Our highly skilled employees collaborate together as a team
to deliver customized services for optimal client satisfaction.
VISION
Our vision is to be Suriname’s preferred bank
by providing high quality financial services.
CORE VALUES
Hakrinbank has defined four core values that provide guidance in
realising its strategic objectives, the activities that support these
and the translation to its organisational structure, systems and
values, norms and behaviours within the organisation, namely:
- Reliability
- Service and customer focus
- Teamwork
- Quality
These core values are anchored in Hakrinbank’s organisational
structure and culture and form the guiding principles for all of its
activities. They clearly delineate what the bank stands for and form
a benchmark for all that the bank does.
In this annual report we focus on our country’s small and medium enter-prise (SME) sector by highlighting a number of our SME clients. From an economic perspective the SME is of great importance to Suriname taking into account that by far the most enterprises belong to this segment.As a source of employment and productivity, the SME is of special importance and it is here where most of the technical and organizational innovations also take place.The potential of the SME sector is often underrated but fortunately this perception is changing.The Hakrinbank is a committed partner of the SME sector and has supported companies throughout their evolution: from startup to growth. And this will not change in the future!
‘A hobby
that
became
much
more’
This is how Ewout
Eriks describes the
company that he
founded with his wife
Amira Mendienta.
As the only butterfly
cultivator in the
Caribbean, Neo
Tropical Insects has
grown to become a
beautiful and unique
Surinamese company
that exports
butter-flies and butterfly
poppies to Europe
and North America.
The company also
offers tours to
tourists and other
visitors.
CONTENTS
Mission, Vision, Core Values 3
Organisation Chart 4
Division of Functions 5
Five years of consolidated statements 6
Report of the Supervisory Board 8
Report of the Executive Board
Introduction 12
Economic developments in 2008 Business of the bank
Nationale Trust- en Financierings Maatschappij N.V. Financial developments of the bank
Auditor’s Report
Financial Statements 2008 (as of 31 December 2008)
Consolidated balance before earnings distribution Consolidated balance after earnings distribution Consolidated income statement
Consolidated cash flow statement
Company balance before earnings distribution Company balance after earnings distribution Consolidated income statement
Notes to the financial statements
Additional Information
Resumes and details regarding ancillary positions of members of the Supervisory Board and Executive Board of Hakrinbank Addresses
Chief Executive Officer
Chief Financial Officer Chief Operating Officer
Deputy Officer Operations Administration & Management Information (Accounting) Treasury & Securities Human Resources &
General Affairs
Insurance
Credit Administration
Foreign Transfers
Compliance & Legal
Nationale Trust- & Financierings Mij. N.V. Information & Communication Technology Domestic Cash Maintenance & Technical Support Affiliates (Credits) Affiliates (Operations) Internal Audit Credits Risk Management Administration & Management Information (Financial Controlling)
Marketing & Public Relations
Mr. M.M. Tjon A Ten Human Resources & General Affairs Mr. M. Naarendorp,Head
Drs. I. Lo Fo Sang Insurance R. Tjon A Kon,Head
Credit Administration Drs. I. Loenersloot,Head
Compliance & Legal Mr. M. Schaap Maintenance & Technical
Support R. Tjokro,Head
Foreign Transfers L. Karg,Interim Head
Information & Communication Technology R. Tjong Akiet,Head
Ing. R. Mahabier A. Semoedi
Domestic M.Tjon,Head
Cash
M. van ‘t Kruys, B.Ec.,Head
Affiliates Branchmanagers - Tourtonne Drs. V. Ramtahalsing - Nieuwe Haven Drs. N. Elshot-Chelius - Latour R. Wimpel Drs. A. Lau - Flora Drs. R. Mohamatsaid Drs. J.D. Bousaid Credits Drs. S. Jadoenathmisier,Coördinator Account Managers: C. Halfhide-Chou Drs. S. Kisoensing-Jhauw Drs. T. Gonesh Ir. P. Quintius E. Frangie M.Sc. R. Soedamah, B.Ec. Nationale Trust- & Financierings Mij. N.V.
H. Vijzelman,Head
Drs. R. Sitaram,Deputy Head
G. Jong M.Sc. Internal Audit B. Jewbali,Head
Drs. R. van Trikt Marketing & Public Relations
Drs. N. Elliot M.Sc. Affiliates Branchmanagers
- Nickerie R. Mangala,Head
A. Anandbahadoer,Deputy Head
- Tamanredjo S. Resomardono
Drs. G. M. Raghoenathsingh MBA Treasury & Securities Drs. P. Tjon Kiem Sang,Head
Drs. R. Amirkhan Administration & Management
R. Liesdek,Accounting
Drs. R. Sheorajpanday,Fin. controlling
Risk Management R. Vanenburg B.Ec.
SUPERVISORY BOARD
Mr. A.K.R. Shyamnarain - President
Drs. H.B. Abrahams - Vice President
Ir. R.A. Mac Donald G. Lie Sem-Nawikromo H.R. Ramdhani Drs. M.M. Sandvliet M.Sc. Drs. J.J.F. Tjang-A-Sjin
EXECUTIVE BOARD
Drs. J.D. Bousaid - Chief Executive Officer
Mr. M.M Tjon A Ten - Chief Operating Officer
Drs. G.M. Raghoenathsingh MBA - Chief Financial Officer
DEPUTY OFFICER
H.S.K. Liu Hung Chung - Operations
FIVE YEARS OF KEY CONSOLIDATED FIGURES
(in thousands of SRD)2008 2007 2006 2005 2004 Balance sheet
Cash and cash equivalents 151,702.4 120,230.2 104,159.4 97,240.7 104,589.0
Due from Clients 544,400.8 431,991.8 306,449.0 229,730.0 161,942.5
Other assets 276,508.7 243,530.7 195,854.6 144,708.6 133,074.3 Total assets 972,611.9 795,752.7 606,463.0 471,679.3 399,605.8 Savings 435,833.9 328,758.9 238,981.7 185,265.1 121,691.3 Other funds 482,307.0 423,688.4 334,243.6 265,183.5 262,371.4 Shareholders’ equity 54,471.0 43,305.4 33,237.7 21,230.7 15,543.1 Total Liabilities 972,611.9 795,752.7 606,463.0 471,679.3 399,605.8 Income Statement Operating income 63,255.0 55,123.8 49,236.5 36,659.5 27,500.6 Operating expenses 34,841.5 29,983.5 27,848.8 21,690.5 17,405.2
Provision for credit risks 2,107.2 1,242.6 1,439.3 1,725.9 1,515.9
Earnings before tax 26,306.3 23,897.7 19,948.4 13,243.1 8,579.5
Taxes 9,470.3 8,603.2 7,181.4 4,767.5 3,088.5
Net Income 16,836.0 15,294.5 12,767.0 8,475.6 5,491.0
Cash Dividend 5,588.4 5,122.7 4,657.0 2,731.8 1,862.8
Ratios (in %)
Efficiency ratio 55 54 56 59 63
Return on average equity 34.4 40.0 46.9 46.1 39.9
Return on average assets 1.90 2.18 2.37 1.95 1.69
Capital ratio 5.60 5.44 5.48 4.50 3.89
BIS ratio 11.49 10.56 11.31 10.01 10.19
Stock information *)
Number of outstanding shares 465,696 465,696 465,696 465,696 465,696
Net earnings per share 36.15 32.84 27.41 18.20 11.79
Dividend per share 12.00 11.00 10.00 6.07 4.00
Dividend (% of par) 8,000.00 7,333.33 6,666.67 3,910.67 2,666.68
Payout ratio (%) 33.19 33.49 36.48 32.23 33.92
Book value equity 116.97 92.99 71.37 45.59 33.38
Market price per share 174.00 150.00 136.00 124.00 106.00
Market capitalisation (x SRD 1,000) 81,031 69,854 63,335 57,746 49,364
Number of employees 262 252 254 247 238
Number of branches 7 7 7 7 7
YOUR
SOLUTIONS
“Let your challenges be
our solutions.”
