• Mind your Business 
• Rising airfares hit labour markets
• CBK to meet biz groups for "crisis" talks
• People's Bank insures its future
• Help at hand for struggling industries
• Travel industry seeks support
• Euphemisms on economic performance
• Unhealthy consumption
• Consumed by the consumer
• News

Mind your Business 

Watte mess!

At a recent meeting of the two sides, a respected business leader cut the man short by saying that business people were meeting the greens to bring political and financial stability in the country not oust political parties. "With arrogant people like that in the UNP, they don't need to sweat to lose elections," was the parting shot of one businessman.

Freight fright

This is because freight charges have also been increased following a hike in insurance premium, as Colombo appears to have become a dirty word among the world's ports of call.

And those feeling the pinch already are those in the garment and tea export sectors who have sent a distress signal to the powers that be.

Liquified shares

Several multinationals earlier showed an interest but are now fighting shy of making a commitment, partly because of the fluid political situation.

And even those who had undertaken to end the monopoly are now having second thoughts; so, the public will have to remain shell-shocked with every gas price hike for some time to come.

Unbeerable COL

The decline is such that some in this usually competitive industry pooled their resources to try and find out what went wrong.

And the answers are not comforting: beer sales are apparently proportional to disposable income and with the soaring cost of living that has been dwindling steadily. The only feasible answer, it appears, is lower pricing with smaller profit margins.

Rising airfares hit labour markets

Sri Lanka's burgeoning overseas employment industry is seeing its own fallout from last month's devastating Tamil rebel strikes with airfares rising while foreign recruitment agents are temporarily putting travel plans to the country on hold.

"We are having a crisis at the moment," said Suraj Dandeniya, president of the Association of Licensed Foreign Employment Agencies (ALFEA), adding that members of the association held a "crisis" meeting on Thursday.

The association has written to the government urging that the SriLankan Airlines-controlled MDP (Market Development Programme) – where airlines are barred from offering cut-rate tickets – be discontinued to enable fiercer competition among airlines. "If this scheme is discontinued, ticket prices will come down," he said.

Taking the opportunity to raise long-standing problems in the industry, ALFEA has also told the government that recruitment agencies will not be responsible for any hardships of workers abroad including providing tickets to return in a crisis, if the government doesn't respond to a call for better usage of funds set aside for the welfare of workers.

"Every worker going abroad contributes US $25 dollars to the government to be used for their welfare. But are these monies being spent wisely? We would like to know how these monies are spent," Dandeniya said, adding that they were expecting a response from the government in two weeks.

Government sources said the concerns of the industry were being studied as well as the latest crisis arising out of the Katunayake attacks.

While the media has focused on the security and tourism fallout from the rebel strikes there has been little mention in newspapers about the negative impact on Sri Lanka's overseas labour market.

Last week all airlines raised fares by a minimum 10 percent as insurance premiums were sharply increased with the safety of Colombo airport coming into question. Some airlines are undecided whether to pullout or remain until the dust settles when insurance premia is reduced once security is seen improving at the airport.

Dandeniya said while increased airfares would put pressure on the labour market, foreign recruitment agents have delayed arrival plans in Colombo, which has in turn put male recruitment on hold here. "At any given time, there are 50 to 100 foreign recruitment agents in Colombo. They select males for jobs abroad while we are responsible for recruiting housemaids."

He said the delays in foreign recruitment agents coming here could affect about 1,000 of the 1,500 jobs that are found for Sri Lankans every month. Airfares to Middle East sectors have risen by between 2,500 rupees to 3,000 rupees per ticket depending on the location.

While airfares for housemaids are met by the employers Sri Lankan males have to pay for their ticket which now costs more. "Many are asking us why the costs have gone up," Dandeniya said.

He said the higher cost of the ticket for employers of housemaids could also make the employment of Indonesian housemaids an attractive proposition now. "Indonesian housemaids are paid around $600 per month compared to Sri Lankan females who get between $ 520 and $550. The increased airfares would add to the cost of hiring a Sri Lankan housemaid," he said.

Dandeniya said a fresh round of airfare hikes is expected in August according to original plans. "That would put added pressure on us," the ALFEA chief said.

There are more than a million Sri Lankans working in the Middle East with the bulk being housemaids. Remittances from Sri Lankan expatriates are a major foreign exchange earner for the country. (FS)

CBK to meet biz groups for "crisis" talks

"Finally she has given us an appointment," one source said. The J-Biz Forum, representing the main business and industry chambers in the country, had written to her several weeks ago for a meeting to discuss the crisis but there was no response until recently.

