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The government has not given any Treasury guarantee to the British consortium Ibis in the privatisation of six cluster bus companies and would do so only after it is satisfied about the merits of the transaction, Finance Minister K.N. Choksy said. "The final
agreement has not yet been signed because the outstanding matters,
particularly the granting of the government guarantee, are being
examined closely by the Prime Minister himself," he told The
Sunday Times FT in an interview last Thursday. "The Treasury
has not given any guarantee up to date." The controversial
deal, in which the Ibis consortium acquired a 39 percent stake worth
Rs. 1.42 billion in the six cluster bus companies, has been criticised
for the way in which government procedures were apparently violated
and for lack of transparency. Opposition
parties have alleged that the Public Enterprises Reform Commission,
which handled the transaction, extended several times the deadline
for Ibis to pay up and did not cash the bid bond when the consortium
failed to do so before the deadline. PERC has maintained
a deafening silence on the deal and has not responded to media queries
about allegations of irregularities in the transaction. An agreement
to hand over the management and shares of the six cluster bus companies
of the CTB was signed on March 31. President Chandrika
Kumaratunga asked the government to suspend the transaction until
it was more completely discussed and her spokesman has called it
a "plunder of national assets". Choksy said
the terms of the agreements have not been finalised yet and that
the queries raised by President Kumaratunga are being examined. "The Minister
of Transport is due to meet the President on the matters raised
by her," he said. "The management
has not yet been handed over to Ibis. Every aspect will be considered
on its merits before the Treasury makes any commitment in the transaction." Choksy said
the privatisation of state-owned institutions is done by the Ministry
of Economic Reforms through the Public Enterprises Reform Commission
and that when PERC put up for sale the 39 percent stake in the bus
companies Ibis was the only bidder. "The sale
of shares openly on the stock exchange is possibly the most transparent
method of privatisation," he said. "Subsequently,
negotiations did take place between PERC and Ibis in regard to certain
terms of the transaction. These talks were also handled by the Ministry
of Economic Reforms in conjunction with PERC. "One issue
that has arisen is in regard to the guarantee to be given by the
government to enable Ibis to raise the initial capital funds required
to refurbish the transport fleet. This itself
was considered in detail by the cabinet in conjunction with the
Attorney General and has not yet been finalised." Choksy said
the government wanted to privatise the bus companies because it
could no longer afford to subsidise the firms, which had been incurring
huge losses due to mismanagement in the past. "It is
not possible to continue in this fashion any longer and privatisation
is essential and inevitable," he said. "However, it does not follow that the Treasury will necessarily grant a guarantee. This will be decided on its merits." Technical irregularities plague insurance privatisation bids Janashakthi
Insurance Company, which bought National Insurance Corp. on the
strength of its expertise in the business, finds it has lost the
bid to buy Sri Lanka Insurance Corp because its proposal was technically
flawed.
