• New plans for TQB from new chief Tilan
• Mind your Business
• Immortal ideas make internet banks
• Hacking to be stopped
• Spice prices sky-rocket
• Are domestic savings rising ?
• Nations trust bank's cutting edge edge
• Information super-corridor or just the gravel road?
• News
• Shoddy deal for paddy farmers
• Enjoining Order issued against Lanka Internet suspended by Supreme Court
• Markets
• Shipping & Aviation

New plans for TQB from new chief Tilan

By Ruvini Jayasinghe

An advisory committee comprising large, medium, small and foreign apparel exporters will be set up to achieve a host of new objectives, the new chairman of Textile Quota Board (TQB) Mr. Tilan Wijesinghe told the Sunday Times Business. "My mandate as the TQB chairman is to preserve the industry and improve it," said Wijesinghe who was appointed amidst bribery allegations - a move the industry considers a show of confidence in him.

"The TQB is not a means to achieve rural employment or expand factory capacity," he said. The TQB should ensure the preservation of the industry without any major correction. The TQB will be a national asset and resource for only four more years.

The industry must prepare for the quotaless era and the TQB has a big role to play here, he added.

Among the new chairman's plans is to streamline the sector so that the stronger players would be stronger and the smaller players will be provided a level playing field to survive.

Wijesinghe wants to modernize plants and machinery, eradicate anomalies between BOI and Non BOI sector of the industry. He is also planning to encourage joint ventures and alliances and even mergers and share swaps to make the industry sustainable. He suggested that stronger companies could adopt smaller companies who will be vulnerable in a non- quota environment in one of these many ways.

Wijesinghe also plans to computerise the industry to a high level.

Responding to industry apprehension that he would use the quota as a carrot to attract more foreign investors and thereby put pressure on the pool quota, Wijesinghe said that foreign investors will be evaluated on a case by case basis and extra quota awarded if their investment justified it.

For example when Linea Intimo set up a US$ 60 million facility the first to make seamless foundation garments on Santoni machines they were given extra quota he explained. While their investment was very high they introduced a new textile plant and an apparel factory and the quota is therefore justified, he added.

The decision to give additional quota is a collective decision made by the 25 - 30 member board which has a representative each from the major apparel exporting association and therefore cannot be attributed to the chairman only, he said. He also responded to industry observations that the Director General Mr. Roy Jayasinghe is not a full time member of the TQB as the TQB Act requires. "I am fully aware of the provision of the TQB Act and if in fact a full time DG is required the matter will be addressed. At present a highly regarded additional secretary to the Industrial Development Ministry is functioning in that capacity, he added.

Mind your Business

Shabby treatment

The "Sun" seems to have set for this telephone company who is treating their most valued asset-the customer rather shabbily. The May and June telephone bills did not come as expected and when inquired the answer was a reassuring one. A new billing system was being introduced in all three languages so, "do not worry" they will come in due course. Both the May and June bills reached a resident in a Colombo suburb on July 19 with the final date for payment being July 14. And yes! the phone was disconnected.

The bill was duly paid but no connection yet. Certainly this company will not win the award for best customer service. A telling story of how promised "sun"shine can turn cloudy for customers!

When the time is ripe

What with all these price hikes, inflation is set to rise and one major bank believes the time is ripe to take advantage of the situation.

It is planning an upward revision of interest rates, hoping that will increase its market share in the competitive local banking industry.

However, the Big Bank has reportedly frowned on the move saying it will lead to a chain reaction and no final decision has been made...

When the going gets tough

With polls around the corner, those occupying the seats of power are feeling the heat, especially with the masses complaining about the rising cost of living.

A group of people's representatives recently made representations to the lady about this, praying for some relief. The lady, who also holds the purse strings promised some concessions and now, those concerned have been asked to study ways and means of reducing the GST- or if that is not possible, to at least exempt essential consumer goods from the tax...

Immortal ideas make internet banks

For most of us Sri Lankans an INTERNET BANK is light years away from internet banking which we are just getting accustomed to. A few commercial banks in Sri Lanka now offer this facility.

Whether you like to shift your accounts from your reputed bank with its plush interiors and courteous staff, to a computer who will politely command you what you should do with your money is entirely up to you.

But for this young Sri Lankan entrepreneur, Joseph de Saram, now domiciled in UK, an internet bank is just only a matter of raising US$ 200 - US$ 300 on the Colombo Stock Exchange.

