Top ambassador slams Sri Lanka on economy, human rights

Europe's top ambassador to Sri Lanka last week slammed the country's leadership for showing lack of focus and attention on a range of issues including the peace process, human rights, economic growth, foreign investment and follow-up on recommendations by donors.

Ilkka Uusitalo, Head of Delegation of the European Commission in Colombo, called for a focused effort on the peace process and not to get carried away with 4-5 percent economic growth, noted that foreign investment has fallen sharply last year while the government had not followed up on post-election recommendations by an EU election monitoring team like more independence of the police and elections commission.

"We support the peace process and Norway's role and hope there are solutions as soon as possible. Unfortunately there is a lack of focus and priority in these issues," he told a "power" breakfast meeting on Friday in Colombo jointly organized by the European Business Information Centre (EBIC) and the EC to discuss EU-Sri Lanka relations in political, economic and trade-related fields.

He said the primary objective is to achieve peace and that should be the priority of any politician and sufficient resources should be allocated to this process. On human rights, there were concerns that though investigations have begun and indictments served against certain individuals, the legal process is slow, time consuming and takes years to complete cases.

On the economic situation, he described the "feel good factor" of average 4-5 percent economic growth in Sri Lanka as a myth. "Four to five percent growth is not sufficient to develop this country. Look at the pace of progress in other countries like Thailand (per capita – US $ 2,000), Malaysia ($ 3,400) or Korea ($ 8,490), which was at a lower level of development in the 1950-60s than Sri Lanka ($ 850). Huge discrepancies. There is something terribly wrong here!" Uusitalo told an audience of business leaders, diplomats, economists, government officials and journalists.

He said the World Bank believes the ethnic conflict reduces growth by 2-3 percentage points and 8 percent economic growth should be the ideal.

But the European ambassador said that the country's economic performance should not be blamed on the conflict. There are other issues that need to be corrected like public sector corruption. "There is a general perception that the level of corruption is not as bad as other countries. That's no excuse," he said adding there were questions on good governance too.

Uusitalo said that one of the problems with the Sri Lanka-IMF deal was that the Sri Lankan government's letter of intent speaks of certain assumptions and expectations like reducing war expenditure and slowing down in crude oil price hikes. "What if this does not happen?" he asked, also referring to the promise of labour reforms and a freeze on new public sector employment.

"There are a lot of issues and difficulties in these assumptions which may be difficult to follow through in this (IMF) programme," he said. Foreign investment trends were also not encouraging with investment falling last year from 2000.

According to EU figures, total estimated foreign investment in Sri Lanka last year fell to 14 billion rupees from 37 billion rupees in 1999 with Britain, Japan and the US being the main investors. Figures show that UK investments fell to 5.1 billion rupees from 15 billion, US investments fell to 261 million from 7.8 billion and Japan to 63 million from 5.6 billion. On the contrary, Finland became a strong investor last year pumping in 2.7 billion worth of investments. India's investment share also fell to 2.7 billion from 4.2 billion.

The European ambassador urged the private sector and chambers of commerce to be more assertive in requesting change while at the same time supporting change and reforms.

He said the overriding concern of donors was poverty reduction and all programmes are designed with this focus. "In Sri Lanka there are huge discrepancies between poverty levels in different parts and donors are looking at how there could be change through their programmes."

Top global deal for MIT

Sri Lanka's Millennium Information Technologies (MIT) has won a top US$ 10 million deal to supply the software for a revolutionary securities trading platform for use across the world.

The new trading platform, based on advanced transaction software allows securities to be traded between buyers, sellers and exchanges around the world. Seventy percent of deals don't come into the stock market until they are done and the new system will bring this informal liquidity into the system while enhancing formal liquidity, MIT Chief Executive Officer Tony Weerasinghe said at a recent press conference.

The new trading platform, ELFnet, is owned by Exchange Lab Inc of USA, who chose the cutting edge technology of MIT over those of other European and US companies.

