News

Ceylon tea, kothala himbutu to get global protection

Under this deal, recognition granted to goods such as wines and spirits under geographical indications of the Trade Related Intellectual Property Rights (TRIPS) system will be extended to products like Ceylon tea, cinnamon and kothala himbutu, considered to be an effective herbal medicine for diabetes, they said.

The fourth WTO ministerial conference in Doha, Qatar, last month had recognised "in principle" Sri Lanka's request for such protection of products of distinctly Sri Lankan origin, they added.

This would come about by extending protection under geographical indications of TRIPS to products other than wines and spirits. Till now, only products such as French champagne and Scotch whisky - considered to have characteristics unique to a particular geographical origin - had been given such protection.

"Developing countries such as Sri Lanka argued that they too need similar recognition for certain products such as Ceylon tea, cinnamon and Indian basmati rice," a Commerce Department official said. "Our position was that this should be a wide concept."

However, for this protection to be effective Sri Lanka needs to have its own laws that recognise the unique nature of such products.

The National Intellectual Property Office has drafted laws - amendments to the Code of Intellectual Property - ensuring protection under the geographical indications of TRIPS.

Geographical indication means an indication which identifies goods as originating in the territory of a country, or a region or locality in that territory, where a given quality, reputation or other characteristics of the goods, is essentially attributable to its geographical origin.

The Sri Lankan delegation in its statement at the Doha ministerial meeting had asked for recognition for products like Ceylon tea, cinnamon and kothala himbutu. 

Sri Lanka's permanent representative to the WTO and the head of the delegation at the Doha talks, K.J. Weerasinghe described the issue as being "significant" to a number of countries including Sri Lanka.

"We attach high priority to the extension of protection under geographical indications for products other than wine and spirits," he said.

Once the domestic laws come into effect, the authorities would have to submit details of specific products to the WTO. Before the Doha WTO meeting business groups such as the Ceylon Chamber of Commerce had pointed out that protection for geographical indications that is limited to wines and spirits was discriminatory and inequitable and needed to be extended to other products.

CCC, Premadasa group in Dubai promotion

Premadasa General Trading (Dubai), a PGL subsidiary, has set up a modern trade centre in Dubai with the objective of promoting Sri Lankan products in Dubai, the commercial hub of the Middle East.

An agreement was signed between the CCC and PGL to promote the trade centre in Dubai amongst CCC members. The centre displays a range of Sri Lankan products from traditional exports such as tea, rubber, coconut and spices to non-traditional exports and high-tech products.

The agreement was signed by C.G. Jayasuriya, Secretary General of the CCC (second from right), and Suranjith Premadasa, Chairman/Managing Director, Premadasa Group (Pvt) Ltd (second from left). Others in the picture are Sudath Ariyawansa, PGL marketing manager and Ms. P. Domingopillai, CCC's senior asst. secretary-general.

National govt could boost stockmarket

By Diana Mathews

Finding a long-term solution to the North East conflict would also sustain the upswing, he told the seminar on "Measures required to sustain the dynamism of the Colombo Stockmarket."

Mendis also called for a policy framework by the new government which supports the private sector. "Clear and consistent economic policies that support profits would have to be developed, specially if the private sector and the capital markets have to play a key role," he said.

He also advocated reforms in Company Law. "Certain issues such as companies not being able to purchase their own shares have impacted negatively on the market."

He said the main reasons for the upswing in the market were the dissolution of parliament and the recent elections. Interest rate cuts in September also had an impact, but it was much lower when compared with the recent movements.

There had been a general downward trend in the stockmarket in recent years mainly because of economic uncertainty, high interest rates and exchange rate uncertainty, he said. Interest rates and turnover are inversely related, he explained, Any rise in interest rates would result in a negative impact on corporate profits, he said.

SL expats consider returning option

By Akhry Ameer

Nextventures Ltd, the fund manager for People's Venture Investment Company (Pvt) Ltd (PVIC), recently met nearly 40 Sri Lankan professionals working in the US to propose a unique business model rather than restricting themselves to mutually exclusive options such as returning. The professionals comprise those working for big tech companies but who are considering going on their own, and those who are finding it difficult to raise funds after having done so. The other participants include those who have been laid off and have started on their own and looking at expanding, and professionals holding senior positions in big companies who are capable of running a second private business.

Organising seminars in Boston and Washington, the VC presented a plan whereby these professionals could set up their own businesses and create value in the US market while accomplishing possible aspects of the businesses through a Sri Lankan subsidiary at a significantly lower cost. The VC would fund the local part of these businesses provided that the business plans are attractive and they agree to convert the Sri Lankan firm's equity to the US firm's equity.

"It is a win-win formula," said Nissanka Weerasekera, MD/CEO of Nextventures who addressed these seminars. He explained that this way the expatriates would not have to spend time trying to prove themselves to US VC's, retain larger equity of their companies that would be otherwise demanded by US VC's and achieve similar output for a significantly lesser investment in Sri Lanka. "In this scenario, we are offering them money to set up ventures here. The convertibility option in a US company or any developed international market gives Nextventures a better exit and upside potential than the local market. Literally we are buying equity in an international company for local rupees," he added.

Weerasekera pointed out that these companies would be on a better footing to market themselves internationally as these expatriates are already involved in them. Most other local investments of Nextventures having created products with good potential lack this advantage and have to work hard towards establishing an international marketing network.

