PART -1

COUNTRY ANALYSIS

1
 HISTORY
Brief History of Nation
Early History & Colonialism

The most ancient of the inhabitants were probably the ancestors of the Veddas, an original
people (numbering about 3,000) now living in remote mountain areas. They were conquered
in the 6th cent. B.C. by the Sinhalese, who were originally from North India; the Ramayana,
the ancient Hindu epic, probably reflects this conquest. The Sri Lanka chronicle
“Mahavamsa” relates the arrival of Vijaya, the first Sinhalese king, in 483 B.C. The Sinhalese
settled in the north & developed an elaborate irrigation system. They founded their capital at
‘Anuradhapura’ which, after the introduction of Buddhism from India in the 3d cent. B.C.,
became one of the chief world centers of that religion; a cutting of the pipal tree under which
Buddha attained enlightenment at Bodh Gaya was planted there. The Temple of the Tooth at
Kandy as well as the Dalada Maligawa are sacred Buddhist sites. Buddhism stimulated the
fine arts in Sri Lanka, its classical period lasted from the 4th to the 6th cent.

The proximity of Sri Lanka to South India resulted in many Tamil invasions. The Chola of
South India conquered Anuradhapura in the early 11th cent & made “Pollonarrua” their
capital. The Sinhalese soon regained power, but in the 12th century, a Tamil kingdom arose in
the north, & the Sinhalese were driven to the southwest. Arab traders, drawn by the island's
spices, arrived in the 12th & 13th cent.; their descendants are the Muslim Moors.

The Portuguese conquered the coastal areas in the early 16th cent. & introduced the Roman
Catholic religion. By the mid-17th cent. The Dutch had taken over the Portuguese
possessions & the rich spice trade. In 1795 the Dutch possessions were occupied by the
British, who made the island, then known as Ceylon, a crown colony in 1798. In 1815 the
island was brought under one rule for the first time when the central area, previously under
the rule of Kandy, was conquered. Under the British, tea, coffee, & rubber plantations were
developed, & schools, including a university, were opened. A movement for independence
arose during World War I. The constitution of 1931 granted universal adult suffrage to the
inhabitants; but demands for independence continued, & in 1946 a more liberal constitution
was enacted.

2
An Independent Nation

As Ceylon, it became independent in 1948. the first prime minister was don “Stephen
senanayake”, the country became a republic & its name was changed to Sri Lanka in 1972.
The newly independent nation retained the name Ceylon until the 1972 constitution renamed
it Sri Lanka.

Full independence was finally granted to the Ceylon on Feb. 4, 1948, with dominion status in
the Commonwealth of Nations. In 1950 delegates of eight countries of the Commonwealth
met in Colombo & adopted the Colombo Plan for economic aid to SE Asia. The replacement
of English as sole official language by Sinhalese alienated the Tamils & other minorities, &
led to Tamil protests & anti-Tamil attacks. Riots in 1958 between Sinhalese & the Tamil
minority over demands by the Tamils for official recognition of their language & the
establishment of a separate Tamil state under a federal system (which had been negotiated but
then abandoned by the government) resulted in severe loss of life, predominantly among the
Tamil community. In Sept., 1959, Prime Minister S. W. R. D. Bandaranaike was assassinated,
& in 1960 his widow, Sirimavo Bandaranaike, became prime minister. The Federal party of
the Tamils was outlawed in 1961, following new disorders.

Certain Western business facilities were nationalized (1962), & the country became involved
in disputes with the United States & Great Britain over compensation. The radical policies of
Mrs. Bandaranaike aroused opposition, & the elections in 1965 gave a parliamentary
plurality once more to the moderate socialist United National party (UNP) of Dudley
Senanayake, who became prime minister with a multiparty coalition. Under Senanayake,

3
closer relations with the West were established & compromise arrangements were made for
recompensing nationalized companies. However, economic problems & severe inflation
continued, aggravated by a burgeoning population (between 1946 & 1970 the population
almost doubled).

In 1970, Mrs. Bandaranaike & her three-party anticapitalist alliance won a landslide victory,
following considerable preelection violence. She launched social welfare programs,
including rice subsidies & free hospitalization, but failed to satisfy the extreme left, which,
under the Marxist People's Liberation Front, attempted to overthrow the government in an
armed rebellion in 1971. With Soviet, British, & Indian aid, the rebellion was quelled after
heavy fighting.

In 1972 the country adopted a new constitution, declared itself a republic while retaining
membership in the Commonwealth of Nations, & changed its name to Sri Lanka. In the early
1970s the government was confronted with a severe economic crisis as the country's food
supplies & foreign exchange reserves dwindle in the face of rising inflation, high
unemployment, a huge trade deficit, & the traditional policy of extensive social-welfare
programs.

Civil War

Repression of the Tamil language fueled demands by the Tamil minority for an independent
state. Election of a new UNP government under J. R. Jayawardene in 1977 & the
implementation of economic reforms geared toward growth did little to restrain an upsurge of
terrorist violence or of bloody anti-Tamil riots (1977, 1981, 1983). In the 1980s the
“Liberation Tigers of Tamil Eelam” initiated a full-scale guerrilla war against the army in the
north & east; at the same time, radical Sinhalese students assassinated government officials
whom they believed were too soft on the Tamils. In response to a request from Jayawardene's
government, India sent (1987) 42,000 troops to NE Sri Lanka. The Indian troops fought an
inconclusive war with the Tigers & were asked to withdraw by Jayawardene's successor,
Ramasinghe Premadasa, who was elected in 1988.

4
The Indian troops withdrew in late 1989, & fighting resumed in 1990. In 1993, Premadasa
was assassinated in a suicide bombing; he was succeeded as president by prime minister &
UNP leader Dingiri Banda Wijetunga. A year later, the opposition People's Alliance party
(PA) came to power, & Chandrika Kumaratunga, the daughter of Sirimavo Bandaranaike,
became prime minister & then president. Her government negotiated a cease-fire with the
Tamil Tigers, but it collapsed after three months as violence resumed. In late 1995 the
government, in a large-scale offensive, captured the Tamil stronghold of Jaffna; heavy
casualties were reported there, while terrorist bombs caused civilian deaths in Colombo. The
war continued throughout the 1990s, as government troops attacked rebel bases & terrorists
carried out political assassinations (including those of several moderate Tamil politicians) &
suicide bombings. By end of the century, more than 60,000 people had been killed in the
ethnic conflict.

In Nov., 2003, the president suspended parliament & assumed control of the defense, interior,
& information ministries, accusing the prime minister of yielding too much to the Tamil
rebels in negotiations. She also briefly declared a state of emergency. The power struggle
created a constitutional crisis in Sri Lanka, & paralyzed the government & its inconclusive
negotiations with Tamil forces.

The crisis continued into 2004, & in January Kumaratunga claimed she was entitled to an
additional year in office because of a secret swearing-in ceremony a year after she was
elected to her second term. (Sri Lanka's supreme court ruled against her claim to an

5
 additional year in 2005.) The following month the president called early elections, which
were held in April. Her PA-led coalition won a plurality of the parliamentary seats, & she
appointed Mahinda Rajapakse prime minister.

Meanwhile, a split developed in the Tamil guerrillas in March, when the smaller eastern force
broke away, but the following month the main northern force reasserted control in the east.
The rebels accused the government of supporting the renegade faction & refused to restart
the peace talks. Sri Lanka's coastal areas, especially in the south & east, were devastated by
the Dec., 2004, Indian Ocean tsunami that was caused by an earthquake off NW Sumatra.
More than 35,000 people died, & more than 800,000 displaced. Only Sumatra itself suffered
greater loss of life.

In the 2005 presidential election, Prime Minister Rajapakse formed an alliance the JVP &
Buddhist nationalists & came out strongly against autonomy for the Tamils, while his main
opponent, the UNP's Wickremasinghe, was supported by Muslim & Tamil parties. Rajapakse
narrowly won the presidency, aided in part by violence & intimidation by the Tamil Tigers
that kept Tamil voters from the polls in the north & east. Rajapakse named as prime minister
Ratnasiri Wickremanayake, a Sinhalese nationalist who had served in the post during 2000–
2001.

By the end of 2005 the cease-fire with the Tamils appeared more breached than honored. A
new round of Norwegian-sponsored peace talks began in Feb., 2006, but even their
continuation was subject to difficult negotiations. In April the breaches of the cease-fire
escalated sharply, & the Tamil Tigers withdrew from the talks. By the fall the country had
returned to civil war in all but name, but attempts to restart negotiations continued. By the
end of 2006 the rebels had declared the truce defunct, & the government had readopted
antiterrorism measures that it had abandoned in 2002. Fighting in E Sri Lanka that began in
July, 2006, led to a government offensive there that continued into subsequent years &
succeeded in reclaiming territory from the rebels. In Jan., 2008, the government officially
ended with the rebel.

6
 GEOGRAPHICAL SETTING

Climate

Sri Lanka has a tropical climate with monsoons (large-scale wind systems that reverse
direction seasonally). Most temperature variation in the country is determined by elevation
rather than season, with cooler temperatures at higher elevations. The average monthly
temperature in the lowlands ranges from 26° to 31°C (78° to 87°F) year-round. Temperatures
at Nuwara Eliya, situated at an elevation of 1,525 m (5,000 ft) in the central highlands, range
from 13°C (55°F) in December to 20°C (70°F) in May.

The monsoons bring two distinct periods of heavy rainfall to Sri Lanka. From May to
October the southwest monsoon brings moisture-laden air from the Indian Ocean. From
December to March the northeast monsoon brings moisture-laden air from the Bay of
Bengal.

These monsoon patterns combine with Sri Lanka’s surface features to create two climatic
zones in the country: a wet zone in the southwest & a dry zone in the north & east. The wet
zone is inundated with rain during both monsoon seasons, with some rainfall between the
monsoons as well. The western slopes of the central highlands are the wettest area of the
country, receiving average precipitation of more than 3,810 mm (150 in) each year.

In contrast, the dry zone usually receives rain only during the northeast monsoon. Periods of
drought are common during the summer months. This zone has average annual precipitation
of less than 1,905 mm (75 in). The driest parts of the zone along the northwestern &
southeastern coasts receive about 1,270 mm (about 50 in) of rain each year.