Ruben Kort
and
Raoul Brahim
offer various tailor-made
ICT solutions.Among other services their company offers its
clients strategic advice and programs to streamline their
business processes in the area of ICT.
To the shareholders In general
It is our pleasure to present our activities for the book year 2008, in which the activities of the Audit Committee and the Remuneration and Nomination Committee will also be discussed. We have also included our recommendation with regards to the financial statements for the book year and the proposed distribution of earnings.
Activities of the Supervisory Board
The Supervisory Board held eleven ordinary meetings and fifteen extraordinary meetings during 2008. Ordinary meetings are held monthly with the Executive Board, while extraordinary meetings depend on the topics to be discussed and are normal-ly attended onnormal-ly by members of the Supervisory Board. Our supervision focused primarily on the company’s results and strategy, and included regular discussions of results achieved to date as presented by the Executive Board, and approval of the 2009 Policy Memorandum, together with the accompanying Operational and Investment Budget for 2009. Other agenda items included corporate governance, risk management and a number of other items. Some of these are discussed in greater detail below.
Corporate Governance
The company continuously strives to inform its share-holders and other stakeshare-holders on relevant develop-ments regarding its activities. Publication in August 2008 of the midyear figures as audited by an external accountant, and the timely distribution to share-holders of notes of the annual General Shareshare-holders’ Meeting, are perfectly in line with this objective. The corporate governance code of the company is intended to act as an instrument for responsible management. Transparency, integrity and trust play an important part in achieving this. It is therefore necessary to regularly evaluate this code and modify accordingly in the case of changes to the bank’s operating environment. In this respect the Board has initiated an evaluation programme in which the current corporate governance code will also be subject to an audit by an external expert. In doing so the Board wishes to gain insight into the extent by which rules and procedures, as laid out in the bank’s
Corporate Governance Codes, are still in tandem with actual international best practices - and hence indicate where modifications may be necessary. It is our inten-tion to have such audits of the current corporate governance code carried out on a regular basis. In so far it has not been discussed elsewhere in this report, the activities of the Supervisory Board are in compliance with the policies as laid out in the Corporate Governance Code of the company.
Activities relating to the Executive Board
With the formal appointment of drs. G.M. Raghoe-nathsingh MBA as Financial Director (Chief Financial Officer) on 1 July 2008, the Executive Board has now become complete. The Supervisory Board wishes Mr Raghoenathsingh the best of luck in carrying out his tasks and reiterates its full support in his executi-on of the Executive Board’s strategies.
The Supervisory Board has again closely followed the international economic developments so as to, when necessary, be able to discuss with the Executive Board strategies to prevent or limit negative effects on the bank’s operations. The Supervisory Board has in collaboration with the Executive Board decided to intensify discussions that are related to these develop-ments.
Activities of the Audit Committee
The Audit Committee has focussed in this book year on financial developments within the bank, as laid out in the Operational and Investment Budget 2008, the monthly realized figures as received by the Executive Board, the reports from the Administration & Management Information (AMI) department, and the internal and external accountant. The Committee has made suggestions in the areas of cost containment and efficiency improvements that have been adopted by a multi-disciplinary working group within the bank. In light of the optimisation of the risk manage-ment of that departmanage-ment, the Committee has, in collaboration with an external accountant, carefully scrutinized policies and procedures of the depart-ment of Foreign Transfers. This has resulted in proposals aimed at controlling specific risks. The Committee has already reported its activities and findings during the ordinary meetings of the Supervisory Board.
Activities of the Remuneration and Nomination Committee
The Remuneration and Nomination Committee focused in 2008 on the incorporation of the newly appointed CFO, drs. G.M. Raghoenathsingh MBA, in the compensation structure of the Executive Board. Furthermore the Committee prepared proposals for the Board concerning the adjustment and modi-fication of salaries and other provisions for the Executive Board in 2008. Against this backdrop the Committee, with the support of an actuarial firm, also focussed its attention on the preparation of a pension fund for the Executive Board and will be tasked with implementing pension regulations for the Board. In addition the committee has continued with the further preparation of a performance management system for the Executive Board The importance of a well functioning system still requires the necessary preparation and as a result the Committee has not yet been able to make a final proposal to the Supervisory Board. The Committee has always reported on its activities in the meetings of the Supervisory Board.
Independence and composition of the Supervisory Board
The Supervisory Board believes that all of its members comply with the requirements for independence as referred to in the Hakrinbank N.V. corporate governance code. Information on the individual Board members and their ancillary positions can be found elsewhere in this report. Drs. J.J.F. Tjang-A-Sjin steps down at his own request as member. The Supervisory Board thanks him for his contributions to the Board during his time as member; he has proposed to the General Share-holders’ Meeting the appointment of drs.A.K. Moensi-Sokowikromo to fill up the vacancy. There were no further changes in the Supervisory Board during 2008, and the Board continues to have seven members. Ir. R.A. Mac Donald and Mr. A.K.R. Shyamnarain are the next supervisory board members scheduled to resign by rotation. Both have confirmed that they wish to be considered for reappointment. The Supervisory Board recommends the appointment of drs. A.K. Moensi-Sokowikromo and the reappoint-ment of ir. R.A. Mac Donald and Mr. A.K.R. Shyam-narain.
Financial statements and proposed distribution of earnings
The Supervisory Board is pleased to present the bank’s financial statements for the 2008 book year.
ANN BIO CARE SKIN
CLINIC
In a luxurious environment Michelle
Bab-Lo Fo Sang offers her clients high-tech
care in the area of skin improvement and
figure corrections.Ann Bio Skin care
differentiates itself through the use of
modern technology and devices.
These financial statements comprise the company balance sheet as per 31 December, the company income statement, the consolidated balance sheet as per 31 December, the consolidated income statement, the consolidated cash flow statement and the accom-panying notes. The financial statements have been audited by external auditors, as required by the bank’s Articles of Incorporation. This report includes the auditors’ approval of the financial statements. The operating result is essentially the outcome of the realization of the policy objectives defined in the 2008 Policy Memorandum which were implemented by the Executive Board. This year too, the operating result was boosted to some degree by the continuing positive developments in Suriname’s macro-economic environment.
