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| Nestle doubles profits and declares 55%
dividend Nestle Lanka Ltd. had performed exceptionally well last year nearly doubling its 1996 profit to Rs. 297.7 million enabling the directors to recommend a dividend of 54.9%, the highest declared in its 17-year history. Although consolidated turnover increased only 10% to Rs. 3.3 billion, Nestle Chairman and Managing Director Kurt Zingg has reported to shareholders that strict cost control had enabled the "excellent performance'' achieved in a climate of 6% growth in the national economy, lower interest and falling inflation. However, the company's core full cream milk powder business had been hurt by a fall in milk prices internationally with imports, mostly from New Zealand and Australia costing around USD 1,850 against the previous year's USD 2,250. Aggravating this was the low 10% duty that applies. The result has been that Nestle had to carry large stocks of locally processed full cream milk powder into 1997 and as a result reduce its fresh milk collections by 8.7% from the previous year. Last year's fresh milk collection was 34 million litres. "Numerous requests were made to the government authorities to help the local dairy industry and processors of local fresh milk to overcome these problems and it is hoped that appropriate measures will be introduced to protect and at the same time develop this industry,'' Zingg said. For these reasons, the contribution of milk powder to the company's positive growth during the year had been marginal. The company's non-milk business had done well with Nestomalt, the malted food drink, leading the way. Nescafe instant coffee sales had continued to grow and Coffeemate, a dairy creamer under the Carnation brand, had been introduced to the ``ever growing supermarket trade'' at the end of the year. In confectionery, a chocolate flavoured wafer, Nestle Super 8, produced to Nestle' quality standards by Ceylon Biscuits was launched in June and the existing range of Kitkat, Smarties and Polo expanded with the introduction of South African made chocolates. "We anticipate the introduction of new varieties of confectioneries as sales of these items are progressing satisfactorily,'' Zing said. While the noodles and food product range under the Magi brand and Cerelac infant cereals had been expanded, the export of coconut milk powder to many countries worldwide had continued. Although a high 175% countervailing duty had blocked entry into the once lucrative Brazilian market, new markets in the USA, Jamaica and India had been found. During the year export sales of this product had declined 19% in volume but only 3% in value as Nestle had concentrated on the more profitable retail business at the expense of marginal bulk exports. The directors of Nestle Lanka Ltd. are Messrs. K. Zingg (chairman and managing director), M.W.O Garret, M. Rashid, L.C.R. de C. Wijetunge, J.E.S. Constantine and A.R. Rasiah (alternate to M.W.O. Garret) 1997 'best year' ever for Lanka's poultry industry Three Acre Farms Ltd. (TAFL), the Ceylon Grain Elevators (CGE) subsidiary which runs one of the country's biggest and most modern poultry hatchery and breeder farm has profited from what its chairman has called "one of the best years'' (1997) for the poultry industry in the country. A stable economic environment, improved tourist traffic and balanced supply and demand had helped healthy prices for chicken both at wholesale and retail level enabling many farmers to recover from the previous year's debacle. "If power cuts in the future could be avoided, the players in the industry has the means to ride over temporary downturns caused by seasonal cyclical demand and supply,'' Chen Tsang Man, TAFL's executive chairman has reported. The year ending Dec. 31, 1997, had seen TAFL which began the year by acquiring the business assets of Christombu Farms, seizing opportunities and achieving a 40% volume growth of in the supply of commercial day-old chicks with an output of over 15 million birds. Turnover was up 200% Rs. 526.6 million from the previous year's Rs. 175.6 million and net profits attributable to shareholders had touched Rs. 66.6 million against the previous year's Rs. 9.4 million loss. The chairman reported that TAFL has entered into an operating agreement with another CGE company, Ceylon Agro-Industries Ltd. to manage the day-to-day operations of its ten sales outlets in the city and suburbs. Although TAFL records no turnover from this arrangement, a monthly profit of Rs. 1.5 million is guaranteed. The company, which now owns 188 acres of land freehold valued at Rs. 102 million, expects 1998 to be a growth year, the chairman said. He expected synergies from earlier acquisitions, stepped-up production, continued streamlining and tight management to bring them more rewards during the current financial year. "Barring unforeseen circumstances, the directors expect TAFL to secure improved levels of group turnover and net profits,'' he said. He saw the long-term outlook for the livestock industry as ``extremely bright'' and said that with the support of correct economic policies and a growing economy, the sector was poised to reap further gains. TAFL which has proposed a first and final dividend of 10% for the year under review will enjoy a lower rate of 15% taxation against the previous 35% under last November's budget proposals, the chairman said. The company's activities cover agriculture, aquaculture and livestock production. The major shareholders of the company are CGE (57.5%), Prima, Singapore (15.3%) and Mr. Hilary. D. Fernando (formerly of Christombu) 9.3%. The company's directors are: Cheng Tsang Man (executive chairman), Primus Cheng Chih Kwong (executive director), Henry Tan Hong Tjioe (executive director), Robert Cheng Chih Cheng, Hilary. D. Fernando, Ferry Tegu Santosa (alternate to Cheng Tsang Man). Local investment strong in teeth of sharp drop on CSE Punters on the Colombo bourse, dazzled by some sharp gains in the last few days and hoping to see the all share index (ASI) clear the 800 point hurdle this week, were doomed to disappointment when the market took a tumble on Thursday and Friday. The ASI which stood at 777.27 on Wednesday had lost nearly 35 points when it closed at 742.10 on Friday in a short 3-day trading week. The sensitive price index too was down