14th November 1999

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Getting hip with accessories

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Getting hip with accessories

Tea is not tea any more, especially without the accessories to go with it. Companies around the world have a wide range of accessories in addition to the long list of teas. The accessories are as varied and wonderful as the teas themselves. You could find enough animals to star a toy farm or a variety of tea pots to satisfy even the weirdest of tastes. If that does not catch your attention you could check out the ducks, houses and other unthought of shapes for tea holders.

The Sunday Times Business Desk gives you a whiff of the accessories industry with Mlessna's range.

Euro Scan (Pvt.) Ltd., better known for their gift teas marketed by the name of Mlessna, one of the pioneers in the export business, boast around 20 accessories in a range of 16,000 items. From tea holders and strainers to porcelain Santa Clause and cute little puppies, all form part of the tea experience. Company officials say though the accessories help in selling tea, a strainer here and a tea set there did not bring in the big bucks. They said that it was the tea itself that created the demand for the accessories than, at least not very often, the accessories themselves.

The accessories are very popular and are targeted at the higher end of the market including tourists and Sri Lankan's going abroad. The accessories also acclaim a market overseas. Most accessories come without tea but the puppies, elephants, Santa Clause' and most other porcelain accessories come with tea.

The company also promotes collctors' items such as thimbles with country flags, which are very popular. We understand that the elephant was the most popular porcelain pet among the locals and tourists.

However, as said before, tea accessories are so vast and varied that you could get lost when you go out to get a gift tea pack. (SF).

Budgets in retrospect—unattained targets

If the normal course of events took place,we would no doubt be com-menting on the Budget for the year 2000. That opportunity has been denied us by the early Presidential election. It is therefore appropriate for us to look at the overall results of the PA government's budgets. The government announced its fiscal objectives very clearly in its first Economic Policy Statement. The pruning down of the budget deficit was considered one of utmost priority. Fiscal discipline was considered the centrepiece of government policy. This is what the Economic Policy Statement said.

"The eventual goal of policy would be to continue to reduce the overall fiscal deficit from a level of 8 per cent of GDP in 1993 to a level of 3 to 4 per cent of GDP well before the year 2000,which would both be consistent with a significant reduction in inflation,and be sufficient to absorb a reasonable amount of concessional aid.

A substantial current account surplus will be generated both by the significant reduction of military expenditure and by curtailing unnecessary and wasteful current expenditure. The long-run objective would be to run an overall surplus in the Budget so as to enable the retirement of the high stock of public debt outstanding.

What has been the actual attainments? The overall budget deficits for the four years from 1995 to 1998 have been,10. 1,9. 4,7. 9 and 9. 2 per cent of GDP. A far cry from the expected reduction in the deficit to 3 or 4 per cent of GDP well before the year 2000. In fact the indications are that the final outturn of the budget deficit this year would be higher than last year's deficit.

The Central Bank has articulated very clearly the government's failure to reduce the budget deficit in its last (1998) Annual Report. It said, "The target in the 1998Budget was to reduce the overall fiscal deficit to 6. 5 per cent of GDP,while generating a surplus in the current account. However, slow growth of tax revenues and large expenditure overruns,particularly in the area of defence,led to larger current account and overall deficits. "

The fact is that when the Budget was presented most analysts,including this column,pointed out that the budgetary figures were unrealistic. This was the same comment with respect to the 1999 budget and the indications are that that prediction is likely to be even more correct. The same factors which affected the unsatisfactory budgetery outturn of 1998 were applicable in greater force in 1999. Defence expenditures were unrealistic,expectations of revenues from GST were optimistic and the budget made no allowance for a downturn in the economy. The slow growth in the economy coupled with a decline in export incomes and possibly reduced corporate profits would imply reduced tax revenues. On the other hand, apart from defence expenditure overruns,the huge expenditure on welfare—the Samurdhi programme—will ensure a higher deficit this year.

In the face of the governmnet's failure to reduce the budget deficits of the past years and the persistence of the unfavourable conditions one wonders what the Budget for 2000 would have been like. Our guess is that like in past budgets,the figures presented would have been rosy,the outturn would have been quite different. Our comment on such a budget would not have been very different to what it has been in the past two years. Now let us wait a while to see what a new government will come up with in the new millennium.