The environment in 2008 has not been left unmarked from the less than conducive international develop-ments that originally manifested itself as an inter-national credit crisis, but later grew out to become a full fledged international economic crisis that finds its effects in the real economy. The ramifications of the international economic crisis are also noticeable in Suriname, despite the continued forecast of real positive growth. The sharp decline in the inter-national prices of amongst others crude oil and aluminium has had a negative effect on state income, the balance of payments and the economic growth. The Supervisory Board is confident that through the adoption of sound policies the government and other parties in the socioeconomic arena will be able to contain the negative effects of the international economic crisis.
Earnings before tax amounted to SRD 26.31 million, with a net earnings after tax of SRD 16.84 million. We propose distributing SRD 5.59 million of this for dividend pay-out to the shareholders and transferring SRD 11.25 million to retained earnings. This means a dividend of SRD 12 per share with SRD 0.15 par value. An amount of SRD 4.00 per share was previously distributed as an interim dividend in August 2008, which means a final dividend of SRD 8.00 per share with SRD 0.15 par value. The dividend to be distributed accounts for 33.2% of the net earnings and corresponds to a dividend percentage of 8,000%.
We recommend that you, our shareholders, adopt these financial statements and thus ratify the Executive Board’s management and the Supervisory Board’s supervision of the bank in the reporting year. We also recommend that you approve the proposed distribution of the earnings for the year.
Our gratitude for the good results
The Supervisory Board would like to express its gratitude for the way in which the Executive Board represented the company’s interests during the reporting year and specifically its efforts and the strategic choices that produced the good operating results for the year. We would also like to thank the management and other employees for the way in which they have individually contributed to a success-ful year for the bank and wish to express our recognition of the vital role that they have played in achieving the objectives set. We would also like to thank our clients and all the other parties who have placed their trust and confidence in Hakrinbank N.V. throughout the year and provided such a strong foundation for a mutually beneficial relationship. Last but not least, we would like to thank you, our share-holders, for your support of our work.
This inspires us as an organisation to continue to strive for excellence in all that we do.
Paramaribo, 14 April 2009
Supervisory Board
Mr. A.K.R. Shyamnarain - Chairman
Drs. H.B. Abrahams - Deputy Chairman
G. Lie Sem-Nawikromo Ir. R.A. Mac Donald H.R. Ramdhani
Drs. M.M. Sandvliet M.Sc. Drs. J.J.F. Tjang-A-Sjin
ZUS & ZO
Fusion:
every-thing
under
the sun.
Zus & Zo is exploited by Brian van ‘t Kruys and Daphne Bruyne.
Next to being a bistro with international meals, a souvenir shop,
a ticketing office for tours to the interior and a guesthouse, they
also frequently organize events such as exhibitions, film and
discussion evenings, and jam sessions.
REPORT OF THE EXECUTIVE BOARD
To our shareholders
We herewith present you with our annual report for the book year 2008. It is with great pleasure that we can report that our bank has again been able to realize satisfactory results. These are the result of the strong performance of the Surinamese economy and successful execution of the bank’s strategy despite a backdrop of increased turbulence on the international financial and other markets, and competition within the Surinamese financial sector.
Macroeconomic indicators showed a positive picture in 2008 that was duly translated into increased consumer and manufacturer confidence. In real terms the economy grew by nearly 7% and again there was a surplus in the government’s budget and balance of payments. Our bank has been able to capitalize on these positive economic developments.
The most important objectives were to achieve sustainable growth, increase earnings capacity, optimize the composition of the balance sheet, improve efficiency and strengthen risk management as well as customer relations management. In addition our aim was to increase employee satisfaction and our social corporate citizenship. Tangible results were realized in a number of areas. Despite the fact that satisfactory results were booked, the financial objectives were not entirely realized as a result of one-off setbacks.
Total consolidated assets increased by 22.2% to SRD 972.6 million, in line with our projections. The market share of the Hakrinbank as measured by its total assets grew by 1.5 percentage points to nearly 25%. Our most important assets, lending to corporates and consumers increased by 26% to SRD 544.4 million, somewhat higher than budgeted. The quality of the credit portfolio stayed at its previous level; the non-performing ratio was a mere 1.72%.
Income before tax grew by 10.1% to SRD 26.3 million; this is lower than projected. This was the result of an unforeseen depreciation in value of our international investment portfolio and the occurrence of other one-off costs. Of the income after tax of SRD 16.8 million,
SRD 5.6 million will be distributed as dividend to our shareholders: a pay-out ratio of 33.2%.
The performance ratios of the bank declined slightly however they remained at a satisfactory level. The return on assets was 1.9% and the return on average equity 34.4%. The efficiency ratio decreased by 1 percentage point to 55%. Our objective remains to improve the performance ratios of the bank through growth and efficiency improvements.
In June of 2008 we reopened our renovated and expanded branch at the Nieuwe Havencomplex. It is a modern “Banking Centre”, where clients can expect an expedited and efficient handling of their banking needs. With this investment of nearly USD 0.5 million we aim to capitalize on the current renovation and expansion of the Nieuwe Haven in Paramaribo that is expected to lead to an increase in business activity. We plan to also open up a new branch mid 2009 in the new departure and arrivals hall of the J.A. Pengel international airport. This branch is also intended to cater to our clients in the wider surrounding area of the airport.
In the last quarter of the reporting year we introduced our Hakrinbank MasterCard credit cards. With this product our clients can carry out transactions in all countries where MasterCard is accepted.
Our subsidiary, the Nationale Trust- en Financierings Maatschappij N.V., has booked satisfactory results.All production objectives were comfortably reached. The balance grew by 33% to SRD 146 million, especially thanks to the increase in lending. Revenues increased by 14%, however income decreased by 2% because of an increase in costs.
The share price of “Hakrinbank N.V.” rose on the Surinamese Stock Exchange by 16% to SRD 174 at 2008 year end. Dividend in the book year 2008 was SRD 12 per share of par value SRD 0.15 of which SRD 4 was already distributed in September 2008 as an interim dividend. Expressed as a percentage of the par value of one share (SRD 0.15) the dividend comes down to 8,000%. This represents an attractive return
for our shareholders and a favourable price/earnings ratio.
In the remainder of this annual report we will present in more detail the economic developments of 2008 that are relevant to our bank’s performance. This report is more detailed than is customary in the banking sector because we decided that the limited
availability of, and access to, up-to-date statistical information for large parts of the society justified devoting extra attention to these aspects in our annual report. We subsequently discuss in this report various developments within Hakrinbank and Nationale Trust- en Financierings Maatschappij, as well as the bank’s financial development and the proposed distribution of earnings.
From left to right: drs. G. Raghoenathsingh, Chief Financial Officer, mr. M. Tjon A Ten, Chief Operating Officer, drs. J. Bousaid, Chief Executive Officer en H. Liu Hung Chung, Deputy Officer Operations.
HEDI INFRA N.V.
Economic Developments in 2008
2008 will be recognized in the history books as the year in which the international financial crisis erupted in all its fury. It marked the beginning of a worldwide economic recession that had all the ingredients to make its effects deep and fundamentally game changing. Ever more often parallels are drawn between this recession and the Great Depression of the 30’s of the last century.
The year 2008 shall also be etched in our memory as the year in which democrat Barack Obama was elected by a large majority as the first black president of the United Stated of America. He is faced with an enormous task of getting the derailed American economy back on track and repairing the tarnished image of the United States internationally.
