Sri Lanka Potentials and Challenges Presentation of the Target Market Analysis
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SRI LANKA AT A GLANCE Capital (Commercial) Colombo Capital (Administrative) Sri Jayewardenepura Kotte Area 65,525 sq km Population 21,409,381 (July 2017 est.) Official Language Sinhala, Tamil
Currency Sri Lanka Rupee (LKR) Time Zone UTC/GMT+5:30
Source: Central Bank of Sri Lanka
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STRATEGIC LOCATION
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ECONOMIC FIGURES 2017 Gross Domestic Product USD 87.2 billion (3.1% growth vs 2016) GDP per capita USD 4,065 FDI Inflows USD 1.7 billion Exports USD 11.3 billion Imports USD 20.9 billion Gross Official Reserves USD 7.9 billion Sources: Central Bank of Sri Lanka, The Minister of Finance and Mass Media
Source: Central Bank of Sri Lanka
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ECONOMIC GROWTH Gross Domestic Product
Real GDP Growth (%)
100 87,2
90 79,3
80
US$ Billion
70
80,5
81,7
2014
2015
2016
2017
5.0
5.0
4.5
4.6
74,2 68,4
2018 est. 5.1
60 50 40 30 20 10 0 2012
2013
Source: Central Bank of Sri Lanka
2014
2015
2016
2017
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EVOLUTION OF FOREIGN DIRECT INVESTMENT Foreign Direct Investment Inflows 1800
1.700
1600
Foreign Direct Investment of BOI Enterprises (US$ million)
1400
US$ Million
1200 1000
933
897
894
800
680
600 400 200
0 2013
2014
2015
2016
Source: Central Bank of Sri Lanka & Board of Investment Sri Lanka
2017
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EVOLUTION OF EXPORTS Total Exports
Top Export Destinations
12
11,4
11 10
10,2
9,9
10,2
Country Value in USD Mn United States 2,920.21
9,2
United Kingdom 1,043.17 US$ Billion
8
India 789.58 Germany 771.5
6
Italy 531.65 (p) Provisional numerical value
4
2
0 2012
2013
2014
2015
2016
2017
Source: Trade Map, Federal Statistics Office, Sri Lanka Export Development Board & CBSL
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MARKET ACCESS IN REGIONS Sri Lanka seeks to increase its access to the world’s most important markets in order to consolidate itself as the ideal export platform Agreement Countries and Partners Free Trade Agreements – Bilateral India, Pakistan, Singapore Under negotiation: China, Indonesia, Malaysia, Thailand Free Trade Agreements – Multilateral South Asian Association for Regional Cooperation – SAARC Agreement on South Asian Free Trade Area - SAFTA Asia Pacific Trade Agreement – APTA Agreement on Global System of Trade Preferences - GSTP Generalized System of Preferences Plus European Union countries Generalized System of Preferences United States
Source: Central Bank of Sri Lanka & Sri Lanka Customs
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IMPORT SECTOR Total Imports 21,5 20,9
US$ Billion
21
Country Value in USD Mn
20,5
India 4,495.82
20
China 4,189.83 United Arab Emirates 1,564.12
19,4
19,5 19,1
18,9
19
19,1
Singapore 1,292.72 Japan 1,038.51
18,5 18
18 17,5 17 16,5 2012
2013
2014
2015
2016
Source: Central Bank of Sri Lanka & Sri Lanka Export Development Board
2017
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BILATERAL TRADE BETWEEN SRI LANKA AND GERMANY 700
EUR Million
600 500 400 300 200 100 0 2013
2014
2015
SL Exports to Germany
2016
SL Imports from Germany
2017
Trade Balance
EUR Million
Year
SL Exports to Germany
SL Imports from Germany
Trade Balance
2013
450
253
197
2014 2015
481 529
217 285
264 244
2016
577
315
262
2017*
653
570
83
* Forecast deviations due to rounding
Source: Central Bank of Sri Lanka & Sri Lanka Export Development Board
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BILATERAL TRADE BETWEEN SRI LANKA AND GERMANY Sri Lanka's Top Import Products from Germany
Sri Lanka's Export Products to Germany
5%
Textile
14%
Machine and Aviation Equipment
8%
Food and Beverages
4%
Chemicals
10%
4%
