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13th June 1999

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Mind your business

By Business Bug
Tip from the Iron Lady

The polls in the South may be over but the 'big matches' are yet to come- the general and presidential polls which must be held by next year.

And the blues are taking this election stuff pretty seriously because they believe they can win but they also know it will be a tight finish.

And that is why they are on the lookout for a professional advertising agency to handle their campaigns next year.

And, it seems the lady at the top seems to prefer 'such and such' an agency which won the elections for the Iron Lady in Britain some time ago.

Who'll be first

What is the last frontier in the cellular phone industry, that all are trying to reach? Judging from the competition, it appears the ability to offer free incoming calls of any duration, at any time of the day, on any day of the year.

And the competition is so intense that some network is going to get there by the end of this year, perhaps.

And the frontrunners in the race are the pioneers and those who say that are now they talking...

De-listing panic

A blue chip which announced it was de-listing a subsidiary from the Stock Exchange had to answer many panic-stricken investors who thought something was horribly wrong with the well-established, diversified company.

There were a lot of calls asking for reasons and reassurance that the parent company will not be de-listed as well.

And, of course that will not happen but this shows the value of proper communication between companies and their shareholders.

World Bank funds more regulators

By Mel Gunasekera

The World Bank has agreed to fund regulatory bodies for the newly reformed public sectors like posts, ports, power and insurance sectors, a treasury official said.

With many state industries that have substantial market power being privatised, the government and the Public Enterprise Reform Commission (PERC) are making efforts to strengthen the regulators, the official said.

The World Bank has already funded the strengthening of the Telecommunications Regulatory Authority, by helping the transformation from a government department to an independent commission, though the efforts have proved less than successful in the gas sector.

The Ports Competition Commission is to be set up under the WB funded ports efficiency improvement project.

The need for an independent regulator has risen, with the P&O being managed by South Asia Gateway Terminal, and the Ports Authority running the Jaya Container Terminal.

The regulator will be set up under the purview of the Ports Ministry and will be accountable to parliament.

The regulator will have jurisdiction over all port participants, to ensure equality among all operators, prevent anti competitive practices and monitor port tariff. However, the ports authority is not too happy about having a regulator, Business Times learns.

The regulator will be set up using the model of the Telecommunications Regulatory Commission (TRC). Ports officials say they would like a less intrusive regulator. They say the TRC has created trouble and they prefer an arbitrator or mediator instead.

Though, the proposal is not accepted yet, officials are hopeful the Ports Authority will come around to accepting it eventually.

The postal regulator is to be established under a postal reform project to convert the postal department into a corporation.

Under the proposed reforms, some services will be open to private competition.

While the exact role of the postal regulator is still murky, postal authorities say they will be looking at price flexibility, competition policy and monopoly in the postal sector and the provision of universal service.

Calling on the move

Big, small, expensive, affordable, various colours, shapes and sizes cell phones take a life of their own in the 21st century.

The market is flooded with cell phones ranging from Rs. 9,000 to over Rs. 50,000. Each unique in its own way, packed with features and functions.

Mobile phones have become a daily accessory, on the road, in the car, offices, homes and everywhere possible.

Mobile phone accessories have become the next best to the phone itself.

Accessories too come in various colours, shapes and sizes. Hands free kit, phone covers in the form necklaces, wrist bands, wallets and handbags are a few chic accessories to come to the market.

Industry officials say these sell like hot cakes, especially after the ruling that prohibits the use of mobile phones by individuals while driving.

However, with the digital revolution, most often the same phone models are available with all service providers, cutting out the space for price discrepancy.

The main competition tool now has been call charges and rental. Companies come out with various packages trying desperately to entice the prospective user.

Competition among the producers too have chanced and we see a scenario where companies work closely with each to construct the phone of tomorrow.

Getting smaller by the day and call charges and phone prices dropping like a brick, mobile phones are selling like hot cakes. We are gradually moving into a wireless world.

Alexander Graham Bell would have never imagined that his invention would make such a revolution.

In today's global marketplace keeping in touch and staying ahead is the name of the game. Mankind is going to great lengths to make sure that he stays ahead in the rat race. Satellite phones and video conferencing are some examples of the virtual office he lives in.

