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Losing money as oil prices rocket
Shell seeks LPG price hike over normal Rs. 25

By Suresh Perera
Claiming that it’s incurring big losses as a result of soaring LPG global prices, Shell Gas Lanka Limited (SGLL) is in consultation with the government to secure a price increase exceeding Rs. 25, which is permissible annually.

Under the privatisation agreement between SGLL and the government, LPG selling prices can be increased when the import prices increase. As such a price revision may be effected up to Rs. 25 per annum. However, the agreement also allows for the LPG selling price to be enhanced immediately beyond Rs. 25 per year, when the LPG import prices spiral by more than 30%.

Only 20% of LPG requirements is procured from the Ceylon Petroleum Corporation while the balance is imported paying international prices, SGLL said.

Asked whether world prices are also paid for the CPC component of LPG, SGLL’s Manager, External Affairs and Brand Communication, Soshana Wijeratne said that it’s not the practice to pay international rates for ‘home purchases’.

Declining to divulge the amount involved, but admitting it was far less in comparison to global LPG prices, Wijeratne said the CPC’s 20% contribution was minimal and all stocks, whether local or imported, are treated as one bulk when averaged.

Obviously, the CPC component is cheaper because it’s minus import duties, freight, transportation and other costs, she said.

‘We have made quite a big loss’, Wijeratne said while declining to reveal the quantum involved. ‘Such sensitive information could help prospective competitors, but the magnitude of the losses can be gauged by looking at the soaring LPG prices’, she said.

Responding to a question as to why LPG for industrial and automobile use cost more than the domestic equivalent, Wijeratne explained that bulk purchases are in any case more expensive, but moves are underway to make it realistic by adjusting it according to a normal pricing mechanism based on kilogrammes. ‘With global prices zooming, we cannot expect the bulk users to pay phenomenal amounts for LPG’.

She said that by next month world LPG prices are expected to climb by US$ 20 and till June this year, a downward trend cannot be anticipated.

‘A pricing mechanism is being sought to cushion the impact. With world LPG prices escalating, a workable pricing structure is vital to strike a balance’, says Shohan Chandiram, Executive, External Affairs and Brand Communication, SGLL.

As international LPG prices continued its upward trend, during the last six months of 1999 alone, they rose by 66%. In Sri Lanka, the prices were adjusted by only 8% during 1999, SGLL said.

‘It’s predicted that the average LPG prices for the current year will be significantly higher than 1999. Already, from December, 1999 to January, 2000 alone the price has increased by 4%, Chandiram said.

‘Talks with the government are continuing with no finality reached so far on a workable pricing apparatus’, he added.

The surge in LPG prices in the global market is attributed to the reduced level of drilling as well as refining of crude oil, coupled with the resultant shortages faced due to the heavy demand for LPG in the west as well as China during the winter months, according to SGLL.

‘This means that if the privatisation agreement is to be fully implemented, the LPG selling prices in Sri Lanka would have to be significantly increased this year to bring it more in line with the world price’, Chandiram explained.

‘In 1996, when the world prices shot up by a record 100%, SGLL protected the customer by absorbing those increases. However, the company is no longer in a position to do so now when over 80% of the country’s LPG demand is imported paying world prices’, Chandiram said.

‘LPG prices in Sri Lanka will have to be reviewed and adjusted to keep in line with the international prices. SGLL has been co-operating with the government to implement measures which help to protect customers from the vagaries in LPG world prices but at the same time, having to strike a balance with ensuring a fair return on investment for its shareholders’, Chandiram said.

On December 30 last year, SGLL increased the price of LPG by Rs. 15. The current price of a 13kg cylinder is Rs. 335 and a 40kg Rs. 1030 (within Colombo city limits).

SGLL was formed when Royal Dutch/Shell Group acquired the then Colombo Gas Company for US$ 37 million in December, 1995. Since its acquisition of the majority 51% of the shares (the government owns the balance 49%), Shell has invested heavily on modernising and upgrading existing facilities and infrastructure.

Malicious rumours of Rs. 30-40 mn. discounted
Rs. 3 million fraud at Lanka Orix Leasing

Lanka Orix Leasing Company Limited (LOLC) has discovered a fraud "in the region of Rs.3 million" allegedly perpetrated by an executive who has left for Australia - "purportedly for a holiday," the company said in a news release.

"The matter has been reported to the police who are investigating it," the company said.

LOLC issued a statement about this fraud in view of what it called "a malicious false rumour to the effect that a huge fraud" had been perpetrated by a very high official of the company who had decamped from the company.

The company which said that figures of Rs.30 and Rs.40 million had been mentioned said that the actual facts are quite different and the sum defrauded is in the region of Rs.3 million.

The company said that they were making an announcement to scotch the "malicious rumour" that was going around and allay any doubts in the minds of its stakeholders.

