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20th December 1998

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Iridium comes to Sri Lanka

First global satellite phone system to be launched

By Mel Gunasekera

Iridium, the global satellite phone service, is to commence commercial operations in Sri Lanka shortly, giving people the power to make and receive calls anywhere… from Mount Everest to the Dead Sea.

"Everything is in place for the commercial launch, we are awaiting the telecom regulators' approval," a top SLT official said.

SLT has been appointed the Iridium service provider for Sri Lanka. The handsets would be sold through Brown & Co. while the cellular services will be provided through Dialog GSM, Iridium LLC Regional Marketing Manager (South Asia) Buddhi Athauda said.

"We are in the process of finalising the conditions set down by the Sri Lankan government as a part of the authorisation for Iridium's service," he said.

Iridium, a joint venture led by Motorola Inc., took US$ 5bn and 11 years to create. It is a network that enables people to communicate on hand-held telephones and pagers worldwide through its constellation of 66 low earth orbit satellites combined with land-based wireless systems.

It went into service after more than a decade of testing and development, some lost satellites and the postponement of the initial launch.

The technology comes at a high price. The phones, being made by Motorola Inc. and Japan's Kyocera Corp., cost about US$ 3,000 each. Calls cost about US$ 2 per minute.

In urban areas, a cellular roaming service features dual-mode phones that can be switched to operate with land-based wireless services. But the Iridium phone, is much larger and heavier than a conventional cellular phone.

It's a matrix tariff system where the call charges are fairly expensive. The call charges differs according to location.

The Sri Lankan tariffs are yet to be finalised as SLT is awaiting approval from the telecom watchdog, the SLT official said. Though Iridium's global launch took place in November, the Sri Lankan commercial launch was put on hold as Sri Lanka Telecom (SLT) and other cellular operators objected to Global Mobile Personal Communication (GMPC) like Iridium, Globalstar and ICO from operating in Sri Lanka without a licence.

Since GMPC offer international calls, SLT is objecting as GMPCs are violating SLT's international voice monopoly. GMPC are designed to operate in the absence of a network; the Telecommunications Regulatory Commission (TRC) has to give a ruling whether Iridium is a system that comes under the Telecommunications Act.

The decision is tricky as the satellite system being used by Iridium is licensed in the USA, while, the gateway system is licensed in India. While the telecom industry awaits the TRC Director General's decision, SLT was permitted to open Iridium's international codes 8816 and 8817 to Iridium users for testing purposes.

Price limit on imported spuds

By Dilrukshi Handunnetti

In a bid to protect potato farmers of Nuwara Eliya from a dreary fate, a presidential directive has been issued for the immediate halting of mortgaging 121 houses and other properties in the district, and to suspend the process of instituting legal action against cultivators, Agricultural Ministry sources said.

This comes in the wake of heavy lobbying by potato growers to extend the deadliness to pay up their loans and to halt the import of potato thereby protecting the local producer.

In a further beneficial move, the Agricultural Ministry has been vested with sole authority to import potato seeds to prevent monopolies by middlemen and the flooding of inferior quality seeds resulting in crop damage.

Sources added that trade regulations have been strengthened to give relief to local producers and hereafter all imported potatoes will be sold at the guaranteed price of Rs.38.50 .

PA parliamentarian for Nuwara Eliya district C.B.Ratnayake said that the two directives were expected to give a much needed boost to potato cultivators who have languished since their economy hit rock bottom last year.

Third world lobby to counter WTO threats

Eminent Sri Lankan economist, Dr Gamani Corea last week suggested the formation of a Third World lobby group or organisation to fight for the rights of developing nations, as the World Trade Organisation (WTO) sets in motion a series of agreements on trade and investment which may not suit developing countries.

His idea was floated at a Colombo seminar where he discussed recent macroeconomic trends in the world and pushed for a greater say for developing countries in the World Bank and International Monetary Fund (IMF) and other international bodies, which try to promote rich nation policies in the developing world.

