• INTO THE UNKNOWN
• AusAID pulls out funding for Title Act
• Listing pivate media not viable say analysts
• A new beginning in economic affairs, please
• The Millennium challenge
• Economy looks bleak in the new millennium
• Year ends on dismal note for CSE
• Economic fundamentals improved in 99
• Hopeful Millennium for rubber industry
• Setting sail to go study
• MIND YOUR BUSINESS
• IPS studies tea industry
• HNB's Annual Report best in SAARC
• Mobitel signs agreement with Bar Association
• Super Extras from KLM and Northwest
• Masters teams up with DDB
• Eagle Insurance on the Internet
• CEE plan to step into the millennium with modern equipment
• Muara Port: Competitive and efficient
• Evergreen launches Ever Utile
• Sea Consortium to enter Mediterranean region
• K LINE to order eight 5,500-TEU container ships
• Brave new deregulated world

INTO THE UNKNOWN

If you are struggling to read this you probably are nursing a millennium hangover!

Yes, its finally here.

Yesterday, we burst into a new century amid Y2K fears and hype, hoping all hell would not break loose and not even the smartest analyst or the most learned astrologer would venture to predict what's in store for humanity in the new millennium.

So far be it for The Sunday Times Business to take on the role of looking through the crystal ball or stacks of statistics to make predictions, but here's some food for thought from the STB team as we rollover to 2000.

Would you like to order your Karapincha on the internet or are you the type who prefers to feel the leaves before buying the bunch?

The computer gurus themselves had no idea what was about to be unleashed with the advent of the microchip in the late 1960s. innovations in more recent years brought more memory, prompting Microsoft founder Bill Gates to crow in 1981 that "640K ought to be enough for anybody." That is 50 times less than the average RAM size today. Personal computer use has exploded in Asia. And the region is expected to lead worldwide growth this year, with a 23 percent sales increase. But who knows? By the turn of the next century will all communication be limited to a pocket or hand held PCs? History has shown this is an industry that outdoes its own predictions. The internet would completely rule us is a fact of business life and we have no choice but to be resigned to it, but to what extent?

As cyberspace engulfs the universe with its versatility and speed, down here in the tear drop in the Indian Ocean, neither the stars nor the analysts hold much hope for economic and business prosperity in the first year of the new millennium.

Now that all that's left over of all the partying and celebrations is a hangover, reality hits hard as we usher in the new millennium with concern and worries more immediate and scary than the distant impact of the internet on our lives.

While the land of paradise struggles to get on its feet, the rest of the developed world marches on leaving us behind.

All big cities and their suburbs are ringing with the words "NO BUSINESS, NO MONEY!" or the more familiar "Salli nehe!"

The chant is common to all businessmen/women from CEO's of multi-national companies to the "handiye kade mudalali."

And they are joined by the millions of others like you, called consumers. We are sure you yourself have used it and heard it.

Meanwhile, the line graph of the local bourse in the last couple of years looks suspiciously like a heart patient's ECG. All we can do is to hope the bourse will find a miraculous cure and stabilise to a firm upward line.

As we stagger into the new millennium we drag along with us the questions of the bygone millennium as yet unanswered.

What's in store for us in the new millennium?

Will Sri Lanka ever be a developed nation?

Will there be equal distribution of wealth worldwide?

What would be the most spectacular invention of the 21st century?

Will we fight a third world war?

Will countries further divide or unite?

Will there be a single currency?

Are we better off than our forefathers were?

And are we truly civilised creatures?

Is this the beginning of the new millennium? Or is it 2001?

What is the world population? Statistics say six billion. But how accurate are statistics? How dependent are we on numbers?

We could go on and on and not get anywhere in particular

Simple questions complex answers. Give it a thought once you have recovered from the millennium hangover.

A spectacular new millennium from The Sunday Times Business team....

