3rd September 2000
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Panadol violates advertising regulations

By Dinali Goonewardene
Manufacturers of Panadol, SmithKline Beecham Mackwoods Limited have been accused by the Cosmetic Devices and Drugs Authority (CDDA) of breaching all codes guidelines and regulations in their advertisements.

An hourly promotion on National Television with a clock face of Panadol which announces the time fails to mention the generic name paracetamol, CDDA officials said. Paracetamol is the generic term for the brand name Panadol and World Health Organisation (WHO) ethical criteria for medicinal drug promotion stipulates that all advertisements must contain the generic name of the drug. The CDDA guidelines embody WHO ethics. SKBM's displays of Panadol on name board of pharmacies, private hospitals and dispensaries also contain no reference to paracetamol.

Meanwhile the code of conduct of the Sri Lanka Chamber of the Pharmaceutical Industry does not permit advertisements of pharmaceutical products without the prior sanction of the Drug Regulatory Authority. Drug Evaluation Sub Committee officials say the advertisements in question have not been presented for evaluation.

The message indicating the time and displaying the Panadol brand name is a public services message which lasts five seconds, not an advertisement, Director Marketing-Consumer Health, SKBM, Dehan Seneviratne said. He maintained the contents of this message had received the drug evaluation sub committees approval when it was a segment of a previous advertisement.

"Advertisements" in the print media, radio and television have always been subjected to sub committee approval, Seneviratne said. 

Meanwhile the CDDA's only recourse is to courts. But officials say they lack funds to pursue issues such as this, in the face of a more pressing agenda involving the quality of drug imports.

Industry officials question whether SmithKline Beecham which is forced to include the generic name in advertisements world wide, is making an exception in a developing country. 

SKBM officials were uncertain if their parent company was a member of the Internation Federation of Pharmaceutical Manufacturers Association. Membership would facilitate public complaints to this body which would take action against members breaching its code. The code insists advertisements must carry the active ingredient of a product using an approved name. 

But to all thisSeneviratne maintained his company's stoic stance that the message in contention is not an advertisement asit fails to list the benefits of the product. 

Meanwhile in the backdrop of an epidemic of deaths suspected of being caused by overdoses of paracetamol, the advertising war rages fast and furious.

Undercurrents of the war surfaced in The Sunday Times of 20 August with a mysterious advertorial on paracetamol overdoses, which did not divulge the source of information. The advertorial refered to deaths of children at the Lady Ridgeway Hospital due

to paracetamol overdoses and made sinister references to resultant liver failures but failed to reveal who placed the advertisement.

The following Sunday saw SKBM make a hasty attempt at damage control with an advertorial aimed "at setting the record straight". The advertorial headline which screamed "Paracetamol first choice for children" described the safety profile of the drug.

What's in a name, one could say. Or a rose by any other name smells as sweet. But not in the case of medicine. Even Panadol the so called harmless drug has to be used in the correct dosages to avoid medical misadventure, possibly fatal.

Debt rules to be changed

The Colombo Stock Exchange (CSE) is tinkering with its debt listing rules to eliminate the mandatory requirement to underwrite issues and maintain a public float of 50 per cent. The proposed change which is expected to reduce listing cost is currently being whetted by the Securities and Exchange Commission, Director General, CSE, Hiran Mendis told The Sunday Times Business.

Underwriting fees consist 1-2 per cent of listing cost. Standardisation of application forms will also help minimise cost. Information which is duplicated in the guarantee agreement and the trust deed will be streamlined to reduce the time taken to whet applications, leading to cost reduction.

The CSE is also considering other changes such as abolishing the minimum issue size of Rs. 50 mn. The exchange is also taking a second look at the debt listing rules which it introduced last year. Concrete steps are being taken to widen the eligibility criteria of sponsors to an issue. While sponsors are currently restricted to stock broking firms other institutions such as merchant banks, law firms and chartered secretarial firms may soon be in the running.

