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Stocks take a tumble on perceived instability

The Colombo stock market took a sharp tumble on Wednesday following the violence in Colombo involving a suicide bomber blowing herself up outside the prime minister’s Flower Road office and the assassination of Tamil Congress leader Kumar Ponnambalam.

Following these violent incidents, the Milanka Index covering the blue chips plunged 20 points to close at 919.9 while the All Share Index came down 9 points to close at 564.2.

Brokers said that investors, shaken by these events, pulled out of the market fearing a period of instability.

On Thursday too, the All Share Index was down 5.7 points while the Milanka was down 9.9 points. Both indices have now shed all the gains made in the weeks prior to the presidential election when many investors perceived a period of stability. There was no trading on Friday due to the curfew.

John Keells Holdings which was trading at Rs.205 cum bonus came down sharply on Wednesday to close at Rs.161 after the scrip went ex-bonus and the 1 for 4 bonus to be alloted this month was factored into the share price.

Turnovers have been low with foreigners picking up bargains from some local investors who have been selling in a climate of uncertainty.

Forbes and Walker predict ‘bullish’ tea prices this year

Based on supply and demand factors, Forbes and Walker, one of the country’s leading tea brokers has projected "a bullish trend’’ on tea prices as "reasonable’’ for this year "or at any rate during the first half of the year 2000’’.

The Forbes weekly tea market report covering the first sale for 2000 said that global tea production which had reached an all time high in 1998 saw significant declines in many producer countries last year. The brokers estimated the overall 1999 deficit in global production to be around 120 million kg or more in 1999 copared to the previous year.

Against the declining trend in Kenya (47.3 million kg) and India (61 million kg) up to end October, Sri Lanka’s tea crop which had for five consecutive years hit record highs was unlikely to show any significant change in 1999, the Forbes report said.

It noted that CTC teas would account for most of the global shortfall.

Discussing demand, the report said that tea prices globally had taken a blow from the effects of the Russian rouble crisis coupled with the decline in oil prices. The Colombo tea market which had been particularly affected by these events beginning in the third quarter of 1998 and continuing up to mid-1999.

Forbes noted that although Colombo’s net sale average at Rs.115.31 per kg was about 14% lower than the Rs.134.35 per kg averaged a year earlier, the monthly average for December 1999 at Rs.130.01 per kg was up 10% from the previous December when the average ran at Rs.117.47.

Forbes said that global tea production during the first quarter is normally low due to the North Indian winter and dry weather in Kenya, Sri Lanka and South India. This suggested that auction volumes during the first quarter of this year, particularly during February and March, are likely to be low.

The report said that importing countries, possibly carrying lower inventories than in the previous year, are likely to take greater volumes. Also, Sri Lanka’s western quality season falls within the first quarter drawing more demand/inquiries for seasonal quality teas.

With the expected cold winter in Russia/CIS likely to increase consumption and more activity expected from Middle Eastern buyers in the wake of improved oil prices, Forbes expected favourable price conditions. These would be strengthened by the expected depreciation of the rupee against the US dollar and the pound sterling, the report said.

Readywear now owns 74% of United Motors

Readywear Industries Limited, one of the biggest garment exporters in the country, now holds nearly 75% of United Motors Limited (UML) following the acquisition of further quantities of UML shares following its mandatory offer to other shareholders of the company under the SEC’s Takeovers and Mergers Code.

Readywear which already held 69.2% of United Motors, made an offer of Rs.45 per share to the remaining shareholders. This brought in 750,488 shares (5.1%) raising Readywear’s stake in United Motors to 74.3%.

Among those major shareholders who did not take up the Readywear offer are the Japanese companies, Mitsubishi Motors (5%) and Kinshu Corporation (9.7%). With these companies remaining stakeholders at United Motors, the company will continue to hold the market leading Mitsubishi agency in Sri Lanka.

A company source said that Hayleys Deputy Chairman, Mahendra Amarasuriya, has been requested to continue as United Motors chairman.

