Economic Capsule - November 2021

Economic Capsule
December 2019
276th
Issue
Research & Development Unit
Economic Capsule
November 2021
298th Issue

C O N T E N T S
BANING & FINANCE
 CBC Results 30.09.2021 (Bank)
 Commercial Bank ranks amongLMD Top 10 companies
 ComBank wins Best Corporate Citizen Sustainability Award 2021
 ComBank receives ‘Most Admired Companies’ award
 ComBank’s automated credit card on-boarding system wins SLASSCOM
award
 ComBank ranked among Sri Lanka’s 10 most women-friendly workplaces
ECONOMY & BUSINESS
 Budget 2022 – Summary
 Expenditure & Revenue Estimates 2021
 Budget 2022 Highlights
 Sri Lanka to raise foreign funding via securitizing remittance surrenders
 Cabinet go-ahead for tourism promotion in four major markets
 Sri Lanka takes decisive steps to go digital
ECONOMY & BUSINESS (Cont.)
 UK’s Flexicare Group sets up USD 15mn medical device production plant in
Bandaragama
 External sector performance Jan-Sep 2021 (USD Mn)
 Sri Lanka’s Manufacturing PMI – Oct 2021
 Sri Lanka’s Services PMI – Oct 2021
 Altair – biggest FDI in real estate business so far
 News Snippets
INTERNATIONAL
 Shipping rates surge threatens global economic recovery, UNCTAD says
 El Salvador plans to create a ‘Bitcoin City’ and raise $1 billion via a ‘Bitcoin Bond’
 Mastercard Partners with Leading Digital Currency Companies Across Asia Pacific
to Launch the Region’s First Crypto-Linked Payment Cards
 Turkish lira hits all-time low before country’s central bank meeting
 UK inflation surges to a 10-year high of 4.2%, worse than expected

CBC Results 30.09.2021 (Bank)

CBC Results 30.09.2021 (Bank) – (Cont.)

Commercial Bank ranks among LMDTop 10
companies
The Commercial Bank was ranked 4th in the LMD Top 10 organizations by Revenue
and 2nd in the same category by Profits.

ComBank wins Best Corporate Citizen
Sustainability Award 2021
The Commercial Bank of Ceylon PLC was declared
Sri Lanka’s ‘Best Corporate Citizen’ in 2021 by the
Ceylon Chamber of Commerce (CCC), achieving the
pinnacle of recognition for sustainability and good
corporate citizenship in the country’s corporate
sector.
Commercial Bank also won the award for the
Finance sector at the awards for ‘Sector Based
Sustainability Champions,’ the ‘Governance’
certificate in the category awards for ‘Consistent
Commitment and Continuous Improvement’ and was second runner-up for the newly-introduced
award for ‘Demonstrated Resilient Practices for COVID-19 Context,’ in addition to receiving an award
for being among the Top 10 Best Corporate Citizens in Sri Lanka

ComBank receives ‘Most Admired Companies’
award
The Commercial Bank of Ceylon received the
award as one of the10 ‘Most Admired
Companies in Sri Lanka’ which was
presented by the International Chamber of
Commerce Sri Lanka (ICCSL) in collaboration
with the Chartered Institute of Management
Accountants (CIMA).
This is the fourth consecutive year that the
Bank was ranked among the top 10
companies in this list

ComBank’s automated credit card on-boarding
system wins SLASSCOM award
The Commercial Bank of Ceylon, a leader in tech-based banking products and services,
recently won the Banking and Financial Services Category Award presented by the Sri Lanka
Association for Software Services Companies (SLASSCOM) for its case study on robotic
process automation (RPA)
The RPA Award for the category was presented to the Bank for its end-to-end automation of
the credit card on-boarding process, launched to improve the customer experience and
reduce operational costs.
Commercial Bank’s case study won one of 10 multi-sector awards at the latest edition of
SLASSCOM’s annual conference titled ‘Digital Genesis.’ The Bank won in the same category
last year too, for its User ID Management function which automates key Human Resources
Management request processes.

