19th – 25th October 2009 FCCISL News Alert Weekly Business Highlight 19th – 25th October 2009
Content Page
1. DEVELOPMENT ECONOMICS 1.1 DON’T MISS THE ‘LUXURY’ BUS THIS TIME 04 1.2 INCREASING DOMESTIC SAVINGS VITAL FOR DEVELOPMENT 08 1.3 CHANGE EASIER AT TIME OF CRISIS 09 1.4 TEMPORARY WORKERS WORST HIT BY ECONOMIC CRISIS 10 1.5 HIGH TAXES SAID TO ENCOURAGE ILLEGAL ECONOMY 11 1.6 INDIA ECONOMY GROWING 6.5 PERCENT THIS YEAR 12 1.7 MORE THAN 2,000 COMPANIES STRUCK OFF THE REGISTER 14 1.8 LSE READY TO HELP LOCAL FIRMS RAISE CAPITAL 15 1.9 ISSUE OVER RE-REGISTERING FIRMS 16
2. INVESTMENT 2.2 SRI LANKA ABLE TO ATTRACT MORE 18 2.2 FOREIGN INVESTMENTS IN STOCK MARKET TO INCREASE 19
3 MANAGEMENT 3.1 PSYCHOLOGICAL ASPECTS IN STRESS MANAGEMENT 22
4 TRADE AND MARKETING 4.1 AS A PRELUDE TO INCREASED US TRADE AND INVESTMENT 29 4.2 EXTERNAL TRADE PERFORMANCES - AUGUST 2009 31 4.3 MARKETING AND SELLING IN TOUGH ECONOMIC CONDITIONS 33 4.4 OPPORTUNITIES IN THE RUSSIAN SEAFOOD MARKET 35 4.5 TODAY’S MARKET SITUATION A BLOODY RED OCEAN 40 4.6 MARKETEERS' ROLE AND APPROACH MORE PIVOTAL 41 4.7 TRADE EASING BETWEEN SRI LANKA AND INDIA 43
5 TOURISM 5.2 FOCUS ON RELIGIOUS TOURISM BENEFICIAL 45 5.3 SUCCESSFUL TOURISM SEASON NEEDED TO BOOST CONFIDENCE 47
6 STOCK MARKET 6.1 WALL STREET UP ON COMPANY EARNINGS EXPECTATIONS 50 6.2 THE CHALLENGE FOR PUBLIC LISTED COMPANY DIRECTORS 51
2 FCCISL News Alert Weekly Business Highlight 19th – 25th October 2009
7 MONEY AND BANKING 7.1GOVERNOR IN JAFFNA 54 7.2 'INDIA STORY' BACK AS FOREIGN MONEY SLOSHES 55 7.3 AMIDST HEAVY ACTIVITY ON BANKS 56 7.4 TEN PERCENT INCREASE DURING THIS YEAR 59 7.5 CENTRAL BANK TELLS BANK HEADS 60
8 FOREIGN EMPLOYMENT 8.1 MIGRANT WORKERS LEAD FOREIGN CAPITAL INFLOW 63 8.2 10% OF SRI LANKAN FOREIGN LABOUR FACED ABUSES 2001 64 8.3 MIGRANT WORKER REMITTANCES BUOY BALANCE 65
9 INFRASTRUCTURE DEVELOPMENT 9.1 COLLABORATE OR COMPETE TO SURVIVE AND THRIVE IN THE COMPETITIVE TELECOM MARKET IN SRI LANKA 68 9.2 TRC FUTURE THEME “BROADBAND FOR ALL” 70
10 ENVIRONMENTAL CHANGES 10.1 CLIMATE TALKS END IN DESPAIR 73 10.2 CLIMATE CHANGE AND JOBS 76
11 SMES 11.1 HP HELPS SMES WITH NEW PRINTER LINEUP 80
12. CONSTRUCTION INDUSTRY 12.1 FINACES PLAY VITAL ROLE 83
13. SHIPPING INDUSTRY 13.1 COLOMBO DOCKYARD RECORDS EXPORT REVENUE GROWTH 85
14. EXPORT AND IMPORT 14.1 INCREASING EXPORT TRENDS – GSP+ 88
15. LABOUR MARKET 15.1 EPC MOOTS LABOUR LAW REFORMS 91
3 FCCISL News Alert Weekly Business Highlight 19th – 25th October 2009
Development Economics
4 FCCISL News Alert Weekly Business Highlight 19th – 25th October 2009
The Island – October 19, 2009
DON’T MISS THE ‘LUXURY’ BUS THIS TIME!
By Dr. Sirimal Abeyratne, University of Colombo
The economist, D.R. Snodgrass is well known to many Sri Lankans who study and write about economic development in post-independence Sri Lanka. He wrote the first, most comprehensive book about development economics of Sri Lanka, titled Ceylon: An Export Economy in Transition, as far back as 1966. More than 3 decades later, he looked back at the Sri Lankan economy on which he once wrote such a valuable book, and wrote another paper. This was titled The Economic Development of Sri Lanka: A Tale of Missed Opportunities, published in 1999 as a chapter of a book edited by R.I. Rotberg. Today, 10 years after this publication, I begin to think whether Snodgrass would write an updated version of the Sri Lankan tale of "missed opportunities".
How to miss the bus? Throughout the post-independence history, Sri Lanka continued to miss the development opportunities that it had, and even the unique opportunities that most of the other Asian countries did not have. Whichever way we analyze why Sri Lanka turned back when there were opportunities, they all melt down into two things – policies and politics! With all due respect and gratitude for ending the 25-year long civil war, with that historical event coupled to a global economy in a recovery phase, now there is a luxury bus waiting for Sri Lankans to get in, and we should not miss it too.
Recent developments do not appear to be conducive to getting the economy on the right track. A glance at Sri Lanka’s position in the world shows a gloomy picture as reported by many international data reports. At the same time, even today, we are witnessing the improvements in many other countries in Asia which were once far behind Sri Lanka. In fact, we witnessed the same thing in the past too, and saw how Singapore, South Korea, Hong Kong, and Malaysia surged ahead leaving Sri Lanka behind.
Where Sri Lanka is? The World Bank’s latest report on Doing Business ranks Sri Lanka 103rd out of 181 countries in the world in terms of ease of doing business. The composite index showing the ease of doing business is estimated using the number of procedures and documentations, time delays and money costs associated with conducting business activities.
5 FCCISL News Alert Weekly Business Highlight 19th – 25th October 2009
We can cheat ourselves saying that, there are still 78 countries below the Sri Lankan position. Similarly, sometimes we also repeat nonsensical statements like "we are the highest in South Asia".
We should compare our standards with those of the best performing countries in the world in order to make sense. Singapore is the best country in the world to do business. Compared to Singapore’s ranking positions in many areas related to business, Sri Lanka performs badly.
The latest report on Economic Freedom in the World by Fraser Institute shows that Sri Lanka’s position has deteriorated during the past 5 years (2003-2007). Strikingly, fast-growing countries like China, India and even Vietnam have improved economic freedom after 2004. It is important to note that, Sri Lanka’s total accumulated foreign investment for the past 30 years amounts to USD 3.5 billion, where as Vietnam annually received USD 3.5 billion in the past few years. Also it is important to note that Singapore and Hong Kong are always on top terms of economic freedom.
Economic freedom is based on indicators representing the size of the government, legal structure and property rights, access to sound money, freedom for international trade, and regulatory mechanisms. Therefore, it is basically the government that restricts economic freedom in a country. The term ‘economic freedom’ is mostly misunderstood. It is also not regarded as equally important as political freedom. Often we forget to note that someone’s freedom cannot affect others’ freedom. In a situation where rule of law is wanting, people or institutions exercise their freedom at the expense of the freedom of others. We should know that ‘someone’s freedom to move their fist is limited by the proximity of the other’s nose’.
South Asian countries were generally regarded as countries with high level of corruption. Few years ago, Bangladesh was reported as the most corrupt country in the world, but it improved remarkably during the subsequent period. India was another country with high level of corruption. During the past few years, India has made a remarkable improvement in reducing the level of corruption. Sri Lanka, however, has moved in the opposite direction.
Another data source that can highlight Sri Lanka’s position in the world is the Global Competitiveness Report. The country competitiveness in economic performance is based on a series of indicators representing government efficiency, corruption, property rights, infrastructure, macroeconomic performance, education, health, market efficiency, technology and other. In the latest report of 2009-2010, out of 133 countries Sri Lanka is ranked 79th below India, China and Vietnam. Even in the case of competitiveness, Singapore and Hong Kong are on top among Asian countries. 6 FCCISL News Alert Weekly Business Highlight 19th – 25th October 2009
Getting the Economy on Track How do we put the economy on the fast-growing track in establishing conditions for sustaining 8-10 percent rate of economic growth for the next 25 years? There are few things we can do. =First, it is necessary to provide a competitive investment-friendly economic policy environment so that investors feel comfortable in investing in Sri Lanka than in another country.
=Secondly, it is necessary to get the macroeconomic fundamentals in order by establishing conditions for sound fiscal management and strong balance of payments position. This will improve investor confidence for long-term investments, weaken the speculative attacks emerging through short-term investments, and lessen the government’s fear for budgetary outcomes.
=Thirdly, it is necessary make the public sector more efficient and effective in order to minimize bureaucratic and regulatory hassles affecting economic activity. In fact, unless public sector reforms continue, it works as a serious bottleneck to rapid economic growth. =Fourthly, rule of law needs to be established not only by imposing laws, but also by enforcing laws in order to maintain law and order.
In order to establish conditions as above, we need to do two things. The first is to identify our own weaknesses and correct them. The second is to look at Sri Lanka’s position in the world and take measures to improve them. The indicators provided by international reports on country positions in the world can be used for setting benchmarks for Sri Lanka to improve conditions conducive to rapid economic growth.
Given the strong political stability of the country at the current juncture, it is the right time to make bold reforms and not miss the great opportunity that Sri Lanka has at this time.
7 FCCISL News Alert Weekly Business Highlight 19th – 25th October 2009
Daily News – October 20, 2009 INCREASING DOMESTIC SAVINGS VITAL FOR DEVELOPMENT Sanjeevi Jayasuriya
Domestic savings play a vital role in the country’s economy by providing the investment necessary for development. One of the key indicators of economic development is the amount of money available for investment, Wealth Trust Corporation Executive Director Mangala Boyagoda said.
Ninety percent of the Sri Lankans still believes in the banking system to save. Sri Lanka’s domestic savings is 14 percent whereas in India it is 26 percent, Malaysia 35 percent and Singapore 40 percent.
“It is important to increase domestic savings to achieve a higher GDP growth. Sri Lanka’s percentage of domestic savings is one of the lowest when compared to other countries and we need to encourage people to save. When the domestic savings are low we have to depend on foreign investment for development,” he said.
“There are a number of methods of saving for individuals, corporates and the Government. Returns from investment instruments differ depending on interest rate risk and credit rate risk.
Any investment has a certain amount of risk. When the risk is higher the return would also be higher,” he said. The measurement of the return is the inflation of a country. The saver is at the losing end if the return is lower than the inflation and considered a negative return. This reduces the purchasing power of an individual, he said.
It is time for the savers to think prudently and select their investment options, he said.
“It is necessary to conduct awareness and education programs for the savers to have an informed choice regarding savings. We are traditionally associated with banks for our saving needs and we need to move our savings options to the capital market,” he said.
8 FCCISL News Alert Weekly Business Highlight 19th – 25th October 2009
Daily News – October 23, 2009 COLOMBO PLAN SECRETARIAT SEMINAR:
‘CHANGE EASIER AT TIME OF CRISIS’ Ramani Kangaraarachchi
Change is easier at a time of crisis therefore countries must use the crisis to bring about the much needed changes in the system, said Institute of Policy Studies Executive Director Dr. Saman Kelegama at a training program for private sector development organized by Colombo Plan Secretariat at the Hilton on Monday. He was making a presentation on ‘How the Asian economies can capitalize on opportunities’.
He said that undertaking change in organizations has been difficult in some Asian countries due to the welfare, politics, and stringent labour laws but this is the best time to diversify export markets, import and aid sources, because a diversified structure is more conducive to cushion external shocks. People have seen the adverse impacts of excessive dependence on US and EU market for Asian exports, he said.
In finding solutions traditional retrenchment through VRS (voluntary retirement schemes) has to be approached with caution as adverse selection in VRS is bound to be there.
Getting them back may be more costly in the long run. Remaining staff will work in an insecure environment and their work load may increase and as a result productivity may suffer. Careful strategizing is required while looking at depleted assets, inventory and waste in minimizing cost, he said
When capitalizing on opportunities it is necessary to regulate global finance and financial markets, recognize the limitations of the information revolution, implement difficult reforms, explore new markets and look at international best practice, he said.
Dr. Kelegama said that capitalism is characterized by booms and busts but booms should not be treated as permanent and busts as temporary.
The information revolution by IT is inadequate for economic agents to act rationally and take prudent decisions at the correct time, he said.
Although it is the common practice during recession to cut the innovation and training budgets it should be a tool for getting the most out of what is already happening and when the market is small there is an opportunity to convert a small group of competitors thereby having a large effect on market share, he said.
9 FCCISL News Alert Weekly Business Highlight 19th – 25th October 2009
The Island – October 22, 2009
TEMPORARY WORKERS WORST HIT BY ECONOMIC CRISIS- ILO
A new report issued by the International Labour Office (ILO) says that workers employed by temporary employment agencies have been among the first to lose their jobs as a result of the financial and economic crisis.
At the same time, the report also observes that ratification of ILO Convention No. 181 on private employment agencies can help to promote Decent Work and ensure better functioning labour markets.
The report – "Private employment agencies, temporary agency workers and their contribution to the labour market" – points to a direct correlation between economic growth and the state of the employment agency industry, with the strong performance and expansion seen during the boom years mirrored by the weakness and contraction of the industry today.
"Private employment agencies play an important role in the functioning of contemporary labour markets. They act as intermediaries in modern labour markets, allowing enterprises greater flexibility to increase or decrease their workforces, while ensuring for the workers sufficient security in terms of job opportunities and employment standards, including pay, working time and training", the report says.
"The private employment agency industry has grown at an incredible pace over the past three decades due to the increasing need to provide workers and services to a growing and flexible labour market. User enterprises hire temporary agency workers to be able to rapidly adjust to the shifting economic realities. Since mid-2008, enterprises have used this pressure-valve function to lay off temporary workers, while often leaving their core workforce intact", said John Myers, industry specialist from the ILO’s Sectoral Activities Department and author of the report.
The biggest temporary job losses were recorded in the manufacturing sector of developed countries, most noticeably in the car industry. The report cites the example of Germany, where it is estimated that between 100,000 and 150,000 temporary agency workers lost their placements in the four to six months after October 2008. Similar trends were seen in Japan, United States, Spain and France.
"Many of the largest private employment agencies are saying that it will be 2010 at least before they see any upturn in business. This would generally happen after overtime hours and the length of the working week begin to rise among the core workforce of user enterprises, and companies’ slack capacity begins to fall. When firms consider turning to agencies to meet their needs, this will be one of the first signs that the economic crisis is beginning to end", said John Myers.
"Countries that have not yet ratified Convention No. 181 are encouraged to do so, as its implementation can be an engine for job creation, structural growth, improved efficiency of national labour markets, better matching of supply and demand for workers, higher labour participation rates and increased diversity. It also sets a clear framework for regulation, licensing and self-regulation, thereby encouraging reliability; ensuring effective protection of workers against unfair practices; discouraging human trafficking; and promoting cooperation between public and private employment services. Finally, ratification could help to promote and implement the Decent Work Agenda by ensuring protection of the rights and working conditions of agency workers", says the report.
10 FCCISL News Alert Weekly Business Highlight 19th – 25th October 2009
Daily Mirror – October 23, 2009
High taxes said to encourage illegal economy
Sri Lanka's complex tax structure and high rates are working against the government by pushing consumers to move towards the informal economy that doesn't pay taxes, a senior economist said. "The Central Bank estimates that revenue losses at import entry points due to illegal importation and under valuation of imports are in the region of 300 million rupees a day," Saman Kelegama, executive director at the think tank, Institute of Policy Studies, said.
"The Board of Investment estimated that in the mobile phone market alone illegal imports, spurred by high duty rates, have caused revenue losses in the magnitude of 600 million rupees."
Kelegama's comments came during a speech at the 14th tax oration seminar on anomalies of the tax system in Sri Lanka, organized by the Institute of Chartered Accountants of Sri Lanka, Wednesday.
Sri Lanka has one of the highest import taxes in Asia. Kelegama said a motor vehicle can be taxed as much as 300 percent from its landing cost.
Kelegama said that according to the motor traders association the number of brand new vehicles imported had plunged to 15,460 in 2008 from 25,382 imported in 2006.
"This year it is estimated to be 5,000," Kelegama said.
Unfair Taxes
However, despite the private sector being forced to pay high taxes, the inefficient public sector enjoys tax free salaries and perks such as duty-free car permits, often re-sold in the open market.
Currently there are over one million public servants in Sri Lanka.
Sri Lanka, in 1977, was one the first countries in South Asia to open-up her economy. In 1979 finance minister, Ronnie De Mel exempted public servants from paying taxes, Kelegama said.
