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Burnt by beer duty hike, Carsons demands policy consistency
"Never again,’’ says 1.8 billion rupee investor

One of Sri Lanka’s biggest business conglomerates which invested Rs. 1.8 billion in a state-of-the-art brewery, burnt by a sudden change in government’s soft liquor excise duty policy, has vowed that it ``is unlikely that we would contemplate major investments in industries where policy consistency is not assured.’’

Carson’s Management Services (Pvt) Ltd., the management company of the Carson Cumberpatch Group, has told shareholders of the Ceylon Brewery Ltd. and Lion Brewery Ceylon Ltd.: ``Considering the experience we have had - a 70% reduction in excise duty in November ‘95, an investment of Rs. 1.8 billion in a state-of-the-art plant, excise duty increased to almost the pre-November ‘95 level in November ‘98 - it is unlikely that we will contemplate major investments in industries where policy consistency is not assured.’’

Both the Ceylon Brewery as well as Lion have complained to their shareholders that since the ``drastic’’ beer excise duty increases announced in the November ‘98 budget, ``your company’s fortunes have seen a dramatic reversal.’’

The companies have been forced to absorb about 50% of the duty increases themselves in the hope that this would partly protect them from reduced sales due to the price factor. Where Lion was concerned this resulted in cost increases of Rs. 64.8 million from November 1998 (when the excise duty increases were effected) up to March 31, 1999, the end of the financial year. The Ceylon Brewery suffered cost increases of half that - Rs. 32.6 million during the same period.

Adding to their woes, volumes decreased 28% despite the company’s themselves carrying half the duty increase.

``Needless to say, had the entire cost increase been passed on to the consumer, the volume drop would have been much more significant,’’ Carsons Management said. ``Thus, your company’s profitability has been greatly affected by both additional costs and a drop in volume.’’

Before the unexpected duty hike blow, the beer industry had performed ``exceptionally well.’’ According to the managers, with duty at a ``reasonable level,’’ there were good shareholder returns, employment generated, large-scale investment and revenue to government. But with the duty increase, there was a reversal in the fortunes of both companies.

Lion which has an issued share capital of Rs. 500 million and a preference share capital of Rs. 350 million, has posted a profit of Rs. 174.4 million for the year ended March 31, 1999. This brewery was only commissioned last year and there are no comparative figures available for the previous year.

The Ceylon Brewery, with an issued share capital of Rs. 209.9 million, posted an after tax result of Rs. 73.8 million for the year, down from Rs. 118.8 million a year earlier.

The two beer companies have pointed out that the authorities have lately tried to combat the illicit liquor menace through law enforcement with a state controlled newspaper reporting that there had been raids on 5,000 hooch dens in Colombo city alone. But they say that while the government’s efforts to crack down on this vice is laudable, their experience is that ``success will be limited in the long term.’’

They continue to urge that the practical long term solution to illicit liquor is a ``pragmatic approach’’ to soft alcohol like beer. If, for example, the 5,000 illicit outlets in Colombo are licensed at a nominal fee of Rs. 10,000 a year, government would net Rs. 50 million revenue and they would retail only legal products generating additional revenue by way of excise duty and limiting the consumption of illicit liquor.

Carson’s oil palm companies boom, issue bonus shares

The Sri Lanka incorporated plantation companies of the Carson’s group with substantial oil palm holdings in Malaysia have performed satisfactorily in the financial year ending March 31, 1999 according to interim statements incorporating

All these companies are relatively modestly capitalised and many of them have shareholdings of other group companies controlled by the Carsons group as well as cross holdings with each other. Most of them made bonus share issues during the year under review, doubling their capital and in one case, that of Shalimar (Malay) Estates, boosted the issued capital from Rs. 2.7 million to Rs. 32.1 million.

The Selinsing Company Limited which has an issued share capital of Rs.32.1 million (double the Rs.16.1 million issued the previous year) has posted an after-tax profit of Rs.23.5 million, down from Rs.35.4 million the previous year. The Selinsing’s group profit of Rs.32.1 million compared with Rs.42.7 million earned the previous year.

The Bukit Darah Company Limited with an ordinary share capital of Rs.4 million and a preference share capital of Rs.40.1 million had posted an after-tax profit of Rs.23.5 million, up from Rs.7.6 million the previous year. The group profit of Rs.26.2 million compared with Rs.10.2 million earned a year earlier.

The Shalimar (Malay) Estate Company Limited has had its issued share capital increased substantially from Rs.2.7 million in the previous financial year to Rs.32.1 million during the year under review. Shalimar posted an after-tax profit of Rs.29.6 million, up from Rs.17.2 million a year earlier. The group profit for the year under review at Rs.53 million compared with Rs.25.9 million earned a year earlier.

The Indo-Malay Estates Limited had posted a profit of Rs.15.2 million, down from Rs.26.6 million the previous year. This company had its issued capital doubled to Rs.24.3 million from Rs.12.15 million the previous year.