Close to 600 business and industry leaders are expected to attend Thursday's meeting at 5 p.m. Coincidentally, the Chamber of Commerce has organised a public discussion on law and order at its auditorium on the same day just after noon.

The J-Biz Forum in the meantime has met at least three political parties – the JVP, the United National Party and Sihala Urumaya – to discuss the crisis, worsened last month by twin attacks by the LTTE on the international airport and adjoining airforce base.

Forum leaders have been trying to persuade political parties to come together in a government of national reconciliation. It has also apprised opposition politicians on the accepted stand of the business community that parliament should be reconvened and the referendum cancelled – because it is a waste of public money.

The forum is also joining calls by religious dignitaries and academics that the UNP should give up its motion of no-confidence against the government on the grounds that as long as that stands, the government will not agree to a national government or recall parliament.

"The UNP was positive on that note. They have agreed to a national government concept and if this is also acceptable to the government then the question of a no- confidence motion does not arise," noted Felix Yahampath, vice chairman of the National Chamber of Exporters.

Chamber of Commerce chairman Chandra Jayaratne, in a letter to President Kumaratunga on Thursday, appealed to her to cancel the referendum and continue with efforts to draft and adopt an amended constitution thro- ugh a consensus building approach.

"The question posed before the people is vague and ambiguous. The verdict is also non-binding," the letter, released to the media, noted.

Mr. Jayaratne said the campaigns leading to the referendum and the process of constitution-making to follow will be nothing "but an extension of the divisive and destructive politics that has virtually destroyed our beloved country in the past few decades."

Political analysts say the government may consent to the growing calls for a cancellation of the referendum, only if it strikes a deal with the opposition – at least with the JVP.

People's Bank insures its future

By Chanakya Dissanayake

This is a part of a strategic plan to double its fee-based income proportion in two years. Currently, People's Bank's fee based proportion stands at 10 percent of the total income. This is low compared to foreign banks in which the fee-based proportion is 50 percent of the total income.

"We will start marketing insurance products from the first quarter 2002. All the branch managers have been given targets to improve fee-based incomes," said People's Bank chairman Mano Tittawela. The bank's 500-plus branch network with its strong rural presence is expected to help gain entry into a largely untapped rural insurance market.

Mr. Tittawela also said the bank is aiming to record a net profit of Rs. 80-100 million at the end of year 2001. 

The People's Bank recorded a loss of Rs. 8.5 billion for the year 1999, after making a full provision for bad debts as at 31 December 1999. The bank is expected to announce an operational break-even (before provisioning) for the year 2000 and a net loss of Rs. 1.3 billion in its financial statement due this week.

"We took major steps to reduce our cost base by launching island-wide campaigns to mobilise low-cost deposits and retire high-cost borrowings from the call money market," said Mr. Tittawella. The bank has also raised its lending rates on its portfolio. "We were actually losing money borrowing in the call money market at 18 percent and lending at lower rates," he added.

Mr. Tittawela added that the bank is now lending to the two largest state importers, CPC and CWC, at market rates. "The US dollar credit lines we negotiated with private banks are at very competitive rates. 

Now we are not entirely dependent on the forex market to raise dollars for large import bills," he said. (Please turn to page 7 for interview with Mr. Tittawela)

Help at hand for struggling industries

Dozens of industries are closing weekly and according to one estimate at least 500 companies have crashed in the past 12 to 18 months due to production costs and debts that are not sustainable.

The issue of a separate state-sponsored unit or institutional mechanism was discussed at a meeting late last month between industry chambers and representatives of commercial banks at the Finance Ministry.

The session, chaired by Treasury secretary, Dr. P. B. Jayasundara, was very positive on the need to help struggling industries.

Mr. Patrick Amarasinghe, a veteran industrialist, said what was needed is a unit that would take over and revive industries that are having problems. "It is not sick industries entirely. It relates to industries that have a chance of recovery given the right dose of medicine," he said, adding that owners could sell out their industries or hand it over for revival.

Treasury Secretary Jayasundara agreed that some support was necessary to revive industries that are facing problems. He said certain industries may have to be phased out while others can be re-oriented if some support is offered.

"The principle is to establish a forum (or unit) to develop a strategy whereby industries that are difficult to operate due to management issues, finance, high interest or competition can be revived," he added.

Travel industry seeks support

By Dinali Goonewardene

They did not give details.

This came as President Chandrika Kumaratunga met Tourism Minister Lakshman Kiriella and industry officials last week to discuss recovery plans for an industry set to see a 60 percent drop in tourist arrivals after the Katunayake terrorist attack.

