Budget 2001 draws bouquets and brickbats

The government's 2000 budget drew both bouquets and brickbats from trade chambers, economists and professionals but there was more criticism than praise from the public. Here are comments made by some chamber groups:

Federation of Chambers of Commerce and Industry:

"The new budget has all signs of a war budget. If we continue like this, the country's economic growth will face more problems.

"We welcome curbs on government spending and cuts in the expenditure of ministers and the officials. But we doubt whether the government could maintain its revenue targets."

National Chamber of Commerce:

"The budget was presented under difficult economic circumstances. When the country has to foot a heavy defence bill it is unrealistic to expect the government to grant too many concessions.

"The surcharge on corporate tax is assumed to be a short term measure and not a reversal in the government's previously stated policy of reducing the tax rates over time.

"The budget proposals focus on expenditure control and management in the state sector through stringent cost control measures. This will call for much more discipline than has been witnessed in the past."

Business Chamber of Commerce:

"The budget has several positive features and some negative ones too.

"The proposals to boost information technology, incentives for foreign remittances, rationalization of holidays and a new bank to support small and medium scale industries are commendable.

"The negative issues are the import duty on raw material, the surcharge on corporate tax and the increase in the national security levy."

Sri Lanka Chamber of Small Industry:

"No one expects a pleasing budget in the present circumstances. The proposal to do away with duty free concessions for vehicles to MPs and government officials and trimming of expenditure on officials' use of vehicles, telephones, etc is a step in the right direction but the question mark is whether there would be effective implementation of the proposals.

"Proposals to help small industries with the creation of a special bank, rationalize holidays and increasing the levy on gambling and horse racing centres are praiseworthy. The industrial sector has been clamouring for duty free imports on raw materials and machinery and for increased duties on imported finished goods. This has fallen on deaf ears.

"Considering that the country is on a war footing, we are obliged to see how the small and medium sector of industry can help the economy, rather than grumble."

Sri Lanka Apparel Exporters Association:

"We are pleased to note that the thrust of the budget proposals have been designed to consolidate and strengthen the industry to prepare it for the challenges ahead.

"Proposals for a level playing field between BOI and non BOI apparel manufacturers and a dedicated fund for the industry are good. On the other hand, we are concerned about the increase in the quota cess and would be asking the government to reconsider the proposed amount of the cess. "The customs supervision of all enterprises other than in the export processing zones and the dilution of the "one stop shop" concept of the BOI are negative proposals and would impede growth."

Up close and rich

Countries with smaller gender gaps have less poverty-World Bank

Countries that promote women's rights and increase their access to resources and schooling have lower poverty rates, faster economic growth and less corruption than countries that do not, says a recently published World Bank report. The report is titled "EnGendering Development—Through Gender Equality in Rights, Resources and Voice".

Countries with smaller gaps between women and men in areas such as education, employment, and property rights not only have lower child malnutrition and mortality, they also have more transparent business and government and faster economic growth which in turn helps to further narrow the gender gap.

"Increasing gender equality is central to the idea of development as freedom, of expanding the choices and control that people have over their lives," says Nicholas Stern, World Bank Chief Economist and Senior Vice President for Development Economics. "The evidence in this report shows that education, health, productivity, credit and governance work better when women are involved."

Released to coincide with International Women's Day on March 8, EnGendering Development is the most extensive study yet of the links between gender and economic progress in developing countries.

The report's recommendations reflect extensive research and engagement with women's groups, as well as a comprehensive on-line consultation of the draft, and a discussion of the research findings at last year's UN Special Session of the General Assembly on Gender Equality, Development and Peace for the 21st Century. "Gender disparities are very closely associated with poverty," says Elizabeth King, co-author of the report.

"The gap between men and women in such things as health and education is greater in poor countries than in rich countries, and within countries it is greatest among the poor.

Experiences from cross-country analysis and case studies show that economic development and institutional change are both necessary to improve the status of women." Gender inequality hurts all members of society, not just girls and women.

The report recommends that societies with high levels of gender inequality adopt specific measures to improve the status of girls and women. Examples include ensuring equal rights to land and other property, and designing infrastructure and services, such as water, transportation, education, health, and credit, to better meet women's needs. Other steps include eliminating gender bias in the workplace and increasing women's participation in politics.

"Societies that discriminate on the basis of gender pay a significant price—in greater poverty, slower economic growth, weaker governance, and a lower quality of life," says Andrew Mason, co-author of the report.

"Although income growth and economic development are good for gender equality in the long run, growth alone cannot deliver the desired results. Societies progress more rapidly if they also adopt specific measures to narrow gender gaps."

According to the report, countries that reduce the gender gap in access to resources and opportunities achieve more rapid economic growth. In Africa, for example, improving rural women's access to productive resources including education, land, and fertilizer could increase agricultural productivity by as much as one-fifth. Despite recent progress, women continue to have less control than men over important resources. In South Asia, women have only about half as many years of education as men, and female secondary school enrolment rates are only two-thirds of male rates. Control of land and of other forms of capital is also highly unequal.