similarly with the decline in pricey blue chips helping to draw the SPI down from 1210.48 on Wednesday to 1142 on Friday. "Local investment is going in and coming out,'' said a director of a group with stockbroking interests. ``But daily volumes are being maintained with plantations the `hot' sector and the focus of investor interest. On Friday's Rs. 155 million turnover, the foreign component was very small. The money was local.'' Given last week's sharp increases, most analysts expected a correction to be inevitable. But the plunge had brokers who had confidently predicted that the market had not peaked to scramble for excuses. Suharto was one excuse and the Indian nuclear test the other. Shockwaves in the region had a spillover effect here but analysts were confident that all that will correct. "We'll see buying support again. That has been the trend,'' one analyst said. ``More good company results are coming in.'' According to the Colombo Stock Exchange's (CSE) April report there was significant appreciation of both indices last month with the ASI gaining 69.3 points (10%) and the sensitive 125.1 points (11%) to close the month at 782.1 and 1,236.6. "Price levels moved up rapidly during the last two weeks of the month. This can be attributed to the growth in earnings of companies during the last quarter of the financial year. Increased foreign participation was also observed during the last two weeks,'' the report said. April saw a Rs. 1.8 billion turnover with average daily turnover at Rs. 94.5 million. Foreigners who were net buyers in March, with net purchases of Rs. 64 million turned net sellers in April with net sales of Rs. 52 million. On the regional front, Bombay moved up 3% and Karachi 1%. Hongkong and Kuala Lumpur were down 9% and 13% respectively. Colombo in comparison performed well appreciating 10% but some of that ground was lost last week. Associates' earnings swell Hayleys Exports' profits Despite a twenty percent drop in operational profits, Hayleys Exports Ltd., the coir fibre exporting arm of the Hayleys Group, has improved overall profitability in the year ending March 31, 1997, thanks to a substantial boost of its share of profits of associate companies, shareholders have been told. The company has announced a gross dividend of 40% for the year, up from the previous year's 35%. The board has recommended a final dividend of 20% on top of a 20% interim paid in February. Group turnover was down slightly to Rs. 225.3 million from Rs. 232.4 million. The operating profit before interest was down to Rs. 30.2 million from Rs. 37.7 million the previous year. Interest charges, however, had fallen to Rs. 7 million from Rs. 9.6 million a year earlier. The share of profits from associate companies at Rs. 29.6 million had surpassed the after-interest operating profit, up Rs. 10.1 million from a year earlier. Shareholders have been told that 6.86% of their final dividend will be tax-free as it is being paid out of exempt dividends received by the company. Hayleys Exports which made a 1 for 6 bonus issue last year has an issued capital of Rs. 35 million. Aitken Spence calls EGM for bonus share issue Aitken Spence and Co. Ltd., the blue chip conglomerate quoted on the Colombo bourse, has called an extraordinary general meeting on June 1 for considering a resolution to capitalize Rs. 48.4 million in the company's reserves by making a bonus share issue of one new share for every three held. Aitken Spence which has ambitious expansion plans hopes to raise US $ 25 million fresh capital abroad with a share issue that will carry a high premium. The company, after discussion with foreign fund managers, is confident that such a share placement is possible. Economic Matters - theme for SAARC Colombo summit Economic matters will be the theme for the SAARC summit meeting in Colombo in mid-July, Foreign Minister Lakshman Kadirgamar said. The Minister, addressing a luncheon meeting of the Foreign Corrsdespondents' Associastion last Friday said that under this theme the leaders of the seven SAARC countries would focus on matters such as the World Trade Orgnisation and globalisation issues. At past summit meetings too economic issues had been discussed but those deliberations were focussed mainly on regional matters such as economic cooperationen, in the region, the South Asian Preferential Trade Arrangement (SAPTA) and the proposed South Asian Free Trade Area (SAFTA). Kadirgamar said he did not expect last week's nuclear tests by India would 'distrub' the Colombo Summit in July. SAARC is made up of the seven South Asian countrties – India, Pakistan, Bhutan, Nepal, Bangladesh, Maldives and Sri Lanka. New box transportation service launched by Navam Welihinda Sri Lanka is one of the 16 countries in the region with this new box service. The other countries in-clude those in Europe, the Middle East, Africa and the Indian sub continent. The service was introduced in the country through Mountain Hawk Express (Pvt.) Ltd. which is a licensee of the FedEx cor-poration. Uddaka Tenna-koon told a press briefing last week that among the benefits of using the service is the straightforward pric-ing structure and the security of the package. The same flat rate applies to 10 kg and up to 25 kg, above which a pro-rata rate applies. The boxes are made of double corrugated waterproof card-board, finished in a tough laminate to protect the contents. The fixed price of the boxes regardless of weight allow many customers to realize significant savings as opposed to existing services where the price is mainly dependent on package weight. Sri Lanka like many other industrial countries is going for the "just in time" approach, meaning reducing the pro-duction cycle time by ordering the required products in time for production, instead of stocking up. The approach is preferred as it is known to bring down the high cost of inventory, the Managing Director said. A company spokesman said that among the benefits of using FedEx is its tracking service which lets customers track the status of shipments 'en-route' and verify proof of performance from their own personal computers. This service was initiated in 1993, the tracking service enabling customers to check the status of their shipment, which include the current position of the package at the time the customer acces-ses the network. FedEx which began operations