The Good Hope Company Limited whose issued capital of Rs.26.5 million was double the Rs.13.3 million the previous year has posted an after-tax profit of Rs.35.3 million, up from Rs.22.6 million the previous year.

Mr. Hari Selvanathan is the chairman of all except one of the Carson’s Malaysian companies. His brother, Mano, who also sits on all these boards is the chairman of Selinsing. Other Carson’s directors including the company’s Chairman, W. Unamboowe, Israel Paulraj and Chandima Gunawardena serve on most of these board.

Chemanex investments pay as manufacture shrinks

Chemanex Limited which has in recent years been diversifying into financial services through its links with the Commercial Bank group has reported a profit after-tax for the year ended March 31, 1999 of Rs.18.5 million, up from Rs.15.9 million a year earlier.

The company’s Chairman, Mr. B.R.L. Fernando, said that their main trading activity since inception had been the servicing of local manufacturers with chemicals and chemical intermediates. The sluggishness of the industries they catered to and competition that had sharpened in recent years has pushed down both their turnover and operational profitability.

Fernando said that it was becoming increasingly evident that they have to further diversify their trading by moving into new areas. This is receiving due attention bearing in mind the reality that many industries geared to meet local demand may suffer further hardship with the open economic policy and the gradual reduction of fiscal levies on imported finished products.

Fernando said that returns from their investments constituting dividend income had grown nearly 19% in the year with Rs.15 million received on that account.

There had been a decline in their income from investments in agro-related ventures. CIC Fertilizers (Pvt) Limited had performed well and paid Chemanex a Rs.3.1 million dividend same as in the previous year. But no dividend was received during the year from Crop Management Services (Pvt) Limited from which they had received Rs.4.3 million the previous year.

Chemanex has a 46% stake in Crop Management Services which managed Maturata Plantations until October 31, 1998. In the previous year they received a dividend of Rs.4.3 million from this company and the share attributable to Chemanex from the profits earned by this company in the year ended March 31, 1999 was Rs.2.8 million. The final dues from Crop Management remains to be paid after the audit of the plantations companies accounts.

Chemanex has received enhanced dividend income of Rs.5.8 million from investments in Commercial Leasing Company Limited, Commercial Insurance Brokers Limited and the Commercial Bank of Ceylon Limited. Fernando said that these companies had continued to perform well with the exception of Commercial Leasing which recorded a dip in

Walkers Tours helps Habarana Walk Inn to double profits

Habarana Walk Inn, owners of The Village at Habarana, the first of the John Keells hotel chain, has posted its highest after-tax profit since 1989/90 in the year ending March 31, 1999 with an earning of Rs.22.4 million, more than double the previous year’s Rs.10.3 million.

The company’s Chairman, Mr. K. Balendra, said that occupancy was up three percent to 57%, turnover up 6% to Rs.64.5 million and profit including dividend income had grown 127% over the previous year largely due to a substantial dividend pay by Walkers Tours Limited, an associate company.

Habarana Walk Inn owns 42.4% of Walkers Tours and had received a dividend totaling Rs.11.6 million during the year under review.

Balendra said that after transferring Rs.5.5 million from the dividend equalisation reserve, the directors have proposed a final dividend of 50% leaving a sum of Rs.7.5 million to be transferred to the general reserve and Rs.9.3 million to the dividend equalisation reserve.

The group profit at Habarana Walk Inn after tax was Rs.52.4 million - an increase of 23%.

"Prospects in the coming year continue to be encouraging and your directors are confident of yet another strong performance. The hotel itself operates satisfactorily but is in need of capital expenditure to maintain standards and this is being looked into in order to ensure the continued profitability of the hotel at operational level,’’ Balendra said.

The directors of the company are: Messrs. K. Balendra (Chairman), V. Lintotawela, C.J. Fernando, A.D. Gunawardana, S.C. Ratnayake, B.S.H. Mendis, Ms. A. Coomaraswamy and Ms. J.C. Ponniah.

3 meals, snacks plus local booze part of package
Bayroo cashes in on all-inclusive concept

International Tourists and Hoteliers Limited, the owners of Beach Hotel Bayroo, has completed what its chairman called "a satisfactory year’’ ending March 31, 1999 enabling the company to settle all outstanding loans and be able to fund urgently required kitchen equipment.

The company’s Chairman, Mr. K. Balendra, reported that the hotel recorded a 67% year-round occupancy, up 11% from the previous year. As a result, turnover was up 10% to Rs.87.8 million and the pre-tax profit was up 11% to Rs.18 million over the previous year.

"However, on account of additional direct costs on account of all-inclusive sales and an increased charge on deferred taxation, profits after tax dropped by 9% against the previous year’s profit of Rs.18 million to record a figure of Rs.16.3 million,’’ he said.

