12th March 2000

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Renewed concerns about food security

Judging from the number of seminars and public utterances there appears to be a renewed concern about food security in the country. Part of this concern may very well be due to the poor performance in our food crops and the fear that the Indo-Sri Lanka free trade agreement would deal a further blow to our agriculture.

It is no doubt also fuelled by the World Bank Report of a few years ago which said that Sri Lanka's rice production was not efficient and therefore it should get out of paddy farming. On the basis of comparative advantage, it argued, that Sri Lanka should use its resources for doing something else. This statement provoked severe criticisms from many quarters and there was a strong fear that the country's agriculture might be undermined by heeding this advice. This may be one reason why various groups have been discussing food security.

For whatever reason there is considerable discussion on how we could ensure food security. Unfortunately much of the discussion is based on a definition of food security as being synonymous with self sufficiency in food, particularly rice. Rice self sufficiency has been a prime objective of economic policy from the 1930s and almost an article of faith. This, despite the fact that the country's food needs have been met to a significant degree from imports financed by tea , rubber and coconut export earnings. Had the country attempted to meet its food needs solely by local production,we would have been in a far worse situation.The revenue derived from one hectare of tea feeds so many more people than from a hectare of paddy.With the diversification of the economy our industrial exports more than finance our food deficits.

This does not mean that we must stop cultivating paddy and other food crops.We must certainly reject the World Bank advice as it is not based on the reality of the country situation nor, even on an understanding of comparative advantage, except in some sort of theoretical sense, far removed from the facts. No less a person than the former Chief Economist of the International Rice Research Institute Dr.Randy Barker has said: "It is clear that Sri Lanka continues to have a comparative advantage in producing rice, particularly in the maha[wet season]when there are almost no suitable crop alternatives." The key issue is the question of practical alternatives.What would our paddy farmers do if they were to give up paddy farming?

The criticism of the World Bank report goes further. Barker and Samad point out that "The World Bank was instrumental in supporting the development of irrigation projects such as the Mahaweli in Sri Lanka and elsewhere in Asia where food grain prices, and hence benefit-cost ratios, were considerably higher than they are today." It was the success of these projects which were responsible for bringing down cereal prices.We might also ask what would be the future prices of grains? What if prices rise? What would be the position of Sri Lanka if it were to produce less., and world prices soared?

What we are advocating is a balanced view. Let us be self sufficient to a point, as our resources permit. But let us not try to be self sufficient at any cost. Our food security will be better served by improved productivity in our agriculture and a competitive and efficient industrial and service sectors.We need not produce all our food as we can obtain food through trade, provided we are efficient in these others sectors as well. The current economic situation, as well as our domestic production levels do not constitute any reasons for feeling insecure. Yet our interests would be well served by improvements in our agriculture, especially as the bulk of our population still depend directly or indirectly on agriculture. Increased incomes would make them more food secure. In fact the problem in Sri Lanka is not that we do not have or cannot get hold of adequate food supplies, but a significant proportion of our people do not have adequate incomes to access the food. This is the real issue in food security in Sri Lanka.This is the problem which we must address.

Tea goes high tech at TSFL

By Feizal Samath

Walking in to this bought leaf factory of the Tea Small holder Factories Ltd (TSFL), the first significant feature that one notices is that the complex looks like a sophisticated BOI garment factory located in a rural village.

The second striking feature that is visible - rather instantly - is the clean floors. There is no tea lying on the floor, which is normal in any other factory.

Thirdly there are fewer workers around - machines do most of the jobs.

Welcome to the new world of tea production - hygienic, quality and automation.

TSFL's state-of-the art factory is possibly the first of its kind in Sri Lanka and creditably designed, devised and constructed by Sri Lankan technocrats and builders.

"We did everything ... from the design stage to the completion of the factory," says Sarath Samaraweera, the company's director/general manager and architect of the factory, showing the Sunday Times team the factory layout during a recent visit.

