Parting words from WB rep

By Feizal Samath

Favourable prices of essential imported commodities and reasonable garments' exports could cushion Sri Lanka's economy against any fallout from the gloomy global economic environment, the World Bank says.

Agriculture production has done well this year while 1999 - weather permitting - is also expected to be a good year. "This year growth prospects are on course while there is no reason for GDP (gross domestic product) to fall below five percent in 1999," said Roberto Bentjerodt, the World Bank's country director.

The World Bank's mood is optimistic and is certainly something to cheer about in a depressed market scenario where the only news is bad news - tea markets tumbling, stockmarkets falling and corporate earnings growth slowing down.

Economic theories abound about which way the Sri Lankan economy is heading. Growth rate forecasts range from less than five percent to over five percent and economists are generally predicting that 1999 would be a more difficult year.

Bentjerodt, who ends his long Colombo assignment in December this year, is optimistic that Sri Lanka's growth next year would be on an even keel.

He said the import prices of key commodities like crude oil, wheat and sugar have been low and would continue to be low next year ensuring favourable terms of trade for Sri Lanka.

"The import prices are low while export prices have not been bad at all. Import prices may fall further next year The external environment may not be rosy on export prices but one has to look in terms of a balance. And trade balance, export prospects and import prospects don't look bad at all for Sri Lanka in 1999," he said in an interview.

After seven years in Sri Lanka, Bentjerodt is leaving Lanka in December to take up an appointment at World Bank headquarters in Washington in the United States.

His assignment in Sri Lanka is probably the longest-ever for any World Bank country representative. Normally World Bank international staff, are assigned for periods of three to five years the most, overseas.

Bentjerodt's stay here was extended since Sri Lanka became one of six countries where a World Bank pilot project was conducted - to extend the role of the bank and establish a country director status.

He was first country manager, then moved on to being country representative and now, country director of the World Bank's Sri Lanka office. The office has grown from four professionals, when Bentjerodt first came to Sri Lanka, to 14 professionals (including himself), now.

He said that the external environment has been good in the last few years upto the early part of this year with Sri Lankan garments' exports - in spite of the East Asian crisis - and tea (in first half 1998), doing well.

Intellectual property laws to be revised by year end

By Chiranthi Rajapakse

New laws to protect intellectual property rights will be introduced by the end of this year, officials at the Ministry of Trade and Commerce said.

These laws will apply in the areas of copyright, trademarks and patents and include the prohibition of the sale of pirated computer software.

The introduction of this new legislation has been made mandatory by the World Trade Organization and international lending agencies. The new laws will increase the patent time given for new inventions from 15 years from the date of registration of the product to 20 years, Dhushyantha Perera of the Ministry of Trade and Commerce said.

Existing copyright laws will be strengthened to stop the sale of pirated computer software, music compact discs and videos.

Patent laws affecting plants and animals will also be amended to protect plants that are used in industrial processes, Mr. Perera said. These changes will protect plant growers, he added.

Another area addressed in the new laws will be the appellation of origin in a product, for example the use of the label, Ceylon tea. The laws will also stop the use of already registered trademarks.

Under the Trade Related Aspects on Intellectual Property (TRPS) agreement signed by Sri Lanka, the new laws must be introduced before January 1, 2000.

Mr. Perera added that these laws would provide protection for traders and inventors. Without these laws foreign investors would be reluctant to invest in Sri Lanka, sources said. Over a hundred countries have signed the TRPS agreement.

New deals at SAARC Fair

By Asiff Hussein

About 160 Sri Lankan participants and 140 participants from the other SAARC states took part in the grand exhibition held at the BMICH from September 8-15.

The trade fair, the second of its kind, was billed as an 'Opportunity for Regional Growth' by its organisers, the Federation of Chambers of Commerce and Industry of Sri Lanka (FCCISL).

All indications are that this year's exhibition, though held on a smaller scale than the first SAARC Trade Fair held in New Delhi two years ago, has nevertheless been a success and has already resulted in a good many agency agreements and joint venture arrangements.

