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When banks bring gifts…

Reader Mr. R Wijesinghe from Ratmalana has sent us a query.

Q: Why do commercial banks offer gifts as incentives to attract customers instead of passing the cost of it (gifts) towards providing a higher rate of interest?

A: Commercial banks have few problems. First: for every Rs. 100 you save the banks mobilise your funds for savings, current and fixed deposits. For every Rs. 100 they raise, Rs. 12 goes towards the Central Bank, for which they don't get a return. It's a cost for the bank.

For instance, if the banker pays you 10 per cent interest, the cost for the bank is not 10. Its 10 per cent for Rs. 88 (100-12); i.e. Rs. 11.86 is the cost for the bank. This Rs. 11.86 does not include the administrative cost, mobilising cost to the bank. The bankers are compelled to raise money at the cheapest cost.

When it comes to return, the savers must decide, and try to understand the risk reward structure and make a prudential investment. As mentioned last week, savers need to look at the credit risk, liquidity and the return on investment.

Commercial banks also face the problem of capital adequacy. According to the Basle standards, the banks have to raise minimum 8 per cent capital against their risk assets. When you increase your loan book, you have to increase our capital as well.

Commercial banks also carry a mismatch in their portfolios. All lending institutions, their assets are long term, they lend long term, but they borrow on short-term one year fixed deposits. This is a huge portfolio mismatch. To cushion the interest impact they must keep high margins, or they must lower the cost of funds.

So these are the problems the banks are facing at present. All lending institutions including the leasing industry has these problem, they give four year leases and borrow short term from the banks. It's not healthy mechanism.

On the other hand, not only the saver, but the borrower also has to pay a price. The industry has not developed yet. Very few commercial banks are willing to lend for long-term housing. There is a great demand for housing, but no funds.

I will take up the matter on raffles given by commercial banks when I talk about the non-tangible assets later.

As a banker I would look at the credit risk and the return on investment before I invest my money. This would be healthy for the saver and healthy for the banking industry. Every investment down the line depends on the risk reward structure, higher the risk higher the return, lower risk lower return.

Bonanza for gem and jewellery trade

By Mallika Wanigasundara

For jewellers, gem merchants, craftsmen in gold, silver and brass it is a duty free ayubowan all the way. A portfolio of concessions, exemptions, incentives covering turnover taxes (GST) revenue taxes, import and export duties, raw materials training covers this generous bonanza. It is almost total liberalisation of the industry.

If these concessions are combined with judicious modernisation of design and technology, awareness of global market conditions, and their requirements, innovativeness in production techniques and determination, these industrialists and craftsmen would be on the gravy train.

Take a look at the sumptuous spread on the plate:

1. Gold, silver, platinum, rough gemstones, cut and polished gemstones and diamonds have been exempted from import duties.

2. Pearls, diamonds, synthetic or precious gemstones, semi-precious stones, diamond powders etc. have been freed from GST.

3. Jewellery manufacturers registered with the Gem and Jewellery Authority can import gold and silver free of import duty, or purchase it from the Bank of Ceylon 'Ceybank' gold shops.

4. Brass manufacturers can import raw materials in the form of sheets, ingots, nuggets and scrap for their handicrafts, free of import duty.

And there is much much more.

Simplified bureaucratic procedures have been put in place for import and export of gems and jewellery and import of raw materials. Products and design improvement and training programs are being launched. Ready and easy credit facilities are being arranged.

This is what was spelt out at a recent seminar held in the heartland of the jewellery industry in Kandy at the Hotel Suisse. Some 150 or so craftsmen, jewellers, gem merchants were present. The seminar was organised by the Export Development Board along with several other agencies.

Its aim was to inform the participants of the concessions and incentives, motivate them, educate them and enthuse them towards improved production for a boundless global market.

Among the other institutions involved in the exercise were: the Sri Lanka General Trading Corporation, Sri Lanka Handicrafts Board, Lanka Salusala, National Crafts Council, National Design Centre, the National Gem and Jewellery Authority, the Bank of Ceylon, the People's Bank, and the National Development Bank. Officials of these organisations spelt out the concessions and incentives, explained their significance and how they could best be made use of by the beneficiaries.

Minister of Internal and International Trade and Food Kingsley T. Wickremaratne advised the gathering roundly on what the industry was up against in the context of today's global market, the dynamics of market forces, the play of competitive prices, the interplay of supply and demand, the tastes of various societies and countries.

He emphasised the need for modernisation, a forward-looking approach and an almost total change of outlook both in production and marketing.

There was a great need for beauty, technical perfection, expert finish and competitive prices, he said. This is the only way to break into the dangerous and risky terrain of the global market, he explained.

But do not try to get there, he said, by buying cheap manpower, by paying low wages, he advised. This will not get you anywhere in the final count, and the national interest suffers he said.

If we continue to pay low wages we will always remain poor. Adopt the sub-contracting system he advised.

