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The export of cut foliage and flowers was started in late seventies with the opening of the economy and hence resulted in an inflow of valuable foreign exchange. About fifteen large scale nurseries and a large number of small firms are engaged in the industry providing direct and indirect employment to a considerable number of Sri Lankans.
The Netherlands has been the largest buyer. Other European countries such as Germany, France, UK, Italy, the Middle East and Japan from the Far East are also considered to be important buyers of Sri Lankan foliage.
Until end of the eighties, Sri Lanka foliage industry recorded a rapid growth and expanded its global market share from 0.4% to 4-6%. Due to the over attractiveness of the industry, and relaxation of export taxes, many newcomers of varying nature (multinational companies, as well as small firms) entered the industry. Saturation of the industry resulted in price undercutting supplying of inferior products, unfair allocations of air cargo space, labour problem etc. The situation was aggravated with higher prices of chemicals and expiration of tax holidays offered to certain companies.
The formation of European Union
The development of tissue culture and the preferential treatment for Latin American and African countries were also causes of the depressed market.
SAMA centre's ethnic jewellery has found an exclusive niche in our Lanka's inflight duty free service.
A typical terracotta jewellery set in grey cloth bag is sold on Air Lanka's inflight service.
Besides this collection, SAMA International Trust, who runs the SAMA Centre in Akuregoda Road, Thalangama, is promoting local cheaply sourced natural raw materials for their jewellery. Terracotta beads herbal seeds, oxidised copper and leather are mixed to create ethnic designs.
SAMA designers use traditional ethnic designs from Anuradhapura period to make ethnic style jewellery, SAMA Trust General Secretary Nihal Peiris told The Sunday Times that SAMA is trying to promote their collection of ethnic style jewellery made with natural raw materials in export markets, where ethnic jewellery is the current trend.
The answer to rising cost of export production is to go where production costs are low, where production could be done at competitive costs Chief Guest, Trade Minister Kinsley T. Wickramaratne said at a recent seminar. Already over 25 Sri Lankan companies have started operating overseas, he added.
"Although people say that the economy is stagnant statistics have shown that exports have increased 23% in 1995 over 94. The stock market where only 210 companies are listed is no indication of the state of the economy where 22,000 companies are registered", said the Minister.
He was speaking at an export development awareness seminar in Koggala organised by the EDB, for southern mediamen recently.
Guest of Honour Governor of the Southern Province, Deshamanya Dr. Neville Kanakaratne, stated the importance of developing the Southern Province is well recognised by the government with the appointment of a special authority and passing a bill in Parliament. "It is very important that all of us irrespective of political differences get together to develop our economy," said the Governor.
Acting Chairman of the EDB R.A.P. Goonetileke said that the media could point of the inadequacies correcting which will help develop new strategies and services to meet the needs of the people.
A number of EDB officials spoke on different aspects of export development. Deputy Director Publicity, EDB Chandrakanthi Dharmadasa gave the overall view of exports and the EDB. It was stated that exports have contributed around 22%-30% to the total export income of the country during the last decade while the contribution in 1995 was 29.6%. The non-traditional exports have increased, responsible for a major share of 81.18% in the total exports, while many new products and markets have been developed.
The market was stagnant at ASPI 550 levels. With no new significant development in the War/economic front, share price movements were stunted.
Stock-brokers met the President to put forward their suggestions to improve the 'CSE'. A document was handed over outlining the adverse economic decisions implemented by the present administration, which has made the 'CSM' decline to these levels. Feed-back from the President is awaited with much anticipation by the brokering community.
Privatization of the plantation companies and interest shown by investors in Agrapatana and Hapugastenne plantations could be classified as limited successes in the privatization scheme.
With a new consortium being created by certain interests who are in the process of purchasing privatized plantation companies, the long term viability of these ventures are at satke.
As monopolies could become harmful to national interest, added precautions should be taken in time of privatization. In the overall macro-analysis of the privatization process, by this administration seems to have been a short term-tunnel vision focus of balancing the budget (96 Nov.) only.
Treasury bill rates for 3 months/12 months have decreased marginally while, 6 months TB rates have increased. The overall TB rates are expected to increase in the coming 2-3 months.
The 'CSE' at these price-levels is a very viable investment option.
P/E 9.8, divident yield 4.7, PBV 5-1 (majority). Quoted plantation companies as well as new issues are recommended.
Union Assurance Ltd., Sri Lanka's leading private insurer launched a shop comprehensive policy which is targeted at shop owners with a minimum asset base of Rs. 250,000 as sum assured, excluding pawn broking/jewellery shops and co-operative outlets, a company release said.
