| Business |
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| VAT
further burdens will be heaped on the public? Finance Minister K.N. Choksy and Deputy Finance Minister Bandula Gunawardene, grappling with the problem of reducing the cost of living with the introduction of VAT, frown as they study a document at last week's news conference. It was held to explain how prices would come down as a result of the new tax system and the exemptions given to many essential commodities. But the public remains sceptical about government assurances. Pic. by Athula Devapriya Small business
enterprises against the wall The problem
is compounded by the government's failure to force banks to soften
their treatment of companies which have defaulted on loan repayments,
SME industry leaders claim. "There
are a large number of companies awaiting closure," said Nawaz
Rajabdeen, vice president of the Federation of Chambers of Commerce
and Industry. "The root cause is that the government doesn't
have the money to pay for what they have purchased." In May, the
National Construction Contractors' Association of Sri Lanka' s western
province division presented the government with a list of overdue
debts owed to its members by government agencies. The total outstanding
added up to about Rs. 2 billion, according to the division's chairman,
Captain K.S.K. Perera. "There's
almost a total blockage of the cashflow," he said. "From
the contractor's point of view it's almost an economic dislocation." Perera said
his own company, Sisira Builders Pvt Ltd, is still awaiting payment
for the construction of a state library in Badulla for which Rs.
4.9 million should have been paid by mid-March and a further Rs.
2.8 million in April. The project
is not the subject of any dispute or litigation, he said. Perera
said that for the past two years government agencies have routinely
delayed payment of their bills by three to five months. But the situation
had worsened since the beginning of this year, he said. Officials
at Uva Provincial Council had told him the debt could not be paid
because they were still awaiting funds from the Treasury. The government
has admitted that it faces an economic crisis, with its debt repayment
obligations outstripping revenue. But it is not certain that the
problem has led to a liquidity crisis, with systemic failure by
government agencies to pay their bills. Gamini Karunaratne,
the senior deputy general manager of treasury at Hatton National
Bank, says he had seen no evidence of the government being unable
to pay its debts. "Some
of my clients have recently been paid very fast [by government agencies],"
he said. But Rajabdeen
said the government's cash crisis had made it impossible for many
SMEs to keep servicing their debts to banks, which were responding
by utilising their powers of "parate execution" to close
businesses down and sell their assets.The UNP government had promised
that it would force the banks to take a softer stance on defaulting
borrowers by helping them trade their way out of trouble, he claimed. But Rajabdeen
said the government had not fulfilled this promise - a failure evidenced
by the many notices that can still be seen in newspapers advertising
the sale of failed business's assets. While larger
commercial private banks such as the Commercial Bank and HSBC were
attempting to give troubled business a second chance, the state-run
Bank of Ceylon and many smaller lenders had not followed suit, he
said. "The banks should resist parate litigation and case-by-case reassess and see if you can revive the company," he said.
The delegation
was accompanied by the Pakistan High Commissioner for Sri Lanka
Ashraf Qureshi and Tanweer A. Khaskheli, Counsellor at the Pakistan
High Commission. The mission's
objective was to identify the areas of cooperation which will be
beneficial to both countries, promoting bilateral trade including
exports, imports, joint ventures, services and cooperation at government
and private level. During their
stay the delegation met with several leading organisations and clinched
several deals. "Sri Lanka
and Pakistan have been enjoying a very cordial and strong relationship
which has helped greater bonds of friendship and exchange of cultural,
social and trade ties," said Nihal Abeysekera, Vice President,
FCCISL during the meeting. "Leaders of our nations, Sri Lanka and Pakistan, have already, achieved a high degree of success in bringing the people of our two countries much closer especially through the FTA and our association have been pleasant since historic times. We will still cherish such cultural, commercial and spiritual affinities," added High Commissioner Qureshi. Seylan MB reports
1st half profit In results
released this week, the SMB Group reported a pre-tax profit of Rs.
6.7 million, a growth of 117 percent from a loss of Rs. 39 million
in 2001. Gross income grew 53 percent to Rs. 248 million. Seylan
Merchant Bank reported a pre-tax profit of Rs. 826,500, a growth
of 102 percent compared to a loss of Rs. 41 million in the first
half of 2001 and gross income of Rs. 203 million, a growth 40 percent. Net interest income growth achieved by the Group and the Bank was a noteworthy feature of this performance SMB's Director/General Manager Rohan Senanayake said. The Group's net interest income grew from a negative income of Rs. 7.3 million to a positive income of Rs. 28 million and the Bank's net interest income grew to Rs. 15 million from a loss of Rs 4.6 million in the first half of 2001. Govt says VAT
will bring down prices "The main
aim of the VAT is to make it easier for the householder to manage
his household budget and to simplify the tax system for the benefit
of business houses," he told a news conference. This was done
despite the "very difficult" revenue position of the government
and a heavy outflow of funds to service debt, he said. Many items
that were previously subject to the 12.5 percent Goods and Services
Tax and the 6.5 percent National Security Levy were now exempt from
VAT, he said. These include
rice, rice flour, wheat, bread, infant powder milk, liquid milk,
coconuts and coconut products, vegetables, eggs, fish, fruit, spices,
crude oil, kerosene, bunker fuel, pharmaceuticals and medical equipment.
