed
segments. debenture issue by LOLC Holdings PLC,
NDBIB was once again acclaimed for arranging a $35 million facility for National
its track record of excellence by securing Savings Bank, an Rs11.5 billion unlisted
the award for “Sri Lanka’s Best Investment debenture issue for National Savings Bank
Bank” by Euromoney Magazine for the and an Rs8 billion listed debenture issue for
10th consecutive year and the award for NDB Bank. It is also noteworthy that each
“Best Corporate and Investment Bank” by debt raise concluded by NDBIB during the
the Asiamoney Awards for the 5th con- year witnessed healthy oversubscription
secutive year during the year 2021. NDBIB levels.
remains the only investment bank in the NDBIB has been able to leverage the
country to be recognised by Euromoney strength of the NDB Group in deal sourc-
Magazine. ing, participation and facilitation. A case
NDBIB also acted as Financial Advisor in point is IPO transactions, where NDBIB
to raise a massive Rs9.5 billion capital acts as financial advisor whilst the rest of
raise for its ultimate parent, NDB Bank the group offers underwriting services,
From left: via a rights issue and a private place- cash management, distribution and anchor
Darshan Perera,
Director/CEO of NDBIB, ment. This share issuance included a investments to build a solid order book.
Kaushini Laksumanage, dual-tranche investment from Norfund, NDBIB also expanded its team strength
Chief Operating Officer of
NDBIB and the Norwegian Investment Fund for with new recruitments during the year
Nilendra Weerasinghe, Developing Countries, through the rights aimed at building on its stellar performance
Chief Corporate Advisory
Officer of NDBIB issue and a concurrent private placement for 2021 and executing a wide variety of
that established Norfund as the single transactions that are in the deal pipeline
largest shareholder of NDB Bank with a for the year 2022.

INVESTOR'S GUIDE
SERVICE THAT
EXTENDS BEYOND
Mercantile Investments is redefining the
financial services experience
M
Gerard Ondaatjie
Managing Director at
ercantile Investments, a Indefatigable in its focus Mercantile Investments
licensed finance company, on superior customer service
takes pride in serving cus- and exceeding client expecta-
tomers from all walks of tions, Mercantile Investments
life for over five decades, recently added gold loan facili-
assisting and fulfilling their ties to its range of financial solu-
financial requirements. Consistent performance over tions. Its thoughtfully crafted
the years has given the company a sturdy capital portfolio of financial services
structure and a place among the strongest financial products includes leasing, vehi-
institutions in the country. cle loans, fixed deposits, savings
Good governance, strong ethics, stability and and microfinance.
a committed workforce are fundamental facets of With 40 branches, includ-
Mercantile Investments’ achievements in the industry. ing its head office in the
While catering to the ever-increasing demands heart of Colombo, Mercantile
of rising financial aspirations of its clientele, the Investments intends to open
organisation has added more vigour by revamping three more modern branches
the branch network into a spacious, luxurious and by April 2022. As it looks to
customer convenient atmosphere. the future, the success story of
State-of-the-art technology is an integral compo- Mercantile Investments will
nent of enhancing daily operations at these branches, continue for years to come,
Dhanushka Fonseka
and soon, the company will have a fully integrated with a “Service That Extends COO / Director at
branch network. Beyond”. Mercantile Investments

INVESTOR'S GUIDE
CBH LANDS MARKET

INTELLIGENCE:
UNDERSTANDING INVESTORS
ACROSS DEMOGRAPHICS AND
THEIR REAL ESTATE NEEDS
From Maturists to Gen Zs, everyone has unique Manjarie Tissera Wijemanne,
expectations and approaches to real estate Founder Deputy Chairperson at CBH Lands
What they are looking for in Real Estate
C
BH Lands Market
Intelligence sheds GEN Z:
light on how investors They have a clear idea about the space they want and an
from all demographics equally clear vision about what they want to do with it.
approach real estate Location matters to them. They are looking for a home
investing, what they away from home, preferably closer to nature.
are looking for and the
factors that drive them
and influence their decisions.
GEN Y:
Each demographic has unique needs
Investing in real estate is somewhat daunting. They are
and expectations in real estate. CBH Lands
often unsure where to start and are shy to ask questions.
Market Intelligence deep dived into the
Investing in real estate seems complicated to them. If
world of Gen Zs, those born after 1995, Gen
they cannot afford a house in a preferred location, they
Ys born between 1981-1995, Gen Xs born
prefer to invest in more affordable areas but worry about
in 1961-1980, the baby boomers born in
protecting their investments. They tend to be very busy,
1945-1960, and pre-1945 born maturists to
so Gen Ys look for one-stop options and solutions to their
understand what makes them tick. These
real estate investment needs.
are their findings:

REAL ESTATE
GEN X:
They are comfortable investing in real estate for the long
term. They are focused on planning for their children's
education and retirement, so Gen Xs are interested in
maximising returns from their property holdings by GEN Y:
generating rental or lease incomes. They are not averse Many experienced dramatic changes in
to investing in bare land, houses, or apartments as long their jobs, incomes, and lifestyles. Several
as their needs are satisfied. plans like starting a family, taking on a new
job, or travelling overseas got shelved due
to the pandemic. They approach invest-
BABY BOOMERS: ment intending to secure their futures and
Like Gen Xs, baby boomers are comfortable with real realise their life goals.
estate and have a knack for maximising returns from
the property they hold but do not occupy themselves.
They will invest in real estate they can easily access,
so distance matters. They prefer investing in bare land
and commercial buildings.
MATURISTS: GEN X:
They have an unshaken belief in real estate as a means
This demographic was probably the most
to build and accumulate wealth for their kids and grand-
hurt by Covid-19. They experienced deep
children. Location or distance does not matter to them as
pay cuts and job losses more than any
long as there are opportunities to maximise returns and
other demographic. They had to deal with
keep investments safe. They prefer investing in bare land
the stresses of falling incomes, dwindling
because they want to build.
savings and kids stuck at home with no
clear direction about their future. They
are cautious about investing and are con-
cerned about protecting their investments
and generating healthy returns.
How has Covid-19 impacted their lives and

influenced their approach to investment
BABY BOOMERS:
They worried about getting vaccinated
and struggled with adapting to buying
essentials online. They spent their time
worrying about family and friends kept
GEN Z:
apart by the lockdowns and movement
The new normal of working from home has made their jobs less stress- restrictions, and are deeply concerned
ful and easier going. They are picky about vacationing and spend a about their wellbeing. Baby boomers look
lot of time on entertainment to keep their sanity in the face of the for investment opportunities that generate
lockdowns and movement restrictions. Their investment decisions healthy returns while accumulating wealth
are influenced by living life to the fullest in a post-pandemic world. for their kids and grandchildren.

INVESTOR'S GUIDE
MATURISTS:
Wrecked by constant worry over their health, ability to visit a
doctor or purchase medicines, they are most concerned about
safe investments.
GEN Z:
They have convinced themselves that
real estate is a viable asset class worth
investing in after actively investing
in other income-generating options,
including cryptocurrencies and other
business collaborations. Most Gen Zs
tend to invest in property with friends
and are unafraid to research and make
up their minds.
Post-Covid, how do
investors view real
GEN Y: estate?
Space matters to them. Spending the
lockdowns confined in small apartments
proved difficult for many of them. Now,
they are keen to explore real estate
opportunities, especially after falling
interest rates brought lustre to the prop-
erty segment. They are well researched
and know what they want, and proac-
tively explore every avenue of purchasing
real estate, including custom financing
terms.
GEN X:
Many in this demographic are interested in rebalancing their
investment portfolios to account for real estate opportunities.
More than price or payment options, Gen Xs tend to focus on
aspects of the legal transfer of property deeds.

REAL ESTATE
BABY BOOMERS GEN Y:

They defer spending on leisure and
With returns from fixed income entertainment, and care deeply about
assets, primarily bank fixed depos- generating reliable returns. They are well
its, declining, they look for real estate researched and are looking to strike a
opportunities with some urgency to healthy balance between high-risk short
claw back dwindling returns on other term yields and long term value.
investments. They tend to look for
options that will give them quick
ownership of real estate titles.
GEN X:
They are hunting for investments that can
generate quick returns for their kids' edu-
cation and home improvements. They are
MATURISTS:
even considering spending on holidaying,
They are more interested in investing overseas travel and upgrading their mode
in a home and garden. Convenience, of transport.
health, and safety are factors influenc-
ing their real estate investment deci-
sions. They tend to view real estate BABY BOOMERS:
as a resilient investment asset that They are keen to spend on leisure and for-
could withstand any aberrations in eign trips but plan on investing 80% of their
the financial system. savings on asset classes that can give them
some cover from rising inflation. Wealth
accumulation matters to them, so they are
also looking for opportunities in private
equity.
MATURISTS:
They yearn to spend more time with fam-
After investing in property, ily and friends and lead content lives, so
what will they do with any

they will spend on these pursuits after
securing their investments.
savings?
CBH Lands provides bespoke investment services in real
estate and property across the country, especially within
the Kurunegala District of the Wayamba Province of Sri
Lanka. The land selection process is very rigorous, and
once purchased, the planning, preparation and develop-
ment are completed by its sister company Ceylon Brand
GEN Z: Developers (Pvt) Limited. On completion of a project, CBH
They want to continue investing, Lands undertakes the process of sales and marketing of
but Gen Zs will also spend freely on the property. Unlike other real estate companies, CBH
lifestyle pursuits and passions. Their Lands controls the entire process, from the selection to
choices tend to be influenced by sus- purchasing, investment, planning, development, mar-
tainability and social and environ- keting, and sales, thereby enabling CBH Lands to perfect
mental concerns. its approach to offering highly personalized services and
solutions to its customers.

B
V brand voice
A D V E R T I S I N G F E AT U R E S
Articles in the following features section that profile successful businesses and interview the people behind their
success stories consist of paid-for content. The section enables companies to give readers a more detailed look at
the way they do business and highlight key points of differentiation and competitive advantage.

BRAND VOICE
Ramesh Shanmuganathan
Executive Vice President and
CIO at John Keells Holdings

BUSINESS CASE
THE BUSINESS
CASE FOR DIGITAL
TRANSFORMATION:
MAKING IT WORK
Ramesh Shanmuganathan on building a
business case for digital transformation
initiatives; focusing on the business case
with the right cues
IN every industry digitally led businesses

have either disrupted or gaind an edge
because they tend to be more efficient,
deliver greater customer value and are
generally seamless in how they integrate
with stakeholders needs.
However many traditional companies
struggle to make headway with thier dig-
ital investments or fail to make the case for these in the first
place. In this interveiw Ramesh Shanmuganathan discusses
how companies might go about making the business case for
digital investment, how success of digital investments might be
measured and why its important to be led by a digital vision.

BRAND VOICE
Why digital transformation? What’s the impe- tives during the pandemic. Unfortunately, most can’t articulate
tus for it? their overall strategy beyond to suggest they made a huge tech-
Digital transformation is a global business phe- nology investment to navigate through the disruption caused by
nomenon, capturing the attention of enterprises the pandemic. Most fail to realize that the imperative for change
in every industry and spurring major invest- is increasingly the creation of an adaptable business — one that
ments. Dismissed as just a buzzword for many can leverage the platform economy and thrive in it. For many
years, digital transformation has become palpable C-suite executives, their digital initiatives have not resulted
and urgent: many companies and their boards, in new business advantages or adaptability and thus has not
as well as senior executives, acknowledge that yielded the transformation that they ought to have achieved.
digital disruption will have a major impact on This dichotomy between business and technology strategy
their industries, and many feel it is imminent. But underscores a broader challenge: senior executives understand
one of the key reasons for a business's slow pivot that technology shouldn’t drive business strategy, but that
lies in what makes the information technologies understanding is superseded by the urge to respond to events
of the digital age different from technologies by making a series of tech-first, one-off investments.
that fueled other business transformations. They Compounding this challenge is the fact that C-suite executives
evolve, seemingly, at warp speed, and can be have different focus areas and goals. A single technology won’t
purpose-built; provided that a business has the address their needs; rather, a complex combination of solutions
right talent and corporate culture in place which may be required. Further, they often don’t speak to each other
is the key challenge for many companies. when making tech decisions, and when they do, they struggle
At traditional organizations, especially those to effectively communicate. Digital transformation is a team
organizations with huge investments in legacy sport and should use a playbook to coordinate strategies across
technology, digital transformation is viewed as leadership functions with consistency in the face of change.
a disruption to be avoided or best executed in While organizations have a digital strategy, they lack a
small steps to protect their existing investments common language to strategize across functions, making it
or until their depreciation cycles are exhausted. challenging to digitally transform and address related oppor-
The pandemic came as a reality check for tunities and risks.
many organizations who took a slow pivot since Indeed, a common language for digital transformation can
they had to scramble to enable remote work enable C-suite executives beyond just the CIO, CTO and CDO
and serve customers in lockdown to keep their to have tech-adjacent and tech-agnostic conversations that
businesses afloat. Practically overnight, digital transcend any individual technology and go to the heart of
transformation was a matter of survival, and it their processes and culture, and how people work and interact.
woke up a lot of C-suite executives since they saw The key is to have a common language across the organization,
that the organizations that were more mature in across functions and units, with the following core philosophies.
their digital transformation suffered much less
costly disruption. The switch flipped since most (A) BREAK-THROUGH HUMAN BEHAVIOURAL AND STRUC-
accelerated their digital business initiatives in TURAL BARRIERS.
the wake of COVID-19, and about half foresee Everything in an organization is interconnected. Leaders across
changing their organizations' business models functions can speak thematically about shared needs, avoid
as a result of the pandemic. redundant investments, address emerging risks, and change
Besides, Emerging technologies such as AI, processes at scale by simply communicating better.
IoT, RPA and edge computing open up entirely
new business opportunities and give rise to com- (B) PLAN BEYOND A SINGLE TECHNOLOGY.
pletely new customer expectations. Companies Platforms, capabilities, and initiatives often involve multiple
with the resources and mindset to leap and gain digital and physical technologies securely working together.
a competitive advantage, widening the gap As these technologies combine, they become greater than the
between digital laggards and leaders. sum of their parts to bring new capabilities and greater value.
How does one frame a conversation around (C) EVOLVE INTO THE FUTURE.
digital transformation? Today’s breakthrough technology is tomorrow’s legacy tech. A
C-suite executives accelerated their digital initia- common language can enable leaders to think flexibly across