7
Topology

8
9
10
The Democratic Socialist Republic of Sri Lanka (formerly known as Ceylon) is about half
the size of England & lies close to the southern tip of India & near the equator. From the
coast, the land rises to a central massif more than 1500 m above sea level. The climate is hot
& humid -monsoon from May to September & the north-east monsoon from November to
March: rainfall, particularly in the south-west, is heavy.

Location: Southern Asia, island in the Indian Ocean, south of India.

Geographic coordinates: 7 00 N, 81 00 E
Area: total:65,610 sq km,
land: 64,740 sq km ,
water: 870 sq km

Coastline: 1,340 km

Climate: tropical monsoon; northeast monsoon (December to March); southwest monsoon

(June to October)

Elevation extremes: lowest point: Indian Ocean 0 m

highest point: Pidurutalagala 2,524 m

Land use: arable land: 13.96%

permanent crops: 15.24%
other: 70.8% (2007)

Irrigated land: 7,430 sq km (2007)

Total renewable water resources: 50 cu km (2001)

Natural hazards: occasional cyclones & tornadoes

Natural resources: limestone, graphite, mineral sands, gems, phosphates, clay,

hydropower etc.

11
Land & resources

The island of Sri Lanka is roughly pear-shaped. The Jaffna Peninsula forms a stemlike
extension in the north. The total area of Sri Lanka is 65,610 sq km (25,332 sq mi). The
greatest length, from north to south, is 440 km (270 mi). The greatest width, from east to
west across the island’s broad southern portion, is 220 km (140 mi). Sri Lanka’s coastline
extends a length of about 1,340 km (about 833 mi).

The land of Sri Lanka can be divided into three geographic zones that correspond to
elevation: the central highlands, the lowland plains, & the coastal belt. The central highlands
include numerous mountains, plateaus, & valleys. Pidurutalagala, the highest point in Sri
Lanka, rises 2,524 m (8,281 ft) in the central highlands. In contrast, the elevation of the
surrounding plains ranges from 90 m (300 ft) to sea level. The plains are broadest in the
north. The coastal belt rises about 30 m (about 100 ft) above sea level. Lagoons, sand
beaches, sand dunes,&marshes predominate along the coast, although steep rocky cliffs are
found in the northeast & southwest.

12
Rivers & lakes

The rivers of Sri Lanka originate in the central highlands. From there they fall down to the
plains & empty into the sea. The rivers are typically unnavigable in their higher reaches,
where they flow swiftly & turbulently through highly eroded passages to the plains below.
Many rivers descend over steep
cliffs, forming spectacular
waterfalls. In their lower courses,
the rivers slowly meander
through flood plains & deltas.

The longest river of Sri Lanka,

the Mahaweli, traverses a course
of about 330 km (about 205 mi).
It flows northeastward across the
central highlands & empties into the Bay of Bengal near the port of Trincomalee, on the
eastern coast. The country’s second longest river is the Aravi Aru, traversing about 220 km
(about 135 mi) on a northwestward course, from the central highlands to the Gulf of Mannār.

Sri Lanka has no natural lakes. Dams on the Mahaweli & other rivers have created large
reservoirs. In addition, a series of small reservoirs called tanks dot the north central plains,
storing water during the dry season. Some of the tanks were constructed as many as 2,000
years ago.

Minerals of commercial value found in Sri lanka are gemstones, graphite, limonite (a mineral
sand), limestone, quartz, mica, industrial clays, & salt. The only commercially extractable
nonferrous metals are titanium, monazite, & zircon, which are found in beach sands in some
costal areas. Sri lanka has been known since ancient times for the variety of its precious &
semiprecious stones. These include high-value gemstone such as sapphire, ruby, cat’s-eye,
topaz & beryl, as well as semiprecious gemstones such as garnet, moonstone, tourmaline,
feldspar.

13
Environment - current issues:

Deforestation; soil erosion; wildlife populations threatened by poaching & urbanization;

coastal degradation from mining activities & increased pollution; freshwater resources being
polluted by industrial wastes & sewage runoff; waste disposal; air pollution in Colombo.
Water is also a serious environment issue in Sri lanka. The mining of coral reefs for the lime
industry has also damaged some marine habitats of Sri lanka.

The Government Of Sri Lanka has ratified international agreement pertaining to global
warming, desertification, endangered species, hazardous wastes, law of the sea & wetlands.

IMPLICATIONS: As Sri Lanka is port it is, so, sea transportation can be done from
India, it is only 32, k.m. away from the port of India. So, Location is favorable for the
export to Sri Lanka.

14
 POLITICAL

TYPE OF POLITICAL SYSTEM

Official name: Democratic Socialist Republic of Sri Lanka

Form of state: Executive presidency based on the French model

Government type: republic

The executive: The president is the head of state, with executive powers. Elected for a period
of six years by universal adult suffrage, the president may dissolve parliament 12 months
after a legislative election.

National legislature: Under the 1978 constitution, the president of the republic, directly
elected for a 6-year term, is chief of state, head of government, & commander in chief of the
armed forces. Responsible to Parliament for the exercise of duties under the constitution &
laws, the president may be removed from office by a two-thirds vote of Parliament with the
concurrence of the Supreme Court. Unicameral legislature; the 225 members are directly
elected for six years by a system of modified proportional representation.

The president appoints & heads a cabinet of ministers responsible to Parliament. The
president's deputy is the prime minister, who leads the ruling party in Parliament. A
parliamentary no-confidence vote requires dissolution of the cabinet & the appointment of a
new one by the president.

Parliament is a unicameral 225-member legislature elected by universal suffrage &

proportional representation to a 6-year term. The president may summon, suspend, or end a
legislative session & dissolve Parliament. Parliament reserves the power to make all laws.

National elections: Presidential & parliamentary elections are held every six years. In the
November 2005 presidential election the UPFA candidate, Mahinda Rajapakse, secured a

15
narrow victory, winning 50.3% of the vote. The next parliamentary election is due around
April 2010.

National government: Mr. Rajapakse, of the People’s Alliance (PA), was elected for his first
term as president in 2005. The UPFA—a alliance of the PA & the Marxist Janatha Vimukthi
Peramuna (JVP, People’s Liberation Front)—won 46.4% of the vote in the 2004 legislative
election, gaining 105 seats in the 225-seat parliament, but fell short of a majority. In 2005 the
JVP left the government, reducing it to a minority. The JVP still provides tentative support to
Mr. Rajapakse, & could rejoin the government.

Local government: Under the Indo-Sri Lankan Accord of July 1987 & the 13th amendment
to the constitution, the Government of Sri Lanka agreed to devolve significant authority to
the provinces. Provincial Councils are directly elected for 5-year terms. The leader of the
council majority serves as the province's chief minister; a provincial governor is appointed by
the president. The councils possess limited powers in education, health, rural development,
social services, agriculture, security, & local taxation. Many of these powers are shared or
subject to central government oversight. As a result, the Provincial Councils have never
functioned effectively. Devolution proposals under consideration as a means of finding a
political solution to the ethnic conflict foresee a strengthening of the Provincial Councils,
with greater autonomy from central control. Predating the accord are municipal, urban, &
rural councils with limited powers.

16
Legislative branch: Unicameral Parliament (225 seats; members elected by popular vote on
the basis of an open-list, proportional representation system by electoral district to serve six-
year terms).

Main members of the government

Executive branch:

President; also in charge of defense & finance: Mahinda Rajapakse

Mahinda Rajapakse with Dr.manmohan singh

Prime minister: Ratnasiri Wickremanayake

Ambassador to the United States--Jaliya Wickramasuriya

Ambassador to the United Nations--H.M.G.S. Palihakkara
Agriculture: Maithripala Sirisena
Enterprise development & investment promotion: Anura Priyadarshana Yapa
Export development & international trade: G L Pieris
Foreign affairs: Rohith Bogollagama

17
Irrigation, water management, ports & aviation: Chamal Rajapakse
Justice & judicial reform: Amarasiri Dodangoda
Petroleum & petroleum resources development: A H M Fowzie
Power & energy: W D J Seneviratne
Public administration & home affairs: Sarath Amunugama
Tourism: Milinda Moragoda

POLITICAL PARTIES IN SRI LANKA

Sri Lanka has a two-party system, which means that there are two dominant political parties,
with difficulty for anybody to achieve electoral success under the banner of any other party.
In the last decades, the“United National Party” & the “Sri Lanka Freedom Party” have been
the largest parties, by far. The general rule, however, has become coalition politics, since
neither SLFP nor UNP are able to gather parliamentary majorities. In the LTTE-controlled
northern areas, the two main parties are non-existent.

There are more than seventy five political parties in sri-lanka

Stability of Government.
Although there are more than 75 parties in sri-lanka there are only two dominant parties in
sri-lanka. So, there is stability in government.

Tax System

All the taxes & mandatory contributions are measured at all levels of government & include
corporate income tax, turnover tax, all labor taxes & contributions paid by the company
(including mandatory contributions paid to private pension or insurance funds), property tax,
property transfer tax, dividend tax, capital gains tax, financial transactions tax, vehicle tax,
sales tax & other small taxes (such as fuel tax, stamp duty & local taxes). A range of standard
deductions & exemptions are also recorded.
Three indicators are constructed:

18
  Number of tax payments, which takes into account the method of payment, the
frequency of payments & the number of agencies involved in our standardized case
study.
 Time, which measures the number of hours per year necessary to prepare & file tax
returns & to pay the corporate income tax, value added tax, sales tax or goods &
service tax & labor taxes & mandatory contributions.
 Total tax rate, which measures the amount of taxes & mandatory contributions
payable by the company during the second year of operation. This amount, expressed
as a percentage of commercial profit, is the sum of all the different taxes payable after
accounting for various deductions & exemptions.

Businesses care about what they get for their taxes & contributions, such as the quality of
infrastructure & social services. Efficient tax systems tend to have less complex tax
arrangements, comprising of straightforward compliance procedures & clear laws. Taxpayers
in such economies often get more from their taxes. Simple, moderate taxes & fast, cheap
administration mean less hassle for businesses, & also more revenue collected & better
public services. More burdensome tax regimes create an incentive to evade taxes.

