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Standard Chartered downsizes on golden handshake terms

Standard Chartered Bank, one of the old established foreign banks in Colombo, has downsized staffing through a voluntary retirement scheme under which 47 of its 267-strong workforce including several executives have opted for early retirement on attractive golden handshake terms.

This downsizing follows a similar exercise by the Deutsch Bank in Colombo which reduced its staff strength recently. Deutsch too paid very attractive early retirement incentives.

The voluntary retirement scheme has cost the bank approximately Rs. 120 million which it believes it can recoup on emoluments and other savings in about three years. The compensation paid will be tax free as a uniform scheme applicable to all staff was offered and a tax directive to this effect has been obtained by the bank.

Well informed sources said that two department heads, 15 executive managers, 12 officers, 4 secretaries, 13 clerks and one minor employee had opted to take early retirement under the scheme.

The highest compensation paid has been Rs. 10 million to one head of department while clerical hands opting out have collected Rs. 8 lakhs on an average over and above their normal retirement benefits.

The voluntary retirement scheme (VRS) was offered to all staff by way of an internal memo signed by Ahmed Rehman, the bank's chief executive in Sri Lanka. It said that VRS will be of "mutual benefit to the bank and to any employee who may opt for retirement with a view to embarking on a new career supported by adequate financial resources."

The staff communication said that the bank had a unique financial opportunity to be able to offer an attractive scheme at this particular time. It made clear that the scheme was strictly non-negotiable and will not be extended beyond March 31.

Under the VRS, those accepting early retirement were offered a lump sum calculated on 2.5 months salary for every completed year of service plus half month's salary for every year to retirement. This was on top of EPF, gratuity according to the gratuity law and housing loans already taken to continue at the concessionary rate for up to one year from retirement under the scheme.

"This is purely a voluntary scheme and may be disregarded by any employee who is not interested in voluntary retirement," Rehman said.

Well informed sources said that while the bank may have to hire a few new employees to replace some of those who opted to leave, the downsizing was by and large a success.

"Some young employees who feel they can carve out a new career for themselves grabbed the opportunity of getting a nest egg they could never have built up through savings. Some young married women whose husbands are well employed found this an opportunity to stop working," one source said.

Other sources said that the union discouraged acceptance of the package hoping that a better offer would be made, while yet other sources who did not wish to be identified said that acceptances among the "target group" had not reached expectations.

Agriculture lag to negate garments growth
Export growth likely to be flat this year

An economic update by John Keells Stock Brokers projects flat export earnings for the current year on the basis of January figures now available.

The research report said that a fall in agricultural exports had resulted in export growth for January recording a moderate 1.5% growth year-on-year in US dollar terms and 12.2% in rupee terms.

"This trend conforms to our expectations of flat export earnings for 1999. Export earnings grew 2.1% in 1998 following an impressive 13% year-on-year growth in 1997", the report said.

It noted that agricultural exports which ranks number 2 in the country's export category, declined 26.4% in dollar terms year-on-year in January largely due to a drop in tea prices.

Tea, which fetched USD 2.38 per kg. last year averaged USD 1.80 per kg. a year later on account of over-supply conditions and the Russian crisis.

Industrial exports that constitute 76% of the total export earnings continued to be driven by growth from textiles and apparel. This grew 15.4% in January helping to boost total industrial exports to 9.6% year-on-year.

The John Keells research report said that this compared favourably with the 3.1% growth recorded by the industrial sector in 1998. Textiles and apparel continued to dominate the sector contributing 56.5% of January's total export earnings.

While the John Keells researchers were bullish on textiles and apparels continuing to perform given the availability of a full complement of quotas for 1999, they remained pessimistic about tea prices improving due to current over-supply conditions and weak buying by the CIS and Russia following the rouble crisis.

The report expected textiles and apparel to drive up industrial export growth by 10% in the current year but anticipated a sluggish agricultural export performance due not only to low tea prices but also a lack of bounce in rubber exports.

"Thus, despite the improvement in industrial exports, 1999 export earnings are likely to stagnate on falling agricultural revenues," the report said.

b
What's the ideal share portfolio?

What should an ideal share portfolio comprise of? Most share market players and investors have their own ideas but, we are sure, would like to be clued into what professional analysts think about the subject.

In its just-published Sri Lanka Market Strategy report, John Keells Stock Brokers, one of the country's leading brokerages have drawn up their "ideal portfolio" to device a core holding for investors.

The result: DFCC Bank, NDB, Sampath, JKH, Cold Stores, Royal Ceramics, Tobacco, Lanka Lubricants, Ceylon Grains, Aitken Spence, Dockyard and Hayleys.

The factors taken into consideration in reaching this conclusion were profitability and valuations, market capitalization and liquidity, management, sectoral exposure, risks, dividend prospects and wealth creation through EVA (earnings and value added) analysis.

"We have also adopted a criterion of risk diversification for sector exposure. For example, to get an exposure to tourism, we have preferred Aitken Spence and Co. instead of a pure (hotel) play like Ahungalle Hotels.

"On similar lines, JKH would be selected for plantation exposure instead of the smaller Maskeliya Plantations. In addition, the portfolio also includes defensives with higher yields to reduce the variability," the report said.

Balendra appointed to Bata board

Mr. Ken Balendra has been appointed a director of Bata Shoe Company of Ceylon Limited with effect from March 10, 1999, the company announced.

This appointment followed a recent meeting between Balendra and a senior executive of the Bata Shoe Organisation at Davos in Switzerland.

Balendra was one of the business leaders who accompanied President Chandrika Kumaratunga for the recent world economic summit in Davos.

