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Amended bids for Sathosa stake The Ministry
of Commerce and Consumer Affairs, in the continuing saga of the
controversial Sathosa privatisation, last week called for an amended
financial bid from the five parties that submitted offers in November,
on the grounds that the value of the stake has increased since then. The "virtually
fresh" bids came two weeks after The Sunday Times FT raised
concerns about impropriety and transparency in the deal amidst long
delays in awarding the tender for the 40 percent stake and management
of the Sathosa supermarket chain. Bids were called more than six
months ago. The call for
amended bids - which financial analysts said virtually amounts to
fresh bids - came in a letter from the Ministry's divesture committee
to the five bidders, the John Keells-Carsons-Ceylon Biscuits consortium,
Cargills, Abans, Shoprite Ltd and Foodlands Lanka, informed sources
said. Informed sources
said the five firms struggled to come up with amended bids by the
deadline date, May 21 as most had seen the May 13-dated letters
only on May 19 due to the long Vesak holiday week. "This is
a joke. It is totally ridiculous to give just two days to come up
with an amended bid," an analyst said. When the deadline
closed four of the five bidders, the John Keells-led consortium,
Cargills, Abans and Shoprite Ltd submitted bids to conform with
the Ministry view that the 40 percent stake would realise a higher
value than when bids were opened on November 29 last year. Commerce Minister
Ravi Karunanayake, asked to respond to allegations that the practice
of calling for amended bids in midstream of a tender process was
unfair, declined to comment saying the matter was sensitive and
he would be informing cabinet shortly on the successful bidder. Industry analysts
slammed the Ministry over its latest move after the long delay itself
in awarding the tender came in for severe criticism. "Where
is the transparency in this exercise? Where is the promised corporate
governance by the government?" another analyst asked. The Ministry
invited not only amended bids, six months after bids closed and
two companies were shortlisted, but also introduced fresh clauses
for bids to be considered like the requirement of "preferable
foreign collaboration", which was not a requirement earlier,
and almost close to another 2,000 employees to be absorbed by the
new managers. Officials close
to the negotiating process, who declined to be named, defended the
decision to call for amended bids. They said that the ministry was
not happy about the earlier valuation and believed the stake was
worth much more. "This view has been vindicated because there
is a 100 percent increase in the value of the new bids. The government
would be getting much more on this deal than less … so why
complain?" one of the officials noted. Industry sources
lamented that though the tender procedure had major flaws, bidders
were unlikely to complain. "On the other hand, whom can one
complain to?" one source said, also acknowledging that the
reluctance to raise objections also stems from the need to win the
tender and not upset officials. Earlier the
John Keells-led consortium and Cargills were recommended for the
final selection while the other three were rejected by Ernst and
Whinney, the cabinet-appointed consultants. The earlier value for
the 40 percent stake was Rs. 400 million. No 'second opinions' at SEC in future The Commissioners
of the Securities and Exchange Commission have decided that investigations
that require to be referred to the Attorney General's Department
will first have to be referred to the Commissioners themselves before
being sent for the AG's opinion. "The Commissioners
have to be informed first, as is the normal practice, and then they
will decide whether it should be referred to the AG's Department,"
said General Denis Perera, the new chairman of the SEC. He was responding
to a query whether those being investigated by the SEC would be
allowed a second opinion after the AG's Department has given its
opinion on the investigation as was the case with the insider dealing
investigation against former SEC chairman Michael Mack. This would
not be the case in future, Perera said, adding: "I was not
there when this happened but I examined the matter and found that
according to the normal procedure it should be referred in the first
instance to the Commission and the Commissioners refer it to the
AG. "But in
that instance it had been referred to the AG before going to the
Commission. In that investigation
the AG's Department said that there was a prima facie case against
Mack and one of the other directors of Aitken Spence. The SEC has
decided to proceed with legal action against them. The SEC Commissioners' decision to get a second opinion, which cleared the accused of any wrongdoing, created much controversy and raised questions whether others too would be accorded the same privilege in future investigations. The AG subsequently
went to the extent of rapping the Commission, saying it had "acted
improperly" in getting a second opinion despite the original
ruling by the A-G's Department. Former SEC
director general Ariththa Wikramanayake said that the practice during
his time was for the Secretariat to inform the Commission of its
findings in an investigation and then refer it to the AG. If certain Commission members had a conflict of interest they were not given specific details of the investigation, he added. Floods ravage tea, agriculture, industries Raging floods
caused by torrential rains that devastated the south have caused
severe damage to the tea industry, the mainstay of the southern
economy, as well as other industries, agriculture and infrastructure. The authorities
were still trying to quantify the damage on Friday because many
areas were cut off with roads impassable, telephone lines down and
no electricity, and people displaced. "We're
still estimating the damage," said Minister of Southern Region
Development, Ananda Kularatna. "Five districts have been affected."
