Sri lanka ppt (1)

CONFIDENTIAL 1

DRAFT

Business Case –

Sri Lanka – A Business CaseTapping an ocean of opportunities

Agenda

Current Status

Business model evaluation

Proposal for change in Business model

Conclusion

Demographic Details

Total population 21,675,648 (July 2013 est.)

Area 65,610 sq. km

Languages Sinhalese, English, Tamil

Life expectancy at birth m/f (years)

71/78

Probability of dying under five (per 1000 live births)

12

Probability of dying between 15 and 60 years m/f (per 1000 population)

191/77

Gross Domestic Product

:

Total expenditure on health as % of GDP

3.4 (2011)

GDP (PPP) $106.5 billion (2010)

Gross national income per capita (PPP international $)

$5,520 (2011); $5,220 (2010)

Graphs

- Graph 1: Fluctuating GDP = Market Uncertainty- Graph 2: Depicts increasing GDP despite fluctuations

Health Challenges

• Three main challenges/problems:– Problem due to Prosperity and Lifestyle – Age chronic illness diseases – Rise of Non-Communicable Diseases

Cases per 100,000 population

Diseases Year

1980 1985 1990 1995 2000 2005 2010

CVD117.3 163.9 163.2 263.3 313.2 353.9 510.2

Cancer 128.3 121.3 142.1 190.1 260.2 282.2 510.2

Mental Disorders 298.0 315.9 337.9 434.0 490.4 465.9 -

Diabetes 65.6 86.6 87.5 78.6 204.8 256.2 380.2

Health Sector of Sri Lanka

Indicators 2009 2010 2011

Private Hospitals 220 172 183

Public Hospitals 555 568 592

No. of Beds (Government)

68,905 69,501 69,731

No. of Doctors (Government)

13,633 14,125 17,199

No. of Nurses (Government)

25,549 27,494 29,234

Expenditure on Health Services & Other Facilities, 2003-2010

World Bank Investment• Project Title: Sri Lanka - Second Health Sector Development Project• Project ID: P118806• Status: Active• Approval Date: March 27, 2013• Closing Date: Sept 30, 2018• Total Project Cost: US$ 5170.00 million• The development objective of the Second Health Sector Development

Project for Sri Lanka is to upgrade the standards of performance of the public health system and enable it to better respond to the challenges of malnutrition and non-communicable diseases.

• The project includes two components. – 1st- Provide support to priority areas under the National Health Development Plan. This

component covers multiple areas: addressing maternal and child health and nutrition; improving the prevention and control of non-communicable diseases; health systems improvement.

– 2nd: Focuse on innovation, results monitoring and capacity-building

WHO Investment

• The strategic agenda developed by WHO in close collaboration with the Ministry of Health and other partners is to concentrate on six areas of work for the next six years (2012 to 2017). These are:– Health Systems– Communicable diseases– Non-communicable diseases, injuries and mental health– Maternal, child and adolescent health including nutrition and food safety

– Emergency preparedness and response– Enhanced partnerships and resource mobilization for health

2013 Budget Outlines (Healthcare Highlights)

Life Expectancy 77.4 (Higher than India and Afghanistan)

Infant mortality rate = 8.5 per 1,000 live births

Maternal mortality rate = 41.6 per 100,000 live births

Proposed Budget for Healthcare = SLR 125 billion (Higher than last year of SLR 74.5 billion)

No. of state run hospitals increased to 592; and private hospitals to 3,183

Total No. of doctors = 17,271; Total Number of Nurses = 29,234

WHO will contribute approx US$ 3 million over the next year

Presently, NCDs accounting for 85% of ill health, disability and early death and is expected to grow further

