14th November 1999
By Dinali Goonawardene
A senior tax consultant called for the appointment of an independent revenue ombudsman at a recent taxation seminar. "The appointment of an independent revenue ombudsman would enable tax payers to air their grievances about revenue departments," Tax Consultant, M. S. Samaratunga said. Mr Samaratunga was speaking at a recent tax seminar held by the Sri Lanka Institute of Taxation.
"There are complaints about the department in the newspapers and as long as there are complaints there is a need for an independent adjudicator or ombudsman whom the tax payer can address directly," Mr Samaratunga said.
In the UK , an adjudicator was appointed through an act of parliament and is removable through impeachment by a two thirds majority. The recently created office of the adjudicator in UK has functioned with success, investigating 628 cases in 1997 of which 52 per cent were upheld.
Quoting from a taxation commission report in the UK, Mr. Samaratunga said that taxpayer confidence in tax laws as well as the organisation that administers them was vital for an effective tax system. The evidence placed before this UK commission indicated a breakdown in tax payer confidence in the UK and causes an ominous question to loom over the tax system in Sri Lanka.
SasiaNet has appointed Mr. S. K. Wickremesinghe, Chairman National Development Bank and Sri Lankan Airlines, and Deshamanya C. Chanmugam, former Secretary to the Treasury and Director Chemical industries (Colombo) Ltd, as Chairman and Non-Executive Director respectively to the Board of SasiaNet (Private) Limited.
SasiaNet develops e-commerce solutions and services for the international financial services and travel industries and Mr. Wickremesinghe and Deshamanya Chanmugam bring a wealth of experience and expertise to the development of the company and this promising industry in Sri Lanka, a company release said.
With the demand for e-commerce solutions growing at a tremendous rate worldwide, SasiaNet will benefit enormously from the presence of these professionals.
The Carsons Group-owned Sunshine Travels Ltd., changed hands last week when Mr. G Sathasivam bought 62.17 percent, triggering off the takeovers and mergers code.
When the mandatory offer closed last week, Sathasivam had acquired 74.13 percent of the company at Rs. 10 per share.
Sunshine Travels has not been in operation for many years. Sathasivam bought Carson's share of 30%, Bhadra Wimalasekera's share of 20% and a few directors' shares which amounted to 62.17% and made a mandatory offer for the remaining shares.
Sathasivam heads Lanka Medical Imports, and is presently the chairman of Watawala Plantations.
He was unavailable for comment at the time of going to press, but his brokers Bartleet Mallory Stockbrokers said, that he hoped to tap his Indian business contact, the Tata Group, to promote inbound and outbound Indian tourist.
The Tata group presently owns the Taj Group of hotels and a number of resort hotels. Tata also has a stake in Watawala Plantations.
Foreign interest in selected blue chips helped the market maintain its upward momentum for the second consecutive week. Net foreign inflows for the week were Rs 82.15 mn. The All Share Price Index rose 1.65 per cent to 548.2 while the Milanka Price Index gained 2.88 per cent to register 892.9. The MBSL Mid Cap Index moved up 0.92 per cent to 977.29. Average turnover for the week was Rs 115.24.
Aitken Spence and Company released its second quarter results showing a net profit after tax of Rs 57.85 mn a 59.7 per cent increase YOY.
Readywear Industries purchased 1.65 mn shares of United Motors Lanka from the Sri Lanka Insurance Corporation at Rs 45, triggering the takeovers and mergers code. The company made a mandatory offer to remaining shareholders at Rs 45 per share.
John Keells Ltd gained 16.54 per cent following the release of second quarter results which showed net profit after tax had increased 11 per cent YOY to Rs 13.9 mn. Soy Foods gained 12.5 per cent while Glaxo Ceylon rose 10 per cent. C W Mackie tumbled 40 per cent while Ceylinco Housing and Real Estate lost 18.18 and Coco Lanka dropped 18.18 per cent.
"This week was a surprise, inspite of the situation in the north there were foreign inflows and the market picked up," Head of Research, NDBS Stock Brokers, Chanaka Wickramasuriya said. He said there was either a perception that the war could not be won and either party coming into power would have to call for peace talks or a perception that the war was having an adverse effect on the present governments campaign and would herald a new government. ìThe market will hold unless investors make further interpretation on the current political and military situation with regard to the forthcoming elections," Wickramasuriya said.
