March 2018 (Date of issued: 4/4/2018) NEWSLETTER_EN11/MARCH/2018. Fountains Latvia Opera and Ballet Theater Riga, Latvia. Photo : 1zoom.

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1 March 2018 (Date of issued: 4/4/2018) NEWSLETTER_EN11/MARCH/2018 Fountains Latvia Opera and Ballet Theater Riga, Latvia Photo : 1zoom.me

Ministry of Megapolis & Western Development and the European Chamber of Commerce of Sri Lanka sign MOU for framework of collaboration to contribute to the successful implementation of the Megapolis

COLOMBO, April 2018: At a recently concluded event the Ministry of Megapolis & Western Development and the European Chamber of Commerce of Sri Lanka signed an MOU to formalize a framework of

The Signatories for the Ministry of Megapolis and Western Development comprised Eng. N. Rupasinghe, Secretary of the Ministry of Megapolis and Western Development of Sri Lanka and Mr. Heinz A.

2 Ministry of Megapolis & Western Development and the European Chamber of Commerce of Sri Lanka sign MOU for framework of collaboration to contribute to the successful implementation of the Megapolis development project. COLOMBO, April 2018: At a recently concluded event the Ministry of Megapolis & Western Development and the European Chamber of Commerce of Sri Lanka signed an MOU to formalize a framework of cooperation to collaborate and contribute to the successful implementation of the Megapolis development project in the Western Region of Sri Lanka. The Signatories for the Ministry of Megapolis and Western Development comprised Eng. N. Rupasinghe, Secretary of the Ministry of Megapolis and Western Development of Sri Lanka and Mr. Heinz A. Reuter, President of the European Chamber of Commerce of Sri Lanka. Going forward, active participation and collaboration between the parties will ensure the following: Dissemination of information on the Megapolis and Western Regional policies and projects. Broadcasting information by ECCSL through its networks and conducting of promotional activities with regard to the Megapolis; Support by the ECCSL to ensure local liasion with the Delegation of the European Union; identification and introduction by ECCSL of European companies which may be suitable investors; cooperation on the business positioning related to the development activities of the Megapolis project; ECCSL will share input and advice with regard to the outbound Megapolis promotional activities and missions as well as inbound delegations; ECCSL will be the Voice of Business and European Business with regard to areas where further consideration is necessary to make the policies and projects more investor and business friendly. A fruitful partnership is envisaged as the outcome of this MOU which will in turn, benefit the growth and the development of the country and the achievement of national objectives as whole. NEWSPAPER Article Insurance, real estate drive December 2017 earnings up Research. DECEMBER quarter earnings of 279 listed companies have spiked 19% year-on-year to Rs. 86 billion, turning around from a dip of 2% year-on-year in September 2017, according to First Capital It said the main drivers of earnings were Insurance (219%YoY) and Real Estate (255%YoY) overcoming the negative effect of Food, Beverage and Tobacco (-37%YoY) and Capital Goods (-21%YoY). The Insurance sector saw a phenomenal earnings growth of 219%YoY to Rs billion (20% of total December 2017 earnings) driven by CTCE (+2199%YoY) and CINS (+102%YoY). CTCE profits were up as change in contractual liability increased to Rs. 5.8 billion while CINS profits increased given the absence of the decline in the insurance fund of Rs. 1.7 billion in December Dear Sri Lankan Exporter, Have you registered with REX? The Real Estate sector saw a profit growth of 255% YoY to Rs. 6.3 billion (7% of total December 2017 earnings) driven by RIL (3874%YoY) and CLND (4843%YoY). First Capital Research said RIL s profits were boosted due to one-off gains of Rs. 1 billion and profits of Rs. 1.5 billion of equity accounted investee arising from its acquisition of 30% stake in UML while CLND s profits were up given the fair value gains on its land property in Pettah. The Food, Beverage and Tobacco sector saw earnings dipping by 37% YoY to Rs billion (14% of total December 2017 earnings) driven by GOOD (-100%YoY) and BUKI (-97%YoY) given the absence of profits from the disposal of plantation assets in December The Capital Goods sector s earnings declined by 21% YoY to Rs. 9.9 billion driven by JKH (-13%YoY) and KAPI (- 3201%YoY). JKH s earnings were affected by a higher cost of sales which eroded gross margins while KAPI saw higher finance cost (+29%YoY) coupled with declining gross margins due to a higher cost of sales. Source: DaliyFT, Monday, 2 April 2018

THE Registered Exporter system (the REX system) is the system of certification of origin of goods that applies in the Generalised System of Preference (GSP) of the European Union since 1 January 2017.

invoice or another commercial document identifying the exported products. Thus, the registered exporter is not obliged to apply upon each export for issue of a certificate of origin.

elaborate a guidance as a standalone document which can then be referenced by all other guidance documents where the REX system is applied (the GSP User Guide, the guidance documents of FTAs).

