The Sunday TimesBusiness

28th April 1996



Praise has its drawbacks

Sri Lanka’s politicians are extremely prone to be lulled by praises, particularly from foreigners.

The latest accolade for the government comes from the Deputy Managing Director of the International Monetary Fund (IMF) P R Narvekar. The IMF has expressed appreciation of Sri Lanka’s progress on the road of economic reform for the well being of its people, says the press report of his meeting with the President and other officials. Mr. Narvekar has gone on record as having said that Sri Lanka’s performance, despite of the unbearable strain of the war, is commendable. Perhaps Mr. Narvekar said many other things which were not so favourable but which we are not privileged to know.

If our governments are to be effective and resolve the enormous economic and social problems facing the country, they can hardly take solace from such pleasantries. One might ask how come if the IMF is so pleased with the government’s s economic reforms the remaining tranches of the Extended. Structural Adjustment Facility have not been forthcoming.

It is a national weakness to compare ourselves with those who have fared worse than us and to take great satisfaction. For decades we have been comparing ourselves with our South Asian neighbours with respect to our per capita income, literacy levels, higher life expectancy and other socioeconomic indicators and become quite complacent about our current economic and social performances. Consequently many countries in South East Asia and East Asia, which began with greater disadvantages and with initial conditions which were not as good as ours, have overtaken us. We should focus our minds on comparisons with achieving nations which would place our performance unfavourably and provide us a motivation for a better effort. Instead, incumbent administrations continue to be lulled into complacency by praises from abroad.

It is quite clear that the country’s recent economic performance has not been very satisfactory and that it is not entirely due to the problems associated with the war and its expenditure. The government has failed to infuse confidence in the private sector and play a pro active role in ushering in a period of robust economic activity. The private sector is not all that confident about the government’s commitment to the announced policies. There are discordant voices in the government itself. The privatisation programme was unable to take off as planned. The current economic performance is far below the expectations generated by the initial policy announcement.

We do not want to sound prophets of gloom. Certainly the economy is not tottering and about to grind to a halt as some commentators appear to say whatever the actual facts show. Last year’s economic performance was a modest one. Agriculture grew to some extent, particularly owing to a further production gain in tea and increased coconut production. Now the tea plantations are facing a possible setback owing to labour unrest. Sri Lanka’s total exports grew by 20 per cent. Industrial exports rose by over 25 per cent. These are favourable developments. But investments did not grow as to be expected owing to lesser confidence and lower profits last year. Private foreign funds registered an increased outflow: US$ 108 million compared to an outflow of only US$ 80 million in the first eleven months of 1995 and 1994 respectively. The Colombo Stock Exchange is faring very badly. The turnover is down, price indices are at the lowest levels in recent times. This is an indicator of expectations of company performance and business confidence.

We are deeply appreciative, like the IMF, that the task of achieving an economic growth amidst an expensive war is indeed difficult. Yet, if the government is to make any headway it cannot afford to be lulled by the praises of diplomatic statements. The government must make an honest assessment of the actual performance of the economy and keep its eyes and ears open to see and hear the valid criticisms of its performance. It must move the bureaucracy to act quickly. It must implement its policies with a single mindedness which is sorely lacking. It must move away from repetitive policy statements to policy action. Else the country’s economic performance would continue to slide and the social tensions that a stagnant economy fosters will be irresoluable

Foreign funds on reverse gear

The net inflow of foreign funds to the Colombo Stock Market during the first quarter of 1996 had exceeded Rs 500 mn. But a reversal was seen in April.

"Most of the foreign funds came after the Central Bank blast," Allied Phillips securities research division said. "Foreign contribution to the market is on the increase and low price levels may attract foreign investors with long term positioning."

Based on market status, Colombo appeared to be a bargain counter, Allied Phillips said. Though all South Asian bourses appeared to have average equal risk level a further escalation of risk in Colombo would hamper foreign funds.

The net foreign inflow in March 1996 had been Rs. 71mn compared with an outflow of Rs. 120mn in December 1995.

However April had seen a setback with a net outflow of Rs. 71mn market sources said.

No marine-cover raise says Insurance

Marine cargo insurance rates are unlikely to go up as a result of the attack on the Colombo Port, insurers have said.

"Sri Lanka had already been identified as a high war risk area by the London based War Risk Rating Committee, as early as November 1995", a top insurance official said.

Following the rating committee's recommendation, British re-insurers had increased their premiums by nearly fivefold, last year. As local marine insurers placed part of their risk with overseas insurers, marine insurance rates had been increased from 0.0275 per cent of the value of the shipment to 0.1525 per cent.

"The incidents relating to the Irish Moana and Sea Tiger activity in general, had caused the rating committee to revise rates. In effect the rates had been adjusted to cover incidents such as the port attack," an official of a leading private insurer said.

Several mainline operators said their scheduled calls at Colombo are unlikely to be altered in the near future.