"The magnitude of the fraud is not material to a company that has net assets of over Rs.1.4 billion and gross assets of over Rs.5.5 billion. Business goes on as usual and all necessary corrective action has been taken to prevent such an occurrence in future," the LOLC statement said.

"We have always believed in the desirability of transparency and are acting in accordance with our belief."

Grain Elevators to pay 25% dividend despite profit downturn

Ceylon Grain Elevators Limited (CGE) in a statement to the Colombo Stock Exchange and shareholders have said that they were proud that their group turnover had stood up to a tough economic environment by rising 5% to Rs. 3.46 billion during the year ended December 31, 1999. But profits were 23% below those of the previous financial year.

The company has announced an interim tax free dividend of 25% absorbing Rs. 150 million for the financial year ending December 31, 1999. Two dividends paid the previous year (an interim and a final) absorbed Rs. 90 million. CGE said that the dividend will be paid on February 18.

These results are incorporated in unaudited results published by the company for the year ended December 31, 1999.

Despite the sharp downturn in profits, CGE described its earnings of Rs.213.8 million as "encouraging."

"Although, profitability is down, shareholders should not be disheartened because the level of profits achieved was creditable under the circumstances," the company said.

CGE said that the Sri Lankan economy had experienced the full impact of the Asian crisis last year with market analysts predicting economic growth to slow to under 4%.

In this situation, the poultry industry had experienced its worst performance since 1996. It had been dogged throughout by excess supply and depressed farm-gate and wholesale prices.

"Consumption only began to pick up with the millennium and year-end seasonal celebrations," a company statement said.

The group results had indicated interest on borrowings increasing to Rs.10.9 million during the year under review from Rs.3.4 million the previous year.

The company said that its net asset value "at this stage" (before dividend declaration) was Rs.35.14 or 11% above the previous year’s figures.

CGE said that trading conditions for the fiscal year of 2000 "looks healthy and our sales have picked up at a brisk pace."

The CGE group has a share capital of Rs.600 million and a share premium of Rs.627.6 million on its books. It carries a capital reserve of Rs.52.3 million, minority interest of Rs.266.5 million and a profit and loss balance of Rs.412.3 million after payment of the interim dividend.

The interim dividend will absorb Rs.150 million, up sharply from the Rs.30 (interim) and Rs.60 million (final) dividend paid in 1998.

What to do about the 19 on your cheque dateline

Wonder what to do about the pre-printed figures 19 on your cheque leaves now that the year 2000 has dawned?

Banks have told customers that while using such cheques, they should write the full date covering the day, month and year (eg. 3.1.2000) in the date column above the pre-printed figures 19.

"It is preferable not to strike out the figures 19," the Sri Lanka Banks Association (Guarantee) Limited said in a circular that the People’s Bank has now distributed among its constituents.

"If the drawer makes any alteration in the date, it would require authentication by his/her full signature.

"Nevertheless, to eliminate the necessity of a second signature authenticating the scoring off, if any, of figures 19, member banks have agreed to pay such cheques, provided they are otherwise in order.

"However, member banks reserve for themselves the right to obtain confirmation from the drawer whenever considered necessary," the statement said.

Worst year for poultry pushes down Three Acre profits 37 percent

Three Acre Farms Limited (TAFL), a member of the CGE group, has like its parent company posted a 2.1% turnover growth for the financial year ended December 31, 1999 but seen its operating profit before-tax dropping a "significant" 37%, shareholders have been told. Group profits attributable to shareholders were down 29% from 1998.

The company attributed the downturn last year to higher discounts in the face of poor market demand for day-old chicks.

Despite the sharp downturn in profits, the directors have declared an interim 20% dividend payable on February 18. This dividend will absorb Rs.46.2 million, the same as what was paid the previous year by way of an interim dividend. There was no final dividend.

TAFL said that 1999 will be remembered as "one of the worst performing years for the poultry industry." The year began well with a healthy first year profit but the situation began to deteriorate progressively due to a combination of factors.

These was a worsening economic environment causing a drop in consumption, an excess supply of commercial broiler day-old chicks following two-and-half-years of uninterrupted growth in the poultry sector and the import of cheaper frozen chicken meat.

"This situation led to uneconomic prices at farm-gate and wholesale levels. TAFL with its broadened business base nevertheless was still able to maintain its market share in the supply of commercial day-old-chicks," the company said.

Despite the downturn in profitability, TAFL had produced 19 million day-old chicks last year, up by over 1 million from 1998.

The directors said that they expect 2000 to be a year of consolidation for the company. Barring unforeseen circumstances, they expected the company to improve both group turnover and net profits.

Group turnover for the year under review was Rs. 529.4 million, up 2% from a year earlier, while the group pre-tax profit was down 37% to Rs. 43.8 million. The group profit attributable to shareholders was Rs. 38.1 million.