3 THE Registered Exporter system (the REX system) is the system of certification of origin of goods that applies in the Generalised System of Preference (GSP) of the European Union since 1 January The REX system simplifies export formalities by allowing the registered exporter to certify the preferential origin himself by including a specific declaration (so-called statements on origin) on the invoice or another commercial document identifying the exported products. Thus, the registered exporter is not obliged to apply upon each export for issue of a certificate of origin. As the REX system is a single system that will be applied in different unilateral, bilateral or multilateral preferential trade arrangements the EU has with third countries, it has been decided to elaborate a guidance as a standalone document which can then be referenced by all other guidance documents where the REX system is applied (the GSP User Guide, the guidance documents of FTAs). After regaining GSP+ facility for Sri Lanka, the REX system was introduced to Sri Lankan exporters and the system has been implemented from 1 st January The 12 month transition period which will be ending 31 st December 2018, has been given Sri Lankan exporters by allowing to get register with the REX system. Until the government is officially implementing REX, GSP certificates and invoice declarations can be presented to claim preference and the current procedures and codes still apply. These are the guidelines which have been published by the Department of Commerce which is implementing the registration for REX system Duly complete REX-1 Form and submit in both PDF and word formats to Department of Commerce. Exporters are requested to commence registration under REX system with effective from 15/06/2017. Exporter should duly complete REX-1 Form and in particular indicate the TIN issued by the Department of Inland Revenue in the cage 1. (Please attach a certified true copy) Please specify the HS codes in cage 4 of REX-2 Form only for goods which have been approved by the Department of Commerce (Cost Statements/ Affidavits/Material Sheets) If there is any amendments or modifications to the registered data (provided by the exporter) such as adding new products, changes in the contact details, etc. please inform the Department of Commerce in writing immediately. Please note that additions for new products are subject to the prior approval from the Department of Commerce. Statement on Origin for the products which have not been approved by the Department of Commerce cannot be issued by the exporters REX system will be effective from 01/01/2018 and the registered exporters will be eligible to make Statement on Origin as per the format specified by EU (please refer to REX-3 Form) for the consignments above 6000 EUR. And Statement on Origin is not required for the consignments below 6000 EUR A Statement on Origin shall be made out for each consignment and will be valid for 12 months from the date on which it is made out. A Statement on Origin may be made out after exportation and it will be admitted in the EU if presented at the latest two years after the importation. Exporters should submit on line to the Department of Commerce the shipment data as per REX-4 Form within two weeks from the on board date. If data on a particular shipment is not made available to the Department of Commerce (using REX-4 Form) at the time of post verification, if any, it will be considered that the consignment in question was not sent from Sri Lanka. SEVERAL eastern Baltic tribes merged in medieval times to form the ethnic core of the Latvian people (ca. 8th-12th centuries A.D.). The region subsequently came under the control of Germans, Poles, Swedes, and finally, Russians. A Latvian republic emerged following World War I, but it was annexed by the USSR in an action never recognized by the US and many other countries. Latvia reestablished its independence in 1991 following the breakup of the Soviet Union. Although the last Russian troops left in 1994, the status of the Russian minority (some 26% of the population) remains of concern to Moscow. Latvia acceded to both NATO and the EU in the spring of 2004; it joined the euro zone in 2014 and the OECD in A dual citizenship law was adopted in 2013, easing naturalization for non-citizen children. ECONOMY OVERVIEW LATVIA is a small, open economy and due to its geographical location, transit services are highly- Population: IMPORTANT FACTORS 1,944,643 (July 2017 est.)

