The Takashi touch!

Thursday, 3 July 2014 00:10 - - {{hitsCtrl.values.hits}}

The low profile Japanese in love with Sri Lanka is silently responsible for attracting Rs. 40 b Japanese investments in to post-war Sri Lanka in just four years; suggests ways how more Japanese investments can be drawn

Takashi Igarashi

Japan is known as the land of the rising sun. At home, Sri Lanka and Japan enjoy perhaps one of the strongest and friendliest relationships. With former President J.R. Jayawardene in 1951 as Finance Minister appealing for compassion for Japan on global stage following World War 2, bilateral ties got a new meaning and a major boost. Last year Japan and Sri Lanka celebrated the 60th anniversary of bilateral relations with President Mahinda Rajapaksa making a state visit to Tokyo. On a critical assessment, more could be achieved via the perennial strong ties between the two countries, especially for the benefit of Sri Lanka. Japan is the most developed nation in Asia and has been a strong supporter of Sri Lanka. In fact Japan used to be the largest financial donor to Sri Lanka and a big investor apart from being an important source market for Sri Lanka Tourism. The trajectory had its ups and downs over the years. Of late, however there has been a fresh vigour in Japanese interests on Sri Lanka, especially from the private sector. Many factors may have sparked that renewed interest. The end of the near 30 year old conflict in the north and east of Sri Lanka is one compelling reason. However there is one person who has played a silent yet effective role for the resurgence of Japanese interests of late. He is the low profile and very unassuming Takashi Igarashi. For someone who originally discovered Sri Lanka as a casual tourist and that is too during the height of JVP insurgency in 1989, his persevering efforts in the firm belief that Sri Lanka has the future potential are highly commendable. Evidently unnoticed by the larger policy makers from both nations, Takashi’s efforts are worth recording because some of the initiatives have begun to produce results already. With post-war revival and promise and considering his early success for Takashi sun certainly rises from Sri Lanka and he could be described as a non-violent samurai from Japan with a passion for Sri Lanka.

Entry in to Lanka and falling in love

Multi-faceted Takashi who has interests in music and agriculture and was engaged in the import-export trade in the late 1980s recalled that he became interested in Sri Lanka after he met a Sri Lankan in a Tokyo hotel. Thereafter he made a visit to Colombo for the first time and found the country to his liking – different to the rapid and advanced pace of life in Tokyo. He made several short trips subsequently as a tourist when time permitted. As he was a frequent visitor he began banking with People’s Bank in Colombo. “I fell in love from the first visit to Sri Lanka. I found Sri Lanka has the best climate and good living conditions in comparison to some of the South and South East Asian countries,” Takashi told the Daily FT in an interview. A few years later given his love for agribusiness, Takashi was encouraged to start a foliage farm in a three-acre land in Watawala for exports. More than as an enterprise, this blooming farm was undertaken as a hobby by Takashi. This activity was however discontinued after three years as the farm was plagued by a disease. Seven years ago, Takashi brought some of his savings and deposited at the Standard Chartered Bank where he first developed an acquaintance with Viraj Malawana who was then the Senior Business Development Manager managing HNW portfolios at SCB. Viraj previously had an eventful early career in capital market. That first contact in 2007 later blossomed into a strong trustworthy relationship as events would later confirm. Viraj introduced some sound investments in listed equities to Takashi who found returns attractive compared to Japanese options. With the battle against LTTE terrorism reaching pitch fever not many foreign investors were active in the Colombo Bourse. However Takashi saw the long term potential and persisted. Takashi invited Viraj to join him due to the knowledge in banking and capital markets sector. With the new task of managing Takashi’s portfolio, Viraj left Standard Chartered Bank and the Takashi-Viraj duo thereafter started NWS Holdings, which is today has exposure and interest to several booming sectors. With the end of the war, as capital markets braced for a rebound the Securities and Exchange Commission was keen to lure foreign investors in 2009. In the task for getting more brokers, the SEC was keen to have a party that could draw more foreign investments. Takashi and Viraj, who began his career at the Colombo Stock Exchange and later served the stockbroking industry, saw an opportunity and applied for a new licence from the SEC. This materialised and New World Securities Ltd., was granted licence as one of the new trading members. The SEC’s advice then was encourage Japanese investments in to listed equities on the basis post-war Sri Lanka will be a safe place for foreign investments. Heeding SEC advice as well as pursuing his own strong belief, Takashi took small groups of companies to Tokyo in batches to introduce to Japanese companies. Around this time, President Mahinda Rajapaksa too urged the broking community to venture out and promote Sri Lanka in a bid to draw more foreign investors.