According to Mr. Ramal Jasinghe, G.M. Marketing UAL, this policy covers business interruption due to peril, insured upto 12 months, with an extension to cover loss of income.
This policy also covers shop owners from fire, riots, malicious acts, explosion, impact by any vehicle to death and disability cover and deterioration of food in freeezer unit due to unannounced power interruption beyond 5 hours.
This policy could also be extended to include surgical and hospital expenses for the proprietor and spouse. Mr. Jasinghe stated that this redesigned policy is a result of intense market research and is an attempt by UAL to get closer to the needs of shop owners.
Stockbrokers have called upon the government not to marginalize the equity market and to speed up privatization in a bid to improve business confidence and macro-economic fundamentals.
The call was made when The Colombo Stockbrokers Association comprising the chief executives of broking companies met the President. SEC Director General, Arittha Wickramanayake, Stock Exchange Chairman Ajith Jayeratne, Stock Exchange Director General, Dylan Moldrich, PERC Chairman Rajan Asirwatham, Central Bank Deputy Governor, S. Easparathasan and Dr. P. B. Jayasundera from the Treasury were also present.
Jardine Fleming Chief Executive, Anura Wickremasinghe speaking on behalf of the Brokers Association told the President that the equity markets were an important barometer of business confidence, though the importance of equity markets varied from country to country.
For example in Malaysia, the ratio of market capitalization to GDP was 330 per cent, in Japan 73 per cent, in India 46 per cent and Korea 37 per cent. In Sri Lanka where market capitalization had nose dived during the last two years it was only 13.7 per cent of GDP at present.
After the Colombo indices started tumbling, top government bureaucrats and Cabinet Ministers attemted to dismiss the importance of the capital market, claiming that only 200 odd companies were listed, out of a 20,000 odd registered limited companies in the country.
However, analysts say this simplistic attitude, displayed the officials uncertain grasp of the real status. For example, it is pointed out that companies such as John Keells and Aitken Spence, represented a major part of the hotel sector in the island. Most of the private commerical banking and insurance firms were also represented. Even in purely numerical terms, most listed companies tended to be holding companies which had several subsidiaries and associate companies.
Especially the big conglomerates, such as Hayleys, John Keells, Aitken Spence, The Finance controlled around a fifty companies each, thereby booting the total number of companies actually represented on the CSE, several fold.
The speeding up of the privatization programme in addition to boosting confidence, would also improve the macro-economic fundamentals by reducing the budget deficit. Mr. Wickremasinghe has also told the President to seriously consider channelling some of the EPF funds into the stockmarket. This brokers feel would send a signal that the government had confidence in the long term prospects of the country.
Most brokers are bullish about the long term prospects for the country, and they say as the EPF is a long term fund this would be an ideal opportunity for EPF to enter the market.
Mr. Wickremasinghe had told the President that the market capitalization of the CSE was only Rs. 92 b, and the EPF had Rs. 110 b worth of funds. Even if only 10 per cent was invested in quoted equities, it was expected to be a major confidence booster.
However, there is widespread opposition to the move from the trade union movement in Sri Lanka.
This contrasts sharply with the situation in Malaysia, which has recently been quoted as a model to follow. The Malaysian Trade Union Congress (MTUC) conducted a major campaign in April this year to force the government to lift the ceiling on equity investments imposed on the EPF in that country. The Union movement, which has been legally depoliticized and closely regulated, felt that the country's workers should own a bigger part of the booming business ventures in the country. In addition they asked for shares in privatized companies to be sold at discounted prices to the EPF and special allocations in all initial public offerings, also to be made to the EPF.
Mr. Wickremasinghe had also suggested that the pricing of public issues (minority states of privatized ventures) should be reviewed, so as to reflect a wider market opinion than that of the underwriting bids, that were earlier accepted by the PERC.
PERC has recently indicated that more market based pricing strategy known as 'bookbuilding' may be used in the future.
Some also feel that the PERC could do more to give life to the market by listing the smaller companies at a slight discount on the market, at minimal cost to the government.
Issues such as Ceylon Oxygen, though small contributed to pep up domestic investors by giving substantial upside potential. In these companies a controlling interest was disposed to a single investors and balance listed on the market.
However the PERC has recently invited bids for a large number of small companies on which 90 per cent of the equity is to be sold to a single owner and no public listing is to follow. This has reinforced the concept that, the present government is acting to marginalize the stock market, analysts believe.
