26th – 02nd May 2010 FCCISL News Alert Weekly Business Highlight 26th – 02nd May 2010
Content Page 1. DEVELOPMENT ECONOMICS 1.1 More infant deaths caused by the global economic crisis 05 1.2 Prospects for deeper South Asian economic Integration improves-IMF 07 1.3 Asia to lead global economic recovery, inequality persists 09 1.4 Sri Lankans still trust the last word! 11 1.5 Mideast economies to grow 4.5%: IMF 14 1.6 Post-crisis global environment likely to be more challenging – ADB 15 1.7 Depoliticizing Foreign Service: Key challenge for new minister 16 1.8 Ceylinco Life stands out with top-class services 18 1.9 Sustainability ‘is impossible if Lanka continues with Current energy policies’ 20 1.10 SAARC to prepare electricity roadmap 25 1.11 Policy Challenges in the post-conflict situation 27
2. INVESTMENT 2.1 Public investments growing 31
3. MANAGEMENT 3.1 What good HR can do for a firm and the CEO 33
4. TRADE & MARKETING 4.1 Ex-estate teas meet fair demand 36 4.2 You must become a corporate athlete! 38
5. MONEY & BANKING 5.1 Private sector credit grows, interest rates down 43 5.2 How the emerging world can deal with surging capital inflows 45 5.3 Five billionaires who live below their means 47 5.4 Taxes in Sri Lanka - Value for Money? 49 5.5 Abrogate SBA? Careful thought needed first 50 5.6 Consider possible repercussions before ending SBA 54
6. TOURISM 6.1 Heavy trading in tourism sector shares 58 6.2 Tourism set to be the fourth highest foreign exchange earner 59 6.3 Promoting Tourism in South Asia 60 2 FCCISL News Alert Weekly Business Highlight 26th – 02nd May 2010
7. EXPORTS 7.1 Export growth to reach us $ 8b in 2010 64 7.2 Natural rubber business forecasts improved outlook 65
8. STOCK MARKET 8.1 Bourse continues shining momentum 70 8.2 Stronger currency, stronger stock market 72 8.3 Pause in record breaking run on the Colombo bourse 74 8.4 Hotel sector shares gaining strength 75 8.5 Speculation of an exit by a bank Overseas Realty to the fore 76 8.6 Sri Lankan stocks close 0.82-pct up 77
9. LABOUR 9.1 International Labour Day and the plight of Migrant domestic workers 79
10. BUSINESS 10.1 Accountants for business - a challenging role ahead 83 10.2 Past two years was very difficult for most businesses – Singer Chief 85
11. ENVIRONMENT 11.1 Environmental awareness one of the major contributing factors 91 11.2 Importance of balancing environment and development 93
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Development Economics
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The Island – April 26, 2010 MORE INFANT DEATHS CAUSED BY THE GLOBAL ECONOMIC CRISIS DONOURS NEED TO HONOUR AID COMMITMENTS, TRADE REGIME MUST CHANGE
By Devan Daniel in Washington DC
The Global Monitoring Report 2010 released by the International Monetary Fund and the World Bank says there would be 260,000 more infant deaths than previously estimated and 53 million more people would remain in extreme poverty by 2015 because of the adverse conditions caused by the global economic crisis and senior officials of both multilateral institutions say efforts need to be doubled if the Millennium Development Goals are to be achieved, calling for improvements in the international trade regime and development aid.
"The global economic crisis has slowed the pace of poverty reduction in developing countries, and is hampering progress towards the Millennium Development Goals. The crisis is having an impact in several key areas relating to hunger, child and maternal health, gender equality, access to clean drinking water, and disease control and would continue to affect long term development prospects well beyond 2015," the report warned.
As a result of the crisis, 53 million more people would remain in extreme poverty taking the total up to 920 million people by 2015, although lower than 1.8 million people in 1990. "Based on these estimates the developing world is still on track to achieve the first MDG of halving extreme poverty from its 1990 level of 42 percent by 2015".
The target of halving the proportion of people suffering from hunger for 1990 to 2015 appears very unlikely to be met as over a billion people struggle to meet basic food needs.
Malnutrition among children and pregnant women has a multiplier effect, accounting for more than one- third of the disease burden of children under age five and over 20 percent of maternal mortality, the report highlighted. According to World Bank projections, for the period from 2009 to the end of 2015, an estimated 1.2 million additional deaths may occur among children under five due to crisis related causes.
More infant...
Justin Lin, World Bank Chief Economist, told journalists at the launch of the report in Washington that by 2015, there would be 260,000 more infant deaths than previously estimated because of the global economic crisis while 350,000 more children would not be able to complete their primary education.
About 100 million more people would not have access to safe drinking water.
"The global community must continue to support developing countries. Multilateral cooperation in trade must be strengthened. The Completion of the Doha round is important in the aftermath of the crisis, because it would help governments resist protectionist pressures and keep markets open as expansionary policies unwind," it said. 5 FCCISL News Alert Weekly Business Highlight 26th – 02nd May 2010
The report said there was a need to go beyond the Doha Development Agenda calling for broadened cooperation between governments on issues of climate change and energy security.
"The crisis has also revealed the importance if strengthening monitoring and public reporting of government measures to increase transparency in the trading system, namely Global Trade Alert, Global Antidumping Database and Word Trade Organization monitoring reports.
Although recent data indicate that trade finance is recovering, the report said a mechanism is needed to collect data and monitor the market systematically and reliably to assess how current interventions influence the supply of credit and trade flows.
Trade logistics of developing countries need more support.
"Lowering trade costs through better trade regulations, trade logistics, and infrastructure can make a critical contribution towards development. The second global review of Aid for Trade in Geneva in July 2009 found that donors were offering more and better aid and that cooperation between developing countries is engaging new partners.
"Expanding aid for trade as laid out in the 2005 World Trade Organization Ministerial Meeting, should continue to be a priority and much more such aid needs to be directed to low income countries which receive only about half the total," the joint IMF- World Bank report said.
Scale up aid…
The report said there was an urgency to scale up aid to low income countries and that developed countries were slow to honour their aid commitments to the full.
"Current donour spending plans leave a shortfall of US$ 14 billion in commitments to raise aid by US$ 50 billion by 2010. The G8 commitment to double aid to Africa by 2010 has yet to be reflected in core development aid to the region. Aid to Africa has grown 5 percent annually since 2000, but much of it in the form of debt relief, humanitarian or emergency assistance, not new finance. Reaching the target requires a further increase of US$ 20 billion. Donour spending plans indicate that only an additional US$ 2 billion is programmed, leaving a gap of US$ 18 billion," it said.
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The Island – April 26, 2010
PARANOIA DOES NOT PREVENT TRADE, LANKA SHOULD GO FOR CEPA WITH INDIA PROSPECTS FOR DEEPER SOUTH ASIAN ECONOMIC INTEGRATION IMPROVES-IMF
By Devan Daniel in Washington DC
The International Monetary Fund (IMF) believes that South Asia’s prospects for a regional grouping have greatly improved and that prospects for deeper economic integration within the region and with the rest of Asia would continue to improve in future. Asia is leading the global recovery and rebounded much faster than more advanced economies in the world where unemployment is higher, household balance sheets are impaired and bank credit remains anemic, said the Director and Deputy Directors of the Asia and Pacific Department of the IMF at a press conference in Washington DC on the sidelines of the IMF- World Bank annual sessions.
Asia’s economy is expected to grow by about 7 percent in 2010 and 2011, while China and India are expected to record economic growth rates of 10 percent and 8.8 percent respectively. Low income countries are estimated to grow at much lower levels. The Island Financial Review raised a question as to the importance of South Asia’s attempt to form a comprehensive regional grouping, which the SAARC process has been trying to do for the past few decades but failing to make much headway, which would ensure equitable growth in the region. Today, South Asia has two faces; one highly sophisticated with access to international markets and the latest technologies and the other languishing in poverty.
"There has been not much progress (in forming a comprehensive regional grouping) until now, but prospects are very good right now. The region is also home to a rapidly growing India. India is also integrating with the rest of Asia. So prospects for South Asian economies to integrate within the region and also with the rest of Asia have greatly improved and would continue to do so," Kalpana Kochlar, Deputy Director, IMF Asia and Pacific Department said.
Although Indo-China trade has been skewered towards Chinese imports, Ms. Kochlar believes that trade between the two economies have grown rapidly over the years. The Head of the IMF Asia and Pacific Department, Anoop Singh, said that the IMF was in favour of such regional groupings. "We put a lot of priority in the growth of regional institutions, organizations and communities across the world. And we are supporting to the extent we can civil society grouping as well in East Asia and South Asia. We are very much in favour in the developments of such regional groupings and doing what we can to support them," Singh said.
Right throughout the spring sessions, the IMF has been lobbying for measures that would address global economic imbalances. This calls for advanced economies (with mounting debts) to depreciate their currencies and boost their exports while emerging economies are expected to appreciate their currencies and improve domestic demand, a step, the IMF says, China has already began to take. Intra regional trade is expected to make this transition smoother.
At the heart of this recommendation is the intension to improve demand in lagging economies of advanced countries and way out for emerging economies to depend on each other to grow their exports without depending on advanced economies.
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Trade and paranoia… A senior official of the IMF not wanting to be quoted later told the Island Financial Review that although tensions between India and Pakistan was holding back the process of deep integration of the South Asian region, trade between the two countries has been growing.
While the South Asia Free Trade Area languishes in cold storage thanks to Indo-Pak paranoia and tough bureaucracies, Sri Lanka has signed two free trade agreements with both India and Pakistan. In 2008, Sri Lanka and India were on the verge of signing a comprehensive economic partnership agreement (CEPA) but here again, paranoia set in and a strong lobby group dissuaded the President Mahinda Rajapaksa from signing the agreement.
Economists in South Asia have been trying to convince their leaders that economic and social integration was the best answer for a region that was by and large poor and poverty stricken, but political consideration always took precedence over anything else. When economists and technocrats worked hard to put the CEPA with India together, in a bid to removing the problems encountered in the free trade agreement, some anti-India businessmen and lobbyists had the audacity to accuse them of being unpatriotic failing to realize that CEPA was formulated to improve conditions for Sri Lanka in dealing with India.
Regardless of the paranoia of an influential few, trade between India and Sri Lanka have increased over the years, and the Central Bank in its annual latest annual report says the CEPA with India could help boost exports, resulting in more earnings and the creation of new jobs. Also, in 2009 India was the largest source of imports, 17.8 percent of all imports. While lobbyists argue that the CEPA would flood the domestic market with Indian goods, the current FTA has increased imports from India and the CEPA proposes to introduce better controls.
"There is great potential for further growth in bilateral trade and investments under comprehensive economic partnership agreements with India and Pakistan. Despite the improvement in trade between Sri Lanka and these countries since the inception of the respective trade agreements, exporters have not fully utilized the benefits available to them," the Central Bank’s Annual Report 2009 said.
"Given the better investment climate in Sri Lanka, it can lure investments using the trade agreements as a platform to capture the vast markets of India and Pakistan. The proposed CEPA with India addresses issues with the free trade agreement such as conformity assessment procedures and product standards. "However, CEPA with India remains stalled after thirteen rounds of technical level negotiations and three rounds of negotiations and Commerce Secretary level. Efforts would need to be taken to derive the benefits offered by trade agreements and to move ahead towards forming more economic partnerships," it said.
The CEPA with Pakistan has been put on hold as senior officials said Sri Lanka would not like to ‘intimidate India’. Treasury Secretary Dr. P. B. Jayasundera told exporters at a recent forum, that it would be foolish to limit imports. "Importers are exporters in another country and we refuse to buy their goods then they could do the same to us". Dr. Jayasundera stressed that Sri Lanka would maintain imports as they are and that exporters should increase their productivity and diversify.
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The Island – April 26, 2010 ASIA TO LEAD GLOBAL ECONOMIC RECOVERY, INEQUALITY PERSISTS
By Devan Daniel in Washington DC
The IMF says Asia would lead the global economic recovery, growing at pace much faster than advanced economies, however, low income countries would grow at a much slower rate compared to the economic giants in the region, China and India.
"A year after the deepest recession in recent history, Asia is leading the global recovery. The ‘green shoots’ of recovery that emerged in Asia earlier than elsewhere in 2009 have continued through the first months of 2010," Anoop Singh, Director IMF Asia and Pacific Department, told journalists in Washington in the sidelines of the IMF-World Bank spring sessions in Washington DC.
Key economic indicators are growing above long term trends, particularly in China, India and Indonesia.
"However, economic recovery in Asian low income countries has proceeded at a slower pace than in emerging Asia, reflecting a weaker impact from the global financial crisis in the downturn and structural fragilities," Singh said.
In contrast to Asia, however, Singh said the pace of recovery in advanced economies outside the region has been weaker, held back by high unemployment rates, impaired household balance sheets, and anemic bank credit.
Economic growth in Asia is expected to be 7.3 percent this year with China leading at 10 percent and India 8.8 percent. Sri Lanka’s post war economy is estimated to grow at 5.5 percent this year.
Singh said two factors underpinned Asia’s strong economic performance.
"First, the global and domestic inventory cycle is likely to boost Asia’s industrial production and exports further for most of 2010 as final demand recovers in advanced economies. Second, although macroeconomic policies may become less accommodative in the region, private domestic demand is expected to remain robust," he said.
High asset values, strong consumer confidence and a gradual improvement in employment conditions are expected to sustain consumption in the region.
A break from the past…
Singh said Asia’s performance thus far has been a break from the past.
"Although GDP growth in Asia has exceeded that of advanced economies over the last three decades, this was the first time Asia is leading a global recovery. In all previous downturns, Asia’s contribution to global recovery was lower than that of other regions," he said.
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In the past, Asia’s recovery in previous recessions had been export led but this time, strong domestic demand has reinforced the recovery and while capital inflows had been slow to return after a recession, this time net capital inflows have surged.
"This is a reflection of high levels of global liquidity and Asia’s improved resilience and economic framework," Singh said.
Asia to lead...
He stressed that although high capital inflows into Asia was because returns were better than in other regions, it was primarily driven by the strong economic prospects of the region.
The risks…
Asia’s strong cyclical position could also pose a threat to medium term stability as more capital inflows are attracted to the region.
"Brighter economic growth prospects and widening interest rate differentials with advanced economies are likely to attract more capital into the region. This could lead to overheating in some economies and increase their vulnerability to credit and asset price booms with the risk of subsequent abrupt reversals," Singh said.
"Although asset price increases have been generally contained, with only a few local exceptions, the continuing increase in excess liquidity in many regional economies raises some concerns and policy makers will need to be attentive to macroeconomic and financial risks," he said.
Low income countries…
Despite, strong growth in the region, poverty and inequality are still high in Asia.
"We are giving a lot of importance to low-income countries in Asia. We are focusing very much on poverty, but having said that, I do want to point out that it is my sense that over the last 10, 15, 20 years, we have seen a greater reduction in poverty in Asia, for example, in China, that has no historic parallel," Singh said in response to query raised by the journalist on the poverty level in the region.
The IMF is organizing a special regional conference in South Korea later this year which would bring together Asia’s policy makers, academics, civil society organizations and other stakeholders where a plenary session, dedicated to the transition of Asian countries from low-income country to emerging status, would be held.
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The Island – April 26, 2010 SRI LANKANS STILL TRUST THE LAST WORD!
By Rohantha N. A. Athukorala
Sri Lanka is yet recovering with the multi-barrel advertising campaign that shook the country in the last three months. However, research reveals that Sri Lankans still scores low for conventional advertising and that word of mouth campaigns swaying their choice. This could be due to the closely knit society in Sri Lanka where people get influenced by their peers, relatives and local celebrities than media advertising. I guess its food for thought for the next provincial council elections.
The last three months multi barrel advertising on the general elections is to sure exceed a five billion rupees. The logic being that the Presidential election catapulted a 1.1 billion rupees with only two candidates at play, whilst the general elections sporting almost a seven hundred candidates will sure out beat this media bombardment.
360-degree attack From a marketing point of view, the money’s invested was not the issue, as end of the day we saw marketing at its best. The winner’s were not the candidates but the novel marketing techniques that were used like the technique 360 degree brand experience was nice to see in practice in Sri Lanka. In fact the brand tracking studies showed how the propensity of a candidate been selected moved when the marketing campaign became effective.
Let me throw light to the globally advocated 360 brand experience was used by candidates at the last election. Every morning when we open the gate we are in-undated with leaflets that was home dropped. Driving down the lane towards the main road the walls are showered with posters targeting the residential neighborhoods. Then, into the main road large hoardings keep hitting the possible voter at intersections targeting voters who commute by car and busses. On the way radio cracks in with a reminder message on why one needs to vote for a particular candidate and the benefits to a voter. At the traffic lights, a guerilla attack is planned a missionary sales person drops a leaflet into the car whilst at office, as soon as one connects on line a personalized e mail comes in with a brand promise.
Going back home the ritual continues and at home most TV programmes mid break prime spots are featured by candidates together with trainers supported by talk shows that sure made an impact to the potential voter. Then to cap the day’s 360 degree experience the mobile buzzes and a text from a candidate asking for the vote. To me it was marketing at its best. I hope some of these best practices will be picked by brand marketing companies.
Post Election review The big question now is why 45% of the people could not be influenced to cast their vote to which ever party? Was it that the New Year festival or was it the pressure on the purse on travel. Or was it that the campaigns were not actually selling a key idea that impacted the voter to make a decision. It may have been even the clutter levels been at such high levels that drove away a voter from the act of purchase. Its worth investing on a structured research so that corrective action can be taken in the future. It might also throw light to the strategies that the new government must pursue.
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It will be also very important to understand which media influenced consumer behaviour given that I saw many households discussing which candidate needs to be given the vote. The key decision-makers have been a housewife based on key issues like street lighting down a road, regular garbage removal, tarring of a road etc which was strange. I also saw how spouses asking a husband or wife what number to cross.
May be, we also must monitor image ratings of those in high office after 100 days etc just like in the US so that it monitors job performance and provides un biased feed back to the policy makers. This must not just be a popularity rating but an attribute rating on the key issues of the country so that it becomes a strategy driver than a political tool.
Multi-barrel advertising In my view nothing sways a Sri Lankan buyer’s choice more than a word of reassurance from the people he or she is close to. Not even a multi barrel media campaign on TV, radio and press can influence a person to an extent driving purchase.
A global online survey conducted by a leading research agency has revealed that word of mouth communication and referencing, as the biggest influence on a consumer’s choice than, conventional advertising. This is specially is true, given the close knit society we in Sri Lanka live in. Think of it, the last purchase we made on a house, once we decided we meet the neighbours and finally that close relative of ours and once we get their thumps up that we give out last word. This is especially true in large value purchases like Cars, home loans, and I see this is in youngsters when having to select there life long partners. A recent study says that almost 50 percent of consumers in Sri Lanka rely on the references from their friends and relatives while making their own decision which is very significant. It will be interesting to see this score on the selection of their candidate at the last elections.
Other countries However, the story is different in developed economies. Take the case of automobiles. In markets like the US, Canada and Japan, more people are influenced by conventional advertising as against developing markets like Sri Lanka, Malaysia and Thailand where it is the neighbor or the colleague who tips the scales one way or the other.
In the case of luxury goods, the psyche of Sri Lankans has always been different. Buying a car is a family decision, so it is only natural that all the members of the family get involved in the purchase decision. Sri Lanka
If we take large insurance companies in Sri Lanka marketing spend are very high on advertising and recognitions on awards to their employees in comparison to above the line media advertising. I have seen a top insurance sales person being gifted with the most modern car with a media blitz that even a blind man would have felt the vibes. The logic being that word of mouth communication generated from this even drives a wave in the market place that naturally builds a high share of voice towards the brand that leads to a top of the mind awareness. This makes the sales person’s job easier. Today this company is the market leader.
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Impact of WWW While reliance on Internet is growing, making buying decisions is on the ascendancy in the west; Sri Lankans don’t yet find the World Wide Web trustworthy enough.
Although in technology driven product categories like mobile phones, where a majority of the buyers are under 30 and seek the latest models, internet searches are popular in Sri Lanka yet, Sri Lankans trust the last word. The best case in point was the recent offer by an airline one is availed of a special price provided that it is booked on line. We saw customers heading to their trusted travel agency and then getting that time tested travel manager to do the needful on the internet. I guess this holds ground on the twitter and e mail campaigns that was advocated by candidates at the last elections that was proved not very successful.
Swayed by friends When the whole world is going crazy with Internet and mobile marketing, it is interesting that Sri Lankans still. Scores low for conventional advertising and that word of mouth campaigns sways their choice. Unlike in the west, Sri Lankans come from very closely knit society where people get influenced by their peers, relatives and local celebrities. People are more than willing to accept a brand if it’s endorsed by their favourite superstar or is recommended by their close associate. The best example in time was a favourite cricketer endorsed a flagging milk powder brand; the stocks had to sent to the distributors directly from the port due the strong demand.
Shifts by brands Interestingly in Sri Lanka a survey reveals that when buying electronics gadgets like mobile phones and Hi Fi sets, the reputation of the brand plays a greater role than any form of advertising in influencing decisions. This explains the strong brand marketing we see on TV. In the case of loans too, the reputation of the financial services firm and word of mouth influence a majority of consumers in Sri Lanka. This is true in the case of high involvement customer categories.
A home loan or car loan decision is not made over night. A few years back nearly the entire home loan business was based on word of mouth but its share has come down because of more companies entering the fray with high decibel ad campaigns. Hence we see the importance of no conventional marketing techniques given the consumer behavior of Sri Lankans who yet believe that last word just like what we saw in the last elections.
The author has a double degree in Marketing and MBA and currently reading for the doctorate in Business Administration. He is a double recipient of the "Marketing Achiever of the year award in Sri Lanka and a Business Achiever Award from PIM Alumni University of Sri Jayewardenepura and a Business Leadership award the Johnson-Lever Industrial business. Rohantha is the Head of National Portfolio Development for Sri Lanka and Maldives in The United Nations Operations (UNOPS) and sits on the Management Team of the Sri Lankan Mission.
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Daily Mirror – April 26, 2010 MIDEAST ECONOMIES TO GROW 4.5%: IMF
Dubai, Reuters - Middle East and North African economies are recovering at a good speed with projected growth of 4.5 percent in 2010 and fiscal stimulus should stay in place to cement the rebound, the International Monetary Fund said. However, the pace of recovery in advanced economies and the impact from Dubai’s debt crisis were key downside risks and the outlook substantially uncertain, the IMF said in its World Economic Outlook. “Government investment programs, especially in infrastructure, will continue to boost domestic demand in the near term in many Mena economies,” the Fund said. “These measures should remain in place to help cement the recovery. High debt levels, however, constrain the scope for fiscal stimulus in some oil-importing economies,” it said. Monetary policy should also continue to be used to help support growth in countries with non pegged exchange rate regimes such as Egypt, if feasible, given subdued inflation pressures, the fund said. “For other economies in the region that have hard pegs to the dollar (Saudi Arabia, United Arab Emirates), monetary policy mirrors US policy and is appropriately simulative,” the IMF said. Egypt’s central bank said in March that inflation remained within its comfort zone and kept interest rates on hold, saying they were supportive for economic growth. Qatar will be the strongest performer among the region’s oil exporters this year with gross domestic product growth expected at 18.5 percent due to continued expansion of natural gas production and government infrastructure spending. Saudi Arabia, the world’s top oil exporter and the largest Arab economy, should grow by 3.7 percent this year, after anemic 0.15 percent growth in 2009 with fiscal spending remaining the key driver. The IMF also raised its GDP growth forecast for the United Arab Emirates, the second biggest Arab economy, to 1.3 percent this year, from 0.6 percent it had forecast following its January consultations with the Gulf oil exporter. It said, however, a vulnerable financial sector and weak property market were holding back economies such as the UAE, which contracted by 0.7 percent in 2009, as well as Kuwait. Among oil importers, Lebanon should outperform the rest with 6 percent expansion this year, while Egypt and Syria would follow with 5 percent growth. The IMF also said the economic impact of Dubai World debt restructuring, one of the main downside risks, has been relatively limited so far but its full impact may not be felt for some time. “In particular, a possible reprising of quasi sovereign debt could have a lasting effect on financial systems, corporate sectors, and, more generally, economic activity in the area,” it said.