CB extends primary dealers deadline

The Central Bank has given a June 15 deadline to commercial banks' interested in forming dedicated primary dealers, primary dealers said. The ultimatum came after certain commercial banks appealed for additional time.

Under the new regulations for dedicated entities, only nine out of the 18 primary dealers signed up by the April 30 deadline.

The guidelines require primary dealers to form separate companies dedicated to dealing in government securities, if they wish to remain as primary dealers.

Commercial banks, who also operated as primary dealers, are reluctant to form separate entities as it conflicts with the bank's deposit mobilisation.

The banks have pointed out that the minimum Rs. 150 mn capital requirement was too high and trading in government securities was not profitable. The Bankers Association wrote to the Public Debt Department seeking more time for the new regulations.

However, only 11 commercial banks belonging to the Bankers Association are primary dealers.

Tax worries non-exporters

By Dinali Goonewardene

Chairman Hayleys Ltd has called for urgent remedial action for anomalies in the tax system.

"The non dedu ctibility of proper expenditure mainly overseas travel and part of the National Security Levy remained unfair and onerous," Chairman, Sunil Mendis said.

"Companies which do not export but are engaged in trading had to add back their overseas travel expenses when computing taxable income. Within the group, this affects Haytech Marketing, Haychem and Coates (Lanka), Ltd Mr. Mendis told The Sunday Times Business.

With globalisation being an important concept for businesses the inability to deduct expenditure incurred in travelling for regional meetings with principals reveals the inadequacy of the tax system, said a tax expert from a leading audit firm.

The Inland Revenue Act No 28 of 1979, according to which tax legislation is based, also prohibits the deduction of technical training expenditure, which is deemed to be of a capital nature and not incurred in earning income.

The law also dictates that rentals paid for vehicles hired by employees on official travel is non deductible. It is also unfair that exchange losses incurred in capital repayments of foreign currency loans are not allowed to be deducted in computing taxable income, tax experts said. However capital gains on repayment of foreign currency loans are not taxed.

The National Security Levy which is governed by the Defence Levy Act No 52 of 1991 too has its quirks.

While the National Security Levy of 5.5 per cent is incurred at the point of purchase, two ninths of it is a non deductible expense when calculating taxable income. This burden has to be borne by the business.

Goods and Services Tax calculations too are onerous, complained tax experts.

While it is the norm in other countries to have one indirect tax, in Sri Lanka Turnover Tax and National Security Levy too have to be provided for.

Cumbersome calculations where Turnover Tax on Turnover Tax has to be paid and National Security Levy on National Security Levy has to be incurred add a bizarre twist to tax calculations in Sri Lanka, tax experts said. For example, in the case of a trader with a turnover of Rs.100 his customers would incur Turnover Tax (TT) of 1 per cent, resulting in an invoice value of Rs.101. The trader would then himself have to pay TT of 1 per cent on the invoice value of Rs.101 which includes the TT paid by his customers.

Aitken Spence Hotels to be delisted

Aitken Spence Hotels Ltd is to be delisted from the CSE shortly.

The process has taken over one year during which shareholders of Aitken Spence Hotels Ltd were offered a share swap for the shares held in Aitken Spence Hotel Holdings.

Nearly ninety seven per cent of the shareholders availed themselves of this offer while 3% did not. "The current offer for the balance 3% is a technical issue which the majority shareholders have voted for," Managing Director Aitken Spence Hotel Holdings, Prema Cooray said. A special resolution to delist the company shares was passed at an extraordinary general meeting of the shareholders.

At present, 96.99% of Aitken Spence Hotels Ltd shares are held by Aitken Spence Hotel Holdings Ltd, formerly known as Ahungalla Hotels Ltd. In turn, 49.85% of Aitken Spence Hotel Holdings Ltd is held by Aitken Spence & Co Ltd.

State dairy farms for sale

Two large state dairy farms were put up for sale by the Public Enterprise Reform Commission (PERC) last week.

PERC has called for expressions of interest for the purchase of 90 per cent shares in Ambewela Livestock Company Ltd and Pattipola Livestock Company Ltd.

The companies are mainly involved in livestock and milk production for commercial purposes. They will be incorporated by the conversion of the existing livestock farms Ambewela and New Zealand farms respectively of the National Livestock Development Board, a PERC communique said.