The factory at Karawita, about 120 kilometres south of Colombo in the Ratnapura district, is all automated including the weighing of the tea when it first enters the factory.

There are no tea pluckers standing in line to hand in their daily collection of leaf but this is so of any bought leaf factory in the south.

The leaf is brought into the premises in lorries and the bags are loaded onto a moving line where the leaf is weighted automatically by a computer.

This information then goes into a mainframe computer in the office of factory superintendent Anil de Silva, while the tea moves on the line to the first stage of production.

There are workers at the factory, but in small numbers to ensure that the automation process is smooth.

Most of them are young women, wearing white caps and smartly dressed in uniforms. That's another new innovation in tea production nowadays - workers with uniforms which is a recent development as estate companies try to bring some dignity to labour, particularly in the hill country plantations where tea pluckers have toiled for decades to bring to our world ... the cup that cheers!

Most of the employees are educated, having studied upto the GCE (ordinary level) and in some cases passed this examination. "We wanted to raise the level of the workforce and also give educated youth jobs," said Samaraweera.

But automation - as seen by the Karawita villagers - has both its positive and negative side. On one hand, the villagers would be proud to have one of Sri Lanka's best tea factories in their midst. Not many could boost of having a computerized tea factory as a neighbour.

Mechanization however means less jobs for local people, and, that has brought some grumbles, even from Labour Minister John Seneviratne, who made a brief surprise visit to the factory to discuss a local problem during the visit of the Sunday Times team.

"This is a nice factory but not many jobs, no!" Seneviratne, who represents the Ratnapura electorate, said with a smile to the Sunday Times correspondent.

Alas, the future of politicians depends on how well they serve their electorate with the creation of job opportunities figuring high up on this agenda - and that may sometimes be at the price of development.

Company officials have a different story. There is a shortage of tea labour in the south and the majority of the 75 factory workers, excluding office staff, have been brought in from areas like Embilipitiya, Suriyawewa and Tanamalwila, about 75 kilometres away, because local people were unavailable.

It is the perennial problem of ... is it dignified to work in a tea factory?

Most estates in the southern region are suffering from this problem and there have been attempts - rather unsuccessful in the past - to shift labour from the central and upcountry estates by management companies to the south to overcome the labour shortage.

"We provide workers with dormitories, food and a recreation room for entertainment purposes," said factory superintendent De Silva.

Samaraweera reckons the arty factory helps to ease the normal drudgery associated with working inside a tea factory.

All the tea is neatly stored in plastic boxes and the floors are kept spotlessly dry and clean. The walkways inside the building are neatly marked with white lines, which are used by staff and outsiders.

Tea is produced under hygienic conditions and quality is maintained at all times - through computers.

"This whole process was developed in-house," says the Director-General Manager, a tea scientist who worked for many years at the Tea Research Institute before joining the company.

TSFL is a subsidiary of the giant John Keells group. A group of investors led by Keells took over the state-run company in 1994 when estates were being handed over to the private sector for management and then ownership.

"In a sense, we were lucky because unlike other estate companies that had to turn around the land and factories, TSFL owned factories which were generally in good, working order," he said.

For the first three years, TSFL injected some capital into the factories and looked at some of the weaknesses.

" There were not many but we felt there was a lack of information going out to smallholders as there was a gap between the producer and the factory," he recalled.

TSFL sought to plug that gap by having greater interaction with producers, organizing seminars and workshops and constantly guiding them through the A to Z of manufacturing. "We were quietly getting better teas through this process," said Samaraweera.

By 1996, TSFL factories were brought to peak condition, the leaf produced by smallholders was better and profits were showing up nicely on the company's balance sheet.

"What do we do next? We had reached a plateau in the growth curve. Either we earn interest on these monies, re-develop the old factories or create a new, automated factory. We decided on the third option," Samaraweera said.

The Karawita factory - which unlike other factories has only one level - is set on five acres of former rubber land and cost 178 million rupees.

