By Naomi Gunasekara
MTV/MBC, the electronic arm of the Maharajah Group of Companies, devastated by a recent fire, resumes normal services this week from one of its unfinished studios vowing to be "bigger and stronger."
"We are looking at this as an opportunity. We will upgrade our studios with the latest technology and come back bigger and stronger," noted MTV Group Director, Mano Wikramanayaka.
MTV, Sirasa TV and Shakthi TV, the three TV stations run by the Maharajah Group, were forced to close down transmission for over four hours along with the radio stations run by the company, as a result of extensive damage caused to its main studio complex by a fire that broke out on January 6. The stations operated from two makeshift broadcasting vans borrowed from Rupavahini and ITN last week.
Speaking to The Sunday Times Business, Wikramanayaka said, "The damage is not valued yet and we still don't know what caused the fire. The studio complex contained four on- air radio studios, one drama studio for radio, two dubbing studios for TV, two on-air studios for TV, edit facilities and other studios. The damage is going to be substantial."
Asked if the loss will be covered by insurance, Wikramanayaka noted that though bank funding would be looked at as an option, nothing has been sorted out with regard to finances. "We have lost three non-linear edit suites, one graphic studio, two edit suites and our satellite TV receiving equipment. It will take time to get back to normal with our TV operations because there are a lot of problems behind the screen. But our attempt is to ensure the quality of our programmes is the same. We also lost some critical tapes that were in the library and I think after these problems are sorted out we will be able to look more deeply into the damage and financial options," he said.
According to Wickramanayaka, they have been constructing a big studio in front of the damaged studio complex and hope to equip this studio with hired equipment and commence transmission from there until the studio complex is rebuilt.
The radio stations run by the group continue to operate from the same studios, as they didn't suffer heavy damage. Informed sources said the damage was expected to be around Rs. 250 million, all of which is unlikely to be covered by insurance.
The Employees' Provident Fund (EPF), the country's biggest investment fund, wants to put more money in private sector investments such as listed equities and corporate debt as well as in the housing sector, EPF Superintendent N. J. Perera said.
The fund has been following a policy of diversifying its investments into more market-oriented investment instruments but has been constrained by the limited opportunities available, he said in an interview.
As at November 2001, according to provisional data, the EPF's total investment portfolio amounted to Rs. 244 billion at cost - twice the size of the Colombo stockmarket at its current market capitalisation of around Rs. 118 billion.
"We're in the process of diversifying our investment portfolio into more market-oriented instruments such as government securities like Treasury Bonds and pay special attention to expanding investments in private sector instruments such as debentures, trust certificates and commercial papers," Perera said.
The bulk of the money - 98 percent of the total investment portfolio – is invested in government-sector instruments with Rs. 177 billion in Rupee loans issued by the Public Debt Department on behalf of the Government, Rs. 60 billion in Treasury Bonds, and Rs. 3 billion in Treasury Bills. The fund has only about four billion rupees invested in private sector instruments such as shares, debentures and trust certificates.
"With such a huge fund, it is difficult to find alternate avenues to invest money to get the required rate of return at an acceptable risk," Perera said. "Investment opportunities in the private sector avenues are limited, so automatically we have to go for government instruments such as Rupee loans, Treasury Bills and Treasury Bonds," he added.
The Colombo stockmarket had been stagnant for years while the market for corporate debt has not yet expanded, he said. EPF started investing in the listed equity market in April 1998 with a long-term view. The listed equity portfolio expanded to record a cost value of Rs. 1.3 billion as at 30 November 2001 from a value of Rs. 386 million as at 31 December 1998. "During this period, we gradually improved our active participation in the equity market and selected stocks with the best profit potential after carrying out in-depth analyses," he said.
"Furthermore, we added shares to our portfolio at discounted market prices even in the sluggish market situation in 2001 that remained up to October and disposed several lots with capital gains."
The fund's listed equity portfolio is performing well and had yielded an annualised rate of return of 14.7 percent on a gross basis during the total holding period from April 1998 to November 2001, he added. EPF fund manager Sanjeewa Fernando said they usually invest only in blue chips. It was up to the companies to prove themselves as good investment avenues and attract EPF investments, he said, adding that the fund also looks for well-structured corporate debt issues with credit ratings.
Stockbrokers have been calling for more investments by institutional investors such as the EPF to activate the stockmarket. But Perera said the EPF has to be very careful in making investments because it is responsible for the members' money. "There are opportunities, but the risks are too high," he said. "The returns may be higher on private sector instruments but the risks are also greater -we have to be careful because we're managing public funds."
Most of the EPF money is invested in government-sector investments, called gilt-edged instruments, as they are risk free compared with that of investments in the private sector, he explained. "There is no risk of default," he added. The EPF has improved its active participation in the secondary market activities of Treasury Bonds and Treasury Bills, thereby enhancing the realizable rate of return from those fixed income securities, he noted.
