The Institute of Chartered Accountants of Sri Lanka (ICASL) has appointed a committee to examine matters relating to financial aspects of corporate governance and to make recommendations, the Institute said.
Institute's Past President Nivard Cabraal, Hayleys Deputy Chairman Mahendra Amarasuriya, Registrar of Companies, K. J. Chitrasiri, President's Counsel, Romesh de Silva, Central Bank Senior Deputy Governor, S. Easparathasan, Ceylon Chamber Chairman, Channa Gunasinghe, CSE Director General, Dylan Moldrich, ICASL Past President, G.C.B. Wijeyesinghe and SEC Director General, Arittha Wickemanayake, ICASL President M. R. Mihular and Secretary D. B. Andaraweera are ex officio members.
The principal responsibilities and liability of auditors, the extent and value of the audit; the links between shareholders, Boards and Directors; the case for audit committees on the Board, including their composition and role and the responsibilities of executive and non-executive directors for reviewing and reporting on corporate and financial performance to shareholders and other interested parties, are the issues on which this committee is expected to report on.
George Ondaatjie the well known hotelier and tourist industry figure was recently appointed to the PATA Industry Council by the PATA Board of Directors, a PATA Secretariat release said.The Industry Council of PATA consists of the tourist industry representative from the PATA countries who provide the PATA with feedback on important changes in the nature of the global tourist industry.
The industry council's meetings, in various parts of the world also provide an important forum for the promotion of destinations. For Sri Lanka currently battling image problems as both a cheap destination and a trouble spot, the industry council would be a forum of strategic importance in countering this position.
Mr. Ondaatjie's appointment to the industry council is seen as a window of opportunity by the tourist industry to improve Sri Lanka's image within the global tourist industry.
Mr. Ondaajie's role in the PATA industry council is further enhanced by his appointment as the industry council proxy to the Board of Directors of PATA. The position of the industry council's proxy to the Board of Directors has often in the past been a precursor to an appointment to the Board of Directors of PATA. Sri Lanka lost its representation on the prestigious PATA Board of Directors with the recent demise of Mr. Clement Ranasooriya, Managing Director of Anglo-Asian Tours.
Sri Lanka has faced different problems at different times but the country was now facing problems from several fronts simultaneously, Opposition Leader Ranil Wickremesinghe has said.
"This is the first time we see, political, military, economic and social problems coming home to roost at the same time," Mr. Wickremesinghe said addressing a forum of the United Professional Group on the state of the economy in Colombo last week.
He said the crisis facing the economy was typified by the situation around Colombo airport. "Your main point of entry to the country is worse than the city of Jaffna. You are lucky to get in, and lucky to get out," he said. "The decision-making process has broken-down . Bureaucrats are afraid to make decisions. Quick decisions are necessary in a market economy," Mr. Wickremesinghe said.
He also criticised tariff reductions saying they were being made too quickly.
The rural economy was virtually coming to a grinding halt, he claimed. Local manufacturers had two main sales seasons, targeting the rural sector - the Christmas and Sinhala and Tamil new year seasons. "The Sinhala and Tamil new year seasons will be worse than the Christmas season," he predicted. He said the banking sector was also thrown into a crisis by the government due to tight liquidity.
Former Central Bank Governor, Neville Karunatilake said the rural sector had been neglected and some of the Regional Rural Development Banks were virtually doing no business at all. The banking system had also faced the worst holocaust in the history of not only Sri Lanka but also globally. During the Second World War the Bank of England and the German Central Bank had been hit, but survived and managed to carry on in the same premises," Mr. Karunatilake said. He said the Central Bank was fortunate that it had the Staff Training College at Rajagiriya to move into, he said.
Dr. Karunatilake said the Central Bank disaster could have been easily avoided. During his time, he said, security measures were introduced to prevent such events. "I had an alarm system which could bring in a response within three minutes. Was it activated at the time, he asked? He said the Bank had lost six top professionals due to death and injury.