A government statement said industry officials had pledged their fullest support to rebuild the industry. But travel advisories continue to be the bane of the tourism market here.

"Travel advisories by foreign countries have been upgraded to travel warnings and we are working to get these scaled down," Deputy Chairman, John Keells Holdings, Jagath Fernando, told The Sunday Times Business Desk.

Sri Lanka Tourist Board chairman, Renton de Alwis, said the industry was preparing a short-term recovery plan. Part of these moves include the undertaking of a security and safety audit by a globally recognised outfit at the Katunayake airport. Some experts are calling for airport security and management to be handed over to international specialists.

The Defence Ministry in a statement said detailed security measures were being enforced at the airport to prevent a recurrence of the attack. The statement was also issued as an assurance to the travel trade that the government was taking steps to ensure maximum protection for tourists.

In another connected development, Emirates CEO, Tim Clarke, and a group of top officials from the Dubai-based airline, which has a 40 percent stake in SriLankan Airlines, are in Colombo to review operations. The group met President Kumaratunga to discuss future plans but no details of the meeting were available.

Smaller airlines have increased fares in an attempt to cope with a massive insurance premium being levied in the aftermath of the terrorist attack. This includes a $120,000 premium on Thai Airways for each landing at the BIA and $100,000 on Emirates.

"The more we fly the more we lose, expenses exceed revenues," General Manager, Thai Airways International Public Co. Ltd, Bundit Saralamba said. "We continue flights for now because of our relationship with the Sri Lankan government. If the situation does not improve we will discontinue operations," he said.

Thai Airways have increased fares to Bangkok by 35 percent. Officials said fares to other destinations were even more expensive in the light of the insurance premium which amounts to one percent of the cost of the aircraft.

Euphemisms on economic performance

Euphemisms to describe economic performance are the order of the day. Officials no doubt search for euphemisms to face the public and press. What else can they really do when they are expected to say that conditions are auspicious when they are not? They are compelled to paint a rosy picture of the economy, as they have no right to independent thinking. They have to please their political bosses.

This is in fact not a new phenomenon; officials and politicians have been doing it for many, many years. The Sri Lankan economy is always doing well, better than the rest as it were, and ending up as we all know, in one economic crisis or the other. Although the country is in an economic mess, the official assessment is that we are doing fairly well, only a mild setback now and then.

Once upon a time, when the economy was perhaps in a worst crisis than even today, a finance minister described the economy as "fundamentally sound". And he was an economist! What he probably meant was that like the Titanic it was unsinkable! Soon after he did not have to steer the state of the finances. Once he crossed over the cracks in the economy were somehow very bad. Like the Titanic it would sink!

To the government the economy is always sound. To the opposition it is always in a state of crisis. In a politicised society like ours most people are on either side, the real situation is never assessed objectively. Perhaps the government believes in what they themselves have contrived to say. That may be one explanation for the complacency and the lack of a sense of urgency on economic policies and their implementation.

What is the state of the economy today? Is it stable as we are told? Does it mean that like the government itself it will not fall? Does it mean that the economy is so stable that it is static and will not grow? Does it mean that it is at a level of low equilibrium from which it is difficult to shake? What is the great advantage of it being stable? Perhaps that it will not sink.

Statistics too could be quoted in many different ways - sometimes the same statistics to support widely different positions. That no doubt was what prompted Diserelli to say in the House of Commons:" Lies, lies and damn lies - statistics". Even the poor performance in our exports is glossed over by focusing on the reduction in imports and the reduced trade deficit in comparison with the corresponding month of last year. The bomb blast we are told will have only a slight impact on the economy.

The private sector's assessment is very different. The projections are for one of the lowest rates of economic growth this year. Business confidence is at a low ebb and a business leader has described the economy as a "fractured economy". Others have described it as an economy in crisis. Whatever the description there can be no doubt that the country is facing a severe economic challenge, partly owing to our own mishandling of the economy and partly owing to unfavourable international economic forces. The sooner the government recognises this and takes meaningful action the better. But then do we have a government?

Unhealthy consumption

Washington - More people than ever before in history around the globe are eating more meat, producing more cars, drinking more coffee, popping more pills and getting obese, according to a new report.

This insatiable consumer demand is adversely affecting the environment and human health, warns Vital Signs 2001, a report on global, social and environmental trends published each year by the Worldwatch Institute.

"We're finding more and more evidence that the developed world's consumption-filled lifestyle choices are often as unhealthy for ourselves as for the planet we inhabit," says Michael Renner, a researcher at the environmental think-tank.