Takashi Igarashi with Japanese Ambassador in Sri Lanka Nobuhito Hobo (centre) and Bansei Securities Group Chairman Toyohiko Murakami at the listing of Bansei Royal Resorts on the Colombo Stock Exchange

Takashi Igarashi with Pan Asia Bank Chairman Nimal Perera and Bansei Securities Managing Director A. Shimamoto when the latter agreed to invest 15% stake in the Lankan commercial bank

Promoting Sri Lanka big time in Japan

Having realised that there was a greater need for a bigger effort too, Takashi with his business partners in Japan as well as excellent support from Sri Lanka’s Ambassador in Japan Admiral Wasantha Karannagoda, organised the first mega Investor Forum in December 2011. For this New World Securities arranged a larger delegation of 10 companies represented by around 20 from senior management. It was the first initiative by a broking firm. The effort included an investment forum at Tokyo’s popular business venue Belle Salle Roppingi, one-to-one business meetings as well as visits to and presentations by the Tokyo Stock Exchange and securities firms in Japan. The well-attended Sri Lanka Investment Forum highlighted the immediate dividends following the end of terrorism as well as vast opportunities for trade, investments and tourism for Japanese companies. Japanese participants numbering nearly 100 comprising Japanese companies, fund managers and high net worth individuals, were provided with simultaneous translations of English presentations. The Lankan companies made short presentations on recent progress and future plans, enticing Japanese firms and high net worth individuals to consider the companies and Sri Lanka as an attractive investment proposition. Destination Sri Lanka was promoted by SriLankan Airlines whilst the Chief Guest at the event was Ambassador in Japan Admiral Karannagoda. Apart from presentations by these companies at the Investor Forum, New World Securities also promoted portfolio investments in shares in listed companies such as JKH, Hayleys, Dialog, Commercial Bank, HNB, Sampath Bank and People’s Leasing. The firms who participated in the first Forum were Nawaloka Holdings Ltd., Royal Ceramics PLC, PABC Bank PLC, Panasian Power PLC, Colombo Land and Development PLC, Ceybank Asset Management Ltd. and Ideal Motors Ltd. Some of the representatives were PABC Bank Deputy Chairman and Royal Ceramics Managing Director Nimal Perera, Nawaloka Holdings Director Harshith Dharmadasa, Ideal Motors Chairman Nalin Welgama and Director Aravinda de Silva, Panasian Power Director Rifky Badurdeen and Ceybank Asset Management CEO Chitra Sathkumara. Encouraged by the success of the 2011 inaugural event and given the growing interest from Japanese companies, NWS Holdings, followed it up with a second forum in October next year i.e. 2012. That forum and the Sri Lankan delegation were bigger. As events would later confirm, the 2012 Forum in Tokyo was also a turning point for Sri Lanka and capital markets. Recognising the importance of wooing Japanese investments and the role played by Takashi and NWS, Deputy Finance Minister Dr. Sarath Amunugama and Central Bank Governor Nivard Cabraal joined the Sri Lankan delegation. Held at the Akihabara Convention Hall, the 2012 Sri Lanka Investor Forum of NWS Holdings saw presentations by Sri Lanka’s Ambassador in Japan Admiral Wasantha Karannagoda, Securities and Exchange Commission Di rector Capital Market Development and Research Vajira Wijegunawardena, Expolanka Holdings Group CEO Hanif Yusoof, Pan Asia Bank Chairman Nimal Perera, and Citrus Leisure Director Dilith Jayaweera among others .

The Rs. 11 billion investment by Japan's Sagawa Logistics recently to buy 51% stake in Expolanka Holdings Plc was a major breakthrough of Takashi's efforts

