ADB-LTTE
talks to repair A-9 road
 By
John Breusch
In an unprecedented move by a major donor agency, the Asian
Development Bank (ADB) met with senior representatives of
the Liberation Tigers of Tamil Eelam (LTTE) two weeks ago
to discuss the bank's plans to fund improvements to the A9
highway to Jaffna.
ADB country
director John Cooney said the bank would provide a $3-4 million
loan to fund the upgrade, which will be carried out by a private
firm contracted to the Road Development Authority (RDA).
 "One
of a number of reasons I went to the north in the last couple
of weeks was to discuss with the LTTE how that might be done,"
he said. "Development finance, loan agreements and what
have you are activities that the LTTE wouldn't have very much
exposure to." Cooney said the ADB had agreed to redirect
the $3-4 million from an old road sector loan that was soon
to close.
Those
funds will constitute just under three-quarters of the cost
of the road works, with the government paying for the remainder.
The ADB's contribution would be given under the terms of the
original loan agreement, which provided for the works to be
carried out by a private firm contracted to the RDA.
"We
suggested to the government that we might be able to redirect
those funds, if the government wished, to doing a basic level
of rehabilitation on the A9 and some of the other critical
roads," Cooney said. "That would keep them in shape
and fulfilling a basic function until a more substantial rehabilitation
programme would come along, which would depend on much more
progress on the peace front."
Although
he would not identify whom he talked to in the LTTE, Cooney
said the April 19 meeting was with "senior representatives"
as well as technical staff from the LTTE's rehabilitation
arm, the Tamil Rehabilitation Organisation (TRO). "The
objective of the exercise was to discuss, in the lowest technical
terms, what we're talking about, how we might operate in the
context of the loan agreement," he said.
"So
we had a long discussion with the LTTE representatives, including
technical representatives in Mullaitivu, and they are now
thinking about that." "I've also since then discussed
this with Prime Minister Ranil Wickremesinghe, with his senior
advisers, and the general intention is that this should go
ahead."
The A9,
which was partially opened two weeks ago after being closed
for about 15 years, is still effectively controlled by the
LTTE. Asked whether the road works would require the ADB to
enter into an agreement with the LTTE, Cooney said: "Exactly
how this will work is still being thrashed out."
"But
the intention is that it will be done as closely as it can
to the way it would be done anywhere in the country in accordance
with the terms of the loan agreement."
The improvements to the A9 were essential for not only economic
reasons, he said.
"It has a significant role in the cease-fire agreement,
so it has a role beyond the pure fiscal, if you like.
"But
the ADB - and the others [donor agencies] - probably won't
commit too much funds to do more extensive work on the A9
or similar areas until the whole peace process is a lot further
advanced," Cooney said. "Firstly, funds are scarce.
And secondly, this is still a very fragile process."
Tiger
conditions to do business in Jaffna
Anyone wanting to do business in Jaffna would have to tie
up with residents of the area, Tamil Tigers rebels have told
members of a business delegation from the Ceylon Chamber of
Commerce. "We understood that we cannot start any business
without the participation of Jaffna residents or merchants
from Jaffna," said Roshnie de Saram, a member of the
chamber delegation.
She and
few others met LTTE representatives while the same point was
made to the chamber's 47-member chamber delegation visiting
Jaffna two weeks ago, during a meeting with the Jaffna Chamber
of Commerce. "This is the understanding we got from the
LTTE and the Jaffna Chamber of Commerce," de Saram said.
"We would like clarification of this from our government
- whether this will be the case if the LTTE is given control
of an interim administration if the peace process is successful."
SB,
Ravi clash on taxing milk imports
By Hiran Senewiratne
Two government ministries are embroiled in an issue over plans
by Agriculture Minister S.B. Dissanayake to raise the tax
on imported milk, a move hotly opposed by Commerce and Consumer
Affairs Minister Ravi Karunanayake. Last week, Dissanayake
said the government intends to impose a tax on imported milk
products, except infant milk, in order to encourage the local
milk industry. A ten-year strategic plan is being prepared
to develop the industry and make the country self-sufficient
in milk, he told a meeting organised by the National Farmers'
Alliance.
The ministry,
he said, is considering a 5-10 percent tax initially. At present
there is a ten percent customs duty on imports of full cream
milk powder and 25 percent duty on liquid milk. Dissanayake
said that in the last few decades local milk production had
dropped dramatically because of milk powder imports and the
lack of a proper policy for this sector. Sri Lanka has the
potential to be self-sufficient in milk within a short span
of time once the ten-year policy is implemented, he added.
However,
Karunanayake told The Sunday Times Business that he opposed
the idea and would never allow prices of any milk product
to go up at this juncture in order to protect consumers. He
said his ministry is always ready to support local industries
but would oppose any measures that would be detrimental to
consumer interests. Dickson Nilaweera, Secretary to the Ministry
of Agriculture and Livestock, said the proposed tax increase
would require the approval of the Tariff Commission.
Chetiya
Sri Nammuni, Commercial Director of New Zealand Milk Food,
said the Ministry of Agriculture had informed the company
of the proposal to impose a 5-10 percent tax on milk product
imports.
Apollo
hires expat Lankan doctors
By Sonali Siriwardena
Over half-a-dozen Sri Lankan specialist doctors living overseas
are to return to the country to form part of the expert team
of doctors at Apollo Hospitals, Colombo, the latest entrant
to the private healthcare sector in the country. A member
of the Apollo Hospitals Group in India, the Rs. 2.8 billion
hospital located in Narahenpita, currently has a bed strength
of 350 and is to begin operations this week.