11 FCCISL News Alert Weekly Business Highlight 19th – 25th October 2009
This was done to give a temporary relief to fast rising private sector salaries as against static public sector wages, he said. In addition to this public sector official salaries are linked to an inflation index.
Till recent times Sri Lanka's inflation was amongst the highest in Asia.
"Sri Lanka is the only country in the world where public sector servants are exempted from taxes," Kelegama said.
"The principle of excluding state workers from tax may have been valid before, but with recent across-the- board pay revisions in the public sector the pay gap between public and private sector has narrowed."
The government is desperately trying to widen the tax net as only 600,000 Sri Lankans pay income tax.
A large proportion of non-state workers resent the exemption of state sector wages from income taxes.
"This can't be justified by any tax policy," Kelegama said.
Sri Lanka's rural community engaged in agriculture does not pay taxes, despite receiving heavily subsidized fertilizer paid up from tax revenue.
Fertilizer subsidizes and handouts are openly propagated by politicians to win over rural voters.
"It would be morally difficult for the government to promote greater tax payer compliance, while maintaining tax exempt status for its own employees," Kelegama said.
"If a suitable income threshold is set, then there should be no reason to exclude public employees from tax liabilities, but such a dramatic policy shift will have to be managed well owing to its political sensitivity." – LBO
12 FCCISL News Alert Weekly Business Highlight 19th – 25th October 2009
Daily News – October 23, 2009 India economy growing 6.5 percent this year
India's economy should grow by 6.5 percent this financial year after surviving the "full fury" of the global slump, a top government advisory panel said Wednesday.
But the panel said interest rates should remain on hold until the next fiscal year starting in April to ensure that the country's nascent recovery remains on track - even though inflation is emerging as a major worry.
The panel, which advises Prime Minister Manmohan Singh on economic policy, said Asia's third-largest economy could grow by 6.25 to 6.7 percent in the fiscal year ending March 31, 2010.
But "our best estimate is that the economy will grow by 6.5 percent," C. Rangarajan, chairman of the Economic Advisory Council, said. That would make the economy "possibly the second-fastest growing in the world," the former central bank chief said.
India had withstood the "full fury of the international crisis" and "weathered the financial turbulence quite well," he told reporters.
He forecast growth next year at seven to eight percent thanks to a better global outlook and said the timing of interest rate increases from record lows would depend on "growth prospects and inflationary pressures".
Rangarajan said the central bank should continue its "highly accommodative" monetary policy this financial year but next year would need to change its stance as inflation picks up pace.
He added that "given the present signs of inflationary pressures," the central bank might "have to act earlier than the US and European economies" to tighten rates.
The panel forecast inflation, now still below one percent, would accelerate to six percent by the end of the financial year, one percentage point beyond the central bank's comfort zone. Inflation is being stoked by rising food prices due to the worst monsoon rains in nearly four decades.
"In the short-term, managing inflationary risks, particularly food-price inflation, is the biggest challenge faced by our policymakers," Rangarajan said.
His comments came a week before a policy meeting of the central bank and were another signal of opposition in government policy circles to any hardening of monetary policy.
India's ruling Congress government is fearful any early move to raise interest rates could choke fragile economic recovery. AFP 13 FCCISL News Alert Weekly Business Highlight 19th – 25th October 2009
Sunday Observer – 25, 2009
More than 2,000 companies struck off the register By Natasha Gunaratne
The Registrar of Companies has struck off 2,361 companies off the register which under the law cease to exist, Registrar D.K. Hettiarachchi told the Sunday Times FT.
These companies had failed to re-register under the New Companies Act No.7 of 2007. Mr Hettiarachchi said a recent position paper by Transparency International (TI) on the Companies Act No. 7 of 2007, raising concerns in particular over Section 487, was their opinion (See page 4). TI said many stakeholders likely to be impacted have no recourse through the Act to prevent errant business persons and directors of companies from misusing section 487 to defraud.
TI added that it gives significant opportunities for errant directors and controlling shareholders to avoid and evade liabilities and penal sanctions; due to the fact that when a company is struck off the register it ceases to be a legal entity and therefore action cannot be brought against it thereafter.
However, Mr. Hettiarachchi said there is recourse under subsection 4 of section 487 for creditors and stakeholders through subsection 4 which allows anyone who has a legitimate money claim pending in court or arbitration proceedings, to apply themselves to re-register the company. Mr. Hettiarachchi said there have been applications for re-registration by creditors under subsection 4 of Section 487 and that re- registration certificates have been issued. He added that any creditors who apply to the Registrar under subsection 4 to have a new number assigned to the company must show the steps they have taken to recover their claims.
According to information provided by the Department, 24,948 applications have been received for re- registration during the period 3 May 2007 to 30 September 2009. During that same period, 17,862 certificates for re-registration were issued and 7086 applications were held for shortcomings. From the 24,948 applications received fore re-registration, 11,303 were submitted in 2007, 12,932 were submitted in 2008 and 713 were submitted in 2009 (up to 30 September).
Of the 17,862 certificates issued by the Department for re-registration, 1,928 were issued in 2007 while 9,784 were issued in 2008. There were 6,150 certificates issued in 2009 (up to 30 September).
14 FCCISL News Alert Weekly Business Highlight 19th – 25th October 2009
Sunday Times – October 25, 2009
LSE ready to help local firms raise capital
The London Stock Exchange Group (LSE) is willing to help Sri Lankan firms raise capital in London. “Local firms in the present market context need to look at ways of raising capital as they possess immense potential to market themselves to the rest of the world. We can help local firms raise financial capital in this regard,” Xavier Rolet, CEO LSE Group told the Sunday Times FT.
He said the present environment presents immense opportunities to Sri Lanka as the country has just closed a ‘very difficult page’ (referring to the cessation of hostilities). “LSE is the number one franchise to raise primary and secondary capital (during the past year). We like to help the Colombo Stock Exchange (CSE) promote Sri Lankan firms in London, now that we are sharing the same IT platform,” he said.
Mr. Rolet was speaking on the sidelines of an event where the Securities and Exchange Commission signed an agreement with LSE -owned MillenieumIT on Tuesday to set up a new electronic surveillance system to track market manipulation and insider deals. Hesaid LSE has raised US$160 billion during the last 12 months, much more than what was raised by the next largest four exchanges put together (New York Stock Exchange, Tokyo Stock Exchange, Hong Kong Stock Exchange and Bombay Stock Exchange).
Mr. Rolet noted that Sri Lankan firms need to develop liquidity. “We have discussed with the CSE about developing liquidity in this market,” he said. He said one of the things that was discussed was how Sri Lankan firms can benefit by listing in the Alternative Investment Market (AIM), which is the largest junior market in the world operated by the LSE.
15 FCCISL News Alert Weekly Business Highlight 19th – 25th October 2009
Sunday Times – October 25, 2009 Issue over re-registering firms TI urges revision in Companies Act Transparency International Sri Lanka (TISL) is calling on the government to reformulate certain provisions in the Companies Act No. 7 of 2007 and has this recommendation in a position paper released this week following an analysis on the failure of a large number of companies to re-register under the Act.
In a press release, TISL said it believes there is ample reason to suggest a hidden agenda behind the questionable inclusion of Section 487 of the Act which aims to remove defunct companies from the register. TISL added that Section 487 was founded on the premise that there were adequate safeguards for stakeholders but TISL is arguing that there is potential for misuse of this transitional provision by errant directors and shareholders. The lacuna in the law may be used in order to escape liability to stakeholders by simple non re- registration of the companies, the press release stated.
According to TISL's position paper, since the Act was passed in October 2006, the Registrar has received 24,623 applications for re-registration and has processed 22,300. Re-registration was completed and certificates issued for 14,900 companies. Out of these, the large majority was private companies (13,409), the balance being public companies (950), public quoted companies (208) and others (333). Thus out of the 66,496 registered companies under the Acts enacted prior to the 2007 Act, only 37% have sought to re- register in terms of the provisions of Section 487. Furthermore, only 208 quoted companies have sought re- registration while the Colombo Stock Exchange (CSE) has 235 companies in its list of quoted companies.
TISL states that these statistics prove that 63% of all companies entitled to re-register under Section 487 have failed to do so. This may be due to lack of awareness, dormant and non-operational companies seeking a simple method of winding up or willful actions of directors and officers in avoiding re-registration.
TISL's analysis of Section 487 is based on 30 interviews conducted in June 2009 with leaders of business, lawyers, bankers, journalists, members of regulatory authorities, professionals, chambers and good governance civil society leaders as well as desk research. According to interviewees, the major loophole in Section 487 was its provision for the process of striking companies off the registry. When an entity is stuck off the Companies Register, it automatically extinguishes the legal status of the company. Consequently, TISL stated that Section 487 appears, prima facie, to be in conflict with the underlying principles of the Act which is to ensure the survival and continuity of a corporate entity as opposed to securing its demise.
TISL stated that many of the stakeholders likely to be impacted have no recourse through the Companies Act to prevent errant business persons and directors of companies from misusing the section to defraud. Nor are they able to take remedial measures if they have been unjustly defrauded. However, a minority of those interviewed felt that this section was created with sufficient safeguards in place to prevent misuse.
Interviews also revealed that Section 487 leaves significant opportunities for errant directors and controlling shareholders to avoid and evade liabilities and penal sanctions; due to the fact that when a company is struck off the register it ceases to be a legal entity and therefore action cannot be brought against it thereafter. The paper stated that it appears fraudulent entities can deliberately non-register in order to escape financial liabilities, legal obligations, potential investigation and consequential penal sanction.
TISL stated that it believes urgent action is needed to prevent misuse of Section 487. The state, Registrar of Companies, regulatory bodies as well as the private sector and civil society should work together to reformulate the law and ensure proper law enforcement. 16 FCCISL News Alert Weekly Business Highlight 19th – 25th October 2009
Investment
17 FCCISL News Alert Weekly Business Highlight 19th – 25th October 2009
DAILY NEWS- OCTOBER 22, 2009
FOREIGN DIRECT INVESTMENTS: Sri Lanka able to attract more HARSHINI PERERA
Despite the economic turmoil Sri Lanka will be able to attract more foreign direct investments in the second half of this year.
Compared to last year Sri Lanka will have improved opportunities in attracting foreign direct investments compared to countries such as China and India, Board of Investment (BOI) Deputy Director General (Investment) A.M.C. Kulasekera told Daily News Business.
Sri Lanka received the highest foreign direct investments of US $ 888.94 million last year. A few developed countries in the world faced a 3-7 percent decline in foreign direct investment due to the economic recession and Sri Lanka also had to face the effects of it. The foreign direct investment is expected to increase in the second half of this year and it will be 70-75 percent of the achievement last year, he said.
Countries such as India, the UK and Germany have come forward in investing in Sri Lanka in IT and BPO sector as well as in hotels and restaurants during last year and 2009.
Among the countries that invested in Sri Lanka, China holds significant place with an investment of US $ 64.760 million from January-June, 2009. India, Malaysia, the UK and Luxembourg are the countries that invested in Sri Lanka during this year.
He said that there was a US $ 72.281 million investment in sectors of textile, wearing apparel and leather in 2008 whereas this sector recorded US $ 25.076 million from January - June this year. Despite all the challenges faced by the BOI, it had adopted simplified methods to attract more investors into the country. Investors are assisted with quick responses and all the information on investments by BOI. Therefore, many investors came into Sri Lanka even in the midst of difficulties, he said.
Foreign Direct Investment of BOI Enterprises January-June 2009* -by Sector
Values in (US$ Mn.)
Sector Excluding loan Including loan US$ (Mn.) US$ (Mn.) Manufacturing 44.001 44.681 Agriculture 0.390 0.472 Services 24.388 24.608 Infrastructure 111.313 182.867 Grand Total 180.092 252.628
(* Provisional) Source: Monitoring Dept. -BOI
18 FCCISL News Alert Weekly Business Highlight 19th – 25th October 2009
Sunday Times – October 25, 2009
Foreign investments in stock market to increase
By Dilshani Samaraweera Stock market analysts are predicting large inflows of foreign funds into the Colombo Stock Exchange from next year and are expecting the rupee to strengthen against the US dollar on the back of it. “The Sri Lankan stock market will attract a lot of foreign interest from next year. Michael Preiss
The cycle of the rupee depreciating will also end. From next year there will be pressure on the rupee to appreciate,” Economic Advisor to Ceylon Asset Management, Michael Preiss, told the Sunday Financial Times in an interview.
Mr Preiss is a specialist on financial markets in emerging economies and was responsible for launching Ceylon Asset Management’s ‘Ceylon Index Fund,’ the fist index fund of the Colombo stock market. He says that a combination of internal and external factors will pull foreign funds into the Colombo stock market.
Externally, interest rates in western countries are coming down (already below 1% in many western countries) and fund managers are looking for better paying places to park their money. Internally, Sri Lanka’s comparatively higher interest rates, coupled with post-war stability and unavoidable reconstruction activities, offer high returns investment opportunities.
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“The situation in Sri Lanka will be driven very much by global forces. The interest rates in the west are so low that emerging markets are becoming more attractive to investors, and Sri Lanka’s currency can only appreciate with time. The internal situation, a country coming out of a war, is also such that markets can only improve,” said Mr Preiss.
Boom The stock market is expected to attract foreign funds faster than Sri Lanka can attract foreign direct investments. “The stock market is more liquid and capital gains are tax free. Also, as a general rule, in situations where interest rates are low, the stock market does better. At this point Sri Lanka’s interest rates are coming down. So money will come into the stock market faster than into other investments,” said Mr Preiss.
In addition to individual investors, large investment funds are also expected to use Sri Lanka to diversify their investment portfolios. “The negative war related publicity is changing. When the publicity improves from next year large pension funds and mutual funds will look at Sri Lanka. When these come in, there will be enormous pressure on the market and for the rupee to appreciate,” said Mr Preiss.
Stronger rupee Due to large inflows of foreign exchange the rupee is expected to strengthen against the dollar by end 2010. “By end of next year I would expect the rupee to appreciate by about 10% against the US dollar,” said Mr Preiss.
Faster growth With the North and East joining the country’s production process, and tourism picking up Sri Lanka’s GDP growth next year can hit between 6% - 10%, says Mr Preiss. He expects to see biggest growth from the regions outside the Western Province, again because of the current extremely low base. “Sri Lanka managed about 6% growth even with a war and very high interest rates.
Now the market size will grow because of the North and East coming into the picture. Interest rates are coming down, insurance costs are reducing and there is stability. So next year Sri Lanka’s growth rate can be in the range of 6% - 10%,” said Mr Preiss.
20 FCCISL News Alert Weekly Business Highlight 19th – 25th October 2009
Management
21 FCCISL News Alert Weekly Business Highlight 19th – 25th October 2009
Daily News – October 22, 2009 CORPORATE WELLNESS AND STRESS MANAGEMENT: Psychological aspects in stress management Dr.K. Kuhathasan Ceo: Cenlead
It is estimated that a large number of managerial level personnel are suffering from high blood pressure and heart related problems. Statistics obtained from various institutions reveals, medical bills connected with the above problems range from 40 to 50 percent of all medical bills settled by institutions. What is the cause of all these negative indicators? Stress at work! Stress management has become the number one priority of managerial staff of today. Constructive versus Destructive Stress The word stress connotes something unpleasant and undesirable. We often use the word to refer to the aggravation brought about by traffic jams, troubled relationships, dwindling, finances, or heavy work loads. This uncomfortable state of mind and disturbing physical symptoms ate all forms of distress, that is, stress, that has a negative impact. On the other hand, stress can have positive effects, such as the feeling of excitement before a speech that arouses us to "get up" for the event and perform in a superior way. Some degree of emotional and physiological arousal is necessary to motivate us for most of our daily activities. This positive stress gives us the energy we need to get up in the morning, to excel at work, and to be creative.
Episodic versus Chronic Stress
22 FCCISL News Alert Weekly Business Highlight 19th – 25th October 2009
Early in the moaning, our stress level may be very low. If we encounter traffic on the way to work and expect to be late to an important meeting, our stress level will increase. If we find that the meeting has been postponed, our stress drips back to a more comfortable level.
Throughout a normal day, week, month, or an year, we are likely to experience a whole range of stress levels, from crises to relaxation, as we react to deadlines, emergencies, weekends, and vocations.
A pattern of high degrees of stress followed by interval of relief is referred to as episodic stress. We endure the anxiety, cope with the challenge, and then relax.
Unfortunately, the stressors many people face today is job insecurity, constant deadlines, poor interpersonal relationships with bosses or co-workers-are continual.
These types of stressors put a person in a state of readiness to deal with threats that they can neither fight nor flee. They produce chronic stress, which is constant and additive. Each stressor contributes to increasing tension that cannot be released productively.
High Stress Occupation. High-stress occupations allow incumbents little control over their jobs, impose relentless time pressures, have threatening or unpleasant physical conditions, or carry responsibilities.
High - stress jobs, such as manager, foreman, and secretary, possess these high-stress characteristics, while low stress jobs such as stock handler, artisan, and college professor do not.
Job Role. Whatever the occupation, certain negative characteristics of a person's role at work can increase the likelihood of his or her experiencing stress.
