12th – 18th July 2010 FCCISL News Alert Weekly Business Highlight 12th – 18th July 2010
Content Page
1. DEVELOPMENT ECONOMICS 1.1 Lanka most liberalized economy in South Asia 05 1.2 Tradition overrides hard economic decisions that plague the tea industry 09 1.3 Services and knowledge based sectors vital for the young - Jagath Savanadasa 11 1.4 The backbone of rural economy 13 1.5 Economic athletism - Twelve pick ups for Sri Lanka 15 1.6 Panasian Power makes its mark in local mini-hydropower Development 21 1.7 What does the rise of the East and collapse of the West really mean? 23
2. MANAGEMENT 2.1 PMP and its value to the community 26 2.2 HR and an ownership attitude 28 2.3 Management tips: A productive meeting 30
3. TRADE & MARKETING 3.1 Has SL-India trade saturated? 34 3.2 Modern retailing growth in Lanka 38 3.3 Invention vital for marketing 40 3.4 Processing, value addition their forte 42 3.5 Derivatives Demystified 44
4. MONEY & BANKING 4.1 Reserve money target revised for stronger growth 47 4.2 CB cuts policy rates 49 4.3 Credit to the private sector continues to grow 50 4.4 IMF facilities seen as alternative for forex reserves 52 4.5 World recovery continues, but risks increase – IMF 53 4.6 How to get the best out of your Training budget 56 4.7 Six provincial banks merge to uplift the rural economy 58 4.8 Finance Business Act to give Central Bank more teeth 59 4.9 PB says interest rates not in line with govt direction 60
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5. TOURISM 5.1 Tourism sector invests $ 10 b 63 5.2 Tourist arrivals up 47.9% in June 65 5.3 Top corporate says sustainability is the key to tourism development in Sri Lanka 66 5.4 Tourist arrivals up 48% in June 67 5.5 Lanka gearing up for tourism with plans to transform the entire island 68 5.6 Sustainability is the key to tourism development in Sri Lanka 69 5.7 Poor image than war cause for low tourism growth 70 5.8 Sustainability is the key to tourism development in Sri Lanka 71
6. EXPORTS 6.1 Tradition overrides hard economic decisions that plague the tea industry 73 6.2 Empowering rubber smallholders 75 6.3 Gems and Jewellery: Exports top Rs.22.4 b 80 6.4 Island-wide Jewellery survey 81 6.5 Gem and jewellery revenue to top $ 1b 82
7. STOCK MARKET 7.1 CSE recovers 84 7.2 Asian markets mostly lower as China stocks fall 85 7.3 Stocks close up 0.48% 86
8. BUSINESS 8.1 Asia Pacific business conference in Colombo draws in record numbers 88 8.2 Customized and waste-free 91
9. CLIMATE CHANGE 9.1 Climate change, emissions trading and the carbon trade 94 9.2 Nature of carbon trade 97
10. TRADE DELEGATION 10.1 SBF delegation visits Sri Lanka 101 10.2 Singapore Business Federation delegation visits Sri Lanka 102
11. FCCISL EVENTS 11.1 Singapore delegation mulls investments here 104
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Development Economics
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Daily News – July 12, 2010 LANKA MOST LIBERALIZED ECONOMY IN SOUTH ASIA
Keynote address by Plantation Industries Minister Mahinda Samarasinghe MP, on ‘Fast Tracking the Economy’ at the 7th Plenary Session of the 24th Conference of the Confederation of Asia-Pacific Chambers of Commerce and Industries (CACCI) and the 11th Sri Lanka Economic Summit organized by the Ceylon Chamber of Commerce on July 7, 2010.
Your Conference theme, which is ‘Facing global and local challenges: the new Dynamics for Economic Development’ is of particular significance to us in present-day Sri Lanka. It is heartening to note that the Ceylon Chamber is facilitating this discourse with a view to fine-tuning the private sector’s strategic response to face the challenges of the current economic environment.
As a point of departure, let me set out the context within which we operate today. Nationally we are poised upon the brink of a potential economic take- off which has been made possible by the end of the armed conflict. The economic indicators are largely positive. As was pointed out in the budget speech made by my colleague Finance and Planning Deputy Minister, due to the resilience of our entrepreneurs, the steadfast determination of our workforce and the policy environment that our government created, Sri Lanka has attained middle income economy status with per capita income rising from USD 1,062 in 2004 to USD 2,053 in 2009. The rate of inflation at 4.6 percent in
June 2010 recorded a downward trend for consecutive four months - a salutary Plantation Industries macro-economic indicator. Minister Mahinda Samarasinghe The Sri Lankan economy has registered a strong rebound with first quarter registering a 7.1 percent growth in GDP. The projection for the year indicates that Sri Lanka’s economy may record a growth rate in the range of 6.5-7 percent in 2010. With this renewed confidence, it is likely that Sri Lanka will re-emerge as a country with accelerated economic growth. The early signs are promising. Foreign investors are investing reasonably aggressively in Sri Lankan Rupee and Dollar denominated debt. As a consequence, our reserve position has crossed the USD 5.5 billion threshold.
Global economic crisis Contrast this with the situation in the first two quarters of last year. As the war drew to a close, Sri Lanka was in a relatively precarious position with foreign reserves at almost USD 1.2 billion, donor nations holding back aid flows and the general conditions for exports also looking weak due to the global economic crisis. On the domestic front, domestic consumption and internal trade was also seeing steep declines, as the population was unsure of what the future held. As economic activity slowed during 2008 and 2009, so did Government revenues from tax collection. The consequent increase in the Budget deficit was unnerving. Today, a little over a year later, we are in the happy position of being able to look back and view the economic outlook in May 2009 as if it were no more than a distant memory.
Reflecting this upturn in our fortunes, President Mahinda Rajapaksa told the Sri Lanka-Ukraine Business Forum on June 30:
“I am pleased to inform you that we have succeeded in establishing stability in the country and ensuring investment protection. The Economist Magazine stated a year ago that Sri Lanka is among the few 5 FCCISL News Alert Weekly Business Highlight 12th – 18th July 2010
countries with the speediest economic growth. Furthermore, with the elimination of terrorism there is security and stability in every part of the country. Sri Lanka has today reached the status of a middle- income developing country with free market liberalized economic policies. Today, Sri Lanka is ranked as the most liberalized economy in South Asia. With the post-conflict stimulus, our economy is expected to grow at a rate of 7 percent this year, and Sri Lanka was rated one of the world’s best performing financial markets in 2009 as investor confidence grew.”
Globally, the pace of economic recovery gives us, especially those in developing countries, reason for cautious optimism. The World Bank’s ‘Prospects for the Global Economy for Summer 2010’ report supports our ambitious growth target. It emphasizes that the risk posed by the European sovereign debt continues to be a concern.
Banking systems According to the Bank, in order to ensure longer-term sustainability, fiscal policy in many high-income countries needs to be tightened sharply over the next several years. Policy that favours a more aggressive reining-in of deficits will, by reducing high-income country borrowing costs, favour medium-term growth in both developing and high-income countries. It says that global GDP is projected to increase by 3.3 percent in the next 18 months, and by 3.5 percent in 2012. Private capital flows to developing countries are projected to increase from 2.7 percent of their GDP in 2009 to 3.2 percent in 2012. Reflecting stronger productivity growth, GDP in developing countries is expected to grow by 6.2, 6.0 and 6.0 percent in 2010, 2011 and 2012.
This is more than twice as quickly as in high-income countries. It goes on to add that limited fiscal space in low-income countries means that if official development assistance were to decline, policymakers in low-income countries could be forced to cut growth enhancing infrastructure and human capital investments. This poses the real risk of number of people living on USD 2 or less per day in 2020 rising to as much as 79 million. The Bank’s report on the region also make interesting reading. On a regional basis, South Asia remains strong in terms of growth, being only second to East Asia and the Pacific. Although the global financial crisis has had important consequences for economic activity in South Asia, that impact was much less pronounced than in all other developing regions. Regional economic activity benefited from limited exposures to the sub-prime markets and global banking systems and relatively resilient capital inflows, which increased as a share of GDP.
Fiscal and monetary stimulus in some countries including Sri Lanka, supported activity as well in trade in services and in agricultural products which were less impacted by the crisis than at the global level. Remittances also proved to be a key source of strength for the region during the global downturn. Reflecting the diversity of its migrant destinations and a rapid and large build-up in the stock of its migrants abroad in recent years, remittances inflows to the region expanded 4.9 percent in 2009 - even as they declined by an estimated 9 percent in the rest of the developing world. And, while they are growing less quickly, remittances to the region have remained positive over the first four months of this year.
The Bank also points to relatively high budget deficits in our region as an area of concern. We are addressing this issue. In the Budget speech, our Government’s stated position was that we consider that the historically high Budget deficit in this country must be phased out in order to reduce the debt burden and strengthen the financial situation so that our people will have better access to finance from our financial institutions. However, we do not believe that such a deficit reduction should be done at the cost of economic growth. 6 FCCISL News Alert Weekly Business Highlight 12th – 18th July 2010
We also do not recognize privatization of State enterprises, selling State assets and cutting down public investments for fiscal adjustment. We believe such adjustment should be done through improvement in the quality of government spending, by putting State assets into productive use and collecting revenue through a broad based and low tax regime. Implementation of such policies will certainly be conducive for business development by the private sector and also be conducive to generate a high growth rate.
Goods and services I have sought to paint, in broad brush-strokes, the factors that impinge upon Sri Lanka’s economic prospects and the environment in which we find ourselves. Next let me turn to the role of a Government in a modern day nation-state. The centrally planned economy with Government being actively engaged in the production of goods and services has given way to new paradigm of governance. Modern public governance, as vividly explained in Osborne and Gaebler’s oft-quoted analogy, is more about steering than rowing. Government now gives direction to the ship of state and builds stronger relationships that help in better and more efficient generation of propulsive force, i.e. the ‘rowing’.
Goods and services are primarily produced by the private sector with appropriate partnerships between public, private and voluntary sectors being built to provide more efficient and targeted outcomes. Governance was broken down into three elements - the form of political regime, how authority is exercised in the management of social and economic resources and lastly policy formulation and implementation. This new direction was allied with concept such as limited government or State withdrawal and ‘reinventing government’. This orthodoxy has been challenged by the recent events on the global stage. To take the maritime metaphor a step further, Government now has not only to steer but to row as a well in certain circumstances and also to standby with a life-preserver when players in the market go ‘overboard’ putting the entire voyage at risk.
The need for active intervention to preserve economic equilibrium and stabilize markets is now recognized and practiced by the very countries that urged us to abandon State intervention and participation in markets. This does not mean a return to the days of launching public enterprises - unwidely white elephants that were badly managed and a drain on the public purse. We recognize that the requisite skills to manage, innovate and develop business and wealth creation reside with the private sector. However, our role is not confined to that of a mere policy maker and regulator. The Budget currently being debated in Parliament emphasizes the need for public investment in infrastructure and social expenditure in areas such as health, education, transport and clean drinking water.
In appropriate areas, direct intervention such as in reconstruction and rebuilding of the North and East, special programs on a regional basis to ensure balanced development and active intervention in agri- business to promote food-security and improve our foreign exchange position, are examples of initiatives that the Government of President Mahinda Rajapaksa is undertaking. I must also point out that our Government views economic growth as related to but distinct from economic development. Our approach and strategy in this regard is laid out for us in the road map set out in the Ten-Year Horizon Development Framework 2006-2016 developed in keeping with the policy goals of the Mahinda Chintana.
Economic development The advantage of this holistic approach to development planning encapsulated in the ‘Mahinda Chintana: Vision for the Future’ is that we do not focus attention on economic development in isolation but on social, economic and cultural revival and resurgence with equity and justice for all. President Rajapaksa, while addressing the Sri Lanka-Ukraine Business Forum, said: 7 FCCISL News Alert Weekly Business Highlight 12th – 18th July 2010
“Our vision for Sri Lanka’s development is apparent. It integrates the positive attributes of market economic policies and economic growth with our own domestic aspirations for social justice and human development.” This broad vision for development exceeds mere GDP growth - it implies development that is fair and inclusive and leads to the improvement of the real quality of life of our people. Our efforts in promoting development to combat poverty must not be only targeted at eradicating income poverty but to increase human capabilities and choices - the pith and substance of people-centric human development.
In conclusion, let me advert to the thrust areas of the economy in which we will welcome and provide facilitation for investment. Of course global trends and demands and a host of exogenous factors can affect these areas and compel us to refine, refocus and reorient our aims and objectives. We must be sensitive to these and be flexible enough to respond to new challenges. As the President identified, our cooperation and collaboration with international business partners is key to our success. He said: “In today’s globalized and integrated world, participation in the global economy is necessary to generate national wealth and create employment in domestic economies.” For our part, we bring to the table a Government that is supportive in creating an investment-friendly climate, a healthy and well-educated workforce, a unique geographical location which is the gateway to South Asia and straddles the key shipping routes between West and East Asia and, above all, a country that is at peace and is rebuilding an reconciling its differences in the aftermath of a long conflict.
Vision for the future We have worked out our priorities. President Mahinda Rajapaksa in Kiev pointed out that: “It is my intention to transform Sri Lanka into a major centre of naval, trade, air, energy and knowledge.” The road-map provided by the ‘Mahinda Chintana: Vision for the future’ offers investment opportunities to the private sector in a wide range of areas including resort hotels and tourism related facilities, construction, IT and Business Process Outsourcing, skills development, clinical trials and research, plantations, urban development, industrial townships, international shopping facilities, renewable energy, higher education, medical facilities, agriculture, livestock and a wide range of value added manufacturing and services.
Our Board of Investment under the astute leadership of Economic Development Minister Basil Rajapaksa has worked out an extensive sector-based incentivization scheme to promote and facilitate investment. Our plans are in place and we are ready and willing to assist genuine, quality investment that will benefit Sri Lanka and her people. As the President told a jointly organized Business Forum arranged by our host and the Indian Chamber of Commerce just over a month ago:
“Those of you who are keen to explore, will find abundant opportunities for investment in Sri Lanka. The scope of immense: from infrastructure, to agri-business, to manufacturing and to a range of services. You will also find that our country offers a rare package of skills, capacity and a willingness to learn and adapt. Our policy is vibrant, our package is enticing and exciting and you would do well to join us in our forward march.” I hope you will join hands with us in this forward march in helping Sri Lanka realize her potential as an ‘emerging wonder of Asia’.
I look forward to hearing your views and trust that we can engage in an open and candid dialogue, which will be of mutual benefit.
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The Island – July 12, 2010
TRADITION OVERRIDES HARD ECONOMIC DECISIONS THAT PLAGUE THE TEA INDUSTRY
By Steve A. Morrell
Minister Plantation Industries, Mahinda Samarasinghe, addressed the Colombo Tea Traders Association Annual general Meeting recently. He was concerned the Tea industry had not evolved to meet challenges of moving demand for this beverage internationally . Reverting to an area of conjectur,e he said, ‘Another area for serious concern with regard to our Tea trade is its dependence on bulk teas. The time has come to increase exports of tea in value added form’.
He also made reference to the Tea Small holder sector and their future role in sustaining the Industry.
The bottom line is, according to recent Tea Board reports, Tea Small holders are main stays of the Tea industry, producing approximately 72 % Ceylon Tea. The Corporate secto,r relegated to second best, could manage just 28 % making up the 100 % exported. Irrespective of this poor showing, Tea Companies Managing State owned tea land have been allocated prime tracts of land they inherited as on going commercial entities, first as British Holdings, and later from the State , in 1992.
Maintenance of these tea lands did not falter under the State. One could not even conceive Plantation Leaders of the stature of Ranjan Wijeratne, permitting any retrograde situation setting in at that time.
Our recent discussions with Brokers, and reverting to the Piyadigama report, the bottom line is that Plantation Companies have been stingy in their investments to ensure each Plantation is an on-going concern.
The Minister’s wide ranging speech included practical suggestions on demand based products and stressed importance of exports in value added form. He said’ I see this area as critical to us as a nation. By emphasizing on bulk Tea we not only loose revenue but also allow room for others to blend our tea , superior in all aspects, with inferior origins and sell as their own blends ‘.
Traditional buyers may have forgotten the taste of Ceylon Tea, he said.
One such traditional buyer, Pakistan, turned to Kenya for their supplies of teawhich is far cheaper than Ceylon Tea. Pakistan imports 56.06 % of their requirements. (Courtesy Asia Siyaka Tea Market report). Sri Lanka dropped far down the list. Indonesia, Ruwanda, Malawi, are all countries supplying more tea to Pakistan.
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Chinese Tea exports to Pakistan have now reached 6.70 % up 2 percentage points since we last focused on Chinese exports .
Our Tea story last week focused on Russia/CIS Countries being or main buyer. But that trade source is dwindling. This fact too stressed our penultimate story two weeks previously.
We have to again concentrate on lack of new markets opening for Ceylon Tea.
However value added exports have gained ground according to recent Tea Board information, only in miniscule quantum pointers. That too such exports have centered on two or three private sector companies who have taken their risks and progressively established their Brands internationally.
Meanwhile, these Plantation Companies were ranked among top ten performers to end June this year. (RPLs). Kahawatte, Talawakelle, Kelani Valley, Hapugastenne, Pussellawa, Maskeliya, Horana, and Bogowantalawa.
Each of these Companies manage about an average 20,000 hectares. Collectively, this represents some 160, 000 hectares. Questions could be asked what of the rest?
The New Minister is faced with an enormous problem; that of rejuvenating the Tea industry and ensuring its leadership slot (now lost), as quickly as possible.
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The Island – July 12, 2010
SERVICES AND KNOWLEDGE BASED SECTORS VITAL FOR THE YOUNG - JAGATH SAVANADASA
It is important to make young people aware of promising and expanding opportunities in new areas of employment and encourage them to follow academic and professional studies to suit the needs of today’s world. This was stated by Jagath Savanadasa, Senior Consultant, Economic Affairs and CEO of the Business Chamber of Commerce.
He was the Chief Guest and delivered the keynote address at the Free Introductory Seminar, a preclude to the Foundation Diploma in Shipping and International Freight Management held on Sunday 4th July 2010, at the Ladies College, Vocational Centre, Flower Road, Colombo 7.
Savanadasa observed that globally the services sector was poised to achieve significant growth. On the other hand, International trade, which surprisingly showed 3.6% growth in 2009, as opposed to the negative growth recorded in 2008, required an influx of new support activity.
Shipping logistics and of course freight related services were important components of the support structure.
Citing from statistics provided by the Institute of Shipping and Logistics, Savanadasa said that 50,000 ships in services and the 1.3 Million personnel engaged in sea borne work was adequate testimony to the shipping sector’s contribution to the world economy. He added that the recession was showing clear signs of change for the better in the developed world. Besides this, the rapid rise of China, Brazil and India- three new economic power houses- were fuelling the post-recession growth process.
The educated youth of today, who have ideas of professional careers in Shipping and other services sectors, should be conscious of these developments. They also should be aware of facts pertaining to Sri Lanka. In the first quarter of 2010 our country showed a commendable increase of 7.6% in the GNP. There are ambitious plans to expand off-shore shipping, improve the Port of Colombo, build a new port in Hambantota and reactivate the port of Galle. Perhaps, in the North- the Kankasanturai port too will see refreshing changes. All such improvements will require trained manpower. It is in this context that training courses in Shipping, Logistics and Freight are important.
Savanadasa, however, expressed disappointment about the lack of progress in the country’s education system. He said that unfortunately the mass of Sri Lankan youth had inadequate exposure to what was taking place in the world. Knowledge of the changes rapidly transforming the world should form a part of the daily teaching of the students.
A few schools in Colombo, Kandy and many of the International schools, provide the right atmosphere and conditions to imbibe facts pertaining to the global economy. It benefits only a miniscule of the student population of around 900,000 young. Reforms of a radical nature to acquaint the students with the changing world and new economic trends are long overdue. Educational reforms should be an ongoing process with constant new inputs and the discarding of old systems and methods True enough computer education is being imparted to many students in rural and semi-urban areas in the country. This, however, is a fundamental development. It is merely a stepping stone to a vastly bigger world of
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learning. That basic foundation should be expanded and students provided a larger picture of the growing world of Trade, Commerce, Science and Technology.
"I am making this statement because of my long experience in teaching University students, those doing their Masters among other post graduate work besides a number of others in pursuit of professional careers. The inadequacies that many of them show in terms of allied and related knowledge, a prime requisite to make them well rounded students, is appalling." This deficiency had probably begun at the school level.
A theoretical knowledge sans knowledge of contemporary trends is wholly inadequate, noted Savanadasa.
Perhaps another factor responsible for this state of affairs is the lack of knowledge of English. Most trade information and literature besides topical economic reading material is available only in English which is the global instrument of communication it comes to the question of acquisition of knowledge in any area of economic activity a good knowledge of English, as opposed to a superficial understanding, is essential." Savanadasa said.
And unfortunately in contrast to false propaganda in regard to the learning of English -to the requisite degree and that it could be done in a matter of days or months as advanced by tutorials and other irresponsible parties, it is a slow - time consuming process of learning. It is also a mixture of various tasks like constant verbal communication, writing, reading, etc.
Turning to the Asian scene and the job opportunities, Savanadasa said that in the 21st century Asia instead of the Western hemisphere will hold the keys to world’s economic advancement. Students of shipping and related areas could capitalize on the growing strength of Asian economies. Even big countries like China and India may open their doors to specialized personnel in the above mentioned fields. As you know already the South Koreans have provided Sri Lankans job opportunities in certain fields of manufacture and services.
Jagath Savanadasa expressed his appreciation of the pioneering endeavour of the Institute of Shipping and Logistics and especially it’s Director, Mr. Gihan Warusavitana who first began introducing these courses as far back as the early 1980s.
He urged the students to concentrate on completing the course. He emphasized that the students should have an inquiring state of mind. They should not be reluctant to query and question teachers on any issues that are not clear. Such questions should not be confined to material presented at a particular lecture but also related areas.
They should supplement their learning by acquiring additional knowledge and reach out to relevant information through the internet besides scanning the financial and trade pages of the daily news papers. "Put aside a few rupees required to buy an English newspaper daily and make a habit out of it’. You will realize how beneficial it is for your future.
It is generally important to think of the future and of the present. Not so much of the past and history. History could be inspiring and perhaps could learn from it at times. So the best thing is to bundle it and put it aside and refer to it when needed, Savanadasa concluded. 12 FCCISL News Alert Weekly Business Highlight 12th – 18th July 2010
Daily News – July 13, 2010 SME SECTOR: THE BACKBONE OF RURAL ECONOMY
Budget speech by Industry and Commerce Minister Rishad Bathiyutheen
Since the Small and Medium Enterprises which accounts for 96 percent of all industrial establishments is the backbone of the rural economy, the Government has identified the SME sector as the key to rural development. Hence, many programs have been implemented island wide to facilitate the sector.
The National Enterprises Development Authority (NEDA) has planned a program to establish entrepreneurial centres in every district to encourage small and medium scale entrepreneurs. The NEDA has also planned to establish a SME University with the support of JICA, for the skill development of entrepreneurs.
With the abolition of the quota system and the recent issues which has arisen with regard to the EU GSP+ scheme, the apparel sector had to face numerous challenges in the competitive global market. Therefore, many programs have been launched by the Government to increase the competitiveness of the local apparel sector, enabling them to overcome their problems.
These include programs on productivity improvement in the apparel sector, Apparel sector image building, clothing design degree program conducted by the Moratuwa University and programs to develop the Small and Medium apparel industry. The Government has granted several concessions to develop the handloom industry as well.
Export sector The export sector of Sri Lanka which experienced a severe setback in 2009 due to the global economic downturn performed satisfactorily during the first five months of this year registering a positive growth rate of 10 percent.
This could be attributed to the Government's pragmatic policies, the resilience shown by the private sector in the pace of numerous adversities and the development programs carried out by the Sri Lanka Export Development Board during this period. The EDB initiated several measures to diversify into new markets and to broaden export supply base to suit the new markets. These initiatives contributed towards reducing the impact of the global recession and support the export sector to weather crisis.
In its efforts to promote and develop exports of Sri Lanka, the Export Development Board (EDB) carried out an array of programs pertaining to enhance the supply chain efficiency, promotion of export oriented SMEs, trade facilitation, provision of trade information, e-commerce services and other support services and entrepreneurship and skills development during this period.
The main objective was to enhance the competitiveness of the export sector and thereby enabling them to confront the global challenges. During 2009, Sri Lanka has expanded its foreign trade relations, through the bilateral regional and multilateral trade agreements of which it is a party.
