The Sunday TimesBusiness

1st December 1996

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Business talent rewarded

Several businessmen who spoke at the Awards Ceremony of the Entrepreneur of the Year 1995 last Monday, stressed the importance of the private sector itself taking the opportunities that have been afforded by recent economic policies and forging ahead. One of them went as far as to say that unless business enterprise expands rapidly another insurrection would be upon us.

Two refreshing aspects of the ceremony require to be noted. First, the fact that the Entrepreneur of the Year contest had reached the provinces and awards were won by several provincial enterprises. The second refreshing factor was that businessmen looked critically at themselves rather than blaming the government or banks. Hard work, persistence and good management were some of the ingredients of their success.

Entrepreneurship is closely associated with risk taking. Even the smallest business enterprise requires entrepreneurship. There is little doubt that most entrepreneurs have to undergo immense difficulties. And not all succeed. Regrettably those who succeed are looked upon as persons who have gained riches unfairly. Instead of applauding their success, our society often frown on their profit making.

It was clear from the range of award winners that enterprises had reached the periphery and that the range of enterprises that were successful varied in size and nature. The linkages between small enterprises and larger export concerns were also evident. It appears that small enterprises have contracted with some of the world's best export, firms and been able to successfully compete in the international market. It was also evident that enterprises which began small had grown to be big. The winner of the 1995 award exemplified this. Kumar Devapura's Tri-Star Garments had begun as a very small enterprise with 10 workers. It had now expanded to an enterprise employing 56,000 workers directly and indirectly and consisted of a large number of factories.

Among the attributes these successful entrepreneurs mentioned for their success were their staying power, the ability to withstand failures, hard work and the support of other institutions. It was gratifying to note that most entrepreneurs paid tribute to the commercial banks and development banks which had assisted them throughout their business history.

Usually private enterprises blame banks and financial institutions for their lack of understanding and accommodation. In contrast these successful entrepreneurs attributed their success to an effective and fruitful relationship between themselves and the banks. This makes one ask the question whether those who fail to use banks as a scapegoat for their own inabilities!

Now that some of the gloom pervading the business climate in the first part of the year has moved away and the budget has given clear signals to support private enterprise, it is indeed the task of the business community to take the lead and get down to increasing their investments, expanding their ventures and improving their efficiency. The wide world of competition into which their projects must find their way is indeed a fiercely competitive one.

It is only those who have the staying power, resoluteness and the ability to adapt themselves to the needs of the market who could survive. The Entrepreneur of the Year awards ceremony gave ample evidence that there were many such entrepreneurs. Others would no doubt have to follow their example and take upon their shoulders to succeed in the country's export-led industrial strategy.


New tax proposals on leasing come under criticism

The new proposal to limit the tax shield in respect of leasing to only lease related income, has come under fine from financial experts who say it is detrimental to the development of the leasing market as a whole and would hamper private capital formation in the long run.

C. T. Smith Stockbrokers Chief Mahendra Jayesekera told a seminar that around 65 to 70 per cent of the leasing market was currently held by non-specialised leasing companies, such as development finance institutions, merchant banks and commercial banks.

As a result of this proposal those institution would be discouraged from going into leasing Mr. Jayasekera said.

Commercial Banks and especially development finance institutions had been leasing at attractive rates as the tax shield enabled them to reduce corporate income tax. This ultimately benefited the borrower in Sri Lanka who was faced with some of the highest interest rates in the world.

It is in principle wrong to restrict areas to specialists Public Enterprise Reform commission Chief ,Rajan Asirwatham said. The proposal aimed to promote specialised leasing companies. It was better to allow institutions to be diversified, Mr. Asirwatham said.

The new proposal which helponly three companies would give an opportunity for Lanka Orix Leasing Company, Mercantile Leasing Company and Commercial Leasing Company to corner a bigger market share until the other came up with alternative mechanisms, analysts said.

Competition is good for an industry because it brings prices down DFCC Treasurer ,Dr. Harsha de Silva pointed out. When competition is eliminated it creates an ologpolistic or monopolistic situation and prices tendto rise

Though some companies did get away with a tax deferral, lower rates had ultimately helped industrialists analysts said.

This will definitely affect capital formation in the long run, Mr. Jayesekera said.


Quality: key to keep European market open

Sri Lankan exports are being increasingly sidelined in Western European markets where ISO standards are being strictly enforced, a standards expert said.

While the number of International Standards Organisation (ISO) certified companies in Sri Lanka is falling short of a dozen, steps are now being taken under programmes such as the USAID funded Technology Initiative for the Private Sector (TIPS) to increase awareness of the ISO 9000 quality standards and to encourage more exporters to obtain ISO certification. TIPS is staffed by the US based International Executive Corps (IESC) volunteers.