By a strange quirk of fate, it was second time lucky for tycoon Harry Jayawardena whose consortium bought SLIC, as he had previously lost the bid for NIC for the same reasons - his consortium's proposal did not meet the technical criteria. Janashakthi has complained that proper procedures had not been followed in the privisation of SLIC since they did not get back their financial proposal unopened despite being rejected on the grounds that their technical proposal was flawed. Under the privatisation
procedure, the technical proposal is examined first and only if
it is valid is the financial proposal considered. "If our
technical bid was accepted, please acknowledge and say so,"
said Chandra Schaffter, Managing Director of Janashakthi. "Our
competitors are making use of this opportunity and saying that we
couldn't even make an acceptable technical bid. It's detrimental
to our reputation." He further said that since the financial proposal has not been returned it means the financial proposal has been opened and their bid price made known to the others. "If they
haven't opened the bid they could always return it. If our bid failed
technically we should be informed officially," he said. Public
Enterprises Reform Commission officials were not available for comment
but other government sources said the unsuccessful bids would be
returned once the agreement details are finalized. Harry Jayawardena,
who was not available for comment on the Rs. 6-billion deal, has
already paid the bulk of the money for SLIC. Finance Minister
K.N. Choksy said the Janashakthi chairman had made representations
to the Cabinet sub-committee on tenders that procedures were not
correctly followed. "However, he (chairman) has categorically
stated in a letter to me that Janashakthi was not objecting to the
transaction and that the transaction could be concluded," Choksy
told The Sunday Times FT in an interview. "I have forwarded Janashakthi's representations to the Ministry of Economic Reforms under which PERC comes. This transaction was handled by PERC and the Ministry of Economic Reforms," Choksy said. "Janashakthi's bid was in fact Rs. 50 million less than the Distilleries' consortium." Unions - UNP opposes, SLFP gets cold feet By Quintus
Perera Kithsiri Perera,
president, Sri Lanka Nidahas Sevaka Sangamaya Branch (SLNSS), the
SLFP controlled union, told The Sunday Times FT that it was pointless
fighting against the privatisation of SLIC as it has already been
done and "nothing can be done about it at this stage".
The union would deal with the new employer to safeguard the interests
of its members. All the major
unions representing the employees, the Ceylon Mercantile Union,
Jathika Sevaka Sangamaya and SLNSS, were having discussions on strategies
to deal with the present situation. They also discussed ways of
obtaining compensation, although the issue would not arise if the
employees were to continue with the new employer. W.A. Somapala, Secretary, CMU Branch, SLIC, said that they have been fighting jointly all along against the move to privatise SLIC but that their protest was weakened when the JSS support was withdrawn. Please turn to They believed
the government would never have privatised SLIC. The present government
deal took them unawares. He said that the JSS members were offered
undue promotions and some members allowed unlimited overtime to
discourage them from getting involved in the protests against privatisation. Samarajeewa
Epa, Vice President, JSS Branch, SLIC, said that they have been
protesting against the privatisation move throughout and they have
been in constant contact with the authorities. The sale of
SLICL to a private party had taken them unawares and they had lost
confidence in the government, he said. When asked
why the JSS pulled out of the joint protest efforts against privatisation,
Epa said that while the joint protest was meant to be against privatisation,
the protestors were at the same time campaigning to topple the government. As a government
sponsored union, the JSS could not support a move to topple the
government and had therefore pulled out. The JSS branch
was now studying the issue and would try its best to see whether
it would be possible to negate the deal even at this moment, failing
which they would be looking at the possibility of protesting against
the deal using the worker strength jointly. SLIC had been
sold for Rs. 6.05 billion despite PERC giving a valuation of Rs.
11billion last March. It would indeed
be a crime to sell this national treasure for Rs. 6,050 million,
the JSS said having pointed out to the government that SLIC’s
net profit for the year 2002 alone had been Rs. 7.67 billion while
the compensation bill for the terrorist attack on the Katunayake
airport was Rs. 9.05 billion. Therefore,
if not for this disaster the net profit for the year 2002 would
have been a massive Rs. 16.72 billion. The JSS branch pointed out that it would be a national crime to sell SLIC for a figure that would be half the annual net profit. Plastic Pakaging
(Pte) Ltd. has manufactured degradable polythene bags and plans
to make its first exports to the United Kingdom shortly. "We have already got orders for bin liners, used to collect trash, and we plan to start commercial exports in early May," said Mervyn Dias, chairman Plastic Pakaging. The company,
which exports non-degradable polythene bags and sheets, has spent
the last two years testing the additives used to make the degradable
polythene bags and has just got the process tested and approved
by the Industrial Technology Institute, he said. It has also been
tested in the UK and USA. The degradation
periods can be controlled by using different loading dosages of
the additives to the main resin. The additive is imported from the
US. "We also hope to introduce this additive to the local market later on," Dias said. The company
wants to raise awareness about the availability of degradable plastic
bags because it has become a huge environmental issue with the government
even considering a ban on the normal material that is not degradable. Dias said the prices of the degradable bags were competitive while manufacturers can use existing machinery to make degradable bags. Mixed impact from Gulf, SARS crises The Gulf war
and the threat posed by SARS (Severe Acute Respiratory Syndrome),
the deadly virus that has claimed the lives of 100 people so far
across the world, has had a mixed impact in Sri Lanka in terms of
inbound and outbound travel, and tourism. Airlines operating here
say the Gulf war has not adversely affected sales which has however
had a bigger impact on airlines operating through Gulf countries.
