26th August 2001
Editorial/Opinion| Plus| Business|
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Criminal pastimeThose who deal with securities must not only be well above board, but appear to be so as well and that is why the local watchdog is sniffing at reports that one such director has a criminal past.
Inquiries made from Uncle Sam appear to have confirmed these suspicions but it will take more to establish any wrongdoing locally.
But then they say there is no smoke without fire and in this instance, there appears to be some flames that need to be doused which is why the watchdog is in hot pursuit.
Bonus for the braveThose in the business community call it the 'white flight' and call it what you may, investors are panicking and deserting Colombo now, all after the airport attack.
And instructions have come from the very top to the boys in the Treasury to explore ways and means of retaining those who are left behind.
And among the new proposals are extended tax holidays and permission for foreigners to buy and own real estate, even if it is used for commercial purposes...
Fuelling around againDespite all the public display of bravado, panic buttons are indeed being pushed in high places and the reason for that is that yet another fuel price hike is inevitable, given the surcharges and high insurance costs.
But, the corp that imports has been asked to grin and bear the losses - at least for a while.
And the reason for that is that polls may be on the cards sooner rather
than later, so it is a case of buy now but pay later, really.
Negotiations under national/caretaker govt favoured, ORG-MARG SMART survey reveals
These are some of the key findings by ORG-MARG SMART, the Colombo research outfit, in a poll amongst a group of 35 CEO's and executive directors of the cream of the business community, conducted between August 10 to 21 on the country's crisis.
"In summary the findings show that despite various attempts by the opposition and the government to divert the people's attention to referendums and impeachments, the business intellectual feels that the most pressing issue or the issue that needs immediate attention is none other than the North-East problem," ORG-MARG SMART said in a statement.
It said that since there was no political stability to do this currently, the immediate solution proposed – according to the findings of the survey – is to resume talks with the LTTE under a national or caretaker government.
"During the rule of this national or caretaker government, the constitution reforms to address the minority needs should be brought in as the long-term solution," it said.
The survey, based on face-to-face interviews under a semi-structured questionnaire, raised some interesting responses from the business community.
It found that many felt the most pressing need in the country is to pursue peace talks with the Tamil Tigers while in second place came economic reforms followed by the formation of a national government. Just five percent of the participants said the immediate priority was the formation of a caretaker government while another seven percent were for opening a dialogue between the ruling People's Alliance (PA) and the opposition.
On the issue of a preferred solution to the north-east problem, the majority of the respondents (31 percent) said the government, the opposition and a third party should together propose a solution to the LTTE through peace talks.
The survey was overwhelmingly (73 percent) of the view that another country should be involved in the peace talks with Norway, followed by India, being the most favoured options.
Respondents (67 percent) felt that a ceasefire by both sides would be acceptable to the LTTE as a condition towards the resumption of talks while 82 percent said the government should resume talks on the basis of a laying down of arms by the rebels.
The Colombo research outfit said in view of the current political and economic crisis it had taken the initiative to contribute to the country's development by providing unbiased opinions of relevant segments of society on current issues.
"Whether it is politicians, businessmen or just general public, it is very common today to hear so many people criticize the current situation and express their utmost dissatisfaction at the state of affairs in the country. However, it is only a few who have tried to see how to overcome this crisis, look for possible solutions if any and see how and who should implement these proposed solutions," it said.
ORG-MARG SMART said while there has been many seminars, talk shows or meetings to discuss issues that the country is facing, "we seem to be losing track of priority issues and wasting valuable time focussing on secondary issues that have come up mostly as consequences of key issues that torment the country at large."
(Complete results of survey next week)
Initial SEC investigations have indicated that the individuals had acted in concert and triggered the takeovers and mergers code by exceeding the 30 percent limit. The code calls for a compulsory offer to the rest of the shareholders once the purchasing investors exceed the 30% limit.
