It’s been an eventful year in Sri Lanka so far. We had the Central Bank bombing, the Tawakkal controversy, the World Cup victory, the power cut saga, the southern area development drive, the launch of Riviresa Il, and much more. Although the country has done well to overcome many of the difficulties it is faced with, it has now arrived at a situation that exposes the fatal weaknesses of our political system and demonstrates why Sri Lanka does not possess the political strength, single-mindedness, or courage to become an industrialised country.
Two years ago, the People's Alliance campaigned on the platform that they would govern honestly, effectively, and fairly. They contrasted their party to the governing UNP and railed against the ‘irregularities’ and ‘corruption’ that purportedly had occured in the previous seventeen years, attacking in particular a certain UNP Minister for ‘dishonesty’ on many fronts. When this Minister was welcomed into the PA ranks like a long lost friend just weeks after the election victory, voters were a little taken aback. The government that was voted in because of its apparent vision and integrity already had its integrity in question.
The Ceylon Workers Congress (CWC) and other unions have threatened, delivered, and seen results of trade union action several times since the PA government came into power. Since April 22, more than 600,000 plantation workers have gone on strike after being ‘advised’ to do so by the CWC.
There are many indications that this strike is not a sincere sign of protest by workers about wages, working conditions, or such issues. Rather, it seems like a show of personal strength at the expense of the country’s economy and its political stability. Other plantation workers’ unions, such as the Upcountry Workers’ Front (UWF), have reluctantly agreed to support the strike but “With criticism.” The General Secretary of the UWF has questioned whether Minister Thondaman is fighting for the rights of plantation workers or trying to ‘Show the world that he is still commanding the plantation sector.’
Last week, Minister Thondaman took the strike to the political arena. He announced that he would propose a ‘no confidence’ motion against Plantations Minister Ratnasiri Wickramanayake in Parliament. Two days later, responding to Minister Thondaman’s canvassing, the UNP decided to support the ‘no confidence’ motion. The decision by the UNP, is much more significant than any CWC action because it clearly reveals the depths to which Sri Lankan politics has descended. It shows that this decision was not made on the basis of principle, ideology, or vision (in fact, the UNP took a much less generous position with the plantation workers unions than the PA has), but simply because it seemed like a good opportunity to attack the government
What Minister Thondaman is proposing amounts to politico economic blackmail. But this does not seem to bother the UNP leadership. Nor does the fact that supporting the CWC in this matter will threaten the privatisation programme, the tea industry, and the stability of the labour force. The fact that Minister Thondaman abandoned the UNP for the winning side after the last election also seems to have slipped their mind.
Situations like this erode the electorate’s faith in the country’s political system and its parties. Both major political forces are expected to have their own distinct ideologies and principles, and to have the maturity and courage to stand by these ideologies and principles in difficult situations. It is sad that we are now at a stage where both political forces define themselves not by what they stand for, but rather by vehemently opposing whatever stance the other takes.
It is time that the government stop pandering to small, vocal interest groups and takes strong measures to bring this situation under control. It should keep in mind that there can be no ‘rapid economic growth’ if investors perceive that the government is weak and vacillating and that it can be blackmailed and bullied into decisions that run counter to its economic policies. There will naturally be a temptation to pacify the CWC with concessions in order to prevent a ‘no confidence’ vote that could threaten the position of the government. There is also a yearning in the electorate for a political force that will courageously stand its ground.
The government will earn a lot of support if it lives up to this.
The Federation of Chambers of Commerce and Industry of Sri Lanka (FCCISL) has proposed that the administration of EPF and ETF be brought under one unit and that employees be issued with pass books so as to ensure that dues are paid regularly.
A federation official said the system, as it now stands, entailed two separate sets of collection/ remittance procedures and hence two cumbersome bureaucratic systems that only lead to increased expenditure for both government and the employer.
At present, the ETF is administered by the Employees Trust Fund Board and the EPF administered directly by the Department of Labour. Whereas the Central Bank is entrusted with the investment of EPF monies, ETF investments are handled by the ETF Board.
"At present, there is rampant evasion of these payments as the problem cannot be controlled by bureaucratic procedures alone. It also leaves room for corruption when these funds are being bureaucratically operated, especially in a context where neither the employee nor the employer is aware of the true situation of the remittances", the official said.
"We suggest that both the EPF and ETF be brought under one unit, preferably the ETF Board as it is an established, independent body that is capable of handling the administration and investment of both EPF and ETF monies.
"A single administrative unit with simplified and streamlined procedures will be a productive exercise in de-bureaucratisation leading to large savings for the government", he said.
He said the Federation was also calling for some responsibility being placed on employers so that they could ensure that the dues are paid on their behalf and everyone is issued with EPF/ETF pass books, he said.
The official suggested that the existing banking system could be utilized for the EPF/ETF savings account pass books. "Monthly contributions may be remitted to the Bank by the employer to be credited to the joint EPF/ETF savings account. Banks could be paid a service fee," he said.
"The Federation is of the view that this would serve as a 'self-checking system'. Banks will credit pass books immediately on receipt of contributions from employers. This will ensure that pass books are made up to date".
Another long-term benefit would be that the employees will be able to withdraw their dues immediately after retirement, "without having to go from pillar to post" as entailed in the existing system, he said.
Records will also be available with all respective banks and not at a central location, thereby avoiding the risk of records getting destroyed in the event of a disaster, like the recent Central Bank bombing, the official said.