TAXES (%)
PROFIT TAX (%) 6.50
LABOR TAX & CONT. 16.9
OTHER TAXES 20.3

TOTAL TAX RATE (% PROFIT) 63.7

Paying Taxes in Sri Lanka

Paying Taxes data 2007 2008 2009
Rank 159 164
Time (hours) 256 256 256
Total tax rate (% profit) 61.9 63.7 63.7
Payments (number) 62 62 62

Sri Lanka is ranked 164 overall for Paying Taxes.

19
Ranking of Sri Lanka in Paying Taxes - Compared to good practice & selected
economies:

The following table shows Paying Taxes data for Sri Lanka compared to good practice
& comparator economies:

Good Practice Payments (number) Time (hours) Total tax rate

Economies (% profit)
Luxembourg 59
Sweden 2
Vanuatu 8.4

Selected Economies
Sri Lanka 62 256 63.7

Comparative
Economies
Afghanistan 8 275 36.4
Bangladesh 21 302 39.5
India 60 271 71.5
Maldives 1 0 9.1
Nepal 34 408 34.1
IMPLICATIONS: Although there are more than 75 political parties in Sri Lanka but
the dominant parties are only two, so there is political stability in the country. But the
tax rate levied is 63.75% of profit & India has also benefit of free trade agreement
with Sri Lanka.

20
 LEGAL
LEGAL SYSTEM

The Sri Lanka judicial system is complex blend of both common-law & civil-law” Sri
Lanka's legal system reflects diverse cultural influences. Criminal law is fundamentally
British. Basic civil law is Roman-Dutch. Laws pertaining to marriage, divorce, & inheritance
are communal.

JUDICIARY

Sri Lanka's judiciary consists of a “Supreme Court, Court of Appeal, High Court, & a
number of subordinate courts”. A highly complex mixture of English common law,
Roman-Dutch, Kandyan,&Jaffna Tamil law; has not accepted compulsory ICJ jurisdiction.

The new superior court complex in Colombo

The “Supreme Court of Sri Lanka” is the highest court of the nation of Sri Lanka.

The Supreme Court of Sri Lanka was created in 1972 after the adoption of a new
Constitution. The Supreme Court is the highest & final superior court of record & is
empowered to exercise its powers, subject to the provisions of the Constitution. The court
rulings take precedence over all lower Courts.
“The Sri Lanka judicial system is complex blend of both common-law & civil-law”. In some
cases such as capital punishment, the decision may be passed on to the President of the
Republic for clemency petitions

21
Sri Lanka's legal system reflects diverse cultural influences. Criminal law is fundamentally
British. Basic civil law is Roman-Dutch. Laws pertaining to marriage, divorce, & inheritance
are communal.

“The principles of English law is applied in relation to Bills of exchange, Sale of Goods,
Partnership, Companies, Insolvency, Banking, Maritime matters, Insurance etc”.

INTELLECTUAL PROPERTY RIGHT

The World Intellectual property organization (WIPO), a specialized agency in the United
Nation’s System, is mandated to promote the protection of Intellectual Property rights in all
the member states.

 INTELLECTUAL PROPERTY RIGHT INCLUDES

 PATENTS
 TRADEMARKS
 INDUSTRIAL DESIGNS
 COPYRIGHT

PATENTS

A patent is valid for 20 years from the date of application. The patent must be renewed
annually from the expiration of the second year from the date of grant paying a fee.

HOW TO PROTECT INVENTIONS (PATENTS) ABROAD

A patent is valid only in the country where it is granted. As Sri Lanka is a member of
the Paris Convention for the protection of industrial property, Sri Lankans can obtain
patents for their inventions in all the member countries of the Paris Convention under
the national law of the particular country. Almost all the countries are members of this
convention.

22
 Alternatively, Sri Lankan nationals or residents can apply under the Patent
Cooperation Treaty (PCT) administered by World Intellectual Property organization
(WIPO). One can apply for a patent in many countries (Member Countries of PCT)
through a single application made to WIPO. This is a simpler procedure.

TRADEMARKS

The registration is valid for a period of 10 years from the date of application & is renewable
on the payment of the fee for further periods of 10 years.

PROTECTION ABROAD

Marks registered in Sri Lanka are valid only in Sri Lanka. If you do business in other
countries it is advisable for you to register the mark in those countries. You have to
make applications in each country where you seek the protection under the respective
national law. ( Sri Lanka is not a member of the Madrid System under which you may
make one international application for the member countries.) However, you can
claim priority under the Paris Convention for the protection of Industrial Property in
its member countries. (Within 6 months from the date of application in Sri Lanka).

INDUSTRIAL DESIGNS

A registered design is protected for five years & renewable for two more periods of five
years.

Designs registered in Sri Lanka are valid only in Sri Lanka. If you do business in other
countries it is advisable for you to register your design in those countries. You have to make
applications in each country where you seek the protection under the respective national law.
However, you can claim priority under the Paris Convention for the protection of Industrial
Property in its member countries.

23
COPYRIGHT

Copyright in Sri Lanka is generally protected during the life of the author & 70 years after
his death.

PROTECTION ABROAD

The woks of Sri Lankan authors are protected in all the member countries of the
Berne Convention for the protection of literary & artistic works under the national
law of the particular country.

IMPLICATIONS: Although Sri Lanka is a member of WIPO & Paris convention

protection of intellectual property rights issue are there they are not protected.

24
 ECONOMY

Sri Lanka began to shift away from a socialist orientation in 1977. Since then, the
government has been deregulating, privatizing, & opening the economy to international
competition. Twenty years of civil war has no doubt slowed economic growth, diversification
& liberalization, & the leftist “Janatha Vimukthi Peramuna” (JVP) uprisings, especially the
second in the late 1980s, also caused extensive upheavals.

Following the quelling of the JVP, increased privatization, reform, & a stress on export-
oriented growth helped revive the economy's performance, taking GDP growth to 7% in
1993. Economic growth has been uneven in the ensuing years as the economy faced a
multitude of global & domestic economic & political challenges. Overall, average annual
GDP growth was 5.2% over 1991-2000.

In 2001, however, GDP growth was negative 1.4%--the first contraction since independence.
The economy was hit by a series of global & domestic economic problems & affected by
terrorist attacks in Sri Lanka & the United States. The crises exposed the fundamental policy
failures & structural imbalances in the economy & the need for bold reforms. The year ended
in parliamentary elections in December, which saw the election of a more pro-capitalism
party to Parliament (while the socialist leaning Sri Lanka Freedom Party retained the
Presidency).

The government of Prime Minister ‘Ranil Wickremasinghe’ of the United National Party has
indicated a strong commitment to economic & social sector reforms, deregulation, & private
sector development. In 2002, Sri Lanka commenced a gradual recovery. Early signs of a
peace dividend were visible throughout the economy. Sri Lanka has been able to reduce
defense expenditures & begin to focus on getting its large, public sector debt under control.
In addition, the economy has benefited from lower interest rates, a recovery in domestic

25
demand, increased tourist arrivals, a revival of the stock exchange, & increased foreign direct
investment (FDI).

In 2002, economic growth bounced up to 4%, helped by strong service sector growth.
Agriculture staged a partial recovery. At present Agriculture in Sri Lanka needs keen
attention as it directed towards disastorus situation. Industrial sector growth, however,
faltered for the second consecutive year due to weak demand & lower prices for Sri Lanka's
exports. The government was able to exert fiscal control, & inflation trended down. Total
FDI inflows during 2002 were about $246 million & are expected to exceed $300 million in
2003. The largest share of FDI has been in the services sector.

Good progress was made under the Stand By Arrangement, which was resumed by the
International Monetary Fund (IMF). These measures, together with peaceful conditions in the
country, have helped restore investor confidence & created conditions for the government to
embark on extensive economic & fiscal reforms & seek donor support for a poverty
reduction & growth strategy. However, the resumption of the civil-war in 2005 led to steep
increase defense expenditures. The increased violence & lawlessness also prompted some
donor countries to cut back on aid to the country.

Sri Lanka has also accumulated a 9.2 % deficit & the central bank has not intervened since
late 2006 to print more currency. A sharp rise in world petroleum prices combined with
fallout from the civil war has led to inflation hitting 20%.

Global economic relations

Exports to the United States, Sri Lanka's most important market, were valued at $1.8 billion
in 2002, or 38% of total exports. For many years, the United States has been Sri Lanka's
biggest market for garments, taking more than 63% of the country's total garment exports.
India is Sri Lanka's largest supplier, with exports of $835 million in 2002. Japan, traditionally
Sri Lanka's largest supplier, was its fourth-largest in 2002 with exports of $355 million. Other
leading suppliers include Hong Kong, Singapore, Taiwan, & South Korea. The United States
is the 10th-largest supplier to Sri Lanka; U.S. exports amounted to $218 million in 2002,
according to Central Bank trade data--U.S. Customs data places U.S. exports to Sri Lanka at
$166 million in 2002. Wheat accounted for 14% of U.S. exports to Sri Lanka in 2002, down
from the previous year.

26
Currency

Sri Lankan rupee

Sri Lanka had switched to a floating currency after a worsening currency crisis due to
sterilized intervention in January 2001. Foreign reserves had been exhausted defending the
rupee from free fall during the 1990s. By 2004, sterilized intervention was resumed to
prevent further depreciation of the rupee & was eased off in 2005 after a rush of foreign aid
due to the tsunami. By 2006, sterilized intervention was restarted as the rupee lost further
ground. The IMF categorizes the Sri Lankan rupee as a managed float. By 2006, the rupee
depreciated by 5 % & depreciated a further 4.2 % within the first half of 2007. This has been
due to flight of capital out of the country because of rising uncertainty & resumption of the
longstanding civil war. The rupee has been under pressure due to widening trade & budget
deficit, increased cost of living, cost of fuel imports & rising inflation. The rising uncertainty
has given rise to a thriving black market for trading between dollars & rupees. Official
trading through the central bank has been problematic for many traders, coming under
increasing moral persuasion to avoid selling rupees for the sake of national interests .

Over all

Sri Lanka saw GDP growth average 4.5% in the last 10 years with the exception of a
recession in 2001. In late December 2004, a major tsunami took about 40,000 lives, left more
than 6,300 missing & 443,000 displaced, & destroyed an estimated $1.5 billion worth of
property. Government spending & reconstruction drove growth to more than 7% in 2006 but
reduced agriculture output probably slowed growth to about 6 percent in 2007. Government
spending & loose monetary policy drove inflation to nearly 16% in 2007.