John Keells Holdings was previously the biggest shareholder of United Motors with a 26.7% interest in the company which it sold for a modest profit as Readywear increased its stake in the company.

Readywear is estimated to have invested over Rs.400 million to acquire its dominant 74% stake in United Motors.

Lankan manufactures stand up to cheap imports
Ceramics sector cashes in on demand for floor and wall tiles

Increasing renovations, the construction of new houses and the growing popularity of the use of tiles in buildings have combined to provide a buoyant domestic market for Sri Lanka’s floor and walltile manufacturers despite a flood of cheap imports, John Keells Stock Brokers said in a report on the ceramics sector.

But porcelain and tableware manufacturers have met with stiff price competition from Asian manufacturers both in the domestic and export markets, it said.

The report said that increased domestic sales had helped both Lanka Walltile Limited (LWL) and Lanka Tiles Limited (LTL) to have registered healthy earnings growth. But depressed margins in the first quarter of the current financial year in a drive to dispose of old stocks from warehouses had seen Royal Ceramics Limited (RCL), the other quoted tile manufacturer, positing an earnings decline.

Earnings of Dankotuwa Porcelain Limited (DPL) had declined on lower volumes, the report said.

John Keells said that both Lanka Tiles land Lanka Walltiles are poised to register impressive earnings growth in the forthcoming year. But Royal Ceramics is likely to register a 10% dip in earnings following a sluggish first quarter in the current financial year. However, given the company’s "impressive’’ tax free dividend yield of 17.2%, the brokers recommended that investors accumulate the stock as a defensive investment.

At Lanka Tiles, a 10% volume growth and higher margin domestic sales have propelled earnings 122% year-on-year for the first half of 2000.

The company which was operating at 90% of capacity was expected to reach full capacity in the context of buoyant domestic sales. John Keells research said that despite brighter output for exports, they expected LTL to maintain focus on the higher margin domestic market in the medium term.

At Lanka Walltiles, increased domestic sales of both floor and walltiles together with the development of new export markets had resulted over 100% increase in the company’s tile division’s earnings.

But poor prices for tea and rubber saw a negative contribution from LWL subsidiary, Ceyexxe Plantations Limited. Irregular fund transfers had compounded the plantations company’s problems.

However, substantial improvement in earnings from the tile division had helped Lanka Walltiles to post 36% year-on-year earnings growth in the first half of the current financial year.

The report said that with domestic markets for tiles expected to remain vibrant through the next financial year, and the company’s efforts at developing new markets abroad should see increased dividends from financial year 2001. Also, better tea and rubber prices are expected to prune losses in the plantations subsidiary.

The report noted that Lanka Walltiles had expressed an interest in disposing of its 51% stake in Ceyexxe Plantations.

Royal Ceramics had embarked on a drive to clear its warehouses of old stocks during the first quarter of the current financial year. The resulting reduction in prices alongside an increase in raw material cost saw first quarter earnings drop 50% year-on-year during the current financial year.

With old stocks disposed, average selling prices have since improved. However, prices remained below the previous year’s levels due to greater price competition from imports.

The company has increased its volumes substantially during the second quarter of the current financial year and with expanding domestic sales, volumes are likely to improve through the second half of the current year.

The report said that with sustained pressure on selling prices through the flood of cheaper imports and a marginal increase in ball clay prices was likely to push down earnings by 10% during the current financial year although higher volumes and cost savings through improvements to the production process should see earnings picking up marginally next year.

At Dankotuwa Porcelain, lower volumes following sluggish world market conditions had pushed down trading profits 29% in the first 9 months of the last financial year. But the company has obtained a 5-year tax holiday from financial year 1999 and its tax liability has declined substantially cushioning the fall in net earnings.

Grindlays say other foreign banks also charge

Referring to our report "Grindlays to charge current account maintenance fees’’ published on December 19, ANZ Grindlays said that the report correctly cited the fees to be charged by the bank but that the implied reference that such fees are not charged by the other old established foreign banks is not correct.