However the net asset value per share after appropriation, but before the dividend declaration at Rs. 29.37 compared favourably with the previous year’s Rs. 27.72.

Akbar Brothers, Van Rees top exporters
Tea prodction hits record high sixth year running

Sri Lanka’s tea production has peaked to a new record for the sixth consecutive year with production totaling 283.7 million kilos achieved in 1999, the Sri Lanka Tea Board and the trade said.

Forbes & Walker said that high growns had done best increasing production volumes by 5.1% (3.9 million kg) and medium growns up 2.2% (1.2 million kg). But low grown volumes declined 0.9% (1.4 million kg).

However, this leading tea broking firm pointed out that despite the slight decline in production in the low grown areas, the sector still contributed about 52% of the national tea crop.

Forbes said that the CIS continues as the single largest importer of Ceylon tea and had last year purchased 3 million kg over corresponding figures for the previous year. The UAE was the second largest importer absorbing an increase of 6.6 million kg against the previous year’s quantity.

Other countries that have increased tea purchases from Sri Lanka last year were Iraq, Iran and Pakistan. Some major importers like India, Turkey, Egypt and Jordan had taken smaller quantities than in the previous year.

The Akbar Brothers Group was the top tea exporter from Sri Lanka last year shipping 231.3 million kgs. They were followed by Van Rees (20.8 million kg), Unilever (19 million kg) and Stassen (17.1 million kg)

Van Rees was the top bulk tea exporter with 17.9 million kg closely followed by Akbar Brothers with 17.5 million kg. Unilever was No.3 with 15 million kg and Stassen No.4 with 11.3 million kg.

Akbar Brothers dominated packeted tea exports with 10.2 million kg followed by the Ceylon Tea Marketing Group (6 million kg), Jafferjees (5.5 million kg), Imperial Teas (5.2 million kg) and Stassen (4.9 million kg).

Forbes & Walker said in a supplement to their last week’s tea market report that the CIS was the main destination for packeted tea with 26.2 million kg followed by the UAE with 9.4 million kg.

The UAE was the lead bulk tea importer with 30.5 million kg followed by Turkey (17.9 million kg), Syria with 14.5 million kg and the CIS with 14.4 million kg. The UK, once the major buyer, took 10.1 million kg.

LB Finance announces Rs. 22.1 mn. profit

LB Finance Limited has completed 1999 with a profit of Rs.22.1 million which the company claims is a demonstration of its ability to perform in a difficult economic environment.

The 28-year-old company which is now a member of the Vanik group has a d

eposit base of Rs.1.1 billion, which it claims to be the third largest among finance companies. There are over 10,000 depositors in the company’s books.

A company news release said that LB recorded a turnover of Rs.407 million in the period under review in a business which focused on the granting of lease and hire purchase facilities, real estate loans, mortgage loans and short term loan facilities.

"Real estate development and pawn broking have been accounting for an increasing share of turnover in the recent past," the company said.

A spokesman said that their management philosophy stressed stability alongside reasonable profitability.

LB which is the first finance company to break into pawn broking opened its first pawning centre in Maradana in late 1998. This was followed by a second in Grandpass last August. Pawn broking is also done at the company’s Kandy branch office.

The spokesman said that their pawn broking business offered a community service by helping those urgently in need of cash to quickly access funds.

"We encourage redemption because we know the personal nature and sentimental value attached to pawned articles," the spokesman said.

LB said that real estate development which they have begun to aggressively pursue in 1998 had been an area of further growth. Their real estate division had made use of core competencies to launch a real estate service last year.

"We provide landowners wishing to sell their property marketing expertise. We plan to take real estate development hitherto confined to Colombo and its suburbs to other areas of the country through our branch network," the spokesman said.

While engaging in an ambitious program of diversification to reduce the risks associated with its traditional lines of business, LB said that it continued to market traditional credit products like leasing, hire purchase and short term loans.

"But in the current business climate, we are adopting a cautious approach in marketing these products. Increasing emphasis has been paid to recoveries," the spokesman said.

LB which relocated its Kandy branch to Milton House last June opened its second branch in Badulla last week. More branches are planned in Gampaha, Kurunegala and Negombo "in the very near future," the news release said.

"These branches will offer the rural population the means of improving their business practices and help the social economic development of the country," the release said.

