Strengthening SL plastics and rubber industry

The Plastics and Rubber Institute of Sri Lanka (PRI) is considering long-term links with India's Central Institute of Plastics, Engineering and Technology (CIPET) for training and transfer of technology.

PRI Secretary, Mr. Ananda Caldera, made these comments while welcoming Mr. R.K. Dwivedi, CIPET's Manager of Business Development at a Colombo seminar last week.

"We met officials of CIPET at Plastindia 2000," said Mr. Joachim Leckscheidt, Head of Project at the Sri Lanka-German Private Sector Promotion Project (PSP), a project of the German Technical Cooperation (GTZ). "Subsequently PRI and CIPET began correspondence and we hope that with Mr. Dwivedi's arrival here, it will be the beginning of a long-term relationship between the CIPET and the Sri Lankan industry, especially PRI members."

Dwivedi made a presentation last week at the seminar sponsored by PSP, on the services that CIPET offers. These include technical and training support for the plastics and rubber industry in Sri Lanka, specific training programmers on mould making, designing and maintenance aspects based on a needs assessment of the Sri Lankan industry, plastic testing facilities available at CIPET's testing centre and entrepreneurship development programmes on "Setting up of a plastics-based industry".

The rubber and plastics industries have been identified by the Sri Lankan government as target sectors for industrialisation and investment promotion, for which development plans have been formulated by the Ministry of Industrial Development. One of the targets of the plastics industry, set for 2010, is to concentrate on processing of 'focal products'; i.e. plastic packaging products and plastics for the electric/electronic industry.

The promotion of clustering between the rubber and plastics industries to promote rubber/plastic blending, another target of the industrial plan, is expected to contribute to the creation of specific products of higher value-addition which can enhance competitiveness in global markets, a PSP release said.

The manufacture of plastic products in Sri Lanka started around 1965 for the local market. It has grown since then, with considerable improvement in product quality and an increasing share of exports. The industry also contributes indirectly to exports, for instance by providing components to the electro and electronics exporting industries, or supplying packaging for garments, footwear, tea and other export sectors.

While consumer goods have dominated the industry for a long time, industrial products are quickly catching up. According to the Central Bank's Annual Report for the year 2000, plastics and PVC products grew by 6.5% in 2000, showing consumer preference for plastics instead of wood products such as furniture, building materials and other household items.

Sri Lanka ranks seventh among rubber producing countries and has been a long time exporter of natural rubber and rubber products to the EU, USA and various Asian destinations. The industry registered an increase of 12.1 percent in the year 2000, according to the Central Bank. Value-added exports include industrial and agricultural tyres and rubber gloves, for which notable increases have been recorded.

Africa could be worst casualty - World Bank

Lack of investment, worsening trade terms and dwindling aid threaten hard-won political reforms on the continent, said Mamphela Ramphele, the World Bank's managing director for human development. "African democracies have had to go through so much to get where they are. If political leaders are not rewarded it becomes more difficult for them to take the next step," she told a Southern Africa Financial Markets conference.

The attacks on the US have further reduced growth, commodity prices and aid commitments, which spelled disaster for Africa, she noted. "Aid flows have halved over the past few years. We anticipate further cuts," she said. As the west's attention is drawn by Asia and the Middle East, reduced aid is likely to stall the re-construction of some of the poorest and most war-weary countries, including Somalia, Sudan, Eritrea and Ethiopia. "

Sampath presents total virtuality

By Akhry Ameer

"Many would ask the question why we are introducing new Internet-based products when there is no money in it. We are doing this for the convenience of our users. There will be benefits from these in the long term," Anil Amarasuriya, Managing Director of Sampath Bank told reporters last week.

Sampath Bank's new host of products included an innovative Web Card, a credit card facility that has been designed specifically for use on the Internet. The Web Card is recognised by VISA and is essentially a credit card number that can be entered at the time of payment on the Internet.

The other innovations, the e-Wallet and the WAP Portal present enhanced accessibility and usage to the first Sri Lankan based Internet Payment Gateway (IPG) that was launched by Sampath Bank in July this year. The e-Wallet works on a similar concept of the traditional wallets and enables a user to store all his/her credit card details including non-Sampath Bank cards, Sampath debit cards and accounts. The wallet is secure as all details are encrypted and stored in the Sampath Bank's server.

The WAP portal enables mobile phone users with WAP facility to make payments. The bank initially plans to provide this feature for the payment of utility bills. An interesting point of the new products was that all of them had been designed locally. Dinesh Rodrigo, CEO/Managing Director of Interblocks (Pvt) Ltd, the company that developed the IPG and its product enhancements the WAP portal and the e-Wallet said, "We are happy that a Sri Lankan bank was the first customer of our IPG solution. All our product enhancements are about widening accessibility."

Ornamental fish in troubled waters

The sources said that an "excessively rigid application of quarantine laws and bans" regarding the import of aquatic plants into Sri Lanka is bound to inflict significant damage to the export industry. If Sri Lankan companies have to face stringent import legislation, they will no longer be able to 'broadbase' tropical fish exports with the inclusion of a wide selection of plants, they said adding that bans and restrictions would encourage illegal imports.

Hayleys Electronics in an expansive mood

Addressing them at the Head Office of Hayleys, the company's new head, Rizvi Zaheed, was quoted as saying in a company statement that Hayleys Electronics would continue to take advantage of its strong island-wide dealer and service networks as the central drivers of its business, but would also look at new innovative ways to stimulate growth.

