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Chamber wants an ombudsman

But bankers say a Code of Best Practice for Banks would do

But the Sri Lanka Bankers' Association (SLBA) says that they are adding the finishing touches to a Code of Best Practice for Banks, which may not require the services of a banking ombudsman. 

Federation of Chambers of Commerce of Sri Lanka (FCC SL) chief Lal de Mel says that the executive committee members have had several discussions to put forward a proposal calling for 'flexible debt recovery laws to be passed which should include Chapter 11 provisions, as well as flexibility for bank's customers to appeal to a banking ombudsmen appointed by the Central Bank'. 

De Mel says that they highlighted the need of a banking ombudsman to the President, who responded favourably and directed her officials, to look into its possibility. 

The American Chapter 11 bankruptcy law gives a company a second lease of life. This Chapter allows the business to continue to operate while it gets time (with court permission) to pay its creditors. The bankruptcy court appoints someone to watch the business operation. The business management must make reports to the court as to how things are going. If the business cannot make it, the business is closed down. If it is successful, the business can emerge from Chapter 11 and resume normal operations. 

There have been numerous international companies that have sought refuge under this Chapter and subsequently reorganised. Most recently the failed global satellite operator Iridium sought refuge under Chapter 11 and is in the process of being resuscitated. 

The recent flurry of bank announcements auctioning movable assets to recover debt has caused concern to industrialists. They in turn argue that the present debt recovery laws favour only the banks. 

"It's necessary especially that a bank manager should not have the power of life and death over instituting parate execution to recover monies," de Mel says adding that winding up "is not the best system." 

Legal experts say that the present bankruptcy laws do provide for re-organisation but it's a long and cumbersome procedure which very few lawyers are aware of. "Our present system is very unhealthy, it's like a funeral," a leading corporate legal expert commented. 

"That's why we need a banking ombudsmen," says de Mel. 

However, SLBA says that they would submit the code of best practice to the Central Bank and let the Bank decide (once they read the code) whether an ombudsman is needed. The Code of Banking practices is a way of communicating to banks' customers the meaning of banking transactions and how they are carried out etc. For instance, the code would spell out the requirements for customers to open a current account, the requirements on how a customer can make a stop payment on a cheque, SLBA Secretary General, Gaston Gunewardene said. 

If a customer still feels he is unfairly treated he can seek redress from the Central Bank, go for arbitration or even appeal to the banking ombudsmen, Gunewardene explained. 

He reckons that in this competitive environment where banks are vying for business, a bank would go all out to satisfy an unhappy customer. 

The code is voluntary and is expected to be released in the coming months.

Competition hits fever pitch

More foreign hospitals coming as the demand for better healthcare rise

The demand for heathcare services is on the rise as changes in life styles, demographic transitions, poor environmental conditions and weaknesses in the existing healthcare delivery system have increased health hazards. 

Meanwhile, health problems related to an aging population (60 years and over) in Sri Lanka is also expected to contribute to the growing demand. It is estimated that old age related illnesses are expected to increase from 9.1 percent in 1995 to 21.5 percent in 2030. 

Officials forecast that this increase in old age population will lead to an increased demand for healthcare services for cardiovascular, neurological, cancer and rheumatological diseases and other common physical and mental problems of the aged. 

The last few years saw a few Asian Hospital giants like Apollo India, Glen Eagles of Singapore in addition to others enter the local scene promising health services to an international standard. Officials said that over Rs. 8 billion had been invested in the health sector by foreign institutions so far.

In addition they expect that the governments incentives for the private sector that include duty exemptions for the import of medical equipment, tax concessions for investment in two tier private hospitals and the provision of free land would attract more investment. 

However, a two fold increase in taxation last year has eroded the private hospitals' profitability.

Further, some hospital sources say that much needed expansion of the hospitals have been hampered largely due to the lack of suitable land for extensions. 

Asiri Hospital opened a new 100-bed hospital close to the existing infirmary to cope with the chronic shortage of beds. 

