Snags hold up cigarettes and alcohol advertising ban law

By Feizal Samath

The controversial ban was due to have been enforced in January this year.

"We find that the draft legislation paving the way for the ban and other issues connected to the national policy on alcohol, tobacco and illicit drugs is too wide in scope and could interfere with some constitutional provisions relating to fundamental rights," Prof. G.L Peiris, Minister of Justice and Constitutional Affairs told The Sunday Times Business last week..

"We could face some fundamental rights issues if we go ahead with the legislation, the way it has been drafted," he said, adding that there could be other problems connected to foreign investments made in the alcohol and tobacco industry.

CTC and beer manufacturers with foreign collaboration have invested millions of rupees in new machinery and equipment. Ceylon Brewery, Sri Lanka's biggest beer producer, and other new brewers have spent large sums on new plants, much before plans to enforce a ban on advertising of alcohol were known.

Suresh Shah, chief executive of Ceylon Brewery said foreign investors in the company had been happy with government policies, until now. "The proposed ban is a complete reversal in policy and sending out a very bad signal to overseas investors," he said.

An official of the Sri Lanka's Alcohol and Drug Information Centre (ADIC), a non-governmental agency heading a community campaign against alcohol and drug abuse, says that he feels industrial pressure against a ban may have contributed to its delay.

"The industry is a very powerful body and they would do whatever is necessary, in their interests, to stall the ban or circumvent it," he said.

However, Minister Peiris denied suggestions that the government was having second thoughts on the ban because of opposition from the industry. He said it would be implemented once the legislation is re-drafted to clear some of the doubts.

The proposed advertising ban had been recommended by the Presidential Task Force on Tobacco, Alcohol and Illicit drugs, in an effort to reduce the consumption of alcohol and tobacco use in Sri Lanka. 

The committee was appointed by President Chandrika Kumaratunga in April 1997, and later in the same year, it finalised a national policy and programme on alcohol, tobacco and illicit drugs. Included in that was the advertising ban.

The goal of the policy is to improve the health and well being of all Sri Lankans, increase productivity by achieving a sustained reduction in use of these substances and a reduction and eventual elimination of harm related to these substances, according to a committee document. 

Industry officials, opposed to the ban, say any legislation arising out of the task force recommendations, would be flawed because it is based on wrong information.

"It is also simple. We were never consulted on this issue," argues Gottfried Thoma, managing director of Ceylon Tobacco Company Ltd (CTC), Sri Lanka's monopoly cigarette manufacturer and local subsidiary of British-American Tobacco (BAT) company. 

"Before any policy is formulated, it is only right and reasonable that you hear the views of the other side as well," Thoma said in an interview in September last year. Even in a court of law, two sides are given a hearing," he said, adding that a recent World Health Organisation (WHO) report disproves government statements that cigarette smoking alone is a killer. 

According to the WHO report, no estimations for tobacco-attributable mortality in Sri Lanka are available. "However oral cancer is the most commonest form of cancer in the southern part of Asia with over 90 percent attributable to prolonged exposure to tobacco and smoking," it said.

A CTC spokesperson said last week that they felt the ban had been delayed since President Kumaratunga had been unable to chair a promised meeting between CTC officials and members of the task force. 

Last October, the president had agreed to summon this meeting after CTC officials complained that their views had not been called for the task force. Other industry officials say that with President Kumaratunga being busy with provincial council polls scheduled for April 1, it is unlikely that the meeting would take place before April or early May.

While the tobacco and alcohol in dustry claims their views were not sought by the presidential committee, the committee says that public representation was called for, through the media on this issue, and the industry did not respond. "Were they waiting for an invitation to present their views?" asked a member of the task force.

However Minister Peiris also agrees that the industry should have been consulted before a ban affecting them is implemented. "I was not aware that the tobacco and alcohol companies were not consulted. If this consultative process has not taken place, then I feel it may be unfair on the part of the committee to recommend a ban," he said.

According to current rules, advertising of alcohol and cigarettes is permitted in newspapers but restricted on television through a state-imposed code of ethics. 

However, with an eye on the impending ban, alcohol - particularly beer manufacturers - and the CTC have pumped in millions of rupees, in recent months, into giant advertising campaigns and use subtle methods to circumvent advertising restrictions of these products. 

