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13th February 2000

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Get ready for the domino effect of the diesel hike

Fact File

Last increase :Sept. 27,1996
World prices : US$ 20
Local price increases
          Petrol : Rs. 10.00
         Auto Diesel : Rs. 0.80
         Kerosene : Rs. 0.90
Since then the Rupee has
depreciated 40 percent to date.
Present Increase :Feb. 7, 2000
World prices(Avg) : US$ 25
Local price increases
         Petrol : Nil
         Auto Diesel : Rs. 2.75
         Kerosene : Rs. 4.80
Inflation as at Jan.
31, 2000 : 4.4 percent
Forecasted Inflation
for the year : 7 % to 10 %

The government's decision to increase diesel and kerosene prices last week raised eyebrows about the switch to diesel and kerosene from the government's work horse, petrol.

Industry officials said that The IMF's or The World Bank's reform recommendations 'might have' influenced the decision. Officials said that the two organisations had been recommending that the government reduce subsidies on whole industries and target them at more deserving sub-sectors to reduce its budget deficit and increase solvency. The other option recommended by the organisations was to increase taxes.

Another reason not to increase petrol prices could well be the drop in demand for petrol. Officials said that the increasing gas conversions had marginally reduced the demand for petrol and hence a oversupply of petrol was building up. Officials said that any increase in petrol prices could further reduce the demand for petrol and as a result, the government would not be able to recover the diesel and kerosene subsidy.

Officials from the Ceylon Petroleum Corporation declined to comment on the issue at the time of going to press.

However, industry officials say that this increase would have far reaching repercussions on the economy. Analysts point out the inflationary effect of a diesel hike could lead to wage hikes, which could cost the state more than subsidising diesel.

They added that historically, governments had increased the price of petrol to compensate for the losses of subsidising diesel and kerosene. In addition, they said that any price increases to diesel and kerosene in the past was always marginal, or gradual.

They said that governments in the past did so with good reason, because steep diesel and kerosene price hikes would increase the cost of living.

Officials however also said that it was time diesel and kerosene prices were raised to recover their cost instead of being cross subsidised by petrol. They said that the price hike had to come sooner or later anyway.

Officials said that in the next few weeks we would experience the ripple effect of the fuel price increases, when the price of goods increase.

They said that though diesel did not have a direct impact on the production of goods and services, our transport system's dependency on it was vital. On the other hand, the increase in gas and kerosene prices would have a more direct impact on the cost of living.

The Ceylon Electricity Board (CEB) is also expected to increase its rates by an estimated 15 percent, following the diesel hike as 40 percent of the national grid runs on diesel generated power.

Big oil trio chart plan to ease prices

Saudi Arabia, Venezuela and Mexico are negotiating a strategy aimed at letting the market down gently to achieve lower average prices over the remainder of the year, international news reports indicate.

But the trio, the architects of output reductions over the past two years, face difficulties in convincing their fellow producers who want to keep prices high.

They will also face tough negotiations on how to share extra supply among the 10 OPEC members plus Mexico and Oman.

It is understood that the three producers want to allow oil prices to ease lower after averaging $25.50 a barrel for London Brent futures and $27.20 for U.S. light crude so far, this year.

Brent last year averaged US$ 18 and U.S. crude US$ 19.25, gains of 35 percent from the lows of 1998, after suppliers agreed to target supply reductions of some five million bpd that expire at the end of March.

Opposition to any strategy to lift volumes after March is likely to come from the three countries that met in Tripoli last month Libya, Algeria and Iran.

Venezuela and non-OPEC Mexico, together with Saudi Arabia masterminded the production cuts last year in a bid to arrest the sharp decline in prices in 1998 and in early 1999. The cuts helped lift oil prices dramatically to nine-year highs.


Arrivals down in December

Tourist arrivals in the peak month of December 1999 were down by 10.6 percent YOY. Ceylon Tourist Board statistics indicate arrivals were 40,326 in December. Security concerns associated with the presidential election were the primary cause for the shortfall in arrivals which resulted in the first YOY decline in sixteen months, analysts said. Expectations of Y2K computer failures also caused people to get the jitters about being airborne during the millennium.

Arrivals from Western Europe, which is a leisure segment fell 16 percent YOY in December. However East Asian arrivals picked up 8 percent YOY indicative of the economic recovery in the region., Meanwhile South Asian arrivals dropped 11 per cent YOY, with Indian arrivals falling 12 percent. Analysts attributed the decline in Indian arrivals to the deteriorating business climate in Sri Lanka.

But the worst is yet to come. The government is likely to impose the 12.5 percent Goods and Services Tax (GST) on the tourism sector in April. In an environment riddled with security concerns hotel operators will be unable to negotiate rates and may be forced to bear the burden of GST, further slimming down their margins. Analysts believe the effect of election related violence is likely to be felt by the industry further down the line as bookings made three to six months in advance cannot be cancelled at short notice. But a glimmer of hope lies in the fact that general elections at least, will be held in the off peak season.