Many foreign participants said that what is more significant than the relatively high visitor turn-out of 100,000 was the long-term implications for business co-operation within the region, especially the investment and marketing opportunities it has generated.

Director of the India pavilion, S. Raghavan said that so far the response has been very encouraging, especially from the local business community.

He observed that of the 70 Indian participants, only two had taken part with the sole purpose of retail trade.

The rest, whose range of products include fabrics, machine tools, pharmaceutical and surgical items were interested in establishing long-term business relationships such as joint-venture partnerships, he said.

He noted that five Indian firms have already signed agency agreements with local business concerns while three others were in the process of doing so.

He pointed out that such agreements could in course of time, result in joint-ventures, as the Indian principals are currently resorting to a 'Test Marketing" policy on the basis of the orders received and depending on the response are likely to enlarge the areas of co-operation.

He said that they also had the intention of developing new areas of co-operation such as processed food production and telecommunication facilities.

Director of the Pakistan pavilion Naim Aslam also said that the response has been very good and that there existed much investment and market potential for Pakistani businesses here.

He noted that of the 42 Pakistani companies that participated about 15 had entered into some sort of business arrangement with local parties while there is also likely to be quite a follow up.

Bangladesh pavilion Director Hafizur Rahman said that many of the 13 Bangladeshi participants had already appointed local agents or had secured significant supply countracts.

This included the Bangladesh Jute Manufacturing Corporation, a leading producer of jute and fabrics which has already been awarded some sizeable supply contracts and Aziz Pipes who have granted Central Industries the agency for the distribution of its unique Plastic Wood, a versatile and cost-effective, high-tech engineering product.

Mr. Rahman pointed out that it is unfortunate that the existing volume of business between the two countries is minute and that the exhibition has served to somewhat correct the situation.

A number of Sri Lankan firms like Abans and Woodplex have also managed to clinch some good deals.

More UK trade

By Shafraz Farook

With last year's trade between Britain and Sri Lanka reaching record heights, British industrialists met Sri Lankan industrialists, to materialize possible trade agreements between the two countries in the small and medium scale industries.

Twenty British delegates led by Keith Horton, Chief Executive Officer of the Leicestershire Chamber of Commerce, called on the Minister of International and Internal Trade, Commerce and Food Kingsley T. Wickremaratne last Monday. The delegates made formal appointments with local entrepreneurs.

Mr. Horton said this was the fifth delegation in the last four years, where over 300 businessmen spread across Britain came to Sri Lanka. They represented small and medium scale business concerns looking for potential trade, in the form of joint ventures, partnerships and small-scale industries.

He said Sri Lanka was used as a springboard for trade. When asked how successful this delegation was, he said it was too early to tell if any agreements were made, but the delegates were confident of doing business in Sri Lanka.

Mr. Horton said, Information Technology was an area they look to develop and also education, especially training in management development.

He said he wished to continue development in Sri Lanka representing the Chamber and to increase trade that would benefit Sri Lanka.

Breweries chief for moderation

Name: Suresh K. Shah
Born in : June 1960
Schooled at: Royal College, Colombo.
Professional qualifications:
- Joined Ford Rhodes, Thornton & Co. a Firm of Chartered Accountants just after leaving school.
- Qualified as a Chartered Accountant in 1985.
Working Experience:
- Qualified - Assistant at Ford Rhodes Thornton & Co. from 85 to 86.
- Joined Lankem as the Chief Accountant in 1986.
- Joined United Motors in 1990.
- Joined Ceylon Breweries in 1991 as the CEO.The scarcity of and the need for professionals at the helm of affairs, let alone business, is a much stressed point today.Suresh Shah is a fully fledged Chartered Accountant who belongs to the handful who have ventured that far, and at quite an early age.A comprehensive professional education plus a wide and varied exposure to the practice sure have helped him get to the top-rung.What's more his down-to-earth humbleness and in-bred innovativeness is indeed a rarity among his calibre.The man sure is "what you call a pleasant surprise"

By Priyantha Gamage

Q. Mr. Shah, would you mind speaking about your company, to start with?

A. Ceylon Breweries is a part of the Carson Cumberbatch Group, which has got the majority share-holding of over 51% in the company.