BUSINESS CASE
business and technology needs, without having the business (5) INTEGRITY:
strategy reliant on any single technology. Focuses on improving resilience, security, ethical
tech, and trust across all internal and external
(D) ACHIEVE A GREATER STRATEGIC BUSINESS VALUE facing business systems and processes with a
THROUGH ITS CAPACITY TO CHANGE AND ABILITY TO WIN. cyber-minded culture to address evolving threats.
This approach helps organizations align and execute against their
business strategy to achieve results of advantage and adaptability There will be more than one technology to con-
of the organization, humans, and technology. sider for each one. Thinking about the imperatives
as categories, or ‘capability stacks,’ can be useful.
The language of digital transformation should appreciate, on Themes allow change categories to become fixed
one side the business, and be grounded in downstream tech- as technology changes. This way, organizations
nology and operations so all parties can understand and con- can consider today’s enabling and disruptive
tribute. It’s important for organizations, as they become more technologies (that is, cloud, IoT, blockchain, AI,
technologically and digitally focused, to have this gap bridged cybersecurity, mobile, 5G, digital reality, edge
so they speak the same language in the business as they do in computing, quantum, and others), while leaving
technology. the same strategy in place for future disruptive
and horizon-next technologies.
How can we build a framework for a common language across
the organization? How should organizations evaluate and deliver
By focusing on business outcomes and technology impacts and their digital initiatives?
enablers to build that common language by thinking thematically Today, C-suite executives evaluate digital invest-
across five key digital imperatives; experience, insights, platforms, ments often traditionally applying a capex-based
connectivity, and integrity. An organization can communicate evaluation since it gives them the comfort to
across functions to put strategy ahead of technology leading to report clearer ROI as opposed to a iterative way
initiatives that deliver a more modular, flexible technology core they feel may result in losing control of fund-
that delivers transformation and strategic value. ing and visibility into how the organization is
These business-techno concepts can act as guardrails to help meeting business needs. This is one of the key
leaders avoid the trap of falling into a technology-led conversa- obstacles to an organization’s ability to deliver
tion. They can also frame digital strategies linked to technical business value.
realities and workforce implications. In essence, they create This stems from a legacy where most digi-
a bridge for coordinated discussions between business and tal initiatives were evaluated and delivered as
technology strategists and workforce and operations leaders. projects with detailed, well-planned-out scope,
budget and timelines designed to achieve specific
(1) EXPERIENCES: outcomes for the organization. The old approach
Focus on optimizing interactions with users, whether they be is engrained in organizations and is the often the
customers, the workforce, or other stakeholders within the default method of evaluation and delivery where
ecosystem. the returns are also seen over a long period.
Today with digital initiatives to take months
(2) INSIGHTS: for evaluation and delivery could mean the dif-
Assess what data, analysis, operating model, and workforce are ference between winning the hearts and minds
required to enable organizational strategies. of your customers, differentiating your product,
pivoting on an iterative idea, or losing market
(3) PLATFORMS: share to a competitor.
Focus on the location and management of information across Product-centric evaluation/delivery empowers
an organization or its network. product teams to explore and deliver outcomes
incrementally on an MPV (minimum viable prod-
(4) CONNECTIVITY: uct) model akin to the born-digital organizations
Involves the flow of information between platforms, experiences, where the product is iteratively enhanced on
and insights, encompassing the future of the internet, and net- a real need. This allows teams to pivot quickly
working with other organizations and ecosystems based on market conditions, customer prefer-

BRAND VOICE
ences and manage the investments incrementally, based on by individual digital initiatives but also their
need or market conditions. support of strategic goals.
For organizations, the key difference is that product-centric
delivery is funded continuously — and is justified by the incre- (2) PERCENTAGE OF ANNUAL TECHNOLOGY
mental value being created. BUDGET SPENT ON DIGITAL INITIATIVES
Organizations that spend only a small propor-
Why take a product-based view to fund digital initiatives? tion of their technology budgets on enabling the
We must understand that digital transformation is about creating most strategic, bold digital initiatives are unlikely
and sustaining value and not just about delivering a feature. to maximize return on digital investment. The
In a product evaluation and funding model, “products” are allocation of technology spending is a leading
defined broadly as capabilities, services, platforms or goods for indicator that organizations can use to monitor
a specific need of a customer segment and that customer can capacity to deliver digital-backed value.
be internal or external.
An organization might define improving employee productiv- (3) TIME REQUIRED TO BUILD A DIGITAL
ity as a product category with underlying product lines such as APPLICATION
developing on-demand training platforms or fostering mentorship Speed, specifically the translation of ideas into
networks. The organizations can assign resources to products products is critical in an organization. In a
according to its digital priorities and leave the details of how fast-changing world, a delay means yielding an
those resources are used to product line managers. These pools advantage to the competition or, worse, produc-
can be funded at monthly or quarterly review meetings and ing a tool that is obsolete before it’s ever used.
adjusted or terminated if they are not performing or yielding the Despite this, many organizations have little idea
incremental, envisaged value thus promoting an experimentation of how they measure up in this area.
culture to drive the transformation agenda.
This approach to funding digital initiatives help organizations (4) PERCENTAGE OF BUSINESS LEADERS’
finance and maintain oversight and controls on digital spend- INCENTIVES LINKED TO VALUE-CREATING
ing without weighing down teams with onerous methods and DIGITAL BUILDS
processes that stall can digital initiatives. Organizational leaders are accountable for digital
This also makes it possible to prioritize funding without being transformation and are driving tangible value.
caught in the trap of trying to build vast monolithic technology Aligning incentives is critical to achieving these
solutions in silos. By giving more control over funding to product ends. Importantly, this includes linking digital
lines, there is far greater scope for those on the front line to deliver incentives among leaders Organizations building
quick, agile projects in response to the needs of the business out their digital and analytics capabilities will
at the time, and then to scale those with the greatest promise. often have multiple technology leaders. But the
ability to mobilize a technology organization to
How does one measure digital success of an organization? support business objectives should ultimately
Most organizations will have a series of digital initiatives in pro- rest on the technology leaders who generally
gress like building a new tech platform, launching new products, controls resourcing, production guidelines, infor-
or investing in infrastructure. mation security, and technology-development
Just tracking a series of digital initiatives alone doesn’t guar- protocols.
antee the organization is increasing revenue, profitability, market
share, efficiency, or competitive moats, as a result. Organizations (5) TOP TECHNICAL TALENT ATTRACTED,
pursuing digitization need to engage the C-suite to take charge PROMOTED, AND RETAINED
and drive performance from digital investment. That means pri- The ability to attract and retain tech talent is argu-
oritizing scalable initiatives capable of improving performance. ably the most crucial driver of long-term success.
An organization’s digital success can be measured by these Tech talent includes individuals with expertise
five markers. in data engineering and analytics, design and
user experience, and core technology.
(1) RETURN ON DIGITAL INVESTMENTS
Measuring the return on digital investment is both standard and What’s the ROI on digital? How does one gov-
essential. Organizations should look not only at value provided ern investment and create sustainable value?

BUSINESS CASE
When it comes to measuring ROI, there isn’t a one-size-fits-all

approach. Take the time to define your principal motivation for
digital transformation, and make sure you have the right metrics
in place to evaluate your success. Better yet, involve the customer
success teams from the platforms you want to work with early in
the process. Engage with them to refine your strategy, troubleshoot
problems and track ROI from day one.
While priorities change, and your company will have its particular
ROI measurs, aligning them and your metrics with your goals and
operations is important.
(A) DECIDE ON YOUR PRIMARY MOTIVATION FOR DIGITAL

TRANSFORMATION. The biggest handicap in aligning
What do you want to achieve with this digital transformation? ROI on digital is the siloed view
Boil it down to a single objective: enable transparency, increase
employee engagement, boost operational efficiency. Why is this
of digital investments. This is the
goal important to your organization? Will transparency have a biggest barrier to capturing digital
positive domino effect in other departments? Will greater opera- value
tional efficiency free up employee time for other responsibilities?
(B) CHOOSE METRICS THAT ALIGN WITH YOUR PRIMARY

MOTIVATION.
Once you’ve identified your main motivation, you can develop
metrics to holistically develop it. What does success look like when to an incoherent digital strategy. It consumes
you meet your objective? What do you need to track and analyze extra time and resources while building multiple
to gather the right data? sources of truth, which jeopardize future data
consistency. What’s missing is a cohesive strategy
(C) ANTICIPATE UNINTENDED IMPACTS. to harness the multiplier effect—or combinatorial
Change always comes with a learning curve, so be prepared. Expect impact—of digital investments. The leadership
some initial delays and roadblocks, and give new changes time to to drive the big picture thinking is key and its
settle in before pulling the plug. lacking leads to more silos being created breaking
the very business case that organizations try to
(D) ROI IN ACTION build for digital.
Let’s look at a simple example of measuring the ROI of digital A zero-based approach to digital investments
transformation within the HR department of a large organization. also links them to the overall digital strategy and
Their goal is to automate the vacation request process to improve embeds ROI into a zero-based plan. It’s about
operational efficiency. Any change may be only one step in the starting with a proverbial clean sheet to under-
organization’s overall digital transformation, but it is clear, meas- stand the full breadth of an organization’s digital
urable and aligned with big-picture goals. investment without blind spots. What does the
organization want to achieve? Where should it
The biggest handicap in aligning ROI on digital is the siloed view invest? What investments are working? Which
of digital investments. This is the biggest barrier to capturing digital ones should be halted?
value. Only a small percent of companies get both cost savings and Zero-based approaches also allow for con-
new growth from digital because the rest tend to invest in silos tinuous control and monitoring of digital value
and this happens across industries. captured and identification of potential interven-
One such example, take a retail organization’s functional depart- tions where the digital value is not achieving its
ments are investing independently in digital initiatives: CRM is potential. We need to start tracking digital value
focusing on the advanced customer and consumer analytics; IT every step of the way and make necessary course
function is looking at in-memory ERPs to accelerate insights and corrections to meet these targets and to avoid
each group is exploring its data lake. This patchwork approach leads depleting the same.

BRAND VOICE
LANKASIGN: A GIANT
STEP IN SRI LANKA’S
DIGITAL ECONOMY
An overview of the history and legal framework
of electronic transactions in Sri Lanka shows how
agencies like LankaClear, ICTA and others are
reshaping the future of the country

A
D I G I TA L S I G N AT U R E S
A history of electronic transactions which predates the

internet, its evolution in Sri Lanka, and everything you B U I L D I N G T H E F O U N DAT I O N S
needs to know about digital signatures and the legal As a nation, it has been some time since Sri Lanka embarked on
implications, were addressed at an insightful online a journey towards a digital economy. While the government,
forum recently. regulators like the Central Bank and the SEC, and agencies such
Sri Lanka was among the first countries to ratify a as ICTA and LankaClear have laid the foundation and continue
United Nations convention governing digital transac- to strengthen the enabling infrastructure, the country’s financial
tions and already agencies like ICTA and LankaClear sector must take the initiative to accelerate progress. Without
with regulatory guidance from the Central Bank have the financial sector’s commitment, Sri Lanka will not be able to
laid the legal framework on which a vibrant digital achieve the objective of becoming a digital country and a digital
payments ecosystem can be built. The Electronic commerce platform for the rest of the world. LankaSign is one
Transactions Act of 2005, and amended in 2017, is such initiative that enables the financial sector to accelerate its
among the earliest pieces of legislation anywhere in digital transformations.
the world and the UN Commission for International The digital signature is of paramount importance in bringing
Trade holds it up as a case study that several countries about a high level of trust so crucial to digital commerce and trade
are now trying to base their laws on. and seamlessly linking Sri Lanka will the rest of the world because
LankaSign is Sri Lanka’s only authorised CSP in Sri the country does not have to limit itself to the domestic market.
Lanka, operated by LankaClear and uses military-grade In India, e-commerce transactions totalled $20 billion in 2020,
security equipment. It complies with Electronic demonstrating the potential Sri Lanka needs to unlock for itself.
Transactions Act (ETA) and is ISO 27000:2013 certified. LankaClear and ICTA are building a cohesive and enabling
Originally used for payment clearing related functions, environment for banks and other important stakeholders in
LankaSign digital certificates are now offered to any the economy to unlock the power of digital signatures in build-
external party who expects to avail themselves of the ing a robust digital payments ecosystem. The combined efforts
service. These certificates are already used by over are guided by the Central Bank and come under the National
600 public and private sector organisations across Payments Council. LankaSign conforms to the highest global
the country with over 600,000 digital certificates standards and uses high-security encryption technology, and
being issued. it received the recognition and ratification of many other agen-
To raise awareness about digital signatures among cies. For example, the U.S. Embassy in Colombo, which has a
the country’s banking fraternity, the ICT Agency of rigorous process of evaluating and procuring technology, has
Sri Lanka (ICTA) with the support of the Ministry of signed up for LankaSign and is already executing transactions.
Technology, LankaClear together with Sri Lanka Banks’ Many government organizations and several large corporates
Association collaborated to organize a webinar ‘Legal in the country are already using LankaSign digital signatures.
Validity of Digital Signatures’ exclusively for the finan- LankaClear is developing mobile compatible formats which will
cial services sector. The virtual event was attended lead to a wider acceptance of digital signatures and elevate digital
by over 300 participants. A synopsis of the webinar transactions not only internally but also externally, beyond the
follows: borders of Sri Lanka.

