16th January 2000

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Another Vote on Account

By Dilrukshi Handunnetti

With the political agenda taking priority once again, the country's economy is destined to suffer further. Therefore the chances of a proper budget been presented in March this year seems remote.

Authoritative sources told The Sunday Times Business that with the President scheduled to be away from the island to receive medical treatment and the Deputy Finance Minister Prof. G L Peiris also being currently indisposed, there are possibilities that another Vote on Account would be presented in April, to allocate finances for a further four month period.

The Appropriation Bill scheduled for last November was not taken up for debate. Instead a hurried Vote on Account was done, amidst severe criticism, to pave the way for presidential elections in December.

Meanwhile, sources from the Finance Ministry confirmed that as the Vote on Account could guarantee steady finances for the entire financial year, the government could resort to drawing money through supplementary estimates for spending under various Heads.

The non-presentation of the budget last year drew much criticism from all quarters including the lending agencies which questioned the ruling PA's prudence in money matters.

They also laid down certain conditions for the PA administration to follow if it was keen on receiving future assistance from donor countries.

OPEC hints extended cuts

The Organisation of Petroleum Exporting Countries (OPEC) recently hinted that the present round of production cuts, which has helped cause crude oil prices to more than double in recent times, could be extended beyond their formal expiry in March 2000.

In a communique issued at the cartel's headquarters in the Austrian capital, OPEC oil ministers said the production restraint agreement will remain in place "until at least the end of March 2000".

Analysts and oil company executives in Vienna said the careful wording of the statement left open the possibility of keeping the regime beyond that date. OPEC ministers welcomed the big recovery in oil prices this year, brought about in large by widespread adherence within the group to a series of production cuts aimed at arresting the sharp decline in prices in 1998 and in the early part of 1999.

Venezuela and non-OPEC Mexico, together with Saudi Arabia masterminded the production cuts. Strict compliance with the cuts helped lift oil prices dramatically to nine-year highs in December 1999 from below US$ 10 a barrel in early 1999.

But some officials feel that the present price level of around $,-$, a barrel for front-month Brent oil futures may prove unsustainable. Especially because the uncertain level of world demand and a perception within OPEC and other main oil companies that global stocks of crude oil remain relatively high.

"There is the feeling that there are a lot of Y2K inventories out there and that OPEC compliance is slipping," Tom Bentz at Paribas Futures told foreign news services.

"It took us two years to bring back the market to stability and we don't like to throw it away easily...We are not going to overreact if we see some report that says inventories are low and critical," sources said.

Brent crude oil futures - the market's estimate of the likely price of oil in two months' time - had risen above US$ 23 a barrel. The price was a 32-month high, a remarkable upswing since the low of just above US$ 10 last February, the culmination of two years of falling prices due to oversupply.

However, they fear the consequences of increasing output in the second quarter of next year, when world oil demand is usually at the low point in its annual cycle.

Hence, several producers have indicated they would support extending the cuts into the second quarter if market conditions remained weak. The head of Venezuelan state oil giant Petroleos de Venezuela (PDVSA), Hector Ciavaldini, said on Monday he thought it would be logical for OPEC to extend the supply cuts beyond March.

In regard to the futures market US and International Oil Industry Analyst say that EIA data released last week show that refiners reduced inputs by 485 thousand barrels per day (bpd) to 13. 9 million bpd during the first week of January. Crude oil inventories rose by 3.1 million barrels to 293.4 million because refiners used less crude oil but continued to receive crude oil into their tanks at about the same rate as previous weeks.

The increase in February futures prices appears to be driven purely by speculation. Most of the futures buyers will not take delivery on oil. Thus, the actual volume of crude oil available on the market continues to increase, which is why spot prices for imported oil remain low. (SF)

ADB finances low income households

Families in low income households will be the main beneficiaries of a new Rs. 1.4 bn loan (US$ 20mn) recently granted by the Asian Development Bank (ADB).

The monies will be distributed by the Central Bank through two participating credit institutions Hatton National Bank and Commercial Bank-who in turn hope to provide housing finance to eligible households living in municipal council, urban council and town centres of pradeshiya sabhas.

"This programme is designed for the urban poor who build their houses in an incremental manner. The programme is designed to support this process," ADB Consultant, Royston Brockman said addressing a public awareness seminar on the new loan scheme.