It is neatly built with nice trees and grassy slopes.

Every process - from the time the tea enters the factory to the complete product is automated. After the tea is weighed on conveyor belts, the same line transfers it to seven giant troughs.

A monorail carries the tea - in buckets - from one process to another without being laid on the floor, as is the case in other, traditional factories.

The withering system is the newest in the country. The factory has a capacity of 12,000 kg per day of green leaf and plans to almost double this to 21,000 kg in six months time with the installation of more machines.

Sri Lanka Growth Fund folds up

The Sri Lanka Growth Fund (SGF) has closed its operations and left the Sri Lankan equity market.

The interest of international investors in country funds has been on the wane in recent times and the preference is for broader funds such as regional or emerging market funds, Country Manager

India, Krishnan P told The Sunday Times Business. As such there are no plans to set up another fund in Sri Lanka, at least for now, he said.

This country specific fund which was launched at US$ 50 million in March 1994 operated till February 2000. It had a diversified portfolio comprising leading Sri Lankan corporates.

The SGF used the All Share Price Index as a benchmark in measuring its performance and its objective at the inception was to generate returns linked to the growth in the Sri Lankan economy.

This offered bright prospects at the time of being launched, Krishnan said.

In 1998 the Sri Lanka Regent Fund bought a 30 per cent stake in the SGF and converted the close ended fund to an open ended fund. While this facilitated shareholders redeeming funds it also forced the fund to pay out cash when stocks were redeemed.

The SGF was consequently forced to sell shares in the Sri Lankan market in order to facilitate redemptions in 1998.

The SGF was listed on the Dublin Stock Exchange and its investment manager was Carlson Investment Management Far East Ltd, Hong Kong. (DG)

Redefinition for used motor vehicles

The Association of Used Motor Spares Importers is asking the government to define used cut portions of vehicles as the general restriction is affecting their business.

The association said the government imposed the restriction in the last budget to curb the importation, assembly and sale of vehicles cut in half as they were losing customs duty on second hand vehicles.

Members said the term used cut portions of vehicles needed to be more specific and include vehicles cut in half, not the fronts of vehicles.

They added that their organisations imported only front parts of vans and cars which they sold as used vehicle parts and did not use for re-assembly and sale.

Officials claim that the importation of used vehicle parts facilitated the vehicle owners to fix damages quickly and inexpensively.

Members claim that over 20,000 vehicles use fronts, cut up from discarded vehicles in Japan. Members say that the office and school transport providers would be the worst affected if the importation of cut-up fronts of vans and cars are restricted.

The association claims that these parts were 200 per cent to 300 per cent cheaper than buying new parts or a major tinkering job. In addition they said that some spares for reconditioned vehicles (claimed to be over 70 per cent) were only available with them.

Less tinkering with tax in future

With the proposed revenue reforms, the government is "moving away from tinkering with the tax structure," Treasury Secretary, Dr. P. B. Jayasundera said at a seminar last week .

"Taxes must grow with the nominal rate of GDP growth and it must be an elastic revenue structure," he added.

Investors both foreigners and local could not take a long-term investment decision if a definite tax structure was not in place he said. For example, if the tax structure were to change annually investors would not know what their tax commitments were before they actually set up business. This is a definite disincentive to a healthy investment climate.

The budget 2000 did not change the existing 35% on corporate taxes, despite earlier signals that the country was moving towards a lower tax regime with a 25% ceiling on corporate tax.

Although the GST and the NSL were not increased the base was widened to net in more sectors and thereby increase revenue. Estimated increase in revenue from widened tax base is Rs. 850 million. Total estimated revenue for 2000 from tax collection is Rs. 201.8 billion .

Tariff reduction has also been too slow and we should have reached the new two-band tariff structure ten years ago, Jayasundera said.