Competition based on price is becoming obsolete and the focus is now turning towards competition based on product quality, IESC Volunteer Dr. Donald Holsten said.

Buyers are now looking for quality and are willing to pay for it, and the survival of Sri Lankan exports depends on the adoption of quality assurance systems, Dr. Holsten said.

The advantage Sri Lanka had was an intelligent and trainable work force. With this as a fundamental basis, the ability to adopt ISO standards and pick the places they want to be in international market is entirely up to the companies, Dr. Holsten said.

Sri Lanka Standards Institute (SLSI) is also in the process of finalising negotiations with the oldest accreditation body of Netherlands, Raad Voor Accreditatie (RVA), and is expected to officially announce accreditation in mid December an SLSI official said.

While the United States which buys 36 per cent of Sri Lankan exports, was not particular about ISO standards the local exporter was at a distinct disadvantage in increasing exports to the European Union (EU) due to the lack of ISO 9000 quality standards, which is becoming an essential criterion for imports to the European Union.

The accreditation of the SLSI certification by placing the RVA logo alongside the SLSI logo will provide the due recognition as ISO 9000 quality standards, enabling exporters to overcome the non tariff barrier used by the EU, SLSI said.

If an organisation were to bring in foreign consultants and auditors to adopt ISO 9002 standard systems and certification from a recognised foreign body, the cost could range anywhere between US $ 25,000 to US $ 500,000, depending on the company, TIPS Chief Executive, Shirly King told The Sunday Times Business.

The SLSI says it is making an effort to build up international recognition and thus provide ISO 9002 certification for about Rs 100,000, making the certification more accessible to larger and smaller manufacturers alike.

Another option available to the local exporter would be to come to TIPS for assistance on adopting ISO 9002 standards and obtaining certification, Mr. King said.

TIPS, would provide grants to companies that come up with a feasible plan.

With funds worth of US $ 23 million being provided by USAID for10 years and a second US $ 11 million received recently to take TIPS beyond the year 2000, the programme will provide assistance to companies in two ways, technical assistance and grants.

"We reduce risk by giving 50% of the total cost to train consultants for the companies," Mr. King said.

The project organised by Dr. Holsten to train fifteen young private industry managers to be qualified consultants for ISO is another way in which TIPS attempts to make ISO certification more accessible to local exporters.

The forming of a local body of consultants from whom exporters could receive advice on adopting ISO standards would help them produce high quality yet cost effective goods giving Sri Lanka a competitive edge in the international market.


Just In Time begins business

A new IT company, Just In Time (JIT) started business recently as an authourized distributor for Philips Business Electronics.

The company, which takes its name from the famous management principle that propelled Japanese industry to great heights, is the sole distributor of Philips personal computers in Sri Lanka.

According to JIT Chairman, Jitendra Warnakulasuriya, the company represents a departure from conventional local computer marketing techniques in two respects, the establishment of an extensive dealer channel network and a comprehensive outsourcing agreement with a leading computer service firm.

''We have decided to develop a dealer network for a selected range of products such as Philips personal computers and Tripplite power protection equipment, so as to extend our reach in the market place''.

''We have also entered into the first major outsourcing agreement with a third party computer service firm, Digital Computer Services (DCS) to provide maintenance services for all computers sold by the company'', he said.

''This agreement will provide customers of JIT with comprehensive after sales support from one of the country's reputed computer maintenance companies, which will be responsible for honouring the warranties on the products. In case DCS is unable to repair a computer within 8 hours, they would be obliged to provide a stand-by computer until repairs have been completed'', added Mr. Warnakulasuriya.

The company, incorporated as a BOI venture, has been in operation since 1993 and has a client base of over 200.

The services offered include the support of multi-vendor computer hardware, software support, network designing and systems integration.

Philips Business Electronics, a business division of the Dutch consumer electronic giant, was established in late 1995. The company, which is based in Taiwan, markets its products in 15 countries including the Philippines, China, India, Thailand, Malaysia, Indonesia, Australia, New Zealand, Egypt and the UAE.


Novel loan scheme

The Finance Company Limited (TFC), now offers a loan scheme to customers who purchase land from them, a Company realese states. The loan can be obtained by using the title of the land as collateral.

Repayment is spread over 15 years. The extent of the loan, which will be based on the value of the land, can be as much as Rs. 2 million at present, the Company has a "land bank" valued at Rs. 800 million - with 50% worth available right now.

In addition, TFC contributes substantially towards easing the perennial problems of transport, through leasing and hire purchase of vehicles, improving lifestyles through easy payment terms for consumer durables - the first Company to do so - and assists small and medium-scale industries through successful negotiations for a loan from FMO - a Netherland-based Organisation.

TFC has 30 Branches - islandwide the largest network among non-banking financial institutions and the branch in Jaffna - dormant for so long - has recommence business.

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