Business

9th December 2001

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Features

  • Delays in decision-making slows growth - ADB
  • FTA favours India – EDB official
  • EFC-ILO symposium on globalisation
  • United Motors' commitment to staff
  • The PAYE tax is discriminatory
  • Unfair tax burden on private sector
  • Computer virus posing as screen saver spreads to Asia

    Delays in decision-making slows growth - ADB

    Delays in decision-making and in implementing development projects by Sri Lankan authorities slow down economic growth and increase the costs to the economy, a foreign aid official said last week.

    "Delays in project implementation costs Sri Lanka money," said Joseph Zveglich, deputy resident representative of the Asian Development Bank (ADB). There was a need to change the government's procurement culture, he told a seminar on "ADB and Sri Lanka's development" arranged by the Sri Lanka Economic Association.

    "It is a slow process but I see people are starting to look at it and to get things moving," he said.

    The ADB was trying to "make every investment dollar more efficient" by concentrating on fewer loans and monitoring disbursement to overcome implementation problems, he said.

    For example, in the power sector there were "plenty of well-thought-out generation plans" which have not been implemented for several reasons. There were "timing and consistency problems" and a need to get people to pay more attention to conditions attached to aid, he said.

    "To my knowledge, no other country has technical evaluation committees and cabinet-appointed tender boards like in Sri Lanka," he said, adding that these take time to set up and to meet.

    However, he acknowledged that such procedures were necessary and had worked quite well when they were set up. The problem, Zveglich said, was not with the system itself but rather with those running it. "If you don't have personnel moving it - it can get bogged down," he added.

    He recalled how a recent project was delayed for six months. Another project, the US$ 70 million southern transport project, was delayed by several issues such as the ADB's guidelines on resettlement which were different from that of the government's and the need to pass a new highways act to replace the previous one that was over 100 years old.

    A procurement support bureau set up with donor support had simplified government procurement guidelines and allowed for a bit more flexibility in big projects, Zveglich said.

    Total ADB lending to Sri Lanka since 1969 amounts to US$ 2.6 billion, he said. There were 23 projects worth US$ 926 million in the pipeline. Most of them were new loans such as the US$ 100 million approved last year under the private sector development programme to support changes in the island's legal and regulatory structures.

    Among the four projects approved this year were the Colombo port efficiency improvement programme meant to improve efficiency and ensure faster turnaround of container ships and also do the design work for the South Harbour project, and a line of credit and project support for small and medium enterprise sector development.

    Although the ADB's net resource transfers of US$ 40 to 120 million a year amount to less than one per cent of Gross Domestic Product, the bank is an important source of government funds, Zveglich said.

    "We're a big piece of the government's budget," he said. ADB funds to the government account for a very large share of government spending - 18 percent of total government investment in 1996 was from ADB funds, although this was now down to about five percent, he said.


    FTA favours India – EDB official

    Complaining of unbalanced trade via the Indo-Lanka Free Trade Agreement (FTA), L.S.G. Thilekeratne, Director General of the Export Development Board, said last week that the FTA has been more beneficial to India than Sri Lanka.

    "The FTA has resulted in increased trade in India's favour," he told a seminar on "Indo-Lanka Free Trade Agreement - Constraints and Way Forward" organised by the National Chamber of Commerce recently.

    He said many constraints existed even after the FTA was signed. There are restrictions to certain ports such as Calcutta and Cochin and this particularly affects the tea and garment sectors, he said.

    Central Bank governor, A.S. Jayawardena said the private sector should stop depending on the government and open up trade windows in other countries.

    "Even though good products are available in embassies there aren't many buyers," he said. "Changes should take place for the betterment of the country," he added. Thus, he noted, constraints should be taken as an opportunity. He also said it was too early to evaluate the benefits to be derived from the FTA and encouraged the private sector to go ahead with the agreement.

    Discussing the issue of balanced trade, he said there is no need for such a requirement. Jayawardene said the FTA doesn't need to have balanced trade between the two countries.