Debt issues overtook equity issues on the CSE in both 1998 and 1999 Rs.2668.4 mn was raised through eleven issues in 1998 and Rs. 1743.2 mn by seven issues in 1999. But issuers of debt have raised concerns of the high listing cost. Debt securities account for 4 per cent of the market capitalisation of the CSE. The debt market has largely been dominated by captive sources and the requirement to maintain a public float of 50 per cent of an issue has not been always been complied with.

The Telecom IPO which seems to have been indefinitely shelved will no doubt cause a huge dent in the government coffers. Analysts expect interest rates to climb steadily towards the end of the year with government expenditure with the forthcoming election and increased defence expenditure following repeated beatings in the war front. Already interest rates on three year treasury bonds have inched up from 12.27 per cent in April to 15.53 per cent at the beginning of September.

Any debt issues planned for the rest of the year and early next year will have to compete with attractive government securities rates making the cost of capital more expensive for the issuer. 

Has devaluation helped our exports?

By Chanayka Dissanayake
Independent economists doubt the sustainability of export growth due to potentially high inflation expected towards the end of this year. Even though the rupee devaluation is expected to give local exports a price advantage, the end result will depend upon the inflation adjusted effective real exchange rate. 

A Research Economist from the Institute for Policy Studies, Dr. Dushni Weera--koon told the Sunday Times Business, " The effectiveness of the devaluation in giving our exporters a competitive advantage will depend upon the comparative inflation of competing countries. If our inflation rate accelerates more than India , China and other competing countries, there will not be a real advantage to the local exporter.

Economists expect inflation to reach 10% at year end due to high government expenditure in the wake of the election, high cost of utilities and potentially high government borrowings to cover the budget deficit.

The forecast budget deficit for the year 1999-2000 was 8% GDP. The bulk of this was planned to be covered from the sale of the Telecom Shares and other privatisation deals. However due to the deteriorating security situation especially after the Elephant Pass debacle making the economic environment less conducive to investors, the government is less likely to go ahead with the deals. This has given speculation to high government debt even above the current parliament approved limit of Rs 135billion.

The first six months of this year saw exports grow by 20% compared to the same period last year. Government devalued the rupee on 27th June 2000, among the main reasons citing a boost for exports.

Eco Apparels first in Mawathagama zone

Eco Apparels (Pvt) Ltd started construction on the first garment factory at the recently opened Mawathagama Free Trade Zone. The project which got underway with a Board of Investment (BOI) loan entails an investment of Rs 60 mn, Chairman, Eco Apparels (Pvt) Ltd, Dileepa Weerasighe told The Sunday Times Business. Weerasinghe has invested Rs.24 mn to supplement a Rs. 20 mn BOI loan which is interest free for eight years. David Rose a co-owner of Daylan (Pvt) Ltd is also investing Rs.16 mn in this venture.

The factory will employ 600 people and its location is intended to exploit the potential of the skilled labour force in the Mawathagama region. The United States and United kingdom markets will be targeted in addition to the Australian market. "I am trying to get quotas for CAT 6 (shorts and pants)and CAT 7 (blouses) for the UK market from the textile quota board," Weerasinghe said. Quotas for blouses and shirts for the United States market are also being sought. Buyers from C&A of UK have already been lined up by Eco Apparels.

The BOI has granted numerous concessions to the company including an eight year tax holiday to be followed by a 15 per cent tax rate for twelve years. The company may also import project related items duty free. Criteria for granting these concessions include the creation of at least 150 employment opportunities by a company which exports 90 per cent of its products. The BOI loan of twenty million has been granted to four companies located in the new free trade zone in Mawathagama.

Chinkara Holdings fail to qualify

Chinkara Holdings has reapplied to Securities and Exchange Commission (SEC) to buy a 49 per cent of CDIC Sassoon Cumberbatch Stock Brokers after its application for a 100 per cent stake was rejected. "The SEC has called for observations from the Colombo Stock Exchange in this regard," Senior Manager Legal Counsel, SEC, Kithsiri Gunawardena told The Sunday Times Business.

