27th August 2000
Front Page
Editorial/Opinion| Plus| Business
Sports| Sports Plus| Mirror Magazine
The Sunday Times on the Web
No more strawberries in Nuwara Eliya
Contents Index Page
Front Page
Sports Plus
Mirrror Magazine

Indian issue could affect our medicine cost

By Dinali Goonewederne
Sri Lanka's spiraling pharmaceutical costs are expected to further rise as India battles to implement World Trade Organisation (WTO) treaties. The WTO's Trade Related Aspects of Intellectual Property Rights (TRIPS) agreement dictates that pharmaceutical product patents be protected and will thus have far reaching repercussions on public health and access to drugs in developing countries. 

India which has traditionally recognized process patents but not product patents is now striving to introduce the legislation before its 2005 WTO deadline, Professor K Weerasuriya of the Colombo University's Pharmacology Department, told The Sunday Times Business. A failed attempt to pass the legislation in parliament has not deterred its introduction through an administrative order. 

But India has not been lax in its treatment of the pharmaceutical industry which is believed to be mature enough to withstand the TRIPS agreement. Indian pharmaceutical companies traditionally reverse engineered pharmaceutical products of multi- nationals to create their own processes. Product patenting will see an end to this practice. 

Sri Lankan legislation has long since complied with international patenting laws, but developments in India are expected to impact the cost of medicine here. "Members may in formulating and amending their laws and regulations adopt measures necessary to protect public health and nutrition," the TRIPS agreement states. 

Compulsory licenses which permit patents to be used without the permission of the rightful owner in the interest of the public are a means to bypass the agreement. 

But Sri Lanka has chosen not to avail itsself of the limited opportunities for compulsory licensing afforded under TRIPS. We are not going to provide for compulsory licensing, Director Intellectual Property, National Intellectual Property Office, DM Karunaratna, said. " It will send the wrong signals to foreign investors. Even if we made a provision that there there are no Sri Lankan companies which can manufacture drugs to international standard, it would be a dead law," he said. 

The decision not to provide for compulsory licensing was reached by an advisory committee comprising ten members. While the committee's membership comprised of lawyers, scientists, artists and university professors, there are no doctors. 

The TRIPS agreement establishes minimum standards in the field of intellectual property. The agreement requires all WTO member states to grant patents for pharmaceutical products or process inventions for a minimum of 20 years.While industrialised countries conformed to these rules in 1996 developing countries were given a deadline of 2000 or 2005 in the event that they had not previously recognized patent rights. 

No more strawberries in Nuwara Eliya

The Jupiter Corporation of Japan which manages the strawberry project in Nuwara Eliya is leaving Sri Lanka's shores following an Urban Development Authority (UDA) directive to vacate its current location. "The UDA is developing the race course and plans to have a sports complex. The strawberry Imageproject is occupying the middle of the race course where the sports centre is to be located," Deputy Director of the UDA's NuwaraEliya sub office, Ms WMS Wijeratne told The Sunday Times Business.

This Board of Investment approved project is presently located on a five acre extent of land on the Nuwara Eliya race course. It employs a hundred people and produces three tons of strawberries monthly. Countries to which strawberries were exported included Saudi Arabia, Hong Kong, Singapore, UK and the Netherlands.

The project which was established in 1982 received a rude shock in July when the UDA wrote to them announcing it had launched a programme "to beautify Nuwara Eliya town and enhance tourist activities within the town area." "As an initial stage the UDA has commenced clearing lake Gregory and the surrounding race course area. Your organization will be given alternative land from Ambewala farm," the UDA letter signed by the Central and Uva province director, JB Hettiarachchi stated. Low temperature, excessive wind, threats from wild life, too slopy terrain and excessive rainfall make the land at Ambewala unsuitable for strawberry cultivation on a commercial scale, Jupiter Company (PVT) Ltd, Managing Director, Jay Wanigasekera told The Sunday Times Business. 

Harvesting would not take place throughout the year in this location, he said. When the project commenced operations in 1982, various climates and elevations were tested to ascertain the suitability for commercial production. Locations tested unsuccessfully included Uda Radella, Bogawantalawa, Kandy Pussellawa and Boralanda. Requests to the UDA to facilitate relocation at a suitable location in Nuwara Eliya has gone unheeded, Wanigasekera said. Three cut flower exporters and a vegetable farmer have also been given quit notices.

