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Sri Lanka to unveil war budget with hopes on peace

by Amal Jayasinghe
COLOMBO, Feb. 13 (AFP) — Sri Lanka is set for another war budget this year with an unprecedented amount to money set aside to fight Tamil Tiger rebels amid gloomy economic prospects, but with better prospects of peace.

Junior finance minister G. L. Peiris is due to unveil the long-awaited 2000 budget in parliament Monday and is due to announce belt-tightening measures that will help the government bridge the widening deficit.

Official figures show that defence spending in 2000 will total 52.43 billion rupees (728 million dollars), up 11.5 percent from the original budgeted figure for 1999.

However, defence budgets have in the past overshot the government’s original estimates by 20 to 25 percent because of escalating fighting between government forces and Tamil Tiger guerrillas in the island’s northeast.

The appropriation bill which was presented in parliament in October showed the government’s total expenditure in 2000 at 291 billion rupees (4.04 billion dollars), down from 339 billion rupees in 1999.

There has been no immediate indication as to where the cuts will come this year, but the government raised diesel and kerosene oil prices by up to 48 percent last week setting off a chain reaction in prices across the board.

The delayed budget is presented amid a troubling economic environment.

Sri Lanka’s exports were down last year by 4.1 percent, the first negative growth in 13 years while official foreign reserves dropped by an alarming 19.8 percent by the end of November last year compared to the level enjoyed by the country at the end of 1998, Central Bank’s latest figures showed.

The tiny stock exchange remained stagnant and the country’s overall economic growth in 1999 was estimated at a dismal 3.6 percent, down from 4.7 percent in 1998.

On the brighter side, the Central Bank claims prudent economic management by the government to curtail inflation at around four percent, one of the lowest in decades. Unemployment was at an almost unbelievable 8.5 percent.

Even though the government is set to spend five to six percent of the country’s GDP on fighting Tamil Tiger guerrillas, the latest budget is presented amid moves by Norway to broker peace.

Norwegian Foreign Minister Knut Vollebaek is expected here Wednesday for talks on bringing the island’s warring sides to the negotiating table, officials said.

Vollebaek will have talks with President Chandrika Kumaratunga as well as Foreign Minsiter Lakshman Kadirgamar and opposition leader Ranil Wickremesinghe.

"The possibility of Norway assisting discussions to take place betwen the Sri Lankan government and the (Liberation Tigers of Tamil Eelam) LTTE aimed at resolving the ethnic problem, is also to be discussed", the foreign ministry said.

The Tiger rebels who have inflicted heavy losses on government forces in recent months and are blamed for a bombing campaign against public transport are also proving equally ferocious in devastating the country’s balance sheet.

Central Bank Governor A. S. Jayawardena has just announced impressive savings made by the defence ministry thanks to what he called better audits when the Tigers scored their most spectacular success against the military in November.

Jayawardena had told reporters that defence spending which accounts for nearly a third of government revenue was well within the projected estimates for the year with no serious consequences for the deficit.

The Governor was to be proved tragically wrong in a matter of days.

The LTTE guerrillas launched an offensive code-named "unceasing waves III" and recaptured what the army had seized from them in 19 months of bitter fighting.

Dozens of vehicles, including tanks, armoured personnel carriers and a helicopter were lost. Gone were tonnes of military hardware, arms and ammunition worth millions of dollars. All lost in just five days.

It was on the original date for the budget in November last year that the Tigers chose to mount their most swift offensive ever against government forces.

Elevan days later, Minister Peiris presented to parliament a mini-budget seeking parliamentary approval for essential spending in the first four months of this year, pending a full-fledged budget.

"The key to success is the early resolution of the ethnic problem", Peiris said. "We need to end the armed conflict, restore peace and commence hard work". And that would be easier said than done.

Foreign selling pressure depresses CSE in January

Foreign selling pressure has depressed the Colombo stock market 3.3% in January according to a performance analysis done by John Keells Stock Brokers.

The broker’s report which noted foreign selling during January to total Rs.190 million said that positive price movements in JKH and Aitken Spence resulted in the diversified holdings sector emerging the winner in the one-week cycle.

"Domestic buying support despite foreign selling pressure on these counters helped the sector to take the top slot," the report said.

John Keells said that foreign selling pressure combined with the lack of any market moving news resulted in investors focusing on defensive high dividend yielding "safe havens" such as Royal Ceramics and Caltex.