27
Sri Lanka's most dynamic sectors now are food processing, textiles & apparel, food &
beverages, port construction, telecommunications, & insurance & banking. The main
economic sectors of the country are tourism, tea export, apparel, textile, rice production &
other agricultural products.

In 2006, plantation crops made up only about 15% of exports (compared with more than 90%
in 1970), while textiles & garments accounted for more than 60%. In addition to these
economic sectors overseas employment contributes highly in foreign exchange, most of them
from middle-east. About 800,000 Sri Lankans work abroad, 90% of them in the Middle East.
They send home more than $1 billion a year. The struggle by the Tamil Tigers of the north &
east for an independent homeland continues to cast a shadow over the economy.

For the next round of reforms, the central bank of Sri Lanka recommends that Colombo
expand market mechanisms in no plantation agriculture, dismantle the government's
monopoly on wheat imports, & promote more competition in the financial sector. A
continuing cloud over the economy is the fighting between the Government of Sri Lanka &
the LTTE, which has cost 65,000 lives in the past 15 years.

Tourism

On the globe or the map of the world, Sri Lanka might look like a tiny green fleck on the
surface of the huge sphere of water, but this tiny green fleck is one of the finest tourism spots
in the world. It is indeed considered a pearl found in water in the shape of a pear by people
who have visited the country & its natives. Sightseeing in Sri Lanka can genuinely become a
dream come true for people who wants to enjoy a perfect holiday amidst nature.

There is no end to places in Sri Lanka where one can visit to attain aesthetic pleasure. One
will find old forts, museums, temples, churches, wildlife sanctuaries, golden beaches,
cascading waterfalls, & also underwater gardens, mountains covered with tea plantations,
ethnic ancient cities & many more to add to the list.

28
Sri Lanka’s tropical climate, scenic beaches, & historical sites are prime tourist attractions.
By the 1970s, sizeable investments were devoted to the building of infrastructure for the
tourism industry, including hotels & resorts. Tourism declined after 1983 as a result of the
civil war & related security concerns. About 560,000 tourists, mostly from Europe & India,
visited Sri Lanka in 2008 approx.

ECONOMY OF SRI LANKA

Currency Sri Lankan rupee (LKR)
Fiscal year Calendar Year
Trade organizations SAFTA, WTO
SRI LANKA (statistics)
GDP ranking 76th (2008)
GDP (purchasing power parity) $82.02 billion (2007 est.)
GDP (official exchange rate) $30.01 billion (2007 est.)
GDP - real growth rate: 6.8% (2007 est.)
GDP - per capita (PPP): $4,000 (2007 est.)
Inflation 20% (2007 est.)
GDP - composition by sector: Agriculture: 11.70%
Industry: 29.9%
Services: 58.4% (2007 est.)
Labor force 7.489 million (2007 est.)
Labor force - by occupation: Agriculture: 34.3%
Industry: 25.3%
Services: 40.4%
Unemployment rate: 6%
Household income or consumption Lowest 10%: 1.1%
by percentage share: Highest 10%: 39.7%
Distribution of family income: 50
Budget: Revenues: $5.384 billion

29
 Expenditures: $7.608 billion
Public debt: 85.8% of GDP
Inflation rate (consumer prices): 15.8%
Central bank discount rate: 15%
Commercial bank prime lending 17.08%
rate:
Agriculture - products: Rice, Sugarcane, Grains, Pulses, Oilseed, Spices, Tea,
Rubber, Coconuts; Milk, Eggs, Hides, Beef; Fish etc.
Industries: Processing of rubber, Tea, Coconuts, Tobacco & Other
Agricultural Commodities; Telecommunications,
Insurance, Banking; Clothing, Textiles; Cement,
Petroleum Refining etc.
Industrial production growth rate: 7.6% (2007 est.)
Electricity - production: 8.317 billion KWh (2006 est.)
Electricity - consumption: 6.884 billion KWh (2006 est.)
Current account balance: $1.019 billion (2007 est.)
Exports: $8.135 billion f.o.b. (2007 est.)
Exports - commodities: Textiles & Apparel, Tea & Spices; Diamonds,
Emeralds, Rubies; Coconut Products, Rubber
Manufactures, Fish etc.
Exports - partners: US 25.5%, UK 13.2%, India 6.7%, Germany 5.7%,
Italy 5.1% (2007).
Imports: $10.36 billion f.o.b. (2007 est.)
Imports - commodities: textile fabrics, mineral products, petroleum, foodstuffs,
machinery & transportation equipment etc.
Imports - partners: India 23.1%, Singapore 9.9%, China 8.2%, Iran 7.5%,
Hong Kong 6.4% (2007)
Reserves of foreign exchange & $3.644 billion (31 December 2007 est.)
gold:
Debt - external: $12.2 billion (31 December 2007 est.)
Market value of publicly traded $7.769 billion (2006)
shares:
Exchange rates: Sri Lankan rupees (LKR) per US dollar - 110.78
(2007), 103.99 (2006), 100.498 (2005), 101.194
(2004), 96.521 (2003).
PUBLIC FINANCE
Public debt 89.6% of GDP
External debt $12.23 billion, (44.6% of GDP)
Revenues $5.61 billion
Expenses $8.39 billion
Economic aid $808 million (recipient)

30
Communication System

General Assessment: Telephone services have improved significantly & are available in
most parts of the country.

Domestic: National trunk network consists mostly of digital microwave radio relay; fiber-
optic links now in use in Colombo area & fixed wireless local loops have been installed;
competition is strong in mobile cellular systems & mobile cellular subscriber ship is
increasing; combined fixed-line & mobile-cellular teledensity is about 50 per 100 persons

International: Country code - 94; the SEA-ME-WE-3&SEA-ME-WE-4 submarine cables

provide connectivity to Asia, Australia, Middle East, Europe, US; satellite earth stations - 2
Intelsat (Indian Ocean).

Telephones - main lines in use 2.742 million (2007)

Telephones - mobile cellular 7.983 million (2007)
Radio broadcast stations AM 15, FM 52, shortwave 4 (2007)
Television broadcast stations: 14 (2008)
Internet country code: .lk
Internet hosts: 4,940 (2008)
Internet users: 771,700 (2007)

Transportation System

Airports: 18 (2007)
Airports - with paved runways: total: 14
Airports - with unpaved runways: total: 4
Railways: total: 1,449 km,
broad gauge: 1,449 km 1.676-m gauge (2007)
Roadways: total: 97,286 km,
paved: 78,802 km,unpaved:
18,484 km (2007)
Waterways: 160 km (primarily on rivers in southwest) (2006)
Ports & terminals: Colombo

IMPLICATIONS: All the economy factor has been considered over the 5 year period.
GDP (PPP)has continuously over the period, GDP (real growth ) over the period has
been increased at 6% CAGR, , GDP (real growth ) over the period has been increased

31
at 6% CAGR. , inflation over the period has been increased at 2.6% CAGR. , public
debt over the period has been decreased by 2% CAGR. , industrial production
Growth Rate over the period has been increased at 47% CAGR above all factor
increase or decrease are attractive for the economy

32
 SOCIO-CULTURAL
Population:
The population of sri lanka is about 21.00 million. The population density is much greater in
the southwestern & northern areas, where the majority of the population live. Density is
highest in the southwest where Colombo, the country's main port & industrial center, is
located.Sri Lanka is ethnically, linguistically, & religiously diverse. About 79 % people live
in rural compare to 21% in urban.

Population 21,128,773 (2008)

Population growth rate 0.94 percent (2008 )
Projected population in 2025 23,707,228 (2025 )
Projected population in 2050 24,920,558 (2050 )
Population density 845 persons per sq mi (2008 )
326 persons per sq km (2008 )
Share urban 21%(2005 )
Share rural 79%(2005 )
Birth rate: 16.63 births/1,000 population (2008)
Death rate: 6.07 deaths/1,000 population (2008 )
Total fertility rate: 2.02 children born/woman (2008 )
Age structure: 0-14 years: 24.1% (male 2,596,463/female 2,495,136)
15-64 years: 68% (male 7,019,446/female 7,340,809)
Over 65 years: 7.9% (male 783,823/female 893,096) (2008)
Median age: Total: 30.4 years
Male: 29.5 years
Female: 31.4 years (2008 )
Sex ratio: At birth: 1.04 male(s)/female
Under 15 years: 1.04 male(s)/female
15-64 years: 0.96 male(s)/female
65 years & over: 0.88 male(s)/female
Total population: 0.97 male(s)/female (2008)
Infant mortality rate: Total: 19.01 deaths/1,000 live births
Male: 20.76 deaths/1,000 live births
Female: 17.17 deaths/1,000 live births (2008)
Ethnic groups:

Sinhalese make up 74% of the population & are concentrated in the densely populated
southwest. Sri Lankan Tamils & Indian Tamils are around 9%, citizens whose South Indian

33
ancestors have lived on the island for centuries. The British brought them to Sri Lanka in the
19th century as tea & rubber plantation workers, & they remain concentrated in the "tea
country" of south-central Sri Lanka.

In accordance with a 1964 agreement with India, Sri Lanka granted citizenship to 230,000
"stateless" Indian Tamils in 1988. Under the pact, India granted citizenship to the remainder,
some 200,000 of whom now live in India. Another 75,000 Indian Tamils, who themselves or
whose parents once applied for Indian citizenship, chose to remain in Sri Lanka & have since
been granted Sri Lankan citizenship.

Other minorities include Muslims (both Moors & Malays), at about 7% of the population;
Burghers, who are descendants of European colonists, principally from the Netherlands & the
United Kingdom (U.K.); & aboriginal Vedas. Most Sinhalese are Buddhist; most Tamils are
Hindu. The majority of Sri Lanka's Muslims practice Sunni Islam. Sizable minorities of both
Sinhalese & Tamils are Christians, most of whom are Roman Catholic. The 1978
constitution, while assuring freedom of religion, grants primacy to Buddhism.

