The Sunday TimesBusiness

19th January, 1997



Army of local entrepreneurs to win economic war - Patrick

A leading Sri Lankan industrialist has called on the government to build an army of local entrepreneurs, give them full backing and send them out to win the economic war for the country.

Patirck Amerasinghe, President of the Federation of the Chambers of Commerce and Industry of Sri Lanka, said that instead of concentrating so much on Fortune 500 investors and BOI companies, the government should give more incentives to local companies.

In an interview with "The Sunday Times" Mr. Amerasinghe also sought more assistance from the government for the Federation's work especially in the provinces. He said local consultancy services should be built up instead of paying massive fees to foreign consultants who in any case did not know very much.

Excerpts from the interview:

Q: Let's start with what happned at the BOI recently? What was the problem?

A: There was no real problem as such. The President wanted to re-constitute the board and I think there is a rule that there should be a representative from the Treasury which I think is a very good thing. Some of the original people were re-appointed.

Why I was not re-appointed is a question to which I don't know the answer myself, because of course I represent a large percentage of the private sector. And I have strongly expressed my views on the fact that the BOI should not approve projects that would have adverse effects on the existing enterprises in the country.

Q: Could you be more specific?

A: I believe there is no point in approving one project that will kill another that already exists. There are also other problems like the fact that the board, once appointed almost never met the line ministries. The greater part of the dialogue takes place with the Chairman alone. Because of this even the members are at times unaware of the happenings for which we will be collectively held responsible later. New ideas are also not brought out due to this because a cross section of views is not reflected

The members are often frustrated by the fact that so many proposals are made, only to find that they never got to where they should go.

Q: Is there any news about who will fill the vacant position on the board?

A: I have heard unofficially that two people have been offered the position so far but both have declined. One person is said to have declined since he had interests which would have caused conflict. But since all this is unofficial I'd rather not speak any further on that.

Q: Aren't vested interests looked into before positions are offered?

A: This is the way things happen in this country. Take for instance the policy distortions between BOI and non-BOI projects, which are competing in the same international markets, yet are not competing on a level playing field.

BOI exporters get all imports such as machinery and raw materials on a duty free basis where as the non-BOI exporters are charged duty on imports. Even the more established and older non-BOI enterprises find it hard to compete we are actually competing amongst ourselves, and the country loses overall, due to this.

The non-BOI exporter has to go through a big process to get a duty rebate as they do not receive duty free imports. He has to first import and then establish a duty rebate rate. He cannot even begin to quote in the international market without knowing the rebate rate and by the time this is established his costs would have risen due to inflation ect., leading the local exporter at a comparative disadvantage.

Q: Aren't these issues brought up?

A: When these issues, which are spoken of over and again are brought up, various committees are appointed to look into them. And another committee is appointed to look into the studies of the previous committee. Now there is a big business growing in consultancy.

Many foreign consultants are brought down frequently and are paid massive amounts in fees, though in actuality, half of these consultants are in a learning process themselves, getting ideas and picking on the brains of the locals.

Q: Is the federation taking steps to train local consultants as a solution to this problem?

A: We are trying to provide consultants, but we are restrained by the lack of funds. At the moment there are 3 in-house consultants under the Small and Medium Enterprises Development schemes (SMED) and also a panel of freelance consultants in specialised subjects

Some 90% of the local enterprises are on a small, medium or micro scale, and they are not even aware of who to go to. We through the provincial chambers established in the southern, north western, central and uva provinces try our best to create this awareness.

We also offer consultancy at subsidised rates charging only 25% of the cost of consultancy subsidising 75% for enterprises that come through member chambers, while 65% will be subsidsed for those who come through non-member chambers under the SMED project using German funding.

If we are to take a more active role in training consultants, we need assistance from the government. The funds we can gather are limited and inadequate. The main sources of funds for the Federation are through the payment of annual subscriptions by the member cahmbers.

Q: What do you see as a solution to this problem?

A: One is to make it compulsory for all businesses to be members of a Chamber. This is done in other countries. And it has proven to be effective. Another would be channel the funds that at present go into a large number of unproductive institutions, such as the 1500 training institutes apart from the formal education system and universities etc. for which around Rs. 4. billion is being spent. Some of these institutions are not even oriented to provide such training.