4 GDP (purchasing power parity) GDP - real growth rate GDP - per capita (PPP) Exports Exports - commodities Exports - partners Imports Imports - commodities Imports - partners Source: World Factbook $53.47 billion (2017 est.) 3.8% (2017 est.) $27,300 (2017 est.) $12.34 billion (2017 est.) foodstuffs, wood and wood products, metals, machinery and equipment, textiles Lithuania 17.3%, Estonia 11.5%, Russia 11.4%, Germany 6.8%, Sweden 5.7%, UK 5.3%, Poland 5%, Denmark 4.4% (2016) $15.13 billion (2017 est.) machinery and equipment, consumer goods, chemicals, fuels, vehicles Lithuania 16.9%, Germany 12.3%, Poland 10.4%, Estonia 7.9%, Russia 7.4%, Finland 4.3%, Netherlands 4.3% (2016) consumption, the latter stoked by rising wages, helped the economy grow by more than 4% in 2017, while inflation rose to 3%. Continued gains in competitiveness and investment will be key to maintaining economic growth, especially in light of unfavorable demographic trends, including the emigration of skilled workers, and one of the highest levels of income inequality in the EU. In the wake of the crisis, the IMF, EU, and other international donors provided substantial financial assistance to Latvia as part of an agreement to defend the currency's peg to the euro in exchange for the government's commitment to stringent austerity measures. The IMF/EU program successfully concluded in December 2011, although, the austerity measures imposed large social costs. The majority of companies, banks, and real estate have been privatized, although the state still holds sizable stakes in a few large enterprises, including 80% ownership of the Latvian national airline. Latvia officially joined the World Trade Organization in February 1999 and the EU in May Latvia also joined the euro zone in 2014 and the OECD in 2016.

5 BILATERAL TRADE RELATIONSHIP BETWEEN SRI LANKA AND LATVIA Values in USD '000' ACCORDING to the trade statistics, bilateral trade relations between Sri Lanka and Latvia was not quite strong in last two years. In 2016, the total trade value presented approximately US$ 7 million (exports to Sri Lanka = US$ 6 million and imports from Sri Lanka = US$ 1 million). Among the top Sri Lankan Export products, Rubber and Rubber based products took the lead and followed by Tea SRI LANKA'S Imports SRI LANKA'S Exports SRI LANKA'S TOP EXPORTS TO LATVIA (Values in USD 000 ) SRI LANKA'S TOP IMPORTS FROM LATVIA (Values in USD 000 ) Product code Product label Sri Lanka's exports to Latvia Value in 2015 Value in 2016 'TOTAL All products 5,785 6,012 '40 Rubber and articles thereof 3,957 4,773 Product code Product label Sri Lanka's imports from Latvia Value in 2015 Value in 2016 'TOTAL All products '60 Knitted or crocheted fabrics '09 Coffee, tea, maté and spices 1, '53 Other vegetable textile fibres; paper yarn and woven fabrics of paper Yarn '61 Articles of apparel and clothing accessories, knitted or crocheted '21 Miscellaneous edible preparations '69 Ceramic products '08 Edible fruit and nuts; peel of citrus fruit or melons '20 Preparations of vegetables, fruit, nuts or other parts of plants '30 Pharmaceutical products 5 3 '85 Electrical machinery and equipment and parts thereof; sound recorders and reproducers, television... Source: Trade Map 0 3 '44 Wood and articles of wood; wood charcoal '84 Machinery, mechanical appliances, nuclear reactors, boilers; parts thereof '85 Electrical machinery and equipment and parts thereof; sound recorders and reproducers, television... '90 Optical, photographic, cinematographic, measuring, checking, precision, medical or surgical... '54 Man-made filaments; strip and the like of man-made textile materials '58 Special woven fabrics; tufted textile fabrics; lace; tapestries; trimmings; embroidery '35 Albuminoidal substances; modified starches; glues; enzymes '61 Articles of apparel and clothing accessories, knitted or crocheted '62 Articles of apparel and clothing accessories, not knitted or crocheted Source: Trade Map

6 UPCOMING TRADE FAIRS IN LATVIA TOP BRANDS IN LATVIA

LATVIA is one of the key players in the European Union and a member of NATO since 2004.