AusAID pulls out funding for Title Act

AusAID (Australian Agency for International Development) has withdrawn assistance for a World Bank sponsored land titling project due to delays in implementing the amendments to the legal regulatory framework, a World Bank official said.

Legal experts have pointed out that the newly enacted Registration of Title Act No: 21 of 1998 needs 84 amendments and two further bills need to be passed before a national programme is implemented.

The Act provides landowners with a clear title for properties based on a survey plan. Under the Act, Sri Lanka will move from a deed registering system to a modern title registering system.

But the Bar Association says there are numerous serious defects in the Act and major amendments are needed to correctly implement Title Registration in Sri Lanka.

In addition to the amendments, a further 33 other enactments need to be reviewed and two new Acts (Surveying and Mapping Act and the Conveyance Act) need to be passed to ensure no contradictions are made in the Act, legal experts said.

The World Bank had earlier pledged technical assistance worth US$ 8 mn towards this project to establish the legal, regulatory and procedural framework for granting secure documented titles and proving related services to landholders including farmers, and to establish the institutional capacity for implementing a long term land administration development programme.

However, a World Bank official said that AusAID which promised to give US$ 1.5 mn worth of technical assistance recently indicated they wish to withdraw its support for the programme due to the delays in implementing it.

The project itself has run into a storm between the Land and Agricultural Ministry and the Home Affairs Ministry.

Presently, land deeds are registered by the Land Registrar who comes under the Home Affairs Ministry, while the Land Ministry surveys the property.

While the Land Ministry wants the title registration to be carried out by his department, the Home Affairs Ministry doesn't want to give up doing deed registration.

Agriculture and Lands Minister D M Jayaratne said, a pilot project has begun and a separate unit set up under his ministry is going ahead issuing titles to the lands gazetted.

Jayaratne denied that neither the Act needed to be amended nor the 33 odd enactment's are needed. However, legal experts say the Minister agreed to plug the loopholes at a AusAID sponsored workshop held last year, but has failed to do so since its politically suicidal to bring amendments as soon as an Act is passed.

In March this year, a group of legal experts shot down the Act, alleging that the Act was riddled with loopholes, created chaos, more litigation and even undermined clear titled land.

Title experts pointed out defects in the proposed Bill and recommended various amendments to be incorporated before it became law. Despite a ministerial written agreement to include their recommendations, the Act was passed in parliament without amendment.

A walk out by the Opposition on the day of the final reading on March 17, 1998, prevented these recommendations being included.

Meanwhile, a World Bank official said as a compromise, due to a difference of opinion, the Lands Ministry will run a skeleton staff to do the title registration. But at the end of the pilot project we will review the efficiency of the project, and then decide after two years as to who will do the title registration.

"We are hopeful that after the parliamentary elections we can come to some sort of an agreement," the official said.

Listing pivate media not viable say analysts

Possible legal moves to broadbase ownership of Sri Lanka's family-run, private electronic and print media by the government are seen as impractical, illogical and irrational, according to stock market and media analysts.

"The media industry, as of now, is not a money-making venture and is unlikely to attract any capital from the stock market," said one analyst.

Last week, Sri Lanka's one-time censor and now Minister of Special Assignments Dr.Sarath Amunugama suggested restrictions should be placed on the private-owned media due to, what he believes partisan behaviour, during the recent election campaign.

Government ministers have accused the private electronic and print media of being pro-United National Party (UNP) while the opposition has levelled the similar accusations against the state media, saying it was biased.

Amunugama, who crossed over with a group of dissident UNP parliamentarians to the ruling People's Alliance (PA) ranks, told the Daily Mirror last week ,private electronic media ownership should be broad based to restrict ownership, and these companies should be quoted on the stock exchange.

"There should not be a single person or a family controlling the majority stake in such a company. Nobody should own more than five percent of the shares," he was quoted as saying.

"If such a quoted company is not doing its job properly, stock prices will go down, eventually making the company correct its approach," he said.

Stockbrokers laughed off the suggestion saying Amunugama was barking up the wrong tree if he felt listed media companies would be guided by shareholder concerns.

