12th July 1998
Patrick Amarasinghe: President -Federation of Chambers of Commerce and Industry in Sri Lanka; National Chamber of Exports; Young Enterpreneur Sri Lanka. Chairman and Managing Director - Woodplex and 'Furnifits'. Director - Export Development Board; People's Regional Development, Association; Japan-Lanka Industrial Development Centre; Tharuna Aruna.
By Priyantha Gamage
Q. Mr. Amarasinghe, the government is quite boastful of a growth in the GNP during 1997. But, there are opposing views that this growth has not been felt at all. Some in fact feel that it is a growth confined to statistics alone. What are your views on this?
A. Actually, as always, when you talk about statistics, there are a lot of question marks on statistics given by anybody. That must be why Mark Twain said, "statistics, more statistics and damned lies".
So, there are a lot of question marks on statistics. The manner in which the statistics are taken is also a matter of concern and in fact we have questioned this on numerous occasions.
Now, in this present situation, it is like this. There certainly has been a growth from 1996 to 1997. Because, 1996 was one of the worst years we have had with power cuts and the drought etc. So, as a result of that, when you compare 1996 to 1997 there is definitely a growth.
But I don't think that it is a good basis to be very happy and complacent about. Because, really, you should look back to 1995 or 1994. One of those previous years.
But sectorwise, of course, there are certain sectors that are showing a growth, for instance, the financial sector. If you look at the top 10 companies, 7 are Banks.
But if you look at the manufacturing sector that's one of the sectors that has been facing a lot of problems. Both the manufacturing sector and the export sector are suffering.
Industries, especially, are facing a lot of competition from goods coming in from India. Because there is dumping and smuggling on a large scale and some of them, just to take their bottom lines up have shifted to trading from manufacturing.
A good example is the "Sisil refrigerator". They now bring it from India and market it here. So overall the ground situation is not at all in line with the statistics that are being poured out.
And today there is a very serious problem on the purchasing power of people. The cost of living has gone up, and as a result your priorities are restricted.
A man who goes for a hair cut twice a month now goes only once a month. What you bought for Rs. 100 at one time, today you can't buy at even Rs. 500.
But we are talking about per capita income going up.
But nobody is finding out as to how much the per capita expenditure has gone up. There's a proportionate increase in the per capita expenditure. So that is also a factor.
And now there's a danger. When our per capita income goes above Rs 1000/- we'd be in big trouble, because the aid giving countries will refuse any more aid.
And I don't know how this per capita income is computed. I am not an expert on economics. Some say that even the privatisation proceeds too are included in this. You must check this out too.
Anyway there's something wrong somewhere. And politicians must not get carried away with this complacent type of statistics. They should double check these things in their own interest.
Q. But, you must agree that the government's quite bold step at lowering the interest rates was a major one towards the facilitation of growth. Surely it has to have some effect?
A. Of course the government with all good intentions brought down the reserve ratio from 15% to 12% hoping that the Banks will bring down the interest rates. What happened is this.
It has come down mainly for the prime customers and some of the new people starting new investments only. But, it has not come down to benefit the vast majority of enterprises that are on the ground which are already there.
They are still paying more or less the old rates which are running at over 25%. The deposit rates have come down but not the overall lending rates. So, there is certain misconception that, overall, the interest rates have come down.
That much we cannot agree totally because, it has not certainly come down for the vast majority of the existing enterprises, other than some of the prime customers.
Anyway, prime customers are the people who always get a better rate. So what has to be done today is that we have to be realistically finding out as to what is going on the ground.
Look at the construction industry. People are not putting up new buildings. Then there's a spiral effect as a result.
Those days people had to wait in queues and influence people to buy cement. Today they are coming behind you to sell their cement.
Q. So do you mean to say that 'Trading' is the least affected sector of all?
A. Now traders are also complaining. They are competing with a lot of goods coming in from smuggling and the informal sector. The formal sector finds it very difficult to compete.
So a lot of traders are having financial difficulties. On the other hand, today it is very, very difficult to collect credit because there is a big cash flow problem.