Nextventures fine-tuned the concept into a viable model having invested in one such local company called Textcentric. Formerly known as Luckysoft Technologies, the company has been established with the aim of creating device and platform independent document readers that can be marketed to publishing houses, universities, etc. to meet the growing trend of e-document viewers especially for scientific, economic, mathematic type material. Currently the popular document reading products in the market such as Acrobat Reader are device dependent and are restricted to a few platforms. The development centre for Textcentric was established locally with an investment around US$ 250,000, the majority of shares being held by Nextventures which otherwise would have to find VC's to fund at least US$ 1 million overseas. As the local VC cannot invest in a foreign company due to local exchange control regulations it set up an investment clause to redeem its local equity for a stake in the US company at a later stage.

Asked why the VC firm turned to the US market, Weerasekera said that the VC had begun focusing on projects based on cost of capital and internal rate of return (IRR) and projects that meet this criteria locally are limited. He emphasised that his company is not a dedicated tech VC but seems to appear as one due to mostly IT based investments falling under this criteria. On the success of the new venture he said, "Many of them have begun talking to us and there are a few we might choose. To us the success of this is purely commercial, but imagine if the government adopts this as a secondary investment strategy, it is bound to bring in something which might be more significant than even the reverse brain drain policy".

Nextventures was launched in April as part of People's Bank reforms to manage the funds of PVIC. PVIC came to be well known in the local corporate circle with its investment of Rs. 7.5 million in Millennium Information Technologies (MIT), which today is worth Rs. 700 million. Other recent investments of the fund after its management agreement with Nextventures have been Interblocks, Emprise IT, Textcentric, etc.

Looking Beyond

The importance of being earnest

By Arjuna Mahendran

The NASDAQ composite index has after all corrected all the way from its peak of 4959 in March 2000 to its Monday reading of 1992, implying it has corrected to less stratospheric levels than then. Inventories of technology goods have fallen to replacement levels allowing DRAM producers like Samsung and Hynix in Korea to start raising prices for a change, after slashing them for over a year. There is strong anecdotal evidence coming out of the US that the slashing of capital spending on technology and communications over the last year is finally bottoming out.

The immediate outcome has been that capital inflows into most Asian markets have grown to exceed their current account surpluses. What is particularly interesting about the flows this time around, when compared with the early 1990s, is that a lot of it has to do with bond issuance as opposed to equity issues. Why would global funds invest in Asian bonds and, to a lesser extent, equities, when economic growth rates across the region languish at sub-3% levels?

To my mind, the answer has to do with the fall in US interest rates after the 11th cut by the Fed this year to their lowest level in 40 years. The funny thing about this development is that it has simultaneously led to rising long-term interest rates in US bond markets implying that traders expect inflation to start rising at some point in the future which would cause the Fed to reverse its stance and go into a rate-raising mode.

This has caused a double-whammy for investors in US bond markets. Prices of long bonds have fallen sharply as interest rates zoomed and yields on short-term money have collapsed. This has created a huge bulge of surplus cash in global markets which has to find a home with decent returns. Otherwise the greying populations of the U.S., Japan and Europe will fret that their retirement savings so assiduously ferreted away into pension funds, insurance policies, hedge funds, mutual funds and what have you will not give them adequate returns.

So what has silently changed in recent weeks is the appetite of fund managers for risky investments in emerging markets. When Argentina, which accounts for about 65% of total emerging market debt, started getting into trouble earlier this year in meeting its debt repayments, markets thought that emerging market debt would slither into the doldrums. Other Latin countries and notably the Philippines in Asia found it increasingly difficult to tap global debt markets for their borrowing needs as the interest rates demanded by investors were very high.

But sometime in November all that changed. Argentina is still in trouble and has already defaulted on some of its debt repayments but investors are flocking around bond and equity issues in emerging markets. 

The more nimble Asian governments and companies have plunged into the fray to stock up on cheap money. Thailand, Indonesia and the Philippines have made large dollar, euro and Samurai (Yen) bond issues in recent weeks at astoundingly low coupons. Thailand and Indonesia have sold large equity chunks in their respective government-owned petroleum and telecom concerns which have been over-subscribed.

All this presents an interesting challenge to Sri Lanka. The new government faces a remarkably benign international backdrop to raise finances which should persist for a while. Our technology sector is restricted to a handful of firms and our road, port, airport, power and telecom infrastructure has been woefully mismanaged and in need of drastic revamping. If we can match the need to rapidly develop these sectors with international funding, I am convinced the economy will recover rapidly.

International wire reports call the new government a pro-business regime. It will have to marshal all of its persuasive skills to grab the attention of international investors and show them that Sri Lanka is earnest about development. That task may not be as daunting as it has been made to appear thus far.

Luxury liner inaugurates new passenger berth

One of the famed Cunard & Seabourn Line's elite "Yachts of Seabourn" group of cruise vessels, the Seabourn Spirit was the first vessel to use the new berth, the ship's local agent Lewis Shipping, a member of the Delmege Forsyth Group said in a statement.

The Seabourn Spirit's Captain Birger Johannes commended the new passenger berth, which he said was comparable with any passenger berth in the world. A new passenger terminal building could see Colombo offering world-class facilities for international cruise operators, Captain Johannes added.

A spokesman for the Delmege Forsyth Group, which has represented the Cunard and Seabourn Line for several decades, said the call of the Seabourn Spirit to Colombo was a very welcome development, especially in the context of the slowdown in tourism.