Luxury plus at Landmark

By Amanthi Jayasuriya

Rising high into the sky is 'The Landmark' at Kollupitiya, the latest high-rise to hit the Colombo skyline. The building complex which houses a shopping mall on the lower levels with offices and exclusive apartments filling up the rest of the 12 floors scheduled to open later this year, originally estimated at Rs. 250 mn, is now expected to cost in excess of Rs. 350 mn. 

A penthouse, a fully equipped gymnasium and residents' cocktail deck on the rooftop complete the building, developers, Regent Plaza (Pvt.) Ltd. said. The final cost was about 20%-30% higher than expected, as it was decided they would not compete with other malls and apartment complexes, but do better. 

"We want to create a kind of building with a sense of exclusivity and avoid what we call the honeycomb syndrome," a spokesman for Regent Plaza said. 

The 45 feet curved curtain wall holds the electric doors of the main entrance to the shopping mall while four escalators service the 20,000 square feet of shopping space under a bronze domed ceiling. 

"Central air conditioning, piped music, marble and granite private lobbies and private escalators bring to the apartments a degree of luxury and practical elegance unmatched in the market," the spokesman said. 

Reserved basement-parking facilities for residents and separate parking for guests and shoppers are provided. Telephone facilities including satellite TV, and continuous rated power generators are installed. 

While contemporary design and luxury have been the theme, security is the keyword at the Landmark. 

"Fifty percent of shopping space has been already leased out while half the apartments have been sold," a spokesman said. 

Ground floor area of 3,750 square feet considered one of the hottest retail locations is reserved for an anchor tenant such as a bank. However, no particular party has been identified yet. 

The apartments are priced from Rs. 9 mn to Rs. 15 mn with the rooftop penthouse going at Rs. 40 mn. 

Local company to make new chip

A Sri Lankan company has been selected to manufacture a brand new computer chip called DIMM (Dual Inline Memory Module). The project is estimated to be approximately US$ 6 million, Director Tandon Associates, Bernie Peiris said last week. 

Computer manufacturers could save around 10%-20% of their hardware cost with the use of a DIMM chip, he added. 

"This is the first time in Asia a new technology such as this has been brought and introduced to manufacture in Sri Lanka," BOI chief Thilan Wijesinghe said. 

"This is the type of investment we are trying to attract here," he added. 

Tandon hopes to employ around 30 young electronic and mechanical engineering graduates. A further 100 back -up jobs are to be created. 

Production is expected to commence early next month. The project would be done in four quick stages, Consultant Tandon Associates Chuck Peddle said. Each phase is estimated to cost around US$ 1.5 mn. 

"We hope to test market the product in India during the first quarter of next year, and the first version would be sold for around Rs. 20,000," he said. 

The hardware is windows compatible. "We came here because of an educative intellectual engineering base," Mr. Peddle said. 

Tandon Associates Lanka commenced operations in 1996 at Pallekella Industrial Park. The company employs 1200 workers and has invested over US$ 10-US$12 mn since inception. The plant manufactures head stack units (a computer component) used in computer disk drives. Tandon has exported over US$ 25 mn worth of components so far and produce around one million head stacks every month, Mr. Peiris said. 

With the introduction of the new project, the BOI has extended a further 10-year tax holiday to Tandon Associates. 

The company is permitted to sell 10 per cent of their produce to the local market. Since there is no duty levied on computers, Sri Lankans will soon be able too enjoy a computer at an affordable price, Mr. Wijesinghe said. 

Biz Buzz

New tariffs

A new cellular tariff scheme is to be announced tomorrow by the Telecommunications Regulatory Commission of Sri Lanka (TRC). The TRC's impending announcement shook up the cellular industry and had operators calling around to verify and trying to figure out what the new changes would be. 

TRC Director General, Prof. Rohan Samarajiva is also expected to announce several other important decisions taken by the Commission, in addition to a programme of activities undertaken this year and plans for next year. 

Vanik Index Fund

Vanik Incorporation is to launch a new Index Fund (IF) which will be linked to the sensitive index. "We are awaiting approval from the SEC. If approval is granted, we endeavour to launch the fund in the New Year to coincide with the new sensitive index being launched by the CSE," Vanik Vice President, Ajith Fernando said. 