Flow of mega Japanese investments

Between the first forum and the second, Takashi and NWS had succeeded in drawing over Rs. 6 billion Japanese investment in to Sri Lanka’s Government Debt market. This was following a breakthrough by Takashi and NWS when they struck a partnership with Tokyo Stock Exchange member Bansei Securities. The flow of Japanese investments both in to government securities and Colombo Stock Exchange-listed companies following the 2011 and 2012 forums of NWS began to accelerate considerably. A few deals were also historic. The most recent was Japan’s second largest logistics firm Sagawa Holdings taking up 51% stake in Expolanka Holding PLC for Rs. 11 billion. Both Expolanka Holdings and Sagawa were brought together at Takashi’s Forum in 2012. This investment was also the first since the Government relaxed foreign ownership restrictions on freight forwarding companies and was the largest private Japanese investment in Sri Lanka’s history. Sagawa’s entry into Sri Lanka is also a major boost for Sri Lanka’s aspiration to become a competitive logistics and shipping hub. Another success from Takashi’s initiatives is the entry of Bansei Securities as a long term investor to Sri Lanka. Starting from a basic partnership agreement originally with NWS, Bansei found greater potential enough in Sri Lanka to come direct and set up its own operations in Sri Lanka. Bansei started with a 15% stake in Pan Asia Bank PLC for Rs. 930 million in April 2013, floating a margin trading company and later diversified in to booming leisure sector taking 40% stake in a southern resort – 34-room resort Coral Rock Hotel which was later renamed and listed as Bansei Royal Resorts Hikkaduwa Ltd. Investment in to the resort firm early this year was Rs. 400 million and more is planned with expansion of the resort on the cards. Bansei Securities Group Chairman Toyohiko Murakami during an interview with Daily FT in February this year said: “Overall sound macroeconomic fundamentals make Sri Lanka a lot safer and attractive. Our clients are happy and so are we.” Murakami said Bansei manages clients’ funds by investing around Japanese Yen 6 to 8 billion in other emerging global markets such as Brazil, Mexico and Turkey. He said that Brazil’s government paper offers higher returns than Sri Lanka but its currency is relatively weaker than Sri Lanka. According to him, more retired and wealthy Japanese investors are looking at emerging markets including Sri Lanka as well as those in South Asia. “Given Sri Lanka’s strategic location in South Asia, the country is a good platform,” he told Daily FT in the February 2014 interview. From Sri Lanka’s government securities market’s perspective, the most significant contribution by Takashi and NWS is that to date they have attracted over Rs. 25 billion Japanese investments. From a relatively new single source, this is gigantic.

Viraj Malawana as the then Senior Business Development Manager at Standard Chartered Bank came in touch with Takashi and later co-founded NWS Holdings with a consortium of investors spearheading push for Japanese investments in to Sri Lanka

How more Japanese companies, investors and tourists can be attracted?

