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Annual Report and Audited Accounts

2014 - 2015

Sri Lanka – Greater Mekong Subregion Business Council of

The Ceylon Chamber of Commerce No. 50, Navam Mawatha, Colombo 2, Sri Lanka.

Tel. +9411-2329143, 2421745-7: Fax. +9411-2381012, 2449352, 2437477 E-mail – info@chamber.lk

Contents…………

1. Launch of the Council

2. Committee 2014 – 2015

3. Membership

4. Review of Activities

Membership Drive

Third Annual General Meeting and Interactive Evening June 2014

Delegation from Thailand November 2014

Delegation from Vietnam December 2014

5. Secretariat

6. Auditors Financial Review 2014 – 2015

7. Sri Lanka Trade Relations with Greater Mekong Subregion

8. Overview of Economy of Greater Mekong Subregion

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Launch of the Council - on 8th June 2010

The Sri Lanka – Vietnam Business Council was inaugurated on 8th June, 2010 under the aegis of the

Ceylon Chamber of Commerce as its 20th Business Council. The inauguration was coincided with the

visit of Hon. Deputy Minister of Trade and Industry in Vietnam, Mr. Le Duong Quang to Sri Lanka with a

high powered 16 member business delegation where the Sri Lanka – Vietnam Business Council

organized business matchmaking sessions for the delegates with potential business partners in Sri

Lanka.

Bilateral Business Councils, an integral part of the Ceylon Chamber of Commerce (CCC), plays a vital

role in the promotion of international business. The Bilateral Business Councils have a great impact on

promoting exports and /or attracting investments through joint meetings with partner countries. The

Business Councils facilitate business matchmaking events through business promotion missions, trade

fairs and product/service catalogue exhibitions as means to promote bilateral business.

Hence, the objectives of the Sri Lanka – Vietnam Business Council were formulated accordingly to

promote trade, investment, tourism and services between Sri Lanka and Vietnam. In addition, special

empathize is made to promote investment from Vietnam to Sri Lanka and encourage the establishment

of joint ventures in Sri Lanka with investors from Vietnam. The Ceylon Chamber of Commerce

facilitates and co-ordinates the activities of the Business Councils by providing professional secretarial

services.

The Sri Lanka – Vietnam Business Council function through a group of businessmen in Sri Lanka and a

counterpart body, in this instance, the Vietnam Chamber of Commerce and Industry where the Ceylon

Chamber of Commerce signed a Memorandum of Understanding in 2004. The Council also maintains a

close relationship with the diplomatic missions in Sri Lanka and in Vietnam.

Highlights of our Council since the inauguration in June 2010 ………………

Sri Lanka – Vietnam Business Council of the Ceylon Chamber of Commerce encompassed to Cambodia, Laos, Myanmar and Thailand of the Greater Mekong Subregion with the objective of further expansion of trade, investment and tourism between Sri Lanka and the Greater Mekong Subregion. Therefore, the name of the Sri Lanka – Vietnam Business Council will be supplemented as –

Sri Lanka – Vietnam Business Council

Greater Mekong Subregion

Thailand, Myanmar, Laos and Cambodia

The Greater Mekong Subregion (GMS) is a natural economic area bound together by the Mekong River, covering 2.6 million square kilometers and a combined population of around 326 million people.

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Office Bearers of the Council for 2014 – 2015

President Dr. Mahesha Ranasoma, Dipped Products PLC

Vice Presidents Mr. Patrick Rodrigo, Walker Sons & Co. Engineering (Pvt) Ltd.

Mr. Vinodh Hirdaramani, Hirdaramani International Exports (Pvt) Ltd. Mr. Andre Fernando, MAC Holdings (Pvt) Ltd.

Immediate Past President Mr. Anton Godfrey, AG International (Pvt) Ltd.

Committee Mr. Sirimal Fernando, Astron Ltd.

Mr. Rohitha Thilakarathne, Merchant Lanka (Pvt) Ltd. Mr. Panduka Weerasinghe, Browns & Company PLC Mr. Ranel Seneviratne, Ranfer Teas (Pvt) Ltd.

