'Lankan economy heading downhill'

A Sri Lankan-born economist last week painted a "gloom and doom" picture of the country's economy, warning that inflation would rise to 30 percent, interbank interest rates would soar to 50 -70 percent while economic growth could slow down to two or three percent.

The negative prognosis, delivered in Colombo by Dr Howard Nicholas, economist and social scientist at the Netherlands-based Institute of Social Studies (ISS), drew "oohs" and "ahhs" from a house-full gathering of economists and others. "We are sitting on a volcano," Niclolas said.

Some dismissed his short and long term views but there were many others who subscribed to Nicholas' position that Sri Lanka was going downhill. 

"We may disagree with his views but that doesn't hide the fact that there is a serious crisis in the country. The government cannot deny it.. if not why free float the dollar?" one local economist asked.

Nicholas, while arguing that most countries now embraced a managed float structure and not a free float, noted that the country needed a good industrial base to face external shocks.

He said the government should not borrow in the money markets and must revert back to borrowings from captive sources like the NSB, ETF and EPF to bring down interest rates. "Take the pressure off the market if you want to fund the budget deficit."

Abandon the ruling People's Alliance government's level playing field strategy, he urged, while noting that the financial community must not be parochial. "Don't look only for easy money through trade but please also support export led growth."

He said it would be disastrous if the economy was allowed to go into a free fall with general expectations of the dollar hitting 110 rupees and beyond. " We need to bring it down to 80 rupees or hold it at 90."

Nicholas said stagflation - inflation and low growth - was expected while the government was likely to raise the GST and personal taxes. "Companies are certain to go bankrupt," he added.

The ISS economist lashed out at proponents of a relaxation of the capital account saying this would be insane if done. "(World financier) George Soros will swallow Sri Lanka with his US $300-400 billion fund when all that Sri Lanka has in reserves was $900 million," he said.

Soros, the world's biggest individual investor, was accused of triggering the East Asia crisis many years ago, with his main accuser being Malaysian Prime Minister Dr Mahathir Mohamed. The financier pumped some funds into the Sri Lankan stockmarkets some years ago through another source.

Nicholas said his biggest worry was not the exchange rate fluctuations but the rise in interest rates. "That is my biggest worry and with a market short of millions of rupees, that is bound to happen if government borrowings continue through the market," he added.

Nicholas said his basic premise is that the recent shift in exchange rate policy was the logical conclusion of a level playing field (equality to local and foreigners in the marketplace).

He said the free float created massive uncertainty for both importers and exporters. "The government says the market is stable then why isn't importers opening Letters of credit?" he asked.

"We shouldn't be worrying too much about currency movements in the United States or Japan and pegging our currency accordingly. We are not competing with these countries, so why worry about their currency levels. We should be worrying about South Asia whose exporters are our main competitors," he said.

Meanwhile the rupee continued to stabilise for the second successive week as demand for the dollar eased. Market sources said export proceeds were coming into the market.
Taking Stock

* National Development Bank, the country's biggest development finance institution, reported consolidated net profit of Rs 549 million for the whole of 2000, down 23 percent from the year before. While NDB's core operating profits have grown, higher provisioning for falling value of investments and bad debts caused earnings to shrink. The 23 percent decline in prices compelled the bank to make provisions for a fall in investment values to Rs 329.6 million in contrast to a write-back of Rs 151 million in the previous year, Asia Securities Ltd stockbrokers said. NDB's 4th quarter 2000 net profit also fell 56 percent to Rs 100 million.

* DFCC Bank, the other development bank, said its unaudited group profit for the nine months to December 2000 was Rs 460 million, up 38 percent in the previous period when compared with Rs 333 million. Net interest income improved from Rs 561 million to Rs 708 million.

* Eagle Insurance Co Ltd announced a 45 percent first and final dividend.