To improve market access for Sri Lankan exports, the Government has taken positive steps to negotiate the Asia Pacific Trade Agreement (APTA) which facilitates Sri Lanka to enhance her market access, 13 FCCISL News Alert Weekly Business Highlight 12th – 18th July 2010
particularly to three major markets namely, China, South Korea and India. It is noteworthy to mention that the export growth to China and South Korea under APTA was 53 percent and 99 percent respectively during 2009.
In addition to the above, Sri Lanka is a party to the bilateral trade agreements; India-Sri Lanka Free Trade Agreement (ISFTA), Pakistan-Sri Lanka Free Trade Agreement (PSFTA) and Investment Framework Agreement (TIFA) with USA, which have made a substantial contribution to the export diversification and foreign exchange earning.
Promoting production Under this Budget, a solid foundation has now been laid to promote a high level of production and investment in our economy. My Ministry and our institutions will also fully participate in the national economic development effort which is being spearheaded by Basil Rajapaksa through his Ministry.
We hope to receive the fullest support and advice of our industrialists, exporters and their chambers for this purpose. We will maintain an active dialogue with these stakeholders to formulate the strategies and plans to achieve the national development targets.
With such dedicated efforts, it will be possible to fulfill President Mahinda Rajapaksa's inspired vision to make Sri Lanka the "Wonder of Asia".
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Daily News – July 13, 2010 ECONOMIC ATHLETISM - TWELVE PICK UPS FOR SRI LANKA
Rohantha N.A. Athukorala
“What is required now is to focus on economic reforms and structural changes that can be activated so that we can move Sri Lanka’s rating in the World Competitiveness ranking from the 107th position to be in the first 30.” Last week one of the all time greats of karate, the three times European champion Sensei Allan Campbell came down to Sri Lanka. Some of us were privileged to be trained by him. One statement made by him that struck me was “The day you stop challenging your mind and body is the day you will begin to die.”
In simple words, what he meant was intellectually stretching your mind such as solving tough problems at work and in sports, stretching yourself physically was the best way of keeping yourself healthy. Thereafter, Sensei Campbell mentioned that irrespective of the age of a person one must engage in this challenging attitude on a daily basis so that it becomes a way of life so that income or geographic locations does not matter. It becomes systemic. It was an interesting concept.
Being a sports enthusiast, I felt this concept one can also be extended to economic athletism. This is where one takes the learning’s from the sports field and relates it to the economics of a country. The best parallel that I can take is the memorable 2004 Greek Olympics and Sri Lanka’s tea industry is linking this to the everyday life of economics in Sri Lanka. Let me see poised to be $2 bn how far I can stretch my mind on this challenge.
Greek crisis From a business and economic sense the Greek Olympics costs dearly to the Government due to poor planning and excessive spending. Initial cost estimate was at $5.6 billion. Then it became $ 8.3 billion and finally the bill was a staggering $12.5 billion. Ticket sales exceeded $ 5.3 million but this was not adequate to cover the costs incurred even with the sponsorship earnings. The games created a fiscal dent to the economy that even shaved off almost 2 percentage points of the GDP of Europe. Some say that this was the beginning of the current economic crisis in Greece that has spread to the total of Europe. Current debt of Greece is at a staggering $ 423 billion and is 120 percent of the GDP which is an alarming situation that any country can walk into. Which is why ‘projects’ like the Olympics, needs to be managed with strong financial regulation especially due to global financial issues of the world. In simple words Greece undertook a developmental agenda by agreeing to host the Olympics without having the adequate financial planning. This is one reason that has resulted in the country becoming debt laden apart from the increased public sector salaries.
China was smart in 2008 On the other hand China handled the Beijing Olympics very smartly. They injected over 40 billion dollars but it was with a very structured financial model to cater to the emerging urban population of 570 million. The Chinese cashed on the Olympics to drive constructions like the Birds Nests stadium but it was designed in a way that it became a part of a University geographical ‘area’ post the event. Hence the Chinese used the Olympics Games to add value to the country than being an economic drain like what 15 FCCISL News Alert Weekly Business Highlight 12th – 18th July 2010
happened in Greece in 2004. While being critical on the Greek Olympics and how it has created an economic crisis there are many pick ups on its economic athletism displayed to the world. Economic Athletism Lesson 1: US Dream 100m Relay quartet humiliated. The 2004 US Olympic team had three 100m finalists, including the 100m Olympic Gold medallist, 200m Gold medallist and the great Maurice Green in the team. Victory was imminent even before the 4 X 100m relay began. All eyes were on the star-studded US dream team. However, the victory podium had the UNKNOWN British team being awarded the Gold Medal. The reason for the humiliating defeat was the brilliant team effort in the baton changes of the British team.
Implication to Sri Lankan economy: When selecting people for Boards of Directors in the Government or private sector, pick a team based on their skill rather than their reputation or stature in society. Logic being, what is required now post the war is cutting edge decisions that are out of the box and aggressive than the run of the mill work ethic. As I sit on many Government ministry boards, I can see this change hands on in the public sector which is fast changing. Some top corporate Chairman coming into the public sector boards consolidates this new approach of making Sri Lanka competitive. Sri Lanka needs to sustain this trend by providing the freedom to implement change.
Economic Athletism Lesson 2: Gold Medal after eight years . The metric mile better known as 1500m is a blue ribbon event in the world of athletics. In 1986, Hicham El Guerrouj was 400m into the finish, he tripped and crashed out of the LA Olympics. In 2000 Sydney Olympics, the Kenyan Noah Ngeny sensationally beat him in the same event. Two weeks before the Greek Olympics, another Kenyan athlete, beat him at the Zurich games. When Hicham El Guerrouj came to the Greek Olympics many said he was destined never to win an Olympic medal. However the gutty El Guerrouje judged the race and kept the pressure in the last 300m to secure a Gold. He went on to win not only the 1500m but also the 5000m. El Guerrouj later said “The victories in Greece wiped my eyes dry the tears of Atlanta and Sydney.”
Implication to Sri Lankan economy: I would like to pick the Sri Lankan tea industry to draw a parallel as I sit on many policy making committees. For the last 16 years the industry has been battered with inconsistent policy and low investment on marketing and promotional spends, low value additions, no funds for re planting and to cap it minimum to zero research and development investment but the passionate tea industry did not give up hope and kept on struggling along. The good news is that post the elections, the new leadership in the Plantation Ministry has created new hope. I can feel the vibes of very strong positiveness and vigour that has set in to the Industry.
With a new business model that is in the making, targeting two billion dollars in export revenue is not far away. As at end Q1, we are already at a +47.2 percent growth in export value, which means that Sri Lanka is on its way towards this objective. Maybe making this industry a priority sector for resources, can help this battered industry and also help nation branding. Economic Athletism Lesson 3: The Great Allen Johnson crashes out of 110 m hurdles. The four times world champion and top favourite in the 110m hurdles- Allen Johnson of the U. S. was brimming with confidence at the starting blocks in the 2004 Olympics.
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His bid to regain his Olympic title ended in disaster when he clipped two hurdles and crashed into the third which has happened only twice in his 13 year career. He later said “Even with my experience I was nervous, given that people were expecting me to perform.” The lesser-known Chinese athlete Liu Xiang went on to win the Gold, break the Olympic record and also equal the world record in the final.
Implication to Sri Lankan economy: Ethically manufactured As I have been actively involved in the policy making of Sri Lanka’s apparels must be publisized economic growth agenda in the last five years in different capacities, I have witnessed an architecture of a home grown economic model that has been able to keep the Sri Lanka alive when most economies were crashing at negative growth such as US,UK, France, Malaysia etc. However, just because the world is watching us post the war for robust economic growth similar to what Allen Johnson was up against, we do not have to emulate Singapore’s business model. We must formulate our own home grown solution to spruce up GDP growth to achieve 7 percent plus growth.
Quarter 1 is already at 7.1 percent which is encouraging. What is required now is to focus on economic reforms and structural changes that can be activated so that we can move Sri Lanka’s rating in the World Competitiveness ranking to be in the first 30.We will be just like the Chinese athlete Liu Xiang who came from behind to win. Economic Athletism Lesson 4: Merley Ottey competes at 44 years /Catalina Ponor at 17 years. One of the greatest women’s athletes Merley Ottey clocked a 11.24 seconds in the 100m for women at the age of 44 years, while the veteran male athlete Franke Fredricks ran a blistering 200m farewell Olympic Games run to be placed fourth with a time of 20.04 secs. On the other end of the spectrum the picture perfect Catalina Ponor at the tender age of 17 years competed on an Aerobic Gymnastic routine to earn 9.75 to win three Olympic Golds. They proved to the world that age was not a barrier.
Implication to Sri Lankan economy: Sri Lanka is now equipped with a strong second bench in the Parliament post the vibrant elections. They are young, business savvy and want to get ahead but, Sri Lanka needs to accept this new culture that is setting in. Even the current structure is very vibrant and hard working which means that a new productivity culture is in place. What is required now is for Sri Lanka’s business sector to accept this new blood that has come into the system and support the administration to make the nessacery changes so that Sri Lanka can be competitive. If we do not make this transition Sri Lanka will lose this chance to grow.
Economic Athletism Lesson 5: Golden girl Isibayeva breaks pole vault world record. The height of the bar stood at 4.60 meters and was cleared by Svetlana Feofanova in her first attempt. Yelena Isibayeva, failed in the first and second attempts. If she clears the 4.60m mark the three-time world champion and reigning world record holder will win Silver. She challenges the judges to raise the bar to 4.65m. There is absolute pin drop silence as she had ONLY one jump left. Yelena Isibayeva focuses and drives for the vault and clears the bar. She goes on to clear 4.75m, 4.85m and finally 4.91 to establish a new Olympic Record. A classic example of delivery under pressure.
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Implication to Sri Lankan economy: Sri Lanka displayed its strength by defeating one of the most ruthless terrorist organizations the LTTE in its own game with a head to head collision that has created new thinking globally of defeating terrorism in the world just like what Isabayeva did at the Greek Olympics. What is required now is for us to get together and see how we can build the bridges with the diaspora so that we can re build the Vannni with their support. The Bank of Ceylon loan scheme is an interesting financial instrument. Yes, we are under pressure, but I am sure we can deliver this expectation. In fact we must, so that we do not allow the world to look down on us any more.
Economic Athletism Lesson 6: Justice Gatlin wins 100m Gold . The hyperactive boy who used to jump off his parents’ TV set dressed in Batman cape went on to win the most prized catch of the Olympics- the 100m dash at a personal best timing of 9.85 seconds. In 2001, he tested positive for amphetamines and was hit by a two-year ban, reduced to one year after he appealed on the grounds he required treatment for attention deficit disorder. But as he roared across the finishing line, Gatling declared himself drug-free. “I feel I am a genuine and clean champion,” said Gatlin. In every athletes career there are tragedies but Gatlin showed the world that he could run with a smiling face and not worry about anything in the past that worried him. He left behind the reigning champion Maurice Green and one of the best fields of sprinters ever assembled for a 100m dash. Six athletes in the final went under 10 seconds. Batman Justin Gatlin was the winner.
Implication to Sri Lankan economy: Currently Sri Lanka is feeling the heat with a ballooning budget deficit and one sore thumb is the loss making ventures that account for 45 billion dollars. In fact it is shaving off 1 percent of GDP in Sri Lanka. CEB is in the red at 7.4 bn, SL Airlines at 12.2 bn, Mihin Air at 0.9 bn, SL postal service at 2.5 bn, SL Railways at 4.8 bn. Hence, rather than getting into the mire by buying more entities such as Shell Gas a better option is to cut the budget deficit by privatizing the state owned enterprises. Maybe we need to start with the money making ventures and then move to the more difficult loss making ones like Sri Lankan Airlines, CEB and the railways is my view. The Q1 fiscal deficit recording a 2.1 percent is encouraging but maintenance is key.
Economic Athletism Lesson 7: Irena Korzhanenko’s discus Gold stripped. Revelation came just one day after the women’s discus final. Gold winner, Irena Korzhanenko tested positive for banned steroid stanozolol. It was the first time two track and field athletes were stripped of their medals for breaking doping rules.
Implication to Sri Lankan economy: The implication to Sri Lanka is that we must strengthen the regulatory framework so that we make sure we do not allow Enrons to happen in Sri Lanka. We must clear the deck on Golden Key. We must also not allow another mobile phone industry fiasco to happen in Sri Lanka as most companies are in the red due to poor regulation. Another case in point is the privatized tea industry of Sri Lanka. In this case, the private sector has lost out on the deal while, the country has lost out in the long term due to poor regulatory action. Sri Lanka must become sensitive to these issues especially in this day and age, where success is achieved at any cost by the private sector.
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Economic Athletism Lesson 8: South African ‘own style’ world high jump champion The two-time world champion Hestrie Cloete from South Africa did not win the Olympic Gold. But when the pressure was at its height, with 60,000 spectators shouting their hearts out, Cloete with absolute ruthless precision went through her ‘own style.’ She mentally went through the steps towards the bar before pacing for the real jump. She won the Silver. But she proved to the world that she has her own style. I will not change even under severe pressure” said Hestrie Cloete.
Implication to Sri Lankan economy: The best parallel to me in Sri Lanka is the apparel industry. We know it’s under pressure given the GSP+ issue with the EU. What is required is to drive home our competitive advantage with the ‘Ethically Manufactured’ proposition and link to strong R and D that is the good work of SLINTEC. We must become the Apparel Capital of the world for Ethically manufactured Garments. The Sri Lanka Designer Festival is one event that can support this proposition. We must make this happen is my view.
Economic Athletism Lesson 9: Fani Halkia breaks the Olympic Record in the Women’s 400m hurdles. Greek athlete Halkia was little known before the games. Her best timing was 56.40 seconds in the 400m hurdles for women. However at the semi finals she electrified the Olympics with 52.77 seconds blistering run that broke the Olympic record. This sent shock waves throughout the world of athletics as such performance improvements normally happen with the help of Performance enhancing drugs’. In the final she ran down Australian world champion Jana Pittman and world record holder Yuliya Pechonkina to storm home five meters clear of the second best. The Halkia’s victory had the majority of the 70,000 home crowd on their feet. Her response to the victory was “The Greek soul is so great that it can carry ourselves to victory.”
Implication to Sri Lankan economy: The best implication is the tourism industry of Sri Lanka. We must ride the wave on this sector with global hype on Sri Lanka post the war. The National Geographic Channel ranking Sri Lanka the “no two must visit in the world” captures this trend well. What is required is to drive tourism development in Kuchchaveli, Pasikudah and Kalpitiya from a strategic sense so that we can increase our rooms from 14,700 to 30,000 in the next five years. If this is not done we cannot make Sri Lanka tourism a two billion industry like Sri Lanka Tea. This direction requires a new financial model if it is to be a reality. If we do not do that like what Fani Halkia did, Sri Lanka will be the loser. What Sri Lanka requires is not promotional spend but robust infrastructure development.
Economic Athletism Lesson 10: For 17th time the US produces an athlete to win the 400m Of the 25 Olympics in which the 400m sprint has been worked out, the US has secured it 17 times. The greatest being Michael Johnson. At the Athens Olympics, a 20 year old “white man’ won the event at a 44.0 seconds flat. It’s a difficult event to master and young Jeremy Wariner reacting to the comment “The fastest white man” he said “....It does not matter whether you are black or white. What matters is to reach your top potential. I never wanted to win. But sure wanted to better my personal best timing.”
Implication to Sri Lankan economy: The lesson for Sri Lanka is that we need to urgently provide a solution to the ethnic issue. Yes, we have won the economic war that ravaged the world in 2007/8 with the financial crisis and then we won war on terror in 2009. But the need of the hour is the solution that we provide the Tamil population of Sri Lanka. We also need to be sensitive to the livelihood development opportunities that we must create for the people in the Vanni. 19 FCCISL News Alert Weekly Business Highlight 12th – 18th July 2010
As Michael Jordan said it’s not whether one is black or white but allowing people to be the best that one can be. We are all Sri Lankans now.
Economic Athletism Lesson 11: Brazilian loses Gold in marathon The Brazilian marathon champion Vicente De Lima who ran into trouble when a spectator crossed the road cost him his chance to winning the Gold. However, his magnimanous gesture of solving the problem won him two medals, the Peace medal of the Olympic Games and the Bronze. A fitting tribute at the final awards ceremony.
Implication to Sri Lankan economy: I strongly feel the time has come for Sri Lanka to decide which industry that it needs to invest into make Sri Lanka competitive. The peanut butter approach, when the pool of funds for investment is allocated to all industries will not work. Its time we look at the future industries like the software industry and the BPO business and do the development work with focus, as this can become the two billion dollar export revenue business for Sri Lanka in the future. Maybe this kind of strategic decision making can make Sri Lanka win two medals on the world stage like the Brazilian.
Economic Athletism Lesson 12: Glamorous Gianna Angelopoulos The Greeks call her the ‘Iron Lady’. Gianna headed the Athens Olympic committee when many an individual thought the job was a nightmare. Glamorous, ruthless and ambitious, the 49 year old has achieved the impossible to get an accolade from the Olympic Chief as “Athens Olympics - A Dream Olympics.” Recent reports say that Ginna Angelopoulos used the games to launch herself into the chair of the nations outgoing president Costis Stephznopoulos. Some journalists who know her in person says, “Behind the charm there’s a rich bitch straight out of Dynasty.” Whichever way it goes it was the ‘Event of the year’ and it was the brainchild of Gianna Angelopoulos. What was her motive, we will have to wait as it unfolds in the future.
Implication to Sri Lankan Economy: We also need to have a ‘Secret Agenda’ every time we take up a challenge. Right now Sri Lanka is managing the relationship with China and India very well but we must be cautious on the CEPA arrangement with India so that we retain the Sri Lankan identity and its service sector. Just like Gianna we must also have a secret agenda on business growth.
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Sunday Observer – July 18, 2010
PANASIAN POWER MAKES ITS MARK IN LOCAL MINI-HYDROPOWER DEVELOPMENT
Panasian Power Limited (PPL), a fully owned subsidiary of Power Hub International, Malaysia, is helping to meet the demand for clean, low-cost energy in Sri Lanka through its mini-hydropower plant in the Ratnapura District. Since incorporation as a Board of Investment registered company in 2002, PPL has been part of the drive to develop the small and mini-hydropower industry in Sri Lanka, owning and operating a 2.0 megawatt mini-hydropower plant in the Ratnapura District which provides electrical energy exclusively to the Ceylon Electricity Board (CEB).
The overall efficiency of the plant is a record high 60 percent. The company is in the process of negotiating the acquisition of a second 2.4 megawatt mini-hydropower project in Nuwara Eliya.
The power generation policy of the mid 1990s encouraged private sector participation, leading to independent power producers (IPPs) such as Panasian Power Limited to supplement local power generation through the establishment of small and mini-hydro plants.
These grid-connected small and mini-hydro plants are some of the A mini-hydropower plant in the most environmentally friendly energy sources available to Sri Lanka. Ratnapura District. Since no water is stored in a reservoir and the water is fed back to the same stream a short time after its diversion and generation of power, there is negligible impact on the environment.
Chairman of the PPL Board of Directors, Dr. Prathap Ramanujam said, "Hydroelectricity as a clean, domestic and renewable source of energy offers immense benefits to Sri Lanka.
It has advantages over other energy sources, particularly in terms of efficiency and its limited impact on the environment.
Panasian Power is committed to harnessing this natural resource to enable an energy-secure future for the Sri Lankan people." In 1992, as the Director General of the Secretariat for Infrastructure Development and Investment, Dr. Ramanujam initiated the first mini-hydropower project and the first private thermal power project in Sri Lanka.
Non-polluting Hydroelectricity is a nonpolluting source of electricity as there are no emissions released by the burning of fuels.
Therefore, the PPL mini-hydropower generation project qualifies for the emission credits offered via the Kyoto Protocol which aims to lower global greenhouse gas emissions.
The emission credits are available to countries and projects that limit or avoid the emission of greenhouse gases and can be sold in the open market to countries below the specified emission targets.
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This financial incentive is a substantial opportunity to further realise the income and value of PPL's hydroelectricity project. Power Hub International is a subsidiary of Malaysia's Majulia Group.
Established in 1985, and in line with its corporate mission to participate actively and effectively in local and in international business, particularly the construction industry, Majulia, as a new organization, stepped ahead to register itself as a Class A Contractor in 1995.
Since its inception, Majulia has completed both large and small projects from small sites developments to massive government and private sector projects.
Under the Malaysian Government's Small Renewable Energy Program, the company was the first to undertake the development of a mini-hydro plant in Malaysia, while venturing into other power generation projects to expand its stake in the renewable energy industry.
This same expertise is at the forefront of efforts by Panasian Power to develop the use of renewable energy in Sri Lanka.
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Sunday Times – July 18, 2010
WHAT DOES THE RISE OF THE EAST AND COLLAPSE OF THE WEST REALLY MEAN?
By Kajanga Kulatunga
One of the advantages of living in a city with a dysfunctional transport system which belongs in the Stone Age is time the commute provides to read a few books each month. A lot is written lately about the imminent economic collapse of the West and rise of the East, predominantly lead by the Asian giants of India and China. As a rule, investors should discount extreme views expressed during turbulent market cycles, which are attributable to prevailing gloom. The truth about the “new world order” can be found somewhere in the middle.
While there is no doubt about the shift in the landscape towards a more balanced world (how long can 12% of the worlds population dictate to the rest?), the readjustments need not spell the end of the west nor a major collapse of economic power in those countries.
It is important to realize that the world economy is a zero sum game (unless we start trading with another planet), where currently deficits of mostly western industrialized countries are financed by the savings of mostly Asian exporters. Ironically, China not only provided cheaper goods, but also cheap credit (via investing in US government securities) to encourage the crazed consumption binge in the United States, and a few other rich countries.
This toxic party is well and truly over. Though markets have rallied since their lows in March 2009, we are nowhere near a normal situation in the global economy. Raghuram Rajan of the University of Chicago Booth School of Business and former chief economist of the IMF notes in a thought-provoking new book, the underlying “fault lines” that caused the global recession are still with us. As nations increasingly fail to support individuals and ageing populations add to the pressure, austerity is going to be the order of the day in many industrialized countries.
This situation is aggravated by the export dependence of most Asian countries, including Sri Lanka. This dependence of foreign demand for Sri Lankan goods and services makes the Central Bank neatly avoid credit demand locally, to see it emerge overseas.
Prof Rajan describes this situation as a “politically strong, but very inefficient domestic-oriented sector”. The problem is that the countries that used to provide the demand – the US and EU – have over- indebted private sectors. This creates major competition amongst exporters for the remaining weak global demand. Adding pressure to the open world economy is growing calls for protectionism.
Publicly listed companies in Sri Lanka offer little attractively priced opportunities to investors seeking protection or to take advantage of this changing world order. Most companies are indirectly or directly exposed to major consumers in the old industrialized world.
Few companies export final consumption goods bound for growing Asian, Latin American or African markets. Most of the intra-region trade is in intermediate goods that feed in to supply chains in Asia, for eventual final goods bound to either US or the UK.
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However, not all is lost as there are some companies who are well placed to take advantage of this new world order. First, soft commodities and food manufacturers would be favourably positioned (although many currently trade at elevated future earnings). Diversified conglomerates with final value added products with increasing market share in the developing world should also provide attractive returns.
Investors should avoid an indirect hit through listed companies who have major dealings with unlisted companies, who are in turn exposed to the declining consumer markets in the US and EU. While most Sri Lankan exports to these markets tend to be value added, which are assumed to have low volatility in demand, the current crisis has begun to test many of these assumptions.
The biggest impact of the new world order however may well be reserved for the average household balance sheets in Sri Lanka. Vital questions need to be answered by the average citizen with regards to a host of issues impacting their life, ranging from the rationale for spending on overseas education for children to the axioms of superior economic outcomes as a result of migrating to old industrialized countries with much lower growth in the future.
Investors must use their collective power to influence corporate managers of the need to diversify from over dependence on the US and EU for profits and growth. The geographic advantage for Sri Lanka is not going to last for too long (new great game or not).
As Harold James, a historian at Princeton University, points out in “The Creation and Destruction of Value”, small states are about to be overwhelmed again by larger states. In that struggle, it is imperative that listed companies in Sri Lanka have created future growth opportunities from the right markets. Big is about to become beautiful again. The West is by no means dead. They are however, on serious life support.