Ethnic groups
Sinhalese 73.8%,
Sri Lankan Moors 7.2%
Indian Tamil 4.6%
Sri Lankan Tamil 3.9%
Other 0.5%
Unspecified 10%

34
Language

Sinhala, an Indo-European language, is the native tongue of the Sinhalese. Tamils & most
Muslims speak Tamil, part of the South Indian Dravidian linguistic group. Use of English has
declined since independence, but it continues to be spoken by many in the middle & upper
middle classes, particularly in Colombo. The government is seeking to reverse the decline in
the use of English, mainly for economic but also for political reasons. Both Sinhala & Tamil
are official languages.

Languages
Sinhala (official & national language) 74%,
Tamil (national language) 18%,
Other 8%,
English (English is commonly used in government
& 10% population are able to speak )

Religious affiliations
Buddhist 69.1%
Muslim 7.6%
Hindu 7.1%
Christian 6.2%
Unspecified 10%

Education & Skills

Literacy definition: Age 15 & over can read & write.

Total population: 90.7%
Male: 92.2%
Female: 89.2% (2001 census)

Schooling is compulsory for children from 5 to 13 years of age. Education is state funded &
offered free of charge at all levels, including the university level. The government also
provides free textbooks to schoolchildren. Literacy rates & educational attainment levels rose
steadily after Sri Lanka became an independent nation in 1948. The government gave high
priority to improving the national education system & access to education. The adult literacy
rate now stands at 90.7 percent. The language of instruction is either Sinhala or Tamil.
English is taught as a second language. Sri lanka have the highest literacy rate in South Asia

35
(91%) & approximately 50% of the students who have completed their higher education are
trained in technical & business disciplines.

Culture of Sri Lanka

Sri Lanka is situated in the Indian Ocean & is one of the most resplendent islands in the
world. Its beauty is not the same everywhere, the coastal beauty of Sri Lanka is definitely
different from the beauty of Central Highlands, or again you will find a totally new world
when you visit the tea plantations of the country. Needless to say for such an ancient country
(in terms of its existence), culture of Sri Lanka is also diverse. Religion plays an important
role in the molding of the social norms & conventions & thus the all the major religions in
the country have certain customs & conventions of their own. Everything that is so uniquely

Sri Lankan plays an significant role in defining the culture of Sri Lanka. Buddhist & Hindu
temples display the architectural splendor of this island. Specially the architecture has heavy
influence of the Southern temples in India. South Indian temples in general have very
intricate & ornate carvings on various themes, they can range from the carvings from epics or
something on the society itself. The majority of the temples were built at the behest of a
particular king from a dynasty, from the temple architecture much can be known about the
particular age/dynasty.
Music & Dances in Sri Lanka

Sri Lanka has its own vibrant culture & customs. Music & dances of Sri Lanka form a very
important part of this culture. Religion in Sri Lanka has influenced the majority of the art

36
forms be it performing or otherwise & so with Buddhism being the major religion of the
country, it is to be expected that music & dances of Sri Lanka will reflect this heritage to a
major extent.

Music in the country has a heavy influence on

Buddhism, it is said that this religion arrived in
the island with Lord Buddha’s visit in 300 BC.
Following the visit the local populace began
converting to Theravada sect of Buddhism &
this faith is rooted in the Sri Lankan music.
Some of the instruments that are used in music
in Sri Lanka are Gata Bera, Thammatama, Yak
Bera, Udakkiya, Hand Rabana, Daula, Bench Rabbana, a very new drum called Gaula has
been added to this list. This new drum was created by one of the noted Sri Lankan musicians
Kalasoori Piyasara Shiladhipati. Gaula is barrel shaped & contains one head from Gata Bera
& one from Daula. Broadly music of Sri Lanka can be categorized in to the following:

 Traditional folk music of Sri Lanka

 Local drama music
 Hindustani classical music
 South Indian classical music
 Tamil & Hindustani film music
 Western Classical music
 Sinhala Light Music

Music & dances in Sri Lanka has equal importance in their society. Dance in Sri Lanka came
in 4th century BC to banish natural disasters & sicknesses. Polonnaruwa period which was in
15th century AD had immense Chola influence & Sri Lankan folk dances started evolving.
More classical dance forms were associated with various rituals & ceremonies, some
centuries old & are based on the indigenous belief of the people before Buddhism came to
accepted as the religion of the island. Dance forms in Sri Lanka vary according to the
regional & local traditions. Everything is different like dresses, drums, songs, way of dancing
& movements of hands, legs & fingers.

37
Classical Dances of Sri Lanka

The origin of Sri Lankan dances goes back to immemorial times

of aboriginal tribes & "yakkas" (devils). According to a Sinhalese
legend, Kandyan dances originate, 2500 years ago, from a magic
ritual that broke the spell on a bewitched king.

 Ves Dance
 Naiyandi Dance
 Uddekki Dance
 Uddekki Dance
 Pantheru Dance
 Vannams

Food Habits

Rice is the staple food of the people for

both lunch & dinner & therefore you can
expect different types of rice platters. It
can be cooked with meat & vegetables
or plain steamed & then taken with
various curries. Curries can be made
from assorted vegetables, fish, seafood,
meat or poultry. A typical curry is either
made with vegetables or chicken or
mutton. Beef is also very popular in Sri Lanka. Rice & one of the “main curries” consist the
bulk of the meal, but you will have a number of side dishes like sambols, chutneys or simply
pickles. Pickles & sambols are at times too hot, you can ask the steward at the restaurant, you
are dining to temper it according to your taste. The most popular sambol of Sri Lanka is very
hot, very tempting provided you enjoy a fiery after taste in your mouth! It is known as the
coconut sambol & apart from ground coconut onions, chillies, dried fish from Maldives &

38
lime juice are used in its preparation. It is served with rice & adds that extra tinge to even the
most bland of Sri Lankan dishes.

Though, it is pertinent to mention that Sri Lankan food is anything but bland! Any discourse
on the cuisine of Sri Lanka will never be complete without mentioning the alcoholic drink
which is popular with both the masses & the classes, toddy. It is prepared from palm tree sap,
do sample some on your holiday to Sri Lanka.

Major festivals & Events

One of the most fascinating island countries of the world, Sri Lanka has a full year long
calendar of religious & social events. Sri Lanka Festival & Events are held in different
seasons but the most noticeable feature of these festivals is that nearly all major festivals take
place or are celebrated on full moon days. Full Moon days are especially significant for this
Buddhist country, each full moon or poya day is a Buddhist holiday. Most shops keep their
shutters down & the public places of entertainment too mainly remain closed. Red meat or
alcohol is not sold in most places & in hotels too alcohol is hard to get.

Sri Lanka has an enormous range of

Buddhist, Hindu, Christian & Muslim
festivals. The “Kandy Esala Perahera”
(July/August) is the country's most
important & spectacular pageant, with 10
days of torch-bearers, whip-crackers,
dancers, drummers & elephants lit up like
giant birthday cakes. It climaxes in great
procession honouring the Sacred Tooth Relic
of Kandy. Second in importance is the
Duruthu Perahera (January), held in
Colombo, which celebrates a visit by Buddha to Sri Lanka.

Other celebrations include National Day (February), which is celebrated with parades, dances
& national games; New Year (March/April), celebrated with elephant races, coconut games

39
& pillow fights; Vesak (May), a sacred full moon festival commemorating the birth, death &
enlightenment of Buddha; the Hindu Vel festival (July/August) in Colombo, where the
ceremonial chariot of Skanda, the God of War, is hauled between two temples; & the
predominantly Hindu Kataragama festival (July/August) in Kataragama, where devotees put
themselves through the whole gamut of ritual masochism.

40
 PART -2
MARKETING AUDIT
&
MARKETING PLAN

41
 REASONS FOR SELECTING SRI LANKA

Reasons for selecting Sri Lanka for the export of rice from India is as below:

 Production of rice in Sri Lanka is less compare to the consumption of rice

 consumption of rice is more compare to the other cereals

 since 2004 Sri Lanka government reduce the import duties on the rice due to the
production of the rice

 India is a major exporter of rice

 Geographically Sri Lanka is situated only 35 km. away from Indian sea coastal
line.

 It is easier & cheaply to export rice to Sri Lanka & to maintain the final price low.
(i.e. competitive advantage to India compare to the other country)

 There is a contract of “FREE TRADE ZONE” between India & Sri Lanka

 There is improving political & business relation between the countries.

 Both countries are promoting cross border trade

 India is major exporter of Sri Lanka, Sri Lanka is importing almost 23.1% of total
import from India

 Sea route transportation is available between two large ports (i.e. Chennai port in
India & Colombo port in Sri Lanka)

42
 Other ports facility are also available by which Sri Lanka is only 35 km away
from India

43
 STARTING A BUSINESS IN SRI LANKA

When entrepreneurs draw up a business plan and try to get under way, the first hurdles they
face are the procedures required to incorporate and register the new firm before they can
legally operate. Economies differ greatly in how they regulate the entry of new businesses. In
some the process is straightforward and affordable. In others the procedures are so
burdensome that entrepreneurs may have to bribe officials to speed the process or may decide
to run their business informally.

Cumbersome entry procedures are associated with more corruption, particularly in

developing economies. Each procedure is a point of contact, a potential opportunity to extract
a bribe. Analysis shows that burdensome entry regulations do not increase the quality of
products, make work safer or reduce pollution. Instead, they constrain private investment;
push more people into the informal economy; increase consumer prices and fuel corruption.

Starting a Business in Sri Lanka

Starting a Business data 2007 2008 2009

Rank 29 29
Procedures (number) 8 5 4
Duration (days) 50 39 38
Cost (% GNI per capita) 9.2 8.5 7.1
Paid in Min. Capital (% of GNI per capita) 0.0 0.0 0.0

Steps to Starting a Business in Sri Lanka

It requires 4 procedures, takes 38 days, and costs 7.10 % GNI per capita to start a business in
Sri Lanka.
List of Procedures:
1. Apply for approval name
2. Register at the Companies Registry
3. Register with tax authorities to obtain a TIN
4. Register with Department of Labor to obtain EPF and ETF registration

44
Benchmarking Starting a Business Regulations:

Sri Lanka is ranked 29 overall for Starting a Business.

Ranking of Sri Lanka in Starting a Business - Compared to good practice and selected
economies:

45
The following table shows starting a Business data for Sri Lanka compared to good
practice and comparator economies:

Good Practice Procedures Duration Cost (% GNI Paid in Min.

