• Ups and downs of Big Mac Index
• Communication Bureaus under TRC scrutiny
• IFC doubles investment
• Maturata goes through
• Threat to a vital limb of economy
• Index-linked instruments a schizophrenic investor could love
• Plunging blue chips - attractive long term buys
• Tea and Tourism drop
• If you were the Finance Minister - Banking sector
• Shipping
• Stock exchange essay contest
• Seven flights to Male
• NDB in Galle
• SIA unveils KrisFlyer
• Luxury cruises for Conqueror users
• IGATEX will upgrade garment industry
• Winners of BQS awards
• Sri Lankan wins prestigious American marketing award
• Benefits of ISO 14001 certification

Ups and downs of Big Mac Index

Some of you may have queued up last week to enjoy a 'Big Mac' at McDonalds first outlet in Sri Lanka. But have you heard of the 'Big Mac Index'?

The Big Mac Index is widely used worldwide by economists to get an idea about the over valuation of non-convertible as well as convertible currencies.

McDonalds opening their first outlet here, gives us a chance to gauge how overvalued our rupee is by calculating the internationally accepted 'Big Mac Index', analyst CDIC Sassoon Research, Chaminda Silva said.

A Big Mac is currently sold in the USA at 50 cents. A Big Mac in Sri Lanka is sold at around Rs. 100.

McDonalds have a standard price worldwide. Equalising a Big Mac at 50 cents to Rs. 100 in Sri Lanka, shows the real value of the local rupee compared to the US dollar. A dollar is presently sold for around Rs. 65. This shows we must depreciate our currency further to Rs. 100, he said.

Our foreign currency ratio is not a realistic value. Because our capital account is closed, its a misconception that our currency is stable, he added

Communication Bureaus under TRC scrutiny

By Mel Gunasekera

Communication bureaus will come under the telecom net soon. The Telecommunications Regulatory Commission (TRC) is in the process of bringing communication bureaus within the TRC law, the TRC chief told The Sunday Times Business.

A taskforce has already been set up by the TRC, which includes representatives from the three operators, namely Sri Lanka Telecom, Suntel and Lanka Bell, to examine industry problems.

Communication bureaus are considered to be re-sellers of telecom services, who previously had no status with the telecom regulatory law.

But a new amendment to the TRC law in 1996 (Section 18 a) makes it an offence to re-sell telecommunications services without permission from the TRC.

"Discussions are taking place with the operators, to get more particulars before we issue a permit," TRC Director General, Prof. Rohan Samarajiva said.

The onus is on the operators to inform regulators of the existence of this type of re-seller.

Once all details are in place, TRC would lay down conditions to the operators authouri-sing them to sell permits to the bureaus.

The TRC will not have any direct dealings with the bureaus themselves. But anybody using telephone lines for the purpose of sending/receiving messages by way of a business by charging a fee will have to get prior approval from the TRC.

The new amendments to the Act have not been enforced yet, as the TRC is still in the process of gathering data from the operators.

The operators have asked for extra time, as they need to find out the actual number of bureaus in existence at present.

Permits would be issued to the operators giving certain terms and conditions. But the responsibility is on the operator to enforce it.

Some of the rules to be enforced include making it mandatory for the bureaus to display their services and tariffs in all three languages, issue receipts to customers, an enclosure for callers' privacy and cleanliness within the bureau.

The permit would have to be prominently displayed. To make it easier for the public, the TRC would issue a permit in different colours for each of the three operators.

At present, some errant bureaus have been found to charge their customers arbitrarily and there is no proper system to monitor the bureaus, nor the services they provide. Neither the regulators nor the operators themselves have data on the number of bureaus in operation.

Communication bureaus are scattered islandwide, serve the rural and urban masses who do not have telephones of their own. Most patronise them to contact their families overseas. Their services range from providing telephone calls, to sending faxes, telexes and e mail. Some bureaus double up by offering photocopy services and selling stationary items.

The bureaus have been found to be the worst defaulters of telecom bills.

Communication bureaus purchase telephone lines and sell the service to customers on a cash basis. As the capital outlay is minimal, this business is seen as an easy way of making money.

IFC doubles investment

The International Finance Corporation (IFC), the lending arm of the World Bank intends to double its investments in Sri Lanka within the next two years, a top IFC official said.Since commencing operations in Sri Lanka nearly two decades ago, IFC cumulative approvals (including syndication) todate exceed US$ 50 mn.

"We are hoping to invest a further US$ 30-50 mn within the next 12 to 24 months," IFC Director South/Southeast Asia Rashad Kaldany said at the opening of the Fund's office in Sri Lanka last week.

However, IFC may scale down its lending operations if the separatist conflict escalated, he warned.

Since July 1998, IFC has so far approved investments in four projects totaling US$ 14.4 mn, which includes Lanka Hospital Corporation Ltd. (US$ 6.5 mn), Aitken Spence (US$ 2.7 mn), Mercantile Leasing (US$ 3.5 mn) and Lanka Orix Factors (US$ 1.7 mn).

IFC's investment portfolio in Sri Lanka was US$ 25.2 mn as of June 1998 consists of US$ 19.8 mn in loans and US$ 5.4 mn in equity. This includes projects in private power generation, general manufacturing, tourism and the financial sector.

They hope to further diversify their operations in private infrastructure projects, development of the small but growing general manufacturing sector, private provision of social services, deepening of Sri Lankan capital markets and financial institutions, and development of the local debt market.