A sum of Rs 35 mn has been invested in the strawberry project while the initial investors included the Japanese International Co- operation Agency (JICA).The project which got off the ground during the JR Jayewardene regime with Japanese collaboration is a non- profit project. Profits enjoyed during the early years were channelled into the president's fund.

Kitten or tiger?

By Chanakya Dissanayake
The Consumer Protection Authority Bill, which came under heavy fire when it was first presented in June, will be amended and presented to Parliament in November. The treasury has signed a MOU with the ADB which is funding the programm to re- appoint a commitee with representations from the Chamber, Consumer Societies, the Fair Trading Commission and the Department of Internal Trade.

The Bill was critisised mainly due to some provitions which exempt all government organisations and persons to whom the government has granted monopolies from being challenged under the fair trading laws.

This new Bill is expected to amalgamate the Consumer Protection Act of 1979 and the Fair Trading Commission Act of 1987. This will consolidate the existing consumer protection and competition laws into one statute. 

The proposed bill will replace the Fair Trading Commission and the Department of Internal Trade with a Consumer Protection Authority.

In 1987 Sri Lanka was the first country in Asia to introduce Fair Trading and Competition laws especially in relation to mergers and monopolies.

However The Fair Trading Commission that was set up to investigate and enforce the fair trading laws became a toothless tiger mainly due to bureaucratic inefficiencies and inadequate funding to hire top professionals.

A top rung commercial lawyer told the STB that, " The effectiveness of a Fair Trading Commission anywhere in the world depends on the calibre of people working in it. In order to investigate mergers or unfair trade practices you need top commercial lawyers, Economists, industrialists and Marketers. If you are not willing to pay top dollars for them, you cannot obtain their expertise. Today the Commission does not have a single lawyer working for them, eventually it will be the local consumer who will lose from a monopoly or unfair competition".

Experts say that The Fair Trading Commission has a wide responsibility of protecting the interest of the consumer at large from trade agreements with foreign countries, privatisation agreements and other related agreements. 

However it was noted that there is little co-ordination between state agencies which are involved in privatisation agreements and the Commission at the time of entering many privatisation agreements. A top Trade Ministry official told STB, " Many state agencies negotiating privatisation deals with foreign multinationals has zero regard for competition laws, if the Commission was in a powerful position, it would not be so".

The Draft Consumer Protection Authority Act came under criticism due to a few omissions from the earlier version. It was earlier proposed to establish a Competition Tribunal with appropriate juridisction, this was changed to a Consumer Protection Council sans legal powers to enforce it's decision. 

Also by section 50 and 81, all government owned establishments and any person to whom the government has granted a monopoly in the interest of the national economy, are exempted from the provisions. These omissions and exemptions are said to be against the interest of the consumer who for example will not be able to bring action against the CEB if they inflate prices to cover up their inefficiencies. The same will apply to privte monopolies which were granted by the government.

"The success of the new Consumer Protection Authority will depend on the people who are appointed to the board. If it fails to attract top multi deciplinery personal, it will suffer the same fate as the Fair Trading Commission", an eminent economist who was instrumental in drawing up the draft bill told STB. 

Jackpot for John Keells

John Keells Holdings chief Ken Balendra jubilantly announced an AAA rating by Duff & Phelps Credit Rating (DCR) Lanka Ltd last week. We will be studying opportunities for mergers and acquisitions, Balendra announced in a predatory mood after his victory.

This achievement is a boost for the Colombo Stock Exchange and should remind foreign investors of quality investment opportunities, Baledra said.

The AAA rating signifies the lowest expectation of credit risk. JKH is the most diversified conglomerate in Sri Lanka and has a strong competitive position in the markets it operates in, Chief Executive Officer, DCR Lanka, Ravi Abeysuriya said about the rating. They are moving into information technology and transport for which the prospects are good while the potential for the food and beverage sector is strong in the region he said.

The company may be affected by cyclical swings in commodity prices, falling margins in the plantation sector or declining transhipment volumes in the Colombo port, but DCR Lanka expects the company to weather these storms. "The company's debt repayment capacity is unlikely to be affected by predictable events," Abeysuriya said. 

The company currently has negligible borrowings and a gearing ratio of 0.7:2. Rs.571 borrowing from a 1.8 bn bank facility constitutes the major portion of its debt. But gearing is now expected to be increased. A gearing ratio of 1.5 :1 would be ideal with companies within the group sporting differing gearing ratios, company officials said.

