Arrogance and foolishness of private sector management

Local villagers believe that there are no medicines for foolishness and arrogance reflected through the saying “Moda kamatath Udangu kamatath beth netha”. The western fairy tales, The Emperor's New Clothes and the Hans Christian Andersen’s “The Evil King”, show us of the many acts of foolishness and arrogance of those in the highest seats of governance.

The Wise Old Owl has heard, seen in action and spoken of in recent months of the foolishness and arrogance of those in governance, beginning with the chief executive and his team around, and the chief of the justice, police and treasury systems. This may lead to the conclusion that, that being foolish and arrogant is a prerogative of those in governance in state services. This being far from the truth, it is time to look at a case study, one of the many, from the private sector itself.

A small business venture is carried on associated with another larger venture and mainly supports the realisation of the objectives of the latter. The small venture also engages in other commercial activities on a marginal scale. The quality of output of the smaller venture is admired by many and praised in public. The usual malady then sets in. Management arrogance and foolishness takes over. Associated with it complacency, lack of commitment to quality and service and a belief that any achievement however stretching in demand is not impossible becomes the management credo.

It is now time for consultants to be called in and for big dream plans to be made requiring equally big investments. A beautifully bound fairy tale called a corporate plan and associated financial forecasts are approved by a newly set up subsidiary. The subsidiary then invites an investment from a venture partner and accommodates on the board of the newly formed company their associates and investors, who have no clue of the business, associated risks and the applicable value drivers. Before the new investor is invited in the inflated egos of capability drives the assets to be re-valued to levels inconsistent with the capacity of the assets to deliver cash flows that justify the revaluation. Nevertheless the revaluation is carried out with a Chartered Valuer lending his name for a fat fee.

The management now needs to show to the new venture partners, the delivery of the promise and starts the process of cooking the books of account. The first opportunity is to capitalize financial costs along with a liberal allocation of labour and maintenance costs as a part of the transfer from the capital work in progress. The next option is of course the valuation of stocks and work in progress, an easy way to inflate returns to desired level by a mere substitution of valuations certified by management.

Next in the process of window dressing was to get enhanced revenues recorded. Sales to related parties provide the management solution to the challenge. To make it material, worthwhile and scaled up, sales outlets are commercially justified and the Board nods its assent. Not only sales but the expenses for operations and capital assets are funded and shown as related party debt. The operational results of the sales outlets are not consolidated giving justifiable reasons.

The next corporate plan, following these successes, is even more ambitious and rosy. The smell of sweet success is enjoyed by all in leadership; this requires the formation of an associate company to expand business along with investment in new technology and capacity building. Of course a new administrative building, with plush air conditioned offices and a board room along with a swanky reception, is a sine qua non. Business diversification has to be the next obvious step. Two new lines of business are entered in to, in a hurry without validation of associated competition, risks and required marketing channels.

The fundamentals of supply chain management, enterprise resource management, financial control, compliance, value drivers of the business, timely management information and management efficiency and effectiveness, the viability of the business model for sustainable growth and shared vision by a committed and capable management are the least in the order of priority.

The bankers of the entity extended facilities without reservation, relying not on cash flows but on property security. The auditors approve the accounts covering their liability with qualifications.

The rot has firmly set in. The foolishness and arrogance of management and the board continue until the cash crunch wakes them one day. Yet a deep shared understanding of the nature of the challenges have not dawned nor have emerged an honest and thorough review of intentions, capacities, ground realities and potential . Management yet shy away from criticism and fail to recognise the need for immediate surgery to remove the cancer and holistic and realistic long term plan deliverable by capable and committed management. May they rest in peace!


Mercantilism is hostile to idea of just wars

By Nous

The distinction between the mercantile and the heroic character of business is neither new nor particularly deep. But it is a useful distinction in understanding the attitude of business towards war and peace at a time when the homeland is under attack from a force whose ruthlessness is rooted in a culture of excessive zeal for martyrdom, rather than in a culture of life.

Although no business is entirely of one or the other character, some business undertakings clearly have a predominantly heroic character.

A soldier patrols the coastline in Trincomalee.

There is no question that a business is heroic, when it prepares the way as a pioneer; or when it proves to be of a hardy breed; or when it is a David taking on Goliaths; or when it infuses a novel element into a prevailing scheme of things.

Likewise only a cynic would deny the stamp of heroism to a business that makes a comeback after a devastating defeat; or one that persists in being the best and in excelling over others in meeting our ever-increasing expectations of making life progressively more efficient, stable and sweet.

Indeed some businesses set out to achieve difficult, novel or beautiful things, animated by a feeling of supreme confidence, exalted courage, considerable ingenuity, and a yearning for greatness.

