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Business Nutshell

13 Feb 2022

1. EPF, ETF to be subjected to surcharge tax The Employees’ Provident Fund (EPF) and Employees’ Trust Fund (ETF) will be subjected to the 25% surcharge tax introduced in Budget 2022, the Treasury confirmed to The Morning Business last Tuesday (8).  The Treasury stated that any fund that exceeds Rs. 2 billion taxable income would be subjected to this surcharge tax. Discussions regarding the potential applicability of the Surcharge Tax Bill to the EPF and the ETF commenced in the aftermath of its publication in the Gazette on Monday (7).  When The Morning Business reached out to the Ministry of Finance Department of Fiscal Policy Director General Dr. M.K.C. Senanayake, he confirmed the veracity of these discussions and stated: “We already gazetted the Bill yesterday (Monday) and as per the Gazette, all funds are liable.” 2.LOLC to acquire Kenyan Microfinance Bank LOLC Holdings PLC, Sri Lanka’s second-largest publicly traded company by revenue, has received regulatory approval to acquire a 73.2% stake in Key Microfinance Bank PLC, Kenya. The lender, which formerly traded as ‘Remu,’ is selling shares to the multinational at a cost of Kenyan shillings (Ksh) 237 million. 3.Forex reserves sufficient only for three weeks: Sajith  The foreign exchange reserves of the Central Bank of Sri Lanka have fallen to $ 2.3 billion, stated Opposition Leader Sajith Premadasa in Parliament on 8 February. However, the Opposition Leader further stated that the usable reserves were only in the range of $ 700-800 million. He added that it would only be sufficient for three weeks worth of imports.  “The Central Bank says that our reserves stood at $ 2.3 billion at the end of January. They say it decreased from $ 3.1-2.3 billion in late December. This is a terrible situation. On the other hand, these figures are misleading the country and the people. This $ 2.3 billion includes the Yuan swap. The Yuan swap is said to have added ¥ 10 billion, which is roughly $ 1.6 billion to the reserves. But, in fact, the current reserves in our country are approximately $ 700-800 million,” he explained.  4.Labour Minister requests Rs. 240 per USD for worker remittances  Minister of Labour Nimal Siripala de Silva stated in Parliament on Tuesday (8) that he had requested the Treasury to grant Rs. 240 for every US Dollar remitted to Sri Lanka by foreign workers. This statement was made by the Labour Minister in response to a question by Sri Lanka Podujana Peramuna (SLPP) MP Mohomad Muzammil.  The Labour Minister stated: “I have requested the Treasury to grant at least Rs. 240 for the dollars remitted to the country by foreign workers. Furthermore, my Ministry has taken steps to formulate a contributory pension scheme for migrant workers. In addition, work is underway to make it mandatory to provide all migrant workers going abroad an insurance of $ 15,000.”  5.Sri Lanka and Nepal continue collaboration in construction The Sri Lanka Embassy in Nepal and the Export Development Board of Sri Lanka (EDB) jointly organised a virtual meeting for Sri Lankan construction companies to interact and learn about procedures and regulations applicable to foreign investors, including for Joint Ventures with the Nepal Ministry of Physical Infrastructure and Transport (MPIT).   
  1. Daily tourist arrivals exceed 4,000 mark
Tourist arrivals last Saturday (5) exceeded 4,000 for the first time in 2022 with 4,090 tourists arriving in the island, increasing the number of tourist arrivals during the first five days of February to 11,500, as per Airport and Aviation Services (Sri Lanka) Ltd. (AASL). Speaking to The Morning Business last Sunday (6), AASL Chairman Gen. (Retd.) G.A. Chandrasiri stated: “For the month of February, over 11,500 tourists have arrived in the country within these five days. Yesterday (5), 4,090 tourists came within 24 hours, which is a significant increase. This is the first time we have exceeded 4,000 tourist arrivals since 25 December 2021. This is an indication of how tourism is flourishing together with our ground support from the airports.”   
  1. Inflation increases to 14.2% in January
Headline inflation, as measured by the year-on-year (YoY) change in the Colombo Consumer Price Index (CCPI), increased to 14.2% in January 2022 from 12.1% in December 2021. Meanwhile, on an annual average basis, the CCPI increase to 6.9% in January 2022 from 6% in December 2021. Inflation was driven by monthly increases of prices of items in both food and non-food categories. Subsequently, food inflation (YoY) increased to 25% in January 2022 from 22.1% in December 2021, while non-food inflation (YoY) increased to 9.2% in January 2022 from 7.5% in December 2021.  
  1. Sri Lanka to establish FTAs with most SE Asian countries
