.

Cross holdings invest extraordinary value in group
Boom year for Carsons' Malaysian oil palm plantation companies

The Carsons controlled plantation companies with Malaysian oil palm estates have had a good year ending March 31, 1998 reflecting the buoyancy in the palm oil industry despite the economic crisis in Malaysia which is the largest producer of this commodity.

Hari Selvanathan, chairman of the Bukit Darah Company Limited which owns 400.7 hectares of bearing oil palm said that their Malaysian companies are forging ahead with their plans to develop 10,000 hectares of oil palm in Central Kalimantan in Indonesia.

He said that "substantial progress" had been made in obtaining all necessary approvals from the relevant Lankan authorities for this project.

Selvanathan explained that the group's proposed shift to Indonesia comes at a time when that country is expected to take over the position of the world's leading palm oil producer from Malaysia by the turn of the century.

He said that this had positioned the group well to take advantage of these new developments in the region.

Selvanathan reported that notwithstanding the East Asian economic crisis, the prospects for the palm oil industry are bright due to a rapidly rising world market demand.

"We are therefore confident of the outcome of our proposed investment in Indonesia given these beneficial market conditions", he said.

Selvanathan also allayed fears of possible currency transfer difficulties in Malaysia which had recently imposed exchange control as a recovery measure for its economic problems. He said that the relevant authorities have clarified that their companies are at liberty to remit operational profits out of Malaysia by submitting a statement of profit declaration.

However, there will be restrictions on the repatriation of sales proceeds of capital assets held in ringgits for a period of 12 months from the date of disposal.

Various oil palm companies within the Carsons Group hold substantial interest in each other and in the parent company itself. They are also big investors in Carsons subsidiaries and associates.

These companies also have substantial holdings in the Ceylon Guardian Investment Trust Limited, the Ceylon Investment Company Limited and the Rubber Investment Trust which have extensive holdings of blue chips here including Sri Lanka incorporated companies with Malaysian plantations.

During the year under review the Bukit Darah plantation had increased production by 1.78% to 7,596 mt.

Carsons Management Services (Pvt) Limited, the managing agents of the company, said that 67% of the plantation's mature area comprising 269 hectares is more than 20 years old. As the optimum life of an oil palm is around 25 years, the company was mindful of replanting and a comprehensive replanting program is being drawn.

But this program will be reviewed annually taking into consideration the price factor, yields and other operational factors such as the availability of suitable skilled labour.

The price fetched for fresh fruit bunches had increased sharply during the latter part of the financial year with the net sales average (NSA) up 26.7% from the previous year. The NSA continues to remain high and is at present around RM 450 per mt.

The managers said that the Indonesian project also involves the construction of an oil mill for processing fresh fruit bunches and a bulking station for shipping the palm oil.

"The gestation period for an agricultural project of this nature is usually 4 to 6 years and it can be expected to generate returns only after this period," the managers said.

Bukit Darah earned a pre-tax profit of Rs.14.34 million on a turnover of Rs.45.6 million during the year under review and the post tax profit was Rs.7.6 million.

Carsons Management said that the oil palm industry was one of few sectors that had not been adversely affected by the regional economic crisis. In fact the crisis had turned to their advantage with the produce earning more ringgits to a mt. of palm oil sold. Such increases in ringgits revenue had influenced the Malaysian government to impose a "windfall levy" of RM 50 per mt. on all sales of palm oil above the price of RM 2,050/mt.

The Selinsing Company Limited with 442.6 hectares in bearing also performed better than the previous year with a pre-tax operating profit of Rs.40.7 million and an after tax profit of Rs.35.4 million.

The Shalimar (Malay) Estate Company Limited with an area of 304.5 hectares in bearing posted a Rs.17.2 million after tax profit.

The Indo-Malay Estates Limited with a plantation in bearing of 286.3 hectares made an after tax profit of Rs.20.6 million.

The Good Hope Company Limited with 252.6 hectares in bearing made an after tax profit of Rs.22.6 million.

These companies have relatively small issued capitals and have declared high dividends of 50% and above going up to 208.4% on the part of Shalimar.

The directors of the companies are drawn from the Carsons directorate and include Messrs. Hari and Mano Selvanathan, W. Unamboowe, I. Paulraj and some others who are also connected to the Carsons Group.

1998 GDP growth dipping below earlier projections

Sri Lanka's GDP in real terms will dip below the earlier projected levels this year according to the latest compilation of the Central Bank which placed the 9-month growth figure at 4.8% achieved in the face of adverse global market conditions.

The Central Bank had earlier projected a growth rate of over 5% for the year, down from 6.4 % in 1997.

The Central Bank said in a news release that GDP growth in the third quarter was 4.1% above the corresponding quarter a year earlier - a performance that "could be considered satisfactory" in the context of recessionary conditions worldwide.

The quarterly GDP statistics released by the Central Bank earlier indicated growth rates of 5.8% for the first quarter and 4.4% for the second quarter in 1998.

The bank said in a news release that in the third quarter, production in the manufacturing sector was up 7.1%, construction 9.4% and services 4.6%. The services sector contributed 59% to the overall growth with manufacturing and construction contributing 30% and 17% respectively.

