Business
18th June 2000

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Affno to revolutionise local web pages

Asia is on its way to become the most powerful trading block in the world. Over the years the Asian region has transformed into a producing nation and more recently is taking on information technology too.

The combination of the two, promises prosperity in the Internet era.

Companies like Affno - a local e-commerce solution provider feel that the Asian region has potential to get on the web and sell their produce direct to the end consumer, cutting cost to the bare minimum.

Affno, is one of the new age e-commerce solution providers who began operation in January to exploit the potential in the region and the rest of the world.

Its head, Suren Kannangara said that his company was concentrating on getting the companies in the region on the web and into e-commerce gradually.

He said that most companies in the region got on the web simply because someone else did and that most company web sites were merely a online version of the company's printed profile. Kannangara says that there was a huge need for companies to understand the dynamics of the web and provide strategies and solutions that will work for businesses. Affno hopes to help these companies communicate the precise message that they wanted to give and to the correct target audience. Already Affno has worked with a few leading Sri Lankan companies to create a web presence and to offer e-commerce services.

Affno will also concentrate on brand building. Kannangara said that since most local manufacturers produce for international brands, overseas consumers were not aware of the existence of many leading local produces.

He said that through the web most of these companies could create an awareness as to their existence and perhaps increase their turnover through e-commerce.

Affno has been set up as an international company right from the outset. The design and engineering base is in Colombo Sri Lanka.

The e-commerce and logistics development base is in Ireland; the marketing bases are in New Jersey and in London.


Watson does it

I came, I fixed it, I am hanging up now. Vijendran Watson, Lanka Bell's outgoing CEO is doing just that after earning the credits for turning the company around in less than two years.

Being the youngest of the two private telephone operators, Lanka Bell commenced operations in 1996. The company invested US$ 150 mn in expensive technology and presently controls around five percent (unofficial estimates) fixed voice market.

Burdened with a high level of foreign debt, Lanka Bell suffered heavy losses since inception - that's until Vijendran Watson took over the reigns in October 1998.

The business has since made a turn around from a loss of Rs. 444 mn to positive earnings before interest, tax, depreciation and amortisation (EBITDA) of Rs. 137 mn for the financial year 1999/2000, Watson says.

Monthly recurring revenue increased by 41 percent since November 1998, while the monthly operating expenditure decreased by around 58 percent in the same period. The management was localised with the removal of 35 expatriate staff and the debts have now been re-structured.

Operationally, the company is cash flow positive and able to purchase its equipment to run its day to day operations.

"When I came in October 1998, the shareholders were putting US$ 300,000 per month into the company. We made this turn around without the shareholders actually putting money into our operations itself."

Some shareholder funds flowed in mainly for the Y2K update.

"We are now in a better position to keep moving on. Whether that's sustainable in the long term, my personal view it is not".

He says that Lanka Bell would survive for a year or two years, needs a large operator to effectively compete in the market with giants like NTT and Telia.

Lanka Bell's present strategy is to concentrate on servicing their existing 35,000 subscriber base. Lanka Bell is also encouraging low users (a large part of their customers) to use their network more frequently.

"We have not gone to sleep. But you obviously need a lot of money to expand which we don't have right now."

A few investors have expressed interest in the company. But once the present country situation and the regulatory environment improves, the company would be able to attract a foreign operator.

"I am very hopeful this situation will change and an operator will look at Lanka Bell very attractively, because we are in a much more better position to invest into now," he said.

"My task was to turn the company around. I dressed the bride and made it attractive for a suitable partner. It was looking rather worn down and now it's looking very attractive. She looks very pretty now. With a positive EBITDA and a business plan it can take it even further," he said.

Work on a VSAT network has commenced. The US$ 1.5 mn project is funded entirely through internal resources, and the company has negotiated a staggered payment from equipment supplier NEC.

However, regulatory issues - the interconnection dispute and the call blocking charges will have to be resolved before further investment flows in.

When Sri Lanka Telecom (SLT) first challenged the Telecom regulator's interconnection determination in 1998, Watson predicted that there would be anarchy in the industry.

His prediction has come true, with operators (licenced and unlicenced) taking comfort in courts.

After going through an exhaustive mediation process, SLT took a short-term decision to challenge the determination in court, plunging the industry into further uncertainty.

Watson says that the industry was keen to settle the issues out of court and got the government involved in the issue. "But they took a different view when they decided to list SLT and they didn't look after the interest of the rest of the industry."

Commenting on the voice over internet traffic growth, Watson says that data traffic has taken a hockey stick curve over the last few months, compared to voice which still has a smooth curve.