Additional Information

2011 Budget: Government allocated SLR 308 million for NCD prevention in the country [Central Bank report 2011]

Allocation Provided by Treasury under Budgetary Support Services and Contingent Liability Project [Jan-Sept 2012]: Grant of SLR 695,000 given for improvement of Maternal and Child Health Units in Hospitals, Infrastructure and Human Resource Development of the National Drugs Quality Assurance Laboratory (NDQAL). Equipment to improve the capacity of Triposha production, Rehabilitation of existing buildings in Provincial Hospitals and basic equipment under the Island Hospital Development Programme. [Ministry of Health]

Free Trade Agreement: Duty free or low import tax bilateral agreement with India, Pakistan and other Asian countries

2012 tax reform: Benefits like tax holidays, classified into SME/Large scale or strategic investments

Exemption from Port and Airpot Levy (PAL): Medical equipment to be donated to an institution which provides free healthcare services with the approval of Ministry of Health [Amendment to PAL Act no. 18 of 2011]

Regulatory Scenario

Cosmetics, Devices and Drugs Regulatory Authority (CDDA)

- Ensure that the Medical devices available to public meet the required standards of quality and are within the existing legislative framework

- Only products registered to CDDA can be manufactured, Imported, transported, and sold in the country.

- Every foreign manufacturer/Exporter has to appoint a Local for registration and other activities related to their products

- Registration of Medical Equipment to the CDDA Sri Lanka is a two phase process. In the 1 st phase a temporary license is issued for a period of one year. In the 2nd phase a permanent license is issued

Phase License Timeline Issued for

NOC Testing 1 week 1 month

First Temporary 4 months 1 year

Second Permanent 6 months 5 years

Regulatory Scenario Continued…

• Develop a system to determine the quality of Medical Devices

• Procures, stores, distribute and monitor medical supplies to all government health institutions and private sector in Sri Lanka.

• Donation distribution from WHO, UNICEF, GAVI, and others

• Distribution of medical items directly to the 26 Regional Medical Supplies Divisions and 50 major hospitals/institutions administered by Central Government

• Responsible for all the procurement, maintenance and management activities related to medical equipment, in most of the government hospitals in the country

•Is a statutory Body empowered by the Act, to regulate use, transport, import, export and dispose of radioactive sources

•Application for authorization process is filed only after completion of registration to CDDA

•The entire process takes around two months.

Atomic Energy

Authority (AEA)

Biomedical Engineering

Services (BES)

National Drug Quality

Assurance Laboratory (NDQAL)

Medical Supplies Division (MSD)

Agenda

Current Status



Conclusion

Current Model

Opportunities for Philips Healthcare – Next 18 months

Customer EquipmentApprox.

value (USD)

Chinese Project 16 slice CT – 4, 1.5 T MRI – 2, Cathlab -1 3.5M USD

Israel Project Brilliance Big Bore - 8 5.2M USD

BES 3T MRI - 1 No. 1.5M USD

Navaloka Bi Plane Cathlab – 1 1 M USD

Epilepsy ProjectPET CT – 1, SPECT – 1, 3T MRI – 1, Angio System - 1

3.2M USD

Browns Multi Modality 1M USD

Durdans Cathlab - 1 600K USD

Lanka 64 slice CT - 1 800K USD

Hemas 16 slice CT – 2, 1.5 T MRI - 1 1.3M USD

Navy 128 slice CT – 1, 3T MRI – 1, DR - 1 2.1M USD

National Cathlab - 1 600K USD

Approx. IS business value

23M USD

Customer’s Feedback

Customer’s Voice

- GE and Siemens providing good after sales services compared to Philips

- Sri Lankan market bombarded with cheap products with same specifications

- Application engineers unable to explain use of advanced features in Philips products

- Then Why Philips? Durable and Efficient products lasting for more than 20 years

- Suggestions: - Reach remote areas with better facilities

like telecom ICUs- Train nurses to use advanced medical

devices- Conduct workshops and conferences- Make devices more user-friendly- Work a bit on prices Yes Maybe No

0123456789

Philips Local Pres-ence requirement?

