News

Milk producers say suggestion to cut advt. costs unreasonable

By Hiran Senewirathne

A government committee, looking at ways of bringing down the cost of essential consumer products, last week said milk products could be reduced if companies trimmed advertising costs.

New Zealand Milk Foods, marketer of Sri Lanka's leading milk brand-Anchor, said government officials made inquiries as to whether the industry could sell milk packs sans the cardboard box at a lower price. "The cardboard box is essential to prevent rodent attacks. If we are to remove the box, we will have to strengthen the foil material at additional cost," said Chethiya Sri Nammuni, Director New Zealand Milk.

"The weighted average advertising cost is only Rs 1.2 per pack in the milk industry. There is no room to reduce this further," argued Cubby Wijetunga Director, Nestle.

Sri Lanka's annual demand for powdered milk stands at 65,000 metric tons, with an annual growth of 6 percent. The local milk production satisfies only 20 percent of this demand. 

International food giant Nestle points out that the cost of one metric ton of imported milk powder has increased to Rs 182,980 in July 2001 from Rs 111,860 in January 2000. This was due to the combined effect of the rupee devaluation and the global short supply of milk due to BSE and Foot and Mouth disease.

"We actually lost Rs 12.6 for every pack we sold last month," said Nestle Lanka chairman Giuseppe Tarnero.

He added that there is no room to further reduce packaging costs which is Rs 7.6 per package. 

"We are using the most cost effective-yet-adequate packaging. Any further cost reduction may compromise the quality of milk."

Marketing experts point out that requesting companies marketing fast moving consumer goods in a competitive environment to cut down on advertising is against free market norms.

"No product in the world is sold without (adequate) advertising," said a leading marketing consultant.

Stockmarket review

"Investors are at cross roads, speculation is driving the market for volume," Director research, MMBL Phillips Securities, Nauzab Fareed said. For prices to move up political direction must provide the clues but foreigners will not play this market and would prefer to adopt a wait and see attitude, he said.

Average turnover for the week was Rs.5.3 million. The ASPI fell 4.8 points to 422.9 while the Milanka Price index fell dropped 7.2 points to 631.0. Net foreign Inflows were Rs.1.4 million.

While parliamentarians raised protests that the democratic process was being sidelined to give way to a dictatorship, stockbrokers echoed similar sentiments. "Investors have become disgusted after parliament was prorogued. The little bit of hope that remained was dashed, investors do not want to invest on the long term," Director Trading, Asia Securities, Tushan Wickramasinghe said.

SEC allows CT Smith director to compound case

The SEC had previously filed action in the Colombo Magistrate's court against Mr. Fernando in September 2000, for allegedly manipulating the market. The transactions in question related to trading in Commercial Bank's shares in October 1997. Market manipulation is the creation of a false or misleading appearance in respect of the trading or the price of any securities listed in a stock market.

Commercial bank's shares traded at Rs.185 on October 6, 1997 but took a turn for the worse and fell to Rs. 162 the next day-a 12 per cent fall. The shares rose to Rs. 175 on October 8 and subsequently regained ground at Rs.180. 

If market manipulation had been proved in court this would constitute a violation of the SEC Act and its rules and regulations, the SEC said in a press release. 

The SEC established the compensation fund under the SEC Act of 1987 to grant compensation to investors who suffer losses due to a licensed stockbroker or dealer failing to meet his contractual obligations. The fund's monies are voted in by parliament and also collected through penalties imposed by the Commission.

British expert at CIMA seminar 

The seminar will cover, inter alia, issues like what needs to be changed to add company-wide value and how it can be done, value adding tools and techniques, balanced scorecard, shareholder value and risk management.

EFC ask firms to close early on census day

The government has declared a half-day holiday for the public sector and is expected to request private establishments to follow suit though there is no provision legally to grant a holiday.

The EFC said in deciding the time to release employees, companies should take into consideration the geographical location of the workplace vis-à-vis the place of residence. 

"Companies may make suitable arrangements with their employees to stay back at work. For such persons who stay back at work to be enumerated during the final census, arrangements can be made with the Census Department for a special enumerator to be sent or appointed by the company," EFC said in a statement.