Officials said that the new hospital could be expanded to accommodate 100 more beds. Nawaloka Hospital also made some renovations in an effort to expand the existing facility. 

Meanwhile, smaller private hospitals say they are finding it difficult to compete with the increasing number of larger BOI hospitals that enjoy many concessions. 

They claim that though they have over 90 per cent bed occupancy, increasing cost and eroding margins affected their profitability. 

However, the growing private sector healthcare continues to operate with very little regulation, due to a lack of necessary legal authority by the committee appointed by the Ministry. 

The proposed act for monitoring, regulating and supervising private health institutions is still being fine-tuned. 

In any event, establishment of a regulatory and monitoring authority for the private health sector is a pressing need to guarantee quality healthcare facilities for the public at an affordable price, in a situation where the number of private services is rapidly increasing, government officials said. 

Unofficial figures show an estimated 120 private hospitals with a bed capacity of over 3000 beds operating as at last year.

Builders to get state buttress

Contractors are usually required to submit securities to their clients, to ensure contractual obligations are carried out. These securities are submitted at the time of bidding, contracting, obtaining advances and during the maintenance. The securities are issued by the State and private sector insurance companies and commercial banks at commercial rates.

Since clients have to encounter delays when calling up for such securities, the clients' demand for 'on demand' securities from banks and insurers. The banks in turn, require unreasonable collateral to issue such bonds and guarantees, Chairman CGF, Eddie de Zylva said.

Meanwhile the Treasury has released Rs. 100 mn as seed capital towards setting up CGF and the initial securities were issued recently.

CGF issues bid bonds, performance bonds, advance payment bonds and maintenance bonds for contracts to the value of Rs. 10 mn. 

Contractors can obtain securities at low interest rates by providing cash deposits or by two contractors of equal or higher status providing indemnities to the sureties.

Contractors must also open a separate bank account for the project, provide the Fund with cash flow statements and a programme of work.

The Fund monitors the contractor's performance from the initial stage up to the end of the maintenance period.

The two sureties obligations are merely to step in and complete the project with the same conditions of contracts and specifications and drawing as entered to by the initial contractor, de Zylva explained.

The CGF asks no collateral. Instead, the Fund needs to satisfy itself with documentary evidence of the contractors past records, bank reference to prove his ability to undertake and construct the relevant project.

De Zylva says the present scheme benefits small contractors who account for 85 percent of the total 3,000 odd contractors. The Fund hopes to include all contractors into the scheme within a five year period, he said.

New firm for tourism promotion

By Dinali Goonewardene

"A draft outlining the scope of the company is presently being prepared and we hope the company will be operational by the end of June," Chairman of the CTB, think tank Asker Moosajee told The Sunday Times Business. 

The objectives of the company will include promoting and reformulating the product offered by the Sri Lankan tourism industry in addition to being an institute for crisis management when the security situation in the country is called into question.

A company by guarantee is one which shareholders do not put in money upfront as share capital but agree to guarantee the liabilities of the company in the event of bankruptcy. Liability is limited to the number of shares guaranteed. 

While a company by guarantee is not owned by its shareholders tourism and travel associations are expected to participate in the company. 

Membership is expected to comprise of participants from the hotel and travel industry and other beneficiaries including transport operators and shops targeting tourists. 

The government has pledged US $5 mn for promotional activity over a period of two years and the private sector is also expected to contribute to the finances of the company on a voluntary basis. 

The collective fund will be used in a national promotion of Sri Lanka. But participation in promotional activities such as fairs overseas will be restricted to members who contribute financially.

The company is expected to take over the marketing function of the CTB including employees and offices overseas. A report on the legal feasibility of the proposals has been prepared by G L and F De Sarams. 

The draft of the scope of the company will have to meet the approval of the tourism industry before being forwarded to the tourism minister who is expected to place it before the Cabinet. 

Earlier plans to set up a Tourism Authority which would inherit the CTB have been shelved as the tourism industry voiced its concern over the efficacy of a new body which would have a legacy of flaws in the old system. 

