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Sri Lanka’s newly formed Chamber of Construction Industry is vehemently opposed to foreign consultants and contractors grabbing the work of local firms, says its president Surath Wickre-masinghe.
“On the other hand, we should invite countries like Singapore, Korea, China, Hong Kong and even Malaysia to join hands with local counterparts with equity to undertake major development projects in Sri Lanka,” he told the chamber’s inaugural meeting.
“If they come with equity we can jointly develop the infrastructure and other projects on a partnership basis,” he added reflecting growing criticism in the construction industry over foreign contractors being preferred over their local counterparts in high-value contracts.
He said Sri Lankan companies were very competitive in comparison to counterparts in South East Asia and South Asia or even North America or Europe. “The technology is the same. We have now mastered the technology and we have the latest technology in our offices. Similarly the contractors have bought the latest machinery, equipment and the know-how.”
The chamber was launched last week at the auditorium of the Sri Lanka Institute of Architects, bringing together associations representing architects, town planners, valuers, quantity surveyors and contractors who are all struggling to cope with a “no work” crisis.
Wickremasinghe, architect of the new chamber, said the industry’s backs are against the wall. “I have been in practice for thirty years or more, our office work load just ran dry. There is nothing coming in. I could not find the money to pay staff salaries; that was a major problem, because the clients did not pay,” he said.
“Some of the clients have still not paid. When they will pay I do not know. Then again there was no prospect of getting new work. We were forced to retrench some staff. More will follow if the situation doesn’t change.”
He said the new chamber would act as a voice for the entire construction industry and as a “think-tank” for its development.
“We are going to lead the construction industry and we are going to tell the government where they are going wrong and how to get the job done.”
Wickremasinghe, a past president of the Sri Lanka Institute of Architects and the Organisation of Professional Associations, said due to bureaucratic bungling and the ignorance of politicians, monies allocated for important projects which the locals could have undertaken have been returned to the donor countries and the World Bank, IMF, ADB and others. These projects have been returned due to counterpart funds not being made available. “If these projects were viable and if they were offered to the private sector, no doubt these projects could have gone ahead and the country would have benefited.”
He said the new chamber could be the catalyst to all stakeholders not only architects, engineers and contractors but also to building material manufacturers, skilled workers, real estate developers, insurance companies, development banks, state agencies and all others connected to the construction industry.
Lanka Cement Ltd, despite a slowdown in construction activity this year, is showing an improved performance for the first eight months of 2001 with cement sales up to August at 7,809 metric tonnes against 4,898 metric tones in the same period in 2000.
Losses from January to August were Rs. 1.7 million, against Rs. 3.2 million in the corresponding period in 2000, which is a 50 percent reduction, the company said adding that it was hoping to break even this year.
The Diamond Brand Cement was well accepted in the Jaffna market with sales depots being established in Nelliady, Kokuvil and Kalviyankadu, its chairman S.A.P. Sooriyapperuma said.
“All efforts have been taken to increase market share in the Jaffna district. Home delivery service has been introduced to cater to house builders,” he said.
The company has entered into contracts with Madras Cement Ltd to supply 2,500 metric tones per month at a very competitive price, ensuring a regular supply. Lanka Cement’s clients include Sri Lanka Air Force, Sri Lanka Army, Common Amenities Board, Sri Lanka Railways, SD & CC, LR & DC and Airport and Aviation Authority.
Sooriyapperuma said the company has embarked on a vigorous marketing campaign to popularize Diamond Brand Cement with projected sales set at 2,500 to 3,000 metric tonnes per month and sales of up to 18,000 metric tones for the whole year.
He said a Voluntary Retirement Scheme for 391 factory employees is being implemented with the assistance of the Treasury this year which would be extended to 76 working staff at head office and site office in 2002.
On completion of the voluntary retirement scheme, a complete re-structuring of the company will be undertaken.
Paranthan Chemicals Co now imports cement direct to Point Pedro from India. “They can offer cement to Jaffna consumers at very much reduced price.
We are also exploring avenues of similarly bringing cement to Point Pedro from India,” he said.
The Jetwing Group of companies recently enhanced their inbound and outbound tourism segments by implementing SunSystems - an Enterprise Resource Planning solution as well as a complete tour system.