"I don't know how this could be done because the richer nations have greater voting rights in these financial institutions. But there must be a way the Third World can articulate its own views in these two forums," he told a seminar on "Globalisation and South Asia: Retrospect and Prospect".

The two-day meeting, held at the Sri Jayawardhanapura University, was organised by the Sri Lanka Association for the Advancement of Science (SLAAS) to mark its 54th annual sessions.

Tracing the phases of development upto globalization, Dr Corea - whose preference for the middle path of development is well known - called for reforms to strengthen the World Bank and IMF so that they could play a bigger role in the Third World.

Development left to the private sector would not work because "private capital goes to where the profits are highest and not necessarily where the policies are best," he argued.

He said the United Nations and its agencies like UNCTAD - which Dr.Corea headed for many years -, initially placed a lot of emphasis on the development process but that process has been reversed and the UN spends less time on these issues, now.

Dr Corea said developing countries were taken unawares by the WTO agreements on investment and trade and did not have an agenda or plan to contest these arrangements.

"Developing countries need to put together an agenda and find a forum to articulate their views," he noted, saying developing countries would otherwise be swamped by these agreements, which are heavily in favour of powerful multinationals.

Dr Corea urged developing countries to develop their own analytical capabilities and set up networks to bring together the Third World on one platform.

Scamper for hampers

As the festive season draws near the hamper craze has hit the corporate world once again.

Hampers in various shapes and sizes containing an assortment of goodies (including alcohol) find their way into homes of clients, influential people and staff members.

Most corporates preferred to make their own hampers in- house. Supermarkets are also a popular choice. But now even department stores, liquor importers and linen shops are cashing in on the hamper fever.

The supermarkets are reporting a steady growth of around 10-15 per cent annually, but the rest, who are relative newcomers are recording 'positive growth'.

Cargills Food City is offering hampers ranging from Rs. 2,430 – Rs. 16,800. The Rs. 16,800 hamper is a vintage special and consists of 12 of the best bottles of liquor in town, a supermarket official said. They find that the food/assortment hampers move faster than the liquor hampers.

Elephant House hampers are priced from Rs. 500- Rs.10,000. They also sell custom-made hampers, where customers can select 10-12 items of their choice, the hampers being priced depending on the cost of the products.

Abdul Rahims is offering a range of 'householdware' hampers with prices ranging from Rs. 1,500 upwards.

The items in the hampers are changed to prevent repetition.

People prefer household items as they last longer than food and liquor items, Director Abdul Rahims, Bary Jaleel said. "The wives are also quite happy with it," he added. Kandygs are offering a range of linen hampers packed in handcrafted baskets.

Prices range from Rs. 1,000 to Rs. 5,000. The Rs. 5,000 hamper includes a tapestry as well.

Orient Lanka has a range of liquor hampers from Rs. 5,750 - Rs. 32,950. "The hampers not only have liquor, but things like imported chocolates," Sales Manger Mohan de Silva said.

Mind your business

By Business Bug
Hit back in anger

Mr. T. was an angry man when his votes were defeated in Parliament last week, largely due to the absence of ruling party members in the house.

But we may not have heard the last of this story, which may now have economic repercussions.

That is because the veteran trade unionist now wants to stage a 'protest strike' just to prove the point that he is still very much in command.

He has been told that such a move can only hurt the economy and embarrass the government but he insists the government is also partly to blame for the debacle at the debate.

For ten bucks

And news of another impending legal tussle:

When the green party pointed out that the little green coloured note issued by the big bank soon after the blues took over may in fact be illegal, many in the big bank saw red.

The flaw was in the constitution of the monetary board, because a secretary to the treasury had not been appointed on the date listed as the date of issue on the note.

Now, inquiries are being held in earnest at the Big Bank. And, instructions may soon go out to recall the note.

The greens, meanwhile are considering whether they could challenge the legality of the note in court. And, all this for ten bucks!

A rose by any other name…

The fair executive who directs information at a controlling bank that is central is said to be shifting focus to matters fiscal and directing policy and economic affairs. We wish her luck....