SEC Director-General, Dr. Dayanath Jayasuriya, confirmed that the SEC
has written to these individuals and directors on the issue but declined
to comment further. Mr. Gunawardene is also chairman of the Colombo Stock
Dr. Jayasundara announced his estimate for this year - factoring the twin effects of the Katunayake attack and the subsequent shipping crisis - at a crowded press conference last week.
Private sector and some Central Bank sources placed their estimates for growth this year at between 2% - 2.5%, which would still be higher than the lowest growth rate recorded in the last 50 years- 0.2% in 1971 following the JVP insurgency.
An IMF team, which came to Sri Lanka recently to review the standby agreement has considered the drop in agriculture production due to droughts, global recession and high inflation caused mainly by the oil prices, to significantly curtail its growth expectations for 2001.
The government is expected to sign a fresh Letter of Intent with the IMF committing to a fresh set of targets.
According to a survey by the Sunday Times Business Desk, private sector economists place their growth estimates between 1.5% and 2% for 2001. However, foreign missions are even more pessimistic in their predictions, predicting a 1% growth for the year. The first half of 2001 recorded only a 1% growth, according to the IMF.
"There was a sharp slowdown in trade during the 3rd quarter 2001 due to the security developments. To achieve a 3% growth in 2001, a strong 4th quarter performance is needed. This is unlikely due to weak external demand and sluggish local conditions," a leading analyst said.
Economists are also considering the possibility of the US dollar weakening due to the prolonged slowdown in the US economy. "A weak dollar during the 2nd quarter could make our exports expensive and further curtail demand", an analyst said.
Dr. Jayasundara also announced the possibility of a US $ 500 million
IMF structural reform programme, starting from 2002. However, Dr. Nadim
Ul Haq, IMF resident Representative, said the three-year programme will
realise only if the government takes concrete measures to implement reforms
in the key sectors including education, labour and public institutions.
By Dinali GoonewardeneShippers' Council president Rohan Masakorale says that he has the backing of regional shippers from Pakistan, Bangladesh and India, in a show of muscle against shipping lines which continue to impose a surcharge despite reductions by insurance underwriters from Lloyds.
Making a veiled threat to shipping lines, at a recent press conference, Masakorale said he didn't wish to sideline any particular organisation. The Sri Lanka Shippers' Council is a member of the Association of Shippers' Councils of India Bangladesh and Pakistan (ASCOBIP's).
Intense discussions between a delegation headed by Ports Minister Ronnie de Mel and London underwriters resulted in the reduction of the war risk premia on hulls by 80 percent consequent to a government guarantee of US $ 50 million. However, certain shipping lines continue to impose a premium ranging from US $ 350 to $1,000 per container, which cost exporters and importers an estimated Rs. 35 million per day at the height of the crisis.
"Shipping lines claim they have not been notified officially by Lloyds. The information was available on the Lloyds list," Masakorale pointed out. However, local correspondents for insurance underwriters denied being notified officially by Lloyds.
Meanwhile, the war risk rating committee is expected to visit Sri Lanka within the next three months to review the surcharge of .075 presently operative which is .0475 percent higher than the original surcharge of .0275 percent.
"We don't accept the Sri Lanka Vessel Operators' Association (SLAVO) proposals to hold this country to ransom," Masakorale said in apparent reference to SLAVO's bid to lobby permission for 100 percent foreign ownership of shipping agencies, waiver of contribution to the shipping development fund and maintenance of foreign currency accounts.
Meanwhile, the Ceylon Association of Ships Agents Secretary, Parakrama Dissanayake, called for an active national line to help exporters and importers. The Ceylon Shipping Corporation is trying to revitalise the national carrier, he said.
Shippers also called for the liberalisation of the bunkering industry
as opposed to a temporary reduction in prices. This would increase the
competitiveness of the port and create job opportunities by increasing
activity, Masakorale said.
By Chanakya DissanayakeSri Lankan commercial banks have decided to present a set of proposals to the Central Bank in order to provide relief to the businesses hard hit by the present economic downturn.
The proposals include a relaxation of the bad debt provisioning requirement of the Central Bank for selected businesses, an increase in the single borrower limit and a repo rate cut of at least 2 percent. The banks have also decided to suspend parate recovery action for a limited period in order to provide relief especially to tourism-related businesses.