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Management
25 FCCISL News Alert Weekly Business Highlight 12th – 18th July 2010
Daily News – July 13, 2010 PMP AND ITS VALUE TO THE COMMUNITY
The SAARC Project Management conference 2010, will be held from September 22 to 26 at Hotel Galadari in collaboration with PMI chapters in the region.
Project Management Institute (PMI) is the leading global Institute for certification and education on Project Management, Certified Project Management Professional (PMP) and Certified Associated Project Managers (CAPM), also PgMP, Program Management Professionals in the world. A brief description of what PMI and PMI Colombo chapter is given below. At present, there are over 500,000 PMPs and over 750,000 PMI chapter members in 170 countries. Globally this is one of the highest recognized and accepted professions.
This is the highest professional qualification/certification that can be achieved by a Project Manager. In order to maintain a project manager’s certification one has to practise and report the minimum number of PDUs- Professional Development Units - by means of education, updating of knowledge by participation in conferences, taking part in social projects or writing/ publishing articles in related areas. In Sri Lanka, we have over 200 PMPs and over 150 members with Colombo Chapter. We also conduct many workshops, professional update seminars, member forums, and conferences for the benefit of members, on behalf of the related public and private professional institutions which are involved in Projects.
PM Best practices will bring productivity, profitability, and professional obligations to stakeholders and project members. The main objective of PMI Colombo Chapter is to bring awareness, education, and knowledge sharing with global experts to its project management professionals.
Some of the achievements of PMI Colombo Chapter are: We are the only chartered institute in Sri Lanka on behalf of project management institute in USA. We have created awareness at the highest level by getting the President’s Office special project unit to implement some workshops with Planning and Implementation Ministry last year, to conduct workshops for all secretaries and all project directors. These were voluntary, non-fee based workshops in collaboration with a New Zealand based consulting company. This was a great success as some of the ministries/institutions are looking at re-training their officers who are engaged in projects to understand the value and practices of pm process in day to day projects.
We have also conducted many private sector and public sector awareness programs and these are ongoing at places such as Sri Lanka Telecom, CEB, Finance Ministry and the Association of Government Accountants. Our very first workshop for religious dignitaries and NGOs was to train how to handle tsunami reconstruction workshops for volunteers with the support of a Singaporean based consultancy firm which was a huge success.
PMI today PMI has many hundreds of education partners locally and globally as (reps) who are authorized to conduct PMP and CAPM related courses. Apart from these, PMI Colombo also conducts specialized workshops, in many industry sectors and knowledge areas. We have started a major educative and awareness campaign with “Education Times” section of the Sunday times to publish many articles to
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show the values to private and public sector to consider the project management as a primary career at government and private sectors.
This is the first ever SAARC conference in this profession. PMI global generally has three global congresses, now they have allowed the regions to have their own conferences annually and Sri Lanka - PMI Colombo chapter - took the leadership to promote the very first SAARC PM conference. We are inviting foreign professionals and investors at a time that we can show our capabilities and the investment friendly environment created after 30 years. Now the Government has created a new Ministry for Economic Development to speed up the developing projects and focus on the key areas for country development. Capitalizing on the recently achieved peaceful atmosphere, we are taking this opportunity to promote Sri Lanka as a tourist destination as well among overseas participants.
We are working closely together with the Tourism Authority in this respect. Infrastructure development covers means many mega projects which are executed concurrently, as HR re-training is a major project by itself, we need professional project managers/consultants locally. If not we would be forced to depend on foreign experts to implement these projects. Industry experts that we have invited would discuss and share their experience in various sessions in this conference. Further, the government policy experts are given an opportunity to share their views and knowledge as policy decision makers, to take the right initiatives to enable these practices and adapt best tools and technology to be used in all mega projects.
As a developing country with many mega projects, we need expert knowledge in many areas such as power, construction, ports/airports to handle many engineering and, communication infrastructures, BPO operations and health and educational facilities; and also to manage HR capacity building projects. PM experts can bring this expert knowledge and case studies from regional and global experiences to this conference.
Offline discussions will be facilitated in parallel to the event at the same location for the purpose of knowledge transfer and networking on behalf of interested industry groups such as government, educational foundations, It and telecom technology, research or any other sector. These experts will share their views and encourage the investors in the region. A key feature at the conference would be felicitating and recognizing several key personalities and organizations which have managed certain projects in the recent past. For this purpose, we will be considering professional project managers as well as non-project managers.
The following sectors/fields would be considered: 1. Social 2. ECO and Environment 3. National Interest
Finally, we are confident that the attention and the recognition that the PMI Colombo chapter is getting through this conference would help PMI to expand further, increasing its membership and creating more and more PMPs. This would finally lead to the development of the country, since it is all about. “Managing Projects” professionally and, at the end of the day, that will decide whether a country is moving forward or not.
(PMI Colombo Chapter)
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Daily News – July 14, 2010 HR AND AN OWNERSHIP ATTITUDE
Ramani Kangaraarachchi
Human Resource Management (HRM) is the coherent approach to the management of an organization’s most valued assets - the people working there who individually and collectively contribute to the achievement of the objectives of the business. The terms ‘human resource management’ and ‘human resources’ (HR) have largely replaced the term ‘personnel management’ as a description of the processes involved in managing people in organizations.
In simple words, HRM means employing people, developing their capacities, utilizing, maintaining and compensating their services in tune with the job and organizational requirements. In that respect the role of the HR Head in any company is very vital towards achieving its objectives. As such Daily News Business started to feature a HR Head in companies fortnightly to educate readers on different aspects of HR and new developments. This is the third of the series where Hilton Colombo Residence HR Head Maju Gamage is featured this week. Excerpts of the interview.
Maju Gamage. Picture by Q: What made you to select HR as your career path? Rukmal Gamage A: My first job was in the Sri Lanka Air Force where I worked for 14 years. It was a very good experience. Then I joined Colombo Dockyard which was highly unionized. The Dockyard work environment was different to my previous experience which I did not enjoy very much. Although I have qualified in several areas, I felt I am a people’s person. I had more empathy. When I got the opportunity to join Hilton Hotel Group in the Food and Beverage department I left the job at Dockyard in 2001.
After sometime the post of HR Head became vacant during a crisis period and I was invited to takeover that appointment by the Management. So It happened accidentally but I must say that I am enjoying the work upto now here. I am well looked after and I continue to do my best for the company.
Q: What is the nature of your company ? A: Hilton Residence is a four star hotel and our major marketing segment is long stay people, leisure sector, and both local and foreign tourists. It has a sports complex catering to health sector as well. There is a work force of 300 people.
Q: Why is HR important to hotel industry? A: One of the most important departments of any hotel staff is human resources management. Proper human resources management can be the difference between a really well run hotel and a poorly run hotel. The human resources manager can control almost the whole feeling and presence of the entire hotel. This makes the importance of human resources management for hotels very evident.
Q: What are the HR issues that companies in this industry should give attention to? A: At present, we have only 14,000 sellable rooms in the country. It is a major problem that we have to look at fast. We expect a large number of tourist arrivals in the coming years. The number of rooms we 28 FCCISL News Alert Weekly Business Highlight 12th – 18th July 2010
have are not sufficient at all may be because the industry did not go forward during the time of ethnic problem. But now the industry has started developing again and with that the staff also have to be developed. Recruiting and training suitable people for the industry cannot be done overnight. Although we have a large number of unemployed youth their awareness about this industry is very poor.
Most of them do not know about the opportunities and they do not consider it as a career path. Therefore turnover of people is high. Sometimes they leave us to go for overseas positions. But we encourage that because there are many opportunities in the trade abroad and they come back to the country one day with a lot of experience and a good exposure. They not only develop the industry domain in the country but also bring foreign exchange to the country.
At Hilton we have introduced an ownership attitude but some do not like to accept it. But if they come and learn there are immense opportunities. There is a huge demand for hotels in the Middle-East. Many leading hotels there are led by Sri Lankan people. There were many awards at culinary competitions for Sri Lankans. There are opportunities in countries like Malaysia, Hong Kong and Canada as well. So we need to educate our young generation about these and change their attitudes to be able to make use of future opportunities. This is a challenge that the industry has to look at carefully.
Q: What are the strategies that hotel has implemented to retain people ? A: Job satisfaction of team members is very vital in retaining people. In the first place our staff is known as team members, we do not call them employees. They are looked after very well. We have introduced a comprehensive opinion survey to measure their job satisfaction. The survey is conducted both in Sinhala and English by a reputed outsourced company in UK. I am proud to say that 98 per cent of our team members are satisfied with their jobs. This survey helps us to retain people. We have eleven departments and in some of them annual turnover is zero and in some others 27 percent.
When a new batch of people come we give them a warm welcome after an orientation program. All our team members are visited at their homes by a member of HR department on their birthdays and gifted with a Hilton cake to enjoy with the family. The service of a in house doctor is available 24 hours and there is also an insurance scheme. These are some of our strategies.
Q: How do you recognize best performance of your team members? A: We believe in recognition. It matters to our team. We have a succession plan and the team members could go up in the ladder based on their performance.
Q: What are the global challenges in the industry? A: In terms of HR, skill is a challenge. We always try to identify training needs locally and internationally and improve their skills to suit the requirements of our customers and fill the gaps. We have a fully fledged training department and we hold monthly meetings to voice the opinions of our team members in order to upgrade skills and personal development which is very important for the industry.
Q: What is the advice you like to give to those who are in the hotel industry and those interested to join the industry? A: Think nationally and have a positive attitude towards the industry in order to achieve success which is a never ending journey.
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Daily News – July 15, 2010 MANAGEMENT TIPS: A PRODUCTIVE MEETING
Dr. K. Kuhathasan CEO: Cenlead
Whether the meeting is conducted electronically or conventionally, its success depends largely on how effective the leader is. If the leader is prepared and has selected the participants carefully, the meeting will generally be productive. The meeting leader is the person most responsible for keeping the ball rolling. If you're the leader, avoid being a dominator, but don't be so passive that you lose control of the group. If the discussion lags, call on those who have not been heard from. Pace the presentation and discussion so you will have time to complete the agenda. As time begins to run out, interrupt the discussion and summarize what has been accomplished.
Another leadership task is either to arrange for someone to record the proceedings or to ask a participant to take notes during the meeting. As the leader, you are also expected to follow the agenda; participants have prepared for the meeting on the basis of the announced agenda. However, don't be rigid. Allow enough time for discussion and give people a chance to raise related issues. If you cut off discussion too quickly or limit the subject too narrowly, no real consensus can emerge. As the meeting gets under way, you will discover that some participants are too quiet, others too talkative. To draw out the shy types, ask for their input on issues that particularly pertain to them. You might say something like "Sunil, you've done a lot of work in this area. What do you think?" For the overly talkative, simply say that time is limited and others need to be heard from.
The best meetings are those where everyone participates, so don't let one or two people dominate your meeting while others doodle on their notepads. As you move through your agenda, stop at the end of each item, summarize what you understand to be the feelings of the group and state the important points made during the discussion. At the conclusion of the meeting, tie up the loose ends. Either summarize the general conclusion of the group or list the suggestions. Wrapping things up ensures that all participants agree on the outcome and gives people a chance to clear up any misunderstandings. Before the meeting breaks up, briefly review who has agreed to do what by what date. As soon as possible after the meeting has taken place, the leader should give all the participants a copy of the minutes or notes showing recommended actions, schedules and responsibilities. The minutes will remind everyone of what place and provide a reference for future actions. It should contain the following:
Decisions that were taken. Who are responsible to implement those decisions. Target dates for implementing those decisions. Checklist for meetings
A. Preparation * Determine the meeting's objectives * Work out an agenda that will achieve your objectives * Select participants * Determine the location and reserve a room * Arrange for light refreshment, if appropriate * Determine whether the lighting, ventilation, acoustics and temperature of the room are adequate. * Determine seating needs: chairs only or table and chairs 30 FCCISL News Alert Weekly Business Highlight 12th – 18th July 2010
B. Conduct * Begin and end the meeting on time * Control the meeting by following the agenda * Encourage full participation and either confront or ignore those who seem to be working at cross- purposes with the group. * Sum up decisions, actions and recommendations as you move through the agenda and restate main points at the end.
C. Follow-up * Distribute notes or minutes on a timely basis. * Take the follow-up action agreed to.
How to get more of business meetings 1. Set goals Develop a list of three to six overall goals. These goals must be oriented toward quality, sales, cost reduction and profits.
2. Think about specific questions you want answered. Develop a list of 10 to 50 pointed questions.
3. Meet everyone at the programe. Talk to them. Each participant has a specific area of expertise. Make a note of it. Start your own network. Exchange cards.
4. Develop an action plan and/or use the format provided in your workbook. Make a list of anything you want to consider doing differently when you get back on the job. This will take the fussiness out of your thinking and will give you tangible benefits.
5. Participate! Ask questions Make contributions. Comments. Be visible. You'll benefit in two ways. First, your mind will almost magically start working on information, problems, solutions. Second, the speaker and attendees will also contribute to finding answers for you. (Don't overdo it. Be relevant)
6. Make contact with the speakers personally (and early). They will think more of and about you. And it will be easier to follow up with problems after the program.
7. Take clear notes Not only will this be helpful for future reference, but the very act of taking good notes and organizing your thoughts will keep you more involved. Forget about rewriting them when you get back. You'll never do it!
8. Write a brief report based on your action plan and notes-one to three pages. And circulate it to anyone who might be interested. It will help them and you. Give them an opportunity to write back to you.
9. Hold a staff briefing with key personal when you get back. Refine your action and plan.
10. Enjoy yourself. You will learn more when you're thinking.
Encouraging participation at meetings * Don't monopolize the discussion. * Don't show verbal or nonverbal disapproval of ideas, even if you disagree with it. * Ask open-ended questions to stimulate discussion. 31 FCCISL News Alert Weekly Business Highlight 12th – 18th July 2010
* Frame problems in positive terms. Don't ask if it's possible to achieve a goal. Ask "How can we achieve our goal?" * Identify the introverts in the group. Make a point of asking for their input. * Don't let extroverts monopolize the discussion. * Don't allow senior members of the group to dominate the discussion. * Use meeting procedures that require the participation of all group members. * Probe to find out what's bothering those who exhibit "hostile silence". * Rotate leadership.
Guidelines for reaching consensus Before commencing the discussion to reach agreement, review the following guidelines with the team members. Give them a written copy of these guidelines so that any member can remind the others when they are off track in following them.
Before starting, get agreement that this process of reaching consensus will take more time than voting would. Agree that if you run out of time during this meeting, the discussion will continue at a later time. Use this method when the team already has proven that members respect and trust each other. Start with the attitude that different viewpoints are both natural and healthy to the team. Treat differences of opinion as indications that relevant information has not been shared adequately, so keep probing.
Discard the notion that someone must "Win" and thus someone else must "lose". If an impasse occurs, look for the most acceptable alternative that both parties can live with.
Each person will present his or her position as clearly and logically as possible. Do not argue over different positions.
View quick agreement as weak. Explore the reasons underlying apparent agreement and make sure that members have agreed willingly. Make sure people don't change their minds just to avoid the conflict or to complete the process.
Do not vote, negotiate, or flip coins, because these are different methods of reaching decisions. They do not lead to consensus.
When you think the group or team has reached consensus, look each person in the eye and ask, "Can you live with this?" be sure to get a clear response. If the individuals says, "No", ask him or her to explain what aspect of the proposal or decision isn't acceptable. Keep discussing all points of view until everyone can truly live with it.
32 FCCISL News Alert Weekly Business Highlight 12th – 18th July 2010
Trade & Marketing
33 FCCISL News Alert Weekly Business Highlight 12th – 18th July 2010
The Island – July 11, 2010
HAS SL-INDIA TRADE SATURATED?
UNCTAD(India)–ADB study reveals a ‘goods’ trade negativity of 11.2% CEPA can reverse the trend but social issues must be avoided. Exports to India poised to cross $400 Mn in 2010 but below 2007. SLINTEC can drive Knowledge Economy to make SL fight Indian companies Mini budget focuses on bringing in Economic Stability…..endorsed by IMF.
By Rohantha N.A. Athukorala
A study done by UNCTAD-India with ADB has estimated the potential trade between countries in the South Asia region is at 8000 million dollars based on the averages from 1995-2005, whilst the actual trade is only 3500 million dollars. This gives us an idea of the potential trade that Sri Lanka can harness only in South Asia, if proper facilitation is done by organizations like SAARC.
This throws out a new dimension to Sri Lanka, given that there is new business opportunities in the proposed CEPA agreement. This opportunity will be initially between Sri Lanka and India and there after may be a CEPA between Sri Lanka and Pakistan. This new business opportunity can in fact off set some impact if a fall out happens in trade in the EU and may be even US in the future.
However, a point to note is that the issues faced on the EU/ US side are not essentially trade related but of political nature. Which is an interesting development that the world is witnessing after a country has defeated one of the most ruthless terrorist organizations of the world that has cost the country $ 200 billion. What Sri Lanka requires is support from the world to recover and not obstacles. Indian support is a must in this context.
South Asia Inter trade - 2% of GDP Even though there is a 4500 million dollar opportunity yet to be captured in the South Asian region, the fact remains that inter regional trade accounts for only 5.5% or a mere 2% of the South Asian Regions GDP. In contrast in East Asia, this number stands at a mammoth 55% of trade coming only from the East Asian countries which is an indication of the strong integration that exists in that part of the world.
A point to note is that the 55% trade accounts for a staggering 20% of the GDP that further justifies that there is opportunity for South Asian countries to grow by way of import/export trade. The question is why has this not happened.
34 FCCISL News Alert Weekly Business Highlight 12th – 18th July 2010
Trade Saturated with India? Whilst the South Asian region lags behind the world on integration a UNCTAD –India/ ADB study of 2008 throws out an alarming revelation that the trade potential between Sri Lanka and India is at saturation point. The study states that the trade potential is at 871 million dollars whilst the actual trade(goods) based on the 1995-2005 average registers 969 million dollars. This means that we have exhausted the potential trade with India. In fact the indicator is negative at a 11.2 percent.
The need for CEPA? May be this could be the reason why exports out of Sri Lanka are hovering at a 500 million dollars in the last year with a meagre growth. In fact in 2009 it declined to 324 million dollars. Latest statistics further reveal that the SAARC countries contribute to 17.1% of Sri Lanka’s trade but, in this basket of goods 91% is from India which further justifies the trade saturation argument.
One way out is to quickly launch into new businesses with India namely Energy, Transport and the all important service sector through such agreements such as the CEPA. However, this needs to be done with caution given that Sri Lanka is coming out of a thirty year war and we need to give a chance for businesses to strengthen and link with the Knowledge economy to drive innovation. SLINTEC’s work on Nano Technology and the sheaduled patents that Sri Lankan businesses will generate will sure help Sri Lanka be competitive against Indians. May be we need to extent this facility to a Nano Park so that Sri Lanka can take the high ground in the South Asia.
Squeeze SL-India FTA ? Whilst from a macro end trade between India and Sri Lanka looks saturated, if we do a detail analysis of the Free Trade Agreement (FTA) with India, we see that the quota utilization of the strategic products of Sri Lanka -Tea and Garments is below 10% which means that there is more to squeeze out of the existing Indo Lanka FTA.
Some of the reasons cited for the Garments and Tea’s not going through to India are not tariff barriers like delays in custom clearance, port restrictions, necessity for several tests to be carried out in India even though a certificates are accompanied by the relevant authorities which are essentially NTB’s. But can this be due to the more deeper issue of trade saturation is worth researching.
The logic of researching this is stronger is because the Indo-Lanka trade agreement was the 1st FTA that each of our country’s have entered into and, it was signed within four months with just 4 -5 consultations according to Professor Ranjan Ratna of the Indian Institute of Foreign trade(IIFT). Which means that it is bound have many rough edges that need to be corrected.
Normally India takes a minimum of 2 years to reach a trade agreement with a minimum of twenty consultations by the two parties. Some even after 6 six years of consultation like India-Thailand FTA, is yet to be concluded which gives us an idea of the limitation of the Indo-Lanka FTA that was signed. But an argument that some make is that a ten year honeymoon is ample time to clear the bottlenecks to be resolved by yet Sri Lanka continues to hover around a 500 million dollars of trade.
If we go back in time the original objectives of the FTA in the case of India for instance it was based on the premise of a study done on the regional comparative advantage (RCA), to drive an equitable trade between regional partners so that each country can benefit from the comparative advantages that one posses in a country. The key obstacle to this end was the gradual removal of trade barriers over a period 35 FCCISL News Alert Weekly Business Highlight 12th – 18th July 2010
of time. Both countries agreed on a list of products which are in the negative list, phasing out list and zero duty lists and the time frame to achieve the end objective of freer trade between the countries. The time frame was important so that suppliers can get adjusted to international competition and visa versa.
Currently, except for the 429 products in the negative list of India, all other products of Sri Lanka have a zero duty access technically into India. From a Indian point of view other than for the 1180 products in the negative list, all other products from India was entitled for duty free access into Sri Lanka but why is the business growing exponentially is the key question to be asked. Could this direct to the logic of trade saturation, as per the UNCTAD/ADB study of 2008. It is also an interesting argument as to why we need to sign up CEPA.
Is it an FTA issue then? On the other hand we can also point out that serious trade did not happen due to the problem of the architecture of the Indo Lanka FTA which means its is a systemic issue than trade saturation. For instance if we get into the brass-tacks of FTA, we see that a number of projects invested in Sri Lanka increased from 34 to 105 And then most of them closing down over time that actually off set the benefits of international trade which would have had its own social ramifications not only in Sri Lanka but also in India. And most of this trade was based on tariff rate in equalities than actual comparative advantages of trade which means the FTA in structure was flawed.
Apart from the Sri Lankan exports declining from $515 million to 324 million and the analogy of trade saturation, if we examine the 2.7 billion dollars of imports that come in from India, almost 70% of them happens outside the FTA meaning that even without the FTA this business would have happened. Hence, one can question the architecture of the Indo-Lanka FTA that was signed way back in 1998.
Even if one discounts the petroleum products that was imported which skews the import picture, the rest of the products imported can be due to trade diversion than real imports. Which means that the FTA needs to be re-crafted that will stimulate trade between the two countries than actually trade saturation taking place.
Confidence level of exporters hurt What ever the reason may be, be it an FTA architecture issue or trade saturation many Sri Lankan exporters have lost confidence on bilateral agreements which are essentially designed to promote fair competition and equitable benefits.
The process in place to address disputes settlement like the NTB issues faced by Sri Lankan exporters are also very complicated and a long drawn. For instance disputes of the SAARC countries are expected to be resolved within 330 days, whilst in the case of our counter parts it’s different and more efficient like ASEAN countries resolve disputes within 290 days and NAFTA in 310 days. Which are also reasons why industrialists are questioning these types of bilateral agreements.
Get help from WB & ADB I feel we must stop hiding behind issues such as Non tariff barrier (NTB’s) or ant Political tariff barrier (PTB’s) and face reality. Lets reach up to organizations like ADB and WB who can support countries achieve the best with trade and there by reduce poverty levels by driving up employement. May be institutions like these coming into the discussion will move the discussion from the top line trade
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numbers like exports and imports and drive towards more sustainable success stories like employement created and reduction of poverty in a country.
Sri Lanka must give leadership The time has come for us to accept reality and invest our time in markets where we can expect quick returns. Sri Lanka requires money coming into the country so that we can drive down the budget deficit to below 5%. We need quick wins now and not long reports and studies
Whilst the debate on what changes are required for CEPA continues, I feel its time for the Sri Lankan representatives do develop a strong Chamber – Government dialogue forum so that we can see how far Sri Lanka can exploit the current FTA for our benefit. There after Sri Lanka must champion CEPA with India and Pakistan to suit Sri Lankan enterprises.
I strongly feel there is opportunity for more trade between countries like Sri Lanka and India and for driving stronger integration in the South Asian region but it requires a strong will from the policy makers of SAARC.
Rohantha Athukorala has an outstanding contribution in private and public sector with a multitude of performance awards locally and internationally and now serves on many a local and Global organizations boards of management. On an honorary capacity, he serves the Government of Sri Lanka on many policy making bodies.
37 FCCISL News Alert Weekly Business Highlight 12th – 18th July 2010
Daily News – July 15, 2010
MARKETING AND SELLING IN TOUGH ECONOMIC CONDITIONS: MODERN RETAILING GROWTH IN LANKA
Prasanna Perera, Marketing and Management Consultant, Chartered Marketer, CIM U.K.
In the last ten years, a major improvement in the retail sector has been observed in Sri Lanka. Super- marketing has come to stay, together with world class footwear, clothing, electronic retailing formats amongst others. The traditional trade (kade's) have also upgraded, in order to compete with the modern retailing formats.