BRAND VOICE
S E T T I N G T H E AG E N D A Law) model law on electronic commerce which pre-dated the

Initiatives such as digital signatures must be internet.
embraced positively in pursuit of a vision This was in the era of electronic data interchanges and there
towards transforming Sri Lanka into a digital was a pioneering move to encourage businesses to provide
economy. Financial inclusion is an integral services to consumers electronically and digitally and to create
part of the overall strategy towards creating legal certainty in that realm. UNCITRAL established the foun-
a digitally inclusive Sri Lanka, and the man- dational principles in the form of the UNCITRAL Model Law
date at ICTA is to enable this transformation. on Electronic Commerce which were not binding on member
The purpose of a digital inclusive Sri Lanka countries.
is all about improving financial inclusion. At Some countries adopted an identical standard manifested
the present, even credit card adoption is low: in the e-commerce model law, some adopted a lower standard,
there are two million active credit cards for some adopted a higher standard which became very prescrip-
23 million debit cards. Therefore, Sri Lanka tive and had an impact on the way businesses could function
needs to ensure that the digital journey especially in providing electronic signatures in a country.
encompasses strategic KPIs to unlock the The issue that the global community had with the UNCITRAL
transformative potential of a digital economy, model law was that with countries adopting different stand-
e-commerce, and fintechs. In this context, ards there was no harmonization. The lack of uniformity in the
understanding the legal implications of dig- global e-commerce legislative landscape became a barrier for
ital signatures is critical for all stakeholders, international cross border e-commerce and electronic business.
particularly the banks and financial services It was only in 2002 that the UN General Assembly adopted
providers. a resolution to appoint a working group within UNCITRAL to
Adopting digital signatures will enable formulate an internationally binding legal instrument through
the financial sector to provide an improved a negotiation process between countries. About 60 countries
user experience in terms of customer actively participated in the negotiations and Sri Lanka was one
onboarding and subsequent digital cus- of them, and thus, the United Nations Convention on the use of
tomer interactions. A circular issued by Communications in International Contracts, or UN Electronic
the Presidential Secretariat made it man- Communications Convention for short, was born.
datory for all government institutions to This became a unified global standard that facilitates cross
move into electronic documents by 31st border trade. It binds member countries to adopt similar domes-
December 2021 with a special emphasis tic standards and legal frameworks. Sri Lanka is in line with
on adopting digital signatures. As such, this international legal instrument now in its second iteration,
several institutions have been prioritized or Electronic Commerce Law 2.0.
in terms of implementation, while several It is the international gold standard governing global digital
government institutions such as Sri Lanka transactions. Universal adoption among member countries has
Customs, Central Bank, Telecommunications been slow because it involves making major changes to domes-
Regulatory Commission, Ceylon Electricity tic electronic transactions legislation, but Sri Lanka being a
Board and Colombo Municipal Council are small country was able to do this faster than most.
already using them. What is important is that this framework, better known as
the UN ECC, also has a unique feature whereby automated
E TA 1 0 1 : I T S E V O L U T I O N A N D S P E - messaging systems and contracts formed through those sys-
C I A L F E AT U R E S tems have legal recognition as well, provided certain default
In Sri Lanka’s journey towards a digital rules are followed.
economy, LankaSign is an important initia- In terms of global adoption of this international legal stand-
tive among many that set the foundation for ard, some of the larger countries adopted it earlier on. Singapore,
accelerated advancement. To give a historic Sri Lanka, and China were also among the early adopters.
perspective on how electronic transaction Singapore played a pivotal role in this endeavour along with
laws came about, the foundation on which China. They were the first signatories to this international treaty
legal frameworks governing electronic from the Asia Pacific region in July 2006. Over the years Korea
transactions stand is the UNCITRAL (United has become a party, they are making amendments to their
Nations Commission on International Trade domestic law to fulfil their obligations under this standard.

other countries, the Sri Lankan legal transactions regime can

also be used as a knowledge export service to other countries.
Fiji, Ghana, Ethiopia, and Costa Rica have already engaged
Sri Lanka’s full cooperation and Sri Lanka is helping them fast
track their journey of establishing enabling legal frameworks.
In this context, Lanka Clear has always been a very proactive
FOLLOWING SRI partner and is another example of a public-private partnership,
a model that Sri Lanka can export to other countries as well.
LANKA’S ELECTRONIC Here are some of the key features of the Electronic
TRANSACTION ACT Transactions Act: it is a piece of legislation founded on inter-
NUMBER 19 OF 2006 AS
national standards and developed with care and purpose.
According to its long title, it is a statute to facilitate and recog-
A MODEL OFTEN CITED nize the formation of contracts, the creation and exchange of
BY THE UNCITRAL four classes of instruments namely data messages, electronic

documents, electronic records, and other communications in
SECRETARIAT, FIJI electronic form, and to provide for the appointment of a cer-
AND BAHRAIN ARE tification authority, and accreditation of certification service

providers who provide authentication services.
ALSO BECOMING STATE All categories of electronic transactions whether B2B, B2C or
PARTIES TO THIS government to business done electronically are legally enabled,
protected and made valid through this Electronic Transactions
CONVENTION Act with the only exceptions being those which are excluded
under Section 23 of the Act including last wills, power of attor-
ney, and the transfer of immovable property.
The Act contains a foundational principle to say that a data
message, electronic document, electronic record, or other
The Philippines is a signatory and are slowly communication should not be denied legal recognition, affect
working towards making amendments to validity or enforceability purely because it is in the electronic
their domestic legal regime to facilitate cross form.
border trade. Thailand has announced acces- In a tribunal or court of law, if somebody were to object
sion, and so has Vietnam. to the presenting of evidence in the form of a data message,
Following Sri Lanka’s Electronic electronic document, electronic record, or a communication
Transaction Act Number 19 of 2006 as a model that is in electronic form, that objection can be ruled out based
often cited by the UNCITRAL Secretariat, Fiji on Section 3 of the Act. That foundational principle is a strong
and Bahrain are also becoming state parties statement legally which goes to the very core of the Electronic
to this convention. Australia had several Transactions Act.
changes at the state level. For instance, the Section 4 is another important section that gives recogni-
State of Victoria has had to significantly mod- tion to the electronic equivalent of writing and is referred to
ify its state laws. In the US, the 50 states have as another foundational principle in the law where functional
amended laws governing contract related equivalence is given to the manual written form. It is a foun-
issues and the White House announced that dational principle, and all that Section 4 says is that even if
they would have to seek the permission of the there is a requirement under any law for something to be in
Senate to accede to this convention. writing, that requirement can be met in digital form if that
Sri Lanka formally ratified this interna- digital record is maintained in a manner that is available for
tional binding instrument and is bound subsequent reference.
legally to the international Gold Standard This concept of subsequent reference requires organizations
with effect from February 2016 and as a con- that are regulated, such as banks, to put in place governance
sequence, Sri Lanka amended its Electronic structures and IT policies concerning maintaining records dig-
Transactions Act. The result is that when itally within the system and that would mean that you have
promoting Sri Lankan knowledge services to security controls and other features built-in.

BRAND VOICE
Once you have those governing structures ensure nonrepudiation and integrity, as well as create reliability
in place and you can demonstrate that doc- through the digital transactions conducted.
uments are digitally archived and stored in The Electronic Communications Convention that Sri Lanka
a manner allowing them to be retrieved for has adopted facilitates cross border recognition of electronic
subsequent reference by indexing them, signatures as well. Sri Lanka can easily establish mutual legal
classifying them, and methodically stor- recognition arrangements with China, Australia, and Singapore
ing them for the duration of the archivable to ensure that all those cross-border documents digitally signed
period, then legally, those will be valid equal become legally accepted at both ends.
to any requirement of a written document The electronic signature regulatory framework is already
prescribed by law. established through Sri Lanka CERT and there is in place a
Sections 5 and 6 are about ensuring reten- governing task force hosted by the Central Bank of Sri Lanka
tion of electronic documents and maintaining appointed under the provisions of the Electronic Transactions
the originality, it also underlies certain prin- Act. Their primary objective is to ensure that the functions
ciples based on Section 4. Section 7 of the associated with issuing electronic signatures or digital signing
Electronic Transactions Act is an especially methods are interoperable to the maximum extent possible
important principle that gives legal recog- and to ensure that they are per international standards. Some
nition to Electronic Signatures and digital of these provisions improved over the years.
signing methods, and it says that where a The task force governing the certificating authority func-
written law requires something to be signed tions have been in operation since 2011 and works closely with
between the parties, that requirement can be the Central Bank of Sri Lanka and LankaClear became the first
met by using an authentication method that authorized certificate service provider in March 2013. This entity
can identify the person and that method has is a public-private partnership established by Central Bank with
to be reliable for the appropriate purpose. other participating banks being shareholders governing Lanka
It must be noted that the Electronic Clear. Its functions have now extended beyond the banking
Transactions Act is much broader: it not
only covers electronic business, electronic
commerce but also covers under Section
8, electronic government related transac-
tions and facilitates a foundational legal
framework for the recognition of electronic
government activity. Anything done manu-
ally in government such as filing of records,
issuing of licenses including the payment
cycle, as now seen in the Customs process,
are covered in this section.
Sections 11 – 17 are specific chapters gov-
erning electronic contracts and Section 18
– 20 are those which relate to the governance
of service providers who provide electronic
signature services and Section 21 covers rules
governing electronic evidence.
On electronic signatures, it must be
emphasized that the foundational principles
through which any manual signature can be
given legal recognition through an electronic
method, that method has to be as dependable
and appropriate for the purpose. However,
digital certificates issued by recognized certi-
fication service providers will enhance legal
validity about that method being reliable to

sector to support the digitalisation of Customs clearance and testimonies, circumstantial evidence, and
more. LankaClear has a special license under the Monetary Law hearsay evidence which is a statement other
Act and is also a sectoral certificate service provider. than the one made by a witness and is par-
When Sri Lanka Root Certificate launched on Valentine’s ticularly important for electronic evidence,
Day in 2020, after a six-year process of technical evaluation, and opinion evidence. These are the types
procurement, and certification under international standards, of evidence that usually apply to Sri Lankan
Sri Lanka became the first in South Asia to adopt an interna- courts.
tional standard governing the issuance of root certificates. Sri Electronic or digital evidence relates
Lanka follows the Web Trust Standard, and many developments to evidence in most electronic apparatus
have since taken place such as the facilitation of single window or devices. Any evidence that is created,
paperless trading activities, and online and digital transactions recorded, stored, produced, or transmitted
in the public sector, including Customs clearance, using digital in any electronic form is electronic evidence.
certificates authorized by Lanka Clear. Even if someone deletes a file, the informa-
tion contained in the deleted file is evidence,
ADMISSIBILITY OF ELECTRONIC EVIDENCE UNDER which may come within the term of infor-
T H E E TA mation or document. Digital or electronic
In Sri Lankan courts, the question arises on how electronic evidence can be crucial to proving a case
transactions satisfy legal requirements if the law requires a and can be relied upon for investigation in
particular document, signature, or evidence to be in writing. The tribunals and courts to either establish or
Electronic Transactions Act has made clear provisions in Section dispute a fact.
3 that if the law requires an original document, an electronic one The introduction of the Special Provisions
can satisfy that requirement. In response to technological and Act enabled the introduction of a series of
market developments and the challenges that have followed, statutes, some of which directly deal with
many jurisdictions have adopted laws governing electronic electronic evidence, in many forms. The Penal
transactions or e-commerce that if they meet certain condi- Court Evidence Ordinance was amended, and
tions, the legal value and the effect of an electronic document several new laws were enacted including the
or communication can also satisfy the purpose and function Intellectual Property Law, the Computer
of a paper-based document. Crimes Act, the Electronic Transactions
The Electronic Transactions Act has not attempted to alter the Act, and the Payment and Settlement Act.
traditional rules governing paper-based documents. It avoids The Evidence Amendment Act was also
creating separate rules for electronic communication and elec- introduced where the video recording of an
tronic transactions. Instead, it has attempted to comply with interview with a child and bank accounts in
the law in principle by requesting that parties compare to the electronic form were permissible as evidence.
minimum standard so that the function and the purpose of a The Electronic Transactions Act was intro-
paper-based document can also be satisfied by the electronic duced in 2006 and the amendment to that
document and communication. was introduced in 2017. The key instruments
In this context, it is important to understand the historic that have legal recognition under the pro-
perspective of the admissibility of electronic evidence in this vision of the Electronic Transactions Act
country. Sri Lanka has the Evidence Ordinance which has of and are broadly defined are data messages,
course made certain provisions to admit documents that can electronic records, electronic documents, and
be classified as oral evidence, documentary evidence, and real other communications which include any
evidence. Oral evidence is given in a court of law or inquiry, doc- statement, declaration, demand, notice or
umentary evidence includes deeds and all documents produced request. However certain other instruments
for the inspection of the court and does not include electronic or have been excluded from the operation of
computer evidence, and real evidence is sometimes interpreted the Electronic Transactions Act. Having said
as computer evidence. that, one must consider the rules that are
Sri Lanka’s Evidence Ordinance has not recognized computer adopted in the Electronic Transactions Act
evidence as real evidence as such this legally is evidence such with regard to admissibility. It has to be con-
as photographs and objects produced in court for inspection. sidered whether a document is relevant or
There are other types of evidence such as direct evidence like admissible, and if it is, then courts will allow

BRAND VOICE
that document to be admitted as evidence. on the prima facie basis that the evidence is reliable and the
In admitting a document as evidence, standard of integrity is met, then the evidence is admissible.
a court will have to consider if it is expert Once the admissibility criteria are met then the next question
testimony or if the evidence coming from to consider is the proof of content; that is the value or weight
a privileged source of information or is it a attached to that document. If the document is not admitted,
confession. Evidence will not be admissible then the question of proof will not arise, but if the document
if it is hearsay, but there are exceptions as far is admitted, the question of proof will arise in court. These
as the electronic aspect is considered if the are the basic criteria, and among them, the authentication of
condition for applicability is satisfied. Then, an electronic document may be relevant in legal proceedings.
the burden will be on the other party to prove As far as admissibility is concerned, the key provision in the
that the conditions have not been met by the Electronic Transactions Act Section 21 refers to four types of
person who relies on the provision. instruments, data messages, electronic documents, electronic
The next question will be whether the records, and other electronic communication. Any information
evidence has been authenticated. The contained therein touching any evidence is relevant. The whole
authentication standard involves reliabil- idea for the purpose of the Electronic Transactions Act for the
ity and integrity, and if a party can satisfy admissibility criteria is first there are two types of documents,
the traditional and the electronic document. In the traditional
document, there is the standard of writing, original signature,
and record-keeping that must be considered.
The purpose and function of a traditional document can also
be satisfied by any electronic document or communication pro-
vided the court is satisfied that certain minimum standards are
met. Those are the standards that have been set out in Sections
4, 5, 6 and 7 and apply to electronic signature as well. If the
conditions which apply to an electronic signature are satisfied
in the digital signature process, that digital signature will enjoy
the same level of effect and value as any traditional signature.
The electronic transaction does not in any way remove the
THE PURPOSE paper-based requirements, but it supports and supplements

them to be consistent with the minimum standard prescribed
AND FUNCTION OF by the Electronic Transaction Act, so the banking sector can
A TRADITIONAL consider this as an advantage.