The directors have proposed a first and final dividend of 15% for the year absorbing Rs.11.6 million and transferred Rs.5 million to the general reserve.

Balendra said that the last winter saw Bayroo being operated for the first full season as an all-inclusive resort. This turned out to be highly successful resulting in. high occupancies throughout the period.

Under the all-inclusive concept, the hotel provides guests with three main meals and snacks during the day, all local alcoholic beverages and house wine with meals as well as a limited animation program for the price of the package for which a supplementary rate is charged.

Those who wish to have foreign liquor and a la carte items like sea food etc have to purchase these directly from the hotel at an additional cost.

"This feature has proved to be very popular in many destinations and is already in operation in a number of beach hotels in Sri Lanka. Prospects for the coming year appear to be excellent with the all-inclusive concept actually improving the marketability of the hotel,’’ Balendra said.

The directors of the company are: Messrs. K. Balendra (Chairman), V. Lintotawela, C.J. Fernando, A.G. Arawwawala (Managing Director), P.N.N. Fernando, W.M.S. Fernando, N. Fernando and Ms. A. Coomaraswamy.

Profits on par with previous year
CIC sees potential in seeds and bio-tech

Chemical Industries (Colombo) Limited (CIC) has posted a group profit of Rs.74.5 million for the year ending March 31, 1999, up marginally from Rs.74 million earned the previous year.

The company’s Chairman, Mr. B.R.L. Fernando, said that they had been able to maintain performance at a level comparable with that of the previous year in fiercely competitive environment.

The company had been able to save on interest charges which came down to Rs.49.4 million during the year under review from the previous year’s high of Rs.67.3 million although a planned disposal of some surplus land had not succeeded due to depressed property markets.

Fernando said that CIC’s far reaching reorganisation was now in place and the company was better positioned to vigorously pursue strategies to obtain a better return on its existing businesses. They are also striving to utilise available assets more effectively.

Given the diversity achieved by the company so far, the directors have also recommended a 1 for 6 bonus share issue on both voting and non voting shares.

They have also recommended a 25% final dividend on top of a 10% interim paid in March to give shareholders a 35% return for the year.

During the year under review, CIC Seeds (Pvt) Limited has won the management of the country’s largest seed farm located at Hingurakgoda on a 50-year lease. The acquisition of this asset with a potential of producing over 100,000 bushels of seed paddy annually places the company in a position to maintain market leadership in the seed and plant materials business, the report said.

CIC said that the Malwanagama Farm fed from the Kalawewa, the Hingurakgoda Farm fed from the Minneriya Tank and the Kalukelle Farm fed from the Maduru Oya will form the core of the seed business which encompasses a large number of outgrowers. Hingurakgoda Farm has been refurbished and is now equipped with a new state-of-the-art seed processing plant specially designed and imported from Germany. This plant incorporates the latest technology for cleaning seed paddy to ensure a uniform premium product.

The company also plans to commercially produce fruits on a 150 acre site identified and also establish a herbal park over 25 acres. Fifty acres of land with mango and coconut plantations have been rehabilitated and replanted and another 50 acres allocated for livestock development.

The balance land available will be developed expanding the plant nursery to produce quality planting material of fruit, forest plants and herbs to meet the company’s own and outside requirements.

CIC is taking advantage of government incentives for non plantation agriculture through CIC Agri Biotech (Pvt) Limited which is dealing in production and sale of exotic horticultural products for foreign markets.

This company has developed the necessary infrastructure, propagation facilities and trained workforce enabling the production of export quality material specially flower bulbs. However, world market conditions had promoted the entry of low cost competition thereby affecting the sale of the company’s main product necessitating a review of operations.

The company said that their laboratory is now extensively used to produce tissue cultured banana plants initially for CIC Seeds, with trial quantities of other potential fruit, flower and vegetable crops.

They had reached an agreement with a well known German-Dutch carnation house, Seleta Weststek, for the production of rooted carnation cuttings. They have also used available flower bulbs to produce cut flowers which are able to give a higher return.

"Any future production of bulbs will be with a firm agreement with a foreign

Serendib writes off hotel sale loss on 1998/99 profits

Serendib Hotels Limited has performed strongly during the year ended March 31, 1999 with an after-tax profit of Rs.30.6 million, up five fold from Rs.6.1 million earned a year earlier enabling it to comfortably absorb a Rs.7.9 million loss on the sale of Emerald Bay Hotels Limited.

Serendib has charged this loss to its profit and loss account and posted a profit of Rs.20.8 million available to shareholders for the year under review, up from Rs.5.1 million earned the previous year.

The company had seen both its turnover, up to Rs.128.5 million from the previous year’s Rs.92.4 million, and its share of associate companies profits before taxation rising comfortably. Associates’ profit share was Rs.11.7 million, up from Rs.3.5 million a year earlier.

