Business

25th November 2001

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Pictures show (top), the old locomotives and (below), the new-look  engines after 
refurbishing and re-engineering.
Contents

Mind your Business 

Wheeler-dealers
The greens are sure a confident lot when it comes to predicting the outcome of the polls though one would expect them to be once bitten, twice shy.

The talk is now that if the greens take over the reins of power major privatisation deals involving telecommunications, airlines and gas distribution will be reviewed. And that is why some overseas stakeholders are already running for cover, seeking assurances from the rival camp - and getting them aplenty!

Bears and bulls wary
The Colombo bourse is set for the Big Bang on polling day - a Bull Run that will take the market to new heights.

Already major institutional players are reportedly buying small parcels of value-for-money blue chips at bargain prices hoping to cash in, in a few weeks time but at the same time being careful not to push the market up right now.

Even then the response of overseas buyers has been lukewarm because they are very sceptical about the outcome of the elections, especially about a smooth transfer of power.

Chain for the better
Sri Lanka has its fair share of supermarkets, with at least three big names indulging in the business but the country doesn't boast of a single international supermarket chain.

That may soon change, if the initial responses of a well-known retailer are anything to go by. If this trend continues, we may soon have not only 'cities' and 'supers' but 'marts' as well!


Pre-poll patchwork for garments

By Feizal Samath
Faced with an unpopular vote base in the form of garment manufacturers and close to one million workers, the government is stepping up efforts to provide quick relief to the industry.

President Chandrika Kumaratunga has summoned an urgent meeting tomorrow with the garment trade where she is expected to announce a series of concessions and incentives to placate a crisis-hit industry.

Not to be outdone, the main opposition United National party (UNP), confident of victory at the December 5 poll, is also working out relief measures including sending a high-powered ministerial team to the US and Europe to press for duty free concessions for Sri Lanka.

The trade has not been officially told the agenda for Monday's meeting with President Kumaratunga but the word is out there is an "X-mas" bonanza in store for garment exporters. "Our letter of invitation just says the president is inviting us for a discussion on the industry," noted Nihal Seneviratne, general secretary of the Sri Lanka Chamber of Garment Exporters.

However, meetings between the Chamber, Treasury, Textile Quota Board (TQB) and the Board of Investment (BOI) has triggered speculation that President Kumaratunga would announce a series of measures to ease the garment crisis.

The concessions are particularly aimed at the small and medium sized industries, which raised a stir in government circles, some weeks ago, calling a press conference to explain the seriousness of the situation.

Industrialists told reporters that they are facing a major crisis with the feared closure of at least 50 small and medium-scale factories as manufacturers grappled with a "no work" scenario.

"I have never faced such a crisis in my 17 years in this industry," noted Seneviratne, also managing director at Nilano Garments Ltd. Cassian Fernando, past president of the chamber and a veteran manufacturer, agreed saying this is one of the worst crises faced by the industry.

Some 200 factories are either working at 50 percent or have shut down production in many of their production lines. UNP leader Ranil Wickremesinghe told The Sunday Times Business he had plans to revive an industry, which was propelled into a major export earner during the UNP's run of power between 1977 to 1994.

He said he was planning to give BOI status and similar concessions to all small and medium scale industries, which would probably be in force by December 5 since Kumaratunga is planning to announce similar concessions at tomorrow's meeting.

The UNP leader also said his government would negotiate with US and EU authorities to provide duty-free access and concessions similar to what Bangladesh and Pakistan have obtained.

A note on the garment industry crisis prepared by a foreign consultancy says that contrary to what trade negotiators say, the end of the quotas (in 2005) will not create a level playing field for Sri Lankan garments.

"Quotas may disappear but tariffs will remain and these tariffs are levied at the highest rate of all major producers."

At a meeting chaired by Treasury Secretary, Dr. P.B. Jayasundera on Thursday, there was general agreement of a level-playing field between BOI and non-BOI industries. "The secretary agreed that these two sectors should be brought under one umbrella," Seneviratne, who was present at the meeting, said.

He said small and medium garment factories are likely to be provided with concessions enjoyed by BOI firms except for tax concessions, which needs parliamentary approval if changes are to be made.

The chamber, citing factory closures and increasing layoffs, has pleaded for a series of concessions and subsidies to pay salaries, reduce the cost of utilities and for re-structuring of their factories.

"We need some cash in our hands to tide over the crisis at least for six months and then hope there would be a turnaround," Seneviratne said.

Upgrading factories is the key towards Sri Lanka's garment exporters meeting the challenges of the industry when the non-quota regime starts in January 2005.

The 2001 budget provides for the creation of a re-structuring fund for the garment industry where a 75 percent state grant will be given to factories while the industry invests the balance 25 percent. "We fought for this for a long time, as this is our money and we need to gear up for 2005. But sadly this has not been implemented," said Cassian Fernando.

"I hope this is not an election stunt and would not be subject to change whoever is in power after the poll," said another industrialist referring to tomorrow's likely announcement.

Lyn Fernando, a former chamber president and managing director at Creations Ltd, said that current indications are that garment exports from Sri Lanka will fall sharply this year while countries in the sub-Sahara region, which have concessions, are increasing their exports.

Fernando, part of an EDB delegation that visited the US and Canada last month to whip up support from buyers, said the EDB should immediately set up an office in New York with a representative and an assistant concentrating only on promoting the country's apparel industry.