in April 1973, after several acquisitions started its overseas operations in 1984 with services to Europe and Asia. The company with its headquarters in Memphis Tennessee, in the US, now serves 211 countries, and claims a global lift capacity of approximately 20.6 million pounds per day. Operations in Sri Lanka began in 1987 under Mountain Hawk Express (Pvt.) Ltd. FedEx which owns 610 aircraft plans to acquire 20 more McDonnell Douglas MD-11 type aircraft from flightlease. Federal Express reported revenues of US$ 11.5 billion for its fiscal year ended May 31, 1997. US - Japan discord on economic issues By Kanes US-Japan trade The US has applied pressure, used questionable measures and bullied Japan for decades to secure specific market openings for US products and to restrict Japanese exports to the US market. Higher tariffs and import quotas thinly disguised as voluntary trade restraints and other restrictive measures were used to reduce imports from Japan of goods such as textiles in 1971 - 1972, steel in 1976-1977, motorcycles in 1983, semi conductors in 1984-1985 and automobiles in 1992-1995. Tariffs on motorcycles were raised from 4.4 per cent to 49.4 per cent in 1983 and tariff on 13 models of Japanese motor cars were pushed up to 100 per cent in 1995. Voluntary trade restraints were applied to steel and other goods. Japan was pressurized in 1986 to enter into a semi-conductor trade agreement to push the share of foreign chips in the Japanese market from 8 per cent to 20 per cent; and when Japan fulfilled this commitment, US tried hard to renew the agreement, even when it had no justification because it feared losing the Japanese market in all these measures, the US acted unilaterally, ignoring the accepted rules of international trade under GATT/WTO. These measures, however, failed to prevent Japan from having a surplus in trade with the US. Then came the Plaza Accord of 1985 under which Japanese yen appreciated from about ´ 250 to the dollar in 1984 to ´ 94 to the dollar in 1995 to reduce the competitiveness of Japanese exports and at the same enhance the competitiveness of dollar exports. According to Yamaichi Securities Research Institute, each one-yen rise against the dollar cuts about 50 billion yen or $ 475 million in export earnings of Japan's electronics and automobiles. Toyota claims that for every one-yen appreciation against the dollar it lost 6 billion yen or $ 51 million in export revenue. Japan's exports suffered but yet it continued to have a trade surplus with US. More recently, US firms have begun to lodge complaints against Japan with the WTO. Eastman Kodak, for instance, has complained that as Japan's Fuji keeps the market tightly closed to outsiders it has only a small share of 10 per cent of Japan's Market while Fuji controls 70 per cent. Fuji has rebutted this accusation by pointing out that it too has only 10 per cent of the US market. The US has now set an upper limit to Japan's current account surplus - ratio to GDP of 2.5 per cent. This ratio exceeded 3.0 per cent in both 1992 and 1993 and was 2.8 per cent in 1994; it, however, declined to 2.2 per cent in 1995 and 1.4 per cent in 1996. The figure for 1997 is estimated at 2.3 per cent - very close to the danger zone and for 1998 2.2 per cent. If by chance the figure exceeds 2.5 per cent in 1997-1998, there will be another trade confrontation between the two countries. While the US and Europe have highlighted Japan's current account surplus with them and generally painted Japan as a mercantilist nation, they have been reluctant to admit that Japan is the world's largest net saver and half of its large savings amounting to about $ 12 trillion is being used by the world's borrowers to finance their development and meet their current account deficits. It is these savings that are represented in its current account surpluses; and they play a positive role in world finance and development. Perhaps the main beneficiary of these savings is the US. The dollar
standard It is not widely known that the US economy is being proved up by a regular inflow of capital from Japan and other countries that have willingly purchased US government bonds even when the dollar was declining. The extent to which Japan has met the savings/current account deficit in the US is illustrated by the fact that it holds more US government bonds or Treasuries than any other country - $ 293 billion or 24 per cent of the $ 1,200 billion held by foreigners. This even exceeds the market value of the gold reserve of US which is around $ 100 billion. If Japan decides to sell its large holdings of US government bonds and use the dollars to buy gold it would trigger a stock market crash even bigger than that of 1929 in US and the rest of the world. It would thereby halt US prosperity and undermine the dollar standard. The need for Japan to hold on to US bonds is so important that it is rumoured that there is a secret understanding reached at the time of American occupation, for Japan not to convert its foreign currency reserves into gold. Japan accuses the US with the world's key currency, for exercising its rights but not fulfilling its obligations and for labelling Anglo-American standards as global standards and applying them strictly to Japan but not to the American economy. The US for example, pushed the yen too far up - ´ 79.75 to the dollar in April 1995 - which led to a sharp fall in Japanese stock prices and cause problems in the financial system. Japan accuses the US of manoeuvring to keep the dollar cheap and hurting Japan. If Japan wanted to retaliate and hurt the US, all it had to do was to sell the US bonds it held, but it did not do so in order to prevent a world depression. How important is Japan's clout over the US economy was well illustrated when the statement by Japan's Prime Minister Hashimoto that Japan had been "tempted to sell US Treasuries to buy gold" on several occasions when US manoeuvred to keep the dollar cheap, led to a fall in Dow Jones industrial average by 192 points in June 1997. This was also a warning to the US not to push up the value of the yen to unreasonable levels and also to be aware of the dangers inherent in the unprecedented boom in the American stock market. Reviving the