The Minister explained that the concessions and incentives alone will not get the beneficiaries very far unless there is courage, innovativeness and guts. Success, he said, does not come in a hurry, and to succeed you have to absorb and adjust to initial failures.

Talking about the mudalali system, he said that it is passe. This is the age of young entrepreneurs hooked on computerisation, and streamlined techniques. Internet is the channel for advertisement, the focus of their contacts. Unless you are with it, you will be left out, he seemed to say.

Among the officials who spelt out the various concessions and incentives were: R.A.P Gunatilleke, Chairman of the EDB, T. Piyadasa of the Sri Lanka Gem and Jewellery Authority, W. Ellawala of the National Crafts Council R.H.P Gunasekera of the Bank of Ceylon, P.H.C Waidyatilleke of the General Trading Corporation, U.W Karunaratne of the EDB, P. Saddhatissa of the Gem Cutting and Trading Centre, N.D. Kulasekara of the National Development Bank, V.S. Kotalawala of Lanka Salusala and others.

There is actually no shortage of gems it was pointed out and lands from state plantations have been leased for gemming. The problem of obtaining brass raw materials is being tackled and this will be available at concessionary rates for the craftsmen.

The idea is to carry out the distribution of these raw materials through craftsmen's groups, thus eliminating the middlemen, who jack up the prices.

There was considerable discussion on modernisation of design and the use of local motifs adapted to the foreign market. Craftsmen were discouraged from copying from foreign catalogues. Instead they were told to develop indigenous designs.

Whirlpool products from Singer

Whirlpool home appliances are now available for use in Sri Lankan homes through Singer.

Whirlpool Corporation, began in 1911 with the dream of one American entrepreneur, Louis Upton who founded the Upton Machine Company to manufacture motor driven wringer washers.

Headquartered in Benton Harbor, Michigan, USA the company manufactures in 12 countries and market products in nearly 140 countries under major brand names such as Whirlpool Kitchen Aid, Roper Estate, Bauknecht, Laden and Ignis.

Whirlpool is also the principal supplier of major home appliances under the brand name Kenmore to Sears Roebuck and Co. ( a relationship that began in 1916).

Whirlpool's international outlook was initiated in 1958 when it entered Brazil with an equity interest in multibras (Brasmotor). In September, 1997, Whirlpool purchased the majority ownership of this business.

The '80's marked the beginning of Whirlpool's aggressive strategy to be a worldwide competitor. The Philips white goods business in Europe was acquired for $ 1 billion.

This marked the successful introduction of the Whirlpool brand in Europe. Recognising Asia and specifically India as a major market a joint venture was forged with the TVs group to manufacture compact washers for the Indian market in 1989.

In 1995 Kelvinator of India was acquired. The same year saw majority control in TVS Whirlpool Ltd., and the company was renamed Whirlpool Washing Machines Ltd.

In 1996 Whirlpool of India (WOI) was formed with the merger of the refrigerator and washer companies.

Besides being the No.1 appliances company in North America the global strategy has ensured that it holds the No.1 position in Latin America while ranking third in Europe.

In Asia Whirlpool is the leading western company and is consistently improving its share of this market. Today Whirlpool represents over 25% of the global appliances units sold... Every two seconds a Whirlpool Appliance is Sold Around the Globe.

The company ended the year 1997 with record unit shipments in several product categories with the net sales of US$ 8.6 billion. The company's net earnings for this period was US$ 238 million.

In 1998 the company anticipates growth in unit shipments largely from its Asian manufacturing base - the frost free refrigerators being manufactured on a global platform from its recently commissioned state-of-the art manufacturing facility in India and the new microwave ovens and automatic washers from China.

The 1998 first quarter results for the company indicate a strong performance with first quarter earnings being up by 58% over the previous year and the company expects performance improvements throughout the year.

Whirlpool Corporation is confident that the tie up with Singer Sri Lanka will be mutually benefitting to both parties.

Singer Sri Lanka a market leader in Consumer Durables, Consumer Electronics and Sewing Machines in Sri Lanka and is a Blue Chip Company whose shares are traded in the Colombo Stock Exchange.

SUN Radio now over the air in Lanka

Two new radio stations SUN FM and HIRU FM went on air last week.

"SUN FM" began its broadcasts in English on 99.9 FM and "HIRU FM" in Sinhala on 107.9 FM.

Three more stations are due to be launched in September, a company release said.

The second Sinhala service - "THARU FM" on 96.7 FM, the second English station "GOLD FM" on 89.8 FM and the Tamil service "SURIYAN FM" on 103.2 FM. The 24-hour service will cater to young-adults, teenagers and contemporary audiences", the release says.

The distinction between SUN and HIRU FM and the other radio stations will be the presentation and the atmosphere created by our young energetic crew of presenters, some of whom are completely new to the industry," GM, Asia Broadcasting Corporation's Raynor Silva says in the release.

