home.gif (305 bytes).

Carsons acquire 10% of Aitken Spence via Stock Exchange

The Carsons Group of Companies has acquired a significant 10% stake in Aitken Spence and Co. Ltd., one of the major conglomerates quoted on the Colombo Stock Exchange through Stock Exchange purchases in recent weeks, well informed business sources said.

``There has been aggressive local buying of foreign held shares of Aitken Spence going at bargain levels on the depressed Colombo stock market for the past several weeks,’’ Colombo brokers said.

According to business circles the buyers were mainly the investment vehicles of the Carsons group - the Ceylon Guardian Investment Trust, Ceylon Investments and Rubber Investment Trust. Carsons are the controlling shareholders of the Guardian Investment Trust Group.

Aitken Spence management has been told that these investments have been made in the light of the Guardian Group disposing of part of its extensive quoted share portfolio to concentrated on well managed companies with substantial potential.

``They already held 3% of our shares. the recent buying has increased this stake to around about 10%,’’ a senior Aitken Spence executive said. He said that they were not uncomfortable in this scenario.

Similar acquisition of Hayleys shares by the Carsons group led to takeover fears. Hayleys increased their issued capital by 10% vesting the new shares in an Employees’ Share Ownership Trust in a move that was widely perceived as ``protective.’’

Carsons sources said that they were not investing new money in the Aitken Spence acquisition but utilising resources raised by the sale of illiquid shares in their portfolio.

``Some of them were good shares but illiquid and we wanted to get out of that kind of stock,’’ a Carsons source said.

The Aitken Spence acquisition had cost Carsons an average of Rs. 94-95 per ten rupee share. Aitken Spence successfully made an international placement of new shares at a Rs. 115 price. Local shareholders too were entitled to subscribe at this price with an investment relief benefit available to individuals but not corporate shareholders.

Asked whether they would seek a seat on the Aitken Spence board, a seniors Carsons source said: ``Not unless we are invited.’’

Liberty Plaza owners looking at car parks and spice growing
Property market has collapsed says giant developer

One of Colombo’s biggest property developers have reported "the collapse of the property market’’ which it has attributed to ``changes in government priorities and the lack of confidence.’’

"The marketability of urban space is becoming more difficult also due to the collapse of the property market, requiring more intensive marketing and debt collection,’’ Prof. T.K.N.P. de Silva, Chairman of Colombo Land & Development Company Limited, the owners of Liberty Plaza said in the company’s annual report for 1998. De Silva is also the chairman of the Urban Development Authority (UDA).

Clarissa (Pvt) Limited of Singapore and the UDA are the main shareholders of Colombo Land, with Clarissa until last year holding 51.46% of the company and the UDA owning 21.43%.

The just published annual report of the Colombo Land has reported that during the year ending December 31, 1998, Clarissa had been voluntarily liquidated and its shares in Colombo Land had been distributed among the Singaporean company’s shareholders.

Under this arrangement, Mr. Ng. Eng. Ghee of Singapore has received nearly 4 million shares of Colombo Land comprising 30.34% of the company. He thus becomes the largest shareholder of the company.

De Silva has reported that the UDA had recently appointed a committee to look into the problem of the non-release of some Pettah land to the company in accordance with an agreement reached in 1980s.

He said that the disposal of middle class apartments the company had developed in Dehiwala had not conformed to plan as a result of the collapse of the property market.

The company which had purchased 40 acres of land in Galle to develop a large housing complex had decided to abandon this project due to the Gall Port project being shelved. Thirty three acres of the Galle land had been disposed while 7 acres have been retained as it has been considered to have future potential with the development of the Engineering Faculty of the Ruhunu University, de Silva said.

He said that Colombo Land was set up essentially to engage in urban property development together with the UDA. " (But) these changes in government priorities and a lack of confidence has shattered the property market, forcing your company to look elsewhere,’’ he has told shareholders.

He said that during the year under review, in view of the depressed property market they had followed a policy of not disposing of property and only leasing their holdings. This has been their core business in 1998.

The year under review had seen a sharp reduction in both the turnover and pre-tax profits of the group with turnover down to Rs.58.7 million from Rs.67.6 million and the pre-tax profit down to Rs.22.4 million from the previous year’s Rs.42.5 million.

The chairman explained that the company’s 1997 turnover included Rs.10 million of a long overdue debt that had been recovered.

The year under review had seen a Rs.5 million decrease in interest income as long term purchases were coming to an end and they were adopting a policy of lease only without sale.