Brimming over with ideas and innovation, this 28 year old medical student turned computer billionaire ( he is worth 25 million pounds at present) wants to take his British based company Rhodium PLC to great heights in Asia headquartered in Colombo and float an internet bank Immortal PLC also in Colombo!

Well if that's going too "techno", de Saram will settle for his multi award winning computer company Rhodium PLC to be listed on the Colombo Exchange to raise funds for the Colombo headquarters of his company and maybe to launch Immortal PLC in Britain.

It's not too difficult to launch an internet bank, the capital required is about 50 - 100 million pounds, de Saram told the Sunday Times Business on a flying visit to Colombo.

De Saram has had talks with the CSE and some investment banks to back his US$ 200 —US$300 IPO for Rhodium. He is yet undecided whether to float Rhodium PLC stock here or launch a new company. Selling stock of a foreign company is not permitted on the CSE. But Director General, CSE, Hiran Mendis is excited by the prospect of such a large issue on the bearish Colombo bourse.

There are ways to overcome these hitches, he told the Sunday Times Business. For example de Saram can float a BOI company and have Rhodium as a stakeholder in the new company, Then it could be listed on the Colombo Exchange and issue shares.

De Saram prefers to issue Rhodium PLC shares but is also considering the formation of a local company with a 49% stake for Rhodium PLC.

Rhodium's main business in UK where it is not yet listed, is both hardware and software. While the company is into distribution of high quality hardware they also develop software for banks, financial organizations and blue chip companies. Rhodium also does data encrypting and secure electronic transactions for internet.

The company's average growth has been a phenomenal 400% from inception in 1995 and attracted a number six ranking in Deloitte and Touche Technology fast 50 ratings (northern region UK) this year.

The company has grown one and a half times over the last financial year and recorded a turnover of 10 million pounds compared to 2.3 million pounds in the last financial year. Pretax profits improved from 0.4 million pounds to 2.48 million pounds. Their balance sheet strength (net book value) grew from 2.1 million pounds in the last financial year to 4.48 million pounds this financial year.

His target for Rhodium is to increase turnover to 25 million pounds in the next financial year.

But listen to this. De Saram says Immortal PLC is the real money-spinner and places its growth at around 1000% without batting an eyelid! The Internet bank's focus will be on high tech offshore fund management, and is estimated to have a turnover of 770 million pounds in the first ten years.

If de Saram's plans succeed Colombo will have a new IT academy, set up from funds of the first IT company to be listed on the CSE. The Colombo headquarters of Rhodium aims to be Asia's top IT company the optimistic de Saram says.

Hacking to be stopped

By Dinali Goonewardene

A Computer Crimes Bill to combat offences such as hacking and unauthorised access, is being drafted by a sub committee appointed by the Ministry of Justice. "The first draft will be presented to the legal draftsman in a month," Subcommittee member, Kalinga Indatissa told The Sunday Times Business.

The Act identifies securing unauthorised access to a computer or system (hacking) as an offence. Accessing a system with the intention of committing an offence results in an aggravated form of liability. Access by an authorised person beyond the point of authority to perform a function he is not empowered to, is also an offence.

Impairing the operation of a computer, programme or the reliability of data are criminal offences.

Hindering the access of authorised persons, facilitating access to unauthorised persons and copying data or information are also labelled as criminal offences. Introducing false information to a computer or programme has been identified as an offence by the sub committee which has considered the increasing number of computer viruses.

The draft Act provides for offenders to be arrested without a warrant and states that offences are non bailable. The bill confers authority to investigate and take necessary action including the confiscation of property.

The United Kingdom was in the forefront of enacting legislation in this area with the Computer Misuse Act of 1990. However the proposed draft of the Computer Crimes Bill incorporates sections from both UK and Singaporean legislation. While UK legislation deals with unauthorised access, intent to commit offences and unauthorised modification of computer material, Singapore laws include the unauthorised interception of computer services and abetments and attempts in this regard.

In Sri Lanka computer related offences are presently dealt with under the penal code which refers to offences against property. However property is defined in the code as tangible property. The Penal Code of 1885 does not deal with issues of the internet, computers and information technology.