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The Island – April 27, 2010
POST-CRISIS GLOBAL ENVIRONMENT LIKELY TO BE MORE CHALLENGING – ADB
By Mario Andree
As the global crisis recedes, developing Asia should exit expansionary monetary and fiscal policies appropriately and reaffirm its commitment to the sound and responsible policies that have fostered macroeconomic stability and’ sustained growth. The Asian Development Outlook 2010 (ADO 2010) notes that Asia’s decisive fiscal and monetary response to the crisis laid the foundation for the region’s speedy and robust recovery. The report emphasizes that the long-standing tradition of fiscal and monetary discipline gave the region the resources - and credibility to unleash its decisive response to the crisis, nevertheless, - within this broader direction of prudence and discipline.
ADO 2010 recognizes that there is plenty of scope for improving and strengthening Asia’s monetary, exchange rate, and fiscal policies. "Beyond the crisis, Asia’s governments face the challenge of adjusting their monetary, exchange rate, and fiscal policies, to better, prepares their countries for the changing environment in the post-crisis period," says Asian Development Bank (ADB). The post-crisis global environment will throw up many difficult structural challenges for Asia. Above all, the region needs to rebalance its growth toward domestic sources in light of the prospective unwinding of global imbalances. The report sets forth a number of specific adjustments to monetary, exchange rate, and fiscal policies to help the region better adapt to the post-crisis world.
These include: = financial regulation should be strengthened and co-coordinated more closely with monetary policy to prevent disruptive asset bubbles.
= Excessive foreign exchange market intervention should be reduced and greater exchange rate flexibility promoted to put them in line with fundamentals.
= Carefully designed capital controls can help guard against disruptive short-term capital flows and prevent extreme volatility in exchange rates.
= Although safeguarding fiscal sustainability remains paramount, a wide range of fiscal measures can remove structural impediments which constrain domestic demand.
= Closer and more systematic coordination of. Monetary, exchange rate, and fiscal policies is required for effectively addressing structural challenges such as rebalancing.
= Similarly, greater intra-regional policy co-ordination will facilitate the exit from current expansionary policies as well as the transition to more flexible exchange rates.
"Intra-regional exchange rate policy coordination among developing Asian countries can also help promote greater exchange rate flexibility in the region, with less concern over losing export competitiveness vis-à-vis neighboring economies," says ADB. Those adjustments call for a closer co- ordination of monetary, exchange rate, and fiscal policies both within countries and across the region’s countries. 15 FCCISL News Alert Weekly Business Highlight 26th – 02nd May 2010
The Island – April 27, 2010
DEPOLITICIZING FOREIGN SERVICE: KEY CHALLENGE FOR NEW MINISTER
By Dinesh Weerakkody
An opposition politician said that in the recent past appointees to the highly skilled foreign service have heavily outnumbered career diplomats among Sri Lankan Ambassadors, High Commissioners, and consul abroad with only 24 being from the total 51 being from the Sri Lanka foreign service.
This means over 50% of the officials appointed to promote Sri Lankan interest abroad are not career diplomats and therefore not really trained for skilled diplomacy or to promote trade.
However, it is generally accepted that top quality non career diplomats can bring in new thinking and fill short term skills gaps in the foreign service that are urgently needed and cannot be grown overnight to meet the new realities in the new global order dominated by global power houses with vested interest, But what is not acceptable is when the state appoints people with no proper track record or basic skills, or even language skills to promote bilateral relations and trade for our country.
In the past, both parties have been accused of using the Foreign Service to give jobs to the boys. President Mahinda Rajapaksa, unlike no other leader, in the past delivered on a single promise that he made in the run up to his election. He got rid of the terrorist problem that had plagued this country for over 30 years.
All Sri Lankan’s whether red, green or blue are grateful to him and the security forces. They have shown their gratitude by giving him an overwhelmingly big majority. So, it is up to him now to use that platform to put this country back to work with out allowing errant ministers to do whatever they wish with state property and use it for their personal benefit.
The former Foreign minister was often criticized in the media for his extravagant life style at the tax- payers expense and for packing the Foreign Service with his relatives. Hopefully the new foreign minister would put a stop to the abuse and work towards resurrecting the Foreign Service. This country urgently needs to build and work on our long-standing international relations as never before because of the huge window of opportunity we have now got with the opening of the North and East.
It would be a shame to squander that opportunity by allowing half-baked ministers and incompetent state representatives to make a mockery of our administrative infrastructure and screw up our foreign relations, especially now that many people see Sri Lanka as a new destination for investment and tourism.
Abuse
This abuse often happens because our public service has got so politicized and as a result public servants are dependent on the politicians for their promotions and development.
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Also the failure, lack of competence and omission on the part of the relevant minister to monitor the affairs of the institutions which come within their purview have led to the deterioration of the public service, Today in the public service there is a dearth of professionals because the salaries do not attract competent people, As a result we have very few competent public officials to tell us how to utilize the funds the government collets from the tax payers and the aid we get from our donors to develop our country.
Whereas in Sri Lanka over the years the Public Service lost its professional edge and became the servant of the politicians rather than of the people and a public service that prefers to tell why things cannot be done rather than offer solutions to achieve the wishes of the people. Therefore, a highly motivated public service will be a key element to our future success. What Sri Lanka needs, like in Singapore, is a powerful, competent and dynamic – technocratic bureaucracy, shielded from political pressure to devise and implement well-honed interventions.
While we need authoritarian leaders, they also must be willing to grant a voice and genuine authority to a competent technocratic elite and key elements in the private sector. Our leaders must realize that economic development is impossible without the co-operation of the private sector. Because, if business prospers, then more money comes into the government coffers.
That means better salaries for the public servants. Therefore, the government needs to create a culture where everyone has an interest in seeing progress and a public service that works with the private sector rather than against it. To tackle these complex problems, the Mahinda administration would need institutions and competent people to reassure competing groups.
Therefore, the first step that the government should do is to build a competent, dynamic, honest and relatively young technocratic cadre and insulate them from political interference. If not, there is no way that the government can convince and win the cooperation of the business elite to share the benefits of growth with the middle class and the poor class.
In fact, in many NICs, competent technocrats have helped their leaders to devise a credible economic strategy and thereby win the economic war. Therefore, in order to foster an effective public service, the Mahinda administration, in addition to tapping the traditionally accorded public service practices in the current administrative service, would also have to employ numerous other mechanisms to increase the appeal of a public service career, thereby heightening competition and improving the pool of applicants.
The government therefore needs to have a system to attract young talent and ensure that only the best get accelerated promotions. The overall principle, long term, should be to pay salaries competitive with the private sector, recruitment and promotion should be merit based and those who make it to the top on merit should be amply rewarded.
In government, as in nearly everything else, you get what you pay for. An effective public service will enable the government to establish legal and regulatory structures that are generally hospitable to private investment and public servants who consider their primary role is to serve the public.
- The writer is CEO of HR Cornucopia Lanka Ltd. 17 FCCISL News Alert Weekly Business Highlight 26th – 02nd May 2010
The Island – April 28, 2010 CEYLINCO LIFE STANDS OUT WITH TOP-CLASS SERVICES
Q: According to an analysis of claims outstanding done by the IBSL as at December 31, 2009, Ceylinco Life has very few claims outstanding. Could you comment? The settlement of claims is our business. The main purpose of purchasing a life insurance policy is to protect one’s dependents. Early settlement is therefore of utmost importance. We have made this a priority in our company and have formulated clear guidelines with a view to ensuring early settlement of claims.
Q: How do you manage this with 175 branches, the largest network in the country? Ceylinco Life has a sophisticated IT system that facilitates every aspect of the company’s business across the branch network. Every claim intimated is entered into the system and monitored centrally until settlement.
Q: Since there are several documents to be produced prior to the settlement of the claims how do you handle this? The most important document is the death certificate and in the case of early claims the policyholder’s medical records are of utmost importance. We go out of our way to help our policyholders to obtain these documents speedily.
Q: What about fraudulent claims? Don’t they delay the process? Yes, we have had such claims but we have a comprehensive procedure to investigate such claims and repudiate them. This does not delay the settlement of legitimate claims.
Q: An accusation against insurance companies is that the small print in a policy is made use of to repudiate claims. Naturally, all benefits promised and the terms and conditions have to be documented in a contract. Very often customers do not read the details. We have trained our salesmen to explain these conditions at the time of delivery of the policy. In the case of Ceylinco Life, the IBSL figures clearly demonstrate that nothing, not even the small print stands in the way of claims settlement. That is how we had only 82 claims outstanding at the end of 2009 out of an industry total of 100,733.
Q: Do you generally give the benefit of the doubt in interpreting the terms and conditions of the policy to the policyholder? We bend over backwards to pay a claim. After all, the payment of a claim is our best advertisement and wherever possible the benefit of the doubt is given to the policy holder.
Q: How did you handle the settlement of the claims in the North and East prior to the cessation of hostilities? Well, it was certainly a challenging task with police reports and the records of the magisterial inquiries differing. We however carried out our own investigations and have been able to settle almost all claims.
Q: What is the greatest challenge to the early settlement of a claim? The greatest challenge obtaining the necessary documents from the policy holder early. We have a special process to help our clients to do this. After all, they are recovering from a bereavement in their family and we need to help them. 18 FCCISL News Alert Weekly Business Highlight 26th – 02nd May 2010
Non disclosure of material information at the time of submitting a proposal is another challenge. We have to overcome this by training our salesmen to impress upon the prospect to make a full disclosure on his or her state of health, as it is the policyholder who would know it best. This would enable the company to charge the appropriate premium, and ensure that there will be no issue in the event of a claim.
Q: Do you also provide health insurance to your life policyholders? Yes. We have several products that can be added on to the life policy namely, the hospital cash benefit, the critical illness benefit which we have branded as Digasiri and the Ceylinco major surgery benefit.
Q: Would you mind explaining these products? The hospital cash benefit pays a sum of money per day for every day that the policy holder remains in hospital. The payment is very clearly indicated in the policy. All the customer has to do is to provide proof of his or her stay in hospital.
The Digasiri benefit (critical illness benefit) covers 25 critical illnesses, the main being heart attack, stroke and cancer. All the policyholder has to do is to provide proof of the illness and the sum insured stated in the policy is paid.
The Ceylinco Major Surgery benefit covers over 500 surgeries. These surgeries are classified into minor, medium and major surgeries and different percentages of the sum insured are payable depending on the category.
Q: Do you find an increasing trend of policyholders adding on healthcare benefits to their life policies? Yes. We do encourage our salesmen to educate customers as this is a definite need.
Q: Your Company was the market leader in 2009 despite difficult times. Would you like to comment? It is only when you face a challenge that the true strength of a company is revealed. We have proved our strength and capabilities beyond any doubt with our performance in 2009. I wish to thank our dedicated employees for their unstinted support.
19 FCCISL News Alert Weekly Business Highlight 26th – 02nd May 2010
The Island – May 1, 2010
SUSTAINABILITY ‘IS IMPOSSIBLE IF LANKA CONTINUES WITH CURRENT ENERGY POLICIES’
By Ifham Nizam
*Renewable and alternate energies are the key *Ranawaka has a crucial role to play as he did with Environment and Natural Resources
The use of renewable alternate energy sources, such as wind and solar energy is growing rapidly. These energy sources do not cause air pollution, health problems or climatic changes. They offer our best chance to replace fossil fuels and develop a sustainable energy policy. Needles to say, experts hail President Mahinda Rajapaksa’s decision to appoint Electrical Engineer Patali Champika Ranawaka as the Power and Energy Minister. One cannot forget the role played by former minister W D J Seneviratne to put Power and Energy Ministry in the right direction.
It will be impossible to achieve sustainability in Sri Lanka if we continue with our present energy policies. Present use of fossil fuels is not sustainable. We need to rethink the sources, uses, and management of energy. Sustainability is the central issue in our decision to continue on the hard path or change to the soft path. Understanding trends in energy production and consumption on a global basis is important it we are to directly address the global impact of burning fossil fuels on problems of air pollution and global warming. Furthermore, the use of energy resources greatly influences global economics as these resources are transported and utilized around the world.
The availability of energy supplies and the future demand for energy are difficult to predict because the technical, economic, political and social assumptions underlying predictions are constantly changing. Champika Ranawaka played a crucial role as the Minister of Environment and Natural Resources. In this article The Island focuses some on the major milestones achieved by the ministry under the able leadership of Ranawaka. When Patali Champika Ranawaka assumed duties as the Minister of Environment and Natural Resources, his priority was to have a clear and comprehensive waste management programme for Sri Lanka.
Ministry officials, however, expressed some reservations about his priorities. They were of the view that "we need not get involved in waste management as it was not a subject which came under the purview of our Ministry". It was their contention that the waste management was the responsibility of respective local authorities and the role they were expected to play was to impose the law on defaulting local authorities.
Since he disliked the idea of policing the local authorities, he initiated a series of discussions with them to study the related problems. The discussions so held established the fact that non availability of technology and financial constrains were the two major impediments by which the local authorities had been handicapped in the sphere of waste management. Having ascertained the root cause of the problem, he decided to introduce the ‘polluter should pay’ principle and established a local fund to facilitate the waste management programmes of the local authorities.
20 FCCISL News Alert Weekly Business Highlight 26th – 02nd May 2010
Although these long over due measures were taken to mitigate serious health, environmental and social issues arising from ad hoc solutions taken in the past on waste management, it was a pity that they were confronted with many obstacles such as politically motivated public protests and non availability of suitable land.
Improper management of solid waste is one of the key environmental problems in Sri Lanka. Lack of systematic approach for waste segregation and collection, transport, intermediate treatment and appropriate final disposal have been contributing to aggravate the solid waste problem in the country. Despite the responsibility to provide reasonable solutions to this problem is within the purview of the Local Authorities (LAS), the Ministry of Environment and Natural Resources (MENR) launched the program in 2008 titled ‘Pilisaru’ National Solid Waste Management Programme to facilitate the LAS and other stakeholders to overcome this issue of improper management of solid waste.
The duration of the Pilisaru Project is three years (2008-2010) and the total financial allocation is Rs.5.6 billion. A three-year action plan was developed covering the entire spectrum of solid waste management and following major activities have been carried out so far by the Pilisaru Project (PP).
Construction of Composting Plant Complexes PP has taken steps to construct large scale composting plant complexes at various locations in the country. The plant at Medirigiriya has been already completed and currently it is in operation. Construction of the Compost Plant at Anuradhapura was completed recently and is under operation now. Constructions of the two major plants at the old waste dump at Pothuwilkumbura in Kolonnawa and Pohorawatta in Kalutara have just started and both of them are expected to be completed within this year. Planning and designing of a large scale plant complex at Hikkaduwa is underway.
The total financial allocation earmarked for the large scale compost plants are to the tune of Rs.372 million. Arrangements are being made to obtain a land of an extent of 43 acres in Bopitiya area to develop a compost plant and a sanitary landfill site to manage the waste generated in Colombo area in an emergency situation.
Establishment of sanitary landfills To ensure environmentally safe disposal of residual waste derived after the composting process, PP has been planning to setup large scale sanitary landfills at several locations serving a large number of LAS in cluster basis. The sites identified are Malamulla in Panadura, Keerikkulama in Anuradapura, Udaganawa in Medirigiriya, Monroviawatta in Hikkaduwa and Gonadikawatta close to Gampola. In addition, a full fledged sanitary landfill is to be constructed at Maligawatta and Dompe with the technical and financial collaboration of the Republic of Korea (through the KOICA) with a view to bring about final disposal facilities to waste generated within the Dompe Pradeshiya Sabha area.
KOICA assistance of Rs.450 million The Korean government extends financial assistance to the tune of Rs.450 million which includes technical co-operation, capacity building, and supply of infrastructure, machineries and vehicles. KOICA has already supplied two vehicles, completed two overseas training programs and fielded several missions to carry out pre-feasibility study at the site. However, the unwarranted public protests, often backed by local political groups, became a great obstacle to make these initiatives realities for the ministry. Small Scale Solid Waste Management Projects for Local Authorities
21 FCCISL News Alert Weekly Business Highlight 26th – 02nd May 2010
PP have assisted more than 41 LAS to establish small-scale compost plants and other infrastructure facilities required for composting process and recycling of non-degradable waste. Most of these plants are in operation at present earning a sizable income for the LAS by selling compost products in the one hand and help minimize the negative environmental impacts on the other hand. Construction work of the six plants in several LAS funded recently is underway while a few more LAS have been earmarked for providing support this year.
More than Rs.92 million has been incurred during the last two years for the construction of these facilities. Similarly, PP has provided more than Rs.94 million out of the total budgeted amount of Rs.108.69 million to the Solid Waste Management Supporting Centre of the Ministry of Local Government and Provincial Councils to establish Environmental Preservation Centres for Kuliyapitiya Urban Council, Nawalapitiya Urban Council, Badulla Municipal Council and Matara Municipal council. The support includes construction of compost plants, facility building, store rooms, office, watcher huts, fencing, and providing machineries and vehicles such as skid steer loaders.
Construction of Biogas Plants for Local Authorities PP also supported the Gampaha Municipal Council to put up two Biogas units to safely dispose market waste. These units have been constructed in the council premises and the biogas so generated is supplied to nearby households. Additionally, Fether collection Foundation submitted a proposal seeking assistance of Pilisaru Project to promote house-hold type bio gas plants and the evaluation of the proposal is underway.
Distribution of composting bins and waste collection bins As a means of providing onsite solutions for the organic waste generated in households, particularly in the urban and sub-urban areas, PP has developed a program to assist LAS by way of supplying plastic compost bins at a subsidized rate -half of the purchasing price. The LAS are advised to supply them to the public, in turn, at one-fourth of a cost of a bin thus the LAS bearing the balance. So far, nearly 15000 bins have been delivered to more than 45 LAS to be distributed them among the households. In addition, bins were also given free of charge to schools and religious places to use them as model composters for the benefit of the school children and pilgrims respectively. Pilisaru Project provides domestic type compost bins to any local authority at half rate to promote household level composting. Another 10000 bins have been ordered to meet the requests made by several other LAS.
Supply of Waste Collection & Transport Vehicles and Land filling equipments / machineries as reward for good performing Local Authorities. PP has taken initiative to support LAS to improve the collection and transport of waste by providing tractors - both engines and compartmentalized trailers, land master tractors and hand carts.
Further, based on the recommendation of a technical panel, PP will also provide skid steer loaders, wheel loaders and excavators LAS, where facilities are available for large scale composting and final disposal of residual waste. Tender process for the procurement of the above items is over by now and evaluation of the bids is already underway. Similarly, PP supplied 15 Skip buckets to Colombo Municipal Council at a total cost of Rs.2.20 million to streamline waste collection system in areas where low income people live. The traditional practices adopted by these people are to throw the garbage along side the main roads causing nuisance to the passers by. Therefore, both the CMC as well as those who live in these congested areas will find win-win situation to mange the waste by using these skip buckets once properly placed.
22 FCCISL News Alert Weekly Business Highlight 26th – 02nd May 2010
SANASA - Pilisaru Banking system The Pilisaru Project introduced a waste banking system known as Sanasa - Pilisaru waste paper recycle banking system whereby the school children can take part in promoting recycling of paper while at the same time earning financial benefits. The prime objective of this initiative is to change the behavioural attitude of children towards proper waste management practices and at the same time to promote paper recycling in line with the national solid waste management strategy of 2007.
So far, this banking system has been introduced to more than 105 schools mostly in the Western and the Southern Provinces. Sanasa Development Bank and private sector recycling company have come forward to join hand with the Pilisaru Project to implement this program in the schools.
Waste management promotional activities A Documentary titled ‘Rata Saru Pilisaru’ and a Docudrama on ’Balan Kadathura Hera Dese’ were produced and action was taken to telecast these programs in the National Rupavahini with a view to raise awareness of the public, mainly on the practice of 3-R system and the advantages of sanitary land filling for final disposal of waste respectively. Action was also taken to produce 10 episodes -each having a duration of 5 minutes) of a novel television program titled ‘Mr. Green’ which was produced following the art brought to light in the ‘Mr. Bean’ program.
In an effort to promote the concepts of reduce & reuse, PP implements program whereby cloth bags are distributed free of charge among the attendees at various national cultural, religious and other important functions as a substitute for polythene bags. More than 30,000 bags have been distributed so far at these events.
Pilisaru Parisara Gammana and Plisau Piivithuru Pasal (school) are two other programs being implemented by the PP in the villages and in schools in the Western Province respectively, mainly to promote the use of compost in home gardening, farming, horticulture etc in place of inorganic fertilizer. Through these programs, it has been able to raise the awareness and inculcate the importance of organic farming among the people at grass root level effectively. More than 60 Pilisaru Parisara Gammana programs in 36 different Divisional Secretariat Divisions and about 50 Pilisaru Pivithuru Pasal programs were already implemented.
Establishment of Pilisaru Parisara Balakaya A "Pilisaru Parisara Balakaya" (PPB) was established taking representative from the Pilisaru Parisara Gammana Program with the objective of, inter alia, serving as leaders in organizing the villagers to promote household solution in the waste management. This PPB is an informal arrangement to communicate between the Pilisaru project and the villagers who have participated in the PPG program. The Inaugural function of PPB was held at Maharagama Youth Council on 18th November 2009 with the participation of about 1800 people.
Publishing of documents PP has taken steps to produce and publish several reports, as given below, each of which addressing various issues and other aspects of the waste management in line with the National Solid Waste Management Strategy.
* "Guide Lines for the Establishment of Provincial Steering Committees and Local Authority level Operational Committees for Solid Waste Management". 23 FCCISL News Alert Weekly Business Highlight 26th – 02nd May 2010
* "Promoting Public-Private Partnership for Solid Waste Management"
* ‘Strengthening the existing regulatory mechanism and legal framework for solid waste management
* "Existing regulatory Mechanism and Legal Framework"
Uthuru Wasanthaya Program Under the Uthuruwasanthaya Programme, the PP has supplied Commissioner of Local Government of Northern Province 2000 Plastic Compost Bins for the distribution among the LAS and the schools in the Northern Province. As many as 1,800 waste collection plastic bins (of three different colours) will also be supplied for schools shortly under the above program. Similarly, 1,565 and 180 waste collection bins were given free of charge to IDP camps at Settikulam and the Madu Shrine respectively.