Central Bank officials commented that while Rs. 100,000 was the maximum loan granted, this was inadequate to build a complete house. Instead, the credit scheme hopes to finance housing activities such as house extensions, provide electricity and water services, construct toilets and home improvements to existing houses such as roof repairs. Part of the loan monies could also be used to acquire land.

The loan carries a ten year repayment period with a minimum 15.5 percent and a maximum 16 percent interest rate.

Central Bank Governor, A S Jayawardene commented that "it would be good if the interest rate [for houses] is reduced since a low interest rate scenario is presently prevailing in Sri Lanka."

To be eligible for a loan, a family's income should be more than Rs. 8, 500 per month. However, participating commercial banks have included another condition that a family should be able to set aside a minimum of Rs. 3,500 for living expenditure each month prior to meeting loan repayments.

The Central Bank had earlier finished implementing a US$ 20 mn loan scheme for families earning less than Rs. 12,000 in conjunction with USAID, Development Finance Department Central Bank Director, M Ramanathan said. This scheme began in 1993 and ended in 1998. We sought a new source of finance, he said

This credit scheme is part of US$ 100 mn ADB loan for urban development.The other facets of the programme include infrastructure development, institutional and capacity building and sites and services where unencumbered land is equipped with infrastructure and given to local authorities to use for development.

Institution and capacity building involves training local staff on financial management, administration and tax collection methods. The project aims to improve the standard of living and also improve the services provided by local authorities while enabling them to collect more revenue and better manage their finances.(DG)

Visions of the future via wires

Sri Lanka Telecom Ltd. (SLT), utilising its existing network facilities has introduced what it calls as 'Vision Carrier', an occasional video service. SLT officials told the Sunday Times Business that they had launched a high quality digital audio and video transmission service utilising their microwave and fibre optic transmission backbone network.

This would enable television stations and other individuals who wish to send or even air audiovisuals, to transmit that audio-visual material from and to any required locations in virtually any part of the world. SLT's Head of Tariff and Interconnection, H.P. Sunil Chandra said that Vision Carrier was highly suited for Television stations as it eliminates the need for transporting bulky equipment to transmit and receive live events back to or from the station and also overcoming geographical obstacles. He said that this would be a cheaper but highly effective and efficient alternative to satellite transmissions.

Mr. Chandra said that at present the user needed to provide the required links at remote outdoor sites from and to the point where the live telecast originates or terminates if the user required a live feed. However, for pre recorded programmes it was a matter of taking the audio visual (camera) to one of the SLT stations based at Anuradhapura, Kandy, Galle, Badulla, Ratnapura and Hambantota. He added that the facility would be available in all the other stations soon. Other applications that could be provided include live uni-directional video conferencing and a capacity to handle five video channels simultaneously. Mr. Chandra said that many other digital video applications would be available by 2001. He added that Vision Carrier was only the first step taken to facilitate the digital television revolution.

The Vision Carrier service promises to save time, equipment and money in addition to a reliable 24 hours and day 365 day a year link thanks to an input switching arrangement that automatically takes an alternate route when the present route is disrupted. SLT has already provided links to transmit 42 programmes in the last two months. Mr. Chandra said that the first programme that was transmitted using the service was the Galle cricket match that was played recently.

However, at present the video broadband network is available for customers for transmitting audio visual programme material live or pre recorded on an 'when required' or occasional basis, he said.

However, Mr. Chandra said that only Rs. 15 million had been spent on the project as it mostly involved enhancing their existing facilities. He said that a further Rs. 24 million would be invested in enhancing the fibre optic rings covering major cities in the island and that it would be completed by end 2000.

Anyone for an Apple?

Together with Wijeya Graphics, one of Apple Computer International Private Limited's (Apple's Indian outpost) two local partners, the iMac, the G4 and the iBook were launched here last week.

The funky looking fun coloured computers are here to stay and company officials said that they would aggressively promote it aiming to penetrate into the local PC, portable and publishing market. Packed with a wide array of every day features (and of course more) the computers promise to be the computing tool of the 21 century.

Hear are some of the key features, functions and specifications of the three models.

The iBook is made for computing on the move so it comes fully-loaded with a lithium-ion battery that runs up to six hours between charges. The iBook has a tough polycarbonate body built to withstand life in a backpack - and no doors or latches to break.

The iBook also offers a very important benefit not generally associated with computers - the freedom to move around while you're working and playing and connecting to the Internet. This is possible because of a device called AirPort, and it lets you use your iBook from anywhere you make yourself comfortable.