Economies (number) (days) per capita) Capital (% of
GNI per capita)
Denmark 0.0
New Zealand 1 1 0.0

Selected Economy
Sri Lanka 4 38 7.1 0.0

Comparator
Economies
Afghanistan 4 9 59.5 0.0
Bangladesh 7 73 25.7 0.0
India 13 30 70.1 0.0
Maldives 5 9 11.5 4.8
Nepal 7 31 60.2 0.0

46
 CLOSING A BUSINESS IN SRI LANKA

The economic crises of the 1990s in emerging markets—from East Asia to Latin America,
from Russia to Mexico—raised concerns about the design of bankruptcy systems and the
ability of such systems to help reorganize viable companies and close down unviable ones. In
countries where bankruptcy is inefficient, unviable businesses linger for years, keeping assets
and human capital from being reallocated to more productive uses.

The Doing Business indicators identify weaknesses in the bankruptcy law as well as the main
procedural and administrative bottlenecks in the bankruptcy process. In many developing
countries bankruptcy is so inefficient that the parties hardly ever use it. In countries such as
these, reform would best focus on improving contract enforcement outside bankruptcy.

Three measures are constructed from the survey responses: the time to go through the
insolvency process, the cost to go through the process and the recovery rate—how much of
the insolvency estate is recovered by stakeholders, taking into account the time, cost,
depreciation of assets and the outcome of the insolvency proceeding.
Bottlenecks in bankruptcy cut into the amount claimants can recover. In countries where
bankruptcy laws are inefficient, this is a strong deterrent to investment. Access to credit
shrinks, and nonperforming loans and financial risk grow because creditors cannot recover
overdue loans. Conversely, efficient bankruptcy laws can encourage entrepreneurs. The
freedom to fail, and to do so through an efficient process, puts people and capital to their
most effective use. The result is more productive businesses and more jobs.

Closing Business in Sri Lanka

Closing a Business data 2007 2008 2009

Rank 42 43
Time (years) 1.7 1.7 1.7
Cost (% of estate) 5 5 5
Recovery rate (cents on the dollar) 50.6 44.6 43.4

Benchmarking Closing Business Regulations:

Sri Lanka is ranked 43 overall for closing a Business.
Ranking of Sri Lanka in Closing Business - Compared to good practice and selected
economies:

47
The following table shows Closing Business data for Sri Lanka compared to good
practice and comparator economies:

Good Practice Recovery rate Time (years) Cost (% GNI per capita)
Economies (cents on the $)
Ireland 0.4
Japan 92.5
Singapore 1

Selected Economy
Sri Lanka 43.4 1.7 5

Comparator Economies
Afghanistan 0 no practice no practice
Bangladesh 23.2 4.0 8
India 10.4 10.0 9
Maldives 18.2 6.7 4
Nepal 24.5 5.0 9

48
 IMPORT POLICIES

Sri Lanka has one of the most liberal trade regimes in South Asia. Sri Lanka’s main trade
policy instrument is the import tariff. A few years ago Sri Lanka set out to have a simplified
transparent two band tariff system. The country has deviated from this policy recently and the
tariff structure is now subject to an increasing number of changes. Currently, there are 6 tariff
bands of 2.5percent, 5 percent,10 percent, 15 percent, 20 percent and 25 percent. Textiles,
crude oil and wheat are free of duty. There are also a number of deviations from the 6-band
tariff policy. Tobacco and cigarettes carry 75 percent and 100 percent duties, respectively. In
addition, there are specific duties on 46 items, including about 12 agricultural products.
These specific duties are aimed at protecting domestic producers. However, they remain
below Sri Lanka’s bound agricultural tariff rate of 50 percent in the WTO. There is no clear
tariff policy on agriculture. Furthermore, 31 items carry an ad-valorem or a specific duty
(whichever is higher).

There is intermittent use of exemptions and waivers. "Regaining Sri Lanka", the
Government’s policy framework, proposes a strongly pro-trade package that includes moving
towards a stable low uniform rate and reducing non-tariff barriers. The Government has
established a Tariff Advisory Council to examine these issues. The finance minister recently
announced that they would reduce the 6 tariff bands to 5.

There are other charges on imports:

 A 10 percent import duty surcharge;
 A 1 percent ports and airports development levy (PAL) on imports;
 A Value Added Tax (VAT) of 15 percent;
 An excise fee on some products such as aerated water, liquor, wines, beer, motor
vehicles and cigarettes;
 An Export Development Board fee on all imports where the customs duty is more
than 45 percent; and
 Port handling charges.

VAT and excise duties are levied on imports and domestic producers.

49
 SRI LANKA TRADE BARRIERS

IMPORT LICENSING

A total of 353 items at the 6-digit level of the Harmonized Tariff Schedule (HST) code
remain under license control, mostly for health and national security reasons. There is a 0.1
percent fee on import licenses.

CUSTOMS BARRIERS

The Government of Sri Lanka implemented the WTO Customs Valuation Agreement in
January 2003 and follows the transaction value method to determine the c.i.f. value. The
scheme has operated quite successfully. Major companies have not faced problems. Sri
Lanka Customs complains of "fly by night" companies undervaluing goods brought in from
Dubai and China. Customs is also in the process of installing an Electronic Data Interchange
(EDI) system to support an automated cargo clearing facility. When implemented, this system
should improve customs administration and facilitate trade.

AGRICULTURE

Following is a list of agricultural trade barriers.

Poultry and meat: There is an unofficial ban on the import of chicken meat, ostensibly to
protect the local industry. Importers have been discouraged from applying for licenses to
import U.S. chicken. A Singaporean-owned poultry company in Sri Lanka dominates the
domestic market with an approximately 80 percent market share. United States chicken could
compete effectively if allowed into the market. Imports of duck and turkey from the United
States are permitted only from states free of avian influenza. Imports of beef from the United
States are banned due to fears of bovine spongiform encephalopathy.

Wheat: The Government is considering adopting phytosanitary regulations for wheat. Such a
move could affect U.S. wheat exports to Sri Lanka. Urocystis agropyri syn Urocystis tritici’

50
and Neovossia indica syn Telletia indica’ are the organisms that are under review for possible
prohibition.
STANDARDS TESTING, LABELING AND CERTIFICATION

At present there are 84 items that come under the Sri Lanka Standards Institution (SLSI)
mandatory import inspection scheme. Importers have to obtain a clearance certificate from
the SLSI to sell their goods. SLSI accepts letters of conformity from foreign laboratories, but
retains the discretion to take samples and perform tests. The list of items under the SLSI
inspection scheme is to be expanded by another 25 items in 2004.

There is discussion within some sections of health and environment sectors to introduce a
labeling requirement for imports of bioengineered food, but no requirements are in place
currently. A new labeling regulation has come into effect which relates to the information that
should appear on a label of any prepackaged food product offered for sale, transported or
advertised for sale in Sri Lanka, including imported food.

GOVERNMENT PROCUREMENT

Sri Lanka is not a member of the WTO Government Procurement Agreement. Government
procurement of goods and services is mostly done through a public tender process. Some
tenders are open only to registered providers. The Government publicly subscribes to
principles of international competitive bidding, but charges of corruption and unfair awards
continue. All tenders presented for Cabinet approval now need to be routed through a cabinet
subcommittee chaired by the Minister of Finance. There are no professional evaluation
experts in Sri Lanka. Tender board members are routinely pulled from other jobs B applying
limited evaluative capacity and lengthening the tender process.

EXPORT SUBSIDIES

Exporting companies approved by the BOI, are generally entitled to corporate tax holidays
and concessions. Exporters receive institutional support from the Export Development Board
in marketing. Sri Lanka Export Credit Insurance Corporation (SLECIC) issues insurance
policies and guarantees to exporters.

51
Imports for exporting industries and BOI approved projects usually are exempted from VAT.
For some others, the VAT is refunded. There are no major complaints regarding VAT refunds.
The airports and ports levy on imports for export processing is 0.5 percent.

INTELLECTUAL PROPERTY (IPR) PROTECTION

Local agents of U.S. and other international companies representing recording, software,
movie, and consumer product industries continue to complain that lack of IPR protection is
damaging their business. Piracy levels are very high for sound recordings and software,
making it difficult for the legitimate industries to establish themselves in Sri Lanka.

Sri Lanka is a party to major intellectual property agreements, including the Berne
Convention for the protection of literary and artistic works, the Paris Convention for the
protection of industrial property, the Madrid Agreement for the elimination of false or
deceptive indication of source on goods, the Nairobi Treaty, the Patent Co-operation Treaty,
the Universal Copyright Convention and the Convention establishing the World Intellectual
Property Organization (WIPO). Sri Lanka’s intellectual property law is based on the WIPO
model law for developing countries. Sri Lanka and the United States signed a Bilateral
Agreement for the Protection of Intellectual Property Rights in 1991, and Sri Lanka is a party
to the WTO Trade-Related Intellectual Property Rights (TRIPS) Agreement.

In November 2003, a new intellectual property law came into force. This law meets both
U.S.-Sri Lanka Bilateral IPR Agreement and TRIPS obligations to a great extent. The law
will now govern copyrights and related rights, industrial designs, patents for inventions,
trademarks and service marks, trade names, layout designs of integrated circuits,
geographical indications, unfair competition and undisclosed information. All trademarks,
designs, industrial designs and patents must be registered with the Director General of
Intellectual Property.

Infringement of IPR is a punishable offense under the new law, and IPR violations are
subject to both criminal and civil jurisdiction. Relief available to owners under the new law
includes injunctive relief, seizure and destruction of infringing goods and plates or

52
implements used for the making of infringing copies, and prohibition of imports and exports.
Penalties for the first offense include a prison sentence of 6 months or a fine of up to
$5,000.The penalties could double for the second offense. Enforcement, however, is a serious
problem, as is public awareness of IPR. The domestic implementing legislation under the old
law was very weak and the Government did not act as an enforcer of IPR laws. Aggrieved
parties had to seek redress of any IPR violation through the courts, a frustrating and time-
consuming process. The Director of Intellectual Property and international experts have
begun IPR legal and enforcement training for customs and police officials. An active US
Embassy-led IPR working group comprising affected industries is also working closely with
the Sri Lanka Government to pursue more aggressive enforcement and enhance public
awareness.

