News

War-risk premiums on Colombo flights rise and fall

By Akhry Ameer

The Board of Airline Representatives (BAR), which is chaired by SriLankan Airlines, in a statement said that insurance premiums which had risen by four-fold in the aftermath of the US crisis were reversed. "On September 19, the insurance premium has reverted to the original surcharged level (August 2001 level)," the September 20 statement said adding that Gulf Air and Emirates have now decided to resume flights.

Last week's sudden increase in insurance premiums sent the industry into a tizzy and resulted in Emirates Airlines and Gulf Airlines suspending flights. Emirates said in a statement – earlier in the week – that the suspension was due to " hugely increased insurance rates currently levied on each aircraft landing at the Bandaranaike International Airport (BIA)."There was also confusion regarding the revised premiums. Earlier in the week, Mr. Neeraj Kumar, acting CEO at SriLankan Airlines, said the insurance surcharge hike would not apply to Colombo-based carriers, which in this case would only mean Sri Lankan Airlines.

But on Thursday, he said there were strong fears that all carriers would be burdened with the higher charge. "Now we understand that there will be no hike. But there is no firm confirmation on this as yet". His remarks came before the BAR statement was issued. Dushy Jayaweera, operations manager of Hemas Air Services (Pvt) Ltd, representing Malaysian Airlines, said they would follow whatever decision taken by SriLankan Airlines (on any hike in insurance premiums) as they operate on a code-sharing basis with SriLankan Airlines and that they have no direct flights into Colombo.

Mr. Jihad Mehyar, country manager for Royal Jordanian Airlines, said that an increase of four times the original fee of $40 had been imposed during the week. However, Royal Jordanian Airlines had not imposed the full hike and had been charging a sum of US $60 per passenger per trip.

"The renewed increase lasted only for 24 hours and thereafter the airline had been informed by its head office to revert to the original rate of $40," he added. BAR said the insurance surcharge since August would continue but may differ from airline to airline. "Needless to say, this surcharge will be withdrawn as soon as the insurers withdraw the war risk insurance completely."

Emirates, in a September 20 statement, said they were resuming flights to Colombo from September 27. "We are grateful to the Sri Lankan government for the efforts it has made to bring about this insurance rate reduction," Mike Simon, Director, Corporate Communications at Emirates said in the statement on Thursday.

He was apparently referring to reports in local newspapers that Mangala Moonesinghe, Sri Lanka's High Commissioner in London, had persuaded Lloyd's London to revise the latest hike.

Sri Lankan garments in crisis 

Advocates for the industry have for some time raised the alarm about the end of the Multi Fibre Agreement (MFA) in 2005 and its impact on the competitiveness of the Sri Lankan apparel sector. Even if the current crisis is resolved the industry will still face severe challenges to remain competitive in a world without quotas. However, if the current situation is not rectified in the coming weeks or months, at best, it could well mark the end of the garment industry in Sri Lanka. There will then be no need to discuss what might happen after the year 2005, the statement said.

"Currently the apparel sector employs some one million people, both directly and indirectly, nearly one tenth of the country's work force. At least 600,000 families, nearly 2 million people, are entirely or primarily dependent on this sector for their livelihood. If over the next few months these people are forced to find another source of income, the ripple effect will be felt by each and every one of us, from boutique owners to trishaw drivers. Unemployment on such a massive scale is a real possibility if no remedial action is taken in the coming weeks."

The effects will also be felt directly by the government. The garment sector brings in US $3 billion in annual export earnings, equivalent to 50% of the nation's exports by value and 10% of its total GDP. The loss of tax revenues that would attend a collapse of the garment sector will add to the government's difficulties in reducing the budget deficit and stabilising the macro-economic environment.

"Why are the next few weeks so critical? The reality is that orders for the Summer 2002 season must be placed within the next month. If buyer confidence is not re-established over the next few weeks garment companies will have no orders for production after January 2002. Without orders, companies will begin to shut down. Sri Lanka's established market presence and network of buyer relationships is its primary competitive edge over other countries. Once buyers move their business to another country it will be almost impossible to get it back," the statement noted.

HSBC IPG system secures fifteen merchants

By Akhry Ameer

HSBC's Internet Payment Gateway is capable of clearing any VISA or Master credit cards anywhere in the world irrespective of the institution that issues the card. "Our system is directly linked to the HSBC servers in Hong Kong. Any customer will know this and have confidence in declaring their card details, as our logo is displayed on the page," said Mr. Priyan L. Attygalle, Manager HSBC Card Centre.