Billed to be a meeting place for world capital markets in cyber space, ELFnet is based on a neutral open architecture platform, which will reach beyond constraining fixed, centralised and proprietary systems. It will use intelligent electronic agents to replicate the depth and flexibility of person-to-person trading.

While MIT has partnered many leading local firms, its revenue streams are primarily dependant on the global market. Among its current projects is the development of products for the Boston Stock Exchange.

Arpico spearheads plastic waste recycling project

Arpico Plastishells Ltd recently announced plans for a nationwide plastic water-recycling project aimed at collecting and recycling plastic waste and educating the public on proper waste management, the company said.

The project will target offices, schools, factories and households. Gray Cat Productions, a well-known environment organisation is assisting Arpico Plastishells with the co-ordination of activities of the programme. "Plastics though useful in many ways, can also be destructive to the environment if not disposed properly," company product manager Nishan Jayasuriya noted.

He said households and offices should start to separate their waste and then dispose it appropriately to reduce environmental damage. "This project aims to let people know there is an option now available to them for recycling their waste plastic," he said.

As part of this project, special bins will be placed at key locations around Colombo for people to dispose their plastic waste. Already a number of collection centres have been established at the Arpico Showrooms in Hyde Park Corner and Navinna in Maharagama.

COMBANK's new customer hot lines

The COMBANK Card Centre can now be reached on the bank's 24-hour customer service ComLines (305283-6) by all COMBANK international credit cardholders and DotCom cardholders, enabling them to make phone inquiries relating to account balances, lost cards, etc., a bank statement said.

This new facility is offered in addition to the many other facilities available to COMBANK International cardholders, Senior Manager - Card Centre, Mr. Amitha Munasinghe said.

Settlement of credit card dues can be made at any COMNET branch, and also at the Holiday Banking Centre (open 365 days), MINICOM centres in Cargills' Food City outlets located at Majestic City, Nugegoda and Staples Street.

Stock Market Report

By Ashwin Hemmanthagama

The week started on a depressed note with low buying interest after news that Norwegian peace envoy Erik Solheim had been "dumped" as a facilitator although he later insisted that he would be part of the mediation team. On Monday, the turnover was reported at Rs. 20 million with the net outflow of foreign investment being Rs 5.3 million. During the day 100,700 ordinary shares of DFCC bank changed hands at an attractive price of Rs. 89.25. The recent interest in the DFCC bank has increased due to the bank enhancing its strategies in providing assistance not only to selected sectors but also credit products as well as services catering to mid-level institutions. Further a good example was shown in diversification with the bank's recent acquisition of Forbes ABN Amro Securities which now functions as DFCC Stock Brokers (Pvt)Ltd.

A foreign investor sold a parcel of 91,100 ordinary shares of Sampath Bank Ltd to a local individual buyer at a price of Rs 3.2 million on Tuesday, which is a considerable amount of cash changing hands from a foreigner to a local individual in recent times.

During the day the price of the ordinary shares of Commercial Bank Ltd fell by Rs. 23, to close at Rs. 75 due to an X-bonus. Meanwhile HNB is seen expanding its stake in the stock market after completing the purchase of shares held by Jardine Fleming in Jardine Fleming HNB Holdings and Jardine Fleming HNB Securities, after the global investment banker pulled out from Sri Lanka. Market sources believe HNB would use its island wide branch network to promote shares.

On Wednesday the market declined slightly by 0.05 in All Share Index and 0.93 in the Milanka Price Index with a turnover of Rs 16.5 million. During the day Rs 2.7 million worth of Lanka Orix Leasing Company shares changed hands among investors after the company said post-tax profits after tax grew by 53 percent.

On Thursday Rs 6.8 million worth of shares in Asia Capital Ltd was transacted among local investors as the company shares were at a discounted price. At the end of the day the Colombo bourse closed at 418.52 and 631.55 respectively. Traders expect an improved market this week with a possible resolution of the crisis arising out of the impeachment of the chief justice.