In Latin America most female household heads in rural areas are either landless or own very small, fragmented holdings.

The same is true in Sub-Saharan Africa, where women are the major producers of food crops. Throughout the developing world, female-managed enterprises are often undercapitalized, having less access to credit and using fewer inputs and machinery than male-managed enterprises.

Countries that reduce gender inequality can reap significant rewards. Some benefits, such as falling infant and child mortality, improved nutrition, and lower fertility rates, are already well known.

The report demonstrates how the positive impacts of reducing gender gaps also include lower AIDS prevalence, less corruption, higher economic productivity, and faster growth, outcomes that have not been traditionally linked to gender equality. Countries where women have greater rights and participate more in public life tend to have cleaner business and government.

The report notes that several studies have found that as the influence of women in public life grows, the level of corruption declines.

This is true even when comparing countries with the same civil liberties, education, legal institutions, and income levels.

A planter's dream turns nightmare

The Securities and Exchange Commission of Sri Lanka (SEC) is probing a complaint by Central Highfields Ceylon (Pvt) Ltd that it was facing a potential loss in excess of US $1.5 million in a 2000 plantation deal with the troubled Vanik Inc that turned sour.

"We are first trying to find out initially whether this issue comes under the ambit of the SEC before proceeding with a thorough investigation of the complaint," a SEC spokesman said. The plantations in question are Forbes Plantations Ltd and Kahawatte Plantations Ltd, both listed firms at the Colombo Stock Exchange.

To tea planter Nimal de Silva, the government's decision to privatise local tea, rubber and coconuts was the best news he had, while working abroad in the early 1990s. It has now turned out to be his worst nightmare.

"It was like a dream come true. Here I was dabbling with tea plantations in the Seychelles and looking at returning to Sri Lanka to put some money into a project and hey presto, the government's privatisation plan was just what the doctor ordered," said de Silva.

Chipped in his wife, Ianthie: "That's what he had always wanted to do - return home and invest." But 14 months after his investment with help from a British investor, De Silva's effort has turned into a cruel dream. The couple's fervent hope now is to at least recover the money they could lose.

It all began in mid-1999 when de Silva and some colleagues floated Central Highfields Ceylon (Pvt) Ltd (CHC) to purchase a 51 percent stake in the state-owned Elkaduwa Plantations. "We spent a lot of time and effort in finding a foreign investor and found Nigel Heath, a lawyer from Britain who agreed to invest US $1.5 million in our company," said de Silva, who spent his planting career of 32 years in the then Whittals group before working for seven years in the Seychelles.

When the Elkaduwa deal got delayed, Kahawatte Plantations - through Forbes Plantations owned by troubled investment banker Vanik Inc - came on the block in March 2000 and CHC expressed an interest to Vanik to buy its stake for 200 million rupees. CHC agreed to pay 100 million rupees and the balance 50 percent in three to four months.

Vanik - facing a financial crisis - wanted the money urgently and said it would arrange a loan of 100 million rupees from a reputed bank to complete the transaction. The loan didn't come from a bank but from the MJF group on the grounds that the money would be repaid in 153 days.

"An agreement was signed between Vanik and MJF Holdings Pvt Ltd whereby MJF would advance the money (Rs 100 million) payable in 153 days with interest.

The security given to MJF for the loan was 66 percent shares in Forbes Plantations," said senior MJF director Malik J. Fernando.

The Vanik-CHC proposal at the time was for CHC to buy Forbes Plantations' 51 percent stake in Kahawatte Plantations. The agreement, which de Silva admitted was flawed and signed by some CHC directors but not seen by other CHC directors, provided for the MJF loan to be handed to a bank in due course. CHC nominees were also to be appointed to the Forbes/Kahawatte board.

"We had high hopes and aspirations in developing this estate with sound management skills," said de Silva. A dispute then arose between CHC's directors, which was contested to court delaying the company search for the balance 100 million rupees.

When the dispute was resolved and the company finally found the balance 100 million rupees - many months after the period in which the loan should have been settled by Vanik to MJF - MJF said it was reluctantly compelled to terminate its loan agreement with Vanik and take control of the estate due to CHC's delay in settling the loan.

MJF's Fernando says the fault was entirely CHC's. "There was a falling out amongst the CHC directors and that delayed by a considerable period the balance money CHC was to give Vanik. On our part, we gave several extensions to CHC to find the balance money - so that Vanik could return our loan - but when the period extended beyond October we realized that our loan would not be returned," argued Fernando.

When CHC wrote in December 2000 - months after the deadline for payment had passed - MJF said it has already taken control of the company, appointing its own board of directors at Kahawatte Plantations and deciding to run the plantation.

"This was like a bolt from the blues. We never expected something like this to happen. We could lose 100 million rupees because a company failed to meet its moral obligations. It is unethical," argued de Silva.

The couple say they are so frustrated and angry that they want to return abroad if the dispute is not resolved. "The government should be looking into this matter," De Silva said.

