Tea records lowest monthly average in June

Tea prices remained steadfast in last week's auctions, but weak prices obtained in June added up to record the lowest monthly average for the year. The Rs. 119.73 average recorded for June was however, higher than the previous years average for the month. The cumulative average tea price was also higher at Rs. 129.37 over the previous years Rs. 106.18 or 22 per cent higher.

The cumulative production figure of 132.5 million kilos recorded as at May was 7.8 per cent higher than in 1999. Asia Siyaka Commodity Brokers forecast a production of 25-26 million kilos for June. The drop is primarily due to the work go slow in the higher elevations.

John Keells Tea Brokers, in a review of the market said that prices were rather high despite a 36 million kilos increase in production over last year. The report concluded that high oil prices increased the Middle East's buying power, while the stabilising Russian market is gradually increasing its purchases.

However, John Keells cautioned that the prevailing weather condition would send down production in the coming months.

Market report

Foreign interest in DFCC

Profit taking and foreign selling pressure on John Keells Holdings saw the market correct itself early in the week. The indices gained the previous week after the JKH bonus was announced. The All Share price Index remained flat to close at 513.54 while the Milanka Price Index dropped. 58 per cent to close at 848.2. The MBSL Midcap Index rose 1.5 per cent to register 897.11.

Rumours of an impending bonus issue kept Commercial Bank shares trading at Rs. 108 while foreign buying into DFCC saw the share hold.

Foreign outflows continued unabated with net foreign sales for the week amounting to Rs.112.8 mn.

The recent devaluation of the rupee will support the rebound in corporate earnings given the export bias of listed companies, Head of Research, Jardine Fleming HNB Securities, Amal Sanderatne said. A subdued better performance in the second half is possible on the back of corporate earnings growth, he said.

The market will continue to consolidate at these levels pending developments from the political front and release of second quarter corporate earnings, Head of Research, Asia Securities, Dushyanth Wijaysingha said.

Anticipated foreign selling will see the market slip below the 500 level and find support around 492, Head of research, CDIC Sasoon Cumberbatch, Diluk Desinghe said.

Call money overnight repo market

The inter-bank call money rate declined slightly during the week. As some of the larger borrowers, borrowed one week's money from the Central Bank reverse repo widow, pressure on the inter-bank call money market lessened.

On Thursday's closing, the inter-bank call rate dropped to 13.25%, probably due to the squaring off day of the commercial banks. However, most transactions were within the 14.25% and 15.25% range. The weekly call money average declined further by 9 basis points to close at 14.75%. We continue to believe that the call money rate is likely to range bound until an improvement in liquidity occurs.

The Central Bank overnight repo rate and the reverse repo rate remained unchanged at 9.5% and 15% respectively. As the call money rate eased slightly, the market repo rates too showed a marginal decline. On Thursday the market repo rates dropped to the 13.25% -14% range from the 14.5% -15% range. However, as the liquidity position did not witness a significant improvement and the repo rate could bounce back in the next week.

Monday continues to be profound day for the reverse repo window at the Central Bank. Given the persistent liquidity shortfall, the market borrowed Rs. 11.2bn from the reverse repo window, where majority of them were likely to be on a term basis rather than overnight. During the other days, the reverse repos were in the range of Rs. 1bn -2bn. As the market was mostly on the borrowing end the repo window hardly had any activity.

TBill

Rs. 2.759bn worth of bills were renewed during the weekly. Though the Central Bank reserved and purchased Rs. 1bn worth of bills from the auction, the liquidity position will remained unchanged, as there were around equivalent amount of other maturities. The auction was fully subscribed. The treasury bill yields continued to surge as the weakened liquidity position prevailed same.

A two-year bond auction was held during the week and offered Rs. 1.5bn worth of bonds. In spite of the Central Bank accepting only Rs. 500mn, the weighted average surged by 52 basis points to close at 13.63%. The secondary market activities were on a lackluster note, as the spread between most of the quotes was wide.

Forex

During the week the Central Bank middle rate remained unchanged at Rs. 77.535 per dollar. The demand for dollars remained strong. The market spot rate moved in between Rs. 79.00 and Rs. 79.22 per dollar. On Wednesday's trading the spot reach its highest level of Rs. 79.22 and closed the week slightly lower at 79.08. The three months forward dollars were at Rs. 80.50 to Rs. 80.60.

Last Week This Week Change 91 Days 12.21% 12.31% 0.10%

182 Days 12.45% 12.47% 0.02%

364 Days 13.09% 13.11% 0.02%

Maturity 01-06-02

Yield 10.75%

Amount offered Rs.bn

1500

Amount Rs. bn

Accepted 500

Weighted 13.63%

average

Change 0.52%

It is now time to move on...

