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20th June 1999

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Globalisation: reckon the deprived

A self-proclaimed radical-integrationist-social-safety-netter, Thomas Friedman believes that globalisation should include investing in and deepening the "social trampolines and safety nets that protect the havenots, know nots, and left-behinds."

Friedman, a foreign affairs columnist for the New York Times and a Pulitzer Prize winning author, was the keynote speaker Monday morning at the opening of a major social protection conference at World Bank headquarters in Washington. The two-day conference, on Strategies for Improving Social Protection Policies in Latin America and the Caribbean, is organized by the World Bank Institute, the Bank's Latin American and Caribbean Region, and the Human Development Network.

Globalisation, said Friedman, is the integration of capital, technology, and information across national borders, in a way that is creating a single global market. It is the international system that replaced the Cold War system.

"If the defining perspective of the Cold War world was division, the defining perspective of globalisation is integration," said Friedman, borrowing from his recently published book on globalisation, The Lexus and the Olive Tree. "The symbol of the Cold War system was a wall, which divided everyone. The symbol of the globalisation system is a World Wide Web, which unites everyone. The defining document of the Cold War system was The Treaty. The defining document of the globalisation system is The Deal."

Explaining why he is a social-safety-netter, Friedman said that "if you are not a social democrat, you will not maintain the consensus you need." If the poor can be protected, then we will be doing God's work. That is the World Bank's mission."

Forget the concepts of "developed" and "developing world." According to Friedman, "there's now just the fast world those who have the operating system and the software applications and the slow world," those who don't have it and choose not to acquire it.

The "operating system," as Friedman has dubbed institutions, governance, and the rule of law, are prerequisites to successfully running the software: free market economies. Without the right operating system, economies will melt down. He pointed to Russia, Thailand and other countries that tried integrating without the right operating system, spurring the global financial crisis.

Latin American and Caribbean economies did not escape unscathed. Indeed, financial upheaval, the plunge in commodity prices, the Banana Trade crisis and natural disasters have battered the region's economies even as they have opened up and sought to integrate. It is against this backdrop, in a region marked by high levels of inequality between rich and poor the poor making up about one-third of the region's population that the role of social safety nets becomes self-evident.

World Bank Managing Director Sven Sandstrom echoed this concern for the poor. Sandstrom said the Bank has increased its commitment to social protection over the years and lends more for social protection to Latin America than for any other region.

Xavier Coll, director of human development in the Bank's LAC region, said the poor are much more at risk in crises, since small changes in income can easily put them and their household below the subsistence level."Social protection programs, in a sense, are an attempt to insure against these risks," said Coll.

Social protection specialists from all over the region are attending the conference workshops on everything from labor issues to pension reforms and social investment funds. Participants are from Argentina, Belize, Bolivia, Brazil, Barbados, Canada, Colombia, Costa Rica, Ecuador, El Salvador, Guatemala, Guyana, Haiti, Honduras, Jamaica, Mexico, Nicaragua, Panama, Paraguay, Peru, St. Lucia, Trinidad and Tobago, Uruguay, Venezuela, Sweden and the US.

The World Bank's Social Protection Group, which helped organize this week's conference, shapes the Bank's policies to help vulnerable countries better manage risk. This is done through: Social Funds: agencies that channel grant funding to small-scale projects to help poor communities design and implement their own infrastructure projects.

Labour Market Interventions: helping governments and individuals to meet the technological challenges of a changing world through Vocational Education

Training programs, improvements in the functioning of labor markets and active interventions to help those that are marginalised.

Pensions: helping governments take care of their older and aging populations through improvements in private pension provision, mandatory savings and public provision.

Social Assistance: programs designed to provide a "safety net" to the poorest population groups, and/or those needing assistance after economic downturns, natural disasters, or other events that pose major risks.

More numbers for the millennium

With the next millennium not far away, Asanga Colonne has come up with a novelty - house number plates. The house number plates are handcrafted to last 100 to 200 years, or even more, Mr. Colonne is emphatic.

On the plate is the number of the house and the legend: 'Millenium 1-1-2000'. The plate is made from high quality aluminum, rust proof. It comes in two colours; black and gray. But you can paint it in whatever colour you like.

The numberplate is sold in the market for Rs. 360 to Rs. 390, and will be available at leading bookshops, supermarkets and can also be ordered at request.

"The prices have been kept to the minimum as the millennium is a unique event that only a few people in a generation will experience, allowing many to purchase it," he said.

As the product is limited and will be made according to a unique pattern, the customers are requested to order beforehand due to the fact that each individual number has to be casted in the product.

AMS Colonial Casters who manufacture the plates are also exporters of various aluminum products to the European market.

GSL Software eyes American Market

Asia Capital has set up a software development company which will cater to the US market.