Takashi says he and NWS will continue to promote Sri Lanka and encourage more Japanese companies and investors to discover the “opportunity Sri Lanka.” Further investments and projects in the financial services sector and tourism sector are on the cards whilst forays into new sectors haven’t been ruled out. Apart from his newborn love for Sri Lanka, Takashi emphasised that Sri Lanka is an ideal country in many sense for investments, business and tourism. He said having witnessed Sri Lanka during the height of the conflict, post-war the country has seen a dramatic improvement from a country and business perspective. “I have seen more confidence and optimism from both businesses and people and this synergises well with the vast improvement in key infrastructure and services post-war,” Takashi pointed out. He also sees greater potential to maximise benefits from strong bilateral ties with Japan though Takashi feels concerted initiatives can be more aggressive and effective. “In general most average Japanese have misunderstood or have the wrong notion about Sri Lanka. Traditionally they have and still view Sri Lanka as a very poor and highly under developed country. For some of the businesses and investors, Sri Lanka is compared or grouped in with countries such as Laos, Myanmar and Cambodia. In truth, Sri Lanka is not similar to those countries but is bigger and better. Sri Lanka is a more developed and beautiful country to invest, to live or for a holiday,” says Takashi. Unfortunately for Sri Lanka, countries like Laos, Myanmar and Cambodia are more aggressive in grabbing the attention of Japan for both investments and tourism. “Ideally Sri Lanka should be more effective because it has what the Japanese cherish – excellent climate, rich culture and heritage, warm and friendly people, excellent beaches and much cleaner living spaces,” he stressed. Takashi feels that these positives of Sri Lanka are made richer by the strong political, diplomatic and religious ties shared by Japan and Sri Lanka. The two countries celebrated 60 years of official bilateral ties in 2012. Despite many positives, Sri Lanka is less known among average Japanese companies and people with the latter being potential high spending tourists whereas there is greater awareness about some of the Southeast Asian nations. This according to Takashi explains why for example there are direct daily flights to Myanmar whilst Sri Lanka still has only a few flights per week. Takashi believes Sri Lanka should properly harness the traditionally strong and well respected political ties with Japan. He opines that in Japan party leaders and those in Executive Councils are more influential and emerging countries in Southeast Asia such as Myanmar, Laos and Cambodia have succeeded in knocking at the right political doors hence the growing Japanese business and tourists interests. Thanks to Takashi’s involvement and passion, as well as Bansei’s new found bullishness, the latter last year enlisted its Executive Advisor and former Nomura Securities senior official Takanori Shimizu to write a book on Sri Lanka, detailing its political stability, rich history and culture as well as opportunities in tourism and financial markets. The first 10,000 copies of the Japanese book were sold out, encouraging Bansei to order a re-print for 10,000 copies as well as launch an English version. The author Shimizu, in February this year, told Daily FT that there is a lot of goodwill in Japan on Sri Lanka but up-to-date information on Sri Lanka was lacking and the book has been very useful in promoting Sri Lanka among Bansei clients as well as other prospective investors. Takashi also said from a corporate or private sector business perspective, the recent Sagawa investment in Expolanka Holdings was a good example to prove that Sri Lanka has good or world class companies unlike for example in Myanmar or Cambodia. “Sri Lanka needs to showcase more similar companies to Japanese businesses and enhance awareness,” he added. Originally Sagawa wanted to look at Sri Lanka in a small way and deployed a team out of its Singapore office to explore. The plan was to take a token 10 to 15% stake but during the due diligence study they realised the true picture and the bigger potential. This prompted Sagawa’s head office in Tokyo to take over the exercise and upscale the investment in to Expolanka Holdings to a subsidiary strategy eventually taking up 51% ownership, according to Takashi. Whilst happy with his efforts so far in promoting Sri Lanka and drawing Japanese companies, Takashi believes reforms and improvements in the Foreign Exchange Control and Inland Revenue/taxation areas were needed to make it easier for foreign investors. He noted that going world over and telling companies to invest in Sri Lanka is counterproductive when some important doors are closed still. Inland Revenue requires respective bank’s confirmation for every single foreign investment via Securities Investment Account (SIA). For example, if a foreign shareholder wishes to invest in a Sri Lanka company, each individual or company must open an SIA Account. Especially in the case of a foreign company where Directors may be in multiple locations around the world and therefore unable to process the documentation requirement in a timely manner to open such SIA Accounts. Takashi said that Sri Lankan authorities must make the investing process smoother and faster if funds are in place rather than requiring an investor to comply with cumbersome multiple procedural requirements. As a suggestion, he comments that perhaps local companies could have dedicated foreign investments accounts whereby foreign investors wishing to invest in that company can route the funds directly to the company’s foreign investment account. Therefore individual investors would not have to open individual SIA Accounts for this purpose. The company can then report directly to the CBSL about such foreign inward remittances. He viewed repatriation process was better than investment entry facilitation. He noted that in Thailand and Vietnam inflow of investments is fast-tracked though when it comes to repatriation Sri Lanka was better. “Overall, Exchange Control laws need to be relaxed further if Sri Lanka is keen to ensure a higher inflow than what the country has enjoyed so far,” he added. Given Takashi’s own experience of having faced initial bottlenecks in investing in Sri Lanka, NWS has started a legal and tax advisory service at its World Trade Centre office with Japanese lawyers and accountants who work with Lankan experts to enhance the ease of entry for Japanese investors to Sri Lanka. Apart from Sri Lanka’s own complexes and rigidities, such advisory service is also important since Japanese have a different legal and tax system and laws. On prospects for luring more Japanese tourists in to Sri Lanka, Takashi is of the view that the industry should tap the high school students segment, possibly with some family tours apart from making further inroads to religious tourists market harnessing the strong roots of Buddhism in Sri Lanka. Another high potential area is golf tourism, an area which Takashi feels Sri Lanka is lagging behind considerably in comparison to destinations in rest of Asia Pacific. “For example there are 150 golf courses in Bangkok whereas Sri Lanka has only three. If Sri Lanka is keen to make Japanese tourists a major market over the long term then building exclusive golf resorts and several more golf courses is critical,” suggested Takashi adding that existing outlets must upgrade their facilities, accommodation and training of caddies. Takashi also said that there are several Japanese companies keen to invest in privately owned boutique or smaller resorts in Sri Lanka but due to current laws concerning land, some of these investments weren’t taking off.

Next Sri Lanka Investor Forum in Tokyo in October 2014

Takashi’s efforts to promote Sri Lanka continue with passion. He and NWS Holdings are planning the next mega Investor Forum in Tokyo in October 2014 based on the resounding success of previous events in 2011 and 2012. NWS is in the process of short listing prospective participants who are willing to promote their companies, products and services. Those who are keen can contact NWS Holdings office located at the World Trade Centre. Takashi said he and the company were busy firming another big Japanese investment via the stock market as Japanese interests in Sri Lanka continue to gather momentum.