These exemptions
coupled with previous cuts in taxes and surcharges should result
in lower prices, he said. The government
would lose about Rs. 800 million in revenue because of these exemptions.
"We expect
a very definite reduction in these prices," Choksy said. Traders
should co-operate with the government to ensure the benefits of
the VAT exemptions are passed on to consumers, he added. Deputy Finance
Minister Bandula Gunawardene said that the government would have
to take stern action against businessmen trying to profit from the
new tax system at a time when the country was facing serious economic
difficulties. With no taxes
on most essential food items, any price hikes would be the result
of factors other than VAT such as the depreciation of the rupee
and rain and drought which affect supplies, he said. However, it
was not clear how VAT on inputs would affect prices. A 10 percent
VAT has been imposed on poultry feed, planting materials and vegetable
seeds, fertiliser including rock phosphate, unprocessed meat, powdered
milk, coconut oil, potatoes, onions and chillies. Gunawardene
declined to answer a question on how taxes on inputs such as fertiliser
would impact on prices. Representatives
of associations of traders of vegetables, fruit, rice, fish and
motor vehicles and bicycles who were present at the news conference
said there would be some reduction in prices. But the official
representing bicycle manufacturers was unable to say how the VAT
will lead to a reduction in prices because of the tax charged on
parts used to assemble the bicycles. Importers of re-conditioned motor vehicles from Japan said there would be some reduction in prices but that they were unable to pass on the full benefit of a lower VAT owing to the appreciation of the yen. Infrastructure
development: A BOI statement
said that what was clear is that Malaysian interest in Sri Lanka's
development is focused on infrastructure. Malaysian money and expertise
will go into areas where that South East Asian nation excels in,
namely port development, highways, low cost housing and township
development. The delegation
was overwhelmed by the interest of a large number of companies specialising
in infrastructure development. This interest will pave the way for
a visit to Sri Lanka, in the near future, of a Malaysian government/
private sector delegation headed by Sami Vellu, Minister of Works
and Public Utilities. West Port is
a good example of an enterprise that has shown considerable interest
in further developing Colombo Port. A similar company is Port Tanjun
Palapas Port, which has also looked at developing a Sri Lankan port.
Hambantota, Galle and Trincomalee have all been earmarked for future
modernisation and are potential candidates for Malaysian investment,
the statement said. Another strong
contender is United Engineers, Malaysia Berhad listing among its
major projects the futuristic new Kuala Lumpur International Airport,
the modern stadium where the previous Commonwealth games were held,
the North-South Highways and the Monorail-Light Rail Transport System
(MRT & LRT). This company has been an active player in the development
of Malaysia and has also undertaken major contracts in India, Morocco,
the Philippines and Thailand. Minister Peries
met officials from Perodua, a Malaysian automobile constructor which
has expressed interest in the manufacture/assembly of the "K"
car in Sri Lanka. The visited also resulted in a boost to existing Malaysian investment in Sri Lanka. After a visit by the minister, the Chairman of Malaysia Telecom announced that they would invest $ 90 million in their existing MTN system in Sri Lanka. Jaffna branch
of Commercial Bank has ATMs Amitha Gooneratne,
Managing Director of the bank, recently opened the fully refurbished
branch which is equipped with the latest technology while every
modern banking convenience available in other parts of the country
is now made available to customers in Jaffna. He said: "Our
history in Jaffna goes back nearly a 100 years and even during the
war, the Commercial Bank branch was open to the public. But due to
obvious technological and logistical reasons, we could not offer
all the services and facilities available in other parts of the
country. As the country's premier financial institution we have
a responsibility to provide comprehensive financial services to
the citizens of Jaffna and we are very happy that we have fulfilled
that by providing the latest banking technology and facilities to
Jaffna." A representative
of Jaffna residents said, "with the current positive outlook,
normal life is gradually returning to Jaffna. Those who left due
to the war are now returning to their homes. Some companies have
already started their operations in Jaffna and a large number have
expressed great interest in setting up businesses. The people of
Jaffna are pleased to see Commercial Bank taking the initiative
to provide people with up to date banking technology". On the same
day Commercial Bank commissioned the second ATM in Jaffna, which
will add more convenience to customers. As the peace initiatives progress, Commercial Bank intends to open more ATMs and branches in the north, a bank statement said. Manoharan and
Sangakkara Associates join SJ Associates T. Someswaran,
Senior Partner and P.E.A. Jayawickreme Managing Partner of SJ Associates
said, "We are indeed delighted that SJ Associates joins Manoharan
and Sangakkara Associates to represent DTT in Sri Lanka. Our clients
will benefit through the combined service capabilities of our two
entities and the support offered by the global DTT network." M.B. Ismail,
Partner of Manoharan and Sangakkara Associates said they were pleased