Training programmes Divisional Environmental officers, Assistant Directors of the CEA and Technical Officers, Public Health Officers and Waste Management Supervisors who are attached to LAS were provided with hands-on comprehensive training on Solid Waste Management and composting by organizing residential training workshops. Detailed theoretical knowledge on the scientific aspects of land filling was also included in the program to harness the latest techniques of land filling. The composting projects operated by the Weligama UC and Negombo MC was selected as the venue for practical exercises while the JICA funded landfill at N’Eliya was selected to provide training on landfill aspects. The experts drawn from Universities and International Organizations serve as the Resources Person voluntarily.
Rehabilitation of the existing Bloemendhal dumping site in Colombo The Bloemendhal dumping site has an approximately 16 Acres with an average height of 30 metres and believed to have contained about 1.5-2.5 million tons of garbage in it.
At present, this site has been suspended for dumping of garbage by the Supreme Court (SC (F/R) No.218/09) in view of the persistent environmental degradation. Supreme Court gave an Order to PP to rehabilitate the Bloemendhal dumping site within a period of 9 months from September 2009. PP has developed a concept proposal with 3 different options viz; Eco Park, Green Park and Container yard, each having different levels of engineering interventions & management resulting in diverse advantages and outcomes. A diagrammatic representation of the options is shown below.
With a view to facilitating the proper decisions making and support optimum design process, it was decided to carry out a pre-feasibility study first and accordingly Dr. Mahesh Jayaweera, Senior Lecturer of the University of Moratuwa, has been entrusted with this study. Giving effect to a Cabinet decision, the PP also pursues acquiring the Bloemendhal site subject to following the land acquisition process.
24 FCCISL News Alert Weekly Business Highlight 26th – 02nd May 2010
The Island – May 1, 2010 SAARC TO PREPARE ELECTRICITY ROADMAP
*South Asian states urged to open service sectors
Thimphu: The 16th SAARC summit has adopted an Indian proposal for a roadmap to create a SAARC market for electricity. The summit urged the member countries to quickly ratify the trade in services deal to open their service sectors. "The leaders recognized the need to enhance co-operation in the energy sector to facilitate energy trade, development of efficient conventional and renewable energy sources including hydropower," said the Thimphu Declaration adopted unanimously.
"The leaders noted the proposal from India for preparing a roadmap for developing a SAARC market for electricity on a regional basis, as SAARC is considering electricity trading, supported by enabling markets in the member states," it said. The leaders emphasized the need to undertake studies to develop regional energy projects, promote regional power trade, efficiency, conservation and development of labeling and standardization of appliances, and sharing of knowledge and technologies, according to the declaration. Earlier, Bangladesh prime minister Sheikh Hasina Wajed in her summit speech proposed for a regional grid of electricity in the SAARC region. Bangladesh has been in negotiation with India and Bhutan to import electricity from the neighboring countries.
Experts say, Nepal has the potential of producing 90,000 megawatts of electricity while Bhutan can produce 30,000 megawatts by utilizing their steep rivers. India has grid connectivity with Nepal and Bhutan to trade in electricity. Bangladesh has initiated a process of connecting its grids with India with a view to importing electricity.
The SAARC’s signing of the trade in services will open up the potential of trade in electricity. "The leaders welcomed the signing of the SAARC Agreement on Trade in Services and expressed that this will open up new vistas of trade cooperation and further deepen the integration of the regional economies," said the declaration. "They called for the early ratification of the agreement." "The leaders also called for the early conclusion of negotiations on the specific schedule of commitments under the agreement," it said.
To make the trade in services, the summit accepted Bangladesh proposal on harmonization of curricula of educational institutes in the region. As per the proposal from Bangladesh, the summit adopted the proposal of regional co-operation to strengthen good governance through sharing of experiences and best practices.
"They noted the proposal by Bangladesh to convene an inter-government meeting in Dhaka on the idea of a SAARC charter of democracy on which Bangladesh offered to circulate a concept paper," said the declaration expressing satisfaction that all member countries democratically elected governments.
Hasina in her summit speech talked in favour of charter of democracy in SAARC. The summit declared 2010-20 as the decade of intra-regional connectivity in SAARC. "They agreed on the need to expedite negotiations with a view to finalizing the two agreements on motor vehicles and railways."
The proposed motor vehicle agreement will allow the free movement of vehicles of one country to another SAARC country. Pakistan earlier objected to the signing of the deal and demanded fresh examination 25 FCCISL News Alert Weekly Business Highlight 26th – 02nd May 2010
before signing. Bhutanese Prime Minister Jigmi Y Thinley presided over the concluding session at the Grand Assembly Hall.
Afghan president Hamid Karzai, Hasina, Indian Prime Minister Manmohan Singh, the Maldives president Mohamed Nasheed, Nepalese Prime Minister Madhav Kumar Nepal, Pakistan Prime Minister Syed Yousaf Raza Gillani and Sri Lankan president Mahinda Rajapaksa attended the concluding session. The South Asian leaders unveiled a $300 million fund to reduce poverty in the region.
India earlier warned that the members of the South Asian Association of Regional Co-operation, or SAARC, must work in unison, expedite development and integrate themselves more fully into the global economy. "If we do not, we run the risk of marginalization and stagnation," India’s Prime Minister Manmohan Singh said in Thimphu.
"The 21st century cannot be an Asian century unless South Asia marches together." One-fifth of the world’s population — and many of its most impoverished — live in the countries that make up the group: India, Pakistan, Sri Lanka, Bhutan, Nepal, Afghanistan, the Maldives and Bangladesh.
The agreement on trade, signed by the nations’ foreign ministers, covers services in health, hospitality, communications, computers and air transport services. The environment convention, signed by the leaders, is aimed at exchanging knowledge and eco-friendly technology to combat climate change. The fund for fighting poverty, with contributions from each nation, will be used for projects that empower women and promote health care and for building infrastructure.
SAARC was set up to promote economic cooperation, but it has often been criticized as little more than a talk shop since its founding in 1985.
Even the host, Bhutanese Prime Minister Jigmi Y. Thinley, said the group’s priorities must be reset if it is to achieve any success.
Bhutan chose to focus much of the summit on climate change because South Asia — including the low- lying delta nation of Bangladesh, the archipelago of the Maldives, and the Himalayan countries of Bhutan and Nepal — is highly vulnerable to its effects.
Bhutan has seen flooding caused by melting glaciers, said its Foreign Secretary Daw Penjo. Thinley said the SAARC member-states should evolve a common position on climate change ahead of the Mexico conference to be held late this year — a follow-up to last December’s UN summit in Copenhagen that failed to hammer out a binding global agreement on limiting carbon emissions.
India, Brazil, South Africa and China emerged as a bloc in Copenhagen. Bhutan, which ended more than a century of royal rule in 2008 with its first parliamentary elections, is hosting the SAARC summit for the first time.
Lack of resources and infrastructure prevented the small and isolated nation from playing host to SAARC leaders until now, said Penjo.
26 FCCISL News Alert Weekly Business Highlight 26th – 02nd May 2010
Sunday Island – May 2, 2010 POLICY CHALLENGES IN THE POST-CONFLICT SITUATION
By R.M.B Senanayake
We ended the war in May 2009 but were immediately caught up in the global financial crisis and the subsequent economic recession. The global financial crisis was fairly well handled or it could have led to a serious foreign exchange crisis. The Central Bank managed the crisis reasonably well in the short term immediate aftermath but there are still challenges ahead. Fortunately foreign investor confidence in the country has not eroded much with direct foreign investment still coming in although lesser volume and migrant remittances are increasing.
But exports have still to recover fully from the economic recession; what we need is not mere recovery but a spurt in earnings. The prospect for this is indeed bleak with the suspension of the GSP Plus by the European Union which will come into operation from August. Our commodity exports face the problem of production limitations. Both tea and rubber production depend on the weather with tea requiring rain while rain slows tapping rubber. Overall, prospects for export growth are bleak. While our foreign remittances grow, such growth is inadequate to meet the balance of trade deficit which is likely to grow this year as the economy recovers and produces 5% growth as predicted by the IMF.
There is also the rise in oil prices which are now over $80 a barrel. Different analysts give different predictions for the future course of oil prices for this year. But they are unlikely to be below $75. In the second half of 2008 oil prices dropped to around $45. So we will face a massive increase in the oil bills which will worsen the current account of the balance of payments. We have of course run current account deficits in the BOP almost every year since 1977 and previously funded such deficits by foreign and bilateral aid often obtained at very concessionary terms. So our debt repayment burden is still not too heavy.
But the present regime has embarked on short term foreign borrowing and foreign bilateral borrowing from China and India. India seems to be more interested in developing the North and East and the time may not be too far when the Tamil people look to her as the savior unless we launch a process of reconciliation. Our politicians are ignorant of the true feelings of the Tamils. The deployment of the Army in the North and the East may give the impression of an army of occupation and the benefits of the so-called ‘uthuru wasanthaya’ are not likely to flow to the whole country unless normal economic relations are encouraged between the north and the south and this is possible only after normalization of relations between the government and the Tamil people.
The Tamil people will have to be wooed by the government and the recent election results show that the Tamils can be more flexible when it comes to voting for the ruling party.
Gaining legitimacy with the West The West seems to have assumed that with the end of the war there would be a return to democratic norms. Minister G.L Pieris has made some noises about it but seeing is believing for words must be matched with deeds. Democracy, unlike other forms of governance, has inherent checks and balances to mitigate the inclination to resort to violence to resolve political differences. If the Opposition is constrained in Parliament and if the JVP is harassed through legal and extra-legal measures they may
27 FCCISL News Alert Weekly Business Highlight 26th – 02nd May 2010
have second thoughts about democracy. They may not win elections but they could pose a threat to peace and democracy.
Suppressing dissent is no way to run a democracy and the appointment of Mr. Mervyn Silva has not created confidence in the media. It is a slap in the face of media freedom and democracy. Similarly, governing the country under Emergency Regulations and continuing to use the Prevention of Terrorism Act to harass opponents and critics is not democracy.
Let us not follow the post conflict African countries like Rwanda or Sierrra Leone. It is still dangerous for journalists to work in most of these countries. In February 2009, four Sierra Leonean female journalists were subjected to an extraordinary attack – abducted, stripped naked and forced to march through the streets of the eastern city of Kenema – for reporting on an anti-Female Genital Mutilation (FGM) campaign on the international day of zero tolerance for female circumcision.
Such impunity undermines the tenets of democracy of which freedom of speech and other basic human rights are intrinsic. Blatant violation of the rights of others who challenge the ruling regime is not democracy. The lack of freedom in those countries was also complicated by widespread corruption, joblessness and insecurity.
There is also the question of funding a standing army of several tens of thousands required originally to fight the war but now making no economic contribution. Can we bear the cost when the government finances are in such a parlous condition? The government is running huge and increasing fiscal deficits and there seems to be no way to cut them down. Can the Defense expenditure be reduced? Security personnel will say no but they have a vested interest.
Security comes not from arms and soldiers but from winning the hearts and minds of the Tamil people. Other countries have appointed Reconciliation Commissions but we have ignored this subject. We seem to have a naïve view of how a defeated people will feel and think. Openness and free expression of the innermost feelings is a sine qua non for reconciliation. Can anyone say the people are free to express their inner feelings?
One can’t expect the Government to agree to war crimes investigation by the UN. But the government must at least show that it respects human rights and democratic freedoms for its ordinary citizens without branding the dissentients as conspirators against the state. Do we want to follow where critical media are ruthlessly closed down, journalists arbitrarily arrested and thrown in jail or forced to flee the country. The appointment of Deputy Minister Mervyn Silva is a bad start.
Cutting government expenditure But there is one area where the government can reduce expenditure and even generate extra income from reforming and running the State Corporations at a profit. Eliminating the massive losses caused by corruption, mismanagement and politicking is essential. Employing the unemployed in government jobs or in the public sector when there is no productive work for them to do is a foolish solution to the unemployment problem. But this seems to be the only solution within the purview of the government. The educated unemployed have always been a destabilizing factor and giving them jobs in the government is not likely to satisfy them. They want not only income but the perks and social status which they think they deserve as graduates. These youth can only serve as fodder for instability in the future as in the past. 28 FCCISL News Alert Weekly Business Highlight 26th – 02nd May 2010
The challenge facing us is indeed how to balance the competing demands to translate peace into concrete development that benefits ordinary people on the streets. With the politicizing of the bureaucracy and the state machinery the government administration generally lacks the necessary capacity or the will to effectively perform core functions of statehood. The Police are not the police of the State but the police of the ruling party politicians. It may well become the same with the courts unless the independence of the judiciary is safeguarded. The health and Educational services are in a crisis with standards falling in education and diseases and death increasing.
Many in the public service are unwilling or simply unable to provide basic public services such as governing legitimately, ensuring physical security, fostering sustainable and equitable economic growth as well as other essential public goods such as clean water, affordable health care, schools, roads and decent jobs.
The government must understand the need for a modern bureaucracy. A servile sycophantic bureaucracy is not equipped to carry out development. Bureaucracy is not an institution which existed in our traditional ruling regimes. It is a recent innovation by the British. The Indian political parties wisely refrained from messing with the public service. But SWRD undermined the public service and the Left political parties saw in the situation an opportunity to establish their own regime through a bloodless revolution by capturing power from within.
It is the height of folly to entrust the governance of a country to a set of politicians who lack modern knowledge and experience in public administration to run the day to day operations of the state machinery. The democratic ethos requires a clear separation of politics and governance and the rule that the politicians should confine themselves to policy and leave the administration to the permanent officials.
Without such a separation there can neither be good administration nor development. The 17th Amendment was an attempt to restore the situation but it will never be agreed to by power hungry politicians who want to arrogate to themselves all power. The 2/3rd majority could lead to another self serving Constitution for the powers that be.
The Communists consolidated their power through a one party state and stifled all dissent. But the last say is with economics. The Warsaw bread riots led to the fall of the communist regime. So the government must not allow high inflation to pauperize the urban people beyond a point.
29 FCCISL News Alert Weekly Business Highlight 26th – 02nd May 2010
Investment
30 FCCISL News Alert Weekly Business Highlight 26th – 02nd May 2010
The Island – April 28, 2010 PUBLIC INVESTMENTS GROWING
Sri Lanka’s public investments are on the rise as government builds new infrastructure for a post-war revival, laying the foundation for more private investment, Treasury secretary P B Jayasundera said. The dawn of peace has created the political stability needed to accelerate economic growth, he told an audience at a logistics quiz. It was organized by the Sri Lanka Shippers’ Council with the aim of improving skills in the sector and making it more attractive along the workforce, especially young people like Singapore has done to emerge as a shipping and aviation hub.
"The government has boldly moved on without waiting for everything to happen through market forces and the private sector," Jayasundera said. "The government is active in building ports, electricity generation and transmission lines, irrigation facilities, and road and rail networks to create the required infrastructure for growth." "The government has moved from 3.5 - 4 percent of national income as public investment to over six percent now and hopefully over the next five years 6.5 - 7 percent," Jayasundera said.
"The reason for this level of investment is not that the government is going to do everything but it is laying the foundation to get five times the investment made by government from the private sector. "Then the total investment of this nation will exceed 35 percent which is what is required to maintain fairly buoyant, sustainable, vibrant economic growth," Jayasundera said. "Now we have around 25 percent of total investment."
In 2009 the government invested the equivalent of 6.7 percent of GDP, despite an ongoing war until May. Sri Lanka has a rickety infrastructure because the government has under-invested for decades and mis- used taxes extracted from the people on populist adventures and subsidies. Sri Lanka’s private sector also cannot build infrastructure as chronic budget deficits have taken away all the savings of the people and kept long term interest rates too high to finance infrastructure.
The government prints money to finance what it cannot borrow and extract as taxes, making both inflation and interest rates wildly volatile. Even last year the government ran a deficit of 9.8 percent higher than a promised 7.0 percent of gross domestic product budget gap. Of the deficit while 6.8 percent of GDP went for investment, 3.7 percent went for current expenses, which perhaps the main problem with the island’s budgets.
The yawning gap in the current account of the budget drags down national savings and investment rates by frittering away private savings that markets could have potentially channeled towards investments. When Sri Lanka’s telecom sector was in state control ordinary people had to be on a waiting list for 10 or 15 years to get a phone.
Freed from state control, a sector that was a growth constraint with even businesses unable to get a phone became a growth driver in itself growing at rates of over 40 percent a year. The government aims to make the island a shipping, aviation, energy and knowledge hub, Jayasundera said.
More skilled people would be required by the time the port completes building a new port next to Colombo harbour, on which construction is underway, he said. - LBO 31 FCCISL News Alert Weekly Business Highlight 26th – 02nd May 2010
Management
32 FCCISL News Alert Weekly Business Highlight 26th – 02nd May 2010
Daily Mirror – April 30, 2010 WHAT GOOD HR CAN DO FOR A FIRM AND THE CEO
By Dinesh Weerakkody Good people are very crucial for any business. So finding them, managing them, motivating them and holding them are key responsibilities of HR. However, in many companies we know of, unfortunately, HR gets it wrong - either operating as a cloak- and-dagger society or a health-and-happiness sideshow. These are extremes, of course, but if there is anything we have learned over the past three years in our consulting practice, it is that that's an outrage, made only more so by the fact that most HR leaders aren't scrambling to fix it for reasons best known to the HR heads. In our view HR should be every single company's engine of growth. What could possibly be more important in a company than who gets hired, developed, promoted, or moved out of the door? After all, business is in a game to make profit and, as with all games, the team that puts the best people on the field and gets them playing together as a team wins and makes adequate money to breed more success, give salary increases to their players and to become famous. It's not that simple anyway to get the best out of your human resources. You would never know that though, until you get the right man on board as your HR head. Why the CFO reigns supreme However, even though many CEOs believe that people power is the real engine of any business, in many companies the CFO reigns supreme and as a result HR is relegated to the background. It just doesn't make sense. If you owned the Indian cricket team, for instance, would you hang around with the team captain or the Treasurer of the Board? Sure, the treasurer can tell you how much money the board has, but the captain knows what it takes to win, how good each player is and where to find strong recruits to fill talent gaps. That's what HR should be all about. And as we see when we move around, it's usually not. That was never as painfully clear to us as it was few years ago when we spoke to some HR professionals about their role. At one point, we asked the audience: "How many of you work at companies where the CEO gives HR a seat at the table equal to that of the CFO?" After an awkward silence, fewer than five people raised their hands. Awful! Since then, we've tried to understand why HR has become so marginalized and often treated as the poor cousin in the management team, and as noted above, there are at least two poles of bad behavior. The cloak-and-dagger role: That occurs when HR managers become stealthy little kingmakers, making and breaking careers, sometimes not even at the CEO's behest. These HR departments can indeed be powerful but often in a detrimental way, prompting the best people to leave just to get away from the palace intrigue of it all, then after a while become a drag on the business and finally get marginalized. Just as often, though, you get the other extreme: HR departments that plan picnics, put out the in-house newsletter and generally drive everyone crazy by enforcing rules and regulations that appear to have no purpose other than to increase bureaucracy. They derive the little power they have by being the 'you can't do that,' which we call the audit or police role. 33 FCCISL News Alert Weekly Business Highlight 26th – 02nd May 2010
Get HR do its real job So to get it right, it all starts with the kind of people boards appoint to run their HR - not kingmakers or cops but real HR professionals, people with real stature and credibility. In fact, they need to fill HR with a special kind of hybrid: people who are one part a priest, hearing all sins and complaints without recrimination, and other part the parent role, loving and nurturing but giving it to you straight when you are off-track. Priest-parent types can rise through HR, but more often than not, they have run something during their careers, such as a factory or a function. They get a good feel of the business - its inner workings, history and tensions, the hidden hierarchies in people's minds. They are known to be relentlessly candid, even when the message is hard, and hold the confidence at any cost. Indeed, with their insight and integrity, the priest-parent earns the trust of the organization. But priest-parent types don't just sit around making people feel warm and happy. They make the company better, first and foremost by overseeing a rigorous performance management system that lets every person in the organization know where he or she stands, and monitoring that system with the same intensity of Sarbanes-Oxley compliance. CEOs should also make sure that HR fulfils two other roles. It should create effective mechanisms, such as rewards, recognition, and training and to motivate and retain people. And it should motivate organizations to face their most charged relationships, such as those with unions, individuals who are no longer delivering results, or stars who are becoming problematic, for instance, becoming arrogant, greedy, instead of growing. Now, given our experience with HR, the kind of high-impact HR activity we talked about probably sounds like a pipedream to a CEO. But given the fact that most CEOs loudly proclaim that people are their "biggest asset," CEOs need to put their money where their mouth is and get HR do its real job: elevating people management to the same level of professionalism and integrity as financial management. Since people in our view are the whole game, what could be more important in a business than to put money behind the people who run your business and create that competitive advantage that other companies cannot copy in a hurry? (The writer is CEO of HR Cornucopia Lanka Ltd.)
34 FCCISL News Alert Weekly Business Highlight 26th – 02nd May 2010
Trade & Marketing
35 FCCISL News Alert Weekly Business Highlight 26th – 02nd May 2010
Daily News – April 30, 2010 JOHN KEELLS TEA MARKET REPORT: EX-ESTATE TEAS MEET FAIR DEMAND
The market for Tuesday's 1.0 Mkgs of Ex-estate teas met with fair demand at lower levels. The decline in prices were less for the better teas on offer which had a good leaf appearance in particular. The below best and plainer teas were Rs.15/- to Rs.20/- easier from last weeks closing levels. In the Western High grown category BOPF's continued to sell more than the BOP's by Rs.20/- and more on average.
However for Uva's this was the opposite with the BOP's selling above its counterparts by as much as Rs.20/- to Rs.30/- at times.
Once again a strong market prevailed for the good CTC PF1's although lower to last week sold in Sri Lankan tea pluckers the range of Rs.500/- to Rs.600/-.
The broken's too from these estates gained by Rs.20/- to Rs.25/-. Russia and the tea bag sector were very active, whilst UK, Japan and Continental buyers lent fair support. With the expected drop in product quality and larger volumes in the future closing sales, buyers would compete forcefully for teas with good leaf standards and reasonable liquors in the next sale or two. This could result in a further gap between the better teas and plainer teas.
The quantity of 2.6 Mkg of Low Growns that came under the hammer this week met with excellent demand. A very similar market to the previous week prevailed where the best and the below best teas attracted widespread demand, whilst the stalky/flaky varieties met with less demand and consequently prices declining Rs.10/- to Rs.15/-.
The rush crops that were experienced after the New Year holidays have now receded, most estates are at present harvesting moderate crops. Demand emanating from Libya that was evident at the Colombo Auction in the recent past has now reduced and it is likely that the Libyan buying will end soon. Therefore, prices at the bottom end of the market is expected to decline further in May. Hence it is imperative that producers now concentrate on a good end product since the price range for the best and the poorer teas are bound to widen.
There was excellent demand from Russia and Iran, whilst Libya, Iraq, Dubai, Syria, Saudi Arabia and other Middle Eastern markets also lent useful support.
Western Teas Select Best BOPs declined Rs.10/-, other good invoices eased Rs.10/- and more, Below Best sorts shed Rs.10/- to Rs.15/- on average, plainer varieties declined Rs.15/- to Rs.20/- and more for the poor leaf sorts. Select Best BOPFs declined Rs.10/- to Rs.15/- and more, other good invoices eased by a similar margin, Below Best sorts shed Rs.15/- to Rs.20/- on average, plainer varieties eased Rs.10/- to Rs.15/- and more. Medium BOPs declined Rs.5/- to Rs.10/-. BOPFs were Rs.10/- to Rs.15/- easier.