Then there are so much of penalties and surcharges etc., on interest and other payments by Banks and other institutions when you don't make your payments in time.
On the other hand, when we have to collect money from our creditors there is no penalty on them. In fact we have to write off those things because we can't get the money back. Most companies have cut down on their inventories.
The Banks also at this particular moment are very cautious because they know that the market trends are such that people are desperately in need of money that they can't lend their money.
So people go and borrow from outside at much higher rates of interest. Actually they are going from the frying pan to the fire.
And several of our members are complaining that some of the worst creditors who are not paying are the Government Agencies themselves. So, when you find it difficult to collect money like that you can't meet your commitments.
And when you default your payments due, you get into more difficulty by these automatic penalties.
Then, when a business is sick here there's no one to go to. There must be a mechanism to help when there's an enterprise in difficulty for reasons beyond their control.
Because what is now important in this country is that when there's a situation where there is a very low rate of investment in the country we must somehow or other try to help the existing enterprises to survive. And we must help them to expand and develop.
Because, they already have some sort of infrastructure on the ground a new man has to re-invest and start anew. When an industry is stuck with some working capital problem, you have to give it some kind of equity. Even in countries like India and Malaysia there are "Sick Industries Acts". We don't have anything like that.
The number of debt recovery notices in the papers today send a shocking signal down the minds of the people.
Now the stock type of thing that is being told to us is that, "You all are inefficient" and "You all have not re-invested". The Textile Industry is a classic example where they say that, "you all have had tax holidays but you all have not re-invested."
Fine, they have tax holidays. But, any businessman will re-invest looking at the potential market only. So, when there's the slightest sickness, what you can do to nip in the bud, we don't do and we get into deep trouble.
So, our argument is to remove the competitive disadvantages we have against all imports. Now we have a free import policy.
We have the lowest tariffs in the region. Then we are competing with smuggled goods and dumped goods. So, how can we cater to a limited market.
Q. So it is apparent that most of the grievances you air are related to small and medium sector. Is it correct? Could you elaborate a bit on this?
A. My personal view is that, which I have been repeating several times, the backbone of this economy is the small and medium sector. The infrastructure costs on them are much less.
So you have to strengthen that sector. Though we are expecting foreign direct investment, it has not come in the way we want it. So, as a result what happens is that we are weakening the most important sector in the country. Because if you look at all the tax benefits, it is the BOI people who get everything. The non-BOI sector which is competing with the same international market or their domestic market have all the penalties and taxes on them. So you are having a double standard.
So it is better to have a lower rate of tax for everybody and equalise them and let them compete on an equal footing or a level playing field, where it is not so.
Even in my own industry I was one of the pioneers in the export of wooden products. By the time I started way back in 1970s there was no institutions in the country supporting exports.
But somehow I ventured out and got into exports. Today, we can't compete with our own people who have been given tax holidays for the same projects here. I am not given this support. But you find somebody else coming with the BOI status and some of these are just given on a platter without even checking their genuineness.
And we can't compete with them because they get duty free machinery, raw material, all that type of things which I can't. I have to go through a laborious process to get my duty rebated. So, you must correct these policy distortions.
Q. What have you got to say about some people's comments that you are anti-government?
A. I am saying these things in the larger interest of this government. Sometimes when we say something which is true people don't like it.
And I think some officials and various people who try to represent matters to government are naturally saying things to protect their own interests.
There are nice fairytale stories that are being told just to make politicians complacent. And they pick that up and argue. In any business what you should do is (the country also today should be run like a business) to see where our costs can be cut down.
Just look at the political cost of this country. We are not cutting down any of those costs.
I consider myself as one of the best friends of any government in power.
Q. You told me that you are 100% for privatisation. So, what do you think about the government's privatisation programme?
A. When I say I am for privatisation, first its privatisation not at any cost. We must take national interests into hands. We should not privatise some of our monopolies.
We are already facing the problem where finally the consumer has to pay for that. And the right prices you get also matters.
In recent times there have been a lot of question marks on the manner in which privatisation has taken place. We are talking about transparency and accountability.