Japanese economy Japan accounts for $ 68 billion or 11 per cent of US's total exports and about 40 per cent of South-East Asia's exports. This, however, is not the only reason why Japanese recovery is crucial to the US economy. The US fears that if the Japanese currency remains stagnant, market forces would push the yen down, and this in turn would enlarge Japan trade surplus with the US and Europe paving the way for a trade war. In April 1998, Japan announced a new reflationary package of tax cuts and public works spending amounting to 16 trillion yen or $ 125 billion. This included cuts in income and other taxes by 4 trillion yen ($ 31.2 billion) in 1998 and by a further 2 trillion yen or $ 15.6 billion in 1999 and new public works to stimulate demand to the tune of 10 trillion yen ($ 78 billion). The US, however, wants Japan to make bigger tax cuts equal, to about 3 per cent of GDP to make a forcible expansion in demand, output and employment. Critics also point out that no changes have been made in the Japanese tax system which rewards saving and provides little relief on mortgage payments. Japan argues that in making tax cuts it has to take into account that it has a very large budget deficit equal to 7.3 per cent of GDP, and its public debt exceeds 200 per cent of GDP. Further, Premier Hashimoto pledged to make cutting the budget deficit his first priority after coming to power in 1996 and had in fact raised the sales tax in 1997 for this purpose. The US is also dissatisfied with the slow progress in banking reforms and deregulation of the economy and financial sector The US wants Japan to stop bailing out weak banks and allow them to bankrupt. Japan had released 13 trillion yen in February 1998 to bail out the weak banks and believes that to allow them to go bankrupt would erode public confidence and have effects opposite to those of tax cuts. The US also wants Japan to provide funds to banks on a large scale to enable them to take out bad loans and become liquid and eager to lend; but Japan has been slow to adopt these measures. The financial sector has been liberalized to a certain extent as the Americans have advocated, but further liberalization is opposed by the bureaucracy. Although US holds the view that the Japanese economy can be stimulated by a substantial expansion of domestic consumption promoted through tax cuts and public spending, Japanese government and society fear that unless consumption is restrained, Japan will have a consumption-oriented American-style society symbolized by the credit card. This is something they do not desire. Almost every year since the slump began in Japan in 1991, the government has enacted stimulus packages embracing increase in public expenditure and tax cuts amounting to $ 85.6 billion in 1992, $ 172.9 billion in 1993, $ 145.7 billion in 1994, $ 380 billion in 1995 and $ 15.4 billion in 1997, but personal consumption has remained flat on account of fall in property prices, growing unemployment, loss of confidence in the banking system and uncertainty of the future. Americans believe that Japan will just keep muddling through. Japanese Model Economic
commentary by Analyst Ministers and politicians generally seem to think that political decisions should be divorced from moral considerations. So we find all governments giving licences to open liquor bars, tolerating violation of the law banning casinos and gambling dens, illicit manufacture of liquor etc.: Politicians are said to be protecting those engaged in such violations of the law making it impossible for the police to check such abuses. Political decisions no doubt must reflect political realities if they are to work. Marrying the two principles requires a compromise and those who actually have to take decisions are frequently forced to compromises, when they face the realities of political power. But there can be only a compromise, not a total surrender of moral principles and only the adoption of political expediency. Our previous leaders like Dudley Senanayake or the present Prime Minister Sirimavo Bandaranaike who governed twice previously, never gave in to total political expediency. Unfortunately such a total capitulation to political expediency occurred in 1983 when President Jayawardene refrained from declaring curfew during the program on the Tamils. During all previous riots the government of the day took its moral responsibility seriously and checked the marauding hooligans. The ethnic problem was to take a serious turn thereafter. So political expediency untempered by moral principles is most blameworthy. The duty of the state is to all the people and protection of the weak and helpless against the mighty and unscrupulous is the rationale for the very existence of the state. Consider the postal ‘strike’ just ended. It was naive to assume that negotiations alone would bring about a solution. Negotiations can succeed only it the two parties are willing to compromise. But there are certain principles that cannot be compromised. It is immoral for workers to refuse to work and yet claim wages merely because they attended the work place. On the other hand the government cannot call upon employees to work after office hours and deny them overtime merely because their salary exceeded a certain limit which is considered as a staff officer's salary elsewhere in government. Consider the issue of MPs' found guilty of corruption by a Presidential Commission of Inquiry. Moral considerations require that the MP should resign or be sacked. Political realities may require a down play of the action required. But there cannot be a total disregard of the moral dimension. Consider the suggestion to impose national conscription. It is desirable that every one should share the burden of war, a war that is being perpetuated by an unrelenting enemy. But the government should round up all the army deserters too. If the government cannot enforce the law with regard to deserters, can it successfully enforce conscription. Wont the conscripts also desert? The government has still to realise that an "effective state" which the World Bank calls for, requires the enforcement of the rule of leave. But there are so many violations of the law with impunity by politicians and criminals associating with them. The government politicians thinks he is above the law. He also thinks the police are under his authority and they should need his requests to protect criminals because they are his supporters. Democracy means much