Enhancing local investment in the share market

This year has seen a tumble in the stock market. It has once again brought home important lessons about the vulnerability of our stock market, which should be addressed and remedied. The overriding lesson that our experience this year should teach us is that a share market dependent and driven largely by foreign investors is unstable.

For reasons beyond our control, prices could rise and fall. If local investors have a larger stake in our market such fluctuations dependent on decisions of foreign investors and fund managers could be mitigated to some extent.

Colombo's share market was over 60 per cent dependent on foreign investors till recently. Consequently, when foreign investors brought in funds, prices rose and local investors too joined in the bull rush. When foreign investors moved out of the market prices fell and local investors too began selling. Many local investors got themselves into financial difficulties. This aggravated the position still further.

More specifically, what happened this year was that with the crisis in East and South East Asia, the euphoria with emerging markets spirited away, particularly with respect to the Asian markets.

To make things much worse, when the United States imposed economic sanctions on India and Pakistan, fund managers moved out of South Asia as well. Fund managers viewed Sri Lanka as a part of South Asia, irrespective of the particular conditions in the country. That was the reason for the second wave of foreign investors' withdrawal from the Colombo Bourse.

At the time when Colombo's prices were falling sharply, there were no fundamental reasons for the fall in share prices. In fact, corporate results were good. Ironically when corporate results were improving share prices were falling. Blue chip company prices fell sharply.

The price earnings ratio in the Colombo market has now reached a very low figure and many shares are below book value. Excellent investment opportunities await share market investors. Yet the recovery in the Colombo Share Market has been quite minimal, rising about 15 per cent from the rock bottom it had reached over a month ago.

These changes in the Stock Market have also resulted in the foreign investment share reducing to about 40 per cent from the earlier 60 per cent. This is the opportune time for both the private sector and the large public institutions to make significant investments in shares. Both public sector institutions and private enterprises must look at the fundamentals of quoted companies and make decisions to invest more of their funds.

By such means the share of local investment in the share market would increase as well as support a revival in the market.

Otherwise, even if the market were to rise again to higher levels the same vulnerability would be inherent in our market. With the price earnings ratio currently prevailing, there should be no doubt that investments in the share market should bring good returns and at current rates of interest better returns than financial investments.

On the other hand, there can be no complete assurance that the market would rise or companies would perform well or better than today. Company performance would depend on the economic environment and international markets.

If a global recovery were to occur next year, then company performances, specially of those dependent on exports, would improve. There are also inherent dangers in the share market. Either an external shock or an internal economic dislocation caused by the security situation could upset the market.

Private investors and public institutions must take a view on what they expect would be the economic outcome, examine the fundamentals of quoted companies and make prudent decisions to invest. If they were to do so Colombo's stock market could offer better prospects to investors and be a useful instrument for the mobilisation of capital.

Perhaps the country is at the crossroads when it is unclear whether the Colombo Stock Market will become an important part of the country's capital market and be an instrument for financing economic development. At the moment companies can hardly look to the market to increase their share capital. An important means of financing the country's development is being by-passed.

Banks, businessmen and their ethics

In the final of the three-part series, "The Role of the Banker" the writer discusses the many ways that business people fudge accounts to hoodwink the taxman. Banks can smell them but seldom smoke them out.

pic 02In defence of the banks, I must state that most en trepreneurs do not take adequate steps to have their transactions properly recorded. This is a matter of integrity and if the banks have the confidence that they will not be duped, I presume the banks can take a different approach.

Majority of entrepreneurs need the services of an accountant only to 'cook the books' for income tax purposes.

Here some of our professionals too have to accept the blame and responsibility as contributing to this situation by wittingly or unwittingly colluding with the entrepreneurs to cheat the taxman.

Although there seem to be adherence to best accounting and reporting practices when it comes to public quoted companies, even some leading audit firms are lax when audits are done on private companies, who often are large borrowers.

Despite the fact that the government is held responsible for all the sins of the country, it appears that at every level there is reluctance to do one's duty as a citizen by paying the due taxes. Most will spend any amount and energy to avoid paying taxes

Sometimes, the reluctance of entrepreneurs to go to banks for financial assistance comes from the fear that information will be made available to the Inland Revenue Department from the banks.