The application for a controlling stake was rejected on the basis that the acquiring company failed to satisfy two of the criteria required for the SEC to give its nod of approval. The acquiring company must have a credible international reputation and be regulated in the country of registration, SEC officials said. It must also have a proven record of successful trading and good turnover. Chinkara which was incorporated in the Bahamas last year failed to meet the grade. Infact the company did not have a set of audited accounts for perusal by the SEC. Although it may have been able to comply with the third requirement to transfer skills and technology and enhance customer oriented service.

The application by Chinkara was made in the aftermath of the budget which liberalised the financial services industry. Foreign firms were permited to hold a 100 per cent stake in stock broking firms. The proposed sale to Chinkara was orchestrated by the Citi National Investment Bank. While the People's Bank intended holding fast to its stake in the broking firm, Carson Cumberbatch and Company Ltd, the National Development Bank and Sassoons had hatched plans to sell out.CDIC Sassoon Cumberbatch Stock Brokers was incorporated in 1992. The firm has a market share of approximately 5 per cent.

Mind Your Business

Last laugh
The pioneer gas converters had the last laugh when a court ruled that the monopoly holders couldn't sell gas to them at a different price from others just because they refused to sign an agreement to make purchases for the next five years. 

Now the other auto gas distributors are shell-shocked and wondering whether they too should go before courts.

That is because they will be forced to buy from the present distributor, well after the monopoly is broken with the prices coming down. So, the dispute may well be dragged before courts again...

Boy oh boy
The boy who looks after investments has impressed the economics man who recently turned blue after being green for so many years. As a result, there is speculation that if the blues win again and if the economics man is given the portfolio he once held, he will sponsor the boy's case for being secretary to the treasury. But, others point out, there are too many 'if's in that story... 
Quality over quantity
A bank which was recently at the centre of controversy has long being pursuing a policy of maintaining only a few branches. That policy was reviewed recently, in the wake of expansion programmes launched by many of it's rivals.

Nevertheless, the bank's hierarchy feels that 'quality over quantity' will be better. Therefore, the sons of the soil will have to be satisfied with more service features but fewer branches than their rivals...

Growth in first half must be maintained 

A seven per cent growth in Gross Domestic Product in the first half of the year is indeed good news. Even more encouraging is the fact that nearly all sectors of the economy displayed healthy rates of growth. Maintaining this growth momentum in the second half of the year is indeed the immediate challenge. This is especially so owing to disruptions that may occur due to the impending general elections. Every effort should be made to consolidate these gains which are due to both internal and international factors. The sources of the growth were many. 

Nearly all sectors of the economy contributed. The manufacturing sector grew by 11.4 per cent, agriculture by 3 per cent and services grew by a significant 7.6 per cent. The growth in these sectors was supported by a healthy export growth. There was an overall export growth of 20 per cent. Industrial exports grew by 21.6 per cent, while agricultural exports grew by 8 per cent. 

As usual the main industrial and agricultural exports accounted for this improvement. Garment exports grew by 24 per cent, while tea exports rose by a further 8 per cent. Tea export growth was due to both an increase in tea production in the first half of this year by 12.7 per cent and an improvement in prices. 

A good performance was witnessed in all agricultural crops. Tea production increased by 12.7 per cent, rubber, which has tended to be stagnant grew by 2.7 per cent, coconut production increased by 10.7 per cent and paddy production in the Maha season was also somewhat higher. 

These production gains are indeed a healthy development as the sluggish growth of the agricultural sector dragged down the country's growth in recent years. The growth in tea production is particularly impressive.

In the past few years tea production has been growing each year and reaching new peaks. It is most likely that tea production this year would exceed last year's peak production to reach a new high. While improved management of the estates has been responsible for part of this increase, most of the credit must go to low country small holders, whose productivity is about twice those in the plantations. What this implies is that the infrastructure serving the small holders should be improved, as their full potential remains untapped owing to deficiencies in providing planting material credit extension and the collection of green leaf. Tea processing facilities though improved in recent years could be strengthened. 

The increased paddy production during the last Maha should not blind us to the inadequate extension services to the paddy farmer, low prices for the crop and the lack of a good marketing system for paddy as well as other crops. The depressed prices for paddy are likely to lead to a reduction in paddy production during the current Yala season. Once again we may have to import more rice and wheat flour in 2001. 