"SLT is like a big frog in a large pond which they don't know is big and there are two tadpoles there who are growing up to challenge this frog in his kingdom. SLT wants to kill these tadpoles not knowing the pond is large. That's how big voice over internet is. NTT themselves are becoming arbitrage in the business as its huge."

He said with the Korean base Dial pad.com commencing business, it would not take long before voice traffic becomes free of charge.

"We are talking months here before someone explores the possibility of doing a similar thing within Sri Lanka."

Commenting on the mobile industry, Watson said the much sought-after calling party pays (CPP) system would not boost mobile growth.

Despite operators offering discounted packages, the economy has to perform well for the mobile operators to do well. He feels that CPP would kill the mobile market. "I don't know why they are so keen about it. They are quoting country statistics but there are reasons other than CPP as to why those countries grew. People will restrict calling mobile phones due since they have to pay national call charges."

Suddenly the purpose of having a mobile is lost because people will keep off calling mobile phones.

Coming from a mobile operator (Mobitel), Watson says he never supported CPP, particularly when you are starting up as a growing business.

From the customer point of view, they now get a minute free incoming, the business can be transacted if you don't mind paying on an urgent basis.

Watson will hang his boots up at Lanka Bell to start a business of his own.

He would move back to Sydney to start a company as a management and technological consultant.


Tea Update

Low growns going lower

Low grown production has peaked but prices are moving in the opposite direction. Low grown averages have dropped since the beginning of the month despite recording the second highest monthly average price of Rs. 140.64 last month.

Tea industry officials hope that this trend would stop with last week's auction, where the last of the large quantities of low growns came under the hammer.

However, the year on year weekly prices remain relatively higher at Rs. 119.13 from the Rs. 103.05 recorded in 1999.

Other varieties saw some gains but not to satisfactory levels.

Praying for pay

What was initially deemed as a prayer campaign has now transformed into a go slow. Asia Siyaka Tea Brokers reported that plantation workers were under performing to the extent that some factories would be forced to close. Therefore, they expect a drop in the quantity on offer form the first sale in July.

The prayer campaign took off last Sunday as all wage talks held between the workers unions and the factory owners failed to come to a workable conclusion. Due the holiday season, officials were not available for comment.

India wants OPEC like pact

The Economic Times reported that India was exploring the possibility of forging OPEC like marketing collaborations for tea, rice and sugar. The first of a series of alliances is expected to be with Sri Lanka for tea, it biggest rival in the tea export market along with Kenya. The article said that an export agreement between the two countries would therefore ensure that they do not undercut prices before foreign buyers. It is also understood that officials plan to convince Kenya to join the OPEC like forum, as it is the only other significant tea exporter. Another key member who might be let into the cartel is Indonesia, which is emerging as a key player in low quality teas. However, according to the report, commerce ministry sources have said that while India and Sri Lanka wee enthusiastic about forging such a past, Kenya appears to be reluctant to join.

Kenyan plantations to be privatised

The privatisation of Kenyan plantations is due to be completed in July this year enabling the industry to run its own affairs, the Kenyan government said. The Agricultural Minister, Chris Obure said that elections would be held in the small holder sector on Jun 19 in parliament for full liberalisation frorm July 1.

Some 300,000 small-scale tea growers are expected to elect new representatives to lead various farmer institutions, including the Kenya Tea Development Authority (KTDA). He had said that he expected to see farmers running their own affairs from grassroots to the apex body.

Reform of the sector has dragged on since 1992, bogged down by bureaucracy and inconsistent government policies. Established in 1954 by the government to overseas and promote the small grower sector, the KTDA has over the years been accused of gross mismanagement.

The KTDA is effectively owned by the 45 tea factories it currently manages, built under the current law, the government retains control over the organisation's operations. The reform will transform the KTDA into a viable entity operating on commercial principles.

Kenya is the world's third largest producer of black tea, producing over 240 million kilos last year, with small holders accounting for 60 percent of the output. Tea is Kenya's top foreign exchange earner, accounting for over 28 per cent of the countries export receipts.


Mobitel ties up with BHP Steel

Mobitel (Pvt) Ltd, has been chosen by BHP Steel Building Products, the largest publicly listed company in Australia, as their mobile communications partner. Mobile communications is of strategic importance to BHP steel as an increasing amount of the business will be conducted over the mobile network, as the field sales staff stay out of the office with the customers. "All our expectations have been met by Mobitel, with clear signals from all the sales locations, the rates being competitive and the service being impeccable," said a BHP spokesperson, in a news release. BHP Steel Building Products Lanka is part of an integrated international steel structure that has been servicing Asia for the past 30 years. BHP has a diverse range of interest spanning petroleum, minerals, transport, communications and steel. Further specialising in the building, constuction and the distributor markets.