Joint venture to promote tourism

By Naomi Gunasekara

Sri Lankan tourism authorities are going ahead with plans to set up a joint venture between the government and the private sector to promote tourism but the plan is unlikely to be a reality until the end of the year.

"The proposal will be approved sometime next week and the company will be established by the end of this year," said Dr. P. Ramunujan, Secretary to the Minister of Tourism.

He said various issues like the drafting of the bill to set up the company, its powers and functions and whether it should be registered or not under the Companies Act would be studied before it is established.

The company, Sri Lanka Tourism Promotion Bureau, will be funded by a cess/levy and will promote Sri Lanka as a tourist destination in the competitive global tourism market.

According to the Chairman, Ceylon Tourist Board, Renton de Alwis, Sri Lanka tourism is at the crossroads today. "We need a consistent and competitive funding mechanism to promote and support our tourism industry. Malaysia spends over $100 million annually on destination promotion while countries like Thailand and Indonesia spend over $40 million. We are nowhere near these countries and there is a need for effective and consistent funding mechanisms," he said.

The concept of formulating a guarantee company funded by a cess/levy to promote Sri Lanka tourism on a more economy-oriented footing is intended to address this void in terms of a consistent and competitive funding mechanism and it is welcomed as a positive move by the private sector.

"In fact it was the private sector that made this proposal about two years ago and it is finally coming through," noted Prema Cooray, Deputy chairman, Aitken Spence group. "No one promoted this destination properly. This is the first time that the country is attempting to promote Sri Lanka tourism and I think that this is the more practical way of doing things. We are for it totally," he added.

Destination promotion is mostly done by the Ceylon Tourist Board, which also performs regulatory functions like training hoteliers, maintaining standards of hotels, etc. The rationale behind the establishment of the guarantee company is, therefore, to transfer certain promotional functions performed by the Ceylon Tourist Board to the proposed company to enable it to concentrate on effective, competitive and market-oriented destination promotion with active participation of the private sector.

"We have to deviate from the banal beach-dominated tourism industry and focus on developing areas like eco, nature, adventure, cultural, village and heritage tourism. There is also a lot of image building to be done simultaneously. We have to create positive vibes, not negative vibes, and act globally. This entails a lot of work," said Mr. de Alwis.

Hailing the move to establish the guarantee company for destination promotion, Mr. Cooray also touched on the role of the private sector in promoting Sri Lanka as a tourist destination through the joint effort; "The majority of the shareholders will be from the private sector. This will add a private sector flavour in its promotional activities.

And although the company is to co-function initially, I feel that the private sector will take it forward with much vigour in the coming years for this is what is required for the growth of the industry."

Meanwhile the Sri Lanka Institute of Marketing (SLIM) signed a "Memorandum of Action (MFA)" with the Sri Lanka Tourist Board to help promote tourism through the use of the board logo on SLIM official letters amongst ways of co-operation.

SriLankan Airlines signs collective agreement in Singapore

SriLankan Airlines continued to enhance its employer-employee relations with the recent signing of a collective agreement for its Singapore staff, the first collective agreement in an overseas station since the company came under new management.

"We believe SriLankan Airlines is the only Sri Lankan company to have a collective agreement with its overseas employees," said the airline's Head of Human Resources, Sunil Dissanayake. The Singapore office has 18 on the staff.

The agreement was signed between SriLankan Airlines and the Singapore Manual and Mercantile Workers' Union on May 8 at Singapore's Ministry of Manpower. The agreement, effective from April 1 2000 for a period of three years, covers staff in Grade 1 – 7. Officials said the deal had been backdated as negotiations in connection with the agreement began more than a year ago.

The agreement will develop and implement performance-related salary increments, departing from the existing system of fixed annual increments.

Increments will be based on merit and tied to individual performance through a system of evaluation that is based on a set criteria.

e-WIS releases Lexmark C720 and J110

e-Wis, the sole distributors of Lexmark in Sri Lanka, have announced the launch of two high impact colour printers the Lexmark C720 and J110 which are designed for improved speed and quality output.

