4th November 2001

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An official works at his desk as the electronic trading board of the Colombo Stock Exchange comes alive after the public gallery was open. (pic. by Ranjith Perera)
An official works at his desk as the electronic trading board of the Colombo Stock Exchange comes alive after the public gallery was open. (pic. by Ranjith Perera)

Mind your Business 

Windfall before fall
Desperate situations need desperate remedies and that is what the blue camp appears to be thinking these days, with polls around the corner.

Even the package of relief measures including a substantial wage hike does not seem to have had an effect, their political pundits claim and have proposed more bonanzas for the voter.

So, don't be surprised folks if the powers that be soon announce reductions in fuel, gas and electricity tariffs. And this they will say is no election gimmick either!

Hostility industry
A once hot city hotel is up for grabs if the price is right, we hear. The hospitality industry is anyway going through a crisis but this hotel is experiencing a really tough time, what with employee unrest and shareholders demanding their pound of flesh.

The present proprietors will gladly hand over the reins of ownership to anyone for a reasonable price but no one it seems is willing to take the risk.

Posts after passing winning post
They may be counting their chickens before they are hatched, but the greens are surely readying themselves to enjoy the spoils of victory.

There are some self-appointed state bank bosses and heads of airlines and of Boards who have already invested in the green camp which led to discreet inquiries from the hierarchy as to whether these claims were true.

It was then that they were summoned and given a dose of reality. "We haven't won yet and even if we do, no decisions have been taken about who heads what."

Economists slam global ranking 

Sri Lanka in 61st position: "This is like a beauty contest"
By Feizal Samath
Private sector and government economists last week slammed a US-backed report on global competitiveness, which has placed Sri Lanka in 61st position out of 75 countries.

"It is not a proper ranking and the methodology used was not proper," said a private sector economist. "This is like a beauty contest. You give some data and then get selected," noted a senior government economist.

But the report came in for cautious praise from the private sector, which said Sri Lanka should have been placed much higher in the index.

"This is not good enough. We should be in the middle range of this index by the end of the decade," said Chandra Jayaratne, Chairman of the Ceylon Chamber of Commerce.

The Global Competitiveness Report (GCR) 2001, a project of the World Economic Forum (WEF) and Harvard University professors Jeffrey Sachs and Michael Porter, which measures the comparative strengths and weaknesses of national economies, has been published since 1975.

Finland was ranked as having the most competitive economy in the world, jumping up five places after being ranked at number six in the 2000 GCR report. The United States, which dominated the rankings last year, was pushed to second place this time.

There are two index rankings with the first being the growth competitiveness index (GCI) which measures the factors that contribute to the future growth of an economy measured by the rate of change of GDP per person.

The second ranking - the Current Competitiveness Index (CCI) - aims to identify the factors that underpin high current productivity and hence current economic performance measured by the level of GDP per person.

Central to both indexes was the executive opinion survey in which more than 4,600 business leaders across the world, including Sri Lanka, were asked to compare various aspects of their local business environment with global standards.

"We should not have been lumped with Latin American countries which are not trading partners of Sri Lanka," said a private sector economist. "There are doubts about the numbers used and the sampling techniques. The money for the Sri Lanka part of the project would have been better spent in another project here by the US."

The Sri Lanka part of the GCR survey was together handled by research outfit, Org Marg Smart, and the Institute of Policy Studies and funded by USAID. The report was released at last month's WEF conference in Geneva.

Sri Lanka, which was included for the first time in the GCR, was placed at number 61 in the GCI and 51 in the CCI. It was among countries at the bottom end of the table like Venezuela, Russia, Colombia, Guatemala, Bolivia, Ecuador, Honduras, Bangladesh, Paraguay, Nicaragua and Zimbabwe.

Japan, which continues to experience economic stagnation, fell to 21 from 22 in 2000 while the rankings of several Asian countries also fell. Singapore dropped to number 2 from 4, Hong Kong to 13 from 7 and Malaysia to 30 from 24.