Consumer needs fuelling the growth of modern retailing At the heart of the growth of modern retailing, is the 'consumer'. The Sri Lankan consumer has been influenced by Western lifestyles and hence now demands greater convenience. Supermarkets and other modern trade outlets offer a wide range of products under one roof. Hence, the consumer need of greater convenience is met. Consumers also demand good quality products at affordable (value-for-money) prices. The modern trade is in a great position to fulfill this requirement as well. The majority of consumers patronizing the modern trade outlets are upper income and upper middle class income consumers.
These consumers are more brand conscious and hence are able to fulfill this need by shopping at supermarkets, hypermarkets and other modern retailers. Consumer lifestyles are also changing. With a greater degree of westernization, a comfortable shopping experience is desired. Hence, the modern retail formats can provide this consumer requirement.
An explosion of products and services across different categories The number of brands available to consumers is increasing rapidly. There are over 150 brands of mineral water and over 400 brands of tea in the market. In broadcasting, there are over 20 TV channels and 59 radio channels to cater to a population of 20 million. Manufacturers find it difficult to enter the traditional trade due to space constraints. (Over crowding of brands). Hence, the demand placed on the modern trade to accommodate new products / brands. The growing influx of brands is leading to larger retail formats emerging. In the case of supermarkets - 4,500 sq.ft. and above, and also hypermarkets. (10,000 sq.ft. and above).
The challenges faced by modern retailers in Sri Lanka Modern retailing is far from easy. There are numerous challenges to be faced in the market. For example, the operational costs are continuing to rise. Hence, margins are slipping, since price increases cannot be made to commensurate the cost increases. Retaining good employees continues to be a challenge, with the influx of employment opportunities in the Middle East. Presently, the modern retailing industry records a high employee turnover, which increases the training costs as well. Dealing with perishables and shop soiled products is another challenge. Inevitably, a fair percentage of profits gets wiped out due to product damages and spoilages. Setting up a modern retailing outlet is a capital extensive exercise. Hence, the challenge is to obtain a satisfactory return on the investment, which depends on the competitive advantage and sustainability of same.
38 FCCISL News Alert Weekly Business Highlight 12th – 18th July 2010
Retaining customers is another challenge faced, due to competitive pressures. Whilst loyalty programs are implemented by certain modern retail chains, the question surfaces as to whether these programmes are really effective in retaining customers. (In the long-term). Further, loyalty programs require investment in ICT and management.
The present situation in Sri Lanka Based on secondary research conducted by the writer, Keells Super has 45 outlets, Cargills Food City 142 outlets and Arpico (Super-centres) 10 outlets. Hence, these three chains have a total of 197 outlets!! In addition, there is another 300 outlets operated by other players such as SunUp and Lak Sathosa. Therefore, the total is an impressive 497 outlets at present. In addition, there are many "Mini Supermarkets" operating in certain provinces. For example Kamal Super, Ananda Super etc., The writer estimates that around 170 operate as stand alone outlets.
In the clothing industry, NOLIMIT operates 17 outlets, ODEL 12 outlets, Fashion Bug 12 outlets to name a few. In addition, there is CIB and ASB that operate a chain of outlets. Therefore, in the clothing industry there would be around 150 outlets operating island wide, that can be classified as modern retail. Take the Electronics industry where Singer operates three chains - Singer Plus, Singer Mega and Sisil. All three chains put together would easily clock over 175 outlets. Abans and Softlogic are the other two players operating a chain of outlets in this industry. All players put together, over 300 outlets of consumer electronic product stores are operational. Based on these statistics, you would no doubt agree that modern retailing has come to stay in Sri Lanka. With the peace dividend, modern retailing will boom in Sri Lanka in the years ahead.
The future of modern retailing To ensure the sustainable growth of modern retailing the following aspects need to be addressed. Supply chain integration and management is a key pre-requisite. Everyone in the supply chain are partners and should be profitable. Human resources need to be harnessed and talent retained in the country. There is scope for a "Modern Retail Academy" on the lines of the Ceylon Hotel School. The Modern Retail Academy should be an independent entity and managed professionally. Technology should be harnessed to reduce operational expenses and other losses. The initial capital investment will pay off in the long run. Visual Merchandising and category management are also key areas that need concentration.
Sri Lankan definitely needs "real" shopping malls, where a variety of merchandise can be offered under one roof. A combined star class hotel and shopping mall will be something Sri Lanka can be proud about. Let us hope that this will be a reality in the not too distant future. Modern retailing is here to stay in Sri Lanka and has now captured a wide section of products and services. The key for modern retailers is to continuously keep their outlets 'fresh' and monitor consumer buying patterns and behaviour. The present players would do well to remember that global players may enter the Sri Lanka market in the near future. Hence, there is no room for complacency and sound marketing practice is a must.
39 FCCISL News Alert Weekly Business Highlight 12th – 18th July 2010
Daily News – July 16, 2010 INVENTION VITAL FOR MARKETING
Charumini de Silva
In Sri Lanka, we have quality marketeers with proven track records in business and can be considered highly professional in the world, PC House Ltd Director, Sarath Wickramanayake said. Here are excerpts of his interview.
Q: As a marketeer what is your perception about using CSR as a marketing tool? A: Corporate Social Responsibility (CSR) is a very important tool. It is a situation where the community and the company are interdependent. My view is that CSR is still a responsibility of an organization, rather than it being identified for business purposes. We believe that the good being done to the society then will result in a genuine appreciation by the society.
Q: How do you align 4Ps (price, production, place and promotion) to suit global changes? PC House Ltd Director Sarath A: The four Ps are the primary ingredients of success in any company. Wickramanayake. Picture by At present technology has broken the barriers of pricing, production, Sumanachandra Ariyawansa place you market the product and how you promote it. It is how fast you reach the customer and how fast you deliver the expectations. Aligning the four Ps is all about the speed and convenience, which we are experiencing in rapidly changing global environment.
Q: What are the mechanisms used to identify the new trends and challenges in the markets in both locally and internationally? A: It is vital for the company to understand the environmental change. Those who do not adopt the changes in the market will not remain in the industry. At PCH we are working with many stakeholders that have a huge reputation in the world. Due to the close relationship with these partners we are being constantly educated by them on the latest trend in the market.
Q: From your point of view, what is the important innovation, invention and re-designing in marketing? A: I think it is invention that takes the lead since the production invention decides on the changes of a product. Invention is vital to move the company forward. The constant participation, trying to identify new ways of doing what you are already doing, trying to find new methods of satisfying your customers and ways and means of outsmarting your competition.
Q: Extent to which you consider customer orientation and innovation? What do you think is most important in Sri Lanka? A: Both are equally important, but we at PCH focus more on customer orientation. Customer orientation and innovation is part of a same cycle.
Companies continuously improve their systems with innovations, processes to ensure that the expectation of the customer is met with a profit. In a global market the high standards of quality are a norm and benchmarks have been set to ensure the companies meet customer expectations. The companies should 40 FCCISL News Alert Weekly Business Highlight 12th – 18th July 2010
seize the new methods of producing whilst maintaining the quality to be more customer oriented as loyal customers tend to be more profitable.
Q: How far can you be satisfied with the customer accessibility of the product or service? A: We have taken all measures to ensure that our customers have enough touch points to receive the level of products and services they are expecting. PC House as an organization provides many avenues for a customer to contact us since the relationship is a long-term one rather than a short-term experience.
Q: What is your view about global branding? A: Market penetration has resulted in local companies to move out of their geographical territory engaging in international trade.
It had facilitated profit maximization with greater volume which is a result of economies of scale, is the way forward to these global brands.
The long-term goal for us is to build global brands and to build globally competitive distribution channels to market our own products and services.
Q: Where do local marketeers stand in the international market? A: I am impressed with the marketing education calibre in our country. In Sri Lanka, we have quality marketeers with proven track records in business and can be considered highly professionals in the world.
41 FCCISL News Alert Weekly Business Highlight 12th – 18th July 2010
Sunday Observer – July 18, 2010 BIG DEMAND FOR LANKAN FRUITS GLOBALLY: PROCESSING, VALUE ADDITION THEIR FORTE
By Surekha Galagoda
"Sri Lankan fruits have a high demand globally, so we can break into any supermarket chain if we have the produce. This is the main reason we are encouraging everyone who has a garden, to grow fruits," said Managing Director CBL Natural Foods (Pvt) Ltd, M. Annes Junaid. He said that the company gives plants and technology to growers. It does not encourage the use of chemical fertilizer.
The use of pesticides and weedicides is banned. Having a compost bin is a must. Most importantly, the harvest is bought at the market rate. The company is ready to expand Managing as there are many buyers but the lack of required quantities is keeping it back. Director M. Annes Opportunities Junaid He said that 10 years ago the country had sufficient quantities of fruits but today due to local demand and processing the produce is insufficient to meet the demand. Junaid sees many opportunities for agriculture in the North and the East. He assured that the company will buy the whole produce and is ready to give an unlimited quantity guarantee to persons who are willing to cultivate fruits which include pineapples, mangoes, bananas and water melon.
At present the company needs 30 metric tons of fruits a day, but getting this quantity is a nightmare. During season, the company processes 30 tons of fruits and lime a day. The company buys fruits from home gardens, from Hambantota to Anuradhapura, which are handpicked. Recently the company moved to the East as well and 200 families from 14 villages in the Ampara district have been selected and given plants.
These moves enhance rural income while employment is generated in the A passion fruit village which mitigates rural migration. At present the main concern of the plantation. company is to expand agriculture on the ground as it will help support many more farmer families. The company supplies to some of the main supermarkets globally which includes Carrafour, Monopris in France as well as supermarkets in USA and UK. He said that the company supplies pineapples and fruit cocktails exclusively to Carrafour.
The potential is much more but the issue is the lack of produce to cater to the demand. Junaid said that earlier Carrafour was purchasing from French Guyana and Thailand but the taste, texture and consistency in the Sri Lankan pineapples, considered the best in the world, was the reason for us to get the order. Earlier the company also exported cashew which provided a lot of self employment, but the local price increase which is higher than global prices coupled with the shortage of cashew has compelled the company to more or less stop exports.
During the Off season the company does the processing of spices and coconut products to retain the trained labour as retaining them too is an issue today. CBL Natural Foods (Pvt) Ltd, a subsidiary of Ceylon Biscuits Ltd started operations in 1989 as Junson Associates to export fresh fruits and vegetables. 42 FCCISL News Alert Weekly Business Highlight 12th – 18th July 2010
In 1994 Cecil Fruit was launched for processing and value addition.
Certified CBL Natural Foods from its inception was involved in promoting rural agriculture and involving many homestead farms in the most remote areas in the country. Cecil Food has been in the forefront of enhancing poor rural farmers' incomes which results in improving the rural economy of the country. In 2003 CBL Natural Foods (Pvt) Ltd became a subsidiary of Ceylon Biscuits Ltd.
The company is organically certified by the Control The range of products. Union from the Netherlands (4262) and has more than 2500 acres of land under certification.
The processing facility is well equipped and manned by experienced personnel. Industry best practices including the GLASS policy, ALLERGENS precaution and the sound environmental policy are adhered to.
Some of the effective tools used are final metal detection of finished goods, steam sterilization of spices and temperature controlled atmosphere for packing cashew.
The company exports fruits in many forms which include dehydrated, canned, fresh, juices, frozen and pulp as well as coconut products, including coconut chips, cashew and spices.
43 FCCISL News Alert Weekly Business Highlight 12th – 18th July 2010
Sunday Times – July 18, 2010 PART ONE – DERIVATIVE BASIC TERMS DERIVATIVES DEMYSTIFIED
By Upul Arunajith
As in any field, be it Medicine, Accounting, or even Sports, there are numerous technical terms that are not within the comprehension of the average person. This is no indication that these terms are complicated. Derivative terms are no exception to the above. Anyone who is interested can master the subject with the passage of time. Provided below is a list of the basic terms as would apply to Derivatives.
Derivative: Financial instrument that derives its value from another underlying product i.e, gold, oil, or equity.
Forward Contract: Agreement between two parties (“buyer” and “seller”) to buy and sell a particular product (wheat) on a Future date for an agreed upon price that is loosely defined.
Futures Contract: A structured forward contract that trades in an organized exchange and its performance guaranteed by a clearing house corporation.
Hedging: Process of transferring the unwanted risk associated with a future purchase / sale of a product in the spot market (cash market) by taking an opposite position in the derivatives market. Akin to an insurance policy.
Leverage: Controlling a large exposure with a relatively small amount of cash outlay.
Liquidity: Ability to buy / sell securities in enough quantity without impacting the bid - offer price.
Mark to Market: The process of valuing the portfolio daily to the market price and the gains and losses recognized.
Margin: A deposit of good faith the Derivatives clearing house corporation requires the buyers and sellers of Futures contracts to pay upfront and maintain throughout the life of the contract
Option Contract: Instrument that gives the holder of the contract the right to exercise but not the obligation, trades in an exchange and performance guaranteed by the clearing house corporation.
44 FCCISL News Alert Weekly Business Highlight 12th – 18th July 2010
Short Selling: Process of borrowing a stock to sell and selling at a high price in anticipation of buying it back at a lower price when the spot market price drops in the future
Speculating: Process of taking a calculated risk and taking a position in the market on the assumption the market will move in their favour based on historical and implied market data.
Strike Price: The price at which the underlying product can be bought / sold by exercising the Option contract. Same as the exercise price.
Zero sum Game: Derivative facilitates a shift of gains and losses. One party’s win is another party’s loss. No win-win outcome.
45 FCCISL News Alert Weekly Business Highlight 12th – 18th July 2010
Money & Banking
46 FCCISL News Alert Weekly Business Highlight 12th – 18th July 2010
The Island – July 12, 2010 RESERVE MONEY TARGET REVISED FOR STRONGER GROWTH
By Devan Daniel
The Central Bank adjusted the annual average reserve money (cash held with the public and demand deposits with banks) target to Rs.334 billion, a 21.2 percent growth from the previous year. The original target was a growth rate of 14.5 percent at Rs.315.5 billion. Earlier this year the Central Bank said it would target reserve money growth in 2010 at 14.5 percent in a bid to maintain inflation at around 5 to 6 percent and economic growth of around 7 percent.
"Although we forecast the economy to grow 7 percent this year, the calculation for reserve money growth was based on a 6.5 percent growth rate. It was only after we revised the growth target to 7 percent after the 7.1 percent GDP growth in the first quarter, that reserve money target was revised," Central Bank Chief Economist K. D. Ranasinghe told the Island Financial Review.
The original reserve money target for the year was Rs.315.5 billion on average with quarterly targets of Rs.306.5 billion for March, Rs.314.9 for June, Rs.313.9 for September and Rs.326.9 for December. According to the revision, the third quarter target has been moved up to Rs.335.8 billion and the fourth quarter is moved up to Rs.350.3 billion, for an annual average of Rs.334 billion, or 21.2 percent growth.
In 2009, the reserve money target was Rs.288.1 billion, a growth of 2.8 percent, but the actual was Rs.275.6 billion, a 0.7 percent decline, as the rate of inflation dipped to levels that were lower than expected with tight monetary policy. "When we formulated the road map for this year we did not have the budget which was delayed because of the elections.
When determining reserve money targets we need to know what the government’s domestic and foreign borrowing requirement would be. We were able to incorporate this information into the revised estimates," Ranasinghe said.
According to the mini budget for 2010, domestic financing of the 8 percent of GDP budget deficit is estimated at Rs.315.3 billion, a 19.66 percent decline from Rs.392.5 billion last year. From January to April this year, domestic financing the deficit amounted to Rs.125.1 billion, down 36.8 percent from Rs.198.1 billion during the corresponding period of 2009.
In April, net credit to the private sector grew by 1.7 percent to Rs.1,242.7 billion from Rs.1,222.3 billion a year ago, a stronger year-on-year growth than in March which was a marginal 0.1 percent.
The bulk of this credit is from the domestic banking unit, which increased its lending in April by 2.5 percent to Rs.1,093.7 billion from Rs.1, 067.5 percent a year earlier. In March, it recorded 0.5 percent 47 FCCISL News Alert Weekly Business Highlight 12th – 18th July 2010
growth. Credit from foreign sources declined 3.8 percent from Rs.154.8 billion in April 2009 to Rs.149 billion. For much of 2008 and 2009 private sector credit had contracted with banks being cautious in their lending and high government borrowing from the domestic sector crowding out credit to the private sector.
In January this year, the Central Bank cautioned the government against reckless spending and crowding out private sector credit. It said the low inflation and low interest rates environment would come under threat if the government did not curtail its expenditures.
Last April, net credit to the government declined 12.2 percent year-on-year to 654 billion, from Rs.745 billion in April 2009. This was due to Central Bank retiring some of its holdings in government securities but domestic banks have increased their lending to the state.
Credit from monetary authorities (Central Bank) declined 61.9 percent to Rs.106.4 billion from Rs.279.3 billion in April 2009.
However, the bulk of the government’s borrowing requirements are met by domestic banking sources, which recorded a 28.1 percent growth from Rs.347.2 billion in April 2009 to Rs.444.8 billion. Meanwhile, credit to public corporations grew 140.1 percent to Rs.74.7 billion from Rs.31.1 billion.
"The revised target is also in line with reserve money targets under the IMF standby facility programme. In fact, our estimate at the beginning of the year was much tighter.
"There is usually high demand for liquid cash during the festive season and whenever there is an election, this is why we saw an increase in reserve money during the first half of the year. Also, the liberation of the North and East has also increased the demand for money compared to the early half of 2009," Ranasinghe said.
Reserve money is targeted to contain inflation and also facilitate enough liquidity in the system to spur economic growth. In 2009, reserve money fell below the target because monetary policy was tight to contain high inflation.
48 FCCISL News Alert Weekly Business Highlight 12th – 18th July 2010
Daily Mirror – July 12, 2010 CB CUTS POLICY RATES
The Monetary Board, at its meeting held on Friday decided to reduce the Repurchase rate and the Reverse Repurchase rate by 25 basis points each with immediate effect. Accordingly, the Repurchase rate and the Reverse Repurchase rate of the Central Bank would be 7.25 per cent and 9.50 per cent, respectively. The monetary policy stance of the Central Bank was gradually eased during 2009 in view of the decline in inflationary pressures and the slowdown in economic activity. Several favourable developments were observed in response to the monetary policy measures taken by the Central Bank. Inflation, as measured by the year-on-year change in the Colombo Consumers' Price Index (base=2002) (CCPI) has continued to decline, for the fourth consecutive month, reaching 4.8 per cent in June 2010, while annual average inflation reached 3.9 per cent in June. Strong growth in the domestic agriculture sector, as well as a decline in the price of key food items in the international market has had a favourable impact on the CCPI. Going forward, inflation is expected to remain subdued, at single digit levels, during the remainder of the year.
Growth in broad money continued to moderate during the first five months of the year. By end May 2010, the year-on-year growth in the broad money supply was 15.5 per cent compared to 18.6 per cent at end 2009. Credit flows to the private sector have been increasing since the latter part of 2009, and reached a year-on-year growth of 3.5 per cent by end May in contrast to a contraction of 5.7 per cent at end 2009. Credit to the private sector needs to continue to expand in the coming months as economic growth picks up. External trade also showed strong signs of recovery during the first four months of the year with exports increasing by 10.7 per cent and non-oil imports increasing by 29 per cent. The gross official reserves of the country including forex swaps were further enhanced by the receipt of two tranches of the IMF-SBA Facility to approximately US dollars 5.7 billion, as at 30 June 2010, which is equivalent to 6 months of imports.
GDP growth in the first quarter of 2010 has been estimated at 7.1 per cent and the economy is expected to expand by around 7 per cent during the year. Taking into consideration these developments in the economy the Monetary Board has decided to revise the policy interest rates downward. In response to this, lending rates of commercial banks are expected to adjust further downward, stimulating economic activity. The Central Bank has also decided to revise the monetary programme for 2010, and accordingly, the targets for reserve money and broad money, which were published in the "Road Map: Monetary and Financial Sector Policies for 2010 and beyond", on account of the subsequent developments in the economy. The key factors underlying this revision are an expected increase in the growth in nominal GDP and the inclusion of information on the fiscal sector from Budget 2010, which was presented to Parliament in June 2010.
Broad money is expected to grow at a rate commensurate with the revised nominal GDP growth of 14.5 per cent. The budget for 2010 envisages that the deficit would be contained at 8 per cent in 2010, with further reductions expected in 2011 and beyond. Several developments within the monetary aggregates, which were observed during the first half of the year, have also underscored the need for a revision. Expansion in reserve money was higher than expected, particularly during the first quarter of 2010, partly due to increased demand for currency with the end to the conflict. As a result, the money multiplier has also shown a contraction, requiring a higher amount of reserve money to maintain broad money within the targeted levels. The release of the next regular statement on monetary policy will be on 20 August 2010. 49 FCCISL News Alert Weekly Business Highlight 12th – 18th July 2010
The Island – July 13, 2010 CREDIT TO THE PRIVATE SECTOR CONTINUES TO GROW
Credit to the private sector recorded robust growth compared to recent times after two major elections and while credit to the government from the Central Bank recorded a steep decline, it increasingly continues to access the domestic banking system.
By Devan Daniel
Private sector credit grew by 3.5 percent last May to Rs.1,249.9 billion from Rs.1,207.1 billion a year ago, latest data from the Central Bank showed. Bank loans to the private sector grew by 3.4 percent to Rs.1,098.2 billion in May from Rs.1,061.8 billion a year ago while credit from domestic sources grew 4.4 percent to Rs.151.7 billion from Rs.145.3 billion. Last April, net credit to the private sector grew by 1.7 percent to Rs.1,242.7 billion from Rs.1,222.3 billion a year ago, a stronger year-on-year growth than in March which was a marginal 0.1 percent.
The bulk of this credit was from the domestic banking unit, which increased its lending in April by 2.5 percent to Rs.1,093.7 billion from Rs.1, 067.5 percent a year earlier. In March, it recorded 0.5 percent growth. Credit from foreign sources declined 3.8 percent from Rs.154.8 billion in April 2009 to Rs.149 billion.
Dealers said banks would be in a position to increase lending if promises regarding the 2011 budget are honoured. Over the past few weeks several top officials, such as Treasury Secretary Dr. P. B. Jayasundera, said the government was planning structural fiscal reforms that would contain high budget deficits.
They also said the government was planning tax cuts to the banking sector while corporate and individual taxes would also be slashed in order for the private sector to bridge the investment deficit in the country and reach seven to eight percent economic growth and double the wealth of Sri Lankans by 2016.
Last January, the Central Bank warned the government against reckless spending and urged it tap into foreign sources to bridge deficits leaving space for the private sector to borrow from the domestic banking sector. It said private sector credit would have to double in order for per capita income (Gross domestic product, or the size of the economy, divided by the population) to double by 2016.
50 FCCISL News Alert Weekly Business Highlight 12th – 18th July 2010
According to latest Central Bank data, net credit to the government fell by 9.2 percent to Rs.673.5 billion in May from Rs.741.9 billion a year ago.
The decline was driven by a 61.6 percent decline in credit from the Central Bank to Rs.106.9 billion from Rs.278.5 billion a year ago. However, credit to the government from the domestic banking system grew much faster than credit to the private sector in May.
It increased by 32.6 percent to Rs.463.3 billion from Rs.349.5 billion. Credit from foreign sources declined 9.3 percent to Rs.103.3 billion from Rs.113.9 billion. Meanwhile, net credit to public corporations grew 92.9 percent in May to Rs.102.8 billion from Rs.53.3 billion a year ago.
Credit from domestic banking sources increased by 96.9 percent to Rs.74.2 billion from Rs.37.7 billion a year ago while credit from foreign sources increased by 83.3 percent to Rs.28.6 billion in May, from Rs.15.6 billion a year ago.
51 FCCISL News Alert Weekly Business Highlight 12th – 18th July 2010
The Island – July 14, 2010 IMF FACILITIES SEEN AS ALTERNATIVE FOR FOREX RESERVES
Daejeon, KOREA July 13, 2010 (LBO) - The International Monetary Fund (IMF) is considering creating new lending facilities to help countries cope with economic shocks and avoid the need to build costly foreign exchange reserves, officials said. Senior official from the IMF and South Korea, which is pushing the idea, said such a ‘global safety net’ would free up funds for badly needed investments instead of being held as reserves to ward off economic shocks.
