The bird of Paradise recently began flights to Mandela country, but later reports have indicated that the route was not a money-spinner.
There have been suggestions that the flight be cancelled, but equally strong is the lobby for pursuing with it.
For the time being at least, the decision is to continue the "trial run" to Jo'burg.
The bids for a state corporation as strong as steel were not satisfactory, so the perky people have called for fresh offers.
Similar bids for other state ventures are being reviewed these days, we hear, because the first bids fell below expectations.
And, at least a few offers calling for fresh bids are on the cards...
At long last, the power crisis is on its way out, but the cost of electricity may rise next year when thermal power generation begins, experts say.
The easiest way to recover this would be to raise electricity tariffs but this may not be popular with the public, they say.
So, some suggest an "Energy tax" where the highest users will bear the brunt of the cost virtually subsidising domestic consumers...
Malaysians who met Sri Lankan officials last week had wanted to know how their country ranked on investments to Sri Lanka, where they had invested heavily in such sectors as tourism. On being told that Singapore, Korea, Japan and Australia were ahead of Malaysia one investor had said their standing was not too bad.
"Yes", quipped another, "Some people had made bigger mistakes than us"
The emerging scenario in the balance of payments is a cause for anxiety. For the first time in the recent past the balance of payments was in deficit in 1995. Indications are that in 1996 once again we would have an overall balance of payments deficit. This has serious implications for our foreign exchange situation, our ability to import and most important, for our long run development.
The country has had a trade deficit for nearly two decades. We have been importing more than we earn from exports. This trade gap has been reduced by remittances from abroad and tourist earnings. Despite these two positive factors our current account was in deficit. But since 1990 movements in the capital account offset this current account deficit to result in an overall balance of payments surplus.
In 1995 this changed. We had a trade deficit of over 900 million SDRs but owing to remittances of over 550 million SDRs and net earnings of in services the current account deficit was reduced to around 350 million SDRs. The inflow of capital was inadequate to offset the current account deficit and we ended up with a balance of payments deficit of around 60 million SDRs. This resulted in our foreign exchange reserves falling from the level it had attained in 1994.
There are two aspects in our balance of payments which cause anxiety. In the first instance, although the trade deficit was in fact reduced, this reduction in the trade deficit was unhealthy as imports of capital goods were much reduced. In other words, we achieved what could be considered a favourable development in our trade owing to an unfavourable development in our import structure. The reduction in capital imports is a warning signal that our investment is being reduced. Therefore the improvement in the trade balance far from being a favourable factor is an unfavourable one. However, the country's exports continue to grow by 12 per cent partly assisted by improved prices for our rubber and tea. Yet our export growth was inadequate to balance our trade despite the reduction in capital imports.
The second unfavourable development is startling. The volume of capital inflows in 1995 was half that of the previous year. The net capital inflow dropped from 700 million SDRs in 1994 to 300 million SDRs in 1995. It is also significant that all types of private investment inflows declined. The most dramatic decline was in portfolio investment, which fell from 20 million SDRs to an outflow of 2 million SDRs. This net outflow does not augur well for our stock market which everybody knows is down in the dumps. A similar development was seen in both direct investment and other private investments. Direct investments fell from 111 million SDRs to as low as 38 million SDRs. Private short term and long term capital inflows fell from about 400 million SDRs to 110 million SDRs fourth of what it was in 1994. If these trends in the capital account continue they could create a serious inadequacy in foreign exchange reserves especially as we cannot possibly expect a trade account to be in surplus.
The balance of payments is in fact a reflection of domestic developments in our external account. It is dependent on domestic production trends and the climate for investment. Increased domestic production would lead to improvements in our exports and reduction in our imports, thereby decreasing a trade deficit in as far as consumer imports in particular are concerned. The climate for investment and the long-run perspective of the country's economic prospects has an important bearing on the capital account as well as imports of capital items and intermediate goods. A slowing down of the economy could reduce the trade deficit by the curtailment of capital and intermediate goods imports. This is what happened in 1995 and it is unfavourable. Similarly the perception of Sri Lanka as a location for investment affects our capital account. There is little doubt that the perception in 1995 was bad. That is the reason for the reduced capital inflows. One could hardly expect 1996 to be better. In fact we see unfavourable signs already. At the end of May this year our external assets had fallen to US 2552 million dollars from US 2630 million dollars one year before. Earnings from tourism too would have declined with the sharp drop of 33 per cent in tourist arrivals.
No doubt part of the problem lies in our security situation. But the real problem lies much deeper. There has to be a recognition that the country's economy lacks momentum owing to the government's own mishandling of the economy and bureaucratic lethargy and inefficiency. The realisation of these deficiencies and corrective actions are the first steps towards an economic recovery. Else the balance of payments could deteriorate even further and weaken the country' s capacity to sustain its economic policies.
Longer term government securities with market yields would be offered to the public soon, financial sources said.
The debt instrument called Treasury Bonds are issued in terms of the Registered Stock and Securities Ordinance. The Act was amended in 1995 to enable the securities to be offered to the public on a tender basis, and for transfer to take place by endorsement.
Last Thursday Central Bank officials met primary dealers of government securities to discuss the matter.
The first treasury bond issue is expected to take place by October 1995.
Unlike treasury bills which are issued at a discount to face value, the treasury bonds will carry a coupon rate of interest.
However investors would be allowed to bid at par or at a premium or discount so that the effective yield will be market-determined.
The first issue would have a maturity of two years.