The bank said that the contribution of the agriculture, mining and quarrying sectors was a negative 6% having received a setback in comparison to performance in last year's third quarter.

Diyawadana Nilame quits Watawala board

Mr. Neranjan P.D. Wijeyeratne has resigned from the board of directors of Watawala Plantations Limited with effect from December 22 and will be replaced by Mr. Nagarjuna Lankesh Wijeyeratne, the Colombo Stock Exchange announced.

Mr. Neranjan Wijeyeratne is the Diyawadana Nilame of the Dalada Maligawa.

There had been further changes in the board of Eden Hotel Limited with Mr. A.S. Lokuhetty being appointed with effect from December 15. Earlier, Mr. S. Nakada, director and Mr. K. A. Gunasena, his alternate, resigned from the Eden board with effect from December 5.

The Colombo Stock Exchange (CSE) also announced that Mr. R. Naftule has resigned from the board of Radiant Gems International Limited with effect from December 9.

Prof. J.W. Wickremasinghe, Chairman of the Sri Lanka Insurance Corporation, has been re-appointed to the board of Property Development Limited (PDL) with effect from December 21, CSE said. PDL are the owners of the Bank of Ceylon Headquarters building and is a quoted subsidiary of the bank.

British flooring firm helps keep Parquet afloat

Parquet (Ceylon) limited has succeeded in raising the Rs.20 million it desperately needed to continue in business from one of its biggest buyers - a British company - which is additionally taking up 22% of Parquet's equity.

Shareholders of the company have been informed by its Chairman, Mr. Singha Weerasekera, that Western Cork Limited (WCL) of Britain, with whom Parquet had been dealing for the past 10 years, has agreed to advance the Rs.20 million needed against purchases over the next 4 to 5 years.

Weerasekera said that WCL is one of its leading distributors of floor coverings in the United Kingdom and has agreed to purchase up to 60% of Parquet's capacity.

In his annual report for 1998, Weerasekera said that the Bank of Ceylon required an unsecured capital injection of Rs.20 million before agreeing to re-schedule the company's existing liabilities and provide it with the necessary working capital to enable it to continue in business.

The chairman said in his annual review that he was hoping to raise these funds through a "possible investor". However this had not materialised and he had approached WCL.

WCL has said that it wished to have a 22% holding of Parquet in consideration for these arrangements and had agreed to purchase 364,320 ten-rupee shares of the company at a price of Rs.4 per share.

"Needless to say, without the support of the WCL, the company will probably not continue in business", Weerasekera said.

He has told his shareholders that he had agreed in principle with WCL that he is prepared to sell the necessary 364,320 ordinary shares held by Singha Holdings (Pvt) Limited at the four rupee price "in order to ensure the survival of the company".

However, he has been advised to offer the other shareholders the same opportunity of selling to WCL at the four-rupee price if they wished to dispose of their holdings.

Parquet shareholders have therefore been told that WCL will place an order with their broker for the purchase of up to 364,320 shares of the company at a maximum price of Rs.4 per share on January 5. This order is to be kept open up to January 7 or until the order is filled, whichever takes place first.

"In the event the said order remains unfilled, I will dispose of up to 364,320 shares of Singha Holdings (Pvt) Limited or the quantity necessary to fill the shortfall", Weerasekera said.

Reckitts flying high

Reckitt & Colman of Ceylon Limited has substantially boosted both turnover and operating profits during the first 9 months of the current financial year ending September 30, 1998.

Turnover during the period under review at Rs.941.7 million was up from Rs.898.7 million a year earlier while the operating profit grew to Rs.122.6 million from Rs.96.1 million.

With an exceptional item of Rs.6 million and provision for tax of Rs.42.4 million (Rs.30.8 million a year earlier), the company had an after tax profit of Rs.86.2 million for the period under review, up from Rs.65.3 million a year earlier.

With unappropriated profits brought forward, Reckitts had Rs.131 million available for appropriation during the period under review. An interim dividend absorbing Rs.26.2 million of these funds has already been paid and the company had a balance of Rs.104.7 million available for appropriation as at September 30, 1998.

Reckitt & Colman has an issued share capital of Rs.131.2 million and reserves of Rs.442.1 million.

Increasing protectionism (anti-dumping measures) and unilateralism in world trade

by Kanes
Protectionism and unilateralism appear to be coming to the fore mainly in developed countries on account of the increasing diversity and competitiveness of developing country exports and the world economic recession. Both protectionism and unilateralism tend to obstruct the expansion of developing country exports and the acceleration of their economic growth, and belie the hopes of a better trading environment generated by the Uruguay Round and the setting up of the WTO.

Anti-Dumping Measures
Increasing competition to some industries in developed countries from exports of developing countries, some of which have recently devalued their currencies and are attempting to export their way out of current economic crisis and the growing economic recession the world over seem to have strengthened the protectionist tendencies in the U.S. and Europe. Protectionism in its latest phase has changed its form from higher tariffs and import quotas to anti-dumping duties on goods which are considered cheap. As most countries have reduced their tariff and import restrictions on industrial goods in successive rounds of GATT negotiations ending in the Uruguay Round and formally notified the world, they cannot raise duties or impose restrictions again without risking demands for compensation at the WTO or retaliation with higher tariffs by others. WTO rules, however, allow countries to impose anti-dumping duties on foreign goods which are sold cheaper than at home or below the cost of production when domestic producers of the importing country can show that they are being harmed.

