9th September 2001
Editorial/Opinion| Plus| Business|
Sports| Mirror Magazine
The "I owe you" MoU The threesome in the
By Chanakya DissanayakeThe shotgun marriage between the PA government and the JVP, Sri Lanka's main Marxist group, has come under heavy fire from business analysts and economists, saying it is a compromise of economic policy for political survival.
The clauses in the lifesaving Memorandum of Understanding (MoU) between the two parties which state that the government should intervene to control the prices of consumer commodities, when affected by external forces, has raised worries about a fresh spending binge which could disrupt all fiscal targets for year 2001.
"This is especially dangerous since the CEB and the CPC are already saddled with losses amounting to billions of rupees, mainly due to not adjusting their prices in line with global prices," an analyst said.
"The JVP should realise that there is no free lunch. It's the tax payers who bear the burden of price fixing," he added.
Director, SG Securities, Singapore, Arjuna Mahendran, said Sri Lanka was on its way to becoming probably the only Marxist country in the world.
The government has repeatedly promised the donor community that it will not subsidise prices of imported essential commodities and services, enabling loss-making state corporations to return to operational profitability.
"To fix prices you need money. When faced with a difficult fiscal situation, you should target the subsidies to the poorest rather than subsidising the whole nation," said Dr. Nadim Ul Haq, Resident Representative IMF in an interview with Sunday Times Business.
The MoU also states that any new privatisation of state enterprises will be frozen for a period of one year. The JVP said all pre-agreed privatisations would go ahead as scheduled. But JVP's Secretary Tilvin Silva contradicted this statement by saying at a press conference last week that the party would stop the SLT sale.
The sale of the government's stake in SLT has been pre-agreed with the donor community and was even included in the 2001 budget as an integral part of government finance.
However, PERC chairman Mano Tittawela announced that the government's stake in both SLT and Shell Gas will be sold as scheduled.
It is also learnt that the next $30 million tranche of the IMF standby agreement which was originally scheduled to be received at end of this month, will be delayed possibly until January 2002.
An IMF team, in Sri Lanka last month for a review of the quarterly performance, was unable to complete the review and sign a fresh Letter of Intent (LOI) with the government enabling the release of the next tranche.
Dr. Ul Haq indicated the possibility of combining two quarterly reviews in November and releasing the funds in January 2002.
The government also announced that it was not going ahead with raising a $200 million commercial loan which was to be arranged by the Deutsche Bank. Tittawella said the current conditions were not favourable to raise the loan.
Aid agency sources said both the Private Sector Structural Adjustment Programme and Poverty Reduction Growth Fund, which could realise approximately $630 million funding to Sri Lanka from the IMF and World Bank over the next three years, could be delayed indefinitely due to the anti-reform stand in the MoU.
Meanwhile, the Central Bank is considering a US dollar denominated bond issue to be held in October, mainly to bridge the shortfall arising from the delay in IMF funds and the Deutsche Bank loan.
The two-year bond is likely to hold a coupon rate of six percent in $ 5000 denomination, interest payable annually. The Central Bank is aiming to raise $ 25 million initially through the issue. This matches with the delayed IMF proceed of $30 million, according to analysts.
"It is most likely that commercial banks will fully subscribe the issue.
Most banks are holding surplus dollars due to a slowdown in imports," a
money broker said.
Reds in the bluesThe blue-red deal may be hailed by many but the business community is not among them. There is widespread apprehension about what the reds will do and corporate bigwigs have already sent word to the red brigade that they would prefer an exchange of ideas.
And the reply has been typical: 'we can talk, but we are not about to change our plans after listening to you'. Indeed, the reverse may well be the case!
Double-crossed!Once again, talk of a reshuffle is in the air and the Treasury is all agog with rumours of a possible change of portfolios.
Of course, both deputies are known to have fallen out of favour with the lady and that has only added to the speculation.
And the latest we hear is that the lady will retain her hold on the purse strings but will offer the deputy's post to the bonnie veteran who crossed over from the greens. If he is willing to accept the demotion, that is.
Paradise jeopardisedAnd then there is the story of how attempts were made at very high levels to reverse the adverse travel advisories that have been issued after the airport disaster.
Several key western countries were tapped and appeals lodged on the
basis that paradise was at present a friend in need. The appeals were accorded
a sympathetic hearing but that was all. 'We cannot jeopardise the safety
of our nationals' was the stock reply.
Not easy. Three years ago farmers struggled with unsold chicken and eggs following overproduction, imports and the cost of living. That phase has begun to haunt the industry once again as 2.3 million kilos of processed chicken lies unsold in cold storage while an equal amount is ready to be harvested but cannot be done due to a surplus in the market.
"We are facing a major crisis," said Dr. D.D. Wanasinghe, chairman of the All Island Poultry Association (AIPA). "This could be worse than the one three years ago as the economy is also battered at the moment in addition to crippling power cuts."