Rubber and Rubber based products
11%
54%
Machinery Electrical and Electronic products
13%
Electrical and Electronic products
Other
Source: Federal Statistics Office, Sri Lanka Export Development Board & CBSL
Measuring Control Technology
77%
Other
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SRI LANKA’S APPLICATION FOR EU GSP+ Sri Lanka’s Export to the EU Region 2006-2017 in USD Mil. 4.000,00 3.500,00 3.000,00 2.500,00 2.000,00 1.500,00 1.000,00
15% increase in exports from Sri Lanka after GSP+
500,00 0,00 2006
2007
2008
2009
2010
2011
2012
2013
Source: Sri Lanka Export Development Board & EU Sri Lanka
2014
2015
2016
2017
2017 after GSP+
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POWER GENERATION IN SRI LANKA • Total power generation in 2017 was 14,150 GWh • Installed capacity of 4,268 MW in 2018 expected • 6,400 MW capacity by 2025 expected • 60% power generation from Renewable energy sources by 2020
Source
Capacity
Major Hydro
1364 MW
No. of Power Plants
Expansion targets 2037 (additional capacity)
17
242 MW
Thermal
5225 MW Coal
900 MW
1
CEB
604 MW
7
IPP
611 MW
5
Mini
356 MW
182
215 MW
Wind
128 MW
15
1205 MW
Solar
51 MW
8
1396 MW
29 MW
9
85 MW
4043
244
8368 MW
Renewable Energy
Hydro
Biomass Total Capacity
Source: The International Trade Administration (ITA), U.S. Department of Commerce
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ELECTRICITY DISTRIBUTION IN SRI LANKA • 28, 479 Low Voltage (139,213 km) • 33 kV and 11 kV Medium Voltage (32,863 km)
99.7% Grid Connectivity Expansion of Generation Capacity: 2018-2037 Long term generation expansion plan
Thermal Power Generation Expansion Projects
Source: CEB
Hydro Power Generation Expansion Projects
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TRANSMISSION NETWORK IN SRI LANKA • CEB is owning the electricity grid and the electricity transmission rights • Grid access of RE is regulated by SLSEA • Current improvements and extensions
Source: CEB
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POWER GENERATION IN SRI LANKA Electricity generation demand likely to increase to 70,000 GWh by 2050 from 14,000 GWh in 2016.
Source: UNDP-LECB-Assessment-Sri-Lanka-Power-Sector
POWER GENERATION IN SRI LANKA
Source: CEB
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POWER GENERATION IN SRI LANKA Capacity Mix and Energy Mix (2017) Capacity Share (%) Other RE 14% IPP Thermal 17% CEB Thermal 15%
Source: CEB , SLSEA
Electricity Generation, May 7, 2018
CEB Hydro 34%
CEB Coal 20%
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POWER GENERATION IN SRI LANKA Renewable Energy Projects and capacity as of Present Status (as at 31st December 2017)
Other Renewable Energy Technology
Capacity (MW)
182
354.044
1
Mini Hydro Power
2
Biomass - Agricultural & Industrial Waste
4
13.08
3
Biomass - Dendro Power
6
13.02
4
Solar Power- Parks
8
51.36
5
Wind Power
15
128.45
213
560
Total 6
Source: CEB
No of Projects
Solar Roof Tops as at January 2018
119
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POWER GENERATION IN SRI LANKA RENEWABLE ENERGY PROJECTS IN SRI LANKA AND PRESENT STATUS (2018) Project
Year of Operation
15MW Thalpitigala
Feasibility Study Completed
2020
20MW Gin Ganga
Prefeasibility being carried out
2022
3 x200 MW Pump Storage
Prefeasibility being carried out
2025
100 MW Mannar Wind Park
Ongoing Tender process
2020
90x1MW Solar Parks
Ongoing Tender process
2018/2019
100 MW Solar Parks
Prefeasibility completed
2020
approved
-
International tender announced
-
800 MW Solar & 240 MW Wind Hybrid at Punarin 100 MW floating solar Maduru Oya Reservoir Source: CEB
Present Status
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POWER GENERATION IN SRI LANKA Base Case Energy Mix by 2030 (Base Case LTGEP 2018-2037) Thermal LNG 17% Thermal Oil 0%
Thermal Coal 47%
Source: CEB
Base Case Energy Mix by 2030 (Revised Base Case LTGEP 2018-2037 as per Oversight Committee on Energy) PSPP, 2%