"We are examining several options to strengthen our tools to help prevent crises and mitigate systemic shocks, including more tailored crisis prevention facilities and multi-country approaches," said IMF managing director Dominique Strauss-Kahn. "These tools would usefully complement countries’ own efforts at insuring themselves against shocks, and may also include cooperation with regional financing mechanisms," he told the Asia 21 conference organised by the IMF in Daejeon, South Korea.
"We’re trying to see how the IMF can provide resources to countries not only when hit by a crisis but when they face the threat of instability . . . to be more active and play a participatory role to avoid a crisis rather than try to fix it afterwards." Jeung-Hyun Yoon, Minister of Strategy and Finance of Korea, which is pressing for a mechanism to be available when leaders of a G-20 group of advanced economies meet in Seoul in November, said the move could free up funds for investments. "Emerging countries say that without such a safety net they have no other option but to accumulate reserves to prevent a crisis which is quite expensive as it incurs quite a big opportunity cost. You can invest the money in other areas but now have to put it into foreign reserves.
"If a ‘safety net’ was available then emerging countries would have less incentive to accumulate foreign reserves. Korea is making a strong case for this," Yoon told a news conference. However, he acknowledged that there were differences between developed and developing countries, with the former believing that having a ‘global safety net’ would be an extra burden on them. A consensus was needed on a safety net that would help to reduce capital flow volatility in times of crisis, he said.
Such an IMF facility would have to have "predictability, sufficiency and accessibility" being big enough and readily available to countries on the verge of a crisis, Yoon said. The IMF’s Strauss-Kahn said increased capital inflows could be expected by developing countries in future. "But they do have the potential to create problems if they disappear fast." He said a "collective insurance" like a safety net would be a better option than countries accumulating reserves individually.
"It is less costly to build it collectively at the IMF than each country having huge amount of reserves to face any crisis. They can then channel capital flows into direct investment."
52 FCCISL News Alert Weekly Business Highlight 12th – 18th July 2010
Daily News – July 15, 2010 WORLD RECOVERY CONTINUES, BUT RISKS INCREASE – IMF
* IMF forecasts continuing global recovery: * But renewed financial turbulence and euro area problems cloud the outlook: * Fiscal consolidation should be based on credible medium-term plans :
Balancing the strong growth numbers for the first half of 2010 and the adverse impact of increased financial turbulence, the IMF forecasts world growth to rise to 4.5 percent this year, before falling somewhat to 4 1/4 percent in 2011-with the world average masking large differences around the globe.
But despite the stronger than expected first half recovery, the IMF warned that uncertainties surrounding sovereign and financial sector risks in parts of the euro area could spread more widely, posing difficulties for both financial stability and the economic outlook.
"While we predict the recovery will continue, it is clear that downside risks have risen sharply," IMF's chief economist Olivier Blanchard told reporters. Blanchard and Jose Vinals, respectively the Fund's Economic and Financial Counselors, launched updates to the IMF's World Economic Outlook (WEO) and Global Financial Stability Report (GFSR) in Hong Kong for the first time.
Differences in performance As always, these world growth rates hide a large difference between and within advanced and emerging and developing economies, with the United States expected to grow at about 3 1/4 percent in 2010, the euro area at 1 percent, Japan at close to 2 1/2 percent, and emerging and developing economies averaging about 6 3/4 percent. Also, the overall numbers do not reveal an important difference between the first and the second half of this year.
For advanced countries for example, growth in the first half is forecast to be 3 percent, while growth in the second half of the year is forecast to be only 2 percent, reflecting a slowdown in private demand growth, Blanchard pointed out.
Vinals-speaking to journalists at a press conference hosted by the Hong Kong Monetary Authority on the 56th floor of the International Finance Center overlooking the spectacular Hong Kong harbour- emphasized that "progress toward global financial stability has recently experienced a setback."
Spotlight on policy implementation Sovereign risks have materialized in parts of Europe, especially Greece, that have eroded confidence in the soundness of banks in some euro area countries, resulting in an increase in funding and liquidity stress in interbank markets because banks are less willing to lend of each other.
In its market update to the GFSR, the IMF points to restoring progress toward financial stability to contain the risks and keep the economic recovery on track. Rapid implementation of stabilization measures taken by the euro area government authorities will be a key component in calming financial markets.
More generally, government policies in advanced economies should focus on credible fiscal consolidation- notably measures to enhance medium-run growth prospects, such as reforms to entitlement and tax 53 FCCISL News Alert Weekly Business Highlight 12th – 18th July 2010
systems. "Supported by accommodative monetary conditions, fiscal actions should be complemented by financial sector reform and structural reforms to enhance growth and competitiveness," the WEO update said.
"Policies in emerging economies should also help rebalance global demand, including through structural reforms and, in some cases, greater exchange rate flexibility." "While we remain cautiously optimistic about the pace of recovery, there are clearly dangers ahead," said Blanchard.
Drivers of Asian growth "How Europe deals with fiscal and financial problems, how advanced countries proceed with fiscal consolidation, and how emerging market countries rebalance their economies, will determine the outcome." The IMF launched the updates to its previous forecast and analysis in Hong Kong ahead of a high-level conference on Asia on July 12-13 in Daejeon, Korea sponsored by the Korean government and the IMF to assess lessons from the crisis and revive the Fund's involvement in the dynamic region.
"Even though there are some parts of Asia which are doing better than others, there are different kinds of assistance, advice that we can provide to different countries," IMF Managing Director Dominique Strauss-Kahn said-including technical assistance, funding, and policy advice.
The IMF forecast said Asia's strong recovery from the global financial crisis continued in the first half of 2010, despite renewed tension in global financial markets. GDP results for the first quarter were generally stronger than anticipated at the time of the last forecast made in April 2010, and high-frequency indicators suggest that economic activity remained brisk during the second quarter.
Economic activity in the region has been sustained by continued buoyancy in exports and private domestic demand. Exports have been boosted by the global and domestic inventory cycles and by recovery of final demand in some advanced economies.
Private fixed investment has strengthened on the back of higher capacity utilization and the still relatively low cost of capital in Asia. Against this background, the IMF's GDP growth forecasts for Asia have been revised upward for 2010, from about 7 percent in the April WEO to about 7 1/2 percent.
For 2011, when the inventory cycle will have run its full course and the stimulus is withdrawn in several countries, Asia's GDP growth overall is expected to settle to a more moderate but also more sustainable rate of about 6 3/4 percent.
Along with the rest of Asia, Korea, which is taking over leadership of the Group of Twenty (G-20) industrialized and emerging market countries this year, has staged an impressive recovery from the global crisis and is expected to grow 5 3/4 percent this year, according to the IMF.
Risks on the rise Both the WEO and GFSR updates said that risks have risen markedly. In the near term, the main risk is an escalation of financial stress and contagion, prompted by rising concern over sovereign risk.
"This could lead to additional increases in funding costs and weaker bank balance sheets, and hence to tighter lending conditions, declining business and consumer confidence, and abrupt changes in exchange rates," according to the WEO update. Because of this uncertain backdrop, the overarching policy 54 FCCISL News Alert Weekly Business Highlight 12th – 18th July 2010
challenge is to restore financial market confidence without choking the recovery. Making the new European Stabilization Mechanism fully operational, resolving uncertainty about bank exposures (including to sovereign debt), ensuring that European banks have adequate capital buffers, and continuing liquidity support are identified in the Global Financial Stability Report market update as immediate priorities in the financial sphere.
The update also calls for greater clarity on the details and timing of intended regulatory reforms, as uncertainty surrounding a final set of reforms is making it difficult for banks to take business decisions and constraining their willingness to lend.
Policies should be determined by country circumstances, the IMF said. Most advanced economies do not need to tighten before 2011 because tightening sooner could undermine the fledgling recovery, but they should not stimulate their economies more.
Current fiscal consolidation plans for 2011 in large advanced economies that envisage a fiscal retrenchment corresponding to an average change in the structural balance of the economy of 1 1/4 percentage points of GDP are broadly appropriate.
At a global level, the IMF said policies should focus on implementing credible plans to lower fiscal deficits over the medium term while maintaining supportive monetary conditions, accelerating financial sector reform, and rebalancing global demand. IMF survey online
55 FCCISL News Alert Weekly Business Highlight 12th – 18th July 2010
The Island – July 15, 2010 HOW TO GET THE BEST OUT OF YOUR TRAINING BUDGET
By Dinesh Weerakkody
Training is basically the formal activity that generally occurs in a classroom or elsewhere whereas Development is broader. For example, one of the key functions of managers is to develop people. That development may manifest itself in different ways. It may occur through on-the-job coaching, performance appraisals or development planning discussions.
Many managers consider development to be far more effective than the traditional classroom training and see it as two separate events. My view is that they go hand in hand. One should start with development planning, collecting facts and data about a person’s performance, competencies and other related behaviours.
Based on this data then a manager should set stretch targets based on the desired performance standards and behaviours. Training then, is an activity or a solution (among others) to address the gap between current and desired performance standards and behaviours.
Impact of training
Then most companies do not know how to measure the impact of training. As a result many companies don’t measure training effectiveness because they find it too difficult to manage. We often refer to Donald Kirkpatrick’s model, which classifies various ways in which you can measure the effectiveness of training.
Kirkpatrick identifies four levels. The first level focuses on attitude. Often we perform this type of evaluation by handing out an evaluation form (happy sheet) at the end of a training program. From this we can assess how participants felt about the training.
The second way is to measure knowledge or skills acquisition and this is fairly simple. For example, at the end of a Product Knowledge Training Program we can have people undertake an examination to test their acquisition of knowledge.
Similarly, we can use role-plays to assess whether people have developed the required skills during a training program. The third level of evaluation really concerns the way that behavior changes after completing a particular program.
Companies often perform level 1 and 2 measurement but stop there. However, evaluating training effectiveness at level 3 and 4 is not as difficult as it may appear.
Competency Based
Many companies are now beginning to identify, measure and develop competencies to drive performance standards. They look at people who do well in their jobs and identify and observe the behaviours that they demonstrate, rather than focus on knowledge or skills alone.
56 FCCISL News Alert Weekly Business Highlight 12th – 18th July 2010
In other words, a person may be very knowledgeable and/or skillful, but may not apply the knowledge and skills on the job in the required way. Competencies involve the behaviours, or the application of the knowledge and skills in ways that drive desired levels of performance.
A company we work with trains Sales Managers to observe their Sales People in the field. They look specifically at the way that sales people behave when conversing or working with customers and how this differs from in the past.
They look at the improvements in their behavior and how that behavior has changed as a result of the training. Finally, Level 4 evaluation focuses on the Rupee impact that the improved behaviours have on the business.
Therefore in the final analysis, training should not be undertaken for the sake of clocking training hours and also to comply with a KPI, instead companies should measure the ROI of all training interventions by tracking the performance of the participants and also promote the idea that people should focus more on self development i.e. invest a few of their own earnings on their own personal development.
(The writer is CEO of HR Cornucopia)
57 FCCISL News Alert Weekly Business Highlight 12th – 18th July 2010
The Island – July 16, 2010 SIX PROVINCIAL BANKS MERGE TO UPLIFT THE RURAL ECONOMY REGIONAL DEVELOPMENT BANK LAUNCHED TODAY
The government will launch the Regional Development Bank today, merging six provincial development banks into a single national entity designed to strengthen the economies of Sri Lanka’s provinces after the Western Province dominated economic growth contributing close to 50 percent of GDP over the years. "The provincial banks are already close to the people of rural Sri Lanka. All we intend to do is to bring their strengths together. These are profitable banks and enjoy brand equity, which is unknown in the Western Province, and we will focus our strengths as one entity to develop our human resources in to an efficient and customer friendly team, invest and expand our IT capabilities and create a single marketing strategy," Chairperson of the new bank, Regional Development Bank, Ms. Janaki Kuruppu, told The Island Financial Review.
The State established several rural development banks at village levels over 25 years ago which were later collected together into six provincial development banks, Wayamba, Kandurata, Uva, Sabaragamuwa and Rajarata. According to the Ministry of Finance and Planning, their combined after- tax-profit for 2009 amounted to Rs.407 million. Total deposits amounted to Rs.30.9 billion while none- performing loans amounted to 4.4 percent of total loans, better than seven percent industry average. Ms. Kuruppu said the Regional Development Bank would have 250 branches to make it the third largest bank in the country in terms of branch network, and plans are being finalized to open 10 to 12 new branches in the North and East.
"We are opening the head office in Colombo and announcing the creation of the Regional Development Bank, but our existence began in rural Sri Lanka and we have 25 years’ experience in serving the people, of being truly close to them. "It is going to be tough competing for deposits but we have already been successful as separate entities, having created brand equity with minimum marketing. By developing our ICT capacities and introducing innovative products and methods of serving our customers we can succeed. While commercial banks start in Colombo and then branch out to rural areas, we started out in the rural economy. She said the banks would focus on providing credit to the self employed and the SME sector. "Often these segments cannot access credit lines because commercial banks are too stringent. The collateral they demand is beyond the hopeful borrowers who are unable to prepare a proper feasibility report, without which there would be no loan. "The Regional Development Bank will look at the viability of the projects and be flexible on borrowing terms. If the whole country is to develop, then the rural sector economy must not be left behind. To develop the rural economies, the SME sector and entrepreneurs in the regions must be uplifted. When they grow they will be able to provide employment and contribute meaningfully to the development of their communities. This is our goal," Ms. Kuruppu said. 58 FCCISL News Alert Weekly Business Highlight 12th – 18th July 2010
The Island – July 16, 2010 FINANCE BUSINESS ACT TO GIVE CENTRAL BANK MORE TEETH
Nine out of 35 registered finance companies listed, June 2011 deadline for the rest
Golden Key and Sakvithi, two unauthorized deposit taking institutions brought legitimate finance companies registered with the Central Bank to their knees after dwindling public confidence caused a run on deposits which resulted in severe liquidity pressures in these companies who could not continue to carry out their day-to-day business transactions.
The Central Bank had time and again informed the public of the dangers in depositing their monies with non-registered finance companies which dangled the carrot of high interest rates to lure depositors in their numbers, many of whom were educated and financially savvy.
When the scandals broke out late 2008, registered finance companies and specialized leasing companies faced a run on deposits and the Central Bank intervened to restore public confidence in the legitimate businesses, but it realized the existing law was inadequate.
"We did our best to keep the public informed but many were lured away by high interest rates. The current law, the Registered Finance Companies Act was inadequate in terms of what the Central Bank could do, even the definition of a finance company was left open for interpretations," Senior Deputy Governor K. G. D. Dheerasinghe said.
"A new act called the Finance Businesses Act has been drafted with provisions that are more stringent than the Registered Finance Companies Act. The draft will have to pass on to the Cabinet through the Ministry of Finance and Planning, amended according to their recommendations and then presented once again for the Cabinet to present the bill to parliament. We hope the Finance Businesses Act would become law before the year ends," he said speaking to the press last morning.
All financial institutions have been directed to list their shares on the Colombo Stock Exchange in a bid to strengthening market discipline and improving transparency. The deadline was set for June 2011. Out of 35 registered finance companies only nine of them are listed to date.
The Central Bank said the deadline would stand and unlisted registered finance companies would have time till then to go public. It said companies which failed to meet the deadline would be dealt with on a case-by-case basis. 59 FCCISL News Alert Weekly Business Highlight 12th – 18th July 2010
The Island – July 17, 2010
*REGIONAL DEVELOPMENT BANK LAUNCHED PB SAYS INTEREST RATES NOT IN LINE WITH GOVT DIRECTION
By Ifham Nizam
Finance and Planning Ministry Secretary Dr. P.B. Jayasundara said that despite attempts by the government to reduce the interest rates certain financial institutions were taking high interest and giving lesser deposit rates.
Speaking at the launch of the Regional Development Bank yesterday in Colombo, he said the gap between interest and deposit rates is too high, thus he would take up this matter at the next Monetary Board meeting to reduce such interest rates.
After opening the Bank, he expressed his gratitude to the Chairperson, the CEO, Directors and staff for the Regional Development Bank for taking the initiative to establish the Bank, which would help empower the rural poor. He added, "Our aim is to go beyond Colombo."
The merger was done in keeping with the Pradeshiya Sanwardena Bank Act No 41 of Parliament of Sri Lanka.
With the amalgamation, the Bank, aims to further strengthen its presence and its activities. The amalgamation will also help meet the Central Bank capital requirement, reduce geographical risks involved in provincial banks and provide a host of other benefits to customers. New products will also be launched in the foreseeable future. A 100 per cent government-owned Bank, the amalgamation will also increase the Bank’s financial stability and enable it to venture into new activities, he said.
Bank’s CEO/ General Manager Ratnasiri Siriwardena said the six regional development banks were merged into a single Regional Development Bank and will be known as RDB, as a measure to empower and uplift the lives of all Sri Lankans with a special focus on the Small and Medium Enterprises sector. The six regional banks amalgamated, were Rajarata, Ruhuna, Wayamba, Uva, Kadurata and Sabaragamuwa Development Banks. The new entity already has a strong asset base of Rs. 42 billion and an island wide network of 251 branches, which will be further strengthened in the coming months.
Expressing his views on the significance of the move, he said that the primary focus of the Bank would be at the regional level. Although the new RDB head office will be located in Colombo, the Bank aims to provide facilities to help uplift the social and economic conditions of the rural poor, who are its main customers.
"We will be focusing especially on regional development activities, and measures will be taken aimed at inculcating savings habits among the rural people, providing good return on deposits and savings, encouraging school children and minors to save money and above all to empower the poor by encouraging them to start income generating activities," he said.
Bank’s Chairperson Janaki Kuruppu strongly believes that the customers would greatly benefit from an efficient and speedy service. 60 FCCISL News Alert Weekly Business Highlight 12th – 18th July 2010
"We will be able to invest in infrastructure and IT as one entity, rather than as six individual banks. In addition, we also aim to look into human resources training and capacity building. Better infrastructure facilities will result in a enhanced service, better human resources means an efficient and customer- friendly service and through better marketing the Bank will be able to introduce new and innovative products and services designed to meet the customer’s need at the national level," she added.
Speaking on the future initiatives, she said: "Our aim is to make the Bank approachable and affordable. Currently, we are focusing on streamlining our existing portfolio of products, but new products will be announced in the near future."
With six provincial offices and 10 district offices and 236 branch offices, the bank employs over 2,300 well-trained personnel. Services will also be expanded to the Northern and Eastern provinces as well.
The Chairperson further said that with the banks, having being in operation for over 25 years, has been able to build customer trust and a solid base, especially where the grassroots are concerned.
The banks were established as Regional Rural Development Banks (RRDBs) in 1985, with one for each district, except in the North and East. The banks came under the purview of the Central Bank of Sri Lanka and the primary objective was the development of the area in which the bank was in operation.
The RRDBs provided development oriented lending facilities, concessionary loan facilities under micro- finance and more income generating facilities. Under a Parliament Act passed in 1997, Regional Development Banks were formed for each province by amalgamating two or three district RRDBs in a province. The banks received their traditional provincial names.
"At a time when Sri Lanka is stepping into an era of growth and property, to develop the country further and accelerate growth, we need to develop each region. For this, we need to develop the people in those regions, help them set up various income-generating activities. Therefore, our focus will be to continue developing these regions by empowering small and medium entrepreneurs in all of the key economic sectors of the country and pave the way for making Sri Lanka the Wonder of Asia", Kuruppu added.
61 FCCISL News Alert Weekly Business Highlight 12th – 18th July 2010
Tourism
62 FCCISL News Alert Weekly Business Highlight 12th – 18th July 2010
Daily News – July 12, 2010
UPGRADING HOTELS AND ENHANCING ROOM CAPACITY: TOURISM SECTOR INVESTS $ 10 B
ANNUAL EARNINGS TO SURPASS US$ 500 M:
Sanjeevi Jayasuriya Sri Lanka’s tourism sector is gearing to face the increase of tourist arrivals by investing US$ 10 billion to enhance the room capacity and upgrade the hotels. It is necessary to carry out brand building and image enhancement activities. Brand development is needed to improve credibility, dependability, believability and acceptability in the minds of the tourists, Jetwing Hotels Ltd Chairman Hiran Cooray said.
He was speaking at a seminar on currant development and future prospects in the tourism sector organized by Acuity Stock Brokers (Pvt) Ltd held last week in Colombo.
Approximately 2,000-3,000 new hotel rooms will be Tourists with an elephant. ANCL file picture constructed during 2010.
Hiran Cooray The country aims to add approximately 20,000 hotel rooms in the next six years to cater to the anticipated boom in tourism.
The Tourism Development Authority has already approved the construction of new hotels in Passekudah and Batticaloa to promote eastern beaches as a tourist destination. Further, new zones which are being developed as tourist hotel sites are, Kuchchaveli north of the eastern port and five islands in Kalpitiya, which would be similar to the Maldives.
As developing tourism related infrastructure facilities, the Government plans to build a domestic airport at Uchchamunai, an under-water amusement park in Kandakkuliya, a golf course in Dutch Bay, a race course and a cricket ground in Kalpitiya. Fishing Tourism, Leisure Tourism and Ayurvedic Tourism are some of the concepts the Government is planning to implement to attract the global appeal.
For the year 2009 the tourism sector enjoyed total earnings of nearly Rs.40,133 million which is equivalent to US$ 350 mn an increase of 8 percent over 2008. Also with higher post war rate structure expected after November 2010, annual earnings should surpass US$ 500 million. 63 FCCISL News Alert Weekly Business Highlight 12th – 18th July 2010
Global tourist arrivals Growth Regional growth * 438 million in 1990 * All the regions have shown growth rates less than
4 percent * 684 million in 2000 * Middle East reached a growth rate in excess of 15 * 922 million in 2008 percent in 2008
The occupancy rates of the hotels which were mainly hit by the three decade of war saw a remarkable growth subsequent to May 2009. The overall occupancy rate hit an average of 48.4 percent in 2009 when compared with the corresponding period of 43 percent. Further the occupancy rates hit an all time high for the first three months of 2010 at an average of 82 percent.
The average spending per tourist decreased to US $ 728.6 in 2008 showing a decrease of 7.8 percent as compared to US $ 791 in 2007. However the average spending increased to US $ 781 a 7 percent increase in 2009.
Considering the top ten contributors to Sri Lanka, India continued its position as the top producer in 2008 and 2009, though the arrivals from India decreased by 2 percent in absolute terms. UK retained its second position with an increase of 263 tourists in 2009. The top five contributors in 2008, who were India, UK, the Maldives, Germany and Australia were able to retain its position in 2009 as well. Remarkable growth of 19 percent was evident from Australia compared to the corresponding year. France which occupied the ninth position in 2008 moved to sixth position with a drastic increase of 50 percent in arrivals.
It is a noteworthy feature that new source markets like Canada and Japan is featuring in the list. Meanwhile, Japan which was dropped from the list in 2008 has come back to the top ten arrivals as a result of the Japanese Government relaxing their travel advisories on Sri Lanka.
64 FCCISL News Alert Weekly Business Highlight 12th – 18th July 2010
The Island – July 12, 2010 TOURIST ARRIVALS UP 47.9% IN JUNE
Tourist arrivals grew 47.9 percent in June to 44,730 from 30,234 arrivals a year ago while total arrivals for the first six months of the year increased by 48.4 percent to 278,652 from 187,729 for the corresponding period of 2009.
According to the Sri Lanka Tourism Development Authority, arrivals from South Asia increased 43.8 percent to 15,090, Middle East 104.6 percent to 2,506, North America 85.5 percent to 3,998, Australasia 65.1 percent to 2,867, East Asia 44.1 percent to 5,172, Eastern Europe 41.4 percent to 1,022, Western Europe 36.6 percent to 1,388 and Africa 37.4 percent to 158. Arrivals from Latin America and the Caribbean declined 7.7 percent to 36.
The highest number of arrivals to Sri Lanka during the first six months of this year was from India with 55,138 arrivals, up 78.4 percent from the previous year. The United Kingdom was the second highest source of tourist arrivals at 44,987, a 24.5 percent growth from last year. Germany was third at 21,500 arrivals, a growth rate of 73.7 percent.
65 FCCISL News Alert Weekly Business Highlight 12th – 18th July 2010
The Island – July 12, 2010
TOP CORPORATE SAYS SUSTAINABILITY IS THE KEY TO TOURISM DEVELOPMENT IN SRI LANKA
Sustainability is a big buzz word globally, and it is increasingly shaping the way how businesses think and operate. In the travel and tourism sector, which is the largest industry worldwide, sustainability has become a key driver, helping market airlines, destinations, hotels and tours.