Anti-dumping measures are generally opaque and flexible and can be taken on very flimsy grounds. The government of the importing country can initiate an investigation if only some - not all - domestic producers complain of injury; firms can prove injury by merely showing that their sales are declining because of increasing imports; and figures can be so manipulated to show that goods are being dumped as it is very difficult to make comparisons across borders. Investigations can be directed at specific firms and countries and they can be punished with different duties. Developing countries have complained that developed countries are using anti-dumping measures even when there is no proof of dumping or damage to their domestic industry, solely to protect their domestic manufacturers against foreign competition mainly from low-cost developing countries. They also question the methods used for calculating dumping measures and for determining injury to domestic industry. Thus, punitive tariffs to protect domestic industry are camouflaged as redress against unfair competition to win popular support.

Anti-dumping duties are both heavy and long lasting. They averaged 57 per cent in the U.S. and 29 per cent in Europe in the period 1991-1995; the duty in U.S. was as high as 454 per cent on super computers made by Japan's NEC in 1997. These punitive duties are reviewed only after five years and can even be extended. Apart from penalizing exporters - by tying them up until their case is settled and making them incur high legal fees, particularly in the U.S. - anti-dumping measures force other exporters to raise prices and curtail sales and deter them from competing effectively. They also encourage foreign and domestic producers to collude to raise prices. Some economists have estimated that the anti-dumping duties are generally twice as costly to the country as equivalent import tariffs because of the pro-cartel effect.

Those who advocate anti-dumping measures defend them as action to prevent 'predatory pricing/selling at prices below prices at home to undercut domestic producers and capture markets and raising prices thereafter to recoup their losses. Apart from the fact that predatory pricing is not recognized in WTO anti-dumping code or U.S. and European laws, "predators' cannot raise prices at a later stage as it would attract new competitors. It is further argued that anti-dumping provides a safety valve for countries that are otherwise liberalizing their markets. This argument ignores the fact that the WTO rules allow countries to use "safeguard measures" for temporary protection against a surge of imports provided compensation is paid. The fact that countries invariably resort to anti-dumping measures instead indicate that their real aim is to bring back protection by the backdoor and not to ease the adjustment for free trade.

U.S. and Europe
The most prominent country in anti-dumping measures is the Untied States which has launched 25 new cases up to October in 1998 as compared to 16 in the whole of 1997. Most of the cases are against cheap steel imports from Japan, Brazil and Russia, memory chips from Taiwan and machine tools, textiles, clothing, apple juice and others from several countries. The U.S. has already slapped anti- dumping duties of 12.64 per cent on Hyundai Electronics industry and 7.61 per cent on L.G. Semilon in South Korea for dumping memory chips and is proposing to impose 103 per cent duty on Taiwan's products. Other developed countries have followed the U.S. Canada is planning to take anti-dumping action against four steel exporting countries and the European Union is investigating 13 steel cases from South Korea to Slovania and threatening to take action on imports of chemicals, consumer electronics, textiles and forestry. It has already imposed punitive duties on magnetic discs from Japan, Taiwan and China and on electronic scales from Singapore. It failed to impose punitive duties on unbleached cotton textiles because of opposition from European users of the material. Australia leads the list in the number of anti-dumping cases launched and China heads the list of main targets as shown in the table.

Anti Dumping Cases 1997
Main Users Main Targets
Australia 42 China 31
European Union 41 South Korea 16
South Africa 23 Taiwan 16
United States 16 United States 15
Argentina 15 Germany 14
South Korea 15 Japan 12
Canada 14 Indonesia 09
India 13 India 07
Brazil 11 Britain 06
Source-WTO

There is increasing evidence that the U.S. is tending towards open protectionism gradually. The chief U.S. trade negotiator Chariene Barshefsky has stated recently that the growing trade deficit of U.S. estimated at about $300 billion in 1999 is "politically unsustainable". The U.S. authorities are in fact encouraging anti-dumping suits by undertaking to vet them faster. Asian countries therefore fear that as quotas under the Multi-Fibre Arrangement are phased out by 2005, American and European textile manufacturers will campaign for anti-dumping measures to defend their industries. Some have pointed out that the Smoot-Hawley tariff in the U.S. in the 1930s led to retaliatory measure by other countries and a collapse of world trade and expressed the fear that judging from the increasing number of anti- dumping measures taken by the U.S. in recent times, history might repeat itself.

A recent development is that the developing countries have now begun to hit back developed countries with anti-dumping measures of their own. Argentina, Brazil, Mexico and South Africa have launched several cases against the U.S. while China, South Korea, India and even Thailand and Indonesia in Asia have initiated several anti-dumping actions and India is establishing a special unit to cope with the increasing number of cases.