The impressive growth in manufactured exports reflects both the increased demand from booming economies of the West and the improved performances of East Asian and South East Asian economies. 

The recovery of most South East Asian economies has resulted in an appreciation of most of their currencies and thereby an improved competitiveness for our manufactured exports, as well as for our rubber exports. It is however imperative that our manufacturers enhance their competitiveness by improved productivity and quality improvements. 

In the context of this improved export situation, rubber and leather goods exports have not fared well. These exports have declined marginally. The two areas in which our performance has been unsatisfactory have been, tourism and investments. Both tourist arrivals and tourist earnings have declined by 3 per cent. Investments too have dried up and there was an out flow of capital from the stock market this year, resulting in a significant decline in share price indices. 

It is doubtful that either of these would improve given the impending elections. The Central Bank's expectation of a 6 per cent growth for the year rests largely on internal conditions. The global economic improvements are likely to provide even better opportunities for manufactured exports. 

What requires to be ensured is that the electoral process does not lead to widespread violence that would disrupt economic activities, especially of our export industries. 

It is also vital that those government agencies, which play an important role in economic activities continue to perform their functions unhindered by the political scene. If we can ensure that, we may achieve the hoped for 6 per cent growth.

You should be glad to be hunted! 

Executive Search has been operating for over two decades, but
their role in searching for the best for the job is still not
understood by many. Perhaps it is because they are the only or
among the handful of such companies. The company's boss,
Mr. Faizal Salieh recounted an event in his professional life,
which tells the whole tale." A chairman of a big company once
asked me what I do and I said I run a company called Executive
Search." "And what do you do?" asked the chairman. "We do
headhunting," said Salieh. "And what is that?" asked the
nonplussed chairman. But over the years, headhunting has
become better known and a more popular way to recruit top
rung executive staff. It is not only the top bosses but also the
people who are eligible for the post who treat us rather warily.
The most common response is how did we get their names
and that they are not looking for a new job! Yes, headhunters
don't have it easy but you should be glad to be hunted because
you have got yourself a top rating..... The Sunday Times
Business spoke to Salieh about Executive Search and its role in
the corporate world. Excerpts from the interview....
By Ruvini Jayasinghe 
ImageSTB: How and when did you set up Executive Search? What was the response to headhunting from the corporate world then and now? 

FS: I still remember one of my first clients - Bartleets, they saw through it. It was about ten years ago. I mean you want us to become the intermediary - going through all the CVs and focussing on the requirement, and selecting a candidate takes a lot of time as against placing an advertisement. Now, not that we are hitting the newspapers, at times we support the newspapers. 

Anyway over the years it has become and will continue to be a "peoples' business." We started the people's business in 1978, and about ten years ago we set up Executive Search primarily to identify, search or head hunt, people at very senior levels.

Now, it's sad I think, that this country has not developed that far, we've only had what has been or what I would call, unofficial head hunting . UK and Europe have been having head hunting, for the last 30 - 40 years. And countries like, SE Asia like Malaysia, Singapore it had been there for the last ten years or more. We've been doing it in the professional sense, for about seven to eight years. 

STB: Why is a headhunting service necessary at all? 

FS: Why head hunting.... because for instance if a company wants they can advertise but may not get the optimum results because people in top positions do not want to be seen to be looking out for better prospects or a change. When people want to be head hunted, there comes the role that I play.

STB: You said that people don't really know about headhunting. How difficult is it to get clients and suitable recruitment in a scenario where the value of your job is not actually widely accepted? 

FS: We have faced a lot of difficulties over the years simply because people who are hunted did not understand our mission. The most common reaction we get when we call up a person we think is suited for the position to be filled is, "How did you get my name?" That is the first thing they ask. Look I'm not interested in the job, they add.

They think that somebody is trying to play the fool with them. Eight out of ten people would react in such a manner. 

And this is what I'm trying to convey to the public at large or the senior executives, the top management, remember that if you are a star performer somebody is bound to call you. If not a headhunter, a friend or somebody else will call. 