Serendib Leisure redefines the hospitality trade online

By Sonali Siriwardena

The introduction of virtual tours and zoom-in facilities, not found before in a hotel website in the country, is in keeping with the strategy to tap the potential of a website as a marketing tool. Complete with a range of multimedia features such as audio and video clips, the website has been improved to maximise its promotional capacity.

Also available is the facility of on-line booking which effectively eliminates the hassle of making reservations by post or phone. This is complemented by a news page, which contains the latest news on the Serendib group and relevant information, company officials said.

The need to shift to different promotional channels has been the focal reason for the launch of the revamped website, officials told a press conference recently.

With seven hotels under its management, Serendib Leisure said that its aim would be firstly to promote Sri Lanka as a prime holiday destination before focusing on the hotels in question. This concept has been incorporated by the use of colourful graphics and maps illustrating the geographic location of the country and the destinations considered by the traveller.

The cities housing the hotels have not been overlooked. Information on the sites of interest in and around the hotel including recreational activities available to the guests - be it jungle treks on elephant backs at Hotel Sigiriya or deep sea fishing at Hotel Serendib - are accessible to the web-visitor. The website carries additional details such as the distance of travel to one's chosen destination from Colombo.

Another novel feature includes the language option made available to those who visit the website. The site lays emphasis on the option to choose -whether it be a virtual tour of a hotel or the language in which the text is presented. A choice of French, German or English is made available to the visitor on logging in to the main site. Serendib Leisure believes that this tri-lingual facility would increase its appeal to a more varied clientele. 

However officials said their target market is in no way restricted to the average sun-loving tourist. Serendib Leisure said it hoped the website attracts on line bookings by Sri Lankans. Officials said they also plan to introduce Sinhala as yet another optional language on the logical basis that language should never be a barrier. This will guide the web visitor through the pages dedicated to each of the group's seven hotels, the latest of which is Hotel Sinbad in Kalutara. 

Over 225 local & foreign suppliers at AISEX

The exhibition, one of the biggest events on the local apparel industry calendar, has been organised on a much larger scale than ever before, and will bring together more than 225 local and foreign exhibitors, who supply products and services to this vital sector of the economy, a spokesman for the organizers said in a press statement.

The three-day exhibition scheduled for November 2 to 4 at the BMICH, is organised by CDC Conventions (Pvt) Ltd for the Sri Lanka Apparel Institute (SLAI). It is supported by the Ministries of Constitutional Affairs & Industrial Development, Internal & International Trade & Commerce, Aviation & Airport Development, and Tourism. Chairman of the Sri Lanka Apparel Institute Professor Lakdas Fernando said the exhibition provides a unique opportunity for people who really matter in the industry, to visit the exhibition. "International exhibitions relating to the apparel industry are usually attended by the heads of companies and only one or two people from each company can participate because of the cost factor. Our aim is to provide an opportunity to a much wider spectrum of persons employed in the industry who can greatly benefit by an exposure to the state of the art technology of this industry, so that rather than one or two individuals the entire decision-making team can view the new developments." He said the local apparel industry provides direct and indirect employment to approximately one million people in Sri Lanka. One area that Sri Lankan skilled workers need training is in specialization and consistency of quality, and on how to use specialized machines. "We need to introduce professionalism in a big way because there is tremendous competition among factories as well as internationally," Professor Fernando added.

John Keells Hotels connects thro' Dialog

The John Keells Hotels wireless application protocol (WAP) portal on Dialog GSM gives users everything from basic information about John Keells Hotels, to a complete hotel listing, locations, price and accommodation options, as well as online reservations, a JKH press release stated.

The key business result of this service extension is that those who use John Keells Hotels as a partner will now have a definite competitive advantage over their competitors. Their response times, accuracy and service levels will be significantly enhanced by Dialog GSM's new and innovative service, the press release said.

Another additional benefit that Dialog WAP partners will enjoy and be motivated by are the special offers and promotions that will be accessible only through Dialog WAP. Travel agencies and tour operators, can re-allocate the time, finances and resources involved in making bookings and arranging vacations with the introduction of WAP.

