World
Bank mulls post-conflict aid
The World Bank is looking at giving Sri Lanka a massive rehabilitation
and reconstruction aid package if peace talks succeed and is
keen not to be left out of the rebuilding effort in which other
international funding agencies have stepped up the tempo of
their operations.
"We
have realised that we have responded too late to the peace
process while other agencies are ahead. Even the UN is seriously
looking at rehabilitation and reconstruction. This is our
turf - we need to do something," a World Bank source
said.
While preparations are underway for the development forum
on June 5-7, which brings together donor countries and lending
agencies for a parley in Colombo for the first time, the bank
is also planning a bigger and higher-level meeting in December
in Paris to discuss the Sri Lankan situation. "Donors
would be represented at a higher level than the local development
forum," the source, who declined to be identified, said.
Top officials
from the Asian Development Bank, the International Monetary
Fund and the United Nations have been visiting Sri Lanka to
assess the current situation as the peace process takes shape.
The business community is confident of the government and
Tamil rebels thrashing out a workable solution to end the
ethnic conflict when peace talks begin next month.
Donor
agencies and countries share the optimism particularly because
there is for the first time third party - Norwegian - involvement
in the peace process. The ADB has said it could use emergency
funds for development if a solution is found while the IMF
has resumed disbursements in a standby credit facility that
was suspended last year after the former government failed
to keep to performance targets.
The World
Bank, the source said, had been concentrating on its current
programmes and paid little attention to the post-conflict
phase until now. A new country director takes over in July
from incumbent Mariana Todorova who completes her third year
in Sri Lanka.
The new
director, Peter Harrold, is a British national and has wide
experience working in post-conflict situations having previously
served in Sierra Leone, Ghana and Liberia. He is likely to
speed up World Bank aid to Sri Lanka for post-conflict work.
Unlike
the former Aid Sri Lanka group meetings held annually in Paris,
development forums are not pledging conferences and even if
they were, Colombo would be pressed to use large sums of unutilised
funds rather than being provided new loans and grants.
"We have an aid pipeline of several million dollars which
have been unutilised over the years due to implementation
problems. If we ask donors for funds, the first question would
be - what has happened to the money we have not spent?"
noted Economic Reforms Minister Milinda Moragoda.
He said
$500 million worth of donor funds for highway projects have
not been utilised as the Colombo-Matara highway and the Colombo
outer circular road have been delayed due to land acquisition
problems.
Moragoda
said there was a need for more effective legislation to acquire
land and pay market rates as compensation if much-needed infrastructure
projects are to get off the ground quickly. Such legislation,
he said, was being prepared to make the acquisition process
transparent, time-bound and more effective.
Govt.
to lease Trinco oil tanks to Indian Oil
The government last week approved the hand over of 17 fuel
tanks at the China Bay storage facility in Trincomalee and
100 petrol sheds island-wide to the Indian Oil Corporation
(IOC).
The aim
of the move was to liberalise the petroleum sector and create
competition that would eventually bring down prices of petroleum
products, government officials said.
A team of Indian officials will visit the island shortly to
inspect the oil tank farm in Trincomalee and finalise details
of the lease agreement.
The Indians
will provide security at the 17 tanks that the IOC will lease
from the Ceylon Petroleum Corporation (CPC) under the proposal
submitted to the cabinet by Minister of Economic Reforms,
Science and Technology Milinda Moragoda. The proposal was
approved by the cabinet on Thursday.
The agreement
will give India a presence in Trincomalee, which is considered
by the Tamil Tigers as the capital of Tamil Eelam. Prime Minister
Ranil Wickremesinghe will discuss the deal during his visit
to India next month. The IOC is expected to invest in the
island and buy 100 of the CPC petrol sheds. The CPC has said
it intends to reduce its network of 350 filling stations and
keep only 120 essential outlets.
A team
of experts from India have already inspected the Trincomalee
oil tank farm, which has 99 tanks with a capacity of 12,100
metric tons each, of which 15 are being used while the rest
lie abandoned and covered by shrub jungle. Ministry of Enterprise
Development, Industrial Policy and Investment G. L. Peiris
confirmed that the IOC has been invited to use part of the
tank farm in collaboration with a local firm. The Indian government
has always had a strategic interest in Trincomalee, he told
the Cabinet news conference.