* Seylan Bank said it was proceeding with a Rs 300 million unsecured, subordinated, redeemable five-year debenture issue (with a par value per debenture of Rs 100) extendable upto Rs 600 million in the event of an oversubscription.

* Eden Hotels said in a press release that W.M. Mendis & Co had sold 4.89 million shares of the hotel company. Following this decision. Mr W.M. Mendis submitted his resignation from the board of directors.
Stockmarket update

Sri Lanka's stockmarket ended on a bearish note last week as uncertainty over the economy continued to hurt sentiment.

Market analysts noted that the Colombo Stock Exchange all share price index (ASPI) was set to end in the 350-400 level in coming weeks as poor trading affects the market.

Trading this week was confined to three days in the week ending February 9 due to the intervening holidays, resulting in a sluggish market. The Milanka Price Index & all Share Price Index which started in the week at 687.4 and 441.5 declined by Thursday by 1.5 and 0.1.

On Tuesday, market movements were guided by the announcement of a 45% first and final dividend declaration by National Development Bank. Separately a local investor bought a chunk of Nestle Lanka shares totalling around 35,000 at 62 rupees each. 

Meanwhile DFCC informed the Colombo Stock Exchange that they have concluded the purchase of 100% of the issued shares of Forbes ABN Amro Securities (Pvt) Ltd from ABN Amro. According to broking sources the new broking firm will be opened as DFCC stockbrokers (Pvt) Ltd in the next few months.

Many companies were transferred from the main board to the default board of the exchange. Vanik Incorporation Ltd., Metalix Engineering Company Ltd., Ceylon Foreign Trade Ltd., Colombo Fort Land & Building Company Ltd., Ceylon Theatres Ltd., Fern Tea Ltd., Kapila Heavy Equipment Ltd., Kelani Tyres Ltd., Lake House Investment Ltd., Lambretta Ceylon Ltd., Lanka Ceramics Ltd., Upali Enterprises Ltd., Upali Investment Holdings Ltd., were the companies transferred owing to non payment of debentures interest on the due date and/or non submission of annual reports for financial years ending March 31, 1999 and December 31, 2000.

Tourism gains from the float

Travel trade sources said earnings from tourism were likely to be higher this year even if arrivals fall from previous years.

According to the Ceylon Tourist Board (CTB), arrivals fell to 400,414 last year, down 8.3 percent from 436,440 recorded in 1999.

The board said arrivals in December totalled 36,948 which was also a decrease of 8.3 percent compared to the corresponding month in 1999.

Figures released by the board showed that there were 200 hotels in operation with 12,935 rooms up to November 2000, up from 167 hotels and 11,926 rooms in the corresponding November month
Ravi's economic poser 

An opposition legislator is planning to ask the government - via a parliamentary question - about the state of Sri Lanka's economy and crucial issues like the budget deficit, and capital and current expenditures since the ruling People's Alliance took office in 1994.

United National Party parliamentarian Ravi Karunanayake, who often queries from government politicians economic situations and particularly the controversial SriLankan Airlines deal, has presented some posers to Deputy Finance Minister G.L. Peiris, to be taken up in parliament next month.

The UNP MP, in questions listed in the parliament order paper, wants to know particulars - on an annual basis since 1994 - of budget deficits as a percentage of GDP, the final outcome of budget deficits after supplementary estimates are presented, the number of supplementary expenditures every year by ministries and whether additional supplementary expenditure has been ever bridged.

SLAQ recognized by ASQ

Continuous interaction and participation in ASQ activities as well as the role played by SLAQ in promoting quality in the region through the association with the Asia Pacific Organization for Quality (APQO) has facilitated to receive such recognition. 

SLAQ had organized training, which is widely accepted by the industry. Other activities such as National Quality Convention, National Benchmarking Service, School projects and the Six-sigma program had given high recognition to SLAQ. School programs are aimed at promotion of quality culture among the next generation, which is expected to have long-term effects in building a foundation for a quality future.