For us in Sri Lanka, the tourism industry is bringing a whole new world of opportunities for economic development, especially in the rural areas. Integrated nature of the tourism industry is such that the economic benefits always spread across the entire country, almost all the people. Tourism also helps us to look after our natural and cultural resources.
Aitken Spence Hotels Group has come a very long way in making their hotels sustainable. According to Malin Hapugoda, Managing Director of the Aitken Spence Hotels Management (Pvt) Ltd. which operates Sri Lanka’s largest hotel portfolio, the Group’s sustainability practices have been adopted long before sustainability became fashionable in the international tourism industry. Mr. Hapugoda said, "Aitken Spence has invested in lot of time and financial resources over the decades to make our hotels world class case study examples of sustainability. We have found out that our business associates and our guests are keen to learn about the sustainability practices of the hotels than ever before. The unique sustainability features of our hotels are clearly giving us a marketing advantage. Our expertise gained in sustainability in Sri Lanka is spreading across to our hotels in the Maldives, India and Oman. "
Sustainable tourism is on the rise in Sri Lanka, with consumer demand growing, travel industry suppliers are developing new green programmes, and the government is encouraging sustainable practices in tourism. But what does "sustainable tourism" really mean? How can it be measured and credibly demonstrated, in order to build consumer confidence, promote efficiency, and fight false claims? Hapugoda emphasizing the importance of credibility and sustainability reporting said, "There are internationally accepted standard guidelines and frameworks for sustainability implementation, evaluation, data collection and reporting. If Sri Lankan hotels want external parties to recognize their efforts and build credibility it is very important to adopt these guidelines to share information on what they have achieved and disclose information on an universally accepted format".
The Sustainability reporting framework developed by the Global Reporting Initiative (GRI) complying with the G3 guidelines and indicator protocols for economic, environment, human rights, labour, product responsibility and societal performance. The report outlines the company’s progress in embedding the ten principles of the United Nations Global Compact and Climate Change mitigation actions.
66 FCCISL News Alert Weekly Business Highlight 12th – 18th July 2010
Daily Mirror – July 12, 2010 TOURIST ARRIVALS UP 48% IN JUNE
Tourist arrivals to Sri Lanka increased by 48.4% during the first half of 2010 (January-June), with a total of 278,652 arrivals to the country in comparison to 187,729 arrivals during the same period last year (2009).
The number of arrivals for the month of June 2010 was recorded as 44,730, which was an increase of 47.9%. In June 2009, the number was 30,234, according to the latest figures released by the Sri Lanka Tourism Development Authority.
Figures showed an increase in the number of arrivals from South Asia, Western Europe, East Asia, North America, Australasia, Middle East, North America and Eastern Europe in the first half of 2010.
Tourists from Western Europe, the traditional tourist generating market, rose 45.2 percent to 108,250 in the first half of 2010. During the same period last year the number was 74,536. The number of visitors from UK went up by 24.5 percent to 44,987 in first half of 2010. It was 36,148 in the first half of 2009. Tourists from France went up by 82.3 percent to 13,480 in the first half of 2010. It was only 7,394 in the same period in 2009. Tourists from Germany increased by 73.7 percent to 21,500, in the first half of 2010. In the same period in 2009, the number of arrivals was 12,377.
From January to June 2010, South Asian visitors rose by 52.6 percent to 76,816 with tourists from India up by 78.4 percent to 55,138. The number was 30,902 in the first half of 2009. From Maldives, the number of tourists to the country went up by 7.9 percent to 15,894 and from Pakistan up 30.4 percent to 3,985 in comparison to the first half of 2009.
Arrivals from Australasia went up by 44.3 percent to 14,087 within the first half of 2010. The number of visitors from Australia went up 43.3 percent to 12,582. The number of tourists was only 8,783 in the first half of 2009. From East Asia, tourist arrivals increased by 43.6 percent to 29,466. Japanese visitors increased by 24.8 percent to 6,145. Visitors from Malaysia rose 231.8 percent to 5,757.
Only 1735 Malaysians arrived in the country in the first half of 2009. Visitors from Singapore rose 55.3 percent to 4,743.
In the first half of 2010, the number of visitors from the Middle East shot up by 102.1 percent to 13,652. Visitors from North America also increased by 70.2 percent to 18,317 with tourists from Canada up by 114.3 percent to 9,913. Only 4,625 Canadians arrived in the country in the first half of 2009. Arrivals from USA increased up by 36.9 percent to 8,404 while arrivals from Eastern Europe increased by 21.6 percent to 16,935 in the period between January and June, 2010.
67 FCCISL News Alert Weekly Business Highlight 12th – 18th July 2010
The Island – July 13, 2010
LANKA GEARING UP FOR TOURISM WITH PLANS TO TRANSFORM THE ENTIRE ISLAND
By Mario Andree
Sri Lanka is getting ready to cater to the rising demand for tourism and expects to invest US$ 10 billion in building and branding the country as a tourist destination, say senior officials. The country expects to build 2,000 to 3,000 more rooms this year, while further creating 20,000 rooms within the next six years, said Chairman Jetwing Hotels, Hiran Cooray.
"For this year, the industry hopes to see half-a-million tourists visit the island generating US$ 500 million as revenue," he said.
Arrivals have increased by 48.4 percent to 278,652 during the first six months of the year from 187,729 for the corresponding period last year.
Director General Sri Lanka Tourism Development Authority told the Island Financial Review, that the occupancy rate of the hotel sector has increased significantly, from 45 percent in 2009 to 60 percent this year.
He said that tourism which was focused towards the south in the past few years has migrated largely towards the North and East.
He also said that the average daily expenditure of a tourist was still low, standing at US$ 80 per day which is expected to grow to US$ 130 within the next six years.
The North and East is gearing up to cater to the rising demand with authorities eyeing Kuchchuveli, Passekudah and Kalpitiya, the beaches of Batticaloa and other favourable locations for development.
Sri Lanka’s goal is to increase the number of rooms from 14,000 in 2010 to 50,000 by 2016 while developing the whole island to cater to tourism demand.
SLTDA said that eight projects are coming up in Kalpitiya mainly from foreign investments. Around 2,000 to 3,000 rooms would be created in this area alone by 2012.
The government is planning to build a domestic airport in Uchchamunai, an Underwater Amusement park in Kandakkuliya, a golf course in Dutch Bay, and a race course and a cricket ground in Kalpitiya. 68 FCCISL News Alert Weekly Business Highlight 12th – 18th July 2010
Daily Mirror – July 14, 2010
SUSTAINABILITY IS THE KEY TO TOURISM DEVELOPMENT IN SRI LANKA
Sustainability is a big buzz word globally, and it is increasingly shaping the way how businesses think and operate. In the travel and tourism sector, which is the largest industry worldwide, sustainability has become a key driver helping market airlines, destinations, hotels and tours.
For us in Sri Lanka, the tourism industry is bringing a whole new world of opportunities for economic development, especially in the rural areas. Integrated nature of the tourism industry is such that the economic benefits always spread across the entire country, almost all the people. Tourism also helps us to look after our natural and cultural resources.
Aitken Spence Hotels Group has come a very long way in making their hotels sustainable. According to Malin Hapugoda, Managing Director, Aitken Spence Hotels Management (Pvt) Ltd. which operates Sri Lanka's largest hotel portfolio, the Group's sustainability practices have been adopted long before sustainability became fashionable in the international tourism industry.
Hapugoda said: "Aitken Spence has invested in lot of time and financial resources over the decades to make our hotels world class case study examples of sustainability. We have found out that our business associates and our guests are keen to learn about the sustainability practices of the hotels than ever before. The unique sustainability features of our hotels are clearly giving us a marketing advantage. Our expertise gained in sustainability in Sri Lanka is spreading across to our hotels in the Maldives, India and Oman."
Sustainable tourism is on the rise in Sri Lanka, with consumer demand growing, travel industry suppliers are developing new green programmes, and the government is encouraging sustainable practices in tourism. But what does "sustainable tourism" really mean? How can it be measured and credibly demonstrated, in order to build consumer confidence, promote efficiency, and fight false claims?
Hapugoda, emphasizing the importance of credibility and sustainability reporting, said: "There are internationally accepted standard guidelines and frameworks for sustainability implementation, evaluation, data collection and reporting. If Sri Lankan hotels want external parties to recognize their efforts and build credibility it is very important to adopt these guidelines to share information on what they have achieved and disclose information on an universally accepted format."
The Sustainability reporting framework developed by the Global Reporting Initiative (GRI) complying with the G3 guidelines and indicator protocols for economic, environment, human rights, labour, product responsibility and societal performance. The report outlines the company's progress in embedding the 10 principles of the United Nations Global Compact and Climate Change mitigation actions.
69 FCCISL News Alert Weekly Business Highlight 12th – 18th July 2010
Daily Mirr0r – July 16, 2010 POOR IMAGE THAN WAR CAUSE FOR LOW TOURISM GROWTH
Latest research done by globally acclaimed organization Insignia Marketing Research reveals that the cause for the non development of Sri Lanka's tourism industry in the last thirty years in not necessary the war with the LTTE that stemmed from a conflict but, the poor Image that the country has globally. This was revealed by Rohantha Athukorala one of Sri Lanka's leading international public sector personalities who also serves the country via Board positions in the Export Development Board and the Industrial Development Board. He said that the poor image was due to the low investment on strategic communications as against competitive nations like Malaysia, Maldives and Thailand that focus on tourism development.
Athukorala, the Head of National Portfolio Development for Sri Lanka and Maldives in the United Nations Operations, made this observation during his address to the Sri Lanka's Building Engineering Association as the Guest Speaker at their Bi - Annual Forum on latest trends in Sri Lanka. The speaker explained the importance that building engineers will play in the tourism industry infrastructure development in the key tourism zones of Kuchchaveli, Pasikudah, Nilaveli and Kalpitiya whilst later on in the Jaffna peninsula. The overall attractiveness of this industry on infrastructural development ranges from Rs.30 to 40 billion in the next three years.
The key focus will be to increase the room capacity which is at just 14,700 currently in the country to at least 26,000 so that Sri Lanka can move from 800,000 tourists that it can cater now to at least a 1.5 million tourists arrivals in the near future. In this connection building engineers have a pivotal role to play Athukorala pointed out. He also said that the latest research reveals that in the focus markets of UK, France, Germany, Middle East, India, China and Russia that attracts the bulk of Sri Lanka's tourist traffic the current awareness of Sri Lanka as a Tourist destination is 16%. Of the surveyed only 5% say that they have a propensity to travel to Sri Lanka in the next 2 years which are attributed to the poor image ratings from a strictly marketing perspective Athukorala added.
The research by Insignia also reveals that Sri Lanka is ranked as 9th amongst South Asian and South East Asian countries as tourist destination to travel. Athukorala being an eminent marketer by profession before joining the International public sector emphasized that the first challenge is to believe in this reality and accept the "as-is- situation." The next step is to be motivated by the opportunity for growth that exists in the country. "If the current communication can bring in almost six hundred thousand tourists into the country and filling in almost ninety percent of the available room capacity just imagine how much opportunity exists for Sri Lanka to attract the target of 2.6 million tourists with a focused communication campaign," queried Athukorala.
Already the average revenues per room has increased considerably post war and crossing the US$ 1 billion revenue mark by the tourism sector from the current $ 400 million is not far away as per the pragmatic analysis by Athukorala. The President of the Sri Lanka's Association of Building Services Engineers Tissa Gunesena said Athukorala's presentation to its members was very useful to plan the future strategies of the sector and commented that personalities such as Mr. Athukorala needs to be more involved in driving implementation of public policy in the country so that Sri Lanka can achieve double digit growth sooner than later.
70 FCCISL News Alert Weekly Business Highlight 12th – 18th July 2010
Daily Mirror – July 16, 2010
SUSTAINABILITY IS THE KEY TO TOURISM DEVELOPMENT IN SRI LANKA
Sustainability is a big buzz word globally, and it is increasingly shaping the way how businesses think and operate. In the travel and tourism sector, which is the largest industry worldwide, sustainability has become a key driver helping market airlines, destinations, hotels & tours.
For us in Sri Lanka, the tourism industry is bringing a whole new world of opportunities for economic development, especially in the rural areas. Integrated nature of the tourism industry is such that the economic benefits always spread across the entire country, almost all the people. Tourism also helps us to look after our natural & cultural resources.
Aitken Spence Hotels Group has come a very long way in making their hotels sustainable. According to Mr. Malin Hapugoda, Managing Director of the Aitken Spence Hotels Management (Pvt) Ltd. which operates Sri Lanka's largest hotel portfolio, the Group's sustainability practices have been adopted long before sustainability became fashionable in the international tourism industry. Mr. Hapugoda said "Aitken Spence has invested in lot of time and financial resources over the decades to make our hotels world class case study examples of sustainability. We have found out that our business associates and our guests are keen to learn about the sustainability practices of the hotels than ever before. The unique sustainability features of our hotels are clearly giving us a marketing advantage. Our expertise gained in sustainability in Sri Lanka is spreading across to our hotels in the Maldives, India & Oman. "
Sustainable tourism is on the rise in Sri Lanka, with consumer demand growing, travel industry suppliers are developing new green programmes, and the government is encouraging sustainable practices in tourism. But what does "sustainable tourism" really mean? How can it be measured and credibly demonstrated, in order to build consumer confidence, promote efficiency, and fight false claims? Mr. Hapugoda emphasizing the importance of credibility & sustainability reporting said, "There are internationally accepted standard guidelines & frameworks for sustainability implementation, evaluation, data collection and reporting. If Sri Lankan hotels want external parties to recognize their efforts and build credibility it is very important to adopt these guidelines to share information on what they have achieved and disclose information on an universally accepted format".
The Sustainability reporting framework developed by the Global Reporting Initiative (GRI) complying with the G3 guidelines and indicator protocols for economic, environment, human rights, labour, product responsibility and societal performance. The report outlines the company's progress in embedding the ten principles of the United Nations Global Compact and Climate Change mitigation actions.
71 FCCISL News Alert Weekly Business Highlight 12th – 18th July 2010
Exports
72 FCCISL News Alert Weekly Business Highlight 12th – 18th July 2010
The Island – July 12, 2010
TRADITION OVERRIDES HARD ECONOMIC DECISIONS THAT PLAGUE THE TEA INDUSTRY
By Steve A. Morrell
Minister Plantation Industries, Mahinda Samarasinghe, addressed the Colombo Tea Traders Association Annual general Meeting recently. He was concerned the Tea industry had not evolved to meet challenges of moving demand for this beverage internationally . Reverting to an area of conjecture he said, ‘Another area for serious concern with regard to our Tea trade is its dependence on bulk teas. The time has come to increase exports of tea in value added form’.
He also made reference to the Tea Small holder sector and their future role in sustaining the Industry.
The bottom line is, according to recent Tea Board reports, Tea Small holders are main stays of the Tea industry, producing approximately 72 % Ceylon Tea. The Corporate sector relegated to second best, could manage just 28 % making up the 100 % exported. Irrespective of this poor showing, Tea Companies Managing State owned tea land have been allocated prime tracts of land they inherited as on going commercial entities, first as British Holdings, and later from the State , in 1992.
Maintenance of these tea lands did not falter under the State. One could not even conceive Plantation Leaders of the stature of Ranjan Wijeratne, permitting any retrograde situation setting in at that time.
Our recent discussions with Brokers, and reverting to the Piyadigama report, the bottom line is that Plantation Companies have been stingy in their investments to ensure each Plantation is an on-going concern.
The Minister’s wide ranging speech included practical suggestions on demand based products and stressed importance of exports in value added form. He said’ I see this area as critical to us as a nation. By emphasizing on bulk Tea we not only loose revenue but also allow room for others to blend our tea , superior in all aspects, with inferior origins and sell as their own blends ‘.
Traditional buyers may have forgotten the taste of Ceylon Tea, he said.
One such traditional buyer, Pakistan, turned to Kenya for their supplies of tea which is far cheaper than Ceylon Tea. Pakistan imports 56.06 % of their requirements. (Courtesy Asia Siyaka Tea Market report). Sri Lanka dropped far down the list. Indonesia, Ruwanda, Malawi, are all countries supplying more tea to Pakistan.
73 FCCISL News Alert Weekly Business Highlight 12th – 18th July 2010
Chinese Tea exports to Pakistan have now reached 6.70 % up 2 percentage points since we last focused on Chinese exports .
Our Tea story last week focused on Russia/CIS Countries being or main buyer. But that trade source is dwindling. This fact too stressed our penultimate story two weeks previously.
We have to again concentrate on lack of new markets opening for Ceylon Tea.
However value added exports have gained ground according to recent Tea Board information, only in miniscule quantum pointers. That too such exports have centered on two or three private sector companies who have taken their risks and progressively established their Brands internationally.
Meanwhile, these Plantation Companies were ranked among top ten performers to end June this year. (RPLs). Kahawatte, Talawakelle, Kelani Valley, Hapugastenne, Pussellawa, Maskeliya, Horana, and Bogowantalawa.
Each of these Companies manage about an average 20,000 hectares. Collectively, this represents some 160, 000 hectares. Questions could be asked what of the rest?
The New Minister is faced with an enormous problem; that of rejuvenating the Tea industry and ensuring its leadership slot (now lost), as quickly as possible.
74 FCCISL News Alert Weekly Business Highlight 12th – 18th July 2010
Daily News – July 13, 2010 EMPOWERING RUBBER SMALLHOLDERS
Dr.N.Yogaratnam
Agricultural development in Southeast Asian countries has followed similar objectives and goals, mainly involved in the need to provide a sustainable livelihood for smallholders and to improve their productivity and income.
The farmers, especially smallholders, have had to try to change their ways of management and to improve their potentials and abilities for increasing farm efficiency and production leading to increased farm income. However, it was found that the progress of rubber smallholder development was less than the achievements of macro-agricultural development. It is also becoming evident that the more development, the more increase in inequity of rights and income gap of people between the plantation sector and the non-plantation sector.
This situation prevails in Southeast Asian countries such as Thailand, Indonesia, Malaysia and Sri Lanka, which depend on exports of agricultural produces such as rubber, oil palm and tea. More than 70 percent of total world rubber production comes from Southeast Asia, with more than twenty million farmers in Southeast Asia growing rubber. Natural rubber
Issues This leads to many questions concerning the farmers, especially smallholders in this region. Why are they still so poor, why is their income so low, what are the main constraints to improving their standard of living, what are the main factors influencing farmers’ achievements, and how can farmers’ potential and ability be improved? The current standard of living of farmers has not improved from what was in the past. Farmers still use low agricultural technologies such as low yielding clones, indigenous practices and management strategies in their production systems and they have limited skills such as inefficient decision-making processes, very little initiative in innovations, and a low educational level. It is therefore, relevant to examine (1) the possible systems that would help to adjust and improve rubber smallholding farms’ efficiency and productivity, and (2) the components of empowerment that might help in moving farm household income towards sustainability.
Land extent The total land extent in the NR world is 10.3 million hectares. It is dominated by the Asian region with 93 percent of the extent. Smallholdings dominance is seen in about 75 to 80 percent of the total extent (table 1) and this is expected to grow further in the major rubber producing countries.
Productivity In Sri Lanka, the rubber small holding have been contributing significantly. Their contribution in 2008 had been 71.7 percent of the national production, while Regional Plantation Companies (RPC) was 26 percent. Five years ago, it had been 65 percent by the smallholders and 35 percent by the RPCs. Despite several constraints, the smallholder sector has been demonstrating an increasing trend in performance with an increase of 16 percent over their production in 2007, while the RPCs contribution declined by 10
75 FCCISL News Alert Weekly Business Highlight 12th – 18th July 2010
percent in 2008. Sri Lankan smallholdings productivity is in the region of 1,290 kg/ha where as in Malaysia it is around, 1,330 to 1,440 and in Indonesia it is in the range of 1,250 to 1,500 kg/ha.
The empowerment concept Empowerment is a process by which people, organization and communities gain mastery over issues of concern to them. The various definitions of ‘empowerment’ are generally consistent with empowerment as an intentional ongoing process centered in the local community, involving mutual respects, critical reflection, caring and group participation though which people lacking an equal share of valued resources gain greater access to and control over those resources. The empowering processes for individuals might include participation in community organization. At the organization level, empowerment might include collective decision-making and shared leadership.
Empowerment at the community level might include collective action to access government and other community resources. For the empowerment of smallholding farmers at an individual level, there must be an intentional ongoing process of farm production which emphasizes the farmer as the center, involving mutual respect, critical reflection, caring and group participation. It is said that the empowerment of the smallholder is the empowerment at the individual level of analysis. The concept integrates perceptions of smallholder control, a proactive approach to life, and critical understanding of the socio-political environment.
Psychological Psychological empowerment is an emphasis on empowerment at the individual level of analysis. It includes learning about controlling agents and acting to influence those agents. Thus, psychological empowerment includes beliefs that goals can be achieved, awareness about resources and factors that hinder or enhance one’s efforts to achieve those goals and efforts to fulfill the goals. The components of psychological empowerment involve the intra-personal, inter-personal and behavioral components. The intra-personal component refers to having people (i.e. farmers) thinking about themselves and includes domain-specific perceived control, domain-specific self-sufficiency, motivation control and perceived competence.
Domain-specific perceived control refers to beliefs about one’s ability to exert influence in different life spheres such as in farm, family, work or the sociopolitical context. The inter-personal component refers to the understanding people have about their community and their environment.
It involves critical awareness of their environment and an understanding of causal agents in decision-making, problem solving and leadership skills. These skills help persons become independent and enable them to control events in their lives. The behavioural component refers to actions taken to directly influence outcomes. It includes mutual help groups, seeking employment and living independently. The behavioral component may also include behaviours to manage stress or adapt to change.
In plantation agriculture, the psychological empowerment of farmer A rubber plant nursery might include educational experience, occupational experience, adjustments for better efficiency and production, (intra-personal components), communication skills such as individual contacts, information exposure, agricultural knowledge and skills in practice and management, increased accessibility to sources 76 FCCISL News Alert Weekly Business Highlight 12th – 18th July 2010
of information, better understanding of the causes of their expenses and incomes, smallholders’ decision- making processes (interpersonal components) and participation through group activities (behavioral component). These components comprise the psychological empowerment of rubber smallholders, which will influence the achievement of farm goals and objectives toward the sustainability of farm production and income in the future.
Educational It was found that the average length of formal schooling of smallholders was 9.2 years; 40.9 percent of total smallholders completed preliminary school(5-7years), while 1.8 percent of total smallholders completed above secondary school(>14 years). The educational experience has an effect on the participation in local rubber smallholders’ groups in the community, and the accessibility to government services and the sources of information in community.
Occupational The occupational experience was defined as the number of years working at this occupation. The average number of years in this occupation of smallholders was 20.3 years, with 44.9 percent of smallholders having worked in rubber from ten to twenty years. The relatively high experience of smallholders at working in their occupation also has an effect the adjustment of smallholders to new or changing farm production system. The more the smallholders have experience, the better are their decisions concerning the process of farm management, skill, knowledge and attitude in their occupation. The occupational experience as a tool of the empowerment of smallholders is important to develop and increase the strength and capacity of smallholders in such things as the decision making process for decreasing risk management, and increasing smallholders learning processes such as skill, knowledge and attitude in production system .
Efficiency and production Physical Smallholders need to adjust the physical components in issues of (1) improving and providing the required resources and management for their farm production activities, (2) improving soil fertility, and (3) correlated enhancement and feasibility studies and research to improve the farming system and management and soil fertility for specific crops. Specific suggestions for physical adjustments needed would be: (1) using manure and growing cover crops to improve soil fertility while trying to decrease chemical usage in disease and pest control and fertilizer, (2) research towards setting a directed plan and implementation strategy, and (3) looking for possible sources of natural water in the community and plan for water resource management.
Biological: The need for using high-yielding clones is an important adjustment to be made. Smallholders normally use any clone that is readily available to them at the time of planting. Thus suggestions for improvement would include (1) providing high yielding clones that are appropriate for specific areas, and (2) improving knowledge of clone selection through training courses. Social: Improving and strengthening local farmers’ groups is a major requirement to help smallholders adjust to new circumstances. Advances gained through such groups can be measured, such as the bargaining price in local market, the participation through group activity, opportunity to participate in co-decision making, solving problem and shared idea.
Suggested activities to improve social adjustment needs: (1) learning about group management through training courses, and (2) enhancement of the local farmers’ group management in agribusiness. Economic: A local capital fund for investment and an efficient local marketing system are economic adjustment 77 FCCISL News Alert Weekly Business Highlight 12th – 18th July 2010
needs, due to the fluctuating produce price and low quality of product that affects the farm income. Traditionally also, smallholders have been getting an unfair price in local markets. Suggestions for improvement include: (1) establishing a local capital fund for investment through local farmers’ groups, perhaps by a tax on production, and (2) a price insurance system, and (3) providing current information to smallholders.