Sampath ownership changes again

The National Development Bank (NDB) bought a 4 percent stake in Sampath Bank from DFCC last week, changing the ownership structure of the bank once again. When 1,542,400 shares changed hands at Rs. 49 per share last Tuesday, NDB increased its stake of Sampath Bank to 12.8 per cent and another strategic alliance in the world of development banking appears to have been formed.

Development banking giant DFCC previously obtained special permission from the Central Bank to hold a 29.8 percent stake in Commercial Bank.

Analysts point out that the development banking market is saturated and a viable avenue of expansion for development banks is through alliances with commercial banks. NDB finally appears to have taken the bull by the horns.

Meanwhile radical shifts in the ownership structure of Sampath Bank have been apparent in the last couple of months. Stassens chief Mr. Harry Jayawardena is said to have a keen interest in the bank. Recent acquisitions by Stassen Exports Ltd (1.35% shares) and Distilleries Company of Sri Lanka Ltd (3.13% shares) bear witness to this. Hatton National Bank of which Mr. Jayawardena is a director also acquired an 8.77 percent stake in Sampath Bank. However the Sri Lanka Growth Fund which had a 2.72 percent stake in the company has moved out of the bank in the process of liquidating its portfolio in Sri Lanka. The Employers Trust Fund which had a 4.5 percent stake in the bank now has a negligible stake in the bank.

Other major stakeholders in the bank include BSDT Investors Pacific International Fund 9.26 percent, Bank of Ceylon 2.82 percent.


Tea and market update

Quotas for tea exports to India

For the first time in the recent history of Sri Lanka, tea exporters will be allocated quotas to export tea to India.

Industry officials said that under the recently concluded, 'long' over due Indo-Sri Lankan Free Trade Agreement (FTA), Sri Lanka had been allowed 15 million kilos of tea exports to India.

It is understood that a sub committee would be formed to formulate the criteria according to which the quotas would be allocated. The sub committee will also decide on the variety of teas that would be exported and their form.

Officials said that they were looking at the growing middle class society of India. They said that it was not viable to compete in the lower end of the market because local teas cost higher than Indian teas in that category.

Moreover, Industry officials said that the upcoming Millennium Convention that is to be held in India from March 22 - 24 and the Tea Convention that is to be held in Pakistan from March 26 - 28 would give local exports a feel of the Indian and Pakistani market.

However, prices in local auctions last week took an unexpected dip as many countries remained subdued.

Low growns attracted less interest from shippers and hence brokers expect the average to decline Rs. 2 to Rs.3. The average price for most other categories are also expected to decline.

In Kenya, factories have been closed and owners are counting losses as a devastating frost is said to have ravaged at least 50 percent of the area under cultivation in the Nandi district in the Rift Valley.

Experts have said that it would at least take six months for tea delivery from the province to stabilise.

The Sunday Standard News, a Kenyan newspaper reported that in addition to the tea plantations, banana plants, livestock fodder and other vegetables were also affected.


Fourth quarter results will dominate

Turnover reached a record high of Rs129.9 million on Tuesday when the National Development Bank (NDB) bought 1.54 million shares in Sampath Bank at Rs.49. NDB now has a 12.8 per cent stake in Sampath Bank. Meanwhile the government increased diesel and kerosene prices by 23 per cent and 48 per cent respectively. The price hike is expected to affect all sectors and inflation is expected to surge.

The All Share Price Index fell 0.62 per cent to close at 557.7 while the Milanka Price Index dropped 0.07 to register 924,623.

The MBSL Midcap Index gained 0.15 per cent to close at 976.82. Average turnover for the week was 56.9 million. Foreign trading was marginal and net foreign outflows were 28.08 million

The upcoming budget would be critical to longer term performance of the market, Head of Research, Asia Securities, Dushyanth Wijaysingha said. A disciplined yet long term growth enhancing budget would help in reducing the level of uncertainty in the market, he said.

Trading in the weeks ahead will be dominated by fourth quarter corporate results which will be coming out, Assistant Manager, John Keells Stock Brokers, Suresh Nadarajah said.

Investors will focus on the plantations to come up with good results and this includes the blue chips, he added.

Market sentiment could be improved if there was an announcement of a further acceleration of the privatisation programme and news of further investment by captive sources in the equity market, Strategist, Jardine Fleming HNB Securities, Amal Sanderatne said.