The fund is aimed at long term investors. Unlike unit trusts, the IF would not try to out-smart the market index, and would not require major funds or portfolio management. 

Investors would stand to loose, if the index is on the decline. But given the long-term characteristics, the fund would be more attractive to long term investors. 

DFCC FRN

DFCC Bank is to commence a road show in two weeks time to raise funds for their US$ 65 mn floating rate note (FRN). The FRN will be for a 10-year period and will carry an interest rate of LIBOR plus 2 per cent, banking sources said. 

The capital would be guaranteed by the ADB, while the Sri Lankan government would guarantee the interest. The placing agent is ABN Amro Bank. The FRN is to be listed on a top European Exchange, though the exact details have not been finalised yet, sources said. 

Funds raised, will be utilised to purchase long term bonds of companies which would consequently be marketed as tradable debt securities. This pioneering project would be named Credit Enhancement Facility (CEF) and is aimed at developing a long-term tradable debt securities market in the country. 

This will not only enhance credit to companies but also will benefit financial institutions which could then raise long term funds from the market and enable the creation of a reliable yield curve. 

Market analysts say DFCC is going to have an uphill task to raise funds, due to the credit squeeze prevailing in the region. Capital market funds are only available in Europe and USA at present. 

Since Sri Lanka does not have a sovereign rating, and the absence of a rating agency would cause the DFCC issue would be priced rather high, an analyst said. Even the recent South Korean bond issue is priced high, due to the prevailing market conditions in the region. 

Milestones

Keep up with it or be left out 

Date of Birth : January 28, 1964  
Alma Mater : Royal College, Colombo 
Education : Followed a diploma course in computer systems design at NIBM after leaving school in 1982.  
Left Sri Lanka in' 84 to do a Degree in Engineering Physics ( an equivalent to a Degree in Applied Physics in Sri Lanka) at Riverside Campus, California, USA.  
Extra- curricular activities: Served as a prefect in College.  
Was elected and worked as a Resident Assistant at "Riverside'  
Assisted the "Gamaray telescope" project of NASA by designing the rotating device there.  
Career : Joined IBM, Sri Lanka, in October' 88 as a trainee systems Engineer. Appointed the Country Manager, IBM in May 98.  
Special Interests : Rowing: 
Captained the Royal College team in 1981 to win the Royal -Thomian Regatta that year.  
Boating: Owns his own boat and 'learning to race' these days'  
Travelling: Extensive travelling both here and abroad.  
Even whilst in campus he travelled across the US and neighbouring countries 'on a shoe string budget' 

Meeting Kavan is what you call a 'pleasant surprise'. He is more a marketeer than the  computer whiz-kid or the engineer he is, what with his friendly smile and winning  manner of speech. Tracing his past it is evident that he had a crystal clear idea as to what he is good at and as to what he wants to do in life. Starting-off with a solid education and topped with a Degree in Engineering Physics, he went onto do what he loved doing. Aren't these the essential ingredients of one who has reached the pinnacle of his career at the tender age of 34 years, becoming the CEO of the country's operation of the multi-national giant, IBM. Let's  listen to what he says.

By Priyantha Gamage

Q. Mr. Ratnayake, shall we start with your roots?  

A. My mother is from Kandy. My father is from Deniyaya, a village called Pallegama. I was raised in Colombo. My father was in the tea industry. He was never a planter but into administration. He was the General Manager of JEDB when he retired. My mother was a housewife. 

Q. How did you come to join a multinational giant like IBM and become its country manager?  

A. There was a vacancy advertised in the papers, when I came back. I applied, went through the interviews, and sat for the aptitude tests. It was long process then. Things are a lot simpler now. And they hired me. 

I think I applied in August and joined in October as a Trainee Systems Engineer. There was an initial period of one year's training. But I did not take the Systems Engineering career path. 

After one year, the management at the time convinced me that I was a better marketeer than an Engineer. That was in mid' 89, I think, so, I became what you called an Associate Marketing Representative, selling solutions. 

And then the Government sector. That's where I learnt the most in my career. I was there for the longest time. Then I became the Marketing Manager of the PC division, the IBM PC company, run separately within the IBM proper, with more flexibility. 

Q. You have been running IBM Sri Lanka for close to six months. During this time, what significant decisions have you taken, specially that result in changing the course of the company?  