Secretariat Ms. Lilakshini de Mel, The Ceylon Chamber of Commerce

Committee Members with Mr. P.T. Tuan, Deputy Head of Mission, Embassy of Vietnam

at the AGM 2014

Seated - Left to Right Ms. Lilakshini de Mel, Mr. P.T. Tuan, Dr. Mahesha Ranasoma, Mr. Patrick Rodrigo, Mr. Andre Fernando

Standing - Left to Right Mr. Ranel Senevirathne, Mr. Rohitha Thilakarathne, Mr. Panduka Weerasekera

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Membership

Membership, the strength of the Council was further expanded rapidly through the vigorous

Membership drives carried out since the establishment of the Council in 2010. As a result, Council was

able to increase the number of members to 50 during the period under review.

AB Mauri Lanka (Pvt) Ltd

AG International (Pvt) Ltd

Apache Capital

Astron Ltd

Brittos

Brown & Co. Plc

C.W. Mackie Plc

Capitol Developers Ltd

Ceyline Travels (Pvt) Ltd

Cinnamon Lakeside Colombo

Citihealth Imports (Pvt) Ltd

Cliftex Industries (Pvt) Ltd

Chrisslogix (Pvt) Ltd. Daya Group (Pvt) Ltd Dipped Products Plc E W Information Systems Ltd Elastomeric Engineering Co. Ltd Fransventures (Pvt) Limited Freight Links International (Pte) Ltd Garmex International (Pvt) Ltd General Equipments Limited Globe Commercial Agencies Ltd Halchem Lanka (Pvt) Ltd Hayleys Agro Farm (Pvt) Ltd Heritage Teas (Pvt) Ltd Hirdaramani International Exports (Pvt) Ltd

Jetwing Hotels Ltd

Jinasena (Pvt) Ltd

Just In Time Holdings (Pvt) Ltd

Lanka IOC Plc

Mac Holdings (Pvt) Ltd

Mackwoods Ltd

Merchant Lanka (Pvt) Ltd

Metatechno Lanka Company (Pvt) Ltd

Microcells (Private) Ltd.

Neem Glow Pharmars

Piyawardena Associates

Ranfer Teas (Pvt) Ltd

Rpc Management Services (Pvt) Ltd

Sea Master Enterprises

Serendib Flour Mills (Pvt) Ltd

Shitake Mushroom Lanka (Pvt) Ltd. Solex Engineering (Pvt) Ltd Spice Of Life (Pvt) Ltd Stassen Exports (Pvt) Ltd Tos Lanka Company (Pvt) Ltd Union Residencies (Pvt) Ltd Van Rees Ceylon Ltd Walker Sons & Co. Eng. (Pvt) Ltd Wavenet International (Pvt) Ltd Zam Gems (Pvt) Ltd

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Review of Activities

Membership Drive

Membership, the strength of the Council was further expanded rapidly through the vigorous Membership

drives carried out which resulted increased number of members from 49 to 51 during the period under

review.

Third Annual General Meeting and the Interactive Evening

The Third Annual General Meeting and the Interactive Evening of the Council was held on 15th June, 2014 at

the Hilton Colombo Residence, Colombo 2. Mr. P. Tuan, Deputy Head of Mission, represented His Excellency

Ton Sinh Thanh, Ambassador for Vietnam as the Chief Guest at the occasion.

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Mr. P. Tuan, Deputy Head of Mission, addressing the gathering stated that despite the great economic

potentials, the economic data show that bilateral economic relationship between our two countries remains

very limited. The increase of last year two-way trade volume from US$ 93 million to US$ 113 million

(Increased 21%) may be seen as good news, but Sri Lankan exports to Vietnam were only around US$ 30

million with very few product lines.

Delegation from Thailand

The Department of International Trade Promotion (DITP), Ministry of Commerce and the Royal Thai

Government, organised a high powered trade delegation from Thailand to visit Sri Lanka in November, 2014.

In order to provide an opportunity for delegates to meet companies the Sri Lanka – Greater Mekong

Subregion Business Council of the Ceylon Chamber of Commerce in association with the Thai Trade Centre in

India organised a Business Forum followed by B2B meetings on at the Cinnamon Grand Colombo.

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Delegation from Vietnam

An 18 member business delegation organised by the Ministry of Industry and Trade - Vietnam visited Sri

Lanka in December 2014. The delegation was headed by Mr. Do Huu Huy, a senior official of the Ministry of

Industry and Trade of Vietnam.