ComBank ranked among Sri Lanka’s 10 most
women-friendly workplaces
processes including recruitment policy, benefits and pay, training and development opportunities, and
policies on abuse and harassment, contributed towards winning this award.
Positioned as Sri Lanka’s first ever gender equality
awards, the WFWP Awards were launched to
recognise organisations that encourage and empower
women at the workplace, add value to the role of
women in the workplace and reiterate Sri Lanka’s
commitment to the United Nation’s Sustainable
Development Goal 5, which covers gender equality
and opportunity.
Commercial Bank’s commitment to the principles of
equal opportunity irrespective of gender and other
variables in its Human Resources Management

Budget 2022 Summary
Budget Summary 2021 Estimate 2022 Budget
Total revenue and grants (Rs. Bn) 1,561 2,284
Tax revenue (Rs. Bn) 1,556 2,274
Total expenditure (Rs. Bn) 3,387 3,912
Budget deficit (Rs. Bn) (1,826) (1,628)
Total foreign financing (Rs. Bn) (48) (179)
Total domestic financing (Rs. Bn) 1,874 1,807
Total revenue / GDP (%) 9.4 12.3
Revenue Proposals for 2022 Rs. Mn
Surcharge Tax 100,000
Social Security Contribution 140,000
VAT & other charges 14,000
Special Goods and Services Tax 50,000
Proposals relating to Motor Vehicles 4,000
Licensed fees, auctions and other non-tax revenue 25,000
Source: MoF

Expenditure & Revenue Estimates 2021
Source: PwC

Budget 2022 Highlights
• Tax Surcharge: A surcharge tax of 25% will be charged on individuals and
companies with a taxable income over LKR 2 Bn for the Y/A 2020/2021.
• Social Security Contribution: w.e.f. 01 April 2022, a Social Security Contribution of
2.5% will be applicable on liable turnover exceeding LKR 120 Mn per annum.
• Special Goods and Services Tax: w.e.f. 01 January 2022, a special GST would be
implemented on telecommunication, motor vehicles, cigarettes, liquor, betting,
and gaming sectors.
• VAT on Banks and Financial service providers: The current VAT on Financial
Services is to be increased by 3% from 15% to 18%. The additional tax of 3% is to
be imposed only for 12 months from Jan 2022 to Dec 2022.

Budget 2022 Highlights (cont)
• Introduction of a fee in respect of vehicles which undergo motor traffic accidents
and allowing the insurer to reimburse the fee from the insurance.
• Introduction of a fee for modernization, modification or upgrading of vehicles.
• An opportunity will be provided to legalize all unauthorized roadworthy motor
vehicles and motorcycles by paying a penalty during a period of amnesty.
• Introduction of a licensing system for conducting leisure related activities at
premises developed as special zones.
• Issuance of telecom related licenses by the Telecommunication Regulatory
Commission will be carried out by way of an auction.
• No business registration fees will be charged in the year 2022 in order to provide
an impetus for new start-ups.

Sri Lanka to raise foreign funding via
securitizing remittance surrenders
Sri Lanka announced plans to securitize the remittance inflows surrendered to the Central Bank in a
bid to raise medium term foreign currency funding aimed at easing the pressure on the domestic
foreign exchange market until inflows from tourism and other sources normalize.
To this end the Central Bank is calling for Request For Proposals (RFPs) from banks, institutional
investors and investment houses for consideration, in order to be appointed as counterparts or
arrangers for what is called a Securitised Financing Arrangement (SFA).
Securitisation is an arrangement often carried out in banks and financial markets where the issuer
pledges a pool of selected assets, which generates receivables for raising money at a negotiated rate
and the repayment happens through the cash flow receivables underlying the asset.
The Central Bank seeks to securitise the 10 % of remittance income mandated for surrender by licensed
banks to the Central Bank. And the money raised through the securitisation will be used to financing
the expenditure approved in the budget.