The Asian Development Bank and poverty alleviation

by Kanes
The Asian Development Bank was established in 1966 and its membership was 57 in 1998. The total lending of the Bank from the inception to end of 1998 amounted to $77.3 billion of which $6 billion was in 1998 alone. The Bank began its operations by financing badly needed infrastructural improvements such as power plants, and water-treatment facilities, but when private investment took over funding of such projects, shifted to assisting poverty alleviation, human resource development, improving governance in pubic corporations, protection of the environment and promotion of the status of women. In 1998, its main target of loans was the financial sector to help resolve the crisis. (See table)

ADB Loans in 1998

Country                          $ Millions           % of Total

Indonesia                          1,800.0                  30.7
China                               1,200.0                  20.1
Philippines                          855.4                  14.3
Thailand                              630.0                  10.5
India                                   250.0                    4.2
Bangladesh                         200.3                    3.4
Sri Lanka                            190.0                    3.2
Vietnam                              184.0                    3.1
Uzbekistan                          120.0                   2.0
Nepal                                  105.0                   1.8
Kirgistan                               65.0                    1.1
Solomon Islands                    26.0                    0.4
Laos                                     20.0                    0.3
Tajikistan                              20.0                    0.3
Vanuatu                                20.0                    0.3
Papua New Guinea                14.1                    0.2
Kiribati                                  10.2                    0.2
Samoa                                   7.5                    0.1
Maldives                                 6.3                    0.1
Bhutan                                   5.7                    0.1
Nauru                                     5.0                    0.1
Three Regional Projects      210.0                    3.5

Total                              6,000.0                 100.0

(Source ADB)

The ADB was involved with the IMF and the World Bank from the beginning in helping East Asian countries to recover from the crisis. It approved a $4 billion loan for South Korea in December 1997 as part of the IMF package for stabilization and structural reforms. The ADB also contributed $1.2 billion to the IMF-led rescue package for Thailand. The ADB, however, faced criticism for its role in supporting IMF policies in these countries: that a multilateral bank like the ADB should not have bailed out private investors and banks that took big risks; that it should not substitute for inadequate IMF capacity in bailout but concentrate on long-term structural work. Some in the World Bank questioned why the ADB went along with harsh IMF policies like closure of banks in Indonesia and Thailand at the height of the crisis which led to a run on all banks - solid and troubled. The ADB should have with its local knowledge of the region played a leadership role without relying on IMF.

The ADB cannot avoid playing a role in financial reforms. The IMF is the prime institution for short- term stabilization while the ADB handles structural reforms. However, the combined IMF/ADB policies brought about currency stabilization. Financial reforms will continue to account for a large part of ADB loans in 1999. The ADB expects to lend $6.5-$7.4 billion in 1999. The ADB also manages the $3.1 billion Asian Currency Support facility provided by Japan. It will be used to help Indonesia to pay interest on loans or to provide loan repayment guarantees. ADB will attempt to strengthen local financial markets. In Singapore it plans to enter the Singapore dollar bond market to raise money for more lending and to help the fledgling market. It has already entered the bond market in Hong Kong and Taiwan to promote broader, more liquid and more transparent primary and secondary bond markets in the region. Even with reforms, another crisis is a possibility. That means ADB must help strengthen monitoring capacities.

The Bank has been criticized by donor countries like the US, Canada, Australia and European Union who have argued that with the trend towards private sector participation in infrastructural projects, the bank could make a greater contribution by moving on to social development including governance and corruption in the same way as the World Bank is doing. The bank is therefore moving toward becoming a more broadbased development institution, involved not only in infrastructure investment but also in technical assistance, policy dialogue and most important social development through poverty alleviation. As to governance, the ADB was the first among multilateral development banks, to have a broad approved governance strategy. The bank is also confident that with most of its staff from Asian countries, it will be able to have better access and a better understanding of Asian realities to make a contribution to reduce corruption.

Reducing Poverty

The Board of Directors of the Asian Development Bank adopted in November 1999 its new goal of lifting people out of poverty. The Bank had previously listed poverty reduction as just one of five goals, but now it has announced it as its single goal. More than 900 million Asians are poor defined as those earning less than $1 a day; they form 70 per cent of the world’s poor. It is appropriate therefore that the region should be the main stage for concerted global efforts to reduce poverty. The new ADB president Chino Tadao wants the Bank to concentrate on the new goal. He says: "nearly 900 million people or almost 70 per cent of world poor live in Asia. This is not acceptable in a developing region that has witnessed outstanding growth in a number of countries. Clearly, economic growth is not reducing poverty fast enough, and the situation has become worse because of the East Asian crisis. No institution services this region and has a strong regional character like the ADB. This is why we must make poverty reduction our single-minded focus".

The question has been raised whether an old institution like the ADB can reinvent itself to play this new role. Although most agree that the bank should tackle poverty, they question whether it has the commitment, expertise and heart to really make a difference. Chino Tadao says: "This is a complete and fundamental shift in operations. Therefore, we have to learn from our early implementation. Twenty, ten or even five years ago, people on the staff wouldn’t have been brought into this program. Now I can’t say 100 per cent agree, but the vast majority clearly support it. This is the cultural change within the institution". He plans to increase the bank staff of 2000 by creating 20 additional positions and recruiting more ‘software experts; including sociologists and anthropologists.