36 FCCISL News Alert Weekly Business Highlight 26th – 02nd May 2010
Nuwara Eliya Teas A few bright BOPs maintained, others declined Rs.20/- to Rs.30/- on average. BOPFs shed Rs.5/- to Rs.10/- on average.
Uva Teas BOPs were firm. BOPFs declined Rs.5/- to Rs.10/- and more. Udapussellawa BOPs gained Rs.5/- to Rs.10/- BOPFs eased Rs.10/- to Rs.15/- on average.
CTC Teas Select Best Low Grown PF1s declined Rs.10/- to Rs.15/-, whilst others shed Rs.20/- to Rs.30/- and more. BP1s were firm. High and Medium PF1s were Rs.20/- to Rs.30/- lower. BP1s were firm.
Low Growns Good demand. Select Best BOP1s eased substantially; however the balance were firm on last levels. Select Best OP1s were steady, Best types were firm to Rs.5/- to Rs.10/- dearer at times, however the stalky varieties were neglected and declined Rs.5/- to Rs.10/-. Select Best OPs shed Rs.10/- on average, however the Best and Below Best types appreciated Rs.10/- to Rs.15/-, poor types declined Rs.5/- to Rs.10/- following quality. Select Best OPAs appreciated Rs.5/- to Rs.10/-, Best and Below Best types too gained Rs.10/- to Rs.15/-, however poor stalky types tended lower by Rs.5/- to Rs.10/-. Select Best Pekoes were irregularly dearer by Rs.5/- to Rs.10/-, the Best types advanced Rs.10/- to Rs.20/-, bold Pekoe varieties advanced sharply by Rs.10/- to Rs.20/-, flaky varieties were firm on last levels.
Shotty Pekoe1s appreciated Rs.5/- to Rs.10/-, Best and Below Best types were irregularly dearer by Rs.10/- to Rs.15/-, poor varieties were steady. Select Best, Best and Below Best BOP.SP moved up Rs.5/- to Rs.10/-, poorer types maintained last levels. Select Best and Best BOPs gained Rs.5/- to Rs.10/- and at times more, Below Best sorts were firm, poorer types gained by Rs.5/-. Select Best and Best FBOPs gained Rs.5/- to Rs.10/-, Below Best types were firm, poorer types also maintained last levels. Select Best and Best FBOPF1s gained Rs.5/- to Rs.8/-, Below Best types were firm, poorer types too maintained last levels. Select Best Tippy varieties maintained last levels, Best types advanced a few rupees, Below Best types were irregular, poorer types gained Rs.5/- to Rs.8/-.
Off Grades Select Best liquoring Fngs1s were dearer by Rs.10/- to Rs.15/-, Best and Below Best appreciated Rs.5/- to Rs.10/-, poorer sorts were dearer by Rs.5/- to Rs.10/-. All BPs sold at firm levels. Select Best BMs were firm to dearer by Rs.5/-, while the Best and the Below Best were irregularly lower by Rs.5/- to Rs.10/-, poorer sorts depreciated Rs.10/-. All Low Grown Fngs appreciated Rs.10/-. Select Best BOP1As were firm to lower by Rs.5/-, whilst the Best and the Below Best too were easier by an average of Rs.15/-, poorer sorts also declined by Rs.10/- to Rs.20/-.
Dust Good demand. Select Best Dust1s gained Rs.5/- to Rs.10/-, while others in the Best and Below Best category appreciated Rs.15/- to Rs.20/-. Clean secondaries were firm, whilst the balance advanced Rs.10/- to Rs.15/-. Best Low Grown Dust/Dust1s declined Rs.10/- to Rs.15/-, whilst the balance gained Rs.5/- to Rs.10/-.
37 FCCISL News Alert Weekly Business Highlight 26th – 02nd May 2010
Daily News – April 30, 2010 YOU MUST BECOME A CORPORATE ATHLETE!
Rohantha Athukorala
Last week I was invited to by my alma mater, the Chartered Institute of Marketing to be the speaker for the members on the hot topic 14 challenges for marketeers post the Jan. 26. After the program one of my colleagues who is heading marketing in a fast moving consumer good multinational company said, I had missed one of the most important challenges faced by marketeers.
He went on to say that the biggest challenge that marketeers are faced with are not the macro challenges but the continuous disruption of work life on the field end due to election rallies in the last five months. I pondered on this comment and I thought how true this is, given the recent developments in the political arena.
Biggest challenge in SL Post May 19, 2009, the biggest issue was getting brand visibility at the point of sale as there is a war for the prime sites for posters, hoardings and media advertising where brands are getting over-powered. Initially it was war victory posters then the Presidential election candidates and now it's the forthcoming general elections. The issue is compounded as from December last year there was no camera's available to shoot any TV commercials, given that all have been booked by the election candidates.
From a marketing operational point of view, this has resulted in chaos to a company as all new product launches has been pushed back to May and beyond because it's so hard to create awareness for consumers to try a new product. The main issue is that the SOV (Share of Voice) is being drowned by election candidates.
When I checked with some of my friends in the advertising industry, the reality that emerged was frightening. Many brands had decided not to advertise in January as many programs are cancelled at the last minute due to a political candidate addressing the Corporate executives must become corporate nation. The logic of using scientific media buying tools athletes to face today’s challenges like OTS (Opportunity To See) or GRP's has become academic as it was only true on paper.
This challenge adds to the pressure to the sales revenues of the company and in turn effects the profitability. The impact is greater given that if a company gets off to a good start in the beginning of the year then, the motivation can be maintained throughout the year. If not, catching up has to be done from the second month onwards which creates pressure at all levels. I guess this challenge will hold true until the end of April because New Year is a time when Sri Lanka's retail sector goes on holiday till the last week of April which further adds to the pressure for the corporate executive.
38 FCCISL News Alert Weekly Business Highlight 26th – 02nd May 2010
The long hours of work and eyes fixed on to the computer screen is now creating many a health issue such as corporate executives having high blood pressure at a very young age, sugar levels increasing to diabetic conditions. Some have cholesterol, which has led to heart decease and sometimes we hear of young executives dying before they reach even the thirties. The question is what is the way out.
Corporate Executive vs being an Athlete Research reveals that the only way out is to make Corporate Executive a Corporate Athlete. Let me explain this. If a Corporate Executive is to work at a high energy level equivalent to a professional athlete the only way out is to increase the stamina levels just like a top athlete of today. For instance, if we take a tennis super star like Roger Federer or the cricketing legend Tendulkar, the challenges they face in the sports field are equal to the challenges faced by a top corporate executive in office.
If we take a typical high performer like Federer, it will include serving hard, positioning the returns with some sharp cross court passes followed up with some aggressive play at the net and then coming back to take a lob at the base line. The next challenges he will face will be questioning wrong line calls by the judges and following it up by engaging the crowd to maintain the off court relationship. It is also customary that a rough media conference happens post the match that adds to the pressure on the player.
On the other hand if we take a typical corporate executive the challenges on a Monday is similar. Multiple decisions having to be taken by analyzing data, each decision can cost the company millions of rupees if the decision is incorrect. Making presentations to get new businesses, briefing media on corporate affairs, engaging the policy makers to influence policy direction and finally ensuring that the humour is maintained so that the spirit of the workplace is kept vibrant. This routine can be mentally very demanding. Hence we can see that there are many similarities between a top class corporate executive and a high performing athlete of today. Let's now examine the differences.
The difference There are many differences between the two. A top class athlete like Roger Federer competes only once a month and may be in eight tournaments for a year. On the other hand, a Corporate Executive will have to perform each day for almost a twelve hour duration at peak performance. Another difference is that an athlete takes up to three months break for a year whilst a corporate executive will get a maximum of two weeks off. The lifespan of a top athlete is between 10-15 years (if one is lucky) whilst a corporate executive will have to perform for 40-45 years. Meaning when you start working at 20 years, until 65 one will continue. This very clearly demonstrates that a Corporate Executive of today needs to be more fitter than a professional athlete if one wants to be competitive in toady's corporate world.
This holds ground more especially because of the turmoil that keeps hitting the corporate world of Sri Lanka. It's been a roller coaster ride with one day being elections then it is post election violence. Then comes GSP+ being suspended and the next is the General Election that sure makes the life of a Corporate Executive a whirlwind task. The only way out is for a Corporate Executive to be a Corporate Athlete. Let me explain this concept.
Becoming a Corporate Athlete As per the scientists that originated this concept Dr. Jim Loehr and Tony Schwartz, the essence of developing a Corporate Athlete have four key capacities that needs to be developed so that
39 FCCISL News Alert Weekly Business Highlight 26th – 02nd May 2010
performance can be at a very high level. They are the physical capacity, the emotional capacity, the mental capacity and finally the spiritual capacity.
Physical capacity development Physical capacity is essentially the capacity to continue working for long hours at peak performance. One can develop this is by doing a 45 minute brisk walk three times a week. The objective is to get your heartbeat up to 120 beats per minute. The walk has to be followed up with a 15 minute routine that includes stomach exercises and stretching. In essence it's only a one hour's dedication that is required.
May be the venue can be the Independence Square where the motivation levels tend to be high too given the different shapes and styles in attendance. The rest of the two days must include a light weight training session so that energy can be built. The maximum weight should be 50 kg. The objective is to stretch the muscle up to a point of tearing and then follow up with a rest day so that re-building takes place. Once this becomes a ritual it's very interesting. Maybe joining a gym and getting trainers' assistance can help.
Emotional capacity development The next building block to become a Corporate Athlete is working on the emotional capacity of ones' self. This is where a close relationship with a human being is a must during the working day. All it takes is a two-three minute telephone call where an intense closeness has to be achieved, so that certain positive hormones get activated. If this is not done, research reveals that there can be emotions that get into the system such as self pity and boredom that elicits negative emotions which are very harmful to health.
Unfortunately, most high performing Corporate Executives feel that giving into one's emotional side is a feminine trait or moreover, a weak characteristic that should not be exposed to others. Research also reveals that if one wants to be a Corporate Athlete in today's high performing environment this second building block of developing the emotional capacity is a must.
The key thing to remember is that these building blocks must become a way of life in a busy executive's working day. In other words it has to become ritualistic behaviour, if one is to get into peak performance for long durations.
Mental capacity development The next skill that is required to be developed is called knowledge management. This has to be done daily. All it takes is reading one article that is mentally stimulating and thereafter reflecting on that for just two-three minutes. This can be done in the evening and all it takes in total is just a 20 minute time block. Once again it's all about habit formation. This can be also done by watching TV programs such as the Buck Stops Here on NDTV or by watching CNN's Boardroom discussions where a top global CEO is being interviewed for success stories in business.
Spiritual capacity development The last building block. But remember that this is not about one's religion. It is more to do with understanding the values which are deep within you. For example you may cherish the last burst of sleep between six-seven a.m. in the morning before you dress up for work. But on the other hand if you have to drop your son to school and this is the quality time that you engage with him then, waking up at 5.45 a.m. to achieve this objective will not be an issue. The challenge is to find out the deeper reasons for your behaviour that motivates and excites you. This is what spiritual capacity development is. It's very 40 FCCISL News Alert Weekly Business Highlight 26th – 02nd May 2010
important to becoming a Corporate Athlete. The challenge once again is making this a routine in your working week.
Next Steps By now, you have a fair idea of the building blocks that will make you a "Corporate Athlete." You also know what the shortcomings are in your life that need to be developed, so that you can become a Corporate Athlete. Practicing this is the next step.
You have to make it a ritual so that it happens naturally. You need to come to a stage where if the gym kit is not in the vehicle you will feel you are not ready to leave home. Also, you will come to a point where foregoing a cocktail party to do your weight training schedule is not a choice any more but a way of life. At this stage you can be termed a Corporate Athlete and then you will suddenly experience that working at high peak performance is equal to playing a game. Then you have really mastered the art of being a Corporate Athlete.
To summarize, it is three days cardio walk and then a two day weights schedule with two days being rest after each weight training session. A few more tips in the life of a Corporate Athlete;
1) Have five-six small meals a day (May be a snack at 10am and 4pm is all it takes)
2) Develop a routine time for sleeping with six-eight hours of sleep a day, being a must.
3) Make a five day workout a routine during the week a ritual.
4) Be proud that you are a Corporate Athlete-do not be shy to practice emotional capacity building.
41 FCCISL News Alert Weekly Business Highlight 26th – 02nd May 2010
Money & Banking
42 FCCISL News Alert Weekly Business Highlight 26th – 02nd May 2010
The Island – April 29, 2010
PRIVATE SECTOR CREDIT GROWS, INTEREST RATES DOWN
By Devan Daniel
Credit to the private sector has increased in February by 1.38 percent to Rs.1,212.3 billion from Rs.1,195.8 billion the previous month while benchmark Treasury bill rates inched downwards as the Central Bank continues to pursue a loose monetary policy.
According to data released by the Central Bank, credit to the private sector from the domestic banking sector increased to Rs.1,064 billion in February from Rs.1,048 billion in January with the balance coming from external sources.
Compared with February 2009, credit to the private sector had declined by 2.8 percent this year. While overall net credit to the government declined 0.4 percent to Rs.669.1 billion from Rs.671.7 billion a year ago, credit from the domestic banking sector had grown 46.1 percent from the previous year.
Credit to the government had grown at a slightly faster rate than credit to the private sector in February, up 1.85 percent from Rs.656.9 billion in January.
Last January, credit to the private sector dropped by 4.6 percent to Rs.1,195.8 billion compared to Rs.1,253 billion in January 2009. Private sector credit had recorded a marginal 0.06 percent growth from December 2009 to January 2010.
Credit to the government increased by 3.1 percent to Rs.656.9 billion in January 2010 from Rs.639.4 billion in January 2009. Credit to public corporations increased by 42 percent to Rs.76.3 billion from 53.7 billion.
Benchmark rates down…
Benchmark Treasury bill interest rates declined marginally at the primary market auction earlier this week where the Central Bank accepted Rs.10.7 million from bids amounting to Rs.30.7 million according to data from the Public Debt Department of the Central Bank.
The three month Treasury bill rate fell marginally to 8.40 percent from 8.46 percent the previous week. The six month bill rate fell to 9.10 percent from 9.21 percent while the twelve month Treasury bill rate fell to 9.30 percent from 9.46 percent.
A year ago, the Treasury bill yields stood at 14.09 percent, 15.88 percent and 16.40 percent for the three month, six month and twelve month bills respectively.
43 FCCISL News Alert Weekly Business Highlight 26th – 02nd May 2010
Market interest rates…
Market interest rates have been moving in either direction with commercial bank lending rates picking up marginally while deposit rates have declined.
The average weighted prime lending rate of commercial banks increased marginally to 10.59 percent last week from 10.42 percent the previous week. A year ago the rate was 18.83 percent. However, these indicative rates applies to lending rates offered to the customers of each bank where as ordinary borrowers would have no choice but accept loans at higher rates.
While prime lending rates increased over the week, indicative deposit rates declined marginally.
The average weighted deposit rates of commercial banks declined to 7.22 percent last week from 7.40 percent the previous week and the average weighted fixed deposit rate declined to 9.71 percent from 9.99 percent. A year ago the indicative deposit and fixed deposit rate stood at 11.53 percent and 16.32 percent respectively.
Earlier this week, the Central Bank announced that it would continue to hold policy interest rates at current low levels in a bid to give commercial banks more time to increase their lending, because, as analysts point out, although interest rates have come down dramatically private sector lending is recovering at slower pace.
44 FCCISL News Alert Weekly Business Highlight 26th – 02nd May 2010
The Island – April 29, 2010
HOW THE EMERGING WORLD CAN DEAL WITH SURGING CAPITAL INFLOWS
By Gerard Lyons
A problem is brewing across much of the emerging world. Many countries, large and small, are on the receiving end of a surge of capital inflows and global liquidity. These flows are broad-based, including bank lending, direct and portfolio investment, plus hot money which move in response to interest rates. Most of the money flowing into these markets often ends up in equity or real estate, adding to inflationary pressures in both. Moreover, the hot money flows can persist until the incentive to speculate is eliminated.
The longer it is before this is addressed the bigger the problem will be. Just as excess liquidity contributed to problems in the Western developed economies ahead of the financial crisis, excess liquidity has the potential to trigger a fresh financial crisis across the emerging world. There is a difference with the West, in that for many emerging economies this problem is a consequence of success, reflecting optimism about growth prospects.
Nonetheless it needs to be addressed with an appropriate and timely policy response. The exact policy may vary for each country. The best response is greater currency flexibility and a move to deepen and broaden capital markets, although this will take time. Thus there will be more immediate responses, including a further build-up of foreign currency reserves, tightening fiscal policy, macro-prudential measures to curb rising house prices, and even short-term capital controls may be needed in some countries if inflows persist.
All of this creates big policy dilemmas. The question is whether countries and policymakers will implement necessary corrective action. The first way to deal with the surge in capital flows is through currency flexibility. The challenge for policymakers is what has become known as the ‘impossible trinity’; it is not possible to have capital mobility, exchange rate stability and an independent monetary policy. Something has to give.
Thus the best option is letting the currency be the shock absorber. Allowing a currency to appreciate may be like waving a red rag to a bull: further speculative inflows may be attracted. Despite that, a number of currencies have appreciated since the bottom of this crisis in March 2009: for instance the South African rand is up 45%, the Korean won 41%, Brazilian real 40%, Polish zloty 34% or the Indonesian rupee 32%.
Some countries, keen to suppress appreciation, have intervened, building up foreign currency reserves. This is ominous, as it was one of many problems that fed the crisis, but it is understandable. In the decade following the 1997 economic crisis, Asian countries saw their holdings as a proportion of global reserves rise from one-third to two-thirds. Such intervention was justified partly by the aim to remain competitive but was aimed at building up safety nets in the event of another crisis. This proved to be a positive tool in this crisis, and that lesson has not been lost on other emerging economies. Thus, intervention may be seen as desirable for some.
45 FCCISL News Alert Weekly Business Highlight 26th – 02nd May 2010
Over the last year, the rise in reserves has been sizeable and has been largely concentrated in Asia, with reserves rising 39% in Hong Kong, 32% in South Korea, 27% in Indonesia and 25% in China. This has complications, boosting domestic monetary growth when their economies may not need it, adding to inflation worries. Heavy reserve increases can lead to sterilization, as seen in China, with the need for increased issuance of bills and bonds to soak up the flows. Such sterilization does not act as a deterrent to persistent capital inflows. Instead, it is a further cost to be borne.
Another way to tackle surging capital inflows is through the deepening and broadening of capital markets. Some of the countries on the receiving end of inward liquidity have current account surpluses, explained by high domestic savings. These countries should bear in mind one of the lessons of last May’s Asian Development Bank meeting in Indonesia. Then a number of features were identified as necessary for Asia: social safety nets; help to small and medium-sized enterprises so that they can be the drivers of sizeable employment growth; and the need to deepen and broaden Asia’s bond markets. All these issues are commendable, but their implementation will take time.
Many emerging economies should be tightening monetary policy. Normally this would take the form of higher interest rates. The fear is that they would attract more hot money. Given this, tightening fiscal policy may be an option or the use of macro-prudential measures. These are aimed at curbing rising house and property prices, and may include limits on how much can be borrowed or lent.
The most controversial option can no longer be ruled out: capital controls. These ideally should be implemented as a last recourse and only where such measures would be effective. Brazil’s use of a tax on portfolio inflows into equities at the end of last year shows that controls are back on the policy agenda. As the scale and speed of inflows has intensified, the question then is in what circumstances are controls justified and in which situations are they likely to be effective? Moreover, even if they do work, exits from controls can be as difficult to manage as their imposition. There can also be contagion, with controls in one country having spill-over effects onto others.
There are a series of controls that can be implemented: unremunerated reserve requirements (URR), as implemented by Chile in 1991 or Thailand in 2006; time requirements stating the minimum time for which inflows must remain, as in Columbia, in 2007, or Malaysia, in 1997; limits on the size, as in Taiwan in 2009; a direct tax on financial transactions, as in Brazil in 2009; or regulation of trade between residents and non-residents, as we saw in the Asian crisis in Thailand and Malaysia.
The reality is that controls may not always be the best option. They may be an effective stop-gap. But imposing capital controls sends a signal that could deter future direct investment inflows as well as causing higher premiums to be paid in the future to compensate for the risk that such controls will reappear.
As capital and liquidity flows into emerging economies, the lesson is to set policy to suit domestic needs. This was a lesson of the Asian crisis itself. For some, capital controls may be effective, but, far better to go for greater currency flexibility and deeper and broader capital markets. These measures may not only help cushion or absorb the inflows but may also help to achieve a balanced global economy.
(Dr. Gerard Lyons is Head of Global Research and Chief Economist at Standard Chartered Bank)
46 FCCISL News Alert Weekly Business Highlight 26th – 02nd May 2010
Daily News – April 30, 2010 FIVE BILLIONAIRES WHO LIVE BELOW THEIR MEANS
Katie Adams
At least once in your life - maybe even once a week or once a day for that matter - you have fantasized about coming into a lot of money.
What would you do if you were worth millions or even billions? Believe it or not there are millionaires and billionaires among us who masquerade as relatively normal, run-of-the-mill people. Take a peek at some of the most frugal
Carlos Slim wealthy people in the world. Ingvar Kamprad Frederik Meijer Millions of people read Buffett's books and follow his firm, Berkshire Hathaway's, every move. But the real secret to Buffett's personal fortune may be his penchant for frugality.
Buffett, who is worth an estimated $47 billion, eschews opulent homes and luxury items. He and his wife still live in their modest home in Omaha, Nebraska which they purchased for just $31,500 more than 50 years ago.
Although he's dined in the best restaurants around the globe, given the choice he would opt for a good burger and fries accompanied by a cold cherry Coke.
When asked why he doesn't own a yacht he responded "Most toys are just a pain in the neck." (Find out how he went from selling soft drinks to buying up companies and making billions of dollars.)
While most of the world is very familiar with Bill Gates, the name Carlos Slim rarely rings a bell. But it's a name worth knowing. Slim, who is a native of Mexico, was just named the world's richest billionaire - that's right, richer than the uber-famous Microsoft founder.
Slim is worth more than $53 billion and while he could afford the world's most extravagant luxuries he rarely indulges. He, like Buffett, doesn't own a yacht or plane and he has lived in the same home for over 40 years.
Ingvar Kamprad The founder of the Swedish furniture phenomenon Ikea struck success with affordable, assemble-it- yourself furniture. For Kamprad, figuring out how to save money isn't just for his customers, it's a high personal value. He's been quoted as saying "Ikea people do not drive flashy cars or stay at luxury hotels." That goes for the founder as well. He flies coach for business and when he needs to get around town locally he either takes the bus or will head out in his 15-year-old Volvo 240 GL.
47 FCCISL News Alert Weekly Business Highlight 26th – 02nd May 2010
Chuck Feeney Growing up in the wake of The Depression as an Irish-American probably has something to do with Feeney's frugality. With a personal motto of "I set out to work hard, not get rich," the co-founder of Duty Free Shoppers has quietly become a billionaire but even more secretively given almost all of it away through his foundation, Atlantic Philanthropies.
In addition to giving more than $600 million to his alma mater Cornell University, he has given billions to schools, research departments and hospitals.
Loath to spend if he doesn't have to, Feeney beats both Buffett and Kamprad in the donation category, giving out less grants than only Ford and the Bill and Melinda Gates Foundations.