Cabinet go-ahead for tourism promotion in
four major markets
The Cabinet nod has been given to implement tourism promotion programmes in main tourism source
markets of United Kingdom, Germany, France and India targeting 2021/2022 tourist season as an
add-on act to the global tourism promotion programme.
Tourism Minister sought the approval of the Cabinet of Ministers to implement the tourism promotion
programmes targeting these markets.
Sri Lanka Tourism Chairperson Kimarli Fernando said the programme would be rolled out as soon as
possible in the four markets having already chosen the implementing parties.
The Government Information Department noted that this programme will be launched as part of a
collective effort launched by the industry to revive the tourism industry affected by the Covid-19
pandemic.

Sri Lanka takes decisive steps to go digital
The Government in October agreed upon a slew of decisive steps to accelerate Sri Lanka’s digital take-
off in a bid to create new growth opportunities and improve efficiency, competitiveness and
transparency.
On a proposal made by Minister of Digital Technology and Entrepreneur Developmen, the Cabinet of
Ministers approved the appointment of committee comprising Government and private sector
individuals to advise the Cabinet on the possible regulations, acts and laws in cryptocurrency mining,
digital-driven banking, adoption of cryptocurrencies and blockchain technologies.
This committee will be mandated to study the regulations and initiatives of other countries such as
Dubai, Malaysia, Philippines, EU, and Singapore, etc., and propose a suitable framework to be
implemented in Sri Lanka. The committee will also study the laws and regulations of other countries in
terms of anti-money laundering, terrorism financing, criminal activities, and the Know Your Customer
(KYC) processes.

UK’s Flexicare Group sets up USD 15mn medical
device production plant in Bandaragama
Flexicare Lanka, a fully-owned subsidiary
of Flexicare Group, UK, has set up a state-
of-the-art modern manufacturing facility
in Bandaragama, with a total investment
of over USD 15mn.
This is the first time in Sri Lanka’s history of manufacturing that such a state-of-the-art medical device
production plant begins its operations in the country. With over 90 percent of the production intended
for exports, Sri Lanka is placed on the global medical consumable devices production map for the first
time.
Flexicare Lanka will be employing over 600 people as part of its first phase, as it gears up production
from its current workforce of 150, with plans for a second expansion in due course.

External sector performance Jan-Sep 2021
(USD Mn)
Source: CBSL
Category Jan-Sep 2020 Jan -Sep 2021 Growth %
Merchandise Imports 11,782 14,938 26.8
•Consumer Goods 2,567 2,890 12.6
•Intermediate Goods 6,576 8,791 33.7
•Investment Goods 2,627 3,249 23.6
•Unclassified 12 8 -34.9
Merchandise Exports 7,445 8,934 20.0
•Industrial Exports 5,680 6,899 21.5
•Agricultural exports 1,739 1,987 14.3
•Mineral exports 16 34 112.0
•Unclassified 11 15 40.2
Trade Balance -4,337 -6,003 -38.4
Tourism 682 51 -92.5
Worker’s Remittance 5,049 4,577 -9.3
Gross FDI (Jan – Jun) 351 398 13.4
Merchandise exports during the first
nine months of 2021 ended with a
growth of 20% compared with the
corresponding period of 2020, while
merchandise imports grew by 26.8%
for the first nine months of 2021 amid
continuation of restrictions on non-
essential imports.
Overall, the trade deficit expanded
significantly by 38.4% during Jan-Sep
2021 period compared to the
corresponding period in 2020.

External sector performance Jan-Sep 2021
(USD Mn) – Cont.
Source: CBSL
Highest growth % in Merchandise Exports
Category Jan-Aug
2020
Jan -Aug
2021
Growth %
Mineral exports 15.9 33.8 112.0
Ceramic products 16.6 27.8 68.1
Rubber 19.9 32.5 62.9
Highest growth % in Merchandise Imports
Category Jan-Aug
2020
Jan-Aug
2021
Growth %
Other Investment
goods
2.4 4.3 80.4
Base Metals 321.9 566.1 75.8
Rubber and articles
thereof
165.4 290.6 75.8
Category Jan-Aug
2020
Jan-Aug
2021
Growth
%
Textile &
garments
3,286.8 3,893.3 18.5
Tea 919.6 986.6 7.3
Rubber products 566.9 772.6 36.3
Highest Contributors Merchandise Exports
Category Jan-Aug
2020
Jan-Aug
2021
Growth
%
Fuel 1,905.2 2,596.8 36.3
Textile & textile
articles
1,581.7 2,049.4 29.6
Machinery &
equipment
1,665.5 2,205.9 32.4
Highest Contributors Merchandise Imports