Spice prices sky-rocket

By Chanakya Dissanayake

Prospects for Sri Lankan spices look bright with prices reaching their highest since 1997. High demand prevailed in the international markets for local spices during the first half of this year. International buying pressure has resulted in the price of cloves sky rocketing from Rs. 70 in July1999 to Rs.325 last week. Cardamom is also experiencing heavy international demand but local short supply conditions have prevented exporters from getting the maximum benefit.

Export earnings from spices increased steadily over the past few years and amounted to Rs. 11,598 million in 1999. This was a 5% increase from the previous year. Sri Lanka is currently exporting six main spices , cinnamon, pepper, cloves, cardamom, nutmeg and mace.

Sri Lanka is the global market leader for Cinnamon, producing 2/3 of the global cinnamon requirements.

Director Intercom Exports Ltd, Mr. Sarada De Silva told the Sunday Times Business, " As a country we need to shift more into value added spice production, but for that we need more investments. Our spice yields are low compared to other countries."

Emphasising the importance of the quality of spices produced, Director Export, Agriculture Department, Mr. Ranjith Kularatne said, " Quality parameters should be maintained to attract high prices in the international markets. Today's quality will be reflected in tomorrow's prices. If the producers want sustained high prices for their commodities, they should sustain the quality".

Currently the government provides a subsidy for re-plantation of spices, in view of improving the yields. However some spice growers said that the delays in paying the subsidy and bureaucratic measures have resulted in low interest in re-plantation and improving the production among the spice growers. Also the unavailability of good quality, high yielding planting material has contributed towards low production.

The local spice exporters are also looking into the possibility of entering Bolivia and Brazil in the South American market to expand Sri Lanka's spice market share.

Are domestic savings rising ?

In 1999 domestic savings reached a new high of 19.8 per cent of Gross Domestic Product(GDP). Domestic savings had hovered around 15 to 16 per cent for quite sometime. Between 1993-96, domestic savings averaged 15.5 per cent of GDP. From 1997 there has been a noticeable upward trend. Domestic savings as a ratio of GDP rose to 17.3 per cent in 1997,19.1 per cent in 1998 and a further 19.8 in 1999.

This is indeed is good news. It holds promise for higher rates of economic growth. Domestic savings provide the best foundation for investment. Sri Lanka's domestic savings have been low in comparison to the domestic savings ratios of most Asian countries. India, a much poorer country in terms of per capita incomes has a higher domestic savings ratio of around 20 per cent of GDP. Countries like Singapore and Malaysia have much higher domestic savings.

Singapore's domestic savings were as high as 51 per cent of GDP in 1997, while Malaysia had a domestic savings of 44 per cent of GDP in the same year. Thailand's savings amounted to 36 per cent, while Indonesia's was 31 per cent of GDP in 1997. Investment is dependent on savings.

Sri Lanka has been fortunate in being able to supplement domestic savings with a significant volume of foreign remittances. These too have been increasing over the years. These private transfers amounted to 3.7 per cent of GDP in 1996.It has now increased to Rs 62.4 billion or 4.1 per cent of GDP. Domestic savings together with these remittances, generally described as the savings of nationals abroad, constitute National Savings. National Savings have increased from 19 per cent of GDP in 1996 to nearly 24 per cent of GDP in 1999.

The increase in domestic savings is the combined effect of the three components, household savings, corporate savings and government savings. Both household savings and corporate savings increased last year contributing to higher domestic savings of Rs 220 billion.

The government has been a dis-saver for many years. Last year the government's dis-savings was reduced somewhat. The day when government savings would be positive appears very distant indeed. The government's revenue would have to exceed its current expenditures for this result.

The reasons for the higher household savings are not clear. One could conjecture that it is a combination of several factors. The increases in per capita income, lower rates of inflation and more aggressive campaigns for savings mobilisation by banks and other financial institutions could be some of the reasons. It is difficult to believe that the savings culture has changed, but it's possible that improved incentives and mechanisms for savings mobilisation could have had an impact on increasing savings.

Corporate savings are quite clearly related to corporate profits and taxation rates. Improved corporate profits would have been the reason for increased corporate savings. It is important to maintain and strengthen these factors in order to continue increasing domestic savings. Our rate of investment has been supported by foreign savings as well. In 1999 such foreign investment was 3.2 per cent of GDP.