Ambewela and Pattipola will have fifty-year leasehold rights to around 880 and 545 acres of land respectively.

The government is encouraging private sector participation in the livestock sector in order to arrest the present trend of increasing imports and to increase the production and consumption levels in the country.

Livestock production in Sri Lanka is still at a subsistence level and the total livestock holdings of 0.56 mn hectares, 99 per cent are categorised as small holdings.

Although an upward trend has been observed with regard to the livestock population in the last decade, none of the species except poultry have kept pace with the increase in the human population, PERC said.

Investors who have experience in livestock farming will be given priority during the selection process.

Investors must have experience in livestock farming and have a strong financial background with a commitment to modernise the farm through the introduction of advance technology. "Livestock production must be continued as the core business of the company, " PERC said.

The deteriorating export performance

The first quarter's export perform ance is dismal.In comparison with last year's first quarter export perfo-rmance,total exports have declined significantly. This contrasts with the usual increase in exports each year. In fact, there was concern when export growth declined in any month or longer period,but what we are witnessing currently is not a decline in export growth,but a decrease in exports.This is disastrous to the economy.

Total exports have declined.All important categories of exports have registered decreased values.

Industrial exports have decrea-sed,agricultural exports have decreased and within these two major categories the main exports have decreased.For instance, garment exports have decreased.

This has not happened for a long time,if ever. Our main agricultural export has decreased owing to a sharp decline in prices. It is mainly these two exports which ensured that we did not suffer the fate of the South East Asian Countries.

That resillience too has disappeared.The future could indeed be bleak as these indicators of export performance have domestic repercussions.

Let us look at the figures. Total exports have decreased by nearly 10 per cent.Agricultural exports have decreased by a massive 25 per cent.The decrease in industrial exports is much less at about 6 per cent, but significantly and ominously garment exports ,our main industrial export which has been prospering through difficult times has for the first time in recent years shown a decrease of nearly 5 per cent. This decrease in garment export performance comes at a time when the government is seeking to set up more garment factories. Nearly all other industrial exports have displayed a decline. The worst affected main exports are however the two main agricultural exports tea and rubber. Both of them have been affected by the decling export prices.Tea prices held good in the recent past,but since the Russian crisis tea prices have been on a downtrend.

This is particularly unfortunate as tea production has been increasing both on the estates and small holdings. The econmic fortunes of the Sri Lankan economy is highly dependent on our export performance.Our exports are worth about 40 per cent of our national income.

A poor performance in our exports affects nearly every sector of our economy.

If the current trend continues there would be decreased employment opportunities and profits and incomes would decline.In turn government revenues would decrease.

The likely impact on the trade balance together with a need to be price competitive would result in a weakening of our currency. A depreciation of the currency means a further set of problems arising out of the inflationary impact.

We have to take the poor export performance seriously and devise policies to correct the deterioration.It would not be an exaggeration to say that any further deterioration in our export perforamnce would signal enormous hardships to our people.

Role of the inventor in development

Dr. L.M.K. Tillekeratne Commissioner Sri Lanka Inventors' Commission

The development of a country in principle depends on the stable economic, social and cultural aspects built up with the aid of resources, manpower and dedication of the people. A major section that promotes a country's industrial and economic development is the creativeness of the people. Intellectual Property is a creation born through the innovativeness of the people which can be sold, transferred or exchanged. Inventions, Innovations and Industrial Property come under the Intellectual Property, ownership of which and the security are guaranteed by the government by a document commonly known as a "Patent".

New inventions need not always be electronic based such as computers or even nuclear science based as most of the laymen believe. It can be a creation which can solve a day to day problem by simplifying its method of construction or making it easy to handle, convenient and more efficient.

Innovations done by our own countrymen, on the other hand, are also extremely important for the development of a country. Innovation is a further development of an invention done by someone else to make it more efficient, more convenient to handle or cheaper.

One of the main objectives of an innovation in addition to these, is making a certain invention of one other person, foreign or local, to make it more applicable to the country where it is used.

Patent certificates can be obtained for innovations as well, as long as the original Patent does not cover the role played by the innovation as described in the process given in the Patent and also is not covered by the claims of the original inventor.