"The market will continue to show moderate gains driven by foreign buying on the back of good corporate fundamentals," Head of Research, Asia Securities, Dushyanth Wijaysingha said.
"The developments in the war front have increased the potential risk in the market and we now expect the market to be more volatile over the next few months,î Strategist, Jardine Fleming HNB Securities, Amal Sanderatne said. It is less likely to remain static at current price levels. Recent foreign buying has seen the big caps outperform but now we feel that the risk reward outlook favours the more defensive midcap segment," he added.
"Since big trades are affected retailers will not beable to make capital gains,î Head of Research, CDIC Sassoon Cumberbatch, Diluk Desinghe said. There is a foreign fund buying in the market and depending on the activity generated by them the market could move up or down," he said.
"The market is showing an upward trend. There is foreign interest and this trend will continue," Research Analyst, Bartleet Mallory Stock Brokers, Zahra Cader said.
Should the industry increase production of CTC? Planters Association Chairman Mr. M.J.C. Amarasuriya told a gathering at the 145 Annual General Meeting, that the industry should increase production of CTC teas, which are used in tea bags for which there is a growing, demand.
However, industry sources said it was not a viable project because local cost of production was higher than that of the country's competitors.
They said this made Sri Lankan manufactured CTC teas too expensive. They added that local CTC teas were of a poor quality compared to Kenyan and Indian CTC teas.
About 10 percent of the island's tea manufacturing capacity today is geared for making CTC. But, due to high cost of production and low prices manufacturers are finding it difficult to sustain their business.
In addition, small holders are selling their leaf to orthodox tea producers, as they are able to pay more because they get better prices.
"My personal view is that 15-20 percent of manufacturing capacity should be converted to making CTC teas," Mr. Amarasuriya said. However, industry sources say we are better off supplying the niche than going with the herd.
Meanwhile, in last week's auctions low growns were back in the limelight. Most varieties gained, pushing up the low grown average.
Asia Siyaka Commodities said that they expect the low grown average to once again exceed the Rs. 130 mark. Other varieties recorded mixed results.
Forbes and Walkers Commodities reported that most Estate workers resumed work today and most plantations were operating in the usual manner.
Nevertheless they expect the curtailment of work on Estates over the past week to 10 days likely be reflected in the auction quantities coming under the hammer at the end of this month and early next month.
Production records were also out last week. Low growns took the limelight here too recording increases over the previous quantities.
On the other hand the high grown sector recorded declines while the mid growns reflected marginal declines.
Stock brokers will have to sit for a refresher course every three years under a Securities and Exchange Commission (SEC) recommendation.
The Colombo Stock Exchange (CSE) has agreed to SEC's proposal, which will be introduced next year, SEC Senior Manager (Marketing), Malik Cader said.
The SEC has been conducting stockbroker exams since the early 1990's. The exams were quite basic with multiple choice questions which suited the times of that era and recorded a 100% pass rate.
Subsequently, the CSE took over in 1997, updated the syllabi and conducted the exams with assistance from the Post Graduate Institute of Management (PIM). The pass rate then dropped to between 30% - 40%.
The present syllabus was developed with assistance from Dr. Lalith Samarakoon of the Sri Jayawardenapura University and with help from USAID for the debt market.
Brokers will have to study four modules covering regulation, the stock exchange, debt and equity market. The pass rate has been raised to 70.
Cader assures exemptions will be given for CIMA and ICMQ qualified people.
The modules will be updated as and when new instruments are being introduced. For instance SEC hopes to introduce futures and options trading in the future, and brokers need to be aware of such derivative instruments, Cader said.
Refresher programmes are quite common in other developed capital markets as well as at recognised professional institutions. Cader says it's easy to introduce a refresher programme to the Sri Lankan market since it is still at a very young stage of development.
The Year 2000 revisions of ISO' s world famous ISO 9000 series of quality management standards have progressed to the stage of Draft International Standards (DIS) and are expected to be published in late November- December 1999.