Need of the hour: Quick support and short downtime

Need a trained team of

application specialists in Sri

Lanka

Insights from Dr. Nirmala Wejesinghe

GE and Siemens provide really good after sales services of MRI and CT machine

Out of order machine – Wasn’t getting service done

Problem with the local presence of Philips

Prices of Philips products are too high

Always have to call in India to Babu or John (Head of

Application Specialist Unit) for servicing

Suggestion: So many hospitals are opening up in Sri Lanka. Philips should pep into other healthcare equipment as well

Dr. Nirmala Wejesinghe

(Senior Consultant Radiologist)

Suggestion: Make the machine more customer friendly

Insights from Dr. Duminda Samarasinghe

GE machines have better controls and more user –friendly compared to Philips

Have been using Philips products since 2004 but not 100%

happyInstallers took 3 months to repair the machine

Software improvement is required – 3D

software needs to be there

Pricing has to be competitive – Justify Pricing

Dr. Duminda Samarasinghe

(Consultant Cardiologist)

In-house FeedbackV. P. Thirumalai

(Regional Manager – South India & Sri Lanka)

Krishan Wickramasinghe(Consultant – Sri Lanka)

Siby Jose (Customer Service – Sri

Lanka)

Hemantha Ekanayake (Manager Regulaotry

Affairs, Technomedics)(Distributor – Sri Lanka)

- Demand growth by 35-45% in 2013- Requirement of a dedicated team in Sri Lanka- Setting up a company would remove the big doubt from customer’s mind- Will help us gain government’s confidence- Technology dependence

- With 21 million people in Sri Lanka, not enough facilities by government and private sector- Post was situation - Demand Increasing - Demand is high in General, Provincial and District hospitals- New hospitals opening in other parts of Sri Lanka as well- Need for better infrastructure in Government hospitals- Need for cancer therapy equipment, Ventilators and Incubators- Total Healthcare Market = 70-75 M USD- Market Uncertainty – Demands will increase for the next 3 years but will gradually drop

- Customers have comforts dealing with the principle company rather than with distributors- Small Office is a good option- Initial investment in setting up an office in Sri Lanka would be huge- 1 or 2 local sales persons are required- Requirement for good service engineers- No warehouse requirement for Sri Lanka office

- Government procurements vary according to the funding availability and priorities change.- Significant increase in demand since 2009 -2011, and decline in government spending since 2012-13 in medical equipment. However, the private sector is steadily growing.- DemandsMOH and BME- US$ 20m; Provincial Directorates- US$ 10m; Grants/ Loan Projects- US$ 20m; Private sector- US$ 20m; Total- US$ 70m- Drawback - Philips has launched only a limited range of products here.- Major competition from Seimens, GE, Toshiba, Shimatzu, Drager

SWOT Analysis

Strengths- Growing healthcare scenario in Sri Lanka

- Low manpower cost

- Established distribution channel

- Unmet clinical need being satisfied by our existing product line

- Tax holidays (2011 tax reforms)

Weaknesses- Siemens operating since past 10 years with direct sales in Sri Lanka

- GE also has direct sales in Sri Lanka

- Time required to establish trust among customers

Opportunities- Increased government expenditure on healthcare

- With improved sales and market, Philips can establish a branch office ‘Philips – Sri Lanka’ along with Lighting and CL division

- E-health integration

Threats- Major competition from GE, Siemens, Toshiba, Mindray

- Threats from government’s attitude to promote local manufacturers

- Larger market potential can attract more competitors

- More prone to natural disasters like tsunami and earthquakes

Model-1(Earlier Model)

Distributors Customers

Business models

Distributors

Philips people from India and Sri

Lanka

Customers

Model-2(Current Model)

Small office of Philips in Sri Lanka


Model-3(Liaison Office)

Philips - Sri Lanka

(Healthcare; Lighting; CL)


Model-4(Branch Office)

Justification for Model 3 & 4

• To gain customer confidence by providing quick service and high uptime commitment