In the UK for example in the privatization of British Telecom, the public was offered shares at a lower price than institutional investors, in a bid to broadbase ownership. Analysts say the Sri Lankan government now seems to have abandoned the concept of creating a share-owning public.
Though most analysts believe that a sharp re-rating of the market is unlikely unless corporate earnings improve, if several smaller issues were successfully listed, it is felt that the PERC could cash in on the revitalized investor interest by listing larger companies at higher prices, in a re-rated market.
Sri Lankan tax laws should be simplified to encourage compliance, and boost revenue, a tax expert has said.
"One way the IRD can make the law simple is to minimize ammendments", Senior Tax Partner of Someswaran Jayewickrame and Company said last week. Mr. Gajendran was delivering the inaugural annual oration on taxation, initiated by the Faculty of Taxation of the Sri Lankan Institute of Chartered Accountants. He was speaking on 'Tax payer rights and remedies'.
"People sometimes seem to believe that the IRD actually takes pleasure in complexity", he said. However, in actual fact, each new provision was an additional burden to the Inland Revenue Department, requiring more staff, and training.
"The ammendments to the tax laws have become like a periodical and this trend should be reversed," he said.
Mr. Gajendran said the tax payer had a 'right to certainty' which had been recognized by Section 123 of the Inland Revenue Act.
He said the perception of the IRD was that when a law is amended, the amending provisions come into force on the date of amendment. "A taxpayer should be entitled to plan his business affairs for a particular year of assessment, taking into consideration the tax laws prevalent at the start of that year and should not be affected in that year of assessment by an amendment which was brought into effect during the said period," he said.
Citing several Indian legal precedents, Mr. Gajendran argued that the Act, as it stands amended on the first day of April of any financial year, must apply to the assessment of that year.
He also stressed the taxpayer's right to confidentiality and secrecy. However in the recent past IRD had requested that the turnover tax returns, issued by its Compliance and Enforcement Branch, be filed by the taxpayer together with payment at specified banks.
"This is a clear case where the IRD has totally disregarded the taxpayer's right to confidentiality", he said.
Mr. Gajendran also revealed that in some instances the IRD has 'evaded' tax laws and failed to grant tax benefits, which were intended in the statute.
One such issue was the refusal to grant full exemption on capital gains arising on the disposal of Treasury Bills.
"The government made a purposeful and productive decision to grant an exemption, on such a gain but the benefit has been denied to the taxpayers, at least for the time being," Mr. Gajendran said.
He said it was perfectly within the rights of the IRD to use its ingenuity to bring about creative interpretations to the provisions in tax statutes.
"But such an endeavour, should not arise from an evasive action by the IRD, whereby it does not give effect to the law strictly arising from policy pronouncement, and deprive the taxpayer of the benefit or advantage he should derive from such provisions.
Mr. Gajendran said that revenue officers should be better remunerated. However he said the IRD should re-think its incentive scheme and make it public.
"It is common knowledge and a well known fact that the incentive scheme to the revenue officers is heavily bent on assessments and collections", he said.
He called upon the IRD administration not to measure efficiency by focusing heavily on assessments and collections.
Mr. Gajendran said the United States Taxpayer Bill of Rights clearly states that the IRD must not use tax enforcement results, to evaluate revenue officers or impose goals on them.
Wayamba Plantations (Pvt.) Ltd., made a strong bid at the Colombo Stock Exchange on Friday 23, to buy control of Agrapatana Plantations Ltd., by bidding upto Rs. 35 per share, for a 51% equity transfer in the tea company.
The bid of Rs. 35/25 was made by Messrs Lankem Ltd., the present Managing Agents of Agrapatana Plantations Ltd.
Mr. W.L. Bogtstra, Managing Director of Wayamba Plantations Ltd., stated that their bid for control of Agrapatana Plantations Ltd., was to give them a product spread in the plantation industry as Chilaw Plantations Ltd., which is managed by them is entirely coconut based.
He explained that prices for their coconut were stable in view of the price support given to their produce from their associated companies who are able to do so in view of their specialisation in coconut added value products based on marketing strategies in conjunction with multinational companies.
Mr. Bogtstra explained that they would have similar arrangements in place in the event of their taking control of a tea company and this would result in improved prices for this product with benefits to the country.
He hopes that the authorities would capitalise on the favourable trend in the Plantation shares and privatise the remaining company early to take advantage of this situation.
It is ressuring to note that there is healthy competition amongst successful Sri Lankan Plantation Companies to broad base their interests particularly in view of the fears of possible Indian domination of our Tea Industry.
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