"We have many genuine clients in tourism-related businesses who are unable to service their debts until the industry recovers. We are asking approval for discretionary provisioning for these loans so that we will not be forced to implement recovery actions," said Rienzie Wijetilleke, Managing Director, Hatton National Bank.
"All our proposals are from a client's perspective," said Anil Amarasuriya, President of the Bankers' Association and CEO, Sampath Bank.
Development banks are also considering the possibility of a high number of loan defaults in the tourism sector until an industry revival. Both DFCC and NDB have exposures of approximately Rs. 1 billion each in the tourism industry. NDB General Manager, Ranjith Fernando, said the bank is renegotiating the loans with the affected businesses.
The development banks are also expected to discuss possible revival measures with the Central Bank shortly. DFCC CEO, Nihal Fonseka, said the bank is currently re-assessing its loan portfolio. "We are not ruling out the possibility of certain clients being unable to service their debts," Fonseka said. Treasury Secretary Dr. P.B. Jayasundara met with bank CEOs on Friday to discuss possible remedial measures. He had appealed to the banks to consider relief to businesses on a case-by-case basis.
Analysts are also calling for immediate action from both the Central Bank and the government to prevent the tourism crisis translating into a banking crisis.
"The Sri Lankan tourism sector moves into a loss situation once the
turnover falls below 30 percent. They cannot service debts until the situation
improves. The Central Bank has to provide some flexibility to the banks
to deal with the present crisis," an analyst said.
In fact they have to act in place of the government. The twin engine of growth - the government - has been virtually shunted to the sidetrack of politics and political survival. When it would emerge to push and pull the economy remains uncertain.
It is vitally important that the business community does not panic. Hard times are to be expected in the course of economic development. After all recessions, business cycles, unfavourable terms of trade and external economic shocks are part and parcel of economic and business developments. It is the resilient that continues, others perish in the capitalistic world of uncertainty, risk and harsh competitiveness. True, the crises we are facing are of a very serious magnitude of diverse origins and seem to defy solution. Yet such setbacks must be viewed as temporary and appropriate responses designed to mitigate the disasters. Sacrifices would have to be made by shareholders, higher management and workers. Trade unions must join hands with the employers to find solutions that will enable their enterprises to continue in production rather than shut down. The solutions should endeavour to avoid heaving unbearable burdens on some. The costs of the crisis should be borne equitably. First of all it is important to assess the effects on each industry realistically. The shock nature of the crisis, the compounding of the crisis by several unexpected waves of disaster and the depressing political climate, have led business enterprises to over react to the crisis. It is vitally important that a sober assessment of the overall situation with respect to each industry is made without delay.
A second requirement is to distinguish between the immediate impact and the phased out effects. The latter may be different to the immediate situation and far more bearable.
A third need of the hour is to look for solutions from within the institutions. The crisis may provide opportunities for rationalising the firms operations and improving its management. There may be areas of unnecessary expenditure that could be curtailed. There may be possibilities of changing the product mix and access different markets. The slackness in the demand for its conventional products may provide an opportunity to think in terms of a greater diversification in the firm's activities.
There may be ways and means by which the industry could reduce costs, find less vulnerable markets and increase its competitiveness.
A fourth strategy is to take action to get cooperative efforts from partners and even competitors in the industry. Firms in the same industry may do well to join hands with competitors and act in unison so as to not jeopardize each other.
A fifth thought is to be optimistic enough to expect changes for the better. Illustrative of this is the first reaction to the surcharges imposed on freight that made exporters despair.
Importers and consumers expected the worst. Now we see an adjustment in these surcharges not because of a love or sympathy for Sri Lanka but due to hard business sense of the shippers themselves to the disadvantages they would themselves incur if ships do not call over in Sri Lankan ports and a timely response of a minister who is still interested in the economy.
It is truism in economics that perceptions have an important role to play in the actual performance of an economy. There is no better elixir to an economy than business confidence and a public perception of impending prosperity. Likewise there is no worse impediment to economic recovery than a feeling of despondency.