The plan to set up a company by guarantee seeks to operate within the parameters of existing legislation as changes in legislation would not be facilitated within the time span of the existing parliament. 

Iminent parliamentary elections would deter the passing of new laws until a new government has been elected. And time is not a luxury afforded to the tourism industry in the face of a crisis spurred by the escalation of the war and a deteriorating security situation.

Giving holidays to productivity too

The large number of holidays and the frequency and pattern of their occurrence, are a significant factor in a loss of productivity in the country and disrupts the production cycle of many industries. Fortunately some of its dire consequences on productivity are mitigated by firms adopting innovative means of getting their workforce to continue working uninterrupted on some holidays. 

Before commenting on the specific issues of how we may tackle the problem of not allowing the country's productivity to decline, it is important to get a balanced view of the problem. 

Humans are not robots, which can work without breaks. Even machines are said to suffer from metal fatigue. Rest and recreation are an important source of strength, which can contribute to overall productivity. All communities have spells of holidays and these do not necessarily lead to a loss of productivity in the economy. A good example of this is the hard working Chinese community, which takes off for an extended period to celebrate the Chinese New Year, in the same manner as our people during our New Year. They go to the villages and partake of traditional new year festivities and traditional customs. This is an important sociological and cultural function. 

Similarly societies with Christian traditions celebrate the Christmas season over a number of days and the last week of the year is basically a period of holidays in these countries. In fact the practice has spread beyond those of Christian societies and the Christmas season is a period of holidays around the world. 

No one argues that these are unhealthy practices for a society. The Sri Lankan holiday situation is very different. It is not only these holiday spells that we enjoy, but a number of other holidays strewn all around the year, particularly in the first half of the year. 

It is not merely the excessive number of holidays, but the haphazard nature of our holiday system, and the manner in which the community treats these, which have a bearing on productivity. The economy functions in a stop go stop fashion owing to these holidays each month. 

In the United States, not only are the number of holidays few, but their observance is scheduled to ensure both the least dislocation of work as well as to facilitate relaxation, travel and enjoyment. Most of the national holidays are scheduled for either a Friday or a Monday, thereby preventing mid-week breaks in work and also giving workers long weekends for enjoyment. 

Productivity and Recreation are both achieved by these means. A fundamental problem in reducing the number of holidays is the pluralistic nature of our society, which recognises not only the majority community's religious holidays, but also those of Hindus, Christians and Muslims. 

An added complexity is the need to give the Poya full moon as a holiday. It is in this complex mosaic of ethnicity and religious diversity that a government has to find a solution to this problem. A system of holidays, which ensures fairness to the various communities and one which does not have an excessive number of holidays is not easy to implement. One must give credit to the government for recognising the need to reduce holidays and having tried to solve this complicated issue. Its efforts have been thwarted by religious leaders, by trade unions and existing agreements on holidays. The government has reduced the number of holidays by cutting out Bandaranaike Day and National Heros Day. 

It has also reduced the number of mercantile holidays for Hindu, Christian and Muslim festivals. Yet Public and Bank holidays for religious festivals remain as before. There is a good rationale for making bank holidays the same as mercantile holidays.

In the present system business activity is hampered by banks being closed on days the private sector is working. There is a need to rationalise the holidays. There is also the practice of firms giving half days when holidays fall on Saturdays. Each institution decides for itself when to give this half day, often combining half days to give full days. This adds a further confusion as different companies close on different days and banks may be closed on these days. 

This is another area for rationalisation. It appears that the only way of reducing the number of holidays lies in a system which gives the minority religions the holidays on the basis of a leave entitlement. It could be mandatory for employees to give 2 or 3 days leave for the religious festivals to those who declare themselves of a particular faith. But these days would not be national holidays. 

The leave should however be debited from the holiday entitlement, as otherwise the majority religion's believers would be having more work than the rest. There is a need for all groups of people to recognise the need to balance the need for holidays with the imperatives of economic life. 

