22nd July 2001
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Rows of lingerie hang in the boardroom of
the upmarket Slimline garments
factory at Pannala. 
Success - the Slimline way

Contents Index Page
Front Page
Mirrror Magazine

Mind your Business 

Deliver or depart
The once high-flying but now troubled financial institution has undergone restructuring and the outfit's boss has survived some very anxious moments.

The strident demand of a group which was demanding their pound of flesh was the ouster of the merchant.

The merchant was saved in the nick of time through the good offices of the lending institution, but this chance might be his last to make good, he has been told in no uncertain terms.

Shackles on shekels shattered
The chaps who earlier maintained only an Interest Section have now been upgraded to full diplomatic status and there are many businesses interested in them.

A diversified blue chip has taken the lead in establishing trade links and plans to promote tea and tourism to the newcomers.

Yet another blue chip has already made headway in plans to set up an IT accessory manufacturing plant with their assistance.

Green-eyed blue frog
And then there is speculation that the former financial whiz kid who is now handling portly matters may shortly return to his familiar job, once the dust settles on the present political unrest.

The man himself is doing nothing to squash the rumours and is instead talking of ushering in an era of economic reform.

But the question that baffles us most is which colour he will sport - green or blue- and those close to him are non-committal about that too!

Cut bank lending rates, pleads trade

By Feizal Samath and Diana Mathews
Sri Lanka's small and medium scale industries, many of which have collapsed or are in great difficulty, are pleading for sharp cuts in interest rates pushing forward the recent two-percent drop in rates by state banks as one of the reasons, but private banks are unmoved.

"We understand the concerns of the industry but there are many valid reasons why banks can't bring down rates overnight," said a senior banker. "We can't follow the state banks that fast."

The business community has repeatedly complained about high borrowing rates that along with other issues like rising raw material costs, labour charges and political and industrial unrest have cost businesses dearly. Close to 500 industries have crashed in the past 18 months unable to keep pace with rising costs. Banks are foreclosing on firms as pay-back time on loans ends. Even big firms are griping about costs and offering golden handshakes to "nicely and diplomatically" get rid of staff as the times are changing in a once-buoyant private sector.

More companies are set to crash unless sharp interest rates are at least trimmed and government incentives offered in particular to the export sector which, according to economists, is heading for hard times due to a worsening US recession and a slowdown in industrialised countries. Garment exports are said to have slowed down in May-June while exporters were also worried about the impact of the political crisis on current production schedules which are for the winter season in the US and Europe.

The interest rates scenario was discussed at a meeting chaired by Treasury Secretary, Dr. P. B. Jayasundara on Thursday which brought together representatives of all major chambers and commercial banks.

While industrialists argued their case for cuts in interest rates, banks made the point that they would have to wait and see the situation and then decide on trimming rates in six to eight weeks time. "We may not be around by that time," an angry and frustrated industrialist told The Sunday Times Business Desk. This newspaper has been receiving many calls and letters from business firms pointing out the unfairness of private banks in not following the example of the two state banks in cutting rates. Some firms say they may switch to state banks if the rates don't fall.

Central Bank Governor, A.S. Jayawardena, also holds a similar view to commercial banks saying private banks will follow the path of state banks - but not immediately. "It won't happen overnight. The cuts will come in time," he said.

"Interest rates have a major effect on the business as a whole," said P. Saldin, Financial Director at CIC. This is a major issue since cost of funds and cost of capital depends on interest rates, he said. Financial transactions are carried out with a number of banks therefore there is a possibility of shifting to government banks if the commercial banks don't cut rates, he added.

Nawaz Rajabdeen, vice president of the Federation of Chambers of Commerce and Industry, said commercial banks should follow the strategy of government banks and reduce interest rates. It is unfair by the banks in not doing so as it affects the industry as a whole, he said.

"The industry cannot carry on," complained Felix Yahampath, Chairman of Kandygs Handlooms and a vice-president of the National Chamber of Exporters. The interest rates are very high when compared to other countries such as Japan and Bangkok, he added.

At the meeting at the treasury, banks were urged by the industry to keep their doors open till 6 pm on weekdays and 2 pm on Saturdays. The banks responded positively to the proposal but said this was only possible if and unless the Central Bank was also open during 

these times.

