The Sunday Times on the Web Business
25th April 1999

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An egg a day may keep doctors away

Nearly 30 years ago, health authorities warned Americans against eating eggs. The concern was cholesterol levels in the national diet. As a result, egg consumption dropped. But now, the results of a major study published in this week's Journal of the American Medical Association (JAMA) suggest that an egg or two a day won't do most people any harm.

The Harvard University study flies in the face of conventional wisdom on eggs. U.S. health authorities advise Americans to eat no more than three or four eggs a week. The theory has been that eggs, which are high in cholesterol, could increase cholesterol in the blood and lead to heart attacks.

But the study of nearly 120,000 people found that those who consumed seven to 14 eggs a week had the same rate of cardiovascular disease as those whose consumption, on average, didn't include even one egg per week.

"Eggs will raise blood levels of cholesterol, but the increase is actually very small and appears to be compensated for by other nutrients, beneficial nutrients, that are present in eggs," says Dr. Meir Stampfer of Harvard University.

Stampfer says saturated fat in food is the problem, not cholesterol. The fat is found in meat and dairy products, and it raises cholesterol levels in a person's blood.


Millennium Office for the new millennium

Media Solutions a BOI approved multimedia and software development company that started operations a year ago has developed a world class software application called Millennium Office.

They are expanding their operations to North America where they are setting up a million dollar subsidiary companies funded by Venture Capital firms and strategic partners with the IT industry.

Media Solutions has appointed Seattle Lab of Washington as the exclusive global distributor of Millennium Office.

Millennium Office is a virtual office that is accessible from anywhere in the world via a web browser, offering email, address book, calendar, fax, ICQ, message bank, expense report, etc. It also includes Millennium Office Briefcase, which gives the user the option to work off-line and synchronises with such popular client applications as Outlook and Eudora. Millennium Office is an award winning Windows NT application developed and patented by Media Solutions. Millennium Office is the first in a series of Web OA (Web Office Automation) applications to be released by Media Solutions.

Seattle Lab pioneered the concept of web-based host applications with Emurl, the first commercial product that allowed access to email via a web browser. Millennium Office takes that concept to the next level, giving people access not only to email, but to all their everyday office tools.

"A product like Millennium Office was at the top of our development priorities already," said L.A. Heberlein, president of Seattle Lab. "We were extremely excited to discover Media Solutions, find that they already had the product in hand, and see that they had done a great job with it. It's everything we could possibly have wanted."

Millennium Office is a Windows NT product, built with a combination of ASP (Active Server Pages) and COM (Component Object Model). It also uses MTS (Microsoft Transaction Server), a performance enhancing feature in Windows NT. Millennium Office supports POP mail, as well as Microsoft SQL Server and the Access database format.


New solar system discovered

It's a question that's been asked as long as humans have looked skyward: What's out there?

The announcement Thursday that scientists at San Francisco State University had discovered a new solar system very much like our own might hold the answer. Someday.

"We scientists don't think about these things from day to day," said Debra Fischer, a member of the SFSU team. "But long vision for us is that we hope to find Earth-like planets around other stars and find them in 'habitable zones,' which would mean that they may support life."

The San Franciscans, helped by astronomers from the Harvard-Smithsonian Center for Astrophysics and the National Center for Atmospheric Research, found strong evidence of three planets revolving around a star called Upsilon Andromedae. What that suggests is that the Milky Way probably teems with similar solar systems that contain Earth-like planets capable of supporting life.

"We don't spend our time 'out there,' thinking about this," Fischer said. "But I do believe the next generation of research will reveal — in one to two decades — Earth-like planets."

The Upsilon Andromedae solar system is the "first kin" to our own ever found, Fischer said. "It suggests that planets are formed much more easily than we originally imagined. And that the Milky Way, which has 200 billion stars, may be filled with other solar systems like this, and ours."

The first planet, and the closest orbiting Upsilon Andromedae, was discovered by SFSU astronomers R. Paul Butler and Geoffrey Marcy in 1996. This planet has three-quarters of the mass of Jupiter, and orbits 0.06 AUs (one AU equals the distance from the Earth to the Sun) from the star.

The middle planet is 0.83 AUs from the star and has at least twice the mass of Jupiter. The third planet has at least four times the mass of Jupiter, and is 2.5 AUs from Upsilon Andromedae.

No current theory suggested that so many giant planets would form around a star. Fischer said this suggested a new paradigm for planet formation. "There may be hundreds of small seed planets — or planetesimals — which grow in the disk of matter around a star," she said.

The planets that develop most quickly would then win the gravitational tug of war and remain in orbit around the star, weeding out the smaller planets.

Butler and Marcy felt that the velocity variations that revealed the closest planet to the star in 1996 were strange because they had an unusual amount of scatter. Earlier this year, enough data was gathered to confirm the second planet, which helped explain some of the confusing data.

But something else seemed to be tugging on the star, said Fischer. There was an extra wobble, which could only be explained by the presence of a third planet.


Biggest of the smallest

You know how some people consider "jumbo shrimp" an oxymoron? Here's another: giant bacteria.

Writing in this week's issue of the journal Science, an international team of researchers report on a single-cell organism that is a leviathan among microbes.