There is the more important term ‘regularly conducted activ-
DOCUMENT ity’ which applies to business transactions conducted regularly.
CAN ALSO BE Any transaction made and properly recorded in the course of
regularly conducted activity on computerised business equip-
SATISFIED BY ment, financial ledgers, computerised accounts ledgers, are all
ANY ELECTRONIC considered to be part of the regularly conducted activity. If that
activity pertains to a knowledgeable person or under his super-
DOCUMENT OR vision, then it is easy to satisfy the court that it is a regularly
COMMUNICATION conducted activity and will fall within Section 21.
PROVIDED
Authentication is an important criterion, and if an electronic
signature is not properly authenticated it may be rejected.
THE COURT IS Authentication of a document in electronic form can be estab-
SATISFIED THAT lished in many ways, by electronic signature, by certificate

service providers, or by the testimony of a witness who has
CERTAIN MINIMUM the knowledge of that particular transaction.
STANDARDS ARE Presumptions also apply in considering the question of

authentication. Authentication is intricately linked with pre-
MET sumption. In the case of metadata, which is found in emails and

creates certain problems, a service provider of the Bankers’ Book has been expanded, which includes the
may be required if it is challenging court, so data stored by electronic means so this can be proved with
it can be authenticated by a forensic exam- an affidavit.
ination, or sent to an expert for his opinion The more important exception to hearsay is the business
with a certificate, and also by IP addresses. record exception. It is important to prove that any private record
Those are the normal tools of authenti- made by an employee will not come within the business record
cation of electronic evidence. but there are exception. It has to be kept by a responsible person of that organ-
also technical standards for which compa- ization and it has to be done in the course of a business trade or
nies and institutions will have to change profession, and if it is done regularly as a regular practice of that
their policies, manage their documents and entity and that is what is known as a regular business activity.
communications so that they will be able to Then Section 21 will be applicable, and courts will apply the
satisfy the reliability of their record manage- admissible criteria. The business record can be any original
ment services. business records such as files, draft letters, agreements, corre-
Unless there is a proper record, courts may spondence, financial documents, accounts, bank statements,
question the management services of a bank payment vouchers, provided these documents satisfy the criteria
or financial institution, or question of relia- required in the business record exception.
bility and the accuracy of the information There are exceptions or presumptions to the general rule if
contained in such management services. there is any data message or communication made by a dead
The reliability of the computer system can person or mentally not in a fit condition to attend court, or is
be satisfied by confirming that the computer outside the country, or does not want to give oral evidence
system was operating properly at all times through fear or the party is preventing anyone from giving
or if there was a technical defect, that it did evidence, giving way to that information, maybe admissible.
not affect the accuracy of the information This will be applicable to a particular situation and not as a
and records taken during the usual course general rule where evidence has to be led that a person is dead,
of business transactions. cannot be found or other requirements.
Authentication can be proven with these On the basis of the prima facie material. which is presented
technical tools. It is also important that the to court usually by an affidavit, with the certificate, the court
data contained in the information is com- will presume the genuineness of this document. The court will
plete, unaltered though there was a chance decide not on its own but on the material presented during
it did not affect the entire system. the pre-trial. It is for the other party to prove otherwise. The
Those are the technical terms to satisfy presumption applies to any distinctive identification mark.
the authentication standard in courts. Those Presumption of accuracy and genuineness, contained in any
are the questions that technical lawyers may electronic document, record, communication or data message
pose in courts who are knowledgeable on is very crucial for banks and financial institutions when they
the record management services systems and want to tender a document to the court and invite the court
the record management policies adopted by to presume the truth of the information and the fact that the
the banks and the financial institutions. The information was sent by the person purported to have sent it.
integrity of the record management system There is a huge opportunity for the service sector especially
services is very crucial when called upon to the certificate service providers to expand and support lawyers
satisfy the standard of authentication. and law firms who will now be compelled to apply the provi-
Hearsay as a general rule is not acceptable. sions of this act. There are certain shortcomings that will have
In the electronic world, there have to be some to be provided to the legal community and the banks, it is now
exceptions because there are some paper- time for the banks and financial institutions to change their
less transactions that take place. Hearsay policies and schedules and recruit technical lawyers.
applies when there is human intervention There is a need for technical lawyers and technical law firms
but there are many exceptions as far as this in this country if Sri Lanka is to apply the provision of the Special
topic is concerned, the banker’s book is Provisions Act and the Electronic Transactions Act. There is a
one exception. Section 19A of the Evidence need for services providers who will provide electronic services
Ordinance was amended and a new section to the litigants and the lawyers, only then will Sri Lanka be able
has now been included, and the concept to reap the full benefits of the Electronic Transactions Act.

BRAND VOICE
EVERYTHING YOU
NEED TO KNOW ABOUT
AN ERP: MISTAKES TO
AVOID AND HOW TO
OPTIMIZE RETURNS
Infomate's Jehan Perinpanayagam
shares insights about unleashing the
transformative power of ERP
Jehan Perinpanayagam
CEO at Infomate

E
ERP 101
Infomate was set up as a shared service

for John Keells Group (JKH) to work on
the SAP platform for the 60+ subsidiaries
of the group and to centralize, standardise
processes, and bring in best practices. I am
enthusiastic about ERP because I have seen
the good, bad, and ugly and the huge poten-
tial that a system like SAP has. But I have also
seen that very often, it is sub-optimized, it
is not used to a fraction of its potential. So,
over our 16 years of business, we have been
able to work on SAP and immensely proud
that we have been catalysts for introducing
a range of SAP best practices, automation
Enterprise Resource Management. Better known as ERP. Most of us and delivering actionable intelligence to our
know it as a platform that runs applications that automate business customers.
functions like production, supply chain, sales, accounting, and more.
Typically, an ERP system gathers and organises business data through Why is it critical to have an ERP? What
an integrated software suite. In this interview, Jehan Perinpanayagam, type of businesses needs them? Should
Chief Executive Officer at Infomate, a pioneering BPM company and SMEs too invest in ERP?
leading BPM export earner that is part of the John Keells Group, tells Businesses, when they start up, focus exclu-
us everything we need to know about ERP, the pitfalls to avoid when sively on their core deliverables. But as they
implementing one and how to maximise returns from existing ERP grow, it is important that the different parts
systems. Jehan begins by taking us through how ERP has evolved over of the business talk to each other, and that
the years and its modern iterations and manifestations: they have a single point of truth.
What typically happens as a company
ERP has been around for over four-five decades. Back then, these were grows, for instance, is that you find that
large and expensive pieces of software that only large companies or gov- the sales department is not coordinated
ernment agencies could afford and these companies used ERP systems with your stocks and supply chain, and in
to integrate production, supply chain, manufacturing, sales, accounting. turn, they are not in sync with your HR and
Today, it has become much more affordable. There are versions for small accounting divisions.
and mid-sized companies. A whole suite of second-tier ERPs is now And then you start to have a lot of opera-
available which are affordable to all. In Sri Lanka, all large compa- tional problems. Managing stocks, suppliers,
nies have ERP systems and even SMEs have good ERP solutions cash flow, and debtors becomes harder, and
up and running. ERP systems are moving to the cloud and businesses realise they need to put their
becoming less server or hardware intensive. house in order, and they need a proper sys-
Over the years, there have been rapid advances in how tem to do that, an ERP system, to be exact.
ERP deliver business insights. Predictive analytics deploying Most of the big ERP systems including SAP,
AI, integration with robotic process automation, user-friendly have versions that are suitable for SMEs. So, I
and customised dashboards generate better information to decision-makers would recommend that SMEs have a version
any way they want it, when they want it and wherever they may be. They of an ERP system that best suits their needs.
can access key insights and keep tabs on critical functions of a business Infomate specialises in all the major
online, even via smart mobile devices. ERP systems are increasingly able to areas concerned with inputs into the ERP
integrate with other data platforms for compliance and fraud analytics. ERPs systems from procuring to pay, to order to
are becoming more user friendly and increasingly efficient in capturing data cash, accounts receivable, record to report,
and able to process large volumes of data in an instant, terabytes of data in the entire range of reconciliation activities
seconds, and present actionable insights on demand by business leaders. such as bank reconciliations, the general
In summary, ERP systems have moved from being very expensive hard- ledger, accruals management, fixed asset
ware and software to much more agile cloud-based, easy to use applications accounting, and master maintenance and
with a lot more insights. more.

BRAND VOICE
In a successful ERP system, everything First, let us talk about a company wanting to implement an ERP system.
starts with the masters. You have your mate- How should they approach it and ensure they invest in something that
rials master, customer master, general ledger best suits their needs?
master, vendor master and so on. We man- I am intimately familiar with this because I was part of the core team of
aged all of these for our customers. project Excalibur that implemented SAP across the JKH Group in 2004 and
If you do not get that right, you end up subsequently been part of many different implementation projects. So, the
with information that is not complete in your first thing is to choose the right ERP platform for your business.
masters and substandard insights. Similarly, It should not be a status symbol because then you can end up with some-
if you end up with duplications, you will thing too expensive or ill-suited to your business. Picking the right fit, and
not get actionable insights, such as data on the right ERP for your business is key. Look at the long term cost of owner-
your biggest suppliers and your procurement ship of the system. Because you have licenses, you need support, you need
patterns. That is where Infomate comes in. maintenance. That is something that some companies do not factor in. They
In each of these areas, we look to bring in look at the initial investment, but they do not factor in the year on year costs.
SAP or ERP best practices to eliminate as Next, you need to consider the right implementation partner. It is especially
much manual work as possible and ensure important to get people with local experience. Many ERP projects here and
that the controls are optimized. You need to overseas fail at this stage because of the implementation partner.
make sure that the controls and segregation Get the right people with expertise on the ground level who have an
of duties are in place. impressive record. Diligently interview the consultants because it comes
down to the individual consultants. Consider their brand name but also drill
down to their individual CVs and the scope and outcomes of past projects.
Then you need to get the right core team from your company who will col-
laborate with the consultants to make sure that the objectives of setting up
an ERP system translate properly into your business.
Avoid rushing a project. Setting timelines for an ERP installation and
implementation is not the best approach, it is often impractical and leads
to half-baked results. You are investing in an expensive system, something
you are going to work with for at least two decades. You need to get it right.
And thereafter, think about your model. Now you are implementing a
Rolls Royce of a system or a Ferrari of a system. And very often, once it is
I would strongly
implemented and assume that it has been implemented well, you must make
sure that it runs efficiently, and it runs optimally. And for that, you need
recommend those
sophisticated users. System insights and what you get out of the system is
only as good as the information that goes into it.
companies who
And here again, I have seen problems, and this is where Infomate has built
expertise around adding a lot of value to our customers because we make
have taken the step

sure that the users are professionally trained, that we have SOPs (standard
operating procedures), quality of inputs, standardised ways of accounting
to embrace an ERP
for every transaction.
Too often, users are only interested in the outcome that they want. What
system, to explore
could happen sometimes, in the haste to just get their work done at a business
unit level, or a divisional level, we sacrifice information that the corporate
if they are making

centre would require. Finally, what happens is at the centre, they are stuck
and then they start resorting to using and pouring over Excel sheets. A
the most of it"

humorous illustration was given to me by a consultant many years ago,
which I found universally true, is that the best ERP system is Excel! Many
companies run sophisticated and expensive ERP systems, but all the reporting
is done on Excel! It is not the fault of ERP, but that of inadequately trained
and ill-equipped people using the system.
There are wonderful functionalities and features that ERP systems like SAP
offer, including electronic bank reconciliations, automatic payment transac-