Commercial banks said if they are to keep their doors open longer for cash transactions, there is the need to transport this cash to the Central Bank vault in Fort for safekeeping - which is a must considering the current security situation.

A senior banker, commenting on interest rates, said it all boiled down to the cost of funds. "We borrow at rates that are compatible with Treasury Bill or reverse repo rates and can't bring it below that. If these rates fall, then our rates would also follow suit. We are not making much money as people think," he said.

On the other hand, he noted that there are other issues like the high deposit rates given to lenders "which we can't bring down overnight."

Colombo bourse up on Thursday despite unrest

Turnover at the Colombo bourse was unusually high on Thursday despite the streets of Colombo being bloodied by battling demonstrators and angry policemen. But analysts said the turnover, which surged to Rs. 65 million, was mainly due to a deal that had been negotiated many months ago.

Thursday's turnover, propped by DFCC Bank selling 2.76 million shares of Ceylon Glass to Gujarat Glass at Rs. 20.50, was the highest during the week. The share is currently trading at Rs. 7. The Indian-based Gujarat Glass group has a majority stake in Ceylon Glass.

The UNP-led demonstration saw three people die while another 50 were injured. Parliament is expected to meet on September 7 and prospects of debating an opposition-led no-confidence motion against the government appear likely.

"Investors are itching for positive developments on the political front," a senior financial analyst said noting that possible political changes may boost the market.

Strategic transactions such as a Rs. 30 million deal of East West on Wednesday have not been reflective of market sentiment. The indices remained flat at the end of the week with the All Share Price Index rising 0.2 points to end at 423.1. The Milanka Price Index fell 2.2 points to close at 628.8. Net foreign inflows for the week were Rs. 83.1 million.

CSE exploring options to survive

The Colombo Stock Exchange (CSE) is exploring new business avenues after a dismal market performance in the year 2000.

The exchange is considering the introduction of trading in commodity futures contracts and intends trading in commercial paper, CSE chairman, Ajit Gunewardene, told stakeholders in his annual report.

"Our investment will depend on how contracts are structured but we will first have to study the futures market and the legal requirements," Director General, CSE, Hiran Mendis said. The Securities and Exchange Commission Act will have to be studied or alternative legislation accommodating commodities futures drawn up, he said. The CSE expects to trade in financial derivatives through a futures index.

"There are certain procedural obstacles to be surmounted in this regard but the CSE is confident that it will be able to develop this segment of the market," he said, referring to the trading of commercial paper. The issue of commercial paper through the CSE requires the issue of a prospectus by issuers which makes the listing impractical. The CSE has taken up this issue with the Registrar of Companies and Advisory Committee on Company Law Reform and recommended that commercial paper 

issued by listed companies should be exempted from the prospectus requirement of the Companies Act.

The CSE has also recommended that the tax bonus for companies be increased and linked to a company's public float. Listed companies currently receive a 5 percent tax bonus. Proposals to permit listed companies to buy back their shares have been put forward in addition to incentive packages for institutional investors, designed to encourage investment by linking stock market investment to limited exemptions from exchange control regulation.

The creation of a Capital Guarantee Investment Fund to channel savings to the market has also been suggested. A proportion of the funds will be invested in gilt-edged securities and will reduce the risk associated with funds dedicated to the stock market.

The stock market had seen steep declines in 2000 with unprecedented foreign investment outflows of Rs. 3.4 billion while average daily turnover in 2000 dwindled to Rs.46 million. The All Share Price Index decreased by 21.8 percent to 447.6 points while the Milanka Price Index fell by 25.4 per cent to 698, the CSE report stated. The decline in prices was the steepest since 1995. (DG)

TRC ensures bulk discount refund 

By Dinali Goonewardene
The Telecom Regulatory Commission (TRC) recently issued a directive to Sri Lanka Telecom (SLT) to refund a bulk discount due to Silvergrand Sourcing Ltd for the company to benefit from a scheme advertised by the telecom giant.