It is not that the ADB has no experience whatsoever in relieving poverty. Crisis related projects in Thailand and Indonesia to provide scholarships to needy children provide some indication of the kind of work it will be doing. Both projects have worked reasonably well, but the Indonesian scheme is regarded as a greater success because about 30 per cent of the funds involved in the Thai project appears to have been misused or have not been given to the neediest children. The difference was while the Thai scheme was implemented by the government, the Indonesian one was administered directly by the ADB. Further, it was run together with the World Bank.

With the new emphasis on poverty reduction, the bank expects to link every project to poverty. All projects will be measured by what they do to alleviate poverty; if it is a road or energy project, how it will affect rural areas and rural inhabitants. Economic growth is still important and will remain a focus of the bank, but it will be growth that is pro-poor. The bank aims to have at least 40 per cent of its loans go to straight "poverty interventions".

Funds

Money is another problem faced by the ADB. Its participation in the IMF-led bailouts of Thailand, South Korea and Indonesia has caused concerns about its financial position. Its loan-reserve ratio dropped from 33.6 per cent in 1997 to 27.7 per cent at the end of 1998. The Bank is negotiating with donor countries to replenish the nearly exhausted Asian Development Fund -the concessional financing window of the ADB. It hopes donors will pledge at least as much as that raised last time — $6.3 billion. In a few years, the bank will also have to go back to the shareholders to increase its ordinary capital resources from which regular loans are drawn. It expected to lend more than $6 billion in 1999 (the amount lent in 1998). It disbursed a record $9.6 billion in 1997 because of the Asian crisis related loans. ADB funds are used exclusively by the poorest countries as shown in the table. China and Indonesia are the biggest borrowers. Chino Tadao is confident that the bank will not lack resources to carry out the poverty alleviation programme. He says: "We believe that the new focus will strengthen our shareholders’ confidence in the ADB as an effective and efficient user of funds. The new strategy also means that ADB will use its resources in more creative and imaginative ways".

Wrong priorities in educational investment and faulty education

by Analyst

Introduction of Free Education

After Independence there was a continuous agitation for the equalization of educational opportunities on the argument that everybody should be able to compete for the best jobs, whether they were rich or poor. During colonial times the emphasis was on literacy for all in the local languages taught in the vernacular schools. The colonial governments funded these schools to enable them to provide free education.

But the expansion of these schools, which catered to the bulk of the populace was insignificant in relation to the expenditure on the English schools. Since the English schools which catered to less than 5% of the school going population, were receiving a disproportionate share of the education budget, being 37% in 1931, and as they were run mainly by the Christian denominations, there was agitation against them. A Committee in 1943, recommended that education should be free in English schools, Training Colleges and in Universities.

The benefit accrued mainly to the middle classes whose children attended these schools. Vernacular school education was already free. But these schools had poor facilities by way of buildings and classroom equipment. The majority of children could not benefit from free education until they had English schools established in their areas of residence. So the government invested heavily in setting up central schools which began to impart an education in the English language as good as in the denominational schools. The government had also taken a decision in the late forties to gradually change over the medium of education to Swabasha. The English schools gradually switched over to Swabasha. The same subjects were taught as earlier but now in Swabasha.

The same pattern of education came to be imparted in the former vernacular schools. Thus mass education came to be introduced in a type of education which the colonialist rulers had restricted to a few English language schools to meet the demand for the colonial public service and the mercantile establishments. In colonial times the vernacular schools were established to provide only literacy, Now they provided the full range of primary and secondary education.

Expansion of General Academic Education

The number of schools increased considerably after Independence, from 2391 in 1945 to 3,686 in 1955, to 4,399 in 1960 and 8,748 in 1970. The number of students increased from 867,191 in 1945 to 2,716,187 and the bulk of them, 2.5 million, were in government schools. University enrolments also increased although mass university education really developed only by the end of the 1960’s. Universal free education from the primary to the university level became established.

How good an investment has been our investment in universally free education? How has it promoted economic growth? Did the growth rate improve as a result of this investment? Would we have achieved a higher sustainable growth rate if we had other priorities for this enormous investment?

The majority opinion among economists is that while growth can be improved by investing in primary education, the returns to secondary and tertiary education are markedly less. The World Development Report (1991) observed "Many studies document the high returns on investment in education. In past studies of growth, education has roughly been proxied by literacy rates or by primary school enrolment ratios. Research for this report suggests that increasing the average amount of education of the labour force by one year, raised GDP by 9%. This holds for the first 3 years of education. The return to an additional year of schooling then diminishes to about 4% a year.