A frequent user of public transportation, Feeney flies economy class, buys clothes from retail stores, and does not waste money on an extensive shoes closet, stating "you can only wear one pair of shoes at a time".
He raised his children in the same way; making them work the same normal summer jobs as most teens.
Frederik Meijer If you live in the Midwest chances are good that you shop at Meijer's chain of grocery stores. Meijer is worth more than $5 billion and nearly half of that was amassed when everyone else was watching their net worth drop in 2009.
Like Buffett he buys reasonably-priced cars and drives them until they die, and like Kamprad he chooses affordable motels when on travel for work.
Also, like Chuck Feeney, rather than carelessly spending his wealth Meijer is focused on the good that it can provide to the community. Yahoo
48 FCCISL News Alert Weekly Business Highlight 26th – 02nd May 2010
Sunday Island – May 2, 2010 TAXES IN SRI LANKA - VALUE FOR MONEY?
Less than 8% of the 8 million people working in Sri Lanka pay Personal Income Tax to the inland Revenue Department. Hence, Corporate and Personal Income Tax only accounts for 19% of state revenue. Meanwhile, with the tax-free threshold for annual personal income at SLR 25,000 per month, recent evidence on Sri Lanka’s overall economic development clearly indicates that many more individuals and businesses should be liable for income tax by now.
This information has been elicited for purposes of a May 5 seminar on ``Taxes in Sri Lanka – Value for Money?’’ under the auspices of the Friedrich Ebert Sifting’s Sri Lanka office at the JAIC Hilton. After a welcome and introduction to the open forum by Mr. Joachim Schlutter, Resident Representative of FES here, a group eminent academics, business leaders and a representative of a worker’s organization will speak for 10 minutes each on the question ``Is Sri Lanka’s Tax System Realistic?’’
They are Prof. W.D. Lakshman, Chairman, Presidential Commission on Taxation, Dr. R.M. Fernando, Executive Director, Aitken Spence, N.R. Gajendran, Senior Partner, Gajma and Co., and K.D.J. Christopher, President Workers Organization for Tax Relief.
Dr. Anila Bandaranauike, retired Assistant Governor of the Central Bank, will facilitate the panel discussion which will be followed by an open discussion with questions taken in English, Sinhala and Tamil.
Tax revenue provides 90% of state revenue. The indirect Value added tax (VAT) takes the lead with a 31% share, being the main tax raised from all consumers in the country. Although the government has a policy to reduce the consumption of alcohol and tobacco, it cannot forgo the excise taxes provided by these sectors which contribute 14% to revenue. Import duties represent only 10% and have been below targets, partly due to ad hoc tax-holidays and duty free waivers. All other taxes only account for the remaining 15%, reflecting a plethora of special taxes, at enormous administrative expense and low returns.
Yet, even with some tax rates as high as 35%, taxes could not even cover the government’s day-to-day expenses, as the size of government has expanded by moving deeper and deeper into debt, without rationalizing or reducing wasteful expenditure. In 2009, taxes provided Rs.619 billion of state revenue of Rs.702 billion, whereas government spent Rs.824 billion on servicing its debt.
* Do we know what our taxes pay for? * What value do potential tax payers expect in return for their tax rupees? * Is the Tax System balancing the charges and returns between payers and nonpayers and between rich and poor adequately? * How can we reduce the costs of the tax system while improving its per formance?
We invite you to discuss these and your questions concerning the Sri Lankan Tax System at the Open Forum, with Business Managers, Civil Service Unionists, Consumer Representatives, Government Professionals, Revenue Officers, Chartered accountants, Academics, Civil Society and concerned Citizens of Sri Lanka.
49 FCCISL News Alert Weekly Business Highlight 26th – 02nd May 2010
Sunday Times – May 2, 2010 ABROGATE SBA? CAREFUL THOUGHT NEEDED FIRST
By W.A. Wijewardena
Veteran economist and respected university don, T.L Gunaruwan (TLG), has raised a very pertinent question: Should we continue the SBA? (Business Times on Sunday, April 25, 2010). He has taken the reader through the latest developments in the Sri Lanka’s economy and argued that the scary state that prompted the country to seek an IMF facility against its convictions in early 2009 does no longer prevail.
He further argues that IMF money given to a country to simply avert a balance of payments crisis is not available for development purposes and it does not help Sri Lanka to mobilize the massive quantum of resources needed for investment in the North and the East, the country’s most urgent requirement of the day. His position is that ‘the confidence factor’ that the country was able to earn with IMF support could anyway be gained by pursuing appropriate macroeconomic policies on its own volition. He comes up with the aphorism that ‘wise people do not wear winter clothes through hot summer as well and suffer’ insinuating that IMF was invited when there was a need and now, that need no longer pressing, IMF is a burden.
Hence, he advises the Sri Lankan authorities to correctly assess the economic climate and reconsider the continuation with SBA. Though TLG has not said it in clear terms, the message is obvious: abrogate SBA. We should thank TLG for coming out with his ideas boldly, because it has enabled the country to debate this vital issue openly and reach a sound decision.
IMF, the Necessary Evil It is not unusual for borrowers from the IMF to consider it a ‘necessary evil’. The opposition to IMF is levelled on two main grounds. First, IMF conditionality for supporting a member country is considered a fetter that prevents a country from taking independent decisions. The IMF advice that calls for a readjustment of the macroeconomy through curtailment of inflation, reduction of budget deficits and adjustment of exchange rates to reflect the country’s competitiveness is considered an interference by an outside agency in the affairs of a sovereign state. Hence, freedom loving individuals (and countries as well) are naturally inclined to opposing the IMF.
IMF’s knowledge base under challenge Second, doubts have been expressed about the superiority of IMF’s knowledge base too. It was not long time ago that Nobel Laureate Joseph Stiglitz, then World Bank’s Chief Economist, publicly embarrassed IMF by questioning the competence of its economists and branding it as an institution run by ‘free market fundamentalists’ implying that IMF was not willing to listen to the other side of the argument too.
The writer has been privy to many top policy makers of governments, both in the developed and the developing countries, complaining of the immaturity and the narrowness of the policy advice being given by IMF advisors. In one instance, a Governor of a central bank of an East Asian country remarked at a public forum that ‘those so called IMF advisors were just raw graduates out of universities and they lacked experience or maturity to offer advice to its member countries’. There were many instances where the writer’s own colleagues maintained that their knowledge was much superior to that of IMF advisors.
50 FCCISL News Alert Weekly Business Highlight 26th – 02nd May 2010
Go to IMF when there is no other option Hence, no one welcomes IMF willingly. Its assistance is sought by them because they do not have any other option. Their own follies have driven them to economic crises from which they cannot get out on their own. Hence, they turn to the ‘necessary evil’ grudgingly and seek to get away on the very first instance they get after obtaining initial assistance from IMF. This is shown by the dismal track record of borrowers from IMF, including Sri Lanka, with regard to the completion of a medium term IMF Policy Adjustment Programme. The majority of borrowers have dropped out of the programme midway and only a handful of them have completed the entire programme.
IMF, knowing well that borrowers are inclined to dropping out midway, makes available its facilities in installments to be released on the condition that the borrower continues to maintain agreed standards on a continuous basis. In the case of Sri Lanka, in its current IMF SBA programme, the first installment was given, but the second is on hold since the country has not been able to fulfill its agreed performance criteria relating to the government budget.
IMF thinking based on sound economics Though the staff attached to IMF may be raw graduates without substantial experience as alleged by some, it does not mean that IMF is without a sound knowledge base. Its policy prescriptions to member countries are based on another celebrated economic model suggested by Robert Mundell (another Nobel Laureate) and IMF’s own Deputy Director of Research, Marcus Fleming, known as Mundell – Fleming Model. This model is an extension of the Keynesian Model, familiar to many, to an economy with relations with the rest of the world. Since all countries today are interrelated with relations and transactions with each other, working with a restrictive Keynesian Model that does not assume such external relations may not be appropriate. Hence, the rejection of IMF prescription requires one to necessarily refute the Mundell – Fleming Model and come up with a more plausible model applicable to a country with relations with foreign countries.
Mundell – Fleming Model The Mundell – Fleming Model is simple enough to understand. If a country with external relations prints more money than what its people need (an undue increase in money supply), the excess money will be used on goods and services, a part being supplied out of domestic goods and the balance out of imported goods. When people are inclined to use more imported goods, it widens the gap between imports and exports leading to a trade deficit and if the trade deficit is not matched by its ability to sell services, to a current account deficit as well. This current account deficit has to be financed by using the existing foreign reserves or borrowing from abroad (a chronic balance of payments crisis). If the exchange rate is not allowed to depreciate appropriately, it will worsen the balance of payments crisis because, it encourages more imports and the use of foreign services and discourages exports and the sale of local services to foreigners. It causes the foreign reserves to fall further (an acute balance of payments crisis). Hence, the prescription is to cut down the money supply.
Government is the culprit But the money supply is increased due to the heavy expenditure of the government which cannot finance its budget deficits out of traditional sources of income. The budget deficits are high because the government sector is too large and government’s economic enterprises are making losses year after year. The government’s budgetary problem is compounded because it now has to pay interest on bigger volumes on past borrowings, having to maintain an ever rising public sector and the need for financing the losses of the government’s economic enterprises. When these enterprises borrow from state banks to 51 FCCISL News Alert Weekly Business Highlight 26th – 02nd May 2010
meet liquidity shortages and finance losses on government guarantees, any subsequent default of loans by them too falls on the government. The government further complicates the issue by using the lion’s share of resources of the economy leaving only peanuts to the private sector for its use. Since wealth is basically created by the private sector, it therefore leads to compromise economic growth, further aggravating balance of payments and inflationary pressures in the economy. Hence, the main cause of the economic crisis is the profligacy of the spending by the government and, without correcting it, the crisis cannot be solved on a permanent basis.
Policy Prescriptions from Mundell – Fleming Model - Hence, the policy prescriptions needed to get out of a crisis arising from the Mundell – Fleming Model are clear.
• First, reform government’s economic enterprises so that they are not a burden to the tax payers.
• Second, reduce the size of the government so that its budget deficits are pruned to manageable levels.
• Third, avoid increasing money supply by financing the deficits by the central banks.
• Fourth, make available the permissible increases in money supply for use by the private sector so that the growth momentum can be continued unabated.
• Fifth, adjust the exchange rate appropriately so that exports are not discouraged, imports are not encouraged and those immigrants remitting money will get a better income.
• Sixth, avoid short term borrowing from international market sources at high interest rates so that future interest payments and loan repayments will not be a burden to the government.
• Seventh, maintain overall economic efficiency in the government sector so that money spent on public services will generate equally matching economic benefits to the people.
Sri Lanka’s situation is scary Sri Lanka’s current situation in this respect is scary though there has been a temporary solace following the SBA deal. According to the Central Bank Annual Report 2009, the budget deficit defined to include grants too as revenue of the government is as high as 9.8 percent and, excluding grants, it stands at 10.3 percent. Six major public enterprises has had operating losses amounting to Rs.49 billion and with loan losses and depreciation properly charged, the net losses may be mounting. Gross foreign reserves stand at $ 5.3 billion, but two-thirds of that constitutes short term flows which are reversible at any time. Exports have become sluggish and imports buoyant creating pressures for the exchange rate to fall, despite the bold intention of authorities to raise its value. The slow domestic growth and rising aggregate demand have allowed inflation to raise its ugly head which may be a major problem for macroeconomic management in the future.
Abrogate SBA but inculcate self - discipline Hence, the abrogation of SBA requires the country to make bold decisions with respect to budget, balance of payments and monetary policy. It is a kind of a self – discipline that has to be instilled at every
52 FCCISL News Alert Weekly Business Highlight 26th – 02nd May 2010
level. It is difficult, but not impossible as has been shown by Singapore which did not rely on IMF or World Bank funding during its transmission from a third world country to the first world status.
The Singapore Story Commenting on the importance of sound macroeconomic policies, Lee Kuan Yew, in the second volume of his autobiography From Third World to First, says that ‘we (Singapore Government) established good labour relations and sound macroeconomic policies, the fundamentals that enable private enterprise to operate successfully’.
About the prohibition of printing money for financing the government, Goh Keng Swee, economic wisdom behind Singapore’s miraculous success, says the following: ‘Our economy was both small and open. Financing budget deficits through Central Bank credit creation appeared to us as an invitation to disaster.
There was no effective way of exchange control in an open trading economy like ours to deal with inevitable balance of payments troubles. Another contributing factor was the world outlook of our colleagues – the old guard as they are now called. We all grew up under difficult conditions and did not believe anybody owed Singapore a living.
The way to better life was through hard work, first in schools, then in universities or polytechnics, and then on the job in the work place. Diligence, education and skills will create wealth, not Central Bank credit’. This was the economic wisdom of Singaporean leaders in 1940s and 1950s, before Mundell and Fleming and IMF SBA conditions.
Hence, Sri Lanka could throw away the SBA and the IMF. But it will require Sri Lanka to follow the same policy package on it own volition to create wealth, prosperity and a better future for its citizens.
53 FCCISL News Alert Weekly Business Highlight 26th – 02nd May 2010
Sunday Times – May 2, 2010 CONSIDER POSSIBLE REPERCUSSIONS BEFORE ENDING SBA
By Professor S.S. Colombage Open University of Sri Lanka
Having read the article of Dr. T. L. Gunaruwan from the University of Colombo in last week’s Business Times, I could not resist presenting my own alternative views on this important issue. Quoting the recently released Annual Report of the Central Bank, the writer points out that the country’s foreign exchange reserves have improved significantly to reach the level of around $ 5 billion. And, therefore, he argues that the “short-term” need of a Stand-by Arrangement (SBA) facility from the International Monetary Fund (IMF) does not seem to exist anymore. He further argues that these funds cannot be used for development purposes, and drawing from this facility will merely increase the foreign indebtedness of the country.
Of course, if the country’s foreign exchange position is strong enough, as Response to Dr T.L. Dr. Gunaruwan pointed out, it is not necessary to rely on the IMF to get Gunaruwan's views on SBA a short-term balance of payments loan such as the SBA. So, I do not have Two retired Central Bankers any quarrel with that premise. But the fundamental questions that I have responded to last week's would like to raise here are – (a) How did the country manage to build up article by economist Dr T.L. this amount of foreign reserves? (b) Can we sustain this reserve growth Gunaruwan where he argues momentum in the medium or long run? In other words, can we blow our the case for ending the own trumpet, and boast about our achievements with regard to the Stand-by Arrangement with reserve buildup, and ridicule a loan facility offered by the IMF or some the IMF. Their responses are other agency? on this page.
Reserve buildup: Result of low imports and high remittances In an article published in Business Times of 28 February 2010, I clearly explained that the improvement in the country’s foreign exchange reserve stock in 2009 was not due to any positive development in the domestic economy, but it was solely a result of a downward trend in imports coupled with a surge of worker remittances, particularly from the Sri Lankan workers employed in the Middle East. A large inflow of worker remittances amounting to over $ 3 billion in 2009 has greatly helped the country to almost double the gross foreign assets to $ 7 billion by the end of 2009 from a mere $ 3.2 billion in the previous year. This is a welcome development, but we should note that it is purely an external outcome rather than an upshot of domestic economic performance. More importantly, as a nation, we are indebted to these workers, who undergo tremendous hardships abroad sacrificing their family life, for bringing in so much foreign exchange without much incentive from the government.
Dismal foreign trade situation
Ironically, the foreign reserves went up in the backdrop of a dismal performance of foreign trade activities (please see the chart). Export earnings declined by 15 % in 2009. The setback was felt in all export categories – industrial, agricultural and mineral. Imports fell down at a much faster rate of 32 % last year. As in the 54 FCCISL News Alert Weekly Business Highlight 26th – 02nd May 2010
case of exports, the import downfall too was experienced in all categories – consumer goods, intermediate goods and investment goods. The declining imports of the last two categories, of course, are a reflection of the economic and business setback.
The decrease in imports helped to halve the trade deficit to -$3.1 billion in 2009 from - $6 billion in the previous year. The inward remittance inflow ($ 3 billion) was almost sufficient to finance the trade deficit (- $3.1 billion) thus, leaving a small current account deficit of -$214 million in 2009, as against a bigger deficit of -$3.9 billion in 2008.
This meant that the country did not have to use its foreign borrowing last year to meet her foreign exchange deficit in the current account, as in the previous years. The entire proceeds of the foreign borrowings taken last year thus, added-on to the country’s foreign reserves. This is how the foreign reserves were built up last year. If not for worker remittances, the current account deficit would have been over -$3 billion, and, the foreign borrowings would have been entirely used to bridge this gap. As a result, the foreign reserves would have been much less. The above facts clearly show the fragile nature of Sri Lanka’s foreign exchange position.
Stand-by agreement In July 2009 the IMF agreed to provide an SBA facility amounting to $ 2.6 billion to Sri Lanka in several tranches. The major objectives of this program were to strengthen the country’s fiscal position while ensuring the availability of resources for the much needed post-conflict reconstruction and relief efforts. The program was also intended to rebuild international reserves and strengthen Sri Lanka’s domestic financial system, and to protect the most vulnerable groups of the population from the burden of economic adjustments. The program also aims to lay a strong macroeconomic foundation to facilitate broader participation of international community in post-conflict reconstruction.
Programme conditions The SBAs are designed to help the member countries of the IMF to deal with short-term balance of payments problems. The length of a SBA is typically 12–24 months, and repayment is due within 3¼ to 5 years of disbursement. As usual, the present SBA has been tied up with certain programme targets agreed upon by the Sri Lankan authorities with the IMF. The disbursements of the loan facility are made conditional on achieving these targets (‘conditionality’).
Accordingly, it was expected to gradually reduce the government budget deficit/GDP ratio from 7.7 % in 2008 to 7 % in 2009, to 6 % in 2010, and to 5 % in 2011. However, the current indications are that the actual budget deficit for 2009 has far exceeded the program targets, and the budget 2010 will be delayed till next October. Under the SBA programme, the government was to also take certain steps to ensure reducing the deficits of the Ceylon Petroleum Corporation and Ceylon Electricity Board, and to reach a balanced budget for these enterprises by 2011. Reconstruction spending for the conflict-affected areas is to be balanced against the need to preserve debt sustainability. The program also envisaged to improve export competitiveness and external viability. It also included conditions relating to monetary policy and financial sector reforms.
From a nationalistic point of view one may visualize these SBA conditions as some kind of a threat to the country’s sovereignty. This is where the question of ownership of an adjustment program arises. Over the years the IMF usually assigns the ownership of such a program to the authorities of the country concerned. It is left to the authorities, who themselves own the program, to go ahead with the agreed 55 FCCISL News Alert Weekly Business Highlight 26th – 02nd May 2010
program or to abandon it. The same principle can be applied to the current SBA as well. In fact, the SBA has the flexibility which allows the recipient country to decide not to draw upon approved amounts immediately, but retain the option to do so if conditions deteriorate at a later stage.
Pro-government flattering and the silent economic profession We need to carefully look at the repercussions of abandoning the SBA, as suggested by Dr. Gunaruwan. First and foremost, as he pointed out “the only benefit that Sri Lanka could possibly derive through this facility at present seems to be the so-called international investor confidence”.
Of course, I do not think that it is the “only benefit”, but I agree with him that the SBA contributes to build up investor confidence. SBA gives an indirect assurance to investors – both local and foreign – that the right policies are in place. Apart from this benefit, there are other advantages as well.
Particularly, the program helps us to do our own housekeeping which is much needed to achieve financial and economic stability so as to facilitate the growth process. For example, it compels the government to adhere to fiscal discipline. As we know, fiscal deficits not only lead to inflationary financing, but also pre- empt resources from the private sector.
In this regard, I agree with last week’s Business Times Editorial which emphasized the need to pursue fiscal discipline. Restructuring of public enterprises and financial institutions is also essential for macroeconomic stability. These reforms are imperative with or without the SBA to shift the economy to a higher growth trajectory.
Continuation of the SBA may not be important at this juncture, given the superficial increase in foreign reserves. But what is important is to revive the economic reforms to pave the growth path.
These are the bitter realities based on well-tested economic principles, and we have to face them sooner or later. It is rather unfortunate that the economic pundits who advise the politicians and policy makers knowingly or unknowingly hide these underlying hard facts, and attempt to paint rosy pictures of the economy. By such actions, they not only try to mislead the general public but also their own political masters.
These pro-government flattery reigns supremely in the absence of logical and objective counter- arguments from the economic profession or from the opposition political parties. Eventually, the much needed economic policy reforms are delayed or not implemented at all.
This is exactly what happened in the recent decades. The victim of all these ill-advice is the country’s economic growth which is the ultimate determinant of the living standards of the people.
56 FCCISL News Alert Weekly Business Highlight 26th – 02nd May 2010
Tourism
57 FCCISL News Alert Weekly Business Highlight 26th – 02nd May 2010
Daily News – April 27, 2010 HEAVY TRADING IN TOURISM SECTOR SHARES Harshini Perera
Hotel sector shares trading in the Colombo Stock Exchange (CSE) for the past few months gained unbelievable heights.
Some shares in the hotel sector went up by 5 percent, but the stocks in the hotel sector has not reached their over-value yet, Capital Trust Securities Director Sarath Rajapakse told Daily News Business.
"There are some hotel projects in the pipeline to get listed in the CSE. Many companies that invested in Jaffna are looking for listings in the CSE in the future" he said.
"Most companies involved in the hotel sector went for IPOs and Rights issues as they have seen the potential in the market. John Keells was the first to issue a public offering. Aitken Spence Hotels Holdings and Marawila Resorts have followed the rights issue in the hotel trade. In Sri Lanka, capital has been a constraint for the development of many projects. Earlier companies went for banks when in need of capital but today they turn towards equity funds," he said.
The keen interest in the hotel sector helped it gain higher than other shares. Many locals have invested in hotel shares. Indian investors go for direct investments in hotels. The investments from foreigners have not yet turned in the CSE.
"During the war period, the tourism industry was not catering to the local tourists but solely depending on foreigners. At present, many hoteliers are catering to locals as well as foreigners. This has resulted in the rapid upward movement of shares in the stock market. The past week has recorded the highest investment contribution to the hotel sector," Rajapaksa said.
58 FCCISL News Alert Weekly Business Highlight 26th – 02nd May 2010
The Island – April 27, 2010
TOURISM SET TO BE THE FOURTH HIGHEST FOREIGN EXCHANGE EARNER
By Mario Andree
Tourism in Sri Lanka is forecast to be the fourth highest revenue earner this year.
Given the high returns estimate and its importance to the country’s economic growth, a focused plan to develop this lucrative market has been implemented by the Sri Lanka Tourism Promotion Bureau (SLTPB), official data says.
The country is also looking forward to improve tourism making it the third highest foreign exchange earner by 2016.
According to the Sri Lanka Tourism Development Authority (SLTDA), Sri Lanka is hoping to earn more than 600 million this year with a number of 600,000 tourists attracted to the country.
External Affairs Minister Prof. G. L Peiris (former Minister of International Trade and Export Development) said last month that Sri Lanka is expecting more than 600,000 tourists for the winter season alone.
Strong investment and focused attention on marketing and reaching high yield markets, in countries such as UK, India, Middle East, Germany, Japan and China will help drive the strategic marketing plan, going forward, SLTDA said.
The SLTPB will pursue a major public relations drive that will strive to promote and build the country’s image.
