• Construction sector is crumbling
• Power crisis rings alarm bells amongst investors
• Life-line for Vanik
• Sunday Times regrets
• SriLankan's new flights bypass Colombo
• The forgotten skills in economic management
• Deficiencies in banking laws in S L
• News

Construction sector is crumbling

Engineers turn computer specialists due to lack of jobs

By Feizal Samath

"We are dying and nobody is giving us a helping hand," lamented Surath Wickremasinghe, a top architect and past president of the Sri Lanka Institute of Architects (SLIA).

This crisis, which the industry says is even worse than the battering to the tourism industry after last month's airport attacks by Tamil rebels, has led to the urgent formation by various segments of the industry of a specialised chamber to lobby support, prevent widespread job cuts and curb mounting losses. Wickremasinghe is the pro-tem chairman of the proposed new chamber for the construction industry.

"Today there is little or no construction. The buildings that you see coming up are ones started two to three years ago and planned five years back. There are no new jobs," noted D.D. Wijemanne, chairman of the National Construction Contractors' Association of Sri Lanka (NCCASL).

Rohan Tudawe, a past president of the NCCASL, noted that construction as a percentage of the country's gross domestic product (GDP) has fallen alarmingly to just three percent compared to 6-7 percent in the mid '90s and nine percent in the 1980s when the giant Mahaweli scheme was on.

"Many of the graduate engineers are taking computer jobs," he said.

In an exclusive interview with The Sunday Times Business Desk, professional groups connected to the construction industry highlighted the problems faced by them like companies forced to slash salaries, retrenching staff, a mass exodus of quantity surveyors to the Middle East and architects being underemployed and possibly unemployed if the crisis worsens.

Professor Lakshman Alwis, architecture professor at Moratuwa University, said another concern was the lack of training opportunities for graduates. "This month, 50 graduates will pass out from our university but we don't see any future for them given the current gloomy situation," he said.

These concerns are being echoed across the spectrum of economic activity in the country where job cuts are inevitable in view of the slowdown. Government economists have said that growth this year may fall to between two and three percent, sharply down from an average five percent in the past decade.

While growth prospects were hurt by rising fuel costs, a crippling power crisis and less money in the hands of people, the rebel attacks at Katunayake further aggravated the situation. An effort last week between the two main political parties to combine in a national government to stave off a worsening of the political and economic mess, failed.

"We are forced to cut salaries," said Wickremasinghe, who has resorted to staff cuts at his company. Milroy Perera, another reputed architect, said he had to cut work to two weeks per month for staff who volunteered a pay cut.

S.N. Wijepala, President of the Institute of Valuers of Sri Lanka, said the property market was very sluggish. "There are no transactions, no money flows. The industry has hit rock bottom."

H.D. Chandrasena, immediate past president of the Institute of Quantity Surveyors, said nearly 70 percent of the 350-odd qualified quantity surveyors have found jobs in the Middle East due to a lack of opportunities here.

"We can't keep them back because there are no jobs to offer. This is a mass exodus which would become a major problem if ever there is a economic revival and a construction boom," he said adding that in the few foreign funded projects, only foreigners are hired.

NCCASL president Wijemanne agreed that foreign contractors were taking up all the local jobs available. The government is also handing out contracts only to the state sector an ignoring the private sector, which can provide a better and cheaper service, he said.

SLIA president Dudley Waas said since Sri Lanka had the best engineers, architects and contractors it wasn't necessary to hire foreign contractors. "We can perform at half the cost."

He said there were some 550 architects employed in 40 firms. Out of this, 10 firms employ between 15 to 50 architects. "They will eventually start cutting jobs. Already there is underemployment which would lead to unemployment very soon," he said, adding that the future was very uncertain. Wickremasinghe said one of the urgent priorities of the new chamber is to examine ways of finding work for the construction industry. He said the problems could have been sorted out if there was a proper dialogue with decision-makers.

"Several projects worth billions of rupees, particularly in the field of infrastructure and urban regeneration have suffered due to the apathy of the bureaucrats. Consequently a number of job opportunities has been lost," he said.

He said while many other (professional) bodies representing diverse areas have voiced concern over economic and financial difficulties they are faced with, the construction industry "has been virtually in the dark with no voice."

Power crisis rings alarm bells amongst investors

By Chanakya Dissanayake

Alarm bells rang in almost all sectors of the Sri Lankan economy last week with the CEB's announcement of prolonged power cuts. Analysts are already factoring the devastating impact of possible 8-hour power cuts up to December this year.

"No foreign investor will be interested in Sri Lanka until the government solves the recurring power crisis," said a leading analyst. 