The budget 2000 proposed a two band tariff structure of 10% and 25% with a non standard 5% which would be phased out over the next three years. Eventually the tariffs would even out to a low, single band structure. Dr. Jayasundera added that hidden and non tariff barriers would also be gradually removed.

MTL gets M&S accreditation

MTL Mountain Hawk (Pvt) Ltd., has announced that it has successfully renewed its accreditation by Marks and Spencer this year and has expanded its range of testing, offering a full range of colourfastness, physical and chemical testing.

MTL Mountain Hawk is the only independent laboratory in Sri Lanka to have been chosen by Marks and Spencer to carry out their testing.

They also carry out testing for all the major US retailers and importers with production in Sri Lanka as well as for several UK retailers and exporters. Over the past year MTL has also expanded its testing range to include more testing to BS and ISO standards. With a network of over 17 laboratories worldwide, MTL Mountain Hawk has the global reach which is necessary in this internationally integrated industry, a release said.

Maersk Sea-Land pull out put SLPA in bad shape

By Gunapala Ranasinghe

From time to time our port had its favourite lines and higher volumes were transferred through the Port of Colombo by those lines thereby enjoying privilege treatments from the port officials due to the sheer size of the operation.

Looking back, in the 80's APL enjoyed a big say in the port when they totally transferred their Hub operations from Fujairah to Colombo. The JCT became their home port and shipping circles at that time called the terminal as "APL Terminal" as the APL enjoyed much bigger say than the rest which is understandable.

But the sad part is when the gulf port became fully operational and managed to convince APL to revert back to its former glory and struck a deal, thus APL divorced its operations from Colombo and shifted back to Fujairah thus putting Colombo Port off balance once again.

Even though Colombo is called a common user port, at that time APL got priority treatment for their operations and having got the maximum advantage when there were operational constraints in Fujairah, they once again decided to revert back to same old port for obvious reasons.

Having burnt their fingers (SLPA), in 1990's Maersk Line started their operations soon after the Liberalization and had their ups and downs. Their top management frequently visited Colombo and in 1997/98 they were very keen to have a priority berthing scheme done for their services. Maersk became one of the top lines of SLPA in 1998 and got most favoured treatments from the port over the rest of the lines, which is a fact.

The productivity improvements, berthing were the issues they discussed during the time of Mr. Premachandra and in fact they recorded higher consistence productivity due to pressure brought by Maersk Line staff in Colombo.

Maersk did not stop there. They were the first line to sign an agreement with JNPT in India and not only that they together with Sea-Land heavily invested in Salalah (Oman) for the construction of a brand new port.

SLPA did not read that message properly and went on to bet on the wrong horse and today we are in a very bad shape when Maersk Sea-Land pulled out their Transshipment Volumes out of Colombo to Salalah. The statistics of Maersk Transshipment Volumes out of Colombo from 1997 January to October 1999 is a clear indication of their intentions. The Sea-Land Volumes are not included here but if this is added the position is precarious.

As per SLPA statistics, the top performers are ZIM/Gold Star, Evergreen both have been very consistence in the last 2/3 years improving their volumes and the Grand Alliance, New World Alliance.

This is a very good lesson for any port when selecting their strategic partners for the future that they should look for their behaviours, their pattern of operations and the performance etc.

The Alliances are to stay in the world and we have to strike a deal with the top performers and have to maintain their presence in order to ensure that Colombo becomes the regional Hub.

Apart from above we also noticed that some of the foreign collaborate Shipping Lines are circumventing the Exchange Control approved CASA tariff where the vessel based expenses debited to Agency Office as they consider joint venture companies are a Cost Centre. One such example is the debiting of Incentive Expenses running into millions of rupees with the connivance of Shipping Advisors to the Agent's account when all other agents are debiting their principals with the incentive paid to expediting vessels performance.

The Shipping Ministry is either not aware or very silent due to the involvement of highly involved experts in shipping.