It will take time before new procedures and court precedents are established under the new
law. In addition, Sri Lanka needs to ratify and conform to the WIPO Performances and
Phonograms Treaty WPPT) and the WIPO Copyright Treaty (WCT). Sri Lanka is completing
its accession to the WTO Information Technology Agreement.

LEGAL SERVICES

A person can provide legal consultancy services without being licensed to practice law in Sri
Lanka. Foreigners are not allowed to practice law (appear in courts) and do not have statutory
recognition in Sri Lanka. Sri Lankan citizens with foreign qualifications need to sit for exams
conducted by the Sri Lanka law college in order to practice and register in the Supreme
Court.

53
 TRADING ACROSS BORDERS IN SRI LANKA

Documents recorded include port filing documents, customs declaration and clearance
documents, as well as official documents exchanged between the parties to the transaction.
Time is recorded in calendar days, from the beginning to the end of each procedure. Cost
includes the fees levied on a 20-foot container in U.S. dollars. All the fees associated with
completing the procedures to export or import the goods are included, such as costs for
documents, administrative fees for customs clearance and technical control, terminal
handling charges and inland transport. The cost measure does not include tariffs or duties.

Economies that have efficient customs, good transport networks and fewer document
requirements, making compliance with export and import procedures faster and cheaper, are
more competitive globally. That can lead to more exports; and exports are associated with
faster growth and more jobs. Conversely, a need to file many documents is associated with
more corruption in customs. Faced with long delays and frequent demands for bribes, many
traders may avoid customs altogether. Instead, they smuggle goods across the border. This
defeats the very purpose in having border control of trade to levy taxes and ensure high
quality of goods.

Trading Across Borders data 2007 2008 2009

Rank 60 66
Documents for export (number) 7 8 8
Time for export (days) 25 21 21
Cost to export (US$ per container) 797 810 865
Documents for import (number) 12 6 6
Time for import (days) 26 20 20
Cost to import (US$ per container) 789 844 895

Benchmarking Trading Across Borders Regulations:

Sri Lanka is ranked 66 overall for Trading Across Borders.

54
Ranking of Sri Lanka in Trading Across Borders - Compared to good practice and
selected economies:

The following table shows trading Across Borders data for Sri Lanka compared to good
practice and comparator economies:

Good Practice Docun. Time for Cost to Docu. Time for Cost to
Economies for Ex. Ex. (days) Ex (US$/ for Im Im (days) Im (US$/
(no) cont.) (no) Cont.)
Denmark 5
France 2 2
Malaysia 450
Singapore 3 439

Selected
Economy
Sri Lanka 8 21 865 6 20 895

Comparator
Economies
Afghanistan 12 74 3000 11 77 2600
Bangladesh 6 28 970 8 32 1375
India 8 17 945 9 20 960
Maldives 8 21 1348 9 20 1348
Nepal 9 41 1764 10 35 1900

55
 RICE INDUSTRY

The importance of rice in Sri Lanka

Rice is the single most important crop occupying 34% (0.77/million ha) of the total
cultivated area on Sri Lanka. On average 560000 ha are cultivated during Maha Month &
310000 ha doring yala month making the average annual extent sown with rice to about
870000 ha. About 1.8 million farm families are engaged in paddy cultivation island-wide. Sri
Lanka currently produces 2.7 million tonne of rough rice annually & satisfies around 95% of
the domestic requirement & 5% of total need satisfied by the imported rice. Rice provides
45% total calorie & 40% protein requirement of an average Sri Lankan. The per capita
consumption of rice fluctuates around 100 kg per year depending on the price of rice, bread
& wheat flour.

It is projected that the demend for rice will increase at 1.1% per year & to meet this rice
production should grow at the rate of 2.9% per year. Increasing the cropping intensity &
national average yield are the options available to achieve this production targets.

The curreny cost of production of rough rice is rs 1.50 per kg.. Nadu rice could be sold at Rs
30-33 & sambha rice at between Rs 35-38 /kg. The cost of Labour, farm power & tradable
inputs constitutes of 55%, 23% & 23% respectively. The labor cost has risen at a higher rate
than other costs over the last few years.

While the global demand for rice will increase at 1.95% the production will increase at
1.62% / annum. Making a tradable rice volume to be doubled in 20 years time.

56
 PRODUCT DETAILS

The product we are going to export to Sri Lanka from India is “Rice” & its specification &
details are as under.

 Product :- Rice
 Brand Name :- Rainbow Rice
 Product Type :- Non Basmati Rice
 Product Line :-
 Non-Basmati White Rice (Short Grain)
 Non-Basmati Parboiled Rice (Sella/yellow)
 Long Grain Non-Basmati White Rice
 Long Grain Non-Basmati Parboiled Rice
(Sella/yellow)
 Long Grain Non-Basmati Premium Quality
Sortexed Rice.

 Product Packaging :- different packages of 20, 30 & 50 Kg.

57
 RESEARCH & INFORMATION SYSTEM

Market research is the gathering, recording and analyzing of information about markets and
their probable reaction to product, price, distribution and promotion decisions. Market
research is critical for successful NPD and marketing mix planning.

Gathering information can be done by either desk or field research. Desk research involves
analyzing all the internal and external information available. Field research is done by
contacting consumers either using surveys, questionnaires, feasibility studies or sampling,
among other methods to get primary data from the target market.

There are various ways of carrying out market research:

Do it yourself: For small companies with limited resources

Market research department: Very large organizations may have their own dedicated
market research department.

Market research agencies: These companies specialize in market research. Research may
be done with the collaboration of the company's marketing department, but fieldwork will be
carried out by the agency.

STAGES IN THE MARKET RESEARCH PROCESS

1. Define marketing problems/opportunities
2. Set objectives, budgets and timetables
3. Research design
a. Who will complete research?
b. What questions need to asked/answered?
c. How much time will be dedicated to research?
4. Data collection
5. Data evaluation
6. Report writing & presentation

58
Problem definition: This is the realization that a marketing problem needs information to
find its solution.

Research design: This defines what form the research will take and what will be achieved. It
encompasses objectives of the research. The research design also includes a timeframe and
the all-important costings.

Data collection: This involves the actual carrying out of the research. There are two main
categories of market research

Qualitative research: This is exploratory research which aims to determine consumers'

attitudes and values in a way that sampling using questionnaires cannot. For this reason
qualitative research relies on some form of interaction with the consumer. Main forms of this
are focus groups, in-depth interviews and observation.

Quantitative research: Surveys and short interviews are the main forms of quantitative
analysis. Here values and attitudes are measured and questions are generally given in a "yes-
no" or scale from 1-5 format.

Data analysis: The form of analysis will depend on the type of research used e.g. qualitative
analysis will generally involve identification of some major issues and present the nature of
the comments made on them. While there are now computer programmes, which can help
interpret data, this is generally used for interpreting qualitative data, which is more statistical.

Report writing: The final report will summarize the objectives of the research and give
detailed analysis. This is presented in graphic form where possible (bar charts, pie charts etc).
It's important that the information is clearly presented so that managers can draw clear
conclusions from the report. An executive summary at the beginning summarizes all major
findings.

59
THE PURPOSE OF MARKET RESEARCH

Market research is the collection and analysis of data in order to identify and satisfy
consumer needs. The main purpose is to reduce risk and facilitate decision-making. It is
particularly useful when launching a new product and ensures that the right goods are
produced. Market research provides information on consumer needs and wants, competitors,
the marketing mix and potential sales.

Individuals have different requirements and consumers with similar characteristics must be
identified. A company can then choose a target market or section of the market for its
products. This provides a focus for marketing activities.

Competitors - no firm exists in isolation. Competitors must be identified and their actions
monitored. Research must be undertaken on competing products in order to identify a
competitive advantage for the new product.

Marketing mix - marketing involves having the right product at the right price in the right
place using the right promotion. These are the 4Ps of the marketing mix. It is necessary for
the right combination of these to be used in order for a product to be successful. For instance
there is no point advertising nationally if research shows the product is only sold in the local
area.

Potential sales - by knowing the likely level of sales a firm will be able to estimate the
correct amount to produce/supply. This reduces the financial risk involved and ensures the
maximum return from the firm’s investment.

METHODS AND TYPES OF MARKET RESEARCH

There are two main methods of market research –

1. Desk research
2. Field research

60
Desk research

It also known as secondary research is making use of information that is already available.
Internally the firm can draw on its own records. Different departments can provide
information on sales trends, customers and costing, which are useful in the development of
new products. Extensive published material can also be sourced externally. In addition the
development of new technology such as the Internet provides information at the touch of a
button.

Field research or primary research

It may include surveys, questionnaires and general observation. Surveys involve questioning
people directly about their attitude to a particular product or service. Surveys are usually
carried out using a face-to-face interview or by telephone. Because it is impossible to survey
all target customers, sampling is used. A representative group or sample, whose views will
accurately reflect the target population, is chosen. Questionnaires are lists of prepared
questions which potential customers are asked to fill out. They are often used in conjunction
with surveys. Careful attention must be given to the design of questionnaires so that the
answers received are of value for decision-making. Information can be gathered by observing
people making purchases. A particular store, for example, could be chosen and a study made
of how many people buy a particular product.

There are two types of market research –

1. Quantitative
2. Qualitative.

Quantitative research

It provides numerical data. At the completion of a quantitative project it is possible to say

(for example) what proportion or percentage of the population fall into different groups –
those that want something, those that would be likely to buy something, those that are in

61
favor of a particular policy or plan, etc. The essence of quantitative research is that every
respondent is asked the same series of questions.

Quantitative research

It can be carried out in various ways including face-to-face interviewing, by telephone, by

post and self-completion questionnaires. Qualitative research provides an understanding of
how or why things are as they are. It can be used on its own or to help in the development of
a questionnaire for a quantitative study. There are no fixed set of questions and therefore no
assumptions about what is, or is not, important. Instead there is a list of topics, problems, or
possibilities to be explored. The informant’s own concerns or assumptions heavily influence
the form and nature of the discussion.

Qualitative research can be used for everything from testing reaction to a potential new
advertising campaign, to exploring staff attitudes to a new management structure or
procedure. There are various sorts of qualitative research, including unstructured interviews
and focus groups (group discussions).

62
LINKING DEVELOPMENT AND MARKET RESEARCH

The technical development of “Rainbow Rice” took place over four years and involved
extensive use of consumer feedback. Market research in the form of consumer testing will
impact on the product's recipe, texture, and packaging. It is important to get all these
elements correct when launching a product.

