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War
threatens economic recovery They forecast
possible losses resulting from imminent freight rate hikes, higher
insurance premiums, and delays and diversion of export cargo with
the Ceylon tea industry, whose low growns are much in demand in
the Middle East, being hit hard. Higher oil prices could translate
into increased transport and production costs and fuel inflation,
which could hamper government efforts to lower borrowing costs. Pledges of
foreign aid that have come with the progress of the peace talks
might also be affected if donors divert funds to rebuild Iraq after
the war. Mahen Dayananda
of the Colombo Tea Traders' Association and deputy chairman of the
Ceylon Chamber of Commerce, said the war could further dampen demand
at the Colombo tea auctions. "We have
had slightly less demand in the auctions over the last couple of
weeks but now that the war has actually broken out it could get
worse for teas which are normally bought by the Middle East,"
he said. "Buyers
may not have enough orders to operate on a regular basis if war
continues for a period of time at which stage the buyers' cash flow
get affected which means pre-shipment credit is going to be an issue,"
he said. "If shipments
are not moving smoothly to the Middle East we could have storage
problems in Colombo." Dayananda,
who heads a Ceylon Chamber crisis committee involving the affected
sectors, said they were trying to liaise with the goverment to see
what support could be given to help the private sector. "If demand
in the auction is not sustained the negative effects will flow down
to the producer which we must try and avoid by having plenty of
liquidity in the export system so buyers can continue to operate
in the auctions." Private tea
factory owner Herman Gunaratne said low grown tea prices had plunged
as a result of the crisis and shipments to the Gulf were being held
up. The government
has assured the industry of support to buy and store unsold teas
until the war is over. The garments industry is worried that the war would affect last-minute spring shipments, according to Ashraff Omar, managing director at Mast Lanka. PM
orders probe on Ibis deal after media spotlight The premier,
according to informed sources, had called for a report within three
days on why the sale of 39 percent shares of six cluster bus companies
to Ibis could not be finalised. Asked for his
comments, Ratwatte confirmed that a report had been called for and
said: "We are trying to get to the bottom of this (issue)." The Sunday
Times FT last week in a story headlined "IBIS bus privatization
a major scam?" raised concerns that the deal was heading for
a disastrous scandal. The report said that attempts were being made
to provide a loan to the British company sans the 39 percent stake
in the six bus companies, violating rules of the Public Enterprise
Reforms Commission (PERC). A fresh valuation
of the 39 percent stock had also been called for in a bid to raise
the loan facility, the paper said. The Sunday Times, in a separate
report in its main section, also raised issues about delays and
extensions connected to the controversial deal. Several newspapers
and unions have raised serious concerns over the Ibis offer. The prime minister's
intervention came amidst reports that he summoned senior officials
of the Board of Investment (BOI) and expressed annoyance over the
lack of progress at this institution. First
national media survey It said the
year-old ceasefire between the government and the LTTE enabled the
agency to carry out a countrywide survey which included the northern
and eastern regions, untapped for many years by research agencies
and the Census Department due to the conflict. Survey Research
Lanka last week released the findings of this bi-annual Media Habits
Survey conducted in January - February 2003 in all nine provinces
of the island. Some of the findings of this interesting survey would be exclusively published in The Sunday Times FT next week Demand
for allowances too! Informed sources
said that Labour Department officials have been approached by some
senior employees for a ruling on this matter. For most top executives
in the banking and private sector, the allowances often far exceed
the monthly, taxable salary. The Central Bank began paying the salaries
of Pramuka employees after its liquidation process was temporarily
halted by a court action from depositors. Shipping
lines abused war risk premiums International
underwriters have still not completely removed the war risk premium
on Sri Lanka and the country still remains an excluded area, it
said in a report on the state of the economy. Following the airport
attack, the entire island was brought under "held cover"
status under which underwriters are free to levy an additional insurance
premium as war risk. Previously, only the northern waters were under
held cover. Insurance premium
on ships are based on their market value, depending on size, age
and condition of the vessels. But two powerful
shipping cartels serving Sri Lanka, IPBCC (India, Pakistan, Bangladesh,
Ceylon Conferences) and TACA (Trans-Pacific Stabilisation Agreement)
fixed war risk premiums at uniform rates without taking into account
the market-based value of the vessel, the IPS report said. "The war
risk premium was abused by several lines in order to earn windfall
profits and to discriminate against Sri Lanka's exporters and importers,"
it said. "It not
only affected the Sri Lankan economy adversely but it was implemented
in the most discriminatory and disorderly manner by some shipping
lines." Representatives
of shipping lines dismissed the charges in the IPS report. "There
were no windfall profits," said Rohan Perera, chairman of the
Ceylon Association of Ship Agents. "During that period the
premiums were yo-yoing because of the volatility at the time." Shipping lines
were forced to pay very high premiums to call at Colombo during
that period, he said. "Even
today despite there being peace the country is still under held
cover status," he added. "Some lines are actually paying
war risk premiums to call at Colombo. It is just that it is not
being passed." Rohan Masakorala,
former chairman of the Sri Lanka Shippers' Council and head of Ascobips
(Association of Shippers' Councils of Bangladesh, India, Pakistan,
and Sri Lanka), said the island was under held cover status although
no surcharge was imposed so that underwriters can impose extra premiums
if and when needed. The shipping industry had repeatedly asked the government to lobby the London insurers and get the held cover status removed but nothing had been done, industry officials said. |
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