27th May 2001
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Diamonds are forever!

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Diamonds are forever!

Sri Lankan diamond cutters are preparing for an increased demand in June, which is the traditional month for brides. Sri Lanka is renowned for its expertise in adding value to raw diamonds purchased from diamond mines around the world through cutting and polishing. The finished products are sold to the US, Japan, Israel and Belgium. 

Mind your Business

Big brother under the hammer?
The sale of one state-run insurance giant has set off a trail of speculation that big brother too may be up for grabs soon.

In fact, there were many overseas institutional investors bothering stockbrokers wanting to know whether the 'leader' will also be auctioned off.

And strangely, the official answer to that question has been a deafening silence - and that does nothing to stop the rumour mill!

Desert bird desperate
The bird of paradise has until now been the beneficiary of significant 'donations' from the state purse and in fact these re-imbursements keep it afloat.

But such largesse seems to have its limits and word has been sent to the bird's desert- based managers that enough is enough.

The managers are now said to be frantically trying to devise ways and means of cutting costs and finding the task a difficult one.

There is trouble brewing at the former state communications monopoly, which is probably why the state media itself turned its guns on the giant's top managers this week in an ill-concealed and vituperative attack.

But perhaps of more concern is that the Japs are not happy at the way things have turned out and have made their displeasure known.

There is even a rumour that they are looking for an escape clause to pull out of the venture. Ah so!

World Bank help for AG to speed up state audits

The World Bank, concerned about governance issues in Sri Lanka, is to assist the country's Auditor General (AG) in conducting speedier audits in government departments and corporations compared to the present system where the reports are three to four years outdated, officials said.

The Auditor General's reports on audits of departments and corporations are submitted to parliament and current reports are of audits completed as far back as 1997/1998.

"We have had two meetings with the AG and his officials on ways of having speedier and more timely audits," said Bradford Herbert, operations advisor at the World Bank office in Colombo.

He said the bank had submitted some proposals to the AG and was expecting a response in the next few weeks. "I think by about two months time we should have a project going," he added. Auditor General S.C. Mayadunne confirmed his department was having talks with the World Bank to improve audit delivery times.

Mr. Herbert said the project could be in the form of technical assistance and infrastructure support to strengthen the work of the department and improve its audits to provide reports faster compared to now.

The Auditor General's reports to parliament, though sometimes outdated, are scrutinized with interest by opposition parliamentarians since it often contains irregularities and other financial problems in state agencies.

"The AG has told us that for an audit to be useful it must be timely and there should be a quicker way of preparing audits. We are pleased that the AG is reform-minded and has a long-term vision. For good governance, the starting point is good auditing," the World Bank official.

Last month, Mr. Herbert told a group of journalists that the bank has tentatively allocated $.350 million for Sri Lankan projects over a three-year period to 2003 but it did not mean that the country is entitled to all this money during this period.

He said these figures could change depending on the projects that are in the pipeline. "For instance, the World Bank disbursed a total of $.106 million in the previous three years to 2000 but the allocation might have been higher," he said without giving details.

The World Bank is funding Sri Lankan government projects in the fields of environment, private sector infrastructure development, education, health and energy services, agriculture and legal and judicial reforms. According to a bank statement, a sum of $.144.3 million has been disbursed out of a total portfolio of projects worth $.440.8 million since 1995 while the balance has been either non-utilised or cancelled.

Referring to social development, Mr. Herbert said the health and education status in areas outside Colombo and in the province was unacceptable. "People are not able to get good health and access to education. This is not saying that there are no health services or schools. But what use is a clinic if there is no doctor or a school without teachers, or that economic conditions are such that children have to work than go to school?"

He said though school attendance and literacy rates were high in Sri Lanka, it was not good enough. "We don't see children graduating with good relevant education and that is why there is a high unemployment rate among university graduates."

The World Bank official said the bank was firm on corruption and good governance. "If we find that there is corruption in one of our projects, we will cancel funding for the whole project," he said adding however that it was difficult to prove corruption because evidence was often hard to get in such cases.

"On the other hand corruption is not as bad as in some other countries. For instance we don't have companies abroad who say the cost of investing in Sri Lanka is as bad as some other countries where corruption exists. But you need to remove this problem wherever it exists," he said.

Mr. Herbert said that Sri Lanka in five years time would graduate to an IBRD (International Bank for Reconstruction and Development) funds-receiving country from an IDA (International Development Association) funds- receiving state. This, he noted, happens when a country goes over the $.920 per capita income bracket.