U.S. Unilateralism: Case of Korea
In addition to anti-dumping action, the U.S. is undermining the stability of the global trading system based on multilateralism by threatening to use Super 301 sanctions unilaterally on trading partners thereby arrogating to itself the role of prosecutor as well as judge and jury in trade disputes. When the Super 301 clause was introduced in 1988, there was international concern that it would threaten the success of the GATT/Uruguay Round. The U.S. however, vowed that Super 301 would be applied only in instances where no multilateral trade agreement existed. South Korea for instance, found that Super 301 figured in all its disputes with the U.S. as there was no effective mechanism to resolve trade disputes within the multilateral forum. GATT as a dispute resolving tool was slow and ineffective; its panel decisions, without legal force, were often ignored. As the U.S. was the largest market Korea was therefore forced to compromise. The U.S. however, tried to browbeat Korea even after the WTO was set up.

The U.S. brought pressure and threatened to use trade sanctions under Super 301 against South Korea in 1997 for not opening its market adequately for U.S. cars. It expressed its displeasure in October 1997 at the small share of U.S. cars in the Korean market and threatened to impose trade sanctions if Korea failed to remove trade barriers to the U.S. car sales within 18 months. U.S. demanded that Korea reduces its import duty on cars from 8 per cent to 2.5 per cent, changes the methods of taxing cars based on engine size, streamlines testing procedures for imported cars and changes consumer perception of foreign cars. Korea resented these demands that it changes its internal laws to accommodate imports from U.S. It pointed out that its tariff on cars were even lower than the European Union's, and the tariff on commercial vehicles was lower than that in the Untied States. It argued that the main reason why American cars were not selling in Korea was that they were too big in size and engine capacity for the narrow streets in the country. The U.S. however, was not convinced and persisted in its demands.

The Koreans warned the U.S. that its demands were a violation of the WTO code of conduct and therefore it would take the dispute to the WTO. Many Koreans believed that the U.S. was worried that Korea might become another Japan and challenge the U.S. car market. Korean companies like Hyundai, Daewoo and Kia had already established factories in several countries like India, Indonesia and Poland and were eroding the car market share of the U.S. Koreans were of the view that the real motive of the U.S. harassment of Korea was this fear of a new competitor in the car market and not so much the U.S. share of the Korean market. The dispute had not been settled by the time of the East Asian currency crisis.

U.S. Unilateralism: India
How fiercely the U.S. fights to protect and support the U.S. multinational in their search for new markets is best illustrated in the case of India. In November 1997, U.S. accused India of maintaining unnecessary barriers to imports and succeeded in the appointment of a WTO panel to decide whether India was breaking global trading rules. India had introduced quantitative restrictions on some 2,700 items about 40 years ago when it was experiencing balance of payments problems. It had been under pressure from the U.S. which felt that India's balance of payments situation was comfortable enough to phase out import restrictions earlier than the six-year period ending in 2003 originally envisaged by India at the WTO. India has been able to reach mutually agreed solutions following bilateral negotiations with the European Community, Switzerland, Canada, Australia, New Zealand and Japan but not with the U.S. which has adopted an intransigent position and introduced various elements that were unrelated to the question of elimination of import restrictions.

India had maintained that lifting of quantitative controls was possible within a reasonable time-frame keeping in mind the time needed by domestic industry for adjustment. The U.S. however, argue that India had misused the GATT clause which permits countries threatened with balance of payments to restrict imports. The U.S. wanted those products which were of interest to American exporters to be free of restrictions and further insisted that India should negotiate tariff bindings on those items or in other words cap the tariffs on those products also. The U.S. was thus behaving as if there was no WTO to monitor world trade and that it could bully, intimidate, threaten and use trade sanctions on developing countries unilaterally to protect its domestic industries and to support its transnational corporations in their search for new markets.

A Vision for 1999 and Beyond

By Analyst
What does the immediate future hold for us? The government feels it is doing well, perhaps because it is able to satisfy the World Bank and I.M.F. about macro-economic stability and their policy recommendations. It has brought down the budget deficit as a percentage of GDP,carried out privatisations of several large state owned enterprises and controlled inflation.

These are no mean achievements, but what of economic growth, of unemployment, of productivity, of our lack of competitiveness, our falling official reserves of foreign exchange? The government newspaper says growth rate will continue as in the last year but another newspaper quoting a report prepared at the instance of U.S.A.I.D. argues that our competitiveness is low. But it believes that growth rates have vindicated the strategy of openness to trade and investment and export led growth.

Another newspaper quotes the Governor of the Central Bank that the growth rate for 1998 has been downgraded to 4.5%. This is much lower than earlier government forecasts. Export growth rate has come down to about 5% from levels of 15 - 18% not so long ago. The Russian financial crisis has affected adversely our tea exports to that country. Our stock market has crashed to a level that prevailed about 10 years ago with no hope for recovery in the short term although the usual movements characteristic of stock markets continue and are often mistaken for more lasting surges by the investing public.

The problem with the government is that apart from pleasing the World Bank and IMF, it has no mind of its own. It has no clear vision of what it wants to achieve or the strategies to do so.

Although central planning has been discredited, it doesn't mean that all planning has to be abandoned. India still continues with its long term plans although it has accepted the free market system. Many developed countries, even Britain and U.S.A. have clear plans for theis economy, and for particular sectors of the economy. Any public utility in those countries have a clear plan for the future - be it water supply, electricity, railways, etc.