By Feizal Samath

When Ken Balendra "hangs up his boots" and walks out of his plush office overlooking Beira Lake at the end of the year, he would probably carry with him a few memorabilia but plenty of memories. "I am looking forward to retirement.

There are many things I want to do," says the chief of John Keells Holdings whose retirement in December, 2000 when he reaches 60 years after a 31-year long career with the company, has already been announced.

In an intuition of things to come, Balendra - who acknowledges that his excellent public relations and management of people took him up the corporate ladder from a junior plantation superintendent - walks through his spacious Ward Place garden pointing out the various trees, including some spice trees, and flowers and a giant fish pond. "I like gardening, although I must confess I haven't done gardening for the past many years," he says. The giant fishpond was originally planned to be a swimming pool " but it would hardly have been used given my busy schedule, so we opted for a fish pond," he noted. Would you miss life at John Keells? "Probably yes but I am also looking at an active period after retirement. I believe the company is in the hands of probably the best management team in Sri Lanka and it is time for me to move on. I had a mandate .. I believed I fulfilled it and now it's time to go." Balendra is interested particularly in social activity and helping his wife Swyrie, a qualified doctor who gave up a profession to support his career, to work with charities. "I like to do social service - work with war victims, children and so on. Using my experience and contacts I believe I can help harness the private sector in social issues. I am also looking at playing golf, which I haven't done for seven years. "When the young Balendra quit Royal school - after flunking the university entrance examinations - and embarked on a planting career, he never expected to end up at the helm of Sri Lanka's biggest conglomerate. "Come to think of it - at that time I would never have even dreamed of being the head of the country's biggest group." Balendra was appointed chairman of John Keells Holdings in January 1, 1990 taking over from David Blackler to become the first Sri Lankan head of the firm. By that time, the company had diversified its business moving from a sole commodities and share broking house to tourism and travel. But it was during Balendra's period as chairman from 1990 to 2000 that the company recorded phenomenal growth moving into different areas of activity. This year, group profits soared to 1.5 billion rupees with 40,000 to 50,000 employees including plantation workers, 2,000 executives and 60 directors on the roll compared to 1990 when profits were at 75 million rupees and there were a total 2,000 employees.

The suave yet modest Balendra - a solid rugby hooker during school and club playing days - attributes the company's success to his team. "I had an excellent team and I was just the captain. I was fortunate in being in the right place at the right time. "While much has been written and is known about the John Keells chief's exploits in the corporate world, not many of today's corporate executive is aware of the dark-tanned schoolboy who was involved in all kinds of sport at Royal. "My father wanted me to be doctor but my interest lay elsewhere. I was into all the activities in school - games, rugby and being a prefect and cadet, " he said with a nostalgic smile when recalling what many of his generation call "the good old days" Balendra played as a hooker for the Royal rugby team and went on to represent the CR & FC club and the All Ceylon Barbarians in 1961 in an Indian tournament and eventually went the way of many rugby players at that time - planting and an outdoor career. Attracted by Sri Lanka's carpeted tea gardens, he joined James Findlays. "Whenever we played in the hill country and Dimbulla, Dickoya or the Kelani Valley, I was amazed at the beauty of the plantations. That was an immediate draw for us youngsters. "Balendra started planting in 1963 at Halgolla estate in Yatiyantota and worked there for six months before being transferred as a junior superintendent or "Sinna Dorai" to Hapugastenne estate in the Ratnapura district. It was there that love blossomed with his future wife, Swyrie, who was then working in the Ratnapura hospital as a doctor and whom he knew earlier. Marriage followed in 1969 and as both their jobs were transferable, Balendra decided to find a city job, applying to a few plantation agency houses. He succeeded at John Keells, Thompson & White, as the company was then known. "I met Lorensz Pereira, the former cricket captain, at a Royal-Thomian encounter in Colombo and he said that John Keells, where he worked, was looking for people with a planting background and asked whether I was interested. "After interviews with Keells chairman Mark, Bostock - who died recently, -, he was offered a job as an executive in the tea department and was to be trained as a broker. But after six months at Keells, he found himself still in the office and not at the auctions. "The other senior executives did not put me on the auction roster since I was 30 years old with several years of planting experience and not the usual school leaver who could be pushed around (by them)."He raised the issue with Bostock and the next day he was put on the rostrum, selling his first catalogue of teas for Keells at the Colombo auction. Success came fast due to his ability to sell quickly and Balendra was soon selling the biggest tea catalogues from the Keells range. "Some people say I was a fast auctioneer. There are advantages in selling fast - the buyers realize that unless they got their bids in fast, they would miss out. It was a tactic, I used and it worked. "When Balendra joined the company, there were just 30 directors and executives and they operated from the 9th floor of the Ceylinco building in Fort. Six months later the company moved to its warehouse premises, where there was 100,000 sq feet - all of which has been converted to office space. He became a company director in 1974 and by that time the company had been renamed John Keells Ltd. "I tell my friends when I show them the rogues gallery in the board room that John Keells, Thompson and White was trimmed to John Keells because if they had the name White on it, I would have stuck out like a sore thumb," the silver-haired CEO laughs. Those were relaxed days. Sri Lanka's corporate class finished work by 4.30 or 5 pm, played rugby or tennis and had a beer unlike today when executives get down to work in the evening after a hectic daily schedule of meetings, meetings, and more meetings.