Despite the current unsettled situation in the country, Jardine Fleming, one of the top names in emerging markets, have stepped up their operations in Sri Lanka, with plans to become a fully fledged merchant bank and bought out one of the local joint venture partners.
Jardine Fleming's presence here began in 1992 when it became one of the three partners in HDF Securities, with Hatton National Bank and DFCC.
The DFCC has now sold out of the company, and Jardine Fleming has boosted their stake to 40 per cent. The Hatton National Bank holds 50 per cent and the company's Chief Executive Anura Wickremasinghe holds the balance. The DFCC has announced its intention of setting up its own investment bank with Morgan Grenfell.
The company has ventured out of its traditional stockbrokering activity and had already set a corporate finance department, which will be under direct supervision from Hong Kong.
"Jardine Flemings strength is in capital markets," Mr. Wickremasinghe says. "That is corporate finance and investment banking. Generally stock brokering is an entry point, to size-up the market and take stock of opportunities."
The privatization program is one of the areas being eyed by Jardine Fleming. The company hopes to participate in future privatizations or perform advisory functions.
"Jardine has acted as advisors to privatizations in many countries," Mr. Wickremasinghe said. "In India they are very big. They just helped privatize the Bombay Electric Company. But we will be looking at corporate finance opportunities in listed and unlisted companies."
The Indian operation is fully owned by Jardine Fleming while in Pakistan their office was first set up as a joint venture but is now a wholly owned subsidiary.
The new company has been named Jardine Fleming-HNB (Pvt) Ltd.
The name change itself is expected to help market Sri Lanka overseas. "People used to ask me what stands for HDF. But everybody knows who Jardine Fleming is. And in Sri Lanka HNB is a household name.
Only two other Jardine Fleming offices in Malaysia and Thailand have joint ventures. Local restrictions prevent Jardine Fleming from boosting their stake further."
He welcomed reported efforts of the BOI to further relax present regulations. "Those will be good signals for investors."
Though there were objections to permitting foreign parties to operate brokering houses in Sri Lanka, their input has not only brought in more business but vastly improved the research capabilities and the information available on local companies.
"You do not have to look far. In India and Pakistan you have 100 per cent ownership. These are countries which liberalized after us.
Due to the depressed market, most stockbrokers have seen their revenues tumbling down. "To date we are breaking even. We are a business operation and we would like to make profits. We feel we can make profits in corporate finance."
Mr. Wickremasinghe says he has been trying to persuade Jardine Fleming to increase their activity in Sri Lanka for some time.
"We did not expect them to increase their stake in a climate like this," he said. But they took a positive long term look.
"They act as catalysts," he says. "Now you will see a more pro-active role in merchant banking though it will take some time to become a fully fledged merchant banking operation.
The Sri Lanka Telecom (SLT) has embarked on a mammoth venture with two international telecom giants to install 200,000 wireless local loop telephones by the year 2000, a stride towards reaching its goal of one million telephone subscribers in Sri Lanka.
Every year some 75,000 odd applicants join the list for new connections. The SLT is able to provide only a mere 25,000 connections a year.
Telecommunications Minister Mangala Samaraweera said if the present state of affairs continued the huge demand for about one million telephones by the year 2000, will only be a dream.
At present there are about 210,000 subscribers connected to the SLT and a few thousands connected to other local mobile telephone services. The number of applicants on the waiting list is nearly 250,000.
"We are very fortunate to have succeeded in selecting two of the best internationally renowned operators in Telia AB the national telecommunications operator of Sweden, and BCI Incorporated of USA- a member of the Bell Canada Group of Companies", Mr. Samaraweera said.
The two companies were selected after a high-level committee by the headed Ministry Secretary evaluated their offers. Each operator paid a licence fee of Rs. 300 million.
The award of the project to these two operators was challenged by a third bidder by way of legal action.
The unsuccessful bidder obtained an enjoining order from the District Court of Colombo. But this enjoining order was later vacated by the Court of Appeal.
The two operators registered their local companies known as Telia Lanka (Pvt)) Limited and Lanka Bell (Pvt) Limited. The Swedish telecom giant Telia formed a consortium consisting of the Metropolitan Group and the National Development Bank.
Each operator has invested more than US dollars 100 million. Roland J. Maness local Director for Lanka Bell said they hoped to increase this investment with the installation of more telephone lines.
Anders Ekman, Senior Project Manger and Director of the consortium, said, Telia was instrumental in Sweden achieving the highest penetration of fixed as well as mobile telephone services in the world. "Even a child carries a mobile in Sweden, and we hope to make it a reality wherever our services are required.
Under this new project, only wireless local loop telephones will be provided. The traditional local loop, a network of copper wires and cables, which connects the telephone to the local exchange may cost as much as 60 per cent of the overall capital and operating cost of a new telecommunication network.
Considering this and the added difficulty of regulating the problem of having more than one operator digging the roads to put their respective plants, the government decided to introduce the Wireless Local Loop technology, which has the advantage of quick deployment.
The consortium is expected to start their services as early as August to the Colombo and Kandy metropolitan areas and reach out to the rest of the country when they start rolling out with the customers.
The charges for a telephone service under this new project will range between Rs. 13,000 to 15,000. According to the telecommunications Ministry this rate would steadily decline as demand increases.
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