At the end of the day the purpose of inviting foreign capital is not only to improve our quality of life, but also the improvement of knowledge based worker but financial loopholes had allowed such unethical Shipping Lines to rob our coffers.

'NMC' to maintain quality service

It is a great pleasure to write this on behalf of Hanjin Shipping, Seoul, Korea, whose local Agent is Navigation Maritime Colombo (Private) Limited.

With the dawn of the new millennium, my Agent, Navigation Maritime Colombo was honoured with two prestigious awards in the country, namely, the Best Agent for Customer Service, Colombo-Europe Sector for 1999 by the Chartered Institute of Shipbrokers and the ISO 9002 Certification from the National Certification Body. It is a landmark achievement for Navigation Maritime Colombo, who became Agents of Hanjin Shipping just five years ago.

I wish to emphasise that my Agent Navigation Maritime Colombo always endeavours to maintain service quality to the highest global standards by investing in manpower and in-house staff training programs from time to time.

With the young, energetic and motivated staff of Navigation Maritime Colombo, I am confident that Hanjin Shipping will become the best Shipping Line out of Colombo. I am extremely proud to be associated with Navigation Maritime Colombo.

S.H. Lee

Owners Representative

Hanjin Sri Lanka

'NMC' to get ISO 9002

Navigation Maritime Colombo (Private) Limited are due for the award of the prestigious ISO 9002 certificate by the Sri Lanka Standards Institution, which is the National Certification body. The ceremonial function will take place at Hilton Colombo on 16th March 2000.

Navigation Maritime Colombo (Private) Limited, was formally floated in 1993 as a Private Limited Liability Company to provide shipping agency services. The Company became the Agents in Sri Lanka, for the world renowned Hanjin Shipping of South Korea in 1995. The Company conducts its business in a salubrious and highly automated office environment, occupying the entirety of the 14th floor of East Tower of the World Trade Centre, Colombo.

Navigation Maritime Colombo (Private) Limited is the second Shipping Agency Company in Sri Lanka to receive this internationally recognised certification, from the National Certification body. This award marks a new milestone in the history of the Company.

The Company qualified to receive this certification having developed an operational system covering all its activities, which meet the quality requirements of ISO 9002,1994 Standard, laid down by the International Standards Organisation based in Geneva.

The Company worked towards obtaining ISO 9002 Certification, keeping in line with the vision of the Principals and the commitment of the Company to be hundred per cent customer oriented. With the achievement of ISO 9002, the Company offers a promised and a written down service to customers, which the Company is determined to maintain and improve, continually and consistently.

The Company's 'Mission' is to be a top level Shipping Agency in Sri Lanka, committed to provide a personalised and cost effective error free service, through aggressive sales and marketing, customer service and vessel operations and logistics. Achievement of the award referred to above, and the ISO 9002 certification, are seen as major steps towards fulfilment of the Company Mission, which in essence is a commitment for customer service.

The business purposes of Navigation Maritime Colombo (Private) Limited, and those of the Principals, Hanjin Shipping, are closely inter-linked, through easy accessibility to all offices of the Principals', through a perfected international communication network, and through the ready accessibility to the Principal's Resident Representative located in the Company office.

SCI tie-up with Sea Services

A new tie-up on the Colombo-Chennai sector has just been announced, between the esteemed Government owned Shipping Corporation Of India [SCI], And Sea Services [UK], the Sri Lankan based Common Carrier that completed in June 1999, five successful years of independent feeder operations on the Colombo-hub. Raju Radha Managing Director of Sea Services (UK) stated, that he was most pleased to have SCI as a partner on this service and added that SCI had informed him that their current Europe service volumes moving in and out of Chennai via Colombo, would be further augmented with their impending USEC service volumes via Colombo. Considerable benefits will thereby accrue to the port of Colombo too via the growing SCI transhipment volumes on this key South Indian sector, by Sea Services being able to offer an independent weekly feeder service with two feeder vessels plying between the ports of Colombo and Chennai.

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