It's so big you can see it. It's as big as the head of a fruit fly or the period that ends this sentence.

"It's the largest bacteria that is known," says Heide Schulz, a Ph.D. student at the Max Planck Institute for Marine Microbiology in Germany.

Schulz spotted the bacteria behemoths, up to three-quarters of a millimeter in diameter, in sediments scooped up off the coast of Namibia during a 1997 expedition. When she first examined them, "I thought it might be a kind of ill bacteria," she says. "But then I realised they were all that big."

An analogy: If an ordinary bacterium were scaled up to the size of newborn mouse, the new bacterium, dubbed Thiomargarita namibiensis would be as big as a blue whale. The previous record holder - Epulopiscum fishelsoni, which lives in the guts of surgeonfish - would be about as big as a lion. The bacterium's vastness comes from how it makes a living. Off the coast of Namibia is an upwelling of deep ocean water, which brings up decaying organic material that has drifted to the ocean bottom. The nutrient-rich waters nurture the growth of phytoplankton - so much so that almost all the oxygen in the water gets used up.

The bacteria living in the olive-green mud therefore need to "breathe" something else. For Thiomargarita, chemicals known as nitrates in the water serve as their oxygen, while hydrogen sulfide, produced by other bacteria in the sediment, is their food. At the centre of each Thiomargarita is a sac of nitrate-rich water, which takes up 97 percent of its volume. "What this bacterium does is it carries around its own oxygen," Nelson says. "If this bacteria were a scuba diver, it would only have to come up to the surface only six to 10 times a year to fill up its tank. Most of it is a scuba tank of nitrate.

"The immobile organism also stores globules of sulfide in its body, giving it a glistening blue-green whiteness, and individual bacteria often line up in chains of a dozen or longer. Scientists also know that there are many more bacteria to study. According to Nelson, "99.9 or 99 percent of bacteria have never been studied in pure culture." Maybe even larger microbes lurk out there.


40-Year asteroid warning

An asteroid discovered by New Mexico researchers this year could come dangerously close to Earth in 40 years, according to calculations by astronomers in Italy.

Asteroid 1999 AN10, located with an Air Force telescope near Socorro, thus moves to the top of science's list of potentially dangerous asteroids.

The chances that it could hit Earth in August 2039 are only one in a billion, according to preliminary data, and "it does not present an urgent situation," said Steven R. Chesley of the University of Pisa.

But the Italian researchers showed that 1999 AN10 will spend at least the next 600 years on an orbit that repeatedly crosses Earth's path, so it remains a long-range danger.

"It's dangerous for centuries," said Brian Marsden, an orbit expert with the International Astronomical Union. Paul Chodas, a researcher with the Near Earth Object program at NASA's Jet Propulsion Laboratory in Pasadena, Calif., agreed.

Scientists at the Lincoln Near-Earth Asteroid Research project, or LINEAR, spotted the half-mile-diameter asteroid Jan. 13 from their vantagepoint at the north end of White Sands Missile Range.

The LINEAR team notified Marsden, who posted the asteroid's coordinates on the Internet so other astronomers could observe it.

Could Be a Big Bang

Although chances of collision are slim, scientists have said that, if there were a collision, an object the size of 1999 AN10 could kill living things over large areas of Earth and change the planet's climate.

The asteroid seemed unexceptional when discovered, said Grant Stokes of Massachusetts Institute of Technology's Lincoln Laboratory, which runs LINEAR.

But the Italian group led by Andrea Milani at Pisa calculated it was likely to pass close to Earth in 2027. They weren't sure how close. But they said there was a remote chance it would pass at just the right distance for Earth's gravity to deflect it onto a path that could then bring it back, 12 years later, for a cataclysmic collision.

But uncertainties about its distance from Earth in 2027 mean even bigger uncertainties about 2039.

Astronomers around the world watched the asteroid until it disappeared Feb. 20 in daytime skies as its orbit neared the sun. They await fresh observations in June.

"That will tell us exactly what the circumstance in 2027 is," Marsden said.(AP)

Causes, consequences, and policy responses to capital flows

What caused the massive surge in capital flows to the emerging markets during the l990s? What were the benefits and problems created by these flows?

These and other issues, including recent patterns of such flows, their effects on recipient countries, and the pros and cons of alternative policy responses are considered in Large Capital Flows: A Survey of the Causes, Consequences, and Policy Responses, by Alejandro Lopez-Mefa of the IMF Institute.

After the debt crisis of 1982-89, significant flows of financial capital returned to many developing countries, Lopez-Mejfa finds. In 1996 net private capital flows to these countries reached $190 billion, almost four times what they were in l990.

Most of this surge was concentrated in Asia and Latin America, where a dozen countries accounted for 75 percent of total capital flows, while 140 of the 166 developing countries accounted for less than 5 percent of inflows.

The heightened interest of investors in some developing countries has led to increased financial integration, which boosts investment and consumption in those countries, with benefits both for them and for the global economy.

Nevertheless, large capital flows are not an unmitigated blessing, according to the author. They can lead to rapid monetary expansion, inflationary pressures, real exchange rate depreciation, risks to the financial sector, and widening current account deficits.