Fitch Ratings Lanka clarifies bank ratings

However, it must be appreciated that a credit rating agency must act with responsibility and provide accurate opinions of the long-term credit worthiness of entities rated, and therefore would decline or defer to award a rating till such time that it could provide an accurate opinion. With regard to the case referred to in Mr Ranjith Perera's letter published in The Sunday Times on July 8 titled "Bank ratings cause confusion" important rulings by several regulatory authorities were pending pertaining to this entity at that time, and therefore a best-informed opinion could not be made. The rating was deferred until the rulings were given, however FRL did not at any time advise the entity "to improve the present position and apply again later" as claimed. Since then, some of these issues have been clarified, and FRL is presently in the process of finalizing the rating, which would be announced to the entity concerned in due course.

Furthermore, unlike some other countries there is no regulatory requirement in Sri Lanka for public deposit mobilizing institutions to make their credit ratings public. As a result any entity that enters into a credit rating agreement does so on an entirely voluntary basis, and has the option of keeping the ratings totally private or publicizing the rating at the most opportune time to them, during the course of the rating agreement. However, once a rating is announced to the public, it would remain public, including any changes to such ratings, which may occur during the course of the rating agreement. 

We trust this clarifies the issues raised by Mr. Perera and see no reason for bank ratings to cause any confusion whatsoever, especially given that no rating applicable to this entity has been announced to the public. There is absolutely no attempt by any party to 'cover up' anything as raised by Mr Perera. It should be appreciated that an inaccurate opinion would not in anyway serve the best interest of the public, nor the entity being rated. 

At this point we would also like to address the clarification raised on capital adequacy. Banks maintain capital as a cushion to absorb losses they encounter in their activities and ensure that they have enough funds to pay back all the depositors in full. Obviously if the available 'cushion' or capital is not sufficient to cover all losses, the remainder of the loss would have to be borne by the depositors. Overall, from a depositor's point of view and a credit rating point of view, its better to have a healthy buffer capital or a high capital adequacy ratio (CAR) as opposed to a minimal one. This is partly the reason that the Central Bank is working towards gradually increasing the minimum required CAR level. 

FRL, having evaluated the domestic banking system in a broader context, is of the view that a situation of over capitalization does not exist. On the contrary, it is our opinion that given the high incidence of non-performing assets the banking system should look at building its capital base over and above the minimum CAR set by Central Bank.

IDM to train corporates through Component Education Server

ICMG's Component Education Server (CES) is a corporate e-learning tool that enables mainstream software development companies to train their staff in middleware and component infrastructure without the actual presence of human trainers. Combining video, voice, graphics and text the CES enables employees of development companies to learn new technologies without having to leave office for training institutions at required times but rather to log in to their local networks as and when they are free.

The Component Education Server from ICMG, India currently has 13 courses that have been programmed to train staff individually at their own pace using only their workstations. The courses utilize a complete session on video by professionals in each of the subject areas accompanied by slides that have been synchronized along with it. Participants also have the facility to log on to other features such as a notepad, a semi-real-time email question and answer session with ICMG professionals, Internet chat rooms on the subject, recommended sites for further learning and research, and laboratory exercises. The participants are also eligible to sit for certification examinations conducted by ICMG once they complete the courses, quizzes, practice tests and assignments.

ICMG builds EAI (Enterprise Application Infrastructure) solutions using CORBA component models. ICMG has its principal office in Virginia, USA with a Development Centre in Bangalore, India.

Mobitel offers 3 plus package

The package is in keeping with Mobitel's new concept of "Suit Your Lifestyle" and is aimed at medium scale business enterprises, family units and groups of friends. Calls within the package will not cost anything provided it is completed within three minutes. Since the package has the capacity to grow up to four connections, family members could join the account and enjoy better communication while keeping the bills at a nominal rate.

This is the first time a cellular company is offering a package with three minutes of outgoing free. The initial connection will be included in the monthly rental of Rs. 299 and the supplementary connections will be on a monthly rental of Rs. 99, the company said. 

The package is seen as an ideal working tool for medium scale businessmen who would be benefiting from the nominal rates and connectivity irrespective of peak or off peak hours.

Satellite communication improves productivity

A company statement said the implications of global satellite communications for Sri Lankan industrial organisations are significant, especially for industries engaged in the assembly of their own products.

Satellite communications enable such industries to:

*Create, track, post and analyse work orders that document all assembly activity.

*Take an order from a customer via Order Entry and interactively create a work order to produce customised shipment.

*Select optional components that increase the selling price.

*Optionally print the details of the customer's assembly bill of materials on the picking ticket and invoice when ready to ship.

*Put component parts back into inventory after an item breakdown.