ERP 101
tions, and robotic process automation, and support team? Are you going to invest in that? Or are you going to collaborate
all these make it much more efficient, more with an expert? for instance, our sister company John Keells IT that supports,
cost-effective, more accurate, and timely. But have very well trained SAP consultants.
it requires a bit of investment in time and
training. This is why you need to get the right What about those companies that already have ERP systems up and
people with the right knowledge to be able running? How can they optimise ERP for better results?
to get the best out of the system. I would strongly recommend those companies who have taken the step to
embrace an ERP system, to explore if they are making the most of it. Are you
What are the common challenges or satisfied that you are getting an ROI on your ERP system? You had a vision.
pitfalls one should avoid when imple- Ask yourself, have I achieved that vision? If not, you need to have a close,
menting an ERP solution? cold look at what you have. And then invest in the time to reset your course.
We Sri Lankans sometimes tend to complicate Work with the right partner to make sure you are getting the best out of your
things. Some companies have invested a lot of ERP system. That will be my very earnest advice. Do not be satisfied. And
time and resources to develop an ERP system do not think that you have to live with what you have. People sometimes
that generates a ton of reports that nobody jokingly say suffer after purchase. You do not need to do that. There is a better
uses. Keep things simple. Build a core team future for your ERP system and your company that Infomate can unleash!
to closely manage the ERP project and the Recently we were approached by a large manufacturing company that said
right consultants to ensure the company gets it was not making full use of its ERP. The first step is to take a dispassionate,
what it wants and needs. It will be best to objective review of the existing ERP system and undertake a gap analysis
have close permission monitoring during the to find out where your company stands. Next, I would recommend either
project to make sure that the minimum levels going with a shared service because if you are running an ERP system, it is
of expectation are properly implemented. an expensive investment. And you need to have sophisticated well-trained
You need to do your homework to whet users to be able to sustain. Thereafter, once you do the gap analysis, have a
consultant CVs and experience and also be process improvement plan. It cannot be done in a day; it will take at least
willing to do your own research. Sometimes 18-24 months. Then work with a sophisticated set of users or have your
ERP consultants will take the easy option. chat service or partner with a company such as Infomate who have those
Another thing to avoid is trying to expert users.
over-customise the ERP system. Every depart- Thereafter, keep assessing against your gap analysis and your list of
ment or function think they are the most improvements, how you are progressing. When we worked with a large
complex and unique in the company which overseas company, we had a list of 30 process improvements that required
in turn believes it is the most complex and stringent monitoring and monthly review to ensure timely progress in the
unique in the industry! They end up trying desired direction. So that would be my advice to companies that already
to customise the ERP system to suit their had ERP systems. It is never too late to correct course!
own siloed way of thinking and working and
this causes confusion and dents focus of the What are your plans for Infomate?
shared purpose and vision of the organisa- Post pandemic, companies have become much more comfortable
tion and the insights will not be strategically with the idea of partnering with SaaS and BPO companies. We are finding
helpful. I would instead recommend re-look that in many parts of the world, people are struggling to find ERP specialists,
at things. Look for ways to simplify a busi- and this is opening doors for Infomate and the country. At present we are
ness. There are plenty of best practices in focusing on developing our markets in Australia, the UK, and North America.
terms of ERP systems that can be fitted into We have a strong presence in the Nordic region too.
your business and avoid over-customizing We have expanded our range of services to include non-finance work
standard ERP systems. as well. For instance, we are working now, again on ERP systems, but on
Then you need to make sure that you have different aspects such as sales, supply chain and HR. These are the different
the right users who are trained and the right aspects of working on an ERP system but beyond finance and accounting.
support team because of the constant new Lead generation, managing helpdesk customers, and supply chain-related
upgrades, developments, technologies, inno- services are some of the new areas we have added. We were very encouraged
vations that one needs to be on top of. You to see what we were able to do with two large multinationals locally. And
need to think about how you are going to we are now looking at many more companies running ERP systems to see
support your ERP system. Have you got your how we can help them.

BRAND VOICE
ENFECTION:
REDEFINING
DIGITAL MARKETING
By bringing science
into digital marketing,
the Sri Lankan startup
that counts Malaysia's
Petronas as a client is
leading a marketing
revolution with digital
technology, education
and advocating for
greater collaboration
among agencies
Saliya Withana,
Founder and Chief Executive Officer at Enfection
94 ECHELON.LK DECEMBER
JANUARY 2022
2021
S
D I G I TA L M A R K E T I N G R E V O L U T I O N
margin perspective, growth has been even

more remarkable, especially given the booming
business in the APAC region.
Growth is observed in clientele and employee
numbers as well. Our staff count includes self-
sustaining teams that garner our digital expertise.
From a people perspective, the team has grown
exponentially over the last few years to the
tune of 70%. While we strive to be a global-first
company, we have local experts who understand
the market that has enabled us to serve over 40+
enterprise clients globally.
The cherry on the cake was when Enfection
was nominated at the global Drum Awards in 2021
for our digital marketing efforts in collaboration
with major Sri Lankan and foreign brands. Which
was a first for any Sri Lankan company.
Saliya Withana, Founder and Chief Executive Officer at Enfection,

Lahiru Halkewela, Co-Founder/Head of Operations, and Shezri
Junaid, Head of Group Account Management, joined Echelon for Lahiru Halkewela,
Co-Founder/Head of Operations
a discussion on how brands should approach digital marketing and
Enfection's meteoric rise as a startup that focused on going global.
What are the market dynamics like as of today?

It is not about how much you spend. Marketers or CMOs tend to
be fixated on the bottom line. But the brand is what is remembered
and can drive conversions. There is a lot of data available out there,
so use that and start building the brand. Successful entrepreneurs
are those that have not jumped from trend to trend but have a solid
proposition. Therefore, companies should not opt for a short-term
approach and need to think long-term. Especially given the eco-
nomic conditions, there is a need to capitalize on leads. Companies
also need to venture out and go global and have a view of making
a difference. That is where we come in.
Tell us about Enfection's purpose and journey thus far?

When Enfection started in 2017, our main focus was to bring a bit
of science into marketing. We spotted gaps in the market, where
digital marketing appeared to be in the mould of vanity expenditure
in correlation with the traditional media angle. Our model looks at
lean testing a buyer's micro-moments through various behavioural
economics principles and connecting that to the business's bottom-
line goals, rather than focusing on feel-good vanity metrics.
While we launched a company in Malaysia and Singapore
two years ago, the pandemic has also been a blessing in disguise
because starting a venture in a different country no longer requires
a physical presence.
Over the last two years, we have achieved revenue growth
of 20% and almost 40% growth this year. From a gross profit

BRAND VOICE
Looking back, acquiring the first client was makes us unique.

a pivotal moment, and at the time, we were We spend time mapping the consumer's purchase journey
among the first in Sri Lanka to use social media irrespective of being online, offline or a hybrid by following Micro
to generate leads. Being appointed to manage Moments principles. Our task is to identify the touchpoints in the
digital content for the 2018 Asian Games was also user purchase journey. We use data to identify each touchpoint
a solidifying moment. Over the last few years, we and provide strategies for them. Furthermore, we incorporate
went regional, becoming an agency for agencies, lean principles into our approach and advise clients on how to
who rely on us to provide strategies for marketing maximize ROIs.
transformation. That opened many doors for us. It is important to also look inwards. We call ourselves a ‘learning
In the Sri Lankan market, we work with the company’ with individuals driving growth, and a majority of our
country's number 1 supermarket brand in order account managers are certified experts. When we talk to people
to communicate their freshness promise to the internally, it is clear that the culture of learning is important, so we
masses. Furthermore, through a proxy marketing embrace that, and it helps us differentiate ourselves.
strategy, we have transformed the pharmaceutical We do not believe in the traditional client versus agency culture.
industry in the region which is highly regulated. We are a marketing transformation partner, actively involved in
These ‘wow’ moments have created a steady knowledge sharing, and this has garnered us a reputation as experts,
business pipeline for Enfection as other brands
with similar challenges started to approach us.
Our data and insights help brands to formulate
a gut feel for their marketing programmes.
Especially if your purchase cycles are longer, you
need more ways than not to predict, to a greater
extent, what the outcome is going to be. This is
where tactics such as Account-Based Marketing,
Proxy Marketing as well as Always On Branding
come into play.
The final frontier would be when Sri Lankan
clientele look to venture overseas. They aspire to
grow, thus reaching out to us to help chart that
course. Traditional exporters and brands who have
been relying on traditional ways to be in front
of potential buyers are now seeking digital as a
channel to go global. This is where the Enfectors
and our regional digital experience come into play.
When it comes to marketing technology
(MarTech), we have developed web and mobile-
based marketing tools, including a learning
management tool used by a global pharma
company in over 14 countries in Asia. Intending to
grab a slice of the MarTech pie, we have our CRM
and reporting tools too. In our bid to become a
product-driven company, we are hoping to provide
a PaaS offering in the MarTech space very soon.
What sets Enfection apart from other marketing

agencies?
We use research and data as the basis for
everything we do, including creative development.
When suggesting concepts to clients, we have the Shezri Junaid,
data to back them up, and that data-led approach Head of Group Account Management

D I G I TA L M A R K E T I N G R E V O L U T I O N
with clients and marketing agencies preferring to collaborate with as the metaverse that’s making some noise now.
us. In the Sri Lankan market, marketing agencies operate in silos. Despite the rapid gains in digital technology
However, in other parts of the region, we see a lot of collaboration elevating e-commerce and other online services, the
between agencies trying to drive real value for their clients by offline and online worlds are also interconnected.
working with an ecosystem of experts like us. This is something We have collaborated with clients to bridge the
we hope to advocate for in Sri Lanka as well. gap and have a full view of online spending versus
offline outcomes through our MarTech and data-led
What are some tangible examples of Enfection’s impact on busi- digital campaigns.
nesses?
When a Sri Lankan supermarket chain wanted to transform from What are Enfection’s plans for the future?
a traditional brick-and-mortar business into a freshness-focused MarTech is a hot topic right now. Products are easier
brand, we took this message across digital channels. The recognition to scale. The digital marketing or technology trends
the campaign received is a direct testament to the work we did in the last 4-5 years encompass technology, AI and
with the client’s team. anything that contributes to the bottom line.
Helping brands go global has been an interesting challenge. As We are focusing on developing mechanisms and
for going regional, we helped Malaysian oil giant Petronas achieve products for brands to address their challenges on
its best-ever multi-billion dollar bid round. We also offered pharma a global level. We want to scale up and create our
brands another go-to-market channel through a proxy marketing own platform, maybe spinning off into a product
approach. company.
Currently, we are an API of growth for partners
in the region, with further expansion plans. We also
have ambitions to open up in the UK, and then look
at Australia, to power marketing services especially
in niche areas including pharma and technology
marketing.
Another area of focus is to be a knowledge agent
and thereby establish a presence for Sri Lanka. At
the university level, we conduct digital training
Another area of focus is to for those who wish to pursue a career in the field,
be a knowledge agent and which will help Sri Lanka achieve branding as a
thereby establish a presence knowledge hub.

We have proven that marketing can be offshored
for Sri Lanka or worked in a hybrid model and plan to launch our
upskilling program for digital marketers. Sri Lanka
has an interesting mix of people who can provide
the required expertise, given the right training and
opportunity. We hope to see the program flourishing
with more people participating and learning with
When it comes to digital marketing, clients need to know what us. Our plans also include helping Sri Lankan brands
is new and what we can do differently that cuts across the noise. go global, as we have the expertise and experience
We have developed strategies using new channels so far untouched to do just that.
in Sri Lanka, which have proved successful in terms of awards Learning is ingrained in our DNA, and we pride
recognition and garnering business revenue. ourselves on being a learning company where we
share the latest industry knowledge and trends,
How does Enfection compare to traditional ventures on customer not only with our Enfectors but also with our belief
acquisition/conversions? network that includes our clients and partners. This
The traditional marketing funnel is changing. We differentiate our is something we will continue to pursue as we grow.
offering by identifying personas, how they engage with a brand, The ultimate goal is to be a learning-focused
their intent, and what they search for online. There are newer factors company with the ambition to be a knowledge
like attribution also coming into play and newer mediums such hub for the region on marketing transformation.

BRAND VOICE
THE TRANSFORMATIONAL
POWERS OF OREL IT
There is a reason why this third-generation
company is the largest IT services exporter in
the country
Dr Upendra Pieris
Chief Executive Officer
OREL IT (Pvt) Ltd
What is your vision for OREL IT, and how is the company helping
businesses to transform themselves post Covid-19?
OREL IT is an innovative tech company that has built a strong
reputation for delivering transformative solutions here and
overseas. A fully-owned subsidiary of Orient Holdings, we
are one of the largest IT solutions providers in Sri Lanka and
the largest IT services exporter in the country.
We employ over 4,500 people who strive for excellence
in whatever they do and have a passion for innovation and
making an impact, sharing a vision to facilitate the Industry
4.0 revolution in Sri Lanka.
We have a vast portfolio of clients across Europe, the
OREL IT's Chief Executive Officer, Dr Upendra US including Israel, whereas we keep expanding into the
Pieris, discusses the company's growing Scandinavian region, Dubai and New Zealand. A third-gen-
impact and influence on the domestic econ- eration family business, we are fulfilling a founding purpose
omy, global expansion, exciting tech and to transform the IT landscape in a meaningful and impact-
achieving gender parity. ful way with client-centric technology solutions for over
12 industry verticals ranging from healthcare to finance,
agriculture, city planning, entertainment, sports and more.
When Covid-19 broke out and companies the world over
scrambled to invest in digital technology to improve internal
processes and generate sales, we had AI-backed tech solu-
tions that our clients could quickly deploy. We developed
a fully-fledged e-commerce solution and an interactive

T R A N S F O R M AT I V E T E C H
AI-based telemedicine platform that became a hit overseas. OREL IT'S RECENT HAUL OF AWARDS
Our AI and QR code-based solutions include tracking Covid DEMONSTRATES THE COMPANY'S GROWING
patients, contact tracing, and keeping tabs on vaccine distri-
IMPORTANCE TO THE ECONOMY
bution. Another AI model we developed scans an area or room
to identify how many people are within that area to ensure OREL IT has an impressive mantel of awards and
adequate social distancing. accolades, underscoring its impact on the economy,
contribution towards developing the tech industry and
Over the past few years, OREL IT has bagged an impressive haul of providing equal opportunities in an environment free of
awards (Please see table). Can you discuss some of these and the discrimination at the workplace. Some of these awards
ingredients behind the company’s success? cover the most challenging periods in recent memory.
Since 2019, OREL IT has been recognized at the Presidential
Export Awards for its significant contribution to the economy.
In 2018, we also won The Most Outstanding Exporter Award
including the top award in the Extra-Large ICT and BPO category.
The following year, we bagged the coveted Presidential Award
for Women Exporter of the Year.
During the pandemic, it was not only the export earnings
that made a difference. Our tech solutions are helping domestic Most Outstanding Extra Large ICT and Most Outstanding
businesses unlock value and growth opportunities. Exporter - 2018 BPO Winner - 2018 IT Company - 2018
awarded by NCE awarded by NCE awarded by ASOCIO
As one of the profound digital one-stop-shops in Sri Lanka,
the Orel BUY app is focused on providing an unequivocal online
shopping experience for both consumers and retail partners. In
fact, a customer could download our app to their android device
or iPhone, or even use this app over the internet. Currently serv-
ing an extensive customer base in Sri Lanka, Orel BUY has in
Best Exporter Entrepreneur Women Exporter Sectorial Award Merit
fact become one of the most preferred e-markets in the country. Awards - 2019 of the Year - 2019 BPM/KPM - 2019
Moreover, we are among a select group of non-banking compa- awarded by NCCSL awarded by EDB awarded by EDB
nies with a digital payment platform. Called OREL Pay, it fulfils
a crucial gap in the country's digital infrastructure, seamlessly
connecting businesses with their customers. OREL Pay can be
linked to any bank account, payment card and allows utility
bill payments and donations to registered charities. OREL Pay
is blazing a trail for fintechs in this country to follow. Gold Award in Extra Large Best Exporter - 2019 Best Enterprise Award -
Winning these awards points to a shift in the economy. In Category ICT BPO - 2019 awarded by NCCSL Large - 2019
Awarded by NCE awarded by NCCSL
the past, traditional exports like tea, coconut, rubber and apparel
dominated the Presidential Export Awards. Now, OREL IT has
demonstrated that a tech company can make it to the top and
have a significant positive impact on the rest of the economy
by creating top-notch jobs and generating foreign currency
inflows to the country.
Biggest Employer in Providing Best BPO Related Solution
We are particularly proud of what we have achieved in terms Employment for Females Provider of the Year
of equal opportunities and gender equality. Female representation Entrepreneur Awards - 2019 (Medium & Large) - 2021
awarded by NCCSL awarded by SAPS
is 50% across the company and slightly higher in upper man-
agement, with our Chairperson Thilaka Ranjani Kodituwakku
continuing to inspire and provide the visionary leadership that
fuels growth. The majority of employees we successfully retain
are women. That sends a clear message to young people that
OREL IT is an exciting place to work and that they can be part
of an organisation determined to make a real difference in this Presidential Export Awards - Presidential Export Awards -
Women Exporter Best Value-Added
country. of the Year - 2019/2020 Exporter - 2020/2021
awarded by EDB awarded by EDB