If the federation was given a fraction of these funds we could show much better results.

Q: Have you made suggestions to the government on these issues?

A: We have made enough suggestions to the last government and this government as well. But there are kingdoms and empires built and under various ministries there are a number of institutions that started under the closed market economy making little or no contribution in the current context of a free market economy.

Q: What is your assessment of the economic situation in 1997?

A: There is a strong view amongst some people, that the solution to our economic problem is to bring in more Fortune 500 companies In an environment where we are going through difficulties, we should try to build an army of local entrepreneurs, give them the backing and send them out to win the economic war for this country.

In this respect to develop more employment and productivity particularly in the provinces, the Federation has been strengthening the Chamber movement in the provinces. And apart from the existing provincial chambers, at present we are working on setting up a Chamber in the Eastern province. Project SMED is also a major step in that direction. We also have programmes such as "towards better employer-employee relationships" to build better internal relationships, and in-house training programmes for companies who wish to educate their staff on labour laws etc. We also have various programmes with universities to make sure the youth are directed the right way.

We also need to protect our local industries from the influx of imports that have increased due to the reduction of tarrifs. The term protection is often misunderstood. What I mean is that we should strengthen our industries to be competitive. We are aware of the globalisation of the economy but we must look after the interests of our country first. We are at a comparative disadvantage on areas such as investment, technology, management skills etc., which are macro flaws that need to be corrected.

Today especially, with SAPTA and SAFTA and such like it is nice to assume that we can export to a large SAARC market of about 1.2 billion. Yet in practical terms we cannot export in large quantities to India due to their high tarif rates of around 60%, compared to our import tarif rate of nearly 35%.

Many countries also use non-tarrif barriers such as licensing schemes etc. but we open our doors to all. We have standards for local products, yet sometimes no standards are set for imports. And when such suggestions are made, they say that we do not have the manpower or facilities to impose these standards on imports.

Has there been any favourable response from the government to the suggestions the Federation has made?

A trade and tarif commission is to be appointed. The members of the Commission have not yet been appointed, but representatives are undoubtedly needed from the Chambers. No matter how good the proposal is, it's success lies in the implementation.

The Federation is non-political and whatever is said is a reflection of the views of the members and is in the larger national interest. I make it a point to see that this is done in the Federation.

By Deshini Liyanarachchi.

DMS boosts retail banking

A software system that supports retail banking operations on the internet has been introduced to the Sri Lankan market, by DMS Software Engineering Ltd.

The software called DMS-CuLink functions as an ancillary system to DMS-CuPROBE (Customer Product Oriented Banking Environment) that was developed in the mid 1980's. However DMS-CuLink is modularized and can also function as a standalone system, or as part of other banking applications.

"Using DMS-CuLink, financial institutions would be able to offer their products and services over the internet to a wider audience without having to maintain an extensive branch network," DMS says.

Services that can be provided on internet are, verification of account balances, inquiries on collections, placement of standing orders, stopping payments, payment of bills and requesting statements.

"A customer may request a statement by internet and obtain the same instantly via e-mail, or may ask the bank to mail a balance certification statement to another party," DMS said.

"The range of functions that can be offered with DMS- CuLink is solely at the hands of the financial institutions using the products," says Financial Services Industry Product Manager at DMS, Udaya Kosgallana. "We can customise the system to suit any institution and offer totally different products for different institutions".

DMS says this is the first internet banking software system developed by a Sri Lankan company.

DMS-CuLink, the company says, uses industry standard encryption and authentication software to prevent unwarranted access. "Security features are not built into the applications itself'', explains Mr. Kosgallana. The financial institution can therefore incorporate its own security algorithms into the system or plug in other commercially available systems that are currently available or are being developed.

"As the reach of internet expands exponentially, internet based products may become an essential strategy for financial institutions,'' DMS says. In other countries even interbank payments are settled via internet.

DMS says their product would work in conjunction with the main software system of a bank, even if it was developed by another vendor. "The need to incorporate a multitude of data management systems and operating system environments has been a product vision since the inception of the product range,'' Mr. Kosgallana said.