    EFC-ILO symposium on globalisation

    The Employers' Federation of Ceylon (EFC) together with the International Labour Organisation (ILO) is organising a symposium on globalisation, competitiveness and socio-economic development on December 11-12 in Colombo.

    The main speaker at the session, S.R. de Silva, senior advisor at the International Organisation of Employers, Geneva, will discuss the issue, "Is globalisation the reason for national socio-economic problems?" which is the theme of a book he recently authored.

    De Silva, a former director-general of Sri Lanka's EFC, has also worked for the ILO.

    The other speakers will be Dr. Rajen Mehrotra, ILO's senior specialist on employers' activities based in New Delhi and Dr. Saman Kelegama, executive director of IPS.

    The EFC said the objectives of the meeting was to identify the relationship between globalisation and competitiveness; the pervasiveness or extent of globalisation; the problems or barriers developing countries face in integrating with the global economy and benefiting from globalisation, and the policies and actions Sri Lanka needs to develop to achieve competitiveness and to benefit from globalisation.


    United Motors' commitment to staff

    United Motors Lanka Limited (UMLL), the top brand new vehicle importer to the country, is placing a lot of emphasis on employee welfare, safety and training.

    Aiming to become the transport solutions provider to all sectors of society, UMLL is setting new standards for itself, the company said in a statement.

    "Such targets may only be achieved through the combined efforts of the management and the employees of the company. Hence, we place a lot of weight on employee welfare, safety and training. This is a continuous procedure and each year we send our staff for training abroad and at the same time conduct special seminars locally with the help of human resource professionals," says a company spokesperson.

    Health safety and welfare of the employees are of paramount importance to the company. Since most of the work is conducted at the workshop, the company has insured the employees. The management has also taken steps to provide the workers with good drinking water, safety equipment and safety gear and overalls where necessary.

    Special security awareness programmes are conducted on a regular basis and all employees have been educated in the usage of fire fighting equipment. Both the 24-hour insurance policy and the special Medical Insurance Scheme have been of immense help to the employees and their families.

    "We have to be equipped to provide a very high service standard. Hence, keeping abreast of new developments is essential. Some of our staff members have been sent for special technical and sales training programmes, conducted by our principals, Mitsubishi Motors," the spokesperson said.

    20% growth at LOLC

    Lanka Orix Leasing Co Ltd (LOLC) has reported a 20 percent growth in profits to Rs. 105 million for the six months to September 2001, the company said.

    It said in keeping with the company's improved profitability, LOLC paid an early interim dividend of 7.5 percent on November 12 as a continuation of last year's policy of providing a steady flow of dividends to its shareholders.

    "LOLC has even bettered its exceptional performance of 2000/2001 during the first half of 2001/2002 despite prevailing economic conditions that are much worse," said LOLC Managing Director Raj de Silva. The company said it was opening a new branch in Kalutara this month.


    The PAYE tax is discriminatory

    Letter

    Ever since 1978, the PAYE system has been used to collect taxes from private sector employees only, which is morally and ethically wrong discriminating against the private sector employees, while at the same time treating public service employees as a privileged lot.

    The government as the employer in the public service has all the right in the world to grant fringe benefits to its employees. Accordingly public service employees enjoy pension rights, railway season tickets at concessionary rates, three sets of railway warrants for the whole family per year, five years salary as a housing loan at a reduced interest rate, etc.

    But does the state have the right to deduct tax from a private sector employee's hard earned money when a public service employee drawing the identical quantum as salary and enjoying the said perks, doesn't pay a red cent as tax?

    The quantum of Rs. 144,000 as a tax-free allowance, which came into effect from 1 April 1993 continues unchanged even though the cost of living has spiralled over ten-fold since 1993.

    A tax-free allowance of Rs. 12,000 per month to a private sector employee nowadays is nothing to crow about, when even the lowest grade employee in a state bank who draws more than Rs. 12,000 per month is also exempted from paying taxes.

    Income Tax assessors are very efficient in maintaining tax files for private sector employees - through returns submitted by the employer. But have they ever designed a system to rope in the sharks that thrive in this society? The answer is in the negative. How many lawyers, medical specialists and other specialised professionals, traders and shopowners declare their monthly and yearly earnings accurately?