Recipe and Texture

Market research carried out randomly chosen consumers found that consumers associated a
unique intimacy with Indian Rice. Popularity of the product in market testing was attributed
to several key features. That identified features would later be incorporated into the product's
brand image and advertising.

Selecting a Brand Name

The name for the new product was chosen following extensive market research. This
included consumer focus groups where groups of consumers were brought together to
provide feedback on a range of potential names for the new bar. Research found that the
name 'Rainbow' represented the characteristics that Rice wanted to reflect in the brand's
personality so that it would appeal to the target market.

A product's brand personality is a description of its characteristics in relation to the target

market for the product. It assists marketers to develop suitable advertising and promotional
campaigns for the product.

Packaging

The packaging for Rainbow Rice was also determined by consumer research and influenced
by the Rainbow brand personality. It was designed to fit with the product's image of being
soft and indulgent and had a particular appeal among the target market. Indeed the selected
colour on the packaging of a combination of Green & Blue was used for their attractiveness

63
Research found that the final packaging showed the new product to be a modern and quality.
The variety of the products offered for the launch phase was the standard packs.

PROMOTION STRATEGIES

THE LAUNCH STRATEGY FOR RICE

The first key challenge was to find the correct in-store position for this product. Now that it
was clear how the product was to be positioned in retail stores, the marketing
communications campaign had to inform consumers about this new product.

THE LAUNCH CAMPAIGN

For a new product like RICE, the main objective of the launch campaign was to build
awareness of the new brand. RICE approached this mainly in three ways: advertising,
sampling and PR.

64
65
Advertising:

A TV ad campaign was devised illustrating one of the important consumption occasions

(watching TV in the evening), and it was aired for eight weeks. This advertisement reached
85% of the market and was seen by every adult in the target audience at least seven times.
Sampling:

From experience, knew that in-store sampling was vital for a successful launch of rice as a
product. A major sampling and couponing campaign was devised whereby three-day
sampling events were carried out across 100 major stores in different countries.

Public Relations:

One of the most underestimated areas of the marketing mix, PR is invaluable for awareness
building of an intended usage occasion. PR can reach consumers when they are least
expecting it, and outside the normal forms of contact like instore, TV etc. To support these
main PR activities undertaken were:

 A Radio Promotion with FM stations where the prizes consisted of hampers with
"all you need for a night-in": Snaps; DVDs, slippers (!) and gift membership of
screenclick.com.

 Media Gift to presenters of drive time radio shows and afternoon TV

 Product Placement: Samples were sent to Fair for display in the shop or possibly for
evening scenes in homes. Samples were also given to major interior design trade
shows for placement on tables in living room displays.

Point of Sale (POS): Naturally, given that the product is sold in retail outlets, in-store
marketing support was also developed. This consisted mainly of attractive floor units, shelf
headers and glorifiers to give standout in-store.

66
ADVERTISING TO REFLECT BRAND PERSONALITY

The advertising theme for the Rainbow RICE product launch was 'All in a RICE Rainbow'.
The advertising strategy was developed around the brand personality of the product and
sought to appeal lower & middle class segments.

PROMOTIONAL STRATEGY

 Advertising by bill board

 Advertising by television
 Advertising by papers

67
DISTRIBUTION STRATEGIES

DISTRIBUTION STRATEGY

A channel performs the work of moving goods from produces to consumers. It overcomes the
time, place, and possession gaps that separate goods and services from those who need or
want them.

PULL STRATEGY FOR RICE

A pull strategy involves the manufacturers using advertising and promotions to induce
consumers to ask intermediaries for the product, thus inducing the intermediaries to order it.

The strategy is appropriate when there is high brand loyalty and high environment in the
category, when people perceive differences between brands and when people choose the
brand before they go to the store.

FUNCTIONS OF STRATEGY

 They assume risks connected with carrying out channel/work.

 They provide for the successive storage and movement of physical products.
 They provide for buyer’s payment of their bills through banks and other financial
institution.
 They oversee actual transfer of ownership from one organization or person to another.
 Gathered in formation about potential and current customers, competitors and other
factors and process in marketing environment.
 They develop and disseminate persuasive communication to stimulate purchasing.
 They reach agreements on price and other terms so that transfer of ownership of
possession can be affected.
 They place order with manufacturers.
 They acquire the funds to finance inventories at different level in channel.

68
STEPS FOR DISTRIBUTION OF RICE

 Analyzing customers needs.

 Establishing channel objectives.
 Identifying the major channel alternatives.
 Evaluating major channel alternatives.

MULTINATIONAL MARKETING SYSTEMS

 Single market; through a single channel for RICE.

 Multi channel marketing for RICE occurs when the firm uses two or more marketing
channels to reach one or more customer segments.

CHANNEL MANAGEMENT DECISION

 Selecting channel member

 Training channel member
 Marketing channel member
 Evaluating channel member

INTERMEDIARIES

 Retailer
 Jobbers
 Wholesaler
 Industrial distribution
 Manufacturer’s representative

69
DISTRIBUTION

Production will be in India & will be exported to Sri Lanka. The company would then
employ a dealer in major city like Colombo or dambula where the retailer or customer can
easily come to the dealer & the deal can be made with the dealer’s support.

DISTRIBUTION CHANNEL

INDIAN FARMER

SUPPLIER (INDIA)

PURCHASER (SRI LANKA)

LOCAL DEALER

RETAILER

CUSTOMER

70
PRICING STRATEGIES

To set the price the concern of all affected parties must be addressed the manufacturer needs
to make a profit so do resellers who demand adequate margin for their services moreover
competitors reaction in terms of their price responses must be anticipated finally it necessary
to take in account both consumer & the value they place the product.

FACTORS AFFECTING SETTING THE PRICE

Several factors must be taken into consideration in setting the price including:

• Cost
• Elasticity of demand
• Supply
• Product image
• Turnover
• Market share or volume
• Product life Cycle
• Number of product involves.
• The optimum mix of these ingredients varies by the product market & corporate
objectives.

FACTOR AFFECTING PRICE SETTING IN INTERNATIONAL CONTEXT

Price setting in the international context is further complicated by such factors as:

• Foreign Exchange Rate

• Relative Labour Cost
• Relative inflation rate in various countries.
• Other important consideration are export packing cost & charges transportation cost
tariff tax laws & Profit Remittance restriction

71
PRICING STRATEGIES

We have to set a price for the first time when we develop a new product.

NINE PRICE QUALITY STRATEGY FOR TEA

Premium strategy = high price, high quality

High value strategy
Super value strategy
Overcharging strategy
Medium value strategy
Good value strategy
Rip off strategy
False economy strategy
Economy strategy
= medium price, high quality
= low price, high quality
= high price, medium quality
= medium price, medium quality
= low price, medium quality
= high price, low quality
= medium price, low quality
= low price, low quality

PROCESS FOR SETTING PRICING STRATEGY/POLICY

 Selecting the pricing objective

 Determining demand
 Estimating costs
 Analyzing competitor’s (cost, price and offers)
 Selecting pricing method
 Selecting final price

ADOPTING THE PRICE

• Geographical price: Barter, compensation deal, counter trade, cash

• Price discount and allowances: Cash discount, quality discount, function discount,
seasonal discount, allowance
• Promotional pricing: Loss leader pricing, special event pricing, cash rebates, low I
interest, longer payment, warranties

72
 • Discriminatory pricing: Customer segment pricing, image pricing, channel pricing,
time pricing
PRICING METHODS

Here we have chosen the cost based price approach, which calculated on basis of cost.

Also we want to go with the negotiation based approach because according to the negotiation
base approach price is low compare to market price, which will leads to the satisfaction of
customers.

73
PROCEDURE TO EXPORT RICE TO SRI LANKA FROM INDIA

First of all you should have IEC NO, from government (India)

When you receive the order, you should notify the customer that can supply the goods as per
the requirements stated on the order & that the LETTER OF CREDIT should be opened in
your favor. That constitutes your acceptance of the contract.

In that notification, you will stipulate how much time is allowed for making the payment
after the document have been received by the customer’s bankers. This is because the
documents will travel quickly by airmail whereas the goods might arrive laterby sea or could
be delayed in the air freight process. However, if you do use air-freight, the customer might
be perfectly happy to authorize the payment to be made as soon as the documents arrive, as
they will include a copy of the BILL OF LADING or AIRWAY BILL which proves that the
goods are on their way.

The opening of the L.C. signifies the customer’s acceptance of the contract.

The ORIGINAL documents, WITH THE BILL OF EXCHANGE, should be sent from your
bank to the customer’s bank as the goods are handed over to the shippers (or their agent).

When sending the goods on F.O.B. basis, it often savis time (and bother for the customer) if
you pay for the INSURANCE of the shipment just before you hand the (i.e. it is usually not
very costly) goods over.

A copy of the documents, WITHOUT THE BILL OF EXCHANGE, should accompany agent
can inform the customer-the shipper or the import the goods, so that bankers as soon as the
goods arrive. The bank will then authorize the release of the goods to the customer or the
agent, provided that the original documents have already arrived at the bank & the BILL has
been accepted.

74
 DOCUMENTS REQUIRE

Import prohibitions, which apply to a range of goods,

The Food Act NO. 26 of 1980-

 Contains the laws & provisions for regulations in food safety;

 Ministry of health is the implementing agency: &

 The food of advisory committee is the statutory body.

The plant protection Act No. 35 of 1999 –

 Contains the regulations for protection of plants, fresh fruits, & vegetables, soil &
others organism.

 Director General of department of agriculture is the statutory body.

 The designated material in the regulation can not be imported into Sri Lanka without
permits.

Import licenses

The department of imports & exports control has a frormal procedure in issuing licenses
where conditions are imposed on import licenses in respect of certain items due to
environmental & other related reasons.

75
 CONCLUSION

Rice export constitutes a considerable share in the national exports. India is likely to be major
exporters next to Thailand & its influence on the global rice trade will be significant. Keeping in view
the importance of rice in the national export items, concerted efforts are required to be made to further
promote the export of rice.

There is a good scope for India to take advantage of the new trade opportunities for promoting the
export of rice. This can be achieved if production is made as per the requirements of international
markets by increased investment in research & development coupled with export friendly trade
policies.

76