26th October 1997


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CSE to take in new brokers

By Asantha Sirimanne

The Colombo Stock Exchange will shortly admit new brokers, after calling for applications from interested parties.

Applications had already been received from a number of local parties for an advertisement place earlier, but no licences were issued to the applicants.

"We will be looking for brokers who can add depth to the market," Colombo Stock Exchange Director General Hiran Mendis told The Sunday Times Business.

Analysts believe that licenses were not issued to respondents to the earlier advertisement because they had not been up to scratch.

Brokers who had responded to the earlier advertisement are expected to apply for licences again.

Some believe that applications with tie-ups with foreign equity specialists who have access to large investment funds may be favourably considered.

However Mr. Mendis said they were not simply looking for foreign brokers, but any party who can contribute positively to the development and expansion of the Colombo market.

The CSE is also hoping to introduce stock lending and borrowing to the market to improve liquidity, which had been one of the key obstacles to greater foreign investor participation.

Due to poor liquidity (less than tenth of the listed shares are regularly traded) large transactions tend to move prices significantly. Large parcels were usually unavailable when foreign investors required.

"There are large parcels of shares with owners and investment funds which rarely trade," Mr. Mendis said. "We are looking at the possibility of lending them to third parties to trade. But we have to do it in such a way as to prevent abuses."

The CSE is not expected to permit short selling but trading will be permitted after delivery is taken of the borrowed stock.

The CSE recently announced that it was planning to set up branch offices in the provinces.

The high-tec trading system had made it possible for the CSE to set up branches with full on line trading capability at a reasonable cost. Stockbrokers could be given a trading desk at the branch office to carry out transactions on behalf of their clients, eliminating the need to contact a Colombo broking office.

"We will be going ahead with our plans, after our operations return to normal," Marketing Manager Rajeeva Bandaranaike said.

Last week the CSE moved back to offices at the World Trade Centre. Its administrative offices are now located at the 24th floor in the West Tower and are using the old telephone numbers.

Mr. Bandaranaike said the CSE would be moving back to the podium block as soon as its repaired by Overseas Realty.

Four pitch for account

By Ruvini Jayasinghe

The four advertising agencies short listed for the US$3mn AirLanka account will make their presentations on November 22, advertising sources told "The Sunday Times Business."

The battle for what is possibly the country's most prestigious account is among J. Walter Thompson Pvt. Ltd., Bates Strategic Alliance Ltd., Minds Lanka Ltd. and Phoenix Advertising Ltd.

Meanwhile J. Walter Thompson Ltd. (JWT) the current contract holder has rejected a request by AirLanka to renew their contract at a discounted commission of 5 percent, sources said.

The company declined in writing a request by the national carrier to accede to the unusual practice of renewing their contract at a reduced commission, the source said.

Working for less than the accepted commission of 15 percent on any account is bad practice and against advertising norms, CEO's of top advertising companies said.

JWT has been holding the AirLanka account since April 1994, and managed to survive not only changes in management but also even a change of government, sources said.

As the national airline is now up for privatisation, an additional three month renewal clause has been introduced to the contract, which expires in December, sources said.

The renewal clause leaves room for the new investors of AirLanka to pick their own advertising agency, when they take over.

In another development an Indian newspaper, the 'Economic Times' of October 17, states in an article about an advertising company, Clarion Advertising Agency, that "also helped Bates Strategic Alliance in Sri Lanka in securing the airline account," the article added.

Although AirLanka is attempting to reduce advertising commissions by 10 percent in an apparent cost cutting exercise, the advertising industry maintains that the move is against basic advertising norms.

Aid agencies want changes on procedures

Top donor agencies have made proposals to change the procurement procedures in government projects as they are delaying the implementation of projects.

"A difficulty in the implementation of projects is that procurement proceudres in Sri Lankan projects are complex and generally prone to delays," Overseas Economic Cooperation Fund (OECF) Colombo Chief Represenatative Ryutaro Koga said in the latest issue of the OECF newsletter. OECF is the implementing agency adminsitering loans granted by the government of Japan.

"To try and overcome the problem, the OECF, Asian Development Bank and World Bank are jointly making proposals to the government on how to create a better procurement system which allows more effective decision making," Mr. Koga said.

The OECF was currently monitoring more than thirty Overseas Development Assistance (ODA) loans granted by the Japanese government.

Japanese aid accounts for around 40 per cent of Sri Lanka's overseas debt, followed by the World Bank and ADB, Mr. Koga said.

"In oder to the OECF to implemnt that has high returns from a development perspective, it is becoming increasingly more important to conduct thourough discussion and co-operation with these other organizations, in addition to the Sri Lankan government," he said.

There is a strong demand from the Sri Lankan government for development finance that takes into account countermeasures against environmental pollution, regional development and small enterprise. In the the past, aid was channelled mostly to economic infrastructure such as ports, electricity generation and transmission, roads and telecommunication.

With other countries showing a greater interest in financing the social sector including education and healthcare in which 'Sri Lanka was relatively advanced' the Sri Lankan government had come to rely more on ODA for economic infrastructure.

But the demand for economic infrastructure was so huge that it could not be met by aid alone.

"ODA loans should be promoted as a medium for facilitating tie-ups with private finance," Mr. Koga said.

At present, the OECF Colombo office was also looking at means of using grant and technical aid together with ODA loans for social sector projects like education, healthcare and medicine. The focus is to create projects which have excellent prospects of being successfully realised.

The OECF is keen that ODA loans should benefit projects relating to high priority areas like environmental policy, regional development, agricultural development and local industrial development, many of which show low profitability.


SAARC banks renew ties

Despite the recent bomb blast more than 200 foreign delegates from the SAARC banking institutions would be in Colombo next month to build closer ties with each other as the region moves towards free trade.

"South Asia has been hailed as one of the fastest growing regions of the world offering vase opportunities for investment and growth," says Mangala Boyagoda who chairs the organising committee of the hosts, Sri Lanka Forex Dealers Association.

"To attain a plateau of excellence we must primarily have a clear understanding of regional financial and economic needs and advantages."

The Sri Lanka FDA has organised the South Asia Forex Dealers Congress to celebrate its 15 th anniversary from November 12 to 15 at the Taj Samudra Hotel. There had so far not been a single cancellation.

The keynote address will be delivered by Reserve Bank of India Governor Dr. C. Rangarajan. World Bank Chief Economist for South Asia John Williamson will also address the congress.

Papers will also be presented by representatives from each SARRC nation.

"Corporation in political and economic issues will not be a reality until we first build a common platform for discussion and learn lesson together, not as individual nations but as a block of countries working towards a common ideal," Mr Boyagoda said.

The congress is sponsored by the BOI and co-sponsored by the Bank of Ceylon and People's Bank. The Central Bank of Sri Lanka, Commercial Bank, DFCC Bank, Seylan, HNB, Hongkong Bank, Citibank, NDB and Reuters are also supporting the congress.

Continue to Business page 2 * Full report on WTC damage out this week * MIND YOUR BUSINESS * Economy and the bomb blast

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