BRAND VOICE
My current role was preceded by my 8-year

stint at the Axiata Group.
During that time, I was overseeing
financing projects, funding and investment
initiatives across the TMI footprint, business
turnarounds, running end-to-end processes
and negotiations in mergers and acquisitions
for the Axiata Group, as well as post-merger
integration initiatives across Axiata's footprint
in Bangladesh, Indonesia, Sri Lanka, Pakistan,
Thailand, Cambodia, Malaysia, Iran, Myanmar,
Laos, East Timor, Maldives and the Philippines.
I can proudly say that my success today
is due to the strong foundation that I gained
Gayan Koralage during my studies at our very own University
Director Group Strategy of edotco Group Sdn. of Sri Jayawardenapura, here in Sri Lanka. I
Bhd. and Acting Country Managing Director
of edotco Sri Lanka graduated in BSC Accountancy and Financial
Management.
BRIDGING CONNECTIVITY
You are a founder member of edotco Group
Sdn. Bhd. and currently responsible for the
long-term strategy of the Group. Tell us about
edotco and what kind of impact does edotco want
GAPS IN SRI LANKA

to make in Sri Lanka?
The edotco Group started its journey with 3
markets with 12000 towers. Now we operate in
8 markets with a portfolio of 40000 towers. We
currently focus on expanding our footprint in
Unleashing the potential for economic growth through
the Asian market through organic and inorganic
increased use of data
strategic investments.
D
Unlike conventional tower companies that
typically confine themselves exclusively to the
business of leasing space on infrastructure
irector Group Strategy of edotco Group Sdn. Bhd. and sites, edotco has developed an operational
Acting Country Managing Director of edotco Sri Lanka, niche for itself that extends beyond mere real
Gayan Koralage, shares his insights on what's on the estate management, and encompasses a wider
horizon for the telecommunications industry. spectrum of fully integrated service offerings
ranging from custom site builds, infrastructure
Can you share with us a little bit about yourself and your co-location, structural field maintenance,
journey to become a top Strategist at an award-winning energy provisioning/ management and even
Multi-national Tower-Co? fibre re-sale. In addition, edotco is equipped
The highlight of my career was spearheading the to provide essential in-building solutions
formation and growth of edotco - as a founding member ("IBS") and small cell deployments for 5G
since 2012 - which is now the 7th largest Tower-Co in the world, operating services to augment the in-fill and/or coverage
in eight Asian markets. requirements of MNOs.
As the Director of edotco Group Strategy, my role revolves around In the Sri Lankan market too, we are
long-term strategy, pricing and commercials, analytics, bite-sized M&A pursuing steady growth as a key enabler of
deals, new market entries, performance analysis, and project management. connectivity, providing infrastructure services
In addition, I also hold the role of Acting Country Managing Director of to telecommunications operators. edotco Sri
edotco Sri Lanka to oversee the expansion of our business in this market. Lanka's core business objective is to provide

I N T E G R AT E D I N F R A S T R U C T U R E S E R V I C E S
end-to-end "Integrated Infrastructure Services"

including Passive Infrastructure Construction
(lamp poles), Operation & Maintenance Services, DIGITALISATION CAN RAISE THE
Energy Solutions, and Remote Monitoring NATIONAL GDP BY MINIMISING THE
Services for the telecommunication industry and
UNDERCONNECTED AND UNCONNECTED
other sectors that require such services.
Given the current context where the world
LANKANS, WHICH IN THE LONG TERM, WILL
is experiencing exponential growth in data BRING SRI LANKA TO THE GLOBAL STAGE
usage during the past 20 months, as the general AS A VIABLE COMPETITOR
population continues to deal with the after-effects
of the Covid-19 pandemic, as an infrastructure
provider, we firmly believe that the backbone to
enabling such technological usage would have
to perform to facilitate high-speed network As an independent infrastructure provider, edotco works with all
connectivity. And we at edotco are pursuing this mobile operators in the country to avoid network overlapping and
agenda relentlessly. For instance, we completed parallel sites, to further reduce costs to the operators, and bring the cost
500 multi-purpose pole locations in 2021, and per GB down for subscribers. edotco utilises its in-house proprietary
we have recently signed up with the Board of network analytics tool (NaPA) to identify the gaps, and work with
Investment of Sri Lanka to add more poles to MNOs and their network insights to strategically deploy multi-purpose
our portfolio, with the intention of bridging the smart poles to address dark spots. edotco is also in partnership with
digital divide in the country, by connecting more city planning bodies and councils to build towers that serve multiple
unconnected and under-connected people. purposes (smart advertising, electric vehicle charging, CCTV security,
public Wi-Fi, environment monitoring, etc.) and ensure that they align
Despite the telco industry being on the brink of a with the aesthetics of the city. This is a beneficial strategy for the local
post-pandemic boom, we see a lot of complaints government bodies in the long term by saving budgets on street lighting
on social media on current connectivity issues. What and other smart street and surveillance expenditure.
is your perspective on the large number of uncon- Given these poles' smaller footprint and low cost, the deployment
nected and under-connected users in the country? times are much shorter than traditional towers. There will be a mass
The pandemic has changed almost all aspects of data requirement in the future due to new technologies such as IoT,
the way we go about our lives. For customers in machine to machine communication and smart cities, etc. edotco is
the telco sphere, the peak online time patterns perfectly positioned to address these requirements with our rapidly
have changed and have remained so even post- deployable, aesthetically designed multi-purpose smart poles.
pandemic. Subscribers experienced per capita
data consumption levels predicted to arrive in In a larger context, what does minimising current gaps in connectivity mean
5 years, in just 20 months. for Sri Lanka and its potential for economic development?
From a telco operator perspective, locations edotco has identified nearly 7000 network capacity gaps on the
with high data demand generated have also island. These vacuums fall below the minimum requirement of a 5Mbps
shifted to under-explored territories. Telcos were download speed. Sri Lanka also falls behind in broadband coverage at
simply not expecting nor prepared to cater to this 37% instead of 50% to over 90% in Asia.
sudden surge and change of data requirement due In 2016, the United Nations recognised internet access as not a
to school and work shifting to the home location. mere privilege but a basic human right. The vast array of opportunities,
Therefore, the pandemic has aggravated and information and digital inclusion presented to connected communities
highlighted the network gaps that have already relates to uplifting the digital economy of any country. This is important
existed in the nation. Given this unpreparedness, as a world bank study concluded that low-and middle-class income
many data consumers in Sri Lanka were left nations experienced a 1.38% increase in GDP for every 10% increase
unconnected and under-connected. This is the in broadband coverage. Digitalisation can contribute to the national
cause of the rise in complaints on social media GDP by minimising the underconnected and unconnected Lankans,
during and immediately after the pandemic. which in the long term, will bring Sri Lanka to the global stage as a
In your view, how does edotco expect to bridge viable competitor.
this digital divide?

THE HIGH COST

OF RED TAPE,
AND WHAT TO DO
ABOUT IT Getting rid of
pointless rules and
regulations can help
businesses emerge
from the shadows
and grow. Our experts
discuss what needs to
be done

RE:START 21

P
Shiran Fernando: There are official indica-
tors such as the World Bank Ease of Doing
Business. If you look at the history of it,
we’ve been swinging from around No. 80
to 110 in the last 10-15 years. There have
been issues across subcategories where
we have fallen through. From a South
Asian or Asian perspective, other coun-
tries have done much better. For example,
India has given a lot of focus to it and
done better, realizing how to advance in
these indices through carefully crafted
reform policies.
Looking at an index like the World
Bank Ease of Doing Business, we see the
subcategories of registering property, get-
ting credit, paying taxes, trading across
borders and enforcing contracts where
Sri Lanka does worse than the overall
ranking. If we were ranked 99 overall, we
ranked 130 or 140, and even around 160,
Pointless rules and regulations hurt busi-
in some of these subcategories. This is
nesses, especially small companies, keeping what’s dragging our overall place down.
them in the shadows and forcing them to We fell behind other countries that
stay small. There are several reasons for Sri have typically attracted FDI in the region,
Lanak’s thick red tape; including an outdated like Malaysia, Vietnam, Thailand and
India. If you look at the comparative
legal and regulatory framework, corruption,
performance of Sri Lanka versus these
rent seeking and a general distrust of private countries, they are doing much better in
capital. most of these indices. Even with certain
In the latest in a series of discussions called African and sub-Saharan countries, Sri
Re:start21, a collabortion between economy- Lanka doesn’t do too great in these four
or five indicators mentioned. That’s where
next.com and the Friedrich Naumann Foun-
we’re dropping off.
dation Sri Lanka office, featured a panel of Beyond the index, there are other
experts on the costs of red tape and how to things that matter for businesses, like pay-
fix it. Held in late 2021, the discussion was ing taxes. With regard to the Deregulation
moderated by Imran Furkan. Commission, the Chamber sent across
It featured Shiran Fernando, the Chief Econ- submissions of the private sector from
the members, in particular on taxation
omist of the Ceylon Chamber of Commerce, and how can we get rid of unnecessary
Roshan Perera, Senior Research Fellow at the documentation, for registration related to
Advocata Institute, and Saliya Wickramasur- SVAT or tax clearance and certifications,
iya, Acting Chairman of the Colombo Port and how those can be simplified.
City Economic Commission. When it comes to paying income
taxes, RAMIS was introduced a few years
Imran Furkan started by asking Shiran Fer- back. But there are operational issues
nando about the key areas that need to be around it, which the private sector finds
addressed to improve the investment cli- not conducive for the ease of doing busi-
mate. Excerpts of the conversation… ness. It is not only about bringing in these

RE:START 21
systems, but also having them updated.

Shiran Fernando There are other areas like para tar-
Chief Economist, Ceylon Chamber iffs, the Customs Act and National Single
of Commerce
Window that the private sector has been
talking about for the last 15 to 20 years.
But we’ve seen very slow progress. That’s
primarily why whether looking at the
index or other factors, we’re stuck in
the middle, compared to a lot of other
countries, which are doing much better
on deregulation.
How can Sri Lankan SMEs compete,

from a global perspective? How can
state-owned monopolies be tackled in
a way that protects all stakeholders and
brings about significant reforms that
filter down to the rest of the economy?
Roshan Perera: Some state-owned
enterprises are the largest commercial
institutions operating in this country.
Any inefficiencies generated in those
sectors would feed into the rest of the
economy. They operate either as monop-
olies or in an oligopolistic environment.
This is because there are certain legal or
regulatory, or technological or economic
barriers to entry.
An industry that has been in the
news recently is gas, where there are
just two players in the market. One is
a state entity but there’s also a private
entity. You would expect that if there’s
a private entity that would create more
competition in the industry, it should
be more efficient. Unfortunately, there
are several factors that prevent it from
being so, and one of it is price controls.
This has led to severe market distortions.
In recent times, we’ve seen the worst
manifestation of these distortions in the
form of shortages and queues.
However, these are only the seen
costs. There are unseen costs, where
because of price controls, companies are
unwilling to make long-term investments
as they aren’t sure if they’ll make an ade-
quate return due to these controls.
It therefore leads to under-invest-
ment. We’ve seen this in several

industry. Because of privatization and deregulation, they allowed

more entrants into the market. As a result, the sector became
more efficient and responsive to consumer needs.
How can Sri Lanka reach the potential of where its FDI needs
to be, and what steps need to be taken?
Saliya Wickramasuriya: The root cause of one of the aspects of
WHAT’S MISSING the issue is the dominant government presence in the economy.
IN MANY OF This leads to government control or efforts to control certain
THESE SECTORS sectors that leave those sectors open to influence and lobbying
at certain government institutions and ministries. We can’t have
IS GOOD our cake and eat it; we’ve got to let go of something.
INTERNATIONAL In this case, control is what we need to let go of, because
CLASS with control comes the ability to make mistakes. Take the pol-
icy of a given sector at a given time in any given government.
TRANSPARENT Every government brings into being certain policies, but the
REGULATIONS challenge is taking those policies from what they are, which is
ON HOW THE the highest thinking of the government, to operationalization,
which is a proper blend of debt and equity, and instruments
RULES SHOULD of investment that requires good regulations.
BE APPLIED What’s missing in many of these sectors is good interna-
tional class transparent regulations on how the rules should
be applied. This is what investors ultimately end up looking
at. They look at how to get in, how to stay in, how to get out,
their return on investment, how to commercialize this, how to
other sectors as well, particularly in large mitigate this and how to seek recourse for this.
utilities. We have the right idea, a fabulous product, a fantastic com-
There are also barriers to entry in these bination of the virtual (trade agreements and market access
sectors. To continue with the example of mechanisms) and the physical – our location, which has been
gas, it’s quite a capital intensive industry, leveraged by our shipping and maritime logistics sector to a
in the sense that you need huge storage great extent. We are ranked number 22 or 23 in the world, in
facilities. There are certain restrictions terms of container handling support. That’s not a small size
on setting up such facilities in the cur- of the pie. However, when the narrative is spun, we tend to
rent environment, and this prevents new leave it at the narrative and don’t support it with the structure
entrants from coming into the industry required for investors to take a step.
and developing a more competitive mar- This brings in a theory of marketing and sales, which is that
ket. you can increase the awareness of people about an opportunity,
If you have common storage facilities and you can do it successfully and globally. But in order to make
and allow other players into the market, somebody invest, which is to do what in the oil and gas sector
that would make it more competitive and is known as FID (final investment decision), there needs to be
as a result, more efficient and keep prices something called a compelling event. A compelling event drives
down so that the consumer benefits. By that person to take the decision to go to the board and get the
bringing in more players, you can make approvals required because Sri Lanka is the best place to be for
it more competitive and have downward them at that time. We haven’t been very good at identifying
pressure on prices. these compelling events.
SOEs should be subject to more mar- The problem with that is compelling events change from
ket competition, because that will lead to person to person. So the necessity is we have to market ourselves
greater efficiencies, and improve service broadly and seek proper investment to get inside the minds
and performance. The classic example of each and every individual investor, understand what their
from a Sri Lankan context is the telecom pain points, business processes and revenue models are, and

RE:START 21
seek the compelling event within that structure.