While much of the world remains too poor to afford such choices, Renner says that the emerging middle classes in developing nations are following the same damaging patterns pioneered in the developed world. Meat and coffee consumption are on the rise, as is obesity. And more than half of the world's smokers are now in developing nations.

The 192-page Vital Signs report documents 49 different trends, from growth in vehicle production and population to the disappearance of coral reefs and many of the world's languages. As a result of increasing consumption, environmental trends are on a downward slope and are leading to an "unravelling of the earth's complex ecological safety net", it says.

The increased consumption of meat, eggs, and milk is threatening water quality around the globe, warns Vital Signs. The planet's population of cows, chickens and pigs have almost tripled since 1961. Traditional farming systems which used livestock waste as fertilizers has given way to practices that are heavily reliant on chemical fertilizers, which end up contaminating the ground water, it says.

While such chemical intensive practices are widespread in North America and Europe, they are spreading to developing countries, including Brazil, China and India, says Worldwatch.

The increase in world coffee production is also contributing to a rise in deforestation and higher usage of fertilizer and pesticides, it says. Production hit an all-time high in 2000, according to the report, jumping nearly 10 percent to 7.1 million tons.

The steady increase in the use of polyvinyl chloride (PVC) plastic worldwide is also a cause for concern, it says. Some 250 million tons of PVC are in use today in building materials, packaging, electrical wiring, and many consumer goods.

Production of PVC, which rose 39 percent between l992 and 1999, has a down side. The manufacturing and disposal of the plastic generates highly toxic chemicals, including dioxins and furans which pollute the air and can leach into the soil and water.

The report predicts that if trends continue, half of the remaining coastal wetlands are likely to be lost by 2080 to agriculture, urban sprawl and rising sea levels as a consequence of global warming. Such bogs and swamps provide a range of important ecological services, including flood control and coral reefs worldwide are also in bad shape. The extent of reefs severely damaged rose from 10 percent as recently as 1992 to 27 percent in late 2000.

Reefs are well known for their rich biodiversity, but they are also important feeding and breeding grounds for commercial fisheries, producing one-tenth of the global fish catch, says the report. They also shelter coastlines from storm damage, erosion and flooding, it says.

"The decay of ecosystems sets the state for more frequent and more devastating 'un-natural' disasters," says the report, referring to natural disturbances like storms that are made worse by human impact on the environment.

Climate change caused by the warming of the earth's temperature resulting from the emission of heat-trapping greenhouse gases threatens to intensify these problems, it says. "Coral reefs, for instance, live at the upper edge of their temperature tolerance, and rising ocean temperatures spell greater stress for corals," says Vital Signs.

Most scientists blame global warming on the burning of coal, gas and oil. Although the use of these fossil-fuels has declined slightly - down 0.3 percent from 1998 - it is still very close to peak levels, says the report. "Annual carbon emissions from fossil-fuel combustion quadrupled over the past half-century to about 6.3 billion tons in 2000," it adds.

One of the main factors contributing to the high consumption of fossil fuels is the growth in the number of cars on the world's roads and lack of progress in boosting fuel efficiency to offset these increases. Global automobile production, says Vital Signs, rose four percent in 2000 to reach a record 40.9 million vehicles. The total global vehicle fleet grew to 532 million.

A greater reliance on cars not only heats up the planet, but is also leading to more sedentary lifestyles that is contributing to an obesity "epidemic", says Vital Signs.

More than one billion people - one in six people on the earth - are now overweight, according to the report. Likely the highest proportion of people considered obese in human history, the ranks of the overweight have increased in rich and poor countries alike, it says.

A major factor behind chronic diseases such as stroke, heart disease, cancer and diabetes, obesity has been labelled "today's principal neglected public health problem" by the World Health Organisation.

World cigarette production also remains near record levels, though per capita supplies have decreased about 10 percent during the past decade. While a growing number of people in industrialised nations reject smoking, cigarette sales in developing nations are rapidly increasing.

China is the world's leading consumer of cigarettes, consumip an estimated 38 percent of the world's cigarettes, says the report. But the increase in smoking is especially pronounced in Africa, where smoking rates are climbing about 5.5 percent each year.

"If these trends continue over the next 20 years, more Africans could die from tobacco-related illnesses than AIDS, malaria, and maternal mortality combined," says Vital Signs, using information from the World Bank.

The good news? The report does point out a few positive trends. The renewable energy sector, although still a very small segment of the market, continues to grow, for instance. Ten times as much electricity is generated through wind power now as in l990, and production of photovoltaic solar cells is ten times higher than in 1987, it says.(IPS)

Consumed by the consumer

Procter & Gamble (P&G) is built on customer data. But investors want inspiration as well as information, says Adam Jones.