With the added expertise of a local advertising agency, the SLTPD is committed to building Sri Lanka’s brand image and market reach. Currently, an in-house PR department has been placed; 6 PR agencies overseas are also in operation, officials said
As competition within the tourism environment is growing, globally, the SLTPB is committed to see more foreign tourists visiting Sri Lanka and also develop new initiatives that would keep the domestic market on an upward trend,
The SLTPB’s goal is to see its innovative and ambitious strategy materialize, even as potential travelers visit Sri Lanka, thus converting a global fondness for the country into actual visitation and increased spending and dispersal, they said.
A tactical promotional campaign with the assistance of the private sector of the travel trade was implemented to create confidence among the visitors to Sri Lanka. The tactical campaign included special packages, domestic tourism campaigns.
59 FCCISL News Alert Weekly Business Highlight 26th – 02nd May 2010
Daily Mirror – April 27, 2010 PROMOTING TOURISM IN SOUTH ASIA
South Asia is home to a solid one-third of the world’s population. Some of the best brains that run the world have South Asian roots or lineage. The region is home to the highest and the second highest mountain peaks of the world (Everest and K2). Most of the world’s quality water resources are in the region with the river systems originating from the Himalayas. Some of world’s best ocean resources (coral reefs of Maldives), beaches (Coxes Bazaar), and mangrove areas (Sunderbans) are located in the region. Its biodiversity is unmatched (Sinharaja, Chitwan).
Home to marvels such as the Taj Mahal, Ajanta, Sigiriya, Timpu, and Taxila, the heritage and cultures of the region date back thousands of years. For centuries, the region has been a hotspot for seafaring nations looking for spices and other riches. It was the playground of several colonial powers, and is now home to almost all of the world’s religions. The cuisine of the region is exquisite, and its people are friendly and warm. The South Asian region has the key ingredients to delight its visitors. Yet, with some 400 million people remaining below the poverty line and 71 million people affected by violence or its threat, most of South Asia remains conflict ridden. Poverty, health, child, and gender-related issues are pulling down the region’s image. In 2007, the South Asian region received less than 1.1 percent (9.7 million) of the 898 million visitors from around the world (UN World Tourism Organization 2008). In comparison, Europe received 53.5 percent of the global arrivals, and the Asian region, including East and Southeast Asia, received 19.3 percent. The volume of arrivals to the Asia Pacific region more than doubled between 2000 and 2007, from 85 million to 198 million (UNESCAP 2008). Within this growth scenario, regrettably, most of South Asia saw only marginal growth, with the exceptions of some significant growth to India and Maldives. For several decades now, the region has promoted tourism. As far back as the early 1980s, the World Tourism Organization (now UNWTO) set up a Secretariat in Colombo for South Asian Tourism Promotion and attempted to promote the region. This initiative failed because of inadequate support and interest from the individual nations’ state tourism organizations. In the 1990s, the SAARC Chambers of Commerce and Industry (SCCI) began a Nepal-based initiative to promote tourism to the region. A special tourism committee was formed and several rounds of meetings were held. A promotional tagline “Magic That Is South Asia” was coined, and talk of a regional tourism year was initiated. It was thought that tourism would improve if private sector business and tourism stakeholders took the lead in moving regional tourism initiatives forward. Several South Asian tourism business and trade markets have been held since the 1990s. On the formal intergovernmental sphere, tourism occupies an important position. The official Web site of the SAARC Secretariat presents tourism as follows: The SAARC Leaders have always recognized the importance of tourism and emphasized the need to take measures for promoting tourism in the region. During the Second Summit, the Leaders underscored that concrete steps should be taken to facilitate tourism in the region. Tourism has been an important dimension of most of the subsequent Summits. At the Twelfth Summit held in Islamabad in January 2004, the Leaders were of the view that development of tourism within South Asia could bring economic,
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social and cultural dividends. There is a need for increasing cooperation to jointly promote tourism with South Asia as well as to promote South Asiaas a tourism destination, inter alia, by improved air links, they stated in the Declaration. To achieve this and to commemorate the twentieth year of the establishment of SAARC, the year 2005 was designated by the Leaders as “South Asia Tourism Year.” Member States were required to individually and jointly organize special events to celebrate it. On the formal action front, the site reports the following: The Working Group on Tourism was established by the Council of Ministers during its Twenty-fourth Session held in Islamabad in January 2004. This was done after a comprehensive review of the SAARC Integrated Programme of Action by the Standing Committee at its Fourth Special Session held in Kathmandu in August 2003. This intergovernmental process will compliment the endeavors by SAARC Chambers of Commerce and Industry (SCCI) Tourism Council, thus ensuring public–private partnership for the promotion of tourism. The First Meeting of the Working Group on Tourism was held in Colombo on 16–17 August 2004. In addition to the SAARC Member States and representatives of the SAARC Secretariat, representatives of the SCCI Tourism Council and the ASEAN Secretariat also attended the Meeting. Besides reviewing the implementation of programme of activities relevant to its mandate, the Working Group made a number of recommendations for promotion of tourism in the SAARC region, for example, printing of a SAARC Travel Guide, production of a documentary movie on tourism in SAARC, promotion of sustainable development of Eco-Tourism, Cultural Tourism and Nature Tourism, collaboration in HRD in tourism sector by having programmes for exchange of teachers, students, teaching modules and materials, Promoting Cooperation in the fi eld of tourism with other relevant regional and international tourism organizations. It also proposed a number of activities to celebrate the South Asia Tourism Year–2005 in a befitting manner. When comparing the progress made on the ground and by other regional tourism initiatives that began much later than SAARC—such as the Association of Southeast Asian Nations (ASEAN), Pacifi c Tourism Commission, European Union (EU) Tourism, and the Mekong Tourism Initiative—progress must be classified, at best, as wanting. With the backdrop of the frustration of SAARC’s underperformance, in 1997, a separate initiative was undertaken by several governments of the South Asian region, titled the South Asian Growth Quadrangle, consisting of Bangladesh; Bhutan; the north, east, and north-east states of India; and Nepal. The Asian Development Bank (ADB) supported the initiative under the South Asian Sub regional Economic Cooperation (SASEC) programme, which includes a tourism component. This is an ongoing program me within the South Asian development framework of the ADB.
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In addition, also in 1997, another initiative was created to link some of SAARC’s countries with Myanmar and Thailand, as the Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation (BIMSTEC), to take advantage of the historical link and turning them into economic opportunities. Named BIMSTEC to represent Bangladesh, India, Myanmar, Sri Lanka, and Thailand Economic Cooperation, it set up a Tourism Working Group and has conducted several rounds of meetings, but to date, it has not achieved much progress. Since 2005, the ADB has supported this initiative as well. South Asia can indeed be described as a dichotomy. Although it has not lived up to expectations as a regional grouping, at the individual country level, tourism development in SAARC presents several unique models, containing some successful best practices. Bhutan has presented a model of tourism development, in which its operations are based on the model of a kinked demand curve (Sen 2004)to create a premium value for the destination. Bhutan limits access to a few tens of thousands of tourists each year at a premium charge, placing the per capita yield from one tourist at a high level. Bhutan has a business model aimed at conserving its heritage, culture, and natural resources. This model is in keeping with its unique development indicator of “Gross National Happiness,” in contrast to the conventional development measurement of gross national product. Maldives, known today as one of the most successful island destinations in the world, works on a business model of establishing strong partnerships with foreign investors and tour operators. Beginning with investments from Sri Lankan conglomerates in the early 1980s (still accounting for about 20 percent of all hotel rooms), Maldives Tourism, offering the “sunny side of life” as its positioning platform is driven by some of the best international and regional brand names in the island tourism business. Nepal is an example of a pioneering brand of unique community based tourism initiative. With its early model of the Annapurna Tourism Development Project8 and the Bhakthipur Conservation Project9 of the 1980s, Nepal introduced a good tourism operational model, offering its unique nature and heritage conservation, community benefit, and sustainable funding features. Sri Lanka is addressing the challenge of global warming and climate change faced by all nations of the world. It has extended its conventional position as a tourist destination of a treasured island with a warm people offering nature, culture, and adventure to include an extensive green cover. Through its Tourism Earth Lung initiative it is working toward being a carbon-neutral destination by 2018. Extract from the World Bank Report on Promoting Economic Cooperation in South Asia.
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Exports
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Daily News – April 30, 2010 EXPORT GROWTH TO REACH US $ 8B IN 2010: REVENUE TOPS US $ 1.08B IN LINE WITH US $ 20B 2020 TARGET:
Sanjeevi Jayasuriya
Sri Lanka’s export sector recorded 8 percent growth for the first quarter of this year and aims at reaching US $ 8 billion mark end of the year.
For the first two months the country recorded US $ 1.088 billion in export revenue.
The export value recorded is inline with the target of 20 billion dollar exports to be achieved by 2020. The sector performance is encouraging despite the global economic Market diversification downturn, Sri Lanka Export Development Board Chairman/ CEO Anil Koswatte told the Daily News Business.
The export growth for February was 8 percent and during the last five years exports have recorded an average growth of 3.5 percent except for 2008. This is a progressive increase and augments well for the future of the export sector, he said.
The year 2005 export figure was US $ 6.3 billion and 2009 it was US $ 7.1 billion.
The country could expect more contribution from the fisheries sector in the coming years as more fishing area is available at present.
“We are working according to the Mahinda Chintana where more emphasis is placed in the export sector. The need of the hour is the product and market diversification and the strategies are focused to fulfill Product diversification this need. This will enable the target to be realistic in value,” Koswatte said. The composition of exports includes apparels 44 percent and tea 16.7 percent.
Fourteen key thrust industries have been identified to be developed to become one billion dollar industries facilitating the achievement of the target value.
These industries are apparels, tea, rubber based products, gems, jewellery, diamonds, electronic and electric products, ICT/BPO/KPO, fisheries, spices and allied products, petroleum products, mineral based products, food and beverage, professional services, footwear and leather products and boat building.
64 FCCISL News Alert Weekly Business Highlight 26th – 02nd May 2010
Daily Mirror – May 1, 2010 NATURAL RUBBER BUSINESS FORECASTS IMPROVED OUTLOOK
By Dr. N. Yogaratnam
Global natural rubber (NR) prices continued to maintain their upward trend fetching around US$ 3.00 in early 2010, says the International Rubber Study Group (IRSG). Prices increased on an average by 36% from early December approaching close to US$ 3.00 level attained in early 2008. The physical price index for Thai RSS 3 increased by 30%; Indonesian SIR 20 and Malaysian SMR increased by 38% and 39% respectively, over the same period.
The upward trend is partly supported by fundamental factors as well as improving market sentiment following an easing in the global recession; physical prices also advanced following the surge in future prices. Aggressive replenishing of stocks by buyers to avoid supply scarcity over next few months on signs of demand recovery supported by the upward trend in prices, is expected to continue during this period. Domestic scenario
The trend in domestic market (Sri Lankan) is equally encouraging, with rubber prices in the Colombo Auction reaching an all time high with a kilogram of rubber fetching around Rs.450/= in the 3rd week of April. Latex crepe as well as RSS1 fetched these high prices in the same auction. The RSS1 grade of rubber fetched only around Rs.105.00 per kg at the auction in November 2008.It is also interesting to note that, there is a good demand for the lower grades of RSS as well.
This increasing trend in NR prices provides a tremendous boost to domestic rubber producers, some of whom were out of rubber business due to the drastic drop in NR prices that was experienced over the last two years
NR output Global output of NR fell by 5.1 % to 8.686 million tones during the 12 months ended December 2009 from 9.150 million tones in the previous year. The fall in supply is attributed to a decline in productivity in spite of expansion in yielding area due to adverse climatic conditions.
Thailand witnessed a 6.1 % drop in supply during 2009 from 3. 090 million tones in 2008 to 2.900 million tones in 2009. In Indonesia, the supply dropped by 5.7% in 2009 to 2.595 million tones from 2.751 million tones the year before. NR out put in Malaysia drastically fell during 2009 by 22.1% from 1.072 million tones in 2008 to 835,000 tonnes in 2009. India's production came down by 7.3% to 817,000 tonnes during 2009 compared to 882,000 in 2008.
In sharp contrast to the first four major producing countries (Thailand, Indonesia, Malaysia and India), NR supply registered a positive growth in Vietnam, China, Sri Lanka and Cambodia, due mainly to expansion in yielding area.
China strengthened its position in the global supply of NR by clocking 17.9% output growth during 2009 while the supply in Vietnam grew by 9.7% during 2009. Cambodia recorded 81.1% rise in supply year before.
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Out put in Sri Lanka grew by 4.7% during 2009. Production in January/ February 2010 had been 12.9 Kg. Mn, which is higher by 5.7% compared with the production of 12.2 Kg. Mn in the same period in 2009.
In 2010, with the expected higher GDP growth and an improving outlook for prices, global NR production is forecast to reach almost 10.56 million tones, a rise of 11.9 %, compared to the previous forecast of a 3.7 % increase to 10.0 million tones, with higher out put seen in all the major NR producing countries.
The domestic NR production which has been showing an increasing trend over the last six years from 90,500 MT in 2002, reaching 133,400 MT in 2009, is expected to record a further significant increase of around 5.7%, in 2010. If this trend in production continues, our total NR production in 2010 would be around 141,003 MT.
Challenges Prices have surged across the world in recent times, following supply crunch in the major NR producing countries. The crunch was caused mainly by climate change and the surge in the price of crude oil, now around US$ 86.
There had been a fall in production of NR in the major rubber producing countries. The fall was mainly attributed to variation on weather pattern. Climate change appears to have been a real threat to several agricultural crops and a tree crop like rubber is no exception.
It had been reported that there were days of heavy rains as well as hot sunny days during the peak yielding months of August to September, in the Indian rubber growing areas. While the rains had disturbed tapping operations, the unusually hot days experienced in their rubber growing areas may have resulted in the evaporation soil moisture and delayed nutrient uptake.
Rains continued with intensity in the other major rubber producing countries of Thailand, Malaysia and even in Sri Lanka, whereas the Indonesian crop, it has been reported, has been affected by dry weather. This is reported to be owing to the unusual weather phenomenon, which has caused rains or dry weather in different regions at the same time.
Moreover, heavy downpours have been forecast in Southern Thailand during the three months of October, November and December 2010. This may bring about a fall in the country's NR production by about 10 %. Thailand produces 250,000 tons of NR a month on the average, but traders expect the annual production to stay within 2.9 million tons, whereas the country's national estimates for NR production in 2010 is over3.0 million tons.
The forecasted weather pattern suggests that the country's official estimates may look unrealistic. Indonesia had a massive earthquakes in some NR producing areas, may also put NR production in disarray.
It is also known that among the terrestrial ecosystems, natural forests sustain the most efficient moisture conservation system. The water use by rubber plantations is still more efficient and is estimated to be 500-600mm lower than the typical tropical rain forests ecosystem. The rate of evaporation is lower in
66 FCCISL News Alert Weekly Business Highlight 26th – 02nd May 2010
rubber plantations compared to the forest ecosystem where mean daily evapo-transpiration of rubber is about 4.5 mm per day.
The crop coefficient values of a rubber tree are reported to be lower during dry seasons, being in the region of 0.179, and even under wet conditions, it is around 1.058. The transpiration rate (TR) is also lower than many other forest species.
These data highlight the ability of rubber plantations to conserve soil moisture more efficiently than most other tree species and thereby they are in a position to adapt themselves to drought conditions. But the problem appears to be extreme weather conditions that are of regular occurrence now and that this trend is expected to continue with more vigor in future
Crude oil Price of crude oil moved ahead of US$ 86 a barrel now. Sheet rubber that was fetching around US$ 3.00 may move up further. Since the price of crude oil is showing a tendency to move up further on higher consumption by the US, world rubber market is expected to witness a continued price boom.
Rubber consumption The Industry Report of IRSG, forecasts an improved out look for global NR and SR consumption growth as compared to the previous projections for 2009 and 2010. The extended recession scenario would result in a 3.3% increase in NR consumption to below 10.0 million tones in 2010, compared to the 8.2 growth rate of 10.6 million tones envisaged in the base case. SR consumption would rise 7.4% to 12.6 million tones in 2010, compared to a 14.9% increase to 13.5 million tones in the base case In Asia/Pacific, the largest consuming region, the latest data suggest that the sharp decline seen in total consumption earlier in 2009 may have been arrested.
Consumption of NR by Indian tyre industry has seen around 6% growth during 2009. Automobile tyres accounted for about 60% of the total NR consumption in the country. The total rubber consumption saw only about 2.55% growth during the same period, due to the decline in the consumption by non-tyre sector.
India is emerging as a large market for automobiles as its fuel-efficient, compact environment-friendly small cars are increasingly in demand in the Asian, European and Latin American markets. Economic and the rising fuel prices are forcing people in these countries to go for small vehicles. The 'scrappage incentive' offered by the European countries for replacing 9-year old cars with small, fuel-efficient vehicles has helped the Indian cars to enlarge its market share in these countries. Though this incentive ended in December 2009, but the trend in preferring compact vehicles will continue.
China has been progressing steadily in rubber consumption, with the tyre sector scaling up production in a bid to mitigate the effect of the US Government's imposition of 35% duty on import of Chinese tyres into the country. The decision has seriously affected Chinese tyre exports to the US. Robust domestic vehicle sales, however, have been driving up demand for tyres in China, which in turn, has necessitated large import of NR into the country.
Vietnam is expected to expand rubber cultivation by 220,000 hectares by 2015, to enhance the total cultivated rubber area to 800,000ha. The prospect of exporting substantial quantum of NR to China is
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believed to be, behind the move for the expansion. Vietnam is a regular supplier of NR to China. 65% of it's total NR exports of around 490,000 tons up to September 2009, was to it's neighbor China.
Outlook Global NR production is forecast to rise by 11.9 to reach almost 10.56 million tones in 2010 compared to the 7% increase envisaged earlier with higher out put expected in all the NR producing countries, according to a Rubber Industry Report.
Asin out put is forecast to rise to 9.92 million tones in 2010 from 8.82 million tones forecast for 2009.Malaysian Rubber Board's estimates indicate that the country's current output of NR is around one million tones. The current yield level stands at 1,400 kg per hectare. Malaysia targets to enhance the productivity to 1,800 kg per hectare in five years' time. A proposal already drawn by them indicates, that the area under the estate sector would be almost doubled from the current extent of 61,000 ha to 120,000 ha in five years' time.
Thailand is also on a move to expand the rubber area. The country has already extended rubber cultivation to 160,000 ha during the five- year period between 2004 and 2009 and has drawn up proposals for planting another 160,000 hectares from 2010.
Sri Lanka also had embarked on a new planting program in the Low country Intermediate Zone covering an extent of 40,000ha, but the pace of replanting activities indicates that the replanting target may not be achieved as desired.
The Global demand for rubber gloves, is also expected to grow by 10% per annum says a 'Rubber World' report. The demand for rubber gloves is reported to be increasing from India, China and Vietnam due to increase in health and hygienic awareness.
Plantation expansion plans of the major NR producing countries have obviously been developed based on the rising trend in rubber prices. Since the global supply of NR is forecast to fall behind its consumption up to 2020, the current boom in the NR market is expected to continue.
68 FCCISL News Alert Weekly Business Highlight 26th – 02nd May 2010
Stock Market
69 FCCISL News Alert Weekly Business Highlight 26th – 02nd May 2010
Daily News – April 26, 2010 BOURSE CONTINUES SHINING MOMENTUM
HOTEL AND BANKING SECTORS PERFORM WELL:
ASPI comfortably pierced the 4,000-points on Monday, hitting a new high as investors returned after holidays enthused by anticipated higher corporate earnings and political stability.
The more sensitive MPI (Milanka Price Index) however showed a greater increase gaining by 178.1 points or 3.9 percent closing the week at 4695.8 points.
Hotel Services (SERV) contributed Rs.1.8 billion to the total market activity this week after trading 59.9 million shares in volume, becoming the largest contributor for the week.
Hotel Services edged higher to close the week at Rs.31.00 per share compared to last week’s closing price of Rs.28.00 per share, whilst trading between a price band of Rs.27.75 and Rs.32.00 per share over the week’s trading.
Apart from the above, Keells Hotels and Sampath Bank contributed considerably to the week’s turnover. Keells Hotels The Colombo Stock Exchange performs well. Picture by contribution was approximately Rs.725.4 Sudath Nishantha million and Sampath Bank contribution was Rs.481.4 million to the total turnover, with approximately 33.7 million Keells Hotels and 1.8 million Sampath Bank shares trading during the week. Keells Hotels saw its price appreciating by 2.47 percent to close at Rs.20.75 per share this week, while Sampath Bank ended the week at Rs.284.75 per share which is an appreciation of 19.5 percent Week-On-Week.
Turnover for the week amounted to a staggering Rs.9.9 billion, which was a 180.2 percent improvement compared to last week’s total activity of Rs.3.5 billion. The average daily turnover stood at Rs.1.98 billion compared Rs.1.18 billion posted last week. 70 FCCISL News Alert Weekly Business Highlight 26th – 02nd May 2010
Foreign participation this week stood at 20.4 percent of total activity. Foreign Purchases for the week totaled Rs.1.2 billion, while foreign sales were significantly higher at Rs.2.9 billion this week. The resultant net foreign outflow amounted to Rs.1.7 billion. Volume wise highest traded stocks this week were, Hotel Services, Nawaloka, Keells Hotels, Tess Agro and Reefcomber.
Political stability gives clarity and direction
The week ended April 23, saw the ASPI move 154.7 points, and the MPI 178.1 points. The week started 19.04.10 saw high investor participation after the holiday season. For the month of April the ASPI index has seen a significant growth with approx 400 points or 10% up from levels of 3725.
Our prediction of the ASPI reaching 4000 was achieved during this week.
Our prognosis would be the ASPI to move to the 4200 levels in the next week with occasional profit taking.
We expect the bourse to appreciate further in the medium term, with positive perception in the political arena due to stability and consistent policy framework and with the expectation of improved corporate earnings.
From a sector perspective hotel, plantation, beverage and food and construction sectors are expected release noteworthy earnings.
As per the latest earnings released, Hunas Falls and Lighthouse hotel have recorded annual profits of Rs.23mn (190 percent YoY growth) and Rs5.7mn (164 percent YoY growth) respectively.
The hotel sector earnings have been driven by the increase in the tourist arrivals recording a 50 percent quarter on quarter growth to 160,000 approx (cumulative from January to March).
(The information contained herein has been compiled from sources that Acuity Stockbrokers (Private) Limited (ASB) believes to be true and reliable but we do not hold ourselves responsible for its completeness or accuracy. No matter published herein create any liability of any kind on ASB. All opinions, views, findings and conclusions included in this report constitute ASB’s judgment of this date and are subject to change without notice.)
71 FCCISL News Alert Weekly Business Highlight 26th – 02nd May 2010
The Island – April 26, 2010 STRONGER CURRENCY, STRONGER STOCK MARKET
WHAT does a strengthening ringgit do to our stock market? TA Securities senior technical analyst Stephen Soo says a firm ringgit is a boost to the stock market as it encourages fund inflows. Although he sees bonds as the main beneficiary of a stronger ringgit, with equities next, he is more bullish on equities for the second half of the year, on the back of the tabling of the 10th Malaysian Plan and the release of more details on the New Economic Model.