More precisely up to 150 feet from an easy-to-install AirPort hardware access point. In addition the iBook comes with Nanosaur, Bugdom, 3D games for those who want it.

The iBook has a 12.1-inch (diagonal) built-in TFT SVGA active-matrix display, offering 640- by 480-pixel and 800- by 600-pixel resolution with millions of colors. The size of the iBook measures up to: Width: 13.5 inches (34.4 cm), Height: 11.6 inches (29.4 cm), Weight: 6.6 pounds (3.0 kg).

The iBook is not just portable, it begs to be carried, company officials said. For this it has a handle, for one thing, and that makes it easy to pick up and carry around.

The iMac on the other is the same as the iBook, the only difference being that it is a desktop version. Just over a year ago, iMac was born. Already two million people have discovered it's the fastest, easiest way to the Internet, and a far more colourful one. What could follow the world's most popular home and classroom computer? A completely new iMac, redesigned from top to bottom, inside and out-and available in three new models: iMac, iMac DV, and iMac DV Special Edition. (However, due to excess world demand only the iMac will be available initially)

It's sleeker, smaller, friendlier and faster (the company claims that with a 350MHz or 400MHz PowerPC G3 chip that out-races even the fastest Pentium III).

Moreover, since the iMac comes preloaded with QuickTime 4-the standard for digital video and streaming media-you can play QuickTime movies, watch QuickTime TV, and take full advantage of interactive websites. And if you're an audiophile, wait until you hear what your MP3 files sound like on the iMac's built-in Harman Kardon speakers. No output cables or adapters to fool with.

Just spectacular stereophonic sound. And the iMac comes with two head phone jacks in front-all the better to blow away two music lovers at a time.

The G4 on the other hand, my, my, my... is a whole different story! (How I'd luv to get hold of one) In plain and simple English the new Power Mac G4 is up to twice as fast as the fastest Pentium III-based PCs. The G4 is better explained if you see it rather than an written explanation.

More money in the new millennium

MTN Dialog last week announced further investments of an estimated US$ 30 million along with the launch of its latest line of features.

The money will come from Telekom Malaysia, Dialog's parent company over the next two years for infrastructure development projects.

Telekom Malaysia's Director Haji Kamal Al Yaffi, who was here last week for the launch of Dialog's new services said that the parent company was pleased with the local operations and is the present trend continued, further investment were possible. Dialog is one of the eleven overseas investments of Telekom Malaysia and according to Mr. Yaffi one of the largest and happier investments.

At the end of the two years Dialog's total investment would add up to approximately US$ 100 million, Dialog CEO Dr. Hans Wijeyasuriya said. At present Dialog serves over 60,000 customers and hopes to increase that with their new services and expansion projects.

Dr. Wijeyasuriya said that with the new features they have launched plus the existing features would further boost sales. The new features include most Automated Teller Machine (ATM) facilities such as fund transfers, balance inquiry in addition to others, short faxes and messages, currency spot rates and cross rates and stock information.

The company believes that the e-volution range of e-commerce services would revolutionize local mobile e-commerce.

At presently only Union Bank Customers can access their accounts, but officials said they would tie up with other banks soon. Other services such as e-mail and fax however could be sent to any part of the world.

This year's economic growth will be slow and steady-ASJ

Sri Lanka's Central Bank governor says the country's economy is expected to grow by five percent this year from four percent in 1999 with sectors like agriculture and telecommunications showing ASJ: lot of potential. In an interview with the Sunday Times Business, Mr. ASJ:.S. Jayawardena dealt with ASJ: range of issues like agriculture practices, budget practices, the world economy and the benefits of the Indo-Sri Lanka trade pact. Excerpts from the interview with Faizal Samath

STB: Economic growth ... how do you see it moving?

ASJ: I think economic growth will move at five percent this year compared to four percent last year. The same growth sectors as in 1999 will maintain their momentum.

For example we expect good growth in agriculture. We expect production to rise in tea, rice, vegetables and other domestic crops.

STB: If rice output is favourable this year, would there still need to be some rice imports this year, as has been the practice in the past?

ASJ: It depends on seasonal shortages. So far the rains are alright. The Maha crop is good but we don't know how the Yala crop would be. We expect some reasonable weather. There have been some productivity increases in rice.

STB: Other sectors where growth is expected?

ASJ: There is tremendous growth in telecom this year. We would probably see the biggest expansion in this sector this year with something in the region of 100,000 lines being installed.