We do not have a data bank of CVs to select executives. What we do is when we go and see a client and he says we are looking for a marketing director, we will study the requirements for the post, the culture of that organization, one of the key elements, of actually, getting a perfect manager.

But if by any chance, if the person is not suitable to fit into that culture, the person must be adaptable and the company also has to be adaptable to change. 

This is why the management talks about change, all these sort of words of the future so to speak. Once we actually get everything that we need, find out the culture of the organization, the possible career complexion of the candidate, what plans they have for him/her the company's ability and plans for expansion, and diversification, then we start the search. Very often nine out of ten times, the people we are looking for are quite happy in the current positions. And then what we have to do is to see how long he /she has been there. We play the role of a detective.

Because you are not looking for a job, it needs a lot of pushing and nudging and saying look you are not going to lose anything by just meeting me or whatever. So we meet in a neutral place and have a chat over a tea or coffee, and behave like two friends meeting each other. Just yesterday I was trying to get somebody out of the office, and he said it was lovely taking to you but I'm not interested. Then we have to plead with things like you are not too far away from my office or your office, so I could met you on your way to work I know where you work so lets meet somewhere half way. We have to make time, give so many calls and take them to a location, which of course has to be confidential. and have a little chat.. And our chat, will be very light hearted, I would say very interactive, friendly. This is not an interview. That is the first approach we make. We look for things like - is this the right person, does she/he have the leadership qualities, skills, then we have management exposure, and explore the qualifications. We have already got the basics. We know that this guy has got his CIM diploma, MBA or whatever. She/he has been in the company for three years and maybe does not want to move after just three years. But generally we believe worldwide that people tend to move and they might be quite willing because unlike his current place of employment, its such a dynamic organization with an HR system where they actually ensure the constant adding of value to the career. 

STB: Have there been instances when recruitment has gone wrong?

FS: Sadly there has been one case in our recruitment, which went the other way. The information about our search and chat with him had gone to their director.

But we are very careful about confidentiality. If nothing happens after the final interview, we destroy all records on the hunted person.

When we call an individual and say we want to meet him he should be really excited. I would be happy if somebody identified me as a suitable person for a top slot. My ego and my self-esteem and whatever should get a boost after such a call. But, some view it suspiciously like we are trying to .. you know 

We are trying to get this message across to the people. That headhunting has to play a role. Not the same role as the newspapers. An advertisement will attract the junior level staff. For example account clerks, drivers, basic level accountants, marketing representatives, But when it comes to a senior management situation, general manager, factory manager, production manager CEOs finance directors, all these top level positions have to be searched for. 

If only things turned around and out of ten executives we searched, if only two people ask the standard question how did you get my name or who are you, we would be happy. Now nine out of ten ask these questions indicating that senior level managers do not know the service or the value of a headhunter.

Its changing, but what they don't realise is headhunting of some sort, going to play a bigger role in the future. 

This is basically the problem we have. We need to have more awareness that headhunting has gone on for many years, in the world around us. Typically in the West.

You know that Michael de Zoysa was headhunted from Singapore or Hong Kong.

We have actually head hunted people, for foreign countries too. Like, for banks in Dubai, Qutar and I think with the 22 years experience, we have a fair knowledge about what weare trying to do .

STB: What sort of professional or academic qualifications are required (if any) to head a head hunting company?

FS: Well obviously a number of skills are required. One is the fact that one has to be an intermediary and what is the primary requirement to get the message across? 

We should be able to read a person's personality, character, values etc. 

How do you identify a guy who is smart, who asks the right question at the right time, one who gives performer or a workaholic, and if he's ambitious? 

It should be the type of person who you would like to invite to your home.Then he is the sort of person you would also like to employ. I always think of that.

But of course you've got to have the knowledge of all the qualifications, the right mix of qualifications. For instance if you are looking for a top marketing director what are the qualifications and the exposure? You think of leadership....