An initial
batch of 65 Indian nurses has also been brought to Colombo.
A group of Sri Lankan nurses is presently being trained in
Madras. The hospital's plan to set up a school of nursing
here has received government approval. It will train nurses
thereby increasing the opportunities for Sri Lankan nurses
to seek employment overseas.
CPC
cuts down losses
The Ceylon Petroleum Corporation (CPC) has cut losses to Rs.
13 billion from Rs. 21 billion (upto end 2001) through savings
on interest payments, staff cuts and passing on world price
hikes to the consumer, its chairman Daham Wimalasena said.
Wimalasena said the CPC, under a new directorate since December
2001, has reduced its losses and now operates an automatic
pricing mechanism. "When world market crude goes up,
we increase the rates (unlike before when it was subsidised)."
He said
the corporation is renegotiating bank borrowings from state
banks and last month, for the first time in years, was able
to deal with private banks. "The state-run Bank of Ceylon
(BoC) and People's Bank were charging us high interest rates
- Libor plus 3.5 percent which then came down to Libor plus
2.5 percent. Private banks have offered us Libor plus 1.25
percent and now BoC is offering us Libor plus 1.75 percent
because of the competition."
He said
savings on interest payments alone would be at least Rs. 500
million by the end of the year while staff cuts are also underway.
"We are in excess of 2,500 staff and we need to cut the
fat to meet competition." But he noted that these cost
reductions wouldn't have any impact on prices. "Our biggest
problem is not the price of world crude but the currency fluctuations.
In fact crude in the 1980s was trading at between $ 30 and
$ 36 per barrel (compared to $ 20-25 levels now) but the selling
price was still much lower then than now because the exchange
rate was low," Wimalasena, who also served as CPC chairman
in the 1980s, added. The rupee currently at 95 rupees per
dollar was around 25 rupees per dollar in the mid-1980s.
The CPC
is also planning to resume oil supplies to Jaffna by road
- for the first time in years - once the LTTE-controlled A-9
is fully cleared. Fuel to the northern peninsula has been
shipped through Trincomalee for more than a decade. There
are also plans to rehabilitate CPC's badly-maintained oil
pipeline between Colombo port and the Kolonnawa refinery on
which 600 squatter families are residing and need to be moved.
"The pipeline is in bad shape and we can't use it at
full pressure, thus taking a long time to unload a vessel,"
he said, adding there were plans to shift 400 families in
the Colombo north area under the rehabilitation scheme expected
to begin in two months and be completed in six months at a
cost of around Rs. 500 million.
"We
plan to follow a new route for the pipeline through the new
port access road and join up the old pipeline," he said
noting that political pressure in moving the squatters had
delayed urgently-needed repairs to the pipeline in the past.
Far
reaching reforms in tea sector
A task force studying ways to de-regulate the tea industry
has recommended the government go ahead with a controversial
proposal to allow imports of orthodox teas from other origins
for blending and re-export but subject to a prohibitive tariff.
The Regulatory
Review Task Force has also recommended that the Tea Board
must give quality clearance for such teas before they are
cleared by Customs as is now done for CTC and speciality tea
imports, official sources said.
Although
existing rules allow manufacturers to import orthodox teas
by paying a duty of 25 percent such imports had been hitherto
banned under a Tea Board directive.
The recommendation to allow imports of orthodox teas is largely
cosmetic because the prevailing tariff of 25 percent, meant
to protect local producers of Ceylon tea, in effect discourages
large scale imports, sources said.
With Sri
Lanka's cost of production the highest among the world's tea
producers, allowing duty free imports of orthodox teas could
affect the commercial viability of plantation companies, they
said. "Also, we don't want rubbish to be imported. That
could damage the image of Ceylon tea," one source said.
The duty
will not clash with World Trade Organisation rules which allow
Sri Lanka to have tariffs of up to 50 percent to protect local
agriculture.
The task
force ascertained the views of all stakeholders in the industry
on this highly divisive issue. All tea producers' associations
- Planters' Association, Federation of Tea Small Holder Societies
and the Private Tea Factory Owners' Association - opposed
imports of cheap orthodox teas from other origins because
they fear it could depress prices of locally made tea and
tarnish the image of Ceylon tea.
Four big
export firms also expressed reservations about allowing imports
of orthodox teas. The Colombo Tea Traders' Association (CTTA)
and the Colombo Brokers' Association remained neutral. It
was only the Tea Exporters' Association that supported imports
of orthodox teas, the sources said. The task force also recommended
the removal of all quantitative restrictions on private sales,
forward contracts and direct sales outside the Colombo auction,
giving producers an unfettered choice in disposing their teas.
It also
said the practice of a Tea Board panel approving prices of
teas sold outside the auction should be replaced by an industry
panel made up of the selling broker and an independent broker.
This panel will monitor prices and, in order to provide transparency,
inform the Tea Board and the CTTA the prices at which such
teas were sold. The Colombo tea auctions have stood the test
of time for over 100 years and provide a free market mechanism
for both buyer and seller to trade in tea in a transparent
manner, sources said.
"The
producer must have the right to sell at a price he considers
advantageous to him," one source said. The sale of tea
outside the auction would allows producers to convert their
crop into cash faster than the six weeks taken now if they
go through the auction.
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