Our report quoted an ANZ Grindlays spokesman saying that their charges are no different from those made by two other old established foreign commercial banks. It added that a customer of one of those banks had said that he was unaware of such charges.

Arosha Jayasundera, Marketing Manager of ANZ Grindlays Bank, said that the source of this information is incorrect and referred to the tariff charges booklet published by these banks.

"You will note that both do in fact charge `account maintenance fees’ where balances fall below a certain level. They also have a limited number of free transactions after which fees do apply,’’ Jayasundera said.

We find that these charges are variable with one bank saying that in practice they charged a service charge of Rs.200 on accounts having a monthly average balance below Rs.25,000 although the tariff charges booklet specify this fees as Rs.250. This bank has no transaction charges except on "stop payment’’ and "returned cheques.’’

A second bank makes a service charge of Rs.100 per month on cleared account balances falling below Rs.5,000 debit and Rs.5,000 credit on any day of the month. There is no charge on cleared account balances always greater than Rs.5,000 debit or credit during the month.

This bank makes no transaction charge on account balances always greater than Rs.10,000 debit or credit during the month while those accounts falling below Rs.10,000 debit or credit on any day of the month are allowed only four debit transactions free. Rs.10 is charged for every additional transaction.

The Banks of Ceylon and the People’s Bank which together control the major share of the commercial banking business in the country do not levy such charges.

The WTO fiasco II

By Kanes
The supporters of the WTO, mainly developed countries, maintain that the WTO has given the world a rule based trading system that has slashed trade barriers, so helping world exports rise from 8 per cent of the global output in 1950 to 26.4 per cent now. The GATT and WTO have helped to bring down the average customs duty on manufactured goods from more than 25 per cent in the 1950s to barely one per cent now. By promoting barrier free competition, the free trade system has benefited consumers with cheaper goods and forced countries to end the artificial feather bedding of their own industries, invigorating them and making them more efficient. One index of the WTO’s success is that 135 countries now belong to it, and another 32 including China, Russia and Saudi Arabia are in the process of joining. No major economy is now outside the WTO’s ambit.

Criticisms of the WTO

WTO’s critics argue that the WTO is a rich man’s club, mainly benefiting large companies - transnational corporations - in developed countries. Poor countries belong to it because they have no alternative: they believe that a rule based multilateral trading system would promote their interests better than a free-for-all, but the transnational corporations have been adept at lobbying powerful countries to their own advantage and benefiting more from free trade than others. The WTO has been better at opening up the developing world for developed countries than at opening rich country markets to the poor ones. For instance, the only three products that the poorest countries can realistically hope to offer to the West - agriculture, textiles and footwear - are among the areas where the WTO has made least progress and developed country protectionist barriers are strongest. The Multi-Fibre Arrangement on textiles and clothing and the Common Agricultural Policy of European Union, as mentioned earlier, greatly limit developing country exports.

The WTO has made little progress in reduction of agricultural subsidies. The food surpluses generated by $250 billion of annual subsidies in developed countries are dumped in the global market thereby undercutting the livelihood of millions of poor farmers in the developing world. Tariff cuts engineered by the WTO are weighted in favour of developed countries, for the average tariff levels imposed by them on manufactured imports from developing countries are significantly higher than those imposed on manufactures imported from each other.

Among the major criticisms of the WTO is that through its powerful disputes settlement mechanism it limits national sovereignty in important ways. European countries, for instance, face strong US and WTO pressure to drop their bans on the import of genetically modified foodstuffs and meat enhanced with potentially dubious hormones which were introduced not to restrict trade but to protect the health of their people. Moral trade sanctions such as the US State Massachusetts’ refusal to do business with firms that invest in army ruled Burma, can be illegal under WTO rules. Another criticism is that it is more concerned with rights of property than with rights of man; it aims at breaking open domestic markets for foreign investors and thereafter promoting the interests of investors and protecting their property. For example, it professes to be helpless to prevent workers being forced to work in violation of labour laws and safety codes, but it does not hesitate to impose trade sanctions on the particular country if the same workers produce ‘pirate’ videos and CDs, in order to protect a corporation’s intellectual property. Trade Unions point out that the WTO has given transnationals the means to rapidly shift their operations to whatever country pays the lowest wages, undercutting workers in the rich countries. Environmentalists argue much the same thing.