Mr. Zaheed who succeeded Sujiva Dewaraja as the Hayleys Group Management Committee Member overseeing Hayleys Electronics, has been with the Hayleys Group for more than 20 years.

Hayleys Electronics is the sole agent in Sri Lanka for the international consumer electronics and lighting products giant, Philips of the Netherlands, Daewoo Electronics, Usha and Daytron.

Three Coins speciality stimulates Sri Lanka's beer scene

Three Coins, the brewer of Sri Lanka's only all-malt, 100 percent natural lager and the country's only bottle-refermented white beer (both niche market products), said that specialty beers have over the past six months secured a major presence in what was once fortified bastions of mass-market products.

In March this year, Three Coins launched a groundbreaking joint venture with Riva N.V of Belgium to produce "3 Coins Riva" a unique bottle-refermented white beer. Considered the ultimate warm weather brew, "Riva" uses top-fermenting yeast and wheat-malt, a Three Coins statement said.

Laugfs gas makes us cry

What happens to the old cylinder? Is Shell ready to refund the Rs. 2,500, we paid? If so, where? At the local dealers or any other place?

As it is the Shell cylinder owners can never be benefited by the reduction of gas prices by Laugfs Lanka. This anomaly has to be corrected by the authorities concerned or the benefit of cheaper gas would be limited to just a few people.

M.D.B. Goonetilleka,
Wadduwa

Sumathi bets on healthcare

This new venture is in association with the Guidant Corporation of USA, said Lakith Peiris, Chief Executive Officer of Life Serve. "We would be the exclusive distributor in Sri Lanka for Guidant products," he said.

These products would be supplied to both private and government hospitals. However, he said the products would be supplied at a lower rate to government hospitals.

Guidant is a leading manufacturer of cardiovascular medical products with sales expected to reach US$ 3 billion this year. They also spend US$ 400 million on research and development. These products help patients with heart disease to return to active and productive lives.

Recessionomics: Monetary policy, hubris

By Arjuna Mahendran

Not surprisingly, the upward ascent of the ASPI tailed off thereafter. The markets were not amused, clearly. And no wonder. There is no evidence, statistical or otherwise, to state that low interest rates stimulate either the stock market or real economic activity in Sri Lanka. Let's look at the evidence.

The last episode of interest rate cuts in Sri Lanka was in 1997 when the treasury bill rate fell to 10% and prime rates to 15%. In that year, economic growth rose to 6.3% and the ASPI rose over 700, its highest level since 1994. This prima facie evidence seems to indicate that indeed there was an economic boom, of sorts, in that year.

But if we dig deeper this is not the case. The GDP growth rate was boosted in 97 by the fact that 96 was a dreadful year when the economy grew by 3.8%. 1996 was the year when we had to suffer the first prolonged bout of power cuts in living memory due to a drought and mismanagement of the CEB. So both agriculture and industry were virtually shut for over three months that year and the surge in growth in 97 is entirely due to the revival to normal levels of activity (what statisticians call the 'base effect').

The stock market surged that year because the rather clever managers at the NDB managed to place a chunk of government-owned shares in their bank into the hands of foreign fund managers. The foreigners were no doubt impressed by the infamous Liam Fox agreement of that year which promised to bring government and opposition together to solve the burning ethnic war in Sri Lanka.

So I cannot conclude that lower interest rates were the prime mover of the economy and stockmarket in 97. Indeed, in 93 when the economy grew almost 7% and the ASPI surged to 1,000, t-bills yielded 19% and the prime rate was at 20%. Moreover, in 98 and 99, despite interest rates remaining relatively low, growth and the ASPI languished.

I would rather look at the direction of interest rates as being the EFFECT of lacklustre economic growth, rather than the CAUSE of higher economic growth in the future.

Thus in 97 rates came down because of the slack in economic growth of the previous year which diminished the demand for credit and hence the price of funds, viz. the rate of interest. The dampening effect of the Asian crisis kept domestic credit demand low thereafter till mid-99. In Oct 99 Presidential elections were announced along with a large increase in expenditure on the war effort, in a desperate bid to win southern votes.

Government borrowing went through the roof thereafter as the stage was set for the Oct 2000 general elections. In consequence, the t-bill and prime rates zoomed up to 18% and 22% respectively, in 2000.

This is why I say interest rates are a consequence rather than a cause of the growth of economic activity in Sri Lanka. Rates have come down this October because the power cuts have once more disrupted domestic activity and cramped private demand for bank credit. In fact, if the IMF had not rapped the government on the knuckles earlier this year to cut its borrowing, interest rates would have remained high.

Now that the IMF programme is gathering dust once more, and we have another burst of pre-election handouts galore, government borrowing will surge once more. My prediction is that the cuts in interest rates will be undone by December.

The moral of the story is that economic policy-makers have a very restricted role to play in boosting activity in Sri Lanka. They should aim to keep policy variables like interest rates and exchange rates relatively stable and not prone to sudden and destabilising swings which confuse the market. Their room for manoeuvre in kick-starting economic growth and the stockmarket is severely limited since it is largely determined by the state of our export markets and sentiment towards emerging markets among foreign investors.

On the other hand inconsistent policies have a tremendously adverse impact on the economy which unnecessarily deepen the extent of economic downturns. The sooner this is realised the better.