The Sunday TimesBusiness

19th May 1996

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Apollo's healthy launch

The world famous Apollo Hospitals Group renowned for its expertise and capability in the high specialty health care projects and services internationally are extending their base to Sri Lanka. Accordingly, Apollo will establish in Sri Lanka a 350-bed ultra-modern multi-disciplinary super specialty hospital, fully equipped with the latest technology geared to cope with intricate diagnostic and critical care needs, associated with tertiary surgery and health care.

The project which is a fully fledged BOI project is estimated at around Rs. 1500 million is ready for take-off on an attractive 7 acre block of land released by the UDA located in central city of Colombo. Ceylon Shipping Lines, Ceyko Projects and other leading Corporate and International participants, backed by the International Finance Corporation (IFC) and the National Development Bank (NDB) will contribute towards the project equity and loan capital.

NDB is spearheading the consortium of major banks and financial institutions who will participate in equity contributions and the financial package that has already been arranged to cover the total requirements for the timely accomplishment of the hospital complex, which will become fully operational in the first half of 1998.

Apollo Hospitals Lanka which is the owning company of this Sri Lanka project is headed by its Chairman, E. A. Wirasinha, a well qualified professional and specalist in Business Administration and Management who is also the Chairman of several leading Industrial an major Commercial Establishments in Sri Lanka and abroad.

The other Directors are - T. D. V. Gunaratne, Managing Director, Ceylon Shipping Lines Ltd, D. P. C. Lawrence, Chartered Accountant, L. A. Wickremasinghe, Attorney at Law & Solicitor, Harsha Soza, Attorney at Law & Solicitor, R. Navaratnam, Managing Director, Ormin (Pte) Ltd. Dr. P Reddy, Chairman, Apollo Hospitals Group, India, a US qualified world renowned Cardiologist, Mrs. Suneetha Reddy, Joint Managing Director, Apollo Hospitals Group, India, V. Subramaniam (Alternate). The Board will also consist of representatives from the National Development Bank and the International Finance Corporation and other Financial and Banking Institutions.


Lama Setha: Pan Asia's offer to the young

By Ruwanthi Ratnayake

A new children's savings account called Lama Setha was introduced last week by the Pan Asia Bank. The savings account offers any parent or guardian over 18 and under 45 years of age, the opportunity to save for a child under 17 years of age. "The children of today are going to be the leaders of tomorrow," said Lakshman Watawala at a news conference, to launch the account.

"Lama Setha" is for a maximum period of 5 years where the parent or guardian enters into a contract with the Bank to save a specific amount on completion of the savings account period. The Bank has fixed the minimum amount that could be contracted at Rs. 12,500/- per agreement or Rs. 2500/- annually per agreement.

This savings account offers a form of protection to the child. The bank honours the savings targetted for the child on completion of the savings period, in the event of death of the parent or guardian. Furthermore, if the death is due to accidental causes, the contracted sum at end of the savings period will double. However, in both these cases the savings could be withdrawn only when the child reaches the age of 18 years.

Free medical benefits depending on the savings agreement are offered upto a maximum limit of Rs. 5000/- per annum. However, this would only be in the case of hospitalization.

Once the savings agreement is completed, the parent or guardian will be entitled to an education loan of upto 85% of the amount deposited. Furthermore, at the end of the agreement if the savings are not withdrawn, the "Lama Setha" Account will be converted to a fixed deposit in the child's name, with a higher rate of interest.


Businesses here wary over BJP factor

Local equity analysts expressed some trepidation at the fallout effects of a BJP-led government on the investment prospects of Sri Lanka.

"The BJP has declared it is against foreign investment in domestic consumer products, but it will welcome investments in infrastructure and export oriented industries," one analyst said. An optimistic view would be that this may increase investment flow to Sri Lanka

Analysts also said investors who had planned for a certain weighting in the region might channel the out-flow from India to neighboring countries such as Pakistan, Bangladesh and Sri Lanka if they did not want to revise their weighting.

However, most analysts think that if investors were scared of India, they are likely to be a scared of the region as a whole. "India has enormous influence on all South Asian equity market, one analyst pointed out. Foreign-investor led rally in India is usually followed by a rally in Pakistan a couple of weeks later. After another time lap the effects are felt in Sri Lanka. This clearly happened last in February," he said.

The reverse is likely to happen if foreign investment start to flow out of India. "We have always benefited from the fallout effects of India. India is very large and foreign investors focus on India and we used to benefit from the spill-over," another analysts said.

Analysts also expressed concern over the political stance that may be taken by the DMK in Tamil Nadu. At the moment the DMK is not openly supporting separatism in Sri Lanka but has been known to be sympathetic to the LTTE. Thus any softening in the DMK approach towards the LTTE could affect stability in Sri Lanka.

Another major negative factor in the case of Sri Lanka was that corporate earnings were weak. Though political uncertainty existed in Pakistan and India, both countries had strong corporate earnings.


Downturn in economic indicators

The publication of the latest Central Bank Annual Report for 1995 gives us an opportunity to ponder over a number of critical developmental issues. Is the economic growth rate adequate? Are our domestic savings adequate to support our growth targets? Do we have anxieties in the growing public debt? Is our balance of payments healthy?