It's also the Management Secretaries of the company.

Q. Who holds the other shares?

A. Carlsberg holds 8% and the rest belongs to the public and we are a public-quoted company.

We are in existence for over 117 years now. The company traces its roots back to 1881 in Nuwara Eliya, where it was started by the British to serve the plantation community.

Then from basically a cottage industry, it developed over the years and we became a company in 1911. Before that i.e from 1881 to 1911, I think we'd have been just a company registered but not a limited liability company. At that time, we were owned by a brewery group which today is Pakistani.

And then in 1911 we became a limited liability company. The growth of the Company can be traced since that point. And then we became a national company.

Q. Have you been able to trace back to see whether it was a single person who was responsible for the initiation of the brewery?

A. There is this person called Samuel Baker who has written books on Sri Lanka. There is some evidence that he may have been the one who started the Brewery. But there is no one hundred per cent. confirmation. Unfortunately we don't have the very old records of the company. No one has really wanted to keep them.

Q. Is there any connection to the "Baker's Falls"?

A. Yes. It's the same person. It's named after him. He was like an adventurer and he apparently seems to have come to Sri Lanka for convalescing. He was here for about eight years and the story goes that during that time he started the brewery. I am not very sure as to whether it is the same man who started this company.

But in a book on Sri Lanka he writes that he started a brewery upcountry.

We know very little of the history of this brewery. In terms of the company currently and even going back, what we have been reputed for over the years since we started business is that we could brew a very good beer.

And the quality of our beer and whatever we have brewed has been well-accepted locally and internationally. We send our beers overseas to quite a few exhibitions and competitions and I think overall we have won something like 50 odd medals.

Q. But you don't export?

A. We don't export very much. We did start exporting a little around the late 80's. And we were quietly picking-up as well. Because there's a lot of potential in Europe. But in 1995 the excise duty came down, and the demand for the product increased locally.

So we couldn't even meet the full demand of even the local market. We didn't have enough capacity in Nuwara Eliya. As a result we didn't concentrate on the export market at that time. So we have not been able to really develop the export market, but that's what we are doing right now.

Q. Excise duty on beer came down drastically in November 1995 and the beer market just bloomed. Beer became a very scarce product for some time. How did your company cope?

A. Since the reduction of excise duty we commissioned a new plant "Lion Brewery" in Biyagama which was a Rs. 1.7 Billion investment. It is a very modern, state-of-the art plant, what an ideal Brewery should be. It is designed for expansion. When you go back to N'Eliya, what you find is that the plant has evolved over the years. It's an old plant and whenever you needed to expand, you found some space available and put your equipment there. This is really not the best way. A brewery should be laid out in a particular manner.

So what we have done in the new Lion Brewery is to have designed the plant to be able to expand to about 1.8 million hecto litres which is about 180 million litres a year at capacity. Our present output is less, around 300,000 hector litres which is 30 million litres a year.

But we have designed the plant so that it can be expanded. Right now we have the lay-out for the brewery to be expanded from 300m to 450m, to 600m, to 900m, to 1.2m. to 1.5 m and 1.8 million hecto litre capacities. So we have the building, drawing and the equipment layout right upto the final capacity.

So, say in another six months or so, if we want to expand from our current capacity of 300,000 million hecto litres to 450,000 million hecto litres, we know exactly where and what should go in.

Q. This current capacity of 300,000 million hecto-litres is restricted to Biyagama alone?

A. Yes. only Biyagama.

Q. What about N'Eliya?

A. At N'Eliya the capacity would be about 150,000 hecto-litres.

Q. You took over this company seven years ago in 1991. What were the major changes to the company since you took over?

A. A couple of things were very easy. Because like I said, the quality was never an issue. It was always very much within the company. Actually when I came in the Carsons Group also had gone through a major change in terms of ownership.