Global Software Labs (GSL), a BOI company, is a joint venture between Asia Capital, US Venture capitalist and an ex-Microsoft Executive.

GSL, which commenced operations this month, is headed by ex-Microsoft Executive Dr. Emerick Fernando.

"We want the company to be the biggest software company in Sri Lanka within two years," GSL CEO, Dr. Fernando said.

"We believe in providing value added software solutions from the 'cradle to the grave', he said.

GSL is already involved in their first project of making a software solution for an American Insurance company with an eight-engineer team.

Over the past few years the investment bank, Asia Capital has acquired significant stakes in companies with excellent growth potential where it can add value to the business.

"I believed Asia Capital's investment in GSL to be one of the most exciting and significant investments the bank has made this year," Asia Capital CEO Dirk Flamer-Caldera said.

The still infant Information Technology industry in Sri Lanka had the greatest growth potential for the next decade, he said.

The company will focus on developing line-of-business applications for its overseas customers, and will focus on Microsoft based technologies.

One of Dr. Fernando's goals is to have GSL adopt and benefit from the best of the breed software development practices used at Microsoft. This allows Global Software Labs to build quality solutions that are on par with those from the best software companies in the world, he said.

Cheaper Ceylon tea worries Kenya

Mombassa traders have expressed concern over cheaper plainer Ceylon teas hitting the market, and undermining prices at the Kenyan auction.

Prices were generally higher at Kenya's weekly tea export auction at Mombassa due to increased buying by Pakistan, traders said. Ex-estate teas gained marginally in Mombassa auctions mainly due to good inquiries from the UK and some of the middle eastern countries.

But record crop levels achieved by Sri Lanka due to wet weather conditions has resulted in a few cheaper teas coming into the market. This has some traders worried because they feel such a trend would give the reputed Ceylon Tea a bad name.

Sri Lankan plainer teas in the previous week's auctions gained about Rs. 9.08 over the previous week, Asia Siyaka Tea Brokers said. This is a drop of over Rs. 25 over the same period last year.

This trend is anticipated as a temporary situation and officials feel that Sri Lankan teas will continue to maintain quality. Kenyan authorities too have said that the plainer teas from Sri Lanka did not appear to have had a long-term damaging effect on the industry.

Tea factory owners will disregard new formula

The Private Tea Factory Owners (PTFOA) in a recent circular, advised its members to disregard a Tea Commission circular on the bought leaf formula.

PTFOA says their Association's Legal Council specifically informed them that there was no provision in the law for the Tea Commissioner to impose these regulations.

The first of the circular referred to, was put out by the Tea Commissioner on March 23 stating that the green leaf out -turn percentage was changed. Another circular was put out on April 29, stating that only the formula was amended and no other changes were intended.

The amendment in the circular pertaining to the green leaf out-turn percentage was changed from 22.22 per cent to 21.5 per cent for all months of the year as per study conducted by the Tea Research Institute.

The circular also stated that all registered manufacturers and licensed green tea dealers who fail to comply with the above directions will be dealt with appropriately in terms of the Tea Control Act No. 51 of 1957.

Twenty two per cent of the weight of the green leaf was deducted as the weight of water in the leaf all year round since the 1980s'. Before this date it was 21.5 per cent for six months and 22.22 per cent for the other six months.

The President of PTFOA, N. B. H. Pilapitiya said the growers selling tea to them did not have a problem with the additional deductions made for surface moisture in the green leaf. He said, it was only a few factory owners who actually defaulted on payments and were unfair to the farmer. "Nobody is perfect," he said.

The change in the formula was brought about after the Tea Smallholders who felt the formula at the time was unfair made an appeal to the present government.

President of the Tea Smallholders Association Rohan Illangaratna said, that though the smallholders were poor, they were more sensible and patriotic than the factory owners and that their intentions were to safeguard the tea industry.

According to the circular put out by the Tea Commissioner, only the weight of containers should be reduced and weight of leaf to the last 250 grams should be taken into account at each weighing and no deductions should be made for wet leaf.

The matter is being referred to the Attorney General's Department.

GDP growth fell by 2.7% from 1998:CB

The Sri Lankan economy showed a GDP growth of 2.7% during the first quarter of 1999, compared to a 5.7% growth over the corresponding quarter of 1998, while, GNP grew by 2.5% during the 1999 first quarter, a Central Bank release said. The manufacturing sector recorded a 3.3% increase during 1999 mainly due to a 1.8% increase in factory output, which had grown by 9% during 1998.

The decline was largely due to a drop in foreign demand due to depressed world economic situation. It had adverse effects on rubber products, coconut and coconut fibre products, ceramic goods, food and beverage products. The food beverage and tobacco industries grew by 3.2% supported by a rise in domestic demand.