The proposed Six-Sigma breakthrough strategy developed by recognized market leader, 

Dr. Mikel Harry will create technical leaders and change agents of Six Sigma tools to produce incredible breakthrough success. SLAQ will link up with Six Sigma Academy in USA and will deliver key implementation principles, practices and techniques that are woven within the foundation of technical material. 

Among the training conducted ISO 9000 Lead Auditor Certificate Course and the ISO 9000 Auditor Transition Program play a vital role in strengthening the ISO 9000 certification activities in Sri Lanka. These are the only programs accredited by the International Registear for Certified Auditors (IRCA) available in Sri Lanka.

In addition SLAQ conducts regular group and in-house programs on ISO 9000 awareness, auditing TQM, ISO 14 000, SA 8000, OHSAS 18001, Six Sigma and many other important programs, which are vital for maintaining effective quality management systems. 

SLAQ diploma for certified Quality Technicians had already become very popular among the industry. SLAQ has already taken steps to conduct M Sc course in Quality Assurance in affiliation with the University of California in USA and diploma course and M Sc with University of Nottingham in UK.

The SLAQ journal 'Quality Today' has received recognition among other international quality associations and is the only regular journal published in the South East Asian Region. Action is already taken to operate an ISO 9000 consultant and auditor registration program on the guidelines issued by IRCA.

The quality awards scheme operated by SLAQ is expected to recognize quality professionals who have made outstanding contributions for the promotion of quality concepts in Sri Lanka. SLAQ food unit will hold the first National Symposium on Food Quality Assurance in December this year.Action is already taken to present the Sri Lanka Association for Quality Act to the parliament which will fill the requirement for a professional body in quality stated in the National Quality Policy issued by Her Excellency the President. 

The recognition received by ASQ will place SLAQ in the world map as ASQ is on of the largest professional bodies in Quality in the world. ASQ is a society of individuals and organizational members dedicated to the ongoing development, advancement and promotion of quality concepts, principles and techniques. ASDQ serves more than 133 000 individual and 1 100 corporate members.

ASQ specializes in training certification and even conducts the prestigious Malcolm Baldridge Award in USA, together with National Institute of Standards and Technology (NIST). This link with ASQ will be tremendous boost SLAQ training programs as ASQ has well-organized training programs under the ASQ Educational program. This includes public courses, conferences, in-house training, certification, self-directed training and distance learning. The training programs cover all-important aspects of quality management. Thorough this affiliation SLAQ will conduct these programs in Sri Lanka using the same training. By conducting these training and seminars in Sri Lanka. SLAQ hope to upgrade quality of training programs to meet international standards so that more quality professional could be developed to support the industrial development.

SLAQ is also making arrangements to hold the International Conference of APQO in 2003 in Colombo after the next meeting of APQO in Beijing in 2002. The Millennium convention of APQO was held at Phoenix Arizona in September 2000. 
First Capital - Money Market {tc "First Capital - Money Market "}

Treasury bond auction

Maturity 26-Jan-03 

Coupon 13.00 

Amount offered Rs.Mn 2000 

Amount Accepted Rs.Mn 2000 

Weighted Average 21.23 

Change 0.27 
Treasury bill auction

91 ` 182 ` 364 

Last Week 19.09 19.11 20.29 

This Week 19.31 19.47 20.68 

Change 0.22% 0.36% 0.39%

The inter-bank call money market and the overnight repo market

The unchanged Central Bank open market operations rate held the overnight market repo rate at 23%. 

Central Bank open market operations

Central Bank's open market rates, repo and reverse repo rates remained persistent at 20% and 23% respectively. During the period the reverse repo window of the Central Bank released Rs. 87.9Bn, averaging Rs.29.3Bn a day. The Central Bank reverse repo window will continue to bridge the liquidity gap in the money market, while the Central Bank's reverse repo rate will continue to guide the interest rate structure. 