The Lexmark C720 laser printer is designed to give mid-volume business work groups a competitive edge.

"Until now, enterprises have shied away from adopting colour laser printing technology – largely because of slower speeds and higher costs," said Ms. Francis Duggan, General Manager, Lexmark, Indian subcontinent. "The Lexmark C720 colour laser printer gives enterprises a powerful business tool to help them gain a competitive edge and enhance their printed communications," he added.

Lexmark's new J110 employs a unique combination of colour laser speed and quality with breakthrough affordability.

Lexmark's Liquid Laser™ technology is an innovative approach that has enabled Lexmark to develop a fast, business class, work group colour printer at half the price of comparable colour lasers.

Serendib - king of cocktails

Hotel Sigiriya walked away with both the first and second places at the 10th Marie Brizard and Beefeater Bartenders competitions, the company said.

Mr. Kingsley Bandara and Mr. Suresh Gunaratne won the first and second places respectively with Colombo Hilton securing third place. While Sigiriya Hotel took the first and second prizes, Club Hotel Dolphin and Hotel Serendib - also from the Serendib Leisure group - were placed among the top ten winners.

This annual competition organised in association with the Tourist Hoteliers' Association and the Ceylon Tourist Board, aims to recognise excellence in service at the bar.

"Serendib Leisure is striving for service excellence and this achievement at the weekend shows that we are moving in the right direction," said Mr. Nishantha Manawadu, Group Training Manager, Serendib Leisure Management.

Implications of the IMF Standby

By A. S. Jayawardena, Governor of the Central Bank

The Standby Arrangement (SBA) which Sri Lanka entered into with the International Monetary Fund (IMF) on 20 April has become a subject of debate; and parliament is expected to have its own debate from 19 – 20 June. Already, Prof G L Peiris, Deputy Minister of Finance has made a statement on the subject to parliament on 6 June which has appeared in all newspapers. At the same time, all the documents relating to the Standby have been tabled in parliament and released to the general public. This is the first occasion when a government in Sri Lanka has done so, all previous Standby documents having been withheld even from the cabinet of ministers. As there has been a lot of misreporting of such arrangements in the past, it was a courageous decision of the President to make these documents available to the public so that they will not be misled by rumour and gossip.

This is not the first time that Sri Lanka has entered into borrowing arrangements with the IMF. There were arrangements in the 60s and the 70s, and most recently in September 1983, March 1988 and September 1991, the last two being longer term structural adjustment facilities. Sri Lanka has also utilised in the past the IMF's facility for compensation of sudden trade income shortfalls when either export income declined because of adverse export prices or import expenses increased because of adverse import prices.

It is important to understand the nature of the IMF and the World Bank, the two institutions established after the Second World War to help countries facing economic adversity. The capital of these two institutions are contributed by the member countries who own quotas in the IMF and shares in the World Bank. There are over 180 countries who are members. The IMF was expected to help countries facing external payment difficulties and the World Bank was expected to help countries restructure and promote development and ameliorate poverty. The IMF keeps in close consultation with all members and expects countries with imminent payment difficulties to come to them early for assistance rather than late, when the exchange rate and the reserves have taken a beating.

As on previous occasions, the government decided to use the standby facilities of the IMF at this time because of the decline in external reserves arising from the sharp increase in payments for oil imports and unexpected increases in budget expenditure. By strengthening the country's reserves, it is possible to prevent undue downward pressure on the rupee. It is precisely to meet such contingencies of temporary balance of payments difficulties that the Standby Arrangements of the IMF are used. Hence, the recent SBA can be described as a well-timed effort to stabilise the economy.

No agreements signed

It should be noted that no agreements as such are signed between the government and the IMF in a SBA. The government engages in a consultation process with the IMF and makes a statement of its future economic policies, which is referred to as the Letter of Intent (LOI). If these policies are deemed to be sound and practicable, the IMF Board approves financial support. Typically, a Standby is a short-term facility and is repayable over 3 to 5 years with the interest currently at 4.38 per cent. In this instance, the SBA amounts to US$ 253 million. The programme is front-loaded in the sense that US$ 131 million is provided immediately; they have increased the reserves from April 25. The rest is available in four tranches of about US$ 30 million at the end of August and November, 2001 and February and May, 2002.