In addition to Balendra, Messrs. Mr. C.P. de Silva who formerly headed the Aitken

Spence group and Hemaka Amarasuriya who leads the Singer group are Lankan members of the local Bata Ceylon board. The other directors are expatriates.

New production equipment will boost future sales - chairman
Bata Ceylon hikes dividend despite lower 1998 profit

Bata Shoe Com-pany of Ceylon Limited had achieved a marginal increase in sales turnover in 1998 and an after-tax profit that was down to Rs.44.2 million from Rs.57 million a year earlier.

The company's Chairman, A. Kelly, has told shareholders that other income earned in 1997 in-cluded a Rs.14.7 million profit on the disposal of real estate so that profit figures for 1997 and 1998 are not directly comparable.

Kelly said that the slight increase in turnover, up Rs.6 million to Rs.1.28 billion, was insufficient to fully absorb all increased expenditure - particularly cost of new production equipment - last year.

He said that the benefit of such expenses will be reflected on the turn-over of future years.

Improved asset management in the company had led to what the chairman called "a most significant reduction in the interest expenses" last year. These char-ges were down to Rs.6.7 million from the previous year's Rs.21.3 million.

This helped earn a pre-tax profit of Rs.74.2 million for 1998, down from Rs.93.5 million a year earlier. The group after-tax profit of Rs.44.2 million was down from Rs.57 million the previous year.

Bata's retail ex-pansion in 1998 had included the opening of "Big Box" concept stores in strategic locations. The newest of these is located in the Car-gills building in the Fort.

Kelly said that many existing stores have already been renovated or given a facelift both in outward appearance and in display format. This program will continue in 1999.

Bata which invested Rs.33.8 million last year on production equipment, primarily moulds for sole units and wholly injected footwear, plans to infuse grea-ter creativity into its product line. Kelly said that the capital expenditure signals the company's intention of staying ab-reast of fast changing consumer preferences.

He said that the Lankan consumer has been exposed to and seeks the latest international developments in footwear styling. The company plans to satisfy this demand.

1998 saw a decline in Bata's ex-port turnover to Rs.51.1 million from Rs.62.5 million the previous year. This was attributed to a downturn in the economies of two of their major export markets, Papua New Guinea and Fiji which resulted in a 40% decline in sales to those countries.

Kelly said that despite this fall in exports, their wholly owned subsidiary, Bata Exports (Pvt) Ltd, had paid the parent company Rs.7.5 million in dividends. He said that they would continue to explore new export opportunities despite stiffer competition from China and other lower labour cost producers in South East Asia.

The company has declared a final dividend of 15% on top of an interim 7.5%. This will give shareholders a 22.5% re-turn absorbing Rs. 27.42 million. This is 2.5% more than the 1998 pay out.

The directors of the company are: Messrs. A. Kelly (Chairman), F. Gar-cia R. (Managing Director - resigned 29.5.98), R.R. Sen-oner (Managing Director - appointed 29.5.98), C.P. de Silva, H.D.S. Amar-asuriya, J.P. Lee and K. Balendra (appoin-ted 10.5.99).

The East Asian crisis and the IMF

By Kanes
The East Asian crisis which really began as a Thai currency crisis in July 1997 soon escalated to a massive economic and political calamity across the region, devastating economies, overthrowing established governments and triggering tidal waves which spread as far as Russia, Brazil, Japan and the West, contributing to a world economic recession. The crisis was not caused by poor economic management or crony capitalism. The macro-economic fundamentals of the East Asian economies were quite sound - high economic growth, low inflation, budget surpluses or small deficits, substantial domestic savings and expanding exports - and they were held by the IMF as models for the other developing countries. If crony capitalism in the form of government - business collusion and state intervention discouraged market forces, it would be difficult to understand how Japan, South Korea, Taiwan and other East Asian economies were able to grow so rapidly - South Korea at an average annual rate of 1O per cent in 1981-1995 and Taiwan at 7-8 per cent in the same period. Those who wrote and spoke of the East Asian miracle were eager to emphasize the role of market forces but not that of the interventionist state which played a key role in making the miracle. Even today, the largest of the companies in these countries remain under state ownership: Pohan Iron and Steel Company in South Korea, Singapore Airlines in Singapore and Mass Transit Railway Corporation in Hong Kong.

Volatile Capital Movements

The East Asian crisis was caused mainly by the volatile movements of speculative capital, particularly hedge funds, and the premature and hasty liberalization of the financial sector which made them possible. Low labour costs, depreciating exchange rate, fiscal stability and high domestic savings combined with the open-door policy attracted substantial foreign investment to East Asia, but its own financial market

lacked an adequate regulatory framework and was too weak to integrate with the global market - ill-equipped to make efficient use of the capital inflows and unable to withstand the shocks of volatile capital movements. The open-door policy allowed hedge funds and others to make portfolio equity investments in their stock exchanges for higher return and permitted domestic banks and firms to borrow foreign funds freely from foreign banks. East Asian countries were "flooded" with so much foreign funds that they lulled the authorities to adopt lax policies, which did not encourage more efficient use of capital. This resulted in a substantial part of the funds being channelled to stock and real estate speculation causing a boom in stock and property markets: for example, Thailand has about 85O,OOO unsold housing units and Taiwan about 9OO,OOO.

