CNA – Sri Lanka and Thailand could sign a free trade agreement (FTA) by March 2024, a top official of the Indian Ocean nation told media yesterday, as it attempts to rebuild its crisis-stricken economy.

The two nations restarted deal negotiations in January, months after a severe financial crisis engulfed Sri Lanka, as its foreign exchange reserves fell to a record low.

“Both sides are enthusiastic and there is strong political will,” Sri Lanka’s chief FTA negotiator KJ Weerasinghe told media.

“There will be several more rounds of talks, but I am confident we can conclude the agreement for signature by March 2024.”

A Thai delegation is expected to visit Colombo from June 26 to 28 for the next round of talks, covering goods, customs cooperation, investment, dispute settlement and services, he added.

Two-way trade was about USD460 million in 2021, Sri Lankan central bank data shows.

Sri Lanka exports mainly tea and precious stones to Thailand, from which it imports electronic equipment, food, rubber, plastics and pharmaceuticals.

Last week President Ranil Wickremesinghe said Sri Lanka would focus on boosting foreign investment, exports and jobs, as it shifts gears from tackling the crisis to growth.

Economic prospects have benefited from moderating inflation, a stronger currency and lower interest rates in recent months.

The IMF expects Sri Lanka’s economy to shrink by about three per cent this year after a contraction of 7.8 per cent in 2022. The government expects to return to growth next year.

The island also expects FDI inflows to rise by a fifth this year, to USD1.3 billion, as it takes steps to attract investment.

AP – Boeing said yesterday deliveries of its 787 Dreamliner have been delayed again by another manufacturing issue, the latest in a string of setbacks affecting the two-aisle jet.

The company said it is inspecting fittings on part of the tail called the horizontal stabiliser “for a nonconforming condition”. The inspections and repairs will affect near-term deliveries but won’t alter the company’s forecast of deliveries for the full year. Boeing did not say how many planes are affected by the new defect.

Boeing said the flaw in the tail is not a safety issue and planes already in airline fleets can keep flying. The company said it notified the Federal Aviation Administration and airlines.

The 787 and the 737 Max have both been plagued by production defects that have sporadically held up deliveries and left airlines without planes that they expected to have for the peak summer season.

In April, Boeing found a problem with fittings on Max jets were the fuselage meets the vertical section of the tail.

A month before that, deliveries of the 787 were stopped while federal regulators looked over documentation of work that was done on new planes. Shipments of 787s have been stopped several times in the past three years because of production issues.

The delays hurt Boeing because buyers usually pay a large part of the purchase price on delivery.

CNA – India’s Cabinet yesterday approved a INR890.47-billion (USD10.79-billion) revival package for loss-making Bharat Sanchar Nigam Ltd (BSNL) to help the state-owned telecom operator deploy 4G and 5G services in a market dominated by private players.

“With this revival package, BSNL will emerge as a stable telecom service provider focussed on providing connectivity to remotest parts of India,” the Cabinet said in a statement.

The development comes days after BSNL partnered with top software company Tata Consultancy Services to help deploy 4G network across the country at a time when larger rivals were rolling out next-generation 5G network.

Debt-laden BSNL, grappling with poor infrastructure, has been posting losses for the past 12 years. The losses narrowed to INR69.82 billion in the year ended March 2022 from INR74.41 billion a year ago.

The company has also been struggling to win customers in the face of intense price competition from Reliance Industries-owned Reliance Jio Infocomm, Bharti Airtel and Vodafone Idea.

The telecom market in India was upended by Jio’s launch in 2016, when it offered free calls and cut-price data plans, eroding the profit and revenue of rivals and leading to consolidation.

Shares of state-owned telecom firm Mahanagar Telephone Nigam Ltd surged 14.3 per cent after the news on a revival package for BSNL.

CNA – Germany’s cartel office said Meta plans to introduce a new overview for users of its platforms Facebook and Instagram, in a step towards allaying anti-trust concerns following years of discussions with the regulator.

Meta’s accounts centre will allow users to make “a largely free and informed decision” about whether they want to use accounts such as Instagram and Facebook in combination or separately, the office said.

“We updated the Meta account overview to show more transparently how our services work together and give people more control over these features,” a Meta spokesperson said.