In their eagerness to cheat the exchequer of taxes by maintaining false accounts, very often the entrepreneurs are not in a position to gauge the true status of their enterprises.

Sometimes 'trusted employees' even cheat them. On the other hand it might be their own brand of management.

The employees are often paid a marginal wages, perhaps half believing fact that they help themselves and therefore, all the energies are diverted to cheat the taxman.

Whether it is the uncivic mind behaviour and neglect of duties as a citizen, it is difficult to pinpoint this general aversion of our businesses to pay any tax. World over, it is a topic of discontent, but then the developed countries have measures to compel everybody to comply.

There appears to be a tacit acceptance of these anti-social habits amongst the banks. One bank manager very confidently told me that 'we know these accounts are not necessarily authentic, we have our own ways of establishing the true income'.

Most entrepreneurs have genuine grievances where they have often got into further trouble 'being frank with the bank'.

The often heard complaint is 'bankers are good at banking, what do they know of my business to tell me how to do it better?'

This is true, I have often been involved in many discussions where the bankers, in good faith, offers you advice on how to run your business, invariably citing the examples of how things are done at a different establishment of the industry. In business, what is good for the goose is not necessarily good for the gander.

They fail to understand that even among banks, they do not necessarily follow similar practices and processes, externally or internally. Even a very healthy business can get wiped out overnight and at the same time a complete write-off could have a miraculous recovery.Banks might often quote 'market information' to confront a client; very often gossip picked up at a cocktail party or 'news' planted by interested parties.

They do have a genuine problem, which I called earlier as 'question of integrity'. Clearly there is an urgent necessity for all parties to accept their individual responsibility and have better communication and transparency.

It goes without saying that the question of integrity equally applies to bankers too, they also should respect the confidence placed in them. Even though the 'brawn' may have a say in ensuring prompt settlement within the 'informal lending sector', I am convinced a majority of these borrowers would honour their 'debts'.

Banks would never be able to compete with the informal sector, although the latter charges exorbitant interest costs.

This inability of the banks to rise to the challenge leaves society with a heavy cost, as it is no secret that 'ill-gotten wealth' stimulates the growth in corruption and social evils. 'Loan Sharking' is as 'profitable' as drug dealing or smuggling!

It is apparent that the demand for 'credit' cannot be met by the existing banking system and practices.

However, by employing the advances made in Information Technology and innovative techniques, the banks may be able to free a good percentage of the hapless victims.

They have to be more open and take the leadership in compelling the other sectors of society, which too are equally threatened by the activities of the 'bad boys' to chip in for the common cause. In other words, engage in the task of society building by encouraging ethical business practices.

My friend, the fish-vendor, knew the importance of paying his 'staff' adequate living wages. If he continued to pay sub-standard living wages, he is aware that they would resort to cheating him in order to exist.

A businessman who avoids taxes, GST and probably exploits his staff/workers by underpaying and not contributing to EPF/ETF is not a one who deserves bank facilities to carry on business.Such a business will also not hesitate to cheat the customer. Added to that he will be able to compete with well-established legitimate businesses.

One can be absolutely certain that this kind of business is at the forefront of proliferation of corrupt practices within society; they would not hesitate a second to offer a bribe to get undue favours done.

I think it is incumbent on the banks to verify these facts, before extending credit. After all, the banks do lend what they borrow from the public and it is not ethical to extend financial support to individuals/institutions that are anti-social. They can ask the auditors to report on such matters and hold them responsible for supplying non-substantiated information.

I would suggest that the banks should build into their calculations, a grading system for businesses that adhere to ethical practices.

The insistence on ethical and good employer practices is now widely adhered to by buyers from Western Countries, who will scrutinize the accounts and records of the suppliers, to ensure that things are done correctly and in accordance with acceptable norms.

Most of the banks now insist on having a qualified accountant in charge of the finances, whenever a loan/facilities involving large amounts are granted. However, the path to bankruptcy is littered with many businesses that were served by well-established names in leading accountancy bodies!