"None of these companies is making reasonable profits. To list a company, there should be a three-year balance sheet showing favourable results and then analysts would recommend a listing. Media companies are more or less like social ventures and barely make profits, and if at all they do, it is with small margins - unless of course one is talking about cable TV companies," said a broker.

Sri Lanka's main electronic media with a sizable news content - MTV/Sirasa, TNL and Swarnavahini/ETV - are all family-run companies and though huge investments have been made, they are certainly not going to attract shareholders whose sole interest is in a profitable balance sheet. The bottomline is profit.

Media analysts say Amunugama's arguments for controls is triggered by the need towards ensuring private media is balanced in its coverage - in a way that the government sees fit. But are shareholders or ethics stockholders of a company interested in ethnics and morality of a company or in profits?

Continued from Page 1

Some may argue that television and radio channels are making enormous sums of money. It may appear so but even stockbrokers believe they won't attract interest in the market because they don't make as much profits as other companies and point to the case of TNL, which is either running at a loss or barely breaking even.

"Who is going to invest in such a company even if by law they are compelled to be listed on the stock exchange?" one analyst asked.

If this is so in the case of radio and television, then newspapers are in an even worst plight like today's newspaper industry where most mainstream publishers make money but barely to cover costs, subsidise other loss-making ventures and to pay salaries.

These are certainly not ventures private investors would want to put their money in unless such investors are like publishers - have the printers ink in their veins or family ambitions of getting involved in the publishing business as a social contribution.

"Many media companies are run like social ventures. They are not viable options for the stock market," said one broker.

Media analysts agree if the government wants to control the private media, it must devise other ways - which of course would be vociferously opposed by journalists , instead of using the stock market as a scapegoat to achieve a certain objective.

Analysts said in the present dispute between state and private media over balanced or partisan coverage - perhaps the best option would be for the state to take full control of the state media and publicly declare so and allow the private media which can be more powerful than state media to function without restriction.

"In this way both sides - government and opposition - have a powerful forum to discuss their issues and get their views across instead of complaining of biased coverage by the state or the private media."

A new beginning in economic affairs, please

The new year that has just dawned has also ushered in a new Century and a new Millennium. It is natural to have new expectations at this time of the year. Yet the events preceding the dawn of the new year has dampened expectations of the business community. .Business expectations are at a low ebb. Unless the government strengthens its policy implementation programmes business confidence is likely to be further eroded and that should not be allowed to happen.

There is a need to redefine government policy. It is true the government made an economic policy statement when it first came into power in 1994. Five years have lapsed and some of the declared objectives such as the reduction of the budget deficit to low levels or even generating a modest surplus has been rendered impossible to achieve. What then is the new fiscal policy stance? Do we again repeat the hope of cutting down the deficit and not being able to keep it or is there a change of policy?

Will the government indicate the envisaged new privatizations? Will the resources of any new privatization be utilised to redeem government debt? These are important questions for the government to take quick decisions on. A new policy statement which appraises the real economic and financial situation is due. Such a statement should not lament over the weaknesses but face them and take appropriate measures to deal with them even at the risk of immediate unpopularity.

Apart from the contribution which the government could make towards economic growth through macro-economic policies and ensuring a fair implementation of regulations, the government has an important role to play in the present context of sluggish economic activity. There is the need for the government to undertake some large scale infrastructure projects, which could enhance the country's development thrust, provide employment opportunities and increase the incomes of the communities in the regions.

One area in which the government must make a strong effort is in agriculture development. Despite the diversification of the economy and the growth of export manufacturing, the majority of our people live in rural areas. They are directly or indirectly dependent on agriculture. The productivity of our food crops must be increased through better research-extension linkages, which have been badly neglected in the last decade.We have to gear our research to the vast potential that exists in scientific agriculture. Our marketing of agricultural produce has to be greatly strengthened. We cannot leave these solely to market forces and the private sector. The government must play a positive and interventionist role to strengthen our small-scale agriculture.