On target with Rs. 40 bn in five years

Sri Lanka has so far raised Rs. 40 bn from privatisations. This averages Rs. 8 bn annually for a five-year period from 1995-1999. "We are happy with this performance and hope to Imagerake in another Rs. 25 bn to Rs. 30 bn this year from Sri Lanka Telecom privatisation alone," Public Enterprise Reform Commission (PERC) Director General, Mano Tittawella said in an interview with The Sunday Times Business. PERC has concluded 55 privatisations in the past five years and the schedule for 2000 indicates at least another six to eight privatisations by the year-end, Tittawella said. Obviously, Sri Lanka Telecom, which is expected to be listed on one or more foreign stock exchanges, is the feather in the cap. But what is also significant is that PERC is taking some firm steps towards liberalising the financial sector - probably the most difficult to tackle. Lining up for corporatisation or privatisation are the state insurance companies and the state banks. Legislation for the liberalisation of the insurance sector and pension reforms is expected to be tabled in parliament in April, Tittawella said. NIC is scheduled to be privatised by June, he added. PERC will also continue with the privatisation of farms in the agricultural sector with bid enhancements to be announced soon for NLDB farms, Pattipola and New Zealand and are identifying two more farms from a cluster of 20 for privatisation. In the plantation sector, the Malwatte Plantation IPO will be out soon at par or Rs. 15 per share, he said. Excerpts from the interview....

STB: How much of SLT have you decided to list?

MT: We have not decided how much to list, but it will be a big issue about US$ 400-450 mn. You can't decide on the percentage now. It will depend on market sentiments at that time.

Now there is a lot of demand for the stocks, so there will be a premium for telecom stocks. We want to do a big issue in June. The advisors will be appointed and given three months or so to do the preparatory work. Also, these are international advisors who know what they are talking about. And their response is that SLT is in good shape.

SLT also has a major advantage of having an internationally recognised technical partner. We couldn't have sold SLT without NTT coming in. So, the advantage of having a strategic investor is that he brings in best practice. We could have never done SLT a few years ago. The response we got, particularly from the calibre of people who bid was encouraging. They did not just come in and bid, they studied SLT first.

STB: There is concern that you should have the SLT listing after the elections. What are your views?

MT: I don't think so. This country should move away from doing things around the elections. For instance in the USA, the economy doesn't stop because there are elections. Investors are not bothered about those things, because they understand that so long as there is political stability, the economy can run smoothly. If you have an election, even if the opposition comes to power, both parties are committed to free market economies.

Only the speculators worry about this and we are not looking at them. This IPO is not going to look at people who want to make a fast buck. We are looking at long term investors.

STB: Have you decided on a price for the issue?

MT: We don't know what sort of price to do the issue at and we are keeping it open. The Global Depository Receipt (GDR) will all depend on the price.

STB: Will there be two prices for Colombo and abroad?

MT: When the market settles there is a differential. But we are told the differential in Colombo is not much. Because that is the arbitrage differential. With the modern technology of the Colombo, settlement system I don't think the differential will be that much. The great thing about the GDR or the American Depository Receipt (ADR) is that it will open the market to a new breed of investors who are otherwise not interested in Sri Lanka. They have their own compliance methods; they are much more comfortable trading on their own exchange, in their own time. There are pros and cons.

Some people feel the whole stock issue should be done in Colombo. From our point of view, we must look at all objectives. Development of the stock market is one; also, the development of SLT is also important.

STB: NTT has not been very forthright about their plans, on whether they want to make Sri Lanka a part of an international hub etc. Can you shed some light on it?

MT: Probably they want to. I think it is true. Things are evolving fast around SLT itself. Other than just a statement to say they would like to consider Sri Lanka as part of a hub, I don't think they themselves have very concrete plans.

Again, you have to be careful with this hub concept. With technology coming in, it can be anywhere. It doesn't have to be a geographical hub.

They themselves are toying with it. You must also understand from NTT's point of view, NTT themselves have undergone a major metamorphosis.

They were privatised recently; they sold off their mobile operation NTT DoCoMo which was the biggest ever listing.

So NTT was also like SLT though they were much more technologically advanced. It's only now that they are coming to grips with competition as Japan has opened up. But all the investment bankers told us, was that it was a big plus having them on board because NTT is a huge technological partner. And with these global mergers taking place you have to get yourself merged with a big one, otherwise you get wiped off.

STB: What about the transactions for the next year and onwards?

MT: Some of the things that will roll over the next year are some of the things we are doing with the BII (Bureau of Infrastructure and Investments) and the line ministries for the water sector. Again, it's at a very early stage. It is possible towards next year that we will offer a few water concessions to the private sector. Greater Colombo is not considered, but the Southern belt and some urban areas.

The consultancy job for that is under bid now. By the end of the month, the government will decide about the technical consultant. We will give them the area and tell them these are the service conditions, areas of investment and the water fees will be regulated by us on an agreed basis and then you run it. They also have to develop the infrastructure area. We need to spend about Rs. 10 bn to 15 bn minimum to upgrade our infrastructure, which we don't have the money for.

