Happy Vesak to our readers
Bubbling with excitement, the children of Sri Lankadara Children's Home pose with one of the kudus they are making with HSBC staff (in the background) under the bank's Vesak lantern competition. The bank says that caring for underprivileged children is one of HSBC's policies.


World Bank mulls post-conflict aid
The World Bank is looking at giving Sri Lanka a massive rehabilitation and reconstruction aid package if peace talks succeed and is keen not to be left out of the rebuilding effort in which other international funding agencies have stepped up the tempo of their operations.

"We have realised that we have responded too late to the peace process while other agencies are ahead. Even the UN is seriously looking at rehabilitation and reconstruction. This is our turf - we need to do something," a World Bank source said.
While preparations are underway for the development forum on June 5-7, which brings together donor countries and lending agencies for a parley in Colombo for the first time, the bank is also planning a bigger and higher-level meeting in December in Paris to discuss the Sri Lankan situation. "Donors would be represented at a higher level than the local development forum," the source, who declined to be identified, said.

Top officials from the Asian Development Bank, the International Monetary Fund and the United Nations have been visiting Sri Lanka to assess the current situation as the peace process takes shape. The business community is confident of the government and Tamil rebels thrashing out a workable solution to end the ethnic conflict when peace talks begin next month.

Donor agencies and countries share the optimism particularly because there is for the first time third party - Norwegian - involvement in the peace process. The ADB has said it could use emergency funds for development if a solution is found while the IMF has resumed disbursements in a standby credit facility that was suspended last year after the former government failed to keep to performance targets.

The World Bank, the source said, had been concentrating on its current programmes and paid little attention to the post-conflict phase until now. A new country director takes over in July from incumbent Mariana Todorova who completes her third year in Sri Lanka.

The new director, Peter Harrold, is a British national and has wide experience working in post-conflict situations having previously served in Sierra Leone, Ghana and Liberia. He is likely to speed up World Bank aid to Sri Lanka for post-conflict work.

Unlike the former Aid Sri Lanka group meetings held annually in Paris, development forums are not pledging conferences and even if they were, Colombo would be pressed to use large sums of unutilised funds rather than being provided new loans and grants.
"We have an aid pipeline of several million dollars which have been unutilised over the years due to implementation problems. If we ask donors for funds, the first question would be - what has happened to the money we have not spent?" noted Economic Reforms Minister Milinda Moragoda.

He said $500 million worth of donor funds for highway projects have not been utilised as the Colombo-Matara highway and the Colombo outer circular road have been delayed due to land acquisition problems.

Moragoda said there was a need for more effective legislation to acquire land and pay market rates as compensation if much-needed infrastructure projects are to get off the ground quickly. Such legislation, he said, was being prepared to make the acquisition process transparent, time-bound and more effective.

Govt. to lease Trinco oil tanks to Indian Oil
The government last week approved the hand over of 17 fuel tanks at the China Bay storage facility in Trincomalee and 100 petrol sheds island-wide to the Indian Oil Corporation (IOC).

The aim of the move was to liberalise the petroleum sector and create competition that would eventually bring down prices of petroleum products, government officials said.
A team of Indian officials will visit the island shortly to inspect the oil tank farm in Trincomalee and finalise details of the lease agreement.

The Indians will provide security at the 17 tanks that the IOC will lease from the Ceylon Petroleum Corporation (CPC) under the proposal submitted to the cabinet by Minister of Economic Reforms, Science and Technology Milinda Moragoda. The proposal was approved by the cabinet on Thursday.

The agreement will give India a presence in Trincomalee, which is considered by the Tamil Tigers as the capital of Tamil Eelam. Prime Minister Ranil Wickremesinghe will discuss the deal during his visit to India next month. The IOC is expected to invest in the island and buy 100 of the CPC petrol sheds. The CPC has said it intends to reduce its network of 350 filling stations and keep only 120 essential outlets.

A team of experts from India have already inspected the Trincomalee oil tank farm, which has 99 tanks with a capacity of 12,100 metric tons each, of which 15 are being used while the rest lie abandoned and covered by shrub jungle. Ministry of Enterprise Development, Industrial Policy and Investment G. L. Peiris confirmed that the IOC has been invited to use part of the tank farm in collaboration with a local firm. The Indian government has always had a strategic interest in Trincomalee, he told the Cabinet news conference.