We have had more than enough of politics last year, let us now get down to business with respect to our economy. Perhaps the first task of the government must be to appoint a full time Finance Minister. This is something everyone knew was a grave deficiency of the government, yet it persisted in the portfolio remaining with the President. At least now, five years too late, let us make amends. Whatever may be the long term benefits of having a full time Finance Minister, there is little doubt that it would inspire a greater degree of confidence in the government and would be interpreted as a signal of greater seriousness in tackling the country's economic problems. There is an urgent need for the government to take the economy seriously. If we don't, we would have begun the 21st Century and the new millennium on a wrong footing.

The Millennium challenge

By Feizal Samath

Roll over, Brits ... we are Sri Lankans. That has been the rallying cry over the past few decades as we try to shake off the vestiges of our colonial masters and create the development and space that would make us proud to be an independent nation.

But like it or not, it was the British that gave us plantations backed by much needed infrastructure: roads, railroads, ports and shipping - which are still the mainstay today.

There is nothing to match that development today other than the giant Mahaweli scheme, the Colombo-Katunayake road and some other projects. Some months back, President Chandrika Kumaratunga opened what was called the country's first flyover, at Ragama while another flyover is in the making at Dematagoda.

Yet little do we realize that the country already has flyovers, at least of a similar kind - at Maradana and near the Galle Face Green to name a few - both built by the British more that 50 years ago.

As Sri Lanka moves from a century of business and economic activity to another century, infrastructure, services, high-tech and the speed of delivery are some of the key elements that would mould this country in the future.

Remember unlike in the past, there is no place now for Third World countries like Sri Lanka to lag behind and then catch up on what the developed world went through maybe 10-20 years ago.

You can't, for instance develop computers here according to the advancements that the United States had maybe 10 years ago. In an age of globalisation and competitiveness, computer developments here must reflect what the world is using today, otherwise you lose out in the race for markets and speed.

How then are we to develop as a nation - delicately placed somewhere between the Third World and the developed world - in the new century? "Our future depends on our capacity to be competitive in international markets," argues Dr Nimal Sanderatne, one of this country's top economists and a former chairman of both the Bank of Ceylon and the National Development Bank (NDB).

This, he says, means efficiency, the development of skills, the use of scientific knowledge, improvement of Sri Lanka's education structure, infrastructure and good governance.

"Unlike the early 20th century, the 21st century belongs to nations which are super efficient and businesses must remember that. We have to produce good quality products at the cheapest possible prices," Sanderatne, now happily lecturing at the Peradeniya University, told Sunday Times Business.

Added to this list is the speed of delivery of services. "Speed is the key to industry these days," says S. Jeyavarman, General Manager of unit trust NAMAL (National Asset Management Ltd).

"If you can't deliver services quickly and rapidly, then you may lose out in this very competitive market."

But perhaps the greatest challenge ahead lies in the speed by which all concerned parties - the government, opposition parties and Tamil rebels - get together and settle the ethnic conflict that has devastated this country for nearly half the period after independence.

Thousands of people have perished; billions of rupees have been spent on defence, billions more lost on declining foreign investment and lower tourist arrivals. These are only the visible losses. What about the unseen losses?

This is what the Institute of Policy Studies, Sri Lanka's best known economic think-tank has to say on the conflict in its latest 1999 State of the Economy report:

"The economic costs of Sri Lanka's secessionist conflict have been substantial and are still mounting. Its costs to the country's social fabric appear to be even larger, even though they cannot be measured. It is a burden that Sri Lanka can ill- afford, particularly at this stage of its development. The country's development prospects depend heavily on how speedily a lasting peace can be achieved."

On the other hand it is uncertain as to what level of development the country would have reached even if we didn't have a war on — because of the destructive nature of Sri Lankan politics where when one political party proposes, the other opposes and the undoing of policies when a new government takes over.