If we can engage on a one-to-one basis with
not more than 10 or 15 international investors
who are in this area, as they’ve already taken the
step to move outside their own jurisdiction, we
Saliya Wickramasuriya can have that conversation more successfully.
Member at Colombo Port City
Economic Commission Right now, we’re leaving those conversa-
tions to promoters and people in the pri-
vate sector, which is not a bad thing. It’s
just that the full weight of government
influence to make something a suc-
cess cannot be brought to bear. As a
result, there’s a lot left up in the air
and to somebody else to sort out,
and grandfathering that could be
done by the government that’s
not getting done.
From an investor’s point of
view, in an economy that is
state dominated, they need the
state to be speedy in action. If
they perceive that the state
is not speedy in action or is
distancing themselves from
the key questions or the hard
questions, it’s not going to
be very compelling to them.
Over the years, we’ve suc-
ceeded in building ourselves
a fantastic story to sell, but
haven’t used the network that
we have in place to sell it well
enough.
When I was in the BOI, we
cut down on broad-based scat-
tergun roadshows and had dia-
logues with the existing inves-
tors to see what could be lever-
aged from their own networks,
because one testimonial is worth a
thousand printed words. From that
point of view, we haven’t maintained
a very strong focus on the individual
business case for investors and in Sri
Lanka’s case, the same applies for the
Port City.
At the moment, we’re focusing on
what we would call anchor investors.
It’s a fantastic value proposition if put in the
right sense, but an anchor investor will need a

customized approach, and that customized approach in some

ways overcomes many of the regulatory barriers and much of
Roshan Perera
the red tape, as you call it. We need to learn there’s a difference Senior Research Fellow,
between marketing the proposition and making the actual sale. Advocata Institute
Roshan: We need to look at labour reforms, because the cost of
hiring is very high, compared to other countries in the region. We
are not a low-cost destination in that sense in terms of labour.
Another area is infrastructure. In certain areas, we are very
strong in terms of infrastructure but there are infrastructure
gaps, which we need to address, particularly in terms of digital
infrastructure. These are aspects we need to think about to be
able to attract investment.
Shiran: Sri Lanka has historically banked on giving long tax

holidays or trade tax incentives, but the investor is looking for
more than that, which is policy consistency, so that they know
what the path is at least for the next 10-15 years and beyond.
Historically, we’ve relied on giving tax incentives, haven’t
really deregulated and sometimes, over-regulated certain mar-
kets. Usually, the trade-off has been on the tax side, which has
had implications for the fiscal side as well. It’s difficult to unravel
because there has to be some level of incentive or attraction for
investors to come in; from their perspective, consistency is key.
Another aspect that investors are looking at, especially on
the manufacturing side, is land; having land available where
you can plug and play, without having underdeveloped land
and an investor having to start from scratch.
When laws and regulations are convoluted, it opens the door

for those who are interpreting those laws and regulations
to enrich themselves. We are reaching a critical juncture in
our development journey, so how do we tackle corruption
in Sri Lanka?
Saliya: Making things easy for investors, and thereby sim-
plifying the process of engagement and ironing out the pain
points, is not something to be done lightly. There is the need SRI LANKA HAS
for regulating and to regulate relevant parts of a business, so HISTORICALLY
we can’t do away with regulations completely. Due diligence
is a person who they say they are.
BANKED ON
All those things are important. What is happening is a mix- GIVING LONG
ture of both. Regulations themselves are causing corruption, TAX HOLIDAYS
because of the rent seeking nature of many of the steps that OR TRADE TAX
are taken and the number of approvals required for everything.
There is value in reducing the number of steps and pain points
INCENTIVES, BUT
to get approvals, imposing deadlines and imposing if and/or THE INVESTOR
no responses are heard by, and so on and so forth. This is fairly IS LOOKING FOR
standard process in other parts of the world.
There’s also a case of corruption causing regulation. Because
MORE THAN THAT,
of the tendency of successive governments to strangle the WHICH IS POLICY
mal-intents of 5%, they inhibit the expansion potential of 95%. CONSISTENCY
RE:START 21
From that standpoint, we need to be a little smarter about how couldn’t really act beyond that because
we deregulate. Margaret Thatcher did it extremely effectively it didn’t have powers with vested with it.
in the UK in the 1980s; thousands upon thousands of obsolete That commission no longer exists. There
statutory notices, acts and regulations were removed. But we isn’t a procedure, at least within govern-
should also be mindful that we don’t want to create another ment or in policy, to scrutinize procure-
problem. ment. We may need to bring back some
Let’s say we have good policy and regulation to support of those measures; maybe some of them
that policy, to drive it into operation equitably. What we often weren’t working fast enough, but at least
then tend to do is confuse things with numerous circulars and they were able to highlight certain gaps.
gazettes, which act in a spirit that is intended to address a dif- On the other hand, some of the leg-
ferent problem but affects everybody else. Simple examples can islation has been there. For example, Sri
be given where a gazette issued for a particular purpose then Lanka was one of the first countries in
puts a blanket dampener on any public sector official taking the region to bring in digital signatures
the initiative to do something in a different sector. through the Electronic Transaction Act.
We must be mindful of not just the policy, but the regulations But we’re not seeing too many institutions
and sometimes ad hoc intervention in those policies by way of or the private sector making full use of it.
different circulars, because every single thing the government Those are the low-hanging fruit in
does sends a message, and that message goes to places we can’t terms of adoption, which can minimize
control. If you’re looking at investment from the outside, we the need for manual processes and
must be mindful of the messages we are sending. thereby reduce corruption.
Roshan: Since we’re looking for the government’s point of What are the biggest barriers to seam-
view, one area is transparency. There’s the open government less trade in Sri Lanka and how can we
initiative, which enables citizens to have greater oversight over tackle the barriers?
the operations of government to strengthen accountability. The Roshan: For a country with such a small
Right to Information Act was one major step in this process. market in terms of size and per capita
But its implementation is key, because it’s not just having the [income], trade has to play a major role
act, but you also need to have that enabling environment to in its growth strategy, and everybody
facilitate and make it implementable. has to focus on how to increase trade,
We need to encourage the use of technology in government, particularly exports.
because that’s a powerful tool to combat corruption. It can Although Sri Lanka was one of the
help minimize human interaction. Another aspect is to enable first countries in South Asia to open its
the collection of information and data, which can be shared borders to trade and foreign direct invest-
between institutions, and be made available to public scrutiny ment, its trade openness index has fallen
and improve accountability. below most countries. This is something
It’s not just technology. You need strong institutions that we need to address.
are able to implement these processes and procedures. You There are regulatory barriers. Verité did
also need to give incentives to public officials to provide infor- a detailed study particularly focusing on
mation accurately and in a timely way, so that people can use the agriculture sector. Some of the major
that information. issues that they identified cut across all
You need collaboration between sectors, not just government. exports.
When we talk about corruption, we only talk about government. One major issue exporters complain
But we need two hands to clap. The private sector needs to be about is regulatory barriers, in terms of
involved, along with civil society and citizens. Corruption is high tariff rates. Our tariff rates are high
not only within borders; we’re seeing it across international compared to other developing coun-
jurisdictions. You need collaboration between jurisdictions to tries. Tariff rates are supposed to pro-
be able to address corruption. tect domestic industries, but if they’re
too high, they become anti-competitive
Shiran: There was a national procurement commission. and affect our export industries. That is
Unfortunately, in its previous mode, it could only flag and being seen now, particularly with the new

import restrictions that have come in. These non-tariff barriers,

where we’ve had across-the-board import restrictions, have
had an adverse impact on exports.
There is a case-by-case basis, and you come back to red tape.
For whatever the exporter needs to be removed, they have to go
to Customs to get it done. There’s a lot of red tape involved there.
Currency and exchange rate policy is a regulatory barrier. THE CONCEPT OF A
It is a price control, since you’re controlling the price of for- ONE-STOP SHOP OR
eign exchange. That has an anti-export bias. Basically, you are
favouring imports versus exports by keeping your currency at
SINGLE WINDOW
a rate that is not the market rate as we see it. Those regulatory FACILITATION IS
barriers need to be addressed very quickly. Unless we improve PART MINDSET
exports, at least in the long term, we won’t able to come out of
this macro situation that we are in.
AND THOUGHT
There are also procedural barriers. The recent Budget tried PROCESS. IF A
to address some of these by identifying that particularly for PARTICULAR
start-ups, there are difficulties in registering a business. These
are aspects that need to be addressed across the board, not on a
STAKEHOLDER
piecemeal basis. There has to be across-the-board identification DOES NOT WISH
of these barriers and then addressing those. But it’s a start, in TO TAKE THE
terms of some of the aspects addressed in the Budget. PROBLEMS OF
Lack of information is another barrier for exporters; you
don’t know what exports are available. The Chambers pro-
OTHERS AND SOLVE
vide information. But from the regulatory authorities, there THEM, NO AMOUNT
is a lack of information. There is a Trade Information Portal, OF PROCESS WILL
but is it updated regularly, and is all the information accurate
and available? These aspects can be adjusted and considered
ASSIST THAT
low-hanging fruit; they don’t cost a lot of money but would
have a huge impact on exports. countries which have SME export portals?
There are piecemeal measures, con-
Shiran: We often talk about retail agreements and such, but necting the dots between the two, so that
before getting into that, you need to put your own house in when you go to the negotiating table, for
order. The biggest issue our trade negotiators face is the mul- these FTAs or any other strategic tool,
tiple para tariffs that are in place. How do you phase them out we know what we’re negotiating with
without disrupting trade? Given the contribution of taxes to and what the advantages will be for the
overall fiscal revenue, how do you do it in a smart way? country, without always coming back and
It’s a bit of a chicken and egg situation, because we want facing a backlash when they are signed.
to add FTAs, with the likes of China and Bangladesh, but we
also need to look at the trade components. Saliya: In terms of the trade aspect of Sri
There are tools being developed. The Trade Information Portal Lanka, we’ve always been pivotal. It is
is being used, and the Chamber, together with institutions, is said that in the old days, we connected
conducting workshops in the regions to educate SME exporters Rome with the king. From that point of
that these facilities are available, to get the knowledge out there, view, Sri Lanka has lived on trade since
how to use it, what to look for and get feedback from them on the Middle Ages. As a by-product of that
the information they are looking for. activity, there have evolved certain things
There’s a role that chambers like ours and the private sector we don’t look at closely enough and cer-
can play in getting more use for these tools. You also have other tain things we look at too closely. One
market access tools. The EDB has a tool to market products, but thing we look at too closely is the fear in
that’s more on a B2B basis and on trading products. How can any trade activity that there is leakage
you get more use for them among SME exporters like in other into the local market.