Rights issue to raise funds for legal battle

A dispute between Magpek Colombo Land Plantation Management (Pvt) Limited and the Malwatte Valley Plantations Limited over profit share is under litigation, shareholders of Colombo Land have been told. A rights issue is being floated to raise funds for the litigation, Colombo Land and Development Company’s annual report said.

This report for 1998 said that Rs.35.9 million was due on profit share according to the draft accounts of Malwatte Valley for the year ended December 31, 1997.

This sum has not been paid by Malwatte Valley to date and Magpek Colombo Land Plantation Management is now pursuing legal action for the recovery of this sum.

Magpek Colombo Land Plantations are making a rights issue at par in the proportion of 1 new share for every 2 held to raise funds for its future expenses which will largely comprise of litigation cost. Colombo Land said that it would take up the rights accruing to it thereby.

Hayleys maintain bonus track record

A one for fourteen bonus share issue announced by Hayleys Ltd. last week has helped the company to maintain its consistent track record of making a bonus share issue annually for fifteen straight years since 1986.

``In terms of proportion, it is relatively modest given the fact that the company had even made a one for one bonus issue as far back as 1994,’’ an old shareholder of the company said. ``There had been several issues of one for two, one for three and one for four.’’

Shareholders have little reason to complain. Since 1979, they have received bonus shares in all but three years from a company that had strived to give its shareholders, including employees, maximum value.

Hayleys which had a capital of Rs. 200,000 in 1952 will have a capital of Rs. 330 million after the most recent bonus shares are allotted. But shareholders noted that the sum capitalised is a substantial Rs. 32 million and in addition to the bonuses, Hayleys have since 1993 consistently paid a 30% dividend.

From 1986 to 1992 the dividend was even higher at 33%, according to a page in the latest annual report recording the history of dividends and bonus issues 1998/99.

Asked whether the company could maintain its 30% dividend level after the newest bonus in the light of the downturn in the plantation sector to which the group is exposed and other negatives, Hayleys /Chairman Sunil Mendis said: ``It’s too early yet to make a forecast on the current year’s profitability. But all things considered, I think we should be okay.’’

Dipped Products, the Hayleys associate, also announced a one for eight bonus issue last week. The first company from the Hayley’s Group to announce a bonus this year was Hayley’s Exports which is making a one for eight bonus issue.

Hayleys posted a profit of Rs. 355 million attributable to shareholders in the financial year ended March 31, 1999, down 15% from Rs. 419 million earned the previous year. The copany has a stated objective of paying a dividend of over 30%.

UDA ban on commercial use of residential space

The Urban Development Authority (UDA) intends implementing a ban on the use of residential space for commercial use "in the near future’’, the chairman of the Colombo Land and Development Company Limited who is also the chairman of the UDA has said.

This statement has been made by Prof. T.K.N.P. de Silva in his chairman’s review of the 1998 report of Colombo Land and Development Company the owners of the Liberty Plaza.

Although there has been a ban on the use of residential space for commercial purposes for a number of years, and the UDA had at times imposed penalties for such misuse of homes, widespread use of residential premises for various commercial purposes continues unabated.

Several government offices are housed in bungalows constructed for use of officials and located in residential areas.

Reporting that a "glut of space in the market’’ had contributed to the decrease in Colombo Land’s profitability, he had indicated the UDA’s intention of prohibiting the use of residential space for commercial purposes.

"This should reverse the trend in the demand for office space,’’ he said.

Russia’s economic crisis goes from bad to worse

by Kanes
The Russian economic crisis shows no signs of ending. The negative economic growth of 4.6 per cent in 1998 is to be followed by negative growth in 1999 too and Russia will shrink by a tenth. The current rate of growth is minus 4.8 per cent. The situation has been aggravated by a bad harvest - the worst in 45 years - which may lead to a scarcity of bread. Russia’s main export oil had suffered from a sharp decline in price in the last three years, and although there has been an upsurge in recent weeks, it is expected to be temporary. The rouble has depreciated by about 75 per cent in the last 12 months and the foreign reserves amount to $7.3 billion; domestic inflation rate is about 113 per cent and short-term interest rates are 60 per cent. Public sector workers like teachers have not been paid for a whole year, as the treasury is empty and teachers went on strike in January 1999. No foreign investment is taking place. Crime and violence have risen alarmingly; Russia’s murder rate is the world’s highest and average male life expectancy has fallen to African levels - 58 years. Economic chaos is paralleled by political instability; President Yeltsin is too ill to provide effective governance and leadership in overcoming the crisis. He changes his prime minister according to his whims and fancies and has dismissed three prime ministers in 14 months. No economic stability is possible in the absence of effective governance and consequently Russia is drifting from crisis to crisis.