"In the final reckoning, Sri Lanka's economic future will depend on how successfully it is able to slough off the partisan, destructive political culture that has frustrated the full benefits of economic development," the IPS report noted.

Everyone agrees that what this country needs is consistent national policies on the ethnic question, unemployment and the way government jobs are given, health, education and utility services.

In a way, there appears to be some consistency now - or even a kind of national policy - on the free market system. At least the two main political parties have agreed that this is the best thing for the country and they are unlikely to move away from that other than tinker around with liberatisation.

Sanderatne, noting that this was a good development, said in retrospect one of the negatives in Sri Lanka's economic history has been the alternating economic policies.

"This discouraged investment and dislocated economic activities. The free market is a good thing for the economy and if we had a wise leadership we could tame the market to be of greater benefit and to reduce any disadvantages," he added.

Economists say the past century has seen considerable changes in the country's economy, beginning from a plantation dominant one. In the 1930s, it was the era of peasant agriculture, especially the rice culture, which gained momentum in the 1950s and 1960s when peasant agriculture became the dominant growth centre. .

In the 1970s, the thrust was on expanding manufacture and exports and today manufactured industrial goods are of greater importance than agricultural exports.

Sanderatne says Sri Lanka throughout the century has been trade dependent and is described by many as an import export economy.

"We are still trade dependent but the character of the dependence is qualitatively different, starting from the export of agricultural produce and import of mostly food items to the export of industrial goods and import of mostly intermediate goods or raw materials for industry and machinery or capital goods."

Other economists say the plantation economy - tea, rubber and coconut - that represented 90 percent of all exports in 1948 (at the time of independence) now accounts for probably less than 20 percent of exports. Middle East employment, where up to one million Sri Lankans send home millions of US dollars in remittances, the garments and the services sector - tourism, hotels, etc - have revolutionised the Sri Lankan economy over the years.

Dr Saman Kelegama, Executive Director of IPS recalls the pattern of development in Europe where the development path started from agriculture, moved to industry and is now placed in the services segment.

In the US for instance, a sizable segment of the economy is in the services sector while in Hong Kong, 70 percent of GDP (gross domestic product) is taken up by the services sector, illustrating where the future lies for countries like Sri Lanka.

Kelegama, also reflecting the thoughts of other economists like Howard Nicholas, believes that Sri Lanka need not follow all the phases of the industrial revolution in its bid to be a developed nation."There is no time to follow all these phases - that the developed world followed - like assembly, light-engineering, heavy-engineering like ship building, high-tech engineering like electronics and computers or the ultimate of aircraft manufacture in that order. We need to jump a few places and place ourselves somewhere in this industrial development phase," he said.

He cited Singapore as an example when that country moved straight from the assembly stage to high-tech development, bypassing the normal process of industrialisation.

Another commonly cited example is that the computer industry here for instance can't remain with Windows 95 if the world is using Windows 98 and more advanced applications.

Sri Lanka's farm (rice and vegetables) economy is another case in point. The farming community has been plagued by large scale, losses and mounting debts, late mechanization, farmer children seeking "more respectable" jobs and moving away from villages, imports of commodities and some farmers even committing suicide as debts and related problems rise.

This economy has been neglected due to mismanagement by the state and the lopsided and ever-changing policies by successive governments. But Kelegama believes that however much Sri Lanka develops in the new millennium, it would still remain an agriculture-based economy and says there are ways of improving this sector.

A recent Central Bank plan to open a futures market in rice and other local crops may take care of one of the biggest problems for farmers - prices.

The bank has evolved a programme whereby farmers and buyers sign up pre-season or pre-harvest contracts at an agreed price and these price levels are maintained during delivery periods. Through this process, farmers are ensured of the agreed price unlike now when they have to cater to the whims and fancies of traders and the much-hated or much-loved middleman.

"This is the technological jump I am talking of. Instead of going through the process of mechanism or new technology, the Central Bank has devised other ways of improving the farm economy, using the futures market concept in the west," said Kelegama.