IBRD funds are lent at six percent whereas IDA funds are at zero interest and 0.5 percent as an administration fee. "Sri Lanka should maximize its IDA utilisation because in five years time the cost of funds would be higher," he added.

Toddy for the west !

By Hiran Senewiratne
Sri Lankan toddy will soon find its way in cans to shelves in supermarkets and shops in Britain, France, Germany and Canada, local officials said.

The state-run Palmyrah Development Board (PDB) has already invested more than eight million rupees on the project in which the PDB plans to export at least 5,000 cans per month in the initial stages.

"This will generate additional income for the country," PDB chairman, Mr. Packiyanathan told The Sunday Times Business Desk adding that the Board also plans to export vinegar made from toddy to the West.

He said the PDB was now in the process of obtaining the ISO 9001 standard certificate for their products mainly to boost export marketing. PDB products are at the moment manufactured in conformity with Sri Lanka and British standard specifications.

He added that the PDB was receiving help from the Ministry of Development, Rehabilitation and Reconstruction of the North and East and Tamil Affairs for export marketing. Mr. Packiyanathan said that due to the unrest in the north and east there was a lot of wastage of toddy. While toddy tappers were paid by local co-operative societies, the toddy that is collected often cannot be marketed and goes waste. "We hope to utilise much of this unused toddy for our export project," he added.

Toddy is a natural product, free from chemicals and an accepted health drink, the PDB chairman said, noting that the Board was also planning to upgrade its distilleries at a cost of Rs.10 million.

Hameedias to sport Adidas

H.S. Clothing, a subsidiary of Hameedias has been appointed the sole distributor for Adidas sportswear in Sri Lanka.

Under the new joint venture H.S Clothing has opened an outlet in Havelock Road to exclusively display the Adidas range.

"We consider Sri Lanka an important market as Sri Lanka is a sports loving nation," Managing Director of South Asia Adidas, Tharum Kunsoor said. He added that the company hopes to sell quality Adidas products at this outlet and plan to open a further three outlets within the next two years.

Mr. Fowzul Hameed, Managing Director of Hameedias said, "We are an integral part of the main German operation. Our senior staff has been trained at Adidas' head office in Germany."

Adidas Sri Lanka will not only be privy to all goods manufactured under the Adidas licence from Germany and order their stocks directly from the Adidas range, but will also take part in all Adidas road shows throughout Europe."

Hameedias has invested Rs. 25 million in the joint venture.

ADB chief due

Asian Development Bank (ADB) chief, Tadao Chino is due to visit Sri Lanka in October, government sources said.

No details of his visit were immediately available but he is expected to meet President Chandrika Kumaratunga, Deputy Finance Minister Professor G.L. Peiris and other officials in addition to visiting some ADB projects in the country.

The last time an ADB president visited Sri Lanka was in 1998 followed by a visit by the bank's vice-president in 1999. In recent years the ADB has stepped up assistance to Sri Lanka. Meanwhile an IMF review mission is in Sri Lanka to discuss the latest standby credit facility and its progress. "The team is looking at the performance of the Sri Lankan economy vis-à-vis the latest reforms programme," a government official explained. 

Sri Lanka obtained a US$ 253 million standby facility from the IMF last month with US$ 130 million already disbursed and the balance coming in four instalments.

Vanik's Meegoda to be replaced?

By Chanakya Dissanayake
A consortium of banks, trying to revive troubled merchant bank Vanik, has decided to obtain a new CEO to replace founder Justin Meegoda as a major part of their restructuring plan to lift the bank out of the woods.

An advertisement published by international consulting firm Price Waterhouse Coopers earlier this month, calling for an applicant with wide corporate "revival" experience, for an unidentified financial institute, gave rise to speculation about the consortium moving to remove Meegoda from the driving seat of Vanik. This week, a consortium member speaking to The Sunday Times Business Desk confirmed the speculation.

"We need someone with market credibility to lift public confidence in Vanik. The new CEO will also evaluate Mr. Meegoda's revival plan and report to us on the feasibility, shortly after assuming office," the consortium member said.

He further added that any additional funding to Vanik by the consortium would depend on the new CEO's impartial opinion on whether the bank could be revived. "If the new CEO believes that Vanik is beyond recovery, we have no choice other than to call it a day," he added.

The consortium, which includes Bank of Ceylon, People's Bank, DFCC and HNB, is in the process of reviewing potential candidates and will make the selection at the meeting scheduled for next week. Vanik, which pioneered many new initiatives in investment banking, saw its troubles emerge in the late '90s from a liquidity crisis that caused a run on deposits owing to losses in investments in a declining market.


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