Understandably, not all the businesses are similarly animated. Before the growth of the capitalistic ways of organising an economy, politics and military service were the main arenas in which the human yearning for greatness could manifest itself in action. But capitalism is a relatively new experience for much of the East.

Likewise, historically in the East, the rituals of servitude and despotism are far more deeply ingrained than those of liberty and the rule of law. It would therefore be unrealistic to expect a keen awareness of the sense of both the dignity and greatness of the human spirit to be a commonplace in the East.

Besides, the great moral faiths of the East have been hostile to any concern with pride. But what is love of greatness but the concern for pride on a grand scale?

However, despite the historical character of our habits, the habitual ways of doing business is becoming increasingly heroic in the East, including perhaps in our own country.

The era of imitations, counterfeits and statist-cronyism may not be completely behind us; and bold experimentation might not be quite ahead of us. But change is taking place.
The sentient beings are extraordinarily plastic. When conditions force change, novel behaviour emerges.

Besides, notwithstanding, the religious opposition to it, love of greatness is a powerful yearning of the soul. It can only be suffocated by a sense of immeasurable sin, of unworthiness and impotence.

After all, we must not forget that Japan changed from imitators to great experimenters. To be sure, Japan was a militaristic society that took enthusiastically to Westernisation since the opening up of Japan to the West by the American naval office Commdore Perry in 1853.

However, there are more than historically determined habits that stand in the way of putting heroism into business undertakings.

The calculating skills of commerce and the lure of monetary gain have the potential to bind a man firmly to a narrowly pragmatic creed and endow him with a moral disposition defined by a deep and abiding “preference for possessions that are profitable and useful rather than for those that are beautiful and unprofitable”, to borrow an illustrious utterance.
Such a mercantilistic or crudely practical disposition might even be deemed praiseworthy in peace times, as a factor in national prosperity. But it is difficult to imagine how such a disposition could be an ally of progress when terrorism has overtaken the nation building process and the need to place the war option on the negotiation table, not as a bluff but as a final resort, is inexorably linked to decisiveness.

For, the mercantilistic habits of business smother and overwhelm such feelings as anger, righteous indignation, or resentment; and such idealistic considerations as loyalty, truthfulness, or the dignity of being a man.

Where the desire to do deals and get good bargains is all consuming nothing else really matters – especially that which impedes the profitable employment of time, effort and resources, from personal slights to those impulses, emotions and desires that aim primarily at pride, beauty, justice, or wisdom. Wealth and power might make a mercantilist arrogant. But arrogance is not pride. Rather it is the price of vice; and pride is the prize of virtue.
In a word, the unheroic way of doing business renders man hostile to the progress of civilisation that demands recourse to war, executed ruthlessly, and aimed at, as in our case, making nation building once more a democratic project, unending and continuous.

It is perhaps just as well that the mercantilists are hostile to war, unless there is profit to be had. The JVP, typically glowing with national pride, revealed its mettle as well as its confidence in the security forces in the axing of its May Day rally – and rocked the agenda of the Tamil terrorists.


Petroleum prices, trade balance and the economic outlook

By Sunil Karunanayake

In keeping with the statutory provisions covering economic activities, price stability and financial systems stability, the Central Bank's Annual Report was presented to the Finance Minister and released to the public last week.

Last year, which started on a disastrous note with the major losses in human life and property in the aftermath of the tsunami, ended on a positive note reflecting an economic growth of 6 percent.

Impressive industrial exports despite the impact on MFA on garments, increase of private remittances, major agricultural crops aided by good weather recording impressive crops, paddy (2,013 thousand tons and 1,233 thousand tons in Maha & Yala), tea (a record 317 million kilograms), inflow of tsunami relief funds and the effects of the debt moratorium improving the balance of payment surplus and improving external reserves being the key significant factors behind this remarkable performance.

Current account to widen

The latest trade statistics released up to the end of February indicates a worsening trade balance at $450 million in comparison to $181.4 million for the corresponding period of 2005.
Given this scenario and the recent global oil price hike, where a barrel rose to $70, sends a serious warning for events to come. Issues in Iran and Nigeria could exert even more pressure.
The debt moratorium benefits and tsunami relief funds flows are unlikely to continue to cushion the current account deficit. The soaring oil prices will affect every aspect of economic activity. It is hard to imagine a stable exchange rate regime in this reality.

Asia reacts

Asian economic growth is likely to come under heavy pressure from rising oil prices. Recently the leaders of ASEAN countries met to assess the situation and vowed to cooperate in energy development to tackle rising costs.

Many Asian economies are manufacturing intensive and heavily oil dependent. The IMF forecasts Asia's growth to slow down. Growth in fast-growing industrial economies, read China and India, too is expected to be adversely affected as they are major oil consumers.