"The number of executives in our firm was small and we knew each other and their families. On auction days I get up at 4 a.m. to mark my catalogue for the day's sales," he recalled. The Colombo tea auction always started exactly at 8 am and if the broker selling the first catalogue was absent, the next catalogue of teas from another broker was taken up. When plantations were nationalized in 1974 by the Sirima Bandaranaike government, agency houses got jittery and feared their businesses would be the next target. It was only John Keells that decided to move into other fields of activity and purchased Walkers Tours, then the biggest inbound tourist operator. The acquisition drew some criticism from other broking firms who believed brokers should be brokers for life and felt John Keells was doing something unethical. When the company acquired Mackinnon Mckenzie Ltd and the building at York Street for three to four million rupees, the murmers of discontent spread and many felt the company had made a wrong choice. Both firms are now among the main profit centres of the John Keells group. The Walkers Tours acquisition had its share of problems.

A breakaway group from Walkers led by veteran industry experts decided to set up their own company called Gemini Tours. Balendra, then the youngest director, was asked to move over to Walkers Tours and put things right.

There were only a few people who stayed on at Walkers with the creation of Gemini Tours, resulting in the foreign principals of Walkers Tours being worried about the future of the business.

Bostock and Balendra did a quick visit of the generating markets in Europe, meeting principals and assuring them that though people had left, the organization would continue. "The travel trade was horrified? How could a tea planter cum tea broker run a travel agency? They expected travel agents to be born not made. Within six months, we succeeded in reviving Walkers Tours," he said with a smile. Balendra believes the key to good management is getting to know people, working with them, basic commonsense and PR. "Basic commonsense - that's what you need. You don't need MBA's to run a travel firm or be in the hospitality business."

The John Keells chief recalls how he carried the bags of tourists who arrived at the airport and couldn't find a porter. "Even as managing director of Walkers Tours I have carried bags, whenever the need arose. I am not ashamed to say it. "Balendra's stint on the plantations was well spent, learning the fine art of managing people and using his PR skills to the maximum. "I have always maintained that the greatest strengths of John Keells is firstly its people, secondly its people and thirdly its people. Not only do we say it, we also practice it.

"The John Keells chief acknowledges that while Sri Lanka should aim for faster economic growth, it must be growth tempered with spare time for a worker and his family unlike the dizzy lifestyles of the west or Asian economies like Hong Kong or Singapore.

"When we were junior executives, we had comfortable lives with a low cost of living, servants and a mother-in-law who looked after the children. We could go for a film with the family," he said adding that today's executive is stretched and finds it hard to cope.

Balendra, as a junior executive, often requested senior management to nominate him for a weekend management course as he was keen to learn. Now when John Keells organizes weekend conferences outside Colombo, executives find it difficult to attend due to home commitments or wanting to spend more time with their children.

Most private sector firms now allow executives to bring their families along on weekend work cum pleasure trips. "That may be one of the responses to society where quality time with the family is hard to come by," he said, quickly adding however that not all firms could afford this facility. When Balendra moved to Colombo from the Ratnapura district, his wife worked at the Colombo General Hospital's Outpatients Department (OPD) for three years and then stopped to take care of the children. "My wife has been with the kids ever since while I worked around the clock. I was fortunate that we could afford to do one job. Not many people, even with the father and mother working, can afford that in terms of today's lifestyles. I am very conscious of that. "When Balendra took over John Keells from Blackler in 1990 the economy was reeling under two problems - the northeast ethnic crisis and the JVP problem. It was not an easy macro economic situation to start with but the John Keells chief has guided his company through troubled waters, taking it to sizzling heights in the past 11 years. Balendra says the three or four main events during his tenure were the purchase of Whittall Boustead which brought in two hotels - Bentota Beach and Coral Gardens - and Elephant House, and in its wake a controversy over sausages, because rivals claimed the merger would create a sausage monopoly. "We were able to prove to the monopolies commission that Keells already had a 95 percent share of the sausage market while the Cold Stores share at that time was only two percent."