• To address fast growth in healthcare demand– Opening of several hospitals across the country– Government is pushing for further investment in

enhancing infrastructure

• To address query that Philips does not have local presence whereas competition has

• Future plan of lighting sector to open up local office

Predictability

Cons Pros

Direct Sales

Quick Customer Service

Trust

Market Uncertainity

Investment

Agenda

Current Status



Conclusion

Registration of a company – Step#1Board of Investment (BOI)

• Foreign Investments require approval under Board of Investment law

Type of Investment approval

Under Section-17- Grants special concessions (like Inland Revenue; Customs; Exchange Control; Import Control) to companies satisfying specific criteria

Under Section-16- Operate only under ‘normal laws’- No exemption or waiver to any law

Registration of a company

No. Procedure Time to Complete Associated Costs

1 Apply for approval name 2 days LKR 500

2The company Secretary signs a consent

1 day

There is no specific fee schedule company secretaries. The fees vary from firm to firm, and is generally based on a quarterly retainer

3Register at the Companies Registry

2 days

LKR 10000 as the registration fee for Form 1 and LKR 500+ for Forms 18 and 19 and the articles of association.

4Register with tax authorities to obtain a TIN

1 day no charge

Taxes

S. No. Tax Rate of Tax Time frame

1. Corporate Income Tax 35% of taxable income - 1 year (from 1st April to 31st March of succeeding year)

2. Nation Building Tax 3% - Every time an article is imported into Sri Lanka- Carries on the business of providing a service of any description

3. Value Added Tax (VAT) Normal rate of VAT = 12%VAT on Luxury goods = 20%

- Every time a good is imported into Sri Lanka

4. Business Turnover Tax - - Every quarter in respect of any business, if the turnover for that quarter is not less than SLR 25,000

5. Property Transfer Tax ranges between 4% and 100% for non-residents

-

Taxation (Possible Exemption)• According to the New Incentive Regime introduced with 2012 Budget, Philips can

acquire tax holidays by entering into one of the following categories:

S. No. Category Qualifying Criteria(Minimum

Investment – SLR Mn)

Tax Incentive

1. Medium Scale – New Enterprise(For Healthcare only)

Investment of 50 and above

Upto 6 years

2. Large Scale – New Enterprise(For Healthcare and Lighting division both)

300 – 500 6

500 – 700 7

700 - 1,000 8

1,000 - 1,500 9

1,500 – 2,500 10

Above 2,500 12

3. Strategic Development Project(For Healthcare, Lighting and CL division)

Any investment capable of altering the economic landscape of Sri Lanka

Full or partial exemptions (depending on the type and the level of investment) of the following taxes.(i) Value Added Tax (VAT); (ii) Income Tax; (iii) Economic Service Charge (ESC); (iv) Customs Duty; (v) Excise Duty; (vi) Nation Building Tax (NBT); (vii) Ports and Airports Development Levy (PAL); (viii) Taxes under the Finance Acts

Manpower

Proposal for 2014-15

Following is the minimum manpower requirement for a liaison office in Sri Lanka:

- 2 customer service (1 already present in Sri Lanka)- 2 Sales Person (1 already present in Sri Lanka) All preferably Sri Lakans- 1 Regulatory/Operations Manager- 1 Supply Chain Manager

Total Manpower Requirement: 6 people

Already Present

- Distributors- 1 sales person- 1 customer service person

Customer’s Take (On Present Situation)

Require for better and quick customer service and application engineers.

Rules in Sri Lanka

- Minimum age for recruitment is 18 years and the normal age of retirement is 55 years, however can be extended

- Difficult to retrench labour under the Termination of Employment Act of Sri Lanka

- Should be no discrimination between male and female workers in terms of remuneration and facilities

- A written contract of employment embodying terms and conditions of service including the designation or category of the employee, normal hours of work, rate of pay, period of training if any, probationary period, leave, holidays and superannuation contribution, has to be issued to every worker including trainees, and acknowledgement of receipt obtained by the employer

- On termination or resignation any certificates in the custody of the management should be returned to the worker at least within 30 days from the date of termination/resignation.