    Private sector employees are taxed when their annual income exceeds Rs. 144,000 but also terminal benefits such as provident fund benefits, gratuity and ETF payments are all subject to tax. This daylight robbery of private sector employees, by way of the PAYE system, and other forms of terminal taxes does not end here. The lawmakers have decreed that the withholding tax should be imposed on interest earned on savings deposited in banks by taxpayers only, whereas it should have been the other way round.

    It is not too late for the government to increase the tax-free allowance of private sector employees to Rs. 288,000.

    Srilal Jayasuriya

    Ratmalana.


    Unfair tax burden on private sector

    The "PAY AS YOU EARN" tax was introduced in October 1971 with a view to collecting taxes from incomes in an expeditious manner, i.e. the tax is collected in monthly instalments from employed persons.

    Employment income includes wages, commissions, overtime pay, travelling and other allowances, fees and profits from employment.

    At present all private sector employees whose employment income is Rs. 12,000 per month or over Rs. 144,000 per annum are liable to P.A.Y.E. tax, whereas all public sector employees inclusive of parliamentarians are exempted from paying this tax. Why this discrimination?

    Both the private and public sector employees buy their loaf of bread from the same bakery and their kilo of dhall from the same grocery for the same price. Then why discriminate between the public and private sector employee?

    With so many privileges enjoyed by public sector employees, one must not forget that public sector employees are entitled to a non-contributory pension scheme, whilst private sector employees are taxed on their retiring gratuity and provident fund benefits.

    Perhaps the most heartless and iniquitous tax to be imposed to-date has been the taxing of the private sector employee's provident fund. It must be remembered that this is not merely double taxation but taxation of one's savings for sustenance during the twilight years of life.

    Article 12 (1) of the Constitution states that "all persons are equal before the law and are entitled to equal protection under the law". Now where is this equality as far as the PAYE is concerned?

    Taxes are dues we pay for privileges of membership in an organised society, but the tax system should bear the essential requisites of equity or fairness. No section of the society should be forced to bear an unfair burden or enjoy undue advantages.

    N. Sri Pragasa

    Colombo 6.


    Computer virus posing as screen saver spreads to Asia

    TOKYO — An e-mail-borne computer virus that poses as a screen saver and deletes files related to security software spread to Asia after infecting computers in the U.S. and Europe, makers of anti-virus programmes said.

    The virus, found in an attachment called "gone.scr," mails itself to all names in the address book of an infected computer, said McAfee.com Corp., which rates the virus "high risk." The e- mail message says the attachment contains a screen saver.

    "We have been notified of ten incidents of the virus so far from individuals as well as companies and are still getting calls," said Hwang Mi Kyung, a spokeswoman at Ahnlab Inc., Korea's largest anti-virus software company.

    The virus, called "Goner" by some computer-security workers, follows similar attacks, such as the Badtrans virus distributed last month and September's Nimda.

    Computers used at about 125 companies in the U.S. and Europe were infected with the virus, said Kaori Iizumi, spokeswoman at Trend Micro Corp., the fourth-largest anti-virus software maker.

    Computer users in Japan, South Korea, China and Singapore reported the bug to anti-software makers such as Trend Micro and Ahnlab. The South Korean government issued a warning about the virus after it was first reported in the country this morning.

    "Many people have been baited to open it," said Vincent Gullotto, director of research with Network Associates Inc. "It's a screen saver, which people seem to bite into."

    The virus spread at investment banks and money managers such as New York-based Amerindo Investment Advisors Inc. An employee downloaded the attachment, unwittingly sending the virus to all names in his address book.

    "When he opened it, it reproduced itself and was sent around the firm, and then I opened it, because I knew from who it came from, and then it sent it out to my entire contact list," said Richard Dukas, a spokesman with Amerindo.

    The virus is infecting users at a slower pace than Badtrans and Nimda, said David Hughes, president of U.S. operations for Sophos Plc, a U.K.-based security-software maker.

    "It's spreading rapidly, though it's not record setting," Hughes said.


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