So in the minds of the public there are a lot of question marks. So whatever privatisation we do should be done in the national interest first. And where there is a monopoly I think we have to be very careful. So I personally feel that to a large extent there is not enough discussion or debate among the organised institutions of the private sector and among the political parties themselves. So you have to have a national policy on privatisation. What happens is that one party is opposing the other when they are in power or the people within the government are also opposing privatisation. So that means people lose confidence in the whole thing. So I think all parties should be brought together to debate on this, brainstorm and find out as to what policy to adopt on privatisation.
Q. You said that manufacturing is one of the worst hit sectors. Does that mean all the concessions that were granted to this sector and all the incentives by the budget has been in vain?
A. You see, most of these concessions are granted to big investors, not for the vast majority of small and medium entrepreneurs.
The small and medium sector is the backbone of the economy. They are the people who don't get any of these benefits. Then the formal small and medium sector are the worst affected because you are caught between the big investors and the informal sector.
The big investors get all the tax benefits on one side and there's a big informal sector even in my own industry who don't pay taxes. You can't compete with them.
This is the sector that brings the most amount of revenue to the government. So, if these sectors get weakened the revenue to the government also gets weakened. So, it is better for people to be in the informal sector than to be in the formal sector.
And there is another worse thing that happens when all these tax concessions are given to one sector of industries. There are so many malpractices that there is no effective monitoring scheme. Now, under BOI for instance, there are so many industries that have started, now that BOI has come outside the zone.
So leakages of raw material into the market, all those things and we are competing with the BOI companies outside the zone, so they can sell their things into the local market. Theoretically this was meant to be export oriented. And they said about 10% and sometimes in special cases they are allowed to be sold locally subject to the import duties that has been paid.
But once you get that status and when you are outside the zone there's no one to monitor what you are doing. So that is hitting the existing local industry in the country.
In April 1997, the Basle Committee on Banking Supervision issued a comprehensive paper identifying core principles for effective banking supervision.
While these internationally harmonized guidelines are generally accepted across countries, they do not always apply to Islamic banking in the same way as they do to other banking systems.
In IMF Working Paper 98/30, Islamic Banking: Issues in Prudential Regulations and Supervision, Luca Errico and Mitra Farahbaksh argue that effective prudential supervision of banks is just as necessary and desirable in Islamic banking as it is in the conventional banking, particularly since Islamic banking has been expanding outside its traditional borders of Muslim economies.
By some estimates, Islamic banking has grown at an annual rate of 15 percent over the past five years; the market's current size is estimated at $70 billion and is projected at about $ 100 billion by the year 2000. Errico and Farahbaksh spoke with the IMF Survey about their study.
IMF SURVEY: How do Islamic precepts influence banking activities? To what extent has the IMF membership adopted Islamic banking practices?
ERRICO: The principles established in the Islamic law, Shariah, influence banks' structure and activities in several ways. Perhaps the most important and well known of these is the prohibition against the payment and receipt of a fixed or predetermined rate of interest, which is replaced by profit-and-loss sharing (PLS) arrangements.
Under these arrangements, the rate of return to financial assets held with banks is not known and not fixed prior to the undertaking of each transaction. Also, banks operate according to specific procedures, using specific financial instruments.
Currently, 48 countries are involved in Islamic banking with varying intensity. In some countries, such as the Islamic Republic of Iran, Pakistan, and Sudan, all banks and financial institutions operate according to Islamic principles. In other countries, such as Bangladesh, Egypt, Indonesia, Jordan, and Malaysia, Islamic banking operates alongside conventional banking.
In some other countries, Islamic banking is a more limited phenomenon involving credit institutions catering to specific segments of the market.
IMF SURVEY: What differentiates Islamic banking from conventional banking?
ERRICO: Banks operating according to the "paradigm" version of Islamic banking differ from "conventional" or interest-based banks in several ways.
First, while the capital value of demand deposits is guaranteed insofar as they are placed with banks as Amanat (safekeeping), neither the capital value nor the return on investment deposits is guaranteed; demand deposits are never remunerated. Second, returns on deposits, which depend on the banks' profits from investments and other activities, are determined ex post.