Treasury bill auction

However, as the investors expecting higher yields to compensate the prevailing economic outlook, the treasury bill yields surged further. We expect the pressure on the treasury bill rates to remain the same, until the liquidity position improves in the system. 

Treasury bond auction

In the absence of a more definite outcome of the IMF structural adjustment loan or any other foreign loan, the investors pitched high to hedge the future economic uncertainties. Therefore, the 2-year bond yield rose up by 27 basis points. 

The investors are likely bid for higher yields until they get strong evidence and confidence of an improvement in the economic fundamentals. 

Foreign exchange - dollar movement

Investment promotion mission to Indonesia 

This mission would serve as a dual purpose mission. It would not only strengthen the trade ties and promote investment and joint ventures between Sri Lanka and Indonesia, it would also offer an opportunity to visit over 300 stalls exhibiting a range of products at the Indonesia Expo 2001.

The programme would include meetings with the relevant trade organisations, one-to-one meetings with the Indonesian business community and visit to the Indonesia Expo 2001.

The Sri Lanka-Indonesia Business Council had organised two such successful missions in the past and this would be the 3rd in the series of the Trade and InvestmentPromotion Mission to be organised by the Lanka-Indonesia Business Council.

This visit would offer a wide exposure and useful business contacts to the delegation, the chamber said in a press release. 

NDB's computer to DS

The Developing Young Minds programme was created by the National Development Bank and is in its 3rd year. More than 22 schools both in urban and rural areas have benefited from this programme. 

Accepting the computer on behalf of the school, the Principal, Mr. Asoka Hewage pledged to make the best use of this computer and train students to be computer savvy and knowledgeable.

Randiviya John Deere Leasing scheme

Seylan Bank offered to assist by extending credit facilities to John Deere Tractor buyers with the "Randiviya" scheme. Seylan Bank is a totally customer oriented Bank and with their very good Islandwide branch network they could be of service to the farmers even in the rural areas through the "Randiviya" credit scheme, in addition to the farming community, all estates, construction companies, hotels, etc. 

John Deere is one of the World's largest and popular manufacturer of agriculture, power generation and construction machinery and equipment. 

Tritel installs 3000th payphone in Hingurana

The installation of the 3000th payphone brings the total investment of the company to US $ 13 million (approximately Rs 1.1 billion). The only payphone company which offers multiple payment modes (coins and cards), Tritel plans to install 1000 additional payphones by the end of this years, the company said.

According to Nihal Ratnayake - General Manager - Payphones 30 per cent of the 3000 payphones installed to date are in rural areas including areas such as Batticoloa, Kalawanchikudi, and Nilaweli in the East and Vavuniya and Jaffna in the North. "We have been fulfilling the aspirations of the ministry of telecommunications by providing communications facilities to some of the most rural areas in the country. Tritel was the only company to be represented in Jaffna till very recently, but due to the situation there, our services have been temporarily interrupted," he said.

Mr Ratnayake said the company conducts intense research in potential areas before installing the payphones to avoid overcrowding of the facility in one area while a scarcity exists in another. "Our focus on making telecommunications technology more accessible to a large number of Sri Lankans has led us to research, source and design products with the customer in mind," he said.

Claiming that Tritel is the most personalised payphone company in the country, he disclosed that it is the only company to have a representative visit each payphone on a daily basis to make sure it is functioning properly. Tritel employs 200 external staff who have been trained by the company to maintain the payphones.

Tritel Services (Pvt) Ltd, commenced operations in July 1997. The company is backed by Sri Inderajaya Sdn Bhd, a Malaysian company that has diverse and extensive interests in telecommunications and power projects in the South Asia region. Tritel also has a pilot project that provides advanced communications in the form of fax, e-mail and web surfing services around the country through Tritel Cafes

Telecom records 70 per cent IDD call completion ratio

IDD facility is now available for 220 countries. Australia, Canada, France, Germany, Hong Kong, India, New Zealnd, Japan, Italy, Saudi Arbabia, Singapore, Switzerland, UK and USA are ranked as very popular destinations from Sri Lanka. As the premier telecommunications provider in the county, SLT's objective is to reduce IDD call charges making IDD available to every telephone customer. Over the last three years IDD call charges have come down by as much as 40%. SLT has also introduced "one-second billing" system where you pay exactly for the time you talk.