Yeltsin dismissed his last prime minister Primakov on May 12th partly because he was sympathetic to the Communists and sought a peace pact with the Duma (Parliament) and the Kremlin and partly because he came into conflict with Yeltsin’s inner circle and big supporters led by the leading businessman or ‘oligarch’ Boris Berezovsky. Primakov wanted to cut down Berezovsky to size; he was deprived of his hold on Aeroflot and CRT (main TV channel) and his security company was raided; in fact, the Prosecutor General issued a warrant for his arrest but Yeltsin countermanded it. Berezovsky is supposed to be managing Yeltsin’s family fortune and he is strongly supported by Yeltsin’s powerful daughter - Tatyana. Primakov also lost Yeltsin’s sympathy when he intended an investigation into the corruption in Kremlin’s own property management company which had indirect links with Tatyana. He also curbed the trade in illegal Vodka from which many made large profits. Thus, Tatyana, Berezovsky and other Yeltsin loyalists like Chubabis and Yumastov all conspired against Primakov and had him replaced by a Yeltsin loyalist Sergei Stepashin as Prime Minister. The ostensible reason given to Primakov’s removal was that he had failed to implement economic reforms and revive the economy. Primakov was certainly not in sympathy with the market-oriented reforms prescribed by the IMF, but so were many others. The question that is being asked is whether Stepashin would prove equal to the formidable task of reviving the economy.

Economic chaos

Restructuring and reviving the Russian economy would not be an easy task. Government revenue and expenditure are being siphoned off by corrupt bureaucrats. The foreign exchange market is being imposed restriction after restriction, but they have failed to stop capital flights estimated at $2 billion a month. The restrictions have also created a dual exchange rate which is a violation of the promise made to the IMF about convertibility. There has been no tax reform, no bankruptcy law, no banking reform, no elimination of corruption - despite undertakings given to the IMF. Nothing has been done to attract foreign investment; on the contrary, foreign investors are likely to be put off by the nonfunctioning financial system, absence of property rights and lack of a rational tax regime. Russia had earlier promised the IMF to pass new laws regarding taxation and banking reforms by mid-June, but this seems unlikely. As to widespread corruption, none expects Stephashin to fight against it.

When Yuri Skuratov, the public prosecutor, was collecting material to prove corruption at the top - linking Yeltsin’s daughter - Yeltsin wanted him sacked, but the Federation Council, the upper house of parliament consisting of regional leaders, voted to keep him in office. Yeltsin lobbied for Skuratov’s dismissal promising regional bosses autonomy. The Russian economy has managed to survive despite structural weaknesses and gross mismanagement because a substantial part of the economy - some estimate it at around 70 per cent now - is immune to market forces, i.e. it is cashless, politicized and corrupt.

Russia’s debts

One of the biggest problems facing Russia is its large public debt. It defaulted on $40 billion of rouble bonds in the financial crash of 1998. Since then it has fallen behind on a further $1.5 billion in dollar debts. Altogether, it has to pay $17.5 billion in principal and interest on its debts falling due in 1999 and if it defaults it will be excluded from the world’s financial markets. Russia owes a larger amount than any other country to the IMF; it is in the same company as Sudan, Liberia, Congo, Somalia, Yugoslavia, Afghanistan and Iraq which have not repaid their debts to the IMF. It has to pay $4.8 billion to the IMF and World Bank alone this year, but fears are expressed that it will be in no position to do so. Russia may not be able to repay its debts because it is virtually bankrupt. Government revenue in 1998 was $1 billion a month but monthly expenditure was $1.5 billion. Although its foreign exchange reserves are $11.6 billion only about $7 billion is in cash; the bare minimum required to cover one month’s imports is around $4 billion. The Russian budget for 1999 assumes $7 billion of foreign credits but this is not expected to materialize. The Russian budget is now regarded as fiction. Further, as exporters have no confidence in the future of their country, they do not bring home their export earnings but invest them in Cyprus or Switzerland. Under these circumstances, Russia will be helpless without more foreign credits and loans.