Although the company registered for the bulk discount scheme in September 1999, SLT didn't give the company the discount due till December 1999, citing the inability of its systems to adapt. "We are awaiting our telephone bill for June and hoping the discount has been included," General Manager, Silvergrand Sourcing, Ajit Karunatillake told the Sunday Times Business Desk.

SLT's bulk discount scheme advertised on 10 July 1999 enabled customers to consolidate a number of phone lines into one bill. SLT offered its customers discounts of 15 percent for bills in excess of 800,000 rupees and 14 percent discounts for bills between 400,000 and 800,000 rupees. A 11 percent discount for revenue streams between 200,000-400,000, 8 percent discount for bills…

between 100,000-200,000, 7 percent for bills between 25,000-100,000 and 5 percent discount for those between 15,000-25,000 were offered by SLT.

While the discount was offered on call charges excluding taxes and levies, it also required customers seeking to benefit from the scheme to register with its business customer unit. Customers were also required to pay their bills on time and in full.

Silvergrand, a garments-buying office, which complied with all these conditions did not receive this benefit and complained to the TRC. Although SLT countered that its systems were not in place and it would be able to offer the discount from December 1999, this did not pass muster with the regulator. The TRC's Internal Committee for the Resolution of Consumer Complaints (CRCC) studied advertisements, announcements and correspondence between SLT 

and Silvergrand and ruled in favour of the company - issuing a directive requiring the company to refund the discount in June 2001. "We appreciate that Sri Lanka Telecom abided by the directive and accepted that they had not given the company a facility it was entitled to," Director Legal, TRC and Chairperson CRCC, Ms. P. R. Amarasiri said. SLT provided the company with the benefit from the discount from September to December 1999.

The Internal Committee for the Resolution of Consumer Complaints comprises three members and was set up under Section 9 of the TRC Act which requires consumer and public complaints to be fielded and investigated. While inquiries pursued are not judicial a resolution may also be reached through agreements as was done in the case of bulk discounts. The committee has sorted out 25 cases and may issue directives in cases not involving monetary redress. When financial redress is required the CRCC makes its recommendations to the Commission, officials said.

BoC to raise capital overseas

By Chanakya Dissanayake
The recent success by the Bank of Ceylon (BoC), Sri Lanka's biggest bank, in raising a $105 million short term loan has expedited its plan to raise long term capital from international capital markets.

According to a reliable source, BoC has already sought government approval for a bond issue later this year.

General Manager BoC, Sarath Silva, strongly hinted that the issue would be held in October 2001. "There are certain matters to be finalised. We are also looking at the possibility of raising bonds in the international market," he said.

Other BoC officials believe it is inadvisable to borrow from here due to local capital market conditions and hence seeking international funds is a better option. The bank does not have any two tier capital (debt capital) at the moment.

BoC Chief Financial Officer, Anthony Barned, also made reference to a bond issue as a possible alternative to raise capital for the bank, in an interview with this newspaper earlier this year.

BoC's $105 short term syndicated loan was arranged by HSBC and Sanwa Bank Ltd. It has a repayment period of two years with an option to redeem in one year. The proceeds of the facility will be used mainly for the financing of government trade bills related to petroleum.

Eugene Szeto, Senior Vice President, Syndicated Finance, HSBC Hong Kong, said the facility was negotiated before the latest political turmoil in Sri Lanka and ruled out the possibility of it having an adverse impact on the servicing of the facility.

However, he indicated the possibility of international investors demanding a higher premium in the future to offset the political risk.

Masahiro Goda, Head, Structured Finance, Sanwa Bank Ltd said the possibility of raising longer-term capital for the BoC would depend on a combination of macro-economic factors.

"Country risk, economic growth and Sri Lanka's ability to service foreign debt using foreign revenues will be evaluated by the investors before they commit long term capital for BoC," he said.

"It is very important for the local banks to raise capital overseas. For that you need to be big," a leading analyst said. He added that the state-owned BoC proved that a bank needs to be either big or covered by a government guarantee to raise capital from international markets.

"The private commercial banks should now realise that size really matters. They should grow either organically or through consolidations - fast," another leading banking sector analyst said.

Unprepared for the global recession

Four years after the Asian crisis suddenly engulfed us, a new glo bal recession is gripping the world. Although a recession was predicted at the beginning of the year with the slowing down of the US economy, current international developments indicate that its severity is likely to be greater than originally predicted.

