10th June 2001
Editorial/Opinion| Plus| Business|
Sports| Mirror Magazine
A worker collects latex from a rubber tree at Neuchatel
Monetary mandarins await mandateThe boys at the Treasury are a perturbed lot these days. They are under pressure from the Washington twins to implement tough reforms but the local politicians are stalling every move.
The latest of these attempts blocked a potential fuel price hike (again!) but the unhappy mandarins have now asked for clear policy directions from the top.
And the answer is to hold on until the present volatile political state of affairs vis-a-vis the peace talks and the no-faith motion settles and then to implement the reforms to the letter.
Quest for quality and quantityA bank which previously adopted a strategy of serving its clients through a few but well-serviced branches has decided to take the plunge and set up more branches.
This was after a survey revealed that it was losing clients to its main rival primarily because of the lack of access.
The first step in the new direction is the setting up more ATMs; new bank branches will soon follow, we hear.
Starry-eyed hoteliersThe news that the hot hotel property which recently changed hands is vying for six-star status has got the industry buzzing.
At least two five-stars are taking serious note and were busy this week pondering potential expansion plans that would bring them a half-a-dozen stars too.
But both these hoteliers are wary: the step would require significant
investments that will not bring rewards in the short-term.
Who says Sri Lankan entrepreneurs have not succeeded under the Indo-Sri Lanka free trade agreement? "There are pros and cons of the success of the FTA but some Sri Lankan companies have sold some unique products in the Indian market," noted Nawaz Rajabdeen, vice president of the Federation of Chambers of Commerce and Industry.
Some of these products include rubber slippers and exercise books. In one significant breakthrough, Robert & Co, a firm in Kurunegala, secured the franchise from Disney - the international children's product chain - to use the Disney logo on exercise books and export it to India. The irony - the paper is imported from India!
"Our products stand out because of their quality and that's why we are getting into niche markets," one expert said.
While the FTA may have not shown expected results, Pakistan and Bangladesh are looking for similar relationships with Sri Lanka, says Federation President Macky Hashim.
He said the Federation of Chambers of Pakistan is keen to formalise a FTA with Sri Lanka and papers and documents in this connection have been processed. Both sides have excellent trade with tea and betel going to Pakistan in return for a range of goods from there.
Bangladesh's commerce chambers are also negotiating with the Sri Lankan
federation for a free trade pact that could open wide the doors to trade
and investment between the two, Mr. Hashim said.
"The next question is whether the government would present the bill in parliament and make it law. That's a decision the political leadership would have to take and that could be anytime now or many months or years later," one campaigner noted.
An official spokesman said the bill was passed by cabinet about two weeks ago, finally overcoming opposition from local liquor and tobacco firms. The main features of the bill are an advertising ban and the creation of a National Authority to implement a series of functions listed in the proposed law.
The proposed advertising ban was recommended by a Presidential Task Force on Tobacco, Alcohol and Illicit Drugs under a national policy aimed at cutting consumption, particularly amongst youth, of harmful substances. Its report was presented in late 1997.
The government accepted the recommendations and wanted to enforce the ban in January 1999 after passing the necessary legislation in parliament. But industry protests stalled the process and has delayed it ever since.
Industry officials argue that the choice of whether to buy or not a product must be left in the hands of consumers and not be decided by law. "We are catering to an adult audience which must have the right to choose," said one industry official.
Current advertising practices relating to tobacco and alcohol products
are ambiguous. While Ceylon Tobacco Ltd, the country's monopoly cigarette
producer, has taken a conscious decision not to advertise in the media
since March 2000, there is no ban on advertising cigarettes in newspapers.
Alcohol products are advertised in newspapers but not on radio or television.
The private electronic media follows a code of ethics on tobacco and advertising
initiated by state-run television stations.
By Chanakya DissanayakeSri Lanka's burgeoning processed rubber industry is growing at such a rapid pace that it is running out of supplies and wants the government to remove barriers to import raw rubber, industry officials say.
"We are heading for a period where local demand would soon outstrip supply and then we would have to import raw rubber to feed a thirsty and aggressive rubber processing industry," noted an industry specialist.
The rubber processing industry has recorded significant growth in recent years generating US$ 196 million in export earnings last year, up from US $ 169 million in 1996. Export of industrial tyres and medical gloves have increased by over 20 percent in 2000, with these items heading a list of impressive rubber products that have found niche markets across the world.
While Sri Lanka's raw rubber production per annum has slumped to 87,000 tonnes in 2000 from 157,000 metric tonnes in 1970, the amount of rubber land has also drastically fallen to 158,000 hectares in 2000 from 198,450 hectares in 1991. Much of the rubber land has been siphoned off for development purposes and housing.
Yet at the same time the local rubber processing industry has grown into a billion-rupee business, sharply raising the level of local consumption. Local raw rubber consumption rose to 75,000 tonnes last year from a mere 15,000 tonnes in 1970. Industry officials point out that in the next five years local demand will go up to 100,000 tonnes, outstripping local supply.
"The time has come for Sri Lanka to move up the rubber value chain," said Lakna Paranawithana, a consultant working for the Rubber Competitiveness Initiative (RCI), a government-private sector partnership.
"Indonesia, Vietnam and Cambodia are all cheaper sources of raw rubber than local supply. We should exploit this opportunity to obtain a cheaper raw material supply and build up a sustainable competitive advantage in producing value added rubber products for the global market," he added.