Lanka Bell exceeds 100,000 Line Mark

According to a Company spokesman, Lanka Bell currently provides services in all Sri Lanka Telecom (SLT) secondary switching areas except in the North and East. Furthermore within the Lanka Bell network a hitherto unmatched call completion level of 82% has been achieved.

Since it's inception the Company has invested close upon 150 million US$, with continued investment taking place in certain identified projects which would further enhance the delivery of services to customers. A number of such projects are currently in the pipeline.

With the 100,000 line milestone having been achieved, this flagship BOI company looks forward to continued expansion and investment in the country.

British Airways relief for quake victims

The flight was manned by volunteer flight and cabin crew including Captain Minesh Patel, 33, a British Airways pilot who has family members missing in the disaster zone. A Boeing 747 passenger jet was made available to carry the necessary freight at a few hours notice, BA said in a statement.

British Airways has already contributed Sterling Pounds 150,000 towards relief work in Gujarat. Sterling Pounds 50,000 has been taken from the British Airways change for good programme with UNICEF.

The funds from Change for Good will be utilised for urgent care to help unaccompanied children in the disaster-affected state of Gujarat get their lives back in order. UNICEF will focus on child protection issues and activities under a strategy of relief in a chronic drought situation combined with the earthquake.

British Airways staff across the airline's network joined hands with one world alliance partner Qantas to distribute donation boxes across their networks towards raising funds for a specific children's project in Gujarat supported by CRY - Child Relief and You. The airline's staff wish to adopt a school or hospital for children that has been destroyed by the earthquake. The staff, along with CRY, will work towards the rehabilitation of the children. Donation boxes are placed at British Airways and Qantas counters throughout South Asia, the Middle East, at British Airways headquarters in London and joint British Airways-Qantas offices.

Alan Briggs, British Airways General Manager South Asia said: The earthquake in Gujarat is a human tragedy which has touched the hearts of our staff and there was a tremendous will to do whatever we could to help. There has been a superb effort by our staff from across the airline to offer every aid and assistance....."

Ad Age Global selects Lowe Lintas as Agency of the Year

Lowe Lintas is represented in Colombo by the Lintas Group which has three professional capabilities, namely: LDB Lintas, Lowe Lintas & Partners and Initiative Media.

The founder and Co-Chairman of the Lintas Group in Sri Lanka, Lilamani Dias Benson said she was delighted with this accolade because the Lowe Lintas Worldwide Agency group has been recognized and honoured for fine professional values and breakthrough creativity. Values that, she maintains the Sri Lankan office of the Lowe Lintas Group has lived upto from its inception.

The portfolio of business of the Lintas Group in Sri Lanka includes such highly respected Clients as Bata, Caltex, Ceylon Cold Stores, CIC, Commecial Bank, CPC, ETF, HSBC, Johnson & Johnson, Mondy, National Savings Bank, New Zealand Milk, Nestle, Pizza Hut, Union Assurance and Unilever. 

She succeeds with ITI Technology

In February 1999, Mrs. Dhammapali purchased the technology for the manufacture of Papadam from ITI (then CISIR). Having commenced on a small scale she gradually increased her production to 200kg per day, and is now supplying her products to the army and airforce.

Following upon the success, in June 1999, she obtained the technology for the preparation of instant stringhopper flour, and also purchased the machinery as recommended by ITI. She now prepares 50kg of stringhopper flour per day and successfully markets her product in Aunradhapura, Polonnaruwa and Nuwara Eliya.