The impact of the US slowdown has affected the European economies that had a healthy growth rate in recent years. In turn its repercussions are beginning to reach the US economy. The Japanese economy that has been struggling to achieve any growth will face a further setback due to the weak performance of other developed economies. 

The inter-relationships and inter-dependence of the major economies on each other means that an economic slowdown in one has a contagious effect on the others. This is precisely what is happening. Such cross currents are also almost immediate.

It takes very little time for the ripple effects to reach our shores. In fact the indications are that it has already had an impact on the economy. Our export performance in the first half of the year partly reflects these recession-led global economic conditions.

In the first four months our export performance has suffered a setback. This is particularly so with regard to manufactured exports that grew by less than one percent. Particularly conspicuous has been the performance of our main industrial export, garments. Garment exports have in fact declined by 1.4 percent in the first four months. This does not reflect the full impact of the recession whose adverse effects are ahead. On the other hand, there are reasons besides the global recession that have affected garment production and exports. Among these are industrial strife and the lawless situation in the country.

The impact of the global recession is not fully reflected in the first four-month figures as it manifests itself mostly after this period. The bad news is that our exports are likely to face much worse conditions during the rest of the year.

The Asian economies are likely to face severe stress owing to the developments in the US, EU countries and Japan. It is only a matter of time when the ripples reach us. China appears to be the only country whose economy is resilient in the face of these global developments.

As we said earlier, the decline in garment exports cannot be placed as entirely due to the global recession. Unconnected with the global market conditions that have emerged is a lack of confidence among industrialists about the business environment. Apart from the current unstable political conditions, there has been a growing concern for security on the one hand and the difficulties of ensuring smooth production conditions owing to labour unrest and difficulties in controlling labour. 

In fact some entrepreneurs are relocating their industries to other countries in Asia that seem more hospitable and less costly. The power crisis is another factor for the country becoming unattractive for investment. One factor that could offer a degree of resilience to our export incomes is that our main agricultural export is likely to be hardly affected by the recession. Tea exports, however, account for only 12 percent of our exports. There is, however, evidence that a resurgence in Kenyan tea production might lower international tea prices.

The fact that there is a high import content in our industrial exports also implies that import values would also decline with export value drops. There are also indications that the sharp depreciation of the currency has resulted in a curtailment of consumer imports. So far oil prices have shown a slight decline from last year's levels.

However, the volume of imports may be high owing to the low water levels in the reservoirs necessitating higher thermal generation of electricity.

These factors may mitigate the crisis, but would not help the country's economic growth. A global recession appears to be likely in the next few months, yet there is no evidence of a preparedness to face it.

No help for Jaffna's battered economy

Jaffna's economy, once a major contributor to Sri Lanka's Gross Domestic Product (GDP), is in tatters ever since Tamil separatist rebels began their bloody campaign nearly two decades ago 

Last week, the Sunday Times business editor, Feizal Samath, spent a few days in the northern city of Jaffna after a tiresome flight via the Airforce's Helitours to look at the situation in a town wracked by 18 years of fighting between government and rebel forces. Here is his report on the city's economy:

JAFFNA - Workers at the Kankesanthurai cement factory gather at a temporary office in the northern Sri Lankan capital and sign an attendance register two or three times a week.

There is no work at the country's biggest factory in the north, which once employed more than 3,000 workers and helped sustain hundreds of families. "We just go to the office and sign the register a couple of times a week, but there is no work," said a senior management staffer. The government has been paying the salaries of about 100 workers for many years despite no production or output.

Like many other factories in the north, the cement production facility has been closed since June 1990, after violence escalated in the region. The cement installation is located in the vicinity of a military base and is unlikely to be reopened for a long time, even if Jaffna returns to peaceful times.

Jaffna's economy, once a major contributor to Sri Lanka's Gross Domestic Product (GDP), is in tatters ever since Tamil separatist rebels began their bloody campaign nearly two decades ago for a separate state in the north and east of the country.