I have been called upon to talk at various events particularly on leadership because that is one of my favourite areas and we are now saying to people that we don't need managers any more we need leaders. People need not be managed any more. They need leadership to perform. We would have needed managers 25 years ago. But now our young people are different. We've got to inspire and motivate them. Just think in the years gone by how we treated servants and peons, drivers, now we have to be so careful of them, we have to treat them even better than we treat our own children sometimes!

Even our own staff you've got to keep motivating them. 

So coming back to the point you've got to have leadership. With leadership you develop qualities like affection for people, standards, good communication etc. There are two lovely definitions that I always talk about, "leadership is all about getting ordinary people to do extraordinary things."And the other is "good leaders have good followers."

STB: How many people get involved in the actual interviews with top executives/managers? Do you personally handle all interviews?

FS: We have one or two in-house consultants. But for senior level positions I get involved. Even in the meeting of the client, I feel confident going myself. 

Now, that is not a good leadership skill. But because its still new to Sri Lanka I must be very careful how I handle the client and candidate. Particularly when they are unwilling or show reluctance or hesitance to be hunted.

About 20% of those we interview would agree to come during working hours. We try to encourage the lower rung to come to our office. But the top rung we meet in more secluded surroundings, a better atmosphere, not in an office. When we meet people at that level in a five star hotel for instance we are able to gather a lot more than if it was in an office. 

Also I don't agree with some and I have had to argue a lot on this point, that the whole board of directors should not be present at the interview. How could you get the best out of a interviewee when all the board is competing for the best questions. It drives a bit of fear into that person. The person will not be normal. She /he is not going to say the things he should be saying.

STB: But most companies do this ? 

FS: It is slightly going out. It is amazing how much information you can get, if you have an informal chat with them. Because you actually take I them into your confidence and try and get yourself into their confidence. And at the end of the day we become so friendly your are able to gather a lot of more weaknesses in the interviewee.

Although they appear to be hardworking, they may like to take long weekends off regularly and so on. Or maybe they had actually moved jobs not because they were ambitious but because they could not perform well in the earlier post. 

I always advice the clients not to have an imposing board to interview the person.

We also advice clients to interview three different people in three different locations before you decide on the right person. Because when you interview people in an office environment they may act different to if they are taken out for tea. If the person is also taken out for lunch and at that point if something wrong is spotted.....

STB: Have you advocated that with your clients? 

FS: I have mentioned it to a few clients but it would be nice if it is widely practiced. When you have narrowed your number to three its not a difficult task to practice this. Eventually the person who is joining you is joining a family.

If you know the ins and out of that person what sort of personality, what sort of character, is he the kind of person you can go out for dinner with? Or can we bring him home to discuss a project? You know ethics, character, morals values...all that counts. 

Once you have made your final selection and get the person on board and you then realizes he/she is not the suitable person, re-hiring will become more expensive. In a country like Sri Lanka it may not be possible with stringent labour laws to fire a person easily.

STB: What would you as a headhunter do if you realise the person you picked is not suited for the job at hand? 

FS: Head hunting plays different roles. We have to be a detective, counsellor. Sometimes we have to say it was lovely to meet you but I don't think you should move from your current position. You've moved job only one year ago and my advice to you is to stick there for a while. I say to my candidates look, you are as important to me as the client because, I can get people to come to us but if one candidate is unhappy in his newfound position, then we feel responsible for the bad move . 

STB: How does a client get to know of your existence and contact you?

FS: By word of mouth more often that not. We never advertise. Like an audit firm. Headhunting is all about total confidentiality.

There have been cases in the past when people I have interviewed have moved jobs and introduce their new employer to us etc. There are lots of people who get to know about us and use us. But what must be stressed is the point I made earlier that people and corporate clientele in particular should understand that there are headhunters who could hunt them out for a new job offer.

STB: How does the hunting really operate? How do you hunt for the right person?

FS: In headhunting there is a lot of work to be done. It's not the same as a placement agency it is very different because, placement services have a data bank. What a placement agency would do is, first advertise and collect the CV of all suitable applicants, go through them and select the best and present it to the company. But what we don't do is we don't advertise, but we actually do research. We also look into our data bank of people whom we have interviewed before. But very often, nine out of ten we cannot use the databank only. We have to search.