"In the last two years, Malaysia has experienced a net outflow of foreign direct investments (FDIs). As the ringgit strengthens, this will at least stop some of the outflows and support liquidity flows. This liquidity will need to go somewhere and stocks will benefit," says Soo. Bank Negara data points to an FDI reversal in 2007, with net outflows of direct investments of RM9.14bil. This increased to RM26.06bil in 2008 and to RM14.62bil in the first nine months of last year. Portfolio investments in Malaysia booked a net inflow of RM8.8bil in the third quarter of 2009 after four quarters of significant outflows. JF Apex Securities Bhd chief operating officer Lim Teck Seng feels that the recent inflow of funds have not had much impact on the stock market as most of the foreign inflows were for fixed income and not equities.
"A strong currency may not favour stock markets as theoretically, Malaysian stocks have become more expensive. For the moment, foreign funds prefer to enjoy yields rather than the riskier returns from equities," he says. Private equity banker Sherilyn Foong says portfolio inflows seem to be faster and nimbler than FDIs. "We’re coming from a low base on the bonds front. My main concern would be if it is, to a significant extent, hot money," she says.
MCIS Zurich Insurance Bhd head of fixed income Michael Chang shares Lim’s views. "Buying government bonds is probably one of the easiest ways if I am expecting the country’s currency to rise," he says. "The risk is deemed moderate and bonds are also fairly liquid investments. Offshore investors can buy into the Malaysian Government Securities (MGS) as it is as good as buying the Malaysian currency," says Chang.
Long-term hazard While most people are of the view that a rising currency signals more investments flowing into the country, and therefore contributing to a rising stock market, this is a mere correlation and not a direct impact. Past studies by ABN Amro Bank and the London Business School have shown that strong currencies do not lead to generous profits from the equity markets. According to the research, countries with weak currencies saw greater stock returns than ones with strengthening currencies.
A broker from a local house says that a strong currency only offers short term benefit for the market. "Over the longer term, it is not good for an exporting economy and for the stock market," he says. Investing in stocks can be viewed as risky compared with other assets. When the central bank raises interest rates, government securities such as the MGS are often regarded as the safest investments and will usually experience a corresponding increase in interest rates. In other words, the risk-free rate of return goes up, making these investments more desirable and a lot safer than stocks. With stocks, one has to factor in the risk premium as well. The ringgit has strengthened some 7% to 3.2015 against the US dollar since the beginning of this year. This will impact the earnings of Malaysian exporters and various other sectors of the economy.
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Over the short term, exporters such as those in the rubber glove, technology, and electrical and electronics sectors may suffer setbacks. Says OSK Research director and research head Chris Eng: "A stronger ringgit is better for the country as long as it strengthens gradually. Lately, the ringgit has strengthened rather quickly and this may not give exporters time to pass on (additional) costs to their customers."
Winners and losers Rubber glove stocks have come under selling pressure of late as investors worry about a repeat of the share price collapse in 2008, when investors assumed that record latex prices, high energy prices and a weakening US dollar would dampen glovemakers’ earnings significantly. Those who remain bullish about the industry contend that the demand for rubber gloves is resilient and that the listed manufacturers, because they are market leaders, will be able to hike selling prices to absorb cost increases. A stronger ringgit means imports tend to cost less. Manufacturers that rely significantly on imported raw materials stand to benefit and will likely see their margins improve, provided their output is largely sold in the domestic market.
With the US dollar weakening against the ringgit, commodities such as oil and gold, which are bought and sold in US dollars, will be cheaper for purchasers in Malaysia. Eng says in this context, the local airlines are beneficiaries, as fuel is denominated in US dollars while sales are mostly in ringgit. "In Malaysia Airlines Bhd’s case, their revenue is mostly derived in Australian and Asian currencies. So they benefit from the strengthening ringgit," he says. Others gaining from the surging ringgit include automotive and food-based companies that import products in US dollars but sell them to Malaysian buyers. Companies that have large foreign debts – Tenaga Nasional Bhd for example – will also benefit. On the flip side, MISC Bhd, whose revenue is mostly in US dollars, may be at a disadvantage.
Profit impact Eng says a stronger ringgit helps control inflation, hence strengthening domestic consumption. One line of argument is that a strong currency also means that imported raw materials are cheaper, thus lowering inventory cost. This leads to lower borrowing obligations and hence less interest to pay. Says a senior analyst: "The price of the finished good also goes down and this leads to a lower cost of living. The strength of a currency is an indicator of economic health." According to the Big Mac index, the ringgit is 40% below its fair-value benchmark with the US dollar as at March 16 (at 3.3245 per US dollar).
The Big Mac index is based on the theory of purchasing-power parity, the notion that a dollar should buy the same amount in all countries. "Based on a trade-weighted index, the ringgit should be fairly valued at 3.23 per US dollar, which is almost close to the current level," says AmResearch senior economist Manokaran Mottain. He is forecasting exports to grow by some 7% to 8% and Malaysia’s gross domestic product to hit 5% this year. Says Chang: "While some exporters lament the stronger currency, a lot of them are importers too and their costs of production have fallen. The most substantial profits are often made in finished goods, not in raw materials.
"Profits made from finished goods are more sustainable as it gives better margins on a longer-term basis. It allow us to move up the value chain." An observer says that while raw materials may be cheaper due to the strengthening ringgit, Malaysian exporters will still be in the losing end when selling finished goods to the global market as their products will be denominated in US dollars. -ANN
73 FCCISL News Alert Weekly Business Highlight 26th – 02nd May 2010
The Island – April 28, 2010
PROFIT TAKING PUSHED DOWN INDICES PAUSE IN RECORD BREAKING RUN ON THE COLOMBO BOURSE
The record breaking run on the Colombo bourse paused yesterday on a turnover of Rs.2.04 billion, up from the previous day’s Rs.1.6 billion, with both indices edging down marginally – the All Share down 1.59 points (0.04%) and the Milanka down 8.58 points (0.18%) with gainers and losers almost on even keel with 77 positive contributors against 78 negatives.
"Overall there was some profit taking which accounted for the decline in the indices," Prashan Fernando of Acuity Stockbrokers said.
The market movement yesterday was a combination of institutional, high net worth and retail activity with JKH trading between Rs.180.50 and Rs.186 providing the bulk of the day’s turnover generating a business volume of Rs.677.3 million.
With 3.7 million shares traded, the counter closed flat at Rs.185 with brokers saying that the share was very active in the latter part of the trading day with 10 crossings at Rs.185.
Ceylon Leather Products, with nearly a million shares traded saw volatile price movement between Rs.117.50 and Rs.136 gaining Rs.9.25 to close at Rs.127.25 contributing the day’s second biggest turnover of Rs.122.6 million.
"The share was fluctuating quite a bit going up and down like a yoyo", Fernando of Acuity said.
The NDB lost 50 cents to close at Rs.219 with nearly 0.5 million shares done between Rs.217 and Rs.222. The trades included three crossings, two at Rs.220 and one at Rs.222.
Liberty Plaza owners, Colombo Land, saw lot of retail activity with 8 million shares traded between Rs.8 and Rs.9.75 gaining Rs.1.25 to close at Rs.9.25 while the highly liquid Keells Hotels lost 50 cents to close at Rs.20.25 on nearly 3 million shares done between Rs.20.25 and Rs.21.
HNB was up 25 cents to Rs.225 on nearly 0.3 million shares while Asia Capital gained Rs.3.25 to close at Rs.21.75 on over 2.4 million shares done between Rs.18 and Rs.23.75.
Other counters that showed volume included Environmental Resources Limited, up Rs.3 to close at Rs.106 on over 0.3 million shares, over 1.3 million Grain Elevators, up a rupee to close at Rs.21.75 on over 1.3 million shares and Colombo Fort Lands, up sharply by Rs.6 to close at Rs.92.25 on nearly 0.3 million shares.
Kotmale Holdings announced a dividend of Rs.2 per share for 2009/10 with dates to be notified.
74 FCCISL News Alert Weekly Business Highlight 26th – 02nd May 2010
The Island – April 29, 2010 HOTEL SECTOR SHARES GAINING STRENGTH
By Mario Andree
Hotel sector shares trading in the Colombo Stock Exchange (CSE) have improved to unbelievable heights in recent weeks. The hotel sector continues to be a favourite given the high expected earnings, the CSE said. The CSE said hotel shares had yet not reached their real value and it is hoped to gain further. There are some hotel projects in the pipeline to be listed in the CSE.
Many companies that invested in Jaffna are looking for listings in the CSE in the future, CSE data showed. In Sri Lanka, capital has been a constraint for the development of many projects. Earlier companies went for banks when in need of capital but today they turn towards equity funds, so many companies in the hospitality sector has turn towards trading shares, a broker said.
The keen interest in the hotel sector helped it gain higher than other shares. Many locals have invested in hotel shares, he said. During the war period, the tourism industry was not catering to the local tourists but solely depending on foreigners.
At present, many hoteliers are catering to locals as well as foreigners. This has resulted in the rapid upward movement of shares in the stock market.
The past week has recorded the highest investment contribution to the hotel sector. CSE data shows. The Board of Investment (BOI) said it has approved and signed agreements for eight new investments worth US$20 million that will create 500 job opportunities, a release showed.
Two mini-hydro power plants and new hotels and hotel refurbishment are among several investments approved by Sri Lanka’s investment promotion agency which would ensure the fulfillment of tourist needs which is expected to arise with the gaining of the sector.
The deal with Nilwala Vidulibala Company for a venture to establish a mini-hydro power plant at Morawaka, south east of the capital Colombo, with an investment of over US$3.28 million.
It also approved an investment of over US$5.5 million for another mini hydro-power plant, of 4,000 kilowatts capacity, at Kirkoswald Estate, Norwood, in the central hills.
The listed Aitken Spence Hotels, which operates a chain of hotels in Sri Lanka, the Maldives and India, signed an agreement with the BOI for an investment project to refurbish and upgrade Neptune Hotel at Beruwala, a beach resort on the south-west coast, with an investment of more than US$4 million. Aitken Spence hotels have gained positive at the CSE. The last trading price stands at Rs.450, according to the CSE report.
BOI also gave approval to the listed Stafford Hotel for a US$4.4 million investment to refurbish and upgrade Club Dolphin at Waikkal, on the north-west coast. The BOI also said it approved an investment of US$500,000 to set up a 25-room hotel in north-central Vavuniya by Thampa Tourist Hotel and Inn.
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The Island – April 30, 2010
SPECULATION OF AN EXIT BY A BANK OVERSEAS REALTY TO THE FORE
The Colombo bourse was back on positive territory yesterday with turnover slightly over Rs.2 billion, about the same as Monday’s Rs.2.3 billion, and the All Share Price Index up 25.54 points (0.50%) while the Milanka gained a marginal 0.41 points (0.00%) with 75 gainers slightly ahead of 73 losers. "We saw a lot of interest in Overseas Realty, owners of the World Trade Centre in Colombo Fort where nearly 23 million shares were traded between Rs.16.75 and Rs.18 gaining 75 cents to close at Rs.17.75 generating the day’s top turnover of Rs.386.6 million," Prashan Fernando of Acuity Stockbrokers said.
He said that as many as 20 million shares were crossed at Rs.16.75 soon after trading commenced yesterday and another large parcel of 600,000 was also crossed at the same Rs.17 price later in the day. Speculation was that a leading commercial bank which had a large block of the counter had exited but there was no confirmation of this or who the buyer was. Raigam Salterns began trading yesterday with a very large share volume of nearly 51.9 million shares done between Rs.4 and Rs.5.25 gaining Rs.1.70 to close at Rs.4.20 contributing Rs.240.2 million to turnover. Brokers said that the recently completed IPO offering the share at Rs.2.50 each was heavily oversubscribed with investors anticipating a fair profit no sooner the counter was listed and trading commenced.
They were proved right although individual allotments on the IPO were small with all subscribers getting a minimum of 5,000 shares and a very small percentage on applications above that floor. JKH closed flat at Rs.185 on nearly 1.3 million shares done between Rs.180.25 and Rs.186. Brokers said that although some fairly large parcels changed hands there were no crossings. HNB was up Rs.4.75 to Rs.230 on over 0.4 million done between Rs.224.75 and Rs.230 including two crossings at Rs.225.25 and Rs.230.
Retail interest was focused on Colombo Land, owners of the Liberty Plaza, with nearly 8.3 million shares done between Rs.9.50 and Rs.11.50 gaining Rs.2 to close at Rs.11.25. Colombo Land warrants too attracted interest with nearly 4.7 million done between Rs.7 and Rs.9.50 gaining Rs.2.75 to close at Rs.9. There was considerable play on Keells Hotels which closed flat at Rs.20.25 on over 2.3 million shares done between Rs.20.25 and Rs.21 while Tokyo Cement (non-voting) edged up 25 cents on nearly 2.3 million shares to close at Rs.20.50.
Among other counters that showed volume was CIC non-voting (nearly 0.6 million shares), up Rs.2.25 to Rs.47.50, Acme, up Rs.11.75 to Rs.38 on 0.7 million shares and Grain Elevators, up a rupee to Rs.22.50 on nearly 1.1 million shares. Ceylon Theatres (over 0.3 million shares), up Rs.3.25 to Rs.69.75 and Richard Pieris, up Rs.2 to Rs.77 on 0.3 million shares also attracted interest.
Aitken Spence announced an interim dividend or Rs.3.50 per share XD from May 10 and payment on May 19 while L.B. Finance announced a dividend of Rs.5 per share XD from May 7 with payment on May 18. Several oil palm companies of the Carsons group declared substantial dividends – Indo Malay (Rs.9.50 per share first and final), Shalimar (Rs.10 per share first and final), Good Hope (Rs.12 per share first and final) and Selinsing (Rs.12.50 per share first and final).
76 FCCISL News Alert Weekly Business Highlight 26th – 02nd May 2010
The Island – May 1, 2010
SRI LANKAN STOCKS CLOSE 0.82-PCT UP
Sri Lankan stocks closed higher yesterday as a few high value banking stocks pushed the market up, while some retail investors took profits on selected hotel and plantation shares on a shortened trading day, brokers said.
The All Share Price Index closed at 4,188.88, up 33.88 points while the more liquid Milanka index rose 0.36 percent (17.04 points) to close at 4,712.43.
Turnover was 1.09 billion rupees, according to stock exchange provisional figures.
High interest in some banking stocks pushed the Milanka index past the 4,700 point mark, brokers said.
Commercial Bank of Ceylon closed at 239.50 rupees, up 50 cents, Hatton National Bank closed at 134.50 rupees, up 4.50 and Sampath Bank closed at 290.25 rupees, up 10.75.
John Keells Holdings closed at 185.25 rupees, up 25 cents, and Distilleries Company of Sri Lankan closed at 124.50 rupees, up 1.25.
Brokers said there was selected profit taking on plantation and hotel sector stocks.
Browns Beach closed at 89.50 rupees, down 50 cents, Eden Hotel Lanka Limited closed at 44.75 rupees, down 25 cents, Hotel Reefcomber closed at 3.70 rupees, down 10 cents and Hotel Services (Ceylon) closed at 30.25 rupees, down 25 cents.
Hotel Sigiriya closed at 60.75 rupees, down 2.25, Kandy Hotels Company 150.00 rupees, down 5.75, The Nuwara Eliya Hotels Company closed at 440.00 rupees, down 1.25,
Elpitiya Plantations closed at 38.00 rupees, down 2.00, Horana Plantations closed at 35.00 rupees, down 1.00, Kahawatte Plantations closed at 39.75 rupees, down 75 cents, Malwatte Valley Plantations closed at 52.75 rupees, down 1.00.
Foreign investors bought 74 million rupees worth of shares and sold 152 million, resulting a net outflow of 78 million rupees, brokers said.
-LBO
77 FCCISL News Alert Weekly Business Highlight 26th – 02nd May 2010
Labour
78 FCCISL News Alert Weekly Business Highlight 26th – 02nd May 2010
Daily Mirror – April 29, 2010
INTERNATIONAL LABOUR DAY AND THE PLIGHT OF MIGRANT DOMESTIC WORKERS
New York, Wednesday – The reforms undertaken by Middle Eastern and Asian governments fall far short of the minimum protection needed to tackle abuses against migrant domestic workers, Human Rights Watch (HRW) said today in a report released in advance of May 1, International Labor Day. Despite recent improvements, millions of Asian and African women workers remain at high risk of exploitation and violence, with little hope of redress, Human Rights Watch said.
The 26-page report, “Slow Reform: Protection of Migrant Domestic Workers in Asia and the Middle East,” reviews conditions in eight countries with large numbers of migrant domestic workers: Lebanon, Jordan, Saudi Arabia, Kuwait, the United Arab Emirates, Bahrain, Singapore, and Malaysia. The report surveys progress in extending protection to domestic workers under labour laws, reforming immigration “sponsorship” systems that contribute to abuse, ensuring effective response by police and Courts to physical and sexual violence and allowing civil society and trade unions to organize.
“Several governments have made concrete improvements for migrant domestic workers in the past five years, but in general, reforms have been slow, incremental, and hard-fought,” said Nisha Varia, Women’s Rights Researcher at Human Rights Watch“. Jordan deserves credit for including domestic work in their labor law, but enforcement remains a big concern. Singapore has prosecuted physical abuse against domestic workers vigorously, but fails to guarantee them even one day off a week.” Several countries across the Middle East and Asia host significant numbers of migrant domestic workers, ranging from 196,000 in Singapore and 200,000 in Lebanon to approximately 660,000 in Kuwait and 1.5 million in Saudi Arabia. Migrant domestic work is an important source of employment for women from Indonesia, Sri Lanka, the Philippines, Nepal, India, and Ethiopia. Migrant domestic workers’ earnings constitute a significant proportion of the billions of dollars of remittances sent to these countries each year. Human Rights Watch research over the past five years has shown that migrant domestic workers risk a range of abuse. Common complaints include unpaid wages, excessive working hours with no time for rest, and heavy debt burdens from exorbitant recruitment fees. Isolation in private homes and forced confinement in the workplace contribute to psychological, physical, and sexual violence, forced labor, and trafficking. “Reforms often encounter stiff resistance both from employers used to having a domestic worker on call around the clock and labor brokers profiting handsomely off a poorly regulated system. Governments should make protecting these vulnerable workers a priority.” Varia said. Most governments exclude domestic workers from their main labour 79 FCCISL News Alert Weekly Business Highlight 26th – 02nd May 2010
laws, denying them protections guaranteed to other workers, such as limits to hours of work or a weekly day of rest. Only Jordan has amended its labour law to include domestic workers, guaranteeing protections such as monthly payment of salaries into a bank account, a weekly day off, paid annual and sick leave, and a maximum 10-hour workday. However, domestic workers cannot leave their workplace without the permission of their employer. The governments of Lebanon, the United Arab Emirates, Kuwait, Bahrain, Saudi Arabia, and Malaysia have all publicly announced they will amend existing labour laws or draft new legislation on domestic work. But despite years of proposals, none have adopted such reforms. Saudi Arabia’s Shura Council approved an annex on domestic work to the labor law, but the Cabinet has not approved it. Singapore’s Ministry of Manpower has repeatedly rejected calls to extend labour law protection to domestic workers. “Instead of ensuring protection under labour laws, governments have relied on creating standard employment contracts or bilateral agreements with labor-sending countries”, Varia said. “Employment contracts and bilateral agreements may be better than nothing, but with weaker protections than labour laws, they effectively reinforce discrimination against domestic workers.” Immigration reforms have proceeded even more slowly than labour reforms, HRW said. In the countries surveyed, domestic workers migrate on fixed-term visas, under which their employers double as their immigration sponsors. This system heightens the risk of abuse by giving inordinate control to employers, who can have domestic workers sent home at will or prohibit them from being hired by a new employer. “Governments have dragged their feet on reforms to the immigration sponsorship system, which contributes to forced labour and trafficking,” Varia said. “They need to move quickly to find alternatives, such as shifting sponsorship from employers to labour authorities or closely monitored employment agencies.” HRW also examined governments’ responses to criminal abuse against domestic workers. Some governments have begun to investigate and successfully prosecute abuse against domestic workers, but numerous obstacles continue to stand in the way of such victories. For example, systems for filing complaints are often out of reach of domestic workers trapped in private homes and unable to speak the local language. For cases that do reach the attention of the authorities, legal proceedings often stretch over years, while victims typically wait in overcrowded shelters, unable to work. The lengthy waits and uncertain outcomes cause many domestic workers to withdraw their complaints or negotiate financial settlements so they could return home quickly. In other cases, domestic workers who bring charges are forced to defend themselves against counter-allegations of theft, witchcraft, and adultery. “a successful prosecution of abusive employers and labour brokers is not only justice served but also a strong deterrent against abuse,” Varia said. Governments should establish accessible ways to file complaints, expedite legal proceedings, and ensure a minimum standard of social services, such as shelter and health care, during the process.” Reforms on regulating domestic work are taking place not only at the national level, but globally. In recognition of the importance of protecting a major source of employment that has been historically neglected, members of the International Labour Organization will begin formal discussions in June to establish global labour standards for domestic work. Lebanon, Bahrain, and Jordan support legally binding standards, while Malaysia, Saudi Arabia, and the United Arab Emirates support a non-binding recommendation. Singapore and Kuwait did not submit official responses. 80 FCCISL News Alert Weekly Business Highlight 26th – 02nd May 2010
HRW urged governments to take the following steps to prevent and respond to abuses against migrant domestic workers: Extend equal labour protection in national law to domestic workers, and address unique circumstances relating to their intermittent working hours, lodging, and board; Improve regulation and oversight of employment agencies and fees charged to these workers by private recruitment agencies; Reform immigration policies so that workers’ visas are not tied to individual sponsors, and so that they can change employers without the first employer’s consent; Improve workers’ access to the criminal justice system, including through confidential complaint mechanisms, prosecutions, and expansion of victim services; Co-operate with labor-sending countries to monitor transnational recruitment, respond to complaints of abuse, and facilitate repatriation; Support a binding convention on domestic work with an accompanying recommendation during the International Labour Conference in June. (HRW)
81 FCCISL News Alert Weekly Business Highlight 26th – 02nd May 2010
Business
82 FCCISL News Alert Weekly Business Highlight 26th – 02nd May 2010
Daily News – April 30, 2010 ACCOUNTANTS FOR BUSINESS - A CHALLENGING ROLE AHEAD
Aruni Rajakarier- Country Manager - ACCA Sri Lanka
ACCA (the Association of Chartered Certified Accountants) has a new theme for 2010. Over the next year, we will champion the theme of Accountants for Business, of how the finance professions help small, medium and large business grow, prosper and survive.
The role of financial professionals to Sri Lanka's development is therefore crucial.
A sound, solid and healthy business sector is important for the whole of the country, and finance professionals have a central part to play here.
One of the hallmarks of sustainable enterprise and development is a strong finance function. Organizations, whether in public or private sectors, benefit strongly from the discipline of financial management, and especially when it is central to the business function, where it is part of its very culture.
The Chief Financial Officer (CFO) has become more Finance professionals add value in whatever roles important in recent years as a guardian of financial they are employed, and are promoters of sound performance business practices, champions of sustainable business development and they also identify new opportunities that can lead to high-performing organizations.
Economically, accountants add considerable value to business by driving down costs and identifying areas for value and profitability - and never more so than in the current global economic environment. They can help an organization steer itself through difficult trading conditions, while seeking to keep their eye firmly on their longer-term goals.
They can identify opportunities and threats.