For egg farmers, it is the second crisis in four months. Around June, farmers across the island had to destroy some 33 percent of the total egg production due to transport problems. "Just when we were recovering, this had to happen," said an egg farmer.''
Producers are forced to sell eggs at 2.35 rupees per egg (farmgate price) when the actual cost of production is 3.20 rupees per egg. "The industry is being destroyed. We are losing 60-70 cents per egg," the farmer said.
Wanasinghe said the crisis today is due to overproduction, less demand from the beleaguered tourism industry and falling consumption patterns due to the rising cost of living.
The association last month launched a 1.5 million-rupee campaign on radio and newspapers to educate the public on the nutritious value of chicken meat and eggs and also requested the public not to pay more than Rs. 144 per kilo, hoping this will improve consumption.
Wanasinghe said one of the biggest problems faced by the industry is what to do with the ready-to-harvest chickens. "The market is flooded with meat now and on the other hand if we don't sell the new chickens, they outgrow their size."
The drought across most parts of the country has also affected many farms and added to the cost. The AIPA met recently and discussed the crisis, and decided to break into five separate groups - hatcheries owners, poultry marketers and processors, feed millers, egg producers and input suppliers - in an effort to arrive at possible solutions.
The association has 1,500 members of which 40 are corporate members while the industry represents 75,000 farmer families and 200,000 others through indirect employment.
Each group met and came up with recommendations. The hatcheries proposed that they "should stop hatching" since 3.4 million day-old chicks are produced per week. The association suggested a 25 percent cut in production of day- old chicks
It was also suggested that hatcheries should sell chicks at a minimum 24 rupees per chick compared to 32 rupees while another proposal to voluntarily stop hatching for two weeks is practically difficult to implement due to the economic crisis, Wanasinghe said.
Wanasinghe also urged consumers to buy branded chicken meat products against the unbranded product due to the acute power crisis which affects cold storage facilities.
"My fear is that the industry is becoming uncompetitive due to high
costs compared with other industries in the region. There could be a threat
to the local industry via imports which are bound to be cheaper given our
high production costs." (FS)
- Group of business associations urge people to put pressure on political parties and the LTTE to get back to peace talks. Convenor Ranjit Fernando, CEO NDB, says group prepared even to talk to the rebels if it would help to end the war.
- Business tycoon Lalith Kotelawala launches bid for peace, sending a letter to LTTE leader Velupillai Prabhakaran suggesting peace talks with his civil society peace group.
- Suraj Dandeniya, president of the Association of Licensed Foreign Employment Agencies (ALFEA) leads campaign of "human chain for peace and democracy" outside Oberoi hotel.
- Facets 2001 international gem and jewellery fair ends.
- Parliament reconvenes on Thursday after two-month absence.
- Roles reversed: Main opposition United National Party hesitant in presenting no-confidence motion against government while PA confident of facing it and urges debate.
- Food aid from local and foreign agencies trickle into drought-stricken areas in the south but concerns raised as to the need for a central authority to handle relief.
- Cash-rich young businessman Dhammika Perera becomes single largest shareholder at NDB.
- Central Bank trims interest rates triggering rate cuts among most
By Diana MathewsThe popular Lion beer and the range of Sunny Hill jams and cordials are among some products that have been stripped of the prestigious SLS quality certification mark.
The Sri Lanka Standards Institution (SLSI) announced in a public notice last week that the licenses issued to these products to use the SLS mark had been cancelled. SLSI said it could no longer guarantee the quality of these products.
These products were Lion beer from Ceylon Brewery, the Sunny Hill range of jams, cordials and sauce from the E.B. Creasy group, ready to serve fruit drinks from Madhura Industries, Hali-Ela, Melba jams and cordials from Speedo Consumer products, Colombo and jams and cordials from Sun Rise products at Ratmalana.
B. S. P. Mendis, SLSI Deputy Director General, told the Sunday Times Business Desk that licences given to products could be withdrawn for various reasons including arrears in the annual payment, quality problems, certain conditions (such as maintaining proper records and preparation of manuals).
"The SLS is a third party guarantee to consumers that the products conform to certain quality and safety requirements on a continuous basis," he said. Mendis said that once the licence has been issued there are stringent requirements that have to be adhered to and if there are any shortcomings, it would result in the withdrawal of the licence.
"We have moved from Ceylon Breweries to Lion Breweries, which is a state of the art factory, and now we have obtained the ISO standard," says Prasanna Amarasinghe, Director Marketing, of Lion Breweries Ltd, when asked about the SLSI move.
Lion beer, the biggest selling beer locally, ran a highly-successful but controversial promotion campaign over television and the media last year with one of the catch phrases being "Is there a lion in you?"
"There is no problem with our quality even though the SLS mark has been withdrawn," he said. Lion Breweries is satisfied with the international ISO Standard, which is ranked higher than the SLS Standard, he added.
An official of Creasy Foods Ltd, which saw its licence being withdrawn for the Sunny Hill product range, declined to comment saying the company would provide a response next week.
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