US$ 2 billion worth of investment, the majority in infrastructure and services have already been approved by the Board of Investment, (BOI), Chairman, Tilan Wijesinghe told a gathering of foreign media journalists and diplomats, at the Trans Asia Hotel.
He was addressing a luncheon meeting of the Foreign Media Journalists Organisation, on the prospects of investment in the face of current constraints.
Less than 4 percent of GDP was invested in infrastructure projects in 1994, compared to 10 percent of GDP for infrastructure about 10 years ago, he said.
The US$ 2 bn in Foreign Direct Investment (FDI) will not be in the form of private sector risk capital, where the investment risk is primarily borne by the investor, he added.
For example investors in the ports projects are assured of a near monopoly while power project investments have a guaranteed rate of return, he explained. A US$ 60 mn power project has already been signed, he said. Mr. Wijesinghe identified short term and long term strategies and discussed how the BOI would overcome problems in implementing these strategies.
Mr. Wijesinghe attributed the current labour unrest to a direct result of the pendulum swinging from one side to the other. A draft Employment Relation Bill, the private sector's answer to the controversial Labour Charter, is now being studied by a cabinet Sub Committee, Mr. Wijesinghe said. The investment aspect will take precedence in the evaluation of this legislation, he said.
He pointed out that ease of exit was as important as ease of entry in promatiny entrepreneurship and investment. Investors should be able to retrench workers when necessary, he said.
Two industrial parks which can be upgraded to industrial townships will be set up in Seethawaka and Meerigama by 1998, Mr. Wijesinghe said. Most investors do not want to go beyond 45-50 km away from Colombo, because they live in the capital. Investment Promotion Zones in Koggala, Kandy etc., have not been popular so far because of this, he said. Investment Promotion Zones in Katunayake and Biyagama are full up, and cannot be extended further. The industrial parks or townships concept offers investors facilities and services like international schools, hospitals, hotels and recreation within the park itself.
The park is centred around the main industries, with the component or accessory industries scattered around the main industry. Housing for the expatriates, schools, hospitals, etc., would be located on the periphery of the park, he said.
It is a fact that FDI which was US$ 280 mn in 1993, has declined over the last two years. If the privatisation of the Ceylon Gas Company, through Royal Dutch Shell Co. Ltd., is not accounted for, FDI has declined 87 percent from 1994 to 1995.
But exports have grown 18 percent over the same period in US dollar terms, and the BOI companies account for 55 percent of total exports.
This growth is attributed to BOI companies going into 2nd, 3rd and 4th phases of operation, he said, 22,000 new jobs have also been created, he added.
Mr. Wijesinghe said the economy could keep ticking despite short term problems like the power crisis, labour unrest and political instability if the proper infrastructure for investment is created by the relevant authoritative bodies and uncertainty is minimised.
The BOI, BII, PERC, SATF, and EDB should work out a co-ordinated, coherent consistent policy framework and guidelines for decision making, which will send out a consistent economic message to foreign investors, he said.
The five Ps, policy, product, price, promotion and process will form the backbone of BOI's long term investment policy, Mr. Wijesinghe said.
He identified the Colombo Katunayake Expressway, Eppawela Phosphate Project and the Colombo and Galle Port projects as some of the major projects to be got underway.
Right now the clamouring is for extremes. We need to strike a harmonius balance, he said.
He said by focussing heavily on single issues, we were losing sight of the larger picture. The delay in setting policy framework was a reflection of the divergence of a coalition government, in power, he said. It is left to the Institution concerned to sort out policy framework and put in place a coherent and consistent policy for FDI, he added.
According to the provisional accounts, Pugoda Textile Lanka Ltd., incurred a net loss of Rs. 151.0m. compared to the previous year profit of Rs. 26.8m. However, net loss after reversal of deferred tax has been reduced to Rs. 102.9m.
The turnover of the company for the year under review is significantly below the previous years' figure. It dropped by 19.6 percent from Rs. 1052m. to Rs. 845m. "The continued sluggish market, tariff for imported fabrics, the release of garments by the export garment industries to the local market and the leakage/smuggling has affected the sales of the fabrics' says V.R. Nataraj, Managing Director of the Company.
The operating results of the company finally affected to decrease the shareholders funds from Rs. 447.9m. to Rs. 344.9m.
Commercial Development Company Ltd., has reported Rs. 37.1m. pre-tax profit and Rs. 22.4m. post-tax profit respectively while some other companies are making losses for the 12 months ended March 31.
According to the provisional accounts, Company's turnover increased marginally by Rs. 44,900. Pre-tax and post-tax profit dropped by 10.3 per cent and 25.5 per cent respectively. However, Company was able to satisfy its shareholders by paying 14 percent interim dividend. The shareholders' funds up marginally by 2.6 percent from Rs. 212.7m. to Rs. 218.3m. during the period under review.
Cargo Boat Development Company Ltd., has reported Rs. 33.6m. loss after making provisions for the loss incurred due to bomb blast on January 31, the post tax profit of Rs. 17.3m. according to the unaudited accounts for the year ended March 31. As a result share holders' funds decreased from Rs. 61.9m to Rs. 28.2m.