Most creative workers of Sri Lanka who have done valuable inventions/innovations suppress their valuable ideas and designs due to the lack of knowledge to implement them to the industry and also owing mainly to financial constraints. Most of the important inventions and innovations of local creative people have, therefore, been stolen and implemented in other countries, obtaining due Intellectual Property Protection for them in their own countries.

The main objective of the Inventors' Commission is, therefore, to identify the creative ideas of school children and others and help them to obtain Intellectual Property Protection for their development and also to implement them to solve burning problems of the industry to develop the economy and environment of the country.

Presidential and National Awards for the local creations of both school children and others awarded to them annually is a great impetus for the encouragement and success of creative persons at a low funding level. Further, such inventions are appreciated and rewarded with cash prizes and medals as well. The Inventors' Commission Act was passed in Parliament in 1979. However, it became really active and held its first national award ceremony in 1994. But it was elevated to the level of a Presidential Award only in 1995.

Rs. 200 million was set aside in the 1997 National Budget to encourage new inventions and new innovations in the fields of science, technology and engineering, and it is out of this money the financial support was given to all the 12 award winners of the Presidential and National Awards in 1997. Since the recognition of local inventions and innovations by awarding Presidential Awards in 1995, the interest among local inventors has increased. Also, the Inventors' Commission has been able to support some of the award winning inventors to commercialize their inventions for the development of the country.

One such invention commercialized with 100% success is the introduction of the water soluble bleaching agent for crepe rubber by the Rubber Research Institute. This chemical is safe and less toxic to handle in the factory and environmental friendly. The oil based bleaching agent used earlier was toxic to handle and cause the crepe rubber produced out of it not suitable for food and pharmaceutical applications.

But, because the dealers of the toxic oil soluble chemical were selling this product at a discounted price some plantations used it even with difficulties and hence there had been problems in promoting the use of this safe chemical. However, after the award of the Presidential Award to this new discovery of the Rubber Research Institute, automatically, planters started using the new introduction realising its value and the dealers too were reluctant to deal with the old oil based chemical owing to its toxicity. Hence within 1-2 years, the water soluble chemical introduced by the RRI gained 100% acceptance in the plantations thereby saving the factory workers from the risk they have been subjected to early. This chemical is not only used l00% locally now, but it is also exported to India and Indonesia from Sri Lanka by Chemanex Ltd

Another novel Sri Lankan invention that gained both local and international recognition was the invention of P.N. Nandadasa of Flexpo Ltd., Nugegoda. His environmental friendly Coir Dust Based Packing Material and the Compressed Brickettes made out of coir dust as a substitute to peat, has already gained international recognition as a greener material causing no harm to the environment and as a substitute for styrofoam based packing material. The "Dummy Plug" invented by T.D.A. Wijenayake which can protect the electrical appliances in a house or office from very high currents, also won a Presidential Award in 1997. Hence, he was also given a financial aid as a soft loan to further develop it, and for commercial production. The Presidential Fund for inventions also granted him free advertising through national media and the Internet for his product while helping him to import electrical components needed through Sathosa.

The Dry Batch Bio Fertilizer/Gas Generator invented by the NERD Centre was recognized by the Inventors' Commission and presented it for the International Inventors' Exhibition held in Geneva in 1996. The coir pith packing material, water soluble bleaching agent and the dry batch bio fertilizer unit sent for this exhibition in 1995 to Geneva won a gold medal, silver medal and a bronze medal respectively. Further, the Sri Lanka Inventors' Commission took action to implement this dry batch technique for making bio fertilizer/gas in Mawathawewa area in Anuradhapura district. Already l4 units of the same is functioning extremely well in this area where paddy straw is being used as the biomass producing the gas and the fertilizer continuously for 6 months. This technique was so popular at the moment that it has now been extended to Hingurakgoda area by the Sri Lanka Inventors' Commission on the directions of Minister Kingsley T. Wickremaratne. A new project to extend this in the other popular paddy growing area, Hambantota district too, commenced in Tissama harama in April.

It is believed that with time to come this gas/fertilizer generator will become popular among the paddy growers all over Sri Lanka to convert their paddy straws into a valuable fertilizer for the farmers, for which there is no demand today.

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