Tony Blair when he assumed office as Prime Minister talked of a'new Britain'. We have to decide what our goals are. How do we tackle the problem of youth unemployment - particularly of the university graduates? Various numbers are quoted as to how many graduates are unemployed - surely the first step is to ascertain the number of unemployed. It is necessary to ascertain their views and perspectives and plan how to solve the problem by creating new job opportunities. Its easy to pay-salaries for non-existent jobs as government teachers or Samurdhi animators. But such measures are no solutions. In fact, they are worse than the disease.

It will quiten the youth for a time but it is not productive work and imposes a social cost via higher budgetary deficits, inflation, general inefficiency and demoralisation of the youth. They have to be employed in socially productive jobs. If they have to be re-educated or retrained, then such tasks should be undertakers. Meanwhile, why continue to produce ever-increasing numbers of graduates if they can't be absorbed into productive jobs in keeping with their aspirations?

Modernisation
We need to modernise our economy as well as our polity. We need a flexible economy to adjust to the turbulance in the world economy we need to have flexible labour markets where the employer can hire and fire with much more freedom. The Termination of Employees Act will have to be repealed. If we don't provide flexibility then whole firms will have to close down instead of re-structuring and at least preserving the jobs of part of the labour force which is better. To provide an illusory job security by law is foolish indeed.

We also need to overhaul government pension schemes which are no longer viable. Non contributory pensions are not viable for the 600,000 odd government employees. The British introduced it when the numbers were small. The private provident fund schemes also need modification. Small firms should be exempted from the mandatory contributions to the EPF.

Good Governance
Good governance is a sine qua non for economic development. The state has an essential role to play, in maintaining law and order, providing infra-structure, etc. while safeguarding fundamental freedoms and democratic principles and procedures. We have only the facade of democracy. The President is bound by her oath of office to protect fundamental freedoms.

One of the charges in the abortive petition of impeachment against President Premadasa was the failure to protect fundamental freedoms of the citizens and interfering with the investigation of crimes by the police. President Clinton is being impeached not only for perjury but also for obstruction of justice. We see at first hand the obstruction of justice and failure to protect fundamental freedoms of the citizens of Wayamba in the run up to the Provincial Council elections.

We need to do away with the absolute legal immunities of the President under the constitution. We need constitutional reforms to make the President accountable to Parliament. We need a freedom of Information Act to give people the right to information from government agencies which helps in better policy formulation since the bureaucracy is not of the necessary calibre and there is more talent and knowledge outside the public service today. We need to modify the rules of debate in Parliament to permit criticism of the President.

De-politicisation of Public Institutions
Politicisation of government institutions has gone too far. We have now reached a stage where the ruling party can perpetuate itself in office using state institutions to do so, just as the communist parties did in the former Soviet Union and Eastern Europe. The ruling party would be very foolish to do so when the economy is facing a serious crisis. The economy will go downhill unless the government undertakes a large investment programme. But to do so it lacks income which it cannot raise by taxation.

If it borrows to finance such investment it will be faced with a serious Balance of Payments crisis in no time. It has no hope of attracting direct foreign investment. One hopes the Free Trade Treaty which is about to be signed with India, will give a fillip to foreign direct investment here by foreign investors both from India and elsewhere.

Fear of a crisis may not deter the government from resorting to anti-democratic acts such as we see presently in Wayamba. Those who exercise power not as trustees but for their personal benefit, do not like to give up power gracefully. Remember how after 1977, the leftists and their mob urged Prime Minister Sirimavo Bandaranaike not to resign.

The campaign of violence unleashed on the opposition by the ruling party with the passive acquiescence of the police shows that democracy is in danger. It is the duty of the government to maintain law and order and ensure free and fair elections. It is the duty of the Head of State who is also the Head of the government to protect fundamental freedoms spelt out in the constitution. Failure to do so would be an impeachable offence.

As for the IGP and police officers, they would be liable to be charged for misuse or abuse of office if they deliberately overlooked violence by the ruling party. Police officers are peace officers under the Police Ordinance.

A citizens group has submitted a report on how to de-politicise public institutions. They have recommended independent commissions for the police, the public service, etc., But their recommendations do not go far enough. There must be what lawyers call "sanctions" if any law is to be effective. Those who misuse or abuse power of office by acts of omission or commission should be punished.

But to punish we need to have an offence. Thereupon misusing or abusing public office should be made a statutory offence punishable with imprisonment. The Nolan Committee in Britain recommended that just such a statutory offence be created. Britain has a code of conduct for public officers called the Armstrong Memorandum which is enforced although it's only a convention.

Papua New Guinea has a code of conduct which is part of its constitution as Section 2. It is binding on all politicians like ministers as well as all bureaucrats holding public office. Anyone who violates it is guilty of misconduct and is to be tried by a tribunal - the Ombudsman Commission. We definitely need to enact a statutory code of conduct for our politicians and bureaucrats.

Electoral Reforms
Back in the beginning, America hoped it could do without political parties. It nonetheless, acquired them almost as soon as it was born. One group of men wanted the constitution adopted, the other did not. Result; a federalist party and an anti-federalist party. The founding fathers hated this blight on the harmony of the new republic just as many good people in our midst want to do away with political parties.

Yet, political parties are indispensable to organise political activity, to select candidates for office, to mobilise voters and to get legislation passed in parliament. Our political parties today are dreadful organisations little different from a band of brigands. They lack internal party democracy. But we must remember that a government cannot work without them. Parties are enabling mechanisms through which men rise to power. But they need to be regulated perhaps by an independent Elections Commission.