In addition, as the experiences of Mexico (1994 - 95), Asia (1997), and Russia (1998) have shown, financial integration can lead to large reversals of the inflows because of changes in expected asset returns, investor herding, and contagion effects.

The author goes on to summarize what is currently known about the causes, consequences, and appropriate policy responses to large capital inflows.

Causes of capital flows

The primary forces driving investor interest in emerging markets are the search for higher returns and risk diversification. Although these forces have always driven investors' decisions, other internal and external factors have also increased the responsiveness of private capital to opportunities in emerging markets.

As regards internal factors, private risk-return characteristics for foreign investors have improved through two channels.

First, external debt restructuring in a wide range of countries has resulted in increased creditworthiness.

Second, productivity gains deriving from structural reforms and heightened confidence in macroeconomic management have also pulled investors into emerging markets.

Among external factors have been cyclic conditions in industrial countries. In particular, along with recessions in industrial countries in the early 1990s, a decline in world real interest rates made profit opportunities in emerging economies relatively more attractive and reduced the default risk of debtor countries.

Other external factors, such as falling com munications costs, strong competition, and rising costs in domestic markets, as well as the growing importance of institutional investors looking for risk diversification and higher rates of return on capital, have also increased capital flows to emerging markets.

Related to capital flows to emerging markets are reversals of these flows. In addition to the experiences of Asia, Mexico, and Russia, major reversals of capital flows have occurred in a number of other developing countries. A common cause for most of these reversals has been a lack of confidence in domestic macroeconomic policies, leading to speculative attacks on the currency and to balance of payments crises.

Balance of payments crises can also be associated with financial vulnerabilities, sudden shifts in agents' expectations, and contagion effects. Contagion effects are important contributors to the recent volatility of international capital markets and can occur through several channels, Lopez-Mejfa argues.

The consequences

A principal benefit of investor interest in developing countries has been increased financial integration, to the advantage of both developing and industrial countries. Financial flows boost growth in developing countries by financing investment and consumption.

They also reduce the volatility of consumption by augmenting opportunities for risk diversification and by allowing international borrowing to offset temporary declines in income.

Nevertheless, large capital inflows might also imply an excessive expansion of aggregate demand and may have negative effects on the financial sector.

Expansion of domestic demand—macroeconomic overheating — is likely to be reflected in inflationary pressures, real exchange rate appreciation, and widening current account deficits.

According to standard open-economy models, a decline in the world interest rate induces income and substitution effects in the capital-importing country, generating increases in consumption and investment, a decline in savings, and a deterioration of the current account.

Ultimately, however, the effects on inflation and the real exchange rate will largely be determined by the exchange rate regime and the amount of international reserve accumulation.

As predicted by the models (sampling 20 developing countries with high capital inflows), the current account deteriorated in all countries except Chile, India, and Sri Lanka during the capital inflow period, although many countries used these inflows to accumulate international reserves. The exchange rate appreciated in 12 of the 20 countries in the sample.

Capital inflows also affect the financial system that intermediates them. First, the quasi-fiscal deficit increases as a result of the sterilization policy that sells high-yielding domestic bonds and buys foreign exchange earning lower interest rates.

Second, the financial system might become more vulnerable because of a rise in lending — usually strengthened by a surge in asset prices — that may exacerbate the maturity mismatch between bank assets and liabilities and reduce loan quality. Increases in bank credit were a generalized outcome of capital inflows.

Finally, microeconomic distortions can exacer- bate the boom-bust cycle during capital flows. An important puzzle for the study of development economics is how a developing country can shift from a path of reasonable growth before a financial crisis to a sharp decline in activity after the crisis.

The author of this study adduces a number of reasons to explain the influence of capital flows on this phenomenon.

Responses and lessons

Countries that have managed to overcome overheating and the adverse financial sector effects of capital inflows have relied on more than a single policy measure, Lopez-Mejfa observes. The appropriate combination of policy options depends on the causes of the inflows, the availability of different instruments, the nature of domestic financial markets, and the macroeconomic and policy climate of the recipient country.

Policymakers typically have at their disposal countercyclical measures (monetary policy, nominal exchange rate flexibility, and fiscal policy), structural policies (trade policy, banking supervision and regulation), and capital controls (including the encouragement of gross outflows) .

Successful policy responses have varied across countries, but have generally used monetary policy in the early stages of the inflow period, the author notes. As inflows persisted and costs associated with different types of sterilization were realized, successful policies began to rely on nominal exchange rate flexibility.

In several cases, the costs of the appreciation of the real exchange rate were mitigated by the imposition of capital controls to moderate the volume of inflows and lengthen their maturities. It appears that capital controls had the desired effect of lengthening maturities in Chile, Colombia, and Malaysia, where short-term capital inflows declined sharply.

This is an important policy outcome because the short maturity of debt was identified as a main determinant of the volatility and reversals of capital flows in the Mexican and Asian crises.

Thus, an appropriate management of private sector debt—an issue largely ignored in the experience of the 1990s—might require innovative techniques, such as prudential regulation or capital controls on inflows of short maturity.