Critics also point out that the WTO’s strategy to increase trade in services is by turning over such services as health care, education, water and utilities to markets (transnational corporations) thereby undermining and destroying local control and protection of communities. Markets or transnational corporations are concerned with maximizing profits not with morals or social values. Markets therefore must not be permitted to replace social decision-making which is done on the basis of ethical and social considerations unrelated to profits. Thus, the opposition of many to trade and investment liberalization programmes of the WTO is understandable.

Many, the developing countries in particular, charge that the WTO lacks democracy and transparency. The WTO officials and WTO dispute settlement panels work in secrecy and the whole decision-making process is also shrouded in secrecy. The US wants decisions taken by consensus not by vote. In reality what happens is that the decisions are made by the big powers among themselves and thereafter others - developing countries mainly - are pressurized and arm twisted into going along.

Thus, whenever the developed countries foresee opposition from developing countries to their proposals, they abandon democratic voting and practice decision making by consensus.

Unequal Benefits

Liberalization to promote free trade has brought benefits only to a few developing countries. Average annual growth of exports of goods and services in the period 1980-1996 exceeded 25 per cent only in 15 countries, was in the range of 5 to 10 per cent in 43 countries and was below 5 per cent in 55 or around half the countries. Average annual exports growth in 1965-1996 in East Asia was 8.8 per cent, South Asia 6.2 per cent, Latin America 5.2 per cent and Sub-Saharan Africa 2.1 per cent. Africa’s share of world exports has fallen. Exports of developing countries further are concentrated in a few countries: about 80 per cent of the exports of developed countries in 1996 was by just 15 countries and those are the ones who benefited most from liberalization and free trade.

Like exports, foreign direct investment too is unevenly distributed. Of the foreign direct investment received by developing countries in the 1990s about 80 per cent was received by 20 countries, mainly China. Foreign direct investment has averaged less than $100 million a year since 1996 for 100 countries and net flows have been negative for nine. In 1996 alone, 95 per cent of the foreign direct investment went to just 26 countries leaving the balance 5 per cent to be shared by 140 other developing countries. Free trade and investment or economic integration is thus dividing developing countries into those that are benefiting from global opportunities and those that are not.

Globalization or free trade and investment, promoted by WTO has widened the gap between the rich and poor countries. The income gap between the richest one-fifth of the world’s people (in developed countries) and the poorest fifth (in developing countries) measured by average national income per head widened from 30 to 1 in 1960 to 74 to 1 in 1997. Per capita income in the least developed countries in real terms, in fact, declined in the last 25 years. Disparity between countries is paralleled by increasing inequality of income within countries. The rich have grown richer and the poor poorer. In the last 10 years, the average income of the bottom 20 per cent of households in US rose by 8 per cent while that of the highest 20 per cent increased by 44 per cent.

The Collapse of Trade Talks

Three days of furious bargaining by ministers of the 135 member WTO failed to forge a consensus on an agenda to a new round of multilateral trade negotiations. It was always going to be a Herculean task for ministers to pare down an incoherent 32 page draft document setting out a wide range of contradictory wish-lists of what should be the agenda for a new round, that had come to them from their ambassadors to the WTO in Geneva. The conference failed not because of this but because of incompetent and amateurish handling by the Americans. The US was from the inception overconfident of its super-power ability to get the other countries to agree with its views or to override them and underestimated the opposition to further liberalization of trade particularly from developing countries.

