19th October 1997


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Mirror Magazine


Mind your Business

By Business Bug

No Italian job

The shock waves of Wednesday's blast are still being felt and mostly in the business community.
A first casualty was a proposed investment by an Italian apparel manufacturer.
The company boss was here to do some prospecting when his hotel room door was ripped off on Wednesday morning.
The man literally grabbed his bags and caught the next flight home.

Rates bait

The state banks may have reduced their interest rates yet again, but this time around, other bankers may not follow.
Many are confident they can still attract clients at the present rates and see no need to cut their profit margins.
The Treasury boys, of course, have other plans and hope the private sector banks will follow in the footsteps of the two state giants.

Sweet and sour

A multinational sponsored ice cream project is reconsidering its plans for expansion.
Sales soared at first, but the taste of success is turning sour now.
First there was litigation to deal with and then the jumbo's became copy cats, stealing the "selling-with-the-tricycle" idea.
So, the initial promise has not kept its momentum and expansion plans may not see the light of day.

Economy to shrug off blast effect

By Asantha Sirimanne

Barely 24 hours after the second terrorist strike at the central business district in Colombo in as many years, economic activities were resuming, with key affected institutions including the Central Bank, BOI and the Colombo Stock Exchange, beginning operations after lightning re-locations.

Though the terrorist strike would affect tourism and foreign investment, it is not expected to make a big impact on economic growth this year.

The immediate outlook for the tourism sector however appears bleak. In 1996 after the Central Bank and Dehiwela bomb blasts, arrivals fell by 25 per cent, and Sri Lanka lost nearly Rs 2.4 bn in tourist earnings.

Most hotels in the country having suffered considerable losses in the recent past and facing delayed debt service payments, are likely to be hit further with cancellations in the upcoming lucrative winter season and depressed arrivals next year.

"The worry is that some of the highly capitalized companies like JKH and Aitken Spence and the banks that lent to the tourism sector may lose profits, affecting the earnings growth in 1997," says Dr. Anush Amerasinghe of SocGen Crosby Securities.

The strike came when the country was looking forward to a 6 per cent increase in Gross Domestic Product after two years of poor growth.

"There won't be a major impact on growth this year," Dr. Anush Amerasinghe said. "Tourism only accounts for 2 per cent of GDP and the performance of agriculture and industry will more than compensate."

"Most of the impact is likely to be short term," agrees Mercantile Merchant Bank Head of Research Nouzab Fareed. "Even tourists will start coming back after about an year."

The Colombo Stock Exchange began trading during the late afternoon Thursday using the back - up facilities of the new state of the art trading system, installed for just this type of contingency.

"The main servers of the trading system are still intact," Deputy General Manager Rohan Fernando said. However they were inoperable. The main display board also appeared to have escaped the worst, though the premises was a shambles.

Three brokering firms, Jardine Fleming HNB Securities, NDBS Stockbrokers and Asia Securities whose offices at the World Trade Centre were badly damaged, traded from temporary trading desks at the back up site of the stock exchange using what ever equipment that could be salvaged. De Silva Abeywardene, JB and Somerville stockbrokers whose communications systems were down, were also given temporary desks. All others operated from their own offices.

"We set up the back office equipment at the Hatton National Bank board room," Jardine Fleming General Manager Deva Ellepola said. "This is probably the first time an exchange had recovered under 24 hours from a severe blow to begin trading," he said.

The index fell 15 points, but there was more foreign buying than selling, resulting in a net inflow of funds on Thursday.

However the blast is expected to impact negatively on foreign direct investments, even though investors are now fully aware of the risks of doing business here, particularly after last year's bomb blast.

"Foreign investors have always been aware of the risk of a terrorist strike, and this had already been discounted," says Mr. Fareed. "But this will certainly delay the closing of negotiations and affect new investors."

The Board of Investment meanwhile is preparing to counter the worst effects of the terrorist risk on foreign direct investment flows.

"This is part of the inherent risk that is allocated to the risk profile of a country," explains Board of Investment Chairman Thilan Wijesinghe. "It is a question of degree whether it is in Tel Aviv, India, Pakistan or here."

The BOI which had its main offices in the damaged World Trade Centre also started working from its old office at Baron Jayathilake Mawatha, from Thursday morning and began to process and issue export import documentation needed to keep BOI approved factories in operation.

The BOI is already sitting on a record volume of investment approvals as well as commitments.

"It does entail a change in strategy," Mr. Wijesinghe said. "More of the focus will be on investment retention. I am confident that committed investment projects will go ahead."

Pan Asia Bank gets new GM

Daya Mutukumarana has been appointed the General Manager of Pan Asia Bank Ltd.

Mr. Mutukumarana had been a deputy general manager at Hatton National Bank. He later moved on to the National Enterprise Bank.

The Pan Asia Bank's head office located at the World Trade Centre was devastated during last week's blast.

The bank would be shifting most of its operations to the Panchikawatte office and to a site in Kollupitiya where the bank was soon to open another office, financial sources said.

Bank tower hit for Rs 100 m

By Ruvini Jayasinghe

The damage to the city's second tallest building in last Wednesday's bomb explosion is estimated at nearly Rs. 100 million, a bank official said.

The shattered glass panes in the Bank of Ceylon (Head Quarters) tower is hardly an indication of the extent of damage inside where ceilings have caved in, light fittings shattered and plaster ripped off the walls on every floor of the 29 storey building. The damage is worst in the first and second floors.

The damage caused this time is worse than the damage caused when Tigers exploded a bomb outside the Central Bank building on January 31st, 1996 which was estimated at Rs. 50 million, the official said.

Chairman BOC, Ms. Dayani de Silva told Business Times that the staff displayed a remarkable resilience in continuing operations amidst the devastation for the second time in two years.

The Bank opened for business for two hours, from 10 am to 12 noon the day after the blast and all operations commenced including dealing room operations GM, Ms. Savithri Jayasinghe said.

"Our computer system was not affected so we were able to service all our customers despite the damage to infrastructure," she added.

The BOC tower is owned by Property Development Ltd., (PDL) in which the BOC has a 85% shareholding.

The building is covered up to a point for damage caused by acts of terrorism, Mrs. Jayasinghe said.

CEO, PDL, Ms. M. Barkumara Kulasuriya told The Sunday Times Business that the building is reinsured, for Rs. 250 million.

Sri Lanka Insurance Corporation Ltd. (SLICL), GM, Mr. Perera told the Business Times that the company is ready to settle all claims, emerging from Wednesday's blast. Some major buildings damaged in the blast are said to be covered with SLICL.

While some damaged buildings have an overseas terrorism cover some hotels only have a local cover, the Government Fund for Terrorism.

This fund pays a maximum of Rs. 10 million on buildings and Rs. 3 million on vehicles. All insurance companies jointly pay the premiums on the fund.

Buildings insured under the strike, riot, civil commotion and terrorism cover (SRCC & TC) will be settled through this fund.

But companies who have a foreign cover for terrorism will be able to claim the full extent of damage through re insurance.

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