Serendib which has an issued capital of Rs.110.3 million has declared a 7.5% interim dividend for the year absorbing Rs.8.3 million. Its net assets had been stated at Rs.325.3 million as at March 31, 1999.

Walkers Tours helps Habarana Walk Inn to double profits

Habarana Walk Inn, owners of The Village at Habarana, the first of the John Keells hotel chain, has posted its highest after-tax profit since 1989/90 in the year ending March 31, 1999 with an earning of Rs.22.4 million, more than double the previous year’s Rs.10.3 million.

The company’s Chairman, Mr. K. Balendra, said that occupancy was up three percent to 57%, turnover up 6% to Rs.64.5 million and profit including dividend income had grown 127% over the previous year largely due to a substantial dividend pay by Walkers Tours Limited, an associate company.

Habarana Walk Inn owns 42.4% of Walkers Tours and had received a dividend totaling Rs.11.6 million during the year under review.

Balendra said that after transferring Rs.5.5 million from the dividend equalisation reserve, the directors have proposed a final dividend of 50% leaving a sum of Rs.7.5 million to be transferred to the general reserve and Rs.9.3 million to the dividend equalisation reserve.

Debt relief for the poorest countries

By Kanes
The total foreign debt of all developing countries now exceeds $2,200 billion. Of this, about $170 billion are owed by 41 "Heavily Indebted Poor Countries" (HIPCs) whose average debts equal 465 per cent or more than four times their annual export earnings. Most of the HIPCs are in Africa and their debt servicing swallows up such a large share of their foreign exchange earnings that there is little left for essential investments in health, education, infrastructural improvements and economic development. Debt service is as high as 47 per cent of export earnings in Ethiopia, 46 per cent in Sierra Leone, 42 per cent in Mazambique, 30 per cent in Ghana and 26 per cent in Uganda. Such heavy debt burdens stifle all development efforts in these countres and aggravate their poverty. They could be provided with opportunities of economic and social development only if international measures are taken to cancel or reduce their heavy indebtedness.

The problem had been recognized for some time and UNCTAD and several non-governmental organizations have highlighted it, but ten years of efforts to solve it have yielded only unsatisfactory results. The Paris Club of official creditors has been offering steadily better terms to poor countries and commercial banks have been buying back their loans at big discounts. These measures, though inadequate, provided some relief. Then in 1996 the World Bank and the IMF launched a Heavily Indebted Poor Countries initiative to create a framework for the systematic debt reduction in return for economic reforms.

The process of debt-relief when the HIPC initiative, however, is rather slow and of limited benefit. Before relief is provided in the form of debt-cancellation or reduction, debtor countries have to prove that they are worthy of relief: their debt burden should exceed 200-250 per cent of export earnings and their debt service ratio should be higher than 20-25 per cent of export earnings. This, however is not difficult. The debtor countries must then implement IMF mandated reforms - designed to make them more democratic, more market-friendly and more oriented towards the world market - for three years before the donors agree to reduce the debts to sustainable levels, and they will actually reduce it only after a further three years of good behaviour. only eight countries have qualified so far and only two - Bolivia and Uganda - have actually received any debt relief even when the declining commodity prices are impoverishing these countries further. Some conditions on the part of the lenders in forgiving debt are understandable, for they must be satisfied that debt relief is used properly for economic and social development and not wasted. A general debt relief can very well be used for personal enrichment of ruling elites, for the financing of prestigious but not useful projects or for increased military expenditure. Marcos of the Philippines, Suharto of Indonesia, Mobutu of Zaire and Abacha of Nigeria are good examples of diversion of foreign aid for questionable purposes. Further, a debt cancellation might also be interpreted as a justification for capital flight in some countries. It may also penalize those countries which managed their economies efficiently without increasing their debts and favour those who mismanaged and got into heavy debt. The IMF’s conditions, however, appear to be strict even for those debtor countries who have used debt relief strictly for development work without wasting it and who generally follow sound policies.

New Initiatives
There is some new thinking on the debt problem of the HIPCs in the developed countries which propose to discuss this and formulate a more effective strategy in the forthcoming G7 Summit in Cologne in June. Some of the leaders of the G7 countries appear to be more positive than before in responding to the call for more debt relief to the poor countries. The German Chancellor Gerhard Schroeder, who says "it is clear that without a radical debt reduction in many of the poorest countries there is no hope of bringing about a fresh start" has announced in the German Parliament that Germany would launch a "Cologne Initiative" for debt relief at the forthcoming meeting. The German proposal is to cancel 1.5 billion DM in debts from development cooperation plus one billion in trade credits of HIPCs who owe Germany a total of 15.5 billion DM. French Finance Minister Dominique Strauss-Kahn has suggested that debt service by developing countries should be suspended for 30 years to allow them to build up their economies without being suffocated by foreign debt.