Under the first past the post system of election minorities, ethnic or religious or special interests, have to link themselves to one or the other of the big parties. Proportional representation has changed all that. It leads to coalition governments where minority parties exert too much pressure as we see today. PR has also weakened the link between an MP and his constituency. This is not necessarily bad since the prime job of an MP is to make laws, pass taxes and hold the executive accountable.

The public have a wrong conception of a national politician. His job is not to provide jobs or obtain funds to build the electorate. The Provincial Council will look after the needs of the electorates, provide the services of the government, plan and develop the province. So we need a smaller national parliament with large constituencies but where the first past, the post system of election is practised.

Our legislators also need technical guidance. They should seek the advice of professional people outside parliament when formulating new laws. There should be wider use of select committees and they should hold public sittings, taking opinions from eminent persons and experts in the field.

One way to balance the need to attract a variety of experienced people to parliament and to ensure that they remain honest would be to offer MPs two options. They can either be full time parliamentarians who can be offered the present high salaries and perks but be debarred from any outside jobs or be part time MPs who could retain outside employment, but be paid much less.

As the power of the government wanes, the opposition waxes. The top men in the bureaucracy are professional courtiers in the power game and good at the game because they are smart at detecting the ebb and flow of the tide of power.

Ethnic Problems
There is increasing evidence that the people want peace. But mere slogan shouting will not bring about peace. There is no evidence that the LTTE has weakened. Perhaps they have become stronger if they have acquired helicopters and aircraft. The unchallenged supremacy of the skies would then have been lost. However, unrealiable Prabhakaran has been, and however immoral it may be to talk to a convicted murderer there seems to be no alternative to negotiating with him if there is to be an end to the war.

A military solution aimed at destroying the LTTE does not seem feasible unless the armed forces can recruit another 20,000 men as stated by the new commander. Either we resort to military conscription, buy the military hardware and make an all-out effort or negotiate now.

Apart from the civil war in the north and east there are danger signals among the other minorities as well. Some people are campaigning vociferously to ban animal slaughter and interfere with the religious practices of the Muslims. Others attach the so-called unethical conversions by Christians although the philosopher Locke pointed out that anybody subject to force to become a Christian could always pretend to be one without actually accepting the religion. So could anybody who has been given any material inducement.

All the major world religions are missionary in nature as directed by their founders. The right to accept or reject a religion is a fundamental right. The state must guarantee the free practice of all religions. The concept of sin or evil is not the same in all religions. So any attempt to enforce a law to ban a sin as perceived by one religion is fraught with grave danger. Virtue enforced has no merit.

Laws that inhibit the free exercise of religion in public places would have to be justified by state interests. Even safety and health regulations will have to be tailored to interfere as little as possible with religious practice. It may not be necessary to go all the way to secularism since the Buddhist tradition is state patronage and protection. But official religious acts which are exclusively Buddhist must necessarily exclude others.

If national identity is equated with a race and religion, there is little hope for the unity of the country. Newspaper readers who contribute to the papers still lament the discrimination by the British colonists although the majority community has exercised power for fifty years.

The year 1999 could be a decisive year. It could either usher in peace or lead to the break up of this polity and bring economic decline in its wake.

S-Lon celebrates ISO 9002 certification

By Franklin R. Satyapalan
S-Lon has won the prestigious ISO 9002 certification from the Sri Lanka Standards Institution (SLSI), its manufacturers announced last week.

S-Lon Lanka (Pvt) Limited is a company belonging to the Maharaja Group and has been in the business of manufacturing plastic pipes and conduits for over 4 decades.

Speaking at a news conference to announce and celebrate the award, Maharaja Group Director S. Kapukotuwa said that the award recognised the quality manifest in all aspects of the production process covering operations, management systems and research and development.

"Our factory and quality assurance unit are all equipped with advanced state-of-the-art technology", Kapukotuwa said.

The ISO 9002 certificate was awarded by Mr. C.D.R.A. Jayawardena, Director General of the Sri Lanka Standards Institution and accepted on behalf of the company by its oldest employee, S. Henry Joseph Fonseka who has been with S-Lon for 33 years.

Kapukotuwa said that the award cemented the quality and trust acquired by their producti over a period of 4 decades. They were the country's pioneer PVC pipes and fittings manufacturer and had been piping water throughout the length and breadth of the country earning the trust of millions of domestic and industrial users.

S-Lon which employees a workforce of 400 claimed a market share of over 50% in Sri Lanka.

"We are the only domestic PVC pipes and fittings manufacturer with international connections with Georg Fischer Piping Systems Limited of Switzerland who manufacture large diameter PVC fittings and valves for cold water systems", a company spokesman said.

S-Long manufactures, markets and distributes PVC products and unplasticised PVC pipes and fittings for potable cold water, ground water, sewage, drainage, waste water, irrigation, gas and effluent systems and electrical and telecom conduiting.

Their product range also includes piping solvent cement, synthetic and water based adhesives and includes CP taps, nuts, bolts and flexible hoses.

The company said that quality is its top priority and this has made S-Lon the first choice for many major industrial projects in this country.