Schultz (1988) observed that the social returns to schooling are lower than the private rates of return. "Particularly for higher education, where the public cost of providing a student with education may be 50 times larger than at primary level, the social rates of return in some developing countries may be insufficient to warrant further expansion of subsidized public higher education". So there is no economic justification for expanding free university education. Our politicians and policy makers seem to be unaware or are deliberately ignoring the requirements for economic growth.

The N.I.C’s of East Asia in the 1960’s and 1970’s concentrated on achieving universal primary education and near universal literacy just before their economies began to ascend. But cross country studies suggest that high performance in literacy and schooling are not automatically followed by sustained economic development and the outstanding performance of Japan and Korea are not due solely to mass literacy and numeracy but to socio-economic regulation, land reform and modern economic management. (Investing in the Future: Setting Educational Priorities in the Developing World by Hallak 1990).

Micro-Economic Management

Micro management does not concern the World Bank or the I.M.F. These institutions confine their attention to macro-economics. So they don’t bother when politicians use their power to exercise patronage, appointing party supporters instead of selecting persons to jobs on merit. Nor are they concerned when politicians wreck public enterprises by over-staffing them or misuse their resources to carry out their election campaigns. Nor do they object when they appropriate funds of the government for their personal or party use.

It’s only civil society that must take action against politicians who cheat or rob public funds. But the people do not understand what is involved in economic micro management of government agencies. They do not mind such abuse as long as they benefit personally. So political patronage in appointments, transfers, discipline of teachers and principals will continue.

Thousands of unqualified teachers have been appointed by governments and this practice is continuing. The education imparted in schools is only as good as the teachers. If unqualified or poorly qualified teachers are appointed what good is the education they impart? How can teachers be motivated if they are transferred at the bidding of politicians. What disorganization is created in schools by transfers of teachers?. Each attempt to help one teacher will necessarily involve another and in this way lead to a mass of transfers disorganizing hundreds of schools.

Type of Education

Economic growth is primarily through industrialization and industrialization requires certain skills in its workforce which vary as industrialization proceeds. In the early stages of industrialization what is required is mechanical skills. It is technical and vocational education rather than general academic education that is critical for industrialization.

Korea set up vocational high school education. The main purpose of vocational schools was to train the skilled workers required by industry .There were agricultural high schools, technical high schools, commercial high schools and fishery and marine high schools.

The agricultural high schools instilled awareness of agriculture and helped individuals to acquire skills in farming. In the technical high schools the emphasis in the 1960’s was on manual or automatic machine operations in line with the policy of promoting labour intensive industries. But as the economy became more sophisticated more technology intensive skills were imparted suitable for the chemical and heavy industries. As the economy became oriented to mass production factories, the training changed. The government did its best to attract students to the technical schools even admitting students on recommendations, setting up internship programs, recruiting competent faculty members etc. School and industry co-operation was encouraged. Our Ministry of Education is wasting time and resources in looking after academic oriented schools which will only produce a mass of unemployed youth who out of desperation will rise up against the establishment. The ministry is pre-occupied with finding places for politicians’children in the prestigious schools in the city.

The country has been facing a shortage of skilled workers like plumbers, masons, carpenters, fitters, not because of industrialization but because many such workmen have gone for work to the Middle East. No conscious attempt has been made to meet this supply shortage. There seems to be neither any organized efforts to find out the supply shortages or to ascertain the demand for skilled manpower industry by industry.

The youth ministry seems to be promoting sports and entertainment among the youth rather than solving youth unemployment. Nor do the training institutions having any feedback mechanism to ascertain how many of their trainees really get jobs after their training. Schools should develop positive attitudes and values in respect of skills and industry. As long as the education system is driven from the centre there is little hope for reorienting education.

The curricula and syllabi are set from the center, the teachers are controlled by the center, the schools are managed by the "education bureaucracy" perhaps the least competent segment in our bureaucracy. The curricula have little relationship with the local economic activities.

There has been in-breeding in the Ministry of Education including the schools and universities and the National Institute of Education which is in charge of curriculum development and teacher training. The degrees in education, both first degrees and postgraduate degrees awarded by the National Institute of Education are questioned as inferior to those awarded by our universities which are in turn inferior to those awarded by foreign universities.

Educational Reforms

Students perform poorly at school. Only 12.5% was the success rate in Mathematics and Science at the G.C.E. (Ordinary Level). Of those who sat for the GCE (Advanced Level) 25% failed in all four subjects. The reforms introduced last year involve changes in syllabi and curricula.

There is rightly a greater emphasis on the local environment. A more activity oriented approach to learning is introduced. There are a lot of assignments, projects which involve self learning by visits to library etc. The examinations which were earlier designed to test memory have been toned down. There will be continuous assessment and evaluation throughout the year. The teaching of English is introduced from year 1. A general English paper is introduced for the GCE (A/L). New subjects like life skills is introduced.