to join SJ Associates and said the joint venture would create a
bigger and more diversified organisation. SJMS Associates
will have 14 partners and 330 staff making it one of the largest
professional services organisations in Sri Lanka. Deloitte Touche
Tohmatsu is one of the world's leading professional services firms,
delivering world-class Assurance and Advisory, Accounting, Auditing,
Tax and Management Consulting Services. More that 90,000 of its professionals in over 130 countries serve nearly one-fifth of the world's largest companies as well as large national enterprises, public institutions and successful fast growing companies. Practical business
education for schools When 30 students
of Gothami Balika Maha Vidyalaya calling themselves the Silver Line
Company started selling food items within the school premises they
were requested to change their line of business by the school administration
as the school canteen incurred losses in consequence. The company
is much like any other business; they have their own president,
a board of directors, conduct board meetings and even carry business
cards. The students are part of a practical business education programme
operating under the guidance of Young Entrepreneur Sri Lanka (YESL). YESL, a non-profit,
non-government organisation, has been conducting practical economic
and business education programmes in Sri Lanka since 1996. Yet very
few are aware that this organisation last year encompassed 20,000
students at various levels in its programmes. The programme
becomes very useful especially at a time where the education curriculum
in Sri Lankan schools and universities is being criticized due to
its failure to gear children to face the challenges of the business
environment when they leave school. YESL is an affiliate body of
Junior Achievement International (JAI), the world's largest and
fastest-growing non-profit economic education organisation that
conducts programmes in 112 countries. The Silver
Line Company project is aimed at the senior students in schools
who have completed their Ordinary Level examinations. The students
at Gothami BMV finally had to settle on selling printed bookmarks
when their economic threat to the canteen worried school administrators.
The project
requires students to group together, conceive a line of business
and float a company to conduct the business. These companies are
just like normal businesses but are registered under YESL. After
the registration trained volunteers conduct a few business initiation
sessions with the students. Subsequently the students have to venture
on their own with an assigned teacher-in-charge as they are given
guidance material by YESL. These materials
have been designed by JAI and provide instructions on how the students
should conduct board meeting, marketing programmes, maintain accounts,
etc. The students are also required to follow a set of regulations
they way businesses have to abide by company laws. "It makes
them workforce ready", says John Geier, Director - South Asia
Region who operates from the JAI regional office at the Hilton JAIC
Tower. He further explained, "The programme also promotes civic
mindedness and business ethics as the students have to pay a nominal
fee as tax, do some social service for the school, and even return
the capital and declare dividends once the company realises profits
and is liquidated at the end of the year." The programme has
proved to be very successful. A group of students who had floated
a company with Rs. 1,500 conducted a musical show and realised profits
to the tune of Rs. 550,000. Another special
benefit of this programme in Sri Lankan schools is English education
because the programme requires conducting all affairs in English
including meetings, correspondence, etc. In addition, it has 24
different programmes designed for all levels from Grade 1 to 13
together with teaching material. At the elementary
level it starts with simple activities like story telling which
has a connected economic aspect. However, "teachers don't know
much about the programme and they see it as a waste of time"
said one of the students. The local programmes
that started with nine schools today covers 200 schools. YESL has
the approval of the Ministry of Education for its programmes and
is looking at expanding towards some of the lesser accessible schools
in rural areas. Many leading businesses have been sponsors of the
programme but the organisation is hoping that more sponsors will
come on board. Patrick Amarasinghe, President of YESL says that
the demand has grown and they need more support from the private
sector. He further
added that this is the only programme where the private sector businesses
not only gain mileage from sponsorship and new customers but also
a new workforce that is business ready. According to him some of
the companies that have supported them have also recruited some
of these young entrepreneurs. Amarasinghe
also emphasised that the contribution always need not be cash. He
says that the organisation needs volunteers from the business circle
who could follow the guidance material and guide a large number
of students. JAI also has
other programmes that are funded by large global companies and bring
together some of the world's best from member countries through
exchange programmes, computer simulated competitions, etc. JAI was
founded in 1919 in the US where it now has a network of 156 offices.
Globally the organisation annually covers over 5.5 million young people from countries such as Albania to Zimbabwe. The YESL could be contacted at 27B, Railway Avenue, Nugegoda. Tel: 815162 More news >> |
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