He reckons that plantation and agriculture labour should move away from the blue-collar phase to the while-collar stage, ensuring the dignity of labour. "If standards are raised and agriculture labour is seen as dignified, then people would like to do such jobs instead of moving into urban areas or cities in search of white- collar work."

There was such success in the Carribean in the case of sugar cane plantation workers whose lifestyles improved once their job titles were made more dignified and their standard of living raised by the creation of entertainment parks, playgrounds and so on.

This in a way is being implemented right now by Sri Lanka's plantation companies where workers are being provided with better housing, toilets, increased wages, better educational facilities, uniforms and a more pleasant environment to work in.

Veteran businessmen and economists agree that the new entrepreneurial class developed during and after the liberation of the Sri Lankan economy in 1977 is the one, which would transform the economy in the new century.

"They will play a key role in the development of Sri Lanka," said a Colombo-based furniture maker. There is also the segment of companies that are expanding overseas like the Hayleys group, John Keells, Aitken Spence, Vanik and the garments industry who would be consistently on the look out for newer markets and investments abroad.

"Unlike the older generation - who grew up in a conservative business environment in the 1950s or the 1970s - the now generation is prepared to take risks," said a financial analyst.

Development of Sri Lanka's rich mineral resource where only gems and ceramics are known worldwide, potential oil deposits in the country's 200 miles of ocean and the growing potential in the insurance industry are some of the keys to the future. So are poverty, ageing and national reconciliation.

Only a contended rural countryside, where most of the poor live, will ensure an equitable distribution of wealth and only a peaceful resolution of the conflict will enable the rural folk to develop and improve their quality of life.

A rapidly ageing population in this country would put strains on the country's social budget and health resources but this is where current insurance reforms, paving the way for opening the insurance market, can help. Good social security schemes, which now only cater to 12 percent of the population, can lead to containment at old age.

But finally the gateway to propel Sri Lanka into the Singapore, Japan or Korea type of country - we would like to live in - would depend on how best the government, the opposition, policy makers and the business community come together to jointly chart a masterplan for the future.

A masterplan that would not be tampered with by any political party or business group; a masterplan that would cater to all segments of Sri Lankan society; a masterplan that we can be proud of, and for the next generations to follow.

Maybe even the creation of an economic/peace council, comprising representatives from different segments, to guide this plan through the ages, would help.

Are we up to this task? That, I believe is the challenge of the future, the challenge of accepting another's point of view for the sake of the nation.

Economy looks bleak in the new millennium

Best-known economic think-tank says Sri Lanka is moving into the new millennium with an economy liberalized 20 years ago but still carries "baggage that pre-dates liberalization."

"The weightiest of these is undoubtedly the public institutional apparatus that has defied reform as it has enjoyed the protection of the country's political culture," said the Institute of Policy Studies (IPS) in its 1999 State of the Economy report, released last week.

It said the failure in administrative reforms mirror the failure to restructure the government's finances, other than for the privatization of state enterprises, which ironically, has provided the wherewithal to postpone more drastic restructuring.

"Similar political factors have postponed other vital reforms, particularly the labour market and in the banking sector."

The report, which dealt with the 1998 Sri Lankan economic figures and projections for 1999, noted while world economic prospects have brightened in the run-up to the next century, Sri Lanka is likely to limp into the new millennium.

It said Sri Lanka also entered the next century hobbled by a costly secessionist conflict which dominated the government's budget, discouraged investment, retarded the development of tourism, destroyed infrastructure and disrupted economic production.

"Its costs to the country's social fabric are undoubtedly even larger."

IPS noted that another cause for concern was the large number of Sri Lankans who enter the millennium with unfulfilled aspirations.

"Though poverty and unemployment levels have declined significantly during the last 20 years, incomes have grown relatively slowly, and other than for the few in the higher income brackets, the majority have not experienced the kind of improvement in consumption levels as might have been expected."