Additionally, positive price movement on Grain Elevators following the announcement of a 25% interim dividend helped the manufacturing sector to outperform the market in the one-week cycle, the report said.

It said that the foreign investor favoured banking and finance sector had under performed the market in all cycles except for the 13-week cycle in which the sector gained l7.6% compared with the market gain of 5.2%.

"The under performance of this sector reflects the severity of foreign selling pressure," John Keells said.

It noted that backed by higher tea prices over the 1-month, 3-month and 6-month cycles, the plantation sector continued to out perform the market. But with the increased rains experienced in the latter part of January, the quality of tea entering the auctions had deteriorated.

Also, volumes of tea on offer had also increased resulting the buyers maintaining lower bidding prices. This had led to the plantation sector seeing a decline in the one-week cycle with most plantation counters taking price dips.

The report said that despite net sale average (NSA) for tea going down the NSA for high growns is averaging Rs.130 per kg and low growns Rs.140 per kg which is almost Rs.10 to Rs.11 per kg higher than what was achieved last year.

"The looming uncertainty over the proposed wage revision which is expected to come into effect in January 2000 is also holding back investors into the sector ahead of the western quality season," the report said.

Powerful Chinese team for Joint Commission meeting

The third session of the Joint Commission of Economic and Trade Co-operation between Sri Lanka and China will be hosted in Colombo from February 22 to 24, the Ministry of Internal and International Commerce and Food said.

China’s Vice Minister of Foreign Trade and Economic Co-operation, Mr. Chen Xinhua will lead the Chinese delegation for these discussions to be hosted by Minister Kingsley T. Wickremeratne together with the Commerce Department.

The Commerce Ministry said that the high level representation of the 9-member Chinese delegation led by the Vice Minister for Foreign Trade and Economic Co-operation augers well for the cordial trade relations existing between the two countries.

"Sri Lanka has been a consistent advocate and long-standing supporter of China’s efforts to penetrate markets worldwide. It has strongly supported China’s accession to ESCAP’s Bangkok Agreement, which among other things grants Sri Lanka generous tariff concessions on several products of export interest to Sri Lanka. Colombo has also expressed continuing support for China’s membership in the World Trade Organisation, and has recently concluded the bi-lateral negotiations under China’s accession to the WTO," the ministry noted.

A spokesman said that China too has encouraged trade and investment here and several possible joint ventures with local partners have already been identified. Among these are the manufacture of pencils, lubricants, carbon brushes, gaskets, rice husk oil, inositol, crucibles, electrical insulations, lightning arrestors, rice wine, straw-based packaging materials and jute-based shopping bags.

The jute shopping bag manufacturing project will be a tripartite venture with Bangladesh.

"A joint venture deep sea fishing project is also on the cards. This will be outside Sri Lanka’s exclusive maritime economic zone," the ministry spokesman said.

Colombo is hopeful about possibilities of the joint venture initiatives that will generate income, create new employment opportunities and enhance foreign exchange earnings benefiting the country in many ways. Some of the new products now being looked at are considered to have potential in the massive SAARC market.

The spokesman also said that the joint commission will specifically address the trade balance between the two countries now in China’s favour. Measures will be discussed to remedy this situation through increased exports from Sri Lanka as well as through economic investment and co-operation.

"The private sector will have an important role to play in these efforts by stepping up initiatives to supply the Chinese market with raw materials, semi finished goods and value added products," the spokesman said.

Currently, Sri Lanka exports only small quantities of tea, rubber, activated carbon, precious and semi-precious stones to China. Many other items could be exported the authorities say. Since 1995 trade between the two countries had almost doubled and volume of goods have increased significantly auguring well for Sino-Lanka trade links in the foreseeable future, they said.

Minister Wickremeratne is eager to see greatly increased trade and investment under the government’s liberal free market policies, the spokesman said.

Stock Exchange provisionally approves SLT debenture listing

The Colombo Stock Exchange (CSE) has provisionally approved the listing of the Sri Lanka Telecom (SLT) debenture issue comprising one million 1,000-rupee debentures totalling a substantial Rs. 1 billion, a spokesperson for the issuers said.

If the issue is oversubscribed, and analysts believe this to be likely, SLT has the option of issuing a further Rs. 500 million worth of debentures.