New IBSL examination structure

The Institute of Bankers of Sri Lanka (IBSL)'s new examination, Certificate in Banking and Finance, will be open to candidates outside the banking community. Hitherto, the banking examinations were open exclusively to employees of the banking sector. In response to demand from non banking financial institutions and current global trend to broad base professional education, the Institue has now opened its exams to all candidates, who would possess the prescribed educational qualifications and other optional working experience, an IBSL press release said.

This step would enable a large number of students in banking and non banking financial institutions and non working students including school leavers to obtain an internationally recognized professional qualification in banking and Finance.

The Institute also said that it has been developing its new qualifcation structure in collaboration with the Chartered Institute of Bankers, London (CIB) and is currenlty negotiating full CIB accreditation for the new IBSL qualifications which will lead to jointly awarded and internationally recognized IBSL/CIB examination certificates.

Successful completion of these negotiations, will also allow IBSL Diploma holders to claim two thirds of the 3 credits required towards the award of the University of Manchester Institute of Science & Technology degree.


Internet booth from LISL

Lanka Internet have introduced an Internet booth, for the first time in Sri Lanka.

The internet booth will comprise of a computer, modem and telephone line, all enclosed securely (like an automatic teller machine). Lanka Internet plans to set-up six booths in Colombo over the next three months, a company release said. The company is confident of setting up around twenty of these units in key locations by the year-end.

Access to the Internet Booth; can be done through the purchase of their prepaid Internet Card, more commonly known as the ICard. All the customer has to do, is purchase an Internet card which is available at any Post Office in Colombo and at authorized dealers, login. The Internet card is available at Rs. 450, Rs. 900 and Rs. 1750. With the Internet card; the customer can monitor the amount of time spent on the Internet.

Customers who do not have access to computers or an email address can now take this route to surf their way through the cyberspace.

Lanka Internet Services Limited; incorporated in April 1995, is backed by Central Finance Company Ltd., Lanka Ventures Ltd., Esjay Electronics (Pvt) Ltd. and International Internet Services Inc. of New York, U.S.A. Lanka Internet is a Board of Investment (BOI) approved Company and has recognised operating status from the International Telecommunication Union.


CIMA to conduct exam under new syllabus

The Chartered Institute of Management Accountants (CIMA) will conduct their first examination under a new revised syllabus in May 2001.

The revised CIMA qualification is a response to the need for CIMA Members to play a wider role in business than ever before, making it necessary to acquire a broader range of management and technical skills.

Substantial market research and development work has been carried out over the last two years to develop a qualification that builds on the success of the current qualification and meets the aspirations of CIMA Members, students and employers.

The changes will be built on three levels instead of the current 4 stages.

The foundation level consists of five papers. Intermediate level is equivalent to the current stage 2 and 3. There are two new subjects - Finance and Systems & Project management which reflect the increasing role played by CIMA Members in these areas. The final level deals with strategic management's accounting in three areas: Financial strategy, business strategy and information strategy. An integrative case study has been introduced at the final level.

CIMA is currently exploring the potential for introducing computer- based assessment into the Foundation level examinations. This would be offered as an alternative to paper based examinations although initially both would be available. The introduction of computer based assessment would allow greater flexibility at the Foundation level as the exams will be on a continuous basis.

Visit: www.cimaglobal.com for more details.


Treasury convention

Standard Chartered Bank is sponsoring the first ever regional Treasury Derivative Convention to be held in Dubai.

Topics to be discussed will include identification of risks in the Foreign Exchange and money markets, measuring of risk factor and usage of approporiate hedging instruments.

Treasury Derivatives Market is still in its nascent stage in Sri Lanka and dealers attending this convention will no doubt, benefit from such a tailor made programe.


Money market update

First Capital

      91 Days 182 Days 364 Days

Last Week 11.90% 12.09% 12.67%

This Week 12.01% 12.15% 12.80%

Change 0.11% 0.06% 0.13%

Inter bank market

At the beginning of the shortened week, the inter-bank call money rate climbed over 15%, to reach to all time high for the year.

But as the week progressed, the rate slightly eased to close at 14% levels. Though there was a notable decline in the reverse repo, no significant improvement was witnessed in market liquidity.

The call money rate fluctuated during the week within the boundaries of 13.75% and 15.5%. The weekly call money average surged up to close at 14.90%, aroun 90 basis points higher than the previous week.

The call money rates are likely to range bound until the liquidity improves in the system.

Repo, reverse repo

The Central Bank overnight repo rate and the reverse repo rate remained unchanged at 9.5% and 15% respectively. Most of the market repo transactions took place between 13.5% and 14.5%.

