The Sunday TimesBusiness

22nd September 1996



Delta Express

Delta Air Lines announced the formation of Delta Express, its new low-fare service which will begin a daily non-stop service from 10 midwest and northeast cities to Orlando and four other Florida cities beginning on October 1st, 1996. It will operate from Hartford/Springfield - Masachusettes; Nashville - Tennessee; Boston - Masachusettes; Louisville - Kentucky; Providence - New port; Newark - New Jersey; Indianapolis - Indiana; Philadelphia - Pennsylavania to Tampa; Fort Laudesdale; Fort Meyers; West Palm Beach.

Sri Lanka - Benelux Business Council

The new Committee of the Sri Lanka - Benelux Business Council for Year 1996/1997.

Executive Committee office bearers - 1996/97: Chairman, G. E. S. Direkze; Vice Chairmen, Sega Nagendra; Mahen Kariyawasan.

Committee members: ABN Amro Bank, Aitken Spence, Hotel Lanka Oberoi, KLM Royal Dutch Airlines, Mansel (Ceylon) Ltd., John Keells Holdings Ltd.

The above Committee is in the process of preparing a business promotion mission to Netherlands and Belgium early next year. Companies interested in participating are requested to contact the Sectretariat on, Tel No: 328880, Fax No: 449352, Attn: Mrs. Alikie Ismail.

Luring foreign capital

The excellent strategies to attract foreign investment would bear little fruit if we do not get our fundamental economic problems resolved. That was the bottom line of a seminar on prospects for foreign investment organised by the Sri Lanka Association of Economists. This Seminar brought out a number of crucial issues on Sri Lanka's economic development. The Board of Investment, Chairman Thilan Wijesinghe indicated that the higher political risk perceived by foreign investors meant that they require a higher rate of return on their investments in Sri Lanka. While foreign investors would be willing to bring in their capital for a return of around 14 per cent in stable countries, they would require an internal rate of return of around 19 to 20 per cent in Sri Lanka' s conditions. He underlined that infrastructure bottlenecks were disincentives to foreign investors. This was particularly so as the Katunayake and Biyagama Free Trade Zones were filled up and the new Free Trade Zones suffered from poor infrastructure. Industrial unrest was another deterrent to foreign investment.

The BOI was using both short term and long term strategies to attract investments. These included the improvement of infrastructure and giving priority for investment in infrastructure projects such as Telecom and Port development. Investment policy was attempting to effectively diversify our industrial structure and attract higher technology industries which would have a higher domestic value addition. The identification of particular industries as well as specific countries for investment was a part of the new strategy to bring in larger foreign investors. The BOI also wanted to transform our tourist industry from what he described as 'an aging product' to a new product concentrating on higher spending recreational tourist traffic. The objective of making Colombo an international centre for gold, gem and jewellery, as well as a hub for shipping and a textile industry catering to our garment export were among the strategies envisaged.

Dr Lloyd Fernando, till recently an alternate Executive Director of the ADB, struck an important note when he said all the excellent strategies that were being worked out by BOI were admirable, but they provided only the necessary conditions and not the sufficient conditions. In order to attract foreign investment at the levels required for the country's economic development, there is a need for greater consistency in policy and a commitment to these policies which ensures that discordant noises and mid stream changes are not made. He went on to further point out that a country's capacity to attract foreign investment depended on a host of factors including an educational programme which brings out the kind of skills needed for modern technology and management.

The prospects for foreign portfolio investment appear very bleak in the short run. TA Securities Gereral Manager R.M.B. Senanayake, said that foreign investors decide to invest on the basis of the earnings on such an investment. The earnings from share investments arose out of profits, the growth of companies and the consequent capital gains. The results of companies in the first half of this year showed lower earnings and in some cases even lower or stable turnover. The power cuts, the increased costs of purchasing generators and the high interest costs were among the reasons which depressed profits. Many companies barely managed to show a profit at all. Given such an unattractive investment situation it is difficult for Sri Lanka to attract foreign investment. In addition, the lack of liquidity in the stock market and the inability of investors to exit from the market quickly were additional reasons for the diminished foreign investment in shares. The international portfolio investment context had also changed after the Mexican crisis. Many of the features of the Mexican economy, such as the large current account deficit in the balance of payments, the budget deficit and low domestic savings were common features in Sri Lanka.

These discussions brought out the undeniable need to get our fundamental economic policies straightened out. There is a need to increase our domestic savings by formulating appropriate policies to enhance such savings. There is a need to get our budget deficits under control by reducing public expenditure. There is a need to be consistent and determined in the implementation of economic policy. And perhaps above all a strong resolve to implement policies expeditiously.

No doubt the continuing war makes many of these difficult, if not impossible to achieve. But one thing can surely be achieved and that is for the government's economic policies to be clear, not only in public pronouncements but in the day to day commitment to upholding these. Such a consistency and commitment could greatly enhance the country's ability to attract foreign investment. We must place economic policy at the forefront of government action, rather than be bogged down by political and constitutional issues.

