31st December 2000
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Cable cars to grace the hills and slopes of Sri Lanka

By Chamintha Thilakarathna
Sri Lanka's first cable cars will be in operation in three of the island's most popular tourist destinations shortly. The cable car project includes the installation of towers, stations and cable cars in Nuwara Eliya, Haputale and Kadugannawa. While all three projects will cost about 20 million euros, the company initiating the project estimates revenues of approximately, Rs. 900 million shortly after its implementation. 

In addition to the revenue, the project is seen as a high employment provider for residents and skilled workers in the areas. At least five hundred direct employment opportunities and thousands of indirect employment opportunities for locals are in the cards.

The project is handled by Doppelmayr Austria, a renowned cable car and monorail systems supplier worldwide. The Country Representative of Doppelmayr, Mr. Victor Fernando said that a sample cable car has arrived in Sri Lanka and is awaiting clearance. 

"The projects are progressing very well. The Nuwara Eliya project is likely to be completed next year and the Haputale project in 2002. As for Kadugannawa, it is difficult to give a time frame as yet," he said.

According to him, much weight has been given to the Nuwara Eliya project at the moment as it is a comparatively smaller project. While its deadline is closing in. 

" The government of Sri Lanka through the relevant area officials have extended immense support for all three projects. Travel agents, hoteliers, Hotels Corporation and private investors too have expressed interest in these projects," Mr. Fernando said.

The project is financed by a soft loan by HypoVereinsbank in Munich. People's Bank of Sri Lanka has guaranteed the loan repayment and has commenced discussions with its subsidiary, People's Merchant Bank on the matter. 

The cable car systems which are aimed as tourist attractions are predicted to elevate the number of tourists visiting the island in due course. 

The proposed 3.5km route for the Nuwara Eliya project will be from the hilltop of Unique View mountain up to the base of the Lover's Leap waterfall. In Haputale, the cable cars will operate in a 12.5km stretch from Idalgashinne to Uda Weriya. The Kadugannawa project which is at an infant stage at the moment has a route outlined from the Kadugannawa tunnel to the base of the Bible Rock. 

Govt. to tap local banks

Government is attempting to borrow a sum between $ 200mn to $400mn from the commercial banks. The Bank of Ceylon is expected to play the major role in raising the funds, according to market sources. The Sunday Times Business also learns that other commercial banks have been contacted for this purpose. The time period is expected to be 3 years, at an intrest rate of London Inter Bank Offered Rate(LIBOR) plus 1.75%. Since the LIBOR is currently close to 7%, this is thought to be an attractive rate for Dollar funds.

The commercial banks are expected to raise the funds mainly through their FCBU operations. The Government previously raised a syndicated loan of $100mn from FCBU's in 1998.

The FCBU's are treated as a part of the domestic banking system when calculating total reserves. This borrowing is likely to help in its attempt to raise funds with liquidity in the domestic market proving to be tight. It is also expected to improve the official external reserve position even though there will only be a shifting of funds within the total reserves. The total reserves stands at $2.2bn as of end October. The gross official reserves are at $1.1bn according to Central Bank figures.

If commercial banks tap foreign capital markets however this would have a direct impact on external reserves which are low at the moment.The new GM of the Bank of Ceylon (BOC), Mr Sarath de Silva however denied the BOC's involvement in the fund raising process. 

Celebrate "real" new year

Science fiction writer Arthur C. Clarke, author of "2001: A Space Odyssey," urged the world in a New Year message Last Wednesday to celebrate "the real beginning" of the new millennium on January 1. 

"The intelligent minority of this world will mark January 01 2001 as the real beginning of the 21 century and the Third Millennium," British-born Clarke said in a statement from his adopted home in Colombo. 

"Those who celebrated the twin events a year too soon are also invited to join in the celebrations," said Clarke, who has been deluged with requests for media interviews ahead of the New Year. 

Clarke felt so strongly about people calling the year 2000 the beginning of the new millennium that he issued a statement in 1999 to try and correct them. 

"Though some people have great difficulty in grasping this... we'll have had only 99 years of this century by January 1 2000," he said at the time. 

Clarke, who turned 83 last month, has lived to see many of his predictions come true including a then controversial theory in 1945 which forecast a world linked by a network of geo-stationary satellites. 