The last major power crisis in 1996 was mainly due to the delay in commissioning the Sapugaskanda diesel power plant. " We were able to predict the 1996 crisis way back in 1992. By 1994 even the power cut hours were calculated. When power plants are not commissioned during the planned period, calculating power cuts is simple mathematics", said Dr Tilak Siyambalapitiya, leading power industry expert. Even if the government decides to go ahead with the coal power project immediately, the commissioning will take six more years and the plant would be ready only by 2007. This is mainly due to the Japanese funding pledged for the project being withdrawn due to government's indecisiveness on whether to implement the project, analysts said. 

"We need to bridge the gap from year 2004 to year 2006, until the coal power plant is commissioned," said Dr Siyambalapitiya. He emphasised the need for the diesel fired plants aimed at bridging this gap to be on schedule, in order to avoid continuous power crisis.

However, Aitken Spence's 20-mega watt Anuradhapura diesel power plant which was originally scheduled to join the national grid in February 2002, was thrown off schedule due to political and religious pressure on the site selection.

Analysts say Sri Lanka is experiencing a dangerous trend of major infrastructure projects including expressways and power plants being delayed by various pressure groups, even after the foreign funds are obtained.

The bulk of the impact from the power crisis will be on the manufacturing sector. Analysts say that there is a strong co-relation between the manufacturing sector growth and Foreign Direct Investment (FDI) to Sri Lanka. 

"In the past majority of the FDI's were factory related. If the manufacturing sector becomes uncompetitive due to the power crisis, FDI's will dry up causing a slowdown in growth for many years," said a research analyst at a leading stock brokerage.

Dr. Dushni Weerakoon, a senior research fellow at the Institute of Policy Studies, said the adverse impact of the power crisis will be less than in 1996 due to many companies being geared to meet the crisis with generators. 

However, the increase in cost of production due to generator usage will affect Sri Lanka's competitiveness in the face of lower cost producers in the region, she added.

Life-line for Vanik

This reduces Vanik's liability to DFCC to Rs. 20 million. DFCC has also granted eight years to repay the amount. DFCC is also considering fresh credit lines for Vanik's factoring and leasing operations, he added.

Seylan Bank has also agreed to grant a moratorium on the outstanding amounts and extend fresh credit lines to the leasing operation. Vanik said it was continuing to negotiate with People's Bank and HNB to obtain similar concessions according to its 

Sunday Times regrets

Mr. Gunawardene is neither being investigated nor probed by the SEC with regard to any share deals. SEC Director-General, Dr. Dayanath Jayasuriya has also written in to say that the SEC has "neither reviewed share transactions of Mr. Gunawardene, nor written to him about any share transactions".

The SEC Director-General says he had referred to Mr. Ajith Fonseka and not Mr. Ajit Gunawardene. The Sunday Times regrets the error.

SriLankan's new flights bypass Colombo

SriLankan Airlines CEO, Peter Hill, said both programmes had been planned earlier and scheduled for implementation later this year but brought forward after the July 24 attacks in which the airline lost almost half its fleet.

Hill, in an interview with The Sunday Times Business, also didn't rule out redundancies if European travel advisories remained through this winter, deterring mass tourism. The Sri Lanka Tourist Board said last week that tourist arrivals in the period August 1 to 15 had dropped sharply by 50 percent to 9,005 from 18,327 in the same 2000 period.

"If the travel advisories remain through the winter, we may have to further cut staff levels and I won't rule out redundancies. A staff level of between 3,000 and 3,500 would the ideal for the airline," he said.

"We have not made anyone redundant so far. But what if the situation worsens? What can a business do? We either fall and bring everyone down or downsize," Hill said, speaking on the company's future plans and concerns.

The recent Volunteer Severance Scheme (VSS) has caused a lot of heartburn amongst airline employees, particularly the way employees were asked to quit under this scheme.

Hill acknowledges the abruptness of the move and admits it could have been handled better. (See letter by ex-staffer on this issue on Page 4).

"On July 24 night, we had no choice. We had six aircraft or half the fleet gone. Yes, I agree it was abrupt and the criticism is justified but we were forced into this situation," he said warning, "If it gets any tougher, we would have to take tough decisions."

On the new direct flights to Male from European capitals, without stopping over in Colombo, Hill says it may raise some criticism but notes that the decision is purely a commercial one and had been, in fact, planned long before the July 24 events.

He said SriLankan Airlines has been discussing with Maldivian authorities the prospects of direct flights there since the national carrier there went bankrupt about a year ago. "Since we flew more flights to Male than any other carrier, we suggested we could serve Male by offering direct flights," he said, adding that after the Maldivian authorities approved the proposal, SriLankan approached and obtained rights from Switzerland, Britain, France and Japan.

"We start flying this month from Colombo-Male-Tokyo-Male-Colombo. These are direct flights to Male and commercially makes sense particularly if some passenger doesn't want to stopover in Colombo," Hill said. (FS)

recovery plan. A response from these banks is expected in the next few weeks.

Wijekoon said Vanik would continue to recover its bad debts and repay the loans owed to banks. Vanik has recovered Rs. 500 million from its bad debts in year 2000 and Rs. 200 million so far this year.

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