Timber ban hits tea production

Managing agents of tea plantations have warned of possible production holdups in the coming months unless a ban of felling trees for firewood is lifted soon.

The order banning the felling trees on estates was issued in August in the wake of abuse of tree felling procedures by managing agents, Plantations Ministry Secretary R. S. Jayaratne said.

Some timber which has been planted specifically for fuel wood is harvested periodically to use as fuel for the dryers in the tea production. In addition, some trees have also been planted for use as timbre. Shade trees are also planted which need to be cut or pruned, plantations sources said.

The Ceylon Electricity Board, the Timber Corporation and the Government Railways are also permitted to harvest timber from estates from time to time.

However, there have been widespread allegations that some managing agents were cutting down trees indiscriminately to improve cashflow and even felling immature trees.

Managing agents, however, complain that with the ban in operation for over a month, they are now running short of stocks of fuel wood. Some factories which make tea from bought leaf (green leaf purchased from outside small holders) are said to have stopped buying tea to conserve fuel wood to process their own tea.

Plantations sources say even if the ban was lifted today they may still face fuel wood shortages in the near future as it takes some time for timber to be dried before use.

Mr. Jayaratne, however, said a new formula for the felling of trees may be put in place in two weeks' time to permit bona fide felling of trees.

Advice on this was sought from the Tea Commissioner's Department, in the case of tea and the Rubber Development Department in the case of rubber.

Union "Nivasa" to guard your home

Will the most stringent security measures and meticulous safety devices protect your home against an unexpected occurrence such as fire or explosion? What would happen in the event of riot or terrorist attack?

Union Assurance offers a vital safeguard against the unexpected, with it's "Nivasa" policy, which according to Marketing General Manager Ramal Jasinghe answers all these questions and much more.

The policy covers accidental damage to TVs, radios and videos (service pipes and cables etc.) replacement of external door locks if keys have been stolen, deterioration of food in the freezer unit due to unannounced power interruptions beyond 5 hours upto Rs. 1500/=, accidental death to domestic pets upto Rs. 10,000/= and ornamental fish and birds upto Rs. 1000/=, surgical and hospital expenses for the whole family, death and disability cover upto Rs. 100,000/=, free life policy for the insured, temporary removal upto 15% of the sum insured, alternative accommodation upto 6 months or 10% of the sum insured.

Mr. Jasinghe also stated that the Policy covered the insured for legal liability for third parties injury or damage with an extended cover that includes food poisoning and medical expenses and guests (upto 25% of sum insured or Rs. 200,000/=), removal of debris, litigation costs upto Rs. 200,000/= and capital additions upto Rs. 25,000/=, loss of cash upto Rs. 5000/=, death and injury to domestic servants upto Rs. 50,000/=, cost of replacing credit cards upto Rs. 300/= and damage to landscaping upto Rs. 25,000/= are offered additionally.

Irregularity charge again

Another Vocational Training Authority (VTA) tender has attracted criticism from tenderers, with complains that a pre-qualification procedure was irregular.

The tender relates to the supply of 50 computers and five dot matrix printers, which is valued at around Rs 5 m.

The tender document had asked for bids to be submitted in two sealed envelopes, with the first one containing details of technical personnel, maintenance details, previous experience and workshop facilities and a bid bond acceptable to the VTA.

The second envelope would contain the actual bid with the technical specification.

However the bid document had specified no minimum requirements, which tenderers allege is unusual. Point were to be awarded in an unspecified manner and the bidders obtaining 75 marks or more being selected for further consideration. If less than three bidders are found to have obtained 75 marks or more, the next highest three bidders would be selected.

The bid documents of the rejected bidders would be returned with the second envelope unopened.

The point scheme tenderers point out was heavily weighted towards the bigger companies while capable smaller companies would be excluded.

This would enable larger companies to bid at higher prices as they were insulated from competition and gain enormous profits at the expense of the government, they allege.

Failed tenderers complain that some of their tender documents had not even been date stamped and singed as in the case of other government departments.

They add that they were not informed of the reasons they were rejected, and their bid bonds were not returned to their banks as is the unusual practice. In addition they were also not informed of the manner in which the points were awarded.

The Chairman of VTA was not available for comment as he was out of the country.

However a top official of VTA denied that the bid documents were not date stamped and said bid bonds were returned to the banks where the banks had requested them to do so.

On the point scheme however he said, it had been devised at a higher level and a Ministry Tender Board as well as a technical evaluation committee were responsible for it.

Meanwhile small computer vendors say that numerous pre-conditions have begun to appear in government tenders in the last few months favoring the larger players in the market.

Such conditions they say are still not commonly found in university tenders.

Universities they say contain computer departments and staff with extensive knowledge of computers who know exactly what is needed.

It is said that with the private sector computer purchases undergoing a slump, large computer vendors were now increasingly turning to relatively small government tenders to increase business volumes.

In this backdrop, small businesses allege, new conditions have mysteriously begun to appear in government tenders.

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