The drafts of ISO 9000, ISO 9001 and ISO 9004 are being circulated to ISO 's national member institutes for a five-month ballot which should be completed by the second half of April 2000. The draft standards are publicly available documents which can be obtained from ISO members ( a full list is posted on ISO's Web site: www. iso.ch). If the ballot is positive, the documents are due to be published - without any further modifications resulting from comments received during the ballot period - as Final Draft International Standards in the third quarter of 2000, with publication as fully fledged International Standards in the fourth quarter of 2000, a news release says. The documents progressed from their status as second Committee Drafts (CD 2' s) to the DIS stage at the 17th meeting of ISO Technical Committee ISO /TC 176, Quality management and quality assurance, held from 9-20 September 1999, in San Francisco, USA . The meeting was attended by more than 300 delegates from 40 countries. Work on the future joint quality and environmental auditing standard, ISO 19011, also moved ahead and the document progressed from Working Draft (WD) to CD status. After a four- month comment period, the document will be reviewed in March 2000 by the Joint Working Group (JWG) composed of members of ISO /TC 176 and ISO /TC 207, Environmental management, which is responsible for the ISO 14000 family of environmental management standards.
A CD2 will then be issued for internal voting within the committees. Target date for a DIS 19011 is November 2000 and the final publication of the standard is targeted for the third quarter of 2001.
Tracker fund of Hong Kong, the unit trust product designed to track the Hang Seng Index launched by the exchange Fund Investment Limited has announced that the price of its offering has been fixed at HK$ 12.88 per share, and the combined retail and institutional offers will raise approximately HK$ 33.3 billion. TraHK will start trading on the 12 of November.
70% of the overall offer, representing approximately HK$ 33 billion in value will be allocated to retail investors in Hong Kong while the remaining 30% of the overall offer, representing approximately HK$ 10 billion, will be allocated to international institutional investors, a news release said.
Jardine Fleming is a joint sponsor and joint global co-odinator for the entire exercise and a joint financial advisor to the Exchange Fund Investment Limited.
Patrick sun, Head of the Corporate Finance and capital markets for greater China, commented: Jardine fleming is extremely pleased with the very successful sale of TraHK which has attracted great demand, particularly from retail investors in Hong Kong.
By Gunapala Ranasinghe
P&O Australia, which is developing the QEQ in Colombo Port is set to buy 96% stake in a container terminal at India's Kandla port, considered the biggest threat to the Colombo Port, through its Mauritius subsidiary South Asia Ports Ltd. Amidst wide opposition to the P&O project in Colombo by shipping experts, the President went ahead and awarded it to P&O. Kandla is one of India's 12 major ports under government control. The terminal has been licensed to P&O for 30 years on a build, operate, transfer (BOT) basis. South Asia Ports sought the Indian government's permission to invest US$25 million in the Kandla stake. A 400 m quay which has already been built is being upgraded into a container berth equipped with quay cranes. The new facilities are expected to be commissioned within 18 months.
P&O expects to handle about 120,000 TEU in its first year of operation and 340,000 TEU on completion of the project. At present, the Kandla berth handles 80,000 TEU. P&O also holds 95% of the Nhava Sheva International Container Terminal near Mumbai, and it recently emerged as the lone bidder to develop a major container terminal at Cochin, in South India.
DSR appeals court rejection
DSR-Senator (DSR) Lines has returned to profitability and is projecting a profit of US$10 million this year. However, the German carrier is now being haunted by a $16 million fine imposed last year by the European Commission on members of the Trans-Atlantic Conference Agreement (TACA).
Although the fines are being appealed, TACA members are still obliged to provide the European Commission with financial security to guarantee the fine. However, a judge at the European Court of First Instance dismissed DSR's application that such a guarantee would call into question its efforts to put the company back on a sound footing, without enabling the Commission to obtain payment of the fine.
The court will soon consider DSR's appeal against its decision to withhold interim support, a decision which mirrored that of the Commission last year in that both rejected DSR's proposition on the grounds that the major shareholder and effective parent, Hanjin Shipping, could provide the guarantee.
DSR's latest appeal will dispute the legal obligations of shareholders towards their business interests. Although DSR is technically facing compulsory liquidation proceedings, the real interest in the case will be as a precedent.
In practice, if the appeal fails the case will fall into the German courts where the EC would sue to recover the fine as debt. Not only could this take years, under German law a limited liability company cannot oblige its shareholders to provide relief. Moreover, German courts have expressed support for DSR's position that liquidation proceedings would damage the company's restructuring efforts.
If all else fails, senior figures at Hanjin have stated they will not stand by and watch the company face bankruptcy, but will offer support as and when necessary.
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