In November 2000, EPF recruited eight fund managers trained in fund management and financial analysis under a World Bank-funded prog-ramme, to strengthen the in-house fund management capacity and facilitate the objective of streamlining the investment process and diversifying the investment portfolio. EPF fund manager Fernando said that the investors were well off with investments in government securities due to the high returns at zero risk compared with that of private sector investments in recent months. Interest rates on government securities went up at the beginning of the fourth quarter of 2000 and remained high till the middle of last year.
"We grabbed the opportunity," Fernando said. "There was no risk involved and the returns were high - so we invested most of our money there." EPF inv-estment decisions are based on three main criteria - the return, the risk and the need to have liquidity, he said.
"We're ready to bear below average risk levels and ask for the credit rating to measure risk if it is a corporate debt issue," he said. "Then we carry out our own thorough analysis to make sure the particular investment satisfies all criteria required by the fund and then negotiate the rate of return."
The EPF is not allowed to invest in listed equities of commercial banks and other financial institutions because of a possible conflict of interest since the Central Bank is regulating and supervising these organisations.
Fernando said they would like to invest overseas but cannot do so because the capital account remains closed. Perera said the EPF's portfolio balance increased at an average rate of 16 percent at cost over the last three years - from Rs. 161 billion in 1998 to Rs. 186 billion in 1999 and Rs. 215 billion in 2000. In 2000 contributions amounted to Rs. 16.8 billion while refunds came to Rs. 10.5 billion. "So we have enough liquidity to repay liabilities in full and on time," he said.
By Dr. S. Colombage
At the 11th SAARC summit that
was concluded last week, the
leaders of the seven-member countries agreed, among other things, to finalise the draft for a South Asia Free Trade Area (SAFTA) by the end of 2002. Initially, the members agreed at the eighth SAARC Summit of 1995 to aim towards achieving SAFTA by the year 2005.
At the ninth Summit of 1997 it was decided to advance the target date of SAFTA to year 2001. But SAARC failed to meet that deadline as adequate negotiations between the members could not be held. So, the new deadline is one year behind the schedule.
Although SAARC was set up in 1985, the process of regional integration, in economic terms, began only in the early 1990's and therefore, the region's experience in this regard is relatively short. Thus, economic cooperation in the South Asian region is progressing rather slowly compared to other regional groupings like the European Union (EU) and Association of South East Asian Nations (ASEAN). The EU has achieved remarkable success in regional integration with the introduction of its single currency, Euro, since the beginning of this month. Our region has to go a long way to attain that level of integration.
At present, the region is attempting to implement the South Asian Preferential Trading Arrangement (SAPTA) that became operational in 1995. SAPTA was expected to be an umbrella framework of rules providing for step-by-step liberalisation of intra-regional trade through reduction of tariffs and para-tariff and non-tariff barriers.
South Asian countries are bound to gain from this process on several fronts. With greater integration, there will be opportunities to promote exports and to mobilise foreign investments within the region. Also, the member countries would be in a better position to sell their products outside the region. It will also be possible to attract more foreign investments from industrial countries.
As regards trade promotion, it shou-ld be noted that export growth depends not only on reduction of tariffs and non-tariff barriers but also on a number of other factors like the size of the country, resource endowments, investment climate, complementarities of goods produced, export competitiveness and quality of goods.
Factors like business confidence, prudent macroeconomic policies and investment incentives are critical in attracting foreign capital. Broadly, the South Asian countries have made some progress in improving these pre-conditions, but still the economic environment in the region is not conducive enough to attract foreign investments. As a result, inflows of foreign capital to the region are not very significant.
Intra-regional trade in the SAARC region remains very low, compared with the region's trade with the rest of the world. Intra-regional trade accounts for less than 5 percent of the region's total trade. Thus, almost the entire foreign trade of the region is being conducted with the rest of the world. SAARC member countries should focus on the potential to expand trade within the region taking into account its huge market. The region is inhibited by an estimated population of over one billion people accounting for one-fifth of the world's population.
Given the possibility of exploiting this huge market available within the region itself to sell member countries' products, a greater role on the part of SAARC is necessary to harness this trade potential in the region and to adopt co-operative policy action. Factors like less trade complementarities, political differences and a small volume of imports from the region by bigger member countries inhibit any trade expansion within the region.
The growth of Sri Lanka's exports to the South Asian region is not very satisfactory. In fact, the country's exports to the region as a ratio of total exports are 3.5 percent. In contrast, Sri Lanka's imports from the region are as high as 11.3 percent of total imports. So, Sri Lanka maintains a trade deficit with the region, mainly with India.
SAARC can gain from the experiences of other regional groupings like EC and ASEAN. Those alliances have developed to the present status by their vision, dedication and discipline. Unlike such blocs, SAARC is severely hampered by political tensions among certain member countries. These need to be resolved to forge cooperation. A certain degree of sacrifice by each member country is also required to achieve a common destiny.
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