Other key events during Balendra's tenure was the GDR issue in 1994 in which the company internationally raised 40 million US dollars, the acquisitions of plantations and the privatization of the Queen Elizabeth quay at the Colombo Port.

The Elephant House deal meant competing with Coca Cola and Pepsi. Unlike in most other countries where the soft drinks market is essentially considered the war of the Colas, in Sri Lanka it was a battle between Elephant House and Coca Cola. "We have done well as a local company against multinationals. There are very few countries in the world where Coke and Pepsi have not been able to kill the indigenous bottler. We are keeping our market share with 45 percent in soft drinks because of our ability to match them cent-to-cent on any promotion campaign. We have an unmatched distribution network with third generation distributors working with us. "Even when Unilevers splashed Walls ice cream across the island, it did not kill Elephant House ice creams, which have a 60 percent share of the market. "Walls helped to expand the market and increase consumption and we benefited from this. We upgraded technology and invested 150 million rupees on an ice cream plant."

Balendra however concedes that it is only the Sri Lankan "multinational" companies like John Keells that can take on global multinationals because of a huge financial and human resource base. While companies in Europe are downsizing and focusing on their core business, bigger companies in Sri Lanka like John Keells are expanding and moving into diversified fields. How come? "My answer is that Sri Lanka is a developing country and some of the opportunities that arise - like the plantations for instance - is a once in a lifetime opportunity. If you have the human resources and the financial capital, you should take advantage of it. Five years down the road - in the plantations case - we know we have added value to the group. They are all generating profits. "Balendra reckons the John Keells GDR issue in 1994 - making it the only Sri Lankan company to be listed overseas - gave the group the financial clout to expand into the hotel industry in the Maldives and the port investment of 240 million US dollar which is probably bigger than the six-year accelerated Mahaweli project in dollar terms.

Sri Lanka's ethnic conflict is the main concern in the economy and the private sector has - through its business peace initiatives - got both the two main political parties talking together. But how do companies survive in a sea of turbulence? "We are concerned about what is happening around us but we must continue to focus on our business. We have to survive because we are answerable to our shareholders, stakeholders and our employees. Within the given environment and constraints we must maximize productivity and motivate staff to perform despite the problems. I keep hearing many people saying there is no hope and so on - but I ask myself that aren't these companies responsible to their shareholders, to the community? Be positive _ yes there are problems, but let's try and overcome them. Those who take a negative view will surely die. "Balendra often tells foreign investors, running away from the country because of the problems, that John Keells has been in business for 130 yrs in this country and in the past four years has invested more than 100 million US dollars in the Sri Lankan economy including the two hotels "If we can do it - a small potty company like us - why can't they do it? If we did not have confidence in these investments and the returns, would we have invested? We might as well have put the money in fixed deposits or treasury bills and earned interest without budging an inch? "Balendra reckons the future of Sri Lanka lies in information technology. His group has 50 software engineers working in company subsidiaries in Britain and Dubai but are looking at 1,000 people, in the next year or so, working in projects locally and overseas. No war tomorrow? Then Sri Lanka, he believes, will sprint to newly industrialized status in five years. "We have everything on our side -a high rate of literacy and geographic location while infrastructure must be the improved.

The highways must be completed even if we spend on war," he says. Like most people, Balendra acknowledges that English is the key to the future and faults governments over the years in failing to realize this. He believes the answer to Sri Lanka's ethnic conflict lies in the creation of four economic regions instead of nine - as suggested by experts - which makes it too crowded.

Balendra's daughter is a lawyer working in New York while his son, who works at Colombo's Aitken Spence Ltd, is planning to go to France to finish his masters in Business Administration.

Has the government approached you with any job offers, a diplomatic posting for instance? "Oh, no. And I am certainly not getting involved in politics. I am however willing to give time to help the country in my field of expertise," he added.

Biz Broadsides by Rajpal A

Good no-good and do-good NGO's.

The role of non- governmental organizations in civil society sounds like it has nothing to do with the concerns of business. But, the way NGO's have been used by those who impose the global economic diktat is a good indication that nothing is what meets the eye in these days of neo-liberal global economic tamasha.

The NGO's are becoming so prolific for one thing, that it is becoming difficult to identify which is doing and which is the do-good. But, be warned that several do good NGO's have been planted by international donor agencies and organizations with whom they are in cahoots, to promote the transitional business agenda.