Changes It has been reported the majority of smallholders respond only to a small level of change to improve their efficiency and production. There are limiting factors such as low educational experience that affects their adoption of new technologies and innovations, and also that affects their perception and understanding of agricultural knowledge, and low capital for investment that affects enlargement of the farm operation. Nevertheless, smallholders in rubber-monoculture system may require a high level of adjustment. This system provides income from only rubber, and it is insufficient for the family for a decent living. They should therefore try to improve their production efficiency by bringing-in professionalism in their approach.
Individual contacts When smallholders have more opportunity to exchange knowledge and to share ideas with extension/advisory officers, they have more empowerment in improving farm efficiency and productivity. But this does not happen. They are faced with the constraints of insufficient extension personnel in their area, inefficient extension system in their area and also, inability to contact the extension that effects the communication between extension and smallholders. But smallholders in rubber-intercrop systems are compelled to have a greater level of individual contact, because production systems of this type need more information and input factors such as fertilizers, planting materials etc.
Knowledge and skills Knowledge and skills are a prime requirement for farm efficiency and productivity. The influence of the learning system is important because it affects the achievements of the farm operation and also affects the decision making process of smallholders in farm management. In integrated farming systems, it was found that smallholders had a fairly high level of knowledge and skills, because this system has a range of production activities. They are therefore compelled to search for new practices and management systems to improve the farm operation at all times. Smallholders in rubber-monoculture system had a very low level of knowledge and skill in practice and management. Because in this system, they continue with the out-dated knowledge and skills they learnt from their parents, thus they feel it is not necessary to receive additional knowledge from the government agencies. They also have a low educational level that affects the rate of adoption and diffusion of innovative technology.
Sources of information Extension agents and television are the main sources of information that smallholders can access in community. Although most smallholders have television and get information mainly from television, they have little interest in agricultural programs. They normally get information from extension agents, but when this system is inefficient, it dampen the enthusiasm of the smallholders to learn.
Behaviour component The behaviour component of smallholders’ empowerment is described in terms of smallholders’ participation through local farmers’ groups such as rubber sheet-making groups and rubber latex group.
78 FCCISL News Alert Weekly Business Highlight 12th – 18th July 2010
Participation is a process which enables smallholders to organize themselves, to identify needs, and to share in the development and evaluation of activities as well as in the benefit from them. Without adequate powers, smallholders can not make effective decisions. In addition, organization is a fundamental instrument of participation. If unorganized smallholders will be unable to build up a power base from which they can influence and claim benefits for their community. Organization is, thus, closely linked to empowerment.
They, normally, participate in some group activities such as group meetings, and express and share ideas, but they do not participate in setting plans and implementation strategies, co-decision making or solving problems. It is likely that the improvement of farm household income for farm sustainability can be accomplished through (1) enhancement of the smallholders’ participation through local smallholders’ group activity, and also, (2) providing appropriate training to enhance their knowledge, attitude and skills in agricultural practices and management strategies, and (3) using the optimum levels of inputs and decreasing chemical fertilizer usage, a costly input.
Conclusion Although rubber smallholders have a low level of primary schooling, they have significant occupational experience that influences their empowerment in decision-making process in farm management and decreasing management risk. In addition, the adjustment needs indicate that smallholders can understand and evaluate the current situation. But presently, they exhibit very little empowerment strategy, because they are faced with many constraints such as, ineffective government plans and policy implications, low level of individual contact with extension/advisory agencies, low information exposure, low knowledge and skills in agricultural practices and management strategies, low accessibility to sources of information, low level of income/expenditure management, and low level of group participation.
It is therefore imperative that we attempt to identify and develop the smallholders’ individual potential as well as their deficiencies as the first priority in the development process of this community. Thus, the enhancement of group activity and smallholders’ participation therein appears to be the starting point in their self-development, in the absence of any organized governmental agency support which had not been readily made available whenever the need arises.
The existing cooperative systems should be strengthened. Rubber based farming systems based on cropping pattern and cultural practices which have been developed in response to the ecological, economic and socio-institutional conditions of different locations appears to be the most beneficial for Sri Lankan smallholders.
79 FCCISL News Alert Weekly Business Highlight 12th – 18th July 2010
Daily News – July 14, 2010 GEMS AND JEWELLERY: EXPORTS TOP RS 22.4 B
Indunil Hewage
Total gem and jewellery export earnings for the first half of 2010 was recorded at Rs.22.4 billion. It was Rs.18.62 billion and Rs.26.2 billion during the first half in 2009 and 2008 respectively.
Sri Lanka’s gem export value recorded Rs.3.8 billion in the first half in 2010 while jewellery export value was Rs.722.5 million.
The country managed to earn Rs.17.5 billion as diamond re-exports during the same period.
Gem exports for 2010 increased by 20 percent when compared to last year and jewellery and diamond re- exports rose by 12 percent and 22 percent respectively in 2010 when compared to last year.
Gem export value recorded Rs.3.2 billion in the first half in 2009 while jewellery exports value was Rs.647.1 million. Sri Lanka earned Rs.14.3 billion as diamond re-exports value during the same period. Gem export value recorded Rs.5.36 billion in the first half in 2008 while jewellery exports value was Rs.987.2 million.
The country earned Rs.19.2 billion as diamond re-exports during the same perild. National Gem and Jewellery Authority, Chairman Anil Koswatte said Thailand, USA, Switzerland and Hong Kong were the main buyers for the country’s gem exports in 2009 and Thailand accounted for 28 percent gem exports in 2009.
However, USA accounted for 26 percent gem exports becoming the major Sri Lankan gem export market during the first quarter in 2010.
Belgium accounted for 76 percent diamond re-exports while Thailand accounted for 12 percent during the year 2009.
Israel was the third largest export market for country’s diamond re-exports during the same year.
USA, Germany, UK and Japan were the major buyers for country’s jewellery exports in 2009 and USA accounted for 27 percent country’s jewellery exports during the same year.
Sri Lankan gem and jewellery products in demand are rings, pendants, necklaces, bracelets and bangles.
80 FCCISL News Alert Weekly Business Highlight 12th – 18th July 2010
The Island – July 17, 2010 ISLAND-WIDE JEWELLERY SURVEY
The National Gem and Jewellery Authority has commenced an island-wide survey on jewellery designers, jewellery shops and pawn brokers for initiating strategies to boost Sri Lanka’s jewellery industry. Accordingly, steps will be taken to gradually raise the standard of Sri Lankan jewellery products to international levels by improving the talents of all jewellery designers in the island. In order to achieve this, the latest technology on jewellery designing will be introduced and plans will be worked out to deal with problems the industry is currently facing and to raise living standards of jewellery designers and technicians.
The Authority has already appointed a committee of officials to conduct the survey which will cover all districts including Jaffna, according to NGJA Chairman and CEO Anil Koswatte. He said that products of highly creative designers were displayed at the FACETS International Jewellery Exhibition where Sri Lankan and international designers exchanged experiences.
Sri Lanka finds gold again History records that there were jewellery and gem sales outlets on the road from Mihintale to Anuradhapura after the arrival of Arahat Mahinda in Sri Lanka.
The ancient written description of the Ruwanweliseya refers to the village of Rambewa - so named according to legend because at this spot gold was unloaded from carts that had broken down due to the weight of the ‘god-given gold’ that was being transported in seven carts after having been unearthed from Ranpathwila, near Anuradhapura. The unloaded gold had then been transferred to other carts. Although it is said that in later periods Sri Lanka had imported gold there’s no evidence of such imports in the country’s long history, says Chairman and CEO, National Gem and Jewellery Authority, Anil Koswatte.
Although not found in large quantities in one area surveys have revealed that Horana, the vicinity of the Nilwala River and Akuressa and Deniyaya have gold deposits, according to the NGJA Chairman.
He further says that investigations by the NGJA Assay Office have revealed that sand samples taken from Deniyaya and surrounding areas in the Southern Province contain gold while the soft sand found in gem mines and river bottoms contain not only gold but also high-value metals like titanium and uranium.
Further search for gold is being conducted under the full patronage of Minister for Environment Anura Priyadarshana Yapa and the day when there will be a demand for Sri Lankan gold from foreign countries is not far off, concludes Koswatte. 81 FCCISL News Alert Weekly Business Highlight 12th – 18th July 2010
Sunday Observer – July 18, 2010 FROM MINE TO MARKET : GEM AND JEWELLERY REVENUE TO TOP $ 1B
By Lalin Fernandopulle
Gem and jewellery, a potential export market for the country will be a US$ 1 billion industry within the next five years, said Chairman, National Gem and Jewellery Authority, (NGJA), Anil Koswatte. He said a strategic plan has been formulated to enhance the quality of gemstones and boost export revenue to achieve the target.
The gem and jewellery export development program comprises a rewarding scheme for value added exports, a fully fledged laboratory to issue international level certificates for precious stones and precious metal and a shopping mall to attract foreign buyers. Koswatte said the shopping mall will be linked to all leading hotels across the country with an outlet at the international airport.
The laboratory and shopping mall will be set up at the World Trade Centre A miner sieves for gems. within the next three months.
Koswatte said the strategic plan is formulated by industry stakeholders that comprise the Ministries of External Affairs, Economic Development, Environment and Natural Resources, the NGJA and exporters. "Income from the gem and jewellery industry was US$ 500 million last year and this year earnings would be much higher due to value added exports", Koswatte said.
"Steps taken to liberalize the gem and jewellery industry and curtail the export of stones in raw form will help generate more income to the country", he said. Sri Lanka is one of the five most important gem bearing nations in the world. The country has been known for centuries for its finest precious stones and called the 'Rathnadeepa', the island of gems. These precious stones have adorned the crowns of kings and rulers from time immemorial and have bedecked royalty world over including Queen Victoria and Princes Diana.
Currently there are over 200 varieties of gem stones in the world of which 70 are found in Sri Lanka. The State Gem Corporation set up in 1971 to face global challenges and develop and manage the entire business value chain was reconstituted as the National Gem and Jewellery Authority in 1993 to promote and develop the gem and jewellery industry in Sri Lanka.
82 FCCISL News Alert Weekly Business Highlight 12th – 18th July 2010
Stock Market
83 FCCISL News Alert Weekly Business Highlight 12th – 18th July 2010
The Island – July 13, 2010 CSE RECOVERS
Stocks closed up Monday as midcap and index heavy stocks made gains, while keen investor interest on Lanka Hospitals pushed its share price by over 50 percent, brokers said.
The All Share Price Index closed at 4,533.95, up 0.63 percent (28.26 points), while the Milanka index of more liquid shares rose 0.22 percent (11.06 points) to close at 5,105.85.
Turnover was 1.13 billion rupees, according to stock exchange provisional figures. At the end of trade there were 73 gainers and 78 losers, brokers said.
"There were retail and institutional interest midcap stocks," Rakshitha Perera, research manager at Acuity Stockbrokers said. "The market has dropped more than 2.7 percent from June 21, 2010. Hence in our view a recovery is inevitable."
The Lanka Hospital Corporation, formerly known as Apollo Hospitals closed at 39.00 rupees, up 13.50 (53 percent) with over 5.3 million shares traded, brokers said.
As of March 31, 2010, Sri Lankan Insurance Corporation had over 54 percent of Lanka Hospital, while Distilleries Company of Sri Lanka, controlled by business tycoon Harry Jayawardena owned 28.59 percent. It closed flat at 126.00 rupees.
Conglomerates, Aitken Spence closed at 1,563.00 rupees, up 62.75 on thin trading volumes, Hayleys closed flat at 300.00 rupees and Hemas Holdings closed at 35.75 rupees, down 25 cents.
John Keells Holdings, an index heavy stock closed at 205.00 rupees, up 2.00 with nearly 720,000 shares changing hands in a privately negotiated off-the-floor deal, brokers said.
Commercial Bank closed at 178.00 rupees, down 1.00, Hatton National Bank closed at 275.00 rupees, up 4.25, Nations Trust Bank closed at 52.50 rupees, up 1.00, Sampath Bank closed at 338.50 rupees, up 4.00 and Seylan Bank closed at 79.00 rupees, up 75 cents.
DFCC Bank closed at 247.00 rupees, down 3.00. Ceylon Tobacco Company, a unit of British American Tobacco closed at 310.00 rupees, up 5.00. "With the second quarter earnings expected to be stable investors would look at stocks that have outperformed peers," Perera said. 84 FCCISL News Alert Weekly Business Highlight 12th – 18th July 2010
The Island – July 14, 2010 ASIAN MARKETS MOSTLY LOWER AS CHINA STOCKS FALL
TOKYO (AP) — Asian markets were mostly lower Tuesday as a tumble in Chinese stocks tempered optimism from U.S. aluminum maker Alcoa’s earnings.
A slew of American companies release quarterly results in the coming weeks and Alcoa’s result spurred hopes that earnings season will provide reassuring signs of recovery in the world’s biggest economy.
But news from China was less encouraging with property prices falling for the first time in 18 months, in a sign that government tightening measures are having an effect. That’s good news for policymakers who hope to avoid a property bubble but has also raised concerns among investors that China’s rapid rebound from the global recession could slow.
The Shanghai Composite index retreated 1.8 percent to 2,459.65 as investors sold property developers and banks, which have lent heavily to the property sector.
Japan’s Nikkei 225 stock average was off 0.2 percent at 9,533.33 and South Korea’s Kospi was little changed at 1,734.96.
Elsewhere, Australia’s S&P/ASX 200 dropped 0.4 percent to 4,392.20 while markets in Singapore, Malaysia, Indonesia and Thailand rose.
In New York on Monday, stocks finished just slightly higher as investors grew cautious ahead of second- quarter earnings reports.
But they got some good news after trading ended when Alcoa reported upbeat results. The manufacturing giant kicked off earnings season by reporting net income of $136 million, or 13 cents share, for the quarter ending June 30. That compared with a loss of $454 million, or 47 cents a share, a year ago.
The Dow Jones industrial average rose 0.2 percent to 10,216.27. The Standard & Poor’s 500 index rose 0.1 percent, to 1,078.75, while the Nasdaq composite index rose 1.91, or 0.1 percent, to 2,198.36.
In currencies, the dollar fell to 88.49 yen from 88.63 yen late Monday. The euro slipped to $1.2588 from $1.2591.
85 FCCISL News Alert Weekly Business Highlight 12th – 18th July 2010
The Island – July 14, 2010 STOCKS CLOSE UP 0.48%
Shares closed up Tuesday as investor interest on midcap stocks pushed the market up, while high volume trading on John Keells Holdings (JKH) boosted turnover, brokers said.
The All Share Price Index closed at 4,555.83, up 21.88 points, while the Milanka index of more liquid shares rose 0.63 percent (32.18 points) to close at 5,138.03.
Turnover was 1.9 billion rupees, according to stock exchange provisional figures.
There was high investor interest on midcap stocks, brokers said.
Midcap stocks, ACL Plastics closed at 116.75 rupees, up 2.75, Ceylinco Insurance closed at 275.00 rupees, up 5.00, Ceylon Cold Stores closed at 280.00, up 4.00, Chemical Industries closed at 76.25 rupees, up 5.00 and Diesel and Motor Engineering closed at 720.00 rupees, up 8.50.
LB Finance closed at 154.25 rupees, up 14.25, Royal Ceramics closed at 159.25 rupees, up 6.25 and Union Assurance closed at 107.27 rupees, up 2.75.
The Finance Company closed at 24.25 rupees, up 3.25 with 1.34 million shares changing hands, and Hemas Power closed at 24.50 rupees, up 1.25 with 5.1 million shares traded.
Nawaloka Hospital closed at 8.25 rupees, up 50 cents with over 6.2 million shares traded, brokers said.
JKH, an index heavy conglomerate closed flat at 205.00 rupees with 3.52 million shares traded, while Hayleys closed flat at 300.00 rupees and Hemas Holdings closed at 36.25 rupees, up 50 cents.
Commercial Bank closed at 178.75 rupees, up 75 cents, Hatton National Bank closed at 274.50 rupees, down 50 cents, Nations Trust Bank closed at 54.00 rupees, up 1.50, Sampath Bank closed at 340.00 rupees, up 1.50 and Seylan Bank closed flat at 79.00 rupees.
National Deelopment Bank closed at 240.00 rupees, up 9.00, and DFCC Bank closed at 246.75 rupees, down 25 cents, brokers said. (LBO)
86 FCCISL News Alert Weekly Business Highlight 12th – 18th July 2010
Business
87 FCCISL News Alert Weekly Business Highlight 12th – 18th July 2010
The Island – July 15, 2010
ASIA PACIFIC BUSINESS CONFERENCE IN COLOMBO DRAWS IN RECORD NUMBERS
= Sri Lanka’s market increasingly vibrant, growing
= Sri Lankan chambers pen several MoUs
= Suresh Shah elected Vice Chairman
A record number of business leaders attended the 24th conference of the Confederation of Asia Pacific Chambers of Commerce and Industries held in Colombo recently. It was first time the event was hosted by Sri Lanka. Releasing the official summery of proceedings, the confederation said the event helped members to explore opportunities in Sri Lanka’s ‘growing and increasingly vibrant market’.
24th CACCI Conference 5-7 July 2010, Colombo, Sri Lanka.
Summary of proceedings 1. The Confederation of Asia-Pacific Chambers of Commerce and Industry (CACCI) successfully held its 24th CACCI Conference in Colombo, Sri Lanka on July 5-7, 2010, with a record turnout of more than 300 delegates composed largely of leading businessmen from 20 Asia-Pacific countries. The event marked the first time that CACCI organized its annual gathering in Sri Lanka. CACCI joined forces with the Ceylon Chamber of Commerce, the Federation of Chambers of Commerce and Industry of Sri Lanka, and the Sri Lanka Convention Bureau, in hosting this year’s meeting, with the view to giving their respective members the opportunity to strengthen links with each other and to jointly explore their future role in Sri Lanka’s growing and increasingly vibrant market.
2. Established in 1966, CACCI serves as a forum for promoting the vital role of the businessmen in the region, increasing regional business interaction, and enhancing regional economic growth. Towards this end, CACCI has been holding annual meetings and biennial Conferences to enable its members to exchange views on current developments and issues of concern to the business sector.
24th CACCI Conference 3. This year’s Colombo gathering carried the theme "Facing Global and Local Challenges: The New Dynamics for Economic Development". Foreign and local experts from the government, the academe, and the business sectors were invited to discuss the current challenges faced by economies in the Asian region, identify priorities on which countries and companies need to focus that can contribute to their 88 FCCISL News Alert Weekly Business Highlight 12th – 18th July 2010
competitiveness, and recommend some policy responses to the changing conditions at home and abroad that governments, international organizations, and private sector participants can adapt to ensure growth and macroeconomic stability in Asia over the medium term.
4. The session topics included: (a) "Climate Change: Mitigating its Impact on Business and Economic Development" Invited speakers shared their views on the importance of climate change mitigation and adaptation to ensure the region’s sustained economic growth; discussed issues surrounding climate change and their implications for business and economic development; and recommended policy measures and stimulate actions that need to be taken by the private and public sectors to reduce those impacts. They also examined how business could play a key role in the mitigation of climate change, through decisions to invest in researching and implementing new energy technologies and energy efficiency measures, among others.
The four session speakers included: Mr. Takashi Hongo, Special Advisor and Director General for Environment Finance Engineering Department at the Japan Bank for International Cooperation; Mr. Renton de Alwis, Former Chairman, Sri Lanka Tourism Board; Ms. Shirani Yasarathne from the International Union for Conserving Nature; and Dr. Mehdi Fakheri, Vice President for International Affairs, Iran Chamber of Commerce, Industries and Mines. The session was chaired by Mr. Annisul Huq, President of the Federation of Bangladesh Chambers of Commerce and Industry and concurrently Chairman of SAARC Chamber of Commerce and Industry.
(b) "Investing in Human Capital and Technology for Sustainable Economic Growth" Invited experts examined how the private sector and governments in the region could invest increasingly in human resources and technology to address the emerging skills requirements associated with the changes in production patterns, including capabilities in the management of technical, financial and human resources enterprises.
The speakers included: Hon (Dr.) Sarath Amunugama, Deputy Minister, Ministry of Finance and Planning; Dr. Hyeun-Suk Rhee, Director, United Nations Asia Pacific Training Cenjtre for Information and Communication Technology for Development (UN-APCICT); Mr. Ravi Peiris, Director General of the Employers Federation of Ceylon; and Mr. Chak Wong, Director of Marketing, Enterprise Solution Sales and Intel World Ahead Program, Intel Asia Pacific. The session was chaired by Mr. Sergey Vasiliev, Director, International Cooperation Department, Chamber of Commerce and Industry of the Russian Federation.
(c) "Issues on Food Security & Opportunities in Innovative Agricultur/Plantation" The speakers shared their views on major issues that impact on global food security; and put forward recommendations for long-term policy planning, identifying priority areas for investments, research and capacity required to increase agricultural production.
The invited speakers included Ms. Rebecca Cohn, Mission Director, USAID, Sri Lanka; Prof. Shabd Swaroop Acharya, Honorary Professor, Institute of Development Studies, India; Dr. Anura Ekanayake, Chairman, The Ceylon Chamber of Commerce; and Mr. Darren Lee, Board Director, Ten Ren Tea Co. Ltd. The session Chairman was Dr. Mehdi Fakheri, Vice President for International Affairs, Iran Chamber of Commerce, Industries and Mines.
89 FCCISL News Alert Weekly Business Highlight 12th – 18th July 2010
(d) "Economic Implications of an Aging Population: Challenges and Opportunities" Delegates exchanged ideas with the invited speakers on how the trend towards aging population would affect economic growth, savings, investment, consumption, labor markets, pensions and taxation. They also discussed how this phenomenon will influence living arrangements, housing demand, migration trends and the need for health care services, and what their implications are for governments and the business communities.
The session speakers include: Dr. W. Indralal de Silva, Professor and Head, Department of Demography, University of Colombo; Prof. Alfred Chan Cheung Ming, Professor and Director, Asia-Pacific Institute of Aging Studies, Hong Kong; Dr. A.T.P. L Abeykoon, Senior Fellow, Institute for Health Policy, Sri Lanka; and Mr. Tariq Sayeed, Former Chairman, Federation of Pakistan Chambers of Commerce and Industry. The session was chaired by CACCI Executive Vice President Amb. Benedicto Yujuico from the Philippines.
5. The Opening Ceremony featured Deputy Finance Minister Dr. Sarath Amunugama as the Keynote Speaker. In his speech, Dr. Amunugama welcomed the holding of the 24th
CACCI Conference in Colombo, and called on the delegates – particularly those from the CACCI member countries – to explore the trade and investment opportunities offered by Sri Lanka. He outlined some of the infrastructure development projects that are being undertaken by the government to support the economic growth of the country, as well as the policy initiatives being set in place to create an environment conducive to business development. Dr. Amunugama noted that the end of the civil war that ravaged the country for three decades had ushered in the prospects for peace and development for the country, and invited CACCI members to take advantage of the opportunities that the new era has opened up for the Sri Lankan economy.
Breakout Sessions 6. Breakout sessions on tourism, information and communications technology (ICT), SME development, youth entrepreneurship, women entrepreneurship, and textiles and garments were also conducted, with each session having its chairman, speakers and panelists.
The breakout sessions discussed trends and developments, problems and issues, and prospects for growth in the sectors concerned. They also explored possible areas of cooperation among CACCI members in each of the sectors.
7. The chairmen for the various breakout sessions included: Ms. Anna Marie Periquet, President, Anna Marie Home Collections, from the Philippines (for the Youth Entrepreneurship session); Mr. George Abraham, Chairman and Managing Director, The GA Group Pte. Ltd. from Singapore (for the SME development session); Mr. Prema Cooray, Managing Director and CEO of CCC Solutions (Pvt) Ltd. from Sri Lanka (for the Tourism session); Dr. Gwo Jiunn Huang, Fellow, Institute for Information Industry, from Taiwan (for the ICT session); Dr. Manju Kalra Prakash, Assistant Secretary-General of the Federation of
90 FCCISL News Alert Weekly Business Highlight 12th – 18th July 2010
Sunday Times – July 18, 2010 CUSTOMIZED AND WASTE-FREE TOMORROW SHOPPING
By Jagdish Hathiramani
In continuing the Business Times' tomorrow SERIES of features exploring life in the distant, or even nearer, future, and following on from last time's piece on tomorrow EDUCATION, we thought we'd again spend some time delving into yet another area of day-to-day life which everyone is familiar with: Shopping.