The company will continue to work constructively with the authority, the spokesperson added.

In 2019, the cartel office sought to ban Meta – then Facebook – from combining user data from several sources without users’ consent.

This prompted years of legal wrangling. The European Union’s top court is expected to weigh in on the matter in July.

The new feature offered by Meta to manage accounts revises a previous plan that the cartel office described as “seriously deficient” and which it said did not inform consumers in a neutral or transparent way.

The office said its most recent assessment was based on standards developed in 2019 and that it therefore could not rule out that stricter requirements may be needed to satisfy German competition law.

PARIS (AFP) – The Organisation for Economic Co-operation and Development (OECD) slightly raised its growth outlook for the world economy yesterday as inflation eases and China dropped Covid restrictions, but it warned the recovery faces a “long road”.

The Paris-based organisation forecast an economic expansion of 2.7 per cent, up from 2.6 per cent in its previous report in March, with upgrades for the United States (US), China and the eurozone.

But it is still under the 3.3 per cent growth recorded in 2022.

The growth forecast for 2024 remains unchanged at 2.9 per cent, the OECD said.

A drop in energy prices, the untangling of supply chain bottlenecks and China’s sooner-than expected re-opening are contributing to the recovery, the OECD said.

Among its 38 members – an eclectic group ranging from the US to Germany, Mexico, Japan and New Zealand – inflation is expected to slow to 6.6 per cent this year, after soaring to 9.4 per cent in 2022.

But core inflation, which strips out volatile energy and food prices, is higher than previously expected, according to the OECD.

The international organisation said this may force central banks, which have already raised interest rates in efforts to tame consumer prices, to further hike borrowing costs.

The OECD warned that higher interest rates around the world are “increasingly being felt”, notably in property and financial markets.

“Signs of stress have started to appear in some financial market segments as investors reassess risks, and credit conditions are tightening,” the report said.

The banking sector was rocked in March by the collapse of US regional lender SVB, whose demise was partly blamed on high rates bringing down the value of its bond portfolio.

The crisis reverberated across the Atlantic, with the Swiss government forcing Swiss banking giant UBS to take over troubled rival Credit Suisse.

The OECD also warned that almost all countries have budget deficits and higher debt levels than before the pandemic as they propped up their economies to withstand the shocks of Covid restrictions and the situation in Ukraine.

As energy prices fall further, government should withdraw schemes aimed at supporting consumers, the OECD said.

The OECD raised its 2023 growth forecasts for the US to 1.6 per cent and China, the second biggest, to 5.4 per cent – both an increase of 0.1 percentage points.

The eurozone also got a slight 0.1-point bump to 0.9 per cent.

Britain was upgraded out of recession territory, with growth now forecast at 0.3 per cent instead of a contraction.

The OECD, however, sharply lowered the outlook for Germany, with zero growth now expected for Europe’s economy while Japan’s GDP will grow 1.3 per cent, a slight downgrade.

CNA – Electric vehicles (EVs) and other technology to cut emissions is likely to drive a surge in French power demand by 2035, meaning France will need to maintain its existing nuclear capacity, grid operator RTE said yesterday.

The European Union in March approved a law to end sales of new C02-emitting cars in 2035.

To meet that goal, electricity is needed both to power the EVs and the battery plants automakers need to produce them. Production of synthetic aviation fuel also relies heavily on power. As a result, electricity use is likely to rise by nearly 10 terawatt-hours (TWh) per year on average over the next decade to between 580 and 640TWh in 2035, the RTE climate and energy report said.

That compares with 452.8TWh in 2022, which was a crisis year as Europe sought to curb its energy demand to cope with the impact of the Ukraine situation and France’s nuclear fleet was subject to an unusually high level of maintenance, meaning its energy output sank to a 34-year low.

Demand stayed below pre-pandemic levels and it is only from 2025 at the earliest that the report predicts demand growth will match levels last experienced in the 1980s when a fleet of new nuclear capacity was built to cope. Over the decade to 2035, RTE projects an average of 350TWh of nuclear power availability per year.

A new Flammanville 3 reactor, expected to start generating at the end of the year provided there are no further delays, will add 10TWh per year.

But the report said France will need the country’s other reactors to have their lifespan extended to 60 years, something safety watchdog ASN is considering.