7 LATVIA is one of the key players in the European Union and a member of NATO since In the recent years, the country has become a hot spot for investment, increasing number of global players are looking to invest in the country and are benefitting for its favorable investment policies. The strategic geographical position in the center of the Baltic area provides big accessibility to the large and rich Nordic markets. ACCESS TO KNOWLEDGE AND SKILLS Labor force is the backbone of any industry and in Latvia there is no shortage for it, foreign investors in Latvia can have access to the huge base of high educated and technically qualified workers. Latvia s workforce is rated in the top five in the world in terms of university students per capita and possesses a northern European culture and work ethic, excellent skills and discipline. Over 85% of Latvians speak Russian; 70% of people under age 40 speak English; German and Scandinavian languages are also widely spoken. LOGISTICS In terms of logistics, Latvia is one of the best locations to establish a business in Northern Europe. Riga itself is the largest city in the Baltic States and is ideally located at the center of the region. It s European Union boarder with Russia, providing Ice-free ports, a fastest growing airport in Europe RIX which offers direct flights to more than 80 destinations, plus a well-developed transport infrastructure in Riga free port. The Trans-Baltic highway (Via Baltica) connects directly to Moscow. FREE TAX ZONES, IMPORT EXPORT AND LATVIA TRADE Latvia has four separate Special Economic Zones (three ports and one inland). All are well connected to transport systems. Zones offer corporate tax discounts (as much as 80%) as well as 0% rates for VAT, customs and excise duties to companies setting up there. Special government funding programs are available to assist export-oriented business activities. Ask B2Baltic team the best zone and check out the ability of the logistic structures partners of B2Baltic. TAX Latvia s labour costs are very competitive, especially compared to those in older EU member countries. Corporate income tax rate is among the lowest in Europe at a flat rate of 15% and dividends to EU citizens are not taxed. Personal income tax is also at a low flat rate of 26%. INFORMATION AND COMMUNICATIONS TECHNOLOGY Latvia has one of the fastest telecommunications infrastructures in the world, providing companies seamless connection with customers and partners abroad. Indicative rankings include: 5th globally for average measured Internet connection speed (7.8Mbps) and 7th globally for broadband connectivity above 5Mbps.

COST EFFECTIVENESS Latvia offers significant cost advantages to investors, including competitive labor and real estate expenses, as well as competitive tax rates.

In Real estate sector, overhead costs have decreased significantly in recent years, particularly for construction, office space and industrial real estate.

8 COST EFFECTIVENESS Latvia offers significant cost advantages to investors, including competitive labor and real estate expenses, as well as competitive tax rates. Coupled with strong productivity in manufacturing and services, Latvia provides investors with a highly cost-effective environment for business, producing compelling returns on investment. In Real estate sector, overhead costs have decreased significantly in recent years, particularly for construction, office space and industrial real estate. You can use B2BALTIC experienced lawyers to manage your real estate transactions. FDI / Investment Policy: The Latvia federal government has formulated special foreign investment friendly policies to encourage maximum investment from foreign companies. The government provides several financial grants to foreign investors investing in the country. The grants are mainly in terms of tax exemptions and loans at very cheap interest rates. KEY INVESTMENT SECTORS: Latvia has huge industrial sector and its economy is noted for its large manufacturing wing and there is plenty of scope for foreign investors to investing in its diverse manufacturing sectors. Foreign companies can consider investing in various segments like Wood processing Food processing Textiles Machinery Since Latvia is located in close proximity to the Baltic Sea, foreign investors can greatly benefit from it, since it provides a perfect gateway for transportation of goods. To attract foreign investment in the country s manufacturing industry, the Latvian government is keen to privatize the sector keeping in mind its contribution to GDP. Since the government of Latvia has privatized the manufacturing sector barring a few sensitive industries, the inflow of FDI was about $11.46 billion in Latvia is truly a world class destination to invest, it has all the elements to become an industrial hub in the future. Foreign companies investing the country are sure to earn valuable returns on their investments.

Manager / Editor Copyright 2018 European Chamber of Commerce of Sri Lanka, All rights reserved.

11 EDITORIAL BOARD Heinz Reuter President ECCSL Arnold Perera Vice President ECCSL John Wilson Director / Legal Counsel ECCSL Janani Wijetunge Operational Manager Dilshan Nawanjana Asst. Manager / Editor Copyright 2018 European Chamber of Commerce of Sri Lanka, All rights reserved. Our mailing address is: The European Chamber of Commerce of Sri Lanka 358/B Elvitigala Mawatha Narahenpita Colombo, Sri Lanka

8 TH AUGUST 2017 NEWSLETTER_EN04/JULY/2017

8 TH AUGUST 2017 NEWSLETTER_EN04/JULY/2017 Sri Lanka - The Next Asian Economic Miracle? Resetting Economic Development Priorities. Prime Minister says GSP+ is the linchpin to exports and job creation The