PSPP 2% Renewable 34%
Energy Mix 2030
Thermal LNG, 23%
Thermal Oil; 0%
Renewable 34%
Energy Mix 2030
Thermal Coal, 41%
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POWER GENERATION IN SRI LANKA Sri Lanka 2016 - 2050 Electricity Generation Mix in MW
Year
Gas Combine Turbine Cycle
Large Coal Hydro
Oil
Wind
Small Hydro
NonConventional Renewable Energy Total
Biomass Solar
2016
178
594
307 825
1335
124
313
34
16
487
3726
2017
113
594
307 825
1490
144
338
49
31
562
3891
2018
183
594
256 825
1490
244
363
74
46
727
4075
2019
218
594
186 825
1490
442
388
99
219
1148
4461
2020
218
594
96 825
1536
690
413
124
392
1619
4888
2030
105
594
26 1425
1576
2313
653
194
1950
5110
8839
2040
105
270
26 1425
1576
6513
703
294
6608
14118
17520
2050
0
0
1573
15155
753
394
16438
32740
34316
0
0
Source: UNDP-LECB-Assessment-Sri-Lanka-Power-Sector
The plan to achieve 100% renewable energy in the energy mix from 2016 until 2050
POWER GENERATION IN SRI LANKA
Today, 3 % of SL’s energy demand is met by renewables such as wind and solar.
Source: UNDP-LECB-Assessment-Sri-Lanka-Power-Sector
THE SOLAR ENERGY SECTOR IN SRI LANKA Solar energy Sector Sri Lanka’s location gains competitive advantage in the solar energy sector 4 - 4.5 kWh/m2 Solar radiation (DNI) per day
Target: 1000 MW until 2025 from solar
100% renewable energies by 2050 16000 MW additional solar power capacity needed till 2050 Electricity price
Solar Energy to reach grid parity by 2020
Solar PV price
Grid parity
Source: UNDP-LECB-Assessment-Sri-Lanka-Power-Sector; Potenzialanalyse 2018
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THE SOLAR ENERGY SECTOR IN SRI LANKA Solar Power Projects & Initiatives
Rooftop Solar Power program 90 x 1 MW Solar Parks 10 MW Solar Parks Utility Scale Solar Parks
Beginning 2018: decision for floating Solar PV Park in Maduru Oya Reservoir
Source: CEB, http://www.blue21.nl/whats-new/,
Solar energy is expected to contribute 30 % while wind energy will contribute 50 % of the total demand by 2050
THE SOLAR ENERGY SECTOR IN SRI LANKA Solar Power Projects & Initiatives Soorya Bala Sangramaya “Battle for Solar Energy” to add 220 MW of solar electricity to the country’s energy grid by 2020 and 1000 MW by 2025
The Roof Top Initiative • consumers have the option to generate and use electricity in their premises • Option to sell excess electricity to the national grid or bank it for later use Multilateral benefits
Source: SLSEA, Ministry of Power and Renewable Energy, https://solarpowerlk.com/soorya-bala-sangramaya-battle-for-solar-energy/
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POTENTIAL IN THE SOLAR ENERGY SECTOR Renewable energy resource potential • Solar power has the potential to meet 32 % of Sri Lanka’s annual power demand of around 10,500 GW • Only 0.01 % of that potential has been developed • Pooneryn & Siymbalanduwa Land based locations Identified • Further incentives needed
Source: Reuters, Ministry of Power & Energy; Sri Lanka Energy Sector Development Plan For A Knowledge-Based Economy 2015 - 2025
SOLAR ENERGY AS ENERGY SOURCE FOR BUILDINGS Current demand: • Peak demand 2062 MW • Annual growth of 5% of energy demand until 2037 • Est. 15,000 Mrd. ktoe by 2020 needed • 16,000 MW solar power capacity extension until 2050
Current situation: • Government support for solar energy related projects • Long Term Generation Extension Plan roadmap • Rooftop initiative • 100,000 households to be equipped with Solar PV • Regulations for net metering
Outlook:
• 100 % renewable energy by 2050 • Investment and innovation in the solar sector in Sri Lanka needed • 20 % of the energy users to generate solar energy with solar PV • 1389 MW Solar (Govt. expansion plans)
Source: Factsheet Sri Lanka, MOPE; Sri Lanka Energy Sector Development Plan For A Knowledge-Based Economy 2015 - 2025