Cost Structure Revenue Streams

Key Partners Key Activities

Key Resources

Value Proposition Customer Relationship

Channels

Customer Segments

Business Model Canvas Sri Lanka – A Business Case12-Aug-2013

Iteration #1

Customer Service team

Precision Tech Services

Technomedics Dedicated Customer service team

Customer service/Sales team

Better Customer Service

Quick Procurement

Public Hospitals

Customer Service

Increased sales

Distributors

InvestmentLand on lease

TaxationManpower

InfrastructureTelecom

MarketingDistributionMarketing

Customer SupportCustomer Relationship

Partnership in Government Policies

Trust

Private Hospitals

Maintaining a small inventory

Marketing and Sales efforts

Sales and Marketing unit

In-patients/Out-patients

Teaching/Research Organizations

Direct Sales

Seminars/Expos/Conferences

Distribution channel

Trust

Improved up-time

Savings on Manpower

transportation

Cheap Manpower

Agenda

Current Status



Conclusion

Updated Sri Lanka Model

Work plan template – with traffic light indicator

Task Owner

Sep05-09

Sep12-16

Sep 19-23

Sep 26-30

Oct 03-07

Oct 10-14

Oct 17-21

Oct 24-28

Nov01-04

Nov 07-11

Nov 14-18

Market Overview Team

Segmentation Analysis

Team

Competition Analysis

Team

Portfolio GAP Analysis

Team

Relevance & Attractiveness of New Categories

Team

Risk & Mitigation Strategies

Team

Sources of Advantage

Team

Levers to seize avantage

Team

Build a Business Model for Sri Lanka

Team

Second Review

Final updat

e

BACKUP

Steps required to open a company in Sri Lanka

• Purchase of land by Non-citizen• Obtaining a Telecom Services• Obtaining an Electricity connection• Obtaining Water Supply connection• Filing Annual Return• Obtaining Visas

Purchase of Land by Non-Citizens

S. No. Sector Investmentrequirement

1. A project for the construction of not less than hundred residential housing units, each constructed on individual allotments of land not exceeding ten perches or a condominium property within the meaning of the apartment Ownership Law, No. 11 of 1973 comprising not less than hundred units for residential or non-residential accommodation.

-

2. Construction and operation of hospitals or hotels. US$ 10 Mn. 3. Infrastructure Development or any other development determined by the Minister of

Finance as being essential for the economic progress of Sri Lanka. US$ 50 Mn.

4. A project solely for the manufacture of non-traditional goods for export for the establishment of its manufacturing plant, office, storage facilities, dormitories for workers.

US$ 1 Mn.

5. Any condominium unit of a condominium property situated on or above the fourth floor of such condominium property, the ownership of which is transferred to a person who is not a citizen of Sri Lanka if the value of such unit is met by inward remittances of foreign currency. (This applies to any condominium property, BOI or otherwise)

-

• Can purchase land in Sri Lanka subject to paying Property Transfer Tax at 100% of the purchase price of such land

• Company approved by BOI, purchasing land under the following will be exempted from this payment provided the total cost of land is met by inward remittance of foreign currency

Obtaining a Telecom ServicesS. No. Procedures

1. Obtain an application from any Regional Telecom Office/Teleshop or download application from Sri Lanka Telecom corporate web site www.slt.lk

2. Submit completed application with a photocopy of NIC/Passport.For Business Usea. For Public Companies or the registered business with two or more owners, at least two directors should sign the application and the company seal to be embossed.b. Business Registration Certification / Certificate of incorporation.c. Form 20.d. If tax exempted, documentary proof.