Shopping as a menial task will soon prove redundant, replaced by a function carried out by the kitchen of the future which will be only too happy to automatically order ingredients based on pre-programmed menus. File pic shows fruit filled displays at a supermarket. Whether you are a house- wife or house- husband, a single professional businessperson or even a school kid, you have definitely done copious amounts of shopping throughout your life. Today, even our pets have the ability to shop, with an increasing number of outlets catering specifically to them.
Even if it is just out of necessity, or as part of some full-fledged hobby or competition; shopping for food, clothes, etc. is just another universe we encounter virtually every day. As such, while the pleasure of shopping is unlikely to be traded away in the future, the hassle and waiting around inherent in the shopping experience has been targeted for elimination; or so the relevant experts assure us.
Before we truly jump into the widening canvass that is the future world of shopping or tomorrow SHOPPING, it is important for us to explain that much of the conceptualizing which has been undertaken in this field only caters to the medium term of 10 to 15 years, 2022 in fact is the farthest date for prediction that I have encountered. As such, excuse us as we are somewhat limited in this flight of fancy. Interestingly, this may be because, as some have argued that, and if much of the technology outlined in our own tomorrow HOME feature is anything to go by; shopping as a menial task will soon prove redundant, replaced by a function carried out by the kitchen of the future which will be only too happy to automatically order ingredients based on pre-programmed menus.
However, as pertains to shopping malls, the social aspect of going to a mall may very well eventually overshadow tendencies to shop for pleasure. A case in point is the Apple store experience where people don't go to buy but rather interact with others and sample iPhones, iPads, iTunes, etc. Products which they often order online, usually customized.
In the short haul however, technological innovations such as Radio Frequency ID (RFID) chips, intelligent foam, etc. will alter our perception shopping to an almost unfathomable degree, offering up effects that will change the face of grocery stores, supermarkets, and even clothing and other shops. These technologies, already being used in concept retail spaces today, are all set to overwhelm such hassles as waiting in line for the cashier or even cashiers themselves. These will also make every interaction with the shops of the future into a self service one similar in some ways to using an Automated Teller Machine but a lot less intensive, if you can imagine it.
This is because RFIDs tagged to products combined with intelligent foam covered surfaces will allow instantaneous check-out when products are lifted off their surface contact point or even when they are 91 FCCISL News Alert Weekly Business Highlight 12th – 18th July 2010
tracked leaving the store in someone’s possession, the person who will then be charged the relevant fee for the product. This RFID tag also allows a whole gamut of automated services, from inventory control to queue control and even recipe or usage suggestions, etc. as well as the chance to reduce waste as packaging no longer becomes necessary, as RFID includes more and more data and mobile smart devices are tasked with identifying more and more functions associated with the product.
Meanwhile, while RFIDs, intelligent foam and even mobile smart devices, such as today’s mobile phone which everybody owns, can benefit multiple stores formats, trends show that grocery stores of the future may only become more specialized, such as with stores becoming organic today, etc. In fact, some forecasters suggest that the future for these stores may be in-store hydroponics pods where certain fruits, vegetables, etc. can grow and be picked right from trees to guarantee freshness. Or , at the same time, data would allow shoppers to track every step in each product’s life cycle so they can choose their own or apply their own methodology to choosing what they like.
Suggested additions for future stores also include automated self service kiosks which help you plan your food budget, sommeliers to suggest wines, compare vintages and even allow you to taste samples, recycling management to facilitate the after use of products you buy or have at home, etc. In the meantime, while all your usage patterns being tracked may be chilling to some, this would mean that there will no longer be a need for you to carry a shopping list as data reader devices will be able to remind you if you have forgotten something or recommend similar items to those you have historically liked, just like Amazon.com does today with online shoppers. But beware, listen to your doctors when they tell you what you can and cannot eat because otherwise one day they may control what you can or cannot buy if they place an emergency medical alert or a lock on certain foods or beverages.
Additionally, clothing and other such stores in the future may just become experiential or social venues as clothes and other items become made-to-order to improve fit or even usability, while at the same time reducing wastage. Full body scans using sensors will facilitate real-time trying on of clothes or using of products as a part of increasingly realistic virtual reality worlds to try before you order. With sampling soon to become the main function of stores.
Shopping malls may actually feel the most radical changes according to predictions because, when products cease to be the focus, the dynamics of these will also change. Some suggest that they may increase their scope to any number of areas such as growing food, manufacturing products, generating electricity and even providing education, if needed.
In conclusion, maybe the only real clue of the distant future of shopping is the example of the Ainsworth Collective located in the Cully neighborhood of the US city of Portland, Oregon. This group of 50 households joined together out of a mutual need for sustainability and community and, as such, has created its own micro economy. The basis of which is a list of service published for access by members, all to encourage local transactions. Offering anything from tax preparation and massage services to cat- baby sitting, etc., this functionality allows them to facilitate the sharing of tools and cars as well as buying in bulk. They even have their own farmer’s market which sells their extra produce, baked goods and other items made by its members. Is this a step forward or backward? You decide.
92 FCCISL News Alert Weekly Business Highlight 12th – 18th July 2010
Climate Change
93 FCCISL News Alert Weekly Business Highlight 12th – 18th July 2010
The Island – July 14, 2010 CLIMATE CHANGE, EMISSIONS TRADING AND THE CARBON TRADE
Dr. Ruwantissa Abeyratne
Most view the environment in its simplistic sense - that it is the overall summation of all things natural. In this context, as Nobel laureate Amartya Sen observes, the pervasive common view is that this "state of nature" will remain without change as long as we interfere with it as little as possible. Sen further states that this misconception can be rejected on two counts, the first being that the value of the environment does not lie in its existing state but in the opportunities it offers humankind, and the second being that it is not sufficient to ensure that the environment is passively preserved by us but there needs to be active initiatives in educating the populace of the world on the environment and the benefits that would accrue to it by our actions such as reducing the population of the world and creating employment opportunities.
In this context, education is a paramount factor that would make us more environmentally conscious. I would add a third factor to Sen’s au fait treatise, that economic instruments which are brought to bear with a view to reducing pollution, particularly in the context of global warming, would be essential to meet the reality that, no matter what we might do to avoid interference with the environment by our enforced inactivity, the growth of world trade would force us to impose economic measures to curb greenhouse gas emissions. It is in this context that aviation and carbon trading becomes important.
The essential philosophy of emissions-trading in environmental protection is based on a certain flexibility allowed to market forces to reach the lowest cost involved in an operation whilst at the same time achieving an environmental target which has been already set. The word "trading" correctly denotes an exchange, and when applied to the aviation context means a certain trade-off between airlines whose fleets pollute more than others and low polluting airlines. The trade-off could take the form of a "purchase" by the high polluting airline of the reduction level of a low polluting airline. Emissions-trading would encourage airlines to seek innovation in technology and to reduce their emission levels.
The subject of emissions-trading falls within the purview of the Intergovernmental Panel on Climate Change (IPCC), which was established in 1988 by the World Meteorological Organization and the United Nations’ Environment Programme (UNEP) to assess the scientific basis and impact of climate change. The IPCC’s first scientific report was published in 1990 and recommended the negotiation of a framework convention to combat global warming. The United Nations Framework Convention on Climate Change (UNFCCC) was adopted on 9 May 1992 and the treaty entered into force on 21 March 1994. The UNFCCC or FCCC is an international environmental treaty produced at the United Nations Conference on Environment and Development (UNCED), informally known as the Earth Summit, held in Rio de Janeiro in 1992. The treaty aimed at reducing emissions of greenhouse gas in order to combat global warming. The treaty as originally framed set no mandatory limits on greenhouse gas emissions for individual nations and contained no enforcement provisions; it is therefore considered legally non- binding. Rather, the treaty included provisions for updates (called "protocols") that would set mandatory emission limits. The principal update is the Kyoto Protocol, which has become much better known than the UNFCCC itself. The stated objective of UNFCCC is "to achieve stabilization of greenhouse gas concentrations in the atmosphere at a low enough level to prevent dangerous anthropogenic interference with the climate system." 94 FCCISL News Alert Weekly Business Highlight 12th – 18th July 2010
Emissions-trading is explicitly addressed in Article 6 of the Kyoto Protocol which states that for the purpose of meeting its commitments under Article 3, any Party included in Annex 1 may transfer to or acquire from, any other such Party emission reduction units resulting from projects aimed at reducing anthropogenic emissions by sources or enhancing anthropogenic removals by sinks of greenhouse gases in any sector of the economy provided the parties concerned approve of such trading; and, inter alia, such trading actually results in a reduction in emission by sources.
The Third Conference of the Parties to the United Nations Framework Convention on Climate Change (Climate Change Convention) was held from 1 to 11 December 1997 at Kyoto, Japan. Significantly the States parties to the Convention adopted a protocol (Kyoto Protocol) on 11 December 1997 under which industrialized countries have agreed to reduce their collective emissions of six greenhouse gases by at least 5 per cent by 2008-2012. The Kyoto Protocol to the United Nations Framework Convention on Climate Change is an amendment to the international treaty on climate change, assigning mandatory emission limitations for the reduction of greenhouse gas emissions to the signatory nations. Article 1 (a) (v) of the Protocol calls each State Party to achieve progressive or phasing out of market imperfections, fiscal incentives, tax and duty exemptions and subsidies in all greenhouse gas emitting sectors that run counter to the objective of the Convention and application of market instruments.
Carbon trading, which is a species of the genus emissions trading is essentially market based and is usually based on a model that first that requires an environmental authority to decide on an acceptable level of overall emissions. The level, or target, once identified, gives rise to permits which are issued consistent with that target, each of which confers the right to release a certain amount of pollution over some period of time. The firms which are issued with these permits, be they airlines or other service and goods providers, may apply these permits to their own emissions, sell excess permits to other pollution sources, or purchase permits from other firms if their emissions exceed their permit holdings. An emissions permit market could be established provided there is extensive coverage of a permits system and there are no barriers to trading in such a market.
Carbon Trading essentially involves purchase contracts whereby one party pays another party in return for greenhouse gas (GHG) emissions reductions or for the right to release a given amount of GHG emissions, that the buyer can use to meet its compliance or corporate objectives concerning climate change mitigation. Trading is conducted by making payment using cash, equity, debt, convertible debt or warrant, or in-kind contributions such as providing technologies to abate GHG emissions. Carbon transactions may either take the form of allowance based transactions where -the buyer purchases emission allowances created and allocated (or auctioned) by regulators under cap-and-trade regimes, or under Project-based transactions, in which the buyer purchases emission credits from a project that can verifiably demonstrate GHG emission reductions compared with what would have happened otherwise.
Another aspect to carbon trading is carbon offsetting, which is the compensating for carbon emissions resulting from human activity. Simple human activity such as putting on a cooker or electric iron involves the production of carbon emissions that contribute to climate change. Offsets are traded in the carbon market .Therefore, simply put, a carbon offset is an emission reduction credit from another organization’s project that results in less carbon dioxide or other greenhouse gases in the atmosphere than would otherwise occur. The ICAO carbon calculator, which has already been mentioned, is a tool that assists in calculating the weight of carbon dioxide produced as a result of a passenger’s air travel that enables the passenger concerned to take effective steps in compensating for the damage caused by his carbon footprint. David Suzuki, the renowned and prize winning environmental scientist gives the 95 FCCISL News Alert Weekly Business Highlight 12th – 18th July 2010
example of wind energy companies that often sell carbon offsets. The wind energy company benefits because the carbon offsets it sells make such projects more economically viable. The buyers of the offsets benefit because they can claim that their purchase resulted in new non-polluting energy, which they can use to mitigate their own greenhouse gas emissions. The buyers may also save money as it may be less expensive for them to purchase offsets than to eliminate their own emissions.
There are numerous types of activities that could give rise to carbon offsets. installations of solar, small hydro, geothermal, and biomass energy or renewable energy such as the energy produced by wind farms as already mentioned can all create carbon offsets by displacing fossil fuels. Other types of offsets available for sale on the market include those resulting from energy efficiency projects, methane capture from landfills or livestock, destruction of potent greenhouse gases such as halocarbons, and carbon sequestration projects (through reforestation, or agriculture) that absorb carbon dioxide from the atmosphere.
There will be palpable trade consequences as a result of the Kyoto Protocol which started the concept of carbon trading. There is little doubt that greenhouse gas emission reduction will affect various sectors in the world economy, notably energy, production and transport. The commitment and action of States coming within Annex 1 to the Protocol that is calculated to meet GHG reduction targets assigned to them will affect the cost of production of traded products which will in turn affect their competitiveness in the World market. Overall trade and investment will be adversely affected as a result of the reduction in Annex I countries of the production of GHG intensive products. The result will be a lowering of the demand for industrial goods and services elsewhere leading to a decrease in the growth of overall trade and investment. Furthermore, the demand in Annex I countries for industrial products from non-Annex I countries that are not facing the Kyoto Protocol’s emission reduction commitments will be increased as the non Annex 1 States would be able to produce more cost effectively.
Whatever may be the results of emissions and carbon trading, years from now, generations to come will analyze the way in which we handled how we handled our own sustainable development. That will be our shadow.
96 FCCISL News Alert Weekly Business Highlight 12th – 18th July 2010
Daily News – July 15, 2010 CLIMATE CHANGE AND EMISSIONS TRADING : NATURE OF CARBON TRADE
Dr Ruwantissa Abeyratne
Most view the environment in its simplistic sense - that it is the overall summation of all things natural. In this context, as Nobel laureate Amartya Sen observes, the pervasive common view is this state of nature will remain without change as long as we interfere with it as little as possible. Sen says this misconception can be rejected on two counts, the first being that the value of the environment does not lie in its existing state but in the opportunities it offers humankind, and the second, it is not sufficient to ensure that the environment is passively preserved by us but there needs to be active initiatives in educating the populace on the environment and the benefits accrue to it by our actions such as reducing the Carbon emissions on large scale. File population and creating employment opportunities. photo
In this context, education is a paramount factor that would make us more environmentally conscious. A third factor to Sen’s au fait treatise is economic instruments brought to bear with a view to reducing pollution, particularly in the global warming context would be essential to meet the reality that, no matter what we might do to avoid interference with the environment by our enforced inactivity, the growth of world trade would force us to impose economic measures to curb greenhouse gas emissions. It is in this context aviation and carbon trading become important. The essential philosophy of emissions- trading in environmental protection is based on a certain flexibility allowing market forces to reach the lowest cost involved in an operation whilst at the same time achieving an environmental target which has been already set.
The word trading correctly denotes an exchange, and when applied to the aviation context means a certain trade-off between airlines whose fleets pollute more than others and low polluting airlines. The trade-off could take the form of a purchase by the high polluting airline of the reduction level of a low polluting airline. Emissions-trading would encourage airlines to seek innovation in technology and to reduce their emission levels.
The subject of emissions-trading falls within the purview of the Intergovernmental Panel on Climate Change (IPCC) established in 1988 by the World Meteorological Organization and the United Nations Environment Program (UNEP) to assess the scientific basis and impact of climate change. Its first scientific report published in 1990 recommended the negotiation of a framework convention to combat global warming. The United Nations Framework Convention on Climate Change (UNFCCC) was adopted on May 9, 1992 and the treaty entered into force on March 21, 1994.
The UNFCCC or FCCC is an international environmental treaty produced at the United Nations Conference on Environment and Development (UNCED), in Rio de Janeiro 1992. The treaty aimed at
97 FCCISL News Alert Weekly Business Highlight 12th – 18th July 2010
reducing greenhouse gas emissions to combat global warming. The treaty as originally framed set no mandatory limits on greenhouse gas emissions for individual nations and contained no enforcement provisions; it is therefore considered legally non-binding. Rather, the treaty included provisions for updates (called “protocols”) that would set mandatory emission limits. The principal update is the Kyoto Protocol which has become much better known than the UNFCCC itself.
“The stated objective is “to achieve stabilization of greenhouse gas concentrations in the atmosphere at a low enough level to prevent dangerous anthropogenic interference with the climate system.” Emissions- trading is explicitly addressed in Article six of the Kyoto Protocol which states that for the purpose of meeting its commitments under Article Three, any Party included in Annex one may transfer to or acquire from, any other such Party emission reduction units resulting from projects aimed at reducing anthropogenic emissions by sources or enhancing anthropogenic removals by sinks of greenhouse gases in any sector of the economy provided the parties concerned approve of such trading; and, inter alia, such trading actually results in a reduction in emission by sources.
The Third Conference of the Parties to the United Nations Framework Convention on Climate Change was held from December 1 to 11, 1997 in Kyoto, Japan. Significantly the parties to the Convention adopted a protocol (Kyoto Protocol) on December 11, 1997 under which industrialized countries have agreed to reduce their collective emissions of six greenhouse gases by at least five percent by 2008-2012.
Carbon trading Carbon trading, which is a species of the genus emissions trading is essentially market based and is usually based on a model that first requires an environmental authority to decide on an acceptable level of overall emissions. The level, or target, once identified, gives rise to permits which are issued consistent with that target, each of which confers the right to release a certain amount of pollution over some period of time. The firms which are issued with these permits, be they airlines or other service and goods providers, may apply these permits to their own emissions, sell excess permits to other pollution sources.
Offsets Carbon trading essentially involves purchase contracts whereby one party pays another party in return for greenhouse gas (GHG) emissions reductions or for the right to release a given amount of GHG emissions, the buyer can use to meet its compliance or corporate objectives concerning climate change
Activities that lead to carbon offsets * Installations of solar, small hydro, geothermal, and biomass energy by displacing fossil fuels.
* Energy efficiency projects
* Methane capture from landfills or livestock
* Destruction of potent greenhouse gases such as halocarbons, and carbon sequestration projects that absorb carbon dioxide mitigation.
98 FCCISL News Alert Weekly Business Highlight 12th – 18th July 2010
Carbon transactions may either take the form of allowance based transactions where -the buyer purchases emission allowances created and allocated by regulators under cap-and-trade regimes, or under Project- based transactions, in which the buyer purchases emission credits from a project that can verifiably demonstrate GHG emission reductions compared with what would have happened otherwise.
Another aspect to carbon trading is carbon offsetting, which is the compensating for carbon emissions resulting from human activity. Simple human activity such as putting on a cooker or electric iron involves the production of carbon emissions that contribute to climate change. Offsets are traded in the carbon market.
Trade consequences There will be palpable trade consequences as a result of the Kyoto Protocol. There is little doubt that greenhouse gas emission reduction will affect various sectors in the world economy, notably energy, production and transport. The commitment and action of States coming within Annex one to the Protocol that is calculated to meet GHG reduction targets assigned to them will affect the cost of production of traded products which will in turn affect their competitiveness in the world market.
Overall trade and investment will be adversely affected as a result of the reduction in Annex I countries of the production of GHG intensive products. The result will be a lowering of the demand for industrial goods and services elsewhere leading to a decrease in the growth of overall trade and investment.
99 FCCISL News Alert Weekly Business Highlight 12th – 18th July 2010
Trade Delegation
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Daily News – July 15, 2010 SBF DELEGATION VISITS SRI LANKA SECOND DELEGATION WITHIN A MONTH:
The Singapore Business Federation (SBF) led a 13 member delegation to Sri Lanka from July 11 to 15. This is the second business delegation from Singapore to visit Sri Lanka within the month.
Singapore's enthusiasm in doing business with Sri Lanka and the resulting trade delegations was due to the success of the seminar held in Singapore by International Enterprise (IE) Singapore in collaboration with the Sri Lanka Singapore Business Council of the Ceylon Chamber of Commerce and the Sri Lankan High Commission in Singapore. The SBF delegation comprised companies engaged in a wide range of commercial activity such as consumer electronics, computers and computer peripherals, beer and beverages, energy, oil/gas, real estate and infrastructure, textiles and services such as leisure and hotel management, warehousing, logistics, mining, architects, consultants, shipping, energy audit and management, Islamic finance/legal services.
The Sri Lanka - Singapore Business Council organized one to one business meetings with Sri Lankan companies interested in meeting members of the visiting delegation on July 12 at the Ceylon Chamber of Commerce.
Sri Lanka - Singapore Business Council President Shamil Mendis, made a presentation on trade between Sri Lanka and Singapore showcasing the business environment in Sri Lanka and the available investment opportunities. Mendis invited the delegates to make use of the investment friendly environment in the country taking into account Sri Lanka is a stepping stone to the entire South Asian market and in particular to the markets of India and Pakistan with which the country has Free Trade Agreements.
He stressed that there was tremendous potential for investment in the area of tourism, education and IT/BPO.
The Sri Lanka - Singapore Business Council is one of the 21 Bilateral Business Councils under the aegis of the Ceylon Chamber of Commerce and focuses on promotion of trade, tourism and services between Sri Lanka and Singapore.
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The Island – July 15, 2010 SINGAPORE BUSINESS FEDERATION DELEGATION VISITS SRI LANKA
Singapore Business Federation (SBF) led a 13 member delegation to Sri Lanka from July 11 to July 15, 2010. This was the second business delegation from Singapore to visit Sri Lanka within the month.
"Singapore’s enthusiasm in doing business with Sri Lanka and the resulting trade delegations was due to the resounding success of the seminar held in Singapore by International Enterprise (IE) Singapore in collaboration with the Sri Lanka-Singapore Business Council of the Ceylon Chamber of Commerce and the Sri Lankan High Commission in Singapore," the Sri Lanka-Singapore Business Council said in a statement.
The SBF delegation comprised companies engaged in a wide range of commercial activity such as Consumer Electronics, Computers and computer peripherals, Beer and Beverages, Energy, Oil/Gas, Real Estate & Infrastructure, Textiles and services such as Leisure and Hotel Management, Warehousing, Logistics, Mining, Architects, Consultants, Shipping, Energy Audit and Management, Islamic Finance/Legal Services.
The Sri Lanka – Singapore Business Council organized one to one business meetings with Sri Lankan companies interested in meeting with members of the visiting delegation on July 12, 2010 at the Ceylon Chamber of Commerce.
Shamil Mendis, President of the Sri Lanka – Singapore Business Council made a presentation on trade between Sri Lanka and Singapore showcasing the business environment in Sri Lanka and the available investment opportunities. Mendis invited the delegates to make use of the investment friendly environment in the country taking into account that Sri Lanka is a stepping stone to the entire market of South Asia and in particular to the markets of India and Pakistan with which the country has Free Trade Agreements. He stressed that there was tremendous potential for investment in the area of Tourism, Education and IT/BPO.
102 FCCISL News Alert Weekly Business Highlight 12th – 18th July 2010
FCCISL Events
103 FCCISL News Alert Weekly Business Highlight 12th – 18th July 2010
Daily News – July 14, 2010 SINGAPORE DELEGATION MULLS INVESTMENTS HERE
Ramani Kangaraarachchi
Singapore investors are keen to invest in construction, agriculture and real estate businesses in Sri Lanka.
A Singapore business delegation of 14 members met 30 Sri Lankan businessmen at the Federation of Chambers of Commerce (FCCISL)yesterday to discuss possibilities of establishing joint ventures.
The members of the delegation were interested in manufacturing beer brands, manufacturing equipment and machinery for the construction industry, create architecture, real estate business, manufacturing lumps and fine powders, construction material, and consultation. Singapore Business Singapore Business Federation Deputy Mission Leader V.K. Rajan said Sri Lanka has its own Federation Deputy natural resources, human resources and the right location for business. Mission Leader V.K.
Rajan and FCCISL They have to work really hard to grab the opportunity. He hoped that President Kosala Singapore and Sri Lanka can strengthen the strong relationship further in Wickramanayake future with this opportunity. exchange pleasantries.
Rajan said Singapore is also a thriving centre of commerce and industry and it has a highly industrialized economy with the manufacturing sector having the most significant contribution to GDP. FCCISL Secretary-General Tusitha Tennakoon said it is the right time to invest in Sri Lanka as there is a stable political situation.
He said that the Government has reduced import duties for vehicles drastically to improve the tourism industry. There are so many opportunities in the North and East for infrastructure development.
Also investors can import raw material and export their products to India, Pakistan and Maldives after value addition.
Tennakoon said that in 1960s Singapore looked up to Sri Lanka and now Sri Lanka is looking up to Singapore as a developed nation.
FCCISL International Affairs Head Ranjani Tudugala said both Sri Lanka and Singapore businessmen were happy about the preliminary meetings they had.
She hoped there will be fruitful results in the near future. The delegation met officials of National Chambers as well.
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