SLT has said that the funds that are being raised will help pay for part of its ongoing expansion. Also, the landmark issue will be the first of its kind giving the public an opportunity of participating in the country’s infrastructure development through an instrument that has received a very strong AA+ credit rating from Duff and Phelps, the respected international agency.

The promoters said that in many developed countries, utility companies directly access public funds through debt securities like utility bonds and debentures.

The SLT issue is considered noteworthy for the reasons that: It would, if oversubscribed, be the largest debenture issue floated through the CSE; it would be the first ever rated issue; and it is the first debt issue listed by an unquoted company under the new CSE listing rules.

"SLT has broken new ground which augurs well for the development of capital markets here," a news release from the promoters said. "It will encourage other companies besides financial institutions to go direct to the market for funds."

This feature, referred to as "disintermediation," is a common in developed markets.

From the investors’ perspective, the issue is considered attractive in safety and return terms. Though unsecured, they have Duff and Phelps AA+ rating, an endorsement of very high credit quality. Also, the issue is attractively priced to incorporate what the promoters call "a sufficient risk and liquidity premium over corresponding gilt edged government securities."

The 5-year issue is redeemable in four annual installments over four years, starting two years after allotment. Investors have the choice of fixed or variable interest options - 14.5% p.a. payable annually, 14% p.a. payable quarterly or a variables Treasury Bills + 1.25% payable annually.

"This will make the issue attractive to both retail investors who will prefer the more frequent payment and institutional investors. The SLT issue is expected to generate a strong appetite from a broad section of the investing public," the promoters said.

Some analysts predict that the return will attract a possible segment of safety conscious savers investing in National Savings Bank fixed deposits now paying 11.5% for annual maturities.

Rs. 1 billion of the issue has been underwritten by a consortium comprising the Bank of Ceylon, the DFCC Bank and ABN Amro Bank. The Commercial Bank will be the trustees representing the debenture holders’ interest while Vanik Corporate Services will be bankers to the issue.

It is structured and managed by the DFCC Bank’s corporate finance division.

Lanka Bell upgrades network

Lanka Bell has announced upgrading of two of their switches in an effort to maintain a competitive edge on superior technology.

A company news release said that the upgrading of their two Nortel DMS 100 switches included the loading of the latest releases of software for Nortel public switches.

"This should enable Lanka Bell to achieve a single platform operation within the Lanka Bell network. Nortel’s latest software releases would lay the platform for Lanka Bell to introduce more advanced network features shortly," the news release said.

It said that in addition, the efficiency of the network will be enhanced by improved call handling capability within and outside the Lanka Bell network. Customers will also benefit from the new features which will also provide more efficient maintenance through advanced monitoring methods introduced through the upgrading.

Lanka Bell currently serves customers in the business and domestic sectors, providing voice lines, dedicated data lines, dialup Internet access lines and customized solutions to business customers.

The company said it was confident of continuing to provide customers with cutting edge technology to support them in competitive environments.

Japan’s slow economic recovery

By Kanes
Japan’s economy which grew at an annual rate of almost 4 per cent in the eighties, exceeding the US rate of 3 per cent, has been growing at 1.5 per cent in the nineties or half the US rate of three per cent. The Japanese economy is in the doldrums. Economic growth which was negative in 1997 and 1998 - minus O.7 per cent and minus 2.1 per cent respectively - is estimated to become a marginally positive 0.9 per cent in 1999. Japan is the only developed country which is experiencing deflation; consumer prices are estimated to fall by 0.3 per cent in 1999. Retail sales have declined for 30 consecutive months as Japanese consumers have been reluctant to spend amid corporate restructuring and falling incomes; they are falling at an annual rate of 1.9 per cent. Bank of Japan’s zero interest rate policy has kept lending rates at record lows but demand for funds is weak with companies more concerned with reducing excess capacity than investing in new facilities. With weak demand from private consumption and investment, the government had no alternative but to push the economy by increased public works spending.