Sri Lanka’s Manufacturing PMI – Oct 2021
Indicating a strong revival in manufacturing activities in the country, the
manufacturing PMI reached a 7-month high at 60.4 in October 2021
with an increase of 6.1 index points compared to the previous month.
This increase in manufacturing PMI was attributable to the increases
observed in all the sub-indices.
Significant increases were observed in New Orders and Production, particularly in the manufacture of food & beverages and textiles & apparel
sectors during the month. Meanwhile, Employment also increased during the month compared to the previous month with the relaxation of travel
restrictions in the country.
The Stock of Purchases increased with the improvement in New Orders and anticipation of the normalisation of economic activities.
Suppliers' Delivery Time lengthened at a higher rate in October 2021. The continuous increase in the cost of imported raw materials, mainly due to
rising global commodity prices, has been highlighted as a major concern by most of the respondents in all sub-sectors.

Sri Lanka’s Services PMI – Oct 2021
Services PMI increased to 57.9 in October 2021 underpinned by the
increases in New Businesses, Business Activities and Expectations for
Activity sub-indices. This is the strongest rate of growth in services
PMI, which was observed since March 2021.
The Index
PMI is calculated as a ‘Diffusion Index’, where it takes values between 0 and 100.
PMI = 50 - sector remained neutral on month-on-month basis
PMI > 50 - sector is generally expanding on month-on-month basis
PMI < 50 - sector is generally declining on month-on-month basis

Altair – biggest FDI in real estate business
so far
Altair Colombo, an iconic luxury
condominium tower and (so far) the tallest
residential and commercial building in Sri
Lanka with a slanting building design, was
ceremoniously opened during the first of
November 2021.
The total investment of the project has been
estimated at USD 250mn.

New airline flies to Colombo
Swiss leisure airline Edelweiss began flights to Colombo from
Zurich providing more travel options for tourists from Western
Europe.
News Snippets
Winter traffic to hit 400,000 arrivals
Sri Lanka’s tourism industry is currently targeting a surge in
winter traffic expecting to hit about 400,000 from October
to end of April next year.
Tourism that has now opened up will see tourists from
countries like Russia, India, the UK, Germany, and France
and also from Poland, Kazakhstan and Ukraine, industry
officials said.
In this respect, the authorities are gearing up to carry out a
number of promotional campaigns in the top five tourist
generating markets.
SriLankan Airlines, the national carrier has started flights to
key markets like Russia with a second weekly flight
expected to commence by December. In addition the airline
recommenced traffic to Paris twice weekly.
Meanwhile, two promotional campaigns are being worked
out; a Rs.200 million television campaign and another
Rs.200 million tactical promotional campaign, officials said.
New Central Bank Foreign Remittances Facilitation
Department
With workers remittances being a key pillar of Sri Lanka’s foreign currency earnings,
the Central Bank has set up a new Foreign Remittances Facilitation Department to
help the smooth flow of these remittances.
“Workers’ remittances have covered around 80 per cent of the annual trade deficit
over the past two decades, and strengthening remittances inflows to the country
brings several socio-economic benefits including the smooth supply of forex
inflows to the formal banking system and the reduction of income and regional
disparities,” the bank said.
The new department set up with effect from November 3 is aimed at facilitating
and streamlining workers’ remittances inflows to the country.
Air France launches direct flights between Colombo and
Paris
Air France recently expanded its long – haul network with the launch of three weekly
direct flights between Paris and Colombo from November 5.
Customers will be able to travel to Paris and connect to the Air France global network
with close to 200 destinations via the convenient hub of Paris, Charles de Gaulle.
Sri Lanka central bank appoints four assistant governors
Sri Lanka’s Central Bank said K G P Sirikumara, D Kumaratunge, U L Muthugala, and C P S
Bandara has been promoted to the post of Assistant Governor with effect from
November 17, 2021.