Domestic savings of 19.8 per cent of GDP supplemented with 4.1 per cent of savings of nationals abroad remitted to the country and foreign investment of 3.2 per cent of GDP resulted in last year's investment increasing to 27.1 per cent of GDP. Since Sri Lanka has had a capital output ratio of around 5, this level of investment would on average generate an economic growth of a little over 5 per cent.

We must continue to pursue policies which assist in increasing domestic savings. Overall economic policies conducive to higher levels of savings are perhaps the most important. Low rates of inflation, which ensure real positive rates of interest and a confidence that the rate of inflation would not rise are most important.

Three other factors could also assist in increasing savings: the development of a savings-oriented culture, aggressive savings mobilisation efforts coupled with a variety of savings products and the adoption of compulsory savings schemes such as the expansion of provident fund schemes and increasing the rate of contributions.

Nations trust bank's cutting edge edge

By Chanakya Dissanayake

What is NTB's cutting edge?

To start off we are concentrating on large corporates, medium scale businesses and the retail sector.

Retail sector or personal banking is a growth area for all banks due to higher margins and spread of risk, also as the economy grows, personal banking opportunities expand.

We want to establish ourselves as a major player in a short period of time - Aruna Gunasekera

For example, as personal income grows there will be an increase in savings and a high demand for personal banking instruments like personal loans.

How we differentiate ourselves from the rest is by centralising our operation and devoting most of our staff at branches to marketing and customer care. By doing this we were able to offer a better service to customers and also cut down on our overheads. This benefit is also passed to the customer by way of higher interest rates for deposits and lower interest rates for borrowings.

We have five different delivery channels, namely, the normal branch network, in-store banking units at supermarkets which are open until 10 p.m seven days a week, our ATM network, telephone banking and the internet banking. No other bank has all these channels working at once. This is how we differentiate ourselves.

On a global context in place of large banks, small internet based banks are becoming increasingly popular. Are you hoping to cater to this trend.?

Our internet model will be officially launched in few weeks time. At the start we will have payment of utility bills, transfer of funds between accounts, stop payments etc. on line. Later on we hope to add value by introducing loan application forms on line, customers can check their eligibility, ceiling on borrowing on the net.

In the future will you look at merging with a larger financial institute or a development bank to to raise further capital and expand the operation?

We want to establish ourselves as a major player in a short period of time. We have opened nine branches concurrently, no other bank has opened so many branches at the same time. Based on our promoters; JKH group and Central Finance which has a massive customer base in the island you can say that our deal flow will be very good. We will be ready for a merger or a strategic alliance in the near future, but it will not be for the purpose of raising capital.

As you can see we have performed extremely well in the capital markets where our issue was oversubscribed many times over. We will have no difficulty in raising the necessary capital from investors.

A large proportion of Sri Lankan population live in rural areas. The majority of this population was traditionally considered unbankable. Do you have any plans to exploit this vast potential.?

Our initial strategy will be to establish a critical mass as soon as possible. After we succeed in that, we will be expanding into the outskirts.

We have a main branch at Kandy, we hope to develop this into a regional base. We will be looking into expanding into rural areas with small banking units. It will come as phase two.

In countries like Sri Lanka, money held outside the banking system is substantial. In your opinion will the current improvements in the personal banking sector attract these funds?

We try to capture these funds in two ways. NTB has introduced a four year fixed deposit certificate with detachable quarterly interest coupons.

Any person can bring this coupon to the bank on maturity date and collect the interest payment. This will be very attractive to low income sectors because they will not be deprived of an regular income.

This is a product unique to us. We have also introduced a target savings scheme where one can initiate a saving plan, say, if you want to save one million in ten years you need to put Rs.4702 every month and you get a free life insurance for the whole amount.

The present Banking Act was drawn at a time where there wasn't any internet banking or phone banking. Should the Act be amended to facilitate these new issues in personal banking?

Yes. The laws should be amended and continuously improved to suit the changing requirements of electronic banking. For example, the Sri Lankan banking sector is developing a system for secure on-line payments, law should also be developed to go hand in hand with the technological developments.

Currently the personal loan schemes are available only to those who are permanently employed and professionals. There are many who are in self employment who cannot access personal loan schemes. Will the NTB change this situation?

We do not have any specific requirement saying you need to be permanently employed to obtain personal loans. In the case of self employed banks find it hard to asses the income pattern and amount. But we have changed the situation, any one can obtain a personal loan if he can provide a guarantor who is permanently employed and some collateral's as security.