Public Works Spending

The authorities have spent about $1.2 trillion in nine packages on public works since 1992 and the positive growth in 1999 is the result of public works expenditure amounting to $234 billion. In order to stimulate economic recovery further, the government has approved a $170 billion stimulus package for the fiscal year 2000-2001 which will be funnelled into traditional public works and social infrastructure spending such as the extension of the bullet train lines and wiring the country for the internet. Several economists doubt that it will boost the economy by more than a percentage point; they believe the pushing power of government public works spending is limited when household spending, retail sales and private investment are dropping. Besides, public works expenditure has raised the national debt from ´ 266 trillion in 1990 to ´600 trillion in 1999; it has already exceeded the GDP for the first time in the country’s history and is estimated to reach 115 per cent of GDP by the end of the next fiscal year. This is rather a disquieting feature for government spending next year will require record issuance of Japanese government bonds and make Japan the country with the worst national debt as a proportion of GDP among the developed countries. The large debt is likely to raise interest rates and taxes once the economy returns to robust growth. Public spending may not prevent the economy from stagnating or contraction in 2000. According to current forecasts, deflationary conditions will continue with prices falling by 0.2 per cent and economic growth will be anything between zero and 0.8 per cent. According to Japan’s monthly tankan survey of business sentiment, about 9,000 companies remained negative in November 1999 but hopes for the future are rising. Personal bankruptcies in Japan reached a record high in 1999 topping 110,000 in the first 11 months of the year outstripping the 103,803 cases recorded for the whole year of 1998.

One of the objectives of the government’s stimulus packages is to rescue thousands of small and medium enterprises which are facing bankruptcy. The authorities offer $96 billion in new loan guarantees and declares support for those companies deemed to be "the key to the rebirth of the Japanese economy". The scheme, however, seems to be only an extension of earlier stimulus measures that since 1998 have pumped nearly $200 billion into ailing companies, much of it disbursed even without rudimentary credit checks. In some cases, loan recipients used the funds to buy stock or start new businesses. Analysts estimate that 1 in 5 dollars spent on the programme could eventually end up as bad loans with tax payers footing the bill. An interesting feature in Japan is that government-owned lenders account for 28 per cent of all direct bank lending in the country. If the above-mentioned government guarantees to bank loans to small and medium sized companies are counted in, the government share of bank lending rises to over 40 per cent.

Appreciating Yen

The yen is continuing its appreciation against the US dollar; from 118 yen to the dollar a year ago it appreciated to 101.34 yen to the dollar on November 30, 1999 - a new four-year high - prompting the Bank of Japan to intervene in order to prevent the yens advance towards 100 to the dollar. The bank intervened twice in November buying around $2 billion but it failed to dent the yen which rose again to 101.33 to the dollar on 24th December 1999 prompting the Bank to intervene again to buy dollars and lowering the exchange rate to around 102-104 to the dollar. A number of factors have conspired to push the dollar lower in the market, including rising hopes for Japan’s recovery and concerns that US share prices are overvalued. The Bank of Japan’s interventions have convinced dealers that they will need to think twice before driving the yen again.

The strong yen is a particular concern as its level is too high and its pace of appreciation too rapid. It is feared that an overly strong yen would undermine the competitiveness of Japanese exports, reduce company profits and add to deflationary pressures at a time when the economic recovery is still fragile. Lower prices are keeping profit margins thin and these margins may be squeezed even further if the yen continues to appreciate. A high yen eats into the value of profits earned overseas. Sony and other big exporters have already blamed the stronger yen for weaker earnings results in the first half of the current fiscal year. Toshiba, for instance, loses five billion yen for each yen of appreciation against the dollar. The high yen thus affects the manufacturing sector; the higher it goes, the more the manufacturing sector shrinks creating more unemployment. A strong yen of course can be beneficial to the rest of Asia as it can sell more to Japan. It also means more restructuring in Japan and more relocation of industries in offshore Asian manufacturing centres. On the other hand, if the strong yen discourages Japanese exports and tips Japan back into a recession, that will not help other Asia at all. The estimated drop in Japan’s exports from $395 billion in 1998 to $389 billion in 1999 or by 1.5 per cent indicates that the strong yen is driving up the cost of exports for overseas buyers. Japan’s foreign exchange reserves, however, have risen from around $212 billion in December 1998 to $271 billion in December 1999 - the largest in the world.

Corporate Restructuring

The recession inevitably has resulted in lower profits or losses to business forcing some of the large firms to restructure by retrenching, in particular, cut their workforce in violation of the tradition of providing them with life-long employment in the firm. Mitsubishi Heavy Industries, for instance, had its profits of 54 billion yen in 1998-1999 turned into a loss of 42 billion yen in 19992000; it has unveiled a four-year restructuring plan that would cut 7000 jobs from its 71,000 strong workforce. NEC Corporation will close its computer manufacturing subsidiary in the US and shift its focus toward internet-related business; more than 2000 of the company’s 2600 worker in California will lose their jobs. Mitsubishi Motors is shedding 10,000 jobs and Nippon Telegraph & Telephone some 20,000 workers by 2003. In addition, since 1991, more small firms have closed than opened, the opposite of what is happening in the US.