So the new owners, the Selvanathan brothers were looking at changing the culture within the entire group and one of the places they started was the Brewery. Because it was potentially one of the major income generators of the group. So my first assignment in that sense was to really change the culture from a very inward looking company into one that is external looking. We were what I'd call a production and accounting driven company. When I came in I still remember Mr. Mano Selvanathan telling me "You are an accountant, but don't look at the accounts. Look at the externals. Look at the market, look at the consumer. So, we changed the company from being a production and finance driven company to one which is very much a market focused company. That was the real major thing that was done over the last seven years now.

Marketing really leads the company. And it has not been an easy period because, we have had to look at our people. I mean the culture consists of people. We had to identify people who didn't fit the culture, we had to change them and we had to bring in new ones.

In that sense, it was like a period of 'heartburn'. But now having gone through that period, I would say that we are very close to being a one hundred percent market driven organisation. We still are not a one hundred percent market driven organisation. But we are very close to getting there?

Q. With all this success around you, why do you still say that you are still not a one hundred percent market driven organisation?

A. Changing culture takes time. It's not easy. And particularly because you are talking about a company that has been around for over one hundred years. It builds up certain things on its own. And sometimes it is very sensitive in making changes. And you can't make a lot of changes immediately. Ideally it would have been nice to sort of just brush everything aside and put in brand new things.

But that would have caused a real upheaval in the company and we may not have progressed as much as we have done today. But I think we are like getting there. I would say within the next 3-4 years we would become really a very well integrated on a 100% market focused company.

Q. What's your present staff strength?

A. Currently, if you only look at Ceylon Brewery we have a staff strength of about 250 persons. Lion Brewery will add another 100 persons.

Q. Is there a particular management principle you rely on in managing your company either personally or as a company? Or is it a combination of several principles?

A. I would say the principle of the company and mine fit together very well. We believe that people make decisions and that decision making is a key factor whether you make the right or wrong decision: Making the decision is a key factor. It's better than doing nothing. And what we are trying to do is to allow people to make decisions. So the management in that sense is very decentralised.

We work in terms of, say for instance I do not get involved in day- to-day activities of the comapny. If I were dealing with marketing for example there are certain guidelines to work within a certain vision for the company and for the marketing division and then from that point, the marketing division take it on its own. Of course at the beginning of the year, there are budgets and staff which we agree on.

But once that is done, there is complete freedom for each section of the company to do whatever they think is fit. It sounds easy, but its not. One of the fundamentals is that you need the right people in the right job. And that's not easy in this country. It's very very difficult to get suitable people you are looking for. This is a major problem for us.

In terms of a working principle, the principle is that, like my job here I'd say is to facilitate the team to be able to do their job. Ideally I'd say that I'd complete my job the day I can say that this company does not need a CEO any more.

Q. You have completed over seven years in this company. So now do you see the progress of the company as against when you took over?

A. The growth has been phenomenal, if you look at the last three years. But that's nothing that I did on my own. When I came in, the Selvanathan brothers, the senior most directors of the group and I together, understood one thing. That the policy that governs the beer Industry.(and it is a government policy) had to change if the company was to progress and to really fulfil its potential.

Let me go back. If you look at the potential, success is not in numbers. That's not how you measure it. Success is to what extent of your potential you have met. And we sat down and identified as the potential for this company as being not to be merely Sri Lankan, but really to be a global company.

We knew that it couldn't be done within a year or two or even ten years. May be it won't even be done within my period in the company. But that was the potential that we felt was there for the company and then we wanted to do whatever we could to at least to lay a foundation for that.

If you look at the global beer industries, it's about Rs. 360 billion worth per annum, in revenue terms. What we said was "let's look at a point zero one per cent of that'. And then you are talking in terms of Rs. 3.5 billion per annum. Now if we could get to that stage you are looking at beer export in Sri Lanka probably the second largest export earner. Just behind garments.