There is a need to give full freedom for minorities to practice their religions without disrupting the country's economy and prospects for much needed foreign investment. Political leaders of all parties, employees and religious leaders must view the issue of holidays in a new light and assist the government to implement a more rational and economically productive holiday system.

Standard Chartered planning to take over ANZ operations

In Pakistan, ANZ Grindlays Bank is the second largest foreign bank in terms of assets with 15 branches, while SCB is placed at number three with 6 branches; Citibank occupying the top slot.

According to bankers, the strategic fit for a merger is said to be ideal with both external and internal dynamics in terms of clientele. In 1999, ANZ's return on equity to head office was 18 percent and SCB's 10 percent, with pre-tax profit of Rs 390 million and Rs 165 million respectively.

According to people familiar with the negotiations, ANZ Grindlays Bank Ltd., one of the three biggest foreign banks in India, will be sold in the first week of May. The purchase will give Standard Chartered access to 500,000 new customers and 40 branches in the world's second most populous nation, and at the same time deepen the bank's presence in the Middle East. "It's a unique business franchise, so we do get approached from time to time," said Paul Edwards, an ANZ spokesman. He declined to comment on any advances from Standard Chartered.Standard Chartered officials also declined to comment. The bank will retain the Grindlay's name, knowledgeable people said.

ANZ, Australia's fourth-largest bank, said last month it was in talks with News Corp, the world's fourth-biggest media company, to offer a jointly branded credit card in India, giving it access to 18 million Indian households which subscribe to News Corp's Star TV service.

For ANZ, the sale offers the chance to exit a market in which it has never reached its profit targets.

The Melbourne-based bank is also fighting a possible prosecution over breaches of foreign exchange regulations in India dating back to 1991. Moreover, it is facing an appeal over a claim for $190 million — subsequently increased to $340 million with interest — following a 1992 dispute with National Housing Bank over the proceeds of a check. ANZ is expected to give Standard Chartered an indemnity over the two cases, which are still going through the Indian courts.

"We've had the view for some time that the risk profile of Grindlays is inappropriate for ANZ's broader strategy," said James Falkiner, head of financial services group at HSBC Securities Australia Ltd. "If they put the funds into a buyback or a new financial services business, it's earnings per share accretionary."

HSBC estimates the book value of 146-year-old ANZ Grindlays at A$1 billion.

Profits Decline

ANZ's South Asian region — including India, Nepal, Bangladesh and Sri Lanka — made a profit of A$104 million in the 12 months to Sept. 30, down 22 percent on the year-earlier period, as local lending in India fell. ANZ will report first-half earnings, for the six months to March 31, on May 1.

In December, ANZ hired Tony Singh, previously with Bank of America, to head the bank's Indian operations, and committed A$50 million over the next five years to develop the personal financial services business in that country. It also hired management consultant, McKinsey & Co. to rebuild the bank's market position, which slipped to No: 3 behind Citibank and Standard Chartered, in a move seen as a last bid by the Melbourne-based bank to rescue its Grindlays business.

ANZ has branches 15 Indian cities and 5,000 staff around the region. The bank also has exposure to the United Arab Emirates — totalling US $1.3 billion at Sept. 30, 1999 — as well as substantial lending in Pakistan, Qatar and Saudi Arabia.

Standard Chartered, a UK bank that does most of its business in Asia, has 580 offices in more than 50 countries. Last month Standard Chartered group chief executive Rana Talwar said it would sell 600 million pounds in bonds and securities to pay for acquisitions around the world.

Pre-tax profit in Standard Chartered's South Asian and Middle East Operations fell 74 percent to 11 million in 1999 from 42 million in 1998 as the bank set aside more money for problem loans.

Standard Chartered shares fell as much as 5.5 pence, or 0.7 percent, to 825p. ANZ shares rose A$0.07, or 0.6 percent, to A$11.47.

Courtesy-Business Recorder

Biz' Broadsides by Rajpal A.