A. I think it's too early to comment. Anyway, we have taken a series of steps to make ourselves more competitive, more dynamic and faster moving. 

Q. Your comments on the local IT industry and its phenomenal growth?  

A. I think the industry has great potential. Several different things are pulling together to cause that, one is the expansion of the telecom infra-structure. Faster technologies like ISDN are available now. 

Second is Internet service-providers. Third would be the management and the individual awareness of IT, specially through television. 

And, of course, low taxation. That's one major thing that has changed over the past few years. There was no tax for a while. Then GST came in. But inspite of that, compared to the taxation rate earlier, it's very low. 

So, as a result, it has helped this technology to go across a wider spectrum. 

Q. Can you tell us about your own company?  

A. IBM is a US company, but now broadbased. It is recognised world-wide to be the No:1 computer company. In terms of revenue, profitability, people, technology, we are ahead of Microsoft. 

We operate in about 164 countries employing 270,000 persons. It has been in Sri Lanka for over 36 years. It started-off as a two man company on May 5 1962. Our first customer was the Insurance Corporation and Chemanex was the first private-sector customer. We have over 100 persons working for us today. I think we are the No:1 computer company in Sri Lanka as well. 

Q. What are the areas of business IBM Sri Lanka is into?  

A. We are a very large software company. Numbers reveal that we are the No:1 software company in the world. These are facts that are kept secret. We are a technology company with some of the world's best technologies. 

What we do here is we help customers apply them to their day to day businesses in different areas. The word 'solution' is one very flippantly used. It means many different things to a customer. But we think, to a greater extent we do solutions as well. Because solutions mean many different things. 

It means the hardwave platform, the operating system,the network, the on-going surveys, the education. We do all these in Sri Lanka. 

When we sell a computer, we educate the customers/personnel, we maintain the equipment that we sell. If you ask me whether we sell - IBM Applications, IBM Branch office does not but together with our partners we sell the complete solutions together with Applications. 

We sell PC servers, mainframes and everything else, whatever is the customer requirement. We start first with the customer. And then we go backwards. We have a range of technologies to address different business problems. And we operate in a consultative way saying' in our best opinion, this is what suits you the best? 

Q. Taking the cue from you? Where do you stand in the PC (Personal Computer) market?  

A. There are no reliable statistics. But we estimate that we are the No:1 in the PC market as well. 

Q. That is IBM PC, is it?  

A. Yes. 

Q. How do you see the unprecedented growth in the PC market?  

A. The best growth is in the PC area. Compared to all the other areas of our business, PC area is doing the best. And we think we are growing with the industry. 

Q. When did you experience the highest growth?  

A. The highest growth we are going to experience is this year. We have already passed the 1997 numbers. 

Q. Do you agree that national IT policy is a dire need today, specially when you take the example of India?  

A. We do need a national IT policy to which all the different players agree to at least be aware of. So, somebody has to develop a plan. It need not be very complex on rigid. It might just be a simple thing showing us directions. 

Because technologies are developing so fast, it is very difficult to plan. You have to take it as it comes and be able to exploit technologies and market conditions that come-up as we go along. 

But, having an approximate direction, saying ' we are going in that direction helps. Then the question arises as to whose responsibility it is? Is it CINTEC''s responsibility or the industry's or what? 

I think, just like in an organisation, it has to be decided right at the top. There has to be commitment from the CEO. Otherwise, different departments will fly-off in different directions and do their own thing. 

It is not that bad too. I mean, they will do something. But there might be no coherent structure. And as a result, you might end-up spending more. 

At some stage, you might be able to tie all these together, but it takes longer to get there. So, the Chief Executive of the country really should lead us. There could be some organisation that does it. But it has to be finally the country's policy. Of course, you can just pay lip service and say you are very committed. But that does not really mean much. 

Q. So, IBM being the world leader and the local leader as well in computing, shouldn't you too be playing a role? I mean, have you at least lobbied with the Government on these points?  

A. Suggesting is more like it. We have access to know-how and we can make it available. And we have over a period of time proposed certain things. One thing we did was to access Nation IT plans of other countries and provide them to the responsible people, so that they know what others do. Singapore has the best example of it. 

