29th April 2001
Editorial/Opinion| Plus| Business|
Sports| Mirror Magazine
Nostalgia Remember the mid-nineties? The Colombo bourse was bullish and brimming with confidence. The trading floor was filled with brokers, investors and other interested parties. In 1994 the Colombo exchange was rated as one of the best performing markets in the world. What has happened now? Why have the bears taken over and for a prolonged period?
By Feizal SamathSri Lanka's monopoly fuel oil supplier is going ahead with plans to start a new joint venture with Petronas, Malaysia's giant state oil producer, to enter the domestic gas market even as it was close to finalizing a similar deal with a local company.
"Petronas has done a feasibility study and is now preparing the terms and conditions for this JV (joint venture) with us. The joint investment would be US 6 million from both sides. They need to have of filling facility and 400,000 gas cylinders," said Ceylon Petroleum Corporation (CPC) chairman Anil Obeyesekera.
He said the project would get off the ground by the end of the year.
Gas Auto Lanka (Pvt) Ltd, suppliers of Laugfs auto gas, expressed dismay at the news of the proposed Petronas deal. "We heard about the negotiations. But it is unbelievable that such a thing is happening when CPC was negotiating with us first and has not come back to us other than with a draft agreement," a company official said.
Obeyesekera said the CPC produces eight percent of the domestic market demand for liquefied petroleum gas (LPG) and now sells it to Shell Gas, which has a monopoly in the market. The monopoly ended in December and the market was opened to other players.
"We agreed to sell our gas which is only 8 percent of the market being produced at the refinery, to a company called Laughfs Gas. They agreed to market our gas at market prices of 50 rupees less than Shell prices at any given time; that the agreement to supply would be for one year; have 400,000 cylinders and that this gas should not be sold to the auto market," he said
Obeyesekera said when Gas Auto Lanka wanted the supply clause changed to three years the CPC opposed such change and then began negotiating with Petronas.
But Gas Auto Lanka said it was unfair to curb the supply clause to one year. "What do we do after one year? From where do we get the supply?" the official asked, adding that the company has already spent close to 60 million rupees, out of an estimated 400 million-rupee project, to build the filling facility at Biyagama and had placed confirmed import orders for thousands of cylinders.
The company has been negotiating with the CPC since January 8, 2000 when it wrote to the corporation offering to set up a filling plant and buy the CPC gas once Shell Gas's monopoly ended that year in December. It told the corporation that it would take a whole year to build the facility and was presenting this early proposal with this in mind.
Industry sources said the cabinet is believed to have approved the CPC-Gas Auto Lanka proposal in February. The CPC send a draft agreement to Gas Auto last month and the company responded two weeks later making some comments on the draft and suggesting amendments. There has been no response since then.
"We have tried reaching officials. But there is no response to our comments. We don't have a letter even saying that the deal is off," the official said, adding that government officials were last year very supportive of the local project and had urged the company to get its facility in place.
"What happens to all the money we have spent? How are we going to recover
this loss if the CPC confirms the tie-up with Petronas?" asked the official,
saying government officials were once again favouring multinationals against
Wanted: a new standard !A company involved in the shipping industry recently disclosed a 200-million rupee expense as a miscellaneous item in its accounts. When asked for details by those in authority, the management's response was simple.
"It was a bribe we had to pay to a leading politician to fulfill an operational requirement," they said. "How else do you want us to disclose it … expose the man?" they asked.
This is a new way of tightening the belt of the private sector, businessmen say.
No confidenceWith a leadership tussle on in the green camp, there is even a rumour that the stage is set for a no-confidence motion against the blues in the near future.
The speculation has reached such proportions that some stock market watchers are predicting a short but significant rise in the bourse and some business houses are soliciting patronage from the green camp already.
But the latter have encountered a difficult problem on their hands: they are not sure which green camp they should approach!
Wanna be tainted?At long last, the board that invests has been vested with a new boss, but the decision was a tough one, we hear.
The lady preferred a high-profile person and had short-listed a few candidates but none of them wanted the job, or so they claimed.
Their reason? They didn't want to be associated with an institution
where they would be tainted with allegations of corruption, regardless
of how 'straight' they were, they said.
The main emphasis of the inspections is to check whether the investment mix of the insurance companies are in line with the Insurance act. "We want the risks to be evenly diversified. Insurance companies should not be over exposed to any particular sector," said Dr Dayanath Jayasuriya, acting Director General IBSL.
In addition, the on-site inspections will also check the technical reserves
the insurance companies must maintain to meet contingent liabilities. If
IBSL is not satisfied with the quality of the investment the company is
holding, it can compel the company to divest the investment.
Minority players comprising Mobil, BP and Shell met Treasury officials recently to complain against the high tariff structure and the unfair playing field in Sri Lanka.
"Locally blended lubricants amount to 70 percent of the market. The other 30 percent is made up of grease, power steering oil and imported high performance oils. That means for 30 percent of the market, we are on equal terms with our competitors," argued Caltex's General Manager Marketing Kishu Gomez.
Defending the privileges it enjoys as the first mover into the Sri Lankan lubricant market, he said Caltex won its monopoly status through competitive bidding with other multinationals having an equal chance. "We offered the highest bid," Gomez added.
"We only enjoy the exclusivity to 700 CPC distributors( Filling Stations). All other channels of lubricant marketing including service stations, garages and spare part distributors are open to competition," he said.
Caltex noted that these privileges are amply justified by the US $ 6 million investment they have made so far in the local market. "We developed the lubricant market. Caltex outsources packaging and many other non-core activities. The resulting overall employment generation is over 10,000."
The company said it enjoys larger economies of scale and their lower prices are due to this. "70 per cent of the vehicles in Sri Lanka are over 10 years old. The locally blended lubricants are suitable for these vehicles. The market is extremely price driven due to this," Gomez said.