A SBA generally signifies the Fund's endorsement of the country's economic policies. The front-loading reflects even stronger support. Generally speaking, such arrangements generate worldwide support for the country. In this instance, the World Bank, the ADB and other donor countries have pledged about US$ 270 million as additional support. Moreover, international private investors generally tend to lend to and invest in countries whose policies have the stamp of approval of the IMF. The IMF's stamp of approval at this time is crucially important to Sri Lanka for two reasons; firstly, the negative effect of the country with the international community because of the internal conflict; secondly, the expected slowdown in the world economy during 2001. Many nations around the world are getting ready to face a slowdown in the coming year and it is always useful to have the support of the international community for Sri Lanka in these circumstances.

Conditionality

Very often the discussions on IMF arrangements get derailed by adverse comments relating to IMF conditionality. In this regard we rarely realise that nothing can be got in this world without some form of conditionality. A child gets pocket money from a parent on a condition of good behaviour. We get a degree from a university only if we study and pass examinations. From no money lender or a bank can we get a loan without conditions which facilitate repayment. When the IMF grants facilities it must be satisfied that the borrowing country has the capacity to duly repay the money. Thus, a country facing a decline in external reserves will have to enunciate its policies which will help increase future reserves which will enable the repayment. It is precisely this that the LOI does, by enumerating government's policy of the future, which will enable it to tide over the current difficulties and to repay the money in 3 to 5 years.

How does Sri Lanka hope to stabilise the economy and improve its reserves so as to be financially viable at the end of 14 months of the SBA? The fundamental policy underlying the arrangement is a commitment to reduce the huge budget deficit of Sri Lanka from nearly 10 per cent last year to 8.5 percent this year and progressively in the future. We need increased revenues or reduced expenditure to reduce a budget deficit. All the revenue increasing measures in the LOI, such as the temporary increase of 40 percent of import dues, raising the national security levy by 1 percentage point and the 20 percent surcharge on corporate income tax, have already been announced in the Budget 2001.

If there is a revenue shortfall, government has already indicated that it would take corrective measures such as raising the price of cigarettes. Due to limitations in raising revenue, greater emphasis is placed on expenditure reduction measures. As the budget proposals had announced, security-related expenditure will be contained at Rs. 63 billion, a saving of about Rs. 8 billion, current expenditure excluding wages will be reduced by 10 percent and public sector employment and wages will be frozen at current levels this year. The President has appointed a commission to review government salaries and has requested public servants, who received a wage increase nine months ago, to wait until next year because of budget constraints. These policy measures are already in place. There is also a reduction of expenditure on Samurdhi which would be achieved by the ongoing programme of removing high income undeserving persons receiving benefits, which could enable some increase in benefits to the deserving poor.

GST

An issue that was left unresolved was the question of the GST. The IMF felt that in view of the difficulty of maintaining a security-related levy (NSL) as a permanent source of revenue, GST may have to take over. The government felt that the GST is yet to become established and an increase now might encourage avoidance.

The most important commitment is to progressively eliminate transfers and subsidies to public enterprises. In simple language, the Petroleum Corporation, the Electricity Board and the CWE will have to cease depending on running their institutions at a loss by running up debts with banks. This does not necessarily mean an increase in their prices, which can be avoided if they can bring down their costs. There is nothing we can do if world prices go up, because any subsidy to prevent world prices being reflected in local prices or for that matter, any other subsidy, means that instead of asking the users of the products to pay for the use, the non-users are compelled to pay for the loss incurred through taxing.