more than holding elections every five years. The rule of law is an essential feature of democracy. Those who attacked the journalist Iqbal Athas have at last been identified. The public thinks it is the pressure from the visiting U.S. government representatives that prompted the authorities to act. The Permanent Commission on Bribery and Corruption has been rendered ineffective. In U.S.A. any such interference with justice is a cause for impeachment of the President. No one is above the law and ministers and officials can exercise only powers given to them by the law. Institutions set up to enforce the law cannot be undermined. Economics and morality The success of the free enterprise economy in the west was originally due to the Puritan ethnic which preached that people should work hard, save money and share with others. Frugality of living and hard work with honest dealing were the values stressed. Even those who made enormous money, the Rockefellers, Carnegies, Mellons set up trusts to spend their wealth on the upliftment of the community. There seems to be a fundamental confusion in our society regarding the real basis and driving force for economic development. The confusion centres on the role of money in the economy. People confuse money with wealth, financial investment with productive investment. The individual can increase his wealth by investing in financial markets like the stock exchange. But wealth for the society is the sum total of real assets. The public has lost sight of the real factors that bring about economic growth. It is real economic activity that must be promoted financial activity is only a means to promote real activity. It is increased physical economic activities like agriculture, manufacturing, trade, services that promote growth and create jobs. The idea of making Colombo a regional financial centre is to look to promote financial activity without a corresponding real economic activity. Merchant capital, industrial capital and finance capital are three different things. The South East Asian crisis is an example of how the pursuit of speculative profits drove those economics to unnecessary heights. These economies had high rates of saving and high rates of investment. But corporate investors and banks borrowed even more funds from Western and Japanese banks and invested because of speculative profits that could be made in the property market and stock market. These markets rose because there was more money available to chase those assets — asset price inflation. The borrowers thought that the foreign funds were cheap because of the artificial holding down of their exchange rates which were pegged to the U.S. dollar. As the U.S. dollar strengthened as well. So loans were justified, investments were made because the value of the under-lying assets were going-up. As long as they rose in price, the investments were justified — until the bubble burst, first in the property market, them in the artificial foreign exchange market and lastly in the stock market. Political patronage The patron-client type of politics at the village level can be reduced only by a proper devolution of power to the village level. The lowest tier of local government is the pradeshiya sabha. It would appear that these local bodies are not having the power to run their affairs owing to encroachment by the central government bureaucracy and national level politicians. The Commission on reform of local government should go into the matter. If the central government has its own bureaucracy at the village level designated as grama sevakas, a proper devolution is not feasible. The central government should utilise the services of the local authority for any village level work. The same problem exists at the provincial level where there is the government agent or divisional secretary treading on the toes of the provincial council. Unless there is adequate decentralisation or devolution to local levels the pattern of patron-client politics will not cease. Nor will the community develop a sense of responsibility until the people have power to decide for themselves. Mistakes will be made and corruption there will be. But it is not likely to be more than under the present system. In any case self reliance can come only by their own efforts. Meanwhile the local schools and hospitals must be put in charge of the local authorities and the Ministry of Education divested of its power to manage through remote control. Equality of opportunity cannot be achieved by free education alone. The educational product offered in the rural schools is not the same as in the big Colombo schools. The educational product in the rural areas can be upgraded only by spending more money per capita on those schools and levying fees from the middle classes in the Colombo schools. Registration of Land
titles Share certificates are available to transfer financial rights. A low cost document of title will facilitate sale and purchase of land. It will not be necessary to have a lawyer to examine the title to see whether the seller has the right to sell and whether he infact owns the land or what are its boundaries? The Minister has said that there are over million plots of land without title deeds or plans. Land is the only asset of rural people. The absence of formal titles has meant that the assets of these people are outside the market economy. Formalised land titles also open the way to credit. Formal property rights have far reaching effects on the economy. In Japan, South Korea and Taiwan after the second world war there was a massive campaign to formalise the property of farmers. If the title registration scheme is implemented successfully there will be much activity in the rural area. Although there has been a 6.4% G.D.P. growth in 1997 according to the Central Bank report, yet the growth in paddy farming was only 8% and inadequate to offset the — 26% growth (negative) in 1996. Incomes of farmers are not improving fast enough. The Minister of Agriculture said there are about 150,000 land cases pending in courts and that many of these cases have been dragging for several years. Title registration will be a boon to all those affected except the lawyers. The lessons of postal
