Car project draws industry ire
Sri Lanka's main car importers last week slammed the Board of Investment (BOI) for approving a project to assemble cars using imported used or second-hand parts but the man in the centre of the storm stood firm, defending his project.

Harsha de Silva, managing director at Vehicles Lanka Pvt Ltd, which began operations six months ago, said the industry was more concerned about competition in the market than safety and insisted that his company is maintaining high safety standards.

"Also our project is aimed at reducing the price of cars and making it accessible to a larger section of the population. I don't know what the fuss is all about. Consumers should be allowed to decide and make choices," he argued.

After the powerful Ceylon Motor Traders' Association (CMTA) called a press conference and raised concerns and opposition to the project, the BOI quickly reacted saying they had suspended import/export facilities to these projects pending a ruling from the Attorney General on all issues and concerns raised.

A BOI spokesman said four projects have been approved to assemble motor vehicles here. One included assembling lorries. CMTA chairman Ajit Algama said such projects would also amount to a gross violation of the intellectual property rights of their principals like Nissan, Toyota or Mitsubishi.

But de Silva countered the argument saying he had sought legal advice from Eardley Perera and Romesh de Silva, two of Sri Lanka's best-known lawyers, on the issue of intellectual property rights before proceeding with the project. He insists that the motor trade is objecting to his project only because the other three projects are essentially for export. "Two are for 100 percent re-export while the lorry assembly company is planning only 20 percent local sales," de Silva noted. He said he has not been informed of the BOI order to suspend export/import facilities because it applies to duty-free goods whereas his imports are duty-paid.

Algama said the concept goes against their principals who spend millions of dollars developing safety measures and use advanced manufacturing technology under stringent quality control mechanisms. The BOI spokesman said the AG would be looking at issues of intellectual property and patent rights. Algama alleged that the company (Vehicles Lanka) has said it would use even new parts for assembly purposes.

The CMTA chief added that the concept is not permitted in any other part of the world due to safety reasons and also contradicted current local regulations where efforts have been made to control the importation of old vehicles and prevent dumping. Some of the earlier budget proposals had also banned the importation of cut body parts due to similar concerns. He urged the cancellation of tax concessions or licences given to the company.

However, De Silva said that his company, which has a workshop on a two-acre site at the industrial estate in Minuwangoda, selects the best parts and would match the best to assemble these cars. "We have good testing equipment to check the engine," he said rejecting charges that the vehicles would be a hazard and not roadworthy. The company has assembled a few vehicles but is yet to put them in the market except for the one de Silva uses.

"There won't be any environmental problems because we are getting the best European testing equipment to check on smoke and carbon dioxide emissions. There will be a guarantee on all our cars. The testing equipment we plan would be the best in Europe to ensure all our vehicles are roadworthy, and much better than reconditioned cars."

He said the cars would around cost Rs. 300,000 less than the reconditioned one and about Rs. 600,000 less than a new car. "This is an enormous savings on foreign exchange to the country," de Silva said, adding that his project would hinder competition in the brand new and reconditioned vehicle market.

"Those who prefer new or reconditioned cars will still purchase those vehicles while I would be catering to a new market. There is space for all of us. So let the consumer decide," he said.

The company plans to expand next year into a 10-acre site at the same location with a combined investment of Rs. 500 million with Japanese and Singaporean partners. The target is to assemble 1,000 vehicles a year which is a small percentage of the 42,000 new and reconditioned vehicles that are imported annually, he said.

CMTA says there are all kinds of problems for these kinds of projects as none of the principals who represent mostly Japanese companies have granted licences for such projects. The used nature of the parts would indicate they are parts of an established brand of motor vehicle. The problem with used parts is that their age cannot be ascertained and therefore would even amount to a dumping mechanism, said another CMTA official.

The CMTA was also critical of the BOI because it had failed to respond to its correspondence on the matter until the association lawyers wrote to the BOI. The association has also made representations to Professor G.L. Peiris, Minister of Enterprise Development, Industrial Policy and Investment Promotion.

ComBank eyes foreign bank in Bangladesh
The Commercial Bank is eyeing a foreign bank in Bangladesh and planning to undertake a due diligence study shortly to evaluate the feasibility of acquiring its operations, the bank's managing director A.L. Gooneratne said in a brief statement.

The statement to the Colombo Stock exchange didn't identify the bank and Gooneratne, when asked by The Sunday Times, declined to give details in keeping with routine confidentiality provisions.