Job role stressors include impossible work loads, idle periods of time, job ambiguity, and conflicting performance expectations.
Destructive stress can make you sick
* Colds and Flu Negative or destructive stress can weaken your immune system, the system of your body that defends against infection. As a result, a person under prolonged stress is more likely to become infected with cold and flu viruses.
* Tension Headaches Stress causes the muscles in your neck and head to tense up, which can cause headaches.
* Coronary Heart Disease Some studies show that prolonged stress may cause changes in your body that may lead to a heart attack. One of these changes is an increased amount of cholesterol in the bloodstream.
23 FCCISL News Alert Weekly Business Highlight 19th – 25th October 2009
Cholesterol is a fat like substance that can clog the arteries that supply blood to the heart. If a blockage of blood to the heart occurs, a heart attack may result.
* High Blood Pressure Part of the stress response is an increase in blood pressure. High blood pressure can eventually cause the rupture of a blood vessel in the brain, resulting in the loss of speech, bodily movement, and even death.
* Chronic Fatigue Prolonged stress can cause a person to feel tired all the time. This type of fatigue is different from the feeling one gets after strenuous physical exercise. Chronic fatigue is a long-term loss of energy.
* Mental illness Prolonged stress can wear down a person's psyche to the point that mental illness results. Damage to person's mind can be just as devastating as damage to the body.
There is even some evidence that people under prolonged stress may be more likely than others to develop cancer.
Stress not only can make you ill, but also can lead to injuries.
When you are under stress, you aren't able to concentrate very well, which could increase your chances of having an accident.
Physical signs
* Headaches often increase in frequency and intensity when you are under pressure.
* Muscle tension, most commonly in the head, neck, shoulders and back can be an early warning sign.
* The skin is particularly sensitive to stress. Dry skin, spots and irritation are all classic reaction symptoms.
* Digestive problems such as an upset stomach, indigestion or the development of an ulcer can be a warning sign that you are not coping well with stress.
* Heart palpitations and chest pains can often be stress - related.
Emotional Signs
* Feeling irritable and short - tempered usually indicates that you are feeling under pressure.
* Depression and a general feeling of gloom can result from stress affecting your general outlook on life.
24 FCCISL News Alert Weekly Business Highlight 19th – 25th October 2009
* Loss of confidence and self-esteem can result from the feeling of being out of control when the demands upon you outweigh your ability to cope.
* If you are feeling drained and lacking in enthusiasm, this may stem from having too many demands placed upon you.
A sense of alienation can result from an inability to cope.
Mental signs
* Lack of concentration is often a symptom of having too many things going round in your head.
* Indecision, even about trivial matters, is a classic symptom of stress.
* Memory can be adversely affected by stress. You many find that you forget facts and figures, or the names of people and places that you would usually remember.
* Stress impairs judgement, leading to bad decision-making and resulting in mistakes.
* Persistently negative thoughts about yourself or your situation is probably a sign that you are not coping well with the demands placed upon you. This will make you feel even worse.
Behaviourial signs
* Disturbed sleep patterns, whether insomnia or an increased need for sleep, are a sure sign that you are feeling stressed.
* Drinking and smoking more than usual are often attempts to find short-term stress relief.
* A reduced sex drive is a common symptom of stress. It can often increase your worries and anxiety, and cause you to withdraw from supportive relationships.
* Withdrawal from the company of friends and family or office relationships usually means that your are feeling unable to cope.
* If you find it difficult to relax and are often fidgeting and unable to sit well, you are probably under stress.
25 FCCISL News Alert Weekly Business Highlight 19th – 25th October 2009
Coping with stress
* Change your internal attitudes/ perceptions. While you may not be able to change some types of external stimuli that are stressful, you can change your internal attitudes and perceptions of these stresses. Examples include.
* Develop social supports that reduce your sense of aloneness.
* Develop a sense of humour about your situation.
* Talk about troubles with friends.
* Know yourself and your level of optimum stress.
* Balance work and play.
* Change your interaction with the environment. This strategy says that if you can "work smarter, not harder," you may be able to reduce the amount of stress on you.
* Improve your skills in areas like goal setting, time management and conflict management.
* Take assertiveness training.
* Use peer feedback as a way to identify areas for possible changes in functioning.
* Change your physical ability to cope. The most common stress reduction activities are those designed to improve the physical resources of our body to handle the stress that you experience.
* Get adequate and proper nutrition.
* Implement a fitness program.
* Cut down on intake stressors (i.e. caffeine, nicotine, sugar, etc).
* Relax, learn to loaf a little.
* Get enough sleep and rest.
* Develop some recreational activities.
26 FCCISL News Alert Weekly Business Highlight 19th – 25th October 2009
* Change your environment. If a stressor is closely related to a particular environment, find a way to place yourself in a different environment. Caution should be taken that one does not develop the style of avoiding all stressful situations, but sometimes this may be a good short - term solution. For example -
* Change job/vocation/ location.
* Develop extended education programs.
* Structure time off from work.
* Set up your job, if possible, so you can work in a variety of different program areas.
Ten-minute Yoga at your desk
* Take a deep breath and let the breath re energise you.
* Close your eyes and spend two minutes doing the deep breathing exercise to concentrate on your breathing and slow your body down.
* Sit up in your chair, with the spine straight and feet flat on the floor. Enjoy the feeling of stability.
* On an in-breath, stretch out your hands in front of you (dont' hunch the shoulders). Really feel the stretch. Rotate the wrists one way and then other for 15 seconds.
* When you cannot stretch any further, interlock the fingers so that the back of your hands are facing you and stretch upwards as far as possible. Enjoy the feeling. Gently release and shake out the arms and hands.
* End by taking a few more deep breaths. Focus on the positive benefits.
Stress levels can be managed and minimised. Manage your destructive stress. Never allow the stress, to have an influence over you.
Some studies show that prolonged stress may cause changes in your body that may lead to heart attack.
One of these changes is an increased amount of cholesterol in the blood stream. If a blockage of blood to the heart occurs, a heart attack may result.
27 FCCISL News Alert Weekly Business Highlight 19th – 25th October 2009
Trade and Marketing
28 FCCISL News Alert Weekly Business Highlight 19th – 25th October 2009
The Island – October 20, 2009
As a prelude to increased US trade and investment Enforcement of IP rights, liberalized GM food imports highlighted
The recently concluded 7th Sri Lanka US Trade and Investment Council meeting highlighted the need for a more stringent enforcement of intellectual property rights (IP). The ban on genetically modified foods (GM) was also discussed during the meeting.
The United States has asked Sri Lanka, ranked high for software piracy in Asia, to better enforce intellectual property rights and also lift restrictions on American imports like genetically modified food, LBO reported.
A visiting senior American official, Michael Delaney, assistant US Trade Representative for South Asia, said intellectual property protection was one of the concerns that figured in trade talks this week between the two sides.
"We’d like to see a strengthened focus on intellectual property protection and strengthened enforcement," he told LBO soon after talks on trade and investment between a visiting US business delegation and Sri Lankan officials.
It was the first round of talks under the US-Sri Lanka Trade and Investment Framework Agreement (TIFA) after the island’s 30-year ethnic war ended in May hen government forces defeated the Tamil Tiger separatists.
Sri Lanka was ranked the second worst offender in software piracy in 2008 for the second year running in a survey of Asia by the Business Software Alliance (BSA) industry body and industry research firm IDC.
The survey published in May showed that Bangladesh was the biggest culprit in the region last year with a piracy rate of 92 percent and Sri Lanka a close second at 90 percent.
29 FCCISL News Alert Weekly Business Highlight 19th – 25th October 2009
It mirrored a similar survey by BSA in 2007 which showed Bangladesh had the highest Asian piracy rate in 2007, at 92 percent, followed by Sri Lanka’s 90 percent.
Sri Lanka’s Director-General of Commerce Gomi Senadheera acknowledged the US concerns on IP rights and said the government was trying to improve enforcement.
"They had concerns with regard to IP. In the last few years we have made a lot of progress. We have the rules in place - it is enforcement that’s the issue."
Delaney also said restrictions on US imports by Sri Lanka had figured in the talks. "There are a variety of restrictions on US imports."
These include GM food, Delaney said. Sri Lanka introduced rules to ban GM food imports some years ago but later relaxed them after protests from importers.
Agriculture development minister Hemakumara Nanayakkara said in July this year that Sri Lanka favours GM food imports, albeit with some restrictions, and that the government was consulting US experts on allowing GM food imports and cultivation of GM crops.
Nanayakkara said imported GM food is being consumed in the island although officially it is not allowed in Sri Lanka and imports of GM food were not labeled as such.
GM crops are genetically modified to improve resistance to disease, pests or drought and improve yields, but there is a growing debate about potential harmful impacts on humans and animals. A US embassy statement said the TIFA talks this week helped attract US private sector investment in post-war Sri Lanka which would serve to generate jobs, particularly in the conflict- affected areas of the island. Among the issues discussed were Sri Lanka’s agricultural biotechnology policies, high import tariffs, intellectual property rights protection and transparency in government procurement, it said. 30 FCCISL News Alert Weekly Business Highlight 19th – 25th October 2009
Daily News – October 21, 2009 EXTERNAL TRADE PERFORMANCE - AUGUST 2009:
Export earnings on upward trend The trade deficit contracted for the eighth consecutive month in August 2009 by 76.9 percent to US dollars 116 million, recording the third lowest trade deficit during the last five years.
The cumulative trade deficit decreased by 59.6 percent to US dollars 1,627 million during the first eight months of 2009 from US dollars 4,032 million in the corresponding period of 2008, a media release from the Central Bank said.
Workers’ remittances increased by 9.9 percent to US dollars 2,195 million during this period. As a result, workers’ remittances during the first eight months of 2009 were US dollars 568 million (about 35 percent) in excess of the trade deficit.
Earnings from exports, which took on an increasing trend since April 2009, reached US dollars 710 million in August, recording the highest monthly value thus far in 2009.
Although export earnings contracted by 6.7 percent in August 2009 on a year-on-year basis, export earnings has taken on an increasing trend since April 2009.
Industrial exports declined by 6.0 percent due to lower exports of petroleum products, diamonds and jewelry, rubber products and machinery and equipment.
However, growth was recorded in the textiles and garments, food and beverages and other industrial exports sub sectors.
Textiles and garments exports rebounded by 8.5 percent, year-on-year, recording US dollars 324 million in August 2009, recording the highest earnings by the sector during the year.
However, agricultural exports, as a whole, which accounted for 23.7 percent of total exports, declined by 7.4 percent in August mainly due to the year-on-year declines in prices of rubber and most other agricultural products.
Although minor agricultural crop exports declined by 25.1 percent in terms of export values (US dollars 25 million), they grew by 34.0 per cent in terms of volume, led by substantial increases in exports of cocoa products, sesame seeds and pepper.
31 FCCISL News Alert Weekly Business Highlight 19th – 25th October 2009
Mineral exports recorded a decline of 30.1 percent, largely due to lower gem exports.
Cumulative earnings from exports during the first eight months of 2009, declined by 17.2 percent to US dollars 4,551 million compared to the corresponding period of 2008.
As a consequence, the Sri Lankan rupee appreciated significantly against both the Euro and the Sterling pound, which peaked at around Rs.140 per euro by end October 2008 and Rs.162 per Sterling pound by end January 2009, respectively.
Despite the sharp appreciation of the Rupee against these currencies, Sri Lankan exporters were able to remain competitive in the EU market.
The Sri Lanka Rupee has now depreciated sharply from the recent peak levels against the Euro and the Sterling pound by around 18.5 percent and 14.0 percent respectively.
According to the European Commission’s estimate, the total value of benefits in terms of lower import duties under the GSP+ scheme for the year 2008 was Euro 78 million which is only 1.4 percent of Sri Lanka’s total exports in the same year.
Therefore, the loss of preferential duty margin by around 6-7 percent arising from a potential withdrawal of the GSP plus facility is not expected to have an adverse impact on Sri Lanka’s exports.
Expenditure on imports declined by 34.6 percent to US dollars 826 million in August 2009, reflecting lower demand across all three major categories of imports. Further, except in the month of March, expenditure on imports in 2009 has been substantially below that of 2008.
The gross official reserves, with and without Asian Clearing Union (ACU) funds, recorded US dollars 4,045.2 million and US dollars 3,890.1 million, respectively, by end August 2009.
This includes short-term net inflows to the Government Treasury bills of US dollars 212.7 million and Treasury bonds of US dollars 797.5 million.
Based on the previous 12 month average imports (US dollars 888 million per month), the gross official reserves, with and without Asian Clearing Union (ACU) funds, were equivalent to 4.6 and 4.4 months of imports, respectively.
32 FCCISL News Alert Weekly Business Highlight 19th – 25th October 2009
Daily News October 21, 2009
MARKETING AND SELLING IN TOUGH ECONOMIC CONDITIONS:
How to sell when market is price-conscious
Series by: Prasanna Perera Marketing and Management Consultant, Chartered Marketer, CIM U.K.
Sri Lankans are price conscious for obvious reasons. Talk to any company in Sri Lanka and they will tell that consumers are becoming more and more price conscious. These company sales persons come back with the same questions - Dealers are requesting higher discounts and higher credit terms? The product off take has slowed down because of dwindling consumer incomes. Against this backdrop, it would be prudent to address the issue of selling in very price sensitive markets.
To sell at the lowest price would be any salesman's dream. Then, do we need salesman to sell at the lowest price? Competent Series by: Prasanna Perera salesman would be skilled enough to achieve sales by reducing the Marketing and Management level of price consciousness. To do this, price should be kept away Consultant, Chartered from dominating the customers mind. What are the techniques Marketer, CIM U.K. available?
Mention the price of the product at the right time, which is as late as possible! Relate the price to the value which the customer receives in return. Consider all price objections as an invitation for information.
Another logical method for playing down the importance of price, is to justify the price - both high price and low price. High prices need to be justified because people would like to avoid spending too much money. Low prices need to be justified, because people do not want to get inferior quality. Most customers tend to suspect a surprisingly low price as evidence that the seller is trying to get rid of a poor quality product or one that does not exactly fit the market.
33 FCCISL News Alert Weekly Business Highlight 19th – 25th October 2009
Price comparison Price comparison is another technique that can be adopted. A high priced product seems less expensive when it can be compared with a product that is much higher in price. The product need not necessarily be compared with something directly substitutable; the psychology works even if there is only a significant relation between the articles.
The comparison can be introduced by demonstration as well. A shaving system for instance, costs more than a disposable razor, but if a customer tries out both, he will invariably want the shaving system and will buy it if he can afford it. Take the example of a hydraulic jack. It costs more than a cheap mechanical jack but once a customer tries out a hydraulic jack, he will buy it if he can afford it.
Whenever price is mentioned in the sales presentation, also mention value. Never merely state the price. Make it a practice to follow up price statements, with a statement about the value of the product offered. Better still, talk value before and after mentioning price. Therefore, the best sequence is first value, then price, then value again.
Salespersons have a better chance in negotiating price, if he initiates the sale, rather than when acting as a mere order Salesman would do well to study the product being sold, to find every aspect of it that compensates for taker. If the customer knows what he its high price. wants and orders, price is a big element in the decision and he is on top. But if the salesman has determined his customer's needs or can sell the benefits of his offer to the customer, the relationship is more balanced. This difference emphasizes the importance of truly creative selling and how it can help in avoiding/ minimizing price based objections.
Sales negotiations Another important aspect for salesman to keep in mind is that the more complex and special a product is, the less important is the price. Salesman who market such products, must keep this facet in their minds, when conducting sales negotiations. Specially made products, strengthen the salesman's power, whilst standardized ones weaken his price bargaining position.
34 FCCISL News Alert Weekly Business Highlight 19th – 25th October 2009
In situations where high price products have to be sold 'compensation' for a high price is a good technique to employ. The customers prices objections should be dealt with by presenting all the compensatory factors. Salesman would do well to study the product being sold, to find every aspect of it that compensates for its high price. These compensating factors should be emphasized to the customer, before price based objections are raised.
Four basic rules for diverting attention from price Make every effort to market a product at a price that the market can afford. A good understanding of the market and customer buying behavior is essential. Profit targets should be aligned to market sentiments and not to internal cost requirements only.
Secondly, consciously lead the customer to concentrate his attention on the value he receives for his money, when making a purchase.
This value-for-money perspective, minimizes the 'price only' preoccupation of customers. Marketing a product as something desirable and useful to a customer is another rule to keep out price. The desirability of a product can be enhanced through the features and related benefits. Finally, a range of proper psychological techniques can be adopted to divert attention from price. Some of these techniques were highlighted in the earlier part of this article and hence, would not be repeated.
Sales persons have the tendency to bury themselves in price (price obsession). To keep price in proper perspective in the sales negotiation, the salesman himself must not be oversensitive to price. Sales people often complain that customers worry too much on price, not realizing that it is they who are hypnotized by their prices and thus lead the customer's mind to that very subject. A more positive approach consists of stressing the profitable and money saving characteristics of the product.
In this brief article, I have attempted to share some techniques on how to reduce the price related dimensions in selling. Price is inevitably an important component in selling a product but there must not be a case of highlighting the inevitable unnecessarily.