The export oriented apparel industry grew by 4.7% due to a greater diversification to non quota garment exports and higher value added in garments.

Output in chemicals, rubber goods and petroleum product category declined by 2.1% due to a decline in production of rubber goods and a decline in petroleum products owing to the closure of the refinery for maintenance repairs.

Processing of tea, rubber and coconut kernel products recorded a growth of 10.5%, due to the production expansion of tea by 24.3% and rubber by 5.4%. however, the output of coconut kernel products declined by 5.2%.

The services sector recorded a 2.9% growth during the quarter, with the impetus mainly stemming from the transport and communication sub sector, which recorded a 8.5% growth, in turn contributing 34% to overall GDP growth. The communication sub sector continued to expand recording a growth rate of 49 per cent

The transport sector grew by 2.5% largely due to the expansion in road haulages associated with production growth. The port services declined by a marginal 1.1% due to a drop in cargo loaded and unloaded in the Colombo port. The volume of containerised cargo handled declined by 2.6% due to a decline in trans-shipment handling.

Banking, insurance and real estate subsector grew by 5%, while the agriculture forestry and fishing sector recorded 8% growth.

Production in tea, rubber, minor export crops, vegetables and fish recorded an increase. Production in paddy, coconut, subsidiary food crops, animal husbandry products, sugar cane and tobacco have recorded a decline.

Tea production in all three elevational categories increased leading to an overall growth of 24.3%.

Switzerland sells gold

Switzerland's plan to create a huge humanitarian fund stumbled on Friday when a rare alliance of Left and Right united to smash a constitutional amendment that would help finance the foundation with gold sales.

Despite the embarrassing setback in parliament, the Berne government and the Swiss National Bank say they can still sell 1,300 tonnes of excess gold reserves once specific legislation authorising such sales is in place early next year.

But the doomed amendment would have allowed the central bank to transfer gold reserves to third parties like the fund, which Berne proposed in 1997 as a way to lift the neutral country from accusations that it cynically profited from World War Two.

The SP objected to the new amendment's mandate that the Swiss National Bank make fighting inflation the primary goal of monetary policy. Party officials said this reflected outdated monetarism that fuelled unemployment.

The SVP, on the other hand, disliked the fact that the upper house's version would let the central bank hand over 500 tonnes of gold to the proposed Solidarity Foundation to aid victims of poverty, human rights abuses and catastrophes. The populist party wants to put all the proceeds of gold sales into Switzerland's state pension fund. Berne has made clear the foundation will not aid individual Holocaust victims, but many Swiss populists still see it as caving in to foreign extortion, especially from Jewish groups, over Switzerland's wartime role as a financial centre with close ties to Nazi Germany.

The Swiss National Bank reiterated that the vote did not derail plans to sell 1,300 tonnes of gold reserves once enabling legislation was in place, probably early next year. REUTERS

New cell tariffs from August

Cellular tariffs are expected to tumble under a recent telecom watchdog directive.

The determination reduces tariffs on calls originating from cellular phones to Sri Lanka Telecom (SLT), and permits mobile operators to keep 20 per cent of the revenue on international calls originating from cellular networks to SLT. The determination will come into effect from August 1, 1999.

The directive also permits calling line identification (A-number information) and provisions for the establishment of points of interconnection and related payments.

The Telecommunication Regulatory Commission (TRC) unveiled a two part decision on the mobile interconnection agreement and said the controversial Calling Party Pays (CPP) decision was put on hold pending a public hearing.

Since inception of cellular services, cellular operators have had to pay the full national rate for every call handed over to their networks from SLT.

Mobile operators who now pay SLT Rs. 3.30 per minute during the peak period will pay only 60 cents per minute under the new agreement.

Given the nature of some of the existing cellular tariffs which directly pass on the interconnect charges and the highly competitive nature of the industry, we expect most of the resultant cost savings will be passed on to the mobile subscribers, Director General TRC, Prof. Rohan Samarajiva said.

The cellular industry has been lobbying the TRC to introduce CPP, as a method of boosting cellular tariffs.

But, Prof. Samarajiva said, CPP would be introduced once a public hearing on issues such as affordability and transparency of charging CPP is debated. The public hearing will be completed within a nine month period and necessary preparations to implement CPP by end 2000 will be made should the TRC decide so, he said.

In order for CPP to be implemented, all originating networks must provide itemised bills - which would be mandatory end next year.

CPP is best done in parallel to the introduction of a new national number scheme, which is also expected next year.

In the interim, all operators are required to participate in a consumer awareness and education campaign for mobile subscribers (who benefit from CPP) and of the fixed access subscribers (who will have to pay additional charges to reach mobile numbers).

TRC's decision to seek public input prior implementation of CPP is one that has been taken in other countries as well. The recent decision by Federal Communication Commission of USA to introduce CPP is to be finalised only after public comment.