FUTURE SCENARIO OF THE SOLAR ENERGY SECTOR Total investment required in Sri Lankan power sector for 100 % renewable energies
Source: UNDP-LECB-Assessment-Sri-Lanka-Power-Sector; Potenzialanalyse 2018
OPPORTUNITIES IN THE SOLAR ENERGY SECTOR 14,150GWh Annual Demand for Electricity
• • • • • • • • •
Construction of new solar plants (incl. Floating Solar PV) Hybrid Solar Projects Energy storage options Developing & Promoting of Non conventional energy sources with improved technology Further research on exploring innovative concepts, especially in regard to energy storage Supply of components Maintenance services Consultancy Capacity building on-site
Source: Board of Investment Sri Lanka & Ministry of Power and Energy
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SOLAR ENERGY AS ENERGY SOURCE FOR BUILDINGS Potential and Market Opportunities for German Companies: • • • • • • • • • • • •
Inverters Solar Controller Storage (battery) systems Battery Management System Solar PV systems Grid integration Service & maintenance Cloud based monitoring systems Weather forecasting services Financing & Insurances Planning & Engineering Training & Education
Source: picture: http://www.awsolar.com.au/service/item/stand-alonehybrid/
INVESTMENT PROTECTION
• Sri Lanka has signed Bilateral Investment Protection Agreements (IPA) ------- 28 countries ( Ex: Australia, Germany, Denmark, France, Sweden) • Sri Lanka also has Bilateral Double Tax Avoidance Agreements (DTAA) -------- 42 countries (Ex. Germany, India, USA) • A founder member of the Multilateral Investment Guarantee Agency (MIGA) Source: Board of Investment Sri Lanka & Parliament.lk
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DOING BUSINESS IN SRI LANKA
TYPES OF COMPANIES Sri Lanka Companies Act No 7 of 2007 Private Companies • A private company must consist of at least one and not more than fifty members. • It must have at least one director. • A private company cannot invite public subscription for its shares. Public Companies • At least seven members are required(there is no upper limit). • It must have at least two directors. • Public companies may invite public subscriptions for their shares or debentures and other securities, and can also be listed on the stock exchange. • They cannot commence business without a business commencement certificate. Offshore Companies • A company registered within or outside Sri Lanka may register itself in Sri Lanka as an offshore company to carry on any business outside the shores of Sri Lanka. • If a company registered outside Sri Lanka registers itself as an offshore company, it is deemed to have been incorporated in Sri Lanka. • An offshore company cannot conduct any business in Sri Lanka
Source: Department of Registrar of Companies & Companies Act No 7 of 2017
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TYPE OF COMPANIES Subsidiaries • To establish a business in Sri Lanka foreign companies can incorporate as a local subsidiary company. • A subsidiary in Sri Lanka must comply with all statutory requirements imposed on domestic companies. Branches • A company incorporated outside Sri Lanka may establish a place of business in Sri Lanka by registering a branch office with the Registrar of Companies. • Applications for registration must be made within one month of establishing a place of business in Sri Lanka. • Generally approval from the relevant line ministry would be required before the registration can be completed. • The liability of a branch extends to its foreign assets. Liaison / Representative Offices • A company incorporated outside Sri Lanka may maintain its presence in Sri Lanka through a representative office, and is of similar status to that of a branch office. • Company is prohibited from engaging in any trading or investment activity or accruing any turnover in Sri Lanka. • No tax incident arises since it is not permitted to trade.
