A multi-dimensional SAARC Economic Co-operation Conference (SAECC) will be held by the SAARC Chamber of Commerce and Industry (SCCI) from November 19-21.
The objective of SAECC is to examine and make recommendations on issues related to economic co-operation. These have been divided into 10 working groups which include, Working Group on Trade, Investment, Energy etc.
Each working group will submit a report which will include recommendations for more effective co-operation in their specific discipline. Seven groups will be chaired by the seven Vice Presidents of SCCI, one from each of the SAARC countries.
Business delegations are invited from all the SAARC countries. Each primary Chamber of Commerce and Industry affiliated with SCCI in each member country is being requested to take up various responsibilities.
The South Asian Free Trade Area (SAFTA) is on its way to becoming a reality by the year 2005 though many obstacles yet hampered its progress, observed Saman Udagedera at a seminar organised by the Ceylon National Chamber of Commerce.
Mr. Udagedera said that there are two schools of thought on regional trading blocs. "One holds that such trading blocs are stumbling blocs to free trade while the other contends that they are building blocks to free trade. The basis of the former argument is that in a situation of trade liberalization world wide much trade diversion would be created as a result of such arrangements.
"For example, some have called the European community a fortress due to its severe trade restrictions," he said.
On the other hand, proponents of regional trading groupings hold that expansion of trading blocs (such as the E.C which now has 15 member states) will eventually pave the way for smoother economic co-operation not between countries, but between regions.
"Future negotiations on economic affairs would be between trading blocs which is expected to make trading a lot easier".
"For instance", he said "the European Union was represented in the Uruguay round of talks on economic co-operation held in 1994 by a single representative".
He said that South Asia had been lagging far behind in this trend and it was only in 1993 at the SAARC summit held in Dhaka that the member countries could agree on a framework to establish a preferential trading arrangement, the SAPTA which became a reality on December 7, 1995."
He added that the preferential Trading Arrangement was just a modest beginning to achieving the goal of a free trade area. Under a preferential Trading Arrangement, member countries exchange tariff concessions on selected products. The next level involves the creation of a free trade area, which will entail the dismantling of all barriers to trade both tariff and non-tariff, to ensure the free movement of goods across borders.
The next stage involves customs Union which will include a free trade area as well as a common external tariff policy.
A still higher stage is monetary union where all member States would have a common currency.
Mr. Udagedera said that wehereas there are as many as 6000 tariff classifications, SAPTA has as yet recognized only 226 such items.
He noted that SAPTA is a very modest beginning and does not even cover marginal inter-SAARC trade.
"Inter-regional trade between SAARC countries is still only 3.8 percent of the entirety of their worldwide trade," he added.
"Further" he noted, "there still exists a number of political and economic differences that have to be corrected before going for a common market.
"To this day, Pakistan permits only 580 selected import items from India. However under SAPTA Pakistan would be forced to open up to Indian goods and give concessions to all goods that have been conceded to other member states".
He said that fears have been expressed by some member states that countries with larger populations and higher production would eventually dominate such a free market. For instance, India, a regional super power with a population of over 900 million (300 million of whom are included in the higher income bracket) and higher production could easily dominate such a market.
"However", he noted "such concerns have been taken into account under SAPTA which has included provisions for safeguards to member countries likely to suffer from unfavourable market forces and in case of a surge in imports, the affected country is free to withdraw the concession unilaterally.
There are a number of favourable features of such an arrangement," explained Mr. Udagedara.
"To ensure that concessions are only given to products genuinely originating from member states products have been classified into two categories: wholly - obtained products which are those products wholly manufactured with raw material or components originating from a particular country, and non-wholly obtained products which are manufactured with sizeable quantities of imported raw material.
He added that the third meeting of the second round of negotiations on SAPTA which is due to be held in New Delhi this month is likely to make more headway in the realization of a Free Trade Area for the South Asian region.
Pelwatte Sugar Industries, ended up with Rs. 56.6m. loss according to the provisional accounts for the quarter ended 30th June, 1996. This is an increase of 32% compared to the previous year's loss of Rs. 42.7m.
Due to accumulated losses shareholders' funds declined by 32% from Rs. 439.4m to Rs. 333.6m. during the period.