The company's turnover dropped by 10 percent from Rs. 19.0m. to Rs. 17.0m. Pre tax profit decreased by 8.4 per cent from Rs. 12.9m. to Rs. 11.8m. However, due to tax adjustment, post tax profit was up by 136 percent from Rs. 7.3m. to Rs. 17.3m.
Explaining the current position of rehabilitation of the damaged building, Chairman of the Company, C.B. Thambiayah says that the Directors are hoping to commence rehabilitation operations within the next few weeks, and to complete such work by the end of December 1996 with government assistance. Barring any unforeseen circumstances leading to delays, the building would probably be ready for occupation by tenants from January 1997.
Performance of Radiant Gems International Ltd., for the year ended March 31 has been not favourable in terms of turnover and operating results as reported in unaudited financial statements.
Company's turnover dropped by 19.5 percent from Rs. 8.2m. to Rs. 6.6m. in 1996. Net loss increased from Rs. 2.9m. to Rs. 4.6m. As a result shareholders' funds decreased by 32.6 percent from Rs. 13.8. to Rs. 9.3m.
Hunter and Company Ltd., was able to reduce its net loss from Rs. 3.9m. to Rs. 1.3m. during the 12 months ended March 31 as reported in its provisional financial accounts.
The Company's turnover dropped by 5 percent from Rs. 110.0m. to Rs. 104.5m. The balance sheet shows a marginal drop of shareholders' funds from Rs. 336m. to Rs. 335.5m.
A major chocolate manufacturer was planning to set up a facility in Lanka to produce it's internationally reputed brand under license.
But now,with no one able to give guarantees about the sluggish economy and the end of power cuts, they are having second thoughts.
So, Vietnam is being looked at as an alternative location for the project, we hear...
The price hike on liquor and cigarettes took many by surprise, but this may not be the last we hear of such hikes.
Raising prices now won't prevent the Doctor from repeating the exercise in the Budget in November, some Treasury boys were heard to say.
But, for the record, even now little Lanka has the highest taxes on cigarettes, worldwide...
Last week saw the entry of a private commercial bank to the pawning industry for the first time.
But others, we hear, are not far behind. Two other private banks will enter the trade before the end of the year.
The industry, policy makers at both banks feel, is full of potentian, at least, more than the Stock Market in it's present state.....
The dairy industry has come into focus once again with the high cost of imported milk. Indications are that milk consumption has come down owing to the high cost of imported milk. The country produces only about 20 per cent of its dairy needs. If current trends continue we may produce even less of our needs of milk. The high cost of imported milk has certainly affected domestic consumers but the more positive and long term perspective should be to use the occasion for developing a viable dairy industry in the country.
It has been argued that Sri Lanka's dairy development has been impeded by free import of milk, the dumping of excess milk produced in temperate countries and the numerous subsidies provided to dairy farmers in Europe. Fortunately the Uruguay Round/GATT negotiations brought about an end to the subsidy to milk producers. This has been the main reason for the increase in international prices. While the European dairy industry has been adversely affected by this and supply of milk reduced consequently, these developments have had a beneficial impact on the dairy industry in countries like Australia and New Zealand. They have benefited by the higher price and raked in handsome profits. It is likely that the decreased demand for milk may result in the Australasian dairy industry responding by the lowering of their prices. But the net result of these developments are likely to be that the imported milk price will be higher than what it was though somewhat less than it is today. Of course the depreciation of our currency and the government's tariff policies would also have an important bearing on the price of imported milk to the consumer. Currently imported milk attracts a 10 per cent customs duty and an additional 7 per cent as defence levy, stamp duty and clearing charges.
In this context, it is vitally important that the country develops a dairy policy based upon a realistic assessment of import prices of milk as well as the cost of production of other countries. We must determine a price which is considered a floor price for milk in the country and producers must be given this floor price at farm gate. Once the producers know the price of such milk, then they must gear themselves to an economic production of milk.
The strategy for milk production must be diverse. There is a need to develop the dairy industry in the Dry Zone one way, the hill country dairy industry must be developed differently. The estate workers have been and should become more important producers of milk. The development of the estate dairies could be a useful income complement to the estate workers. The privatised estates must come into the production of milk in a big way. They could each contribute to the other's efficiency. Besides this, the development of the dairy industry would provide a useful source of organic fertiliser for the estates and improve the fertility of their land, not only for tea cultivation but also other crops which could be grown on marginal or uncultivated land. The opportunities and challenges are many and the current increase in milk price provides the basis for beginning to evolve a rational dairy development industry.
We must also not forget that an important component of the livestock and dairy industry of the country is the water buffalo, which are found in plenty in the dry zone areas of the country. These buffalos provide an important source of high fat milk. Such milk can be particularly useful for dairy products: not only the traditional curd but also yoghurt, butter, cheese and ice cream. A considerable amount of research has been done over the last decade on improving the buffalo stock, developing a nutritional brick and devising methods of feeding and rearing the water buffalo. These research findings must now be put to use and the development of the water buffalo for dairy as well as draught power should be considered.
We must turn the current crisis of high prices for milk into an opportunity for the development of the dairy industry. Over the last few decades there has been a considerable amount of studies undertaken both nationally and by international agencies. There is hardly any need for new studies to be undertaken. What is needed is to utilise the known facts to develop a viable and sustainable policy for dairy development in the country.
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