The direct effects of the international financial crisis on our country are as of yet limited. The global economic crisis that followed will however leave its marks on the Surinamese economy especially during 2009 and 2010. Our country has however in the past years been able to build financial and other buffers that should enable it to weather the crisis relatively unscathed.
The macroeconomic performance of Suriname remained in 2008 – as in previous years - robust, for which compliments were given by the Article IV Consultation Mission of the International Monetary Fund (IMF) and the rating agency “Standard & Poor’s”.
According to estimates by the IMF, real economic growth was approximately 6.8%, somewhat higher than in 2007. This growth was the result of an increase in demand on the world markets for our most important export goods during most of the year. Consumer spending also rose, as well as the volume of investments.
A surplus was realized on the current account of the balance of payments that added to the increase in the monetary reserve. The public finances closed (on a cash basis) with a surplus, while the national debt showed only a slight increase.
On a less positive note, the abovementioned develop-ments also led to the acceleration of the inflation rate as a result of the increased price of oil and staple
Hedi Infra N.V. constructs electric and
water distribution systems.
In the daily operations the company’s
belief in working with
environmentally-friendly, sustainable and innovative materials
is clearly manifested.
foods, the appreciation of the Euro, and the stagnant development of the country’s productivity. Since October inflation has showed a decrease mainly due to dropping import prices as a result of the worldwide economic recession and the appreciation of the US dollar - to which our currency is pegged - vis-à-vis the Euro.
In this chapter we aim to discuss more in detail the economic developments that have taken place in our country during the 2008 book year.
Government Finances
As can be seen from the table below, the actual figures of government finances were significantly better on a cash basis than initially budgeted by the National Assembly in 2008.
Thanks primarily to higher than forecast direct and indirect tax revenues, together with lower than budgeted capital expenditures, the country recorded a surplus.
Income on the current account totalled SRD 2,111.1 million, which was SRD 345.6 million, or 20%, higher than budgeted.
Realised Budgeted Realised
2007 2008 2008 Direct taxes 737,6 672,2 835,5 Indirect taxes 731,5 672,0 878,7 Non-tax revenues 359,1 421,3 396,9 Total income 1,828,2 1,765,5 2,111,1
Expenditures on the current account totalled SRD 1,742.8 million, which was SRD 80.7 million, or 5%, above budgetary forecasts.
Actual current expenditure was as follows (in millions of SRD):
Realised Budgeted Realised
2007 2008 2008
Wages and salaries 692.4 754.8 758.5
Goods and services 411.0 435.2 435.8
Subsidies/
Government grants 458.9 397.3 487.7
Interest on state debt 94.5 74.8 60.8
Total current
expenditure 1,656.8 1,662.1 1,742.8
Wages and salaries in 2008 rose by around 8%, in line with budgetary forecasts. The increase in current public expenditures was furthermore the result of a rise in subsidies and government grants by SRD 487.7 million. These expenditures formed more than a quarter of all current account expenditures, which can be regarded as high.
The surplus on the current account totalled SRD 368.3 million or SRD 264.9 million higher than budgeted. Because of the limited execution capacity available for the implementation of projects, only a limited number of investment projects were realized. As a result capital expenditures were SRD 278.4 million, significantly lower than budgeted.
The developments presented above resulted in a total budget surplus of SRD 145.9 million, or approxi-mately 2% of the Gross Domestic Product (GDP), instead of the budgeted deficit of SRD 493.4 million. Despite the positive figures realised above, govern-ment finances remained structurally weak. No signifi-cant measures were taken to improve this situation
Budget for 2008 financial year (in millions of SRD)
Description Expenditures Income Difference As % of GDP
Current account 1,662.1 1,720.5 58.4 0.8
Capital account 551.8 0.0 -551.8 -7.4
Total current and capital account 2,213.9 1,720.5 -493.4 -6.6
Another challenge to the government finances is posed by the possible negative ramifications of the worldwide recession. Constant monitoring and a proactive stance are therefore essential to balance the government’s financial affairs as well as the economy.
National Debt
Domestic as well as internationally placed govern-ment debt has increased in 2008. It should be noted that the definition of state debt used in the State Debt Act differs from the definition widely used internatio-nally. According to the Surinamese definition, state debt includes undrawn amounts under committed loan facilities and also State guarantees that have not been called, whereas the international markets do not normally include these items.
This in turn leads to an overestimation of the real debt. The extent and nature of Suriname’s domestic and foreign state debt are shown below.
The domestic debt increased by SRD 48.2 million or 8.3% to SRD 628 million. By entering into a number of loan agreements resulting from the financing of large infrastructural projects, future debt repayments have increased in SRD as well as in foreign currencies. This explains the strong increase of the line item “State guarantees and committed loans”. The interna-tionally placed debt increased by USD 16.7 million or 5.6% to USD 315.4 million. This rise is predominant-ly the result of arrears on the bilateral loans from Brazil and the United States.
The Surinamese government is in negotiations with these befriended nations in order to find a solution to this debt situation. Despite the increase of the national debt, Suriname’s debt ratio (debt as a percentage of GDP) of 25% is still on the low side. This ratio has consistently shown a downward trend in recent years.
Year end
Lender Type 2008*) 2007 2006
Domestic debt by lender type (x SRD 1000)
Debt to Central Bank of Suriname 397,272 302,598 326,007
Debt to Banks 85,649 151,204 206,395
Debt to Private Clients 145,112 126,007 118,438
Total domestic debt 628,033 579,809 650,840
State guarantees 25,628 21,931 19,547
Committed Loans 260,860 31,037 50,646
Total domestic debt including state guarantees 914,521 632,778 721,034
and committed loans
Foreign debt by lender type (x USD 1000)
Multilateral lenders 72,936 70,437 63,083
Bilateral lenders 242,456 228,303 322,950
Commercial lenders 0 0 5,077
Total foreign debt 315,392 298,740 391,110
State Guarantees 18,789 19,873 0
Committed Loans 309,800 120,807 107,104
Total foreign debt including State Guarantees
and committed Loans 643,981 439,420 498,213
*) preliminary figures
Monetary Developments
The Central Bank of Suriname’s monetary policy remained unchanged in 2008. The mandatory cash reserve requirements for SRD as well as foreign currencies remained unchanged. On January 2 2008 the interest rate on Treasury Bills of the Republic of Suriname were further decreased from 8% to 7.5% per annum while the Central Bank discount rate fell from 10% to 9.5% per annum.
The expanded monetary aggregate, M2, an important indicator for monetary policy, rose in the 2008 book year by SRD 209.5 million or 15.4% to SRD 1,569.8 million. This increase, that was less than in 2007, was predominantly due to an increase in bank lending to the private sector and less by liquidity inflows from abroad. It is also noteworthy to mention that the fiscal behaviour of the government resulted in a substantial liquidity destruction of SRD 228.7 million.
Liquidity growth has led to a small increase in the liquidity ratio (domestic monetary aggregate (M2) as % of GDP), to an estimated 21%. This variable currently hovers under the long-term average of 25%. It should, however, be noted that payments
and bank balances in foreign currencies do not form part of M2. Aforementioned balances rose by SRD 138.9 million (as converted) or 8.4% to SRD 1,796 million – this is 114.4% of M2. The room for liquidity as a consequence needs to be closely monitored in order to reign in inflation.