Watchdogs to meet in Colombo

A World Bank training programme for South Asian regulators is scheduled to be held in December in Sri Lanka. The South Asian Forum for Infrastructure Regulation (SAFIR) was established by the World Bank in response to the need identified by relatively new regulatory bodies to build up regulatory capacity in the region. SAFIR last met in Agra in February 2000 and its December meeting is expected to bring together a host of regulators from sectors including electricity, water, ports and telecommunications. International and regional faculty members are expected to address the watch dogs.

SAFIR's initiatives are guided by a steering committee of experienced regulators from the region. Its aims include building decision making and response capacity in the region .

Mind Your Business 

Stock taking
A major overseas investor wanted to assess the prospects of Colombo's stocks because of the uncertainty over the outcome of the polls and commissioned three brokers for the job. Two out of three said that the greens will emerge winners though the lady will continue to occupy the throne and the other said the race was too close to call. Now, word has leaked out and other major investors are worried that the executive and the legislature being controlled by two different camps could cause havoc in the market... 
Seeing black
But even if brokers think that way, there are others who believe otherwise- and none more so than the bonnie boy who crossed over anticipating a blue victory. The man has been gifted with economic affairs and industries for the moment but he is busy telling everyone that after the poll, he'll be in charge of the black box after all. And that has had the good professor's advisors telling all and sundry that if that be the case, the professor won't be deputising anymore...
Scores to settle
We all know cricket is big business these days, what with sponsorship deals and television rights filling in the controlling body's coffers. But the authority is now in the hands of the former bosses and the committee which handled affairs in the interim period is out. And with a lot of past scores to settle, monies deposited by the controlling body in certain banks are now being withdrawn and re-deposited in other banks, we hear. And with the amounts running into many millions, the partners in progress are not happy...
Insurance for elections
A state insurer has just sold its biggest policy we hear. Over 300 potential recruits are all milling around the corridors of the 'Mandiraya' militantly awaiting, appointment before the general elections in October. The maturity of these 300 employees assures the family vote also we hear. Orders from the top cannot be dismissed and so the country's largest insurer is in this unenviable 'state!


The twin engines of growth 

The new Minister of Economic Affairs and Industrial Develop ment, Ronnie de Mel, struck a new note as it were, when he said that there were Twin Engines of Growth-the private and public sectors. 

He dismissed the view that the private sector alone could be the sole engine of growth. It is not that Mr de Mel depreciated the role of the private sector, instead he emphasised the continuing and essential role, which the public sector must play if the economy is to achieve rapid economic growth. 

This is particularly so at the stage of economic growth and development that we are in. The euphoria about the lead role which the private sector must perform has tended to devalue the role and importance of the public sector in recent times. 

Mr. de Mel's characterisation of the roles as those of twin engines puts back a much needed emphasis on the efficient functioning of the public sector. But words alone would not ensure an effective role by the public sector. There must be a concerted effort to bring back a high level of efficiency to our public service if the process of economic growth is to regain a new momentum. This pre-vitalisation of the public services must of course wait till the elections are over. Then the government must take bold measures to fashion a slimmer, more competent, efficient and better paid public service. 

The independence of the public service as well as far better remuneration are essential ingredients of that reform. Political interference has robbed the public servants of their initiative. Low remuneration has resulted in low quality of recruits. The lack of promotional prospects on the basis of performance, rather than seniority, has enervated the public services and weakened its capabilities. 

It was Lee Kwan Yu who once said about wages in the public service that "if you offer peanuts, you get monkeys". Adequate rewards must indeed be a corner stone in the building of a robust public service. But that alone will not suffice to ensure either efficiency or a service free of corruption. The details of reforming the public service has been dealt with in the unimplemented Administrative Reforms Commission Report. 

The Institute of Policy Studies has elaborated on some of these issues in their series of publications on governance. There is not much need to study the issues in detail. What requires to be done is a course of action to implement the recommendations and perhaps add a few others to strengthen these recommendations. There must be a conviction that this is a priority issue for economic development. Then and then only can the bold measures be taken. There has been considerable attention on privatisation in recent years. But privatisation has meant the mere transfer of ownership of government held business undertakings to private owners. 