Vanik Ltd is the only Sri Lankan entity - apart from the Ceylinco group - that is involved in financial services in Dhaka with its own merchant bank. The ailing Colombo firm's interests in the overseas bank was recently reduced to 20 percent after it sold a 40 percent stake to Sampath and its Hong Kong-based partner.

Commercial Bank said in a separate statement that together with DFCC Bank it is involved in a due diligence to evaluate the feasibility of acquiring a 51 percent stake - held by a foreign insurance company - in an unidentified local insurance firm.

The only stake available in the market currently is that at Eagle Insurance whose main Zurich-based partner has announced plans to sell its 58 percent stock. The Commercial Bank/DFCC combine was unsuccessful in its efforts to secure the Sri Lanka Insurance Corporation, which went to the Harry Jayawardena/Distilleries/Ait-ken Spence consortium. Meanwhile, DFCC Bank said it has expressed interest in acquiring MERC Bank and was negotiating with the latter. MERC Bank has been unable to meet the required capital adequacy ratios of the Central Bank and is seeking new partners with fresh capital, banking sources said.

Union Bank, which is also struggling through a host of problems, is also said to be eyed by Sampath Bank with the head of a top Colombo firm tipped to be its new chairman.

Mundogas battles criticism, rivals
By Akhry Ameer
Mundogas Lanka Chairman Ariyaseeli Wickramanayake, battered and bruised by court battles and public criticism, came back fighting last week alleging he was being harassed and blocked from distributing cheaper gas with a supply ship berthed outside Galle for nearly a week.

Click image for a larger view

Click image for a larger view

"The world market price has come down by $ 100 during the last month, but we have not seen the benefit pass to the consumer. My gas is outside the harbour for nearly a week with port authority officials not allowing us to unload. Somebody must respond to all this; I am being held back," he argued adding that his price could go down further with the next shipment according to world market prices. "Others are making a profit of Rs. 200 per cylinder and these profits are being distributed amongst officials."

The company sent a detailed response to various questions raised in articles appearing in last week's The Sunday Times-FT over Mundo's delay in coming into the market, extracts of which appear on page …

In a separate letter to The Sunday Times-FT, the Chairman of Mundogas S.A.R.J.F. Brothers reiterated that Mundogas is paying meticulous attention to the safety procedures required by SLPA and the Sri Lankan naval authorities.

"This type of operation is not new to us. We have done it elsewhere for blue chip companies which include Shell and Caltex. I can personally assure your readers that the terminal and filling operations in Galle will be as safe as any other in Sri Lanka. No responsible operator would have it otherwise. It is my fervent hope that our labours will be enjoyed by the Sri Lankan consumers within this month and that attempts by parties, with their own interests at heart, to prevent Mundogas from operating will be unsuccessful".

Mundogas is facing six court cases objecting to its operations with petitioners retaining some of the best counsels in the country. One of the cases have been filed by a destitute old lady in Galle, says Wickramanayake. "Obviously someone else is paying for it." The latest addition was an action by Shell Gas Lanka Limited and Shell International Petroleum Company Ltd to prevent Mundogas from illegally filling, distributing or selling cylinders carrying its trademarks. Shell officials also informed Commerce Minister Ravi Karunanayake last week that they planned to reduce prices.

Asked about the delays in commencing operations, the local Mundo chief said, "You can see what I have been going through all this while." He dismissed reports that his filling plant is yet uninstalled saying it has been installed for the last six months and they were latest versions from Denmark that no other operator possesses locally.

Replying to claims that he was going against industry practice of proprietary cylinders, he said there are six million cylinders in the country for which people have paid five times its cost. "When the dollar was Rs. 70 we still paid Rs. 3,300 for a cylinder when it should have actually cost Rs. 770," he added.

Wickramanayake was of the view that there was 'nothing unusual' in his barge operation and that the same barge had been supplying Shell in the Philippines until a few months ago. He questioned the double standards being applied to Mundogas when vessels for other operators have been docked at the port for as much as eight days unloading LPG into browsers.

The embattled Mundo chief acknowledged that he has so far not sold any gas but denied claims that the cylinders handed over to 60 dealers during a recent ceremony were empty. They were filled with unusable LPG from the residue that cannot be pumped out from the barge. This had been misunderstood as a false declaration that the barge was empty when it entered the Galle port, he alleged.