That is the potential we have. We understood one other thing, that if we were to take the company to that level, it was essential that we have a substantial volume in our home market in Sri Lanka. Because, you know by selling the kind of volumes that we were selling we didn't have the economies of scale that were necessary to compete with an overseas company.

I'll give you an example, 40% of our cost of exports is the cost of the bottle. So when you go and talk to the bottle supplier, what they say is 'you bring us greater volume and we'll give you a lower price' So, to get that greater volume we have to have a substantial market in our home country. That is fundamental.

How do we get a substantial market. When beer was sold at Rs. 58/- a bottle, and when "kasippu" was available at that time probably at Rs. 35/- or Rs. 40/- at the most there was no way you were going to get that market. There was absolutely no way. So we understood that fundamental, that the company had to have the right policy in place if that potential was to met.

So then we started working on it. And one thing that worked in our favour was that this country had a genuine alcohol related problem. I mean it's a genuine problem.

The extent of illicit liquor consumed in this country is unbelievable. The damage that is done is unbelieveable.So, the fact that this country had a serious problem on its hand meant that even the government was willing to listen to a proposal which would help reduce that problem. And when you look at the international scene, you realise that goverments abroad have made soft alcohol like beer and wine taxed at lower rates and therefore cheaper and freely available because it prevents people consuming illicit liquor.

We pointed this out to our local authorities. And I must say that they accepted the principle.

Creating awareness about changes in international liquor markets resulted in the reduction of excise duty on beer in November 1995. It came down by something like 70% giving us the opportunity of really focusing on overall strategy of making the company and the local beer industry a huge export earner for the country. So potentially that is where it is.

And I'd say that at the end of the day, if we are to say we are successful, we must achieve the objective of becoming a substantial sizeable export-earner for Sri Lanka.

Q. What is you present export income?

A. At the moment very small. I mean it is not worth talking about.

Q. How did the demand for your product respond to the lowering of the excise duty by 70%?

A. I would say that the demand went up by over 200%. At that time our only competitor was McCallum Brewery. Together, we couldn't meet the demand.

There was no question of exporting at the time, which is why we started our new Brewery in Biyagama. Now we are working on the export market.

Q. The substantial decrease in duty; was it the result of years of persuasion by the industry or the Government's own decision.

A. Finally it was the Government's decision. But I think we certainly influenced them. Not in a 'funny' way, but we had a very good case. And, I think what really supported was that internationally the practice is what we were recommending.

If you look at any country from U.K. USA, Germany to even in Asian like Singapore, Korea, Japan, beer is affordable in all these places. The idea is that the consumers will not go for illicit or hard liquor.

The alcohol industry is a sensitive industry. No question about that. And alcohol abuse is bad. I mean it has to be prevented. There is again no question of that. And what they say is that, the more alcohol you take is the greater the chance of abuse. So, the lower the level of alcohol consumed, the lesser the chance of abuse.

And then beer has the lowest alcoholic percentage.There's only 4% alcohol. Wine has 13%. If you take a licquer it has 20% - 26%. Arrack has about 35%. Scotch has 42%. So at 4% alcohol, beer is almost nothing. It's better to get people drinking beverage with a low alcohol volume in preferance to getting into the higher alcohol products. So, this I think governments universally have understood. And thats the principle that we were working on.

If you look at Sri Lanka's alcohol consumption about 64% is illicit liquor. About 30% is legally made but hard liquor, like arrack. Only around 6% is soft alcohol like beer.

Q. Has the reduction in excise duty resulted in government coffers collecting more revenue as well?

A. In March 1995, just before excise duty came down, total revenue from our company was about Rs. 430 odd million. For the last financial year, ie; 31st March 98 that increased to something like Rs. 630 million. Its about a 60% increase.

Q. Mr. Shah, what are your views on the proposed ban on advertisements on alcohol in the media?

A. What you can ban in the legalised industry. You can't ban the illegal industry. I mean the illegal industy is not supposed to be there, but everyone knows that it is there. You just can't ban that. Right now there's a lot of pressure in terms of the National Alcohol policy, the Government has received by the Task Force.