In order to facilitate members to meet the delegates, the Sri Lanka – Greater Mekong Sub-region Business in

association with the Embassy of Vietnam in Colombo and the Council Ceylon Chamber of Commerce

organised a Business Networking Event on 8th December 2015 at the Chamber. Sri Lanka and Vietnam, two

the largest Rubber producers in the world should explore the possibility of setting up a ‘Single Price

Mechanism” for selling rubber, suggests the Vietnamese Ambassador in Sri Lanka Pan Kieu Thu.

She made this suggestion, as she says, both Sri Lanka and Vietnam depends on the global market to sell their

rubber produce by exporting. “85-pct of our rubber produce is exported and we are largely depending on

the world price. So I thought about, have we ever talked about a common price mechanism, between our

two countries,” she said. Pan Kieu Thu speaking further at the event also suggested that both countries

should explore the possibility of working in the areas of Fertiliser and Home Appliances sectors. “We have

been cooperating very well in rice and the tea industry, bilateral trade is not only tea and rice, we should

look beyond,” the Diplomat added. The trade between Vietnam and Sri Lanka stood at just US$ 200 million

in the year 2013 with the trade balance standing in favour of Vietnam.

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Secretariat

The Ceylon Chamber of Commerce provided Secretarial Services to the Council during the period under

review.

Auditors Financial Review 2014 – 2015

M/s. KPMG Ford, Rhodes, Thornton & Co. was elected Auditors of the Council.

By order of the Committee

Lilakshini de Mel For Secretary

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Financial Review 2014 – 2015

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External Trade with Greater Mekong Subregion Countries

Myanmar

Sri Lanka’s External Trade with Myanmar

Main items Exported from Sri Lanka

Main items Imported from Myanmar

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Thailand

Sri Lanka’s External Trade with Thailand

Main items Exported from Sri Lanka

Main items Imported to Sri Lanka

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Vietnam Sri Lanka’s External Trade with Vietnam

Main items Exported from Sri Lanka

Main items Imported to Sri Lanka

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Overview of Economy of Greater Mekong Subregion

The Greater Mekong Subregion (GMS) comprises Cambodia, the People's Republic of China, Lao People's

Democratic Republic, Myanmar, Thailand, and Viet Nam.

In 1992, with ADB's assistance, the six countries entered into a program of subregional economic

cooperation, designed to enhance economic relations among the countries. The GMS Program, with support

from ADB and other donors, helps the implementation of high priority subregional projects in transport,

energy, telecommunications, environment, human resource development, tourism, trade, private sector

investment, and agriculture.

Substantial progress has been achieved in terms of implementing GMS projects since 1992. Priority

infrastructure projects worth around $11 billion have either been completed or are being implemented.

Among these are the upgrading of the Phnom Penh (Cambodia)-Ho Chi Minh City (Viet Nam) highway and the

East-West Economic Corridor that will eventually extend from the Andaman Sea to Da Nang.

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Cambodia

Overview

Cambodia has moved closer to lower middle-income status via resounding economic growth driven by solid

performances in garment manufacture, tourism, paddy and milled rice, and construction. While this growth

is expected to continue through 2015-2016, the economy remains vulnerable to exogenous shocks and

natural disasters. The Cambodia Socio-Economic Survey indicated that poverty in Cambodia fell dramatically

between 2007 and 2012, from about 50% to below 20%.

Economic performance

Solid growth in 2014 estimated at 7.0% slightly underperformed the 7.3% average of the previous 3 years.

Industry and services were the drivers as agriculture lagged. Prolonged expansion has lifted Cambodia’s

gross national income per capita toward the $1,045 threshold for entry into lower-middle income status.

Political tensions and, in the garment industry, labor unrest spilled from 2013 into 2014 to temporarily

dampen investment and disrupt garment manufacturing and tourism. These headwinds eased as the year

progressed. Exports of garments and footwear, based on customs data, reached $6.0 billion in 2014, rising

by 10.7% but decelerating from the previous year. Shipments to the European Union increased by 22% to

$2.4 billion, but those to the US fell by 5.4% to $2.0 billion. Construction continued to expand, funded by

inflows of foreign direct investment (FDI) and a 34.3% rise in bank credit for the segment. Industry as a

whole grew by an estimated 9.8%.

Economic prospects

The outlook is for economic growth to pick up in light of anticipated stronger performance in trade partners

- the United States and Thailand and, to a lesser extent, the European Union - coupled with a calmer

domestic political environment and lower fuel costs. The gross domestic product is projected to increase by

7.3% in 2015 and 7.5% in 2016.