Apart from damage to industry and agriculture there has been severe
damage to highways that the Road Development Authority was still
assessing. Many gravel roads in the interior have been washed away. Kularatna said
in Katuwana alone damage to property has been estimated at least
Rs. 25 million. The government
was considering ways to help businesses affected by the floods,
he said. Small and medium
sector industries, the largest business sector in the island, have
been hit badly in the southern region, said Nihal Abeysekera, chairman
of the Joint Business Forum and head of the Federation of Chambers
of Commerce and Industry of Sri Lanka. "We're still trying to get accurate assessments of the damage. We've been told by our people in Sabaragamuwa that it is quite bad there and in some parts of Matara too. We're trying to help businesses - employment is going to get affected." The damage caused
by floods is expected to sharply reduce the tea crop in June since
waste swathes of tea bushes have been submerged, many smallholders
who produce the green leaf made refugees and factories flooded,
cut off or without power. "Landslides and floods in the Southern Province are having a devastating impact on the low grown tea industry, with many factories either marooned or flooded," said Niraj de Mel, TASL chief executive officer. Even growing
conditions will be severely affected due to too much water on the
ground. "Consequently,
low grown offerings in mid to end-June will be severely curtailed,"
de Mel said. Even transport
of teas from upcountry plantations would be hampered because many
roads were impassable owing to floodwaters and earthslips. Tea production
in some 200 factories in the Ratnapura, Galle and Matara districts
of the province is almost at a standstill, said Sarath Samaraweera,
President of the Private Tea Factory Owners' Association. Rains had affected
the quality of leaf while tea was not being plucked in many plantations
as floods had reduced worker turnout. "Some
tea smallholdings have been completely submerged," he said.
"The water levels will fall in a few days but till then there'll
be no work. “Tea is
a hardy bush so it will survive but if the ground remains water-logged
for long bushes could be damaged." Roads had been
"terribly affected" and would require extensive repairs.
"Roads have become rivers, electricity supply and telephones
lines have been cut," Samaraweera said. The smallholders
who produce the low grown teas and factory owners would be hard
pressed to survive the latest crisis, coming on top of the severe
blow to the industry caused by the Iraq war, he said. The TASL said large quantities of made tea were destroyed and machinery damaged in factories under water, and that owing to landslides and roads being under water, transport of leaf to factories and made tea to Colombo warehouses was disrupted. Brokers Asia
Siyaka Commodities said that overall initial estimates are that
significant loss of tea land has not occurred. "Tea production will decline with some percentage being irretrievable," it said. Latex collection
has declined because heavy rain disrupted tapping but rubber estates
have not been affected by floods or earthslips, H.M.K. Herath, director
general of the Rubber Development Department said. Officials at
Dipped Products Ltd, the big manufacturer of rubber gloves, said
it has enough latex stocks to last for a couple of months but might
be forced to import raw material if rains continue. The Finance
Ministry announced on Thursday that a special flood relief fund
has been set up under the Director General of Fiscal Policy and
Economic Affairs and that donations will be exempted from tax. N. Warusawitana, Director General, State Accounts, said over Rs. 12.5 million had been received up to Friday afternoon."We will release the funds to Government Agents to be used as necessary," he said. DLB's Rs. 322 million in unclaimed prize money The Development
Lotteries Board (DLB), in the centre of a dispute between President
Chandrika Kumaratunga and Prime Minister Ranil Wickremesinghe, last
year reported total sales or income of Rs. 2.3 billion, up from
Rs. 1.5 billion in the earlier financial year. According to
the DLB accounts for 2002 and 2001 (January to December), the board
made a gross profit of Rs. 767.9 million against Rs. 603.8 million
in 2001. Expenses totalled Rs. 309.6 million versus Rs. 158 million. The net profit,
which includes a whopping Rs. 322 million (Rs. 76 million in 2001)
in unclaimed prize money, was Rs. 781.2 million against Rs. 485.6
million in 2001, the accounts show. Some of the
figures on the accounts however don't tally with last week's DLB
advertisement providing income and allocations to the president's
fund. While the advertisement reports that Rs. 460 million was remitted
to the president's fund last year with another Rs. 484 million to
be sent making it a grand total of Rs. 945 million, the accounts
show that the contribution to the president's fund last year was
Rs. 379 million with another Rs. 484 million shown as surplus -
together making it a total of Rs. 863.8 million. Income or sales figures of Rs. 2.8 billion in 2002 and Rs. 1.9 billion, according to the advertisement, do not tally with the sales figures shown in the official accounts. The DLB issue
still remains unresolved with DLB directors still reporting to the
Ministry of Economic Reforms even after the president took charge
of the department which triggered a constitutional crisis.
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