STB: On Tea, what are your expectations this year? Also other industrial exports?

ASJ: We expect an increase in volume, rising prices and earnings to go up to 665 million US dollars from 625 million US dollars last year. Exports are expected to rise from 277 million kg from 271 million kg in 1999.

In rubber too, we expect foreign earnings to pick up - it has been in the doldrums in recent times - to 38 million US dollars from 35 million US dollars while coconut earnings would rise to 133 million US dollars from 121 million US dollars.

In industrial production, garments export values are seen growing to 2.6 billion dollars this year from 2.4 billion dollars in 1999, petroleum exports to 86 million dollars from 70 million dollars and diamonds to 71 million dollars from 65 million.

The total worth of industrial exports this year is seen rising to 3.8 billion dollars from 3.4 billion dollars last year. Other export sectors expected to do well are leather, rubber and wood products.

Also remember this is the year when we hope to get the Indo-Sri Lanka trade agreement into practice. That will open up new vistas of trade, which are still not being anticipated now when we discuss growth scenarios.

STB: Is there finality reached on the items on the negative list of the trade pact?

ASJ: The Trade Minister told me that he was traveling to India very shortly to finalise the list. There have been problems on tea and garments and in both cases there would be ASJ: STBuota. Earlier these were non-STBuota items.

India was reluctant to allow tea and garment imports ... so now we are trying to work out STBuotas for the two products. Outside the negative list, everything else would be freely traded.

Originally tea and garments were not in the list. But after the agreement was signed, India wanted these items included in the list.

STB: When do you see this agreement taking off?

ASJ: I think if (both sides) finalise the list in March, trade can start in April.

STB: Could the fast-track agreement, once launched, galvanise the Sri Lanka's economy this year?

ASJ: It is very difficult to say ... very difficult to predict. According to some studies that we did, if the trade starting moving, the gains to Sri Lanka would be an increase of about eight times in the amount of exports to India. It would be substantial. Sri Lanka now exports goods worth 35 million dollars to India.

STB: How is the world economy seen faring this year?

ASJ: It is expected to perform better than last year. Of course we are coming out of ASJ: recovery. The biggest problem has been the Japanese economy - the engine that drives Asia. Korea also had some major problems but if these are sorted out, then there would be ASJ: slow and steady recovery.

The Japanese economy is recovering compared to earlier when it had negative growth and when this picks up, Asia will grow. Asia would then purchase more from Sri Lanka. The Japanese recovery would also help to improve the Korean situation.

STB: What about foreign investment into Sri Lanka from South and East Asia?

ASJ: If one looks at how the global investment moved before the (East Asian financial) crisis, it came from the United States and Europe to Asia in large doses.

But 80 to 90 percent of this investment went only to China, Taiwan and Korea. Most of it went to few of the big Tigers. What others got was very little.

The investment is now returning but it is returning to countries that are recovering fast from the crisis.

STB: Where does Sri Lanka stand in this scenario?

ASJ: This country should be an attractive place ... it should be amongst the top investment-seeking countries in Asia like Singapore, Hong Kong, etc but because of the war there is ASJ: negative image.

That we get as investment is the type of investment that comes to South Asia and India for instance. Most people who like to invest in India like to invest in Sri Lanka too.

With the Indo-Sri Lanka trade agreement we become ASJ: more attractive place to invest. One can invest in Sri Lanka and trade in India because Sri Lanka is ASJ: better place to operate than in India.

I think this agreement would draw some additional investment.

So you believe it is less bureaucratic to invest here than in India?

There is much less regulation, and Sri Lanka is ASJ: cheaper place to invest.

Communications are better and English is more widely used. There are ASJ: lot of attractions in Sri Lanka as an investment base.

STB: Are there any major international companies that have expressed interest in investing here - as ASJ: window to India - once the fast-track agreement gets off the ground?

ASJ: I don't have any details and it may be too premature but we have heard of some companies who may be interested, those who have ASJ: global perspective of Asia.

STB: How is the forward market in agriculture working?

ASJ: Looking at agriculture in Sri Lanka, farmers have enormous resources like bank credit, water, land, fertilizer and subsidies.

But with all these resources available, agriculture productivity is growing very slowly which means there are many other problems in agriculture that must be tackled.

Land tenure or ownership may have to be addressed but I believe one of the most important issues that have been neglected is the marketing of agriculture produce.

We give the farmer fertilizer, water and many other things but when the crop comes, prices are left to the mercy of the market.