strike In other countries notice of strike must be given to the employer. Here we find even doctors and nurses leaving the sick to die and walking out on strike. It is the public and the poor in particular who suffer from such sudden strikes. Surely a law is required to regulate trade union action in the public sector. The private sector can be left to sort out their problems with their trade unions. But its time parliament examined the problems in the public sector and made recommendations for a new law governing trade unions there-in. The opposition must act with responsibility to solve this problem since it is a people's problem and they are the people's representatives. It is time to have a select committee to go into these problems and come up with a solution after hearing evidence from all parties. A trade dispute should be defined strictly to exclude frivolous demands like the removal of a head of department or a minister of questions involving public policy. Those who resort to intimidation of fellow workers within or outside the work place should be criminally liable irrespective of being trade union officials. No striker should be permitted to damage public property and in the event of such damage the trade union should be liable in civil law to make good the loss. Such claim should be a charge on the trade union funds on a court order. Will the government act or wait for the next strike and repeat the same mistakes? In India the Courts have sought to protect the public from unreasonable strikes by transport employees. In Andhra Pradesh the High Court passed strictures on employees of the transport board who had resorted to "an inhuman and inconsiderate strike" jeopardising the careers of over 10 lackhs school children when the annual examinations were going on. The court ordered the suspension of the strike and when the employees union stayed away dealt with them for contempt of court. The unions disclaimed giving a formal strike call. But there was evidence to the contrary and the ‘High Court’ initiated contempt action. This step was in addition to deduction of wages on the principle of "no work no pay" laid down by the Supreme Sourt. (The Hindu) its time our government took notice of how our democratic neighbour is handling the problem of inhuman strikes. Tourism: where we've gone wrong and
The first point to be made in that the service industries, of which tourism is foremost, will be gaining the importance in our economy. Given the small size of our domestic market, the vital strategic location of our island, the availability of an educated workforce and global trends towards service industries, there is no doubt that sectors such as tourism, telecommunication, offshore banking, financial services, computer software manufacture and shipping and aviation will be vital growth areas in the Sri Lanka economy of the future. A recent study shows that in the 21st century technological charges will enable global economies to produce the required industrial output with less than 20% of the present workforce. The futurologists say that we are approaching a world economy where there would be no smokestack industries and a class of workers who have only manual labour to sell will become redundant. Countries will have to contend with large populations whose labour is redundant. Management of leisure rather than management of work will become a major issue. We are already seeing the beginnings of this trend and the recent shocks to the Asian economies is only an early manifestation of things to come. They come as shocks to politicians and policy makers but the reality is that fundamental charges in the global economy are already taking place. There is no doubt that tourism has the potential to play a bigger role in our economy. It is a heartening fact that there is bipartisan agreement on this. I remember that it was Mrs. Sirima Bandaranaike who started this development in 1963. It was followed up by Mr. J.R.Jayewardene who took a personal interest in this subject as Minister of State and released tourism from controls which enabled a phenomenal growth in the late seventies. But it cannot be over emphasized that there must be discipline both in the public and private sectors if tourism is to flourish. All too often the war is cited as on excuse for slow growth when in fact the main reason is lack of planning, efficiency and discipline. To give you just one example, conditions have deteriorated so much at the Katunayake Airport that tourists are harassed on arrival. We must not forget that the tourist has spent a minimum of 12 hours inside the steel tube which we call an airplane. The bulk of our tourists are charter traffic from Europe and unless the frontier formalities, customs and transportation to the city are streamlined, we create a bad impression which will eventually affect the trade. As a frequent traveler I have seen that many of the immigration and customs personnel have not been trained. Today PR is a necessary skill for such officials, but it is conspicuous by its absence. Many of them do not have the requisite language skills. When I was Secretary, I made arrangements for some of these officials to be taken on observations tours of other countries so that they could see for themselves how courteously their business is conducted. Unfortunately these tours have been stopped. Though everyone turns a blind eye, the transportation from the airport appears to be in the hands of a "mafia" who pay no need to the police and the Airports Authority. Thousands of hardworking Sri Lankan maids are harassed and exploited when they reach their motherland and no one in authority, as well as the media, have the guts to stop this type of rampant indiscipline which is comparable only to that of some African and Latin American banana republics. It is a joke when the Ministry of Tourism talks about tourist development while not having the courage to stop this type of blatantly unlawful behavior. The state of some of the vehicles that have been passed as fit for tourist traffic have to be seen to be believed. It is a great pity that the highups who flit though the VIP lounge have no time to see the chaos outside the airport. Let me now turn to another aspect of our future - the emerging South Asian market. Recent studies have shown the growth of a large middle class in India and Pakistan which is a potential tourist market. One must remember that tourism in Singapore and Malaysia have grown largely because of the regional