The Asian Broadcasting Corporation's (ABC) parent company SUN RISE Radio Station of the UK holds a 60% equity ownership and management rights in ABC with a total investment of US $8-9 million, with the balance 40% being held by local investors. SUN RlSE Radio was the world's first independent commercial Radio Station to be licensed specifically for the Asian community.

The Company operates a number of Radio Stations in the UK, with SUN RISE holding outright ownership of five Radio Stations and part ownership in almost 50 other Radio Stations - again catering specifically for the Asian market.

"Although the normal 'modus operandi' of SUN RlSE in Radio is only on a turnkey basis, the rare investment opportunity it has made in Sri Lanka is due to the fact that it considers commercial broadcasting in Sri Lanka to still be in its infancy, with immense potential for a "complete Radio Service", said Dr. Avtar Lit, CEO of both SUN RISE and ABC.

Why they come again and again to Intercon

Sri Lanka's pioneer 5 - star hotel, the Ceylon Inter-Continental, celebrated its Silver Jubilee last Thursday amidst much fanfare, a food fiesta and an awards ceremony to recognise the loyalty and commitment of its employees throughout the years.

Sixty-four employees of the hotel including 26 Staff members who have served the hotel from its very inception were felicitated on the occasion for their contribution to the success of the hotel and espeically its unique 'personalized care' service.

Those employees who have served the hotel for 20-25 years received service pins and gold coins while staff members of 15, 10 and 5 years received cash awards.

The hotel has also organised a Thai Food festival at Cafe Emerald, in conjunction with its Silver Jubilee celebrations.

The chefs and hostesses have been flown in from the Siam Inter-Continental Bangkok for the purpose.

General Manager of the Ceylon Inter-Continental, Lal Leanage who has also served the hotel since its inception said that organised tourism in the country was in its infancy when the hotel commenced operations 25 years ago.

The Ceylon Inter-Continental which enjoys the distinction of being the first ever 5 - star hotel in the country was opened by Prime Minister Sirimavo Bandaranaike on July 1973.

The world's major tour operators were also flown in to participate in the week long grand opening celebrations, recalled Mr. Leanage.

He observed that the hotel's unique personalized care service which has been in operation since its inception has enabled it to record the highest percentage of repeat clientele amongst Colombo's top hotels.

It is estimated that as much as 80 per cent of the hotel's customers comprise repeat clientele.

Mr. Leanage attributed the success of the personalized care service to the relatively small size of the hotel with its 250 plush rooms.

This includes specially trained hotel Staff who address clients by name if they have booked in the hotel more than once and a computerized guest history system recording the client's likes and dislikes pertaining to cuisine served at the hotel and his or her favourite room which will be especially reserved for the client in advance once notice is given.

The hotel mainly caters to business clients and leisure travellers who presently amount to about 20 per cent of the hotel's clientele.

Business diary

Customer care for frontliners

July 10 and 11

A two-day workshop titled "Customer Care for Front Liners" is being organised by the Sri Lanka Institute of Marketing from 8.15 a.m. to 5.30 p.m. each day, at the Earl's Court, Trans Asia Hotel.

The main objectives are to teach participants the fundamental skills in superior customer service, assist them develop the right mind set in customer service management and help them take responsibility for personal growth and development on-the-job.

Among the areas to be addressed at the workshop are Communication Skills for Frontliners, a Mindset to Extend Customer Care,Grooming for Success,Assertiveness and Listening Skills for Customer Care and how to develop and apply these skills in your career.

Ideally suited for Secretaries, Customer Service Executives, Showroom and Counter Sales Staff, Tele-sales staff, Receptionists and Telephone Operators, the methods employed for training include interactive presentations by resource persons followed by group sessions to prepare role plays, based on practical scenarios, for presentations and feedback using video playback. A Certificate of Participation issued by the Sri Lanka Institute of Marketing will be awarded to each participant.

Another award for Sampath Bank

General Manager and CEO of Sampath Bank Kumar Abayanayaka received the award for "Outstanding New Business Venture Project in 1998" awarded by the Asian Banking Digest, the prestigious financial publication. He received the award at the Asia Pacific Banking Congress in Manila at which he made an address on "The future of electronic Banking and its impact on the Banking Industry". The award was presented to Mr Abayanayaka by the Chairman of the Central Bank of Philippines.

This presentation to Sampath Bank was for the introduction of the SET/Debit Card. This innovation enable customers to withdraw money from Automatic Teller Machines and as well as paying for goods and services on-line. This is another value-added service introduced for the first time in the South Asian Region by Sampath Bank.

More Business * Motivating Employees for Better Results * Learn To Handle Trade Unions * EU ministers want end to shipyard subsidies * Lanka Lubricants strong despite expected competition * MLL plans restructuring with NDB, IFC guarantees

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