Responding to allegations of being favoured by the Ministry of Commerce and Consumer Affairs which recently published advertisements backing Mundo, Wickramanayake said Minister Ravi Karunanayake had clarified the issue saying - through a television programme - that the government had not paid for such an advertisement. The minister had said the advertisement had been paid by "supporters," he said. However, it was unclear whether the supporters were Karunanayake's or Wickramanayake's or both.

In the midst of the storm, Mundogas ran an advertisement on Wednesday asking consumers to exchange their used gas cylinders for a brand new filled Mundo Gas cylinder, raising fresh questions - where and when can consumers get this gas?

Asked what steps Mundo gas would take to honour orders issued by Courts, Wickramanayake questioned the technicality at the point of sale. "Who am I to challenge the ownership when someone brings a cylinder and says it is 'mine," he queried when told that he would face problems with court if he refilled other cylinders.

The Mundo chief parried and dodged probing questions on the new advertisement but appeared to imply that old cylinders handed over would be refilled and resold. He added that soon there would be others who would manufacture cylinders and sell it freely in the market.

He was also critical of the writer of last week's article headlined "Anarchic attempts to use the Galle Port for LPG operations" in this newspaper, saying he has never seen or heard of Dr. Asoka Jinadasa in his (Wickramanayake's) 30-year involvement in the petroleum industry and alleged that Jinadasa is being funded by Shell to write such articles.

Steven Bartholomeusz, Manager, External Affairs and Brand Communications of Shell said Jinadasa had been a facilitator for its stakeholder forums and dealer convention and had been hired through an advertising agency that serviced Shell.

Jinadasa said Shell had invited him to be the mediator in the stakeholder forum, and that he was neither for nor against any operator. He stressed the importance of the facts of the article and the absence of a regulator creating a sense of lawlessness in the industry.

Wickramanayake said that Mundo Gas (International) is not new to the country and has been the supplier of the pre-privatisation Ceylon Gas Company.

He said that his experience too was unmatched having been the pioneer in offshore bunkering with his own fleet of vessels. Wickramanayake is also the State Petroleum Corporation (SPC) appointed inspector and his company is the contractor in the installation of the offshore Single Point Mooring (SPM) facility for SPC and still maintains it.

ETF to invest offshore
The Employees' Trust Fund wants to use up to five percent of its total portfolio in offshore investments since local interest rates are falling, resulting in poor returns on investment, its board chairman Dinesh Weerakkody said.

The current ETF portfolio of Rs. 41 billion is expected to rise to Rs. 46 billion by the end of the year. Weerakkody said if the ETFB was to meet its 11 % dividend target this year compared to 12 % last year, it had to get a better return and investment overseas was the option. It would be the first public pension fund to go overseas.

The fund said it is seeking Finance Ministry approval (and later Central Bank permission) to invest in dollar, sterling pounds and gold investments. It is also seeking a primary dealers licence because it is unable to get the best deal in the market through other vendors.

Harry Jayawardena takes over at Aitken Spence
Aitken Spence will continue to focus on core areas like tourism and power, and the latest insurance sector, under the new chairman, tycoon Harry Jayawardena, but the organization will also be streamlined and see "stringent" cost-cutting measures.

The conglomerate last week announced that Jayawardena, who also heads Distilleries and Stassen's, has been appointed as its chairman while Rajan Britto was named deputy chairman while continuing in his current position as managing director.

"We're going to focus on our core activities - tourism, power and insurance," a company main board spokesman said.

"The two major growth areas this year are insurance and the 100MW power plant at Embilipitiya, which is also a huge investment," he said. The company is still interested in expanding in tourism although not immediately because of the SARS epidemic.

“We’re interested in the Maldives and Trincomalee and also south India, especially with SriLankan Airlines flying to Cochin," the spokesman said.

"The new management is also going to streamline the company and take stringent cost cutting measures while rewarding the performance of staff," he added.

Asked if cost cutting measures means trimming staff, the spokesman said: "No, but we'll be careful with new recruitment."

The organization will also be decentralized. "Previously there was a lot of centralization. We'd like to decentralize and give more responsibility to people, and reward them on performance." The management will also look for more synergies within the group and related companies.

Insurance is one area where such synergies are foreseen given Aitken Spence's long-standing links with Lloyd's Insurance and the recent acquisition of Sri Lanka Insurance Corporation in a joint bid with Distilleries.

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