project draws industry ire
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.
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
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.
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.
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.
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.
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.
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.
eyes foreign bank in Bangladesh
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.
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.
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
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.
battles criticism, rivals
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
image for a larger view
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."
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
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".
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.
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.
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.
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.
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.
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
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
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
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.
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.
to invest offshore
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
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.
Jayawardena takes over at Aitken Spence
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.
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.
going to focus on our core activities - tourism, power and insurance,"
a company main board spokesman said.
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.
interested in the Maldives and Trincomalee and also south India,
especially with SriLankan Airlines flying to Cochin," the spokesman
management is also going to streamline the company and take stringent
cost cutting measures while rewarding the performance of staff,"
Asked if cost
cutting measures means trimming staff, the spokesman said: "No,
but we'll be careful with new recruitment."
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.
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.