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Rubber
industry bouncing back Experts attributed
the recovery in prices to production cutbacks by major South East
Asian producers and revived demand, especially from tyre manufacturers,
as the world comes out of recession. Prices are expected to remain firm for the foreseeable future. "Current prices are very attractive and they will go up further," said Dr. L.M.K. Tillekeratne, Director of the Rubber Research Institute, who earlier this year forecast a rebound in prices. "Now people
have resumed tapping; production is improving," he said. "We
hope rubber would reach a price of not less than Rs. 100 by the
end of the year." Smallholders,
who account for the bulk of production, had given up tapping and
neglected their estates during the slump in prices as it was no
longer remunerative for them to do so. Malin Goonetileke,
secretary general of the Planters' Association, said the rubber
industry was pleased with the revival in prices. But, he said,
regional plantation companies that began diversifying into oil palm
because of the prolonged slump in rubber prices would go ahead with
their projects and were planning to set up a mill to refine crude
palm oil. Oil palm had
been grown in Nakiyadeniya since the mid-1960s but three regional
plantation companies, Namunukula, Elpitiya and Agalawatte, plan
to plant up to 1,000 hectares of oil palm each. They also plan to
set up a joint mill that can process five tonnes of palm oil each
day, Goonetileke said. "No good
rubber lands have been affected," he said. "The companies
converted into oil palm only marginal rubber lands or other land." Tillekeratne
of the RRI said rubber consumption was fairly high but that output
was not enough to meet demand. Manufacturers were importing about
5,000 tonnes of good grades of sheet and latex a month. With bad weather
disrupting tapping, imports are likely to go up to 10,000 tonnes
a month. The government restricts rubber imports but allow manufacturers
to import on a case-by-case basis. Prices had
revived after major producers in the Tripod Alliance - Thailand,
Indonesia and Malaysia who account for nearly 60 percent of global
output - cut production by four percent each. The yield in these
countries had also fallen owing to the severe damage done to rubber
trees by overexploiting. This created
a shortfall of rubber in the world market, which coupled with revived
demand, caused rubber prices to shoot up. The alienation
of rubber land for other purposes had also eased. Tillekeratne
said rubber was the only crop to have survived the drought which
affected both tea and coconut. Rubber production
might rise to around 90,000 tonnes this year, he said. The slump in
prices and neglect of estates led to a gradual decrease in rubber
production, with output falling to a mere 86,000 tonnes last year,
the lowest ever. Production had peaked in 1960 when 160,000 kg was
produced. The downturn
prompted many to predict a bleak future for rubber since domestic
consumption by the local industry had been on the rise in recent
years. More than 60 percent of the rubber output was used by the
local industry last year. The fall in
rubber production caused alarm among rubber products manufacturers,
forcing them to import rubber to meet their requirements. Sri Lanka is a big manufacturer of rubber tyres and household and industrial gloves. The government has decided to expand rubber cultivation into dry zone areas to ensure an adequate supply of raw material for local industry in the years ahead. Extensive replanting of rubber with high yielding new varieties developed by the RRI is also required since many trees are senile and the soil depleted after decades of use. CEOs
discuss children's needs after charity concert The objective
of the "CEOs Roundtable on children" at the Trans Asia
Hotel is to familiarize the Lankan business community on the real
issues confronting needy children and seek ways to bring about a
significant change in their lives. The keynote
address at the roundtable will be made by Greig Craft, founder of
the Asia Injury Prevention Foundation, a children's charity based
in Vietnam and the 'Helmets for Kids' initiative. Craft is also
the Vice Chairman of the Asia-Pacific Council of American Chambers
of Commerce. Ted Chaiban, UNICEF Representative in Colombo will
also address the event. Some of Sri
Lanka's top business leaders are participating at the breakfast
meeting which has the backing of a group of CEOs supporting children's
causes. The meeting is a follow up to the Katmandu summit on children organized by UNICEF last year which brought together children, business leaders and NGOs. The conference will be preceded by a concert of country and folk music at the same venue tonight organized by the CMF in association with UNICEF, Emirates, Cargills, The Sunday Times, Gold FM and Dynavision. Featuring local and foreign bands, the concert - the 11th in a series of charity shows - is raising funds for needy children. Organisers of the concert said tickets are available today at the Trans Asia hotel. "The CMF has finally succeeded in its long cherished goal of bringing the business community together to discuss children's needs through the medium of music," a CMF spokesman said.
Company officials
said they prefer to physically carry out all transactions rather
than rely on technology. This is because
they are compelled to submit documents anyway and also because of
worries that, if anything goes wrong in their registration procedures,
electronic transactions might be more difficult to trace than a
paper trail. The Registrar
of Companies, D.K. Hettiarachchi, said online registration has not
replaced the procedure of physically handing over essential documents. But, he said,
online registration has made the procedure more convenient and accessible.
Company officials
also said that the information on the department's website was incomplete
as it does not provide registration numbers of listed companies,
essential in taking legal action against a company. At present, companies have to perfect a form and get approval to manually refer all registers to find these numbers. (Please also see Page 7). Seizure
of MH's home stayed The minister's
Media Secretary Fauzul Khalid said that Mohamed had never defaulted
any bank and that he had negotiated with the Seylan Bank to repay
the loan in 25 years under the normal banking procedures. He said
the minister received a letter from the bank last week extending
the payment period. Mohamed took
the loan to give it to his sons to start up a business, he said.