demand. The Indian middle class has been estimated to be in the region of 150 million. Till recently bureaucratic controls inhibited regional tourism. For instance the Reserve Bank of India restricted the allowance for foreign travel, even SAARC travel, which is absurd when one considers the disparities in the size of populations of India and Sri Lanka. Even SAARC has thought of reciprocity in preferential allocations for travel. Changes, however are afoot. India has announced that it will make the Indian rupee freely convertible in the near future. Such currency changes which are inevitable should increase the volume of traffic to Sri Lanka. It must be said that we are not making a concerted and serious effort to develop Indian leisure traffic. There are so many ad hoc efforts made by the Tourist Board but the expected results have not materialized largely due to lack of co-ordination. With the Taj and Oberoi groups, which are leading hoteliers in the region, much greater effort could be put in this direction. When I visit Bombay and Delhi there are many who want to know of the products available here particularly for leisure activities such as golf, tennis, yachting and horse riding. This information is sadly lacking. The policy decision to keep our embassies out of tourism promotion, particularly in India since we maintain missions in Delhi, Bombay and Madras, must be charged. All these missions should spearhead our promotion in India. As you know, each tourist category has its own preference . A characteristic of the Indian traffic is that they wish to buy household goods, electronic equipment, gold and gems. At one stage a duty free scheme was evolved under Minister Lalith Athulathmudali for this market. That too has been abandoned. My argument therefore is that much more needs to be done to lift tourism from the doldrums. The Tourist Board statistics regarding arrivals raise grave doubts. Unless we re-examine and reform our present procedures, another of our potential development areas will suffer irreparable damage. Stock Market Profit taking by local institutional and retail investors resulted in both indices registering significant declines during the holiday shortened three-day trading week. Though the market remained flat on the commencement of the week’s trading on Wednesday, widespread selling on Thursday in particular, resulted in the ASPI moving down 35.6 points or 4.58% while the SPI declined by 70.3 points or 5.80% WoW to close at 742.1 and 1,142.0 respectively. The ASPI lost 22.5 points or 2.89% and the SPI shed 51.8 points or 4.28% on Thursday alone. The Banking & Finance Sector, followed by the Plantation Sector, the driving force behind the recent market rally, led the net declines. The level of activity remained moderate this week with most of the activity continuing to be focussed on the plantation sector. The average turnover this week was Rs. 134.7 Mn, significantly down from the figure of Rs. 220.8 Mn last week. Overseas participation accounted for only 17% of three week’s turnover, while they remained net sellers in the market with a net outflow of Rs. 32.4 Mn in foreign funds being recorded. This was however, significantly lower than the net outflow of Rs. 94.9 Mn recorded last week. Although the market lost considerable ground this week due to wide spread profit taking the fundamentals remain strong while the valuations are even more attractive with the declines. As a result, these declines could be an ideal opportunity for investors to pick up selected stocks. Furthermore, there was renewed buying support evident in selected stocks during the latter part of Friday’s trading. This could be a precursor to another rally in the market when the current round of profit taking dries up. An article carried in the newspapers this weekend mentioned that the EPF would obtain the services of an international consultant to advice them on hiring a fund manager to manage their funds, which are now being invested in the equity market. The fund will gradually build up a portfolio with the aim of giving better returns to contributors to the EPF. It was also mentioned that the fund is expected to invest more aggressively in the coming weeks, especially in blue chips. This should give a further boost to the Colombo market. Our Buy recommendations at current levels include: Maskeliya Plantations, Tokyo Cement, Lanka Lubricants, Richard Pieris, Commercial Bank, Sampath Bank, JKH and Ceylon Brewery. Profits double in "excellent recovery'' at Aitken Spence Aitken Spence and Co. Ltd. has reported "an excellent recovery'' during the year ended March 31, 1998, with its profits better than doubling from a poor fiscal 1996/97, the company's chairman/CEO has reported to shareholders. Mr. R. Sivaratnam, the company's chairman and managing director, said he was delighted to report this performance driven "by the impressive results from our Maldivian hotels and the notable turnaround by our Sri Lankan tourism sector.'' He reported that their manufacturing sector profits had increased through a strong performance by the printing operation while cargo handling performed to expectation. Sivaratnam said that their profits did not include a significant contribution from the plantation sector since Elpitiya Plantations had absorbed the full cost of the labour wage increase during their period of management. Also, the results of Talawakelle Plantations had not been consolidated due to the different accounting periods. "Since these factors will not be effective in the year 1998/99, I am confident that this sector will contribute substantially to group profits,'' the chairman said. The year under review had seen turnover up 21% to Rs. 3.4 billion while the pre-tax profit had doubled to Rs. 244.6 million from Rs. 122.6 million a year earlier. A higher tax provision of Rs. 47 million (Rs. 28.7 million the previous year) left an after-tax profit of Rs. 197.7 million, up from Rs. 94 million a year earlier. After discounting minority interest of Rs. 32.4 million (Rs. 8.6 million in 1996/97), the net profit attributable to Aitken Spence was Rs. 165.2 million, up from Rs. 81.4 million a year earlier. With unappropriated profits of Rs. 211.6 million brought forward, a sum of Rs. 376.8 million was available for appropriation. The directors have not yet recommended a final dividend for fiscal 1997/98. 