BOI to be a self-financing unit

Setting up industrial parks, hiring space to investors

The Board of Investment (BOI), Sri Lanka's main state-owned, investment promotion agency, is planning to launch a string of industrial parks complete with industries, townships, housing and recreational activities in an effort to turn the cash-strapped organisation into a self-financing institution.

“We are not getting (enough) money from the government Treasury. So we need to look at ways of raising our own money to finance programmes,” BOI chairman Arjunna Mahendran told The Sunday Times FT.

The BOI is using a model based on an old joint venture partnership between the government and the DFCC where the agency took over a Fertiliser Corporation complex and converted into an industrial estate.

“I want to use that model and borrow from banks like the World Bank, etc. using concessional money and start the industrial parks (with non-related government funds),” Mahendran said, adding that this is a major departure from the current practice of relying on state funds to drive the country's investment.

The agency has invited an expert from the Jerong Town Corporation in Singapore which has expertise in industrial estates and townships, as an advisor to the project.
“The BOI has to graduate into a financially autonomous entity. In the past we have been just an industrial estate arm of the government. We should graduate to be a self-sustaining, viable entity of our own. Now that Sri Lanka's peace process has reached a positive stage we can finance these projects instead of relying on the state,” the BOI chief added.

A public company would be set up for this purpose and eventually listed in the Colombo Stock Exchange to enable anyone to invest in it. The entire industrial estate development activity would be funded by banks. The industrial estates (or parks) will be modeled on the lines of what is available in the Asian region like Singapore, China or Malaysia for instance. There will be industrial infrastructure like good roads, telecommunications and power plus townships that would have worker housing, schools, hospitals and recreation facilities.

“One of the mistakes we have made is that we haven't developed housing and townships linked to industrial development in the past 10-15 years. What we have are industrial estates. By creating towns, housing and schools side by side with industry (like in China or Malaysia), workers became part and parcel of the whole region, get married, have children and have a sense of ownership in the complex. It becomes a self-contained unit.”

Mahendran said Prime Minister Ranil Wickremesinghe has identified the region between Biyagama and Horana on the eastern side of the western province, as the best location for these sites.

Surveyors are currently doing a feasibility study to find the best site. The BOI will lease state land and develop these self-contained, mini cities. It would be linked to new highways, the port and airport.

The BOI chief said this plan forms the agency's broad vision for the next three to five years. “Our existing industrial estates are filling up fast and we need land. This is top priority for the coming year and we hope to start next year the first generation of industrial parks.”

APL seeks full ownership of agency

The Shipping Ministry has rejected a bid by American President Line (APL) for full ownership of its agency business here but the carrier is pressing its case, citing proposed new investments and new services to be introduced through the Colombo port.

APL has just signed a terminal services agreement with the Sri Lanka Ports Authority under which they will exclusively patronise Colombo's Jaya Container Terminal for a period of two years.

Until the week before last APL had one service at JCT and one at Queen Elizabeth Quay operated by a consortium led by P&O Ports.

APL's bid for full ownership of its agency had been supported by the Board of Investment which has been pressing for the liberalisation of the agency business and allowing full foreign ownership.

The move has been resisted by the shipping agents, especially the Ceylon Association of Ships' Agents, who feel it would result in a loss of foreign exchange earned by the country.

Foreign shipping lines can now own only up to 40 percent of the agency.

Ship agents have also said full foreign ownership was not required since Sri Lankans have the skills to provide the required services.

APL officials said they were still holding talks with the authorities on their bid and had not given up hope.

The carrier, owned and operated by Neptune Orient Lines of Singapore, is considering new investments here and bringing in new services to Colombo port, officials said.

War jitters hit Ceylon tea auction

Gulf war fears hit the Colombo tea auction last week, dragging down prices of Low Growns which are much in demand in the Middle East and brokers said shipments could get affected if fighting does break out.

Asia Siyaka Commodities said the market for Low Growns was "substantially" lower with less demand for the relatively large volume of 3.1 million kg on offer.

They attributed the drop to tension in the Middle East where American forces are being poured in for an attack on Iraq.

"The fear of being caught with large stocks in transit is hampering the movement of tea," said Anil Cooke, senior vice president of Asia Siyaka. "We could be hit severely." Shipments to Russia, the biggest market for Ceylon tea, could also get affected if war breaks out in the Gulf since they move via the Red Sea or across the borders of other Middle East countries, he said.

“Up to November we exported 64 million kg to Russia, pushing India out as the prime supplier,” Cooke said.

“It’s a major breakthrough.”

Other brokers said shipments might not be disrupted that badly given the experience of the 1991 Gulf war.

Brokers John Keels said the trade would be closely watching developments in the Gulf.

But they added: “The resilience demonstrated in the transfer of teas to consumers from auction centres around the world in similar circumstances previously should only encourage exporters.”

Cooke of Asia Siyaka said that even if shipments were not disrupted the costs would rise, with war risk hull and freight insurance premiums, and bunker surcharges being imposed.

“All this would come out of the price of tea,” he added.

SEC crisis swept under the carpet

A former market regulator last week warned that the crisis at the Securities and Exchange Commission (SEC) will be swept under the carpet and nobody held accountable.“ This issue (mark my words) will be swept under the carpet. It will be delayed as long as possible till the heat is off. Nobody will be held accountable for this situation,” noted Arittha Wikramanayake, a one-time SEC director general and now a top corporate lawyer.

He said the SEC would never be able to regulate the capital markets. “The entire credibility of the SEC is gone. They won’t be able to (effectively) prosecute anymore,” he told a Colombo seminar on insider dealing organised by Corporate Consultants Ltd.

Wikramanayake called for an early resolution of this crisis and urged that the public be quickly informed of the Attorney General's verdict, which Finance Minister K.N. Choksy has said would end the matter. “If the Attorney General rules in favour of the SEC investigation, then Michael Mack must go.

If the AG rules in favour of the report submitted by a panel appointed by the commissioners, then Dayanath Jayasuriya must go.”

His comments came amidst growing concern about delays on a decision in the SEC insider trading fiasco against Mack, the SEC chairman now on leave of absence, and two other former directors of Aitken Spence.

Chanaka de Silva, a lawyer and partner of Nithya Partners, said it was unfortunate a business community that preached corporate governance was not practicing it.

“One may ask the question … why should directors resign when politicians have been up to all kinds of corruption and not resigned? But in this case it is the preacher (business community) that is not practising what they preach.”

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