The concept of the government is that wherever the private sector can come in we allow the private sector to do it.

This is a three to five year programme and a lot of work is being done.

STB: What about corporatisation and how is it different from privatisation?

MT: There is no exact word as such. Privatisation is just a sell off if you describe it colloquially. You can do privatisation in so many different ways.

You can do a management sell off, a 51 percent, or place 10 percent on the stock market. So, it is essentially a sale.

Corporatisation is something you do prior to a privatisation, like if you have an authority you make it a company, you have articles of association, you have qualifications for directors, best accounting practices etc. So, it is run like any other company. That way the management in these state owned enterprises can take their own decisions, there is management flexibilities, they can hire market-oriented people and a board is responsible. And after that if, that company runs well the state can own it.

We also want to get away from the concept of the state owning and managing. You can own a company, be a shareholder but not have anything to do with the management. An independent board can run it on private lines just like any other company. Later on, we may list it on the CSE at the right time two three years down the line. Because there may be some strategic assets like the port, airport, which the government for various reasons wants to keep ownership of, until it, reaches a certain state. Even western governments have kept ownership of them.

But that doesn't mean you can't reform them. They should run better than now. In most of these enterprises, there are competent people, but they are poorly paid, their procurement procedures are dictated to by ancient laws. Particularly with competition like the port, where the P&O came in they are going to feel the pinch. Because on one side, you get a privately run operation, the other side takes time to operate so they may get wiped off.

You can look at telecom. Once competition came in, it was easier to move towards privatisation because they saw their power disappearing. So long as monopolies are there, you can be inefficient. Because monopolies are inefficient.

Ports

But we will corporatise ports, because it is a strategic business location also. We will bring in better management practices. We have no timeframe for it as it is at a very early stage. These things will take two to three years.

Airport

It's a similar thing with the airport. We are just starting now. We are not thinking of privatising, but we are thinking of coporatising it, so that it can run like any other airport and raise its own funds. They can have a debenture issue, have a bond issue.

Insurance

The other area is insurance. NIC is being privatised. For that, we are selling a strategic stake. We don't see any reason why the government should be in insurance. Because it's a small insurance company.

As far as ICSL is concerned, we are not thinking of privatising it, but corporatising it as well. The reason for that is very simple because ICSL has 50 percent of the market share.

So, we have to be careful at this stage. No decision has been taken, so all options are open. But the inclination is to corporatise it first, get its accounts up to date, get an independent board and at that stage we will take a decision as to what we are hoping to do with ICSL.

STB: What about the financial sector?

MT: Hopefully insurance will be the start for the financial sector reforms. With NIC being privatised and a new insurance Act coming through, and also some degree of coporatisation in ICSL, we will level out the playing field. We are putting out the new Insurance Act, which is going to be called Insurance and pension reform. That is one side of the capital market. The second side will be the deepening of the debt market. The initiative taken by the Central Bank to get Duff & Phelps in, to set up a rating agency, going for a sovereign rating and all that.

And also with water concessions to be given out in two years, these companies will start raising more and more funds here. Unlike telecom, which depends 50 percent on foreign exchange revenue, things like water and electricity are total rupee earnings. If they borrow Rs. 15 bn from here, all the banks will go bankrupt. They will have to borrow from abroad. That's the problem with telecom itself, Rs. 1 bn means you exceed your single exposure limit. In the private sector, this means you have to raise the money yourself, because the government is not going to give it to you.

So hopefully in three years this debt market with assistance from the ADB and the World Bank will happen, and I hope will be ready by at least the end of 2001 for that.

STB: What about the two state banks?

MT: There is one side who say state banks should be privatised. Others say they are national assets.

So probably, the answer is in between, because the state banks cannot be privatised. Because if you get a private sector investor into the Bank of Ceylon and People's Bank they will close down within three months all the bank's non profitable operations. And when they do that, they will have to close half their branches. So when that happens, the fellow in Dehiattekandiya has no way of getting his Dubai money. It's serious because Bank of Ceylon and People's Bank play a development role. Rightly or wrongly, the commercial banks have got into development banking activities. And no other agency will take it up.

STB: So, what are the options?

MT: The problem is even if you were to privatise it, it will take a long time. Secondly, you have to develop other institutions to take up that responsibility. I mean the Bank of Ceylon has done a lot in this regard.

While the state banks should not be privatised in my opinion, I also don't believe they should remain where they are. We should do a similar corporatisation exercise, but do it very seriously. It's a huge problem at the end of the day, if you take the doubtful debts of the two banks and write them off. We are in trouble then. The banks are big, and they have huge state patronisation. So, at the initial stage of corporatisation they must have state ownership.