Tobacco and beer ad vertisements appear on television with catchy slogans attractive catch phrases and powerful images. Product names or the companies involved have been left out but the advertisements leave little room for imagination or the identity of the products and their companies. Cigarette and alcohol firms are also spending millions of rupees on sports sponsorship, which would also be disallowed under the proposed ban.

With the west becoming more health conscious and stronger anti-smoking lobbies emerging, cigarette manufacturers find it hard to expand in the United States, for instance. Now, Asia and South Asia in particular have become "hunting" grounds for cigarette firms seeking new clients and expanded markets.

Recently, BAT successfully concluded a merger with another US tobacco giant, Rothmans and indications are that the duo will make a coordinated attack on Asian markets this year, ploughing millions of dollars into advertising, sports sponsorship and give-aways to attract new smokers.

According to Dr Sajeeva Ranaweera, a spokesman for the presidential committee that prepared the national policy, tobacco kills one person every 20 seconds around the world. 

Half of long-term smokers die due to tobacco-related illnesses while half of this number will not live up to the middle age.

He said tobacco policies in many countries, target children who think it is fashionable to smoke, a charge the industry denies. "Statistics here show that 15 percent of the smokers start before they reach 11 years," Ranaweera said, in an interview in September.

"We have no problem about moderate drinking. It is only abuse that we are worried about. Our target is to reduce per capita consumption of alcohol," Ranaweera said, conceding however that, unlike cigarettes, there were no figures to cite consumption levels that are injurious to health.

Late last year, Dr Ranaweera and Dr Diyanath Samarasinghe, a reputed psychiatrist and another member of the presidential committee, were virtually "pummelled" at a panel discussion on the proposed ban organised by the Sri Lanka Institute of Marketing (SLIM).

The meeting, held at the Taj Samudra hotel, drew a crowd who appeared to be largely anti-ban and from the advertising industry, who are set to lose a lot of money and clientele if the ban is enforced.

The two doctors were unfairly shouted down with criticism from the crowd. The other two panelists were Shah and Thoma. Although the moderator of the discussion tried to play fair by panelists from both sides, anti-ban participants made it difficult for the two doctors, to express their views, and wondered whether they had done the right thing in agreeing to participate at such a meeting.

Given the vociferous opposition to the proposed ban from cigarette and alcohol manufacturers and the advertising industry, organisers of such discussions should ensure that panelists are not unfairly treated, because they come by invitation. Panel discussions are meant to be fair, balanced and provocative but not one-sided.

Stockmarket uncertainty with elections round the corner

By Feizal Samath 

"More than anything else, it is the uncertainty that worries the investor. We have been living in uncertain times in the past few years due to the ethnic conflict, but continuing global economic problems and local political violence adds to the confusion and uncertainty," noted Nanda Nair, research head at John Keells Stockbrokers.

The markets have been in a spin since the run-up to the northwestern or Wayamba provincial poll and election day itself, last month, in which election monitors and political parties reported widespread rigging and intimidation of voters. Violence was also on the rise.

The People's Alliance (PA) government has rejected charges that it was involved in large-scale rigging and tampering of ballots but admits that some members of their party may have resorted to undemocratic acts. The main opposition United National Party also faced similar accusations.

Earlier this month, President Chandrika Kumaratunga promised to appoint a committee to inquire into allegations against party workers and said action would be taken against violators. But nearly four weeks after the poll, the committee is yet to be appointed and two government ministers faced embarrassing questions as to its delay, during the weekly post-cabinet press briefing on Thursday. 

Asked whether the committee had been appointed or not (a simple yes or no answer), Deputy Media, Posts and Telecommunications Minister Anura Priyadharshana Yapa responded by saying, "I will check (whether or not it has been appointed) and let you know." 

Stockmarket analysts said such delays could erode public confidence in the President and the government, and create further uncertainty. The Wayamba polls violence has been reflected in the markets with most analysts and investors taking a pessimistic and wait-and-see view.

Nair says that there are mixed signals in the market but doesn't expect any drastic fall. "With the April holiday season also approaching, any significant changes in the market would be seen only around end April or early May," he said.

