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19th July 1998

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Barclays boss calls for more investment in banking

"Technology has been moving forward in the banking business and needs a lot of investment, customer needs are becoming more demanding and employee development and training is
very important." This in a nutshell is what Barclays Bank PLC Chairman Andrew Buxton had to say about the banking industry. Mr. Buxton delivered the keynote address on the global banking scenario and banking beyond the year 2000 at the banking symposium organised by the ssociation of Professional Bankers last week.The Sunday Times Business spoke to Andrew Buxton just an hour before he caught his flight back home. Excerpts from the Interview.

By Ruvini Jayasinghe

Q. Can we discuss briefly the structure of Barclays' Bank PLC and its market rating?

A. The bank is the 10th largest in the world and No. 3 in Britain in market value behind Hong Kong and Shanghai Banking Corporation (HSBC) and Lloyds. It's operating profit for 1997 was 2.4 billion pounds. And its current market value is 27 billion pounds.

In terms of international business it is Britain's No 2 bank behind HSBC and operates in 70 countries across the globe.

We have a relatively high market rating. We are a double A (AA) rated bank, which is in the world now quite high.

Q.One of Britain's big banks, the Midland Bank was taken over by the Hong Kong and Shanghai Banking Corporation (HSBC) sometime ago. Is it true that a another big international bank is looking at Barclays bank similarly?

A.One of the things that I was discussing at the seminar was the consolidation that is going on in the world. All over the world there are a large number of bank mergers going on.

It is easier because of technology. Bigger units now can be managed without difficulty. Administration is easier. And there is also a saving on the cost of running smaller units. There is over capacity in the banking business. When you bring banks together you still got considerable choice because you still got a lot of banks.

In the US itself there has been about 300 mergers or acquisitions over the last 2 years. It is has begun in Europe also. In the UK too it has been happening.

Barclays is always interested in what is going in the world and watches the merger process. But we are No. 10 in the world and I donít think there is any pressure on us to merge. And I think if we were smaller there would be some pressure. But when we are as large and strong in the world, I think we can stand up on our own feet. But that does not mean to say that we dont watch the process. We do.

Q.What are Britain's reservations about joining the EMU?

Will Britain eventually become a reluctant member?

A: I think it is likely that Britain will join Monetary Union in 2002 or 2003. I think that the government would like to join but they still have some reservations.

The reservations are mostly connected with the stage of the psycho that Britain is in. You probably know that the British economy has done extremely well in the past five years, since it came out of a recession in 1992.

In the past two to three years the British economy has grown by over 3.5% per cent per annum which is very good growth rate for a developed economy.

What is happening now is that the economy is beginning to turn down because it is becoming over heated. And the Bank of England is now using interest rates to slow down the economy.

Now Europe is in a very different position. Europe came out of recession about two years ago and is clearly in a growth path, which is out of sequence with UK.

That means that interest rates and exchange rates structure is out of sequence with Europe. It is very difficult to decide what exchange rate Britain should go in, when the economies are not compatible.

What the government wants to do is to stabilize the British economy with the European economies so that there will be no strain in the exchange rates or interest rates. As you know the pound is quite high now. It would be quite wrong for the British economy to go into a fixed rate of the Monetary Union at a time when the pound is so high. It will cripple British exports.

The other thing that the British government is worried about is that the European Central Bank is properly managed. Economies that go into the EMU may not be well managed. I'm talking about the state economies and not the industrial economies. Britain would like to be assured that Monetary Union authorities can actually manage that when they put these countries together.

I just want to make one more point about the EMU. The reason the British are concerned ,worried about the workings of the EMU is because this is very much a political project running as an economic project.

The monetary union is a union of 11 countries for political reasons rather than economic reasons. But yet the strain is going to be taken economically. I think that if it were running as an economic project the member countries would have been smaller. Because there are a number of countries there that have had their economies linked together for a long time. I mean for instance, Germany, Austria, the Netherlands, The Benelux countries, they have worked together for a long\pardA. Well, some countries have stretched the criteria a bit.

Q.Will global banking undermine the regulatory process of commercial banking?

With regard to Britain's monetary policy, in your capacity as a member of the court of the Bank of England, what is the role of the monetary policy committee?

A: Monetary policy at the moment in Britain is designed to try to control inflation. And that means interest rates having to be used to damp down demand, when demand gets too great and threatens inflation. That is one of the reasons the pound is so strong, so exporters are worried about the interest rate policy.