Experiences in several countries show that individual policies can interact to produce unintended effects on the composition of capital inflows. In particular, the policy mix of a pegged exchange rate, heavy sterilization, and no capital controls to discourage short-term flows can explain the change in the composition of capital inflows in the period leading up to the Asian crisis.

Indeed, in 1994-95, Asian countries, most notably Thailand, increasingly started to attract short-term flows. Consequently, foreign direct investment and portfolio investment accounted for a declining share in total private flows.

In the presence of structural forces driving capital inflows, fiscal restraint becomes crucial, Lopez-Mejfa emphasizes. In fact, it avoids the costs associated with the different types of sterilization policies, is a substitute for exchange rate flexibility, and thus limits the appreciation of the real exchange rate.

Few countries, however, have relied on fiscal policy because it is usually too inflexible to be effective in responding to fluctuations in capital movements. But in countries where the fiscal stance was tightened, the real exchange rate depreciated and the economy experienced larger growth.

Mind your Business

By Business Bug

Defence first

The war in the North and East has been a drain on the country's economy for sometime now and decision makers at the Treasury have recommended cuts in defence spending for next year.

Feelers have been sent to the highest levels of government, but there is resistance to the idea, we hear.

With next year likely to have at least one major election, defence spending cuts would not be prudent, the Treasury has been told.

Vahini vs Vahini

After the deal to telecast the Cup that we will be defending at Lords was won by the Golden Vahini, the State Vahini was very agitated .

They wanted to know whether telecast of "important national events" - and they thought the Cup was one - couldn't be reserved for them.

That could be done only if the event was sponsored by them, they were told.

Try again

The collapse of Vajpayee's coalition in Delhi has got the Trading Boys all excited.

Thay always felt that they got a raw deal from the Free Trade Agreement, with India gaining the upper hand.

Now, with heads rolling on the other side of the Palk Straits, Colombo will push to re-negotiate most of the agreement, we are told...........

FTA: Industry fears run down

By Dinali Goonewardene

Double standards apply to foreign imports which are not subject to standards unlike Sri Lankan products and this will pave the way for substandard products, the chairman of a leading export chamber said.

"There were no consultations with the business community before signing the agreement and no adjustments have been made for the problems Sri Lankan industrialists would face," Chairman Chamber of Exporters, Patrick Amarasinghe said during a panel discussion on the Indo-Lanka free trade agreement.

Voicing the fear that many industries would be run down, the businessmen turned politician Amarasinghe said, Sri Lankan products cannot benefit from economies of scale unlike Indian products and a lot of enterprises will shift focus from manufacturing to trading.

He cited the example of Sisil fridges which were a good quality product but have now been superseded by Indian fridges which are marketed under the brand name Sisil.

The prevailing high interest scenario in Sri Lanka is a disincentive to investment. While India gives grants to its small and medium sized enterprises, Sri Lankans have to borrow at high interest rates.

"Indians have numerous regulations which restrict the free flow of money out of the country and there is an incentive to over invoice products to Sri Lanka and retain money in Sri Lanka," he said. "This is officially allowed," he reiterated.

An opportunity to strengthen tourism under the FTA has been overlooked, he said. A regional package could be promoted to attract tourists coming into the region to exploit the similarity of cultures. "The airline industry too would benefit from this," he said.

The Indian government has given into the tea lobby although the Sri Lankan government continues not to heed the voice of its industrialists.

"The private sector is not represented in the negotiating team and representation is essential even at this late stage," he argued.

Moderator Lal de Mel said, "Sri Lanka should be more competitive and this could be facilitated by a lower tax base."

Meanwhile, at a recent seminar BOI chief Thilan Wijesinghe, defended the FTA as being a mechanism for expanding and diversifying trade.

"India imports US$ 2 bn worth electronic components and the bulk of this is imported from Thailand and Malaysia. These components can be manufactured at a 30-40% cost advantage and exported from Sri Lanka", he said.

Watawala profits down to Rs 86m

Watawala Plantations operating profits have decreased by 60% for the year ended st December 31 1998. Profits declined from Rs. 2.1 billion to Rs. 86 million. Turnover decreased by 9.5%, from Rs 1.2 billion to Rs 1.1 billion.

The chairman's report describes sluggish growth for the industry with the El Nino phenomenon and the Russian currency crisis with its attendant adverse impact on tea prices.

Tea production declined by 15% in comparison to the previous year, from 8.88 million kgs to 7.54 million kgs, attributed by the chairman to adverse weather.

Rubber production also dropped by 1.5% during the period. Watawala is the only plantation company with a substantial stake in oil palm and production of this crop during the period decreased by 6.5% in comparison to the previous year. This was due to machine break downs and disruptions caused by a modernisation programme. An unprecedented revision in labour wages also eroded profitability.

Return on capital employed declined from 16.5% in 1997 to 6.3% in 1998. Asset turnover dropped from .9 in 1997 to .8 in 1998. Profit margins have deteriorated from 17.7% in 1997 to 7.78% in 1998. This indicates that the decline in ROCE is primarily due to lower margins being realised. Liquidity as determined by the current ratio has deteriorated from 1.48 in 1997 to 1.03 in 1998.

Gearing decreased from 14.8% in 1997 to 6% in 1998. During the year the company repaid Rs 40 million nonconvertible debentures and increased its issued share capital by 36.67 million after the conversion of convertible debentures.