The destruction of the library was an irreparable loss to the country. "A unique collection of documents which are peculiar to Sri Lanka was housed in that library," Dr. Karunatilake said. "People who say that the library can be restored in three or five years, are talking rubbish. "
A pioneering venture celebrated its twentieth anniversary last week. This export oriented project is Dipped Products Limited formed in 1976 for the manufacture of products from natural rubber latex using the 'dipping' process. It was started at a time when rubber was being exported in its raw form to the western countries.
Dipped Products is a joint venture between two of Sri Lanka's foremost public companies - Hayleys and Richard Pieris & Company. Steady progress over the past two decades has made Dipped Products confident of reaching the Rs. 1000 million target in turnover this year.
In the segmentation of Hayleys activities into 12 groups, Dipped Products falls into the 'Rubber' category dealing with the manufacture of natural and synthetic latex household and industrial gloves and latex thread.
Ranked among the top five latex glove producers in the world, Dipped Products recorded a significant improvement in their Balance Sheet during the last financial year (1994/95). Turnover reached Rs. 590.5 million, a 43% increase from the previous year. Profit before tax was Rs. 91 million whereas the previous year's figure was Rs. 61.7 million.
Dipped Products made a substantial contribution to the Hayleys Group. Chairman Sunil Mendis commented that the performance of Dipped Products was particularly creditable when viewed against the rising price of natural rubber, which is the main raw material in its manufacturing process.
Following the Company's incorporation in 1976, Dipped Products made their first export in 1979. The next few years saw the first phase of the expansion of factory activities and the public share issue of the company came in 1983. The second phase of the factory expansion began in 1986.
The nineties saw Dipped Products expanding into new areas. Five subsidiary companies were incorporated within five years. The first was Palma Limited to manufacture rubber thread. Within five years, Palma has become a major supplier to the local garment industry with more than 95% of the product being eventually exported.
Teething problems relating to quality due to technological reasons have been sorted out and a growth of both domestic and overseas client base has been witnessed. In the last financial year, Palma recorded a 55% increase in turnover reaching Rs. 42 million. It is envisaged that the operation will be profitable this year.
Grossart Limited was the second subsidiary to be incorporated. It is one of three outfits in the Group producing rubber gloves. Grossart concentrates on fabric supported and unsupported gloves. Profits from this operation at Kottawa doubled in 1994/95. (Dipped Products factory is also at Kottawa).
Venigros Limited manufactures natural and synthetic rubber gloves in its factory at Weliweriya, starting production in the early part of 1995. The factory is situated in Kelaniya.
DPL Plantations Limited was incorporated in 1992 to manage Kelani Valley Plantations Ltd, a Regional Plantation Company. Following the introduction of systematic management improvements to the tea and rubber properties vested in this company, DPL Plantations recorded a pre-tax profit of Rs. 26 million in 1994/95 as against a loss of Rs. 38 million in the previous year. Last year saw the acquisition of Kelani Valley Plantations Limited following the government's privatization programme where DPL Plantations excercised the option to acquire a controlling interest.
Over the year, Dipped products have developed a number of export markets to where their products have a ready demand. Heading the list is USA & Canada where 33% of the products are bought. Next comes UK and France buying 15% of the volume, followed by Italy (9%), Spain (7%) and Germany (6%). Products also go to Holland, New Zealand, Australia and Japan.
The success of Dipped Products has been attributed mainly to the overriding commitment to quality and customer satisfaction among all employees. Their dedicated service led to the Company obtaining the ISO 9000 accreditation this year. The Group employs 430 persons.
Chairman Sunil Mendis summed up Dipped Products as "magnificent example of collaboration by Hayleys and Richard Pieris which over a decade had underpinned the earnings of both". In the words of Managing Director N.G. wickremeratne, "there is much that is possible by releasing and capturing the natural enthusiasm and innovation of people at work. "
Interest rates are tumbling down. At least this is so with respect to Treasury Bill yields The expectation is that commercial bank lending rates would respond to this decline in due course, if the downward trend in Treasury Bill yields continues.
