braces for Gulf war shock
Amid dire warnings
of severe disruption to the import-dependent economy if there is
another war in the Gulf, the government is considering urgent measures
to build up adequate stocks of essential commodities to ensure food
security in the event of US military action against Iraq and provide
a safety net to consumers.
Fears for the
safety of thousands of Sri Lankan migrants in the Middle East, mostly
housemaids, also prompted the government to consider ways to arrange
an airlift home for these workers.
Tension in the
Gulf has already had an impact on Ceylon tea exports, with shipments
to the region, a key market, being disrupted, resulting in large
quantities remaining unsold at the Colombo auctions and stocks accumulating
The crisis prompted warnings of unrest in villages, which depend
on the tea trade, with industry officials accusing the government
of not having a contingency plan to meet the situation.
Consumer Affairs Minister Ravi Karunanayake has urged the government
launch a co-ordinated programme of action to prepare for any disruption
caused by the situation in the Gulf and provide a safety net
to ensure the welfare of consumers.
In a memorandum
to the cabinet, Karunanayake said the lead up to a war is likely
to result in heightened volatility in world markets for commodity
food items and freight rates as both governments and private trade
build up strategic food stocks.
Any such supply
problems would lead to panic buying and hoarding by retail traders,
leaving consumers vulnerable to spiralling prices, he warned.
should consider suitable contingency measures to avert
a national shortage of essential food items if normal imports are
disrupted, he suggested.
could primarily focus on improving the capacity of private sector
trade channels to function under the conditions that would prevail
during a war as well as focus on the use of public sector resources
to meet the requirements of emergency food storage and distribution,
should determine quantities to be bought immediately
by the CWE, assess current food stock levels islandwide to determine
any shortfall against desirable safety levels, and mobilise extra
storage space, he recommended.
He said the
island, being a net food importing developing country, was more
dependent on imports for her requirements of wheat flour, sugar,
powdered milk, lentils (dhal) and about 10 percent of rice consumption,
than neighbours like India and Pakistan.
should also consider fiscal measures to encourage higher import
volumes of selected items, and step up monitoring and surveillance
of the wholesale trade to effectively intervene against panic buying
and hoarding, he said.
the government was worried about the vulnerability of consumers
to the economic shocks of a war, especially at a time when the cost
of living is already high and set to rise further with price hikes
in gas, electricity and telephone calls.
The Ceylon Petroleum
Corporation has said it is taking measures to source petroleum supplies
from East Asia and reduce dependence on Middle East oil to prepare
for a possible disruption to oil shipments or price hikes if fighting
Minister Lakshman Kiriella has summoned an emergency meeting on
Wednesday of all tea trade stakeholders, along with officials from
the Treasury and commercial banks, to discuss ways to resolve the
crisis facing the industry.
Tea Board officials
said the industry had been asked to come with specific proposals
to get over the crisis and the meeting would discuss giving relief
on bank loan repayments and warehousing problems.
Prices of Low
Grown teas, which account for more than half of Sri Lanka s crop
and are much in demand in the Gulf, fell further at the auctions
of January 27-28 owing to slack demand from Middle Eastern buyers,
brokers and factory owners said.
said the mood was turning desperate in the southern
low country, where Low Growns are produced, mainly by some 350,000
Tea Factory Owners Association (PTFOA) said almost a million kg
or 15-20 percent of auction quantities remained unsold at the last
two sales when usually all teas are sold.
is probably a couple of weeks away already were feeling the
heat. Therell be severe repercussions, warned PTFOA
chairman Sarath Samaraweera. This has never happened before.
million kg of Low Grown teas are sold at the auctions each week
of the crop consists of Low Growns of which 60-70 percent is shipped
to the Middle East and North Africa
said factories would be forced to stop production owing to lack
of cash if the crisis continued for a couple of weeks longer and
warned that it could cause unrest in villages which depend on the
cultivation and supply of green leaf.
were demanding low-cost credit and a moratorium on loan repayments
to help tide over cash flow problems, which made it difficult to
pay smallholders who supply green leaf.
said they need government support to find storage space since warehouses
in Colombo would soon be overflowing and would not be able to accept
to purchase SLIC stake in Commercial Bank
Finance Corporation (IFC) has offered to buy part of the stake in
Commercial Bank held by the government through Sri Lanka Insurance
made a firm offer to the government to buy a 15 percent stake,
said Sanjeewa Senanayake, IFC Country Manager. SLIC holds
30 percent in Commercial Bank out of which 20 percent is up for
sale. We are offering to buy 15 percent of it as the Banking Act
does not permit us to buy all."