Palm Garden Hotels Ltd., reported 42% decrease in turnover followed by Rs. 3.8 m. loss for the quarter ended 30th June, 1996.
The company's turnover for the quarter was Rs. 8.9m. compared to Rs.15.5m. for the corresponding period in the previous year.
Mikechris Industries Ltd., whose main line of business includes manufacturing of polypropylene film, tape, woven sheets and bags reported Rs. 35.9m. turnover followed by Rs. 706,944 net loss for the quarter ended 30th June, 1996, as against one million post tax profit in the previous year. Analysis of provisional accounts show 26% decline of turnover compared to the previous year. The carry forward loss at the end of the period under review was Rs. 21.1m.
Ceylon Synthetic Textile Mills Ltd., reported 60% increase in turnover for the 3 months ended 30th June, 1996.
According to provisional accounts the company's turnover for the period was Rs. 40.4 m. However, the company ended up with Rs. 4.1m. loss. Accumulated loss at the end of the period was Rs.117.5 m.
Although there had been a decline compared to previous year Ceylon Printers Ltd., was able to earn Rs. 310.2m. post tax profit for the quarter ended 30th June, 1996 when most of the companies trying hard to show profit in their accounts.
According to the provisional accounts company's pre tax profit decline by 40% from Rs. 793,120 to Rs. 470,288. Post tax profit declined by 34% the turnover declined by 45% from Rs. 4.2m. to Rs. 2.3m.
Paragon Ceylon Ltd., reported Rs. 2.2m. turnover for the 3 months ended 30th June, 1996. This is 48% decrease over the previous period.
Profit before taxation decreased by 70% from Rs. 641,063 to Rs.192,578. Profit after taxation was Rs.117,578 which shows 69% decrease over the corresponding period in the previous year.
Office Equipment Ltd., reported Rs. 5.8m. turnover for the quarter ended 30th June, 1996.
According to the provisional accounts the company's turnover declined by 19% compared to the corresponding period in the previous year.
Profit before taxation dropped by 57% from Rs.717,837 to Rs. 308,823. Profit after taxation was Rs.180,323 which shows 58% decrease over the previous year.
Slow growth
Kalamazoo Systems Ltd., is another company which had shown slow growth during the quarter ended 30th June, 1996.
The company's turnover, profit before taxation, and profit after taxation dropped by approximately 30% during this period. The comparative figures are given below as appears in the provisional accounts.
30.6.96 30.06.95 Rs Rs. Turnover 5,708,594 8,174,454 Profit before taxation 748,630 1,061,445 Profit after taxation 438,630 634,220
Despite the decline of turnover and profit Sathosa Motors Limited was able to increase its shareholders' funds during the quarter ended 30th June, 1996.
According to the unaudited accounts the company's turnover was down by 16% from Rs.171.9m to Rs.145.1m. During this quarter pre tax and post tax profit decreased by 25% and 20% respectively. The comparative figures are as follows:-
30.6.96 30.6.95 Rs '000 Rs'000 Profit before taxation 13869 18647 Profit after taxation 8322 10612
However, shareholders' funds increased by 24% due to changes in capital reserves and revenue reserves.
The Federation of Chamber of Commerce and Industry of Sri Lanka (FCCISL) will be offering the services of in-house training programmes and workshops, the Federation said.
This service would be catering mainly to the requirements of members of chambers and associations affiliated to the Federation or any other interested firms. Most of the programmes are for a duration of 1 or 2 days, depending on the requirements of the client.
The fee payable will be negotiable and will include designing the programme, developing course material, and conducting the programme. In the case of programmes conducted outside Colombo, an additional fee will be charged to cover the travelling and accommodation cost. However, the cost of premises and refreshments has to be met by the organisation involved in conducting the programme.
Should the devolution of finances to the regions be implemented in a phased manner? This question arose during the seminar on 'Fiscal Policy Issues in the Devolution Proposals', where the intellectually acclaimed scholar and expert on fiscal policy, Dr. Raja J. Chelliah, bared a host of problematic issues relating to the devolution of finances.