ACCA believes that accountancy is entering a golden age - and not just because financial skills are needed in a time of difficult economic conditions.
Recent surveys by ACCA show that demand remains high for accounting skills around the world, in developed and developing nations.
The Chief Financial Officer (CFO) has become more important in recent years as a guardian of financial performance and a key player in creating long-term value.
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It is no accident that professional accountants are found on the boards of listed companies around the world. And the outward-facing role of CFOs has broadened.
The CFO is increasingly the guardian of the brand, ensuring that the company adheres to good sustainable practices.
Accountants are no longer just reporting to the shareholders and to comply with regulation. They must play their part in maintaining and building the reputation of the business.
Accountants are also essential to supporting the small business sector. SMEs make a positive contribution to economic growth, requiring well-rounded finance managers and advisers to ensure small businesses survive and grow.
When it comes to education and training of finance professionals, ACCA creates the 'complete finance professional', with the skills required for financial reporting, management accounting, compliance with tax and other regimes, risk management and performance analysis. They are grounded in professional and ethical practices and with the knowledge appropriate to provide well-rounded advice to company owners and managers. They are fit for business.
The accountant for business, whether an employee of the organization, or a firm contracted to provide bookkeeping and accounts preparation service, provides a vital financial disciplinary function in ensuring the business is financially sound and sustainable.
The accountant in business has a pivotal relationship with other key stakeholders essential for the ongoing success of the organization, from presenting financial statements for quoted companies, in a timely fashion and professionally prepared in compliance with International Financial Reporting Standards (IFRS), is absolutely essential.
And also the accountant in business can often be a motivator for those many employees in the organization who are not financially minded, but who yet are charged with a financial or budgetary responsibility.
Understanding the motivations of others, demonstrating in practical terms why finance matters to them can be a source of huge value to the organization, in terms of controlling cost, and of optimizing income. We are in a golden age in terms of the relevance of accountants to business.
Over the last 18 months, as a systemic global banking collapse has evolved into a significant worldwide recession, with some countries seeing a rocky recovery, a range of presumptions about accounting, organizations and society have been radically called into question.
What business needs now is discipline over the immediate short term, but also the confidence of knowing they possess a business model which is sustainable. Finance professionals now have every opportunity to emerge as leaders - but ultimately it will depend on their willingness to rise to the challenge.
84 FCCISL News Alert Weekly Business Highlight 26th – 02nd May 2010
Sunday Times – May 2, 2010
PAST TWO YEARS WAS VERY DIFFICULT FOR MOST BUSINESSES – SINGER CHIEF
Interview with Hemaka Amarasuriya
Starting off his career at Singer Industries as an accountant in 1973, Hemaka Amarasuriya has come a long way since seeing off a inward-looking, closed market era that ruined business and deprived people of their basic needs and to an even worst period of a conflict that lasted nearly 30 years and ended in 2009. Preparing for retirement from his day-to-day work as Managing Director/CEO at a much, more diversified company than what it was in 1973, Mr Amarasuriya will remain as the non-executive chairman and only attend board meetings from June 30 with his successor being Asoka Peiris, the company’s head of finance.
Ready for retirement? “Not really, the past two years have been very hectic. However I have spoken to a few colleagues who say that the first three months is difficult but thereafter there are plenty of time to do things. I am keeping my options open. Travel is one option,” he told the Business Times in an interview. Here are excerpts of an interview in which the Singer chief recalls his days at Singer, family life and talks about discipline in society, governance, a new resurgence in domestic sewing machines and why he is not in favour of laptops and mobile communication:
Life at Singer: I joined Singer because it’s the oldest multinational in the world and has a long tradition, good values and a culture. At that time, the company was a manufacturing plant making mainly sewing machines. The economy was closed at the time and even imports were by license with the Ministry of Industries giving a quota every year and we had to work within that Expressing a point quota.
The government was almost anti-multinational and preferred local companies against multinationals. It was very difficult times and there was price control and we had to seek permission from the Ministry of Industries to increase prices. Though these were not essential commodities, they were considered essential and we had little opportunity of making profits.
On parts being sourced locally: There was an import substitution programme at that time encouraged by the Ministry of Industries with T.B. Subasinghe as the Minister where 20 % of the components came from local sub-contractors. We had stringent quality controls so whatever churned out locally was as good as imports. It was mostly on the cast-iron side because at that time, sewing machines were all cast-iron. However to develop a local industry for components you need to have large volumes. For localization to succeed, you need large volumes for the economies of scale. With the quota system we were selling about 15,000 machines a year and the market was starved. Whatever we manufactured we sold.
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The consumer: The average consumer was the middle-income housewife using the machine for home use. Those days everything was related to the import-export balance with foreign exchange being very scarce amidst an oil crisis in the mid-1970s. It was very difficult for companies to operate. We sold some locally manufactured products like water geezers and steel cupboards from St. Anthony’s Industries to supplement our product line. There was no local industry at that time other than sewing machines and refrigerators, the latter being in the very primitive stage.
Continuation of a closed economy: It was very clear that the country was going down and people were being deprived of basic goods which they should enjoy as humans. For a human to develop he or she needs though basic things and they were deprived of this.
Striking events in the first 10 years at Singer: When Sri Lanka opened the economy in 1977, we were ahead of even South East Asia in most respects because Singapore, Malaysia and Thailand were closed at that time as they were protecting local industry. We were ahead of the game, giving our consumers a lot of insight into international products and as a result today the Sri Lankan consumer is very fastidious and will not compromise on quality or standards of products. The consumer wants the best even at the bottom end. They are brand conscious and as you get into the higher echelons of society, they are more savvy about technology. By opening the economy we opened the minds of our consumers certainly must faster than the rest of South Asia even the ‘Tigers” in South East Asia.
Missing the bus: India opened up much later in 1991 but its catch-up has been much faster compared to Sri Lanka. That’s because Sri Lanka didn’t actively pursue added-value of local products in engineering and electronics. If this was done creating a market for sub contracting of components like industrial estates for electronics, Sri Lanka would have grown much faster and created more jobs.
When you create jobs, the consumer market also grows. Thus the economy would have picked up and per capita would have been $4,000-$5,000 (now its $2000). Malaysia’s population for example is just slightly higher than Sri Lanka but it took the opportunity and created a vibrant local industry for parts plus exporting a part of it.
On conflict deterring growth: The conflict was only confined to a part of the country. The real problem was the stop-start industrial policy of the two warring parties that have governed this country. One wanted an open economy with everything imported with low tariffs while the other wanted a lot of local added-value. This stop-start policy led to tariffs fluctuating up and down when governments changed. As a result, local industry didn’t really take off.
We have done well in terms of refrigerators because this product doesn’t need many sub contractors. A lot can be done in-house and we do more than 50% added value now and we can produce the country’s total requirements.
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The refrigerator industry can be replicated in electronics, in Sewing still a lively art other areas. Another area where the local industry is strong Believe it or not, the age of the domestic is furniture. The furniture industry is no longer a family sewing machine has not ended at home. business; it has gone into a new dimension largely in exports The demand for sewing machines has – small to medium entrepreneurs. The country lacks a good suddenly see a resurgence in the West, dynamic minister to drive the industrial policy. according to Singer Chairman Hemaka
Amarasuriya. Economists are partly to blame for the lack of a strong
industrial policy because they keep saying that the Sri “Demand is growing in the US, Europe Lankan market is too small. But we have 20 million people and Japan. There has been amazing and are in the league of nations like Australia, the growth in the last decade particularly Netherlands, Saudi Arabia. It’s wrong to say we are small. from the ‘baby boomers’ (a generation Look at Europe, how many countries have smaller born after the Second World War in 1945) populations that ours? It’s only Britain, France, etc that for domestic sewing machines because have large populations. Our per capita is low but if you add they feel lonely after their children have value to products the per capita will rise, the country will left home. The husband will probably prosper and the domestic market will grow. play golf or go fishing while the wife purchases a modern, computerized sewing I have always maintained that the Sri Lankan market is not machines. small; its just that its under-developed and this is due to the
policies of our governments. They began sewing at home, making clothes for their grandchildren and build On a good industrial policy: up esteem in the eyes of the family (as A good industrial policy will see per capita doubling and useful people). There was a resurgence of a foreign investment coming in for re-export (produce here, product life cycle, an example of a sewing sell locally and also export). We have received many offers machine coming back to importance. to sell to India because the Indian market is so huge and the These countries were showing 20-30% way its growing the local industry cannot keep pace with it growth in the machine sales. The sewing particularly in South India. machine hasn’t died. In Sri Lanka demand hasn’t declined and is still at Sri Lanka is the ideal launching pad for South India. We did 60,000 -70,000 machines a year. some test marketing last year where we opened three shops
and that this was an enlightening experience. Sri Lanka can Users may not sew full garments but get into those markets, even in appliances, furniture. would use it for modifications, etc.
Another aspect of the art being alive is We had to halt the process because of the global downturn that Singer runs 60 sewing schools and and I hope Singer Asia which invested in this process while thousands have passed through these we did the management, will resume it. However the test academies, and set up their own, small marketing was very revealing and Sri Lankan manufacturers dress-boutiques. have a place. We some sold of our refrigerators and
furniture. Fees are very nominal and we also give scholarships. It’s not a visible part of Balancing family life and work: Singer’s profile, is available worldwide It’s difficult to balance the two because office work takes so from the inception and another reason much of your time leaving less time for the family. It’s a why sewing is alive as an art.” very difficult balancing act. This is a problem for any CEO anywhere in the world. It’s one of the most difficult 87 FCCISL News Alert Weekly Business Highlight 26th – 02nd May 2010
balancing acts for any CEO. If somebody says, its not so, I won’t believe him particularly if they have young children.
On being a hands-on CEO: That’s the only way to be successful. Otherwise you have to listen to lot of people and their reports which are often not accurate. I spend a lot of time going into the field. I enjoy that a lot; visiting markets, walking around, talking to my sales force and the customers, and the factories. I spent a lot of time and I like walking around.
On being nice to people: It’s common courtesy to be nice to your visitor. My parents as well as my principals at Ernst & Young where I did my apprenticeship inculcated that kind of relationship of being nice to people, greeting people, seeing them off.
On whether stress affects one’s ability to be nice to people: I don’t think stress should be given as an excuse for not being nice to people or diluting your value system. Management is all about people: its about motivating your people and being fair to them. That is my first priority and often there is this bad Sri Lankan culture of tending to look at what is wrong or negative (in a person). I don’t know whom we learnt it from. Maybe the British, but we also blame the British for everything. We always look at what is negative. In a person, there is a positive and a negative side. People like to be praised – well done or great; simple words that mean a lot.
On new technology: We are too slavish to laptops and blackberrys. A blackberry hounds a subordinate. When you are in international business, in the middle of the night you may get a message because the sender has forgotten the time-zone difference. That’s puts stress on people. The personal touch is going out of the younger generation. They are buried in their laptops, in numbers and figures. What does that mean? That’s all historical figures. Business is more dynamic; its something happening today in the marketplace. Its not a historical event. We should not be a slave to past information particularly in a growing market like Sri Lanka.
I know people who have the courage to say ‘I don’t need a blackberry, I don’t need to be a slave to my laptop’, those who are honest who don’t really need this technology.
On what he uses: I use only an ordinary mobile phone. But on retirement I may use a blackberry because no one is going to chase me then!
Technology improving performance: I am not a great believer of technology. Sitting and looking at numbers, historical data is a waste of time. For me, business means going out to the marketplace, talking to suppliers, looking at factory production and capacities, essentially walking the floor. Technology is important but for example you cannot predict the future on past data. Ofcourse you can intrapolate and extrapolate but unless you know your suppliers, your dealers, the marketplace, the competition, how can you find what’s going on? Technology won’t give you that information; it never does.
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International experience: Whenever Sri Lankans get the opportunity (to work abroad) they have done well. We have a way about us; we are modest and have a better understanding of people than most Asians. That was a huge advantage whenever I did work outside (being first Area Manager and then became Senior Vice President of Singer International based in Colombo except for one year where I managed the Singapore operation in 1984. I also chaired the Singer Global Business Council which implements the policies of the company across the world).
What I discovered was that I was able to work very well with my subordinates. Sri Lankans are not known very well across the globe and there could be complex situations but this never happened to me. My colleagues were very happy to work under me – Australians, South Africans who I managed – and I enjoyed that part of my career specially traveling around mainly in Asia and Africa and seeing other markets. I also handled human resource development for three years and two years in procurement (sourcing).
Governance in the private sector: There is a lot of room for improvement. We should not be preaching to others; we should be putting our own house in order. However the rules are very stringent for corporate governance but whether they are observed is the question. We have done extremely well in the garment industry and in the hotel industry – on the eco side.
On the need to allow creativity and transforming good ideas to commercial use for the benefit of society: There is a need to change things but we can’t expect the government to do everything. I don’t know whether there any enough philanthropists who should be funding innovation or providing micro loans. Unfortunately the many inventors or creators of products are not heard of after receiving an award or presenting their creation at an exhibition.
They don’t have markets, information to sell their products. There is an amazing number of school children who are innovators who get awards, etc but beyond that do they get any grants? Do they have a mentor who would take them on and try to develop them?
89 FCCISL News Alert Weekly Business Highlight 26th – 02nd May 2010
Environment
90 FCCISL News Alert Weekly Business Highlight 26th – 02nd May 2010
The Island – April 26, 2010 TIMELY STEPS GIVE ADDITIONAL PROFITS TO HUNDREDS OF FARMER FAMILIES
By Ifham Nizam
Loans from Rs.5,000 to Rs.50,000 Environmental awareness one of the major contributing factors
Nearly 2,300 people or more than 600 families had financially benefited from the prevention of environmental degradation with initial support of the United Nations Development (UNDP) which is being continued under the Global Environment Facility (GEF) Small Grants Programmed (SGP) in Naula in the Matale District.
Bibila, Melpitiya, Murutholuwa and Wewaththaawa are the four villages in the Naula Divisional Secretariat area of the Matale District facing low yield of harvest due to land degradation in the upper montane areas.
Chena cultivation is the prime source of income for the villagers and many villagers undergo numerous hardships due to environmental disturbances. Lack of land availability and the rocky conditions of the land made matters even worse. With the villagers having to reuse the same plots which lead to rapid land degradation.
The Naula Grameeya Sanwardhana Maha Sanghamaya or Naula Village Development Society – NVDS, an active organisation in Murutholuwa, led by Athugedra Sriyani Ekanayake, commenced activities in the mid-nineties with assistance from UNDP to improve matters.
"We initiated successful programs to minimize land degradation at Murutholuwa and Wewaththewa. Working closely with the land officer of the Naula Divisional Secretariat who provided the scientific knowledge for the design," she added.
She also said that everything was possible with the initiation of UNDP’GEF project helping us with Rs. Six lakhs and now we have Rs.100 lakhs. We earned such a balance due to sheer hard work and dedication."
Sriyani told The Island now they provide loans from Rs.5,000 to Rs.50, 000 for self-employment where the focus is on agriculture and sustainable development.
She also said that with the support of the World Food Programme they have provided 70 water pumps from the Jinasena Group where farmers are given three years time to repay in installments. She also said that they work with 24 Grama Sevakas under the guidance of the Provincial Councils.
Initial field visits are made with the land officer and each plot is surveyed and the areas where live fences or traditional stone terraces identified and estimates of construction materials made.
Awareness programmes were carried out within the community regarding the programme as well as the construction of live fences and stone terraces, as well as the design. 91 FCCISL News Alert Weekly Business Highlight 26th – 02nd May 2010
She says each plot had its own record with required documentation including a map of the plot where the terraces should appear.
Conservation of waterways through planting of suitable flora and increasing the water retaining capacity of the waterways was also carried out through the construction of ridges within the waterway thereby creating natural pools, she said.
She also said the visible changes and the awareness programmes have made villagers realize the necessity to protect the environment and the catchment area which they carry out voluntarily.
Voluntary labour both in the construction of the fences and ridges in the waterway is used. The phase one of the programme was carried out in Murutholuwa and Wewaththewa villages where 30,000 feet of stone terraces and 50,000 feet of live fences were constructed.
According to Sriyani, they conduct environmental awareness progress frequently and special programs were conducted to mark the World Environment Day on June 5. In Bibila and Melpitiya villages, 50,000 feet of stone terraces and 30,000 feet of live fences were constructed.
Some of their other achievements are: =Farmers ceasing to encroach on forested areas to establish new plots for chena cultivation.
= Increasing the water retention capacity of the waterway which flow through the villages of Bibila, Melpitiya, Murutholuwa and Wewaththaawa.
= Reducing soil erosion on the banks of the water way through the planting and maintenance of suitable types of flora.
= Increasing the water retention capacity of the waterway as well as the groundwater in the area.
=Decreasing the silting of the Nalanda, Ebowala and Bibila, Danvehara tanks in the lower region.
=Increasing of the yield of harvest within the plots.
=Farmers gradually turning into organic farming.
=Creating compost out of organic waste as fertilizer.
=The soil samples tested before and after the construction of the terraces show a marked improvement of the soil.
= The water samples tested before and after the prevention of soil erosion too has improved in quality as well as increasing the water retention capacity of the area.
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Sunday Observer – May 2, 2010
IMPORTANCE OF BALANCING ENVIRONMENT AND DEVELOPMENT
Increasing awareness and growing public concern on negative impact of environmental issues has led many governments to re-consider their strategies for growth and economic development. Many of the Asian countries are trying to balance the development and environmental needs.
This is because our survival depends on the health of the planet which comprises land, air, water, plants, animals and micro-organisms. "People should be concerned about what we are doing to the climate," said Chief of the Climate Monitoring Branch of the National Oceanic and Atmospheric Administration, Jay Lawrimore.
It therefore, indicates that all of us are also responsible for the health of the living planet for our own well-being and as well as our future generations.
Today, any activity or condition resulting from human activity that affects the environment adversely is defined as 'environmental pollution'. The environmental problems may be broadly classified as follows; Local and immediate problems such as water pollution arising out of municipal wastes, air pollution due to automobiles and industries, noise pollution due to improper use of electronic equipments and other machineries, regional problems such as acid rain, dumping and poisoning of the environment by toxic waste, deforestation, soil erosion, destruction of habitat and loss of bio diversity, global environmental issues like green-house gas effect, ozone layer depletion.
International initiatives Over the years a large number of international environmental agreements have been signed. The best known is the agenda 21, which took place because of the Rio Conference held in 1992. Agenda 21 contains a series of action plans for changing environmental behaviour in society. Most of the countries had begun implementing such plans making a significant contribution to protect the environment.
Other significant agreements include the Helsinki Convention, HELCON, which protects marine life in the Baltic, the Paris Convention, PARCON, which regulates emissions to the North Sea and the North Atlantic from land based sources, and the Basle Convention which governs transport of hazardous waste that crosses national borders. The Vienna Convention (including the Montreal protocol), which addresses global reductions in ozone depleting substances, has had a large impact.
The interesting initiative, in the recent years was the Kyoto Protocol, which seeks commitments from all countries to reduce emissions of greenhouse gases in order to prevent global climate changes.
Sustainable development There are a number of definitions of sustainable development. The Sustainable Development term refers to the principle that the present generation shall not exploit natural resources in such a way as to put future generations in danger.
Three factors namely environmental, social, and economic had been added to the above mentioned definition based on the Rio Summit held in 1992, and, enriched this definition by indicating that any development policy should include reference to the said factors. 93 FCCISL News Alert Weekly Business Highlight 26th – 02nd May 2010
Furthermore, later under the said main three pillars other sub-components were added and enriched the definition. Considering the three main pillars of the definition, it is clear that implementing a sustainable development approach within an organization is a horizontal task covering all functions of the organization.
The present trend towards a green supply chain has emphasized that organization today can not only satisfy consumers' needs and wants by upgrading quality of product and service but also remain in compliance with increasingly stringent environmental regulations.
Green design and regulations The basic idea of green design is to reduce ecological impact throughout all phases of a product's life cycle, by introducing a better design. This methodology helps to minimize the processing costs at the end of a product's life whilst contributing to increase the profits from recovered materials.
In designing a product, the designing team can change the raw materials or substances used during the manufacturing to be less toxic, more environmental friendly. For example hybrid car is a green product. However, for some organizations green design concept is proactive one as far as Europe is concerned due to the publishing of particularly the following three directives.
ROHS Directive This European directive is known as Restriction of Hazardous Substances (ROHS), which addresses to limit the use of six hazardous substances used in soldered joints, cathode ray tubes, relays or printed circuit boards.
This is mainly applicable for manufacturers of electronics and computer equipment. Therefore, equipment which does not meet the standards cannot be sold in the European Union. However, this directive indirectly covers all major IT companies in the world.
WEEE Directive The Waste Electrical and Electronic Equipment (WEEE) directive requires electrical and electronic equipment waste to be collected and recovered, giving priority to reusing and recycling materials and products. This directive, therefore, requires manufacturers to set up recovery and recycling channels for their products or components.
Restriction of Chemicals (REACH) This REACH directive requires 'users' of chemical substances to provide proof of their non-toxicity. This directive covers many industry sectors.
In response to the global trends in green trade and the new expectations, many large organizations in the world have begun to integrate environmental considerations into product design. Many organizations all over the world now consider concepts like raw material reduction, energy conservation, use of changeable parts and components, product recyclable, reduction of packaging volume and weight at the design stage of the product as these steps would support to reduce the environmental burden created by products. This indicates that the 'Vision' shared by these organizations is to achieve sustainable development through the recycling and reuse of the earth's limited resources.
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Strategies and mechanisms In view of the above, it is very necessary to consider the following points in order to develop a suitable program to promote the concept of Greening the supply chain.
Knowledge of the environmental performance of the product when making a decision to purchase that product, long-term awareness and education programs to promote the Green Concept and its benefits among people. Full support from both the Policy-making and decision-making levels about the Importance of Green Procurement, * Availability of waste recycling and reuse schemes, * Availability of resource reduction technologies, * Availability of Environmental Management Programs and any other related programs, * Availability of incentives and encouragements like tax concessions etc to industry to proceed in manufacturing of green products, * Availability of Financial and infrastructure support programs especially focusing SMEs, * Availability of national level programs at the highest level to recognize the 'Green Organizations' in the country.
Based on the above guidelines, it is possible to evaluate our current situation and accordingly we can identify the gaps. Once we identify the gaps it is necessary to formulate sound strategies and mechanisms to cover up the gaps so as to implement an effective 'Green promotion' program.
Current initiatives It is worthwhile to mention that the Environment and Natural Resources Ministry under the guidance of Environment Minister has taken steps to establish a National Council for Sustainable Development (NCSD) along with a national action plan 'Haritha Lanka' covering 10 thrust areas with the able Leadership of President to ensure the environmental sustainability of development programs in the country.
This is a very commendable step and it is necessary to implement this program with the support of every individual in the country to integrate environmental and sustainable development considerations into the day-to-day decision-making at all levels of the country to make Sri Lanka a model country. This approach will help us to make our country an environmental friendly country.
It is interesting to note a part of the speech made by the Dalai Lama at the Consecration of the Statue of the Buddha and the International Conference on Ecological Responsibility-a Dialogue with Buddhism, he said, 'I feel that it is extremely important that each individual realize their responsibility for preserving the environment, to make it a part of daily life, create the same attitude in their families, and spread it to the community'. This is the message that all of us should remember if we want to create an environmental friendly country.
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