Foreign donors and creditors are reluctant to extend further assistance as they have no faith in Russia’s promises and ability to undertake the reforms they desire. The IMF for instance, wants higher taxes, market prices for energy and housing, banking reforms and tax collection in cash and not IOUs but the Russian authorities are generally opposed to raising taxes and implementing other reforms. Many Russian politicians believe that it is Western and IMF advice on matters like privatization and budget stringency that is responsible for the crisis and therefore Russia need not repay the loans given for the failed "shock therapy" and it should not undertake structural reforms which are painful. Some fear that Russia might under these circumstances refuse to repay IMF loans but repay instead some other loans like the World Bank’s. It knows that IMF rules are applied less stringently and less consistently to a large country like Russia with nuclear weapons and which the West desire to prevent from going back to Communism. The Kossovo crisis has in fact strengthened Russia’s stand as the West is anxious not to antagonize it. Russia is demanding $8 billion in the latest round of talks with the IMF but may settle for $4.6 billion - which is sufficient to pay the IMF.

Russia is planning to restructure or seek forgiveness of $100 billion worth of debt it inherited from the former Soviet Union while honouring the $50 billion it has borrowed since then. It is not easy to distinguish between these categories as shown in the case of Russia’s latest default in April on a tranche of "Min Fins" or government bonds which were offered by the Russian government as compensation for those who held hard currency deposits in the former Soviet banks. Although they were issued by the Russian government itself, it has now decided that they are not its problem. The default on "Min Fins" is similar to the default in August 1998 on domestic rouble debt worth $40 billion. These bond holders are now considering a restructuring deal worth one cent in the dollar. The repudiation of the "Min Fins" is bad news for those western banks and governments who hold former Soviet debt. Russia has defaulted on almost all payments since August 1998 and it appears to assume that creditors will agree eventually to another restructuring.

There may be an excuse if Russia is defaulting on its loan repayments because it needs to gain a breathing space for economic recovery. This is, however, not the case, for while other crisis-hit economies have used their financial crisis to restructure and reform, Russia has used its to postpone any restructuring and reform. Its flippant treatment of foreign creditors and investors is unlikely to create confidence in the economy and its management. It appears to be under the impression that it can do anything it likes and get away with it. The West is mainly responsible for this situation - wittingly or unwittingly.

Russian oligarchs

In the meantime, many Russian oligarchs are floundering in business as a result of crash of their banks, accumulated foreign debts and illiquidity. Some of them in oil and gas business have fared well. Among the big oligarchs who are in difficulties are Yuri Luzhkov, Rem Vytakhirev, Vagit Alekperov, Alexander Smolensky, Boris Berezovsky, Vladimir Potanin, Mikhail Khodorkovsky - most of them being bankers. Mikhail Fridman and Vladimir Gusinsky appear to be all right but the one who has emerged as the most powerful oligarch now is Yuri Luzhkov, the Mayor of Moscow, who is expected to contest the presidency next year. None of the oligarchs want to pay taxes and the government is reluctant to enforce its taxation laws strictly. It is said that the government is deliberately lenient to oligarchs as they are the biggest supporters of Yeltsin.

The West’s aim in assisting Russia was to transform it into a free market economy and a friendly power to share the responsibility of the world’s problems, but that aim remains a dream. The pro-Western reformers the West supported were both inept and corrupt and diverted a part of the foreign aid for private gain. The Russian politicians in the Duma still distrust the West and are suspicious of the reform packages of the IMF. The free market economy, the West helped to build, has turned out to be a monster in the form of Mafia or bandit capitalism, resenting and opposing effective governance, taxation and reforms and breaking laws and regulations to make profits by questionable means. The West thought that bandit capitalism would become more civilized with the passage of time but that is not happening. In spite of all the chaos, the West will provide some aid to Russia - at least to prevent it from collapse and turning into an enemy.

Urbanisation feeds the informal economy

by Analyst
One of the consequences of economic growth or really of industrialisation, is the rampant urbanisation. Sprawling cities spring up with large concentrations of urban dwellers, living in cramped houses on narrow streets, in the midst of high rise buildings.

There is the marked tendency for enterprises to establish factories and plants near existing cities. It is because the cities have the infrastructure like power, water, roads etc., as well as the skilled and unskilled labour necessary for industrial growth.

Urbanisation is understood as a rise in the proportion of people living in urban as opposed to rural areas. It also means that where previously settlements were dispersed, they now tend to be concentrated in cities and towns.

Urbanisation involves more than the mere transfer of residence from rural to urban areas. It sets in motion a cultural process which involves alteration in the values and behaviour of those involved. Profound social changes take place which transform the political culture of the country.