Irksome red tape
The most unfortunate thing about this crisis is that the north and the east has been virtually wiped out in the computation of key economic data by authorities. Sri Lanka's economic growth is calculated minus some sectors in war-torn areas in the two regions - sad for a city like Jaffna that once supplied 40 percent of the south's fish needs.

Rice, vegetables, the wonderful Jaffna mangoes and a lot of other produce went to the south from here - not anymore.

"Before 1983 we had a thriving economy with vegetables, onions and potatoes in plenty and they were supplied to the south," recalled Kandiah Kularatnam, president of the Jaffna Chamber of Commerce.

There were dozens of factories in addition to the KKS cement facility - powerloom factories, caustic soda units, glass, aluminium, ice - this entire small and medium industry has been ruined by the war and conflict. Traders yearn for peace and hark back to the good old days of the 1950s and 1960s when contacts between the north and the south were smooth and people were friendly - not at each other's throats like today.

"Those days were wonderful. Our southern friends relished Jaffna's famous palmyrah toddy or mangoes," said one trader nostalgically. The main market in Jaffna has its share of foreign apples and pears brought from Colombo but few buyers.

"Life is difficult and things are costly," said a young housewife who selected some fish at the nearby market.

Internal travel licences
The licence or pass requirement makes life complicated for Jaffna traders. "Apart from the numerous passes that are compulsory for travel in different parts of the city - national ID, army pass and navy pass, we also have to process a lot of documents and spend a lot of time doing this to bring goods from Colombo by ship," noted Kathigesan Nithiyananda, secretary of the chamber, who speaks in faultless Sinhala.

He said the trade is taxed twice - they pay 12.5 percent GST on the goods brought by ship and also another 12.5 percent GST on turnover. "We have appealed to the authorities but there has been little response," Nithiyananda said, arguing that if taxes are reduced they could bring down the prices of goods which are much more costlier than Colombo.

Traders spend hours at civil affairs offices attending to documentation to "import" goods from Colombo. "The way things are run here, Colombo is like another foreign country," said Kularatnam citing the enormous travel restrictions in and out of Jaffna.

The chamber has 600 members and its office is housed in the former headquarters of the Eelanadu newspaper, one of the first newspapers in the city. The Eelanadu collapsed in the early 1990s due to a labour dispute precipitated by interference from militant groups.

The chamber has made dozens of appeals to the authorities to relax travel restrictions and lighten the workload relating to paperwork to transport goods from Colombo. There has been no progress on these appeals apart from a cursory "we will look into it" response from the authorities.

Tuesday, July 10 was a tension-filled day in the city, which was swarming with armed soldiers and police. The previous day, the Jaffna university was shut by the authorities due to student unrest and security authorities feared there would be turmoil in schools too.

Fearing increased checking and harassment by soldiers, residents stayed indoors and few ventured into the Jaffna market for their daily marketing needs. "It is one of those bad days. This happens at least once a month," said a fruit seller looking around his empty stall.

Appeals to foreign agencies
In recent months, ambassadors and high commissioners from the United States, Britain and Canada have joined a host of other foreign visitors to Jaffna to assess the situation. UN projects funded by the west have been stalled since April 2000 when major battles broke out between government forces and the LTTE who were determined to wrest control of the city. The military successfully defended the city.

A de-mining programme undertaken by a UN team to clear some areas of mines and allow residents to return to their abandoned homes has been suspended and the foreigners have returned home in view of the uncertainty. "Unless we get assurances from both the government and the LTTE that they won't re-lay mines, the de-mining programme is unlikely to resume," said a local UN worker.

The Jaffna chamber officials also met the US, British and Canadian envoys and appealed to them to use their influence to persuade Sri Lankan authorities to relax the restrictions in Jaffna. The envoys have promised to help in whatever way they can.

There are about four ships that come to Jaffna from the south bringing food and other items monthly. Sometimes they come together causing congestion and other problems or come after long periods, causing shortages and a sharp increase in prices.

"There is no system or proper schedules in ship arrivals. We are at the mercy of others," said Kularatnam. One of their main requests to the authorities is to open or clear the road to Jaffna from the south to enable uninterrupted distribution of supplies.