Despite the fact that cash reserve requirements remain unchanged, interest rates have shown a further downward trend. This is in part due to the large liquid position of the banking system and the intensified competition. The average interest rate spreads of commercial banks declined as a result by 1 percentage point to 5.6%. In 2005 this was still at 9.6%. With the USD loans interest rate margins fell by 0.1 percentage points to 6.5% and with Euro loans margins fell by 0.3 percentage points.
Foreign Exchange
The official foreign exchange rate with the US dollar, our most important foreign trade currency, has seen negligible fluctuations in 2008. The following chart shows the monthly movements in the buy and sell quotes for the US dollar in 2008.
The following table shows the changes in the money supply in the Surinamese economy (M2, in millions of SRD):
2008*) 2007*) 2006
1. Liquidity created for the state -228.7 -114.3 -31.7
2. Lending to the private sector 244.5 154.1 58.8
3. Other liquidity created 16.6 -228.5 -89.2
Total domestic liquidity created 32.4 -188.7 -62.1
4. Liquidity from abroad 177.1 466.8 263.9
Total 1 to 4 209.5 278.1 201.8
Liquidity ratio (M2 : Nominal GNP market prices) 20.91) 20.4 18.9
*) Preliminary figures 1) Own estimates
USD:SRD buy and sell quotes 2008
The situation in 2008 with respect to the foreign exchange market is almost the same as it was in 2007. At that time there was upward pressure on the exchange rate for the USD. This pressure was apparently the result of a shortage in supply that extended to the months in which there was normally an increased supply (June till August and December). The increased demand can be in part allocated to speculators and those looking for arbitrage opportu-nities in the foreign exchange market. Non banking institutes offered foreign currency at a number of basis points above the maximum that the Central Bank of Suriname has laid down. The commercial banks, obliged to comply to these ceilings, lost competitive terrain as a result. The Central Bank of Suriname has by means of foreign currency interven-tions tried to relieve the upward pressure on the USD, however these have had insufficient effect.
The EUR:USD exchange rate displayed strong volatility in 2008, in contrast to the upward trend shown in 2007. This volatility stimulated trading in these currencies in order to earnings from volatility swings. Given that the SRD is linked to the USD and consequently floats against the Euro, exchange rates movements between the SRD and the Euro are directly linked to the EUR:USD movements on the international foreign exchange markets. In June the free market Euro exchange rate reached an all time
high of approximately SRD 4.50. In October this rate dropped to a low of SRD 3.63 before regaining some of its value to end up at SRD 4.00 year end. The Euro sell rate of the Central Bank dropped from SRD 4.13 as of year end 2007 to SRD 3.81 at the end of 2008.
Balance of Payments
An average increase of prices of our most important exports namely crude oil, gold and to a lesser extent alumina resulted in a rise in export value by 28.2% to USD 1,689.2 million. Thanks to the increased trade and production and the increase in consumer demand, imports also increased by USD 412.5 million or 36.7% to USD 1,537.6 million. Because of imports outweighing our exports, the surplus on the balance of payments accounts decreased by USD 40 million to USD 151.6 million.
There was a larger deficit on the services account as a result of increased expenditures. The primary balance again showed a surplus that was in part due to the increased interest rate income from bank investments in the international money and capital markets, and the decreased interest rate payments to non citizens. Due to the abovementioned developments the surplus on the current account decreased by USD 88.6 mil-lion to USD 124.6 milmil-lion. The movements on the various sub-accounts that make up the balance of Buy Sell 2.758 2.800 2.758 2.800 2.757 2.800 2.757 2.800 2.758 2.800 2.758 2.800 2.758 2.800 2.761 2.800 2.754 2.801 2.753 2.800 2.758 2.800 2.756 2.800 2.70 2.72 2.74 2.76 2.78 2.80 2.82 dec nov oct sept aug july june may apr mar feb jan
Balance of payments on cash basis (in millions of US dollars)
2008*) 2007*) 2006
Goods 151.6 192.1 232.3
Services -132.5 -62.0 -34.9
Primary Incomes 18.1 5.7 -51.6
Income Transfers 87.4 77.4 35.9
Balance current accounts 124.6 213.2 181.7
Capital account -33.2 -186.4 -159.6
Items still to be classified1) -47.0 131.3 66.9
Balance non-monetary 44.4 158.1 89.0
sectors *) preliminary figures
1) Movements in residents’ foreign currency accounts. Source: Central Bank of Suriname
Development of the monetary reserve (in millions of USD)
payments resulted in the balance of the non-monetary sectors diminishing to USD 44.4 million, substantially lower than in 2007.
The worldwide economic recession has since the fourth quarter of 2008 led to a substantial drop in world commodity prices especially of crude oil and alumina. The overall revenues from these important commodities shall as a result drop and it is to be expected that this will also affect our balance of pay-ments for 2009.
Monetary reserve
Due to the surplus in the balance of payments, net foreign assets rose in 2008 by USD 65.6 million or 15% to USD 501.5 million. This growth is however less than in 2007 due to the smaller surplus. This reserve translates into almost 4 months import coverage of goods and services and lies somewhat above the internationally accepted standard of at least 3 months.
Year-end
Description 2008*) 2007*) 2006
1. Monetary authorities
a. Gold reserves 42.3 34.8 23.0
b. IMF special drawing rights 0.6 0.9 1.3
c. IMF reserve position 9.5 9.7 9.2
d. Foreign exchange receivables 624.7 396.0 237.8
e. Foreign exchange owed to residents -200.9 -40.1 -28.8
f. Secured foreign exchange obligations -0.6 -0.6 -0.6
Total 1 475.6 400.7 241.9
2. Currency banks
a. Foreign exchange receivables 379.8 409.0 303.5
b. Foreign exchange owed to residents -319.2 -339.9 -253.7
c. Foreign exchange owed to non-residents -28.4 -27.7 -24.3
Total 2 32.2 41.4 25.5
Total1 +2 507.8 442.1 267.4
3. Amounts owed in SRD to non-residents -6.3 -6.2 -6.2
Net foreign exchange assets 501.5 435.9 261.2
*) preliminary figures Source: Central Bank of Suriname
The expected deterioration of the balance of pay-ments in 2009 shall also have its effect on the monetary reserve. A continued build up of this reserve is in our view necessary in order to protect the value of the Surinamese dollar. In addition, in view of the high
On the Surinamese Stock Exchange the effective turn-over dropped by 90% to SRD 192,000 in comparison with the year before. The number of traded shares also declined. In the case of 2 stocks there were no transactions at all. The most actively traded shares were those of the Hakrinbank, Assuria and Torarica, which accounted for 26.0%, 23.3% and 15.6% respec-tively of the total trading volume in SRD.
The number of listings remained unchanged. The most active brokers were the DSB bank and Hakrinbank which accounted for 37.7% and 37.5% of the total trading volume in SRD terms.