IPS reckons a speedy settlement of the ethnic conflict is imperative if Sri Lanka is to forge ahead and make up for lost time. "A lasting peace would be a tremendous boost to the country's development outlook, and must be pursued as a first priority," it said.

The economic think-tank also stressed the importance of governance, drawing lessons from the East Asian crisis where the lack of governance and transparency was probably the main cause of that region's economic meltdown.

"In the final reckoning, Sri Lanka's economic future will depend on how successfully it is able to slough off the partisan, destructive political culture that has frustrated the full benefits of economic development," it said.

"Thus the maturity of its political class will be the final determinant of whether Sri Lanka graduates to the high-income end of the spectrum, or remains in the low-income category in the new millennium."

The report has a special section on the economic costs of the ethnic conflict and relates to a recent study done by IPS on this subject.

The study, relating to the cost of war between 1984 and 1996, took into account direct costs like government and rebel war expenditure, government spending on relief measures, cost of lost infrastructure while indirect costs meant lost income due to foregone public investment, lost income from fewer tourist arrivals, loss of human capital - dead or injured, and lost output in the north and the east.

That study concluded the conflict had cost the economy nearly 170 percent of its total output in the year 1996. "Indirect costs are of a far greater magnitude than the direct costs, and the lost earnings due to lost foreign investment tops the bill by a significant margin," IPS said.

But it noted these figures were probably an understatement, as there were many other economic costs that couldn't be quantified.

"It is not only in the conflict areas ... and the border areas that there is widespread, abject poverty and destitution.

The conflict has also reduced the health stock of people in these areas: malnutrition, infant and maternal mortality rates are increasing, and many people are suffering from trauma due to conflict-related violence," it said.

IPS said, in this context, the education system has been disrupted, there has been a general militarisation of Sri Lankan society and a general breakdown of law and order.

Year ends on dismal note for CSE

The Colombo bourse ended the year on a dismal note on the back of declining GDP growth. The All Share Price Index (ASPI) which started the year at 572.5 points ended at 597.3 while the Milanka Price Index (MPI) which was launched on the 4 th of January closed the year at 937.5.

The market reached its pinnacle for the year on the 14th of December when the ASPI registered 602.6 and the MPI 1010.7 as investors placed their bets in the run up to the presidential election. The market dropped to its lowest ebb on the 23 rd of June when the ASPI registered 512.2 and the MPI 813.2. Average turnover during the year was Rs 61.5 mn and 205,900 trades took place during the year.

"It was definitely a disappointing year but the economy might perform better next year if there is more consistent government policy and an improvement in the Asian region," Head of Research, NDBS Stock Brokers, Chanaka Wickramasuriya said. "Continued government privatisation and trade liberalisation would also help," he added.

"Decreased levels of activity have plagued the market," General Manager, Forbes ABN Amro securities, Alistair Corera said. He said a listing of Sri Lanka telecom or an infrastructure project would boost activity levels. "If brokers are provided other avenues such as margin trading, selling on their own account and short selling, it would increase activity levels," Corera said.

Foreign investors stayed away due to external factors such as the good performance of the US market, Assistant Manager, John Keells Stock Brokers, Suresh Nadarajah said. "Investors are awaiting an investment stimulating budget and are waiting for the president to sort out priorities on the list such as tackling the north east conflict with the opposition"he said. "The plantation sector will go in to the millennium with a shortage of 100 mn kgs of tea. The free trade agreement will open up the market for lower end teas. This improvement will flow into the conglomerate and encourage investment," Mr Nadarajah said.

"Listing of Sri Lanka Telecom will be a beacon to re-attract foreign institutional investment to Sri Lanka," Strategist, Jardine Fleming HNB Securities, Amal Sanderatne said. "If world wide investment flows are more favourable towards markets with small market capitalisations and less liquidity the disappointment seen in frontier markets such as Sri Lanka could reverse," he said.

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