Salesman would do well to realize that they dig their own graves, by being too obsessed with prices. Instead, salesman should improve their creative selling skills and remember that selling is not selling at the lowest price.
You do not need professional salesman to sell a product at the lowest price! What is required are salesman, who are professional and understand the basic principles of demand/supply management.
35 FCCISL News Alert Weekly Business Highlight 19th – 25th October 2009
Daily News – October 21, 2009
Opportunities in the Russian Seafood Market
Russia has emerged as the 8th major market for Sri Lanka contributing to 148 six digit HS code product categories in 2008. During the last five years this market has progressively grown each year increasing from US$ 140.2 Mn in 2003 to US$ 220.8 Mn in 2008.
In the face of increasing purchasing power of the population and a steady increase in consumer demand for a number of products Sri Lanka could exploit opportunities in the seafood sector in this market particularly in regard to warm water shrimps.
This article on the Market situation of the seafood sector in Russia is reproduced from an International Journal to encourage prospective Sri Lankan would be exporters to explore market opportunities.
Seafood is one of the fastest developing segments in the Russian food industry, and most importantly it is still a long way from saturation point. According to market observers, this is due to two key reasons: firstly the rate of growth of supply; and secondly because struggling producers and suppliers have been forced to widen the range of foods they offer. Seafood is one of the fastest developing segments in the Russian food industry This means that while in previous years stores would only stock frozen shrimp, consumers can now buy the likes of octopus, mussels, scallops and cuttlefish, to name but a few.
While market evolution has pursued a course of enlarging the amount of higher-grade and expensive items on offer, consumers have also come to understand much more about the sizes, glazes and other factors that contribute to a premium-quality product.
The latter characteristic sits well with the growing welfare of the population and its pursuit of healthier lifestyles.
36 FCCISL News Alert Weekly Business Highlight 19th – 25th October 2009
Norge-Fish believes that with the growing purchasing power of the Russian population - forecast to grow at an impressive 20 percent annually for the foreseeable future - seafood consumption will not only grow in terms of quantity but will also raise its quality benchmarks too.
One of the more peculiar traits of the seafood sector, however, has been its export of raw materials and the country's subsequent reliance on imported ready-to-eat products.
It should come as no surprise, therefore, to learn that a handful of the market's local leaders have started to create their own production lines, aimed initially at producing more frozen and brined products, and with much more ambitious long-term plans.
Initially, the bill to upgrade the necessary equipment necessary to release an extra 800,000 tons of product annually on to the domestic market will cost in the region of $10 million.
However, looking at the longer term, the Russian retail market for seafood bears a very close similarity with that of Western Europe in that while there is massive market for budget or cheaper lines, such as shell on the peeled shrimp, squid tubes, fillets and rings and seafood cocktails, there is also a fast-growing and very lucrative market for expensive products such as warm water shrimp, spiny lobsters, scallops, octopus and crab.
The frozen seafood market
The frozen seafood market can be divided into three tiers: the lowest is the shell on shrimp with a size of 90/120 pieces per kg and a maximum price of $4 per kg in the medium tier are larger shrimps with a size of 50/80 pieces per kg, also included in this segment are mussels, seafood cocktails and squid, with prices up to $10 per kg lastly there is the upper segment, comprising such products as warm and fresh water shrimp, crab claws and lobster tails. Prices in this group are above $10 per kg.
Although all tiers demonstrate growth major sales are registered in the bottom tier. The upper segment shows an average annual growth of 20 percent particularly driven by sales of exotic shrimp in Moscow and St. Petersburg, cities that also seem relatively immune to seasonal fluctuations. Also creeping into the top layer over the last two years have been organic products.
The tendency is for customers who shop in the lower bracket to buy own brands of retail chains while those shopping in the tiers above prefer branded items of produces.
37 FCCISL News Alert Weekly Business Highlight 19th – 25th October 2009
This, perhaps confirms their social status and fulfils their expectations in terms of product quality.
It is also worth noting that packaging plays an important part in the decision making process of Customers. Currently the most popular seafood is packed in 200-300g, 400-500g and 1 kg vacuum- packs, both with and without backing plates.
According to Norge-Fish, the total volume of crustaceans imported in 2006 was more than 70,000 tons of which lobsters, spiny lobsters, crabs and shrimp comprised about 60,000 tons.
Of this, the contribution from shrimp imports was 46,000 tons. During the first eight months of last year, the same import group trebled in volume, year on year. The main exporters of this segment are Denmark (58 percent) and Canada (12 percent).
In 2006, Russia imported less than 11,000 tons of molluscs, including 6000 tones of squid and octopus. In the first quarter of last year imports doubled compared to the same period of the previous year. The main exporters were Thailand (16 percent), Vietnam (11 percent) and Chile (10 percent). At the time of writing, several suppliers from these countries were not allowed to export into the Russian market as a result of sanitary rule breaches.
However, Russia is not all about warm water shrimp. In the year 2007 total consumption of coldwater varieties was estimated to exceed 50,000 tones, compared with 2002 when the assessed capacity of the Russian market was just 8000 tons. The estimated annual growth of frozen shrimp consumption is about 20 percent and Russia now shares second place in shrimp consumption with both Sweden and China, after the UK in the first place.
Russia is in the unusual situation of annually catching 4 million tons of shrimps, which are almost all exported to Korea, Japan and the USA, while she imports 90 percent of the domestic shrimp requirement from Denmark and Canada.
How has this happened? The short answer is that Russian fishery companies find it much easier to catch and immediately sell to overseas markets than to undertake the very complicated process of preliminary processing and delivery to the home market.
The seafood market growth in Russia is also well supported by a growing Japanese-style food consumption. During the last two years, roe from flying fish, as well as swordfish, eel, mussels (shell-on), large octopus and langoustines have appeared on the market and have become very popular. 38 FCCISL News Alert Weekly Business Highlight 19th – 25th October 2009
Other new items are anglerfish tails, John Dory (Zeus faber) ladyfish (Elps saurus), species of parrot fish and silver pomfret (Pampus argenteus). These species can till only be found at restaurants, most of which do not need more than 10-15kg per month. However the demand is nevertheless growing.
At restaurants, patrons can also find various tunas and swordfish.
Unfortunately, these tend to be co-treated as there are no restrictions prohibiting the sale of such produce unlike in the European Union (EU).
The latest, but still extremely popular product, in restaurants are live scallops, are brought in via airfreighted from the Far East, along with species of crab and lobster.
Widely available at retail stores are species such as red mullet (Mullus surmuletus), shark steaks and fillets, seabass, gilthead bream (Sparus aurata) and red cod (Pseudophycis bachus).
The developing Russian seafood market on the whole is still very young: in the former USSR, customers could buy herring, horse mackerel, pilchards, sardine, cod and mackerel on a daily basis. Less common were flounders, halibut, squid and small shrimp: while sturgeon, canned crab meat and Pacific salmon would be rare so-called “holiday food selections”.
However by the end of the 20th Century an enormous number of species and unusual seafood appeared on the market. And yet, according to Norge-Fish, the market is still ‘very close-minded’, which means that in order to sell unusual species some traders have had to be deceitful. This has led to skinless shark fillets often being sold under the name ‘northern sturgeon’, Chilean redbait (Emmelichthys nitidus) going under the name of ‘Caspian trout’ or even ‘mountain trout’, while rock gurnard (Trigloporus lastovisa) often finds itself billed as ‘sturgeons’ fry.
Changes are also expected in the distribution sector. Most seafood is currently distributed by supermarkets and food markets, but in future it is expected that more specialized fishmonger stores will appear, selling only chilled and fresh seafood. Also the market is set to spread geographically so that while 20% of all seafood is currently sold in Moscow and St. Petersburg, the more distant regions are also being eyed by traders looking to open up new markets.
39 FCCISL News Alert Weekly Business Highlight 19th – 25th October 2009
Daily News – October 22, 2009
P RIVATE SECTOR DEVELOPMENT PROGRAM TRAINING COURSE:
‘Today’s market situation a bloody red ocean’
Ramani KANGARAARACHCHI
In today’s market situation, business people immerse themselves in overcrowded industries and saturated business opportunities, a ‘bloody red ocean’ of rivals fighting over a shrinking profit pool, said Colombo Plan Secretariat, Secretary General, Patricia Yoon-Moi Chia at the inauguration of the Private Sector Development Program Training Course organized by the Colombo Plan Secretariat (CPS) at Hotel Hilton on Monday.
She said that entrepreneurship is not about making fast money and wealth creation alone. It is the development of that can-do entrepreneurial spirit. Hence it is a distinct way of doing things and having the courage, passion and innovation to put a dream into action. Since the small and medium enterprises (SMEs) in the developing countries are adversely impacted by the current economic crisis market space will shrink and SMEs face even stiffer competition. Hence, strategic thinking is needed to look for new opportunities in the market, and it requires entrepreneurs to think outside the box, she said.
Having the training program on ‘Executing the Blue Ocean Patricia Yoon-Moi Chia Strategy’ (BOS) will provide innovative ideas to entrepreneurs making competition irrelevant and creating a new uncontested market. Although this concept is new to some people its thinking is not. Many of the businesses that exist today are previously unknown and have created their own blue ocean, she said.
This program has enabled the CPS to showcase Sri Lanka’s success stories and it will also provide an excellent opportunity for participants to establish a useful network across the Asia Pacific region.
Prominent speakers from the private companies of Sri Lanka have been invited to provide insights into their successes in the various fields at this six day (19-24) program where members from Afghanistan, Bangladesh, India, Indonesia, Laos, Malaysia, Maldives, Myanmar, Thailand, Vietnam, Pakistan, Papua New Guinea and Sri Lanka participate.
The Colombo Plan established in 1951 to enhance social and economic development of the countries of the region has expanded to 26 member countries today including non-commonwealth countries and countries belonging to regional groupings such as (ASEAN) the Association of South East Asian Nations.
40 FCCISL News Alert Weekly Business Highlight 19th – 25th October 2009
Daily News – October 23, 2009 THE PARADIGM SHIFT OF BUSINESS HAS DEVELOPED AN ENVIRONMENT OF UNCERTAINTY: Marketeers' role and approach more pivotal The current role of the marketeer is more challenging than ever. The paradigm shift of business has developed an environment of uncertainty which will not guarantee your future survival based on your past successes. Therefore, the marketeers role and approach has become more pivotal for the very existence of business with every passing day, said Tigo Sri Lanka Marketing Manager- Postpay, Gamika de Silva Here are his down to earth views. Q: What inspired you to select marketing as your career? A: I came into the marketing field accidentally. I did science for my secondary studies and I wanted to pursue my career in the armed forces. This desire was triggered as my father was attached to the Sri Lanka Air Force, but I could not reach my goal by joining the armed forces, as there were restrictions from my family. I started my career as soon as I left school being short of a few marks to attend university. This was a turning point in my life as a senior official advised me where I first started my career. He made me to take up marketing as a career since he felt that I have marketing potential and since then I have come a long way. I have no regrets for selecting marketing as a career. What inspired me further was the depth of this discipline. The beauty of this discipline is that your work is not monotonous; you get to meet new people, work in cross-functional teams, and also understand a business in-depth. Marketing not only allows enjoying what you do but it also helps to be the driving force of the business. You are a business manager as you get hands-on marketing and that is an advantage of marketing. Q: Being a frontliner of the company, what are the challenges you face in the field of marketing? A: The current role of the marketeer is more challenging than ever. The paradigm shift of business has developed an environment of uncertainty which will not guarantee your future survival based on your past successes. Therefore, the marketeers role and approach has become more pivotal for the very existence of business with every passing day. A current marketeer cannot relax saying that at one time this strategy has worked and you can rely on the same this time also. For instance, technology becomes out of date in a matter of hours, competitors come out with various strategies and then the markets evolve according to all these facts rapidly. To overcome current market challenges you need to be one step ahead always and keep challenging yourself to see what suits the market best. This paves the way for innovation and fresh thinking. I also believe that Tigo Sri Lanka, Marketing Manager-Postpay, Gamika de understanding the competitor is as important Silva as understanding the customer. Marketeers should always pre-empt how your competitor react and prepare yourself.
41 FCCISL News Alert Weekly Business Highlight 19th – 25th October 2009
At present the consumers are well educated and information is at their fingertips, hence their requirements are sophisticated. Therefore, the marketeers role becomes challenging as they have to understand the evolving consumer needs. The changes in the economic conditions have scaled down the development of markets. In most organizations, at a time of an economic downturn, the management's first attempt of reducing cost is to minimize the budget of marketing, which is not viable. However, successful companies manage to retain their marketing and advertising exposure whilst adjusting their situation to economic challenges. Q: What is the impact of the current economic crisis on your organization? A: We as a company have maintained our stance in the market and we are proud of our achievements despite the negative conditions. Q: In many companies we often see that marketeers are not represented at boardroom meetings. What is your view? A: This has been an ongoing issue for the marketing fraternity. As it is pointed out, we can count the number of marketeers at the boardroom by the fingers of one hand. This also reflects back to the marketeers whether they really deserve to be at the boardroom. In the past, marketing was considered only as a communication function, but it has changed currently as marketeers have become business managers than just communication managers. Developing the discipline of becoming a business manager is not easy. Being number savvy is a tough hurdle that many marketeers face. I feel that it is a myth than a reality that marketers are not good in numbers. It is just that you need to learn and understand to develop such a control within you. In my opinion, the limitation of marketeers in the boardroom is attributed to these reasons and only a few have excelled in it. The trend in the field of marketing is turning towards being the drivers of business and development of business management skills. This reality has to be communicated to the business fraternity and it becomes the responsibility of the marketing fraternity as a whole to uplift the image of the profession and drive the businesses and would result in the growth of the number of marketing professionals at the boardroom. Q: What are the advertising strategies that you employ in your organization? A: We do our basics right. We are precise on our segmenting, targeting and positioning. The key to success is being consistent. Q: What are the challenges you see when it comes to global branding? A: The challenges are twofold. Firstly it is identifying global opportunities. This becomes easier as the world is at your fingertips with the development of technology. The second point is to understand the consumer mindset. It is of paramount importance that your global branding strategy be localized to suit different markets. Language and social cultural barriers will be a tough task to handle. The key is your strategy to the market. Identifying the opportunity, sense, size and seize it. Q: What do you think about local marketeers? A: I am proud to state that the local marketeers are talented. I have experienced in a recent brand competition the level of talent and the sophistication that the Sri Lankan marketeer has. As a profession, marketing has grown immensely. By the time we left school accountancy, IT or Law were the main opportunities available, but today the acceptance and the belief in marketing as a profession has grown immensely. As a profession to grow in the future, I believe the marketing professionals should get involved on contributing to the fraternity. It could be through share of knowledge, experience or by means of taking responsibility to take marketing to the next level.
42 FCCISL News Alert Weekly Business Highlight 19th – 25th October 2009
Sunday Times – October 25, 2009
Trade easing between Sri Lanka and India
Indian counsellor says,’not sure of the reasons’ By Quintus Perera
Trade between India and Sri Lanka has eased in recent months by around 40% compared to booming trade earlier but the reasons for the decline is unclear, said Santosh Jha, Counsellor (Economic and Commercial) High Commission of India in Sri Lanka.
He was speaking at a press conference in Colombo last week to announce the holding of EXCON 2009, the 5th International Construction Equipment and Construction Techno logy Trade Fair to be held at the Bangalore International Exhibition Centre, Bangaore, India from 25 – 29 November. He said that earlier economic relations between India and Sri Lanka were very fast where every week there were some developments taking place.
The Free Trade Agreement between the two countries augmented economic relationship and both countries made great achievements due to this FTA, he said adding that Sri Lanka benefitted more by this FTA.
The exhibition which is the second largest in the world and in the South Asian region held every two years was officially introduced in Sri Lanka at the Road Show held in Taj Samudra on Wednesday. The largest exhibition is conducted in Germany organized once every three years. Anand Sundaresan, EXCON 2009 Steering Committee, CII Member and Managing Director, Schwing Stetter India Pvt Ltd MD said that the exhibition would offer opportunities for those who look for the latest construction equipment and technology available in the Indian market.
He said that at the 2007 EXCON the sales reached Indian Rs 4,000 million, there were 30,000 visitors with 250 participating exhibitors. He said that this year they are expecting 350 exhibitors with country pavilions from China, Italy, South Korea, Germany and UK.
43 FCCISL News Alert Weekly Business Highlight 19th – 25th October 2009
Tourism
44 FCCISL News Alert Weekly Business Highlight 19th – 25th October 2009
The Island – October 20, 2009
Focus on religious tourism beneficial By Mario Andree
Sri Lanka Tourism Development Authority (SLTDA) plans for 30,000 hotel rooms and new resorts to grow the economy of Sri Lanka. The targeted tourist arrival Sri Lanka hopes for by 2016 has been calculated to be two million according to the SLTDA web page.
According to the Director General of SLTDA S. Kaleiselvam "The target we have is to get 2.5 million arrivals by 2016,"
"The major developments for new hotels are taking place in the North and East, we already are working on four major projects in the area" he said.