The company's earnings per share has declined by 61% from Rs 10.95 to Rs 4.23. Its price earnings ratio based on the share price of Rs 13 is 3.07 in compariosn to an industry P/E of 3.4.

The chairman's report details updated practices such as Good Agricultural Practice (GAP) whereby improvements to harvesting technology and systems has occurred. 180 hectares of tea and rubber have been replanted. Two factories have been modernised in terms of technology and hygienic practice. 175 hectares have been planted in palm oil estates and a mill upgraded to state of the art status and capacity doubled. These investments are intended to ensure long term viability.

The company launched its value added "Zesta" tea in the local markets. It plans to adopt more aggressive measures to enhance the company's brand equity.

SLT to introduce card system for IDD calls

By Shafraz Farook

IDD callers will get limitless IDD accessibility with GLOBALLINK GOLD call card from Sri Lanka Telecom. SLT's service would allow cardholders to make IDD calls from any SLT phone with a dial tone, regardless of an IDD connection, from anywhere in Sri Lanka. The card holders' phone which could be located anywhere in Sri Lanka will be charged for the call in the monthly bill.

Local calls made to access the system will not be charged and there will be no change to the IDD call charges. The GLOBALLINK card acts like a credit card with credit slots of Rs.50, 000. Once the customer reaches the end of a slot he could extend it further by just calling the card centre, for as much as they require.

SLT claims that the system has a fool proof security system, which allows only those with the personal identification number (PIN) and a personal account number (PAN) access to the system. Customers have the privilege of selecting one of the three national languages.

At present SLT is providing the service only to customers whose monthly IDD usage exceeds Rs. 10,000. They hope to extend the service to others if they see a demand. Officials said that there might be a prepaid card system and a system that allows customers to make calls from abroad.

Mobitel looks for investors abroad

Mobitel, one of Sri Lanka's fastest growing cellular networks is looking at the possibility of going for an IPO, Mobitel's CEO said.

"We are looking at the possibility of attracting foreign and local investors," CEO Cathy Anston said.

Mobitel which is Sri Lanka's third cellular network is 60 per cent owned by Telstra Australia and 40 per cent by Sri Lanka Telecom.

The company is introducing digital technology to its subscribers commencing next month. The necessary funds for this expansion programme came via supplier credits and internally generated funds, she said.

Having gained a 36 per cent market share as the third entrant to the cellular industry, Mobitel boasts of 60,000 subscribers.

Our coverage is bigger, though the traffic is 1 per cent below our nearest rival Celltel, she said.

Gone are the days when cellular phones were a status symbol. The cellular industry has been booming over the recent years (thanks to a long waiting list for fixed access phones) with an annual industry growth of 50 per cent.

However, market penetration remains at 0.8 per cent, way below some of the other countries that have similar incomes. "Its not a profitable growth," she said.

"Though our rival Celltel has more customers, our customers talk more and generate more traffic," she said.

She expressed concerns that the sector is not profitable and the overall industry is making a huge loss due to unfair interconnection agreement.

She was hopeful that discussions the operators were having with the regulatory authorities will bear fruit and the celluar subscribers will be given the benefit of free incoming calls which will ease the burden on cellular users.

Pfizer plans to make Viagra in China

BEIJING, U.S. pharmaceutical firm Pfizer Inc (PFE.N) plans to manufacture the anti-impotence drug Viagra in China, the Beijing Evening News reported on Friday. Pfizer planned to seek permission from Chinese drug regulators next month to make and sell Viagra in China, the newspaper said.

If approved by the regulators, Viagra would be manufactured at Pfizer's plant in the northeastern city of Dalian from September, it said.

Clinical trials of Viagra in Beijing and Shanghai were completed recently, the newspaper said. Pfizer's Shanghai sales manager was quoted as saying Viagra would not be sold in China as a health product.

The diamond-shaped blue pill would be sold as a drug under the "strict guidance" of doctors, said the sales manager, who was identified by his surname, Zhang. Pfizer has not decided what Chinese name to use for the drug.


Ceylinco Developers to build Millennium city

Ceylinco Developers Ltd. will build a Mega Township in Oruwela, Athurugiriya, in association with DFCC and NDB.

The 1575 house scheme, The Millenium City will be built on a 100 acre blowck of land bordering the Athurugiriya-Kaduwela and Athurugiriya-Koratota main roads.

Ceylinco Developers won the bid over 22 other competitors including foreigners, for the masive housing project.

The Athurugiriya site was an Urban Development Authority property which was transferred to the BOI and purchased by Ceylinco at government valued prices and free of G.S.T.

Board of Investment concessions have enabled the Company to have 20%-30% cost savings," Assistant Brand Manager, Ceylinco Developers, Sithmini Perera told The Sunday Times Business. The site is considered one of the finest properties available in the Western Province and is in close proxinity to the Colombo city, she said.

Oruwela, Athurugiriya was earmarked as a state sponsored low cost, mass scale development project which was later up for bids to the private sector because of lack of funding.

The project caters to the lower and middle income category and the upper middle class. The houses are in three categories, Heartland (Rs.650,000-1.1Mn), Olympus (Rs.1.9-2.5Mn), and Paradise (Rs.2.5-3.5Mn).