RE:START 21
When you consider the size of the local market, with respect three or four centres of excellence – peri-
to the potential activity that is being traded, the efforts expended odic, they come and they go – and one of
at addressing those issues spawn huge amounts of red tape, them is the driving license or DVLC. There
which disincentivise anybody from coming into this business was a time when it was an absolutely
in Sri Lanka at all. humming machine. The other one was
We are pretty significant in the world of shipping and mar- the Pensions Department, which is still
itime services, but provide less than 1% or about half a percent a very customer-oriented place of call.
of the world’s bunker fuel sales. With the captive customer base And the third is the ID and passport office.
that the Port of Colombo has, the fact that we’re not selling That again, went up and then went
more bunkers implies several things. There’ll be justification down. But we have been through peri-
when you ask the industry about it. But what it means is people ods of greatness where institutions that
haven’t spent enough time focusing on proactive policy inter- are not even mandated or required to
vention to bring the market potential up to what the potential cooperate, collaborate and assist have
indicates it could be. done so because of the mindset that has
There are many different reasons for that, primarily, people been inculcated within them. To a great
protecting their own positions within the industry. There’ll be deal, it requires putting the right people
people who perceive interventions as geopolitically laden. But in the right places and giving them the
all it needs is a very clear, simple, transparent national policy freedom to act.
on how the industry as a whole can increase. The activity of When we delegate to officials the
trading brings with it all sorts of other different aspects that responsibility of taking a decision, we
don’t get a holistic look at. must recognize that those who delegate
must be responsible for the decision.
How do we increase coordination, not just within government, Delegating to a manager and then hold-
but also public and private partnerships? ing them responsible for whatever hap-
Saliya: The concept of a one-stop shop or single window facil- pens isn’t the desired management style;
itation is part mindset and thought process. If a particular you’ve got to be the boss that empowers
stakeholder does not wish to take the problems of others and your people and stands by them. We find
solve them, no amount of process will assist that. that lacking because individual institu-
Part of it is encouraging the business of a good customer-ori- tions have so many levels of hierarchy
ented attitude, which is something we have lost over the over that everyone needs to go up.
the years, because a lot of facilitation can be done informally. If you talk to Sri Lanka Customs,
When you get to the formal part of it, I will speak for the Port you will find that officers do not wish
City Act and what it purports to do, which is the introduction to engage even with officers in another
of a formal single window facilitation by legislating that reg- branch, because that’s not their job. We
ulatory authorities have a physical presence in the Port City have compartmentalized ourselves by
Commission premises. effectively truncating accountability and
Anybody coming there will be able to have the conversations responsibility.
required, to get the approvals required that the agency would In Port City, we plan to remove the
otherwise demand of the project. That’s a good approach. It obstacles for any transaction we can pos-
is yet to be tested, but will be very soon, because ultimately, sibly think of by keeping transparency
that’s not the final solution. It’s a means to get mindsets to that using technology to accomplish certain
point where all our public facing officials have that desire to objectives, while still making it as painless
participate in solving an investor’s problems. It’s a team effort. an experienced as possible. It’s taking a
You can legislate it, and have the customs, immigration and little time to compose that product, but
other offices sitting here. But that’s not really going to force them when it comes out, will offer a different
to do their job. It’s something that must exist in the hearts and customer experience than we would
minds of the people involved in attempting to do so. It’s easy expect to have outside.
to have all the power and still not be interested in helping. So
we must encourage places where service has to be seen. Roshan: The incentive structure is very
In my limited experience here in Sri Lanka, there have been important. Government officials have a

tendency to fear that they’re going to last Budget, the private

either lose a job or not going to be as sector retirement age was
important when they give over some of extended. There wasn’t
the responsibilities. You have to change a public policy debate or
the incentive structure and they need anything like that, but post
to understand the overall objective. it, everyone had a view.
What are we really aiming at? Are we Finally, the bill was passed
aiming at keeping our turf and keeping with a few provisions. So
that within the departments, or is there a WE CAN TAKE it’s the way these things are
higher objective? That needs to be incul-
cated in the entire government service or
AN EXAMPLE put out.
Maybe it shouldn’t be
sector. It’s not only in government but a FROM OTHER from these statements but
mindset change. COUNTRIES. rather, using frameworks
Give the right incentives. It’s not about COUNTRIES LIKE like the National Labour
salary, because salary is only a small part.
There are so many other incentives. We
SINGAPORE Advisory Council, to force
upon it. Right now, it’s a
need to look at case studies to see how HAVE A TRADE great opportunity because
those particular institutions transformed NET. ITS TRADE post-COVID especially for
from what they were to where they are
now, and how government officials do
OPENNESS IS the service industry, some
of these regulations are not
that job or make that transformation. 320%. KOREA even applicable.
Those are some lessons that we need to HAS A VERY We’re looking at a
learn from and try to replicate or make GOOD PORTAL, A Labour Act which is so
more ubiquitous across all departments.
SINGLE WINDOW many years back. There
aren’t provisions for part-
Shiran: With the passport offices and a CONCEPT, AND time work, contract work;
few other agencies, there is an incentive ITS TRADE there are a lot of grey areas.
to the process in place. It’s keeping those
functional and alive. Institutions need to
OPENNESS IS Other countries are moving
forward towards four-day
be well-led. If you have a very charismatic MUCH HIGHER weeks as well. But it’s a
leader that people buy into and believe, THAN OURS slow process to get there.
the change will happen. But beyond that, That is also the opportu-
you might need an institution person to nity to get more women into
continue these practices. There’s focus the labour force, because
on the public sector and the need to do the pandemic highlighted
better. and spotlighted the impact
Even in the recent Budget, you saw a it does have on families and
focus on reducing wastage. Part of that females who are working in the labour force, and even males,
is coming through better coordination because they’re at home and have to play a bigger role as well.
and giving more ownership to come up These laws need to keep up. An economic situation like this
with better plans, better budgets, the way highlights the need for these tools, which are cross-cutting. If you
they spend, how they staff. Hopefully, look at education or labour, these now need to move forward.
that culture is created so that you don’t Otherwise, investors will think of another particular country.
need a person particularly to keep those What has made Sri Lanka attract a lot of IT firms is the skills,
practices going in. not necessarily on the labour side. But if the labour side gets
sorted, there’ll be opportunity and more people willing to come
How can we tackle labour market in. Things like shift work in the IT industry are taking place.
reforms? But those provisions are not even in these acts governing it.
Shiran: It’s about the way these issues There’s lot of discussion, but a roadmap of how we can get
are brought up. For example, in the to that needs to be established, without being pre-empted in

RE:START 21
a budget speech or some other statement, which then arouses tal ID and many other things have been
everything, and a lot of noise comes in and the end objective built off this. If the government decides
is lost. it wants to give relief to a particular
region or wants to build something, it
Roshan: With an ageing population, we need to be mindful and gets built, because cash transfer is made
that you have this huge pool of labour that’s outside the labour to a particular household. That’s a key
force, which is the female labour. It was disappointing that tool, and the government has realized
the Budget didn’t discuss that or have too much to address it. and is prioritizing it, but it needs to get
Particularly given the experience we’ve had with the pandemic to the end of it.
with school closures and lockdowns, we need to have thought
about this much more closely. Roshan: Getting the single window facil-
We don’t have to reinvent the wheel; there are other countries ity at customs is a game changer. That
that have done this before. We can learn from their experiences will facilitate cross-border trade. That
and see how we can engage this huge pool of labour that is needs to be looked at for many reasons,
outside the labour force. basically transparency and corruption.
There is also a huge pool of informal labour very badly There’s also the time and cost of com-
affected due to the lockdowns and the pandemic. We need to pliance. Exporters or importers have to
see what kind of protection can be given. Just as much as we spend a lot of time to clear goods or get
need to tackle some of these labour regulations, we need to see approvals. Exporters still have to submit
what safety nets are available, because informal workers can documents in hardcopy form and not all
be out there if there’s a shock. Those aspects also need to be agencies are linked.
looked at when we’re looking at labour regulation. We can take an example from other
countries. Countries like Singapore have
Saliya: Reforms are necessary, because they’re an essential part a trade net. Its trade openness is 320%.
of overhead costing in terms of project financing from an invest- Korea has a very good portal, a single
ment point of view. However, we have to be mindful that our window concept, and its trade open-
labour market, the actual individual workers, suffer protection. ness is much higher than ours. These are
At the same time, looking at where things are in the current examples of how something simple could
state of the economy, we lost a couple of chances to affect affect a change in the entire international
effective reforms. The conflict years were one perhaps, and the trade in Sri Lanka.
COVID period was another. I’m simply hoping that there won’t
be a recession that gives us a third opportunity. But whatever it Saliya: Essentially, where the world is
is needs to be done fairly quickly, because the longer it’s kept, going is, the more its able to individualize
the more political will that will be required. information in terms of the digital ID, the
Digitalization has been used by many countries to remove more it is able to individualize interven-
a lot of red tape and bring about transparency and so on. What tion. People are being treated very specif-
are your views on how that can be applied to Sri Lanka? What ically. Medicine is being administered. It’s
are the key areas to focus on to get some quick wins and build bespoke treatment to individuals now.
further on this? It doesn’t take much to assume that
eventually, tax collection and incentive
Shiran: We’ve be talking about this concept of digital ID for granting to people who have been out-
about 15-20 years. Initially, the issue was whether you need performers or outliers in the field of pro-
a physical card, and that whole procurement process took a viding solutions to their customers can
long time. But now, a lot of countries have done it without be and must be the end result of any
anything physical. attempt to digitalize. Otherwise, it ends
If that can come in, it can be a game changer in the sense up being a weapon of Orwellian nature.
of how we collect taxes, and look at healthcare, trade taxes, Knowing isn’t the message or the rea-
and give out welfare and targeted relief whenever things like son; it should be less the security part and
the pandemic emerge. In that sense, there is a big opportunity. more the service part that we can expect.
The best example is how India has done it with their digi- But we must move away from paper.

DIOGENES
‘INNOVATE OR DIE’
ARE THE MAN’S
WATCHWORDS
FOR 2022
And be first, be smarter - or cheat!
BY SOCRATES
‘Innovate or die’. These famed iron’s hot, and leave no money-mak-

words of legendary manage- ing stone unturned…
ment guru Peter Drucker have Diogenes has stopped listening.
gone to The Man’s head as he As the toreador who took all the
chairs the New Year’s Day meet- risks with the bearer bonds and
ing of the CatAstrophe invest- much else besides, and who will very
ment fund’s asset-relocation team. likely be at the sharp end of whatever
Alongside Diogenes Fernando are The The Man has in mind, ‘innovate or die’ has
Man’s banker buddy and loan-shark Boris ‘The unfortunate and unwelcome connotations.
Bite’ Fernando. The latter is in attendance solely on the He recalls philosopher Friedrich Nietzsche’s best-
grounds that, as Lyndon Baines Johnson so memorably known aphorism—‘what does not kill me, makes me
said of J. Edgar Hoover, “it’s probably better to have him stronger’—and Mahatma Gandhi’s take on facing the
inside the tent pissing out, than outside the tent pissing in”. future: ‘Live as if you were to die tomorrow.’
Diogenes, having spent most of New Year’s Eve night Which was easy for them to say, he thinks, but not
celebrating with the local riff-raff at the Feisty Fisherman, is quite in accord with his New Year’s resolutions to a) avoid
barely compos mentis, while the banker buddy exudes the putting his head any further into the lion’s mouth, and b)
bedside manner of someone with his finger firmly on the to assemble an escape kit for if or when the shit hits the
nation’s financial pulse, if not it’s jugular. fan and he finds himself the subject of an Interpol APB.
The Bite, meanwhile, is seemingly dumbstruck by his first, On the other hand, if that last were to happen while
and no doubt last, admittance to The Man’s luxurious inner he’s abroad and in possession of another sizable chunk
sanctum, with its dark oak panelling, crystal chandelier, and of illicit bearer bonds, the future could very well take
antique brass-bound mahogany desk on which sit gilt-framed care of itself, which might be something worth thinking
photographs of the not-so-great and the not-so-good. about…
Right then, listen up, says The Man, as he quotes megab- He is jerked back to reality by The Man banging on
anker Jeremy Irons in Margin Call: There are three ways to the desk. I want ideas, he says, innovative ideas, ideas
make a living in this business—be first, be smarter, or cheat! that will make CatAstrophe a name to be reckoned
And unlike Mr Irons, he adds, I do cheat, and will continue to with in the assets-relocation business! And I want them
cheat for as long as everyone else is doing likewise..! yesterday! So Happy New Year, onwards and upwards,
Moreover, he says, we are entering a not-so-brave new and see yourselves out!
world of economic fear and uncertainty, with Scorpio in the Diogenes has now gone back to bed, where he intends
seventh house and pestilence stalking the land! Therefore, we to stay until his head stops spinning, which might take
must be ready to take the bull by the horns, strike while the some time…

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SRI LANKA SHOULD NOT USE FOREIGN RESERVES FOR IMPORTS IF IT WANTS TO END ECONOMIC CRISIS

2 ECHELON.LK JANUARY 2022

I BELIEVE ANY PERSON HAS IT IN

JANUARY 2022 ECHELON.LK 3

10 ECHELON.LK JANUARY 2022

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14 ECHELON.LK JANUARY 2022

Lurking danger of the herd

SHAMINDRA KULAMANNAGE, EDITOR-IN-CHIEF

JOIN THE ECHELON COMMUNITY Facebook

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DEPUTY EDITOR Devan Daniel

CONTRIBUTORS Chanka Jayasinghe, Mahadiya Hamza

COLUMNISTS Bellwether, Rohan Samarajiva, Nick Hart, Chanuka Wattegama

DESIGN & LAYOUT Buddhika Pigera, Ashantha Ranasinghe, Shanaka Sumanasekara

PHOTOGRAPHY Trevor Sylvester, Saaliya Thilakarathna

EXECUTIVE DIRECTOR Antoinette Ludowyk

PUBLISHER Echelon Media (Pvt) Ltd

CHAIRMAN Channa De Silva

For reprint information,

18 ECHELON.LK JANUARY 2022

SET A NEW RECORD

SEP 2021 Rs111.4Bn

20 ECHELON.LK JANUARY 2022

Sep 2020 Sep 2021

JANUARY 2022 ECHELON.LK 21

explained. However, the swaps did not help. The

22 ECHELON.LK JANUARY 2022

D inusha Bhaskaran, Chief Executive

24 ECHELON.LK JANUARY 2022

What is your vision for Vallibel One? What kind of legacy do

JANUARY 2022 ECHELON.LK 25

26 ECHELON.LK JANUARY 2022

JANUARY 2022 ECHELON.LK 27

Markets and the economy don’t always move in

IMF or not, reforms are a must

Portfolio management during

JANUARY 2022 ECHELON.LK 29

SRI LANKA SHOULD

ILLUSTRATIONS BY: TREVOR SYLVESTER

30 ECHELON.LK JANUARY 2022

JANUARY 2022 ECHELON.LK 31

not the exchange rate SUSPENSION OF CONVERTIBILITY

the monetary base

32 ECHELON.LK JANUARY 2022

If interventions are made for imports with reserves, and

JANUARY 2022 ECHELON.LK 33

ILLUSTRATIONS BY: BUDDHIKA PIGERA

34 ECHELON.LK JANUARY 2022

JANUARY 2022 ECHELON.LK 35

36 ECHELON.LK JANUARY 2022

38 ECHELON.LK JANUARY 2022

JANUARY 2022 ECHELON.LK 39

Can we start with opening comments?

40 ECHELON.LK JANUARY 2022

Sanjeewa Fernando: We face a challenging

If the international sovereign bonds (ISBs)

JANUARY 2022 ECHELON.LK 41

low the fixed income market did not attract

How much of the current asset prices is due

42 ECHELON.LK JANUARY 2022

IMF does come in and puts in restrictions,

Over the last year or so, the market index