The fact of climate change is now a topic and many countries are in a debate, "The developed countries like USA did not see the consequences of major development, now after the catastrophe happened they demand the environment to be made stable,
"Sri Lanka as a developing country has a plan and has methods to prevent the environment from further destruction, the new hotels and resorts which are coming up will also play a role in helping the environment,
"We already are planning and adopting methods to preserve and develop the environment, as it places a vital role in the tourism industry,
"The threat of taking over lands from the owners in the developing areas is a false alarm, as there are plenty of lands just open with a good potential for development,
"Already foreign investors have called to help develop the areas, the targeted investor group is from Europe," Kaleiselvam told the Island Financial Review.
"There are many sites which are being developed to attract the tourists to achieve the target, and now we are largely focusing on religious tourism." Chairman Bernad Gunathilaka said.
45 FCCISL News Alert Weekly Business Highlight 19th – 25th October 2009
"We see there are a large number of visitors arriving to the country, to get a glance of our religious activities,
"Esala perahara is one of the largest celebrations in Sri Lanka and many from Europe arrive to watch this historical event,
"We had never seen the Hindu religion Activities and Historical sites as a potential before, but now we see the high demand and the high value of the Ramayana trail which we and India only share,
"The trail is unique and we have around 50 sites in Sri Lanka which has great value and which no other country competes for," he said.
India has the second highest stand in the number of arrivals to Sri Lanka. According to the Statistics of SLTDA 3,000 devotees visited these sites last year. The target for this year is 5,000.
Our goal is to have 100,000 arrivals from India with in the next three years. The Indian market is a two way process according to SLTDA, Sri Lanka has 80 percent Buddhists who travel to India for a glimpse of the culture, and 80 percent of Indian Hindus travel to Sri Lanka to get a glimpse of the historical sites.
46 FCCISL News Alert Weekly Business Highlight 19th – 25th October 2009
The Island - October 23, 2009
Economic growth to double in 2010 Successful tourism season needed to boost confidence By Devan Daniel
A Chartered Wealth Manager says Sri Lanka’s economic growth could almost double in 2010 as peace takes hold of the country, and a successful tourism season this year-end would help bring much needed confidence to the country’s economic actors, but warns against complacency.
Michael Preiss, who is Economic Advisor and member of the Director Board of Ceylon Asset Management—fund managers of the Ceylon Index Fund that invests in the TOP 10 index companies on the CSE, Director and Research Fellow of the Hong Kong based Asian Bond Market Forum, firmly believes the end of the decades-long war would in its self bring economic dividends but needed hard work to make it sustainable.
"Now that there is peace and virtually two new provinces contributing to the economy (the North and East caught in the deadlock of the thirty year war) Sri Lanka’s economy can grow by 6 to 8 percent in 2010," Preiss told the Island Financial Review in a recent interview.
The Central Bank’s revised GDP growth rate for this year is in the range of 3.5 and 4.5 percent and Preiss believes growth could double next year.
"Now that there is peace, the economy can only grow. Sri Lanka has experienced a vicious spiral for so long because of terrorism, high interest rates and high inflation. But things have changed now, and the country is in a virtuous spiral," he said.
"People need to believe in themselves. It is human nature, after a bad experience, to keep looking over their shoulders. It is like driving a car with your eyes constantly looking at the rear-view mirror. Sri Lanka needs to look forward.
"I believe a strong tourism season at the end of this year will help restore confidence in the economic actors of the country and make them believe in themselves," Preiss said.
The onset of peace after the war ended last April has also lifted Sri Lanka’s profile as a destination for foreign investors and Preiss said this would only continue and believes peace it self would bring economic growth.
"But, Sri Lanka needs to guard against complacency. The risk now is that the opportunities that have been opened up would not be taken. The government needs to start with a new slate and restore investor confidence," Preiss said.
47 FCCISL News Alert Weekly Business Highlight 19th – 25th October 2009
Fiscal imbalances...work like mad...
Sri Lanka has suffered from fiscal imbalances for decades, and the government is committed to bringing down the fiscal deficit (to about 5 percent of GDP by 2013 as per commitments with the IMF) according to the Fiscal Management Responsibility Act.
"It is okay to run a fiscal deficit. The government would have to borrow more in order to kick-start development activities. Fiscal prudence is not the wisest thing right now; it is not the right time for that. In fact, it could be a mistake to try to cut down spending," Preiss said.
"What is needed now, however, is for the government to spend right and spend wisely. Now that the war is over, the government can virtually start with a clean slate to rebuild the economy," he said.
"Now is the time to work like mad and earn the trust of all the stakeholders to the country’s economy. There must not be half hearted ministry-level goals. Everybody would have to pull together. The biggest risk facing Sri Lanka now is complacency," Preiss said.
A government think-tank in a recent report said Sri Lanka needs to maintain fiscal flexibility in order to respond effectively to the needs of the once war-torn regions of the North and East.
"Fiscal developments so far in 2009 have been unfavourable. Revenue growth has contracted sharply by 9.6 percent during January-April 2009 compared to a growth of 24 percent in the corresponding period in 2008. Expenditure has grown at 28 percent—slightly above the 24 percent growth recorded in the corresponding period in 2008," the Institute of Policy Studies said in its flagship publication ‘Sri Lanka: State of the Economy 2009.’
"As a result, the overall budget deficit estimate for the period has doubled to 4 percent of GDP relative to the 2.1 percent recorded in the same period of 2008.
"These developments suggest that Sri Lanka’s fiscal situation is set to weaken considerably, contrary to the optimistic fiscal deficit target of 6.5 percent of GDP announced in November 2008 in the government’s budgetary estimates for 2009," the IPS said.
"Indeed, the revised fiscal target of 7 percent of GDP announced following the Letter of Intent with the IMF also looks to be similarly optimistic," it said.
"The immediate response calls for rationalisation of expenditures—cutting back on profligate expenditure— so that priority areas are not duly affected," the IPS report said.
48 FCCISL News Alert Weekly Business Highlight 19th – 25th October 2009
Stock Market
49 FCCISL News Alert Weekly Business Highlight 19th – 25th October 2009
Daily News – October 21, 2009 Wall Street up on company earnings expectations
US stocks climbed to fresh highs for the year Monday amid optimism on third quarter corporate earnings in a reflection of recovery prospects from prolonged recession.
The Dow Jones Industrial Average rose 96.28 points (0.96 percent) in final trades to 10,092.19. The key index had slipped below 10,000 on Friday, two days after breaching the sensitive mark for the first time in more than a year.
The Nasdaq composite added 19.52 points (0.91 percent) to 2,176.32 and the broad-market Standard & Poor's 500 index rose 10.23 points (0.94 percent) to a provisional close of 1,097.91.Stocks rose from the opening bell on early expectations that a series of financial results of companies expected this week will beat Wall Street projections.
"Third quarter earnings should soon end as a market stimulus," said Wells Fargo Advisors' chief market strategist Al Goldman.
He said that the stock market was resilient "despite a ton of problems and uncertainties" with "still a great deal of buying power on the sidelines."
"Bullish talk is way up, but bullish action by long-term investors has been modest," Goldman said.
The Dow's rise above 10,000 last week sparked a spate of celebrations but also provoked some skepticism about whether the market has gotten ahead of the economy and corporate earnings.
Gains were inspired earlier in the week by better-than-expected earnings from key firms including JPMorgan Chase, Goldman Sachs and Google, among others, but the mood was dampened by disappointing results later from Bank of America and General Electric.
This week, about a dozen Dow-linked companies and 135 member companies of the S&P 500 index are due to report their results. AFP
50 FCCISL News Alert Weekly Business Highlight 19th – 25th October 2009
The Island – October 23, 2009
The Challenge for Public Listed Company Directors By Dinesh Weerakkody
An Indian MC speaking at a Luncheon meeting in India on the topic "The Director’s life" said mention the phrase board of directors" to the average investor, and they are likely to conjure up images of nicely dressed men and women seated around a teak table, smiling congenially and attending the odd board meeting. This is entirely understandable; many annual reports prominently feature glossy photographs of just such scenes. Then, he said, ask the investor to describe the primary responsibility of the board of directors and very few will be able to give you a definitive answer. At the core of corporate governance, of course, is the role of the board in overseeing how management serves the short term and long-term interests of shareholders and other stakeholders. Therefore, a board’s role he argued is to enhance shareholder value and the long-term financial performance. It agrees strategy and assesses its effectiveness by, for example ensuring that company operations are in line with strategy; and monitoring financial and key executive performance. Then some other matters are delegated to committees like the audit committee ( to monitor financial reporting and internal controls), the nominations committee ( to monitor directors performance and board appointments), the remuneration committee (to approve executive remuneration and incentive arrangements) and corporate/strategy/risk and social responsibility committees are becoming increasingly common.
Right Balance This he argued underscores the need to have a mixture of the right mix of talent on a board i.e. age, education, skills and varying experience. Therefore, he argued if seat-warmers on a board were re-elected unanimously, that means the entire board voted for them too and to endure an ineffective or otherwise dysfunctional fellow director in a public listed company is a recipe for disaster. However, he said this is not to slam boards. As a whole, they add real value. Nevertheless, boards frequently tolerate troublesome performance from one or two of their members; it is simply too time-consuming or impolite to eradicate. In addition, that, unfortunately, is why too many board directors do not make the full contribution they could, and should. Then some Directors in listed companies in India he said are too busy with their own companies, other directorships or their lives in general to care about a particular board. He observed that some directors do not have the passion to work up any interest. Still others lie low for job security. In most Asian markets, the speaker observed prestige is often the reward. As a result, many do not wish to challenge or probe data given at meetings. Nor do they venture out into the field to check the pulse of the company, 51 FCCISL News Alert Weekly Business Highlight 19th – 25th October 2009 checking to make sure that what they are hearing in the boardroom about values and strategy matches what employees are feeling and saying. Further, he observed some directors lack courage-a key characteristic of any good board member. With every public or private challenge, they pollute the boardroom by hyperventilating for a settlement, even if it means selling out on principle just to get out of the crosshairs. Sure, a board must settle a dispute on occasion, but never before seeing the organization through a thoughtful discovery of the facts. Such a process creates a culture of trust between management and the board, and it is only in such an environment that risks can/will be taken. Responding to a question from a chairman of a manufacturing outfit about the basic hygiene skills, a director needs to have to become an effective board member and whether some boards have its own powerful Non Executive Director committee within the board to take key decisions. The speaker observed a director should be an expert or a generalist’s, be commercially savvy, credible, willing to commit time and have the courage to take those tough and unpopular decisions. As to having a secretive board-within-a-board the speaker argued that turns other directors into second-class citizens such a dynamic decommissions the majority of the board’s brain- and what a waste that is – but it also undermines the board’s relationship with the rest. In conclusion he said directors must focus on the big picture issues like CEO succession and strategy, meeting with the high- potential talent and discussing industry dynamics, without getting caught up in all operations details, because board members are there for their special expertise, wisdom, sound counsel and judgment, not for the day-to-day running of the business. In the final analysis, as a board member, it is easier, he argued to let a couple of benchwarmers stand around until retirement and to tolerate a few disruptions for the sake of peace, but the problem is, companies that uses public money to run their operations and make money-selling products to the public need to be much more responsible, accessible and be accountable to the public than ever before. Therefore, all those listed companies need to get their management firstly, to understand the anticipated performance of the company and secondly ensure the company is on track, because no one can keep a Board on its best behavior but the Board itself. In fact, Professor Sonnenfeld in an article in the Harvard Business Review "What makes great boards great", identified four characteristics of successful boards. Firstly, they operate in a climate of trust, based on timely access to relevant information and people, without meddling in day to day operations. Secondly, they foster informed dissent and discourage silent board members. Thirdly they don’t typecast board members. You need "big picture" individuals who have the technical capacity to probe individual businesses and products. Fourthly, they ensure individual accountability and evaluate performance of directors as rigorously as is done for top management. There may be lessons here for Sri Lankan companies.
52 FCCISL News Alert Weekly Business Highlight 19th – 25th October 2009
Money & Banking
53 FCCISL News Alert Weekly Business Highlight 19th – 25th October 2009
DAILY NEWS – OCTOBER 19, 2009 GOVERNOR IN JAFFNA : CB APPROVES 134 BANKING CENTRES IN NE Sanjeevi Jayasuriya
The banking sector needs to play a major role in the economic activities in the Northern and the Eastern provinces. We need to ensure that the financial infusion takes place in these provinces. As the Central Bank (CB) we monitor and follow up the banking activities closely for the smooth functioning of the banking system, said Governor Central Bank Ajith Nivard Cabraal.
We need to provide assistance for the Northern and the Eastern provinces to revive economic activities and for the development. The banking sector is an essential component in the economic development in the area, he said.
The Governor will visit Jaffna today to open branches of NDB and Bank of Ceylon.
There are 53 bank branches in the North and 89 bank branches in the East at present. With 19 extension offices and 187 student and postal units, a total of Ajith Nivard Cabraal 259 banking centres are in operation in the North. In the East, there are 44 extension offices and 253 student and postal units - a total of 386 banking centres, said Assistant Governor Ananda Silva.
The Central Bank has given approval for 26 branches and nine extension offices in the Eastern province whereas for the Northern province approval was given for 41 branches and 43 extension offices since April. There are also 15 mobile units in IDP camps, he said.
The banking industry in these provinces would face the problem of the lack of skilled manpower. Though, there will be employment opportunities in the areas, finding suitable employees will be a difficult task, he said.
It will be important to have a mechanism to provide job oriented training and Governmental support is necessary in this regard.
Many people have left the area due to war and it is important to set up a training facility, he said.
There are opportunities for the banking sector in the areas of agriculture, fisheries, livestock, tourism and services such as boat bunkering, he said.
54 FCCISL News Alert Weekly Business Highlight 19th – 25th October 2009
Daily News – October 19, 2009 'India story' back as foreign money sloshes in The "India story" is back as the country's stock market soars and foreign investment pours in, lured by robust economic and corporate numbers, but some analysts see warning signs flashing.
Foreign investors have been racing to put their money into Asia's third-largest economy, drawn by a slew of upbeat economic indicators and healthy quarterly corporate earnings growth.
The positive numbers have lifted the gloom that set in after the global economy soured. But now some analysts worry investors may be getting carried away in their enthusiasm for Indian assets.
"The market is getting overbought," Amitabh Chakraborty, equities president of New Delhi-based Religare Securities told AFP. "One should be extremely cautious. Most of the good news is already priced in."
Others, though, such as brokerage Morgan Stanley, say the benchmark 30-share Sensex index could rise by another 13 percent by the end of 2009, driven by strong company earnings. The index is already up nearly 80 percent so far this year - ranking it among the top 10 performers globally - as foreign investors have pumped in 13.6 billion dollars into stocks.
They have snapped up shares from banking to construction to infrastructure, erasing last year's outflows. India's rupee is also on a winning streak, trading near 46 to the dollar after plunging to a record low of 52 in March and many analysts expect it to firm more as the central bank uses a stronger currency to check inflation. Last year, as economic growth faltered, the situation was radically different with risk-shy overseas investors rushing for the exits.
The withdrawal of funds drove the Sensex in full-year 2008 down 52 percent - its worst slide in three decades - and put the brakes on the so-called "India story," a reference to India's rosy investment prospects. But analysts now say foreign investors are increasingly looking at the country as a hedge against a weakening dollar, attracted by signs of an economic rebound.
"India is turning out to be a hot investment destination," said C.K. George, managing director of Geojit BNP Paribas Financial Services. Last week, figures showed India's industrial output jumped by 10.4 percent in August, its biggest leap in 22 months, on the back of double-digit growth in manufacturing, mining and electricity production.
"India's industrial sector is back and back with a vengeance," said HSBC economist Robert Prior- Wandesforde. But analysts caution the strong indicators are in large part due to government stimulus and aggressive interest rate cuts. "We're not yet back on a high-growth path," said Dharmitikirti Joshi, principal economist at leading ratings agency Crisil. Economists note credit demand growth is still weak, showing India's economy is a long way from firing on all cylinders.
55 FCCISL News Alert Weekly Business Highlight 19th – 25th October 2009
DAILY NEWS – OCTOBER 19, 2009
AMIDST HEAVY ACTIVITY ON BANKS Market steady
The market opened on a high note on Monday but however settled into a narrow trading range as the week progressed. Nevertheless the activity levels continued to remain strong with high interest seen on banking sector stocks. Comparing Week on Week (WoW) the ASPI (All Share Price Index) rose by 16.6 points or 0.5 percent to close at 3131.9 points, while the MPI (Milanka Price Index) improved by a higher 42.7 points or 1.2 percent to close at 3546.9 points.
A 7.3 million quantity of banking sector counter, HNB, traded during the week with larger chunks being traded during the early part of the week, which were reportedly sold by Browns' Group. On Monday the counter managed to contribute Rs.866.0 million, towards the day's turnover with a total of 5.0 million shares trading on the back of renewed foreign interest. During the week, the counter was seen trading between a range of Rs.169.75 and Rs.175.00 per share to close at Rs.170.00 per share on Friday while contributing Rs.1.3 billion towards weekly turnover which led the counter becoming the highest contributor towards this week.
Market heavyweight counter JKH also managed to contribute notably towards weekly turnover this week, even though the volumes traded remained slightly lower compared to last week.