Third, banks have to intermediate funds through specific Islamic modes of financing, the most important of which such as Mudaraba (trustee finance) and Musharaka (equity participation) are based on the PLS principle. Under these modes of financing, banks bear entirely and exclusively the financial risk of the transaction. When operating through PLS modes, they have a reduced ability to request collateral or other guarantees as a safeguard against credit risk. In the event of a borrower's default barring fraud or mismanagement - banks lose the loaned funds, and entrepreneurs lose their time and effort.
These key features make Islamic banking essentially an equity-based system, where capital is always at risk and providers of capital and labour are put on an equal footing. Islamic modes of financing do, however, include non-PLS modes, such as mark-up, lease, and lease-purchase, that do not substantially differ from similar activities in conventional banking.
Also, Islamic banks have an interesting similarity with conventional investment companies, including mutual funds, partly because of the way they treat investment deposits, but also because they pool depositors' funds to provide depositors with professional investment management.
A fundamental difference, however, is that investment companies sell their capital to the public, while Islamic banks accept deposits from the public.
IMF SURVEY: What are some of the implications of these differences?
ERRICO: Investors in conventinal investment companies are in a much stronger positon compared to despositors in Islamic banks in terms of accessing information, monitoring performance, and influencing strategic decisions. Hence, corporate and market governance is markedly different.
Second, Islamic banks seem to be better poised than conventional banks to absorb external shocks, given their ability to reduce the capital value of investment deposits in the event of a loss.
However, solvency risks stemming from an asset-liability mismatch cannot be ruled out. This is especially true for banks operating under a two-tiered Mudaraba system where the asset and liability sides of banks' balance sheets are fully integrated.
And, third, assessing and managing operational risk is more difficult for Islamic banks because of their reduced ability to require collateral, which - in the case of Mudaraba - is coupled with a total lack of control over the management of their clients' business for the duration of contractual relationships.
This underscores the need for a greater emphasis on the management of operational risk and information diclosure in Islamic banking than in normally the case in conventional systems.
IMF SURVEY: How are Islamic banks that operate in conventional systems supervised?
ERRICO: The lack of uniformity in the way different Muslim countries apply Islamic principles makes it difficult to generalize as to what may be considered Islamic banking in practice.
We thought it helpful, therefore, to use a paradigm of Islamic banking as a benchmark against which to measure current practices.
Our conclusion is that none of the Islamic banks presently in business in conventional systems operates according to a paradigm version of Islamic banking.
For all practical purposes, they operate to varying degrees in a hybrid way - somewhere between the paradigm version and conventional banking. That said, Islamic banks operating in conventional systems are supervised as conventional banks, without recognition of the special issues that Islamic banking involves.
In our view, this may result in less effective banking supervision, create an uneven playing field, and delay or even impede fuller global integration of Islamic banking.
IMF SURVEY: What rules apply to conventional banks operating in Islamic systems?
ERRICO: The majority of countries influenced by Islamic banking practices apply the same regulatory framework to both conventional and Islamic banks.
This regulatory framework tends to follow standards and guidelines established by the Basle Committee on Banking Supervision.
However, these standards are not always applicable to, or appropriate for Islamic banks.
IMF SURVEY: What would be the main elements of regulatory framework designed to address the special characteristics of Islamic banks?
FARAHBAKSH: We used a CAMEL rating framework to address management of operational risks in Islamic banks.
A CAMEL rating assesses bank's capital adequacy, asset quality, management capability, level and quality of earnings, liquidity, and sensitivity to market risk.
This measure of a bank's relative soundness is calculated on a 1 to 5 scale, with 1 being a strong performance. The standard CAMEL rating would need to be adjusted, however, to reflect the particular characteristics of Islamic banks.
For instance, a CAMEL rating for capital adequacy in an Islamic banking environment should place greater emphasis on the volume of risky assets.
This is because the bulk of assets of banks operating according to a paradigm version of Islamic banking consist mainly of PLS transactions, which are mostly incollateralized equity financing.
Therefore, the ratio of riskier assets to total assets may be higher in Islamic banks than in conventional banks.
