ATTN: MR: CHANDIMA UDABAGE

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THE STATE OF BUSINESS – 8th NOV, 2007

BUDGET SEMINAR VTR CHAMI

ADD STATE OF BUSINESS BRIDGE

BUDGET COMMENTS VTR RAVI

BREAK 2 – ADD STATE OF BUSINESS BRIDGE

FITCH VTR ANOUK

LINE UP EDITOR ANOUK

ANCHOR ANOUK

HEADLINES
1. POST BUDGET VIEWS- FINANCE SECRETARY DEFENDS
2008 BUDGET, AND
2. CONTENT AND CAUTION- MIXED REACTIONS FROM
BUSINESS COMMUNITY TO THE NEW BUDGET
1. PB BUDGET REVIEW – VTR
FINANCE SECRETARY DR. P. B. JAYASUNDERA SAYS ENERGY WILL NO
LONGER BECOME A PRODUCT FOR TAXATION WHEN ENERGY PRICES ARE
HIGH.

HE ADDED THAT THE STEP TAKEN BY THE GOVERNMENT TO REDUCE

THE VAT COMPONENT IN PETROL FROM 15 PERCENT TO 5 PERCENT
STARTING FROM JANUARY IS A MOVE TOWARDS THIS.

HE MADE THIS COMMENT WHILE SPEAKING AT A POST BUDGET

SEMINAR HELD IN COLOMBO YESTERDAY.

ROLL VTR

BREAK

2. POST MORTEM - VTR

IN THE AFTERMATH OF THE BUDGET PRESENTATION FOR 2008 WHICH

CONCLUDED YESTERDAY MIXED REACTIONS BEGAN TRICKLING IN TO
THE VARIOUS PROPOSALS THAT WERE FORWARDED.

INDUSTRY EXPERTS FROM THE LOCAL BUSINESS COMMUNITY JOIN US

ONCE AGAIN TO SHARE THEIR VIEWS ON THESE PROPOSALS
INTRODUCED IN THE GOVERNMENT’S BUDGET FOR NEXT YEAR.

ROLL VTR

BREAK

3. FITCH - VTR

FITCH RATINGS CONSIDERS THE SRI LANKAN BANKING SYSTEM TO BE

MORE RESILIENT THAN IN THE PAST, ALTHOUGH IT COULD BE
MODERATELY AFFECTED BY ASSET QUALITY AND PROFITABILITY IN
THE FACE OF THE CURRENT ECONOMIC CONDITIONS AND THE EFFECTS
OF THE GOVERNMENT'S WEAK FISCAL POSITION.

ACCORDING TO THE RATING AGENCY, THE STATE'S RECENT FISCAL

WEAKNESSES, ITS RESULTING EFFECT ON MONETARY POLICY
STABILITY AND OVERALL POLICY CONSISTENCY HAVE BEEN, AND
WILL BE, THE SECTOR'S PRIMARY CONCERNS IN THE SHORT TO
MEDIUM TERM.
THESE OBSERVATIONS HAVE BEEN MADE IN A SPECIAL REPORT TO BE
PUBLISHED BY FITCH SHORTLY.

ROLL VTR

AND THAT’S ALL WE HAVE FOR YOU ON THE STATE OF BUSINESS

TODAY. DON’T GO AWAY, UP NEXT IS THE GRAND FINAL OF THE
FORD MODEL SUPER MODEL OF SRI LANKA.
SEGMENT: MAIN
DATE: 08 / 11 / 2007
REPORTER: CHAMINDA
SLUG: PB BUDGET REVIEW – VTR

FINANCE SECRETARY DR. P. B. JAYASUNDERA SAYS ENERGY WILL NO

LONGER BECOME A PRODUCT FOR TAXATION WHEN ENERGY PRICES ARE
HIGH.

HE ADDED THAT THE STEP TAKEN BY THE GOVERNMENT TO REDUCE

THE VAT COMPONENT IN PETROL FROM 15 PERCENT TO 5 PERCENT
STARTING FROM JANUARY IS A MOVE TOWARDS THIS.