In March 1999, President Clinton addressing 46 African countries made a call for deeper debt relief: "We should provide extraordinary relief for countries making extraordinary efforts to build working economies", and proposed measures to forgive instead of rescheduling a further $70 billion of the poorest countries’ debts. He wants the rich countries to forgive all bilateral concessional loans and to agree that at least 90 per cent of new aid to HIPCs will be grants rather than loans. He also suggests that the rich countries should contribute to pay for it and the IMF should sell some of its gold.

Taking the cue from Clinton, the British Chancellor of the Exchequer Gordon Brown called for a fivefold increase of the HIPC Trust Fund of $440 million to $2 billion to speed up debt relief to the world’s poorest countries. Britain is pressing the European Development Fund to find half of the $2 billion fund with the other half coming from the IMF, World Bank and the rich countries of the West. Britain has suggested that if the European Union is against making a direct contribution to the HIPC Trust Fund, it should make a contribution to multilateral funds to help poor countries meet debt servicing costs in advance of HIPC debt relief. Britain which has already pledged $71 million to the HIPC Trust Fund, announced an extra $100 Million for debt-relief on June 9 ahead of the Summit meeting. The IMF and the World Bank have agreed to reform the HIPC initiative to let more countries qualify for more debt relief but they made it clear that they would stick to strict economic reform as a condition for help: World Bank President James Wolfensohn said he hoped the basis for an improved initiative would be hammered out in time for the IMF/World Bank meeting in September and that up to 20 countries might receive debt relief before the millenium.

In a letter to German Chancellor, Gerhard Shroeder, host of the Group 7 Summit in Cologne, UN Secretary-General Kofi Annan has called for debt relief for the world’s poorest nations without further cuts in official government assistance. He also stated that developing countries needed a seat at the table when a new international financial system was devised to prevent a recurrence of recent devastating crises in East Asia, Russia and Brazil. He pointed out "there is a grave risk that the bulk of the world’s population will be left on the margin of today’s liberalized global economy, living in abject poverty". In spite of various promises by the international community to reduce poverty there are some 3 billion people in the developing countries living on the margin of subsistence with little hope of a better life for their children, he underlined.

There is also evidence that the big powers may expand the debt relief scheme to cover mid-level income nations as well as poor heavily indebted nations. This inclusion reflects the desire of some big powers to provide debt relief to nations with close ties to them. The United States, for example, has called on the G7 powers to forgive some of their loans to Jordan which being a mid-level income nation is not covered by the HIPC scheme. The US move reflects Washington’s hope to facilitate a Middle East peace process by easing economic burdens. The new Jordanian King won promises from Canada and UK in May that they would press Jordan’s case for debt forgiveness at the summit meeting. There are also some signs that the big powers favour waiving entirely repayments of official development aid extended to HIPCs but France and Japan, which hold large outstanding loans to poor countries are reluctant to agree on the sweeping waiver plan.

IMF’s Gold Sales
The managing director of the IMF is reported to have proposed the sale of some 5 million ounces of gold held by the Fund and use the interest earned on the funds generated by the sale of gold to expand the Funds initiative to provide relief to HIPCs. The IMF’s gold reserves are estimated to exceed 100 million ounces and there appears to be a growing consensus among the G-7 industrial countries to support the sale of more than 5 million ounces. How much will be the quantity finally agreed upon for sale is yet to be determined, but it may be anywhere between 5 and 10 million ounces. The British Chancellor of the Exchequer, Gordon Brown, is reported to favour the sale of about 10 million ounces. The sale of 5 million ounces at current prices is estimated to yield about $1.5 billion.

Some analysts have pointed out that this is not the right time to sell gold as gold prices are at their lowest level since 1978 - about $280 per ounce. They have also raised an important issue, whether the IMF should sell gold to raise resources to provide debt relief to HIPCs when it could obtain such resources by either increasing of quotas or issuing of fresh Special Drawing Rights (SDRs). The IMF, they argue, should be increasing its gold stocks now instead of selling them in order to strengthen its position as world’s lender of last resort. It could buy gold with newly created SDRs to strengthen the reserve backing for SDRs so that it need not depend on the G-7 countries for any future extension of credit to crisis-hit countries as in the recent East Asian, Russian and Brazilian crises. Further, the amount involved for debt relief to HIPCs is much lower than what was extended to East Asian countries, Russia and Brazil, and the IMF should be able to mobilize them without selling gold.

How this new thinking will find expression in concrete terms will be seen only at the Cologne summit this month.

Educational reform has ignored fundamental issues

by Analyst

The background
In the 1950’s and 60’s a major policy objective of the government was to expand enrolment. The enrolment in government schools increased fro m 216,067 or 39% of the total population in 1931 to 378,861 or 44% in 1945. The number of government schools almost doubled.

The vernacular schools which were free, merely sought to provide literacy and not modern knowledge as such. They had poor buildings and facilities and catered to about 95% of the school going population. The English language schools in urban areas catered to less than 5% of the school going population. They levied fees but were also assisted by the government financially. In 1931, 37% of government expenditure went to this 5% of the school going population.