SunSystems is a leading financial and business software solution for organizations globally. This out of the box, parameter-driven application, provides financial, order fulfillment and e-business solutions delivering collaborative commerce capabilities, managing director of iOM Lanka Ltd. Zulficar Ghouse said. “It was iOM’s 21-year experience in the software development industry coupled with ISO 9001 quality standards and the highly skilled and dedicated development team that was the key towards securing a large account such as Jetwing,” he said. With Jetwing Travels’ primary business being handling of tours in Sri Lanka, the comprehensive tour system being developed by iOM for Jetwing is designed to give the company a complete leisure management system.
The Jetwing group signed an agreement with iOM Lanka Ltd. a subsidiary of iOM International Holdings Ltd, recently for the supply of this new system. (AH)
The Asian Development Bank (ADB) last week approved a US$25 million loan to help people affected by Sri Lanka’s 18-year conflict in the worst-affected northern and eastern provinces.
It will support a project to provide housing and other basic services for those displaced by the conflict, improve health and education facilities, and re-establish agricultural and fishing activities as a means of livelihood for people currently dependent on welfare payments, the ADB said in a statement. The North East Community Restoration and Development Project will help communities affected by the conflict, particularly a significant proportion of the approximately 800,000 people who have been forced to leave their homes because of the conflict. It will also help others who have lost their livelihoods and their access to basic health and education facilities. The project will provide training and employment, and raise health and education standards in areas where between 60 and 90 percent of the people live below the poverty line. It will be implemented in close coordination with other development projects and programs in the area. The statement said the ADB loan will cover more than 60 percent of the total project cost of US$40 million. The government will provide US$7 million and the beneficiaries will contribute another US$1 million in kind. The rest of the funds will be provided by the OPEC Fund, Germany and the Netherlands. The ADB loan will have a term of 32 years, including a grace period of 8 years. It will carry an interest rate of 1 percent during the grace period and 1.5 percent thereafter. The project is expected to end in 2006.
Last month’s terrorist attacks in the US will hurt economic growth in developing countries worldwide in 2001 and 2002, condemn as many as 10 million more people to live in poverty next year, and hamper the fight against childhood diseases and malnutrition, the World Bank says in a preliminary economic assessment released earlier this month. Before September 11, the Bank expected developing country growth to fall from
5.5 percent in 2000 to 2.9 percent in 2001 as a result of slowdowns in the US,
Japan and Europe, and then rebound to 4.3 percent in 2002. But because the
attacks will delay the rich countries’ recovery into 2002, the Bank now warns
that developing countries’ growth could be lower by 0.5-0.75 percentage points
in 2002. “We have seen the human toll the recent attacks wrought in the US, with citizens from some 80 nations perishing in New York, Washington and Pennsylvania,” says World Bank President James D. Wolfensohn. “But there is another human toll that is largely unseen and one that will be felt in all parts of the developing world, especially Africa.”
“We estimate that tens of thousands more children will die worldwide and some 10 million more people are likely to be living below the poverty line of $1 a day because of the terrorist attacks. This is simply from loss of income. Many, many more people will be thrown into poverty if development strategies are disrupted.”
Ripples Felt Throughout World
Prior to the crisis, the Bank estimated that the US and other OECD countries would grow by 1.1 percent in 2001 and recover to 2.2 percent in 2002. But now, GDP growth rates in the OECD could be lower by 0.75-1.25 percentage points in 2002. This assumes that business returns to normal by mid-2002, that consumers
eventually respond to lower interest rates as they have in the past recession,
and that no new events shock the global economy.
Already, there are signs that higher costs and reduced economic activity are
putting a damper on global trade. Insurance and security costs and delays at
customs clearance are among the main factors pushing up the costs of trade.
Major shipping lines, for example, have increased freight rates to India by 10
to 15 percent.
Tourism related trade flows are being hit exceptionally hard. Around 65 percent
of the holidays booked for the Caribbean have been cancelled. The Middle East
is also likely to suffer a sharp decline in tourism revenues during the coming
winter.
The fallout from the September 11 attacks will affect different groups of
developing countries in different ways, reflecting their particular vulnerabilities. For the poorest countries that stall or fall into recession as
a result of a decline in exports, tourism, commodity prices, or foreign investment, the number of people living below $1 a day will rise. In countries that experience positive but slower growth, fewer people will be able to climb
out of poverty than otherwise would have been the case.
The slower growth and recessions will hit the most vulnerable people in
developing countries the hardest. The Bank estimates that an additional 20,000 -
40,000 children under five years old could die from the economic consequences of
the September 11 attack as poverty worsens.