"Bangladesh and Nigeria, though ranking near the bottom of the GCI scale, showed tremendous potential for growth if they are able to enhance their political and technological capacities under the auspices of stable macroeconomics," the report said.

The report analyses various aspects of an economy including the speed by which approvals are given to set up an industry, getting water, electricity and other basic services.

"They get these numbers together and make some awful judgement which makes the ranking suspect," said a senior government economist who added: "These rankings don't mean anything. This is only of academic interest."

He said when an investor puts his money in Sri Lanka "he is certainly not going to go by such rankings. There are certain other criteria that he would be looking for."

However, the economist noted that the details and the analysis that went into the study would be useful data for the country.

"We should have been doing better. Our true potential is mid-range. We have not fulfilled our true potential so far," asserted chamber chief Jayaratne.

Other economists noted that the private sector's tacit approval of the index would give it a window towards demanding more services and benefits from the government.

"By saying our ranking is not good enough and we need to be more competitive, the private sector can canvass for more support from the government," one analyst noted.

IMF team due end-November 

An IMF team was in Sri Lanka last week on a routine mission to review the country's economy but did not discuss the recent standby loan in which a second installment has been delayed, official sources said.

The sources said the team arrived on Friday and left on Tuesday and met ministers and officials including acting Finance Minister Mangala Samaraweera in the absence of President Chandrika Kumaratunga, also Finance Minister, who was in Britain on what her office described as a "working visit."

They said another IMF team was expected to return in end-November or early December to review the standby loan facility with the government. Under the 14-month IMF deal the government got the first tranche of US $ 131 million out of a US $ 253 million loan facility to build up foreign reserves.

The second tranche was due around October/November but an IMF team visiting Colombo in August was unable to finalise the second letter of intent with the government for the release of the balance funds. The sources said while the fund was happy with Sri Lanka's performance to June 2001, it was of the view that the targets set out in the MoU between the two sides were unlikely to be kept due to the changing economic scenario.

Fiscal consolidation was a key component of the programme. Under the 2001 budget, the overall government deficit was to be reduced from 9.8 percent of GDP in 2000 to 8.5 percent of GDP, with further reductions over the medium term to 5 percent. 

"I don't think these targets could be met given the recent changes," one source said. Sri Lanka's economy, particularly tourism, took a heavy blow after Tamil rebels attacked Katunayake airport while the waiver of farmer loans and government handouts to the poor and the working class will considerably raise spending while revenue falls.

The sources said a fresh letter of intent has to be entered into between the IMF and the government taking these changes into consideration and setting new targets before the second tranche is released.

Back to basics for EDB

It's back to basics for the Sri Lanka Export Development Board as it attempts to revive the once-popular Exporters' Forum.

The forum, launched in the 1980s and held at the BMICH, was an effective method of solving the problems of the export trade.

The EDB said the first revived session of the forum would be chaired by Ronnie de Mel, Trade, Industrial Development and Rural Development Minister, on Tuesday at 10.45 am at the auditorium of the DHPL building at Navam Mawatha.

The minister will be announcing the first relief package for exporters at this session. The EDB said it had contacted various exporter associations and chambers regarding their problems for the purpose of organising incentives and assistance schemes. It said exporter associations, chambers and relevant public officials have been invited for the inaugural session.

CSE baits investors 

The Colombo Stock Exchange (CSE), buoyed by renewed interest in the stockmarket ahead of national polls, last week reopened its public gallery after a lapse of ten years.

Market activity has picked up sharply after the date for polls was announced earlier last month, with considerable retail interest coming from CSE's Matara Centre.

The CSE, which maintained a public gallery from 1985 to 1991 but closed it due to security among other reasons, decided to open its doors once again as part of the long-term strategy to build a strong local retail investor base.

"Our objective is to offer another access point to the stockmarket for retail investors," said CSE Chairman Ajit Gunawardene adding that the overall strategy of the exchange is to increase and encourage domestic and retail institutional investment in the stockmarket.

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