56 FCCISL News Alert Weekly Business Highlight 19th – 25th October 2009
The most part of the volumes were traded on Thursday, which saw 1.4 million of 2.6 million shares traded for the week. During the week JKH traded within a price range of Rs.153.00 and Rs.155.00 per share. The contribution towards weekly turnover amounted to Rs.400.9 million, however the share closed 0.5 percent lower compared to last week at Rs.170.00 per share.
Attention was drawn towards banking counters this week, as trades in HNB, Commercial Bank (COMB), DFCC, Seylan Bank (Non Voting), Pan Asia and Nations Trust managed to come within the top 10 contributors for the week.
The week saw 2.0 million COMB shares trading, with the contribution towards turnover amounting to Rs.358.7 million while WoW the share closed 5.6 percent higher at Rs.190.25 per share. DFCC, which became the fifth largest contributor, injected Rs.344.8 million while trading a total of 2.2 million shares. Similarly, DFCC share too showed an improvement this week, which closed 7.4 percent higher WoW at Rs.164.25 per share on Friday.
Among the other counters which saw interest during the week were Browns amidst the speculation over the sale of HNB shares held by the company. During the week 2.2 million Browns shares traded with its share price showing an 8.4 percent increase WoW to close at Rs.84.00 per share. Contribution towards weekly turnover from the counter amounted to Rs.347.7 million. Activity levels remained high during the week, with total turnover amounting to Rs.6.4 billion, higher than the Rs.5.6 billion posted last week. The average daily turnover stood at Rs.1.3 billion, showing a growth of 15.6 percent WoW. Foreign participation too was slightly higher at 26.0 percent of total activity, as trades on the highest contributed stock HNB went through as foreign trades. Foreign purchases totaled to Rs.2.2 billion and foreign sales amounted to Rs.1.3 billion, resulting in strong net foreign inflows of Rs.1.1 billion.
Amongst the heavily traded stocks this week were, Tess Agro, Seylan Bank (Non Voting), Piramal Glass, Sierra Cable and Dialog.
Point of View
Stick to fundamentals
As we expected the market witnessed high activity throughout the week, backed by strong investor sentiments. The ASPI however gained only 16.6 points Week-on-Week while the more liquid MPI climbed 42.7 points.
57 FCCISL News Alert Weekly Business Highlight 19th – 25th October 2009
We do not expect any sharp change in investor sentiments over the coming week, thus the market would hold steady backed by healthy activity levels. The third quarter corporate earnings season has now begun. While the overall expectations on third quarter earnings remain mild, any weaker or better than expected company earnings could affect short term market direction. Earnings in the 2Q of 2009 witnessed a drop, largely on the back of poor earnings reported by Telcos (Refer graph below).
According to our analysis corporate earnings excluding the Telecom sector witnessed a 49.9 percent improvement Quarter on Quarter (QoQ). While, third quarter earnings are likely to witness an YoY drop, we believe QoQ earnings would show a notable improvement.
While economic, political developments and participation of foreigners in the market are likely to be key factors driving the market, short term fluctuations would also trace corporate earnings announcements for the third quarter. In our view the real recovery of earnings would be seen during the final quarter and as such we advise the investors to focus on the medium term and stick to fundamentally sound counters.
The information contained herein has been compiled from sources that Acuity Stockbrokers (Private) Limited (ASB) believes to be true and reliable but we do not hold ourselves responsible for its completeness or accuracy. No matter published herein create any liability of any kind on ASB.
All opinions, views, findings and conclusions included in this report constitute ASB's judgment of this date and are subject to change without notice. ASB has the sole copyright for this report and the information and views contained cannot be reproduced or quoted in part or whole in any form whatsoever without the written permission from ASB.
58 FCCISL News Alert Weekly Business Highlight 19th – 25th October 2009
Daily News – October 21, 2009
TEN PERCENT INCREASE DURING THIS YEAR:
Government targets Rs.850 b tax revenue Harshini Perera The country is targeting Rs.850 billion through the tax revenue this year and expects to increase its revenue by 10 percent during this year.
State Revenue, State Finance Minister and Finance and Planning Deputy Minister, Ranjith Siyambalapitiya told Daily News Business the tax income of the departments of Customs, Excise, Inland Revenue and the Registrar of Motor Vehicles (RMV) was Rs..780 billion last year.
It is expected to increase the income to Rs.850 billion this year which is a 10 percent growth compared to the last Minister Siyambalapitiya year, he said. There has been a slow down in the Government income received during the first and second quarters of this year. The expected foreign exchange earnings decreased somewhat this year due to the global economic downturn. But after the end of the war the situation improved. Even then the 10 percent loss of foreign exchange earning could not be prevented.
Compared to the past few years, the inflation rate has decreased to 0.7 percent this year despite the difficulties faced by Sri Lanka. This is a good sign of a better economy in the coming years, he said.
Under the provisions of the Constitution, the Government could only spend the money passed by the annual budget until December 31 this year. Hence, the Government has to present the Vote on Account before December 31, 2009, he said.
59 FCCISL News Alert Weekly Business Highlight 19th – 25th October 2009
The Island – October 23, 2009
Central Bank tells bank heads where to put their money Not in govt securities, but lend more By Devan Daniel
The Central Bank has asked heads of commercial banks to increase lending to the private sector without investing excess funds in government securities.
"The Central Bank made a strong case as to why we should increase lending to the private sector instead of investing in government Treasury bills and bonds.
"It said the economy needed stimulation to grow and with banks focused on investing in government securities, the economy is starved of much needed funds," a top senior banker of a private commercial bank told the Island Financial Review.
"On a policy level, the Central Bank’s request makes sense. The economy is not going to grow with banks increasingly opting to invest in government securities.
"Each bank would have to reconsider the role they would want to play in rebuilding the country’s economy after the war and revisit their books and try to find ways in which credit to the private sector can be increased," he said not wanting to be named.
Since the beginning of the year, the Central Bank has been slashing policy rates in a bid to bring down lending rates so that commercial banks could increase lending to the private sector.
Commercial banks did bring down rates to fall in line with the Central Bank’s policy direction, but there is still room for rates to be lowered further.
However, despite rates coming off, commercial banks are reluctant to lend to the private sector preferring to ‘park’ excess rupee liquidity into ‘low risk’ government securities with guaranteed returns.
With the Central Bank purchasing dollars, the banking sector was infused with surplus liquidity positions for several weeks, where it was not uncommon to see surplus positions exceed the Rs. 20 billion mark. As at last Wednesday, market liquidity was a Rs. 12 billion surplus.
Rates are down and there is more than enough money in the system, but banks are unwilling to lend.
During the first seven months of this year net credit to the government from the banking sector increased by 90.7 percent from Rs. 399.9 billion as at July 2008 to Rs. 762.6 billion as at July 2009.
Credit to the private sector, on the other hand had declined by 2.1 percent to Rs. 1.203 trillion from Rs. 1.229 trillion.
60 FCCISL News Alert Weekly Business Highlight 19th – 25th October 2009
"The war ended in May. How far have we really come since then? We (commercial banks) would have to seriously consider increasing credit to the private sector if there is going to be economic growth.
"Also, we would have to increase our delivery channels to the North and East and in other rural areas if we are going to be effective contributors," the senior banker said.
"Of course, our lending has to increase but only in terms of quality lending. We must not sacrifice prudence for the sake of increasing credit to the private sector," he said.
Benchmark yields easing off...
Treasury bill yields came down marginally at this week’s auction.
91-day Treasury bills received bids amounting to Rs. 4.2 billion of which the Central Bank accepted Rs. 2.2 billion and the rate came down to 9.1 percent from 9.15 last week.
182-day Treasury bills saw rates reach 9.76 percent this week from 9.81percent a week ago. Bids amounting to Rs. 7.4 billion were received while Rs. 3.8 billion was accepted.
The one year Treasury bill rate also came down marginally to 10.22 percent from 10.26 percent the previous week. Bids received Rs. 5.9 billion, accepted Rs. 2.2 billion.
Dealers said benchmark yields could be easing off particularly in the bond market where yields reached 10.32 percent for both four-year and five year Treasury bonds.
"Foreign investments into government rupee denominated securities are restricted so there is unlikely to be a push for a further reduction in rates, which have probably bottomed off," a dealer said.
Rates could go up...
Treasury bill and bond rates are expected to increase by the year-end as banks cash in on their profits.
"Many banks invested in government securities to make profits, so at the year-end there would be some profit taking when some banks realise their investments, so there could be some upward pressure on rates then," a dealer said.
61 FCCISL News Alert Weekly Business Highlight 19th – 25th October 2009
Foreign Employment
62 FCCISL News Alert Weekly Business Highlight 19th – 25th October 2009
Daily News – October 19, 2009
Migrant workers lead foreign capital inflow Sanjeevi Jayasuriya
At a glance
* Total number of out migrants estimated to be 1.8 million
* Remittances of migrant workers around $ 3 billion
* First country report on International Migration Outlook 2008 launched
Remittances of migrant workers are close to US $ 3 billion or seven percent of the GDP or 36 percent of exports earnings and it is the second largest foreign exchange earner to Sri Lanka.
It has become the leading source of foreign capital to Sri Lanka, overtaking the official development assistance and foreign direct investment Institute of Policy Studies of Sri Lanka, Executive Director Dr. Saman Kelegama said.
International labour migration is an important area in the Sri Lanka’s socio-economic system.
Migration from Sri Lanka has grown in importance for the past several decades and the numbers have increased over tenfold during the same period.
The total number of out migrants of Sri Lanka on employment abroad at present is estimated to be 1.8 million while annually the outflow of workers is estimated to be around 250,000 people, he said.
In 2007, 23 percent of the total employment generated and 21 percent of the labour force in Sri Lanka was represented by foreign employment. he said.
Sri Lanka has a huge mismatch between the international demand for jobs and its supply capabilities.
The most pressing issue is the skill mismatch of what is demanded by the foreign countries and what Sri Lankan workers could offer. The Government has placed special emphasis on the promotion of high skilled workers as against the low skilled categories of labour migrants, but much work needs to be done, he said. The first country report on International Migration Outlook Sri Lanka 2008 was launched on Friday.
63 FCCISL News Alert Weekly Business Highlight 19th – 25th October 2009
Sunday Times – October 25, 2009
10% of Sri Lankan foreign labour faced abuses in 2001
In 2001, 10% of Sri Lanka's migrant labour faced abuse of a physical, psychological or sexual nature, with low skilled categories subjected to high levels of abuse. In 2007, there were 8,445 complaints received, a new study shows.
Meanwhile, Sri Lanka earned 7% of its Gross Domestic Product (US$ 3 billion) from remittances attributable to foreign workers, 80% of these from Middle East countries and about 18% from Europe. These earnings made up 36% export earnings and 21% import payments, and have become the leading source of foreign capital to the country, overtaking inflows from foreign aid and foreign direct investment.
There are presently 1.8 million Sri Lankans estimated to be working abroad with 250,000 being the annual outflow of workers; 21% of the country's total 2007 labor force. In addition, Sri Lanka also had the highest rate of expatriation of doctors to OECD countries and the third highest rate of expatriation of nurses.
The majority of Sri Lanka's foreign workers proved to be housemaids or unskilled workers (together 70%) while 24.7% were skilled. 82% of all local labor was expatriated to Saudi Arabia, Kuwait, Qatar and the United Arab Emirates. Housemaids or unskilled workers remitted 80% of their income back home, while skilled labour mostly spent their income abroad.
These facts were revealed at the launch of the first edition of the "International Migration Outlook - Sri Lanka 2008" country report commissioned by the International Organization for Migration.
The report, which was compiled by Sri Lanka's Institute of Policy Studies and based on data gathered from the "Department of Emigration and Immigration, Sri Lanka Bureau of Foreign Employment, the CID, the BOI, Sri Lanka Tourist Board, and Foreign Diplomatic Missions in Sri Lanka, IOM and others", also identified a number of areas of concern for the future of for the country's foreign employment sector, including: a "skills mismatch of what is demanded by foreign countries and what Sri Lankan workers could offer"; a "tremendous need" to make zonal remittance centres available to rural parts of the country; and a lack of conventions with the Middle East (currently only signed memorandums of understanding exist) pertaining to the treatment of Sri Lankan foreign employees.
64 FCCISL News Alert Weekly Business Highlight 19th – 25th October 2009
The Island – October 21, 2009
Migrant worker remittances buoy balance of payments but Data problems prolongs suffering By Devan Daniel
Sri Lanka’s migrant workers play an important role in the country’s economy with their remittances providing stability to the balance of payments and providing development finance but poor data collection is hampering the creation of policies aimed at improving their welfare, a new study of the Institute of Policy Studies (IPS) highlights.
Last week the IPS launched the first country report on migration titled ‘International Migration Outlook— Sri Lanka: 2008’.
"The total number of migrant workers is estimated to be 1.8 million with an annual outflow of about 250,000 workers. In 2007, migrant workers amounted to about 23 percent of total employment generated and 21 percent of the labour force," Executive Directive IPS, Dr. Saman Kelegama said.
"Remittances of migrant workers are close to US$ 3 billion or seven percent of GDP or 36 percent of its export earnings and are the second largest foreign exchanger earner. It has become the leading source of foreign capital, overtaking official development assistance and foreign direct investments," he pointed out.
Despite the importance of migrant workers to Sri Lanka’s economy, many of our workers, most of whom are women, are vulnerable to abuse and Sri Lanka lacks a basic tool in ensuring worker rights are protected overseas—a comprehensive data base.
"All this is well and good," Dr. Kelegama said of the contribution to the national economy made by our migrant workers, "but, there is another side of migration that does not paint such a rosy picture," he said.
Migration, although providing a means to come out of poverty, better access to healthcare facilities and education, there are social problems that families are vulnerable to, especially where mothers leave their homes.
Harassment, exploitation, abuse of worker rights, sexual abuse, forced labour and human trafficking are some of the vices are workers are vulnerable to.
"In order to examine the ways and means of minimizing the negative aspects and maximizing the positive aspects of migration, we must have a clear data base on migration. After all, good policies can be made only on the basis of a solid and accurate data base," Dr. Kelegama said stressing the rationale for IPS to compile the study on migration in collaboration with the International Organization for Migration (IOM)-Sri Lanka.
65 FCCISL News Alert Weekly Business Highlight 19th – 25th October 2009
Data problems...
Ruwan Jayathilaka, Co-author of the report and Research Officer, IPS, said Sri Lanka had data problems and does not have an integrated migration data collection system for both immigration and emigration data.
"Most of the data goes unrecorded under the present scenario," he said.
Jayathilaka also pointed out that occupational categorization adopted by the Sri Lanka Bureau of Foreign Employment was not in line with the International Standard Classification of Occupations (ISCO), which makes comparing data difficult.
He said Sri Lanka needs to adopt policies that would protect the rights of low-skilled workers, mostly women, the majority of whom are employed in the Middle East. Managing migration was also critical in minimizing brain-drain and the drag on the domestic economy.
"In order to find the correct balance of skilled migration, we need to focus on education reforms, targeted training and economic development in order to gain the best results in the long term," Jayathilaka said.
He said it was important to identify the existence of the many social problems associated with migration and the families that are left behind, so that effective policies could be formulated to address such issues.
Identifying the potential contribution of the Diaspora to the domestic post-war economy and making formal remittances channels more accessible in rural areas are other areas that need to be given attention.
All this, including the need to increase institutional capacities to counter human trafficking and promoting Sri Lanka as a safe tourist destination will require comprehensive data so that effective policies can be formulated.
The numbers...
Co-author Ms. Tilani Jayawardhana, Research Economist, IPS, presented some vital data from the ‘International Migration Outlook—Sri Lanka: 2008’.
In 2007, the estimated migrant workforce amounted to approximately 1.6 million with female workers numbering a shade over a million.
Close to 50 percent of total migrant workers are housemaids. More than 85 percent of out total migrant workforce are in the Middle East.
While skilled and professional categories accounted for 27 percent of total migrant workers, unskilled workers remitted more than 80 percent of their earnings back to Sri Lanka, suggesting that it was the most vulnerable, harassed and abused who buoy the country’s balance of payments and provide development finance through foreign exchange inflows.
66 FCCISL News Alert Weekly Business Highlight 19th – 25th October 2009
Abuse...
Ms. Jayawardhana said low skilled workers were subject to high levels of abuse due to their lack of education, training and awareness of laws and working conditions in the host country.
"In 2001, about 10 percent of our female migrant workers had been victims of some form of physical, psychological or sexual abuse. In 2007, there were 8,445 complaints made, the most common being non- payment of agreed salary, physical and sexual harassment, breach of contract and the lack of communication of vital information," Ms. Jayawardhana said.
While the majority of workers are low skilled female workers who are exposed to many difficulties, Sri Lanka is also facing a brain drain of sorts.
Brian drain...
"Sri Lanka is facing a shortage of skilled professionals and this is being felt in the healthcare and construction sectors," Ms. Jayawardhana said.
"Sri Lanka has the highest expatriation rate of doctors and the third highest expatriation rate of nurses to developed countries (of the OECD) with 4,668 doctors and 2,032 nurses," she said.
Ms. Jayawardhana pointed out that over 5,700 job vacancies remain unfilled in the BOI job bank as well.
In 2007, the government and private sectors together had 84,207 unfilled vacancies of which 16,650 of these were highly skilled positions, 26,312 skilled and 39,358 semi skilled and elementary occupations.