Fluctuating prices, which makes it uneconomical to the farmer, is ASJ: common problem in many countries including Sri Lanka and this has resulted in limited scale forward markets here like in gherkin, passion fruit and tobacco.

Forward markets is not ASJ: new concept in Sri Lanka and this practice is now being extended to old crops like rice, so that when ASJ: farmer starts growing his product he can contract to sell it in three to four months time to ASJ: buyer.

For instance if it costs ASJ: farmer 30 rupees per kg to produce ASJ: particular commodity, he can - after keeping ASJ: 50 percent profit margin - sell it forward at 45 rupees to the buyer.

He is then assured of ASJ: realistic price for his produce.

The buyer also benefits because he pays 45 rupees for ASJ: product that, during the off-season, may cost 75 rupees. He has an assured supply; he can plan production, set up cold storage facilities because production has been planned.

The consumer is also benefited by stable prices with little or no fluctuations.

This forward market concept sets up ASJ: whole range of possibilities in the market.

In the case of the farmer, if he knows he can get ASJ: solid 50 percent return on his crop - unlike today when he is eternally in debt or barely makes profits - he will put more fertilizer, produce newer varieties, use more expensive seed and generally improve the STBuality of his product. Agriculture can then become much more productive and cost-effective.

Banks, who act as mediators and facilitators in these forward arrangements, can recover their loans instead of forever seeing farmers in debt.

These forward contracts are legally valid and can be enforced in ASJ: court of law in case of default.

These arrangements also help banks because they have ASJ: solid contract in hand compared to earlier when they gave loans on the premise of ASJ: return on crops. The system is already in place and banks are interested and getting involved. For instance, the CIC group and seed farmers have set up forward arrangements under this scheme.

STB: How do you see the services sector faring this year?

ASJ: This is the biggest growth sector. Tourism is up while telecom is growing substantially.

Internationally some countries are routing their calls through Colombo because of the expert services available here. Bangladesh routes international calls to Pakistan through Colombo instead of India for instance because Sri Lanka is ASJ: more efficient gateway.

STB: What is the progress on pension reforms?

ASJ: Things are moving slowly on this front. It has to come with public sector reforms. More public servants must be trained and they should be more skilled.

Since two years ago, the Central Bank launched its own contributory pension scheme for new entrants to the bank. Now this could be ASJ: start in area of pensions reforms.

STB: What is happening on the budget front? Is ASJ: budget being presented this year as planned or is there provision for ASJ: rolling Vote on Account?

ASJ: We need to present ASJ: budget by March when the Vote on Account - approved in November 1999 for ASJ: four-month period from January - ends.

The budget deficit, as ASJ: percentage of GDP (gross domestic product) is 7.9 percent and our target is to bring it down to 7-7.5 percent. Our budget deficits are high due to the war.

The budget would have to be passed before March because there is no money for the government after March.

If you ask me whether another Vote on Account can be passed, technically that is possible. But I don't think it is ASJ: good thing because you lose your long-term perspective.

When ASJ: government is re-elected for ASJ: second term, it is important that they set out their vision in the budget.

The budget would be prepared on ASJ: three-year budget cycle on ASJ: five to 10 year planning cycle as in the past.

Major rate hike angers shippers

Shippers were up in arms at a recent meeting over an impending rate increase by the Transpacific Stabilisation agreement (TSA). The TSA, a grouping of thirteen shipping lines recently announced a rate increase of US$ 1000 per 40 foot container from Asia to the USA, effective from May 2000.

"They arbitrarily increase rates without letting market forces operate," Chairman, Sri Lanka Shippers Council, Rohan Masakorale told The Sunday Times Business. "These pre-planned rate increases are unjustified," he added.

The TSA increased rates twice January 1998 and May 1999 by US$ 1000 per 40 foot container in addition to levying a peak season surcharge of US$ 300 per 40 foot container and a Suez canal surcharge of US$ 120 per 40 foot container.

There have been continuous representations made by the Federation of ASEAN Shippers Council to the US regulator the Federal Maritime Commission (FMC) regarding the cartelisation of shipping services to the US. If the FMC does not take action the shippers councils will be making a representation to the World Trade Organisation to draw up a code of conduct for the liner industry to stop cartels, Mr Masakorale said.

Trucking settlement slow

The dispute between the Association of Container Transporters (ACT) and the Sri Lanka Ports Authority (SLPA) took a different twist last week, with the SLPA giving back only a part of ACT's trucking business.