The US focused so much on driving through its own agenda both in domestic politics and trade that they were blind to where this would end. It virtually gave up the role of chairman of the conference to speak for domestic groups - US industries groups on agriculture, dumping and labour issues. Consequently it failed to forge unity with the European Union and Japan, as it had done in the past, before confronting the developing nations. The chairman, Charlene Bershefsky handled the meeting so badly that she alienated almost all the members. The developing countries blamed the US for keeping them in the cold telling them nothing of the secret talks between the US and the European Union. Their ministers felt insulted at the way they were brushed aside by the big powers, particularly by the USA. The conference in addition was badly organized; four of the five working groups were properly constituted after wasting one day and moreover, the mass anti-WTO protests on Seattle streets prevented their members from meeting.

The developing countries were outraged by President Bill Clinton’s call for trade sanctions against countries that violated core labour standards. (It even surprised the American negotiating team which had sought to reassure developing nations that the US had a limited objective on the labour issue and threw into disarray its delicately balanced initiative.) It revealed America’s insenstivity to the major concerns of the developing countries and the priority given to US domestic over international issues. They realized that Clinton’s attempt to push labour standards to the agenda was motivated not by moral considerations but by his desire to win the support of powerful US labour unions who were concerned with the threats to their jobs from cheap imports from low-cost developing countries. Besides, Clinton was obliged to labour unions as they had reportedly donated $ 12.4 million to the Democrats in the past two years. The Malaysian Prime Minister Mahathir Mohamed described this succinctly as follows: "the concern over child labour and sweat shop factories is expressive of a sense of caring. But unfortunately, the concern (by Western nations) is shown only when the products of child labour and sweat shops compete with the products of the highly-paid, high living, four-day week workers in the developed countries. "

No amount or browbeating and arm twisting by the US could overcome the firm opposition of developing countries to the inclusion of labour and environmental standards to the WTO agenda.

President Clinton, reportedly, instructed his negotiators to allow the world trade talks to collapse when he realized that the likely outcome would not have been favourable for the US or have won support from the labour unions who are backing Al Gore’s presidential campaign. He had miscalculated his calling for core labour and environmental standards, backed by trade sanctions to be inserted into the WTO rules. The initiative backfired because the developing countries saw attempts to ban child labour and impose environmental standards as American protectionism. In addition, Clinton’s miscalculation in trying to use the talks, as he has used so many other international treaty negotiations, as a grandstand for scoring domestic political points, infuriated many delegations from the European Union and developing countries.

Environmentalists and development groups believe that the collapse of the talks strengthens their hand in calling for reform of the way the WTO works, and in particular of its sanctions-backed disputes panels which are the strongest international dispute resolution mechanism short of war. The WTO, it is clear, needs radical institutional reform if it is to become credible as a multilateral organizations rather than as a club of rich countries. "The rich countries can no longer sustain the hypocrisy of talking like free traders while systematically excluding key products of developing countries from their markets".

Perhaps the only good thing which has resulted from the conference is Britain’s announcement of unilateral suspension of its tariff barriers against exports of the world’s poorest 48 countries for three years, in an attempt to foster a new global trade deal. It is expected that the EU and USA would also extend such preferential treatment to the poorest countries.

America’s credibility and sincerity have suffered a serious setback. The world has lost confidence in America’s leadership in future international trade negotiations.

Waywardness or development – the prospect for year 2000

By Analyst
In developed countries like Britain or USA you recognise economic misfortune by the dole queues and soup kitchens. In developing countries there are no such obvious signs. But signs there are, such as the poorly occupied hotels, the vacant commercial buildings, the wails of businessmen, owing to their inability to find buyers for their foods or property.

This Christmas saw textiles and garments sold cheaply on the pavements and particular shops, obvious leakages from garment manufacturers who import fabric duty free purportedly to manufacture garments for export, but in fact to be sold in the local market.

The measure of lower spending power in the volume of sales in the shopping malls. The export markets for our main manufacturing items-garments, is stagnant. An apparent contradiction is the large number of luxury vehicles on the road, like Volvos, Pajeros etc. It is said that many of these vehicles are not paid for but bought on tick with money from banks and finance companies.