But it is more important to control inflation over the long term than to lower interest rates in order to have a lower exchange rate.

Q.What is the inflation rate in Britain?

A.It is about 3.5 %. But 2.5 % is the guideline that the government has set over a period. It might go beyond that but then the Bank of England Monetary Policy Committee (MPC) has the task of bringing it down. In fact that is what they are trying to do.

A fundamental issue that Britain has grasped is to separate monetary policy from supervisory policy. The supervisory policy has been moved away from the Bank of England to the Financial Services Authority (FSA) and monetary policy is now the prime responsibility of the Bank of England, which is why they have a Monetary Policy Committee. And now the Court of the Bank of England has to see that they perform in the right way. I am a non-executive director of the Bank of Engla\pardA.At the moment the banks here really are not paying enough attention to customer service.

I also think the corporate governance of a bank and the way they interact with the regulator is going to change.

I think we have a central bank here that has the right idea of what to do. and they are making good progress But there is more that can be done to tighten up the regulatory process. This is happening globally not just here. One of the questions you asked me as will global banking undermine the regulatory process of banking. The answer to that is No.

But the regulators will have to invest, as the bank advance the regulators need to advance as well. The banks look at the regulators as being anti banking. That is not the case, the regulators and the banks need to work together because it is the customer who is demanding those standards in the bank.

The other important thing is the development of people. Banks in Sri Lanka should pay more attention to development of people ,staff, training, and encouraging the staff to make suggestion for the improvement of the service.

Banking here has a good grounding. I think that comes from common sense in the bank industry and common sense in the Central Bank.

But I also see that there is much more investment need in the banking sector. Not just investment in people and technology but also in corporate governance and the way in which banks are managed. The governance of banking is very important for the country. Because if you have a banking crisis because of bad management in the banks that is serious for the country.

Political interference of the commercial working of the banks is the way to ruin the banking system.

(See also comment above)

Everyone's a millionaire at Millennium

Tony Weerasinghe is no doubt our equal to Bill Gates of 'Microsoft' fame. Innovation, devotion, love and dedication to what you do and not being afraid to change seem to be the main ingredients of his recipe for success. Is there any other term that aptly describes one who builds-up a billion-rupee corporation mastering what he started as a pastime, but a GENIUS.

By Priyantha Gamage

Q: Mr. Weerasinghe what made you shift over to an entirely new field (of computer-programming) to start anew from a rather promising career at 'Siedles' as a Manager at the time?

A: I got more involved in computers. Then I thought it was a more interesting thing. And that there's no point sitting there as a manager, and that it is the technology people will move towards in the future. So what made me I have no clue or where I am going to be.

I took a big risk there specially in joining Computer land from DMS. Because DMS was a well established company. But the package was huge. I took a big risk because Sun Microsystems paid me for the first year and I had to meet a number.

And if I meet that number, from my second year Computerland was to pay me that same figure. If I didn't meet that number I didn't have a job.

So I took a big challenge. Then I went up from there and I have no clue what made me do it. I was going to leave Computerland anyway because I had got an Area Manager's job in a big multinational company.

So I was going to be based in Singapore. When they realized that I was leaving they said: 'We don't know how to handle this now. It's too complicated for us. Why don't you take it.'

So I had no clue and then the employees too got to know that I was leaving and many of them had come from various other organizations. And they only came because I was there. And they asked me, "Why don't you take the company? So it was a decision made on the spur of the moment.

I don't know whether they meant it. But I took it seriously and started working on it. It was a big challenge. When we bought it the money market was at 60%. So borrowing was tremendously difficult.

It so happened that I must give everything to my brother-in-law (the late Mr. Nalanda Ellawala). When he knew that I needed money he came and gave all his deeds. He had faith in me. So that's how it all started. And then the employees also put in money.

Q: What was the purchase consideration like?

A: We paid Rs. 32 million to Computerland. So just imagine the amount of money we needed and I didn't have that kind of money. And the bank also believed in what I was going to do. But they needed security.

So from there onwards we managed to get things out very well and here we are now.

Q: There's no doubt that you have done extremely well as a company, but how has Millennium fared financially?

A: We had a successful year from the beginning itself. In 1997 as a full financial year the earnings per share was about 60%. This financial year starting from March 1997 it was about 75%. So we have a phenomenal growth. We have been growing from almost when we started, then it was about 300%.