SLPA wrote to ACT saying that according to the Port Development Minister's ruling that was to come into effect on September 5, 1999, members of ACT would get 30 percent of all inter-terminal transfers.

The remaining 70 percent would be handled by Sea Consortium Lanka (Pvt.) Ltd., who presently handles around 80 percent. While expressing their disappointment, ACT officials said that the SLPA's decision was not in line with the parliament's decision that required SLPA to identify the percentage of inter-terminal transfers prior to its hand over to Sea Consortium.

ACT officials said that its members handled over 50 percent of all inter-terminal transport prior to the handover to Sea Consortium. ACT officials claim that its members have lost at least Rs. 6 million since this issue started.

However, the letter also stated that the ACT would have to abide by the conditions set by the SLPA and handle operations at rates decided by the SLPA.

The issue started last September when inter-terminal transfer operations were handed over to Sea Consortium by the South Asian Gateway Terminal.

Talawakelle steals the limelight

Market update By Dinali Goonewardene

Talawakelle Plantations stole the limelight on the Colombo bourse last week. The stock which commenced trading on Wednesday rose to a premium of 90 percent on Thursday but closed the week at Rs. 16.75.

Meanwhile, the banking sector blue chip counters took a tumble amidst heavy foreign selling. Foreign sales during the week were Rs. 83.9 mn, while foreign purchases were restricted to Rs. 10.6 mn. Brokers predict more sales next week.

The All Share Price Index rose 0.3 per cent to close at 549.6 while the sensitive Milanka Price Index gained 0.5 per cent to register 892.5. Average turnover for the week was Rs. 39.1 mn.

"The market will remain range bound at current levels in the short term till clear political direction emerges on the holding of parliamentary elections," Head of Research, Asia Securities, Dushyanth Wijeysingha said. "Once Telecom is listed in the third quarter there will be a substantial revival in foreign interest," he said.

"We are optimistic on the plantation sector with expectations of stronger tea prices likely to boost profits in the plantation companies," Strategist, Jardine Fleming HNB Securities, Amal Sanderatne said. "Defensive midcap stocks are recommended for more risk averse investors," he added.

"Fundamentally the market outlook is positive, exports are rising and tourism saw unexpected growth," Head of Research, MMBL Securities, Nouzab Fareed said. "However the investors outlook is pessimistic due to political uncertainty. When the uncertainty clears I strongly feel 600 is not far away for the index," he added.

Tea Update

Iraqi bid: exporters hope for better prices

Shafraz Farook

Thirty one eager tea exporters registered themselves to bid for the Iraqi tender under the seventh phase of the US oil for food programme.

However Tea Board officials said that they anticipate at least two companies to drop out of the tender.

A week of discussions will begin tomorrow and the Iraqi authorities are expected to come back with their decision next week.

Officials said that the quantity on offer was not known as yet.

Meanwhile, in last week's auctions quality teas attracted many buyers while gaining on last weeks price levels.

Low grown teas that took the spotlight through most of the fourth quarter of last year saw relatively low demand all round.

Asia Siyaka said that low grown prices continued to be strong, but the pressure on prices had eased somewhat.

They feel that perhaps the large quantities up for sale in the weeks ahead might be the reason for it.

Production figures on the other hand is set to be at record levels.

Asia Siyaka forecasts a gain of around kilos achieved in 1998.

Sri Lanka is the only major tea producing country to record an accumulated increase in production as India and Kenya together recorded over a 100 million kilo short fall in tea production.

Colombo bourse bearish over Asian bull run

While all other Asian markets in the region ended 1999 on a positive growth, the Colombo bourse continued to ignore the regional buoyancy to fall 4% over the 52-week cycle ending 30th December 1999, A John Keells Stock Brokers Weekly report said. The report said that concerns over a slowing economy, falling corporate earnings and the overhang of Provincial Council elections resulted in the All Share Price Index falling 14% by mid June 1999.

"This depressed market condition threw up opportunities for a host of strategic acquisitions for the rest of the year. In fact, the average daily turnover of Rs. 62m recorded for 1999, would have been much lower if not for some of the strategic deals that went through during the year."

The report said that the Motors, Hotels & Travels and the Diversified Holdings sectors, which were subjected to takeovers and rumours of acquisition bids, were the only gainers during the 52-week cycle. "The acquisition of controlling interest in United Motors by Readywear Industries propped up the Motor Sector. The acquisition of Hotel Services and Rumours of a similar bid on Trans Asia Hotels boosted the Hotels & Travels Sector. The purchase of a substantial stake in Aitken Spence & Co by Distilleries Company of Sri Lanka moved the Diversified Holdings Sector over the 52-week cycle.