As a result, the level of the risk-weighted capital adequacy ratio would need to be higher than 8 percent, which is the minimum level recommended by the Basle Committee.
The methodology for assessing asset riskiness in an Islamic framework should be adjusted to the specific characteristics of Islamic modes of financing. PLS modes are riskier than non-PLS modes and, among the former, Mudaraba transactions seem to be riskier than Musharaka transactions or direct investment. Therefore, Mudaraba contracts should carry the highest risk weight, and non-PLS modes, the lowest.
A CAMEL rating for the adequacy of liquidity in an Islamic environment should take into account the fact that - in contrast to conventional banks - Islamic banks cannot obtain funds from lender-of-last-resort facilities, such as Lombard and discount windows.
This is because such facilities involve the payment of interest.
Also, while in principle appropriately designed short-term financial instruments and interbank and money markets are possible in an Islamic environment, in practice, they are rather underdeveloped.
The Association of Chartered Bankers of Sri Lanka (ACBSL) which is the local arm of the Chartered Institute of Bankers (London) launched its programme for the year 1998/99 on of July 2 at Galle Face Hotel at a simple but impressive ceremony.
This was the fifth consecutive year that the Association launched its programme publicly. The programme covers educational events for students of banking and lecture programmes for discerning bankers and social events for young bankers.
UK High Commissioner in Sri Lanka, David Tatham, who was the Chief Guest at this year's function commended the Association for its dedication and stated that organisations such as the ACBSL should provide inspiration to the banking community. He also congratulated the three recipients of the Life-Time Awards for the year 1998.
The Life-Time Awards which are awarded annually are reserved for outstanding Chartered Bankers whose contribution to the banking industry have been acknowledged and acclaimed. All three recipients for 1998 are Fellows of the Chartered Institute of Bankers.
Patrick de Silva, Deputy General Manager of Sampath Bank who has put in more than 40 years of service was presented with a Life-Time Award for his contributions to the industry specially, in the area of finance of foreign trade.
Rienzie T. Wijetilleke, Managing Director Hatton National Bank Ltd was a popular choice and received his award for the numerous services he has rendered to the banking industry in Sri Lanka and also for his dynamic leadership, which has taken the HNB to great heights.
The third recipient, A.L. Abeygunewardena, a former Deputy General Manager of Bank of Ceylon, is well known in the banking education arena and is a popular lecturer at the Institute of Bankers in Sri Lanka. He has to his credit many study packs compiled by him.
HNB created history in the capital markets by raising the required Rs. 1 billion (the largest quoted debenture issue todate) in record time, a company release says.
It was also the first time a Sri Lankan corporate entity tested the market with a debt instrument that was subordinated to the interest of general and secured creditors.
HNB received 2893 applications amounting to Rs. 1652 million, for their debenture issue which closed recently.
Based on this significant response from both individual and institutional investors, the Bank in consultation with the Colombo Stock Exchange decided on the following allotment basis:
Based on the above allotment approximately Rs. 635 million was allocated to the investors in the category of
HNB estimates that approximately 30% of the HNB debenture holders would account for from the outstations including the North and the East, the release added.
The fact that the HNB debenture issue was over subscribed by 1.6 times is a good indicator for secondary market activity. The Bank is hopeful that applicants who did not receive the full allocation would participate in the secondary market to meet their investment objectives, they added.
HNB's Corporate Finance Division (CFD) was responsible for the structuring the above issue. The CFD is fully equipped to assist any Sri Lankan corporate entity that intends raising medium to long term debt capital in the form of Debentures and bonds.
Value (Rs) Allotment
Note: No applicant in higher category has been allotted a lesser amount of debentures than an applicant in the immediate preceding category.
To celebrate their Golden Jubilee which falls this year, Hemas Group organized a sports meet for staff members and their families, at the Race Course (Sports Ministry) Grounds recently. The chief guest was Nuruddin Esufally, Senior Life Director of Hemas, while the guests of honour were Sriyani Kulawansa and Julian Bolling.