Treasury bonds are exempt from stamp duty and withholding tax.
The instrument would be issued at a minimum value of Rs 10,000.
The general public would not be allowed to bid for treasury bonds but they would be able to invest in the bonds through primary dealers.
The government had issued Rs 113 billion worth of short term treasury bills by the end of 1995 and Rs 133b worth of rupee loans of longer term maturity. This does not include the Rs 24b restructuring bonds that were created to bail out the Bank of Ceylon and People's Bank.
A majority of the rupee securities which are usually not taken up by the private sector are held by the Employees Provident Fund and the National Development Bank. By end 1995 the EPF held Rs 93 b worth of rupee loans and the NSB held Rs 34 b.
Analysts say the relatively large amount of short term treasury bills on issue put enormous pressure on the short term money markets of the country.
The lack of market rate medium and long term government securities had given rise to a myopic investment culture among private investors that tended to be focused on the short term.
As maturity of treasury bills only ran up to an year, the country's risk free yield curve had also not developed beyond this time.
This had made it extremely difficult for private corporate to issue long term debt though some had issues had taken place from time to time.
The issue of Treasury bonds is expected to provide a boost to the debt markets of the country.
The accounts of Lankan Carbons Ltd., a quoted company engaged in the manufacture of activated carbon have been qualified by the auditors.
The company was set up in collaboration with Sutcliffe Speakman plc, a British company who held 43 per cent of the equity. The other major shareholders were Mercantile Credit Ltd., Sri Lanka Export Development Board and NDB.
The company which had a sales agreement with Sutcliffe Speakman was embroiled in litigation after finished products were sold to another company.
Later Sutcliffe claimed £ 817,000 for non performance by Lankan Carbons to supply a total of 1248 tonnes of activated carbon. This had later been brought down to £ 533,000.
Though a financing plan was agreed later to revive the company with the infusion of fresh capital and the settling of the claim by Suffcliffe Speakman, it fell through.
The accounts for the year ended 31st march 1994, were presented at the annual general meeting held recently.
The company had registered a loss of Rs 37 m for the year. accumulated losses stood at Rs 66 m as at 31st March 1994. Net liabilities were Rs 32.9 m.
The factory premises were auctioned by the National Development Bank under the provisions of Recovery of Loans by Banks (Special Provisions) Act no 4 of 1990 for the recovery of money due to the Bank.
Sutcliffe Speakman also claimed the £ 533,000 from The Bank of Ceylon which had given a bank guarantee to the company, after legal action failed to prevent the event.
Auditors of Lankan Carbons have qualified the report saying Rs 37 m provided for in the accounts in this regard was insufficient as the exchange rate prevailing on the balance sheet date had not been used. As a result the accounts did not comply with the Sri Lankan Accounting Standard No. 21.
The auditors also said that as the company had incurred further losses after the year end and had ceased to operate, the financial statements should not have been prepared on a going concern basis.
Provision should also have been made to reduce the value of assets to their recoverable amount, to provide for any further liabilities that may arise and fixed assets and long term liabilities would have to be reclassified as current assets and current liabilities.
The auditors also added that three directors of the company have not confirmed whether they do or do not have any interests in contracts with the company.
Members of the Malaysian delegation who were in Sri Lanka during the week have suggested that the government reserve a large project or privatization enterprise for their countrymen in a practical demonstration of the Sri Lankan government's desire to woo Malaysian business to this country.
"This is the type of action that gets Sri Lanka talked about in the cocktail circuits", a member of the delegation said.
The Malaysians had cited the upcoming privatization of Sri Lanka Telecom or AirLanka as a possible area for such an action, The Sunday Times Business learns.
The businessmen accompanied the Economic Advisor to the Malaysian government Tun Daim Zainuddin who visited Sri Lanka last week.
They said the action would be a "grand gesture" that would get the attention of the Malaysian business community and serve as a catalyst to bring in further investments to the country.
The suggestion was made when the delegation met BOI Chief Thilan Wijesinghe. The Economic Advisor to the President, Dr. Lal Jayawardene was also present.
Dr. Jayawardene had explafresh study conducted on the future power requirements of the country.
While historical data demonstrated that power demand grew by 10 per cent, future power demand was also believed to continue along the same lines with a possibility of increasing by 12 per cent if economic growth picked up rapidly.
Mr. Wijesinghe said there were also opportunities to take part in toll roads such as the Katunayake highway that was proposed to be built.
Delegates also suggested that Mr. Wijesinghe visit Kuala Lumpur and present specific proposals targetted at Malaysians, including the setting up of an industrial park exclusively for them.
A discount card aimed at middle-class consumers was launched this week.
Glenfrey de Mel, the chairman of the Card firm, Visionwide International, said: "By acting as mediator for the Visionwide operation of the Discount Card (VDC), we feel that both the buyer and the seller are benefiting".
According to him the new discount card is a timely offering to the middle class consumers who have less purchasing power in view of the prevailing economic situation.
Sellers, too are benefiting by way of offering discounts and gaining more sales. Hence, it is advantageous to both the buyer and the seller.
A directory of sales outlets or discounts is offered upon the purchase of the card, the company said. The directory includes the names of several shops, restaurants, resort hotels, hospitals and supermarkets. "Our target is to build up a 25,000 clientele of largely middle class within a year",Mr. de Mel said.
He said the first discount is offered when purchasing the card itself which is valid for one year and then cost of the card can easily be covered by various discounts that are offered at outlets.
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