In 1948 free education was introduced and it mainly subsidised the middle class families who were paying fees for education in English schools, the training colleges and the universities. It did not provide any new benefit to the majority who were already receiving free education in the vernacular schools.

Obviously what was required was to raise the level of education in these vernacular schools. The government therefore decided to increase the number of English type senior schools and central schools as fast as teachers and facilities could be provided.

Along with free education, the government introduced the mother tongue as the medium of education for primary schools. This was to be extended each year until secondary education was entirely in the mother tongue.

Other policy measures like building more schools, training more teachers etc. were part of this policy of getting increasing numbers of children into school as fast as possible. Rarely has a policy been so universally popular. But our political leaders were so naive that they did not realise that the British type comprehensive schools on which the English language schools were modelled, could not apply to the whole population.

The education in these schools was to produce clerks and administrators for the colonial public service. The economy needs farmers, artisans, mechanics and mass education which is a product of only the last hundred years even in developed countries must cater for this need of the economy.

Only a small number of students can be provided jobs as white collar workers. There must be a streaming of students after primary school. The large bulk of students must be diverted to the skilled jobs as carpenters, masons etc. These jobs do not need secondary education. In fact such education seems positively harmful since it will lead to higher job aspirations.

Dignity of labour is not a value in our society. With education being free upto university, there is no mechanism to divert students to the vocational and technical streams. So students who are unfit for secondary education continue in secondary schools and those who are unfit for university education continue in secondary schools, sitting and re-sitting for examinations to obtain higher aggregate, marks.

This major problem has not been addressed by any government because it would be unpopular to do so. The higher salaries in white collar jobs which are protected by trade unions and protective labour legislation, also attracts students to academic education rather than to vocational education.

Politicians and nationalists while ignoring the economic aspects of educational policy, saw education as a vehicle for nation building through state schools. They thought that education in swabasha will help to restore traditional culture and religion. This has not happened if we go by the ransacking of temples for treasure and the general decline in moral values and religious piety.

Politicians still believe that every one is entitled to education, some even considering it a human right although mass education is a phenomenon only of the present century even in the developed west. It is the socialist policies formulated by Lord Beveridge after the second world war which seem to have inspired our leaders. Economists and social activists thought that mass education was a good way of inculcating people into attitudes and values appropriate for modernisation, an argument ably presented by Dr. Amartya Sen in more recent times.

School Enrolments
Literacy which was 57% in 1946 improve to 72% in 1963 and 87% in 1981. School participation rates improved dramatically. There was a massive increase in school enrolments in the post independence era. This was in the context of a rapidly expanding population. Each year more and more children entered the school going age group, yet enrolments rose both in absolute terms and as a percentage of the age group.

But this growth in enrolments has not meant an improvement in educational standards. Nor has mass education led to any improvement in religious and moral life of the people.

Failures and weaknesses
The educational sector has suffered greatly from politicisation. Poorly educated teachers have been recruited on political patronage. It is noteworthy that only 22% of teachers are graduates and yet we have turned out large numbers of graduates many of whom are still unemployed.

The curricula have been watered down and are somewhat inappropriate in some subjects. Teaching methods are outdated. Many schools are poorly equipped. Rate-learning is the general norm and is promoted by the system of examinations.

Merely increasing the numbers on the roll, put an intolerable strain on the existing staff and facilities particularly in the universities. Entry to universities is not strictly on merit as it should be. Remote schools continue to be badly equipped without minimum facilities while money is allocated for the urban schools and the prestigious city schools which provide a superior education to the middle classes.

There is a tremendous rush to gain admission to these schools and as demand exceeds the supply of places there is money to be made in the context of the area rule limiting envolment to a catchment area. It would be far more equitable to levy fees and fill a percentage on scholarship, at least in these schools.

The obvious solution is to have more schools. But a good school cannot be established overnight even if the money is found. And the money is not available since the government is bankrupt. The private sector should be co-opted to provide education.

In some developed countries the private sector has been co-opted to provide education as subcontractors to the government. There is scope for investment in education as shown by the international schools. But these schools charge too much and have too many frills. They can cater only to an elite.

Why not allow religious bodies and charitable trusts to set up new grant aided schools. There are complaints from Muslims and Catholics in Kandy that they are unable to admit their children to schools. It will provide more choice to parents and to teachers too and increase employment opportunities for the educated.

The government could utilise its funds to set up new schools in the rural areas and provide more facilities for existing schools.

Economists and sociologists point out that development policy is generally titled in favour of urban classes. According to Michael Lipton "the most important class conflict in the poor countries of the world today is not between labour and capital. Nor is it between foreign and national interests. It is between rural and urban classes".