Corporate restructuring is also undermining Japan’s traditional business patterns and practices, in particular the Keiretsu, or powerful corporate groups held together by common values, business relationships and a web of cross shareholding, with Japanese banks at the centre, owning the largest amount of cross-held shares and ensuring flow of cheap credit within the group. Keiretsu have their origin in the pre-war Zaibatsu - the giant holding companies that then dominated the economy. The six largest Keiretsu are the Mitsubishi Group, Mitsui Group, Sumitomo Group, Dai-ichi Kangin Group, Fuyo Group and Toyota Group: old group loyalties are now fast disappearing with increasing cross-Keiretsu marriages which were unheard of before; banks belonging to some groups are merging with outsiders - those belonging to rival groups. For example, Fuji Bank (Fuyo Group) merged with Dai-ichi Kangyo Bank (Dai-ichi Group) and the Bank of Tokyo; Sumitomo Bank (Sumitomo group) merged with Sakura Bank (Mitsui Group). Globalization of industries such as oil and finance has left Japanese companies too small and too insular and they have to catch up soon. Thus, Nikko severed old loyalties to Mitsubishi and sold one-fourth of its share capital to an outsider - Citigroup in 1998 and Mitsubishi oil merged with an outsider- Nippon oil in 1999. Cross holdings are slowly unwinding as banks and insurers pull out of the stock market.

Japanese companies are also improving corporate governance by encouraging shareholder participation and becoming more open and transparent. About 250 companies broke with tradition this year by calling shareholders together five days earlier than the customary date of June 29 when 88 per cent of Japan’s top listed firms held their sessions. Giant firms like Sony and Sanyo have appointed outsiders to their boards of directors. Part of the drive to improve corporate governance involves management. A growing number of corporations in Japan have appointed chief operating officer with the aim of streamlining decision-making in a company and in the process making management more responsive to shareholder concerns. Sony introduced the title of COO only in 1997. Since then, 179 corporations - 7 per cent of the biggest public companies in Japan - have created such a position or announced plans to do so.

Restructuring is pursued also by forming mergers with foreign firms by major Japanese firms which had shunned all foreign links in the past. Nissan Motors for example, has sold 36.8 per cent of its shares to Renault Motors of France. The new joint venture will slash it workforce by 14 per cent or 21,000 and cut its output by 30 per cent under a restructuring plan; three domestic plants will be shut by 2002. General Motors (US) has purchased 20 per cent of Fuji Heavy Industries which makes Subaru cars; it already has a 49 per cent share of Isuzu and 10 per cent of Suzuki. Long-Terms Credit Bank was purchased by a foreign consortium led by the American Ripplewood Holdings; GE Capital purchased Lake Company (a Japanese consumer firm), GE Finance Assurance bought Toho Mutual Life Insurance; Travellers Group bought 25 per cent of Nikko Securities; Merrill Lynch purchased a part of Yamaichi Securities and Associated Trust Capital bought 90 per cent of DIC Finance.

It is significant that some government officials and business leaders are openly advocating reform of Japan’s strict immigration policies as a part of restructuring the economy. This may sound paradoxical when Japan is having about 3.3 million unemployed but the fact of the matter is that Japan is confronting a twin drain on its labour pool: a rapidly greying populating and a sharply declining birth rate. The low birth rate - 1,5 children per woman is expected to reduce the present population of 126 million to 101 million by 2050. About a third would be older than 65, up from 17 per cent now. It is estimated that the country’s overall workforce will peak at 69. 1 million in 2005 and then fall to 68.3 million five years later. It is feared that future growth will run out of steam in the absence of new sources of labour and this will need a relaxation of immigration barriers in about ten years. The government is already moving towards lifting some restrictions on foreign skilled workers but progress is expected to be slow at the beginning because of opposition to foreign workers. Some economists, however, believe that foreign workers may be needed to make up as much as a third of the labour shortfall expected early in the new century.