A US based mainline operator said its scheduled services remained unaltered.

"We give monthly security reports to our principals," the local agency for a major Far Eastern line said. "We have been doing this for several years, even during the JVP times". The official said there had been no changes to scheduled operations.

Feeder operators also said their volumes had not gone down. The feeder operators are vital to Colombo Port's transshipment business as they provide a link between Colombo and regional ports. Colombo is served by four major feeders. "There have been some concern and inquiries but business volumes had not gone down," a leading feeder operator said.

Are strike issues labour related or political?

On the 22nd , a strike commenced in the Plantation sector. The cause of the strike was given as the refusal of the companies to give 300 days work per year and increase wages by Rs. 8. We understand that discussions were going on between the Employers’ Federation on behalf of the plantation companies and the major unions for the finalization of a collective agreement which was supposed to address these two demands as well.

However, the Unions chose to treat these two issues as preconditions to any further negotiations and broke off discussions until such time as the two demands were met.

Collective bargaining cannot be done on the basis of one side taking an inflexible stand and also treating issues as preconditions to further negotiations as has happened in this case.

An interesting factor is that the CWC originally attempted negotiations on its own and the LJEWU which is aligned with the UNP came along with representatives of the JPTUC which is aligned with the PA government. Subsequently, the LJEWU swapped sides and participated with the CWC in joint negotiations. The question therefore is whether the issues are in fact trade union issues concerning benefits to workers or whether the issue is more of a political one, with the question of whether it is beneficial or not to workers being a side issue being made use of for political ends.

The cry of the CWC is that the workers are fighting for a living wage and that they are badly off. However, these same workers are contributing Rs.15 from their hard earned income to the Union every month. The CWC claims around four hundred thousand members and on this basis, their monthly income should be 6 million rupees. We suppose much could be done with this type of money. Inquiries reveal that the Plantation Management

Companies pay their trade union, the Employers Federation, about one tenth of that amount annually. Does the money of the workers help to keep trade union leaders in luxury or is there any tangible benefit to them? Often the poor living condition of worker is highlighted by trade union. However, the CWC Headquarters stands on prime land in Colombo 7 occupying in excess of quarter acre of land. It is strange that the headquarters need to stand hundreds of miles away from where workers actually perform their services. In the case of Companies it is different, as the top Managements are housed in Colombo and therefore their trade union should be within reach. In the case of workers what would be essential is easy accessibility to the workers on the Estates.

The enormous amount of money collected by the Plantation Unions could have been used to fund hospitals, schools and vocational training units which would have improved the position of the workers. It would also be interesting to find out how much aid is received from international agencies for the upliftment of the estate workers.

Solar power heats market

By Asiff Hussein

Solco, a unique polymer-based solar heater system was recently launched by Chemical Industries (Colombo) Ltd.

The system which has been developed with technological transfer from SOLCO International, will be manufactured and assembled solely in Sri Lanka. It will cater to both the domestic and foreign market.

Chairman, CIC, B.R.L. Fernando said that the solar heater market was a continually increasing one with a growth rate of 15% per annum. "At present 800 units are sold annually in Sri Lanka and we hope to capture a fair share of this rapidly growing market," he said.

He however noted that the product has a limited export potential as it is bulky and would be costly to ship overseas.

He said that the unit is economically priced at Rs. 59,000, nearly half the cost of a conventional heater of similar capacity. "The solar heaters are manufactured at CIC's Ekala factory with 12 persons being currently engaged in its production," added Mr. Fernando.

General Manager, SOLCO International, Tony Marwick said that the product has 2-3 times the life-span of a conventional system. "Whereas some types of a solar heaters on the market have an average life-span of 5-7 years, Solco units will last as long as 15 years or more, as no contact of metal with water can possibly take place. No corrosion means less wear and tear.

Mr. Marwick said that the unit's water storage capacity of 185 litres is more than sufficient for a family of 5-7 individuals. He further said that the unit is capable of heating water to temperatures double that of the usual day temperature and conserving the heat in its unique polyurethane insulated storage tank. At most, there could be a 5% decrease in temperatures overnight.

As for safety, the absence of any electric power source and thermostatically controlled temperatures ensure that there will be no risk of electrocution or burning, explained Mr. Marwick. While adding that large establishments, Resort hotels for instance, could install a series of units in order to obtain its hot water requirements.

He said SOLCO International, based in Perth, Australia, was established in 1984, as a result of collaboration between the Australian Government and leading industrialists to come up with a means of reducing the production cost of solar hot water systems.

The product, which has the distinction of being the world's first, and only, polymer-based solar heater, was first marketed in 1988 and has since gained a considerable market in many Asian, European and African countries, added Mr. Marwick.

Continue to Business page 3
Return to Business contents page

Go to the Business Section Archive


Home Page Front Page OP/ED News Sports

Please send your comments and suggestions on this web site to or to