In October 1999 she attended a workshop conducted by ITI and funded by SMED for the Sabaragamuwa Chamber of Commerce and seeing lucrative market for the products she purchased the technology for the manufacture of noodles. She started a production line to manufacture 250 kilos of noodles/day and finds that this does not still satisfy the demand. She now intends introducing dehydrated vegetables and a flavour pack to the product to harness the consumer demand for this product. 

ITI takes great pride in assisting clients such as Mrs. Dhammapali, to take up entrepreneurship, and will provide every assistance to them to achieve this end.

Ind-Sri video a new move

Ind-Sri Video Production (Pvt.) Ltd, based in Nugegoda, has been approved by the Board of Investment (BOI) and is hoping to set up a video production house here to improve Sri Lankan films through the use of advanced and latest technology currently being used in Bollywood.

The first phase of this project cost is approximately Rs. 20 Million and once this phase is completed the promoters of the company are going to expand this project by pumping another 20 million rupees. The company is going to launch very soon an advertisement unit also, which will provide expertise on cine and Tele commercials. It plans to bring down some expert Directors and technicians from India.

The company has tied up with one of the leading advertising firms in India. The company is hoping to bring models from India and simultaneously arrange to send Sri Lankan models to India, to make international commercials at their end.

It plans to bring down camera men and editors' from India with permission from the BOI., and to train Sri Lankan crew.

TriStar receives ISO 9002

He was speaking at the 22nd anniversary celebrations of the Tri Star Apparel Exports group and the awarding of the ISO 9002 certification by the Sri Lankan Standards Institution (SLSI) in Colombo, on January 22. 

Kumar Dewapura, founder chairman of the group, received the award from SLSI Director-General C.D.R.A. Jayawardene.

Mr. Wijesinghe, Chairman and Director General of the Board of Investment delivering the keynote address said, Mr. Dewapura has not only become the employer of the largest workforce but also the largest exporter of garments. 

He was also the pioneer in introducing Marks and Spencer to Sri Lanka. The fact that Tri Star was able to triple the first orders in the next three years shows how well Marks and Spencer have appreciated their efforts. Mr. Dewapura harnessed rural talent by training them in skills and through it changing the lifestyles of the rural people and their economic wellbeing. 

He said with the emergence of Civil Society and WTO, it is essential that Sri Lanka ensure sound labour management systems and development of Information Technology. "Logistically it is advisable that we shift to air-freighting." The first such project in this connection is the setting up of the Global Logistics Hub set up close to the Airport by Marks and Spencer, he added. 

Tri Star Chairman Mr. Dewapura recalled when he started his first factory 22 years ago, there were only 15 workers and ten machines. This factory started by first exporting 250 garments to Germany and today despite various problems they face, Tri Star operates 30 factories and 10 Service stations with around 25,000 employees. 

He recalled how he opened the first factory in a rural area at Karandagolla in the Kurunegala District. "The fact that 15,000 applied for 500 jobs in the factory showed the gravity of the problem of unemployment among rural youth. Those recruited were so poor that they wore old clothing and did not wear even slippers. Today he was happy to see them doing well in life dressing well, wearing gold jewellery and even building their own homes," he added. 

The Tri Star Group today alone pays out Rs. 100 million per month to the villages through payment of wages to employees of factories in the villages thus contributing to economic development of their neighbourhoods.

Cathay Cargo gets Double Gold!

During the past year, Colombo recorded 92.6% positive variance against target and 87.7% revenue growth compared to the figures for the previous year, Cathay Pacific said in a press release. The airline's performance in yield growth, revenue growth, distribution and express product revenue growth resulted in Colombo also achieving the 3rd slot in best performance overall in the Cathay cargo network for the year 2000.
Chaminda Gunasekara, Cargo Manager, Cathay Pacific Airways Colombo receives the Gold Award from Kenny Tang, General Manager Cathay Pacific Airways Cargo in Hong Kong.

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