Favourable Trends — one favourable sign is the rising stock market prices. Foreign investors are pouring into the Tokyo Stock Market in the hope that Japan’s economy is recovering and shrugging off the resulting surge in the yen. The Tokyo Nikkei index has risen by 25 per cent in the last 12 months. Another is that Japan’s biggest banks are making money after three years in the red, helped by lower bad-loan provisions, wider loan spreads and soaring stock market. All but one of the 17 top banks reported positive results for the six months to September 1999. The third good sign is the moderation of unemployment from the record high of 4.9 per cent in July 1999 to 4.6 per cent in September although it is still high by Japanese standards.

Free education worsens inequality in society

By Analyst
A complex relationship exists between skills, employment and economic growth. Countries like Korea, Thailand and Malaysia concentrated on primary education in the early stages of growth and as the economy developed emphasized secondary education. There is no real case for subsidizing tertiary education when the social returns are less than the private returns.

In most countries including the developed countries like U.K and U.S.A. government finance for university education has to be supplemented by the individual. Fees were introduced in U.K and China. Australia used a graduate tax, a special tax on the earnings of graduates. There is a strong case for doing so from doctors engaged in private practice if they were educated at state expense.

Within university education priority should be for science and technology education. In Korea for example the number of scientists and engineers per thousand population increased from 7 in the late 1960’s to 22 in the late 1970’s, whereas in Brazil and Mexico it remained at the same levels of 6 and 7 respectively in the same period. By the 1980’s, the number rose to 47 in Korea as compared to less than 10 in most developing countries.

In Sri Lanka although the number of Universities have increased to 12, the annual intake for the engineering courses have remained around 400, which is insignificant in terms of the number of engineers per thousand population.

The governmental policies with regard to education in our country have shown wrong priorities. The involvement of the private sector and the N.G.O. sector in providing education has also been insignificant. For a long time these sectors were debarred from providing education.

Since recruitment to the universities is not based on merit but includes discrimination in favor of districts, many good students cannot enter the universities particularly in Medicine and engineering. Many students go abroad to study in foreign Universities, which are very costly.

University students oppose the setting up of Universities by the private sector because they fear competition. Some countries on the other hand choose the technical and professional grades from the brightest In higher education what matters is quality as shown by the successful developing countries which produce outstanding scientists and technical professionals.

Being tied to instruction in swabasha the universities are but glorified tutories where students gather knowledge confined to whatever notes are provided by their lecturers, a case of the one eyed being kings in the land of the blind. If the government wishes to raise the standard of university education it should encourage fee levying private universities.

There is no argument against it on grounds of equity. It has been proved that while the spread of primary education to the poor tends to make it redistributive, public expenditure on secondary and higher education tends to re-distribute income from the poor to the rich, since the children of poor parents have comparatively little opportunity to benefit from it. (World Bank 1980).

Over the years our governments have followed wrong priorities with regard to the type of education. The use of selection tests is necessary to reduce iniquities and inefficiencies since the best available opportunities are limited and should be rationed to those who can most profit from them.

Investment in the development of human resources is needed so that technological progress can support economic growth. It is the build up of technological capacity that lays the foundation for economic growth. Expanding general secondary and tertiary education is a waste of resources. The type of education and training in skills required during various stages in economic growth is different. We have by our faulty policies created an intelligentsia, which cannot be provided jobs not now, not ever. We are saddled with a permanent educated unemployed. Yet our politicians want to open more universities.

The enormous investment in secondary and tertiary education have not produced commensurate social returns. If such expenditure was on physical infrastructure or on setting up manufacturing enterprises we would indeed have achieved much higher rates of economic growth. Not only did we spend on capital investment like school buildings but also financed the entire current expenditure on education from the budget by providing free education to all.

What have we got to show for it. A large pool of educated unemployed, as much as 30% of the labor force with no hope of ever providing them employment in keeping with their qualifications and fulfilling their aspirations. It is called a mismatch between the supply and demand for labour.

While manpower planning and industrialization can ensure a better balance between supply and demand in the labour market, there is no possibility of clearing the backlog of such unemployment unless these youth are willing to accept the jobs available. It is not the best policy to appoint overqualified persons to jobs which do not require such education. Such jobs will not provide job satisfaction to the recipients, who will nurse a permanent sense of resentment and be unable to give of their best.

It is a colossal blunder to have introduced universal secondary education and mass tertiary education in purely academic subjects which is economically unproductive, when what the economy required was technical and vocational education to provide the elementary skills needed during the first stage of industrialization.