Celebrations began with a Marathon Race flagged off from Race Course Avenue and sponsored by "Seven Seas". The Sports Meet began with the hoisting of the National Flag and those of Hemas by the Directors of Hemas Holdings, Abbas Esufally, Imtiaz Esufally, Husein Esufally and Murtaza A.H. Esufally. This was followed by the lighting of the Hemas Sports Meet Torch.
All sectors of the Hemas Group were represented at the Meet, with each sector having its own decorated tent in the assigned colour. The Hemas 50'th year logo was visible everywhere, on tents on caps and T shirts worn by the participants.
Events comprised track & field, as well as fun events and a fancy dress parade. Special 50th anniversary Gold, Silver and Bronze medals were distributed to the winners of track and field events.
After the prize distribution, Chandralal Wickremapathirana, Chairman of the Sports Meet Organizing Committee, delivered the vote of thanks.
The Sports Meet was part of the year long celebrations of the Hemas Group, which will culminate at the end of the year, and which reflects the spirit of teamwork which Hemas is proud of.
Against the backdrop of a generally sluggish transportation market, ACS's volumes have more than tripled since 1991. ACS's revenue, through not released publicly, contributes handsomely to overall APL profits.
And ACS contributes to APL in another way as well: In 1997, ACS customers chose APL to carry 37% of their volumes.
What's behind the continuing vitality of ACS? First, as ACS Market Manager Rod Miller points out, supply-chain management goes beyond merely managing the physical movement of goods.
Besides the basic business of consolidating cargo - that is, combining small shipments into full containerloads to reduce customer's shipping costs ACS also adds value through automated information retrieval and delivery, supply-chain analysis, various warehousing and distribution services, and other services such as airfreight logistics management.
With its products and services, ACS helps its customers effectively and efficiently manage their supply-chains, thereby reducing their overall supply-chain costs. That has kept ACS's revenues climbing, even as pressure increases to keep overall transportation costs down.
"The nature of our business enables us to talk with customers about their supply-chain problems and come up with solutions, instead of just playing the rate game," Miller says of the worldwide merchandisers and retailers who make up ACS's primary clients.
"We see a growing recognition throughout our customers' organizations - from the top down - that the supply-chain has a real connection to their business results."
Another advantage for the consolidation business, Miller observes, is the longevity of the customer relationship. Whereas shipping customers may come and go with the latest rates, Miller says consolidation customers typically prefer long-term relationships.
That's because of the complexity of consolidation procedures and the need to integrate computer systems between the customer and the consolidator. As a result, customers tend to stay for years.
That has certainly been the case with JC Penney, The Gap, IKEA, The Limited and Stride-Rite Shoes, all longtime ACS customers.
The merger with NOL has offered additional opportunities, as well. Previous NOL customers such as electronics manufacturer Philips and retailers Pier I and Woolworth, for example, have expressed interest in ACS's services.
More important, Miller says, the merger with NOL "has reinforced and renewed APL's strong, long-term commitment to logistics, capitalizing on a truly global network."
ACS has an extensive network of offices and warehouses, with operations in 88 cities and 40 countries.
The most recent expansions have been in South America, with the next planned for Africa. ACS has an especially impressive presence in China, where booming manufacturers of footwear, clothing, consumer electronics and toys are turning out the goods on which ACS has built its reputation and expertise.
ACS's online computer network extends throughout Asia, Europe, and the US, offering customers several different "information products."
Included are Electronic Data Interchange, and barcode scanning in 25 locations and 17 countries.
Full shipment tracking is available through a desktop client/server system called ANSWERS, and now through the Internet with NetTrac, the first Internet application of its kind.
In ACS's markets, Miller says, customers choose their consolidation and logistics partners based not only on physical networks, but also on the partner's ability to provide critical "visibility" of the cargo throughout the supply-chain.
That's because the more information that retailers or merchandisers can obtain - and the more meaningful it is the better prepared they are to respond to their own market demands for inventory and distribution.
For customers, the far reach of ACS's systems provides a distinct competitive advantage, as does ACS's network of physical consolidation and warehousing location around the globe.