Great feat by SL engineers

The ingenuity of Sri Lankan engineers was recently showcased when a project undertaken by Caterpiller engineers through local agent United Tractors & Equipment Ltd (UTE) saved the country a massive Rs. 460 million and gave Sri Lanka Railways a facelift.

The company said on November 1, the railway department commissioned the first of four locomotives literally resurrected from the railway's scrap yard and re-engineered with Caterpiller's local agents.

The project places Sri Lanka as the first country in Asia to re-power locomotives with Caterpillar 35115 diesel engines. "This remarkable engineering feat assumed greater significance with the locomotives assigned to the gruelling upcountry line, where in earlier incidents, some of the best known and brand new engines have failed," the UTE statement said.

"The locomotives selected for rehabilitation have been in the railway scrap yard in Ratmalana exposed to the elements for over a decade. The transformation since then has surprised even the hardest detractors of the project," said Priath Fernando, chairman of UTE.

He said re-commissioning locomotives condemned as scrap metal not only saves vast sums of public money but also pays tribute to local engineering and technical skills.

A Sri Lanka Railways spokesman said the cost to the government for rehabilitating one locomotive was just Rs. 45 million compared to Rs. 165 million, if a brand new locomotive was purchased.

UTE, meanwhile, began a new phase in its 54-year old business journey, moving to its own industrial estate along with sister companies. The company, including the head office, has shifted to a prime site at Wattala.


Small scale firms face big crisis

745 wind up during the past six months

The Small and Medium Entrepreneurs' Lanka Organisation (SMELO) has informed the government that more than 745 small and medium scale enterprises have closed during the last six months.

''People have been left in the lurch due to the unavailability of any support from the government and any other institution. We have informed the government of this plight through letters and meetings with officials,'' a SMELO spokesman said.

Many members of the SMELO, at a news conference last week in Colombo, blamed the situation on the current economic crisis coupled with economic mismanagement, which they said has reduced the purchasing power of the people.

They said last year the contribution from small and medium-scale enterprises (SMEs) in the economic development of the country amounted to more than 50 percent of production.

"These small and medium size businesses are a force to be reckoned with and are the driving force of the economy,'' President of the SMELO, D.G.W. Muhandiramge said.

Every month at least hundred SME's were shutting down due to the absence of proper economic policies to safeguard these industries.

He said that most of their entrepreneurs had many problems but no government has listened to their grievances since independence.

The SMELO president said at present they have close to 5,850 members in their organisation who are "hoping against hope" for some government incentives and concessions to protect their industries.

Some of the problems faced by these industries include difficulties in obtaining initial capital for the business, non-availability and the lack of support from banks and financial institutions, Muhandiramge added.

SMELO has requested the government to establish a small and medium Entrepreneur Investment Board to help and assist industries and those facing a crisis.


Relate your success story

Do you run a business that is unusual or against all odds? Have you succeeded in life as a small or medium-scale business battling against multi-nationals and giant local conglomerates and still made it to the top?

The Sunday Times Business Desk would like to hear from you to highlight your success and the winning formula. Write/ contact the Business Editor on e-mail btimes@wijeya.lk, The Sunday Times, 8, Hunupitiya Cross Road, Colombo 2 or telephone 304179.


Dispute with TRC costs Tritel Rs.20 million

By Hiran Senewiratne
A 20 million-rupee investment by Tritel, Sri Lanka's biggest payphone company, in a new voice mail system at phone booths across the island went down the drain after telecommunication authorities introduced a set of new regulations this year.

"We are thoroughly disappointed with the relevant authorities for letting us down," said Tritel Chief Executive Officer, Robert. J. Schuster.

To add to the disappointment, the company has delayed plans to invest US $ 5-10 million to improve its network and also double the number of telephone booths, due to economic uncertainty in the country.

Schuster, referring to the voice mail dispute, said the company was the first to design and develop a voice mail system for payphones in Sri Lanka at a time when permission was not necessary. This happened before new regulations governing this facility came into place this year by the Telecommunication Regulatory Commission (TRC).

He said the TRC then gave negative replies to repeated requests to permit the use of this system. The Tritel chief said permission was not necessary until the new rules came into force. TRC Director General, R.D. Somasiri, however, said Tritel has never applied for a license and is therefore not a licensed operator to use voice mail.

He said licences to operate voice mail have been given to Sri Lanka Telecom, Suntel and Lanka Bell - all fixed phone operators - and not payphone operators.

A disappointed Schuster said value added products such as voice mail systems were necessary to attract customers in the face of growing competition from fixed phone and mobile phone operators.

Tritel has 3,000 telephone booths across the island and enjoys a 60 percent market share including rural areas in this telecommunication segment. But reduced telephone call rate charges and stagnation in the market, plus high taxes and GST have eroded the profits of the business in addition to bureaucratic red tape.

Schuster said the company was not getting decent returns on their investment and the cloudy economic environment has stalled future investment plans.

"We are coming out with value addition to our pay phone system to attract more customers'' asserted Ranjan Guruge, General Manager Operations at TSG Lanka Ltd, another payphone company.

He said his company had the lowest call charges in the town and were offering customers novel products like the "Gold Card" to save money with value addition including tariff advantages. "Since mobile phone charges are high, it is cheaper to use prepaid phone cards."



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