Where would these people be found. How big is that company? Is it bigger or similar to that of our client. Will the culture of one organization be the same as the other? In head hunting we charge a retainer. Because we have our costs and the time that we spend, sometimes we have to go out of Colombo, and even when we have to meet a client we spend at least minimum one hour to one and a half-hours to find out exactly what they are looking for. What their company stands for. What the company's future is. What the future of the individual who we are searching for is. All that is important because when we met an individual we've got to be able to say all these things to him.

We do have a basic placement company also. 

Now what is also happening is that I sometimes get a call from a top CEO looking for a new break. Maybe they want a new challenge or feel they can get a better deal elsewhere. Or they are simply not too happy. So they call me up and ask and I respond by saying that I love to meet people and make an appointment with them on the cellphone because it offers better confidentiality. You never know if one of those people is the person we are looking for.

I don't think people have really looked at headhunting the way it should be looked at. There is a lot of groundwork to be done and a fair amount of intuition, coordinating with the company, your client. Sometimes even they are not quite sure what they are looking for. They feel they need somebody but do not know how best to set about it. Sometimes they have advertised and not got the proper person. 

STB: Is it only the private sector that uses a head hunting service? 

FS: It is really strange, but why shouldn't the government and the public sector look at head hunting .If the public sector is to compete or run like the private sector, it depends on the type of people you hire. 

Contract law to be amended

By Chanakya Dissanayake
The Legal and Judicial Reforms Project will introduce amendments to the prevailing Contract Law in Sri Lanka. The main areas looked into are provisions regarding, Sale of Goods , Misrepresentation and Frustration of Contract. The head of the Core Group on Contract Law reforms, Mr Thilak Goonerwardene in an exclusive interview to STB said, " Our main intention is to make our Commercial Law compatible with legal systems of developed countries. These legal reforms are aimed at building investor confidence in Sri Lanka by providing a conducive legal environment for business".

Sri Lanka's prevailing Sale of Goods Ordinance dates back to the 18th century and has become obsolete in the modern business environment. The ordinance has more emphasis on sale of tangible goods and does not have enough scope for sale of services. However the modern day business has shifted towards more service oriented products. The Reforms Project will be introducing new provisions, especially regarding package service products such as banking solutions and other service based contracts.

One of the main areas under scrutiny will be the provisions regarding the quality of the products. The new provisions will be based on a principal requirement of quality reflecting the price. The quality requirement on higher priced goods will be comparatively more stringent than on low priced goods manufactured as cottage industries. This approach has been tested in many countries abroad and known to be an equitable system. However all goods will be subjected to minimum quality requirements regarding defects, blemishes and other general standards.

The project is also expected to introduce provisions regarding bulk sales and payments in advance. Especially regarding part payments and advance payments the new provisions will attempt to establish a point where the title of the good passes from seller to buyer.

Misrepresentation in Contract is an area which does not have many Case Law examples in Sri Lanka. Mr. Goonewardene said that they are looking into the three main areas of Misrepresentation namely, Innocent Misrepresentation, Negligent Misrepresentation and Fraudulent Misrepresentation. " Today in Sri Lanka Fraudulent Misrepresentation is dealt under the Penal Code. This has resulted in a high burden of proof on the claimant, because the criminal element should be proved beyond reasonable doubts. We are looking into the possibilities of bringing the Fraudulent Misrepresentation under the wing of Civil Law to reduce the burden of proof", he further added.

Until recently Negligent Representation was not identified in Sri Lanka. It was classed along with the Innocent Misrepresentation. But today Judges are distinctively identifying Negligent Misrepresentation following a decision in UK.

The current Case Law remedies available for Frustration of Contract, are seen as unequitable since most often the whole burden falls on one party. The Project will be proposing a system where losses are adjusted between the two parties. Some Foreign legislations will also be used as possible models for this purpose.

Once the draft legislation is drawn up Stake holders including the business community will be consulted on the provisions. The business community's suggestions will also be incorporated into the draft. 


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