Rajiv Casie Chetty, head of research at CT Smith Stockbrokers, believes that investors are certainly cautious and would probably take a negative view of the April 1 elections.

"The degree of uncertainty is very high, sentiment is negative and stock volumes are down. In addition to the heap of external problems that we have been having for several months, we now have to contend with local problems. Low tea prices are also a big concern as some companies have a lot of exposure to plantations," he said.

With the tea industry in crisis, profits are falling for the big plantation houses. Maskeliya Plantations, from the John Keells group, reported a fall in profits to 249 million rupees in the nine months of fiscal 1998/99 from 149 million rupees in the same previous fiscal year.

With tea prices dropping by around 40 rupees per kilo now from 115 rupees per kilo at the same time last year due to lower demand from CIS countries, brokers Jardine Fleming said in results forecast on John Keells Holdings "we ... forecast the contribution from the plantation sector to slow down to 35.6 percent of the JKH bottom line in FY 3/99 and 14.4 percent by FY 3/2000."

Nair from John Keells also conceded that though tea incomes were anticipated to fall, because of last year's Russian crisis, it was not expected to be as bad as it is now. Prices have fallen sharply in the past six to eight tea auctions in Colombo and large quantities on offer, has compounded the problem.

Last week, low grown tea producers said they were struggling for survival and that many factories are threatened with closure. They are appealing to the government for some financial help to tide over the crisis.

Casie Chetty said another worrying aspect in the market was that institutional investors who normally take a long-term view of the market, unlike individuals who are more speculators, are also unsure of the future. "Institutions are also taking a short term view like others and not holding onto stocks. We are certainly living in uncertain times."

Another analyst at a top brokerage, referring to the outcome of the April 1 poll, said that if the PA won convincingly or the UNP scraped through a win, there could be a rally in the market. 

"Both these wins would given an indication of the popularity swing, particularly since general and presidential elections are due in the next 12 to 16 months.

If the PA wins by a small margin, then the uncertain scenario would continue," the analyst, who declined to be named, said.

He said in such a case there may be a disruption of current fiscal discipline; the low interest rate regime could end and the government may resort to handouts to attract votes - a classic vote-buying scenario - putting the budget deficit out of control. 

"We are looking at subdued markets and I am not at all optimistic that the market would go up in the near term," he said.

Master Plan for industrialisation in the new millennium 

Ministry officials said that the need for a master plan to industrialise and promote investment in Sri Lanka was due to the manufacturing sector being rather small compared to ASEAN and other countries. The industrial structure of Sri Lanka is heavily dependent on textile and garments. 

The Multinational Fibre Agreement, which expires in 2005, is predicted to cause a substantial impact on the Sri Lankan economy unless the industrial structure is strengthened. 

Industrialisation of the export sector needs to be strategically promoted due to the severe competition caused by globalisation and free trade agreements. Foreign Direct Investment is another key aspect in industrialisation. Unfortunately though, this has not been increasing mainly due to the war. 

The master plan will also address the high rate of unemployment in Sri Lanka. At present the industrial sector provides only for only 16 - 17 percent of the working population. 

This figure is as high as 30 percent in industrialised nations. A JICA delegation is now here studying the sectors that have growth potential and a competitive advantage against other countries (SAARC and ASEAN). The study will be conducted in two phases. The Ministry has broadly classified the sectors into 28 sub sectors of which five to seven sectors would be identified in the phase one study.

Phase two will be a detailed study on the identified sub sectors and a study on a master plan for industrialisation and investment promotion in Sri Lanka with a target year 2010. The study is expected to be completed by mid 2000.

Though this is most welcome, the question arises 'is this master plan worth the while, With the free trade agreement signed recently by Sri Lanka and India coming into force in early March, 

Metal Recyclers shift to new site: scotch rumours 

Relevant authorities have been informed of the disposal of some of the company's fixed assets, Jayasinghe said. 

Dispelling damaging rumours about the company, Mr. Jayasinghe said the company was re-locating its factory in a new site in Yakala, Kaduwela. 

The Central Environmental Authority has given approval for the new site, but the company is still awaiting BOI approval to re-commence operations within 6-8 weeks, he said.