The stock index reflecting the developments in (weighted) market capitalisation of all listed stocks, rose in 2008 by 553.3 points or 31% to 2,323.0. This increase lay well above the inflation rate, which means
dollarization level of bank balances, we deem it beneficial that the Central Bank builds up an extra reserve that it can utilize if the Bank needs to act as a lender of last resort in case of (temporary) bank liquidity shortfalls.
that the average investment in shares generated an attractive return in real terms during the year. The distribution of stock dividend of 300% in the book year of 2008 has resulted in a decrease in the share price for the DSB Bank.
The Banking System in Suriname
In contrast to many banks elsewhere in the world, Surinamese banks have in 2008 experienced a favourable development. The relative isolation from the international banking system has prevented contagion by risky structured finance products such as collateralized debt obligations, assets backed securities and credit default swaps, leaving the Suriname banking system relatively unscathed. Assets as well as lending increased substantially and earnings ability remained in line.
The Surinamese Stock Exchange
The following table provides an overview of trade on the Surinamese Stock Exchange in 2008
Stock Par value Trading Volume Closing share price
per share # shares SRD dec. dec.
2007 2008 Assuria 0.10 2,536 44,601 15.50 19.05 C.I.C. 0.01 3,167 24,202 6.80 8.00 DSB Bank 0.10 1,229 22,383 47.25 20.00 Elgawa 0.01 28 224 6.00 8.00 Hakrinbank 0.15 302 49,902 150.00 174.00
Margarine & Vettenfabriek 0.01 3,082 16,797 5.20 5.45
Self Reliance 0.01 270 2,514 8.60 9.10 Surinaamse Brouwerij 5.00 - - 98.00 125.00 Torarica 0.10 600 29,950 39.20 54.00 Varossieau 0.10 - - 16.00 16.60 VSH-United 0.01 50 1,100 21.50 22.00 Total shares 11,264 191,673
- Exchange Index as of 31 December 2008: 2,323,0 - Source: Securities Trading Association of Suriname
Key figures of the general banking sector in Suriname (in millions of SRD)
Year-end 2008*) 2007*) 2006
Total assets 4,438.9 3,745.7 2,871.0
Funds available for lending and cash/cash equivalents
Funds on current accounts 818.6 696.6 539.7
(Compulsory cash reserve) (227.1) 6) (197.9)4) (179.4)2)
591.5 498.7 360.3
Savings 464.1 408.9 311.8
Term deposits 219.8 181.8 126.5
Capital and reserves 233.2 195.2 157.3
Total funds available for lending and cash/cash equivalents 1,508.6 1,284.6 955.9
Lending and investments
in SURINAMESE DOLLARS 1,270.35) 953.9 3) 764.21)
in US DOLLARS 295.7 223.8 177.4
in EURO 60.0 54.3 44.7
Key ratios
Capital Adequacy ratio I
(capital and reserves as % of total assets) 5.25 5.21 5.48
Capital Adequacy ratio II
(capital and reserves as % of lending) 10.24 11.14 11.30
1. Excluding provision for bad and doubtful debts of SRD 36,1 million *) preliminary figures 2. Excluding cash reserve of SRD 76,8 million for housing loans Source: Central Bank of Suriname 3. Excluding provision for bad and doubtful debts of SRD 42,7 million
4. Excluding cash reserve of SRD 115,9 million for housing loans 5. Excluding provisions for bad and doubtful debts of SRD 46,2 million Excluding cash reserve of SRD 146,3 million for housing loans
Total consolidated assets rose by 18.5% to SRD 4,438.9 million while total lending rose by more than 31%. Funds available for lending rose less rapidly than the growth in SRD lending, in turn leading to less room for liquidity. The Capital Adequacy ratio I remained relatively unchanged. The Capital Adequacy ratio II according to the BIS definition decreased to more than 10% and remained above the accepted norm of 8%.
Previous annual reports discussed the increasing US dollarization of bank balance sheets and the implications of this in detail. The Central Bank of Suriname and the commercial banks’ executive boards have pursued policies aimed at reversing this
trend. The Central Bank has laid down a high foreign exchange cash reserve obligation of 33.3% on commercial banks and is considering increasing this reserve requirement. In addition it aims to – as previously indicated – further increase its monetary reserves such that it can play a role in case a bank would suddenly require liquidity support.
Commercial banks give interest rates incentives for SRD credits and have escape clauses built in to their foreign exchange credit arrangements, such that these can be converted to local currency loans if necessary. As can be seen from the following diagram, these polices have led to some success.
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The share of total deposits denominated in foreign currencies decreased in 2008 by 1.9 percentage points to 54.4%. The extent to which lending was in dollars decreased substantially by 3.8 percentage points to 45.6%. Our expectation is that this will further decrease in 2009 due to the limited interest rate differential between the SRD- and foreign exchange loans. The goal is to bring back these rates substan-tially, in part in order to decrease foreign exchange risk. Deteriorating economic growth and the changing macro economic environment shall influence the banking system in 2009. Lower growth percentages will need to be taken into account. The financial position and the earnings capacity will however remain at a satisfactory level.
Inflation
Inflation in Suriname is measured on the basis of the development of the consumer price index (an average change in the price of a fixed, representative basket of 240 consumer goods). According to preliminary figures compiled by the General Office of Statistics consumer prices rose on average by 14.7% in 2008, in comparison with 6.4% in 2007. Inflation according to the year-end method rose by much less, namely from 8.3% to 9.4%.
The acceleration of the inflation rate is predominant-ly due to price increases in crude oil, food staples and the appreciation of the Euro. Inflation is higher in Suriname than for our relevant foreign trading part-ners which could lead to pressure on exchange rates.
Year Average Year End
inflation (%) inflation (%) 2005 9.5 15.8 2006 11.3 4.7 2007 6.4 8.3 2008 1) 14.7 9.4 1) preliminary figures
As a result of the worldwide recession, import prices have been dropping since the third quarter and its effect on price indices has been visible in Suriname since October 2007. It is expected that this trend will continue in 2009 and inflation will decrease. At the end of February 2009 year-on-year inflation (February 2009 - February 2008) already declined to 6%. As a result a moderate stance can be expected of the labour unions during the 2009 wage negotiations in order to limit local cost increases, maintain employment positions and uphold the competitive-ness of the private sector. The employees of Suralco LLC also deserve an honourable mention due to their decline of an earlier agreed upon loan increase for 2009. In this way they are contributing to an increased competitive positioning of their company that is currently struggling as a result of the international recession.
Developments in important production sectors
Driven by high average mineral prices on the world markets and increased consumer and production confidence, the real economy grew in 2008 according to estimates by almost 7%. In particular the sector mining, building and construction and trade contributed to this growth.
Especially the prices of crude oil and gold rose significantly. The agricultural sector also capitalized on the positive situation on the world markets. Investments in the hotel and tourism sector remained high.
In the fourth quarter prices of alumina and crude oil dropped substantially as a result of the worldwide recession that will negatively influence economic growth in 2009 and 2010. It is expected that a slack in foreign demand may be partly mitigated by the increased local activity that is related to large govern-ment infrastructure projects.
This will culminate in an expected real GDP growth in 2009 of approximately 4-5%, still very acceptable taken the current worldwide situation.
Bauxite Sector
The jointly operating bauxite companies, Suralco and BHP-Billiton, have operated satisfactorily in 2008, despite the negative effects of the worldwide crisis in the last quarter.