It goes to show that having scores of professionals in managing a business is no guarantee of success.

I believe this is one aspect that banks should bear in mind, when they start telling businessman how to manage their enterprises.

I am personally aware of a very senior professional accountant who faced prosecution on criminal charges, simply because he was loyal to the director, more than the institution.

The much-praised business-acumen or the entrepreneurship, in modern jargon, strategic management, is what the banks should look for amongst a prospective borrower or within the corporate culture.

Bankers and other professionals would know that entrepreneurs who take responsibility for their actions do not exploit the employees, fleece the customer and are conscious of their social duties, are the kind that should be carefully nurtured and guided to establish themselves better.

Such a business community could be the backbone of a strong and resilient economy.

It is areas of quality, productivity that should be encouraged.

The banks should also be aware that out of their reach there are millions of daily wage earners and they too invest in gold jewellery, etc., not necessarily for adornments but also as 'wealth that can be used in an emergency'.

That shows a percentage of their income could be profitably diverted to savings. Therefore, although my gardener may reek of y'days 'kassippu' when he comes to the bank, nevertheless he should not be denied a 'book' to save his excess income!

The writer Ananda S. Wijesuriya is an enterprise consultant with over 30 years experience in commerce and industry. His wide and varied career has taken him to diverse fields from transacting with retailers at Anamaduwa, to precious metal trading with Swiss Banks in Zurich to Investment Portfolios with Merril Lynch of New York.

Call for more Czech trade

Czech businessmen are keen to invest on power projects in Sri Lanka. In view of the current balance of payments which is in favour of Sri Lanka the Czech Republic, should take steps to increase the exchange of merchandise between the two countries, Commercial Counsellor Czech Republic in New Delhi, Bohuslav Zavadil said.

The trade figures between the two countries amounted to US$ 6.2 mn between January to September 1998. Sri Lanka exported US$ 3.8 mn worth of goods, whilst Czech Republic exported US$ 2.4 mn to Sri Lanka. From this is evident that the mutual trade is far below the potential of our countries and we have to look forward how to increase the exchange of merchandise," Mr. Zavadil said addressing the members of the Ceylon Chamber of Commerce on business opportunities available with the Czech Republic.

Mr. Zavadil was joined by Joseph Penkava (Chairman/CEO JHP) and Martin Neborak (CEO Family Credit Union Bank Czech Republic).

At present, Sri Lanka imports machinery and transport equipment, synthetic rubber, reclaimed rubber, paper and paper board, textile yarn, iron and steel products, textile and leather machines, electrical apparatus, hand tools and machines, office machines and lighting products.Sri Lanka exports include food products, handicrafts, fruits and nuts, tea, spices, natural rubber, crude vegetable material, travel goods, handbags and readymade garments. He spoke of Sri Lanka's tourist potential to attract the young and rich Czech entrepreneurs who are ready to spend a lot of money for holidays in Sri Lanka.

Ex-NDB chief goes to teach: his love

National Development Bank Chairman Dr. Nimal Sanderatne is leaving the bank at the end of this month to take up a teaching appointment at the Post Graduate Institute of Agriculture in Peradeniya.

"I am going back to what I love most - teaching. Also the idea of living in the hill country is an exciting prospect," Dr Sanderatne told The Sunday Times Business.

A reputed economist, Dr Sanderatne's term as NDB chairman ended in October this year but he was asked to stay on up to December 31 to enable government authorities to find his successor.It is still not known who the new NDB chairman will he.

Dr Sanderatne, who plans to teach agriculture economics, has been involved in teaching assignments in the past. A former director of research at the Central Bank, he was a visiting lecturer at the Kelaniya University during his Central Bank days. He has also taught at Wisconsin University in the US.The NDB chairman is also a former chairman of the Bank of Ceylon and a former senior fellow at the Institute of Policy Studies.

CSE closes early

The Colombo Stock Exchange informs the general public that trading on December 24, 1998 will commence at 9.00 a.m. and close at 10.30 a.m. CDS counters will be closed at 10.30 a.m.