Fag and booze ban gets a breather

A planned Sri Lankan ban on cigarette and alcohol advertising, stalled by industry protests and other complications, is unlikely to become law at least for another six months, political and industry analysts say. With presidential elections around the corner followed by parliamentary polls, the ban - which should have been enforced in January - could be on the backburner for a while, giving the industry more breathing space. "The government will be too preoccupied with other burning issues in the coming months, particularly how to garner votes. The proposed bill is likely to be on the backburner Imagefor at least six months," one political analyst noted.

Last week, President Chandrika Kumaratunga announced her desire to seek a second term in office, thus triggering the official process of calling for early elections. The Elections Commissioner then set the date for polls on December 21. Kumaratunga's six-year term ends only in November 2000. Parliamentary polls are likely to be held soon after presidential the elections, analysts say. 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, accepting the recommendations, decided to enforce the ban in January 1999 after passing the necessary legislation in parliament. But industry protests and other problems have stalked the proposed law. Earlier this year, Justice Minister Professor Peiris told this correspondent that the draft legislation to ban tobacco and alcohol advertising was being reconsidered due to some fundamental problems. "We find that the draft legislation is too wide in scope and could interfere with some constitutional provisions relating to fundamental rights," he said at that time. Industry officials say the choice of whether to buy a product or not must be left in the hands of the consumer and should not be decided by law. "We are catering to an adult audience which must have the right to choose," said one industry official. But pro-ban campaigners like the Alcohol and Drugs Information Centre (ADIC), a non-governmental organisation heading a community campaign against widespread alcohol and drug abuse, blame consumption among youngsters and teenagers on devious and "enticing" forms of advertising.

Suresh Shah, chief executive of Ceylon Brewery Ltd - which markets the world-famous Carlsberg beer and other popular local brands - says the government has not considered their views on the proposed ban. "In August this year, the Finance Ministry sent us the draft bill on the ban and asked for our comments. We sent our comments and sought a meeting but nothing happened. Now we are told the Bill has been gazetted, but none of our comments has been included," he told this correspondent. The beer industry, in particular, is agitated over the ban, saying the product is considered soft liquor and in most countries across the world is exempted from any general alcohol-advertising ban. In addition to the forthcoming ban, the industry is facing other problems. Consumption, particularly beer, has fallen for reasons other than the negative publicity while public opposition is growing against the tobacco and alcohol industry. Shah said that sales volumes of beer fell prior to November 1998 when government taxes were increased compelling beer makers to raise prices. After that beer sales have been stagnant for economic reasons. "There is a general decline in sales of all beverages and this may be due to an economic slowdown and less disposable incomes amongst consumers," he said.

Another negative factor is an accelerated campaign, by unknown persons, to smear cigarette and alcohol billboards across the country. "Although this has been going on for many years, there has been an acceleration in the number of our billboards being vandalized by tar and paint in the past few months," Shah said, adding he believed it was an organized group who was behind this. The main target of this particular anti-liquor lobby is the lion brand beer sold by Ceylon Brewery Ltd. Herman J.C. Perera, the company's brand manager, said out of the 60 large-sized wall murals across the country, at least 50 have been smeared with tar or paint in the past two years. The Midweek Mirror newspaper, reporting Perera's comments in an October 6 story on the anti-billboard campaign, said in Colombo one wall mural advertising Heineken beer - also marketed by Ceylon Brewery - has been vandalized three times in the past six months. "We sell beer," Perera was quoted as saying, "which has a lower alcohol content than arrack, or toddy (both indigenous liquors), for that matter. But we have been singled out for these attacks." One reason could be the powerful and costly media advertising campaign undertaken by the company in recent months to promote lion beer. Kumari Welegedera, spokesperson for ADIC, vehemently denies any involvement in the destruction of tobacco and alcohol billboards. "We do not resort to vandalism. We have used legitimate means such as stickers and wall posters to counter tobacco and alcohol advertising," she said. But she agrees that public anger over tobacco and alcohol products is growing. "It could be a frustrated public who knows. We are getting more inquiries from the public now keen to learn about our work," she said.