Metal Recyclers scaled down its operations last year as the company was facing liquidity problems since it had a huge carried forward net loss. 

The company had to scale down its operations due to adverse trading conditions of non-ferous heavy metal.

The company said the trading price of non-ferous heavy metal had declined by as much as 40 per cent and that the viability of manual segregation of heavy metals in Sri Lanka and re-exporting the same, is in jeopardy due to the possibility of having such metals mechanically segregated abroad.

The venture related to metal skimming was however to continue.

The company earlier said they had a lot of used machinery and equipment devolved on them when they purchased the current premises of Lanka Loha Hardware Ltd., and that this would be disposed of to use the funds raised for operational expenses and settle liabilities. 

Mr. Jayasinge is director of several companies including Pan Asia Bank, Uni Walkers Holdings, Lanka Tiles, Ceredac, and Ceylon Tea Gardens.

Bedtime business with ETV

Lanka Business Report hopes to bring up- to- the- minute business news and information to local TV audiences. The programme will examine current business issues with an analytical and investigative outlook.

The producers say the programme will bring state-of-the-art production and news delivery techniques to local business news audiences. 

It will cover capital and money markets, government policy, the economy and implications of regional and global events and trends. 

Lanka Business Report will also deal with new technology that affects the local business environment including the Internet, which is the emerging new media for global business.

LBR hopes to serve the information needs of businessmen, policy makers, bureaucrats, academics and others interested in the local business sector by providing quality and relevant information timely and succinctly.

The programme is targeted not only at business executives, but also students, and any TV viewers with a keen interest in business.

Manila urges mergers to form ASEAN multinationals

"We have to be neighbour-oriented and look at the 500 million strong ASEAN market," Trade Secretary Jose Pardo said, referring to the combined population of the nine-member Association of Southeast Asian Nations.

"Companies should look into opportunities of the markets of our neighbours and take advantage of our preferential tariff treatment," Pardo told members of the Makati Business Club, an influential group of Philippine business leaders.

Mergers between companies in ASEAN should be encouraged so that they could form regional multinationals, he said. Pardo made the remarks as the Philippines faced a series of plant closures by Western multinationals.

Members of ASEAN have agreed to progressively reduce tariffs on 85 percent of all products traded within the region to between zero and 5.0 percent from January 2000.

ASEAN groups Brunei, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand and Vietnam. Pardo said joint ventures and mergers among ASEAN companies would create economies of scale and help them cope with the competition from western firms.

"It is hoped that in the end, ASEAN companies will attain multinational status," Pardo said. He also noted that some multinational corporations were trimming their operations in the Philippines.

Among these are pharmaceutical firms Warner Lambert and Abbott Laboratories, athletic-apparel makers Nike and Reebok, and consumer goods concerns Johnson & Johnson and Colgate-Palmolive.

He stressed, however, that the government was not alarmed by these closures. He cited other companies, such as Switzerland-based Nestle and Anglo-Dutch conglomerate Unilever, entering the country through joint ventures.

The two pharmaceutical firms said separately that the closures were part of the regional realignment of operations. Ebb Hinchliffe, director of the American Chamber of Commerce of the Philippines, said the closures would not drastically raise the number of unemployed because some of the companies would continue to subcontract up to 70 percent of their products with local firms.

Pardo said that the trade department had appealed in writing to the head offices of Nike and Johnson & Johnson but a much-publicised labour dispute within Philippine Airlines [PHL.CN] and news of its militant labour force had "dampened our prospects."

Credit Lyonnais sued 

The lawsuit alleges that the defendants skirted California insurance laws in an attempt to obtain a valuable junk bond portfolio belonging to Executive Life Insurance Co., a Los Angeles insurance company taken over by the state in 1991 after it became one the largest insurance failures in U.S. history.

Specifically, the suit said the defendants fraudulently concealed the involvement of certain parties who took over ownership and management of Aurora National Life Assurance Company, a new company formed to take responsibility for policies issued by Executive Life.

"These rogue individuals and their corporate partners came to California with a scheme shrouded in lawless deceit, so they could evade regulations intended to protect innocent policyholders and consumers," California Insurance Commissioner Chuck Quackenbush, an elected official, said in a statement.

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