As investors flee to safer havens, the already weak flow of capital to developing countries will decline further and be increasingly concentrated in countries that are considered to be relatively immune from the crisis. The
pattern established in the 1990s of private capital flows accounting for a much
greater share of developing countries’ financing needs is expected to be
reversed in the near term as both equity and lending activities contract in
lower risk countries. This will require greater support from bilateral and multilateral official sources if the financing needs of a growing number of developing countries are to be met.
Outside of the US and OECD countries, the ripples from the September 11 attacks will be felt across all of the world’s regions, particularly in countries dependent on tourism, remittances from populations living overseas, and foreign investment.
The worst hit area will be Africa, where in addition to the possible increases
in poverty of 2-3 million people as a result of lower growth and incomes, a further 2 million people may be condemned to living below $1 a day due to the effects of falling commodity prices. Commodity prices were forecast to fall 7.4 percent on average this year, and are likely to fall even more as a result of the events of September 11. Farmers, rural labourers, and others tied to agriculture will bear a major portion of the burden. Travel and tourism represent almost 10 percent of merchandise exports for the region and are also likely to be disrupted.
The 300 million poor in Sub-Saharan Africa are particularly vulnerable because most countries have little or no safety nets, and poor households have minimal savings to cushion bad times. About half the additional child deaths worldwide are likely to be in Africa.
Oil prices are now at $22/bbl, $5/bbl lower than just before September 11, after
a brief upward spike following the attacks. Prices of non-oil commodities have
also declined. Many agricultural futures have declined by 5 percent since the
attacks. These declines are likely to set the stage for lower commodity prices that are lower by 3 percent for agriculture and 5 percent for metals next year.
These prices have never recovered the levels seen prior to the East Asia crisis
of 1997-98, and now find themselves buffeted by yet another global downturn. For
economies that are dependent on commodity exports, particularly for cotton and
beverage exporters, this portends a potentially large terms of trade shock over
and above the impacts of slower growth in GDP.
Poverty Fight
The Bank’s assessment is subject to revision in coming weeks and depends on how
events unfold. But World Bank Chief Economist Nicholas Stern stresses that both rich and developing countries must be vigorous and vigilant to ensure that the
global rebound occurs next year and continues strongly into 2003.
“Policy responses have to be swift and somewhat bolder in rich and poor countries because of the heightened level of risk to the global economy and they have to be vigilant because the uncertainties associated with future political
and military events are unusually large,” says Stern. “Maintaining world trade
is more important than ever, especially in the face of an economic slowdown which is often accompanied by pressures for increased protectionism.” Several steps are crucial in sustaining the global fight against poverty in the wake of September 11:
* Boost Foreign Aid—Private capital flows to developing countries are going down
sharply, reversing the trend of the last decade. They are estimated to fall from
$240 billion last year to an estimated $160 billion this year. This makes it
even more imperative that governments increase official assistance to fill the
financing gap. Currently, aid claims only 0.22 percent of GNP of the OECD
countries, far short of the 0.7 percent goal agreed to by the international community. The evidence from the Bank’s work on aid effectiveness demonstrates that well-directed aid, combined with strong reform efforts, can greatly reduce poverty, and can also mitigate particular effects of crises, such as terms of trade shocks.
* Reduce Trade Barriers—Now more than ever, the WTO summit must go ahead, and it must be a development round, one that is motivated primarily by a desire to use
trade as a tool for poverty reduction and development. Substantial trade liberalization such as this would provide an additional cumulative income in developing countries of some $1.5 trillion over a decade.
Coordination
* More Coordination—The major industrial countries are likely to have a greater positive impact if their policies move in the same direction as they did
immediately after the attacks. Building additional coordination into the conduct
of economic policy, particularly monetary policy, could help counteract large
shocks in the global financial system. Beyond reliance on all-important automatic stabilizers, fiscal policy may have to be better targeted in the coming months, particularly in providing assistance to low income groups and to
affected regions, which are most likely to feel the immediate brunt of a slowdown and disruption.
* Building Social Consensus for Continued Reforms—Only a limited number of developing countries can adopt counter-cyclical macroeconomic policies. Most countries are too small to counteract imported shocks, and many face limited financing capabilities. For these countries, accelerating reforms to improve the
investment climate may help encourage foreign and domestic investment during
this time of heightened uncertainty.
Additional financing from the international financial institutions may help implement pro-poor programs and leverage directly or indirectly more private investment.
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