Heartland, mainly made for the lower segment will have 1200 houses, Olympus 230 houses and the rest for Paradise houses.

The new project will take the initiative to protect the environment and to preserve trees. "There will be a minimal cutting of trees," Ms.Perera said. The roads will be constructed with trees on either side for shade.

The land has the basic supply of three-phase electricity, pipe borne water, private telephone lines and internal roads.

The proposed scheme would consist of a commercial complex with supermarkets and shops, parks, pre-schools, day care centres, playgrounds and a community centre etc. The upper category will have more facilities like swimming pool, clubhouse, gymnasium, tennis courts and a cyber cafe with internet facilities.

In addition the entire scheme will have a park, a lake, recreational areas and wide access roads with transport facilities such as bus terminals and taxi services. The scheme will also have 24 units of 'shophouses' where people could use for business purposes .

The shopping complex is to be rented out.

Ms. Perera said that there had been active response even without advertising. "The project starting this week will take 3 1/2 years to finish," she added.

Ceylinco Developers will be arranging financing for their customers through banks and financial organizations. Easy payment terms could be made by Hatton National Bank, Seylan Bank and Commercial Bank.

The main architects for the scheme are Ananda Gamage, Prasanna Gunawardana, and Bruce Sellsmith.

KBSL to provide office solutions

Keels Business Systems (KBSL) is planning to become a complete office solutions provider in Sri Lanka.

In collaboration with Lucent technologies, KBSL offers hardware and software products that address all aspects of front and back office enterprise level needs.

Lucent Technologies has been in the local market for nearly three years and has gained a firm foothold in Sri Lanka in major corporations including CSE, Seylan Bank, Hong Kong & Shanghai Bank, SLT, Celltel, Galadari and Taj Exotica, KBSL MB, Keith Modder said.

Lucent Technologies help corporations build more powerful and flexible distribution networks, and new ways to enhance and streamline call centre operations by offering customers self service options. The basic function of the system is to integrate the phone systerm with the computer system. By doing this the networked system will identify the caller through a number of systems available and direct the call to the officer having the most appropriarte skills to handle the customer.

Lucent Technologies customer sales and services solutions can be customised to enhance call centre operations.

Lucent Technologies is the result of AT&T's trivesture in 1996. "A new company with 127 years of experience," Lucent's Business Communications Systems Regional Director, Eric Tan said.

Cellular growth slow in Lanka but Celltel will hammer on

Michel SchluterWorldwide cellular growth is predicted to overtake fixed access lines and the numbers are expected to top 1 billion subscribers by year 2000. However, the Sri Lankan cellular industry has seen a modest growth notching 174,202 as at end 1998. Despite the tariffs being one of the lowest in the region, market penetration is a dismal 0.8 per cent, compared to an industry average of 2 percent. Celltel's new CEO, Michel Schluter discussed his views on the cellular industry in an interview with Mel Gunasekera.

Q: What is Celltel's background?

A: We are 99.8 per cent owned by Millicom International based in Luxembourg but traded on the Nasdaq stock exchange. We are a BOI company and we will celebrate 10 years in Sri Lanka this year.

Q: What are your total investments in Sri Lanka todate?

A: Around US$ 50 mn.

Q: What are your investment plans for Sri Lanka this year?

A: It's a good question, but I can't tell you because of competition. But we are certainly hoping to invest more in Sri Lanka. The investment in numbers, it's difficult to say.

Q: Some of your competitors are hoping to go digital. What are your plans where technology is concerned?

A: We are considering going digital or third generation technology (3G).

Q: Do you hope to finance this technological change. Will Millicom fund it?

A: Normally we will raise it locally with the support of Millicom.

Q: Do you plan anything special to celebrate your 10 years of operation?

A: We certainly would be recognising the 10 years. We don't want to give away any of our plans before as one of our competitors might jump on it before that.

Q: Most of the operators in the communication industry in Sri Lanka are finding it difficult to fund their expansion programmes. Are you also facing a similar challenge?

A: We have had no trouble at all. At the moment no problems at all. With HNB last year we raised Rs. 450 mn for our funding programme. I think it was the largest by a cellular company.

Q: You have been in Sri Lanka before. What is your perception of the cellular industry?

A: Penetration is very low compared to other markets in the world. Sri Lanka has 0.8 per cent penetration as a total of the cellular market, which is very very low. The penetration is low even compared to the Asian countries.

Q: What is the average or ideal figure for market penetration?

A: It should have been 2% by now since we launched 10 years ago. In Europe its over 50%. It's high in Hong Kong, in China, Phillippines the average is something like 2 per cent.

Q: You are the pioneers of cellular services, and you came at a time when there was a long waiting list for fixed access phones and people were buying cellular phones to use them as fixed access lines. So how come the numbers are so low?

A: With giving low tariffs compared to the region, we expect penetration to be high.

Q: So where have we gone wrong, why is Sri Lanka lagging behind?

A: I don't know, it's something we need to find out.

Q: Hasn't Celltel done any studies in this area as to why it's so low despite having four operators?