Data problems 2... Sri Lanka’s poor mechanisms to collect, process and disseminate data is not limited to the migration worker sector.
The Unemployment Benefits Insurance Scheme, proposed by the government earlier this year as a short term relief package to workers who had lost their jobs because of the global financial crisis, is being delayed because something crucial is lacking—data.
The Sri Lanka office of the International Labour Organization also attempted a rapid assessment of employment in the face of the crisis but fragmented, weak data prevented anything conclusive coming out from the study.
Some relief... Earlier this year, the government adopted a National Labour Migration Policy aimed at strengthening institutional capacities and governance of the migration process, protect worker rights and link migration to the country’s development strategies.
While many initiatives have already been implemented by the government, Minister of Labour Relations and Manpower, Athauda Seneviratne, said many things ‘should’ be done to protect and safeguard the rights of our migrant workers and their families. 67 FCCISL News Alert Weekly Business Highlight 19th – 25th October 2009
Infrastructure development
68 FCCISL News Alert Weekly Business Highlight 19th – 25th October 2009
Daily Mirror – October 19, 2009
Collaborate or compete to survive and thrive in the competitive Telecom market in Sri Lanka By Dr. Arosha Fernando
We have amazed the world with the rise and rise of the Sri Lankan telecom industry. Even today we are the first to implement some of the most sophisticated telecom solutions and services.
Market is still rising, creating more and more competition. According to the regulator – TRC’s statistics, less than 3,000 cellular subscribers we had in 1992 have gone over 11 million in 2008. In 4th quarter 2008, teledensity is 54.6 mobile phones per 100 people.
Today this vibrant cellular market is shared by number of players, all taking the future with a positive outlook. Competition has brought the tariff down to a level that some operators can’t keep up, due to the cost of ongoing operations. Cost of capital, on the other hand, is also increasing with the competition as subscribers demand for better service quality requiring network expansions. This is a common problem shared by all the players in the market. Now it is the time to share a common solution.
Global Trends
It’s not only in Sri Lanka, in anywhere in the world mobile operators’ networks used to be closely guarded and kept away from competitors in the past. However, today, for mobile operators, owning and running a network is much less important these days than luring subscribers with attractive devices and services. With cost cutting being taken to the next level, many service providers around the world are striking deals to share resources, right down to the active layer. In achieving this, today mobile operators are engaged in the once unthinkable; the model of collaboration by working with competitors to share their networks. They understand that collaborating with the competitors will not only help them lower costs but also save much needed cash to fund new technology rollouts in the near future, such as 4G - Long Term Evolution (LTE).
Shared Networks
Network sharing at a basic level is not new. To some degree mobile operators have been sharing sites housing their cabins for years. But in some parts of the world during past two years operators have taken the depth and scale of network sharing to a new level. These operators now are not just sharing site 69 FCCISL News Alert Weekly Business Highlight 19th – 25th October 2009 infrastructure such as towers, cabins and power supplies, but also active elements such as antennas and base stations, radio access networks as these network elements are becoming commoditized and non- differentiating. “The further you go the greater the benefits” says Bradley Mead, Managing Director of Ericsson UK’s managed services division.
Early this year the agreement reached between 3 UK and T Mobile aimed to save £2 billion over a 10 year period by combining the two 3G networks. The two companies would part-own the infrastructure, such as transmission towers, but would compete for customers by adding value to basic services. The two operators are now sharing networks and even started to decommission some existing towers, with T Mobile already noticing savings, costs, freeing up money that can be invested.
Further, Vodafone and O2 have agreed to share their mobile networks, in order to improve mobile phone reception across the country, and, more importantly, improve the availability and quality of mobile services. Matthew Key, CEO of O2 owners Telephonic Europe has said “the current economic situation was a catalyst achieving this agreement”. The merging of the networks has seen the operators saving hundreds of millions of pounds.
Another success story, two of the world's largest operators forged a landmark business agreement, Spain's Telefónica and Britain's Vodafone to share parts of their mobile networks. The Telefónica / Vodafone deal was an acknowledgement that the cost of building and running state-of-the-art mobile networks has grown beyond the ability even of giants to shoulder alone. The Telefónica / Vodafone deal has allowed both companies to focus less on infrastructure and more on service innovation. Sharing existing networks will also reduce the number of staff required reducing the direct operational expenses.
Time is now
Looking at the global trends and current practices in the telecom industry, one of the best solutions in reducing cost appeared to be merging of 2 or more networks. Mobile service provides in Sri Lanka need to think other strategies which are more practical in the short term, as well as leading to a long term solutions. The strategies such as sharing the existing infrastructure with other operators more and more, planning to have one common infrastructure in newly developing areas such as Northern Province etc will help mobile operators to survive and thrive in the current competitive telecom market in Sri Lanka.
70 FCCISL News Alert Weekly Business Highlight 19th – 25th October 2009
Daily News – October 23, 2009
TRC FUTURE THEME 'BROADBAND FOR ALL': Over 60 percent of FDI in 2008 for telecom industry
Sanjeevi JAYASURIYA
Sri Lanka's telecommunication industry offers the lowest tariffs in the Asian region. The industry will move from 'sender keeps all' regime to interconnection rate from this month for long-term sustainability of the industry, Telecommunications Regulatory Commission (TRC) of Sri Lanka Director General Priyantha Kariyapperuma told Daily News Business.
The country's telecommunication industry has a growth potential and the technology deployment in the industry is on par with the developed countries. Over 60 percent of the foreign direct investment (FDI) in 2008 was for the telecommunication industry, he said.
"There are 13 million mobile users in the country. People could engage in m-commerce and m-banking using mobile phones. The next stage of telecommunication is not only the voice, but the broadband. Our theme for the future is "broadband for all", he said. The young generation is the most important segment of a country's development. It is essential to have regulatory and legislative framework in place to ensure proper functioning of the industry. The country needs to introduce periodical amendments to suit the changing needs of the technological advancements to combat cyber crime, he said.
All new technologies are for the new generation. There is a risk when children are exposed to the Internet. The International Telecommunication Union is working to ensure cyber-security, enable cyber space and protect children on-line, he said.
Child Protection On-line (CPO) aims to tackle cyber-security holistically addressing legal, technical, organizational and procedural issues as well as capacity building and international cooperation, he said.
The country has a Computer Emergency Response Team consisting experts from ICTA, SLIIT Malambe and some academics from Universities to work towards ensuring cyber security. It is linked with high-tech crime units in the world with the support of Interpol, Kariyapperuma said.
"Cyber security matters are sensitive and we are working closely with international agencies to up-date our knowledge in this new area of threat. The world is trying its best to avoid a war in cyber space," he said.
71 FCCISL News Alert Weekly Business Highlight 19th – 25th October 2009
Environmental Change
72 FCCISL News Alert Weekly Business Highlight 19th – 25th October 2009
The Island – October 19, 2009
Climate talks end in despair By Ifham Nizam
Renowned experts, scientists representing the developing nations especially India, believe last week’s climate meet in Thailand ended in despair.
Some fear that the discussion in the Thai capital may be the end of the Kyoto process.
India’s renowned scientific organization, the Centre for Science and Environment (CSE) which focuses mainly on science and environment, represented the Bangkok Climate Change talks, sees the developed nations (Annex I) nations working overtime to kill the Kyoto Protocol.
CSE Climate Team Head Kushal P S Yadav condemned these efforts to junk the Protocol in favour of a new deal just to accommodate the US, meanwhile the EU emerges the new deal-breaker. CSE raises the specter of failure of the Copenhagen CoP in December.
The 15th Conference of Parties scheduled to be held in Copenhagen from December 7 might fizzle out, going by the results of the recently concluded Bangkok climate meet – according to CSE. CSE’s climate team attended and closely followed the Bangkok deliberations which, it says have left most problems unresolved.
"Bangkok was supposed to be a major milestone in the run-up to Copenhagen, but at the end of it, existing problems have remained. What’s worse, new ones have emerged," says Kushal P S Yadav, head of CSE’s climate team.
The Bangkok Climate Change Talks were held from September 28 till October 9, and revolved around the ninth session of the Ad-hoc Working Group on Kyoto Protocol (AWG-KP) and the seventh session of the Ad-hoc Working Group on Long-term Cooperative Action.
Killing the Kyoto process What became clear at Bangkok was that the Kyoto Protocol is being slowly driven to its death, with almost all the Annex I countries turning away from it. The negotiations in the AWG-KP have not made any progress as no country is ready to commit to the second phase reduction targets.
With the US not ratifying the Protocol, nor making any legal commitment to reduce emissions, comparability of reduction efforts for the Annex I countries became a major issue in Bangkok. Japan had already expressed its dissatisfaction with the Kyoto Protocol, and the European Union (EU) has now started rooting for a new legal instrument to replace it.
Following the US model, other developed countries have begun moving away from internationally binding emissions reduction targets towards having domestic legislations and targets which can eventually be enshrined into a new treaty. Says Yadav: "This is nothing but slow dismantling of an 73 FCCISL News Alert Weekly Business Highlight 19th – 25th October 2009
internationally binding agreement. National targets cannot be treated at the same level as commitments made under the Kyoto Protocol. This is evident from the current commitments made by a few developed countries and blocks, which remain well below the levels which science says, are required."
The developing nations, of course, are not amused. According to Yadav, "the move by developed countries to dump the existing processes and instruments is being seen as an attempt to weaken the existing levels of commitments and obligations for Annex I nations". Addressing a meeting at Bangkok, Shyam Saran, the Indian prime minister’s special envoy on climate change, said categorically: "The Annex I countries are coming down to much lower level of obligations. We have said ‘no’ to this. We will not sign any such deal."
Says Sunita Narain, director, CSE and a member of the prime minister’s committee on climate change: "We strongly condemn this attempt to junk the Kyoto Protocol and move the goal-posts."
She adds: "President Barack Obama of the US has been bestowed this year’s Nobel Peace Prize, but does he deserve it? What the world needs at this juncture is decisive and strong climate leadership, and we sincerely hope that president Obama earns his Nobel by providing this leadership."
The penultimate negotiating session before the historic UN Climate Change Conference in Copenhagen in December wrapped up last week in the Thai capitol Bangkok with progress made on what needs to constitute the "bricks and mortar" of the Copenhagen agreed outcome, but a continuing lack of clarity on key deliverables to make a successful international climate change deal workable.
"A will has emerged in Bangkok to build the architecture to rapidly implement climate action," said UNFCCC Executive Secretary Yvo de Boer, "but significant differences remain. In December, citizens everywhere in
the world will have a right to know exactly what their governments will do to prevent dangerous climate change. It is time now to step back from self interest and let the common interest prevail," he added.
Parties made progress on the issues of adaptation, technology transfer and capacity building. They also reached agreement on technical issues such as forests and land use, how to assess the global warming potentials of new greenhouse gases and the number of options for strengthening the Kyoto Protocol’s Clean Development Mechanism.
However, little progress was made on the issue of mid-term emission reduction targets for industrialized countries. And clarity is lacking on the issue of finance that developing countries need to undertake additional actions to limit their emissions growth and adapt to the inevitable effects of climate change.
74 FCCISL News Alert Weekly Business Highlight 19th – 25th October 2009
"A good example with regard to what industrialized countries can do to increase the level of their ambition in the context of an international agreement at Copenhagen is the minus 40 per cent emissions reduction target announced by Norway today," the UN’s top climate change official said.
The negotiations in Thailand will be followed by five days of
pre-Copenhagen negotiations in Barcelona (2-6 November) before the UN Climate Change Conference in Copenhagen (7-18 December).
"Negotiators have three weeks back in their capitals to receive guidance from their political leaders to complete their work," said Yvo de Boer.
"Bold leadership must open the roadblocks around the essentials of targets and finance that the negotiators can complete their journey," he added.
Heads of state and government meeting in New York in September identified five politically essential issues to a deliver a comprehensive, fair and effective Copenhagen agreement.
The climate change deal clinched in Copenhagen is to ensure enhanced action to assist the most vulnerable and the poorest to adapt to the impacts of climate change. Furthermore, world leaders have agreed that clarity must be provided on ambitious emission reduction targets of industrialized countries, as well as the need for nationally appropriate mitigation actions by developing countries with the necessary support.
A beacon to guide discussions is the Intergovernmental Panel on Climate Change’s finding that an aggregate emission reduction by industrialized countries of between minus 25 per cent and 40 per cent over 1990 levels would be required by 2020, and that global emissions would need to be reduced by at least 50 per cent by 2050, in order to stave off the worst effects of climate change.
The fourth essential identified by heads of state and government is that the Copenhagen agreed outcome needs to generate scaled-up financial and
technological resources, with a mechanism put in place that would funds to be generated automatically over time. Finally, they have agreed that the Copenhagen deal needs to create an equitable governance structure to manage funds for adaptation and mitigation that address the needs of developing countries.
UNFCCC With 192 Parties, the United Nations Framework Convention on Climate Change(UNFCCC) has near universal membership and is the parent treaty of the 1997 Kyoto Protocol. The Kyoto Protocol has to date 184 member Parties. Under the Protocol, 37 States, consisting of highly industrialized countries and countries undergoing the process of transition to a market economy, have legally binding emission limitation and reduction commitments. The ultimate objective of both treaties is to stabilize greenhouse gas concentrations in the atmosphere at a level that will prevent dangerous human interference with the climate system. 75 FCCISL News Alert Weekly Business Highlight 19th – 25th October 2009
Daily News – October 20, 2009
Climate change and jobs DEALING WITH THE MYTHS:
ASIA AND THE PACIFIC ARE MOST EXPOSED TO THE IMPACT OF CLIMATE CHANGE. THEREFORE, PROGRESS TOWARDS A GLOBAL CLIMATE DEAL IS CRUCIAL FOR ITS DEVELOPMENT AND ITS STABILITY.
But such a global journey to a low carbon and climate resilient future will necessarily involve the world of work and those who will actually do the job, says ILO Regional Office for Asia and the Pacific Regional Derector Sachiko Yamamoto.
Meena Thakur is aged around 36. She lives with her husband and three children in a farmers' community in Jabalpur, Madhya Pradesh, India.
During the dry season she lives mainly by preparing cakes of cow dung and selling them as fuel to a nearby brick kiln.
Managing and disposing of the dung produced by cows from the local dairy sector is a major issue for the surrounding communities as the dung is dumped widely and contaminates the local river. In addition it gives off methane gas. It may seem obvious that climate change- related programs and financial support - facilitating access to renewable energy and a wider range of ways of earning a living - would be welcomed by the farming community in Jabalpur.
But it may come as bad news to Meena and her friends in the dung cake business, cutting off their supply of dung.
She and her family exist on about US$60 per month, and any change that threatens even a cent of that income threatens her. She does not view the issues of climate Green jobs are important agents of change and as such can play a change in the same way as we do. constructive role in the debate and ultimate agreement 76 FCCISL News Alert Weekly Business Highlight 19th – 25th October 2009
Yet without her support and that of others like her, if the climate change challenge is not converted into opportunities for better livelihoods and jobs, we will not be able to turn negotiated agreements into concrete change.
It is understandable that questions are being asked about whether mitigating climate change is feasible, whether, in current circumstances, we should not be committing resources to supporting livelihoods and the bottom line?
Although the financial crisis may be easing there is no doubt that the related social crisis continues for many of the most vulnerable countries in Asia and the Pacific, and beyond.
In a region where one billion people are classified as working poor (living on less than US$2 per day), 100 million people were for the first time recorded as being without a job in 2009. In South East Asia in the first nine months of 2009, unemployment increased by roughly 10 percent and labour productivity decreased by 2.5 percent, a remarkable drop in such a short period of time. In Cambodia alone, a quarter of the garment sector factories have closed.
This does not make an easy atmosphere for negotiations on reducing emissions, including those at the United Nations headquarters in Bangkok.
These concerns should be aired. But at the same time some myths need to be dispelled. The first myth is that action on the environment is bad news for jobs.
Rather, past experience demonstrates that well-designed, environment-related investments are beneficial for employment overall, although there are shifts in the labour market structure.
The so-called green sectors of the economy can be expected to create more jobs, directly and indirectly, than will be lost in other sectors.
A recent HSBC survey found that, worldwide, businesses selling low carbon goods and services now generate more revenue than the aerospace and defence industries combined, making this sector one of the new linchpins of the global economy.
A second myth is that environmental measures only bring financial costs. Win-win options clearly exist. Examples include the introduction of energy efficient appliances and equipment, the sustainable management of resources such as water, and improvements in housekeeping practices. The widespread introduction of such measures could greatly reduce carbon emissions in
77 FCCISL News Alert Weekly Business Highlight 19th – 25th October 2009 developing countries and would bring ancillary benefits such as short return-on-investment periods, net productivity gains, better working conditions and little or no harm to employment.
To these two myths third would be add - which is that environmental issues such as climate change are the concern of specialists and can be solved by environmentalists and negotiators alone.
Whether we like it or not, climate change will revolutionize the way we produce, consume and earn a living. This historical transformation will affect all sectors of the economy, in all countries, and consequently all peoples.
Any commitment by governments will require support from all layers of society; young and old, male and female, poor and rich, urban and rural, workers and employers.
