24th June 2001
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Employees of Metalix protesting against the
attempt made by the NDB to auction the factory 
last Wednesday. The takeover by NDB has 
resulted in the loss of employment for 100 workers
including the disabled worker in the inset. 
(Pix by Gemunu Wellage)
Partners in progress:executioners in 
distress, say industrialists

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New player in air cargo transport

A local firm is setting its sights on giving the country's national carrier a run for its money by entering the air cargo transportation sector and has applied to the Department of Civil Aviation for a licence.

Air Lanka Cargo Ltd (ACL) has been set up with an authorised share capital of Rs. 15 billion with plans to lease two planes from Sharjah or Bulgaria.

"Sri Lanka has an open skies policy for cargo and we intend giving competitors a run for their money," Director, Air Lanka Cargo Ltd, Vajira Wijesuriya told The Sunday Times Business Desk. ACL expects to commence operations in July subject to approval from the Department of Civil Aviation.

Competitors include SriLankan Airlines Cargo and Expo Aviation. The new company's promoters believe using the name Air Lanka Cargo would help them benefit from the vast goodwill and brand image which has traditionally been associated with it.

The company is considering entering into a dry lease costing US $ 550,000 an year to obtain a 36-year old Russian-built Antonov aircraft and intends operating on some of its competitors routes including the Maldives and India. It also plans to include routes such as Colombo-Dubai, Dubai-India and Colombo-Singapore. 

Following the application for a licence the Civil Aviation Department is expected to evaluate the company's maintenance control and operational manuals in order to recommend any amendments, if necessary, prior to granting approval.

"We intend using this opportunity to gain a foothold into the passenger transport sector although there is no open skies policy in this area at present," Mr. Wijesuriya said.

Shareholders of the new venture include companies from the East West Group, Wijesuriya Holdings and Land and Buildings (Pvt) Ltd. While products transported by air would include garments and perishables such as vegetables, flowers and fish, competition is expected from passenger crafts which transport cargo. 

PERC distorts profits picture-Shell says 

By Hiran Senewiratne
As Shell prepares for another price increase in domestic and industrial gas, a controversy has arisen over company profits published in the state-run Public Enterprise Reforms Commission's (PERC) official website, which the former says is misleading.

PERC said, in an official announcement inviting offers to purchase the government's 49 percent stake in Shell, that Shell Lanka Ltd had recorded a profit of Rs. 379 million, Rs. 303 million and Rs. 34 million respectively in the years 1998, 1999 and 2000.

But a Shell company spokesman said these figures reflect a distorted picture of the real situation, since PERC has not considered massive losses incurred by its subsidiary, Shell Terminal Lanka Ltd. "Taking into consideration the performance of the two companies together, Shell has incurred a loss," he added.

However, the spokesman and other Shell officials declined to comment on whether Shell Lanka had made profits in the aforementioned years. PERC officials said they were audited figures given by the Shell company itself. The dispute has created public doubt as to the credibility of both sets of figures.

Shell officials in the past have repeatedly reported losses. Figures released by the company last week reveal an accumulated loss of Rs. 1.1 billion during the last five years of operations in Sri Lanka.

Shell is currently considering a 15 percent increase in gas prices to offset losses, which is set to trigger another public outcry against the Anglo-Dutch gas giant.

The company has been accused by consumers and political parties of increasing gas prices many times in the past year to boost profitability, a charge Shell has denied.

Shell said that according to an agreement with the government, during the monopoly period (which ended last November) the company is permitted to increase gas prices twice a year.

Currency devaluation, world price increases of gas and investment for expansion of the network have resulted in heavy losses, a company spokesman said.

Bata walks tall after two bad years

Bata Ltd, Sri Lanka's biggest shoemaker, is turning around from a period of financial problems and restive labour at its retail outlets, with increased production and planned profitability.

The multinational company rejected reports and speculation that Bata was closing down its production unit, selling off to a competitor and limiting its operations to an import and distribution outfit.

"Closing down? No way, we are heading for better times and have even raised production," Peruvian-born Jorge Carbajal, managing director of Bata told The Sunday Times Business Desk.

"We have been here for more than 50 years. We will remain here for another 50 years or more. We will stay here during the good times and the bad times," he added. The company faced a crisis at its retail outlets last December in a dispute with a JVP-led union over union rights.