Big deal for MIT
Millennium Information Technologies (MIT) has clinched three new deals worth $34 million to provide stock exchange software products for American clients, its CEO Tony Weerasinghe said.

"We have got into the big league," he said. "These clients trade something like 10 times the amount of Sri Lanka's GDP in a day." An official announcement on the new business is expected shortly, Weerasinghe said. The company opened offices in the US and Singapore last year. He added the new deals meant their presence in the US was paying off. MIT expects to complete the first project by the end of this year. (See Page 5)

Foreign banks mixed on peace hopes
By John Breusch
Hopes for a peace-inspired boost to foreign investment are rising with Standard Chartered, one of the country's biggest foreign-owned banks, reporting a pick-up in activity in the past two months.

Standard Chartered's chief executive in Sri Lanka, Wasim Saifi, predicted that the commencement of peace talks - scheduled for next month - could galvanise growing confidence in the Sri Lankan economy.

"The interest will be heightened if the talks get underway," he said. Saifi said interest from foreign investors had increased in the past two months after the first quarter had provided little indication of improvement.

Investors appeared to be lured for a variety of reasons: some spotting opportunities in the domestic economy; others targeting export and tourism; and some investors from the region seeking to take advantage of tariff benefits.

"The peace by itself would not have got the business in," he said. "But people would have been looking at those opportunities and may not have moved so far because of concerns about war." "But now there's some optimism." However, Sri Lanka's other major foreign-owned bank, HSBC, said investors appeared to be still wary of the prospects for peace.

"We've not seen any actual increase [in foreign investment) until now," said Mark Humble, who took over as HSBC's new chief executive in Sri Lanka earlier this month.
"I think it's too early for newcomers to make that big leap." But Humble said there appeared to be increased activity among multinationals already based in the country.
HSBC's biggest international clients in Sri Lanka include British American Tobacco and Unilever - two companies that have already began to reach into the north and east since the ceasefire commenced in February and with the opening of the A9 highway to Jaffna.
"They have started to expand their distribution network," he said.

"The existing players I think are starting to expand and explore new opportunities."
Humble highlighted two sectors that were receiving renewed interest from foreign investors: tourism and energy. "The tourism industry of course has fantastic prospects," he said.

"So existing customers here in Sri Lanka are looking at hotel properties both on the south and the west coast, and on the east coast. "I'm aware of two foreign investors that are interested in buying [tourism] property here."

The development of Sri Lanka's troubled energy sector has also created interest among foreign investors, he said.

Unilever eyes ageing population
Unilever Ceylon aims to exploit the opportunities provided by an ageing population, greater urbanisation and a growing female workforce in the island by focusing on products like anti-ageing creams, functional foods and beauty products.

The company, a subsidiary of the consumer products multinational, has set a target of achieving an annual turnover of Rs. 23 billion in four years' time, its chairman Ehsan Malik said last week.

"In reaction to the changing face of Sri Lanka and the opportunities that this brings for us, our vision is to double our branded business by 2006," he told representatives of supermarkets with which Unilever does business.

He predicted that demand for anti-ageing creams would rise with Sri Lanka's population ageing, owing to a low birth rate and improved living standards that help people live longer. Malik said that with the number of working women set to rise, limiting the time they can spend in the kitchen and in keeping the house clean, there would be more scope for ready-to-eat food and what he called convenient hygiene solutions.

"One implication of more working women is that women will marry at a later age," Malik said. "Hence, there should be a higher demand for beauty products." Increasing urbanisation - at least half the population will live in towns by 2010 - should "accelerate the switch from commodities to branded consumption," he said.

Unilever Ceylon's turnover is "significantly higher" than that of Nestle, Ceylon Tobacco Company or any other consumer products company in the country, Malik also said.
"Indeed, CTC's total turnover for the first quarter of 2002 amounted to no more than our turnover in just a single month of March - a little over one billion rupees," he said.


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