One of the strategies of the elite, he says, is to invest too little in rural education while too many of those acquiring skills, who come from rural areas migrate to the cities. Politicians elected from these areas prefer to live in the city and send their children to city schools. Doctors coming from rural areas never go back to their places of origin to serve their people.

Urban bias is not only evident in resource allocation but also in loading the terms of trade against the rural producer. The rural farmer has to pay for over-priced farm inputs while the government, in order to keep food prices low for urban workers, who might otherwise riot, imports grain and foodstaffs.

It is better for the state to engage the private sector in education. To improve education whilst maintaining it free. The only feasibility is to permit religious trusts who alone may be interested in running grant aided schools. Private fee levying schools following the national curricula should be encouraged.

Teacher choice of schools is as essential as parental choice of schools. The notion of a distinctive ethos for a school can emerge only over a long time. Unless a school is staffed by teachers who are committed to a school’s philosophy, educational and religious, such an ethos will not emerge.

The bureaucrats in the Ministry of Education still have the mindset of those who took over the denominational schools in the 1960’s amidst opposition. They seem to delight in creating dissension in grant aided schools, which they don’t like because their writ over them is not all powerful as in the case of state owned schools.

They appoint to schools, principals who follow a religion different from the religious background of the school. Too many schools are prevented from developing a clear and distinctive philosophy and then living upto it, simply because some staff declare to commit themselves to it or strive to subvert it. Such people would not be tolerated in any organisation in business for example. Why then undermine schools in this manner?

Organisation and Management
The schools like other institutions in the private sector, have been politicised. A politicised institution can be written off as far as achieving its objectives are concerned. It is useless teaching management to principals if they are not free to manage. If teachers have to go to politicians to obtain transfers or promotions they won’t be motivated to work in the interests of the students or of the school.

So far those engaged in the educational reform programme, have failed to question their assumption about school organisation and management or about the kind of people who should staff schools and undertake teaching functions. The emphasis has been on curriculum change.

Mere educational qualifications are not enough since teachers are expected to mould the character of students. To do so, they must themselves be of good character and provide role models to the students. Nor does teaching and management go together. As in the case of doctors, those who are good at administration only should be recruited to management posts like principals and head teachers.

Never mind if they are drawn from teachers but principals must have management ability. Too many people in management positions can’t say "boo" to a goose. Gifted teachers are not necessarily good principals. Nor should such teachers be taken out completes from teaching. They must have a choice of career advancement as teachers without having to become principals.

The problem of the ineffective head teacher and the ineffective classroom teacher has not been addressed. To make schools more effective the deadwood among teachers and principals who have obtained their jobs through political influence, should be removed. School Development Boards have been established. They should be made the governing bodies for schools, given powers over appointments and disciplined subject to guidelines by the Public Service Commission. This is the practice followed in U.K.

Both teachers and principals should be put on renevable contracts and renewed only if they perform. The appointment of teachers should be handed over to school boards. They could have a representative of the local authority as in U.K. The disciplinary control of teachers should also be decentralised to the school boards.

Teachers will not like such changes because they are largely unaccountable now. They can’t bluff the parents who are on the spot unlike far away officials of the Ministry of Education. Without radical changes in organisation and management of the schools, there will be no effective improvement in educational standards.

Education for life
Ask any student in the G.C.E. (Ordinary Level) class what a school should teach and he will tell you it should teach things that are useful for jobs. But the schools are not equipped to do so. The teachers have no experience of the wider world outside the school.

Most teachers enter the profession because they have no chance of getting any other job. They have no direct experience of any other activity. Many are dissatisfied, lacking in job satisfaction. Those who are old enough to be in their late fifties or sixties remember the dedicated teachers who taught them. How can we get back a similar cadre of dedicated teachers? This is a central issue to be addressed by reformers.

Moral and Religions Education
Ours is a plural society and the only way to build understanding among the communities is for each community to learn the language of the other — Sinhalese must learn Tamil and vice versa. Is this accepted policy?

Schools seem to be in confusion over religious and moral education. Religious education is being treated as another subject to be taught and learnt. But imparting knowledge is not enough to inculcate moral and ethical values in students.

We have witnessed two youth insurrections where revolting youth displayed Pol Potist brutally. Ragging also shows up the failure to inculcate religious and ethical values. In every religion moral values are linked to beliefs and the religious basis for morality is important.

Its useless pretending that state schools are non-sectarian. Its better to accept that each school must have a religious background like the former denominational schools whether Buddhist like Ananda, Nalanda or Catholic. It would seem better to set back to the pattern prior to state take over of denominational schools.

Schools could be treated as Buddhist or Catholic or Muslim. The existence of religion based schools is not inherently divisive any more than the existence of different, cultural lingnistic or ethnic groups is inherently injurious to social harmony. State schools are to all intents and purposes Buddhist schools. It would be hypocritical to argue otherwise and not accept the right of other religious communities to transmit their religious values and beliefs to their young.