*Generate work orders for made-to-stock items.

*Make sure the costs of assemblies reflect the actual cost of the components including variable and fixed costs.

*Post work orders as they are finished or even partially post made-to-date quantities.

Exciting news from Asian Paints

Asian Paints (Lanka) Marketing Manager M. Sudhir said participants may enter the competition by matching a shade in a poster showing a cricket jersey at "Colour World" dispensing outlets set up by the company, with the identical shade on the Apcolite shade card available at these outlets."

"To make the process more simple, we will give them a multiple choice answer of four shade names, from which the customer has to select the correct shade," he explained. A person who wishes to participate in the promotion has to purchase four litres of Apcolite paint from a Colour World outlet. The participant will then receive a coupon which has the four shades to choose from to win a prize. All customers who purchase four litres or more of Apcolite from the Colour Worlds will also re ceive a special spot gift, Mr Sudhir said.

Customs Import documentation centre should be outside port

He said that the association had to deal with many institutions, such as the Customs, SLPA, SLSI, BOI, Dept. of Exchange Control, Import Control, Health Services, Quarantine, Ship & Freight Forwarding Agents, Airport Aviation and Environmental Authorities, Transporters etc., who are all operating from divergent offices and points, to clear and deliver import shipments. 

"Our practice and procedures both at Customs and Ports are systems in place prior to the advent of containers in 1980," he said 

The ACFA chairman stressed the need for the appointment of a Customs Appeal Committee on import shipment related disputes to afford the trade a fair hearing. Mr. H. D. S.Premachandra, the Additional Managing Director, Sri Lanka Ports Authority, said the SLPA always wants to maintain a trade friendly approach and invited the ACFA for a joint monthly meeting to discuss and resolve all delivery related problems. He also said the SLPA has been operating a one-stop FCL documentation centre at Canal Road, Fort since December 2000. 

Mr. W. D. Laxman Perera, Director General of Customs in his address said that, as at present there is an effective blending of enforcement requirements with that of trade facilitations. He complimented the ACFA and other trade chambers for its assistance during his tenure that also afforded the customs an opportunity to service the trade in an effective manner. 

The following office bearers and committee were appointed for the year 2001/2002: Chairman -Mr.M.S.M.Niyas- Serendib Freight Services, Vice Chairman- Mr.Pius Paiva-Ace Cargo Pvt Ltd, Secretary-Mr.Howard Sela-MIT Cargo Pvt Ltd, Treasurer-Mr.Ghouse Arfin-Overseas Cargo, and Committee Members Mr.Salindu Watapuluwa- Imexo Global Ltd, Mr.K.N.Mohanrajah-Transworld Enterprises, Mr.R.M.Senevirathna-East-West, Mr.Navin Piyatissa-Freight Express Pvt Ltd and Mr.Uvaiz Samsudeen-GAC Cargo Systems Ltd. 

Bartleet opens new building in Matara

Mr De Mel emphasised the importance of financially assisting producers in the region, particularly those in the commodities sector, which is the lifeblood of the southern economy. Mr. Susantha Fernando, Jt Managing Director, highlighted the history of Bartleet Financial Services Ltd and its decision to branch out to major provincial cities over the last few years. The Matara branch, he said, was the company's first branch in 1997 amidst many teething problems. 

He said the management team led by branch manager, Sampath Nishantha, had done splendidly in making the branch a success.

New office bearers

The outgoing committee recommended the election of the following office bearers for 2001/2001.

President : Mr. T.L. Raj Secretary : Ms. Ashani Kiridena,Treasurer : Mr. V. Kandasamy, Editor : Mr. Rajiv Casie Chetty Public Relations Officer :Ms. Shiyamalee Karunanayake Education Officer : Mr. Linus Jeganathan ,Committee Members : Mr. U.H. Palihakkara : Mr. Ajith Tudawe : Mr. K. Gnanenthiran : Mr. D.T. Mannakkara : Mr. Dilshan Rodrigo :Ms.Suganthini Kumaraswamy: Mr. Sanjaya Senaratne : Mr. Nizrin Shabir Husain Student committee member : Mr. K.P. Ravishankar