Further the staff of the integration team ensures that all merchants conform to the web page requirements mandated by VISA and MasterCard. This means that all merchants linked to HSBC's IPG have adequate information concerning the goods being purchased, the refund policies, customer service numbers, etc. At present DIMO, Eureka Online, Celltel, Crescat, EzBiz, Keells Hotels and Browns Group are linked through HSBC's IPG. According to Denver Lewis, Merchant Acquiring Manager, a further 25 customers have expressed interest to link their sites through HSBC's IPG.

The Internet Payment Gateway software in use by HSBC has been specially designed for the bank and functions using the international 128-bit SSL (Secure Socket Layer) protection method. The software also provides various tools such as a Merchant Administration Model for merchants to pre-programme or manually carry out settlements with the bank. In addition the system also provides for recurring payments, part shipments, automatic settlements, multi-currency transactions and also clear e-mail and mail order transactions.

"Our system requires just one day to link-up any merchant. And the integration is straightforward provided the merchant has met our requirements. We also provide the merchants access to our test gateway so that no errors occur after implementation. As the service provider we also ensure that comprehensive training on the system is given to the merchant, and that we update them with risk related issues, etc. through recurring training," said Mr. Lewis on the services offered by the bank to its merchants.

HSBC is one of the oldest foreign banks in Sri Lanka with a 109 year-old presence. The bank is the leader in the local credit card market with over 86,000 VISA and Master card holders to its credit. Currently the bank operates through ten branches and seven off site ATM's in Sri Lanka.

Asian kite festival today

The SLTB advised the public coming for the festival, to gather after 3.30 pm when the event gets underway. "The public is advised to come through the old parliament side and proceed to the Galle Face green. Public car parking has been arranged at the old Cornels Grounds adjoining Ranmuthu Hotel where vehicles could be parked," a SLTB statement said.

War may affect shipping routes to Europe

He said after the Katunayake attacks, Lloyd's Insurance in UK introduced a war risk surcharge on ships calling at Colombo port and later reduced it to US $ 700 per 40-ft container and US $ 350 for a 20-ft container, which has affected business at the port.

Major industries guilty of environmental pollution

By Diana Mathews

Currently the crucial challenge confronting the world is pollution with manufacturing industries being among the biggest contributors to rising pollution levels, the officials said adding there was a need to exert pollution control.

Cleaner Production (CP), the officials noted, is a process which could be used to effect changes.

M. N. R. Cooray, Manager of Environment and Industrial Engineering, Small and Medium Enterprise Developers (SMED), speaking at a seminar on the theme, 'Cleaner Production Awareness' organised by SMED in Colombo recently, said that "CP is a proactive strategy which will generate profits while reducing pollution."

He said CP includes the efficient use of raw material and energy, the elimination of toxic or dangerous materials and the reduction of emissions and waste while ensuring the modification of products.

CP is a continuous application of an integrated, preventive environment strategy applied to processes, products and services to increase efficiency and reduce risks to humans and the environment. CP saves money for companies while reducing waste and ensuring a cleaner environment.

Mr. Cooray said only 19 percent of the population in greater Colombo discharge waste into the sewerage system while the rest comes from pollution. Colombo generates 1,100 tonnes of garbage per day with around 5-6 percent coming from plastics. All these are costs, he said, adding "costs to the society as a whole."

Japan, a country with a 100 percent drop in pollution, should be Sri Lanka's role model for a better and cleaner environment. "The government, private institutions and social groups have worked together towards this great achievement," said Prof. Dhammika Dissanayake, Department of Sinhala and Journalism, University of Sri Jayawardenapura.

Between 1965 to 1992 large Japanese business organisations had spent 350 billion yen annually on research to find ways of preventing pollution. Nippon Steel, for example, had spent 420 billion yen on environmental preservation measures around their factory during the past 20 years.

Dilmah - perfection to a 'tea'

By Carl Muller

"I was determined not to bow to commercial demands," he said. "As far as tea was concerned, I did not want to take short-cuts or compromise on quality. We grow tea on our own plantations in Sri Lanka. We taste it, we nurture it. To me, tradition is important and I respect tradition. I went the old-fashioned way to give consumers here Sri Lanka's finest and freshest tea."