Black friday and blues to follow

That was just one day before a federal judge pronounced it a predatory monopoly subject to horrifying penalties — and possibly a forced breakup. So, I directed my broker to get me into the market. Grab some of that high-flying stuff, I ordained, and make me obscenely rich. You can see the results yourself on exchanges in Singapore, Hongkong, Tokyo, New York, everywhere. Prices shoot up one day, plummet the next. I shall not make you weep with details of what has happened to my newly adventuresome investment portfolio. ''That's a Washington political columnist, trying to derive some black humor out of black Friday (week before last) when the stock markets collapsed. The New York Stock Exchange fell by a record 616 points. Billions of pounds of pension money depend on the stock market, in the US, and many people feel they are getting burnt by the current turmoil around the world . ( Quote from "This is Money.'')

But, the Washington political columnists and the pensioners troubles will be nothing when the bubble really bursts. Those Americans who have invested in large sums in the stock market will have to face the prospects of losing houses, pensions, life's savings. Yet, all that will be small beer, compared to the global crisis that will follow….

It's not as if globally speaking, there isn't a crisis. Asia is on the recovery, say the gods who prognosticate from their heavenly abode's fitted with monitors that beam NASDAQ, Nikkei and those seismic indices, which hold the key to modern day human happiness. But, the food riots in Asia have left a bitter taste in the mouth, and that taste still lingers from Bangkok to Seoul to Taipei. The less said about Colombo the better of course. 

"There is no doubt in my mind that the emergence of world currency and financial markets as a giant high - tech rapid velocity "gambling casino" for speculators contributed to spreading crisis. '' That's not my opinion. David A Smith, a Goliath in the Centre for Study Of Democracy in Irvine California, said that. Anybody who thought that the Asian crisis was due to faulty management of Asian economies and banking systems is a simpleton, according to this man. 

"I find myself in partial agreement with those - including some whose overall world-views I find repugnant - who argue that what we are calling "the East Asian crisis" is a local manifestation of the (rather out-of-control!) dynamics of the contemporary global banking and finance system.''

So says Smith. Even here, it can be seen that the American is finding it hard to hide his disbelief that the world economy is sick. ( How can it be — it's American driven, no?) Therefore Smith grants a sop to the Establishment. Which is that he finds the overall worldview of "some people'' repugnant. Nevertheless he agrees with them. "Out of control dynamics of the contemporary global and banking and finance system'' translates as - - the global economy is quite sick. 

"Indeed, as "the Asian crisis" now begins to lap at the shores of the United States (with stock market declines, an emerging credit crunch and a projected general economic downturn), there is a growing appreciation that, perhaps some aspects of globalization really may have "gone too far." " There Smith goes again. . Look at him now - hardly like the cat that got the cream, eh? Said like a true American, because he is now feels that the effect of globalization has gone too far only because it's beginning now to hurt the American economy as well. That's when it begins to hurt Smith, and other good men like him.

But, more about all that later. The last time the Asian and the Latin American economies convulsed, serious economic consequences ensued, which induced IMF and the World Bank to tighten their policies of maintaining a stranglehold on the developing world economies. But, from Thailand to Mexico, people were tired of a globalised economy which was leaving people impoverished, even as they were being thought to sing hosannas to liberalized global trade and laissez faire economies.

Some rebelled. They evolved alternate currencies. Community currencies sidetracked the absurd results of the global economy, an economy which left people not being able to transact even though there was supply and demand, purely because there was no money in the community. Seattle erupted during the WTO. And just this Tuesday, even as I write this, the World Bank has had to contend with demonstrations in America, which resulted in dozens of arrests. Said one demonstrator that "the IMF robs the food and the livelihood of people in poor countries." Wolfenson, the new World Bank Chairman was forced to issue a retort. So, this is a column which in the future aims to bring business issues into a global perspective. It will roil a lot of people who have sold to neo-liberal neo-colonial economic forces. That's a promise. 

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