Big
deal for MIT
Millennium Information Technologies (MIT) has clinched three
new deals worth $34 million to provide stock exchange software
products for American clients, its CEO Tony Weerasinghe said.
"We
have got into the big league," he said. "These clients
trade something like 10 times the amount of Sri Lanka's GDP
in a day." An official announcement on the new business
is expected shortly, Weerasinghe said. The company opened
offices in the US and Singapore last year. He added the new
deals meant their presence in the US was paying off. MIT expects
to complete the first project by the end of this year. (See
Page 5)
Foreign
banks mixed on peace hopes
By John Breusch
Hopes for a peace-inspired boost to foreign investment are
rising with Standard Chartered, one of the country's biggest
foreign-owned banks, reporting a pick-up in activity in the
past two months.
Standard
Chartered's chief executive in Sri Lanka, Wasim Saifi, predicted
that the commencement of peace talks - scheduled for next
month - could galvanise growing confidence in the Sri Lankan
economy.
"The
interest will be heightened if the talks get underway,"
he said. Saifi said interest from foreign investors had increased
in the past two months after the first quarter had provided
little indication of improvement.
Investors
appeared to be lured for a variety of reasons: some spotting
opportunities in the domestic economy; others targeting export
and tourism; and some investors from the region seeking to
take advantage of tariff benefits.
"The
peace by itself would not have got the business in,"
he said. "But people would have been looking at those
opportunities and may not have moved so far because of concerns
about war." "But now there's some optimism."
However, Sri Lanka's other major foreign-owned bank, HSBC,
said investors appeared to be still wary of the prospects
for peace.
"We've
not seen any actual increase [in foreign investment) until
now," said Mark Humble, who took over as HSBC's new chief
executive in Sri Lanka earlier this month.
"I think it's too early for newcomers to make that big
leap." But Humble said there appeared to be increased
activity among multinationals already based in the country.
HSBC's biggest international clients in Sri Lanka include
British American Tobacco and Unilever - two companies that
have already began to reach into the north and east since
the ceasefire commenced in February and with the opening of
the A9 highway to Jaffna.
"They have started to expand their distribution network,"
he said.
"The
existing players I think are starting to expand and explore
new opportunities."
Humble highlighted two sectors that were receiving renewed
interest from foreign investors: tourism and energy. "The
tourism industry of course has fantastic prospects,"
he said.
"So
existing customers here in Sri Lanka are looking at hotel
properties both on the south and the west coast, and on the
east coast. "I'm aware of two foreign investors that
are interested in buying [tourism] property here."
The development
of Sri Lanka's troubled energy sector has also created interest
among foreign investors, he said.
Unilever
eyes ageing population
Unilever Ceylon aims to exploit the opportunities provided
by an ageing population, greater urbanisation and a growing
female workforce in the island by focusing on products like
anti-ageing creams, functional foods and beauty products.
The company,
a subsidiary of the consumer products multinational, has set
a target of achieving an annual turnover of Rs. 23 billion
in four years' time, its chairman Ehsan Malik said last week.
"In
reaction to the changing face of Sri Lanka and the opportunities
that this brings for us, our vision is to double our branded
business by 2006," he told representatives of supermarkets
with which Unilever does business.
He predicted
that demand for anti-ageing creams would rise with Sri Lanka's
population ageing, owing to a low birth rate and improved
living standards that help people live longer. Malik said
that with the number of working women set to rise, limiting
the time they can spend in the kitchen and in keeping the
house clean, there would be more scope for ready-to-eat food
and what he called convenient hygiene solutions.
"One
implication of more working women is that women will marry
at a later age," Malik said. "Hence, there should
be a higher demand for beauty products." Increasing urbanisation
- at least half the population will live in towns by 2010
- should "accelerate the switch from commodities to branded
consumption," he said.
Unilever
Ceylon's turnover is "significantly higher" than
that of Nestle, Ceylon Tobacco Company or any other consumer
products company in the country, Malik also said.
"Indeed, CTC's total turnover for the first quarter of
2002 amounted to no more than our turnover in just a single
month of March - a little over one billion rupees," he
said.
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