Significant strides in establishing Free Trade Agreements (FTAs) with Bangladesh and the Maldives, together with existing FTAs will pave the way to initiate FTAs with most Southeast Asian countries by next year, enhancing Sri Lanka’s position as an attractive destination for Foreign Direct Investments (FDI), State Minister of Regional Co-operation Tharaka Balasuriya stated recently. Speaking at a webinar organised by the Ceylon Chamber of Commerce and the Ukrainian Chamber of Commerce and Industry (UCCI), aimed at promoting bilateral trade between the two countries, Balasuriya expressed the desire for greater collaboration between the two countries, highlighting Sri Lanka’s burgeoning ICT industry as likely to be of particular interest to Ukraine, which is renowned for its “ICT capabilities and for having the best coders in the world”.    9) Global chip shortage: Toyota profits fall as production hit Japanese motor industry giant Toyota saw its profits fall by 21% for the last three months of 2021 as the global chip shortage hit production. The company said that its third quarter operating profit came in at ¥ 784.4 billion (£ 5 billion; $ 6.8 billion). The world's best-selling carmaker also cut its annual production target by 500,000 from 9 million vehicles to 8.5 million.   10) Record-high seizure of $ 5 b in stolen Bitcoin Stolen Bitcoin worth more than $ 5 billion (£ 3.7 billion) has been seized by the US Department of Justice – the largest ever confiscation of its kind. Officials also arrested and charged two people on Tuesday attempting to launder the money, which amounts to nearly 120,000 Bitcoin. The funds, stolen by a hacker who breached a cryptocurrency exchange in 2016, were valued at about $ 71 million. But, with the rise in Bitcoin's value, it is now valued at more than $ 5 billion.   11) Rental costs jump as workers return to the office The cost of renting a property in a city centre is rising as office workers, students and international residents return, according to Zoopla. The property portal said greater competition meant that renters taking on a new let were paying £ 62 more a month than they did pre-pandemic. This higher demand is set to ease in the coming months, in part owing to the rising cost of living faced by the renters.   12) Amazon and Nike exploring Peloton takeover: Reports Exercise brand Peloton is attracting bid attention from the likes of Amazon and Nike, according to reports. They have been attracted by the soaring sales of Peloton's exercise bikes and treadmills during the pandemic. Suitors have not been put off by the return to gyms post-lockdown, which has left the firm worth less than a fifth of its peak $ 50 billion valuation.  
  1. Apple will let shoppers pay merchants by holding phones together
Apple on Tuesday (8) announced plans to introduce a contactless payment option later this year that will let businesses use iPhones to process transactions in stores without any additional hardware, competing with services like Square. The new ‘Tap to Pay’ feature will allow US merchants of all sizes to accept payments simply by holding their iPhone close to the customer's iPhone or Apple Watch. It also works with contactless credit and debit cards. The feature, which will be included in an upcoming iOS beta update and will only be available on iPhone XS models and later, could help Apple (AAPL) deepen its relationships with retailers.   14) Household debt jumped by $ 1 t in 2021, highest since 2007 A big year for car and home shopping helped push Americans to take on a lot more debt last year. Household debt increased by $ 1 trillion in 2021, the biggest annual increase since 2007, according to data from the Federal Reserve Bank of New York. In the fourth quarter alone, household debt grew by $ 333 billion to $ 15.58 trillion, the largest quarterly rate of increase since 2007 as well.   15) India to launch digital rupee and tax crypto profits India is planning to launch a digital version of the rupee, becoming the latest country to join the rush to create state-backed virtual currencies. The country's central bank expects to introduce the currency "using blockchain and other technologies" some time in the new fiscal year, which begins in April, according to Indian Finance Minister Nirmala Sitharaman. Presenting India's annual budget to parliament on Tuesday (8), Sitharaman said the digital rupee would "give a big boost to the digital economy."    16) Pfizer’s Covid sales to top $ 50 b this year, investors want more Pfizer Inc said on Tuesday (8) it expected 2022 sales of its Covid-19 vaccine and antiviral pill to top $ 54 b, but that fell short of lofty Wall Street estimates and its shares were off about 3%. Still, Chief Executive Albert Bourla said final sales for its oral Covid-19 antiviral, Paxlovid, could be “way bigger” than what Pfizer has forecasted since its current outlook only included contracts that have been or are close to being signed. Pfizer currently expects $ 22 billion in 2022 sales of the treatment, compared with Wall Street estimates of $ 22.88 billion.   17) Asia Pacific trade booms despite COVID curbs: ADB Trade in the Asia Pacific region grew faster than the global average last year despite Covid-19 restrictions and supply chain disruptions, according to the Asian Development Bank (ADB). Asia Pacific trade grew almost 30% in the first three quarters of 2021, compared with global growth of about 28%, according to the Asian Economic Integration Report 2022 released on Wednesday. Trade among economies in the region alone rebounded just over 31% over the period, after a 3.1% contraction in 2020, the Manila-based development bank said. (Sources; CNN, BBC, Aljazeera)


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