Bu$ine$$ Mailbag

Banking monopoly – death blow to the small industrialist 

Instead of taking action to bring down interest rates which have gone to astronomical heights, the Central Bank is trying to make matters worse by encouraging reduced competition among banks, which at least to some extent, helps borrowers to get affordable rates. Despite all the competition, even now entrepreneurs have to pay at least 30% on overdrafts and at least 25% on long-term loans. This was very much different to a few years earlier when agricultural and industrial sectors were given priority and affordable rates of interest were permitted through the banking sector. If a customer found HNB rates too high he had the option of going to the Commercial Bank. If that was also too high he could negotiate with Seylan Bank and get a lower rate. Failing all that he could go to Sampath Bank. If even two of these banks are combined as being planned, small industrialists will always have to pay very high rates due to reduced competition. 

High interest rates will not only affect the industries but also adversely affect the employment generation capacity resulting in higher unemployment at a time when industries are going through one of the most difficult periods in our post independence history. We face obstacles such as high interest rates, direct and indirect taxes, GST, defence levies, ETF/EPF contributions coupled with low cost imports.

Let us hope that the Central Bank will not take away the little privilege the small industrialists now have in going from one bank to the other until we get the rate that we can afford. I dread to think of a situation where people have only the two state banks and one private bank to negotiate with. It will soon happen unless the Central Bank moves decisively to prevent the Commercial Bank and DFCC from forming a banking monopoly which will control all types of rates whether it may be short term or long term because one cannot envisage state banks going out of their way to offer competition to large private banking monopolies. The government and the tax authorities have already saddled small industrialists and the small timer with unbearable burdens. The Central Bank will kill the industry if it permits banking monopolies at the expense of the small industrialist ignoring the fact that these are the industries that provide the bulk of the country's employment generation

Henry Seneviratne
Kadawatha.

Interest of minority shareholders 

For example a company through the influence of major shareholders may agree to a merger merely because major shareholders are promised various positions in the new company. 

In the same manner the company may take decisions to tie-up large sums of money in buying over another company merely for major shareholders to get positions in the board of the other company despite the entire investment being of no value to the company. 

We have also seen companies getting into building projects which are far beyond their capacity running into billions of rupees at times, solely to satisfy major shareholders who would indirectly benefit by kickbacks such as obtaining contracts in the construction of the building at off market prices, not to mention other commissions they may receive in the process. 

On the brighter side however the legal framework is there to look after the rights of the minority shareholders with 5 percent of the shareholders either in numbers or value being able to move court to stop any action brought about by the majority shareholders if it can be shown that the rights of the minority shareholders are infringed. 

Having laws however written only on statute books would not help the cause, if the regulators turn a blind eye to violations and corrupt practices that would result in many small time investors getting a raw deal, as only a few would take an interest to go to courts for infringements of this nature. 

In recent times we had seen shocking displays by regulators such as the SEC and the Central Bank, who reduced themselves to mere bystanders or passengers when a few major shareholders made attempts to go ahead with decisions not only detrimental to the companies they represent and its minority shareholders but also to the country at large. B.B. Perera,

Dehiwela

Workmen's compensation has archaic rules 

But most of the employees are not aware of these benefits. In 1990, inflation was much less than now. Hence the amount of compensation (Rs.250,000) was perhaps sufficient for the dependants to deposit it in a bank account and get a monthly interest. Now a workman or his family living in an urban area, has to pay house rent, educate the children, settle medical bills and maintain a family for which a monthly income of at least Rs. 10,000/= is needed. This is possible only on a one-million-rupee deposit. We urge the government to revise the Workmen's Compensation figure to one million rupees from the current Rs.250,000. 

The life of a worker is certainly worth more than the present amount. We urge trade unions and trade chambers to support and canvass this proposal. 

The government must also revise the categories under occupational diseases.

The diseases referred to in the ordinance are not consistent with current trends. They are more suited for a 19th century English economy based on coal mining and the iron and steel industry. This list does not have heart diseases which is the No. 1 killer in Sri Lanka today. Most of the drivers who work continuously for 10-15 hours a day without sufficient exercise die of heart conditions or paralysis. They are not entitled to compensation! In the case of natural death, even after working hours, there should be at least 10 percent compensation. This will help to cover funeral expenses. The government also must ensure that they educate the workers about their rights and enforce strict compliance by the employers. We request the readers to present their views on this important national issue. 

Ranjith Abeysinghe 
Kotte. 

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