But it can be made much more efficient, particularly the People's Bank. The Bank of Ceylon has had a history of being a little more corporate oriented. So, we are hoping that this year, serious attempts are made to make these two banks viable institutions. Also in a way, the banking sector is opened up and they do play a major role. The issue with the People's Bank and the Bank of Ceylon is not only in cost, but the bad loans, bad provisioning. That's where the cost is.

So, the government's major aim of reducing the interest rates, with these privatisations will go a large extent towards debt reduction schemes. Hopefully we can then bring our interest rates down below 10 percent. It will be difficult to do so if we don't make the two state banks efficient.

My own view is that given the present constraints the two state banks are not that bad. But they need some assistance. A few years down the line it may be a different story.

STB: What about the postal reforms?

MT: It's proceeding. The Act will come in April. A lot of legislation is waiting to be cleared. With the budget, we are out till March. The first reading of the Postal Act is over and the Minister is very keen to see the Act go through.

People have to realise that change has to happen at the end of the day. One of the things the Act will do is to regularise the courier services.

STB: There has been some criticism that PERC has not looked into the interest of the minority shareholders.

MT: The issue of minority rights will be looked into when the new Company's Act comes into place sometime this year.

But the SEC is also working on steps to improve corporate governance. We have to improve governance even where privatisation is concerned. We are not that bad regionally, when compared to most people. At the end of the day as minority shareholders, you don't have much to say, but at least you should be told as to what's going on.

The problem is that for minorities to sell their shares they don't know what's going on, the reporting structure, the management fees and so on. That's where the rating agency is important. If a rating agency gives a company a C- rating, then you are going in with your eyes open and you know these guys are not exactly the best of the lot.


Informatics and Markus Data in a strategic alliance

Informatics, one of Sri Lanka's pioneering Information Technology giants and Norway's Markus Data entered in- to a joint venture agreement to develop software for export to the European market. The agreement was signed by Finn Worm Petersen, Chairman of Markus Data as Lal Dias, Director/General Manager, Informatics International, a company release said.

Informatics, established in 1983, is a systems integrator with over 300 computer professionals and one of a few ISO 9001 certified software developers in the region. The company has been involved in off shore software development for overseas clients for the past 12 years in UK, Germany, Holland and Singapore. It already has a strategic joint venture partnership with the Swedish ERP solutions provider IFS which employs more than 200 software engineers in Colombo, the release added.

Informatics also markets its packaged software products in the Asian Region and its flagship product is a Telecom Billing and Customer Care system, whose international client base includes some prestigious names such as NTT, Cable and Wireless and MiIlicom.

The human resources required by informatics and its partners are mainly sourced from its education arm, set up in 1989 in collaboration with Manchester Metropolitan University, which offers degrees in computing and business studies. The institute has a student population of over 700 at present which will expand to 2,000 by year 2002. This degree programme gives Informatics' access to hundreds of quality IT graduates each year.

Markus Data AS, established in 1988 is a major player in the Norwegian market for Credit Management Applications, and follows a strategic goal to continue this development and to extend its markets into the European Union and Eastern European countries. Markus Data AS has been a key player in the Norwegian market since the early nineties, the release added.

During the past two years Markus Data has expanded its marketing effort into all the Scandinavian markets, and have already established co-operation with several International Credit Management Agencies. With the establishment of this joint venture company as its Software Development Centre in Sri Lanka, Markus Data will support its customer relations team in each country, and will move most of its strategic software development to this centre. The centre itself will have as a primary function to out source development projects to co-operating software companies and its major targets will be to establish a pool of development resources, so as to provide flexibility and unlimited development resources for Markus Data and its clients. The Centre will utilise the latest technology and skilled development resources and will serve as a regional office for Markus Data in development and marketing activities in Asia.


Mobitel goes digital in the suburbs

Mobitel's recently launched digital network, will soon cover Wattala, Dehiwala and Nugegoda. The company also plans to extend it to Kandy by the end of the year.

"At Mobitel we have the unique advantage of a dual network," a company news release says. "The dual mode handsets we introduced will automatically switch to an analog mode if the customer is in an analog area. Mobitel customers can still travel out of Colombo and use the handsets on analog service, while enjoying the superior technology of digital where it is available," the release adds.

Digital technology will make it possible for Mobitel to introduce to customers some of the advanced features and value-added services that are available in mobile communications. Worldwide, new developments in the field of mobile telecommunications are based on the supersor digital technology."Digitizing the network offers many advantages for our customers."

Mobitel digital customers would have the satisfaction of using a state-of-the-art digital mobile phone with features like enhanced clarity and battery life. Confidentiality is another big plus point, since it is widely accepted that digital phones have the best confidentiality factor. Modern features like one-number automatic roaming, e-mail and Internet services on the handset are possible with digital technology.