Shipping rates surge threatens global economic
recovery, UNCTAD says
A surge in container shipping rates poses a
threat to the global economic recovery, with
small countries dependent on deliveries by sea
expected to be hardest hit by a spike in import
prices, U.N. agency UNCTAD said.
Source:Reuters
A surge in demand for consumer goods during
the pandemic has created major supply
bottlenecks around the world, which has
impacted the supply of container ships and
boxes to transport cargo.
Shipping and port officials expect global supply chain disruptions to extend into 2022. “The current surge
in freight rates will have a profound impact on trade and undermine socioeconomic recovery, especially
in developing countries, until maritime shipping operations return to normal,” said UNCTAD Secretary
General Rebeca Grynspan.

El Salvador plans to create a ‘Bitcoin City’ and raise
$1 billion via a ‘Bitcoin Bond’
Source: CNBC
El Salvador plans to construct a “Bitcoin City” near a volcano that will be funded by the cryptocurrency, the
country’s President Nayib Bukele announced
The city will have residential and commercial areas, services, entertainment, restaurants and an airport and will be
built near Conchagua volcano in south eastern El Salvador.
Construction will begin in 2022 and the city will have no taxes except from value added tax (VAT).
In June, El Salvador passed a law making it the first country in the world to accept bitcoin as legal tender. But not all
of its population is on board with the move.
In September, thousands of people took the streets to protest against the law, fearing the introduction of the
cryptocurrency could lead to instability in the central American nation.

Mastercard Partners with Leading Digital Currency
Companies Across Asia Pacific to Launch the Region’s
First Crypto-Linked Payment Cards
Source: mastercard.com
In partnership with Mastercard, three leading
cryptocurrency service providers in Asia Pacific will be
launching crypto-funded Mastercard payment cards.
For the first time, consumers and businesses in the Asia Pacific region will be able to apply for crypto-linked Mastercard credit,
debit or pre-paid cards that will enable them to instantly convert their cryptocurrencies into traditional fiat currency, which can be
spent everywhere Mastercard is accepted around the world.
The three digital asset service providers that Mastercard is partnering with are Amber Group, Bitkub in Thailand, and CoinJar in
Australia, all of which offer cryptocurrency purchase and exchange services in their respective domestic markets.
These companies are the first APAC-based cryptocurrency platforms to join Mastercard’s global Crypto Card Program which was
designed to make it simpler and faster for crypto firms to bring secure, compliant payment cards to market, as consumers
increasingly seek to fund everyday transactions securely and efficiently with digital currencies.

Turkish lira hits all-time low before country’s
central bank meeting
Source: CNBC
The Turkish lira continued its slide ahead of the
country’s central bank meeting.
The currency fell to a record low of 10.98
against the dollar but pared some losses to
trade at 10.72 on Nov 18.
On 22 November the currency crossed the
11.00 barrier reaching 11.21

UK inflation surges to a 10-year high of 4.2%,
worse than expected
The cost of living in the U.K. surged in October to a 10-year high, with the figure now more
than double the target set by the Bank of England.
The U.K.’s Consumer Prices Index rose by 4.2% in the 12 months to October, up from 3.1% in
September. Economists polled by Reuters had a expected a figure of 3.9% for October.
Source: CNBC
The Bank of England held interest rates steady earlier this month, defying many investors’
expectations that it would become the first major central bank to hike rates following the
coronavirus pandemic.
The Bank has been monitoring a confluence of crucial data points as inflation remains
persistently high while economic growth moderates and labor conditions tighten. New
data will surely add more pressure on the Bank to act at its December meeting.

The views expressed in Economic Capsule are not necessarily those of the Management of Commercial Bank of Ceylon PLC
The information contained in this presentation has been drawn from sources that we believe to be reliable. However, while we have taken reasonable care to maintain accuracy/completeness of the information,
it should be noted that Commercial Bank of Ceylon PLC and/or its employees should not be held responsible, for providing the information or for losses or damages, financial or otherwise, suffered in consequence
of using such information for whatever purpose.
< Research & Development Unit >

Economic Capsule - November 2021

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