BOI: Putting the house in order
Plans are underway to break up Sri Lanka's Board of Investment (BOI) into
three more efficient entities while an extensive audit of its finances
is also being undertaken.
"We want to put the house in order. That is our priority this year,"
said Arjuna Mahendran, BOI chairman and managing director. An audit of
the BOI would be carried out by selected investment banks and internal
auditors due to the parlous state of the agency's financial affairs.
He said as far as promotion is concerned, the BOI's immediate focus
is on India and Singapore. "Prime Minister Ranil Wickremesinghe is also
very keen that we attract investors from these two countries," he said
adding that the recent trip by the premier to Singapore was aimed at kick
starting this process.
The BOI will be separated into three units handling the zones, import/export
(Investor Services Centre) and promotion. A key change is the setting up
of a holding company and smaller companies to run the BOI's 14 zones.
The holding company will be listed on the stock exchange, the BOI chief
noted. "We hardly have time for promotion which should be our primary focus.
A lot of time is spent on tackling problems at the zones and ensuring services
(on the imports and exports side)," Mahendran said. The zones have been
neglected over the past few years and have many problems relating to infrastructure
and administration which is cumbersome and bureaucratic.
One of the biggest problems he is facing at the moment is finding money
to pay off bills. The BOI needs Rs. 900 million for January to March but
the Treasury has allocated only Rs. 45 million.
"The government is cutting spending to the bare minimum and we are having
a tough time settling the bills for work done in the recent past," he said.
There was no money to pay contractors for a variety of work including building
bridges, roads or solid waste plants.
"They (contractors) might sue is if we don't pay up. We are trying to
defer payments as much as possible," he said adding that the BOI has requested
Treasury approval to borrow money to pay off the debts.
In one example, he said the BOI spent Rs. 42 million on an image-building
campaign in the foreign media in November 2001 in a decision taken after
parliament had been dissolved. "We don't have the money to pay even this
bill."
The BOI wants to make the zones profit centres and is asking investment
banks for proposals to "corporatise" the zones. Twelve offers are also
being evaluated from companies to provide ISO 9001 certification standards
for the BOI.
Another decision involving the BOI is the formation of a Revenue Authority
bringing together the BOI, the Customs and the Inland Revenue Department
in terms of revenue collection.
Legislation is also being drafted on the government's proposed development
zones. The BOI will delegate the authority of attracting investments to
these zones whose CEO's will serve on the BOI board as directors.
Power crisis may worsen if rains fail
Power cuts are likely to be extended if rainfall during the southwest monsoon
(starting around end March) is below normal. "Extending power cuts would
be absolutely the last resort," said Prof. Mohan Munasinghe, chairman of
the National Energy Council.
"March would be a critical period. We're hoping for a normal monsoon.
If March is drier than expected then we would be forced to take more stringent
measures than we've already done," he told The Sunday Times Business.
There were no immediate plans to extend power cuts but an energy task
force was monitoring the situation on a weekly basis, trying to tackle
problems as they arise, he said. BOI chief Arjuna Mahendran, a member of
the government's energy policy committee, also agreed that if the rains
fail during the next monsoon, the power crisis could worsen.
Energy expert Dr. Tilak Siyambalapitiya warned last week that electricity
price hikes were likely in May, after local government polls, and that
the country was heading for another power crunch in 2004. "We shall be
seeing very high electricity prices," he told a conference on de-regulation
over the weekend. With the cost of producing electricity far higher than
the selling price, "price increases are a must to make the Ceylon Electricity
Board a viable entity," he said. By 2010 Sri Lanka will probably be the
country with the highest electricity prices, he said.
Prof. Munasinghe said the CEB was considering "price revisions".
Siyambalapitiya said the present power crisis was a result of repeated
delays in building new power plants over the last few years. "Low rainfall
is not the reason for the present power crisis," he said. "The crisis was
predicted years ago." He predicted another serious power crisis in 2004,
again owing to delays in building power plants.
"A shortfall of 500 giga watt hours is inevitable in 2004," he said.
"This means four to six hour power cuts over three months."
Munasinghe said they had two options in tackling the present power crisis
- using emergency power and captive power. The CEB had contracted for 80
MW of emergency power and was offering significantly higher prices - around
Rs. 10 per kilowatt hour - for captive power (that is generated by factories
and hotels).
System versus personal rapport
Business leaders taking part in last week's conference on de-regulation
repeatedly called for a proper and effective system in the government to
ensure decisions are taken in a timely manner.
Bureaucrats have become used to not taking decisions or having a tendency
to pass the buck, with years of political interference in their work making
them demoralised and unwilling to take responsibility for decisions, it
was pointed out.
Decision-making based on personal relationship, such as that between
former president R. Premadasa and former Finance Ministry secretary R.
Paskaralingam, was not desirable and, in any case, could not be repeated
because of different political and social circumstances. What was required
was a system that would work irrespective of personalities. Paskaralingam,
now an advisor to the Ministry of Policy Development and Implementation,
was also present at the meeting. |