An economically relevant and cost effective education would according to T.V. Rao (Human Resources Development-Experiences. Interventions. Strategies!) need the following strategies:

l. Inculcating the right attitudes to learning, vocational skill development and productive work from early school education

2. Orienting or re-orienting middle school curricula for technical and vocational skill development

3 Developing entrepreneurial skills and attitudes for self- employment

4 Extending technical and vocational education to other higher education system and beyond the school level

5. Improving the efficiency and effectiveness of existing institutions through appropriate institution building, organization development and manpower development interventions.

At the primary school level there are many drop-outs although drop-out rates are not available. The average school avoidance rate is according to the Consumer Finances Survey of 1987 11.9%. It is only in the estate sector that the school avoidance rate is high, being over 30%. Why should the parents send their children to primary schools when nothing useful is taught to the children.

School drop out rates increase at the fifth standard level as it was in the past. It is at this level that most countries select the vocational stream for those students that do not perform well in academic work. No selection tests at this level are possible because politicians will not hear of it. But vocational schools should at least be available for those who drop out.

Other countries have shown what can be done to build on the resources available in the village. In these countries occupation based training was made available to groups of villagers in weaving, leather work, carpentry , agriculture based activities and animal husbandry.

But our teachers have no connection or relationship with the village economy. They are controlled by the central educational bureaucracy. They have no freedom to follow a curriculum suitable to the economic activities of the village.

The first step in any educational reform should be to hand over the schools to the local community and thereby enlist the participation of the parents in running the schools. This is how most schools originated in the developed countries. In Britain the School Boards have considerable autonomy. There should be local autonomy in formulating curricula suitable for the local economy.

The role of the curriculum experts of the ministry should be to advise the local schools on how to fashion the curricula using local examples, local occupational base and assist in understanding local problems, such as the poor prices they get for their products, how to get together to solve the problems of credit and marketing.

This requires training of teachers and autonomy for the examination system. But the type of training of teachers is not the type of academic training now given to teachers. It is a training in how to utilize local examples to illustrate the teaching of the primary school syllabus.

Secondary school education is treated purely as a preparation for higher education. But what is wanted is to prepare the student for life and the world of work. So other countries have sought to introduce work related and life related subjects in schools. The recent reforms seek to do so. But the facilities in schools are limited. Instead of providing libraries it may be desirable to provide some equipment required in agriculture or industry or even in the home so that the students can become familiar with commonly used equipment in his environment.

Students in secondary school are at a stage in their life when they are influenced by whatever equipment they are familiar with to decide on their future occupations. It is desirable therefore to introduce some practical arts at this stage so that they cay develop a feel for technology or at least learn to respect the skilled manual worker.

Most households do not know how to plan their household budgets and carry out planned purchases for their daily needs. Many resort to impulsive buying when they see goods displayed. Home economics would constitute a useful source of training rather than business studies which is now in the curriculum. Teachers in rural areas are reluctant to participate in community activities as most of them are not from the areas in which they teach. Nor is such participation in community activities recognized by the educational bureaucrats in the ministry.

Achievement Motivation

David McClelland in his pioneering work on The Achieving Society (1961) came to the conclusion after studying children’s stories in different cultures that countries that have advanced economically are those that emphasized achievement motivation - the desire to achieve something or do something excellent, or do something different.

Child rearing habits in the developed countries for example differ from those in developing countries where mothers are over-protective and children are unduly restricted. His analysis suggests that the way children are socialized and the nature of the socialization process determine whether they will undertake entrepreneurial activities.

Our parents overemphasize academic studies and drive children to absorption in books holding out the professions as the goal of their educational career. Of course the professional men iike doctors, engineers, lawyers earn far too much because of the barriers of entry to such professions. If these barriers are removed and the private sector allowed to participate in the provision of knowledge for medicine, engineering, accountancy etc. the supply in these professions will increase and bring down their incomes, making them less attractive for prospective entrants.

The regulation of the professions cannot be left to the professional bodies which are after all no different to trade unions in safeguarding the interests of the professions. The Chartered Accountants continue to debar C.I.M.A members from entry to the auditing of even private unincorporated businesses although those who pass the Diploma in Accountancy of the Technical College are allowed.

The inter-active patterns of parents with their children, the inter-active patterns associated with religion and social class and core religious values affect achievement orientation, which is important for economic development. This factor of achievement orientation and how to introduce it to our society has not received the attention of policy makers unlike in other developing countries like India, Malaysia and the Philippines.