ANKARA, TURKIYE (AP) – The Turkish lira tumbled to a fresh record low yesterday, extending its slide against the US dollar since President Recep Tayyip Erdogan started his third term.

The lira weakened by over six per cent yesterday hitting 23.15 against the dollar. The decline took the currency’s loss since the appointment of Erdogan’s new government to eight per cent. The currency weakened by around 20 per cent since the start of the year.

The Turkish currency has declined in value since 2021 due to what economists said is Erdogan’s insistence on keeping borrowing costs low to stimulate growth despite skyrocketing inflation.

The policy runs contrary to conventional economic approaches that call for higher interest rates to tame inflation.

On Saturday, Erdogan reappointed Mehmet Simsek, an internationally respected former banker, as treasury and finance minister in his new Cabinet.

The appointment was viewed as a sign that Erdogan’s new administration might pursue more conventional economic policies.

Simsek, a former Merrill Lynch banker who previously served as finance minister and deputy prime minister under Erdogan, returned to the Cabinet after a five-year break from politics.

CNA – Malaysia’s state oil firm Petronas, or Petroliam Nasional Berhad, yesterday logged a first-quarter profit and said it anticipates moderating oil and gas prices to squeeze its profitability this year.

Its post-tax profit during the three-month period rose to MYR23.8 billion (USD5.17 billion), compared with profit of MYR23.4 billion in the same quarter a year ago.

Revenue rose to MYR90.4 billion (USD19.65 billion) compared with MYR78.2 billion in the same quarter last year, but dropped 15 per cent from the fourth quarter of 2022.

Petronas said the better revenue performance was due to improved sales volumes and favourable impact from foreign exchange, although it was offset by lower average realised prices from major products. “Oil and gas prices are expected to moderate due to continued economic uncertainties, hence lower profitability is anticipated compared to last year,” the firm said.

Capital investments amounted to MYR10.5 billion, contributed by upstream and gas projects, it said.

Domestic capital expenditure was up by 44 per cent from the same period last year, mainly for its floating liquefied natural gas (LNG) project in Sabah state and the Kasawari gas field development in Sarawak state, it said.

“Given the risk of continued uncertainty and volatility in the business environment, Petronas will maintain a cautious outlook for 2023,” it added.

CNA – Japan’s financial regulator is exploring ways to bolster financing for leveraged buyouts (LBOs) and is in discussions with big banks and other institutions about how to bring more participants into the market, regulatory officials said.

As more corporations step up sales of non-core assets or seek buyers due to succession issues, Japan’s regulators have grown worried that the LBO finance market, concentrated among a few large banks, is not mature or diverse enough to deal with the rising risks and demands.

“We are studying what we could do to have more participants in the LBO market while ensuring that risks are properly controlled,” deputy director-general at the FSA Toshinori Yashiki said in an interview.

“We hope to have a framework that helps prevent risks of leveraged financing being excessively concentrated in certain banks,” he added, citing the development of a secondary market among possible options.

That marks a more proactive stance by regulators towards LBOs.

Japan has yet to develop a secondary market for leveraged loans similar to that in the United States, and arrangers of large buyout debt deals are typically limited to big, deep-pocketed commercial banks that hold the bulk of them on their balance sheets.

The limited universe of players means a concentration of risk, which stirred concern among regulators when Marelli Holdings Co, an auto parts supplier bought by KKR & Co in a leveraged deal, requested a massive debt waiver and generated losses for some top banks last year.

Outstanding LBO loans held by major Japanese banks doubled in five years to about JPY4.5 trillion (USD32.32 billion), according to FSA data for the year to March 2022.

As an initial step, the FSA office that monitors major banks has initiated a dialogue with large banks and other financial institutions such as insurers, an FSA official in charge of the dialogue said in a separate interview.

“We know there is no easy solution,” said the official, who declined to be named.

Financial institutions have also been moving to widen the investor base for leveraged financing.

MUFG Bank created Japan’s first LBO debt fund this year, targetting institutional investors including regional banks and insurers.

“Market participation by broader types of investors will help to stabilise financing for deals, as we expect the LBO loan market to grow further,” said Jin Nishikawa, who heads the bank’s M&A finance department in Japan.