The Sri Lanka Rubber Cluster, part of the RCI and dedicated to improve the competitiveness of the rubber industry through private and state participation, has developed a framework for a "Rubber City".
Rubber City is a fully integrated modern industrial city aimed at attracting large, medium and small-scale rubber value adding industries. The 300-hectare proposed project is located at Matugama, adjoining the proposed southern highway.
The project involves a total investment of Rs. 175 billion and is expected to raise the total turnover from rubber products to Rs. 100 billion in 2005.
Funds for the project come from both the government and the private sector. "The government will provide the initial infrastructure while a large number of companies are expected to invest in facilities and relocate their production to this site," Paranawithana said.
The Rubber Cluster is also planning to accommodate top rubber players from India, China and Europe. "Rubber City will be providing high quality, high income jobs to more than 60, 000 individuals. This will amply compensate any loss of income to the rubber smallholders resulting from raw rubber imports," he said.
Government ministers, senior state officials and private sector industry
officials were due to visit the Matugama site on Saturday to discuss project
plans and construction targets.
"We are looking into the matter with an open mind," said Dr. Dayanath Jayasuriya, SEC Director-General when asked to comment on the deals. He did not give details.
Both John Keells and Asia Capital Ltd have denied reports that either
had purchased a large chunk of Richard Peiris shares on June 1 and a few
parcels thereafter last week.
Sri Lankan entrepreneurs take note - the prestigious Entrepreneur of the Year competition is around the corner, testing the skills of local entrepreneurship and providing awards and recognition for tenacity, skills, courage, vision and a heap of other issues.
There are no barriers to compete. Big or small, industries whether in the rural countryside - lacking in facilities - or the big conglomerates with access to urban services, are treated alike and on a level playing field. There is no discrimination between big and small.
"We are looking for the entrepreneurship skills of individuals and their talents - not so much the success or turnover of the business - and want to reward such persons," noted Tissa Jayaweera, chairman of the organising committee of this year's competition.
The Entrepreneur of the Year competition is organised by the Federation of Chambers of Commerce and Industry (FCCSL) in an event that has been held annually since 1995 except for a brief break in 1998. It is organised at provincial and national level. After the regional events are held, the provincial winners vie for the national awards
Application forms for the competition are available from June 18 from the federation office and the 40-odd regional chambers that are members of the federation. Entries close on July 31. Provincial award ceremonies will be held from around October culminating with the national awards ceremony in Colombo on November 28.
The awards include 79 gold and platinum trophies at provincial level and 33 national-level trophies. Previous winners include industrialists from Jaffna and Ampara with the competition drawing over 500 applications every year and more are expected this year.
"There are more than 40,000 registered companies but the number of applications
we get is just a fraction of this figure. We need more individuals and
companies to enter the competition as ultimately they, and Sri Lankan industry
as a whole are the beneficiaries," said Samantha Abeywickrema, federation
Whatever a government proposes, the opposition opposes. The issue with respect to the conditions imposed by the IMF and other international agencies have not been discussed in terms of their merits and disadvantages but totally rejected mostly owing to their being recommendations or conditions of these agencies. We are not suggesting that all the envisaged reforms should be undertaken in toto without modification and change. What is lacking is a reasoned discussion and a greater consensus in the changes so as to ensure the building up of a higher capacity for economic growth.
The latest (Central Bank) Annual Report has pointed to the dangers of this inability to undertake reforms. It has said: "The economic outlook for 2001 and the medium term economic prospects indicate that the situation could change from bad to worse, unless corrective measures are taken without any further delay and necessary reforms are implemented consistently and effectively." There is enough evidence already that the government has given up on several components of the reforms envisaged. It has made very strong and unequivocal statements that it will not allow the establishment of private universities, a very vital component of the proposed educational reforms. It has reiterated its position that the government would not privatise the two state banks. It is very likely that the much-needed reforms in labour laws would also be shelved. Health reforms may also suffer the same fate.
The overall result of not undertaking needed reforms would be that we would become a low quality society, unable to compete in the international market place. That may certainly help in the political ambitions of certain groups by creating economic difficulties that are conducive to political instability, tensions and violence. This in turn would result in a further downturn in the economy.
Some of the opposition comes on entirely ideological grounds or because the opposition to the proposals disrupts the government's actions and are politically popular. If narrow political gains guide the approach of political parties, then there is little doubt that potential economic gains would be lost and the country would be relegated to one of the poorest countries in Asia and perhaps, the world. The government must be credited with an articulated vision. This has been clearly stated in VISION 21 of November 1999. Yet its inability to translate that vision into institutional realities has been most pronounced. No doubt much of the difficulties have arisen owing to a lack of a clear majority in parliament, the diverse components of the coalition and the attitudes of the opposition political parties.
The government has also failed to give a lead by attempting to place these economic issues in the forefront and confront the opposition in more reasoned discussion rather that in political rhetoric. The size and composition of the cabinet is a conspicuous illustration of this. Its own actions have been politically motivated rather than on the basis of good economics.
There are several areas of fiscal reforms it has failed to act on. Consequently its vision is not likely to be realised. As (former finance minister) Ronnie de Mel once said, then from the opposition ranks, the vision could turn out to be only a dream.
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