Now we are at least going, may be, at 100%. Already this year what we targeted to make, that is April 98 - March 99, we are almost there for the entire year. Wev'e already secured sales for the entire year 1998, by now.

Q: Are you at liberty to disclose the figure?

A: Yes, we are quite open at Millennium. Basically we are hoping to touch about half a billion rupees.

Q: What is the secret behind the success of Millennium?

A: I think one of the key things in Millennium that went right for us is the new technology and our dynamic of moving towards it. We have always been ahead of technology.

We are the only Sri Lankan company that competes internationally bidding by ourselves. We are not bidding by some big players but by 'Millennium Information Technology.'

Of course, we have the pitfalls of being a small company. But we want to have the name recognised. And I think we have established that and we hope that Sri Lanka will get a name for software because a lot of these companies are going with big names. So the big name wins the tender and then they get whatever small job.

We have won two international tenders in Mauritius and Croatia So I think we have proved that we can stand on our own feet.

We are working on another five or six at the moment. So we hope to close at least two by the year end.

Q: When Millennium computerised the Colombo Stock Exchange it was internationally commended as one of the best computations around the globe and you have won many other prestigious contracts since then. So - how have you fared in the international market?

A: We are now moving to various international markets. We had successful implementation in Mauritius. We went to Croatia at the end of last year. The implementation date was July.

It went live on the correct date and it is very unusual for a Software development company.

We've built-up a very good international stream now. We were selected by the World Business Review on our new technology and I think we are the only Asian country to be able to be selected so.

It's a programme on new technology hosted by former US Defence Secretary Casper Weinberg. So we are now getting calls from some of the international giants.

Q: What would you name as the biggest asset of your company, Mr. Weerasinghe?

A: I clearly believe that it's the people we have and the freedom that we have given them to use their talent and they are basically being their own creators. It's only guidance that comes from me.

A lot of people who have met me have said that 'we have been watching you. We are taking Millennium as a model'. A lot of Sri Lankan companies do.

Millennium is owned by employees themselves, 62% is owned by them. We have over 100 persons now and about 80 are shareholders of the company, even the drivers and the peons.

I think they believed in me that they mortgaged their houses and put money to this company.

And none of these shares were given free. They have to buy them. At that time we gave it at a par-value of Rs. 10/=.

My idea is that 'it's not only you who should make money, but also everyone who works with me'. We have a philosophy here,' nobody works for me. They all work with me'. So we did that culturing and everybody works at their own organization.

Even my driver has Rs. 50,000/- worth of shares or so. If you take the present share value of that he's a millionaire.

One of my concepts was to make everyone who works here at least a millionaire. And I think it's becoming fruitful now. We have been valued very highly. We are the only company that's chosen for the Software investment forum.

Q: What is the mix of your cadre?

A: We have about 50% of them as Software Engineers, about 25% as System Integrators, only about 5% as the supporting staff and the balance on sales.

Q: And I am sure they are remunerated above average levels?

A: If you take their salaries it's probably the highest among the IT companies here. Because we feel that our biggest asset is our employees.

Q: What other exclusive employee welfare schemes are there?

A: We have a programme where there are three areas we look at. One is job satisfaction. I think we have achieved that. Second one is higher studies. So Millennium is tying up with a world-recognized university where anybody from Millennium can go and do their higher studies if they meet the required score. You don't have to be brilliant to meet the score.

Our car ratio is 2:1 here where 52 employees have cars. We hope one day to have it at 1:1.

The next one we are looking at is housing, how to facilitate that. So we have taken a broad angle of how to improve their life styles and whatever values to add so I think as a company we have brought in new cultures, new technology and innovative ideas.

Q: Is there a specific objective you want to fulfil as a company?

A: Our target is to become a billion rupee company by the year 2000. We are on the way to that target. It can be even much higher. We are at the moment saturated in growth. So we are organising ourselves to take in more work.

Q: Is there a particular Management principle that you adhere to in running Millennium?

A: When we look at the other companies we see that management theories they say are the best. I don't know whether it's co-incidience we feel that we are practising them already.

We have a separate Remuneration team. That means with other outside directors we have set up a separate committee. Now people say that, that's the best way to do it because when they are from the outside world they know what the market is. We've done that. We have a separate Internal Audit team too, mostly from outsiders.