Miller says ACS's growth today is coming from the three sources that every company wants - current customers, new customers in existing locations, and expansion to new sites.
An industry leading information network, a huge postmerger presence and continued growth in the supply-chain market all point to an expansive future for an established yet continually innovative organization.
A further sign of the on-going consolidation and rationalisation taking place in the marine container leasing industry comes with the announcement that Textainer Equipment Management (TEM) has taken over management control of the box fleet of PrimeSource Holdings.
The deal, which became effective on April 1, 1998, combines Prime Source's Premier Service, package, including its unique pick-up/delivery service, with Textainer's established range of term lease, master lease and finance lease services.
With PrimeSource's 50,000 TEU all Corten steel containers, with an average age of just two and a half years', fully incorporated into TEM's pool, the combined fleet numbers 550,000 TEU. On the basis of planned purchases, this will increase to 600,000 TEU by the end of 1998. According to TEU the average age of the fleet is less than four years.
Commenting on the arrangement, John Maccarone, president, TEM, said:'With a much larger fleet, and more offices and staff, we feel we will be able not only to continue the PrimeSource tradition on but to do it on a larger scale.'
However, an industry analyst believes that PrimeSource's leasing contracts have been relatively high cost and its operating scope rather limited and that its service offerings will eventually be phased out/merged into TEM's product range.
Jen Hoelter, president and CEO of Textainer Group (the holding company), expects to see significant cost savings and economies of scale benefits from the deal. 'As a company, TEM has expanded successfully by taking over the fleets of companies, such as Maxu, World Container Leasing and Interocean,' he explained. 'We are always on the look out for new opportunities.'
For PrimeSource, which apparently also approached other lessors, there was a need to build its equipment pool up to a meaningful level.
Meanwhile, Cape Town-based Trancor - a common shareholder in both companies - is also thought to have played a significant role in the latest development in the interests of maximising its investment returns. According to the South African container equipment and services company's 1997 annual report, it held 44%-50% of the shares in Textainer Group and 40% of PrimeSource.
A final vote by the US Senate on legislation to reform the US Shipping Act of 1984 was scheduled for April 21, 1998. Us for consideration on that date will be an amendment by Senator Slade Gorton which would give non-vessel operating common carriers the right to sign confidential service contracts with shippers. This is already provided for ocean carriers in S414.
Gorton's amendment is unpopular with the coalition of interests, ie, shippers, ocean carriers, ports and longshore labour, which are backing the latest version of the legislation. This had been expected to be passed by the Senate in March, but was delayed as a result of a disagreement between Republicans and Democrats over federal judge confirmations.
Informed Washington sources suggested that it was unlikely that Gorton's amendment would be passed. However, if it were, then S414 would in effect be killed off, as the amendment would be unacceptable to ocean carriers and labour alike.
Assuming S414 was passed on April 21, then it would proceed to the House of Representatives. Supporters of the legislation hope that the House will not opt to hold hearings on the act, a process that the House transport and infrastructure committee went through relatively recently when it was considering a House bill to revise the 1984 Shipping Act. However, the House initiative differed from S414 in some respects, notably calling for the Federal Maritime Commission to be abolished and its functions subsumed into a body within the Department of Transportation. These, and other differences, will have to be reconciled if revision of the 1984 Act is to be completed.
House hearings would delay the reform process at a time when the House is pre-occupied with 13 major appropriations bills, including highway funding as part of the Intermodal Surface Transportation Efficiency Act (ISTEA). With this legislative load, speed is of the essence if the reformed shipping act is to make it through the House before the current session ends in Autumn 1998.
Danish ship operator, Nordana Line, is to launch a new direct service between UK, Northern Europe and East Africa linking Antwerp and Tilbury with Mombasa via the Suez Canal. Dar-Es-Salaam is to be served on inducement.
The East Africa Express Service will, initially, deploy three modern, ro-ro, multipurpose vessels on a fortnightly frequency and will cater primarily for rolling, conventional and project related cargo, in addition to containers.
The first sailing, Nordana Kisumu was from Antwerp on May 27, 1998, followed thereafter by Nordana Kampala and Nordana Kitale.
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