Joint Venture Company • A joint venture can be with other Sri Lankan companies or foreign entities. • A joint venture business may be incorporated or carried on as an unincorporated business similar to that of a partnership. • Joint ventures have become popular in recent years; particularly in export oriented projects.
Source: Department of Registrar of Companies & Companies Act No 7 of 2017
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TAX SYSTEM IN SRI LANKA
Corporate Income Tax On profit and Income
Personal Income Tax • Tax Free Allowance LKR 500,000 for all sources of income Additional tax relief of LKR 700,000 for employees only •
Rates of Tax – 2018/2019 Taxable Income (LKR)
Rate %
Cumulative Tax (LKR)
First 600,000
4
24,000
Next 600,000
8
72,000
Next 600,000
12
144,000
Next 600,000
16
240,000
Next 600,000
20
360,000
Balance
24
•
Withholding Tax
Withholding tax on interest Assessable income -
14
Company predominantly conducting a business of exporting goods & services
14
Company predominantly conducting an agricultural business
14
15
Company predominantly providing educational services
14 14
Interest to non-resident person
14
Company predominantly engaged in an undertaking for the promotion of tourism
Rent paid to Resident person
10
Company predominantly providing information technology
14
All other cases including non-resident person
14
Persons engaged in betting & gaming, liquor or tobacco business
40
Companies other than taxable at 40% and 14%
28
On dividends distributed
14
Remittance of profits
14
Standard rate – 15% Exports & specified international services - zero rated Registration Threshold for VAT is Rs 3Mn per Quarter or Rs 12Mn per annum
Source: Department of Inland Revenue Sri Lanka
Small and Medium enterprise
Interest paid to a resident person (other than senior citizen
Value Added Tax (VAT) • •
Rate %
Rate %
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COMMERCIAL AGENCY IN SRI LANKA •
A relationship of principal and agent as known in English law can be determined by private contract.
•
According to the previous Exchange Control Act, there was a provision for Agency which represents a foreign company, that has to be approved by the Controller of Exchange in Sri Lanka. But, according to the Foreign Exchange Act No. 12 of 2017, there is no any provision for Agency.
Duties of an agent to his principal • • • • •
The Agent must follow the Principal’s instructions The agent must act in person and not delegate his duties Agent’s duty to exercise reasonable diligence, care and skill Agent’s duty to maintain accounts Agents duty to act in the Principal’s interest
Source: Department of Foreign Exchange, Law of Agency in Sri Lanka
Duties of the Principal towards the Agent • • •
The right to remuneration The right to an indemnity The right to exercise a lien
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YOUR WINDOW TO BUSINESS WITH SRI LANKA Delegation of German Industry and Commerce in Sri Lanka AHK Sri Lanka was officially inaugurated on 27th March 2018, with the purpose of enhance the bilateral economic relationship between Germany and Sri Lanka, • • • • • •
Market Access Support (Partner searching, Market information, Market studies) Trade Fair Support (Consultancy and Information) Legal Information Debt Collection and Mediation Vocational and Continuous Training Public Relationship Support
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THANK YOU
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