That unfortunately is wishful thinking given the security situation in the north, parts of which are controlled by the LTTE, particularly stretches of road from Vavuniya to Elephant Pass on the Kandy-Jaffna main highway.

Two ships dock at the Jaffna port carrying petrol and diesel every month but traders say this is not enough and often petrol is in short supply.

Fishermen are the worst hit. At a fish market at Gurunagar near Jaffna, a few traders gather round and bargain with fishermen trying to sell their meagre catch. On that particular Wednesday, there were few crabs and small fish up for grabs.

Fishing is restricted to certain hours and fishermen are permitted to use only rowing or sail boats and allowed a distance of three miles offshore compared to 22 miles many years ago.

At the Gurunagar jetty, a few vallams or fishing craft come ashore with the daily catch. "Not good today," grumbled one man as he pulled his boat. In the distance, one can spot the Pooneryn lagoon, much of which comes under the control of the rebels.

Xavier Ponikku, manager of the Gurunagar Fishing Society, sits in a dilapidated house, looking after the welfare of the fisherfolk. "Fishing is allowed only between 6 am and 2 pm unlike round-the-clock fishing earlier," he said.

The number of fishermen has fallen to 1,200 from 1,800 earlier with the others doing different jobs as fishing is unproductive and income levels are low. The fishermen's daily catch is around 5-6 kilogrammes compared to 500-600 kgs earlier with most of the fish being small ones against giant-sized paraws in the 1960s/70s.

Cash transfer system
Much of the city's economy revolves around foreign remittances. A sizable portion of Jaffna's population is abroad - up to 30 percent by some estimates - and most of their earnings are sent back to sustain families here in the absence of proper jobs and incomes. Once known as the money-order economy because monies abroad were remitted by money-order to Jaffna, the times have changed to much quicker transactions where agents here hand over cash to residents with relatives abroad who have paid an equal sum to an agent in the country they live in.

"The cash transfer system is quite active. Once a relative of a Jaffna resident hands over money to an agent, say in Germany, that man contacts his agent in Jaffna who then goes to the house of the resident and hands over the agreed amount. It is Jaffna's response to the home banking concept," noted a journalist.

If you don't want to rely on agents then the city's only Western Union branch operated by Seylan Bank comes in handy. Western Union lives up to its reputation of speedy foreign transactions as long as telephones and other communication facilities work.

The brain drain is an enormous problem. Jaffna is losing much of its youth, many of whom leave the city for jobs in Colombo or abroad. The going rate for a ticket and visa to "freedom" in the west - through illegal channels - is 1.3 million rupees. "When my children grow up and leave school, I intend to sent them abroad with the help of relatives there. There is no future here. Either you suffer without a proper job or join the Tigers," said a teacher.

Most youngsters who find their way abroad - Canada is the preferred destination now - are able to earn sufficient money in a year to pay back a relative who sponsored them on often dangerous trips across many countries, either by air or by sea.

Success - the Slimline way

By Chanakya Dissanayake
The CEO of a Sri Lankan garment factory, which brings $50 million to the country each year, walks into its maintenance shop unannounced. There is no panic among the mechanics, no getting up to say 'good morning', not even a glance to acknowledge his presence. He is treated just like another employee working at the factory.

A new corporate culture? The factory is Slimline, one of the most technologically advanced garment manufacturing plants in Asia, which produces an exclusive range of ladies lingerie. The CEO is Dian Gomez.

Last Tuesday, The Sunday Times Business spent a whole day at the Slimline factory, in Pannala in the north-western province, to find out what really makes a Sri Lankan enterprise achieve world class standards. Slimline has won almost all the local productivity and quality awards during its short spell of eight years. Today its clients include Victoria's Secret in USA and Marks and Spencer in UK. It is also the first garment factory in Asia to pioneer the Rs. 40 million SAP -material resource planning system.

Is Slimline really different, or is it just the corporate fad? We tried to answer that question throughout the day.

Multi-talented work-force
Of the 2,200-strong workforce, the majority has studied up to the GCE A/L. Slimline also employs approximately 120 local and foreign graduates in their management cadre. Many of them hold Masters degrees in management and economics. The panty and bra manufacturer has succeeded in even attracting and retaining a London School of Economics graduate.

