25th January 1998


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CB to eliminate share gap in bank accounts

By Asantha Sirimanne

The Central Bank is to introduce new guidelines on the accounting treatment of share portfolios in the balance sheets of commercial bank.

"We are going to discuss it with the banks and reach an agreement at least with the banks," Central Bank Governor A. S. Jayawardena said.

Based on the historic cost convention banks as well as other companies account for share portfolios at cost. However with recent down turns in the market there have been wide gaps between the market value of a share portfolio and the value set in the balance sheet.

This tends to mislead the users of such financial statements about the actual financial status of the company concerned.

Existing accounting standards allow companies to carry long-term investment at cost. Only short term investments are required to be shown at market value.

Companies especially, financial institutions have been accused to misstating their true financial status by listing shares in the investment portfolio and not re-valuing the shares downwards to the market value.

Financial institutions such as banks, finance companies, development banks and merchant banks have significant portion of the assets in equities.

Merchant banks which are heavily involved in capital markets and have traditionally had the biggest exposure to equities and are regarded as the worst offenders.

While both commercial banks and finance companies are regulated by the Central Bank, merchant banks operate with nor regulation at all.

In addition to portfolio losses the merchant banks also have mismatched assets with long-term lending funded by short term borrowing. Though merchant banks were forced to restructure their debt during the high interest rate environment in 95 and 96, analysts say they are still not out of the woods.

S.Asia steers Colombo Port in growth path

By Mel Gunasekera

The Port of Colombo which is ranked 26th among the container handling ports across the world, recorded a growth of around 22 per cent in 1997, compared to a growth of 20 per cent in 1996.

Total container traffic increased by 24.4 per cent to 1.68mn Twenty Equivalent Units (TEU's), surpassing the 1.5 mn target set for the year, Deputy Chief Operations Manager Sri Lanka Ports Authority (SLPA), H Premaratne told The Sunday Times Business .

In 1998 the port is aiming to handle between 1.8-2.0 mn TEU's.

Transshipments, which account for nearly 73 per cent of total container handling, grew by 25.8 per cent in 1997. Transshipments from South India have contributed to the rapid growth of container traffic, Mr. Premaratne said.

Demand for cargo in the subcontinent grew by 12-13 per cent in 1997. Despite regional giants like Singapore and the Gulf countries competing for their share of traffic, Sri Lanka recorded a phenomenal growth of 24 per cent, compared to a modest 9 per cent growth by Singapore in 1997, Mr. Premaratne added.

The Indian ports play a significant role in attracting container traffic to Sri Lanka. Indian ports do not have the upto date facilities available in Colombo, neither can they handle large container vessels. Labour relations in the Indian ports are rather poor, with a strike going on in at least one port every week, with no signs of dispute ending.

"Sri Lanka feels the impact of Indian strikes," Chief Operations Manager SLPA, S K Premachandra said. The Colombo port has a better record in labour relations. Most labour strikes are limited to picketing and are not prolonged. This has so far not deterred major shipping lines from coming to Colombo.

"Reliability is the key factor. Our workers understand this, and are keen not to hamper the lucrative transshipment business," Mr. Premachandra said.

Sri Lanka accounted for 20.4 per cent of the subcontinent container market in 1997. In 1996, it was 17.6 per cent and 1995 it was 16.6 per cent. "As you can see, we are gradually eating into India's market. We are not competing with India, infact, whatever facilities they have is complimentary to us," he said.

Mr. Premachandra believes the Indian subcontinent has been spared by the Asian currency crisis. Before the crisis unfolded, Singapore port, though the largest, was the most expensive in the region. The Singapore dollar which was appreciating sharply against the US dollar, has since weakened. They are still not attractive enough as their handling charges are rising sharply, he said.

Though Sri Lanka is the second busiest port in the region, her tariff rates are the lowest. A twenty foot container costs US$ 71.05 and forty foot costs US$ 104 for transshipment.

Productivity too has contributed significantly to the development of the port. Productivity is measured as to how many boxes are handled per hour.

During period 1996-76 Colombo port handled approximately 4,000 TEU's. Since beginning of this year, we are handling around 5,000-5,500 TEU's per day and we hope to increase it further by the end of the year, Mr. Premachandra said.

The SLPA has invested in a continuos training program to change the attitude of their staff. Though the SLPA is a monopoly business, times have changed, and the management has recognised the need to be more customer oriented.s

Continue to Business page 2 * EFC seeks essential services tag for hotels * SAARC quality soon * Management Consultants form new forum * Sri Lanka keeps cool,no devaluation * Lucky contract

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