The other aspect of privatisation that could benefit the economy has hardly been heard of in Sri Lanka. This is the introduction of private sector management systems to the public sector. It is vitally necessary for public sector institutions, be they be the general administrative service, or public corporations, statutory authorities, state banks, research institutions or universities, to incorporate private sector management systems to enhance their efficiency and performance. 

Public institutions should be made more accountable, not merely in their financial operations but be performance oriented in their accountability. There are several institutions in the public sector which need not be privatised in the sense that the ownership need not change from the government to the private sector. What these institutions need woefully is an improvement in the managerial efficiency and management systems which would ensure that. 

That indeed requires the more efficient managerial systems of the private sector to be implanted in the public sector. We hope that the recognition that the public sector has a vital role to play in the economy would lead to significant and drastic reforms of the public services to support and contribute directly and indirectly to the country's economic growth and development. 

The reform of the public service is a herculean task, which should not be shunned because of its inherent difficulties to reform. The twin engines must be capable of performing its functions as well as pull together if we are to climb to greater economic heights. 

Rubber- all set to rebound? 

Currently world consumption of natural rubber exceeds production. In the first quarter of this year (Jan to Mar 2000) the IRSG estimates the deficit to be about 210,000 tonnes. However in spite of this, full recovery in prices of natural rubber is expected to be a gradual process. 
By Ramuk
After several years in the doldrums rubber prices are looking up once again. International rubber prices have picked up from the lows of last year and the London based International Rubber Study Group (IRSG) is predicting a rubber shortage in two years time.

The primary reasons for this forecast is the rapidly growing demand. The growth in demand has been fuelled by,

a) The oil price hikes that the world has seen since last year, and

b) The recovery of the SE Asian economies. 

In the year1999 the world consumed a total of about 10.1 million tonnes of synthetic rubber and about 6.7 million tonnes of natural rubber. Both natural and synthetic rubber have their preferred uses but there are some varieties of synthetic rubber that are substitutable by natural rubber and vice versa. 

Synthetic rubber, which is produced from oil, has been facing a severe cost-push due to the recent escalation of international oil prices. Currently general-purpose varieties of synthetic rubber are trading at prices much higher than those of natural rubber. 

The second major factor is the recovery of the SE Asian economies. Having faced a recession for the last two years, the SE Asian economies are now seeing growth rates that exceed expectations. 

The Asian region is by far the biggest consumer of natural rubber. 

In 1999, the Asia Pacific region consumed about 54% of the world total output of natural rubber, compared to 19% for North America and 16% for the EU. 

Thus growth in these economies has a big impact on the consumption of natural rubber. This is not only through expansion in demand for rubber based products but also in the expansion of demand for transport. 

Over 60% of the natural rubber produced in the world is used by the motor vehicle tire industry.

The gradual recovery in rubber prices can be seen from chart 1 which gives the monthly average London auction spot prices for RSS 1 in pence per kilo from Aug 1999 to date.

Currently world consumption of natural rubber exceeds production. In the first quarter of this year (Jan to Mar 2000) the IRSG estimates the deficit to be about 210,000 tonnes. However in spite of this, full recovery in prices of natural rubber is expected to be a gradual process. This is due to the fact that there are still large stock piles of natural rubber held by organizations such as the INRO which holds a stockpile of about 138,000 tonnes and countries such as Thailand which is estimated to hold a stockpile of 263,000 tonnes. 

Gradual increases in rubber prices will come in as these stockpiles start to clear. The intelligence unit of "The Economist" forecasts a price rise of 30% in 2001 followed by another 30% in 2002.

This increase can be seen reflected in the Singapore futures exchange prices for RSS 3 given in US $ cents per kilo as on the 14th of August 2000.

Sri Lanka is a very small player in the international natural rubber market. National rubber production in 1999 was recorded at 97 thousand tonnes (97 million kilos) compared to an estimated world production of 6.7 million tonnes. (i.e. about 1.5% of global production). 

However the impact of this increase will nevertheless be felt in the bottom line of rubber producing regional plantation companies.


More Business

Return to Business Contents


Business Archives

Front Page| News/Comment| Editorial/Opinion| Plus| Business| Sports| Sports Plus| Mirror Magazine

Please send your comments and suggestions on this web site to 

The Sunday Times or to Information Laboratories (Pvt.) Ltd.

Presented on the World Wide Web by Infomation Laboratories (Pvt.) Ltd.
Hosted By LAcNet