Addressing an audience of senior officials, academics and a few MPs, at the International Centre for Ethnic Studies, Dr. Chelliah pointed out that there were several conflicting provisions regarding the financial responsibilities of the centre and the regions. He stressed that there should be no ambiguity in whether the centre or the regions have powers and responsibilities in finance. All such power should be either accredited to the regions or be the function of the centre and the residuary powers should be stipulated as residing in either the centre or the regions.
One overall deficiency of the devolution proposals on finance appears to be the lack of adequate finances to the regions to enable them to perform the functions devolving on them. He pointed out the need for finances to back adequately the devolved powers. Else the devolved functions would not be effective and in some instances may affect vital activities adversely. The devolution of finances should be done in a manner so as to not affect unduly the national economy and fiscal discipline should be adequately safeguarded. Dr. Chelliah pointed out that there are few taxes for the regions and a central issue is how adequate finance could be provided to the regional governments.
He pointed out that it is more economical and effective for the central government to collect taxes and share the revenues with the regions. The regions collecting taxes which go to the central coffers, he pointed out, were by and large ineffective with the exception of those in Germany.
Since it would be necessary for the regions to obtain finances from the centre, the principles on which these are provided should be clear. It is generally recognised that the poorer regions should be given additional finances on a principle of equalisation. However, the implementation of such a scheme requires good data like regional per capita incomes, which are not available in Sri Lanka. In fact it was pointed out that we even lack data on population of the regions, since the last census was carried out as far back as 1981. Therefore, some other methods would require to be adopted. Perhaps a central contribution for education on the basis of the number of pupils or where health is concerned on the basis of hospital beds, and though unsatisfactory, some relationship to the 1981 population figures.
Dr. Chelliah was not opposed to the regions borrowing either domestically or from abroad. He, however, said the possibilities of borrowing from abroad may be very limited. Since there are restrictions on capital movements,it may be necessary for the regions to comply with regulations. He urged the need to have rating agencies for both the centre and the regions so that lenders could assess the risks or credit worthiness of lending to regional governments. Since the central government would not take the risk it is left to the regions to convince lenders of their credit worthiness.
The proposals for the devolution of finances to the regions are still in a formative stage. But the discussion led by Dr. Chelliah pointed out that there were many shortcomings and these would have to be remedied. It is in this context that he agreed that the devolution could be implemented in stages. Even though other countries have not implemented the devolution of finances step by step there was no reason why Sri Lanka should not adopt such a strategy. If so the ultimate intent of the devolution should be made clear and its implementation should be in a few stipulated stages. Such a process may be least costly in terms of mistakes owing to the country’s inexperience, the dearth of financial administrators and the disrupted condition of the country. Even the developed countries which devolved finances often made severe and costly mistakes and there is no need for Sri Lanka to bear such costs at a time when public finances are in a most difficult condition. This proposal to implement the devolution of finances must be carefully examined and considered.
review period 9/10/96 to 16/10/96
With local high-net-worth (hni) investors increasing their holdings in a wide variety of shares ranging from plantation sector to the banking and motor concerns, it was evident that the CSM would be able to penetrate that psychological barrier of "ASPI" 600 levels earlier than expected. Foreign institutional investors who were net-sellers for the past months seem to be reversing their strategy gradually with nett buying recorded on certain days of the review period.
The budget in November is expected to be very conducive to investors with a certain amount of leeway given to locals who have accumulated unaccounted funds (black money) to be given the opportunity of merging with the formal economy (white money). This is assumed to be implemented by way of investments in CSM where the capital component would not be queried.
Reviewing the half-yearly performance of the privatized (RPC) plantation companies, it is seen that the performance for the half-year has improved immensely. This could be expected due to the bullish trends prevalant in the world tea and commoditiy prices. The ideal weather conditions also contributed to the increase in productivity which together with the private sector management would have had a major impact on how the plantations were run.
It is expected that the plantation sector companies analysed above would be very sound long-term investments with average returns better than the market .
The third quarter for companies with the financial year ending March (Y/E 31/3) and fourth quarter for y/e 31/12 companies are expected to be better than the previous quarters. With semblance of business recovery from the long recovery situation it is expected the quarterly reports would reflect the gradual turn-around of the economy. Therefore it is expected the CSM's ASPI would be able to recover at least 10% from October to December 96.
Concerned parties have expressed fears that some sectors of the economy would suffer if the proposed Goods and Services Tax (GST) is not made applicable to all.