Virtual monopoly takes over gas

By Chanakya Dissanayake
Shell Gas Lanka Ltd announced last week that they would maintain the revised price, even if world LP gas prices decline in the future. The need to recoup the Rs 400 mn losses and the massive capital investment, were cited as reasons. 

Speaking about the post monopoly era, Shell spokesperson Shohan Chandirum told Sunday Times Business, " We are doing everything possible to cut our internal costs. This year alone we were able to cut costs by Rs 100mn". 

Commenting about the possibility of competitors entering the market with lower prices, " We adhere to international quality and safety standards. Consumers will eventually realise the value of higher quality over lower prices", Chandirum added. 

However, some analysts expressed fears about continuance of a virtual Shell monopoly due to its comparative advantage of having a terminal.

Shell Gas further claimed that even though the world crude oil prices are on a decline, the LP gas " Contract price" remains high due to the high demand created by the winter season in the northern hemisphere. 

According to Shell, the world prices for LP gas has increased by 25% between June-December 2000 and the Rupee has devalued by 9.5%. 

This amounts to a cost increase of 34.4%, however Shell claims that it increased the price by only 8.3% as a response. Currently Shell is obtaining a break even price from the market.

Meanwhile, Lanka Auto Gas renewed its claim of reducing the market price by 5% and the Cylinder price by 50%, when they enter the market early next year. Lanka Auto Gas MD, Wegapitiya said, " our comparative advantage will be the lower fixed costs. 

We hope to pass the benefit of lower fixed costs to the consumer". Wegapitiya further added that Shell's massive fixed costs are preventing them from reducing the price even when world prices decrease. 

" A good example is the Renault bowser that was imported by Shell at a cost of Rs 16 mn each. We can import a bowser for Rs 3 mn and pass the benefit to the consumer", he added.

Lanka Auto Gas has made an appeal to the CPC to sell the local LP gas production from refineries to them. Currently it is sold to Shell gas. Lanka Auto Gas claims that this will enable them to sell at a lower price. 

Commenting on measures to reduce the cylinder price, " the world price for LP gas cylinder is between $ 16-20. However Shell was selling at almost $ 48, we hope to sell the cylinder at cost", Wegapitiya added. 

Meanwhile the opposition economic think tank led by Dr Karunasena Kodithuwakku, alleged that the Government has unofficially subsidised the Shell gas terminal amounting to Rs 480 mn. They claim that this would result in a non- level playing field after the monopoly ends. " In 1996 when the world LP gas prices came down, Shell increased it's prices", said Dr Kodithuwakku.

Up, up, up and pop

Fuel prices are up, cost of living is up and blood pressure is catching up. 

The latest fuel hike set off fireworks in consumers' hearts last week and dampened hopes of a prosperous New Year. The hike will inevitably set off a series of new price increases in the new year and set a new high for cost of living. 

The year started off with a positive note and full of enthusiasm. However, with the bourse dwindling down to the doldrums, cost of living taking off to new heights, rupee being devalued, and interest rates going up, consumers and businessmen alike have lost what little hope they had of prosperity. 

Tones of annoyance and words of abuse replaced sounds of merriment this holiday season. But why are we complaining? Statistics show that consumption patterns have not shifted dramatically due to the rise in the cost of living. This is because we, the consumers of this country have not stopped buying our daily needs, we have not cut down on our travels, we are not eating less and some of us still do spend pots of money for entertainment.

So, why are we complaining? Because the cost of living is rising! 

Informal surveys have found that individuals continue consuming the same level of goods and services as most of them are essentials in daily life. An individual would inevitably cut back on these daily necessities due to high costs, but that cut does not add up to shift consumption patterns.

Consumers and businesses are distorted with the rapid rises in cost. The corporate sector is trimming fringes to cut costs while investors are disgusted with the bourse. Employers are not in a position to raise salaries to keep pace with the rising cost of living and employees are trying to find alternative means of keeping both ends of the candle alight. 

All this increases spell doom and gloom for the New Year.

The business community say that they will be taking the next year, a day at a time as they were uncertain of the economic environment in the New Year. Plantation officials say they fear more strikes in the New Year with the latest fuel increase. Software developers, hailed as the gods of our future are uncertain of their future because the US tec stocks are popping. 

Consumers fear more fuel price increases and businesses dread anymore increases in interest rates. 

Critics say that this might be the next most popular cause for suicide in Sri Lanka. 


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