Foreign banks had lent so much to East Asia that by the middle of 1997 there were about $ 274 billion of international bank loans outstanding to borrowers in five countries: Indonesia, Malaysia, Philippines, Thailand and South Korea. of this amount, about $ 175 billion were short-term, maturing in less than one year, and this exceeded the combined liquid foreign exchange reserves of about $ 1OO billion of the five countries. The excessive short-term foreign debts in relation to foreign reserves combined with the appreciating exchange rates resulting from the dollar peg, slow growth of exports, decline in world demand for personal computers and rising labour costs, alarmed the foreign banks and made them reduce or recall their loans. To make matters worse, when the IMF presented austere and deflationary policies - bank closures, high interest rates and public spending cuts, the portfolio investors too panicked and sold their shares and repatriated the proceeds in dollars. Foreign portfolio investors withdrew $ 28 billion and foreign bankers $ 77 billion in 1997 making a reverse capital flow of $ 1O5 billion - equal to 11 per cent of the pre-crisis GDP of the five countries. No economy could have withstood such a large and sudden shock. The inevitable results were currency depreciation of 3O to 7O per cent, stock and property markets crash of over 5O per cent, bankruptcy of thousands of companies, loans defaults and $ 1 trillion of nonperforming loans and unemployment of about 1O million. After a decade or more of dazzling 1O per cent growth rates, economies have contracted by as much as 18 per cent in 1998. In Indonesia alone, per capita GNP fell from $ 3O38 to about $ 6OO with the economy shrinking by 18 per cent in 1998, currency depreciating by 8O per cent, stock market falling by 3O per cent, unemployment reaching 15 per cent of the labour force and poverty shooting up by as many as 6 million people.

The former Prime Minster of Singapore - Lee Kuan Yew - summarized the situation in East Asia, in an interview with the Newsweek of December 1,1998 as follows:

"From their (East Asian countries) point of view they didn't do that much wrong. They didn't cheat or rob anybody. They simply borrowed foreign money, which they invested wrongly. The punishment was out of all proportions to their crime; and they are in a state of shock. It will take some time to get the balance and perspective right."

International Monetary Fund

The currency crisis in East Asia was made into an economic recession, strangely enough, by the International Monetary Fund. The crisis was essentially a banking crisis and not one caused by the government through excessive deficit financing and state intervention. The crisis could have been nipped in the bud if the domestic banks were assisted by postponement and rescheduling of their foreign debts, but the IMF wrongly diagnosed it as an economic crisis caused by excess demand and directed the countries to deflate their economies by fiscal and monetary squeeze. As Professor Jeffrey Sachs of Harvard who describes the IMF as the "Typhoid Mary of emerging markets", points out: "When the IMF panicked - ostentatiously declaring that Asia needed drastic financial surgery such as immediate and widespread bank closures, astronomical interest rates and drastic fiscal cuts - the investors panicked right alongside". The deflationary measures, by reducing aggregate demand converted the currency crisis into an economic recession and created social unrest.

When social unrest resulted in bloody violence, overthrow of established governments and political instability, wisdom dawned on the IMF to reverse its stereotype policies and prescribe instead expansionary policies and restore welfare benefits. At the beginning, in 1997, Indonesia, Thailand and South Korea were forced to achieve budget surpluses of 1 to 2 per cent of GDP but within a few months, in early 1998, they were permitted to have budget deficits up to 3 per cent of GDP. This, however, was too late and too little to arrest the recession, which had set in. The IMF's stabilization programme of currency depreciation, high interest rates and closure of banks was designed to win the confidence of foreign investors and lure back foreign funds, but it not only failed to achieve this objective but also deflated and shrank the economies throwing millions out of employment. When it gave priority to win foreign investors' confidence, it ignored the effect on high interest rates on domestic business - lower sales, fall in asset values, insolvency and bankruptcy - as a result of shrinkage in aggregate demand. Even if high interest could attract foreign funds, it failed to realize, it would be at the expense of domestic solvency. Sachs refers to "poor advice from Washington, which tended to exacerbate panic and economic contraction".

Strangely enough, George Soros too blames the IMF for the recession: "... the IMF is now a part of the problem, not part of the solution. Its mission is to preserve the international financial system, and its policies are designed to enable the country that's in trouble to service its international obligations. Therefore, it always advocates high interest rates, pushing the county into recession."

Some doubts have been created in Asia whether the IMF really wanted to save the region from an economic recession. These doubts arose when the US and the IMF opposed the Japanese proposal to set up an Asian Monetary Fund of $ 100 billion designed to stabilize Asian currencies against speculative attacks: Japan, China, Taiwan, Hong Kong and Singapore were to contribute most of the capital of the fund and the weaker countries the balance. This proposal was made in September 1997 at the annual meeting of the IMF in Hong Kong. If the Asian Monetary Fund had been established it might have prevented the drastic fall in currency values and allowed the countries to restructure their banking sector at low cost in terms of national output and employment. The US and IMF opposed this sound proposal as they feared that it would offer assistance under softer conditions and undermine the authroity of the IMF. In addition, by excluding the US from the Asian Monetary Fund, it created concern that the US would lose economic leadership in Asia which US considered was essential to prevent regionalism and protectionism which threaten US interests.

Double Standards

Many Asian analysts have also criticized the IMF and the US for applying double standards. Both parties advised the East Asian countries the virtues of a free market and to allow weaker firms to fail as required by market discipline and to raise interest rates. They opposed bailout of weak firms and banks as Indonesia, Thailand and South Korea had done at the beginning; and it was at their request that this process has been slowed down. In the US, on the other hand, the Federal Reserve Bank orchestrated a rescue operation in September 1998 to bail out one of its biggest hedge funds - the Long-Term Capital Management - which was crippled with debts of over $ 3 billion and lowered interest rates. It was all right for the US to bail out inefficient firms and lower interest rates but wrong for the East Asian developing countries to bail out what they consider as their strategic enterprises and lower interest rates. Market discipline is for others, not the US!