Call for better economic cooperation

At the recently concluded international conference on Economic Co-operation in the SAARC, held in New Delhi the working group on trade, which met under the Chairmanship of Granwille Perera, Vice President, SAARC Chamber of Commerce & Industry in Sri Lanka, with Dr. B. Bhattacharya (India) as co-chairman, made the following recommendations:

* The items identified by the study circulated as the backgrounder, for SAPTA fast track should be enlarged, made more trade generating/augmenting, mutually reinforming and beneficial to the member-countries.

* It was also suggested that a countrywise negative list of items be prepared and agreed upon.

* The preferential tariff should be far less than the (Most Favoured Nation) MFN rate. In fact, efforts should be towards moving to the zero tariff rate. It was suggested that for across-the-board tariff reduction, it may be considered to have the preferential SAPTA rates at 75% of MFN rates. These preferential rates may be reduced by 25% each year so as to achieve zero rate at the end of year 2000.

However, taking into account the differential stages of development and varying requirements of the member-countries, it was agreed that the concept of zero tariff should be focused initially on primary products - more particularly agri-products with permissible waivers in specific cases - with the ultimate objective of bringing in all agreed fast track items under zero tariff machanism.

* Tariff reduction should be negotiated sector by sector and across-the-board. However, specific industry requirement for protection might require certain exemptions from across-the-board formulation. Concerted efforts should be made towards launching SAFTA by 1998, i.e., advancing it by two years. Efforts should also be made to bring about harmonisation of product classification and tariff structure, to make the second round of SAPTA negotiations easy, effective and mutually beneficial.

It was, at this stage, clarified by the representative of SAARC Secretariat that harmonisation of tariff structure was an altogether new area, not discussed any time before at the Governmental discussions/negotiation. A recommendation can nevertheless be made towards this end.

* Special preferential treatment be accorded to least-developed member-countries (LDC) like.

* Preferential tariff was crucial for augmenting the level of intra-regional trade. However, this had not, so far been a major barrier. What had been coming in the way of trade promotion and economic co-operation was non-tariff barriers which ought to be minimised. To begin with, it should be made mandatory to remove non-tariff barriers on the goods having been identified/agreed upon for tariff concessions. In other words, the non-tariff barriers should be removed on all the fast track items agreed upon.

* Determined efforts should also be made to enlarge the base of economic co-operation, i.e., going beyond the realm of trade covering mutually beneficial joint ventures, production co-operation, buy-back arrangements, marketing collaboration, as also subcontracting, for example, in such areas as cotton, jute, tea, where inter se competition had been eroding the benefits to the member-countries. Towards this end, product specific councils be set up with a view to widening the scope of co-operation.

* Notwithstanding the trade barriers, informal trade, in large volume, was in operation. It was, therefore, necessary to get rid of existing barriers and facilitate inter se trade as much as fast as possible by removing restrictions - formal and informal - opening up land routes, wherever possible, providing easy and effective transport and transit facilities.

* Trade in services needs to be given a push and promoted. This would specially call for removal of restrictions on visits.

* Exchange of information, commercial information, in particular, was necessary to establish complementarities and identify areas and avenues for mutual co-operation.

* Travel and movement of people was of utmost importance in strengthening contacts and relationship - more particularly business relationship - and therefore, all travel restrictions be removed and the procedure for grant of visa relaxed. A Chamber of Commerce recommendation should be sufficient for granting business visa. In fact, a scheme be evolved for issuance of one SAARC Visa which should hold good for any or all member-countries.

* To make the intra-regional mutual co-operation an effective and on-going process, the member-countries should endeavour to fall in line with the pattern followed in the European Union and designate a Minister of SAARC affairs in each member-country, if not immediately at least at an appropriate time, keeping in view the importance of the recommendation of strengthening mutual co-operation.

Some delegates also expressed their apprehension that political differences in some countries were coming in the way of enlarging the scope of economic co-operation. It was, however, felt that expansion of mutual trade and economic co-operation in other fields would, in themselves, act as a cementing factor and, therefore, all-out efforts should be made to strengthen them.

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