The intentions of the policy are very honourable. We don't deny that. We don't doubt it. For example, one of the things they say is 'reduce our per-capita consumption of alcohol'. We firmly support that because we believe that Sri Lankans consume too much alcohol right now.

But is it beer that is consumed too much. The answer is 'no'. It is illicit liquor that is consumed too much. So, I think that if we are to solve the problem we must address the problem itself. Banning advertising on the legalised industry is not going to reduce kasippu consumption because illicit liquor is not advertised. And illicit liquor is 64% of total alochol consumption, so by banning advertising, you are not going to reduce consumption of illicit liquor. So, the whole policy in that sense is not directed at the right source.

Q. So what do you recommend?

A. What we say is, we agree with the objectives, we agree with the principles of the policy. But is it directed properly? Please look back at that.

Take, for example, kasippu, has 35% alcohol content in a bottle. If you can get the person who is drinking say a quarter bottle of illicit liquor per day, which then means that he's taking roughly about 10% alcohol per day, to move from that into beer which has just 4% alcohol per bottle, then immediately you are reducing the per capita consumption of the country by more than half.

You are encouraging a legalised industry which then brings added benefits to the economy of the country, plus you are achieving your objectives. So what we say is look at if from that point of view. Don't target the legalised industry, because it is not the problem. The problem is the illicit industry, target them.

And you cannot target them from law enforcement. Because, if you could, the last fifty years would have ensured that the illicit industry will not survive. That has not been the case.

The case has been not withstanding law enforcement we have a huge illicit liquor industry. The law enforcement will not take care of it. You have to provide a person with a reasonable alternative at a resonable price with reasonable availability to combat this. Do that and your problem will be solved. That's what I am saying.

I'll give you an example. We have a system of licensed retail outlets. This country has 1500 licensed retail outlets to serve the entire 65,000 square kilometres. You can buy legally manufactured products only through them. Of these 1500 outlets about 350 outlets are either high class restaurants, five star hotels, beach resorts, places which an average consumer has no access to.

He has only 1200 outlets from where he can buy beer or arrack. So each of these 1500 outlets serve something like 43 square kilometres on average. In UK each such outlet serves something like 1.6 square kilometres.

On a population basis, one outlet in Sri Lanka serves 12,400 people on average. In UK, one such outlet serves something like 363 people. So a villager in a remote part of the couuntry just can't get a legalised product. So he goes for the illicit product.

Q. This number of 1500 outlets, is it before or after the increase of outlets?

A. Actually there wasn't an increase, in that service. If there was it must have been 50 - 60 outlets. It didn't double or treble. I mean we practically serve every outlet in the country and we know. It's in our records. There was not an explosion of outlets as you suggest.

Q. The trend in the medical opinions seems to be contrary to what you say. Now doctors and various research show us that even beer could to the same damage as any other hard alcohol. What have you got to say on that?

A. It depends. It's like this. There is no question that abuse is harmful. It's harmful to the person who consumes, to the society and to those around you. Because once you abuse, you basically lose your central balance. There is no question about that. Abuse is harmful.

And you can abuse beer as much as you can abuse anything else. But there is also something called a moderate and responsible consumption. There is absolutely no medical evidence that moderate consumption is harmful. It is just not there. People have tried to link moderate consumption and health hazards, but it has not been proven. What we would advocate is moderate consumption. We are not saying, 'abuse alcohol'. That's crazy no one should do that.

Importance of the minimum tariff

By Gunapala Ranasinghe

Sri Lanka, being a third world country, is heavily dependent on foreign exchange earnings to sustain its economy. One of the major areas of earning foreign exchange is export, while the Sri Lankan expatriate community too makes a sizeable contribution in this area.

The government, with a view to promote exports, has extended export credit to shippers, highlighting the importance of earning foreign exchange.

Service sectors, like tourism and air travel, are governed by strict minimum tariffs imposed by the government to prevent rate undercutting and loss of valuable foreign exchange to the country.