Asian critics also contrast the harsh treatment meted out to domestic banks (borrowers) and the generous treatment given to foreign banks (lenders). The IMF was instrumental in closing several weak banks - which went bankrupt during the crisis - and restricting their credit; in addition its monetary squeeze by reducing aggregate demand reduced bank business and profits and saddled the banks with millions of dollars of bad debts. Thus, almost all major banks in Indonesia, Thailand and South Korea suffered losses in 1998 while their bad loans are preventing them from conducting their normal lending operations. Domestic banks, further are persuaded by the IMF to form partnership with foreign banks or allow them to purchase them outright. In South Korea, for example, Korea's First Bank and Seoul Bank have been purchased partly by foreign banks while the Bangkok Investment in Thailand and Panin Bank and Nisp Bank in Indonesia too have brought in foreign partners. This is a repetition of the Mexican experience where the IMF's reforms led to the transfer of about 20 per cent of the Mexican banking system to foreign ownership. On the other hand, the foreign banks, which lent to other banks have suffered little. Although a part of their loans remain unpaid, the IMF has rescheduled their repayments; thus, their money is not lost. In fact, some argue that the IMF creates a moral hazard; the knowledge that the IMF will in some way bail them out, tends to make the foreign banks continue their reckless lending to emerging markets as before.

Similar criticism is made of the G7's proposal to set up a $ 9O billion dollar fund "to help protect vulnerable but essentially healthy nations" from currency and stock market speculation. It is expected to be a precautionary fund to be established under the IMF; its underlying objective is to send a clear message to speculators that they may be taking big risks if they (short) sell a nation's currency. Critics point out that in practice, however, the fund will entice speculators to persist in their raids on national currencies.

The fund, it is argued, is like a "safety net" for speculators. If for instance, central banks in Asia were compelled to default on their forward foreign exchange contracts, by vainly attempting to prop up their currencies, the fund would enable foreign banks and other financial institutions to collect their loans. The money to bail out speculators would be readily available and accessible well in advance of a currency crisis.

It is also a widely held view that both the IMF and the World Bank generally tend to be sympathetic and less harsh in their prescriptions, to countries which they and the US favour and support politically. The World Bank, for instance, has recently admitted that it turned a blind eye to the tottering financial system, widespread corruption and social unrest in Indonesia during the last years of President Suharto's rule. An internal report of the Bank states that the bank staff and managers were aware of the country's problems but continued to praise the country's economic performance. Had the World Bank been honest and spotlighted the country's problems and prescribed remedial measures, perhaps the crisis in Indonesia might have been averted or reduced in its severity. It is likely that the IMF too adopted a similar attitude to Suharto's Indonesia and allowed the crisis to develop unchecked.

Why Not Controls?

Some Asian analysts have raised the question why currency controls were not used to tackle the crisis. Currency controls, they argue, could have saved the foreign exchange reserves for paying for imports and servicing foreign debt rather than wasting them to fight against speculators. They point to China where currency controls have protected the economy from speculators but not discouraged the inflow of foreign capital. In fact the first deputy managing director of the IMF - Stanley Fischer - stated "Controls... provide a breathing space to undertake reforms". The same views were echoed by the chief economist of the World Bank - Joseph Stiglitz - who recognized the risks of freeing fragile financial markets in developing countries and believed that mild controls could reduce incentives for risking lending and that opening the economy to foreign banks may cause excessive competition, reduce bank profits and create instability.

The IMF is, however, opposed to any type of currency controls. Perhaps this is because currency controls make it difficult for foreign lenders/investors to withdraw their loans and investments. IMF probably feared that if foreign banks/investors could not collect on loans/investments in crisis-hit countries, then they might withdraw their funds from other developing countries and put them in difficulties too. Although the countries - Indonesia, Thailand and South Korea - refrained from controls on IMF's advice, it did not prevent the foreign bankers and investors pulling out their money from other countries including Russia and Brazil. It is also strange that the IMF with all its power and influence, could not persuade the foreign banks not to pull out all their funds at once but to phase them out so as not to strain the fragile economies.

Some Asians, including the Malaysian Prime Minister, believe that the IMF prescribed deflation and prevented controls in order to facilitate foreign takeovers of local assets in East Asia. The drastic fall in property prices and the need of firms for funds have whetted the appetite of foreign investors to own such properties and to open up new markets. Already, several domestic firms have been purchased by foreign firms. Foreign takeover of national assets, however, is being strongly resisted in the crisis-stricken countries.

Development and the Cultural Crisis

By Analyst
We are a plural society with several cultures although the Sinhala Buddhist culture is dominant, as often pointed out by its champions. But Sinhala Buddhist culture is not an integrated culture today.

A homogeneous integrated culture has all its parts articulated by the same basic value. The dominant aspect of a unified culture will permeate not only its philosophy and religion but its ethics and law as well.

But the law which governs society was enacted by the colonial rulers and it has not changed much. The principles underlying the legal system have not changed at all even when society has changed dramatically. The ethics are also basically those derived from western tradition.

The basic value and foundation of Sinhala Buddhist culture is of course Theravada Buddhism as in Laos, Cambodia and Thailand. Buddhism is a world religion which proclaimed compassion for all living beings and not only for any single tribe or nation. As the Rock Edict of King Asoka stated all men are my children. Just as I seek the welfare and happiness of my own children in this world and the next. I seek the same things for all men."