Everyone of their students will have a 'Think Pad' when they join a particular level. Every, teacher is extended the facility before they give it to the students, so that the teachers know how to use it. And even their individual departments have a definite strategy. That is one thing. And while I was handling the Government sector we were actively doing that and offering to bring down experts to do the Planning. 

Experts could have been brought from within the IBM or outside. A national IT plan has to be our plan. Finally, there's no way to get away from the fact that you have to develop your own plan. 

You can access expertise. But you can't expect some other world organisation to do it for you. Because that way, all kinds of other interests could get into it. But it should not be too rigid. 

Q. In your opinion do you think we can get into software exports, as a country?  

A. Yes. 

Q. What do you think, are our plus attributes in that area?  

A. Very creative thinking. Because, we have people who think very creatively. We just have to bring in the discipline and the professionalism. Undoubtedly, we are going to do well. But one recommendation I do have is that local organisations, both public and private should invest in IT and software. 

When you take software companies that do well, like SAP of Germany or People- soft of USA, they have grown to be the size they are today on a solid local industry. Even when you look at India, it is the same. 

When a local company does it, they have to invest in it. 

It will then build the industry, expose you to technology and the business processes. And there will be an effect of 'growing-together'. 

A good example is the IT industry helping the Garment Industry to be more competitive. So there is potential for that which is why the Garment sector should spend more on software projects. 

If the industry grows, it has great potential for the future for which we have resources. We only need very little resources to get into the software business. The technology, low cost, the people -we have all these. 

Q. Finally, what are your suggestions for a better local IT industry?  

A. I think it has to be in our blood. So, we have to start young. We must start at schools since putting computers in every school is going to be costly. The Government has looked at Regional Centres. They always talk of it. So, they have to start developing on that concept now so that, people grow-up with an IT culture in them. And access to it is one of the basic ways of doing that so, you have to catch them young. Whilst doing that, you have to start with the other end and see as to what the industry needs. Because, it changes from year to year. 

Shake up in Asian banks after crisis

Bank of Ceylon in Top 200

The gyrations that swept through Asian banking markets in 1998 have resulted in a radical shake-up of THE Bankers top 200 Asian listing. The extent of the upheaval in the rankings is unprecedented in the history of the listing. 

Last year, the devaluation of the Thai baht on July 2 triggered currency turmoil throughout Southeast Asia. Banking systems across the region were thrown into crisis and the IMF stepped in to hammer together rescue packages for Thailand, Indonesia and Korea, and the Philippines' facility was extended and augmented. 

As the economic slowdown across the region deepened, non-performing loans started to mount up and to eat into banks' capital and profits. Steep falls in the local currencies also impacted the rankings by Tier One capital and assets. 

While the crisis rearranged many of the rankings further down the listing, the same names as last year, that is, Chinese, Australian and Singaporean banks, featured in the top 10 places in the Top 200. 

Industrial & Commercial Bank of China and Bank of China swapped positions to appear first and second this year, followed by National Australia Bank, which retained third position. 

The highest share of the total $173 billion Tier One capital of the Top 200 banks is held by China, which has 21%, up from 18% last year. 

Taiwan has the second biggest share of 17%, up from 15% last year, followed by Australia with 15%, up from 14%. 

However, Korea's share has halved to 7% from 14%, in evidence of the severe difficulties its banks have encountered. Total Tier One capital has fallen 14% from $200 billion last year. 

Of total assets, China holds by far the biggest proportion with 37%, followed by Taiwan with 15%, Australia with 14% and Korea with 9%. 

In terms of profits, the listing by country reveals the losses suffered by many banks, notably the South Korean, of which 19 out of 27 were in the red at the end of financial year 1997/1998. 

Although others registered lower profits, the full impact of the escalating Asian crisis will be reflected next year. 

The Korean banks also featured strongly among those which recorded big falls down the listing due to shrinking levels of Tier One capital. 

Hanil Bank, for example, fell to 36 from 16 and Cho Hung Bank to 38 from 17. Among more dramatic plunges, Seoul Bank fell to 100 from 32, reflecting a more than 40% fall in capital. 

In contrast Sime Bank shot up to 55 from 138 last year, after the bank's majority shareholder, Sime Darby, doubled the bank's capital to support its effort to gain Tier One status. 