The rich and the powerful are not known to be honest in their dealings or faithful in their obligations to repay loans to the banks. Anyway what a socially unproductive investment! The volume of loans made by banks which are gone sour are quite high. They will increase as the downturn in business drags on. Many such loans will have to be written off. The state banks will carry them in their balance sheets creating a false picture of their net worth and capital adequacy. The public know there is an implicit guarantee of their deposits by the government. Other financial institutions which are privately owned have their own problems.

Development is a Process

Our political leaders since Independence have held a very simplistic view of development. They at first thought by providing free the basic needs of the people from the budget, such as free rice, free education and free health, the people would be relieved of poverty. But poverty remains with us and 25% of the population is still poor.

Development is a process and it requires changes on many fronts. As Lee Kuan Yew said: "I say without the slightest remorse that we wouldn’t be here, would not have made the economic progress, if we had not intervened on very personal matters — who your neighbour is, how you live, the noise you make, how you spit (or where you spit) or what language you use.... It was fundamental social and cultural changes that brought us here".

Witness the chaos in our own society — the pavements being occupied by hawkers often distributing foods belonging to merchants. The pedestrian has to walk on the road while roads are widened at enormens cost to the taxpayer. Garbage is dumped everywhere. Noise pollution is tolerated if not encouraged by the government. What is required is a vast socialisation process. The people have to be trained how to behave in a modern urbanised society.

Lee Kuan Yew also pointed out that Singapore was not homogeneous and never will be. One language is a social glue, that helps to keep a society together, but it’s not stronger than religions or ethnic pulls..... Our political leaders like SWRD failed to grasp this truth or chose to ignore it in the quest for power. We are paying the price for it.

Lee Kuan Yew also said "we decide what is right. Never mind what the people think — that’s another problem". Our political leaders divorced ethics from politics like the Prince of Machiavelli. We now have an amoral politics, a politics of opportunism, divorced from ethical principles.

If SWRD ushered in the age of the common man, he also introduced the age of mediocrities. At independence we had one of the best public services of the region. Our politicians have killed it. Today we have a public service full of mediocrities with little understanding of the problems of governance. In fact there is no governance.

The bureaucrats have abdicated their authority in favour of politicians. The latter have exercised this authority not in accordance with the law or regulations but in their selfish interests and in the interests of their political supporters. They use this authority to harass their political opponents.

The bureaucrats have no job satisfaction and no commitment. The crafty and dishonest among them have taken after the politicians, making their own hay while the sun shines.

But look at Singapore the whole landscape physical and social, has been altered. Its people enjoy very high per capita incomes. The vast majority of them live in housing estates. But unlike Europe or U.S.A. they do not have the problems that accompany such housings like violence, vandalism and drug taking.

This has not happened by accident. It was achieved by a determined political leadership which enforced the law without fear or favour. Contrary to popular opinion, democracy does not mean freedom to violate the law. Nor does it mean undisciplined social behaviour.

Liberty requires a high degree of self discipline on the part of individuals as we see in countries like U.K. Liberty can survive only if the law is respected and obeyed by the large majority, leaving only a minority who break the law to be punished by the state.

Punishment must be such that the criminal makes amends to society. Although it may not be necessary to establish labour camps as in the former Soviet Union, yet prisoners must be put to work for the benefit of society. There are many public buildings to be cleaned, broken furniture to be repaired, parks to be cleaned and maintained. Shouldn’t prison labour be utilised for such public purpose?

The Singapore government also showed how trade unions could be tamed. There is no fundamental right to strike. Wages in Singapore were fixed by the National Wages Council, a tripartite grouping of employers, trade unions and the government. Keeping labour quiet was part of the enlightened leadership of Lee Kuan Yew.

"This" he said, "is how a country succeeds, you pick winners, you concentrate on those items, on those skills, on those products which will sweep the market".

We must do the same. We have to pick winners. Possible winners are the port, tourism, garments, electronics, computer software. But instead of developing market leaders, our political leaders milk the Ports Authority, the Petroleum Corporation, the CEB and other state owned enterprises.

All these state owned enterprises must be privatised along with the state banks. This seems to be the only feasible way to end the curse of political patronage and corruption and conserve financial resources development. Which are now being dissipated.