The school is to set up an Activity Room where students will be familiarized with activities like motor mechanism, wiring, agriculture etc. These are salutary reforms. Even the politically controversial aptitude test at the G.C.E. (A.L) is desirable if not essential in view of the sad lack of general knowledge and awareness of the local environment.

In years 1 and 2, the emphasis is on learning through activities and on getting children to socialize. In teaching religion, the emphasis is not on acquiring knowledge in ethics and religion but on inculcating values of respect for others. Teachers are expected to lead in religious exercises. All this is very good. But do the schools and the teachers in particular understand what is intended by these reforms?

To be continued

Sri Lanka-India revive tottering trade deal

COLOMBO, Feb. 3 — Sri Lanka and India have salvaged a tottering trade pact by agreeing to implement a scaled down version from next month, exactly a year after it was due to go into effect, diplomats here said Thursday.

India’s Commerce Secretary, P. P. Prabhu and Sri Lanka’s Finance Secretary, P. B. Jayasundera exchanged letters in New Delhi, Wednesday to make the "Free Trade Agreement" between the two countries operational from March.

The agreement, originally described as a landmark deal was signed by Sri Lankan President Chandrika Kumaratunga and Indian Premier Atal Behari Vajpayee in December 1998 was due to come into effect in March 1999.

However, the pact was scuttled when New Delhi withdrew concessions promised to Sri Lankan exports.

The free trade agreement now imposes quotas on Sri Lankan tea exports to India with an upper ceiling of 15 million kilograms a year.

India will also allow Sri Lanka to export eight million pieces of clothing to India at preferential tariffs, however six million pieces must have Indian fabric in them to qualify for the concessions.

India had orginally agreed to allow Sri Lanka’s main export commodities, tea and rubber, concessionary duty rates in a bid to reduce the huge trade gap that favours India by a ratio of 13 to one.

Without Sri Lankan tea — better known by the country’s previous name Ceylon — having easier access to the vast Indian market, the trade agreement would be of little value to the smaller country.

The 15 million kilograms of tea allowed into the India market will be at 50 percent of the usual duty.

In March last year, India rejected a Sri Lankan call for a 50-million-kilogram tea quota.

Tea trade officials here said India had gone back on promises following intense pressure from three tea-growing states in India which feared competition from cheaper Sri Lankan tea.

Mapping out the future of DFCC Bank
New CEO outlines key areas

Physics graduate turned banker Nihal Fonseka has taken over the reins of DFCC Bank with a mission to fulfil - achieve DFCC Bank’s goal of becoming the premier private sector financial services organisation in Sri Lanka. With two and a half decades of banking experience with one of the most dynamic commercial banks in the global network HSBC, he is confident he can do it.

"It is a challenging task. Having been the Deputy CEO at HSBC, Sri Lanka for ten years during which time HSBC underwent a phenomenal change, I saw a challenging opportunity here", he says. Over the decades, DFCC Bank has changed from a State managed institution to a leading blue chip and one of the largest capitalized companies on the Stock Exchange. It was then a predominantly project based lending institution. Over a period of four decades it has become a diversified financial services group.

"The entire concept of banking has now changed. Even commercial banks have diversified into many new areas. New financial instruments are being developed. Competition is getting tougher. So we have to plan our future course of action to meet the changing environment", Mr. Fonseka says. As General Manager/Director & Chief Executive, he has a big role to play deciding on strategy and making vital decisions.

What should DFCC Bank’s future be is a key issue. Following a major strategic study done by the renowned international consultant agency, Pricewaterhouse Coopers of USA, the way to go is clear. The strategy has been accepted both by the Board of Directors and the staff and the Bank is now in the process of implementing it. This will mean interpreting the Bank’s development role in a wider sense developing businesses through their growth cycles while focusing on projects as well as developing and expanding market segments.

"In the process we will have to make several changes. Of course, change also means doing in a different way what you always did. Several key areas have been identified which will be of benefit to our customers as well as other stakeholders", Mr. Fonseka reveals.

One key area is strengthening the Bank’s partnership with Commercial Bank where the Bank has about 30% equity. "It was the right decision made to get involved with a retail bank with a well established franchise. Now we have to see how the partnership can be brought closer and make it generate more value for stakeholders of both institutions", Mr. Fonseka explains. "Both institutions want to move forward speedily and are in the process of jointly working out strategies in order to maximise synergy benefits".

Quoting examples, he said that Commercial Bank’s branch network can be utilised for the benefit of DFCC Bank’s clients too. Commercial Bank has good IT systems and training facilities operating from which DFCC may be able to benefit. On the other hand, DFCC can refer their clients to Commercial Bank for their working capital requirements. Both have skills and strengths. What needs to be done is to set up a formal mechanism whereby the two institutions can cross sell each other’s products and services in a more efficient manner.