The recent Ericsson, NKT, Sierra and Nokia projects added to S-Lon's growing list of customers, the company said.

Asked whether their product would face problems as a result of the recent free trade agreement with India, Kapukotuwa said that they would lobby the trade and industrial chambers if there is a decision to remove the tariffs on the import of PVC pipes and fittings from India.

He also said that they had an export market in the Maldives whose requirements were relatively small. But they were looking at Middle Eastern and African markets given their international ISO 9002 certification.

Maharaja's group director Mr. U. Gunawardene welcomed the media and the guests and presented an audio visual on S-Lon products.

Mr. C.D.R.A. Jayawardena, Director General of the Sri Lanka Standards Institution explained the meaning and significance of ISO 9002 certification.,

S-Lon Factory Director Mr. R.R. Shanthacumar said that theirs was a team effort. When they realised the need to boost production and productivity as well as quality, all employees got together and participated in identifying areas where production could be improved.

"We visualised, we planned the work, we worked out the plan systematically with the cooperation of every department. Everybody contributed in some way to the improvement of our standard of production. We all came together as a team and teamwork played a key role in our work", Shanthacumar said.

He expressed his firm belief that the achievement of ISO 9002 will play a meaningful role in the development of the company's production.

Inflation going down, says Central Bank

The Colombo District Consumers' Price Index (CDCPI, base October 1996 to September 1997 = 100) computed by the Central Bank of Sri Lanka indicates a lower annual average inflation rate of 7.3 percent for the year 1998, slightly lower than 7.4 percent recorded in 1997.

Generally, improved supply of food items helped to decelerate price increases during the year. The point to point increase of the Index (December 1998 over December 1997) at 4 percent was substantially lower than 8.3 percent for December 1997"', a news release from the Central Bank said.

In December 1998 the CDCPI rose by 1.1 percent to reach 113.8 mainly due to the seasonal increases in food prices in that month. The sub index for food rose by 1.5 percent in December following a 4.9 percent increase in November. Prices of all varieties of rice, dried chillies, onions, potatoes, coconut and a few varieties of vegetables increased due to both supply factors and greater demand on account of the festival season. However, contrary to normal seasonal increases, prices of several food items such as vegetables, eggs, fish and lime declined. The sub index for liquor and tobacco group increased by 3.3 percent due to the full impact of higher taxation, the release said.

The Colombo Consumers' Price Index (CCPI base 1952 = 100) published by the Government Department of Statistics for the e month of December was 2336.6. This represents a monthly increase of 1.2 percent over the level of the previous month. Reflecting a similar trend to the Colombo District Consumer Price Index, the annual inflation for 1998 as measured by the CCPI at 9.4 percent was slightly below the correspondng figure for 1997 which was 9.6 percent, the Central Bank said.

According to the latest figures available for the Greater Colombo Consumers' Price Index (GCPI, base January to June 1989 = 100) which is an alternative price index computed by the Department of Census and Statistics, the annual average inflation was 7.3 percent in November compared with 7.4 percent in the previous month, the release said.

Rs. 80m. price mentioned for pending OTB deal

A Rs. 80 million price is mentioned in well informed circles as the likely price the Colombo branch of the Overseas Trust Bank of Hongkong which is selling out is likely to command in a deal that would be finalised early this year once pending approvals are finalised.

The John Keells Holdings and the Central Finance Groups will lead this acquisition with a respective equity share of 25 and 20 percent. The World Bank's soft loan affiliate, the International Finance Corporation (IFC) is also expected to be a participant in the buying consortium with a stake of about 15 percent.

Financial circles said that it is likely that the buyers will farm out the balance equity in small parcels to other commercial interests here with an ability to give the bank useful business but without board participation.

The restriction on big business group holdings in banks was increased from the earlier 15 percent to a maximum 25 percent around the middle of last year. This relaxation will help the pending deal.

``The approvals are still not through and are pending," one well informed business source said, ``but the takeover by the JKH - CF-led consortium is on the way to being approved. The wheels are moving and the various stages of this process are likely to completed sooner than later."

Central Finance's Chairman and CEO, Mr. Chandra Wijenaike, who had long served the Hatton National Bank as Deputy Chairman relinquished his position at HNB some months ago. Financial circles said that this was in preparation for the pending deal as directors of commercial banks are not legally permitted to serve on more than one bank board.

The OTB's Colombo office, long headed by Mr. C.J. Anthonis, a former general manager of the Bank of Ceylon, had built up a thriving business.

There are restrictions under the banking law of borrowings by stakeholders in banks they control and JKH and CF cannot enter in loan arrangements with OTB once they have significant shareholdings there. But both outfits can offer a bank in which they have an interest deposits, foreign exchange and other lucrative business.

``But while they will undoubtedly give an organisation in which they are interested some business, their interests demand that they keep much of it with the commercial banks with whom they have had long and mutually beneficial relations," one well informed source said. ``They are not likely to pull out existing business from their present bankers in a big way merely because they themselves are interested in a bank."

Kingsley focuses on China trade

The Minister of Internal and International Commerce and Food, Kingsley T. Wickramaratne stressed the opportunities for substantially uplifting existing trade and economic relations between Sri Lanka and China at the third annual general meeting of the Sri Lanka/China Business Co-operation Council held in Colombo recently.