"The opportunities for career development offered by Slimline are in line with those of any world class organisation in the UK or USA," a graduate said. "We have enough independence to practice what we have learned," another explained. Mr. Gomez believes that the role of a CEO is that of a coach, picking up the best talent, grooming them and motivating them to achieve best results.

Slimline also has arguably the highest concentration of sportspersons on its staff. It includes five national boxers, a national pistol shooting champion and five members of the women's national cricket team.

"Sports binds us together. It helps us to align the beliefs of 2,200 people with the corporate vision," says Mr. Gomez, a former national boxer himself who occasionally spars with his boxing "colleagues".

A motivational movie made in-house shows Slimline boxers winning national competitions, closely watched by their CEO in the ringside. "Whether boxing with a mighty opponent or making panties, it is the motivation that achieves excellence," Mr. Gomez said.

What really motivates the Sri Lankan worker? "Competitive spirit and the emotions," Mr. Gomez said, reflecting on his own experience at Slimline.

In order to gain an insight into what really motivates the workforce, Slimline carried out a most popular personality voting competition in 1996. The questionnaire featured ten personalities ranging from Sanath Jayasuriya, Aravinda de Silva to prominent politicians, Chandrika Kumaratunga, Ranil Wickremesinghe and leading cinema actors.

At the end of the list the name of the military legend, Major General Denzil Kobbekaduwa was also included.

"We were expecting the girls to vote for the cricket idols, but we were surprised when more than 95% of them voted for General Kobbekaduwa," said Mr. Gomez. It was later found out that one of the reasons for the selection is that more than 60% of the labour force has a relative serving in the army. Slimline later decided to actively pursue community service projects to help war affected families.

"Our latest project to build 20 houses for war heroes raised Rs. 6 million within the plant. That is how we achieved corporate alignment," the Slimline CEO added.

The management and the workers at the plant share a common canteen, a gym and a library. "This removes the 'them and us feeling'. Management should realise we exist because of them (workers)," Mr. Gomez said.

He also relates how a simple gesture like giving the workers a lift on their way to office in the morning could break the psychological barrier between the management and the workers. "This is nothing new. We are just putting the management theory into practice. Companies always say people come first. But do they really practice it?"

Barriers to creating a learning organisation
In the initial stages some managers were doubtful about people-oriented strategies being adopted by the company. Many questioned the need for a change in the status quo. Fears about loss of control and the workers misusing the delegated authority had reigned.

"The biggest challenge was to change the aversion to risk among the managers," said Mr. Gomez.

Recently it had been decided to give the security guards computer training. "Some managers asked me why. But why not? They have studied up to the Advanced Level. No one wants to be a security officer for the rest of his life," he added.

However, not all managers fit into the culture. Some get rejected by the workers. Some feel threatened when the workers come up with suggestions. "When I see situations like that I intervene and have a talk with the manager concerned on how the system works here," said Mr. Gomez

SAP-the way forward
When Slimline became the first garment factory in Asia to implement the SAP system at a cost of Rs. 40 million, many saw it as putting a Rolls Royce on a gravel road in Pannala. Despite the criticism the company went ahead with implementing the concept.

"We have achieved both qualitative and quantitative benefits from the SAP system. Stock write off losses have been reduced and there is a massive overall improvement in efficiency," Mr. Gomez said.

Making the difference
To us, the biggest difference is the corporate culture inside the plant. There are no barking supervisors, no shouting about when the overhead displays indicate a drop in efficiency. Instead we found a highly motivated and trained workforce believing themselves to be part of some great achievement.

The "pride to be part of the team" feeling is everywhere, not restricted to the management but among workers as well. Not a single manager complained about the workforce, a sharp contrast from many other factories we have visited where the management from CEO downwards constantly comment on the inefficiency and the lack of cooperation from workers.

Managers are actually proud about their workers. "Moving out of Colombo to Pannala changed the way I look at life. I realised that life is all about creating opportunities and enabling the people achieve their potential," Mr. Gomez said.

Slimline has built an auditorium and a science lab for a local school with the aid of their foreign partners and university admissions from the school have improved significantly since then.

"The community should feel the tangible benefits of a business," he said.


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