Seylan Bank
officials declined comment. Before the last general elections, the
bank had advertised in the newspapers to sell the property and recover
the money owned by Mohamed, also a former speaker. Khalid also denied reports that Mohamed's appointment of Seylan Bank chairman Lalith Kotelawala as the chairman of the Western Region Development Council (WRDC), which comes under his purview, was connected to the former speaker's loan repayment being rescheduled. The appointment of Kotelawala for the WRDC was not a political appointment but one made by the Council itself, he said. Lankan
ambassador backs globalisation Currently Vice President for Fixed Income Banking in the Structured Finance Group at Raymond James where he is responsible for developing and structuring securitisation transactions, the 48-year-old Sri Lankan diplomat holds various degrees in International Economics and Political Sciences from US universities. In a very active,
25-year Sri Lankan and international career he has travelled across
the world from Sri Lanka to the United States and to all major global
and emerging markets. In Sri Lanka, Subasinghe has also advised
President Junius Jayewardene and counselled Ranasinghe Premadasa
on international economic and financial issues and US-Sri Lanka
bilateral issues. The ambassador is a strong supporter of globalisation and economic development throughout the world whose comments on these issues have been reported in the Wall Street Journal, Corporate Location and the Asian Wall Street Journal. He has also addressed many conferences and symposiums in the US, Europe and in Sri Lanka. ESOPs
- reward or poison pill? Shareholders
of Commercial Bank recently approved a resolution to launch an Employee
Share Option Plan, which bank sources said is aimed at motivating
senior staff to improve profit margins. Last year only
three firms, Richard Peiris and Company, John Keells Holdings and
Aitken Spence, issued shares under the ESOP. However, Colombo Stock
Exchange officials said that there has been a gradual increase over
the last few years of companies adopting this type of plan. Under the Companies
Act, no company can directly or indirectly enhance its own shares,
except through an ESOP scheme. Though primarily
launched as an employee reward scheme, recently, in the wake of
so many large investors buying into well established companies,
ESOPs have been used the world over to ward off raiders and induce
what is popularly referred to as a 'Poison Pill". Companies often
use ESOPs to encourage employees to achieve both individual and
company targets, which are set at the beginning of each financial
year, said Ranjith Samaranayake, Deputy General Manager of Commercial
Bank. This share option plan is only available to senior executives. He said he feels that an ESOP would be a valuable incentive to company decision makers, who would ensure the growth of the bank in order to receive higher dividends for their shares. The bank will
initiate the ESOP scheme at the end of the financial year 2002/03,
provided that bank profits increase from that, in 2001, which is
the base year. The bank intends to offer a five-percent stake over
a period of four years, with the company providing bridging loans
to employees interested in buying these shares. These loans are
to be settled in six months with a reasonable six percent being
levied as interest. The share prices
are to be decided on the weighted average of the share prices in
the last quarter of 2002/03, Samaranayake said. These shares are
to be allocated to employees on a formula based on the employee's
salary, rank and his individual performance. Kithsiri Gunewardena, Director Legal of the Securities and Exchange Commission, the stock market watchdog body, believes that the opportunity provided by ESOPs must be awarded to all employees of a company and not just senior executives. An ESOP would
make all employees feel part of the company and develop a sense
of loyalty towards it. "At the
end of the day, the employee will not bother about market fluctuations
in the stock market," he said. "He or she would be interested
to see how much dividends they could get from these shares. If the
dividends are low, then the employees would be motivated to work
harder." Sunethra Wijethilleke,
Legal Advisor for Asia Capital, one of the first companies to introduce
this scheme in Sri Lanka, said that when the company had an ESOP
scheme back in 1997, the response was tremendous. "Employees
want to be recognised and feel that they are a vital component in
the company's growth." She also said that most employees, to
date, have not sold their company shares, which she highlights as
true company loyalty. Former Board
of Investment chief, Thilan Wijesinghe, said that he was surprised
as to why 'Corporate Sri Lanka' has shown great reluctance to introduce
the ESOP scheme. "This
is because of some of the archaic views of traditional Boards of
Directors who do not wish to change with the times," he said.
Wijesinghe
said that in the USA more than 90 percent of all listed companies
have this scheme, and that employees usually demand such schemes
in their terms of employment. "In a world where intellectual
capital plays a significant role, incentives such as ESOPs must
be carried out in order to retain talented employees," he added.
Explaining
the poison pill concept, the SEC's Gunewardena, said that when investors
buy more than 30 percent of shares in a company, under law, they
can make an outright bid to all other shareholders, to buy all remaining
shares at a reasonable market price. The most common example for a 'poison pill' was the issue of bonus shares by a company, which increases the company's share capital and the amount of money a potential raider would have to pay. "ESOPs have the same effect," he said. Thilan Wijesinghe said that ESOPs as a poison pill was not a new concept and cited John Keels Holdings as one such company that used this legitimate tactic. He believes
that ESOPs could be used as a double-edged sword; to boost employee
morale and to prevent dangerous takeovers. However, he said that nobody should be stopped from taking over a company. "It is
perfectly acceptable, as long as it is done under the regulatory
authority of the Stock Exchange." A company which
has an ESOP scheme would stand to benefit since it would win the
loyalty of employees who would be more aware of its real position
than an ordinary shareholder, he said. Large investors would have to convince the employees that a take over would only benefit the company and not harm it, he added. |
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