Business Times

Business Times on the year gone by

The firsts and lasts of 2010
By Jagdish Hathiramani

As we look back on a just ended 2010 from the first days of a new year arrived, it is important to remind ourselves of all that has gone before to be able to make a fresh start and renew the promise of things to come...

While 2010 will forever be known to us Sri Lankans as the year that President Mahinda Rajapaksa secured his second term in office, it may also become infamous for being possibly the first time in our local history that an opposition candidate for the presidency has been jailed.

And, in so doing, has put any possible political instability centre stage while also earning us condemnation from key members of the world community. Meanwhile, all throughout, a UN Panel on Human Rights convened this year appears to overshadow our every interaction, diplomatic or otherwise, with the global community.

Not only the year that the ruling UPFA won a majority in parliament, 2010 was also when the Executive Presidency was not only retained but also term limits on presidents were removed allowing for unlimited re-election. Furthermore, the latter half of the year also saw the emergence of a bitter leadership struggle at the main opposition UNP, a situation which could result in a new party leader fairly soon.

2010 was also historic because it saw a number of landmarks, from the opening of the Hambantota port, the first in more than a hundred years; to the first time in its history that Sri Lanka has ever imported coconuts, something we have always had in aundance.

The year also marked the introduction of closed circuit cameras spread throughout our country’s capital and a first Commonwealth Games Gold medal in Boxing in 72 years for the nation, an honour later rescinded when the now disgraced former medalist Manju Wanniarachchi was disqualified after he was found taking a banned substance.

Also notable in 2010 was the passing of an order requiring cigarette and alcohol users to pay for their treatment at state hospitals, which would otherwise be free, from January 1, 2011. It was also the year when, early on, our worst fears regarding media suppression were once again realised after Lanka e-news journalist Prageeth Ekneliyagoda was abducted by persons unknown on January 24, 2010. He is still missing.

However, even if the above were the big headlines for 2010, there were a number of other events that were also deserving of the public spotlight, however briefly. A spate of Initial Public Offerings at the Colombo Stock Exchange over 2010 could, according to some opinions, lead to investors overexposure, with many becoming wary of putting their money in upcoming issues, especially troubling since as many as 60 IPO's are expected in 2011.

The end of the year has also allowed us some somber reminders of the fragility of life: While there have been armed conflict related deaths; 22 have died and 300 hundred more infected as a result of Swine Flu, local HIV Positive cases rose to more than 1,200, and more than 26,000 dengue cases ultimately lead to a death toll of about 200. This at a time when we have recently welcomed our 600,000th tourist, despite the looming threat of removal of our country’s visa on arrival facility, almost universally considered a huge blow to Sri Lanka’s tourism industry which is just now taking off.

Also important, there were 460 deaths of Sri Lankans abroad, mainly due to natural causes (70%) followed by accidents (100 deaths), suicides (29) and murders (9). Also revealed was that suicides, exclusive to the migrant workers, had more than doubled from the year before.

While 2010 has not witnessed the runs on financial institutions we saw in 2009, it has led to various unflattering revelations. These included an aborted re-election bid by Lalith Kotelawala, soon to be indicted by the country's Attorney General, as Chairman of Ceylinco Insurance, one of the nation's largest publicly listed companies. This is still being cited today as a reason for the need for far reaching overhauls of the rules governing directorships at public listed companies.

It was also the year a number of Ceylinco companies changed their names with some even going for public listings, with others finally bailed out by the Central Bank. Additionally, the Central Bank also revealed this year that out of 35 finance companies that operate locally, only 27 were compliant with the bank's guidelines for registered finance companies.

In addition, 2010 also marked the 10th anniversary of the Indo Sri Lanka Free Trade Agreement. At the same time, this year also saw heated exchanges about the need for a Comprehensive Economic Partnership Agreement (CEPA) between the two partners, even though few in Sri Lanka yet know what details the agreement contains.

This was also the year that Sri Lanka bought out a venture formerly run by Shell Gas for US$ 63 million, re-naming it Litro. An entity expected to list publicly in 2011. However, one of the most spectacular displays of public excess of 2010 was undoubtedly the Bollywood film awards IIFA which was held locally where allegedly Rs. 450 million was spent by the Sri Lankan government to secure high profile Indian cinema personalities, of which only a few came. While not overtly having a negatively impact on our tourism numbers, this unmitigated disaster, which also cost the local business community much in terms of closed roads, traffic delays, etc., suggested to us that we have a long way to go to reclaim our country’s far gone standing as one of the most hospitable places worldwide, especially considering the number of high profile personalities in Bollywood or business that ended up boycotting the affair.
While 2010 was the year we finally lost our GSP plus concessions in the European Union, a major concern for our apparel and ceramics industries among others, it was also when we faced fresh problem with the loss of the US-based GSP possibly in the cards. However, nothing was decided as a review still continues.

Perhaps most impactful of all for the business community in 2010 was a Vote on Account (mini budget) early in the year, in place of a budget last year, which led to a significant drop in import duties. This also proved to become a cautionary tale with many investors holding off until November’s full budget reading.
However, when it eventually did arrive, the 2011 budget proved to be business friendly with a much simplified new taxation policy. However, there was not much relief for the man on the street; neither in the rural sector which was arguably the engine for last year's better than expected growth, nor in the urban sector which is expected to again attain its former glory in 2011.

This was particularly jarring with a promised wage hike of Rs. 2,500 proving to be not in the cards for 2011 while food based inflation keeps skyrocketing. Finally, maybe the biggest problems of all for local investors, at a time when the local stock exchange continues to be lauded as the second best performing stock exchange in the world, was the introduction of automatic cooling off periods if the price of a stock goes above or below 10% as well as the anticipated 2011 substitution of informal margin trading by brokers with a registered commercial bank-based system requiring 50% down.

The latter more than anything may have served to stymie the more speculative elements of the local stock market, those credited with our supernova type growth, which could also have been said to have significantly cooled down the exchange's growth trajectory in 2010 and into 2011.

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