HE MADE THIS COMMENT WHILE SPEAKING AT A POST BUDGET

SEMINAR HELD IN COLOMBO YESTERDAY.

ROLL VTR

Dr. P. B. Jayasundera – Treasury Secretary

Ministry of Finance

‘BUDGET REVIEW’
VOICE OVER – PB BUDGET – 08 / 11 – CHAMINDA

JUST HOURS AFTER THE PRESIDENT’S BUDGET SPEECH, THE

GOVERNMENT’S FINANCE SECRETARY DR. P.B. JAYASUNDERA TOOK
THE STAGE TO DEFEND THE LATEST BUDGET PROPOSALS WHICH ARE
RECEIVING MIX REACTIONS FROM ALL QUARTERS.

JAYASUNDERA SAID THE NEW BUDGET AS USUAL STICKS WITH THE

GOVERNMENT’S 10 YEAR DEVELOPMENT PLAN WHICH MAINLY FOCUSES
ON DEVELOPING DOMESTIC INDUSTRIES.

THE GOVERNMENT HAS GRANTED CONCESSIONS TO THE TEXTILE

SECTOR, SHIPPING SECTOR, AND GEM AND JEWELRY SECTOR WHICH
HE SAYS WILL HELP TO BOOST THE LOCAL EXPORT SECTOR.

29.55
to deepen the export service, the economic service charge
has been clarified that percentage cannot exceed 0.25
percent meaning the esc has truly converted to an export
friendly taxpolicy30.28.

HE ADDED THAT AREAS SUCH AS CORPORATE TAX WERE LEFT

UNCHANGED AS THE GOVERNMENT SAW THE NEED TO DO SO.

50.34
WHAT HAPPENED WAS CORPORATE TAX IS UNCHANGED, PERSORNAL TAX
IS UNCHANGED. VAT IN FACT IS MOVING AWAY FOR MANY PRODUCTS
AND INFACT TO MANAGE THE PREVAILING ENERGY PRICES, VAT IS
PHASING OUT FROM THE PETROLEUM PRODUCT. AND IF THAT IS NOT
SUFFICIENT EVEN THE EXERCISE WILL BE REMOVED FROM PETROL
WHICH MEANS ENERGY WILL NO LONGER BECOME A PRODUCT FOR
TAXATION WHEN ENERGY PRICES ARE HIGH51.20 THAT MAY ONLY BE
A COST RECOVERY ANYBODY HAVE TO PAY BUT IT WILL NOT BE A
TAXABLE ITEM.51.26

THE GOVERNMENT’S REVENUE FOR NEXT YEAR IS TARGETED AT

750.44 BILLION RUPEES AN INCREASE OF 24 PERCENT FROM THIS
YEAR.

TAXATION IS THE KEY PART IN THIS REVENUE GENERATION PLAN

WITH TAXES ON GOODS AND SERVICES ALSO KNOWN AS INDIRECT
TAXES ESTIMATED TO CONTRIBUTE 441 BILLION RUPEES.

TAXES ON WIRELESS PHONES, AMENDING EXCISE DUTY ON NON

ESSENTIAL IMPORTS AND A MONTHLY ENVIRONMENT LEVY OF 20
RUPEES PER HOUSEHOLD POSSESSING A VEHICLE, TELEPHONE AND
ELECTRICITY ARE SOME OF THE NEW REVENUE GENERATION
MECHANISMS.

CIGARETTES, LIQUOR AND MOTOR VEHICLES ARE ALSO BECOMING

INTENSIVELY SUBJECT TO TAXATION.