It is vitally important that the business community faces this crisis
of huge proportions with realism and a long-term perspective. What they
cannot expect the government to provide, they must themselves devise. It
is now clear that business in Sri Lanka must possess attributes that can
face up to crises and devise means of survival that are not dependent on
the government. The wisdom of the business community can help the country
at this time of chaos and uncertainty.
By Sonali Siriwardene"President Chandrika Kumaratunga is no longer part of the solution but part of the problem," said opposition leader Ranil Wickremesinghe at a political crisis seminar held at the Ceylon Chamber of Commerce auditorium last week.
"For the first time in the 5,000 year history of this nation, the country's air and sea ports are in danger. This is why we feel that there has to be a change of administration if the country is to survive the crisis," he said, speaking on behalf of the People's Movement for Democracy, a grouping of political parties.
The UNP leader is convinced that reconvening parliament is the only way to resolve the situation, as "this would enable either the formation of an all-party or caretaker government which will guarantee a solution to the problem."
When asked whether the country would return to an era where similar discussions were taboo due to lack of freedom to express views and opinions as experienced during the UNP reign, the opposition leader denied any knowledge of such a period - eluding that it may be in reference to the pre-independence era.
The opposition parties are eager to engage in a dialogue with the president, but she has failed to respond to the many letters and requests made to her, he said.
HNB Managing Director, Rienzie Wijetilleke, representing the banking and finance sector, took the political parties to task insisting that they should strike a compromise with the government and arrive at an instant solution to the national crisis.
The politicians should stop attacking each other and understand the crying need to establish accountability within the government administration.
Mr. Wijetilleke also warned that as it stands at the moment - it is only a matter of time that the youth of the country raise their heads in anger at the lack of proper leadership.
Aitken Spence Group Deputy Chairman, Prema Cooray, speaking on behalf of the tourist industry hard hit by the BIA attack, expressed optimism saying that the country has great potential in the tourist map of the world.
The fear of the foreign community in coming to the country is well founded and it is up to Sri Lanka to restore confidence and ensure that the security situation is stabilised in the coming weeks, he said.
Also voicing their thoughts on the crisis and the strain on their respective
fields were representatives of varied sectors including garments, tea,
shipping and aviation, law and order, power and energy and governance issues.
It is also the sixth member of the Richard Pieris Group to receive ISO 9002 –which is given by the International Organisation for Standardisation following an assessment of 18 different elements of a company which includes key areas such as management responsibility, documentation of systems, process control and concern for the environment.
The accreditation, which is given to organisations engaged in production, installation and services, focuses primarily on customer satisfaction.
It also requires a yearly appraisal to be carried out for the consistent maintenance of standards.
Speaking at a press briefing held recently to announce the accreditation, Gerry Suraweera, General Manager/ Director of Richard Pieris Rubber Compounds Ltd, recounted the history of the Richard Pieris Group of Companies which dates back to 1932.
The company, which went public in 1951, now comprises 11 rubber related companies and presently holds a 10% market share of Sri Lanka's rubber production.
Mr. Suraweera said Richard Pieris Rubber Compounds Ltd worked towards the ISO 9002 certification in 1999 with the use of company resources.
As forerunners in the rubber industry Richard Pieris was the first company to introduce rubber products such as mats, hoses, artificial leather cloth 'Arpihyde' and plastic water tanks under 'Plastishells' to Sri Lanka.
Interestingly 'Rigifoam' is also a brand name of the company and not a generic name as thought by many.
Following an extensive restructuring programme in 1995 coupled with a Rs. 50 million investment in feeder machinery, Richard Pieris Rubber Compounds Ltd began a new phrase of compound production involving the highly polluting yet irreplaceable element of black carbon. Seen as a necessary evil in rubber production - the use of the component has been a literal black runner. However, the use of feeder machinery, which eliminates the manual handling of the black dust, has enabled the company to achieve an enviable standard of cleanliness and foster an employee friendly environment.
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