"Our competitors are trying to gain market share without making any investment. The market share we enjoy are direct results of proper marketing strategies and millions of dollars of investment," the Caltext marketing chief added.
Industry sources say that two multinationals are lobbying diplomatic support to influence the government to provide a fair playing field.
"The government invited many players into Sri Lanka ... placing one
on the throne while the rest of us had to share the floor," said a top
official of a lubricant multinational. (CD)
Sri Lanka is a recipient of World Bank aid. The bank announced the appointment of Maarten de Jong as director of a newly created Department of Institutional Integrity. De Jong, a Dutch national, will leave his post as Managing Director of the European Institute for Law Enforcement Cooperation (EULEC).
As director, de Jong will advise senior management in these areas and further develop the Bank's investigative strategies and procedures, contributing to policy initiatives and programmes that will strengthen the Bank's anti-fraud and corruption efforts. De Jong will also raise awareness of the need of high ethical standards by Bank staff.
Since late 1997, the World Bank has undertaken more than 600 specific anti-corruption programmes and governance initiatives in 95 borrower countries.
Recent examples of anti-corruption projects include tax administration in Latvia; judicial reform in Albania, Guatemala and Morocco; administrative and civil service reform in Bolivia and Ghana; regulatory reform in Georgia; and support for the Ombudsman in Peru.
The Bank's investigations has so far resulted in 58 firms and individuals
being permanently banned from future Bank-financed contracts. The Bank
is the first multilateral development bank to publish on its external web
page the names of firms and individuals found to have committed some form
of fraud or corruption.
By Chanakya DissanayakeThe National Savings Bank (NSB), the country's top savings bank that's been involved in some dynamic marketing campaigns, has cut its compulsory retirement age to 58 years from 60 to attract younger people to the staff and make the bank more competitive.
NSB re-launched its image as "your family bank", two years ago to defend its market leader position in retail banking from more competitive private banks.
Backed by aggressive and innovative advertising campaigns, it was able to record an all time high in deposit mobilisation of Rs 13 billion last year. However it is still far from the customer service levels offered by the private banks, according to analysts.
They say NSB's mature staff is a major impediment towards increasing customer service levels and improving the existing systems. "We have realised the fact that we are having ageing staff," said NSB chairman Cyril Herath. He said that in addition to lowering of the compulsory retirement age, the bank would be recruiting 30 members to the management staff during 2001.
However he ruled out the possibility of announcing a volunteer staff retirement (VSR) scheme in the near future, to expedite the process. " The cost effectiveness of a VSR scheme needs to be evaluated in the NSB's context, before we plan a similar scheme".
Mr. Herath further said that the retirement of older staff needed to be phased out strategically to prevent too many experienced staff leaving too soon, hampering the operations of the bank.
NSB, even though highly capitalized, is yet to electronically connect its branch network. This is also indirectly linked to the mature staff situation, creating serious training problems.
"Last year we computerised 35 branches. But, we had enough resources to double it. The problem lies in training and development of staff, to a greater extent," said N.B.S.B. Balalle, General Manager, NSB.
The bank plans to spend Rs 100 million this year to upgrade its IT infrastructure, this includes interconnecting 10 branches in the Colombo vicinity. However NSB has more aggressive future plans to upgrade its systems. "We are currently working with a leading IT consultancy to develop an IT master plan that will give us the competitive leverage," said Mr. Balalle.
NSB recorded a pre tax profit growth of 12.5 percent, from Rs 1.1billion
in 1999 to Rs 1.25 billion for 2000.
By Akhry Ameer"The Internet is still in our future" was the message put across by Jan Gessin of AOEMA (Asia Oceania Electronic Market Place Association) at a seminar in Colombo last week.
"Demolishing Barriers" was theme of the meeting organized by Sri Lanka Telecom with AOEMA aimed at overcoming e-commerce issues in the new millennium.
Ms. Gessin, a Consultant of AOEMA explained in her presentation that despite the dotcom crashes, the Internet is still a tool that lowers cost of communication dramatically and that e-commerce is still evolving.
Her presentation focussed on the fact that the dotcom crashes were purely due to the older economy companies successfully implementing IT solutions for their businesses and in the process bringing down the high share prices of dotcom firms. She also analysed the differences between the e-commerce applications in the previous years and its future trend.
"The e-commerce trend in 98 and 99 was about scoring hits at websites and selling products at give away prices. Selling at a loss doesn't translate into profits."
"Three CDs for $1 including shipping wont work. Do you want a lot of people looking around in your store or do you want a lot of people to actually buy your products? The Internet is not going away. The new economy was always about productivity gains and it still is," she added. She also presented salient points on lessons learned, opportunities, future trends and models in her presentation.
The seminar also tackled various issues through various topics such as "Thriving in a dramatically changing world", e-learning, language translation issues, "e-commerce and the law". A representative of the Telecommunications Regulatory Commission (TRC) also made a presentation on the role played by TRC in Sri Lanka.
Other speakers included Kavan Ratnayake, IBM Country Manager for Sri Lanka, Prof. Lakshman R. Watawala, Deputy Chairman of Singapore Informatics, Nayani Fernando, IT Consultant of the Bank of Ceylon, Michael Baker, CEO of AOEMA and other officials of Sri Lanka Telecom.
AOEMA is a non-profit regional organization that promotes electronic commerce across the Asia-Pacific Region. AOEMA is supported by the Ministry of Public Management, Home Affairs, Posts and Telecommunications and the Foundation of Multi Media Communications of Japan. Representatives of leading private companies such as banks, software companies, service providers, telecom operators and other organizations like the BOI attended this seminar and participated in the panel discussion.
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