Francis from Boca Raton has been short-changed by America's favourite washing powder. "The box indicated that there were 40 loads. We used the low setting of the little cup and got 34 loads."

"Oh my goodness!" sympathises Mary McCarthy at the other end of the telephone line, logging the complaint on her computer.

It does not take much to win Francis back. Ms. McCarthy, a fabric and homecare specialist at Procter & Gamble's headquarters in Cincinnati, offers to send coupons for free Tide but Francis is a habitual user of the detergent and says that will not be necessary. His work is done already, the integrity of his washing powder restored.

If only Wall Street was so loyal. Renowned for its symbiotic relationship with consumers, P&G has recently found its dealings with the financial world more difficult. Profits excluding reorganisation costs grew by only 2 percent, to $4.23bn (£2.95bn), in 1999-2000 after disappointing growth from its flagship brands. The company scaled back its growth forecasts in February.

The climate of financial suspicion was not eased by this week's $4.95bn acquisition of Clairol, the shampoo and hair colouring business of Bristol-Myers Squibb. Recently after the deal was announced by John Pepper, P&G's chairman, the company's shares opened nearly 4 percent down. Perhaps the company needs to spend more time with investors and less talking to the likes of Francis.

P&G does not see it that way. On the contrary, the company is pressing ahead with initiatives to generate still more information about consumers.

P&G already proclaims that consumer understanding is "the heart and start" of everything it does. It set up one of the first market research departments in 1924 and now receives comments from more than 4.5m consumers annually (in the UK, these are written up as a fictionalised diary of a typical family, the Hedleys).

Its attempts to get ever closer to the public and depends heavily on the Internet, which promises to make research quicker and cheaper. P&G has set up a "consumer corner" on the web, where selected users post messages about their experiences with P&G products.

Dry cleaning

P&G is also part of the growing trend for companies to send camera crews into homes around the world to collect footage of the minutiae of real lives. Like Mars, the confectioner, it is a client of Everyday Lives, a research firm based in Twickenham, London, whose guinea pigs include five households in Manchester, Birmingham, Paisley, Brighton and Ashford, Kent.

Anthropological rigour also lies behind P&G's Future Home Lab in Cincinnati, which resembles the showroom of a Dixons or Circuit City store than the next big thing in domesticity. P&G uses the front room, dominated by a plasma-screen NEC television set, to test consumer responses to websites. The kitchen is a hub of indecision, stuffed with competing Internet machines - although the refrigerator does contain real food.

P&G hopes that the Future Home Lab will reveal consumers' preferences and that the company will be able to discover which gadgets will dominate the household of the future.

In an ideal world, data about consumers would complement an instinct for new products. However, the fear is that at P&G, information is a substitute for inspiration.

P&G has introduced useful small changes - selling washing powder in tablet form, adding a fancy dispenser to liquid detergent - to keep key brands fresh. Its consumer research lends itself to incremental tweaking.

But other new products from P&G look less nimble. It recently launched a $44 tooth-whitening kit in the US under the Crest brand. Users wear flexible strips on their teeth for an hour a day over two weeks so the peroxide can seep in. A fabric spray that is supposed to release wrinkles from clothes looks equally fiddly and unconvincing.

P&G knows that it takes more than just listening to consumers to generate products that completely redefine a category. The company's recent history lacks a big bang innovation in the mould of Pampers, first test-marketed in Peoria, Illinois in 1961, or Tide, which was introduced in 1946. The initial sales boost from some of its more promising launches, such as Dryel, has not been sustained. 

Vulnerable to criticism

Burt Flickinger, a former P&G executive, says: "P&G over-researches instead of concentrating on what is critically important."

Mr. Flickinger, now managing director of Reach Marketing, a consultancy, thinks P&G is "fiddling, to a certain degree, while Cincinnati is burning". One sign of the lack of innovation is P&G's recent acquisitions. In the absence of new blockbuster products, the company has been buying growth. The Clairol deal follows the purchase of Iams, the petfood group, in 1999, which followed the purchase of Tambrands, the maker of Tampax, in 1997.

"Growth through acquisition" is a less attractive slogan than "understanding the consumer of the future", which is perhaps why P&G has been so keen to emphasise its consumer research efforts instead.

The new tools have the potential to pay their way by cutting travel bills, speeding up research projects and generating income from third parties keen to buy the research.

In the longer run, though, there is a threat to the P&G approach. The company's model of research-led product development assumes the continued participation of consumers.

Francis may be keen to allow P&G into his life - but his children, conditioned to be more sceptical of brands and consumption in general, may not. 

(Courtesy: Financial Times)

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