MJF counters the argument saying it is not a case of ethics but an issue precipitated by CHC shareholders itself.

"If the directorate didn't break up -as they did -then the balance money would have come from CHC to Vanik and we could have got our loan back. But the money didn't come in time. That was the problem,' said MJF's Fernando. While both CHC and MJF level accusations at each other, it is obvious that the De Silva's have lost a lot of money with the courts being the only recourse to recover the 'lost' cash.

Point of view

Central Bank Reforms - Are they necessary?

By Ritsy de Silva

Dr. S.S Colombage's versatile article on the above subject published in The Sunday Times on 4th March, is an eye opener for the ordinary readers in this country. We must be thankful to the senior banker who tried to do a balanced analysis on the current situation.

When Mr.John Exter identified the mission, vision & objective of the Central Bank, our country had been categorized as "a developing nation". After 51 years, we are still a developing nation!

About half of our population is believed to be below the subsistence level. According to a survey data published by a private sector research firm in 1998, over 60% of the total working population earns less than Rs.12,500 a month. During the above 51 years, cost of living indicators have risen as high as 2500% showing signs of an unspoken, galloping inflation.

Sri-Lankan society has changed a lot during the past 51 years. People have become much educated, sophisticated and receptive to change. However, most of the key state sector organisations who were expected to promote change became unproductive threadmills during the above period. Most of these organisations never bothered about their mission, vision and objectives. We spoke about planning but never got into the planning culture. Precisely, no planning body in this country was ever responsible to design and implement a "National Periodic Plan" .

I feel that is the crux of the question.... A strong economy starts with national planning and effective monetary control systems. Nobody can implement controls without a plan. In a modern economy, long range national planning will promote factor employment and a balanced growth. (What is shown in the Central Bank annual report as 'growth' in many instances is, actually, an unplanned sectoral growth). Without this pre-condition, the Central Bank cannot achieve its long term monetary objectives. In such a situation, the Bank has to sacrifice its strategic monetary objectives to achieve short term fiscal requirements of the economy. That is exactly what has happened today. It is quite unlikely that the economists of the bank do not foresee this situation!

The ordinary citizens living in this country have to ask several questions from those who closely monitor the economy in this regard...How long can private sector taxpayers maintain an unproductive public sector, while achieving their organisational objectives? What is the social responsibility of the so called "economists" in our society? Don't they have the convincing power? To whom do they advise? Do they still fool us by saying a Rupee has 100 cents etc..?

At least, after 51 years of time, it is nice to know that the planning and monetary authorities are also floating without achieving their pre-set objectives. In such a situation, who is going to correct it? As the current situation is so critical, why not young and old economists of this country assist the Government to formulate a national plan. Do they feel it is not their baby. Or else, do they seek additional perks or promotions to do their job?

Our culture today is to blame the politician while talking about management theories. Instead, we must try to sit with them and work together without looking at personal benefits. Closing the stable door after the horse had bolted will be too latel!

AIESEC aims for 10,000 exchanges by 2005

By Akhry Ameer

AIESEC, the world's largest student managed non-profit organization aims to achieve 10,000 exchanges by 2005, said Ms. Janet Craven, a member of the organization's international support team recently.

Ms. Craven was on a three-week visit to Colombo to offer advice, guidance and motivation to the local AIESEC branch. AIESEC Sri Lanka, established in 1995 with an international congress that was held here, is an independent student run organization providing management, technical, development and linguistic relationships for undergraduates and graduates.

Its core activity is the exchange of young individuals between member countries. Through this it aims to build cross border co-operation among students while promoting personal and professional development of the students. Internationally over 2000 young people exchange traineeship opportunities lasting up to 18 months in various sectors in various countries.

"Most people haven't heard much about AIESEC because we work a lot with the NGO's. We are also looking for support from the established companies for our programmes. If our local companies support the exchanges from abroad then more of our students would be able to go to other countries," explained Padmaka Mirihagalla, AIESEC President in Sri Lanka. Currently two local undergraduates are on a traineeship in Austria while an Austrian graduate is set to start her traineeship at a local company shortly.

"When organizations support and work with us they help the development of the youth and also fulfil their corporate social responsibility," explained Mr. Mirihagalla, speaking further on the need for organizations to support their endeavours. Beside the exchange program AIESEC here conducts an annual business forum for its members, leadership seminars, etc. It also hosts international participants on traineeship in SriLanka. AIESEC is active in four universities in Sri Lanka and has been supported by Ceylon Shipping Lines, Ceylon Tobacco Company, CDC Conventions, Nestle Lanka, IFS and SriLankan Airlines. It also has a Board of Advisors from the corporate sector.

AIESEC International was established in Sweden after World War II in 1949 by a group of young idealists. Today the network has grown with more than 50,000 members from 741 academic institutions in over 87 countries. To support its activities AIESEC has also developed a web-based software to share databases among member countries and facilitate exchanges.

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