Although the Plantation Sector under-performed the market over the 52-week cycle, the sector turned out to be the best performing sector over the 26-week cycle due to a buoyancy of tea prices, the report added.

John Keells Stock Brokers expect 1999 GDP growth to have slowed down to 3.6% from 4.7% a year ago. "Looking forward, an improved scenario for tea and garment exports, together with an increased performance of the telecommunications and construction sectors should see the economy recover to post a 4.7% GDP growth in CY2000," their weekly report said.

DSI awarded ISO 9001

M/s D. Samson Industries Ltd. (DSI), the parent company of Samson Group, has been awarded the prestigious ISO 9001 ACCREDITED Quality System Certificate. The certification body is M/s Det Norski Veritas (DNV), a Norwegian company accredited by RVA of the Netherlands.

DSI obtained ISO 9001 Quality Certificate for their rubber compounding and EVA (Ethylene Vinyl Acetate) sheet manufacturing plants, a news release says.

DSI, was incorporated as a limited liability company in 1962 to provide employment youth in the south. The company engaged only in footwear manufacture in early stages and later developed to rubber compounding and manufacture of natural rubber and EVA based microcellular sheets and moulded rubber articles.

Since the local market share of footwear is increasing for DSI, the management has taken steps to improve productivity by providing the latest machinery and technology and most importantly training its employees. The company also exports footwear to European Community and Middle East, the release adds.

The factory is located at Bataduwa 4 km from Galle town. The company employs about 1000 people from the surrounding villages.

The involvement of employees in the management is established by means of Employee Suggestion Scheme based on the Japanese Kaizen concept. This scheme is well documented and started about 1 1/2 years ago. About 200 suggestions received so far and about 30 suggestions are already being implemented.

The company also established a Subcontracting System where about 150 subcontractors are engaged. Five to ten people are employed by each subcontractor thus providing indirect employment to village people.

The basic raw materials like natural rubber, industrial clay and whiting are obtained locally and used under strict quality control measures. The imported raw materials are also undergoing similar measures.

DSI is expected to launch programs to obtain ISO 14000 (Environmental standards) and ISO 18000 ( safety standards ) in the near future.

LEO and MacManus Groups merge?

The Leo Group and The MacManus Group recently made a joint announcement that they will merge, creating a new top-tier global advertising and diversified marketing services company. Headquartered in Chicago with more than US$11 billion in annual billings, the company will consist of 500 operating units in 90 countries and 16,000 employees. Revenues of the new holding company, which will be temporarily referred to as "BDM" will be split evenly between the U.S. and overseas markets and between general advertising and diversified marketing services, a company release says. BDM's agencies are responsible for advertising campaigns that have helped to build many of the world's leading brands. Major clients currently served by both companies include Proctor & Gamble, General Motors, the Coca - Cola Company, The Pillsbury Company and The Phillip Morris Companies.

The Leo Group, formed in 1999, is the parent holding company for the Leo Burnett branded worldwide advertising business; Starcom Worldwide its media services company; and a 49% a stake in London - based Bartle Bogle Hegarty. Burnett currently handles many leading global brands, including Coca-Cola, Hallmark, Kellogg, Reebok, Johnnie Walker, Nintendo, Tampax and Walt Disney.

Leo Burnett is represented in Sri Lanka by Leo Burnett Solutions Inc, a total marketing communications company which was established in Sri Lanka in June 1999 and is headed by Ranil de Silva.

E-Commerce law reform initiative by CINTEC

A subcommittee on Electronic Commerce and Law was established by the Council for Information Technology (CINTEC), the National apex body for IT in Sri Lanka, with the objective of identifying the nature and the magnitude of the legal problems and IT controls that must be addressed so as to facilitate and promote electronic commerce.

The Sub-committee will take the following objectives into account in formulating Legislation or any other form of regulation.

Legislation could be recommended only if it will increase the overall efficiency of E-Commerce transactions. In developing options, the Sub-committee will seek to ensure efficiency and reliability in the market place and in contract dealings and other commercial transactions, to minimize the regulatory burden on business and the government, and keep litigation and costs to a minimum.