Buddhism as a philosophy and a religion is against the mere satisfaction of the senses as the be-all and end-all of man's existence. It denies the truth of the perceptions derived from the senses, which it considers as illusions. It regards the world of the senses as false values or at best unimportant and subordinate. Buddhism preaches the extinction of craving not the satisfaction of the desires or cravings. The ethics derived is not relative. Sensory pleasures are treated as utterly irrelevant or as an illusion.

Nationalism

But with the revival of Buddhism in the last century religious emotion became inter twined with Sinhala nationalism. Nationalism is basically a pernicious phenomenon derived from the west. It worships the collective power of the nation, almost deifies the nation and the nation in this case did not encompass all the people, leaving out significant ethnic and religious minorities.

Nationalism when combined with religious emotion, becomes a deadly cocktail. A distinction is drawn between "we" and "they" and they are considered as the enemy who has taken unfair advantage of "us". The wars of the past, the pre-modern age of kings and queens were essentially dynastic wars and war to them was more like a sport for which they could not expend too much wealth or sacrifice too many lives, given the size of the economy and the low incomes of the people.

So, these wars were not inflamed by mass emotions like the wars in the modern age. Nationalism was essentially created by the intelligentsia. They distorted history by casting the wars between the ancient kings against the South Indian invaders in a nationalist mould in order to project history and seek continuity for Sinhala Buddhist nationalism.

Buddhism a world religion which preached universal compassion thus became the hand maid of nationalism, with compassion being confined to one's ethnic and religious compatriots. Some of the Buddhist intellectuals also saw value in Marxism, which is a materialist philosophy, denying idealism as a fiction. Marxism stressed economic factors rather than the spiritual factors for the liberation of mankind.

Some intellectuals even saw some affinities between Buddhism and Marxism although the latter treated religion as the opium of the masses. To them moral and ethical values were relative and the end justifies the means. Any means fair or foul could be employed to further the course of history which was moving towards socialism and the victory of the working class over the capitalists.

Even some Buddhist monks became Communists, although the Communists were destroyers and quite willing to resort to violence in ushering in the revolution. They believed in the class war and imbued the trade unions and the working class with this concept. They have thereby undermined the spiritual values on which Buddhism like other religions, are based.

The spiritual values expounded by the traditional Buddhist religion and culture were thereby eroded, particularly among the younger generation. We saw Pol Potism emerge as the value system of the JVP in 1971. Although their revolt was put down, it didn't take even twenty years for the same force to re-emerge and stage a similar revolt in 1988-89.

They used the divisiveness in society, particularly the class distinction between the upper class which was English educated and the others who were vernacular educated, to stir up class hatred similar to what S.W.R.D. did in 1956.

Any society must take pains over the education of its elite. The SLFP enforced an interior education (although free) on the poor while educating the children of the English educated parents in English. Swabasha could not provide an equally good modern education required for a modern state.

Disintegration of Culture

We are living and observing the disintegration of the cultures in our society both the Buddhist nationalist culture as well as the secular western oriented culture of democracy and human rights. If we cannot stop it, we can at least try to understand its nature, its causes and consequences.

Development theory used to argue that modernisation cannot take place until the traditional culture is eroded. Western countries were looked upon as models for the developing countries. They had controlled poverty and inequality and established democracy.

Sociologists argued that there were certain features in traditional cultures which had to change before industrialisation and development could take place. Some said there should be greater differentiation of roles in society as the division of labour spread from the economic to the social sphere.

Next was the diffusion of rational norms in decision making by the individual in society. People will have to perceive that the circumstances surrounding them can be changed by human effort. If religious belief involves fatalism, then religion would be an obstacle to development. The sum total of the theory was that traditional societies will gradually eliminate their economic, political and cultural institutions and values, replacing them with modern ones.

The modernisation theory cannot explain satisfactorily the disintegration in culture that we are now witnessing in our country. It is not only the traditional culture that is falling apart. Even the Western oriented political culture and democratic institutions are also collapsing.

Oswald Spengler pointed out that each culture is mortal and that having reached maturity, it begins to decline. The end of this decline is irretrievable collapse of the culture and society in question.

Just look at how treasure hunters are breaking open statues of the Buddha, smashing the head and prising open the body in search of treasure. Obviously these statues are not being regarded as sacred. Shortly after 1956 every roadside bo tree was converted into a shrine and Buddha statues placed for worship. Arnold Toynbee pointed out that when a religion becomes a state religion, religion becomes a conservative force.

The essence of the crisis consists in the progressive devaluation of the ethics and norms of the law. Moral precepts have ceased to affect human conduct. Rude power and fraud are the only controlling power in human relationships. When Adam Smith talked of the pursuit of self-interest, he never thought people would dispense with all moral restraints on their conduct.

Some people blame the open economy introduced in 1977, for the break-down in moral values. Human beings function at different levels and moral and religious values should regulate all human activity, economic, political and social. But religion and ethics have ceased to be of any importance. Consumerism has become the religion.

Since moral values are looked upon as relative, it is inevitable that over time people become cynical about them. Fear of hell no longer constrains them. If the pleasure and happiness arising from the senses is all there is, then its inevitable that everyone will be hedonistic.

Decline in Moral values

But everyone cannot satisfy his desire and appetites as the amount of such sensory values is limited. Hence there is a clash of individuals and groups who pursue their material and sensual appetites.

Recently there was wanton murder of a whole family in Hokandara. The motivation of the killer, who was an illicit distiller was to acquire the land which the victim owned and which he refused to sell. But the man was not to be put off. He would acquire it by hook or by crook. It is the same attitude displayed in the Wayamba election - win by hook or by crook.