For an operator digital technology would give them an edge over competition where introducing new mobile features is concerned. "In a digital network there is maximum utilization of voice channels, more efficiency through a high call completion rate," the spokesman said.


Ceylinco L&T bags largest cement deal

Sri Lanka's largest cement plant Ceylinco L&T with a 7000 metric ton capacity opened recently. The plant is a joint venture between Ceylinco Consolidated and Larsen and Toubro, a regional construction giant, at Peliyagoda, which is Sri Lanka's largest cement plant. Ceylinco L&T Premium Portland Cement is manufactured using state-of-the-art technology at a fully automated plant.The product is pegged to set new quality standards in the Sri Lankan market. The product is designed to conform not only to SLS requirements, but to British and American quality standards as well. A sophisticated technical laboratory of international standards has been set up at the plant to ensure rigid quality control of outgoing cement and applied R&D, a company release says.

Ceylinco L&T has set up a cement plant near the Colombo port. The plant has 4 silos of 7,000 metric tons capacity each to ensure uninterrupted supply of cement. The cement is ISO 9002 accredited.

The Rs. 680 million joint venture between the Ceylinco Group and Larsen and Toubro markets the cement in Sri Lanka. Bulk and bagged cement is available throughout the country. The bagged cement is available in a distinctive yellow packaging with the blue Ceylinco L&T logo that sets it apart from other brands, with key features like low chloride, low alkali, moderate sulphate resistant.


E Trade to distribute REDI-to-Wear

E Trade (Private) Limited has been appointed as the sole distributor of REDI-to-Wear for Sri Lanka and the Maldives. With more and more overseas buying companies "asking" their Asian suppliers to communicate using Electronic Data Interchange (EDI) it is rapidly becoming essential for Sri Lankan manufacturers to equip themselves with the right tools to enable the effective use of EDI.

REDI-to-Wear has been developed by The EDI Shop Limited, a company founded in Hong Kong and with branches around the world, as the first truly off-the-shelf EDI package that enables Textile and Garment traders to exchange commercial documents internationally by EDI - easily and cost effectively, a company release said.

Without doubt, EDI is faster, more accurate and, for both buyers and suppliers, much cheaper than traditional paper-based communications. But, EDI has been seen to be difficult to implement and to use, particularly in industries like textile and garments where computer literacy is often the least of considerations when hiring staff.

REDI-to-Wear changes all this. It takes the EDI requirements of major buying companies overseas - including famous names such as Debenhams, Liz Claiborne, GAP and Lands' End - and presents these as a common interface that look as if it has been designed for the Textile and Garment industry - which it has. REDI-to-Wear is easy to use, easy to administer and, best of all, is extremely cost effective in providing increased efficiencies and capabilities for manufacturers, the release adds.

In its current version, REDI-to-Wear includes the receipt of Orders, Order Changes, Pre-Order Commitments Delivery Orders & Tag/Label Requests and the sending of Order Acknowledgements, Despatch Advices & Advance Ship Notices plus Tag/Label Orders to print bureau. Already under development are Invoices, links to logistics providers and financial institutions. REDI-to-Wear is also able to print both Bar Coded Price Tickets and Carton End Lables for the increasing number of buyers that are demanding this. There is also a Critical Path reporting system that enables suppliers to track progress of their buyers' Orders through the manufacturing processes.

To meet the requirements of an increasing number of North American buying companies, The EDI Shop has included a Scan & Pack facility in REDI-to-Wear. As there are subtle differences between the ways in which various companies require Scan & Pack to be used, The EDI Shop has built in a generic feature that can, and will, be made to work with these different requirements - all without any extra charges.

The EDI Shop Managing Director John Sanders said "Another major difference with REDI-to-Wear is that as more buyers start using EDI they will be automatically added without the need to buy extra software, or to pay for additional configurations. Equally, all enhancements to REDI-to-Wear are provided as an automatic part of our support and maintenance, without any additonal charges.


Shipping and Aviation supplement

  • Amadeus and the Y2K bug
  • MCS Logistics sole agents of M+R Spedag
  • Hong Kong port generates 7.5% cargo increase
  • Delmege opens first paint depot in Galle
  • Plan demise no surprise
  • Amadeus and the Y2K bug

    It is called the information age - the latest and most exciting wave to grip humanity after the agricultural and the industrial revolution. The tiny computer chip today rules the world and can even, in some aspects, substitute its creator man. It is the age of Internet Travels, e-commerce, on-line shopping and networking. Thanks to the wireless environment, every industry has drastically benefited in terms of costs, labour and most importantly, time. Technological advancements are being made at an equally dizzy speed.