In the reporting year alumina production declined by 1.1% to 2,153,968 metric ton. The refinery operated at 98% capacity and export volume rose by 0.7% to 2,176,531 metric tons.
The total export value was USD 715.5 million, an increase of nearly 2%. The average export price increased by merely 1.2% to USD 329 per metric ton. Transfers to Suriname amounted to USD 88.5 million related to local payments (excluding to Staatsolie N.V., for delivered oil products).
This amount is 28.4% lower than in 2007. State income from this sector amounted to USD 44.7 million, a decrease of 46.3%. The number of employees rose by 0.6% to 1,170 persons. The short term outlook for the alumina sector is not positive. The negotiations between the Surinamese government and the domes-tically operating alumina companies did not result in an agreement in 2008 and no agreement could be established with BHP-Billiton to set up a mine in West Suriname near the Bakhuysgebergte. As a result this company has decided to abort operations in Suriname by the end of 2010 and the country is now
on the lookout for other partners to develop the bauxite reserves in West Suriname.
Oil Sector
Due to increased production and strong prices, the State Oil Company booked record revenue and earnings in 2008. Production of crude oil increased by 0.5 million barrels or 8.5% to more than 5.9 million. The average daily production from more than 1100 production wells amounted to 16,200 barrels. The average net selling price of “Saramacca crude oil” was USD 76.75 per barrel, 36% higher than in 2007. Over 2008 gross revenue amounted to USD 540 million, an increase from USD 203 million or 60% versus the previous year. Earnings before taxes resulted in USD 388 million, an increase of 152%. Net income contribution (on a cash basis) to the balance of payments was USD 269 million and to the State approximately USD 180 million.
The refinery achieved a good capacity utilisation and refined 2.54 million barrels of crude oil. The production is however almost 4% lower than in 2007 because operations at the refinery were temporarily suspended for maintenance during 4 weeks. Of the total production, 46% was delivered to Suralco, 10% as shipping fuel, 39% was exported and 5% was sold on the domestic market.
Refining capacity is planned to double in a number of years to 15,000 barrels per day, whilst gasoline, premium diesel, heating oil, sulphuric acid and bitumen shall also be produced. A pre-feasibility study has been concluded in 2008. In addition a start has been made with the site development and environmental impact assessment study. The aim is to round this project off by 2013.
The exploration of the Surinamese off-shore area, where four foreign oil companies are currently active in numerous sea blocks, has been continued intensively. Noteworthy are the drillings by Repsol in the West Tapir 1 well in Block 30. Despite the fact that no oil was discovered, the information gathered will be of importance for further planning of activities. In the meantime the international tendering process for blocks 43 and 44 have commenced.
The onshore exploration activities have also been intensified in 2008 with the aim to guarantee long term production. In this respect drilling is being
carried out in the Weg naar Zee Oost and the Commewijne Area, where oil reserves have been dis-covered. It is expected that in the first half of 2009 drilling shall commence in the Coesewijne Areas. A contract has been signed with Geokenetics for the carrying out of a 2D-seismolgocial survey of 540 km coastal area. The official commencement took place on November 13, 2008 in Nickerie and the program is planned to finalize in June 2009. A budget of USD 25 million has been made available for this project. Since September 2008 oil prices have considerably dropped on the international market especially due to the drop in demand emanating from the worldwide recession. This will lead to a decrease in revenues and earnings for the State Oil Company in 2009. The mid-term outlook is however positive for the oil sector.
Gold Sector
The upward trend of gold continued in 2008. For the first time since the 80’s in the last century the magical threshold of US dollar 1,000 per troy ounce (31.1 grams) was broken for a number of days in mid march 2008. The price peaked at USD 1,033 on 17 March.
The average gold price on the London Metal Exchange was USD 871.96 per troy ounce in the reporting year, 25.4% higher than in 2007. This increase was predominantly caused by the “flight to quality” due tot the increased economical and political uncertainties and the limited outlook for the world economy. Various analysts expect that this upward trend will continue in 2009, whereby a new high con-tinues to be a real possibility.
The positive developments in the international markets had a positive influence on the Surinamese gold sector. Production as well as returns increased. The largest gold mining company in Suriname, IAMGOLD, a listed Canadian company with a market cap of USD 2 billion, produced approximately 315,000 troy ounce (10,000 kg) in 2008, an increase of 17% versus the previous year. The average selling price was approximately USD 800 per troy ounce whilst the cost price was USD 480. The company’s performance improved in 2008, so that the transfers to the Surinamese state in taxes on salaries, royalties and income tax increased to USD 50 million. The company invested in the book year USD 46 million in exploration and capacity expansion. The proven
reserves increased by more than 20,000 kg, putting the life of the mine at an estimated 10 years. The expectation is that the production will further increase in 2009.
The largest Surinamese gold mining company, Sarakreek Resource Corporation that owns a concession on the Sarakreek to the South of VanBlommenstein dam, also achieved good operating results. The company strives towards a larger scale operation, in all likelihood with a foreign partner. Surgold, the joint venture between Alcoa N.V. and Newmont Mining Corporation, has in the meantime concluded its exploration program in the Nassau Mountains in East Suriname. Commercially extract-able reserves of 2.2 mln troy ounce have been proven, although at higher operating costs than IAMGOLD in Brokopondo.
In the meantime negotiations have commenced between the Surinamese government and Surgold in order to arrive at an exploitation agreement. Speed is of the essence to capitalize on the achieved momen-tum in order to come up with the best agreement for all parties. The signal that will given by such an agree-ment shall positively indicate that Suriname is an upcoming gold mining country.
Agricultural Sector Rice Sector
The total area of rice fields under cultivation increased by 3.7% to 43,654 ha. This increase was for large as well as small paddy producers. In the fall of 2008 volumes sown rose remarkably by approximate-ly 3,850 ha to 23,751 ha, due to favourable market prices and a strong outlook. Various key figures showing the developments in the sector over the past five years can be seen in the following table.
In the reporting year the average production dropped per hectare by 1.5% to 4,189 metric ton, due in large part to the less favourable climatic conditions. As a result of an increase of land under cultivation, the production increased by 2.2% to 182,877 metric ton. The export volume of rice increased in 2008 by more than 1%. Partly as a result of administrative barriers on the side of the government, exporters were not able to capitalize more on the favourable conditions that presented themselves in the market. These barriers were lifted after a number of months.
Average export prices of cargo as well as white rice were significantly higher because of developments on both the supply and demand sides in the world mar-ket. The export values more than doubled. Shipments to the EU, our most important market, increased by more than 85% or 29,000 metric ton. Exports to the Caricom market however dropped by 26% to 20,500 metric ton. Because the EU market predominantly buys cargo rice, the export of the latter was higher than white rice. In previous years the reverse was true. Prices of rice have since the second half of 2008 shown a downward trend. The production costs of
paddy have also shown a downward trend since the beginning of Q4 as a result of lower diesel and fertilizer input costs. In order to attain reasonable returns, productivity improvements across the value chain are crucial.
The rice sector is still supported by the European Union and the Cariforum who have made available an amount for the sector that is well utilized by entrepre-neurs active in it.
