25th January 1998

EFC seeks essential services tag for hotels

The Employers Federation has called for the government to declare hotels an essential service to stop 'wildcat strikes' in the industry.

"We need not emphasise the difficulties that the Trade as a whole face in promoting tourism at the present juncture with the war situation and the threat of bombs and carnage, without having to also face the threat of worker pressures and wildcat action," EFC Director General EFG Amerasinghe said in a letter to labour minister John Seneviratne.

The EFC drew attention to the picketing and strike carried out in sympathy with the workers in the Port in the first week of December which the said, caused major disruptions.

"Although solidarity could have been shown in some other manner which did not affect the business of the Hotels the action which was taken unnecessarily hampered and caused loss to the hotels as well," the EFC said.

There have been industrial action at Taj Samudra, Pegasus Reef Hotel Colombo Hilton, Confifi Beach Hotel, Riverina, Palm Garden and Trans Asia Hotel mainly relating to bonus disputes.

The EFC accused trade unions of trying to extract benefits for themselves at a time when the hotel industry was most vulnerable.

"It is not only the particular employer faced with the situation who suffers in the long run, the bad image the hotels are getting as a result of such walk outs and unprincipled conduct is made known throughout the world with drastic consequences for tourism and business in general in Sri Lanka," the EFC said.

The EFC therefore called for the declaration of the industry as an essential service, which makes it necessary for 21 days notice to be given before a strike.

"Along with the declaration of the hotel sector as an essential industry it is urged that clear instructions be given to the Labour Department to ensure that conciliation procedure is used speedily," the EFC said.

It added that consideration be given to the employers ability to meet the demands from a financial point of view and the need for guests not to be harassed in any way.

EFC said in some Unions executives and subordinates are acting together and called for an end to the practice. The EFC claimed that the practice impeded the maintenance of management services.

SAARC quality soon

Steps are being taken to form Federation of Quality Association in the SAARC region.

"Initially Sri Lanka, Pakistan, India, Bangladesh and Nepal with form a network and the invite Maldives and Bhutan to join," quality and Japanese style management expert Sunil Wijesinghe said.

Mr Wijesinghe was recently invited to India and Bangladesh to make presentations at quality conventions in these countries.

Mr. Wijesinghe is the President of the Sri Lanka Association for the Advancement of Quality and Productivity.

The Quality Circle Forum of India had invited Mr Wijesinghe to address their convention attended by 2000 delegates form India and abroad in December.

Mr. Wijesinghe's paper covered the status of quality management in Sri Lanka. "Many participants were impressed with the Sri Lanka government's role in promoting productivity by declaring a National P roductivity Decade and implementing a massive awareness programme and also with the initiative taken to adopt a National Quality Policy," he said.

In Bangladesh Mr. Wijesinghe attended the convention of the Bangladesh Society for Total Quality Management.

His paper focused on the development of employee involvement in quality through Japanese style quality circles at shop floor level.

Mr. Wijesinghe says quality circles have only recently become popular in Bangladesh.

Management Consultants form new forum

A professional body for management consultants has been established.

The Institute of Management Consultants of Sri Lanka (IMCSL) will cater to the needs of various branches of management consultants, develop a system of certification and provide training facilities to upgrade professional standards, its promoters said.

The Institute expects to strengthen professional standards, encourage application of generally accepted consultancy knowledge and develop a set of behavioral rules.

Dr. K. Kuhathasan has been elected as the founder president of IMCSL.

"With the advent of liberal market oriented policies, rapidly expanding economic environment and accelerated infrastructure development activities, management consultancy is set to expand rapidly," Dr. Kuhathasan said.

Sri Lanka keeps cool,no devaluation

The Central Bank has expressed a firm resolve not to engage in competitive devaluation against East Asian currencies.

"We must be cautious in reacting to a fluid situation," Central Bank Governor A. S. Jayawardena said.

While currencies of Indonesia, Thailand, Malaysia and Philippines have plummeted since July the Sri Lankan rupee depreciated only about 8 per cent. Though capital account controls have helped keep the country safe against speculative attacks, monetary officials say Sri Lanka also lacks most of the fundamental macro-economic weaknesses seen in East Asian countries.

These countries have run consistently high current account deficits and had huge foreign currency denominated loans, Central Bank foreign department official Nimal Ratnayake told a seminar last week.

Most of the funds had gone in to real estate, property development, construction and grandiose infrastructure projects, fuelling an unsustainable speculative bubble.

With their currencies being securely pegged to the dollar, these countries have enjoyed stable exchange rates. The low currency risk and high domestic interest rates had prompted excessive lending by lulling lenders into a false sense of security.

Though Sri Lankan domestic interest rates had risen to 20 - 25 per cent levels two years ago short term foreign funds had not come in because the capital account was not liberalised.

The banking system of East Asian countries had also been weakened by lending into high risk areas, prompted by government in some cases. This had resulted in huge bad loans.

Though authorities say the Sri Lankan banking system is relatively sound critics say even local banks carry substantial doubtful debts. In fact the two state banks had tens of billions of government money injected to compensate for bad debts incurred due to lending to political favourites and loss making state owned ventures.

The Thai Baht had fallen to about 55 Bahts to the dollar by December 1996 from 25 Bahts to a dollar. The Malaysian Ringgit plummeted to more than 4.6 to the dollar from around 2.5. The Philippine Peso fell below 45 to the dollar from 26 and the Korean Won below 1800 from about 900.

The Indonesian Rupiah meanwhile fell around four times to below 10,000 against the dollar by end December.

Last week the currency fell below 17,000 to a dollar before the Indonesian central bank intervened.

Though the nominal exchange rate has plummeted Central Bank officials say rising inflation will rob these countries of most of the benefits of a cheap currency.

Central Bank Research officer Dr. Amarakone Bandara says inflation in all these countries have been gradually picking up.

After the Mexico crises, its currency fell 55 per cent. However in the ensuing months inflation had risen by about 48 per cent. Inflation had continued even after the currency stabilized.

"When we have these huge devaluations we must be careful to find out what happens to internal prices," Mr. Jayawardena said.

In Indonesia petroleum prices had shot up 27 per cent in one week. The price of bread had risen four times.

"These causes cost of production to go up," Mr. Jayawardena said.

Sri Lankan exporters have expressed concern at losing competitiveness against East Asian producers, as they try to export their way out of the crises by cutting the dollar price of their products. Already Thai resorts are marketing hotel rooms far below the prices offered by Sri Lankan hotels. High value added exporters engaged in rubber, coconut and ceramic based products who produce goods that are directly competing with East Asian countries fear the effects of currency devaluation most.

Mr. Jayawardena says the Sri Lanka Rupee's gradual depreciation over the years, has ensured that it has kept pace with other currencies.

In 1985 the Thai Baht had been 26 against the dollar, when the rupee was 25 to the dollar. In mid 1997 just before the crises started the Baht was 25 against the dollar, but the Sri Lankan rupee was 59 to the dollar.

"After watching the nominal rate if we cry for devaluation we will get into serious trouble," Mr. Jayawardena warned.

" We will watch the situation to see what develops and act carefully," he said. "It is a question of keeping your cool."

Lucky contract

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Continue to Business page 3 * Tea: gains and challenges * IMF policy to positively impact on poverty alleviation

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