In addition to the projects approved so far, a further 12 approved projects are in the pipeline, he said.

Explaining the significance of the opening of the IFC's office he said, "There is tremendous opportunity for us to increase our activities in Sri Lanka. It's important for us to be closer to our clients."

He said that despite the ethnic turmoil, Sri Lanka has continued to have strong growth.

"The balance of our portfolio is doing well."

IFC is keen to invest in the areas of financing, infrastructure development, telecommunications, software development and agri-based industry,all of which involves a minimum investment of about US$ 5 mn, he added. (MG)

Maturata goes through

The prolonged Maturata Plantation sale, which was on hold after a series of hiccups, will be finalised early November. Free Lanka Trading Company Ltd. has nearly completed transactions to purchase 51 per cent of the plantation, market sources said.

Free Lanka secured the controlling stake at a cost of Rs. 884.5 mn (including convertible debentures). Free Lanka paid Rs. 75 per share - the highest price secured during the plantation privatisation process. Other bidders for the issue included Forbes Ceylon Ltd and Asia Capital.

However, the transaction ran into legal dispute with Free Lanka Trading taking a restraining order against the Employees Trust Fund (ETF) preventing them from selling the stake to another party.

Free Lanka Trading failed to make the required full payment, despite PERC/ETF giving an additional grace period.

Threat to a vital limb of economy

Tourism is once again threatened This time not from concerns of security as much as global conditions which are driving tourist arrivals down. Tourist arrivals this year have hardly kept up with the levels of last year. With the expansion of hotel facilities around the country this is bad news.

The tourist industry has been a vital part of our economy in the last two decades. Tourism's contribution to GDP is significant. In 1997 tourist revenue was estimated at Rs. 12.3 billion. Tourism employs about 34,000 persons directly and nearly 50,000 persons indirectly. It is also a support to our handicrafts and agricultural produce. Given such a significant role in our economy we cannot allow tourism to decline.

In the first seven months of this year tourist arrivals were lower than the corresponding period last year: 202,674 compared to 205,101. Tourist earnings have dropped from US$17.6 million to 16.8 million, a drop of 4.5 per cent.

The main factor affecting tourism at present is the global economic environment. When there is a slow-down in the global economy expenditure on travel is likely to be curtailed. It is said that the fall in prices of Western stock markets has changed expenditure patterns.

When people perceive their wealth to have diminished they are more prudent in non-essential expenditure. Expenditure on travel is a casualty of such expenditure curtailment. Besides this, the crisis in the Asian region has had a disastrous effect on our tourists.

Destinations in East and South East Asia are now far more attractive than ours owing to an appreciable depreciation in their currencies.

European tourists are likely to by-pass Sri Lanka, which has now turned out to be a comparatively high-cost destination.

Besides this, tourists and business travellers from other Asian countries to Sri Lanka have dwindled. The hotel industry may have to look at these facts squarely and adopt pricing policies which make Sri Lanka's tourism attractive.

Besides the issue of competitive pricing there is the need for the government to view tourism as a sector requiring policy actions which would render Sri Lanka an attractive destination. There seems to be very little done at present.

The traffic congestion on our roads, the poor roads in some of the notable tourist destinations, pollution of the atmosphere and unattractive environments on the roads to tourist destinations are some of the deficiencies.

These have to be corrected. There has to be a conscious effort to improve our environment. Otherwise those who spend time at scenic locations may carry with them memories of the unattractive travel to and from them. The hassles of travel may outweigh the benefits of their stay in scenic locations.

There must also be an effort to make Colombo itself a more attractive city. As it is, its attractiveness is dwindling with traffic congestion, air pollution, garbage and rutty and water-logged roads. Apart from these environmental factors, government must make an effort to provide attractions in the city. Colombo compares very unfavourably with other capital cities in the number of attractions it could offer. Such attractions are not necessarily those of night life but also other points of interest. The Dehiwela Zoo, which was a very attractive one has ceased to be a great tourist attraction. What was one of Asia's finest zoological gardens, has turned out to be an under-developed and poorly maintained zoo.

Colombo has hardly any good art galleries to speak of. The Museum, which could have been a good introduction to our ancient cities, has also fallen by the wayside. The Vihara Maha Devi Park has lost its beauty especially by its use in various ways which cannot be considered tasteful.

The Beira a potential attraction remains polluted and unexploited. There is an urgent need to develop Colombo as an attractive city with points of historical interest as well as entertainment spots. The only conspicuous positive development in Colombo has been the number of restaurants serving a variety of Eastern and Western foods.

Another important determinant of tourist development is the easy accessibility of Colombo by air. Today few reputed international airlines fly to Colombo. Every effort must be made to attract airlines to fly through Colombo if we are to develop our tourism.The fact that AirLanka brings in nearly 50 per cent of tourists should be viewed as a negative factor not a positive one.

Sri Lanka cannot afford to neglect its tourist industry. A considerable amount of capital has already been invested. Many financial institutions have lent to the hotel industry; the persons directly and indirectly employed are considerable and its contribution to incomes is significant. It is also a sector where the country has mobilised excellent human resources, and trained staff find employment abroad.Tourism is an industry in which Sri Lanka has a comparative advantage. It must transform this comparative advantage into a competitive advantage through a conscious effort to support the industry.

More Business * Index-linked instruments a schizophrenic investor could love * Plunging blue chips - attractive long term buys * Tea and Tourism drop * If you were the Finance Minister - Banking sector