53.45
LET ME GIVE YOU EXAMPLES THE REVISION DONE FOR CIGARETTES
AND LIQUOR ALONG BRING ALMOST 8 BILLION RUPEES, AND THOSE
ARE THE CHANGES WE MADE IN ORDER TO ENSURE THAT MUCH MORE
MEANINGFUL TAXES TO MAINTAINED AT THE CURRENT LEVEL.54.19
58.02
THERE IS NO REASON TODAY FOR NON SRI LANKAN PROFESSIONALS
TO BE GIVEN LAW TAXES AS AGAINST SRI LANKANS., THAT IS ONE
FUNDAMENTAL CHANGE HAPPENING IN PERSONAL INCOME.58.22.

HE ALSO SAID ANOTHER KEY STEP THAT HAS BEEN TAKEN IS

ELIMINATING THE “TAX DISTORTION” THAT HAS CROPPED UP OWING
TO THE PROVISION OF TAX HOLIDAYS TO PROMOTE INVESTMENTS IN
THE COUNTRY.

59.14
HEREAFTER UNLESS IT IS A FLAGSHIP INVESTMENT THAT WILL
ALTER THE LANDSCAPE OF THE COUNTRY, WHY SHOULD BE WE HAVE
THAT KIND OF TAXES 59.54 HEREAFTER TAX HOLIDAYS WILL BE
EITHER CONFINED FOR ACTIVITIES GOING BEYOND COLOMBO OR
ENJOY A SHORT HOLIDAY PERIOD, BUT NO EXTENSION AND COMING
DOWN. WHAT IS THE MERIT OF THIS, WE QUICKLY NEED TO COME TO
A REASONABLY COMPETITIVE TAX REGIME.1.00.20

ENDS.
SEGMENT: MAIN

DATE: 8TH NOV 07

REPORTER: ANOUK

SLUG: FITCH - VTR

FITCH RATINGS CONSIDERS THE SRI LANKAN BANKING SYSTEM TO BE

MORE RESILIENT THAN IN THE PAST, ALTHOUGH IT COULD BE
MODERATELY AFFECTED BY ASSET QUALITY AND PROFITABILITY IN
THE FACE OF THE CURRENT ECONOMIC CONDITIONS AND THE EFFECTS
OF THE GOVERNMENT'S WEAK FISCAL POSITION.

ACCORDING TO THE RATING AGENCY, THE STATE'S RECENT FISCAL

WEAKNESSES, ITS RESULTING EFFECT ON MONETARY POLICY
STABILITY AND OVERALL POLICY CONSISTENCY HAVE BEEN, AND
WILL BE, THE SECTOR'S PRIMARY CONCERNS IN THE SHORT TO
MEDIUM TERM.

THESE OBSERVATIONS HAVE BEEN MADE IN A SPECIAL REPORT TO BE

PUBLISHED BY FITCH SHORTLY.

ROLL VTR

TAGS

“BANKING SECTOR HAS USUALLY GROWN

IN LINE WITH REAL GDP AND INFLATION”- FITCH

“CONTINUED INCREASES TO TAXATION WILL

HAVE NEGATIVE IMPACT ON CAPITAL ACCRETION”- FITCH

VOICE OVER/ 8TH NOV 07/ FITCH/ ANOUK

FITCH STATES THAT IN IN SPITE OF A VOLATILE, AND RECENTLY

RISING, INTEREST RATE ENVIRONMENT, THE SRI LANKAN BANKING
INDUSTRY HAS MANAGED TO SUSTAIN ITS PROFITABILITY. NET
INTEREST MARGINS HAVE BEEN RELATIVELY STABLE AT AROUND 4%-
4.5%, LARGELY AS A RESULT OF THE SHORT-TERM NATURE OF
ASSETS AND LIABILITIES.

THE SECTOR HAS USUALLY GROWN IN LINE WITH REAL GDP AND
INFLATION, ALTHOUGH GROWTH HAS SURGED IN RECENT YEARS AT A
COMPOUND ANNUAL GROWTH RATE OF 20.7% BETWEEN THE 2002 AND
2006 FINANCIAL YEAR AND 28.1% DURING 2006, BEFORE DECLINING
TO 11.2% DURING THE FIRST HALF OF 2007.