SARS has affected mostly traffic from some Asian destinations like
Hong Kong and Singapore. A spokesman
for the Sri Lanka Foreign Employment Bureau (SLFEB) said there was
a drop of around 20 percent in departures but noted that there was
no drop in employment opportunities. A spokesman
for Singapore Airlines said there was a 35 percent drop in passenger
traffic due to SARS while Kuwait Airways noted that since the war
started they had reduced flights from five per week to three but
expected to resume the cancelled two very soon. A SriLankan
Airlines spokesperson indicated that the impact of SARS and Gulf
war has not affected the airline. American Airlines said the Iraqi
war affected them a little bit but there was no impact due to SARS.
Air Canada indicated that their Hong Kong market was affected due
to the virus while British Airways reported few problems due to
the war. A spokesman for Saudi Arabian Airlines said that SARS did not affect them at all, but declined to comment on the impact from the Gulf crisis. Thai Airways noted that there was no significant change in the business and travel patterns. Internal Trade Dept. gas cylinder directive illegal? By Akhry
Ameer The directive
issued through the Ministry of Commerce and Consumer Affairs coincided
with the announcement by the newest entrant into the market, Mundo
Gas, that it would begin the sale of LPG at a cost of Rs. 495/-
per cylinder, and would accept any cylinder for filling or refilling. Mundo Gas,
which plans to operate an LPG tanker barge in Galle port, made several
announcements of price increases on previous occasions without having
begun operations. "Not one
cylinder can leave the port," said W.K.H. Wegapitiya, Chairman
of LAUGFS Lanka Gas (Pvt) Ltd that had obtained the injunction last
month preventing other operators using their cylinders. The injunction,
originally issued for a period of one month, has been extended till
May 6. The majority stakeholder of the LPG market in Sri Lanka, Shell Gas Lanka Ltd, that has made public its views on the issue on several occasions, is yet to respond to the entry of the new operator. "We have not still received an official notice," said Steven Bartholomeusz, Manager, External Affairs and Brand Communications. He added that
filling of third party cylinders is against international practices
and is in violation of Intellectual Property Rights. Wegapitiya
too confirmed that his company had not received any communication
in this regard, adding that this would affect both local and international
investor confidence. Both Shell and Laugfs have made significant
investments in cylinders and LPG-related operations. The issue raised
by existing operators is on the grounds that, should the practice
be allowed, they will not be able to guarantee the safety and quality
of the product. However, Ariyaseela
Wickramanayake, Chair-man of Mundo Gas, questioned whether any hazardous
incidents had taken place in the last five years. He assured that
there was zero risk in this practice. He added that
third party cylinders belonging to other operators or new cylinders
that would be sold in the market by other dealers could be refilled
at any of the 60 filling depots of his company. These cylinders
would be certified through a safety cap and a sticker on the cylinder
body that gives the identity of the company that last filled the
cylinder together with a receipt. Meanwhile,
the directive by the ministry states that all operators should also
follow standards, specifications and codes of practice laid down
by the Sri Lanka Standards Institution (SLSI), if any, with regard
to the filling/refilling and/or selling of LPG cylinders. However, according
to officials at SLSI, currently no rules exist on the filling/refilling
of cylinders but only on its design requirement. The Commissioner of the Department of Internal Trade was not available for clarification at the time of going to press.
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