In a time where credit cards have become essential we still don't see a credit card facility in your product portfolio. Will NTB introduce a credit card in the near future?

The capital investment required for a credit card facility is huge. Before we introduce a credit card we will be offering something similar to a credit card to our customers. Through this we will be building up a vital data base and when we know the exact spending patterns we will go ahead with a credit card to these customers.

Biz broadsides by Rajpal A.

Information super-corridor or just the gravel road?

Though Sri Lanka has entered the (third) information age, there is still uncertainty whether we want to be there or not. At least that seems to be what's apparent from the way Internet technology and its use in this country is treated. Sri Lanka's Internet users still have to pay through their noses for server access; but more importantly, they pay for the start-up and the additional minutes for the local call when they access the Worldwide Web. This is in contrast to countries which charge for the start-up only in accessing the net (meaning that there is a charge is, say, for the first four minutes only…..)

There is no competing in the global markets without " informatization'', and this is clear form many papers that have been devoted to extensive studies on this subject. A recent study uses data from 112 nations, to show the relevance of the "old-paradigm" variables—literacy, education, urbanization, and mass media density—to the density of telephones and computers in nations. All indications are that where there is a higher density of computers and telephones, there is a higher literacy level and mass media density, for example.

Though this does not mean that there is no argument on whether the information age is going to help or hinder developing nations, it is fairly clear that there is an emerging consensus that smaller nations can break economic barriers, if the information superhighway is put to good use. The World Economic competitiveness index, for instance, projects Taiwan as sixth and South Korea 19th among 53 countries representing more than 95 percent of world output, trade and investment flows (WEF 1998). Where preconditions exist for the creation of a similar environment, other small countries (e.g., Malaysia, Mauritius, and Sri Lanka) too are likely to "take off."

Mahathir Mohammed, for instance, who acquired notoriety status for his resistance to the development paradigms of the West, initiated the Information Corridor in his country, acknowledging that "though internet is not going to create absolute equity'', it will create " conditions for the solving of certain problems at a local level.''The information corridor in Malaysia has taken off, whereas in Sri Lanka the information superhighway still looks more like a gravel road. This despite the prognostications that Sri Lanka wants to be the hub of information technology in the region, when many other regional giants are aspiring for that status after having invested sensibly in the area of developing such technology.

Theorists such has Sussman have pointed out that the information technology will marginalize Third World poor even further, as a result of "Third World elite's being sucked more into the mainstream of the globalised economy through information technology.'' It is not as if such dystopain as opposed to utopian fears are not absent in considering the information superhighway and its benefits.

But, this is one area in which a country even if it stands to lose by some aspects of the technology, stand to gain on the final analysis. Shelton Gooneratne of Moorhead University, in an interesting paper on these aspects of information technology, states that the state of capitalism engendered by the Third Communication Revolution has left the nations—small or big—with little option but to informatize so they could effectively compete in the world material economy.

A reduction of that position would be that most countries would have no choice expect to "informatize.'' But, here at least, the Hobson's choice seems to offer more exciting prospects than other Hobson's choices arising from the global economy. This can be seen, even from a "dystopian'' point of view that doesn't see the age of information technology in a very optimistic light.

Though globalization may spell the "end of the nation'' ( as Gooneratne ponders, with a question mark) rural communities can benefit from cellular technology and internet technology in away in which the neo-liberal rapacious architects of the global transnational economic system would not like.

Developing countries had the potential to leapfrog into sophisticated technologies such as wireless and satellites at a fraction of the cost of laying wire, say Irwing and Knight, two information technology utopians. But, though Utopians can be seen as apologists for the hegemony of global capital, the counter argument is that the information superhighway can nix the giants.

It can create a counter economy faster than any other means — an in effect whack the predators of neo-liberal capital with their own weapon. At least, that is what this writer would envisage, especially considering the fact that we in many ways are now fundamentally tied to the neo liberal economy — - even though it's not good for us and we do not like it.

Which is not to say we as a country take it's forces lying down, but to say, we get smarter, and look at everything with reference to their own bearings and ramifications. As the postulations of those such as Mahatir and the advocates of the competitiveness index asserts, — full participation in the information revolution is at least the only outside chance that small countries such as ours have, in being economic forces to be reckoned with in the world.

More Business

Return to Business Contents