The employees in these state enterprises disrupt public life and make the people suffer with their frequent strikes. The president must reduce the number of ministers and deputy ministers to the previous level before her election binge. They cost too much to the taxpayer with their Pajeros, security officers and numerous perks.

Law of the Vacuum

Nature abhors a vacuum and whenever there is a vacuum in human affairs outsiders move in. A declining institution, whether a country, a university, a trade union or a business enterprise is one in which the leaders have lost their way. "Empires collapse as a result of internal decay and rulers who are guiltless of any particular crime cause disaster through all they have failed to do. The PA government during the last spell failed to do many things. Its biggest failure is in maintaining law and order.

The presidential system of government is designed for strong government. The president is the chief executive and has complete freedom in appointing ministers. In the USA they are technocrats and professionals. So is it in Japan. In France several top civil servants are appointed to the cabinet.

The country needs a cabinet of ministers drawn from the most competent and honest among the people, be they politicians, or professionals. What an irony that the people have been suffering the misrule of unscrupulous, incompetent ministers when there is no dearth of able competent and honest men.

Our problems are on account of maladministration and the plundering of public funds by crooks masquerading as politicians. The foremost task therefore is to bring the right man to the right job, beginning with the posts of ministers. The country cannot afford nincompoops as ministers. Check-mating them after appointing them will not work.

Cultural Dimensions

Development requires changes of attitudes and thinking on the part of the people. Traditionally the subcontinent has been steeped in negative attitudes to life. There never was any belief in the capacity to change the world. The westerners had come to believe in the Biblical injunction "to subdue the world". In the east the individual was resigned to his fate viewing his station in life as due to his past karma. If he was born poor, that was it. If he was born to a low caste he must accept the social opprobrium and upper caste taunts.

The past 150 years of material advance in the west has shown beyond doubt that social change is tightly linked to economic growth. In fact they are almost the same thing. Yet throughout the period since independence we have been afraid of change as much as we have wanted economic growth.

Intellectuals concerned with the traditional culture have warned of enemies such as the open economy. These enemies have been also identified with ethnic and religious minorities.

Capitalism leads to individualism and religion became a matter of individual conscience rather than a communal imposition. Religion is not something that society can dictate to the individual. In feudal times the religion of the subjects was the religion of the ruler.

The individual no longer accepts tradition as binding on him. He will no longer respect or abide by the traditional feudal order with its levels of aristocracy and peasantry and the caste system. Ancestral and feudal claims to social superiority are no longer acceptable to the common man.

Is the world a friendly place for mankind or is it hostile? One’s perception affects one’s attitude to life. Similarly, one’s perception of whether good or evil triumphs, will affect one’s attitude to life’s activity.

Our society is characterised by very low trust. People don’t extend trust to others. But trust is essential for modern economic activity. People have to be reminded that wealth does not fall from the skies. Wealth must be created before it can be distributed or spent.

While business offers employment, our workers have to be reminded that business does not exist only for the purpose of giving jobs. Lawyers, accountants, doctors are there to provide a service and to charge for such service a fair fee. In our economy they have become parasites, drawing away more wealth than due to them.

Development means more than economic growth. Kuwait has a very high per capita income but it is not a developed country. Our under-development is due to our failure to utilise fully our labour to produce goods. Of course labour cannot be employed without capital.

Money saved by people must be converted into physical assets like machinery and equipment and used to produce goods utilising the unemployed labour. Paying people for not doing any work or doing unproductive work is not development. The physical assets must be utilised productively. They must be put to use as much as possible before their physical life comes to an end.

Our politicians do not understand or don’t care. That is why they indulge in political patronage and pork barrel politics, misusing scarce public funds.

To quote Lee Kuan Yew again "we are born unequal and we’ve got to make the best of the lot. And whether it is fruit trees, whether it is race horses, whatever it is, this is the way nature works.... Don’t we want to use some, common sense and say to ourselves, the more we have of people who can run this economy better, the better it is for everybody’... Because one outstanding man who discovers how to do a microchip or whatever, can transform our lives and provide jobs and raise standards of living".