Record 420,000 tourists expected this year

Sri Lanka’s tourist industry is optimistic that visitor arrivals this year will hit a record 420,000 easily surpassing the previous high of 407,511 arrivals in 1995.

This projection has been made by John Keells Stock Brokers which has pointed out that a 34.76% year-on-year growth in tourist arrivals in April had helped to boost total arrivals for the January-April period, already buoyed by an excellent winter season to March, by 23.8% year-on-year.

April arrivals were strongly influenced by a Borah religious convention which helped to double arrivals from India and Pakistan which was considered one-off windfall for the local tourist industry.

The John Keells report said that April arrivals from Western Europe which faltered marginally in early April due to fears of civil unrest in the lead-up to the Provincial Council elections, had picked up after the elections to record 16.1% growth during the month.

British arrivals, one of the largest factors in the market at present, had maintained a healthy 15.8% growth while arrivals from France, Italy and the Netherlands have grown 61.6%, 53% and 39.4% respectively.

The report was optimistic about better summer arrivals this year despite competition from other destination in the region with excess summer capacity.

``While the growth is likely to slow from the excellent winter base of 1998, the momentum provided by the growth in the 1H 1999, is likely to push arrivals to a 12% growth in 1999. Arrivals at 420,000 + pax for 1999 should easily surpass the previous high of 407,511 arrivals in. 1995,’’ John Keells said.

Satisfactory year at Habarana Lodge

Habarana Lodge Limited, the popular John Keells hotel which has been described as "a hotel that became a park’’ has reported what its chairman called "a most satisfactory’’ year ending March 31, 1999 with significant growth in both turnover and profits.

The company’s Chairman, Mr. K. Balendra, said that turnover had increased 17% to Rs.119 million and the pre-tax profit was up 81% to Rs.29.5 million.

However, with its tax holiday ended, it had become liable to taxes of Rs.11.5 million against Rs.1.7 million over the previous year. The result was an after-tax profit of Rs.18.1 million, up 24% from the previous year’s Rs.14.6 million.

Balendra said that the company paid a 40% dividend the previous year absorbing tax exempt profits accumulated up to March 31, 1998 when the tax exemption ended. The directors have now recommended a final dividend of 20% for the year under review for shareholder approval.

Balendra said that more capital expenditure is required to maintain and further upgrade the property and this will be undertaken on a phased basis.

The year under review saw capital expenditure of Rs.8 million invested in the purchase of equipment and motor vehicles under tax exemptions offered by the government. Part of these funds also went into the construction of an ayurvedic herbal centre which is now open. Balendra said that this will contribute to enhance the hotel’s future profits.

Habarana Lodge has now become a popular week-end retreat for both Lankans and resident expatriates. Balendra said that visiting tourists too have been complimentary about quality of facilities and the services provided.

He said that a conference and a seminar hall combined with a discotheque will be built during the current financial year and it is also intended to complete the total refurbishment of the kitchen.

He congratulated the team at Habarana Lodge for becoming the first resort hotel in the country to obtain ISO 9002 certification.

John Keells Holdings and its subsidiaries own 78.1% of The Lodge.

The directors of the company are: Messrs. K. Balendra (Chairman), V. Lintotawela, C.J. Fernando, A.D. Gunewardene, S.C. Ratnayake, G.S.A. Gunasekera, J.S. Ratwatte, B.S.H. Mendis and Ms. J.C. Ponniah.

CSE’s May turnover up but indices down

Average daily turnover on the Colombo Stock Exchange (CSE) during May at Rs.94.9 million was a 226% improvement over the April figures partly due to the CTC Eagle sale which enabled May 21 turnover to clock Rs.747.9 million - the highest daily turnover since February 22, 1994.

CSE said in its monthly market report for May that the all share price index closed the month down 0.3 points to 546.8 points while the Milanka index was down .08 points to 889.3 points.

The report said that there were 4 equity issues last month - Namunukula Plantations, Ruhunu Hotels and Travels, Metropolitan Resource Holdings and Nations Trust Bank thatg together raised Rs.400.6 million. The total equity raised by initial public offers during the whole of last year was Rs.349 million which was surpassed in May alone.

Foreign sales continued to outpace purchases with foreign investors being net sellers of Rs.28.3 million worth of shares in May, down from Rs.125.3 million in April.

Although Colombo Stock Exchange remained depressed, most foreign stock markets had experienced high volatility in May with Wall Street’s Dow Jones index breaking the 11,000 barrier for the first time in its history on May 3. However, it subsequently changed direction and shed 2% during the month.

On May 4, the London’s Financial Times index and the Cac 40 in Paris also reached their highest points ever but with speculation about the change in direction of the Dow Jones index, European markets were affected with the Financial Times index dropping 5% and the Paris index 3% during the month.

In South Asia, the Bombay Stock Exchange index gained 19% while Karachi moved up by 10%.

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