There are fears that key sectors such as financial services, shipping, and airline services would be taxed under the existing turnover tax law, and would therefore not be able to derive the benefits of GST unlike other sectors.
As the law presently stands, turnover tax is levied cumulatively at each stage of production and sale leading to the well known “cascading” effect.
GST also known as Value Added Tax or VAT enables a manufacturer/supplier to set off taxes paid on inputs by the original manufacturer/supplier against his own GST liability.
Under the proposed GST bill, businesses such as banking, shipping and airline services have been listed as exempt.
Some commercial activities have also been listed to be charged GST at a zero rate, mainly exports.
Tax experts point out that while zero rated activities would not be charged GST at all and would be able to claim back GST on inputs already paid by their suppliers ,exempt businesses would not be able to claim back GST already paid on their inputs. However they are also not charged GST under normal circumstances.
Experts say unlike in the wholesale and retail trade where documentation procedures are somewhat lax, in areas such as financial services, shipping and airline services, accounting procedures are well established and are therefore ideal candidates for GST to be implemented at an early stage.
However there are growing fears that financial services, shipping and airline services would be subject to the existing turnover taxes to prevent revenue losses to government, at least for a few years.
Banking is believed to bring in annual turnover tax revenue in excess of Rs 1.5 bn and airline ticket sales alone over Rs 1 billion.
In this case, experts say an additional distortion would be added to the economy.
Though there were proposals originally to make specific provisions for turnover tax law to be made applicable to activities such as banking, the draft bill tabled in parliament does not contain such a provision.
Tax experts say it is the intention of promoters of the law to ultimately zero rate financial services, but it may have to be delayed to prevent revenue losses to government.
Another area of concern is the turnover tax presently charged by provincial councils on the sale of goods.
Even after the introduction of GST, this is expected to continue and businesses who buy goods and services from firms subjected to this tax would also not be able to claim back or set off such levies.
Perks clothing, a subsidiary of Hameedia, recently launched its latest line of men's designer clothes - the Signature Designer collection which will feature garments manufactured entirely out of imported fabric and accessories from Japan, Korea and Thailand.
Hameedia's Managing Director, Fouzul Hameed said the new range would initially feature shirts and trousers to be followed by ties, belts etc.
According to him, Hameedia has a market share of 45 per cent in upmarket men's fashions including its Lee Bond and Signature ranges.
Commercial Leasing, has added another branch office to the ever expanding network this time at Bambalapitiya.
The Meewella Building, provides easy access and ample parking space, along with the prompt, courteous and personalized service, which has always been a trademark of Commercial Leasing, the company said.
The Company has another branch office at Kandy, while the head office is located at Fort. The opening of the new branch at Bambalapitiya is in keeping with the continuous commitment of Commercial Leasing to provide its valued customers with a convenient service.
Central Finance Company Ltd., which held Rs. 3.2 bn in deposits by the end of March 1996 had introduced a new deposit scheme during the previous financial year.
The scheme targetted at small depositors, has a quarterly draw which doubles the deposit.
By end of 1995, Central Finance had held 35 per cent of the total Rs. 8.2 bn deposits held by finance companies in the country.
Last year the company's turnover has risen sharply to Rs. 4.2 mn from Rs. 3.5 mn and after tax profits had grown to Rs. 102 mn from Rs. 90 mn a year before.
The people who protect anything big or small announced last week they were planning to set up a savings bond.
But they may not be the only Bank wanting to do this from the private sector.
Another very viable bank is exploring the possiblity and we may have an announcement soon.
First it was the Workers' Charter that caused all the confusion. Then, it was the Public Enterprises Rehabilitation Bill. Then came the announcement that the latter would be effective for only six months.
All this is confusing overseas corporate investors who are still keen on buying up bargain priced Blue Chips in the Colombo Market.
So, one of their local agents asked a local bigwig, "Can you tell us which way these bills would go?"
"We ourselves don't know the answer to that" was the sheepish reply.
The keyword in business circles these days is infrastructure.
So, in keeping with that slogan, the authorities are thinking of a second superhighway - towards the central hills.
Given the terrain, that should be more expensive than the one leading south, but plans are still being formulated.
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