To Fernando, the dream did not seem to pose difficulties. In fact, it made perfect sense, but it took years to achieve – years of planning and learning the industry until, in the end, there was absolutely no reason why he could not make his dream come true.

"What I wanted was to give this huge tea-drinking market garden-fresh, unblended Sri Lanka tea."

Forty-three years ago, Fernando began his career as a tea–taster and blender and he found it strange that local tea was exported only in bulk, as raw material, to blenders and packers world-wide. "This meant that by the time the tea reached consumers, it was many months old; and tea loses its flavour from the moment it leaves the plantation".

He now sees that the tea is packed right where it is grown and then sent, unblended, to consumers who always look for good-quality fresh tea. "You have only to taste really fresh tea to know how nicer it is."

As he says, it is such a tradition in Australia to relax around a table with a good cup of steaming tea. It's the time when families come together, secrets are shared, news exchanged. "Most people don't know that tea was first used as a medicine. In Australia, grandmothers still tell the family to have a healthy cup of tea. They made a lot of sense!"

Tea is rich in anti-oxidants and the fresher the tea, the healthier it is. Fernando read the research of Dr. Charita Seneviratne of the University of Sri Jayawardenapura who also emphasised that the fresher the tea, the richer the pharmacological benefits.

"The problem is that bulk tea imported into countries for blending and packeting, sit on ships and in warehouses for six to eight months before it reaches the stores. When tea is blended and packeted in the UK and then re-exported to Australia, it can be more than a year old when it finally reaches the consumer," Fernando said.

It took him time to get things going and it was 13 years ago that he launched Dilmah – "the family tea." Dilmah: comes from the names of his two sons, Dilhan and Malik. It was the beginning of a dynasty and one that Fernando believes will go on giving Australia the finest quality tea.

Dilmah tea is hand-picked, packeted garden-fresh and flown to Australia and other world destinations. Fernando personally guides his team. To him, it is now a matter of family pride and Sri Lanka tea is earning the best name ever wherever he supplies!

Air Canada resumes services

The airline said in a statement that it expects these adjustments to result in an overall reduction of 20 percent in its trans-border U.S. flight schedule in keeping with capacity reductions of the large U.S. carriers. In addition, Air Canada will continue to monitor demand in domestic and international markets and make adjustments when necessary.

Air Canada operates more than 700 flights now representing over 80 percent of its normal mainline schedule serving all 160 of the carrier's destinations across Canada, the United States, Europe, Asia, South Pacific, Caribbean and Latin and South America.

Suntel profits up in Jan-June 2001

"This is an increase of 15 percent from the same period last year," a company spokesman said. 

Last year the company reported a net loss of Rs. 147 million in the same period, the company said in a statement.

Suntel said it is concerned about the delay in introducing the annual tariff revision, a delay that is blocking further expansion and investment in the country. During the period 1997 to 2000, it has been market practice for the WLL (wireless loop) operators to increase tariffs in unison with Sri Lanka Telecom.

It said the government recently announced its decision not to increase tariffs, at least until the end of the year.

New paradigms in insurance sector

LETTER

The question was raised there about the relationship of insurance to the local leasing business, with the latter almost replacing the hire purchase business in Sri Lanka. It was pointed out by the audience that it was an implied condition in an insurance contract, between insurer and insured, that proceeds of any claim were to be paid to the insured, while under a policy assigned in favour of a third party, such as the lessor (designated in the policy assignment as "Owner") the rights and claims under the policy had, naturally, to pass on to the assignee/owner, and that is expressly stated in the standard endorsement assigning the policy. On the contrary, however, there seems to be some local insurers, who are under the belief that the assignee should obtain the consent of the insured/assignor to be entitled to the claim proceeds.

If the insurers' irregular practice referred to above is a new paradigm in insurance, it certainly leaves much to be desired!

What has to be decided upon is, which of them has priority - the moral obligation or the legal obligation under the contract. It, therefore, seems to be a joke, to say the least, for an insurer to expect an assignee of a policy to obtain the assignor/insured's consent to pay claim proceeds to the former, it is the latter who should actually give his consent if the insured is to be paid. Why may I ask should these insurance stalwarts trip over the flowers in their carpet, so to say? The insurer's object in resorting to the irregular practice may be to pamper the insured in order to retain his custom. However, this is hardly the way to do it.

C. S. A. Fernando
Moratuwa

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