There is no justification why the non-consumers of petroleum, electricity or bread should be called upon to pay losses through taxation so that the consumers will get the product at a cheaper price. These price distortions heap untold burdens on unidentifiable groups all over the country. They are now universally regarded as inefficient, inequitable, counter-productive and harmful to a country's development. In the ultimate analysis, none of us can have a free meal, because someone has to pay for it ultimately. Hence, it is important for good economic policy to make the consumers pay for what they get, at least the cost of production. This policy may cause some hardships to people who have got habituated to receiving subsidies at other tax payers' expense, but they should realise that this is unfair by the majority of the people and that the only viable solution to the cost of living problem is to raise the income of the people. Also, the government has committed itself that if it is compelled to raise prices because world prices have moved up, it will automatically bring them down when the world prices go down. This is necessary for economic discipline in the country.

The government has also made a commitment to reduce public sector borrowings and wherever possible to use privatisation proceeds to reduce domestic debt. That would also mean that public enterprises will have to pay back their debts to the banks, a healthy development, because some enterprises have behaved as if they could borrow to the hilt and not repay their loans to the banking system, which have been made out of people's deposits. Also, it has been a sensible practice of the government to use privatisation proceeds of enterprises which have been set up in the past by public borrowing, to reduce the past public debt rather than use it for current expenditure. These are very healthy developments.

Exchange rate

On the exchange rate, the IMF has endorsed the Central Bank's decision to independently float the rupee (Central Bank not intervening daily in the morning) since 23 January. (Incidentally the rupee was floated in 1978). The IMF had been advocating and supporting the previous policy of widening the intervention band since June 2000 and probably preferred a continuous widening in the future. But the Central Bank found that this policy would only have aggravated the situation because the local market tended to take the Central Bank's selling rate as an indication of the future direction of the rupee. Hence, the Central Bank took the view that the market must take full responsibility for its bids and offers, which would yield profits to those who dealt prudently and losses to those who gambled. The only concern it had was that, as in Indonesia or Thailand or Korea, the rupee could have gone into a free fall, which would have had very adverse effects on the cost of living. There was evidence, however, that this would not happen unless the market behaved perversely, because, unlike Indonesia, Thailand etc., Sri Lanka has not maintained an artificially overvalued currency linked to the US$ in the past. Hence, here should not be any pressure in the market to push the rupee down as in other countries. As expected, the rupee went down marginally and now has stabilised at a level which in the view of many observers is now at a fairly realistic and stable level.

The Fund also expects the future monetary policy framework to be developed which will explicitly target a desired rate of inflation, moving away from the current structure of targeting supply of money. Inflation targeting is gaining ground in all central banks in the world and our Central Bank is also moving in this direction. It is expected that monetary policy could be better targeted to achieve the primary objective of a Central Bank, of maintaining a low level of price changes.

Contained in the SBA are also reforms of the two state banks. There are no proposals for privatisation of these two banks. In fact mere privatisation of these two banks will serve no purpose. But the government states in the LOI that it will restructure these banks as dynamic and competitive institutions, a process we started last year. A similar process has been started in the Central Bank.

With regard to the labour market, the government has committed itself to expedite labour tribunal cases where delays have caused very high costs to businesses. When labour costs rise in this instance, businesses become reluctant to employ new labour. That is not good for a country which has about 8 percent of its people unemployed. All labour laws which protect existing labour only, without considering the right of all people to employment, are increasingly becoming anachronistic. There are also government commitments to gradually move to a social safety net to protect labour in transition. These are not new to government policy.

These are some of the major aspects of the SBA. It will thus be quite evident that there is nothing new in this SBA than the policies that have been repeatedly spelt out by the government in various policy statements and budget speeches. In other words there are no surprises hidden from the public. Some price increases would be inevitable but it is important to bear in mind that the cost of living of the people can be helped or improved mainly by taking measures to increase their income, rather than artificially through price subsidies.

Time and time again, the wisdom of this policy has been proven in Sri Lanka as well as in many other countries. Many countries have learnt this lesson very early and have taken strong steps to stabilise their economies, after which they have emerged as fast developing countries. The choice before Sri Lanka is whether to adopt sensible policies that will help increase the people's income in the future or go back to stagnate in an abyss of price distortions and economic mismanagement.