In December 1995 and in early January this year. one year Treasury Bills yielded as much as over 19 per cent per annum. In mid February the yield fell to around 17.5 per cent per annum and on February 23rd they declined to 15.4 per cent per annum. This is indeed a sharp and rapid decline in Treasury Bill yields. It is a rare phenomenon for Treasury Bill yields to decline by as much as 3 to 4 percentage points in a little over one month.
Just as much as the expectation was that Treasury Bill yields would continue to increase when yields were on an upward trend, there is the expectation that yields would decline, now that a downward trend is apparent. In both movements the expectations themselves played a role in either increasing or decreasing yield rates.
There are several concerns on which we would like to focus. First of all: is such a sudden shift in interest rates healthy for an economy? When interest rates fluctuate so sharply, investment decisions are hard to make. Uncertainty adds to the risk factor of investments and there tends to be an aversion to making investments.
The second consideration is that when interest rates shoot up as high as they did, they do considerable harm to medium and long term investments. The decline in interest rates may not be able to reverse the harmful effects of the very high interest rate regime in the recent past immediately. It would take quite some time for the investment climate to take due recognition of a new moderately high interest rate regime. The sharp ups and downs of interest rates may also erode business confidence in the stability of interest rates. A reasonably high but stable rates of interest may be better for investment than the sharp fluctuations we have witnessed in the recent past.
Another very important consideration is whether the business community would have confidence in the lower interest rates being sustainable. Surely the fundamentals of the economy have not changed drastically in the last month to usher in a different interest rate structure. The causes which created the high interest rates are well known. The massive budget deficit, itself fueled by rapidly increasing defence expenditure, was the main reason for the government to offer high and attractive interest rates to finance the Treasury Bills. It is true that with high interest rates for Treasury Bills there was an over subscription but with rates coming down so sharply there is no reason to expect the public to subscribe the same sorts of finances at the lower yield levels. Therefore, the rates may have to increase again. A better management of the Treasury Bill issues at rates which were not excessively high but reasonably high may have succeeded in obtaining adequate resources. This would have been better than allowing the yields to soar up and then bring them down sharply. It is unlikely that investors and the business community would expect the lower rates prevailing currently to remain there for much longer. This is particularly so as one could expect the government's budget deficit to be even larger than what was announced in the budget as supplementaries for new defence expenditures are likely.
The fluctuations in the interest rates may prove as harmful as the high interest rates we had recently. The unsustainability of the low rates for Treasury Bills is also likely to be counter productive to the government's mobilisation of adequate funds. All in all, the Treasury Bill yield rates appear to be very untidy and unconducive to good macro economic management. The recent experience appears to amplify the Friedman hypothesis that when governments intervene in the market they invariably intervene too late and in the wrong direction! In this case the direction may not be wrong but the correction too much.
A new company, Protector Safety & Medi-Furni Marketing & Trading Company was launched recently as the marketing and trading arm of the three manufacturing companies of the Gunasekara Group, namely, Protector Clothing Co., Industrial Safety Equipment Co., and Hospital Equipment Co.
The marketing functions of the companies were previously handled by Industrial Safety Equipment Co.
Industrial Safety Equipment Co., started in 1968, is the first company in Sri Lanka to have embarked on the manufacture of safety equipment. It is better known as Personnel Protective Wear (PPW).
This includes helmets, goggles, gloves, nose and mouth masks and safety belts.
According to Operations Director, Shiraz Salih, Industrial Safety Company's market share in personnel protective wear is 75 percent.
Protector Clothing Company, another prominent member of the group is involved in the manufacture of uniforms, overalls, aprons, raincoats, hats, caps and protective clothing against fire. It has a virtual monopoly in the manufacture and marketing of protective clothing in Sri Lanka.
Hospital Equipment Company manufactures examination beds, patient trolleys, instrument trolleys, instrument cabinets, stretchers and wheel chairs.
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