However, earlier this year Bank Negara Malaysia (central bank) revealed Sime Bank recorded a pre-tax loss of M$1.6 billion ($421million) for the six months to the end of December after it had been forced to make M$1.8 billion provisions to cover bad and doubtful assets. 

Part of the losses were accounted for by Sime Securities, the bank's stockbroking subsidiary, which was hit hard by the financial crisis. 

Bank Negara also revealed that Bank Bumiputra had severe asset problems. 

In March this year, Rashid Hussain Berhad clinched a deal to take over Sime Bank with a view to merging it with RHB Bank, its banking subsidiary, after abandoning talks to acquire Bank of Commerce. 

Last month, Bank Bumiputra announced that it would merge with Commerce Asset Holding, parent of Bank of Commerce, in a transaction which would create Malaysia's second biggest banking group. Both deals will impact next year's listing. 

Next year's listing will also reflect the restructing of the Korean banking sector, which got under way this year. In June 1998, the government ruled that the five strongest banks, that is, Shinhan Bank, Housing & Commercial Bank Korea, Kookmin Bank, Hana Bank and Koram Bank, should take over the five smaller, weak banks, Donghwar Bank, DongNam Bank, Dae Dong Bank, Chung Chong Bank and Kyungki Bank respectively. Mergers have also been announced between Kookmin and Korea Long Term Credit Bank and between Hana Bank and Boram Bank. 

Names which have disappeared from the listing this year include United Bank of Pakistan where liquidity problems and a negative capital position led to the management of the bank being handed over to State Bank of Pakistan (central bank). The State Bank has since raised Rs21 billion ($419 million) for the bank by fully subscribing to a rights issue and intends to privatise it. 

Union Bank of Hong Kong has also disappeared from the listing, after China Merchants Group, which owns, China Merchants Bank, acquired a 51.5% stake. 

The two banks have been consolidated which has lifted China Merchants Bank to 66 from 97 last year. Tamara Bank of Indonesia and Union Bank of Bangkok of Thailand fell out of the table because of a shrinkage in their capital last year. 

New names appearing this year include Development Bank of the Philippines (121), which has converted to a commercial bank. Bank BTN is the result of the merger of the Indonesian Bank Tagunagan Negara and Bank BNI. 

Other new entrants include Andhra Bank of India, PhileoAllied Bank (Malaysia), Bank Seng Heng of Macau, Muslim Commercial Bank of Pakistan, Syndicate Bank and IndusInd Bank of India. 

Some appear because they have provided up-to-date information while others' capital has risen. 

While a number of Thai and Indonesian banks have fallen down the rankings this year, next year's listing will give a truer picture of the havoc wreaked on those countries by the Asian crisis. 

In Indonesia, the banking system is now judged to be largely insolvent and in April this year the Indonesian Bank Restructuring Agency (IBRA) froze the operations of seven banks (too small to appear in the listing) and placed another seven under IBRA management. 

Five of those placed under IBRA management appear in the listing. Bank Dagang National Indonesia, Bank Ekspor Impor Indonesia, Bank Danamon Indonesia, Bank Umum Nasional, Bank Tiara Asia. 

The seven used more than Rp2 trillion of government liquidity, that is more than 500% of their total equity, according to IBRA. 

In a further move, at the end of May, IBRA replaced the management of Bank Central Asia, the flagship of Salim Group, the country's biggest conglomerate, after the bank was reported to have received a large amount of funds lent by Bank Indonesia (central bank) to seven troubled banks. 

On 23 August, Bank Indonesia suspended the operations of Bank Dagang Nasional Indonesia, whose demand deposits, saving and time deposits were transferred to Bank Negara Indonesia and Bank Dagang Negara. 

Similarly, in Thailand, the Thai authorities have taken drastic measures this year to shore up the sinking banking system. In the first two months of 1998, the Bank of Thailand (central bank) nationalised four stricken banks which had received hefty injections of liquidity from the Financial Institutions Development Fund (FIDF), its support fund. 

In August, the authorities announced that two of the four, one of which is Siam City Bank (137 in the listing), would be recapitalised through a debt to equity conversion and sold to new investors. Of the remaining two, Krung Thai Bank (43), the state owned bank, was to take over First Bangkok City Bank (39).-Courtesy 'The Banker'

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