Asked why Commercial
Bank was chosen as an investment, he said, "We have been closely
monitoring the performance of the bank. It is a well-managed bank
with good corporate governance. Commercial Bank is expanding, and
moving toward project lending and opening up branches in the region."
Chrishantha Perera said his company was allowed to hold 30 percent
of Commercial Bank, despite the restrictions under the Banking Act,
because it is a state-owned entity, but that this would change when
it is privatised.
SLIC has told
bidders through the Public Enterprise Reforms Commission that it
wants to sell a 20 percent stake in Commercial Bank at the prevailing
market price, he said.
to quit Ceylon Chamber
Renton de Alwis,
Secretary General/CEO of the Ceylon Chamber of Commerce, is quitting
the chamber on March 31 for health reasons.
De Alwis, a
former Sri Lanka Tourist Board chairman who joined the chamber six
months ago, said he had informed the chamber hierarchy of his decision.
I am having
a few health problems and want to take a break from a hectic work
schedule, he said adding that he has enjoyed his stint at
investors buy Pramuka Merchant
A group of investors has acquired and plan to rename Pramuka
Merchant Corporation, a unit of the troubled Pramuka Savings and
Development Bank which was closed by the Central Bank in December
owing to alleged serious financial irregularities.
of Union Assurance, Sarath Wikramanayake, is a consultant to the
has decided to break away from Pramuka Savings and Development Bank
in an attempt to survive the backlash due to the closure of its
parent firm and to give the company a facelift.
first step in giving the company a facelift we have broken away
from the Pramuka Group," said Dayantha Fernando, Managing Director
of Pramuka Merchant and a director on the Board of the emerging
to make the break was made after the new investors, going by the
name of Mercury Investment Holdings Pvt. Ltd., described as a holding
company, acquired the stakes in Pramuka Merchant held by Pramuka
Holdings and Rohan Perera, the former chairman of Pramuka Bank.
Mercury Investment has on its Board Sarath Herath and Priyantha
went abroad before he could be questioned by the Criminal Investigations
Department about the irregularities in Pramuka Bank and is now hunted
Four of the
five directors on the Board of Pramuka Merchant told The Sunday
Times FT in the interview that the main aim in keeping the company
afloat for this long, despite the severe backlash, was their concern
for their customers.
step in rebuilding the company would be to change the name, which
has been approved by the Registrar of Companies but cannot be published
till certain statutory requirements are met, said Fernando.
company would "be sourcing certain investors to invest in the
company." Fernando said that they had received offers from
UK, but were waiting till all the necessary formalities are complete.
The new Board
will consist of only five directors, namely Frank Irugalbandara
(chairman), Sarath Herath, Ms. Neela de Zoysa, Dayantha Fernando
and Ranjan Mellawa.
of the emerging company said that their business plans have not
been completely formulated but one plan would be to appeal to their
placement holders to keep their placements for a minimum period
of one year without demanding payment even at maturity so that they
could service the interest.
present also expressed hope that the company, with its network of
10 branches, would do well with the investments by Mercury Investment
Holdings, which is backed by construction interests.
few companies would have faced what we have faced and survived for
this long," said Fernando.
director in the new Board of Pramuka Merchant, said, "one key
area is to concentrate more on the core area of merchant banking
and we've got a very senior merchant banker, the former CEO of Union
Assurance, Sarath Wikramanayake as a consultant to the Board. He
is planning to guide the Board in a somewhat new direction, where
we will concentrate more on merchant banking."
said that action would be taken by them to ensure that costs are
kept to a bare minimum in order for them to "survive this difficult
said the original investment by Mercury Investment Holdings Pvt.
Ltd. was motivated by public interest. But the directors said it
was a good deal for anyone who was prepared to take the initial
The old staff
of Pramuka Merchant would be retained as "the company is trying
to resurrect (itself) with the assistance of all the officers."