Oracle looks to oust Microsoft

Oracle and Sun Microsystems, in a direct assault on their mutual archival Microsoft, will announce on Monday they'll work together on a new type of computer that needs no operating system, industry sources said.

Seeing Microsoft (MSFT), the world's largest software company, mired in its antitrust case with government regulators, its competitors — Sun, Oracle, America Online, and others — feel bold enough to circle and attack Microsoft more directly.

If this latest assault from Sun and Oracle is successful, it could obviate the need for the software giant's Windows NT operating system, designed for heavy-duty computing. NT competes primarily with Sun's (SUNW) own brand of the Unix operating system, called Solaris, and Hewlett-Packard's (HWP) HP-UX.

"What Oracle and Sun are doing here is cutting out Microsoft," said Rob Enderle, an analyst with market research firm Giga Information Group. "That would get them both excited and is reasonably compelling."

On top of that, Enderle said, a recent survey conducted by his firm showed dissatisfaction with Microsoft was running high among its corporate customers.

"Dissatisfaction is extremely high with Microsoft, much higher than with anyone else," Enderle said. "It looks like the market might respond very favorably to this."

Officials for Sun and Oracle (ORCL) declined to comment. A telephone conference call is scheduled for 10 a.m. PST Monday with Oracle chief executive Larry Ellison and Sun chief executive Scott McNealy.

When the products would be available was not clear.

Ellison, in a keynote address in November at the mammoth Comdex computer trade show in Las Vegas, outlined his plans to bundle Oracle's latest Internet-friendly database, 8i, on computers that would bypass the need for Windows NT and any other operating system.

He said then Oracle would ship products by March, adding that his company was already in discussions with Sun, Hewlett-Packard, Compaq Computer (CPQ), and Dell Computer (DELL) about supplying the hardware for the deal.Oracle's database now runs on top of Sun's operating system, NT, and others. Although the new computer will have no operating system, the computers and Oracle's software would still require a "microkernel," essentially a tiny piece of software to help Oracle's database software talk to the hardware.

Ellison did not specify what type of kernel the company would select, but candidates include kernels from operating systems software such as Linux, HP-UX, Solaris, System 10 from Apple Computer (APPL), FreeBSD, and NetBSD.

Enderle said Oracle would most likely pick Sun's kernel, because it already has experience working with it, it is more powerful, and it's easier to make it work in computers with multiple microprocessors-the brains of the devices.

"Sun and Oracle have united to say you don't need Bill Gates and Microsoft," said David Wu, an analyst with ABN Amro Chicago in San Francisco. "You don't need more than a microkernel" to run Oracle's database. Reuter

Dawn of a new era

At a historic moment, mission commander Robert Cabana and Russian Cosmonaut/mission specialist Sergei Krikalev swung open the hatch between the Endeavour and the First Element of the International Space Station on December 10.

The STS-88 astronauts completed the first steps in the orbital construction of the International Space Station. In all, it took Jerry Ross and James Newman three space walks totalling 21 hours and 22 minutes to complete the initial assembly of the station.

International Space Station flight controllers at Mission Control, Houston and at the Russian Mission Control Center in Korolev, outside Moscow, will now spend the next five months monitoring the station's systems and awaiting the launch of Discovery on the STS-96 mission. STS-96 will see a multinational crew of seven astronauts return to the station in a logistics re-supply flight (2A.1), which will include at least one space-walk to attach additional hardware to the new orbiting facility.

The Space Shuttle and two types of Russian rockets will conduct 45 missions to launch and assemble the more than 100 elements that will comprise the completed International Space Station. In all, 460 tons of structures, modules, equipment and supplies will be placed in orbit by the year 2004.

The International Space Station continues the largest scientific co-operative program in history, drawing on the resources and scientific expertise of 16 nations.

More Business *Customised over the counter *Power drunk battery *Reach out and fleece someone *Farewell, Milkman *Plantations companies - a slow growth *Business Briefs *From Citibank to NDB's DGM

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