The country's economic growth rate continues to hover at 5.5 per cent. This rate is recognised by most economists as being inadequate to generate expected increases in per capita income and provide employment opportunities. As the Central Bank's Annual Report itself states, the per capita income "is yet far below those of developed countries and the fast growing Asian countries ... the fact remains that Sri Lanka has a long way to go to reach the level of emerging Asian economies". It is most important that the country's growth rate surges to around 8 per cent to achieve our desired economic objectives and to prevent social tensions.

A fundamental requisite for economic growth is a high level of savings. Regrettably the country has been unable to increase its domestic savings ratio to a higher level. In fact it has fallen from 16 per cent of GDP in 1993 to 15.5 per cent of GDP last year. It is vital that the country adopts policies which enable domestic and private sector corporate savings to grow, especially as the Bank report itself admits public sector savings is well nigh impossible. One of the most important tasks must surely be to formulate policies which could increase the domestic savings in the country. Fortunately foreign savings at around 4 per cent of GDP enables a higher level of investment.

Manufacturing has now emerged as being as important as our agriculture. The contribution of agriculture to GDP has been halved from that of the 1960s, when it contributed 40 per cent of GDP. Such a structural change is part of the process of economic growth and development. Yet we must not presume that this structural change in the economy implies that we could neglect our agriculture. The decline in importance of agriculture is as much due to agriculture's poor performance, as indeed the growth of manufacturing. Although agriculture's contribution is now only 20 per cent of GDP, it still has the potential to increase production and make useful contributions to employment generation, exports and the reduction of imports.

The industrial sector, which has shown resilience at times of crises, continued to grow and displayed some diversification in industrial output. But last year's growth of 9 per cent is inadequate, especially in the context of higher growth in recent years. In 1993 manufacturing output increased by 10.5 per cent.

A continuing cause for anxiety is the increase in the public debt. The public debt increased by 17 per cent last year. Public debt servicing absorbs a very substantial proportion of revenue and leaves little possibilities of government expenditure on more productive activities. The high interest rates prevailing in recent years no doubt added to the debt servicing burden. The unsatisfactory element in the public debt is the large domestic debt. The foreign debt is manageable and its servicing cost in terms of the country's export revenues is quite manageable at around 14 per cent. The Annual Report points out that the interest cost of the foreign debt is minimal owing to the concessionary nature of the borrowings. The interest rate of foreign loans averages to only 1.5 per cent which is easily borne especially in the light of the country's rate of inflation. The salient question is 'Are we using our foreign loans effectively?'

In 1995 several economic problems arose due to the imprudent wheat flour subsidy. The subsidised wheat flour prices created burdens on the public finances of the country, reduced the profitability of paddy cultivation and increased imports of wheat. That the wheat flour subsidy should have been introduced and continued as long as it did is an indication that the government gave a greater weight age to a presumed political advantage irrespective of its adverse impact on the economy.

In 1995, for the first time in the last 5 years, the country suffered a balance of payments deficit. This despite a growth in exports of 8 per cent and a reduced growth in imports. The underlying reason for this balance of payments deficit was the net inflow of capital being inadequate to offset the deficit in the current account as in previous years.

Besides this, the improvement in the trade balance is a cause for anxiety as it was mainly achieved by a decline in imports. The trade balance improved owing to a reduction in capital imports. This is not a favourable development. The Central Bank Report itself points out that the drop of investment goods imports by 18 per cent "warrants consideration as it is related to domestic investment and could constrain the growth potential of the country". To put it more boldly, the decline in investment goods imports is an early signal of a slowing down in economic activity. Perhaps its full impact will be seen in 1996 and after. This drop in capital imports must be taken seriously, examined carefully and corrective policies put in place quickly, if economic growth is to keep up its momentum.

Overall, the country's economic performance in 1995 shows a noticeable down trend from 1993. Key economic indicators growth rate, savings, balance of payments disclose this down turn and are concerns for anxiety. The government cannot remain complacent. The down turn in the economy must be corrected.


Mind Your Business

By Business Bug

Double-blow

While most hotels, hit by low occupancy, are planning packages for locals to try and offset the effects of dwindling tourist traffic, a think tank is also busy trying to bail out the hospitality trade.

They were working on a package of their own for the hotel industry, that would include generous grants and tax concessions.

But now, the package may not see the light of day because it was the brainchild of you know who!

Boss' strike

You heard of a plantation workers' strike, but ever seen a plantation managers' strike?

Some in the industry have suggested this as a last resort to prevent Mr. T. having his eight rupees - or even five - a day pay hike.

Mr. T's workers may be having their problems, they say, but giving such a pay rise will only ensure the estates will go bust.

The only compromise, it appears, would be a pay-hike linked to productivity, but will Mr. T. agree.

Prices and polls

Despite the postponement, Local Government polls have to be held, the powers that be believe.

So, there won't be anymore obvious price hikes of essentials - bread, milk food and the like, until the polls are over at least.

But a higher defence levy is a possibility because the coffers have to be filled and no one grumbles about protecting the country, anyway....

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