A: We have a strategy in place as to how we are going to increase market penetration. We have now launched penetrative tariffs. We have calling within the Celltel network the cheapest telephone call you can make in the country. We now offer the cheapest peak rate telephone calls all over the country.

Q: So why aren't people going for cellular?

A: You see, the waiting list for Sri Lanka Telecom (SLT) is high, its like 1 phone per 88 people. There are many reasons, but obviously price is the main thing.

Cellular phones are very cheap now, it's even cheaper than a Suntel or Lanka Bell. You can pick up a cellular phone for Rs. 7000.

Q: Cellular phones have become more affordable now. How are the dealers selling them at such low prices, is anybody subsidising them?

A: The prices are coming down because they are making more batteries, producers are making more volumes. So the more you produce them the cheaper they become. Technology has also improved. Ten years ago, the whole thing cost a lot of money, but the whole thing is cheap because producers are manufacturing higher volumes.

Q: Do you plan to bring in offers where the network operator offers the entire phone package at a very low rate for a minimum one year contract, but subsequently recovers the cost by tying customers down for a one year period?

A: Sri Lanka is not geared up to offer that facility for instance, somebody continues not to pay us the monthly access fee, in the UK you can have somebody blacklisted because of the postcode system. So the person's credit rating will be affected severely if he defaults the payment to you. Here there is no such system.

Q: Do you think there is a need for an organisation that monitors individual credit rating?

A: We don't have that problem. We have credit limits on customers who default on the post-paid system. The pre-paid customers pay for their services up front.

Q: How do you keep track of bad customers who switch from one network to another?

A: We do have our own credit limits, and we do our own checking. If the guy does not have a good track record we can always ask him to pay a deposit.

Q: The recent kidnapping case, one of the abductors went and bought a cellcard using a bogus ID card. Do you have any method to prevent people buying your products using forged documents?

A: He picked the best cellular service!! We have no way of screening a kidnapper. So long as you pay the money up front.

Q: How successful has the Cellcard been in Sri Lanka?

A: If we did not have the Cellcard our penetration would be even lower in Sri Lanka. There is an advantage cost to the consumers basically. Cellcard users can control his cost at his own advantage.

Q: How has the Cellcard grown compared to your normal connections?

A: The cellcard service sells far more than the credit based service. We don't want to give out numbers due to competition, but Cellcard sales have exceeded credit based sales. The numbers began increasing almost immediately after the launch, it was that much of a success. It was an immediate success.

Q: Are you marketing it more aggressively than credit based connections?

A: No, we have two different ways of marketing. We actually have two different advertising agencies handling it. It's two different products and each different product suits individuals different needs. So the good news is that if our customers are using a brand new tariff we have launched with the Cellcard, it is tailored towards specific people's needs.

Q: Have you offered anything new to CellCard users?

A: We have offered three new tariffs. We also want to break down the cellcard service to cater to different segments of the market, with different tariff operations. There are tariffs for low, medium and higher users so they can tailor it for their needs.

Q: What happens to Cellcard customers who run out of credit. They have no option but to go and buy a new card. Are you hoping to introduce a system where customers can extend their credit limit on the Cellcard?

A: We are thinking of something to make life easier, but we cannot say anything. It's easy already as there are a large number of retail outlets that operate 24 hours a day that sells these cards. We have ways of enhancing it further which will be launched in the very near future.

Q: Are you planning to launch any new products since the Cellcard system?

A: Yes we are always looking at new products to further enhance our operation. Our objective is to continuously add value to the Cellcard operation.

Q: The recent SLT tariff hike announced by the TRC, froze the hike on cellular services as the TRC is in the process of finalising the interconnection agreement for cellular services.

A: I am not aware of the hike on cellular tariff being frozen, we have not got anything in writing yet. The whole interconnection agreement with SLT depends on the Caller Party Pays (CPP) coming into effect. Whereby, if a landline calls a mobile phone, he will have to pay an additional cost for the call, and the mobile user will not have to pay for the incoming call. It's a fair system.

Q: Do you think that this is one of the drawbacks for the low penetration?

A: Yes, because mobile users sometimes switch their phones off to control incoming calls. It's the guy who is calling who makes a choice. He can either call the other guy on a mobile phone and pay more for the call, or he can wait till the guy comes back to his office and call him on a landline. It's the guy who is calling who can make the choice, not the mobile user.

Q: Is this one of the reasons that people don't like do give out their cellular numbers?

A: Yes. It also prevents us from printing a cellular directory with the list of all our subscribers, because do we have the right to put someone's number in the directory as the guy who receives the call has to pay for its cost.

The whole cellular industry will benefit if CPP comes into affect as it will be a cost base system amongst all operators.

Q: What's the status of CPP?

A: There are negotiations still going. The TRC is to make a decision on this matter, and I can only say that it will be in the best interest of the cellular industry in Sri Lanka. Because the main benefit of CPP is that people will keep their phones switched on and it will increase penetration.

Q: Celltel does not offer caller identification. Will this method help screen unwanted calls?

A: I don't think so. When the phone rings even if the customer is unable to recognise the number he will still pick the call up with curiosity. CPP is the answer.

Q: What is your coverage in Sri Lanka at the moment, and what new areas do you have lined up?