The problem was sorted out through a compromise resolution but there have been persistent rumours in the past few months that Bata was among a group of companies that has been troubled by a labour crisis and faced uncertainty.

Bata's post-tax losses rose to Rs. 64 million last year from a loss of Rs. 51.5 million in 1999 mainly due to high production costs and higher-than-market-rate wages for the 1,100-work force. 

Mr. Carbajal said this year a major turnaround was expected with an improvement in the loss situation in the first half and profits in the second half. "We hope to break even this year and then start making profits," he said during a tour of the company's Ratmalana factory, where dozens of workers sat at assembly lines turning out shoes.

This was no indication of a factory in crisis. Some senior management executives had also returned from visits to overseas Bata factories to ascertain new techniques and study new designs, aimed at improving quality, increasing output and preparing for a major product launch in July.

Bata produces and markets shoes of 700 different designs in its network of retail outlets. Currently factory production has increased to 90 percent capacity from 60 percent last year. Mr. Carbajal said 70 percent of Bata output is made at the factory, 27 percent outsourced and about three percent imported, mainly from a Bata supplier in China.

Bata says it has a 27 percent share of the local shoe market where demand is around 25 to 27 million pairs a year. (FS)

Mind your Business 

Shocking suggestion
With scandal after scandal emerging from the board that electrifies the country, there have been suggestions to privatize that institution too.

But a vociferous section of the ruling party is against the idea, citing the case of the gas distributors who continue to raise their rates and make politicians unpopular. Nevertheless, top officials have been asked to look into the pros and cons of the issue, including the political aspects and the possibility of privatization on a regional basis.

Turbulent time for trade
While these are politically volatile times that rarely lead to economic stability, it was unfortunate that the man who lost his job happened to hold the trade portfolio.

His sudden and unceremonious dismissal wrought havoc in business circles and at least two prospective overseas investors who were meeting top state officials to discuss business opportunities were perturbed, to put it mildly. 

They went through the motions of the meeting, we hear, but now their answer is more likely to be in the negative, especially after they were told that no replacement has yet been named for the ousted minister.

Dambulla stadium damned?
If anything is in a mess in this country, cricket is. The gentlemen's game is being put through a legal wrangle and caught up with the issue is that stadium in Dambulla.

With the ownership of the ground in dispute, hoteliers in the region who invested in expansion programmes are complaining that without cricket to support tourism, they would all end up in the red. Formal representations are likely to be made on the matter to the man that matters - after all, he is in charge of tourism as well.

Partners in progress:executioners in distress, say industrialists

By Chanakya Dissanayake
National Development Bank's (NDB) takeover and their attempt to auction the Metalix Engineering Company's factory last Wednesday was just another routine exercise for the bank. But to the 100 workers at the factory, it was the end of their livelihood.

When the workers pleaded with the NDB officers not to seize the factory and make them destitute overnight, NDB officers Peter Nanayakkara and Dalrene Seneviratne calmly explained that they were only performing their duty.

Auctioneer Dunstan Kelaart apparently unaffected by the display of emotions said, "All I have to do is drop the hammer (to complete the auction), get into my jeep and go home." The miniature hammer in his pocket was never taken out as the auction was postponed due to the crisis. 

Metalix attempted a last ditch stand against the NDB when it tried to get a court order squashing the NDB resolution to auction the factory for non-settlement of dues. Their appeal was rejected on Monday and the NDB got the green light to proceed.

The issue raises a fresh debate over the Parate Execution for failing companies. Trade chambers have been campaigning against it for many years, calling it a no-win situation for both banks and industries. Once the bank seizes the property they retain it for a long period due to the lack of buyers in a depressed economy. Meanwhile, production is discontinued and the workers are deprived of an income. "Banks have become real estate owners, if you go by their balance sheets," Dr. Bandula Perera, a top chamber personality once said.

Chambers have been promoting the U S Bankruptcy Law Chapter 11-style reforms as a win-win solution for banks and the industries in distress. Chapter 11 attempts to revive a sick industry by making available management expertise and protection from creditors for a limited time period, in order to turn the company around. However, the government is yet to consider these reforms favourably. In the meantime, bank notifications in newspapers regarding the auctioning of business premises seized by them are fast beginning to outnumber obituary notices!