Ceylon Tobacco Ltd, the country's only cigarette manufacturer, frowns upon these violent attempts to curb consumption patterns. "We have no objective to peaceful public campaigns opposing smoking and so on, but this is a bit too much. We have reports that it is mostly youth who go around at the dead of night smearing our billboards," a company spokesperson said. "Is this the kind of (violent) culture we want?" she asked. Company billboards and hoardings even on small wayside tea kiosks have been affected increasingly after the proposed advertising ban was announced last year. She said a few days after International No Smoking Day on May 31, 33 billboards of the company were smeared with paint. A government campaign, some months back, to seek public opinion on the proposed ban has also drawn an enthusiastic response. Advertisements were run in national newspapers seeking public support for the ban and requesting the public to respond through post cards. "We got 16,000 postcards of support after 11 insertions in newspapers. There were also requests for 50,000 posters of the advertisement, mostly from youth groups," said a spokesperson for Masters Advertising Ltd, an advertising firm commissioned to handle the public campaign. She said the response was not as good as a normal consumer campaign, which draws an average 100,000 postcards. "But remember we had only a small budget compared to millions of rupees that are spent on other consumer campaigns." As part of the public campaign, about 8,000 postcards have been displayed on a billboard just outside Colombo's main National Hospital in the capital. With the pro-ban and anti-ban debate growing, the industry however gets a brief respite as the legislation is now held up owing to the upcoming presidential and parliamentary polls. "Well, in that sense, there is some relief," laughs Shah.

Don't give up self - sufficiency says economist

Sri Lanka's venerated economist says glo-balization is an inevitable happening but warns that though protectionism or self-sufficiency are considered bad words nowadays the country must not give up its ability to be self-sufficient in some areas.

"We must not forego our ability to have an element of self-sufficiency. We should not give up whatever self-sufficiency we have in the name of comparative advantage," Dr Gamani Corea, retired Secretary-General of UNCTAD, told a small but representative group at the Marga Institute last month.

Corea was invited by new Marga chairman Dr Lloyd Fernando, to discuss globalization in the international, regional and Sri Lankan context and trigger discussion among the 30- odd group of academics, diplomats, economists, sociologists and other scholars present.

Fernando, presiding at his first public session as Marga chairman, said he hoped Corea's views would launch a process whereby various views are expressed on how globalization in the new millennium would impact on Sri Lanka.

"What we want to do is base our future research programmes on various aspects of globalisation and how Sri Lanka should tackle such issues," he said.

Fernando took over as Marga chairman earlier this month, from Godfrey Gunatillake who stepped down after a long period at the helm of affairs.

Corea wears many economic hats, local and international. He is chairman of the board of governors of the Institute of Policy Studies and a senior governor of the Marga Institute, which he helped found in 1972.

The retired UN official's views on globalization reflects his often-expressed view that globalization should be tempered with some kind of protectionism for local industry and consumers.

His economic and political overview took the audience through Sri Lanka's economy in the 1950s to now, his own experiences in negotiating with aid agencies, the need for developing countries to have a bigger say in the affairs of the World Bank and the International Monetary Fund (IMF) and caution against moving away from protectionism and self-sufficiency.

Corea blasted World Bank policy saying it was not performing the role it originally intended to play. "It is supposed to be a major source of funds for developing countries. That was what it set out to do. Not anymore. The World Bank and the IMF need to be reformed to suit the requirements of developing nations."

Calling for ways in which developing countries can be bigger participants in the role of these two institutions, Corea recalled his own experiences in aid negotiations with these two institutions in the 1950s.

"The World Bank conditions were essentially confined to the technical soundness of projects. That was the first phase. In the second phase, the Bank came up with demands on monetary systems and overheated exchange rates. Now there are demands on social mobilization."

He said the paradox was that the Bank doles out less money than before but imposed more conditions and the same prescription is recommended for all countries irrespective of their differing local situations, cultures, population and economies.

"It is unfair to interfere too much with the autonomy of developing countries, which have to enforce projects according to their needs and realities," Corea noted.

He strongly urged that the UN system be brought back into the World Bank/IMF negotiating process - like in the 1950s and the 1960s - to enable developing countries to have more of a clout in the affairs of Washington's financial twins.