During the week, the market borrowed Rs. 16.75 bn from the Central Bank reverse repo window, averaging approximately Rs. 4.18 bn a day. The repo window continued remain somewhat dormant.

TBill auction

Rs. 3.22 bn worth treasury bills were auctioned last week. The Central Bank, reserved and bought Rs. 1.5 bn worth of bills, with the intension of securing the rates and pumping much needed liquidity to the market. However, despite of the Central Bank intervention the treasury bill yields for all categories surged up.

There was no bond auction held during the week.

Forex

With overnight interest rates reaching as high as 15%, most of the spot transactions too place above the Central Bank selling rate. The demand for dollars remained very high. The market spot rate moved in between Rs. 75.10 and Rs. 75.30 per dollar.

During the week the Central Bank selling rate increased by 22cents, while the spot rate was rose up by 21 cents.

Three month forward dollars are in the range of Rs.76.10 and 76.20.

Biz broadsides


Who is really getting rich?

The champion of the global neo liberal economy is the United Stats of America. Neo liberal economics championed by the Americans, has caused economic havoc and impoverishment in poor or developing nations, or so it has been said in these columns. Underlying this theme is the assumption that America is getting richer, while the rest of he world is getting poorer.

But, assumptions can be flawed in one curious way. It is true that America is getting richer, but the inequalities within America itself increase, and in that sense "America is getting poorer'' and one can understand the strong reaction against the WTO by Americans themselves in Seattle for instance.

In the book, Politics of the Rich and the Poor, Kevin Phillips, a former Presidential aide, says that in the decade of the eighties and into the nineties, the top ten per cent of the American families, increased their average income by 16 per cent.

The top five per cent of the American families increased their incomes by a 23 per cent. But the extremely favoured, neo liberal and the top one per cent of the population, increased their incomes by a whopping 50 per cent.

But, as for the poorer Americans, the bottom eighty per cent all lost out in America's economic leap forward.

The bottom 10 per cent of the Americans, lost 15 per cent of their already meagre incomes. From the rock bottom average of US$ 4113 annually, they plunged into a inhuman US$ 3054 annually.

At the end of the eighties, the top 1 per cent of the American families, had incomes 65 times as great as those of the bottom 10 per cent.

But, a decade later, the top 1 per cent was 115 times as well off as the bottom tenth. Says Phillips, that the "USA is the most unequal society on earth neo liberal policies have deepened this inequality in the land which first proclaimed that all persons are created equal.''

The human rights of the poorer American people are hard-hit in the process, despite the fact that the American leadership is in denial about this fact.

The nexus between economic growth and human rights is more obvious now, after the advent of neo liberalism.

For instance, in Asia, the orthodox assumption was that specific attention to human rights was not necessary in these countries, because economic development would underwrite future advances.

The first and overwhelming priority was economic development -and it was thought that human rights would come later after economic progress was achieved.

But, this was not how things turned out. The Asian economies collapsed, and the hard fought for living standards never materialized.

Now, the IMF too seems to becoming more sensitive to the assault on human rights through neo liberal policies.

But, herein lies some of the bigger comedies of our times. For example, the World Bank is on a drive to reduce poverty in fact the core mandate of the World Bank is to reduce poverty.

The objectives of the World Bank are to protect working populations against major income risks, and to help the non employed to gain access to productive employment.

The World Bank, say the Bank sources, have identified the problem as both a financial and human one , and therefore in Thailand Indonesia Korea and Malaysia the bank is funding provisions for emergency food and medical supplies, the establishment of social safety nets, poverty alleviation income generation projects etc.

But, the point is that the economic polices supported by the World Bank, ensures the kind of poverty and degeneration of human rights that the Bank wants to alleviate. "The critical decisions made in the cabinet rooms and boardrooms in the trading floors and in the financial institutions have absolutely no regard for the impressive body of international human rights standards.

When decisions about internal rates, government spending or wage rates are being made, we can be sure that it is the credit ratings agencies such as Moody's which count, and not those on the UN committee on Economic social and cultural rights. '( Asia Pacific forum Report.)

In other words, the World Bank and the champions of the neo liberal economic system in the West have panicked.

They feel that there will be more views of xenophobia and more "illiberal attitudes'' among the people of the developing nations, who feel that they have been left behind in the global economic process.

The West now wants to make more interventions. Human rights abuses and illiberal attitudes have to be met, they feel with more intervention.

But, a problem created by them, cannot easily be solved by them. Neo liberal economics has spawned human rights abuses not just in the developing world, but in the US itself . ( Refer earlier paragraph on "inhuman income'' among the poorest deciles in USA.)

So the Bank's problem's are not ones that can be changed with a few surgical interventions

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