The moral commandment says "thou shall not covert thy neighbour's goods." But when these moral values have no binding force, the struggle is bound to become ever sharper and more intensive.

The ground for the use of force is particularly conducive owing to the on-going war. There are said to be over fifteen thousand army deserters who have decamped with their arms and ammunition. They are unemployed and lack a source of income. They can and do offer their services as contract killers.

There are also the illegal casino owners, smugglers, boot leggers who flourish with the patronage of the politician and the policeman. So we have the emergence of brute force as the arbiter of the struggle for power, wealth and pleasure.

There are no persons or groups who can give the moral leadership and draw attention to the spiritual values. No religious man can oppose peace and urge war in the name of his tribe or race without undermining the entire moral environment. The Buddhist monks are unable to give moral leadership. If killing the enemy can be justified in war, its difficult to prevent people extending it to their personal enemies.

Political philosophers including Machiavelli all have warned that policemen alone cannot enforce law and maintain orders. They realised the need for additional controls of religion and a moral code. The priest, playing upon the fear of hell, must supplement the police and the prison. But religion as a mere ceremonial adjunct will not move people to be moral, unless that religion has some value which will bind its adherents.

If Buddhism were to achieve this, the monks will have to be very spiritually enlightened persons who will set an example by practice and not merely by precept. As it is, they have forfeited their social efficacy and compassion for all living beings has been supplanted by hatred and antagonism of man for man, of class for class, of race for race.

As a result, might has become right. There are still isolated appeals to 'public opinion' or to moral values. But when uttered by politicians in power, however high they are, they are only smoke screens, masking their egotistical aspirations and desire for power.

The Minister for the Media vows to protect journalists conveniently forgetting that a well known editor who was attacked not once but on two different occasions separated in time, is still waiting for justice to be enforced.

TV violence

In this environment of moral decay, comes television and videos. A few years ago a two year old toddler - James Bulger was killed by two ten year olds. There was a wave of revulsion in Britain and the popular view was that the two boys had seen a violent video called "Child's Play 3".

We have no laws at all about videos and video parlours. Television shows and videos which portray crime and violence have an effect on real life in society. Research studies have shown that there is a correlation between the amount of TV and video violence watched and aggression among the 8 year olds.

There was also a correlation between watching violence at eight years and aggressiveness at 19. Early aggression predicts late aggression and exposure to media violence correlates with early aggression. There is also the sexual permisiveness of the west portrayed in western films. Censorship of erotic scenes is necessary whatever those who argue for the artistic expression may have to say.

Pornographic books and magazines and blue films are always too freely available. Whatever the arguments for economic liberalism, that is for freedom in economic activities, nobody in the west argues for social liberalism with the same forces. In the west there are controls on what is regarded as socially damaging. We too have enacted laws to control activities harmful to society. But our state is unable to enforce such laws.

Perhaps the most alarming feature is the decline in the family. Aristotle said the health of a society can be judged from the health of the institution of the family. The migration of women to the Middle East as housemaids has led to the break up of many families.

The ties binding husband and wife and children into one entity has weakened and families are broken up more and more by divorce and separation. The bond uniting parents and children has likewise become weaker. The children no longer follow the values imparted by their parents, if they impart any values at all for they have no time to do so.

Abortion is very high in our society and the size of the family has shrunk. The family has practically ceased to function as a socializing agent. It provides no educational force for the children.

Sorokin points out that "in order to survive for any considerable period, the members of any society must possess a minimum of solidarity, altruism and good will." A thoroughly anti-social society cannot survive. Earlier the family did the socializing. Now it is left to the schools to do so. But state education is as much a failure as state activity in business.

Instead of inculcating in children a strong sense of moral and social integrity, government teachers seem to be encouraging moral laxity and loose relationships. Judging from what newspaper readers write to the press, the intelligentsia is more interested in promoting conflict between social groups and religious groups.

The debate on the rights and wrongs of the ethnic groups is full of abuse, scarcely hiding the hatred in their hearts and minds so we have an "increase in the number of criminals, of irresponsible persons, of paid minions of anti-social groups, from common murderers to the praetorian guards of the dictators." (Sorokin)

Those who think that there is law and order still or who expect the state to protect them are under an illusion. We are living in the midst of lawlessness. Freedom is in peril not only from dictators. It is in danger from lawlessness as well when gun carrying men decide who will or will not have freedom.

Man is a social animal. But he cannot live in society without moral principles being observed. It is upto the various religions to see that their followers observe the minimum moral values required for peaceful social intercourse. It is upto the monks the traditional upholders of ethical values to wean their followers away from the consumerism and moral permissiveness of the age.

John Keells project 400,000 tourist arrivals

February tourist arrivals have maintained the positive tempo set for a successful winter season 1998/99 according to arrival statistics now published by the Ceylon Tourist Board and there is every prospect of the 400,000 visitor barrier to be broken tis year.

A John Keells Stock Brokers research report said that an increase in West European arrivals had helped boost February traffic 16% to 41,526 visitors with German and British tourists leading the league.

Traffic from South and East Asia had also grown although the numbers are much smaller than West European arrivals. According to the report, preliminary surveys point to the up-trend extending to March as well and John Keells are confident that their projection of a 9% increase in arrivals for the period between April 1998 and March 1999 will be achieved.

The report said that there was greater interest in Asian holidays in the West following the regional currency devaluations and aggressive marketing by leading operators. Sri Lanka had benefited by the crowding out of capacities in Thailand, a key arrival destination, and apprehension about civil disturbances in Indonesia and Malaysia.