Discussing Sri Lanka in the context of globalization, Corea said one of the advantages now was that the country had to cope less with population pressures than before and could chart out its future destiny.

He said in the past 50 years, population growth was one of the key factors and "we had to cope with quantity in terms of schools, transportation and jobs."

With population pressures subsiding - and a rapidly ageing population - the focus on social and economic development could be shifted to quality services instead of the earlier "quantity" services.

"We should look at providing better schools, better transportation and better jobs, now that we need not contend with a rapidly growing population. In a way we can expect some relief here," he added.

Corea said vast economic changes were taking place in Sri Lanka with traditional crops like tea, rubber and coconut being no more the driving force in the economy. Labour shortages are likely to be endemic in the plantation sectors as more and more young people, living on estates, seek jobs outside this sector.

The textiles and garments industry would also be affected when quotas come to an end in 2005, and garments exporters would face a difficult and competitive global environment.

"Sri Lanka lacks raw materials and relies on imported inputs. These would be major issues to our add-value local industry when the quota system ends," he noted.

Overseas employment particularly in the Middle East was also not going to last for long. "Like garments, this is also time-bound and available for a specific period. It also depends on oil prices," Corea said.

He said though protectionism is considered a thing of the past, Sri Lanka should not rule out discreet, time-bound and very selective protectionism to help producers on their feet.

Corea was critical of the foreign investment policies practiced by both the former and current Sri Lankan governments, saying having foreign investors in an exclusive enclave (free trade zones) and allowing them to move out whenever they wanted, was not the solution.

"There should be a process of learning of technology, learning of various processes for local industrialists which can't take place in exclusive zones," he added.

Referring to the social dimension, Corea said Sri Lanka got high marks for its quality of life indicators but the big emphasis on the social sector did not impact on economic growth.

Sri Lanka's social spending programme - though in recent years it has fallen - has been amongst the best in Asia including Malaysia or Singapore.

But while the country put a lot on social spending, the economy suffered unlike other Asian countries where rapid economic growth has taken place in the past decades.

"There should be no trade-offs. You can't neglect one sector (economy) for another sector (social development). They should reinforce each other," he said.

The discussion raised some pertinent issues from the audience. Bradman Weerakoon, retired civil servant and a population expert, slightly disagreed with Corea's view that Sri Lanka's population problem was over.

Weerakoon said there was still an increase of a quarter of a million people to the population and it would take another 30 years when aged people formed a sizable part of the population.

Howard Nicholas, a Dutch-based economist of Sri Lanka origin who helped set up the Institute of Policy Studies in the mid-1980s, said one of the most disturbing issues currently was the emphasis paid to the financial sector and not industry.

"Most of my students, when asked what type of employment they prefer, say they want to go into the financial services sector. What happens to industry then?" he asked.

Nicholas, who occasionally teaches at the Colombo University, was also critical of the decision to privatize development banks like the National Development Bank (NDB) and the Development Finance Corporation of Ceylon (DFCC).

The NDB and DFCC were set up to provide loans to industry but with their new role as private sector banks, would be involved in commercial lending, he said warning that industry would suffer once again.

Institute of Policy Studies executive director Saman Kelegama, endorsed these views, saying the decision to privatize the state development banks would prove negative to industrial growth.

Latec may make vehicles in Sri Lanka

By Shafraz Farook

Latec and their overseas partners are looking at the possibility of assembling passenger vehicles here. L·tec Engineering and Management Services (Pvt.) Ltd., Managing Director, Ravi Wethasinghe said, three years down the line L·tec with the support and expertise of Mayflower Corporation would seriously look at assembling a passenger vehicle.

He said the company's present workshosp already had most of the infrastructure to assemble passenger vehicles and it was now a matter of getting the logistics in place.

The company at present manufactures buses for the local market. Their overseas partners invested Rs. 600 million recently in the company's latest venture, in which the company will assemble and rebuild 5000 buses for the government within the next two years.

Mayflower Bus and Coach, Joint Chief Executive, John Smith who was here last week to inspect the plant and the work in progress said that Sri Lanka's strategic location in the Indian Ocean might interest them in exporting buses assembled here.

He added that if the prospects were attractive they might consider further investments in the company.


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