Private sector companies will face a formidable challenge to compete in the upcoming South Asian Single Market, where they cannot rely on duty rebates, protective mechanisms or state subsidies, Trade Minister Kingsley T. Wickramaratne has said.
Speaking at a meeting organised by the Ceylon Chamber of Commerce, Mr. Wickramaratne said in the near future government would be divorcing itself from commerce and business altogether.
"In future, the Government will only be a facilitator to the private sector, which will hence be deemed the country's engine of growth."
"In the future, it will be up to the private sector to look after the welfare, education and health of the people," he said.
The Minister said the government was committed to increase the per capita income to US $1200 by the year 2000 from the present US $650. The private sector would be able to take up these challenges only if it was prepared to change with change, he said.
"Companies will have to change their management techniques and business strategies. Most of the 22,000 companies registered in Sri Lanka are family-owned and only about 200 of them have gone public. These companies ought to move from family-owned companies to public companies.
They must stop grieving over high interest rates and be prepared to go public to find necessary funds for investment. They must expand their businesses into neighbouring countries and become 'regional multinationals'. The government has already embarked on a scheme to offer dollar loans to companies prepared to invest in the region. The Bank of Ceylon is contemplating opening branches throughout the SAARC region," the Minister said.
Minister Wickramaratne observed that today regionalization has come to stay. "The European Union, NAFTA and OPEC are but a few examples of such regional blocs."
He attributed the rise of the EU, which first came up with the concept of a single market, to "the shrinkage of market segments and decline in buying power in Europe compelling them to create a single market to contain the market to themselves."
However, Minister Wickramaratne observed that the reasons behind the formation of NAFTA was altogether different. "The aim of NAFTA is to gain a competitive advantage by combining the marketing expertise of USA with the technological expertise of Canada and the human resources of Mexico. As such, NAFTA is adopting an outword looking approach for trade promotion," he said.
"History records that industrialized nations benefited immensely from dividing and exploiting our countries. But the SAARC countries were able to change history on December 7, 1995 by implementing SAPTA, the first step in our march towards the creation of a South Asian Single Market" he said.
Mr. Wickramaratne said all member states had already negotiated for concessions on 226 items and the number of products on the concessionary lists would be significantly increased at the new round of talks in June this year.
The rains have come at last but not in sufficiently yet to do away with the power cut.
The initial estimate was that the power cut would be on until May. But the government is aware of the serious repercussions the power cut would have on the economy. So, they are considering restoring normal supply by mid-April, if the weather gods co-operate.
Meanwhile, a leading investment house has forecast that the country's GDP growth will fall by three to four per cent if the power cut continues until May....
Foreigners were conspicuous by their absence in the Colombo Stock Market this week.
A military offensive in the North was imminent, most of them had been advised, so the market would fall sharply in the coming weeks, they had been advised we hear....
Now that our cricketers are flying high, the Board has received many offers to sponsor the flanelled gods.
Some of the offers were very tempting, including one from the new world.
But the Board has decided it would repay loyalty. So, even though the team song has changed from 'underdogs' to 'champions', they would stick to the same singer....
Shipping business world here is said to be badly shaken by a story about how three major ship lines are contemplating a change of the local Agency Houses that presently service them.
The change, shipping sources say, is bound to take place shortly.
Reasons adduced by the three main shipping lines for this move are (a) poor service offered by the Agent and (b) failure of the Agent to remit the dues as per instructions.
This contemplated move has not been arrived at overnight. According to the sources the Agency Houses have duly been written to about the poor quality of service and the delay in the remittances.
Agency Houses, the shipping sources say, have no excuse to defend themselves against these allegations. Further, in a highly competitive business, as shipping is, service has always to be the best, if the liner companies are not to risk losing their business and revenue.
The shipping lines intending to change to Agents have been unofficially talking to likely parties willing to takeover. In addition quite a few Agency Houses servicing other liner companies are hotly competing with each other undercover to grab in spoils.
The period under review started with a bang for Sri Lankans, with our team being crowned the world champions of cricketers one-day variety.
The brokers and investors expected the euphoria following the successes in the cricket field to penetrate The Stock Market which was not to be; as the emergence of local and foreign profit takers, started to exert selling pressure in the market.
With the Sinhala/Tamil New Year coming up in April the selling pressure is bound to continue further due to cashing in on stocks by retailers for festivity purposes.
A marginal increase in Treasury Bill rates was to be seen during the period under review, with the government needing more and more money for its war effort. The TB rates are also expected to increase, which could result in investors moving into fixed income securities (of TB, CDs).