We have to dismantle regulations and provide freedom to enterpreneurs. We have to make the best use of our labour. We cannot allow them to be unemployed. Our people have to come to terms with modernisation even if it is at odds with our traditional culture.

The key to this is a knowledge of the English language. "With language comes values". English education inculcates a belief in law, democracy and modern literal humanist values.

In the 1950s our leaders thought we could go back to the past to recapture our ancient culture which prevailed before the colonialists came in. But it is not possible to put the clock back. The attachment to the Sinhalese race and the Buddhist religion are not bad in themselves if it leads to co-operation and mutual support. But when such attachment is directed outwards in the form of antagonism to those others who are "not us", trouble sets in.

The Sinhala Buddhists suffered under the colonialists. Tamils and Christians did benefit unduly. But it’s not possible to rectify historical injustices by practising discrimination. This has led to social division and war.

Athurugiriya township project ‘biggie’ in pipeline
Profits fall at Ceylinco Securities despite 62% turnover growth

Ceylinco Securities and Financial Services Limited (CSF) has boosted consolidated turnover by 61% to Rs.732.6 million during the year ending March 31, 1999, but seen a decline in profits due to provisioning for a sharp fall in the value of the copany’s share portfolio.

Profit before tax at Rs.12.5 million was down 23.1% from the previous year. As there was no tax commitment, this remained the bottom line.

The company’s Chairman, Mr. Lalith Kotelawala, has told shareholders that though the profit had declined from the previous year, their group profit before provisions and tax had grown 74% year-on-year.

"The drop in profit after tax was due to provisioning and amortisation to the tune of Rs.34.2 million,’’ he said.

Kotelawala attributed the expansion of fund based activities of leasing and real estate trading to be the principal factors for this "noteworthy performance.’’

He said that fee based activities tended to be low and they had concentrated on fund based activities. Also, they had followed an expansionary program in the outskirts of the metropolitan area by setting up branches in the major towns.

The diversification to the outskirts had further enabled the company to increase its fund based activities significantly, the chairman said.

He said that the intense competition that prevailed in the financial sector industry had compelled them to diversify into different avenues of business expansion. Already they were involved in a massive housing project at Athurugiriya, the largest BOI approved project of that nature.

Kotelawala said that as there were no signs of recovery in fee based activities in the future, they had concentrated on fund based activities and looked for other avenues of lucrative diversification.

He said that the company looks forward with optimism to the future.

The Ceylinco Securities and Financial Services group have substantial holdings in Ceylinco-Seylan companies. This includes a 7.5% stake in The Finance Company Limited, 9.6% in Seylan Bank, 9.8% in Ceylinco Insurance, 10.3% in Ceylinco Housing and Real Estate and 13.9% in Golden Key Credit Card.

CSF subsidiary, Ceylinco Developers Limited, is developing the Rs.1.8 billion Athurugiriya township which will consist of 1,575 houses and other infrastructure.

This project is being done in partnership with the DFCC and the NDB and a letter of intent of agreement has been signed with the company and the Board of investment giving them all BOI concessions.

The company’s Deputy Chairman and CEO, Mr. W.G.B.M. Ranaweera, said that despite profit growth, the directors do not recommend a dividend to ordinary shareholders although a preference dividend of 2.5% will be declared and paid. This was a prudent policy adopted by the board in the context of low investment banking activities and the high exposure of the company to the share market.

CSF is largely owned by Ceylinco group companies including Ceylinco Diamond Trading (17.8%), Ceylinco Insurance (13.4%) and Blue Diamonds (10.5%).

The directors of the company are: Messrs. Lalith Kotelawala (Chairman/MD), W.G.B.M. Ranaweera (Deputy Chairman/CEO), Mrs. S.P.C. Kotelawala, W.B.B.C.J. Fernando, J.E.P.A. de Silva, S.K.M. Perera, Ms. M. Sabaratnam and S.R. Wijesinghe.

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