The Philippines is making arrangements to develop alternative and renewable energy resources and increasing cooperation with the oil-rich Middle East. The country is also considering setting up a special unit to handle such activities.

Doing nothing is not an option

Despite gloomy forecasts and much activity on energy conservation taking place around the region, Sri Lanka seems totally insensitive to the situation other than revising the prices upwards periodically.

Here too they have done away with the global price-linked price mechanism that provided lower shocks. Setting the clock back too is going to bring in an adverse economic effect owing to increased energy consumption, certainly not what we want at this stage.

While much criticism has been leveled against subsidies we cannot forget the poor and they rightfully deserve government assistance.

I am not aware of any research done on traffic congestion and the related fuel wastage in the city, but the presumption is: it's enormous.

We cannot expect a sudden expansion of road networks nor flyovers that are long term projects. But why cannot some priority be given to the traffic issue rather than leave it in the hands of helpless, untrained traffic officers who often give directions to motorists instead of relying on automated traffic signals.

Then arbitrary road closures are affected without analyzing the impact. We should follow the Philippines example and set up a special unit to curtail misuse and wastage of fuel.

It's no secret that politicians use fleets of high energy consuming vehicles and with the concept of jumbo cabinets and project ministers, provincial ministers etc, expenditure on this account has gone beyond reasonable limits.

Why not reconsider the policies of the import of vehicles of high-fuel usage which even our roads cannot absorb. It's a pity that over the years the railways have been doomed for ruination resulting in goods transport being confined mostly to road.

A circular bus service touching the key areas of the city would certainly be a boon to motorists who now have to drive their vehicles into such areas at tremendous cost to themselves and the country.

Rising fuel costs will have a snowballing adverse effect on poverty, competitiveness of exports, budgetary discipline and inflation, cost of living and demands for higher wages. This is a priority for the government as much as the war.

Thought for the week

Within an environment of gloom with threats to peace and stability, as well as roadblocks back in the city, Sri Lanka ruggerites scored a morale-boosting victory over China to progress on their path towards qualifying for the World Cup.
As reiterated in this column sports is now a global industry and is a economic stimulant and those who were at Longden Place last Saturday would have witnessed the large expatriate spectator groups and the international officials who were present despite adverse publicity on the security issues in the global media.

Comments on this article should be sent to the writer at


US beverage industry cuts calories in school drinks

New York – The US beverage industry has agreed to fight child obesity by cutting calories and shrinking the serving sizes of drinks sold at schools in a deal brokered by self-described former "fat kid" Bill Clinton.

Looking to cut the numbers of obese children in US schools Coca-Cola, PepsiCo, Cadbury Schweppes and the American Beverage Association volunteered for the program that will ban some of their best-selling products from a market of 35 million U.S. public school children.

Under the plan unveiled on Wednesday at Clinton's New York-based foundation, the number of calories in school beverages will be capped at 100 except for certain milks and juices. By comparison, a can of regular Coca-Cola has 140 calories.

"Today is significant much like it was when Roger Bannister ran a four-minute mile or when the sound barrier was broken. Many did it later but somebody had to do it first," said Arkansas Gov. Mike Huckabee, who has joined Clinton's campaign against child obesity and battled chronic obesity himself.

Since 1980, obesity rates have tripled among adolescents aged 13 to 17 and doubled among younger children, according to a federal government report issued on Tuesday. An estimated 16 percent of children aged 6 to 19 are obese, it said.
Clinton illustrated how the program could help, saying an 8-year-old who cuts 45 calories a day from his diet would be 20 pounds (9 kg) lighter by the time he or she graduates from high school.

The former president, who has had two heart-related operations in recent years and was overweight as a child, has made child obesity one of his top public policy issues since leaving the White House in 2001.
Clinton praised the beverage industry for taking a risk with the initiative. But one expert said vending machines in schools are not a big revenue source for carbonated soft-drink manufacturers.

"The effect on their business will be minimal," said Manny Goldman, a beverage industry consultant. "There's a lot more than soft drinks that is responsible for childhood obesity. But soft drinks are visible products and are an easy target."
The agreement is part of a larger effort by Clinton's nonprofit foundation and the American Heart Association to promote a better diet and more active lifestyle for youths.

The beverage industry agreed to apply the new limits to 75 percent of the nation's public and private schools before the start of the 2008-09 school year and apply it to all schools a year later.

Elementary schools will sell only water, small servings of juices with no added sweeteners, and small servings of milk that are fat-free or low-fat.
Middle schools will have the same restrictions while allowing slightly larger portion sizes. For high schools, at least half of available beverages must be water, zero-calorie and low-calorie drinks.
– Reuters.

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