What the SBA with the endorsement by the IMF/World Bank and the other donors shows is that Sri Lanka has the support of the international community to undertake strong policies which will promote development and reduce poverty. However, much delayed price adjustments of petroleum and other products may cause short-term difficulties to some people, which will have to be borne so that future incomes can be raised. These are realities which we have to face. We cannot run away from problems.

Then there is the senseless rhetoric that by borrowing, we are mortgaging our country and its future. We don't sell ourselves when we borrow to build a house. This is sheer archaic logic. As long as we increase our income by borrowing after paying back interest and capital, it is beneficial. Sri Lanka has been a prudent borrower and an external debt service of Rs. 13 in Rs. 100 of foreign earnings per year indicates that. It shows that we have raised our loans on very concessional terms.

Increasingly, the international community is getting tired of countries whose people do not live in peace and whose people cannot manage their economies prudently. These countries get marginalised by the world community. By not doing the right thing now, we run the risk of getting marginalised in a rapidly growing community of nations.

Aitken Spence, Richard Pieris record good profits

Aitken Spence and Company recorded its best ever performance in the financial year 2001 despite the country being placed on a war footing. Profits of the conglomerate with the highest exposure to the tourism sector grew 30 percent to Rs.641 million, aided by major contributions from its Maldivian investments. Profit growth in the Maldivian hotel sector was 60 percent in comparison to 18 percent growth from Sri Lankan hotels.

Although in a buoyant mood following his announcement of profit growth for five consecutive years, Aitken Spence Chairman, R. Sivaratnam, doesn't waiver in his criticism of government pressure on the private sector when negotiating with trade unions.

"If the government gets involved as an arbitrator it should leave aside its political agenda and be strictly impartial," Mr. Sivaratnam told shareholders in his annual report. The cargo logistics sector grew 31 percent in the financial year while restructuring in printing and packaging divisions led to a 14 percent reduction in staff levels. This followed the termination of an agreement to supply the Ceylon Tobacco Company.

Stringent cost controls and increased tea prices saw profits at Elpitiya Plantations rise by 33 percent. A yield of 1,700 kg per hectare was the highest achieved since the company's inception. Talawakelle Plantations also recorded a good year. Work on its infrastructure development projects has got underway and the company expects "handsome returns" in the years ahead. The company seeks high yielding business opportunities in the region while it continues its restructuring program.

Three percent growth for Richard Pieris & Co.

Richard Pieris and Company Ltd's (RPL) profits grew 3 percent to Rs.312 million.

"2000/2001 definitely provided a challenge," Chairman, RPL, Henry Pieris said of an year which saw turnover grow by 21 percent to Rs.3160 million.

Profits from ordinary activities fell steeply from Rs. 231 million to Rs.185 million annually due to a doubtful debt from LAB Trading BV, a leading distributor.

The rubber sector registered operating profits of Rs.161 million on the back of a 33 percent rise in turnover to Rs.1249 million.

The tyre sector recorded impressive growth with turnover increasing 25 percent to Rs.746 million. Though the plastic sector turnover grew 17 percent to Rs.536 million margins eroded with the depreciation of the rupee impacting the costs of raw materials.

While the furniture sector recorded a loss from operations of Rs.4 million, the distribution sector recorded improved results and two new showrooms were opened increasing the number of retail outlets to 13.

Reckitt's profits up

Reckitt Benckiser (Lanka) Ltd, formerly Reckitt & Colman Ceylon Ltd, saw sales and profits grow by 17 percent and 72 percent respectively last year while better cash flows were also recorded, the company said last week.

Company chairman, Lalith de Mel, who is also chairman of Sri Lanka Telecom and chairman/managing director of the Board of Investment, said in his report for the year 2000 that the growth was mainly due to strong focus on Reckitt's core categories of pest control products and anti-septics.

Post-tax profits was 75.7 million rupees, up 29 percent from the 1999 financial year.