The minister noted that Sino-Lanka trade which had grown from Rs.7 billion in 1993 to over Rs.10 billion last year was heavily in China's favour with the trade balance peaking to Rs.9 billion in 1997.

Lanka's imports from China averaged approximately 3% of total imports globally and encompassed a wide range of goods. However, exports to China were below 0.5% the total Lankan exports. They comprising mostly relatively small volumes of tea, rubber and precious stones together with a few non-traditional manufactures.

The minister said that this data demonstrated the possibilities of Sri Lanka maximising trade opportunities with China given China's major imports and enormous market for items such as soybeans, edible vegetable oil and seeds, sugar, plywood paper, textiles, garments and cotton piece goods.

Mr. Wickramaratne stressed the pressing need to address the recurring problem of widely disproportionate trade imbalance between the two countries by promoting joint ventures.

He said that fruitful discussions on this subject had been held at ministerial level both in Colombo and Beijing and specific areas for joint ventures had been identified.

Among these are carbon brushes, packaging material from straw, jute shopping bags, pencils, lubricants, gaskets, crucibles, electrical insulations and lightening arresters, rice wine etc.

"In time to come the finished products from these joint ventures could well be targeted to penetrate the wider South Asian SAARC market which consists of over 1 billion people in addition to supplying to the markets in Sri Lanka and China. The gains that would undoubtedly accrue from such joint venture endeavours cannot be exaggerated", he said.

Mr. Wickramaratne said that exploiting these possibilities would help create employment, generate income and enhance foreign exchange earnings.

He pointed out that the Beijing government had already taken concrete measures to expand Chinese direct investment here by providing an interest subsidised preferential credit (ISP credit) of RMB 150 million towards the establishment of joint ventures in selected areas.

These cover manufacture of food products, rubber products, electrodes, phosphate fertiliser, cardboard, rice bran oil etc.

The minister noted that the Ceylon Fisheries Corporation already appeared to have utilised a substantial amount of the ISP Credit in collaboration with a Chinese company. He urged members of the Sri Lanka/China Business Council to exploit "this valuable resource" in furthering the establishment of useful joint ventures in the two countries.

CIMA sponsors seminar on cost management developments

The Sri Lanka Division of the Chartered Institute of Management Accountants together with the Faculty of Management and Finance of the Colombo University will present a seminar on the latest developments in cost management on January 11 at the Colombo Hilton.

The chief speaker on this occasion will be Prof. Trevor Hopper, an eminent scholar who presently serves as the KPMG Peat Marwick Professor of Management Accounting & Head of the School of Accounting & Finance at the Victoria University in Manchester.

CIMA said in a news release that Prof. Hopper had carried out extensive research and had been exposed to shop-floor experiences with different types of companies operating in both the West and the East.

"He will present two papers and an overview relating to research findings in a number of cross sectional areas", the CIMA news release said.

It said that the main focus of the seminar will be the transferability of specific techniques now being developed into different environments specially in developing economies.

Prof. Hopper will review the overall development in Japanese cost management practices and will go on to bring in pertinent case studies from small and medium sized Japanese companies. The seminar will then contend as how world class manufacturing could be taken as a driving force of corporate strategy.

The CIMA news release further said that there has been some skepticism on the wisdom of transferring and transforming subsets of Japanese oriented cost management techniques and practices without due recognition to their interdependency on the total methodology. In view of this it is a must for all senior management who intend to use these new techniques, to participate in workshops of this nature in order to develop their thoughts before adopting these techniques within their companies.

"The seminar will be more workshop oriented and should be of interest to all sections of the economy be it manufacturing, trade or service industries", it said.

Prof. Hopper has been a visiting professor at some of the celebrated universities and is the joint editor of the British Accounting Review, and serves in the editorial boards of (1) Accounting, Auditing and Accountability Journal, (2) Accounting, Organisations and Society, (3) Management Accounting Research and (4) Critical Perspectives of Accounting.

He has also authored over 50 academic and professional publications including papers, books and research reports and is regarded as one of the prominent proponents of the social and organisational paradigm of management accounting.

This is the second seminar presented by the CIMA Sri Lanka Division within three months featuring an eminent academic scholar.

Mobitel buys $ 20 m.worth of Ericsson technology

Ericsson, the Swedish telecommunication specialist, has signed a contract with Mobitel to digitise its nationwide wireless network here.

Ericsson said in a news release that this "upgrade contract" is worth USD 20 million (SEK 155 million).

Currently there are 60,000 subscribers in Mobitel's AMPS network who will be moved to the digital network during the first quarter of 1999 with D-AMPS IS-136 (TDMS) technology provided by Ericsson.

Ericsson said that this modern technology provided "smooth and cost effective digital migration capability".

Mobitel is a consortium between the Australia based Telstra with a 60% stake and Sri Lanka Telecom holding the balance 40%.

Ericsson said that there are over 90 million subscribers using TDMA/AMPS network in over 100 countries worldwide and approximately 60 million of them already use the new digital service that is being provided here.

Ericsson is one of the world's leading providers of telecom services with its telecommunications solutions combine telcom and datacom technologies with the freedom of mobility for the user.

The company has over 100,000 employees in 140 countries worldwide.

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