John Keells researchers expect the spurt in the first quarter arrivals this year to boost the 1999 total to over 400,000 from 381,000 in 1998.

Dramatic reduction in finance costs
C.W. Mackie completes restructuring

C.W.Mackie & Company Limited has informed its shareholders that the capital reorganisation scheme to restructure the company announced earlier this year has been completed in March.

The company's Chairman, Mr. B. M. Amarasekara, said that the restructuring has reduced the company's borrowings by Rs.123.9 million. He expected the infusion of Rs.360 million equity/debt capital to improve the liquidity of the group and reduce financing cost by about Rs.45 million per year.

Under the restructuring, a subordinated loan of 7 million Danish kroner (about Rs.73.5 million) had been received from the Industrialisation Fund for Developing Countries (IFU) in Denmark. This low interest loan is repayable after a grace period of three years over the succeeding five years with an annual interest rate at the Copenhagen Inter Bank Offer Rate plus a 3% premium.

Additional equity of Rs.20.8 million was raised by the private placement of 1.4 million ten- rupee shares at a price of Rs.15 per share with IFU. This is equivalent to 10% of C.W.Mackie's issued capital.

The company has also realised a sum of Rs.265.7 million from a rights issue of 22.1 million ten-rupee shares at Rs.12 per share.

C.W. Mackie has invested Rs.176.9 million of the funds raised in equity and debt capital in four of its associates including the troubled Korea Ceylon Footwear Manufacturing Company Limited.

The bulk of this money amounting to Rs.130 million has been pumped into Korea Ceylon by way of a subordinated convertible loan.

C.W. Mackie has also invested in Ceymac Rubber Company Limited (Rs.10.6 million by way of a rights issue), Scan Products Holding Company Limited (Rs.26.3 million also by a rights issue) and Rs.10 million in Ceytra by private placement. Ceytra is now a subsidiary of C.W. Mackie which owns nearly 60% of that company.

Growth expected to slow to 4% this year
John Keells estimate 4.7% GDP in 1998

One of the country's leading stock brokers have estimated that 1998 GDP would be 4.7% ahead of the Central Bank's release of its 1998 report at the end of this month.

"The deterioration of the external environment vis-a-vis the Asian crisis and the Russian crisis is expected to slow down GDP growth in 1998 to 4.7% (government estimated 5%) from a 6.4% growth in 1997", John Keells Stock Brokers said in a just published strategy report.

It assessed the economy as 'fairly resilient' considering the extent of problems on the external front. Noting that the 1997 growth rate came off a lower 1996 base, the report pointed out that a prolonged drought had hit both agricultural and industrial sectors as the country's electricity is largely hydro-based.

Provisional figures for the first 9 months of 1998 shows real GDP growth of 4.8%, down from 6.6% a year earlier.

The report said that all three key sectors - agriculture, manufacturing and services - were expected to record lower growth figures in 1998 in comparison with the previous year. It expected agriculture which contributes about 18% to total output to have grown 2.3% year-on-year in 1998 with tea showing buoyancy with higher prices particularly in the first quarter of last year and a marginal 1% increase in production.

However, both the rubber and coconut sectors were expected to record declines of 3% and 5% year-on-year respectively.

The manufacturing sector which constitutes about 22% of the total output is expected to have grown 6.5% in 1998. As in the previous 4 years, the textiles and garment sub-sector had been the main driving force.

"With 70% of textile and garment exports being under the quota system, the sub-sector continues to remain an important area for Sri Lanka's output. However, the 30% non-quota category has been affected due to the Asian crisis with lower volumes and prices", the report said.

The services sector which contributed over 50% of total output is expected to have grown 5% last year with electricity, telecommunications, port services and tourism all showing improved performance. Telecommunications particularly continued to expand with increased private sector participation and improved performance by Sri Lanka Telecom.

The report forecast GDP growth this year to slow to 4% with the external environment expected to remain volatile with most economies going through a consolidation phase. John Keells felt that the recovery phase will be stretched out to the new millennium.

The report identified three constraints to growth - the diversion of scarce development resources to defence, lower tea prices and a higher import bill in the context of an anticipated 8% depreciation of the rupee against the dollar.

It expected this year's defence expenditure to exceed the government target of Rs.47 billion and estimated tea prices to average about Rs.110 per kilogram in 1999, down from last year's Rs.130 per kilogram.

"Sri Lanka's dependence on imports of food, fuel and defence related items is expected to result in the import bill coming in at 35% of GDP in 1999" , the report said.

This report which was out in April notes that the all share price index had declined over 10% since January this year. There has been negative investor sentiment, it pointed out, but said that there were medium term opportunities given the lower interest rates and bargain prices.

A U.S. break for Tri Star

A major US clothing dealer plans to shift a significant portion of his supply base to Tri Star factories here, a Tri Star spokesman said.

Mr. Larry Burak, a senior Vice-President of Guess Inc. of Los Angeles is now in town at the invitation of Tri Star Chairman Kumar Dewapura to finalise the deal, he said.

Guess which has a chain of 160 outlets in the U.S. marketing clothing under popular labels has launched an expansion program. They are interested in a tie-up with Tri Star in this regard, the spokesman said.

Burak is accompanied on his visit here by Laxman Vishwanath, Managing Director of LNC Apparels of Connecticut, a major supplier to Guess Inc.

"They have already visited several of our factories both in Colombo and in the provinces to see our production facilities. Mr. Burak was full of praise at the high quality standards maintained and the healthy working environment", the Tri Star spokesman said.