Absence of tariffs in these areas would inevitably lead to rate wars and foreign exchange drain. The airlines and hotels are able to maintain a very high standard of service to its customers mainly due to its maintenance of minimum tariffs.

When services are rendered to foreign principals in Sri Lankan soil, fixing minimum tariffs is essential to get the maximum benefit in terms of foreign exchange.

Therefore, vendors who provide such services to foreign principals should strive to strictly maintain these minimum tariffs and obtain the maximum possible foreign exchange to the country which will ultimately help to uplift the living standards of the Sri Lankan population and the economy of the country.

The authorities concerned should not only endeavour to protect and maintain minimum tariffs, but also monitor its implementation, and subject the violators for punishment. The tariffs set by the Controller of Exchange should be strictly adhered to by all parties concerned.

The container industry is another area which is governed by an Exchange Control Tariff. This minimum tariff is set by the Controller of Exchange way back in 1990 and is still valid. Container depots are established with large investments and the maintenance of the depots and equipment is a costly business.

To provide a first class service like the airline and hotel industry, container depots too need valuable foreign exchange, and the only way to obtain it is by strictly adhering to the minimum tariff. The government should intervene to protect the container industry by strictly enforcing the Exchange Control Tariff since the container depots contribute to the economy of the country by way of taxes for the services provided by them to the foreign shipping lines.

Further, a majority of these container depots are owned by Sri Lankans, and therefore, all the turnover is retained in the country.

However, it has been noted that with the introduction of GST, the 3% BTT levied on all foreign principals for freight collections has been abolished and "0" rated with the introduction of GST recently. The loss to the government with the "0" rating is around Rs. 600 million in foreign exchange a year.

In spite of this massive benefit to foreign principals through the "0" rating, their representatives still attempt to interfere in the implementation of exchange control policies of the government for levying minimum tariffs for services rendered by local container depot operators and exert pressure to abolish the tariff.

It was reported recently in the media that Howard Lamb, Managing Director of Sealand Colombo, had asserted that the Controller of Exchange should cease involving himself in setting tariffs for ancillary services.

The Exchange Control Tariff for the container industry, we feel, is a very sensible one, imposed for the protection of the local container industry as well as preventing the fleecing of valuable foreign exchange by foreign principals.

However, if Mr. Lamb with other foreign representatives of shipping lines, continues to interfere in the exchange control policies, it is strongly recommended that the government should re-consider the implementation of the freight tax on foreign shipping lines before they remit the freight money out of the country.

The local container depot industry was born about 15 years ago. With the liberalization of the economy, the Colombo port's activities increased dramatically and the port found itself unable to cope with the ever increasing container traffic due to congestion.

Therefore, the then Minister of Trade and Shipping invited private entrepreneurs to invest in developing inland container terminals. These newly born container depots provided the required infrastructure for the government to handle the transport of goods.

Mahathir justifies fleet sale

Mirzan Mahathir, son of Malaysian prime minister Mohammed Mahathir, has denied that pressure from the banks forced him to sell the PNSL-Pacific Basin fleet to the Malaysia International Shipping Corporation, less than two years after paying around $300m for it.

Analysts said Mr. Mahathir's Konsortium Perkapalan's high borrowings produced a severe cash flow problem when Malaysia's currency and stock market collapsed. Banks acted to protect their loan and Mr. Mahathir was forced to sell the fleet.

But he said: "In fact the banks were very divided about whether we should sell the fleet. We decided to seek a sale because that fitted in well with our overall strategy".

He said it was always Konsortium Perkapalan's aim to put the fleet of handy-sized dry bulk carriers, tankers and others into a separate entity from the main logistics company, but the intention had not been to give up ownership.

MISC bought the PNSL-Pacific fleet from Konsoritum Perkapalan for $230m three months ago. The price was independently arrived at by London-based shipbroker Clarkson and the Chase Manhattan Bank.

(Lloyd's Tankers Focus)

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