Bangladesh had some very good examples of ostensibly people - friendly NGO's being hijacked by multinationals to sell their ( often dangerous ) products. After the flood of 1998, (Akther in Changing Strategies of Future Actions and Solidarity) multinational corporations such as Monsanato Novertis and ACI aggressively promoted hybrid seeds and genetically modified seeds via the micro credit schemes of the NGO's.

Now, the micro credit schemes in Bangladesh have been huge successes, especially in the area of "empowering'' ( sorry about the jargon ) women. So, when these schemes are hijacked for purposes of promoting multinational pesticide sales, the people were not necessarily alarmed.

Something that has done good to the community, cannot turn out to be harmful, right?

Wrong. The Nayakrishi farmers in Bangladesh cottoned on to the fact that there was an insidious multinational agenda that was present in the so called free seed distribution schemes that were carried out by the micro credit NGO's.

The farmers resisted , and protested against the secret visit of a Monsanato official in Bangladesh.

Then, they took the important step of organizing bio- diversity festivals. In these festivals, the farmer fisherfolk and weaver communities of the Nayakrishi pledged to preserve bio-diversity and genetic resources, particularly indigenous seeds.

The assault on bio- diversity is particularly insidious in Sri Lanka, which for instance, has lost most of the genetic resources in terms of the large varieties of seed paddy that was viable historically in this country's bio- diverse gene pool.

But, the kind of resistance that was available in Bangladesh does not obtain here. But, the World Bank sponsored NGO's or other NGO's which come within the ambit of World Bank control or the control or control of other organizations which act in the interests of promoting transitional capital, can create worse havoc.

One thing that the World Bank sponsored NGO's are ecstatic about is the "empowerment'' of people — the empowerment of civil society. But, such empowerment has sought to replace government in the areas of education, and similar key areas in which central government is irreplaceable.

This kind of NGO "empowerment'' is insidious, and can be as insidious as the Monsananto attempt to distribute hybrid and genetically modified seeds in Bangladesh.

Such NGO's of course do not have any legitimacy, as often the governments which sanctioned these NGO's do not represent the views of the people. But that's another argument, perhaps for a different time, and a different forum.

But, the problem with the NGO conundrum is that there are NGO's which have been formed and "networked'' as a counter to the NGO's that have the interests of transitional capital and organizations such as the World Bank as their core agenda ( ....which fact of course is not transparent to the people who these "NGO's'' seek to benefit. )

These NGO's spring from within the people, and do not in any way give legitimacy to the stratagems of the World Bank or allied organizations.

For instance, a network was formed called the South Asia Network on Food Ecology and culture ( SANFEC). ( Akther, Changing Strategies for future Action and Solidarity.)

SANFEC abhors the idea of food "merely as a consumer object'' and it brought people with various backgrounds to work on using local seed and genetic material and genetic resources, and adopting and improving production techniques suitable for farmer's seed.'' This organization also sponsored the protest, when the members of the Nayakrishi stood in front of the Pan Pacific Hotel Sonargaon, where Montsanto official Mr Navaretti was staying when he came to Bangladesh to distribute genetically modified seeds. The protest was " very effective in making his visit controversial.'' Though the whole NGO conundrum cannot be addressed in one article, suffice to say that the NGO's are hardly the saviors — particularly those which liaise with organizations which promote, either directly or indirectly the neo- liberal economic order and global transnational capital.

In the Sky

Three Coins takes to the sky

Three Coins Beer took wing with SriLankan Airlines as an in-flight beer, recently. A first for a locally produced beer, It was exactly one year ago that the new Three Coins was launched as a 100% malt, all natural beer.

One year later, Three Coins is helping to give the local beer industry a truly world-class profile a company release says.

Three Coins is now available on all routes serviced by SriLankan Airlines.

Until now there had been no opportunity for the national carrier to consider selecting a local beer.

Three Coins succeeded in creating this opportunity, because of its emphasis on quality, style, and innovation - rather than on the bottom-line. The local beer market is highly sensitive to price; and those who seek to dominate the mass market have, neither a compelling reason nor a desire, to look beyond the bottom-line.

But, says the company spokesman, Sudath Liyanasuriya, "Three Coins is a niche-market beer and as such our goal has been, not to dominate the bland mass market, but to create a national beer that is a match for any, anywhere in the world. To have gained wings on the first anniversary of the launch of the new Three Coins is being viewed by some industry analysts as a measure of the company's success as a niche marketer of craft or premium beers, the release adds.

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