When deals made in high level conference rooms do not have the grass roots support of people like Meena, they are hard to deliver on. Delivering on reduction targets starts with engaging those on the ground whose jobs and livelihoods will be the first to be affected. We need to anticipate and smooth the inevitable changes and manage a 'just transition' towards a sustainable, low-carbon path.
The good news is that the world of work is ready to be part of the solution. In June this year governments, employers' and workers' organizations from the ILO's 183 member States adopted a Global Jobs Pact that supports a shift to a low-carbon, environmentally-friendly economy as a way to accelerate a jobs recovery.
Green jobs (decent, environmentally-sound jobs that fuel the growing green economy), are important agents of change and as such can play a constructive role in the debate and ultimate agreement.
For Meena and her colleagues this means concrete, timely, technical and financial help to explore alternatives, giving her in the option of more value-added tasks like dairy processing.
Progress towards a low carbon future will necessarily involve the world of work, and convincing those who actually do the job.
A win-win deal that supports economic recovery and emission reduction is ambitious, but possible. Employment and green jobs in particular, are part of the solution.
78 FCCISL News Alert Weekly Business Highlight 19th – 25th October 2009
SMEs
79 FCCISL News Alert Weekly Business Highlight 19th – 25th October 2009
Daily Mirror – October 21, 2009
HP helps SMEs with new printer lineup By Cheranka Mendis
Director Supplies Sales, IPG APJ, HP Asia Pacific, P. V. Viswanath
Small and Medium Entrepreneurs (SMEs) is a group that is widely spoken of in today’s context. Hewlett Packard too is geared up to play its part in contributing to the upliftment and development of this group by introducing a comprehensive suite of printing solutions and programs with the newly launched range of HP Officejet Pro printers that was announced yesterday.
The new range, promising significant cost savings and up to 50% energy-use savings, aims at helping SMEs obtain more value from their investments in the IT field. It was said that the new range would benefit this segment of the economy by facilitating to reduce the fast increasing budgetary pressures, driving down-printing costs, increasing energy efficiency while leveraging print management tools to further reduce costs, and renewing the SMEs’ printer fleet.
The new HP Officejet and HP Officejet Pro line encompass the HP Officejet Pro 8500 All-in-One (AiO) series, the HP Officejet Pro 8000 Printer Series and HP Officejet 6500 All-in-One (AiO) series. These printers, based on an average worldwide pricing as of February this year have the ability to improve business productivity for a lower cost than a colour laser, Director Supplies Sales, IPG APJ, HP Asia Pacific, P. V. Viswanath said.
“Over 3 years, HP’s Officejet Pro could save our customers 55% in total printing costs or USD 2,726 compared with the Samsung CLP 310,” Mr. Viswanath said. While costs of the HP Officejet Pro 8000 will be USD 786 for the first year, USD 1,490 in the second year and USD 2194 in the third year, the DEL 1320C accumulates a cost of USD 4,376 by its third year while Samsung CLP 315
accumulates USD 4920 by its third period, Mr. Viswanath said. “The HP’s Officejet Pro would not only cut savings cost but also aims at conserving energy and resources as well,” the Director of 80 FCCISL News Alert Weekly Business Highlight 19th – 25th October 2009
Supplies Sales said. “It has been noted that up to 50% less energy use than compatible laser jet printers in the market is indicated by the use of these printers, while a built in auto-duplexer can save up to half on paper cost which would promote an economically green environment. A Smart Web printing is also installed to reduce the number of wasted pages and this is Energy star qualified,” he explained.
The HP Inkjet 940 ink, the newly formulated HP Officejet pigment inks introduced at the launch, was said to be prepared to lower the cost per page in color printing with a highest yield supplier of printing up to 2200 pages with premium printing durability, and offer archive quality and water resistance. “This is also the best option for the photography business as studies show that the chemical and pigmentation included in this offers a photograph a life span of almost 200 years,” Mr. Viswanath noted.
On SMEs, Mr. Viswanath said that “when everything counts for cost-cutting in today’s business environment, HP wanted to alleviate the considerable cost and cash flow pressures and better mange their imaging and printing costs with our innovative portfolio of print solutions, tools and programmes. This announcement today further demonstrates our commitment to the SMEs”.
While speaking on the envisaged market trends, Mr. Viswanath stated that the printable content is set to triple from 2009 to 2012 and that there will be a massive shift from analog to digital printing. “Currently global records indicate that 90% of the printers in use are analog and only 10% are digital computers. However it is indicated that a major shift of almost 200 billion will tip to digital printers in the near future. Also there has been speculation that customers will shift to higher value units from the current units,” he said.
On paper-less environment, a hot topic among many business personnel at present, Mr. Viswanath stated that a paper-less environment will soon be created, however with expected printing growth in the market. “The paper environment will grow because of the content, the content will increase. Yes, people are using alternative methods for printing and a paper-less society will be created. However with the increasing content, there wont be any hindrance for printers.”
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Construction Industry
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DAILY NEWS – OCTOBER 22, 2009 CHAMBER TO HOLD "EXCON 2009" END OCTOBER: Finances play vital role IN CONSTRUCTION INDUSTRY: Sanjeevi JAYASURIYA
The downward trend in the interest rates and low inflation is a boost for many industries, particularly the construction industry where finances play a vital role. The macro economic environment is favourable for trade, investment and tourism and Sri Lanka needs to capitalize on this situation for economic development, said Export Development and International Trade Minister, Prof. G.L. Peiris.
"We need to focus on the service sector where the country has the potential to develop. The construction industry should use modern technology to showcase to the world the inherent potential of the industry. The industry possesses all the capabilities of other countries, but lack capital. We need to address this issue," he said. The Chamber of Construction Industry Sri Lanka will conduct Sri Lanka's first ever international construction expo 'Excon 2009' from October 30 - November 1 at the Sirimavo Bandaranaike Memorial Exhibition Centre.
"Excon 2009 is designed to enhance the capabilities and the competitiveness of the domestic construction industry with special focus on the SME sector. We strongly advocate sustainable construction industry to achieve grassroot level development," said the Chamber of Construction Industry Sri Lanka Chief Executive Officer/ Secretary General, Dakshitha Thalgodapitiya.
The Chamber has identified the inability to access Workers at a construction site credit and obtain various bond and guarantees required by the industry as one of the major impediments for this sector to enhance its capacities, he said.
To overcome the non availability of easy access to obtaining bonds and guarantees the Chamber is at present in the process of formulating a conceptual framework of bonds and guarantees scheme where the Chamber envisages to play the role of a surety agent as available in many other developed and developing countries, he said.
The surety agent is essentially independent from the owner, surety and the contractor where it will evaluate the contractors ability to do bonded work and facilitate communication between the contractor and surety underwriting the contract bonds. The Chamber will use Excon 2009 to launch its surety agency with leading insurers in the country, he said.
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Shipping Industry
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Daily News – October 22, 2009
Colombo Dockyard records export revenue growth Sanjeevi JAYASURIYA
Colombo Dockyard PLC, over the past ten years has recorded an export revenue growth over 482 percent while internal capacity and infrastructure development reached its optimum level.
"The export revenue of US $ 18.9 million in 1999 has been increased up to US $ 110 million in 2009", said Managing Director/ Chief Executive Officer Colombo Dockyard PLC (CDL) Mangala P.B. Yapa.
The Export Development Board of Sri Lanka has set a target to achieve US $ 20 billion revenue in the export sector by 2020 and as a major player in the country's shipping industry CDL aims at becoming a significant contributor, he said.
The exporters need to increase their value addition by moving up on the value chain and increase the volumes to reach Ship repair being carried out at the Colombo Dockyard this target. The products and services should be targeted for high-end users, if Sri Lanka is aspiring to be an exporting country and to increase the revenue generated, he said.
"Sri Lanka has a high literacy rate and there is a great demand to engage in non-agriculture jobs. Thus, the objective of the nation should be to deploy more and more youth in the revenue generating professions", Mapa said.
Shipbuilding and ship repairs are industries that requires highly skilled and disciplined workforce. We need to train the necessary human resources to derive benefits from such industries.
Sri Lanka's geographical positioning and being situated in a sea lane has natural and comparative advantages, but this is not enough and we need to address the other impediments and make our industries globally competitive, if the country is to move forward, he said. 85 FCCISL News Alert Weekly Business Highlight 19th – 25th October 2009
Shipbuilding and ship repairing needs sheltered waters. If we do not have natural sheltered waters, as in the case of Far East and China, it is necessary to create such sheltered areas by building harbours and breakwaters, barring the oceanic waves from disturbing the operations. Obviously, creating such infrastructure involves heavy expenditure and the Government support is vital. As Sri Lanka does not possess any raw material or equipment for shipbuilding and ship repair, we need to import almost everything to build ships, he said.
Therefore, if we are aspiring to develop shipbuilding and ship repair as a thrust industry for export market, which has great potential and an opportunity, we need the Government to seriously look into the many advantages we face, he said.
"We need incentives for training and development, research and development and such expenditure must receive tax relief and incentives to encourage the industrialists. The shipping industry needs highly skilled, competent employees. Steps must be taken to Mangala P.B. Yapa train them and that would facilitate employment generation and to do so we must transform our current supply driven education system to a demand driven system, Mapa said.
The shipbuilding business involves substantial international exposure and there is reasonable risk in granting credit to various customers.
In order to mitigate such risks against any potential volatility, a State sponsored fund or an entity must be set up and a mechanism should be in place to address funding requirements and for mitigation of credit risk, he said.
Colombo Dockyard PLC enjoys an enviable reputation as one of South Asia's leading ship repairers and shipbuilders.
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Export and Import
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Daily Mirror – October 22, 2009
Increasing Export trend can fill possible GSP + loss - CBSL As more and more stories related GSP Plus surface, the Central Bank said yesterday that exports will continue to increase during the remaining months of 2009 and 2010, notwithstanding the uncertainties on the continuation of the GSP+ concessions.
“With the deepening of the global financial crisis, both the Euro and the Sterling depreciated against many currencies. As a result, the Sri Lankan rupee appreciated significantly against both currencies with a peak of around Rs.140 per Euro by end October 2008 and Rs.162 per Sterling Pound by end January 2009 respectively.”
The CBSL noted that despite the sharp appreciation of the Rupee against these currencies, Sri Lankan exporters were able to remain competitive in the EU market. The Sri Lanka Rupee has now depreciated sharply from the recent peak levels against the Euro and the Sterling by around 18.5 per cent and 14.0 per cent respectively.
According to the European Commission’s estimate, the total value of benefits in terms of lower import duties under the GSP+ scheme for the year 2008 was euro 78 million which is only 1.4 per cent of Sri Lanka’s total exports in the same year. Therefore, the loss of preferential duty margin by around 6-7% arising from a potential withdrawal of the GSP plus facility is not expected to have an adverse impact on Sri Lanka’s exports,” the Bank said.
Highlighting external sector performance for the month of August the Central Bank said that the trade deficit contracted for the eighth consecutive month in August 2009 by 76.9% to US dollars 116 million, recording the third lowest trade deficit during the last five years.
The cumulative trade deficit decreased by 59.6% to US dollars 1,627 million during the first eight months of 2009 from US dollars 4,032 million in the corresponding period of 2008. Workers’ remittances increased by 9.9% to US dollars 2,195 million during this period.
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As a result, Workers’ remittances during the first eight months of 2009 were US dollars 568 million (about 35 per cent) in excess of the trade deficit. Earnings from exports, which took on an increasing trend since April 2009, reached US dollars 710 million in August, recording the highest monthly value thus far in 2009.
Although export earnings contracted by 6.7 per cent in August 2009 on a year-on-year basis, export earnings has taken on an increasing trend since April 2009.
Industrial exports declined by 6% due to lower exports of petroleum products, diamonds and jewellery, rubber products and machinery and equipment. However, growth was recorded in the textiles and garments, food and beverages and other industrial exports subsectors. Textiles and garments exports rebounded by 8.5%, year-on-year, recording US dollars 324 million in August 2009, recording the highest earnings by the sector during the year.
With respect to agricultural exports the CBSL noted that the tea sector performed well, reflecting a year-on year growth of 2.8 percent to US dollars 121 million in August 2009. Tea prices continued to fetch premium prices in the international market. The average export price of tea reached a record high of US dollars 4.34 per kilo in August 2009.
However, agricultural exports, as a whole, which accounted for 23.7 per cent of total exports, declined by 7.4 per cent in August mainly due to the year-on-year declines in prices of rubber and most other agricultural products. Coconut exports too, declined in terms of prices as well as volumes, compared to August 2008.
Although minor agricultural crop exports declined by 25.1 per cent in terms of export values (US dollars 25 million), they grew by 34.0 per cent in terms of volume, led by substantial increases in exports of cocoa products, sesame seeds and pepper. Mineral exports recorded a decline of 30.1 per cent, largely due to lower gem exports.
Cumulative earnings from exports during the first eight months of 2009, declined by 17.2 per cent to US dollars 4,551 million compared to the corresponding period of 2008.Expenditure on imports in the meantime declined by 34.6 per cent as noted by the CBSL to US dollars 826 million in August 2009, reflecting lower demand across all three major categories of imports. Further, except in the month of March, expenditure on imports in 2009 has been substantially below that of 2008.
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Imports of intermediate goods declined by 38.5 per cent to US dollars 516 million, mainly due to the lower expenditure on imports of petroleum and fertilizer due to their lower prices. The average import price of crude oil declined by 47.2 per cent to US dollars 67.52 per barrel in August 2009, from US dollars 127.96 per barrel in August 2008. The average fertilizer import price has declined by 67.7 per cent to US dollars 344 per metric ton during this period. However, textile and clothing imports, which are used as inputs for apparel exports, increased by 7.7 per cent to US dollars 120 million in August, reflecting the potential growth in apparel exports in coming months. The imports of consumer goods declined by 21.9 per cent to US dollars 150 million, on account of lower commodity prices and lower import volumes. Imports of non-food consumer items have declined by 30.5 per cent to US dollars 56 million in August 2009 led by lower imports of motor vehicles and electrical equipment. Expenditure on investment goods has also declined by 30.8 per cent to US dollars 150 million in August 2009 reflecting declines in all sub categories. Cumulative expenditure on imports during the first eight months of 2009, declined by 35.2 per cent to US dollars 6,179 million compared to the corresponding period of 2008.
The gross official reserves, with and without Asian Clearing Union (ACU) funds, recorded US dollars 4,045.2 million and US dollars 3,890.1 million, respectively, by end August 2009. This includes short-term net inflows to the Government Treasury bills of US dollars 212.7 million and Treasury bonds of US dollars 797.5 million. Based on the previous 12 month average imports (US dollars 888 million per month), the gross official reserves, with and without Asian Clearing Union (ACU) funds, were equivalent to 4.6 and 4.4 months of imports, respectively.
By 13 October 2009, the CBSL is of the view that gross official reserves, excluding ACU receipts, are provisionally estimated to have further improved to approximately US dollars 4,500 million. The significant growth in reserves was mainly due to the continuous absorption of foreign exchange by the Central Bank whereby from end March 2009 to 15 October, the CBSL has absorbed US dollars 2,529.3 million from the foreign exchange market.
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Labour Market
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Daily News – October 23, 2009 EFC moots labour law reforms
Sanjeevi JAYASURIYA The consequences of the global recession affected some of the enterprises that requiring them to look at various alternatives to sustain their businesses and also safeguard employment wherever possible. The Employers’ Federation of Ceylon (EFC) recognized its role and moved in swiftly to assist employers who encountered difficulties as a result of the economic downturn, said EFC Chairman, Kumar Jayasuriya.
In a time of a crisis whatever laws and regulations a country might possess in relation to employment, such a regulatory framework will not be able to secure employment, he said.
The EFC has taken an initiative to demonstrate its commitment towards social responsibility through its Employers Network on Disability that has gained a lot of acceptance and recognition not only in Sri Lanka, but also by the other Employers Organizations around the world, he said.
During the last year, the Employers Network on Disability, with the financial assistance given by It is time the private sector in Sri Lanka is given the Handicap International produced six videos on required policy framework “Employment of disabled persons”. The objective of the release of these videos was to show the capabilities of both male and female employees and to raise awareness among employers and the civil society on the benefits of productive employment of disabled persons, he said.
It is time that the private sector in Sri Lanka is given the required policy framework and necessary changes to sustain enterprises and safeguard employment. The latest edition of Doing Business 2009 published by the World Bank and IFC ranks Sri Lanka 110 out of 181 economies in relation to employing workers. Sri Lanka also came within 10 countries with the highest costs in relation to termination of employment.
These statistics show that our social policies do not correspond to the status of our economy. What we need is not a “hire and fire regime”. We need to have a labour relations framework that will create an enabling environment for employers to make the required changes quickly to survive any business, Jayasuriya said.
The EFC has made comprehensive submissions to the Government with regard to labour law reforms. Proposals were made in respect of a few labour related statutes in which reforms were needed, both in terms of ensuring clarity and also make labour regulations more relevant to the current business realities. The current labour regulatory framework in Sri Lanka is an impediment to business in a highly competitive global market, he said.
“It is important that our labour laws supplement and facilitate socio economic progress and development. Our country cannot afford the delay in synchronizing the labour law regime with our economic environment,” he said.
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