GROWTH WAS INITIALLY SPURRED BY A RELATIVELY LOOSE MONETARY

POLICY AND THE FINANCING OF LARGE REVENUE AND FISCAL
DEFICITS THROUGH THE BANKING SYSTEM. IT DECLINED, HOWEVER,
DURING 2007, OWING TO MODERATE ECONOMIC GROWTH AND A
TIGHTENING MONETARY POLICY.

EFFECTIVE TAXATION FOR THE SECTOR, HOWEVER, HAS STEADILY

INCREASED DURING THE LAST TWO TO THREE YEARS THROUGH
ADDITIONAL TAXES ON THE FINANCIAL SECTOR. FITCH IS OF THE
OPINION THAT ANY CONTINUED INCREASES TO TAXATION WILL HAVE
A NEGATIVE IMPACT ON CAPITAL ACCRETION BY WAY OF BOTH
RETENTION AND INFUSIONS.

HOWEVER, FITCH OBSERVES THAT THE ECONOMIC CAPITAL POSITION

- AS MEASURED BY THE EQUITY TO ASSETS RATIO - IS LOWER FOR
MOST OF THE LARGER BANKS, INCLUDING THE TWO LARGEST (WHICH
ARE STATE-OWNED).

IT ADDS THAT ENSURING ADEQUATE CAPITALISATION WILL BE A

CHALLENGE IN THE FUTURE IN THE FACE OF CONSTRAINED ROE AND,
FOR THE STATE BANKS, THE GOVERNMENT'S FISCAL LIMITATIONS.

ENDS/
SEGMENT: MAIN
DATE: 08 / 11
REPORTER: RAVI
SLUG: POST MORTEM - VTR

IN THE AFTERMATH OF THE BUDGET PRESENTATION FOR 2008 WHICH

CONCLUDED YESTERDAY MIXED REACTIONS BEGAN TRICKLING IN TO
THE VARIOUS PROPOSALS THAT WERE FORWARDED.

INDUSTRY EXPERTS FROM THE LOCAL BUSINESS COMMUNITY JOIN US

ONCE AGAIN TO SHARE THEIR VIEWS ON THESE PROPOSALS
INTRODUCED IN THE GOVERNMENT’S BUDGET FOR NEXT YEAR.

ROLL VTR

Professor Rohan Samarajiva

Executive Director
LIRNE asia

Deshamanya Dr. Lalith Kotelawala

Chairman
Ceylinco Consolidated

N. R. Gajendran – Tax Consultant

Partner
Gajma & Co.

‘VIEWS ON BUDGET 2008’

VOICE OVER – POST MORTEM – RAVI – 08 / 11 / 2007

THE GOVERNMENT’S PLAN TO EXTEND THE 10 PERCENT TAX LEVIED

ON MOBILE PHONES TO WIRELESS PHONES CAME UNDER CRITICISM BY
TELCOM EXPERTS.

ROHAN SAMARAJEEWA – 03.08

MEANWHILE SPEAKING TO THE MEDIA TODAY IN COLOMBO CHAIRMAN

OF CEYLINCO CONSOLIDATED DR. LALITH KOTALAWELA HAILED THE
GOVERNMENT’S BUDGET AS A PRO DEVELOPMENT ONE.

HE COMMENDED THE GOVERNMENT’S PLANS TO SET UP A SPECIAL

FREE TRADE ZONE FOR BUILDING MATERIAL AS A GOOD MOVE MADE
TOWARDS DEVELOPING THE CONSTRUCTION INDUSTRY.

LALITH CUT – 16.30 – 17.16

MEANWHILE EXPERTS SAY STEPS TAKEN THROUGH THE 2008 BUDGET

TO REMOVE THE DISTORTION PREVAILING WITH REGARD TO TAX
HOLIDAYS IS A PROGRESSIVE MOVE.

BUT THEY ALSO THREW IN A WORD OF CAUTION REGARDING CERTAIN

AMENDMENTS.

VC – GAJ
07:40 – 08:37

END