Over the medium term, growth will be stimulated by gradual diversification into light manufacturing and

further integration into regional and global supply chains.

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Lao People’s Democratic Republic

Overview

The economy of the Lao People’s Democratic Republic continues to grow vigorously. An investment boom,

based on natural resources and fueled by mining and exports of hydropower, has seen gross national income

double since 2006. Economic growth moderated in 2014, but is still buoyant, supported by external demand

and foreign direct investment. Annual average headline inflation dropped substantially in 2014, due to

reduced domestic demand and a sharp decline in global oil prices. Yet the Lao PDR remains highly

vulnerable to external economic shocks.

Despite headwinds that have slowed growth, the gross domestic product of the Lao People’s Democratic

Republic is seen increasing by 7.0% this year and slightly faster in 2016, fuelled by expansion in hydropower

and services. Inflation is expected to remain modest, and some improvement is forecast in external

accounts. Renewed efforts are needed to spur the development of the domestic private sector. Economic

performance. Growth was maintained above 7% for a ninth consecutive year in 2014, though fiscal

tightening and weaker global demand for minerals moderated the pace by 0.5 percentage points to 7.4%.

Two decades of significant economic growth helped to halve the national poverty rate from 46% in 1992 to

23% in 2013.

Economic prospects

Growth is expected to moderate further in 2015 as lackluster demand for minerals weighs on mining and as

fiscal constraints curb public investment. Nevertheless, growth in the gross domestic product is forecast at

7.0% in 2015, picking up to 7.2% in 2016.

Investment in power projects will generate much of the growth over the forecast period. More than 20

power projects are under construction, including the $3.5 billion Xayaburi hydropower plant, scheduled for

commissioning in 2019 with capacity to generate 1.3 gigawatts. Power generation will get a boost when the

large Hongsa lignite power plant, able to generate 1.9 gigawatts, comes on stream later this year and is

fully operational in 2016. Total electricity production is projected to rise by 6% in 2015, accelerating

significantly in 2016 when six new plants come online.

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Myanmar

Overview

Myanmar is striving for inclusive economic growth and poverty reduction, with strong potential for high

growth in the years ahead. The country enjoys abundant natural resources, a strategic location at the

crossroads of Asia, and a large, youthful population. Emerging from decades of economic and political

isolation, Myanmar represents a sizable market, with wide-ranging investment opportunities.

Economic performance

Growth in Myanmar’s gross domestic product is estimated at 7.7% in Fiscal Year 2014 (ending 31 March

2015), reflecting strong expansion in construction, manufacturing, and services. The government’s

ambitious structural reform program has underpinned the strong growth performance in recent years.

Construction was driven by government investment in infrastructure, and property development in Yangon

and Mandalay. Manufacturing benefitted from increasing flows of foreign direct investment, with more than

one new garment factory opening per week on average in 2014. Growth in services was bolstered by a surge

in tourist arrivals from 2.0 million in 2013 to an estimated 3.1 million in 2014.

Economic prospects

After moderating in FY2014, growth is forecast to accelerate to 8.3% in FY2015 and remain close to this

pace in FY2016 as it is propelled by investment stimulated by structural reform, an improved business

environment, and Myanmar’s gradual integration into the subregion of Southeast Asia. Better prospects in

neighboring India and Thailand - and further afield in the major industrial economies - support the outlook

for Myanmar but are partly offset by a slowdown in the People’s Republic of China.

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Thailand

Overview

With its strategic geopolitical position and significance as the second largest economy in the Association of

Southeast Asian Nations (ASEAN), Thailand plays a major role in promoting regional cooperation and

integration. Having attained upper middle-income status, the country aspires to reach higher-income status

within the next 2 decades. However, since the late 1990s, economic growth in Thailand has been impeded

by global economic shocks, natural disasters, sociopolitical tensions, and relatively low investment. Other

challenges to growth have included persistent inequality, environmental degradation, and an aging

population. In Thailand, cautious economic recovery that started in 2014 is expected to gather momentum

slowly, nudged forward by higher investment and abetted by a calmer political environment, better

prospects for some exports markets, and lower fuel costs. Consumer prices will barely change this year

before edging up in 2016. Stronger public investment depends heavily on state-owned enterprises, which

need reform.