Improving the ability to implement

The President's move to estab- lish implementation units in each ministry is most welcome. We hope this effort would result in the various proposals and plans that are mooted from time to time to be implemented more effectively and expeditiously. Our hopes are, however, tempered with considerable scepticism.

There can be no doubt that one of the most serious impediments to the country's economic growth and development has been the difficulty to implement plans. This is not a recent phenomenon. It has been a feature of our development experience at least since independence but more likely stretches into a much longer time period. The clearest illustration of this inability is that the country never implemented the various plans and implementation programs that had been drawn up beginning with the excellent 10-year plan. In fact the government that came into power in 1965 decided that it was useless to have any plans in the conventional sense and proceeded to adopt a strategy of implementation programs. It also combined the planning ministry with the implementation ministry.

One of the innovations at that time was the Operations Room where the targets of the various development ministries were displayed and the Prime Minister himself reviewed the progress of implementation. Where needed, special efforts were mounted to cope with shortfalls in implementation. Such a move was expected to keep the bureaucracy on their feet. Perhaps the President's proposal to set up implementation units is similar to Mr. Dudley Senanayake's Operations Room concept.

Even such an effort had limited success. The bureaucracy found means by which it could bluff the Planning and Plan Implementation Ministry. In as far as the operations room statistics were concerned, there was implementation, but not so on the ground. Admittedly there was a greater sense of urgency and an impact on implementation owing to this strategy. Considering the current poor implementation performance, if the present effort meets with even the measure of success of the Operations Room, it would be an achievement.

A clear example of the inability of governments to implement projects comes from the experience of being unable to utilise the aid foreign donors commit to the country. There are many reasons why there is an under-utilisation of aid, but the basic factor is the incapacity to proceed with the implementation of foreign funded projects within the agreed time frames for them. We make a hue and cry about the amount of foreign aid we get. Yet in fact we are able to only utilise a fraction of the committed aid owing to limited capacities to implement the projects for which the aid is committed. Various bottlenecks, constraints in local finances and personnel and sheer lethargy are among the factors for this state of poor progress on foreign aided projects.

The reasons for our inability to implement are numerous. One of the root causes is the conduct of ministers themselves, including the President. Everyone is aware that the President wastes hours and hours of work time by making ministers kick their heels waiting for her to come to meetings she has summoned. When ten officers wait for three hours it is a waste of 30 hours of work of important officials. Since this happens so often hundreds of hours of work are lost each week. The impact is not confined to these hours of work loss, as other officers who have to implement things cannot do their work owing to the long absence of their superiors.

Another example where the politicians themselves are responsible for the weakening implementation are the numerous tamashas that are held. Officials spend a great deal of time having to attend these, prepare the groundwork, arrange the ceremonies and attend to so many details. Therefore instead of doing their substantial work they spend their time on these activities. The third example is the number of meetings officials have to attend at the ministries. The time lost is particularly considerable when field officials have to come from distant places to attend these meetings. In the case of particular ministries, where their departments are not in Colombo, the time lost by key officials is enormous. In fact, some officers may be spending as much time on the road as in their offices.

A fourth illustration comes from the numerous seminars that are organised by various government agencies. These seminars cost money and waste the time of a large number of persons as they bear no fruit. They have become a substitute for action. There is no follow up or implementation of the ideas discussed. Instead one seminar follows another, repeating the ideas in previous seminars. These do not exhaust the reasons for poor implementation. The lack of discipline, political interference in public administration, inadequate skills, inter-departmental delays, poor organisational methods and outdated systems are among other factors for low efficiencies. Improving implementation capacities and administrative efficiency is therefore a Herculean task. We doubt very much that the President's proposal to establish implementation units in each ministry would make any serious dent in the capacity to implement. The implementation units we fear will end up being unable to implement. Yet try we must.

Point of View

Plug loopholes in Industrial Disputes Act

By Frank Jinadasa
It would appear from an article by Mr. Irwin Jayasuriya that appeared in The Sunday Times of May 13, 2001, that far-reaching measures have been provided in the interest of both employers and employees, as well as the nation, by the reconciliation of disputes under the Industrial Disputes Act No. 43 of 1950. Unfortunately, there appears to be loop-holes in the Act, which as stated by Mr. Jayasuriya, employers, some small time industrialists and businessmen take advantage of and avoid appearing before the Conciliation Board.