    Technology has shrunk the world and brought nations and communities closer than ever before. This has led to the growth of global giants and corporates operating in countries across continents. Consequentially, travel around the world has zoomed up by leaps and bounds with a rise seen in both corporate and leisure travel. To cope up with the pressures of information overload and paucity of time, the travel industry, for example, the world's largest industry, devised the extremely efficient and powerful GDS (Global Distribution System).

    The industry has experienced a major transformation with the introduction of automation. Imagine a system storing all the data about your itinerary, giving you travel information from anywhere, any time about every tourist destinations in the world, making your reservation, confirming the same, suggesting the cheapest and quickest manner of travelling-and-all this at the click of a few buttons. These user-friendly products provide an easy solution to the needs of the travel agent, and therefore the demand for travel distribution products is rising exponentially, driven by technology and market needs. These electronic highways integrate distributed, client server architecture's and provide products for PC-based offices. The major GDS players, collectively, distribute information to more than 5,00,000 workstations and manage, for airlines alone, over one billion bookings a year. Amadeus distributes worldwide, channelling information to travel agents on over 120 countries and to sales offices of 150 airlines.

    Amadeus, with the help of reservation tools and various office management products have made travel easy and quick. Travelling is now not only stress free for the traveller but also equally relaxed for the travel agents and other involved with travel arrangements.

    Along with the speed, efficiency and other boons of technology, this revolution has also spread the scare that comes with the Year 2000 - the risk of losing all stored data as PCs crash the world over. The Y2K or Millennium bug, as it is popularly known, is a threat that looms large over almost all sectors like banking, medicine and travel etc......

    The impact of the Y2K problem has not been as grave for Amadeus as for other Computerised Reservation Systems as the system is just ten years old and therefore only limited number of changes are necessary to allow the system to process Year 2000 data. Also, the fact that Amadeus has continuously evolved its system in line with functional and technical changes has helped Amadeus face this threat. In fact, the total manpower dedicated to Year 2000 will represent less than 5 per cent of Amedeus's software development capability.

    The Amadeus Year 2000 project has been underway since 1996. Testing began in 1997 to simulate how the central system would react in Year 2000. Since then the Company has done meticulous inventories and analyses of all systems and applications, making modifications when required. In addition to the testing underway, Amadeus launched a programme worldwide to help its travel agency customers overcome the Millennium bug. Since the travel technology industry is highly integrated, the key to the success of Amadeus is ensuring our providers are Year 2000 compliant, as they feed the information into our central system. As part of this, information and awareness programmes for travel agencies in various countries were implemented. Given the high inter-dependencies between provider's systems and the Amadeus system, the company focused of working closely together to ensure that their systems are also Year 2000 compliant.

    Amadeus attained Year 2000 compliance by end of 1998 and issued its first Year 2000 ticket on January 5, 1999. The latest figures and the observed trend show that today we have successfully processed (add bookings) close to 35 million Y2K air bookings, including about 500,000 for January 1, 2000.


    MCS Logistics sole agents of M+R Spedag

    MCS Logistics was born last year with a sole purpose of providing customers with Networking across the continent. With the de-regulation and with the invent of Globalization, it is mandatory to have connectivity in the other part of the world to compete effectively.

    MCS with the vast experience behind in the Liner Shipping and Consolidation work headed by Hemantha Wickremasinghe, another product of CSC.

    MCS is involved with Logistics Management, consolidation and strategic planning for export trade for selected customers who need such a service and to concentrate on their Core businesses.

    M+R having seen the potential of MCS and their dynamic vision for the 21st Century decided to appoint them as their sole agent in Sri Lanka for the purpose of re-inventing their Market presence in the Indian sub-continent.

    Mr. Giovanni said, "With M+R Network and their communication system, customers could be given information without any hassle and Sri Lankan customers are assured of Swiss Quality when they deal with MCS, M+R Network".

    They are pretty strong in Far East, Europe and CIS countries and it goes without saying with their superior connection to the customers and with the shipping lines, it is very much competitive in dealing with M+R AGENCY NETWORK.


    Hong Kong port generates 7.5% cargo increase

    Overall cargo through-put at Hong Kong port grew 6% to 43.3m tonnes in the third quarter of this year compared with a year earlier, the local census and statistics department has announced.

    The figures come just days after the Port and Maritime Board revealed that box through-put at Kwai Chung port grew 14.1% to 885,330 teu in November compared with November 1998. This took the accumulated through-put between January and November to 9.4m teu, a 7.5% increase compared to a year earlier.

    The latest census and statistics department figures cover both containerised and bulk cargo.

    They show that the volume of inbound cargo dropped by 1% to 26.4m tonnes, while outbound freight soared 19% to 17m tonnes between July and September, compared with the same period last year.