Basically what the world is saying is required for the success of a company. We have set up those things already. And I think the concept of 'open door' is there. For instance, if an employee wants to see me he can come into my room directly. There are no tiers or barriers he has to pass.

And there's the first name basis, No 'Sirs' no 'Mrs', just the first name.

And it's open 24 hours a day. There are no restrictions. Anyone can get into the office and work. So I think by this freedom, we have empowered them to do their work well. All these new projects that we are doing is being done by very young people.

So what we have done probably is giving them guidance to make use of their creative talents to become much more, appreciate it and get to the business field. So we are just giving them business guidance.

I basically, generally give them only the concept. How to execute it, they must find the best way and I'm amazed at some of the things they have done.

We've given everybody web access 24 hours a day. And the research that they do even impresses me. One day my wife and I were passing this way. It was at about 1 O' clock in the morning and we were returning after a dance. I saw that the lights were on in the office and came to see at least 30 people working.

Nobody forces them or tells them to come. They are given the opportunity and they like that. I think what's there is the sense of belonging that 'this is mine, I am a part of it and I want to grow with it.'One of the key things that we have done in our organisation is that it's an entirely different way of working. We have built our own Intranet. From ordering the clips it's all done on computer. There's no paper. We'd probably in the future allow our customers to raise purchase orders with us on the web itself.

Q: Is there any particular company or person you take as a model in moulding your own company?

A: Well, the model company that I have modelled after is purely Microsoft. No dress-code, share options etc. And that's one company that breaks it's own products. So I learnt a lot from them. I don't model after people, I don't believe in it.

But, I think you have to admire the guy for what he has done as a company. I model him initially, more hot on the man himself, but how he set-up the company. And it so happens that I have always believed that I never wanted to run my own company. I have always believed that it's 'team work' that brings success not that one person.

Q: Do you perceive Sri Lanka as a country which could excel in software exports?

A: I definitely think so. I think Sri Lanka has a tremendous potential. Our IQ levels are high.

I think we are generally above average compared to India. We don't have a vast difference between brilliant and non-brilliant like them. I think our general level of most of them are brilliant.

The only thing is that we are not given the correct technology. There's not much help from the government. There has to be a push from the government side.

Year 2000, that's going to be a US $ three trillion market which is going to be the biggest industry in the world. It's going to be much more than garments or electronics. And we have the natural resources. We have only to exploit them.

So I think there is a lot of work the government should do to enhance this market. And for the government to do that, there should be the correct people. If correct things are done, by Year 2002, IT export revenue will be our number one.

Q: So what do you suggest that we do in order to reach that goal?

A: We have to take a radical approach. We have to basically do a leap - frog kind of an approach in heading there.

We have to set up some competence centres where people who don't have money can go to test there skills.

And I feel whether it's right or wrong do another 200 Garment Factory sort of Programme. Arrange the funds, tell them the technology required and anyone who starts a software industry with these technologies the government will give the money.

That's how the Garment Industry came up. Of course some fell by the way. I say, many will fall. But as an industry it will improve. The ones who do it correctly will be the masters. Currently there's no such thing.

And I think our education system should be changed. I believe that computer should be a subject from year one not only for O/L or A/L. Because finally people are saying that books will come on computers. So it has to be done.

And the next thing is to have a programme that would enhance their knowledge and skills. Today we are still teaching obsolete computer languages people don't use. We have to keep changing our syllabuses with the world. Because change is a flexible thing. It's never constant.

What you learn tomorrow may be obsolete the day after. So you have to be continually changing. We have to build that into our education system. So there's so much to do that the government will have to take it as a priority.

Q: Naturally Millennium has been quite innovative from inception and as you say that could very well be a factor in your success. So what's in store?

A: There are a lot of innovative things we have. We are just about to launch our newest and it's also the first in the world. We are doing it together with 'Dialog'. We are publishing stock exchange information on the mobile phone.

So if you are a serious stock-exchange player you can go to the web decide, define what stocks you want to see or give the present details or whatever criteria that you want because you are not usually looking at the entire market.

And when that criteria hits at the exchange your mobile phone will be automatically run and it will show you on the display all the required information, right at that time wherever you are in the world.

We are also hoping to introduce total electronic commerce so that people will use the Web to promote their transactions. People are a bit worried about security but the world has out- lived that.

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