2008*) 2007 2006 2005 2004
Under cultivation (hectares) 43,654 42,087 44,232 45,563 49,020
Production of dry paddy (Mt) 182,877 179,012 182,659 163,955 174,490
Average production per hectare (Mt) 4,189 4,253 4,130 3,598 3,560
Export volumes (USD 1,000) 53,091 52,499 41,462 35,877 51,830
Export value (USD 1,000) 32,313 15,415 11,516 8,913 11,891
Exportprijs cargorijst (USD/mton/gemiddeld) 604 255 236 220 190
Exportprijs witte rijst (USD/mton/gemiddeld) 610 325 297 301 268
Source: Ministry of Agriculture, Animal Husbandry and Fisheries * Preliminary figures
The core business of Rijstpak N.V is the processing, distribution and
export of rice and rice derivates under the brand name Paloma.The
company was ISO certified in 2008 and exploits 2 state of the art
hulling mills in the Nickerie district.This company is considered to
be one of Suriname’s main rice exporters to Europe.
Banana Industry
The banana industry is important to our country for a variety of reasons: production and export, as well as the creation of employment. Employing 2,416 people, the Stichting Behoud Bananen Sector (SBBS) is, next to the State, the largest employer.
Production rose in 2008 from 56,246 ton to 65,438 ton, an increase of more than 16% that was entirely exported to the European Union. The FOB export value was USD 33.1 million, an increase of USD 13.7 million or 70% in comparison to 2007, in large part as the result of the increased export volume, better prices and the average higher exchange rate of the Euro against the USD.
In our previous annual report we presented the problem of market entry into the EU by ACP coun-tries (including Suriname), and this challenge has to date not been solved. The Latin American countries demand a substantial decrease in the import tariffs, which the ACP countries vehemently protest against this. It doesn’t require much explanation to realise that due to this situation, the price that SBBS receives for her products isn’t satisfactory.
The privatization process is struggling because of the uncertainties surrounding the abovementioned market entry and pricing issues. Currently talks are being held with the Belgian company Univeg that already maintains a management agreement with the SBBS, with regards to the full acquisition of SBBS.
Economic outlook for 2009
The continuing worldwide economic recession will undoubtedly have negative ramifications for the Surinamese economy although its depth and duration is yet difficult to ascertain. Our expectation is that the economic performance of our country will decline, but that with a good approach to the situation any negative effects can be mitigated in an acceptable manner. According to the 2009 estimates of the Office of Planning, the real economy shall decline by approxi-mately 2 percentage points to 4-5%. Diminishing foreign demand shall only in part be compensated by
increased domestic investment activity as a result of some large infrastructural and civil engineering projects. The projects shall in large part be funded through the use of development funds and con-cessional loans. The limited execution capacity how-ever will still form a bottleneck.
The strong decrease in prices of crude oil and alumina on the international markets shall also influence the balance of payments and thus also the development of the monetary reserve. State income from the mining sector shall drop, and as a result will put State finances under pressure. On a positive side-note, the majority of transfers to the State from the mining companies (and other companies) for book year 2008 will actually take place in 2009.
In light of the expected economic developments we deem it prudent that the government develops a comprehensive policy approach to mitigate the effects. In recent years our country has been able to build up strong financial and other buffers and as such should be able to survive this crisis relatively unscathed. Most economists and the IMF expect a gradual rebound of the worldwide economy starting in 2010.
On a positive note, the emerging downward infla-tionary trend that started in October 2008 shall continue in 2009. This in turn will translate into positive purchasing power for the public. One require-ment is however that the unions show restraint during the wage negotiations for 2009.
Another positive development is the increased out-sourcing and offshoring of commercial services, especially from the Netherlands, to our country. We define outsourcing as the relocation of certain business activities of a company to countries with a better price-quality ratio in order to improve its competitive positioning. In the reporting year a number of service companies have outsourced a modest part of their business to Suriname and more is to be expected in 2009. The majority of the business activities are call-centres, back-office processing for financial institutions, ICT and marketing companies, administrative and technical service providers and care providers. The government should stimulate this development.
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Business of the bank
Introduction
Positive results have been booked in book year 2008. The bank experienced strong growth and returns have increased. At the same time much energy has been put into the improvement of the internal control of the bank’s processes and operations. Management is based on task-setting budgets, with objectives being quantified wherever possible. These objectives are recorded in the annual plan, which is part of the bank’s strategic plan.
We can report to our satisfaction that the operational objectives for 2008 were for the most part realized. 2008 is the first year in which we implemented the strategic planning document 2008 - 2010 that was developed in 2007 with the support of expert con-sultants and active involvement of our entire organi-sation. The most important objectives were to achieve sustainable growth, increase earnings capacity, optimize the balance sheet composition, improve efficiency and strengthen risk management as well as customer relations management. In addition our aim was to increase employee satisfaction, optimize our HR policy and further our involvement with the community of which we form an integral part by actively sponsoring various projects.
Total consolidated assets rose by 22.2% to SRD 972.6 million, in comparison to 31.2% in 2007. Consolidated lending grew by 26%, much higher than budgeted. Dollarization of the credit portfolio dropped by 3 percentage points to 41% due to an active policy to reverse this trend. The quality of the credit portfolio stayed on track as indicated by the low non-performing ratio of 1.72%. The market share of the Hakrinbank with respect to lending remained virtually the same at approximately 24%.
The bank’s assets and liabilities management stayed on track and as of year end 2008 interest generating assets accounted for approximately 82% of the total balance. This has a positive impact on income before taxes, that increased by 10% to SRD 26.3 million. One of the bank’s main operational objectives in 2006 was to improve overall productivity by achieving a better efficiency ratio. This however showed a deterioration from 54% to 55% as per year end. This
ratio was impacted negatively by increases in staff expenses, and downward adjustment of the market value of our international investment portfolio. Our objective is to still improve the efficiency ratio by 1.5 - 2% points per year.
In June of 2008 we reopened our renovated and expanded branch at the Nieuwe Havencomplex. It is a modern “Banking Centre”, where clients can expect an expedited and efficient handling of their banking needs. In mid 2009 we will also open up a new branch in the new departures and arrivals hall of the J.A. Pengel airport. This branch is also intended to cater to our clients in the wider vicinity of the airport. In following we will present the most important developments in 2008 within our organisation and its various departments, including our subsidiary the Nationale Trust- en Financierings Maatschappij N.V.
Corporate Governance
Proper corporate governance is particularly important for banks, given that they play such a major role in economic stability and development. Even more so, banks influence the behaviour of their many corporate clients in this area and hence their risk management. Effective governance is a precondition for maintaining public confidence.
The current worldwide financial crisis and the diminished trust in financial institutions is in our view a reflection of a lack of corporate governance within these organisations. It is therefore even more important to give priority to sound management. The Executive Board and Supervisory Board of the Hakrinbank deem it important that “best practices” in corporate governance are adhered to within our bank and a leading example can be given to the rest of the Surinamese community. As far as we are aware, Hakrinbank is the first Surinamese-owned company to have formulated a formal corporate governance code a number of years ago, and to use it as the basis for its activities. We are a proponent of a national corporate code that can act as a guide for ensuring good governance throughout the country’s business sector.
This code, which can be found on our website, contains guidelines for the Executive Board, Supervisory Board and shareholders. The tasks, powers and responsibilities of these committees - the