    Freight through-put on ocean-going ships increased by 3% to 32.5m, while cargo through-put handled by river trade vessels, covering Macau and China's Pearl River Delta ports, grew 13% to 11m tonnes.

    A government spokesman said the increases were due to "a sharp rebound of goods driven by a further pick-up [of the economies] in East Asia, sustained robust demand in the US and general strengthening in the European economies."

    Transhipment of ocean-going and river trade inbound and outbound cargoes rose substantially - inbound ocean transhipment soared 41% to 5.1m tonnes, outbound ocean transhipment by 25% to 4.6m tonnes. There were similar increases in river- trade transhipment - 37% in inbound cargo to 1.2m tonnes and 27% in outbound freight to 6.1m tonnes.

    The biggest growth markets for inbound cargo, originating outside Hong Kong, were Thailand, where the volume of freight increased by 46%, Indonesia, which saw a 17% increase, and Malaysia which rose 14%.

    The largest growth areas for outbound cargoes were to Indonesia which soared by 109%, the Philippines, up 53%, and Singapore 31%.

    By commodity, the biggest volume increases were in iron and steel which grew 37% in the third quarter this year compared with the same period last year, resins and plastics which rose 26% and sand and gravel which posted a 17% rise. However, the volume of petroleum and related products fell by 28% and coal and coke by 26%.


    Delmege opens first paint depot in Galle

    Delmege Forsyth & Co. (Paints) Pvt. Ltd. inaugurated their first paint distribution depot in Galle. The mayor of Galle, Mr. Lional Premasiri presided over the opening ceremony. The depot will service paint outlets in the Southern province.

    Mr. Premasiri said at the inauguration: "We welcome the initiative of Delmege Forsyth in opening a depot in Galle. We hope that traders will adapt to the challenges of a competitive business environment". The inauguration ceremony was followed by a luncheon at the Lighthouse Hotel in Galle.

    The opening of the depot is a part of the restructuring process of the company's distribution system to ensure that paint dealers receive that best services, inventories are optimally managed and a cost efficiency is enhanced. Delmege Forsyth & Co Paints' new partner Asian Paints has successfully implemented this system in several countries and is confident that it will benefit dealers immensely in Sri Lanka too.

    S. Mohandas, Chief Executive, Delmege Forsyth & Co. Paints Ltd. said, "The response from dealers to this new system of distribution has been very encouraging. We believe that we will not only be able to serve dealers better but we will also be able to enhance profitability of all our business partners".

    Some of the country's leading paint brands, Crown and Permoglaze are manufactured and marketed by Delmege Forsyth & Co (Paints) Pvt. Ltd. Also available under these brands are a full range of emulsions, enamel paints, floor paints, wood finishes and auto paints.


    Plan demise no surprise

    Cargo 2000's decision after nearly three years to jettison its ambitious 'master operating plan' and become a standards certification agency has come as no surprise to air freight insiders, writes Roger Hailey.

    "Since when have a group of 35 airlines and freight forwarders been able to decide anything? This is not a surprise, it was always on the cards," said one airline observer who wished to remain anonymous.

    However, Lufthansa Cargo boss Wilhelm Althen had already cast doubt on Cargo 2000, the alliance between airlines and forwarders which planned to offer integrator service standards for air freight.

    In an interview with Lloyd's List, the soon-to-retire Mr. Althen said that a mix-match of cargo and passenger-focused airlines, plus a reluctance to invest huge amounts in computer systems, are a major drawback of Cargo 2000.

    He prophesied: "In my view Cargo 2000 is necessary for standardisation. I do not believe that Cargo 2000 can be a solution to create something like an integrator network for the airlines. "As long as you have all airlines and most of the forwarders in that institution it will not work and it will not work for one very simple reason.

    "You still have two groups of airlines. You have belly carriers concentrating on its contribution only for passenger services. They don't really care about where quality is produced for the ground investment, they just want to have enough in the bellies.

    "And then there is the other group with a strong focus on cargo, these are the designated, cargo carriers going their own way."

    Cargo 2000 was set up in response to failing air freight delivery times when Federal Express, DHL and TNT shook up the industry. Airfreight delivery times have scarcely improved over 20 years. The average is now six days compared with 6.5 days in the late 1970s. Mr. Althen says that in Cargo 2000 "the slowest makes the pace," comparing the situation to IATA: "As long as you have to have a consensus between all the airlines, it won't work."

    He continued: "Cargo 2000 is fantastic instrument for standardising the IT role of the cargo airlines and forwarders.

    "But in Cargo 2000 there are so many airlines with a different view. At the moment we invest yearly in IT the same amount we invest in a freighter, which means up to US$200m. Nowadays investment in IT is more important than investment into capacity. You can buy the capacity but you cannot buy the IT systems.

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