3. Collect / Receive the invoice

4. Pay Installation Cost – at any Regional Telecom Office or Teleshop.

Telecom Companies

Websites

Lanka Bell www.lankabell.netSuntel www.suntel.lkDialog www.dialog.lkMobitel www.mobitel.lkHutch www.hutch.lkEtisalat www.etisalat.lkAirtel www.airtel.lk

Provide Landline facilities

Provide Mobile connection facilities

http://www.slt.lk/

Obtaining an Electricity connection

S. No. ProcedureTime to

Complete Associated Costs

1Submit application to Ceylon Electricity Board and await external site inspection

14 calendar days LKR 2,000.0

2Ceylon Electricity Board conducts site inspection and provides estimate to customer

37 calendar days no charge

3Request and receive Internal wiring inspection from Colombo Municipal Commission.

14 calendar days LKR 15,000.0

4

Customer signs supply contract with Ceylon Electricity Board, and Ceylon Electricity Board conducts external connection works, installs the meter and electricity starts flowing

67 calendar days LKR 3,882,737.6

Obtaining Water Supply connectionS. No. Procedure

1. Obtain an application from the relevant Area Engineer’s Office/Local Area Office or download the form from the web site(www.waterboard.lk).

2. Complete the application form provided by NWSDB andhand over to the nearest office with Gramasevaka certificate orassessment or Certificate of Conformity (COC) of the premises.

3. Obtain consent from the local authorities for damage to road(If there is damage to the road in installing the water connection,applicant should be required to pay a fee for this to the relevantRoad Authority).

4. On-site examination by NWSDB for clearance.

5. Pay the estimated cost for the connection to NWSDB.

6. Enter into a service agreement with the NWSDB.

7. The connection would be given after 3 working days from signingof the service agreement.

Filing Annual Return

S. No. Procedure

1. Obtain the relevant form from the Registrar General of Companies or download the same from their web site www.drec.gov.lk.a. Form 15 – Companies other than a Company Limited by Guaranteeb. Form 15A - Companies Limited by Guarantee

2. File the duly completed form within 30 working days from the date of Annual General Meeting/Resolution.

3. Pay a fee of Rs. 3,000 plus VAT of 12% to file the annual return to ROC.

Obtaining Visas

S. No. Procedure

1. Obtain an application form from Department of Immigration and Emigration, Sri Lanka Mission abroad or download an application from the website. (www.immigration.gov.lk)

2. Hand over Application to the relevant Department or Mission.

3. Documentation required: Recommendation of line Ministry or BOI for a foreign national who desires to invest monetary capital or to engage in business activities in Sri Lanka

4. Issued for: 1 year

Other Ministries – An OpportunityMedical Supplies Division (MSD)

- Main functions are estimating, indenting, procuring, storing, distributing and monitoring of medical supplies (including vaccines, Surgical items, Laboratory Items, Radioactive Items and Printed materials) to all government health institutions in Sri Lanka.

- In addition MSD responsible for supplying the private sector with all dangerous drugs and essential medical items which are not available in the open market.

- Procure total requirements of medical items mainly through State Pharmaceutical Corporation (SPC) which is the procurement agent for Ministry of Health.

- Receive and distribute donations from donor agencies such as WHO/UNICEF (including GAVI) and others.- Has 18 Bulk warehouses to receipt, store and issue these items- Responsible for the distribution of medical items directly to the 26 Regional Medical Supplies Divisions RMSD) and

50 major hospitals /institutions administered by Central Government- 26 RMSD are responsible for the supply of medical items to small hospitals under the purview of Provincial Councils

National Drug Quality Assurance Laboratory (NDQAL)

Develop a system to determine the quality of Medical Devices

Biomedical Engineering Services (BES)

- Responsible for all the procurement, maintenance and management activities related to medical equipment, in most of the government hospitals in the country

- Provincial councils also procure equipment but their maintenance capabilities are not in par with the required level- Updates: Medical Equipment management improvement(as of March 2008), Japanese collaboration

Total asset maintained worth Rs 12,000 million1 technician per 750 hospital beds50% of medical equipment in government hospitals not in working condition