Shell ups LP gas prices

Gas, increased the price of liquid petroleum gas by three percent last week.

The price increase has been agreed between the Sri Lankan government and Shell in line with the privatisation agreement.

The price of LPG in Sri Lanka is one of the lowest in the world, Shell Gas said.

In 1996, following the privatisation of the Colombo Gas Company the international price (contract price) of LPG increased by a staggering 100 per cent. Shell was unable to pass this price increase to local customers due to government controls on LPG pricing. The impact of the price increase therefore had to be borne by the company, Shell Gas said.

The international price of LPG was considerably lower in 1998. However, Shell did not change its prices during the last 18 months. Under the terms of the privatisation agreement with the government, Shell can increase prices annually by 10 per cent based on LPG prices at the time of privatisation. At the time of privatisation the cost of a 13 kg cylinder was Rs. 250.

The price of LPG is determined by factors such as inflation, the devaluation of the rupee against the dollar and the cost of importing and transporting LPG. "The last three years has seen inflation rise by 33 per cent, a 27 per cent devaluation of the rupee and the increases of world prices for LPG by 17 per cent," the company said.

Printer's devil

Last week's caption story quoted the prices of the Alcatel One Touch Com as Rs. 15,500, where as it should have read as Rs. 35,000+ taxes. We regret the error.

Travel agents meet in Bangkok

The Travel Agents Association (TAASL) will hold its 24th AGM and second convention at Bangkok, Thailand on the 26 to 28 of this month.

President of the Association Udaya Nanayakkara said, that moving the meeting overseas was the first step towards the goal of making a truly global association.

He said, that this would provide the opportunity not only for interaction between Sri Lankan Travel agents and tour operators, but also between them and their counterparts in other countries.

The convention includes a series of panel discussions on the subjects related to travel, tourism and aviation. Around 150 delegates from here and the region are expected to comprise the delegation.

Telecom briefs

Bulk discounts for SLT users

Sri Lanka Telecom (SLT) will give bulk discounts up to 15 per cent to large customers, the Telecommunication Regulatory Commission (TRC) announced last week.

The discounts will apply to the total bill of a customer and not for the bill per individual line.

Customers who generate more than Rs. 15,000 in revenue per month will be eligible for discounts, beginning from 5 per cent.

SLT officials said each customer will be given one account number under which the customer can have all his telephone lines. The decision is expected to help nearly 40,000 SLT's business subscribers.

However, officials were not sure whether re-sellers like payphone operators and communication bureaus will be eligible for bulk discounts.

TRC said SLT's bulk discounts was purely a business decision to reward its customers.

Telecom operators cess re-structured

Telecom operators will pay a uniform cess of 0.3 per cent of turnover under an amendment to the TRC Act.

As part of their licence agreement, operators are required to pay a cess to the TRC.

The cess charge has differed from operator and in a number of cases, especially in the case of Internet Service Providers have been charged a cess of 1 per cent of turnover.

New Internet service providers

In a bid to popularise the internet and to enhance quality and price competitiveness, the TRC has issued licences to several new Internet service providers: Project Consultants International (Pvt.) Ltd., MTT Networks (Pvt.) Ltd., DPMC Electronics (Pvt.) Ltd., Celltel Lanka Ltd., Victrasoft Services (Pvt.) Ltd. and Dynaweb Services (Pvt.) Ltd.

The TRC has approved internet tariffs for two new service providers, Victrasoft Services and Dynaweb Services.

Home cell concept by Dialog

Dialog GSM (MTN Networks) will introduce a new mobile tariff where calls will be charged at a reduced rate, for calls generated from their home zones, The Telecommunication Regulatory Commission announced last week.

Under this novel tariff scheme, a subscriber in a designated cell that is served by a single base station without overlap, will be able to sign up for home cell tariff.

The rental will be lower, and the call charges for calls originated and received while the subscriber is within the home cell will be lower than the normal tariffs.

However, the subscriber will have to pay higher than normal call charges when making or receiving calls from outside the home cell.

The proposal seems to be biased towards the rural areas since most of these areas use very few transmitting towers.

Whereas in the highly urban areas, there are many tower's transmission overlapping one-another. Dialog GSM too proposes to offer the 'home cell' concept primarily to rural subscribers. Subscribers in densely covered areas such as Colombo will not be eligible for home cell tariffs because multiple base stations with overlapping coverage serve these areas.

At present, Britain is the only other country providing this service.

Experts in the field feel that if this system is introduced, Sri Lanka's already accelerated growth will get turbo charged.

Present statistics show that Sri Lanka has over 180,000 mobile phone users, connected to the four mobile phone operators.

The sector recorded a growth of over 52 per cent in 1998 surpassing the growth recorded by fixed phones.

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