Economic performance

A contraction in Thailand’s gross domestic product (GDP) in the first quarter of 2014 was followed by a

cautious recovery sufficient for the economy to post marginal growth of 0.7% for the year. Political unrest

and street protests disrupted economic activity into the first half of 2014, culminating in a military takeover

of the government in May. Various disruptions since 2007 have confined average growth over this period to

2.9%.

Economic prospects

The economy is expected to benefit this year from a relatively calm political environment, the restoration

of government investment, better prospects for exports to the major industrial economies, and lower fuel

costs for businesses and consumers. These factors are forecast to lift GDP growth to 3.6% in 2015 and 4.1%

next year. In particular, public fixed investment will rise in 2015 after last year’s decline and is expected to

accelerate in 2016. The interim government has approved an infrastructure program that includes $95

billion in investments over 8 years in railways, roads, ports, airports, and special economic zones. This year,

public investment will be confined to relatively small projects, with larger-scale construction to start from

next year. The government plans to offer contracts for mass rapid transit rail lines in Bangkok and for

double-tracking rail lines across the country.

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Vietnam

Overview

In recent years, Viet Nam’s economic growth has slowed, and single-digit inflation has prevailed. Tight

economic policies have helped stabilize the fiscal deficit, and generate a current account surplus. Viet Nam

needs to accelerate economic restructuring, particularly reforms in the banking sector and to state-owned

enterprises. Despite remarkable achievements in reducing poverty, serious development challenges are

posed by income and non-income inequality and pockets of poverty, particularly among ethnic minorities.

Rising foreign direct investment helped to accelerate economic growth in Viet Nam to 6.0% in 2014. Inflation

abated, and robust external accounts enabled the rebuilding of foreign reserves. Growth is forecast to edge

higher again this year and next, while inflation remains relatively low. Policy challenges are to reform banks

and state enterprises and to integrate domestic firms into global value chains.

Economic performance

The economy grew by 6.0% in 2014, the strongest pace since 2011. Industry expanded by 7.1%, against 5.4%

in 2013, benefitting from foreign direct investment (FDI) that boosted growth in manufacturing to 8.5%.

Recovery in demand for property lifted growth in construction to 7.1%. Agriculture picked up to grow by

3.5%, supported by higher exports of fish and shrimp.

By contrast, growth in services eased from the previous year to 6.0%, partly a result of fewer visitors from

the People’s Republic of China (PRC), which hurt tourism. Total visitor arrivals increased by 4.0% in 2014 - a

deceleration from 10.6% in 2013.

Economic prospects

Growth in gross domestic product is forecast to edge up to 6.1% in 2015 and 6.2% in 2016, with FDI an

important driver. Data from the Foreign Investment Agency show that new FDI commitments rose to $15.6

billion in 2014, while an additional $4.6 billion was committed to existing foreign-funded projects.

Better economic performance in the major industrial economies - particularly the United States, Viet Nam’s

biggest export market - will spur exports, but this positive effect will be partly offset by slowing growth in

the PRC. Exports of manufactured products will continue to expand, given that 76% of last year’s disbursed

FDI was directed into manufacturing.

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We wish to place on record our sincere appreciation

to

Officials attached to the following institutions for their guidance and

support extended to

Sri Lanka – Greater Mekong Subregion Business Council during 2014 – 2015

Board of Investment of Sri Lanka

Department of Commerce Sri Lanka

Embassy of Myanmar in Sri Lanka

Embassy of Thailand in Sri Lanka

Embassy of the Socialist Republic of Vietnam in Sri Lanka

Embassy of the Democratic Socialist Repubilc of Sri Lanka in Vietnam

Embassy of the Democratic Socialist Republic of Sri Lanka in Myanmar

Embassy of the Democratic Socialist Republic of Sri Lanka in Thailand

Ministry of Foreign Affairs Sri Lanka

Sri Lanka Export Development Board

Sri Lanka Tourism Development Authority

Thai Trade Centre in Chennai, India

Vietnam Chamber of Commerce and Industry

Vietnam - Sri Lanka Business Council

Our special appreciation also to Sponsors of our events/newsletters during

2014 - 2015

AG International (Pvt) Ltd.

Astron Ltd.

Dipped Products PLC

Hirdaramani International Exports (Pvt) Ltd.

MAC Holdings (Pvt) Ltd.

Union Residences (Pvt) Ltd.