A: There are limitations as to how far we can go because of the situation in the north and east. We are restricted to the areas where people would want us to provide a service. Particularly in the North and East. However, SLT has services and I gather that they have fantastic revenues from those areas.

In terms of coverage in the island, we cover most of the major cities. I don't think anybody will know what percentage of the population we cover, as there has not been a proper census. When you see an ID card, it does not mean that the person lives in the area anymore, so it's difficult to give percentages in terms of population because of the movement of the population.

Q: There are various rumours that cellular companies are not making much of a profit and that the margins are very low, is this true?

A: Well we are not making a profit either.

Q: For how long do you think this scenario can continue given the fact that you have foreign ownership?

A: I leave that answer to you.

Q: Many countries have been de-regulating their telecommunication sectors. In your opinion, how has Sri Lanka fared so far in this respect?

A: The efforts done by TRC and the things they are looking into is very positive. Basically they are taking action on the right things. I hope there will be a very efficient interpretation of the decisions and the decisions will be implemented very fast. That's my big worry. Otherwise it's basically very good. I only hope they can enforce faster implementations.

Q: SLT's waiting list is coming down, and the WLL operators are pushing ahead for more subscribers, do you find them a threat to your industry, now that more and more people are in possession of fixed access phones?

A: People have not given up their cellular phones, but there has been a decrease in use of the phone. Though cellular phones have the mobility, if a customer has the option of using his house phone at a cheaper rate, then they will decide to use that phone. Although they won't give up the benefits of cellular.

Q: Roughly how many mobile operators are there in the market today?

A: Around 150,000 and we control 51%.

John Keells goes on-line

Joan Keells Stock Brokers has launched an on-line information and order placement facility through e-mail to its clients. The information facility is in the form of a daily stock market update titled "stock news@your mail" which will be provided free of charge to any client.

The document "stock news@your mail" would include a brief summary of the market, stock market statistics, including closing prices of selected counters, a section on latest business snippets - both from the domestic and international scene - with particular focus on capital markets, stock market announcements and key recommendations. "Stock news@your mail" is expected to be e-mailed to clients within one hour of conclusion of trading at the Colombo Stock Exchange (CSE).

The order placement facility would enable the company's clients to communicate orders at any time of the day at their convenience from any location, depending on the particular e-mail connection being used.

John Keells Stock Brokers (JKSB) plans to use technology for purposes of market differentiation. The use of the internet and e-business is one such move in that direction. E-commerce (electronic commerce), which is a popular concept in most developed markets like in the US, is now being frequently used by the financial services industry, globally. JKSB has as a result decided to introduce this concept with regard to its broking activities.

Colombo bourse flat but regionals pick up

By Feizal Samath

A slowdown in the Sri Lankan economy and slow corporate earnings growth are further affecting the depressed Colombo stock market that is performing contrary to regional trends where bourses are bouncing back, brokers and analysts say.

"We seem to go against regional trends. Our market has been flat when regional markets have improved," said Nanda Nair, research director at John Keells Stockbrokers.

While activity and turnover have seen some improvements this year, the indices at the Colombo bourse have been flat. The Colombo Stock Exchange All Share Price Index was 540 points on Thursday, down from around 580 at the end of December 1998.

The markets are yet to recover from the East Asian financial crisis in 1997 and last year's fallout from nuclear tests carried by India and Pakistan. Foreign investors pulled out of the Indian sub-continent but the flows, since the uncertainty ended, have been a mere trickle. Last week's dramatic political developments in India with the fall of Prime Minister Atal Behari Vajpayee's government, triggered some worried faces in Colombo.

But brokers are hopeful the Indian scenario would not have an impact in Colombo. "I don't think there is any impact. We certainly felt the blow from the nuclear crisis," said Rajiv Casiechetty, research head at brokers C.T. Smith.

John Keells' Nair said the Colombo indices - largely influenced by foreign investment - were not moving either way because foreign investors were both buying and selling. "One of the old problems is that this market is too liquid - not enough stocks to trade - for foreign buyers. They prefer to go to other markets like Singapore, Hong Kong, Korea or Malaysia," he said.

The Sri Lankan bourse has 230 quoted stocks but only 50 of these are actively traded.

Analysts say a general slowdown in the economy has impacted on corporate earnings and most of the first quarter 1998/99 earnings of blue chip firms, due in the next few weeks, are expected to be lower than initial projections.

Casiechetty said the market has discounted the results and prices have already fallen on expectations of lower earnings from blue chips.

Conglomerates like John Keells and Aitken Spence have seen sharp falls in earnings from plantations while tourism has made some gains.

Private economists say the economy has been sluggish this year due to a combination of local and external factors. Banks are feeling the pinch in a slow growth scenario with less loans being disbursed, more non-performing loans and interest rate margins being squeezed in a bid to get business.

They say that pressure on government to spend more on vote-catching projects ahead of next year's round of key elections - parliamentary and presidential - would put the budget in spin, affect budget deficit targets and stretch the overall economy.

Nair feels that tea prices are likely to recover in the next few months and lead to an improvement in the earnings of plantation companies. 'I think the stock market could consolidate by the end of the year and get us back to the 590-600 index figure," he said.

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