Earlier this month, Mr. Stephen Readman, Vice-Chairman of Readman's Ltd of the UK was here to finalise arrangements for a partnership with Tri Star.

The group operates 30 factories countrywide employing 30,000 both directly and indirectly. Some of the group's factories are up for sale although Dewapura is confident that given quotas he can turn around some previously non-performing facilities.

Foreign correspondents get free cell phones from Mobitel

A joint agreement between Mobitel and the Foreign Correspondent's Association (FCA) was signed Wednesday March 24, where members have been provided the latest mobile telephones for their communication needs.

Under this deal, Mobitel is providing FCA members with cellular phones free of charge. In return monthly bills of at least Rs.1,500 per instrument issued must be generated. A FCA spokesman said that there is a gentlemen's agreement that lags on the minimum calls taken on some instruments may be caught up by leads on others under the package. Foreign correspondents are heavy users of mobile phones.

Under this tie up Mobitel has also been appointed the "Official Mobile Phone Provider" of the Foreign Cor-respondent's Association for a period of two years. This was disclosed at a news briefing held at the Galle Face Hotel to mark the handing over of the first batch of phones to members of the association.

Cathy Aston, Mobiltel's CEO/Managing Dirtector presents the Mobitel Agreement to K. J. M. Varma, President of the Foreign Correspondents Association while Posts, Telecom munication and Media Minister Mangala Samaraweera and FCA treasurer Vandana Chopra look on.
Minister of Posts and Telecom-munication and the Media Mangala Samaraweera who was the chief guest at this function presented the phones to Mr. K.J.M. Varma, President of the FCA and the Treasurer on behalf of Mobitel. Director General of Tele-communication Prof. Rohan Samara-jiva and Ms. Cathy Aston, CEO/ Managing Director of Mobitel were also present.

Speaking at the presentation ceremony Ms. Aston stated that this was Mobitel's second involvement with the journalists, earlier being associated with the Western Province Mass Media Forum through the Bank of Ceylon. She added Mobitel considered it a privilege to be involved with the mass media personnel, as telecommunications played a pivotal role in the profession of journalism and as a leading mobile service provider, Mobitel was able to service their needs.

The managing director further explained that the network was going through a major upgrading program to provide customers digital options that is a unique feature in the mobile communications in Sri Lanka. She claimed that the Mobitel network had the largest coverage and the best customer care service in the country.

Mr. Varma said that FCA was pleased to be associated with Mobitel because it offered the latest technology with its digital network and also provides the best coverage and customer service. He said that the FCA members were pleased to use the latest dual mode hand sets offered by Mobitel as their profession demanded a high quality mobile service coupled with the best technology and service.

The minister in his brief address said that he was pleased to hand over the mobile phone units to the foreign correspondents on behalf of Mobitel and said he was pleased that the network was supporting better communication for the journalists.

Charity cap sale heads for target

The efforts of Sri Lanka's banking sector to market a charity cricket cap bearing an embroidered lion emblem and Arjuna Ranatunga's signature is heading towards its target, a NDB news release said.

Saying that the charity cap has already netted Rs.5.5 million, the banks were confident of collecting the remaining Rs.12 million to buy the much needed MRI scanner for the Colombo National Hospital.

The Neurosurgery Trust has collected almost Rs.15 million from individual donations from 8,500 members of the public while the President's Fund has pledged a further Rs.30 million towards the scanner.

The banks are attempting to collect the remaining Rs.12 million by selling the premium quality blue cotton caps at Rs.250 each through all branches of the banks participating in the project.

They are the Bank of Ceylon, Peoples Bank, NSB, HNB, Seylan, Sampath, CitiBank, Central Bank and NDB.

"This is a hat collection with a difference and has been endorsed by Arjuna Ranatunga. Several other banks have offered their support through outright contributions", the NDB said.

The NDB which is coordinating the collection asked the public to help by buying a cap or through direct contributions by cheques in excess of Rs.50 in favour of NDBSL MRI SCANNER A/C, C/o National Development Bank, P.O. Box 1827 - MRI, Colombo 2.

"This project has brought about a tremendous amount of support from everybody. The media in particular have put their collective support behind this. We are deeply grateful to them..." said Anjum Cader, Senior Executive Marketing, NDB. "We now need the public to respond with more donations, as the caps are nearly sold out. So I do hope the public will back us in any small way they can..."

Rubber tapper training at Tebuwana

Agalawatte Plantations Limited (APL) managed by Mackwoods Plantations (Pvt) Limited has undertaken a project to improve rubber tapping skills in the interest of productivity, a company news release said.

The company claimed that this is the first program of its kind initiated by any plantation to upgrade the skills of its workers.

Skilled tappers are becoming less available today and the rubber industry is feeling the bite of loss of experienced workers as old tappers retire. With children of estate workers less inclined to accept employment on the estates, rubber growers are feeling the shortage of good tappers.

APL said that its intention is to provide facilities to improve and develop the skills of present tappers who will, in turn become trainers of younger tappers.

The new training project established at the Vocational Training Centre on Clyde Estate, Tebuwana, is expected to improve and develop the skills and knowledge of tappers on this estate and neighbouring properties managed by APL, the company said.

All participants who complete the course will be issued a certificate at the end of their training, APL said. It also said that it will equip skilled tappers with uniforms and other protective clothing in the future.

Officials of Rubber Research Institute and the superintendent of Clyde Estate were associated in this training program. The newly established vocational training centre on Clyde will also be used for training plantation executives, estate staff and workers, the news release said.

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