Mr. Fonseka is also keen to make DFCC Bank more customer friendly. The first step in this direction has already been taken with the shifting of the Colombo Branch from the head office premises to a more convenient location (at Hunupitiya Road) in a busier commercial area. Both the visibility and location are much better and the Branch has been modelled differently making it reach out to the customer. "It’s modern, open and friendlier", he says. "We need an image change. This is the start".

Mr. Fonseka sees a big opportunity in the Debt Securities Market. This area has not seen much development in Sri Lanka but is gradually moving into place. A Credit Rating Agency or a rating agency which advises on the ability to service debt has been set up. Sri Lanka Telecom (SLT) is one of the first institutions to get a rating from the agency. SLT has got a rating of AA+ which is very good. "We can provide advisory services to companies structuring and issuing debt and getting a rating from the agency", he points out. In addition, the Bank can step into areas of underwriting and guaranteeing debts as well. Apart from originating, Corporate Debt Trading is another area where he sees an opportunity for the Bank. The debt trading function is not well developed in Sri Lanka. Special skills are needed and the Bank has plans to get involved in the area of complementing debt origination.

Mr. Fonseka believes that in the current set-up businesses are too fragmented. The trend is towards mergers and acquisitions. He feels within this decade, there will be mergers, acquisitions, consolidations and divestments. Investment banking being a highly skilled business, there will be opportunities for DFCC Bank to provide advisory services in relation to action best suited for businesses. The Government’s commitment to an ambitious privatisation programme will also provide DFCC opportunities in the investment banking area.

Mr. Fonseka realises fully well the need for resourcing before proceeding with the implementation of the plans he has outlined. He has identified three key resource needs. One is IT resources and management information systems. This he sees as being critical for the effective management of risk in a growth phase involving new business lines. Then there is a need for human resources. While he is quite happy with the available skills, he sees a few gaps. Recruitment for key positions will be finalised soon. Then there is the need to tie up funding. A resource mobilization programme is being worked out.

In conclusion, Mr. Fonseka has this to say about shareholders. "It is unfortunate that many businesses in Sri Lanka do not pay sufficient attention to shareholders. Many people have the mistaken notion that equity capital is cheap or free. Then they grumble that capital is scarce. The fact is that capital is plentiful but it is expensive. During my first year, one of my priorities will be to evolve DFCC to a position where shareholders can look forward with confidence to sustainable value creation".

Cyber-campus computing degrees on offer here

Singapore Informatics Computer Institute, a subsidiary of Informatics Holdings Limited of Singapore is offering students access to the latest Internet Virtual Learning University (IVLU) which it says is a new world class cyber-campus learning environment that will propel them to the new millennium.

The Singapore company was the first educational institution to launch a full cyber-campus study in collaboration with the University of Portsmouth in Britain.

Portsmouth is a leading British university with over 14,500 students. It is a member of the Association of Commonwealth Universities and is recognised by the Institute of the UK as a Centre of Excellence.

Portsmouth’s BSc (Hons) in computing programme, a specialist degree course for candidates interested in the area of data base and systems development, is offered through cyber-campus.

A company news release said that at the end of the programme, students will be able to understand the technologies and methods that are relevant for the creation and maintenance of computing systems. They will also be able to solve business problems with the creation of effective information technology systems.

At a recent launching of Portsmouth cyber-campus degree leading to a Bsc (Hons) in computing, Internal and International Commerce & Food Minister, Kingsley T. Wickramaratne said that quality university programmes of this nature will enable the development of a human resource base here to produce the quality and number of IT professionals needed by the country.

He said that the recognition of the diploma and advance diploma for the degree programme was another good scheme to provide a career progression to any youth who do not get an opportunity to enter the university after leaving school.

"Those who qualify in IT are in demand not only in Sri Lanka but overseas and therefore IT education will certainly improve the quality of life," the minister said.

Coke challenges Elephant with cheaper soda

Coca Cola which has lost substantial market share in recent years to Elephant House has re-launched its Lion Club Soda in a price-based challenge to the market leader.

"We are offering the best value for money to our consumers,’’ Ruchi Gunewardene, Country Manager of Coca Cola Far East announced at a press conference last week.

The company said that the decision to offer competitive pricing was in keeping with Coca Cola’s philosophy of providing the consumers with brands with better value.

"At Rs.5 per 300 ml Lion Club Soda offers more soda for each rupee when compared to the pricing of other brands available in the market,’’ a company news release said.

Gunewardene further added, "With this value offering we are confident of increasing our volumes by enhancing our customer base.’’

The Lion soft drinks range which originally belonged to Pure Beverages Limited has been in Sri Lanka since 1995. Coca Cola took a controlling interest of Pure Beverages a few years ago and the company’s name has since been changed to Coca Cola Beverages Sri Lanka Limited.

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