The Vanik issue of Rs. 600mn unsecured redeemable debentures with interest of 21.55% p.a. paid quarterly and marketed to retailers, could in the short-run (1 - 1 1/2 months) affect the share-market due to funds utilized elsewhere.
In the global scene foreign institutions are on the look-out for emerging-markets to invest, with Bombay and Karachi showing moderate gains within this period. Foreign activity in these markets averaging 60% - 70% of daily turnover.
The local retailers and High-net-worth individuals outlook towards the stock-market has been one of pessimism due to political sectors and all other relevant economic, social and security factors. Expansion of business has been substituted by consolidation. In the long run, serious repercussions can be felt. Contributing facts are the declining imports of machinery and heavy vehicles, a slow down in business and illiquidity in the markets.
Investors should invest expecting long term returns (12-36 months) than short term gains. At current depressed prices, an investor could build a portfolio comprising fundamentally strong blue chips for quarter the price he would have paid two years back.
Stock picking by professional investors at these depressed levels has made it possible for them to gain a reasonable return over the past months.
For the period under review the market has shed nearly 30 ASI points. Turnover has remained pathetic except on a few days where large quantities of a specific share changed hands. Decline to gains on almost each day over the period has been in the ratio at 2.1
The market is expected to shed pessimistically ASI 20 odd points because of inactivity and lethargy prevailing over April due to holidays. Stocks which fall below idealistic price levels should be grabbed by investors.
It seems that from time to time, Sri Lankan politicians, administrators, and media get stuck on certain buzzwords such as "NIC status" or "rapid economic growth." No sooner are these terms familiarised in the media, they are used to justify policies and plans without a complete understanding of what the buzzword actually means.
For years, many national and sectoral policies were developed and projects were approved with the objective of reaching NIC status by the Year 2000. The only problem was that no one knew exactly what NIC status meant in practical terms. What are the indicators used for measuring progress toward NIC status? How much should a country's income per capita be or how much should its export earnings be in order to be christened a NIC?
The current buzzword in operation, one that has been around for some time, is "sustainable development." The current government has pledged, in many forums, to pursue a path of sustainable development. At face value, since it is a term which describes the process and nature of development - and not a fairly arbitrary target that an economy has to reach in a certain amount of time - sustainable development seems a much more reasonable aspiration. However, it is crucial that, before we start moving mountains in the name of sustainable development, we understand exactly what sustainable development is.
One of the early interpretations of sustainable development was that it "met the needs of the present generation without compromising the needs of future generations." Embodied in this idea is the fact that the resource base available to us is limited and has to be shared among many generations. Also that there is a trade-off between using resources and preserving environmental quality. The situation we want to avoid is one where resource shortages and declining environmental quality undermine both the economy's ability to grow and the population's quality of life.
This illustrates that sustainable development is all about striking the right balance. A balance between using resources now and using them in the future, a balance between economic growth and environmental protection and a balance in income distribution. This is a fairly complex objective to work toward because parties with differing perspectives and priorities could choose a balance more heavily weighted towards one side or the other and use sustainable development to justify their positions.
For instance, private investors and proponents of public sector development projects say that the implementation of their project - building a road, constructing a petroleum refinery, developing a port - will contribute to sustainable development.
On the other hand environmentalists say that conserving the natural environment - forests, wildlife, clean air and water - will contribute to sustainable development.
The conflict between investors and environmentalists/regulators has arisen in many other countries and it seems to be happening now in Sri Lanka. We witnessed the rather dramatic conflict between investors and environmentalists a couple of years ago during the planning and construction of the Kandalama Hotel. The rejection of the Upper Kotmale Hydro Power Project at the Environmental Impact Assessment (EIA) stage has left many in the economic growth camp embittered, particularly in the face of this colossal power crisis. Conflict arose recently over the construction of the southern highway which had bypassed the EIA requirement, even though the environmental consequences might be significant. After much back-and-forth between the Central Environmental Authority, the Road Development Authority, and the ministry concerned the EIA is now being processed. However, since construction has already begun, the EIA seems redundant.
The point that many seemed to have missed is that in order to achieve sustainable development - and that seems to have been accepted as a major goal of both camps - you cannot sacrifice environmental considerations for economic growth objectives or vice versa. Planners must keep in mind national priorities and try to achieve the optimal balance between the two. Requirements like EIAs are only tools to use in working out this balance.
It is evident that sustainable development is a complex concept that should be understood well in order to guide development decisions.
Sustainable development is not a goal in itself and should not be thrown around indiscriminately by politicians, administrators or the media. The country should set its own economic development goals and priorities and then decide on what trade-offs it is prepared to make within the framework of sustainable development.
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