Some officials of the Labour Department do not appear to extend their co-operation under the system of dispute resolution by conciliation. This is a very sad and discouraging and warrants appropriate amendments/additions to the Act to safeguard employees, who are generally the only victims of such situations, from consequent hardships.

The Establishment Code, approved by the Cabinet Ministers in terms of Article 55 (4) of the Constitution of the Democratic Socialist Republic of Sri Lanka, provides specifically and in detail procedures to be followed in holding disciplinary inquiries in the public sector, but where the private sector is concerned there appears to be a total absence of legal protection in what is termed a "Domestic Inquiry" by employers, which is of comparatively recent origin, and termed so to give the impression of a fair hearing afforded to an accused employee.

The methods some unscrupulous employers adopt in the guise of "Domestic Inquiries" (fair hearings) to harass and intimidate employees they wish to discontinue from their services, are incredible. The general modus operandi being:

a) The employee is interdicted, sometimes without wages, even without issuing a formal "Show Cause" and a Charge Sheet follows only after a search for material, after interdiction, to issue the same;

b) The word 'fraud' is included in some of the charges, even when there isn't even a semblance of a fraud, merely to make interdiction without wages to appear justified;

c) The Inquiring Officer is a person of the employer's choice and since this is apparently a means of an additional income for the Inquiring Officer, he can, if he chooses to, be partial towards the employers;

d) The employers maintain that the employee's defence representative should be someone acceptable to them, which is understandable, but in the event he is unacceptable, no reasons are given on the grounds that they are not obliged to give reasons;

e) The inquiry is deliberately delayed and, in the meantime, the employee has no means of sustenance for his wife and family and himself, while he has to bear the costs of defending himself at the inquiry as well;

f) Under these circumstances he is "driven to the wall" and, on being unable to bear it any longer, submits himself and accepts whatever pittance that is offered to him by his employers in settlement of the dispute and leaves his employment;

g) In instances where the domestic inquiry is concluded the Inquiring Officer's findings are not made available to the defendant employee on the grounds that it is a privileged document.

In a recent case of a dispute in the estate sector, an employee was interdicted without wages, with no formal show cause issued to him. One week later, despite the annual audit which was free of adverse comments, and done only five months earlier, a special audit was carried out and a charge sheet was issued three months after interdiction. The domestic inquiry commenced five months after interdiction and took 20 months to be concluded. A further four months were taken by the Inquiring Officer to finalise his report, making a total of 29 months after interdiction, while all this time the employee was without wages. Finally the employee's service was terminated with retrospective effect from the date of interdiction. This dispute is now before the Labour Tribunal.

While the inquiry was proceeding, the employee appealed to the Labour Department to intervene and provide some relief. The Labour Commissioner who investigated was of the view that the inquiry was unduly delayed and suggested to the employers to pay the employee 1/2 months wages until the inquiry was concluded, but this was unacceptable to the employers. The Labour Commissioner then stipulated dates for the finalisation of the dispute, but this was ignored by the employer.

Sri Lanka is perhaps one of the few countries where unscrupulous employers can resort to irregular practices on account of inadequate industrial laws, despite being a socialist country, to the detriment of employees. It is imperative that the following be given due consideration:

a) Procedures to be followed prior to interdiction, when interdiction is contemplated;

b) Interdiction without wages, when considered appropriate, only with the approval of the Labour Commissioner or by a court order;

c) Conciliation Officer to be appointed by the Commissioner of Labour from a panel of Conciliation Officers, comprising essentially of retired officials with a judicial background, and others of similar standing who will be paid at the conclusion of an inquiry by the employer through the Labour Secretariat;

d) Specific period for the conclusion of the domestic inquiry depending on the number and nature of charges, but not exceeding three months, unless with the approval of the Labour Commissioner;

e) The Inquiring Officer's findings to be forwarded to the employers through the Labour Secretariat, with a copy to the defendant employee;

f) If either party is in disagreement with the Inquiring Officer's findings, the employer or employee, as the case may be, may resort to a decision from a higher court as provided in the Industrial Disputes Act related to Labour Tribunal orders, but the Act amended to double the penalty in the event of a negative order from a higher court.

This will not only provide some protection to employees, but also ease congestion at the Labour Tribunals.


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