14-15% interest on Singer zero coupons? Blue chip Singer which has had a 120-year long presence in Sri Lanka is continuing its strategy of directly accessing the money market through retail investors - this time through the instrument of an unsecured 1-year zero coupon carrying a Rs. 100 million face value. Singer who some months ago issued commercial paper tapping the retail money market expects that investors can get a yield of between 14 to 15 percent on the zero coupons structured through MB Financial Services, Singer Chairman Hemaka Amarasuriya said. A company news release said that this is one of the few such notes to be issued by the corporate sector and will enable Singer to access the money market directly through retail investors enabling it to diversify its borrower platform. At the same time, it would participate in the development of the secondary market. Amarasuriya expected high net worth individuals to turn to the new instrument in the face of falling Treasury Bill rates. The note has been issued in smaller denominations to facilitate retailing. "It would provide the retail investors an opportunity of investing in a low risk high yielding debt security of Singer (Sri Lanka) Ltd.'', the news release said. The issue will open on May 20, Singer said. Great leap forward in Bata profits The Bata Shoe Company of Ceylon Ltd. has taken a what its Chairman Alan Kelly called a "major leap forward in profitability'' better than quadrupling its net profit for the year ended December 31, 1997, to Rs. 57 million from the previous year's dismal Rs. 11.8 million. Last year's profit, inclusive of Rs. 14.7 million gain on the sale of a residential property "no longer required by the company'', was a 10-year second best for Bata Ceylon. It was only bettered in 1993 when the bottom line read Rs. 62 million. Kelly who noted that the surge in profitability was achieved on the back of a modest 7% turnover increase attributed the welcome improvement to several factors. They included improved margins, contained overheads and halved interest to Rs. 21.3 million from the previous year's Rs. 42.6 million. Bank borrowings standing at Rs. 215.5 million at the end of 1996 had bottomed to Rs. 73.7 million a year later, the chairman said offering an example of the improved performance. Kelly said that the operating profit of Rs. 100 million was up 60% from a year earlier - admittedly a bad year for the company when it was able to declared only a 5% dividend to its shareholders. Last year's performance enabled a 20% pay out more in line with the dividends the company has been paying in recent years. Exports had also done well during the year under review with the export turnover rising over 50% to Rs. 65.2 million from the previous year's Rs. 42.5 million thanks to what Kelly called a "concerted attempt to increase export earnings.'' This had enabled Bata Exports (Private) Ltd. to distribute a Rs. 7.5 million tax-free dividend to the parent company during the year. "Your company will continue to explore every potential opportunity to boost exports despite facing stiff competition from suppliers in countries like Indonesia, Vietnam and China,'' Kelly said. The directors of the company are Messrs. A. Kelly (chairman), F. Garcia R (managing director), C.P. de Silva, H.D.S. Amarasuriya and J.P. Lee. Mr. J.E.P.A. de Silva has been appointed to the board of the Seylan Bank Ltd. with effect from April 24, the Colombo Stock Exchange reported. The CSE has also been notified that Mrs. D.D.E. Jayasinghe has resigned from the board of Metal Recyclers Colombo Ltd. Belgium names international trade counselor here
The appointment has been conveyed to the Sri Lanka High Commission in New Delhi by the Belgian Ambassador to India who is concurrently accredited to Colombo. In addition to her business interests, Mrs. Kotelawela is also an International Council Member of the Asia Society, New York, and its sole representative in Sri Lanka. Janashakthi Spearheads Road Safety Campaign Janashakhi General Insurance Company Ltd., heeded a call of the Deputy Minister of Defence Anuruddha Ratwatte to take a leadership role in the campaign for the road safety by helping the Colombo Municipal Council to install and maintain instruments that would help both pedestrian and vehicular traffic in the city of Colombo. "As an Insurance Company, Janashakthi had a dual role to play. It was a step towards reducing its own claim cost, but more importantly a tremendous step forward in protecting the lives and limbs especially of children and the aged, was what was foremost in our minds," a company Spokesman said.
The company has also undertaken the renovation, restoration and maintenance of the symbolic clock tower in the heart of Kandy and main-tenance of under passes. The under passes were constructed in Kandy, as part of the activities undertaken by the Kandy Municipal Council, to coincide with the 50th Independence of the country. CIMA finalists receive certificates by Navam Welihinda The convocation for the passed finalists and new members was held on May 14 at the BMICH. The chairman of the Ceylinco group, Lalith Kotelawala, was the chief guest. Kotelawala, before presenting the certificates, emphasised the importance of a good accountant in businesses today. He said that over the years he had learnt the value of sound financial advice and would never venture into a new business without consulting a qualified accountant. The president of CIMA Sri Lanka, S. Nallainathan, quoted a famous saying "It’s not what you get that makes you successful it’s what you’re continuing to do with what you’ve got" when he advised the new graduates on why a good accountant is needed to manage a company’s finances. He said that seeking CIMA qualifications continue to be a popular option among many career minded individuals. The number of students studying for CIMA in Sri Lanka alone exceed 5,500. The CIMA certificate is internationally acceptable for a professional or academic career and it provides soundly trained professionals essential for the growth of a nation. Over the past years CIMA Sri Lanka maintained a high standard in examination results, Nilam Jayasinghe, Vice President said. Sri Lanka is known to produce a world prize winner on every occasion, and this time was no exception, he said. |
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