In assessing the matters stated above due regard shall be given for the need to resolve the legal uncertainties which are often cited as an impediment for the adoption of E-Commerce, and the appropriate means of updating the law to take account of technological change.

The Sub committee will also identity the form that the legislation should take particularly whether the law would be updated by enacting framework for electronic commerce legislation; or enacting such framework legislation, together with more detailed amendments to existing legislation.

The Sub-Committee presently consists of representatives from the Bankers' Association, the Securities and Exchange Commission, the Colombo Stock Exchange, the Legal Draftsman's Department, Ministry of Justice, the Law Faculty and Senior Lawyers. Institutions representing sectors of the economy, which contribute towards the legislative efforts of the Sub-Committee, are called upon to contact CINTEC for further details(Also see WWW I html).

Mercator's COMET for SriLankan Airlines

Mercator, the Dubai-based IT solutions provider, is now implementing its airline outstation accounting system, COMET, For SriLankan Airlines. COMET designed and marketed by Mercator, a subsidiary of the Emirates Group, allows airlines to decentralise financial activities at outstation level while retaining effective control at head office, a news release says.

It is a flexible system which can address the specific needs of each station and ensures uniformity in financial accounting practices and reporting.

The implementation for SriLankan Airlines commenced in late July and the nine station project was completed in early December. This covers both passenger and cargo offices. Six outstation sites are currently using COMET.

Peter Hill, SriLankan Airlines' Chief Executive Officer, says in a company release. "COMET enables us to decentralise the Accounting responsibility for our overseas stations to the stations themselves, rather than it being controlled completely from Colombo. COMET is also an important element within our Finance Information Techonolgy systems, all of which have been replaced in the last six months. There is no doubt that we now have a suite of Finance systems which are at least as good as any other airline worldwide".

New President for ICSA Sri Lanka

The Institute of Chartered Secretaries and Administrators, at its Annual General Meeting held on December 17, 1999, elected Mr. B.K.D.S. Samarasinghe as the President of the Institute. Mr. Samarasinghe as an active member of the Council of the Institute for the last ten years has contributed substantially to project the image of the Institute and for the development of the profession of the Chartered Company Secretary in Sri Lanka. In the capacity of the Chairman of the, "Work Shops, Seminars and National Conference Committee", he has conceptualised the themes and structured most of the National Conferences held in the past eight years. He also played a leading role in the preparation of the three-year Corporate Plans of the Institute and negotiating the funding agreements with the Parent Institute in the United Kingdom.

ISO 9002 for Mountain Hawk Express service

Mountain Hawk Express, the Licensee for FedEx has won an additional acclaim to its credit when they were awarded the ISO 9002 certification for its courier services and heavy freight operations recently. The company is a member of the Mercantile Merchant Bank Group (MMBG).

The crucial task of undertaking the assessment of quality compliance was carried out by Lloyd's Register Quality Assurance (LRQA), a leading international certification body that undertook the ISO 9001 certification assessment of FedEx for its global operations. This momentous achievement signifies the company's strong commitment to providing consistent service standards and technological solutions customized to individual/corporate air express needs, a company release says.

Federal Express, a subsidiary of FDX Corp., connects areas that generate 90% of the world's gross domestic product in 24-48 hours with door to door, custom cleared service and a money back guarantee. The company's unmatched air route authorities and infrastructure make it the world's largest express transportation company, providing fast, reliable, and time definite transportation of more than three million items to 211 countries each working day. FedEx employs more than 148,000 employees and has more than 44,400 drop off locations, 643 aircraft and 43,500 vehicles in its integrated global network.

SriLankan Airlines enchance their services to Kuwait

SriLankan Airlines recently enhanced services to Kuwait entering into a block seat arrangement with Kuwait Airways to offer passengers seats on the Kuwait Airways flight on Saturday.

SriLankan Airlines has four flights each week to Kuwait, on Tuesday, Wednesday, Thursday and Sunday. The Thursday flight operates non-stop to Kuwait while the Wednesday flight operates via Dubai and the Tuesday and Sunday flights travel onwards from Kuwait to Beirut.

The arrangement with Kuwait Airways offers SriLankan Airlines' passengers another service to Kuwait on Saturday.

The new facility adds to the choice of weekend flights for passengers and will prove very convenient to the many Sri Lankans returning to work after their vacations in the island. SriLankan Airlines flies its brand new Airbus A330-200 which offers the latest inflight amenities and facilities such as personal TVs and personal phones in every seat and air-to-ground fax, to Kuwait from January.

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