Achievement motivation training has been used to develop the entrepreneurial spirit in these countries. Even those passing out of technical schools should be given a training in enterprise management skills so that they can set up their own business without waiting for a demand for their skills.

Australia has a Small Business Management course at school level which includes a feasibility study check list, an entrepreneurial selfassessment scale and a small business management book. Many youth are taking to the running of three-wheelers. Few of them have any understanding of business and if the trend continues there is likely to be an over-supply reducing earnings for every body. This is the pattern in most lines of small business.

The institutions like the finance Companies and the banks who finance such activities should carry out market research at their cost and make available the data on payment to prospective investors and borrowers from the financial institutions. There is a crying need for market research information for prospective entrepreneurs not only in industry but even in agricultural crop production where farmers are learning at a bitter cost what happens when everybody goes for the same seasonal crops .

The emphasis seems to be on high level technology like computer training. But technical and vocational education are even more important in the lower levels and in rural areas. It may be better to concentrate on primary school drop-outs illiterate adults and women. In some countries training programs have been taken to rural artisans who are partly engaged in family to upgrade their skills through a cadre of instructors who are themselves skilled workers. A skill upgrading instructor team visits key villages in Gambia to upgrade village avisans skills.

Chamber expects ‘teething problems’ in Indo-Lanka FTA

The Ceylon Chamber of Commerce has welcomed the implementation of the Free Trade Agreement between Sri Lanka and India from next month saying that it could contribute to the expansion of investment and trade.

The Chamber admitted the possibility of a few initial "teething problems," but is proceeding to throw its full weight behind the implementation of the agreement.

Already eight Chambers/Associations including the Ceylon Chamber of Commerce have formed a secretariat to handle all issues concerning the free trade agreement. This was done at the request of the Ministry of Finance and Planning.

A Chamber news release said that one of its objectives this year was to carry forward the Indo-Lanka initiative by promoting and jointly consulting with its counterpart in India, the Confederation of Indian Industry.

"For this purpose, Joint Economic Commissions will be appointed from both sides and the first joint meeting will be held on the finalisation of the two committees," a chamber news release said.

"This initiative will be implemented through the Association for Sri Lanka-India Economic Development, a business council affiliated to the Ceylon Chamber of Commerce."

Refurbishment and palate ticklers at the Taj

The Taj Samudra Hotel which is planning an extensive refurbishment shortly has brought down a Chinese chef to revamp its popular Golden Dragon Restaurant which is the biggest single restaurant outlet in any of the big hotels in Colombo.

"We are hoping to do a complete refurbishment of the hotel later this year and we may possibly get the help of the Taj group for this investment,’’ Mr. Shiraz Cader, the sales manager of the hotel said.

The new chef, Lo Ka Yan having worked in many parts of the world like Switzerland, Indonesia, India, Bejing, Hong Kong, has over 30 years experience in Chinese cooking and specialises in Szechuan and Cantonese food. He’s already done a new menu for the Golden Dragon.

"He loves experimenting with various ingredients and has perfected many dishes based on what he calls `X.O.’ sauce. He blends this sauce every day with dry scallops,’’ Cader said.

The Taj Samudra’s Executive Chef Natarajan said that while many people regards Szechuan to be chilli hot, it was not chillies but a special pepper that chef Lo Ka Yan calls aniseed that tingles your tongue.

Natarajan claimed a "delicious and well balanced menu’’ has been devised for the Golden Dragon his new chef. It was launched on the auspicious Chinese New Year Day on February 5.

"This is the Year of the Dragon and we hope it will be auspicious for the Golden Dragon at the Taj,’’ Sales Manager Cader said.

The Taj is also catering to its large Indian clientele as well as the many Sri Lankans who relish Indian food with Dosa (thosai) Festival which opens tomorrow and continues for a month.

This festival will provide a variety of dosas from 5 pm to 7 pm daily. Natarajan said that Indians are fond of snacking in the evenings and they are catering to this custom.

He also promised a "Southern Spices Festival’’ from February 25 to March 5 for which chefs from India are being flown here. Gourmet cooking from South India including Chettinad cooking that have been a huge success at the Taj in the past are promised.

Cader said that they were hopeful that the well known Taj Group in India who are shareholders of the Taj Samudra in Colombo will invest in upgrading the Colombo property which has been financially troubled over a very long period.

Taj Lanka Hotels have apid no dividends since the Taj Samudra was commissioned.

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