The main reasons for migration from rural to urban areas were analysed in the Consumer Finances and Socio-Economic Survey Report of 1987 published by the Central Bank. Better employment opportunities was given as a reason by 20% of the sample and better facilities by another 21%.

There is a great demand for domestic help in the urban areas, made use of by women in particular from rural and estate areas. Many job opportunities are also created in the construction industry where there is a constant demand for both skilled workers like masons and carpenters as well as for unskilled labourers as helpers.

Majority of migrants tend to be unmarried young adults. They usually have very little stake in their villages lacking cultivable land or other resources. Those with educational qualifications also tend to move to urban areas in search of jobs in the formal organised sector as clerks, salesmen, managers etc. They often have close relatives already in the urban areas and cities who will give them a helping hand and a sense of security in a strange environment.

Visits to the village decrease as time goes on with the big event being the visit during the annual Sinhala New Year in April when Colombo is almost deserted. Urban migrants send back remittances to their families in the village either in cash or in kind with consumer durables like television and radio sets. Over time the frequency of remittances also decreases as the migrant’s length of residence in the city increases. But the romantic attachment to the village never quite snaps in the migrants heart.

Slums

The migrants take up residence in a shanty complex when they first take up residences in the city. They cannot afford anything else. But middle class persons like clerks, nurses, teachers prefer to live in the suburban towns and commute to their place of work in the city.

But lower rung workers cannot afford to do so and have no alternative but to take up residence in slums. The slums too have their levels. Some are squalid dilapidated huts and it is to them that new migrants who lack any marketable skills, gravitate to. Others are more solid houses often improved by their occupants bit by bit.

Some of them are quite well off, owning radio and television sets and often tapping illegally into pipe borne water service and overhead electricity mains. Those migrants who arrived in the city earlier often became landlords, renting out slum houses to others. They have moved up in the social scale and acquired respectability.

There are also the political landlords who command influence in the squatter settlement. Many of there slums are given condescending names like "Korea" denoting their inferior social and economic status.

Squatting is illegal

Squatting is an openly defiant act, with squatters taking over almost any urban vacant land which is a road, railway or canal reservation or a vacant undeveloped lot owned by several absentee landlords. These lands are occupied often under the patronage of a local political big-wig. Whatever materials are available to hand are made use of to construct a hut or house.

Third world governments have largely ignored these illegal settlements and taken no action to prevent them until they become a blight on society. The Indian Supreme Court in 1985 ruled that "no person has the right to encroach, by erecting a structure or otherwise, on footpaths, pavements or any other place reserved or earmarked for a public purpose", in a case meant to evict people who lived on the pavements of India’s cities.

But mass scale eviction is impossible. The pavement dewellers of Bombay were the cause of the dispute. The pavements were themselves under the control of "slum lords" who charged new arrivals in the city Rs. 1,000 — Rs. 2,500 rupees for the privilege of being an illegal squatter. Once established these pavement dwellers build shacks, raise families and live out their lives there.

We have so far not faced the problem of pavement dwellers, although our pavements are occupied by hawkers who are no less a nuisance, obstructing pedestrians and forcing them to walk on the middle of the road to be occasionally knocked down by passing vehicles.

The government, both the central government as well as the local municipal authorities ignore the problem. They ignore the problem when it can be controlled. When the problem gets out of hand they draw up plans to build houses for these squatters who had no right to encroach in the first place, thus sending out the wrong signal, encouraging more squatters.

The informal economy

The sub human conditions in slums and squatter settlements create social and political disruptions. These settlements harbour prostitution, crime and drug trafficking. The misery which migrants undergo during and after their migration to the cities can under no circumstances be justified in the name of progress or development.

In some developing countries the urbanisation was a result of industrialisation. But its not so in our country. According to a survey carried out by UNICEF in 1983 (unpublished) in the slums of Colombo, the proportion of the reporting people engaged in manufacturing activities was not significant.

The vast majority of the slum dwellers worked in the informal economy, in retail trade in domestic work and construction. Most of these activities fall within the service sector rather than in production. The survey also showed that 50% of the adults in the slums were unemployed.

This doesn’t mean they lack a source of income. It is not possible to survive in the city without income. Nor is it possible to depend on others, on one’s kinfolk as in the village. So many resort to questionable activities like prostitution, drug trafficking, illicit manufacture and sale of alcohol, theft, pick pocketing and crime.

The policies of liberalisation, and de-regulation have spawned new occupations. They have strengthened the urban bias in the country’s development. According to the Department of Census and Statistics the urban population in 1992 was 21%. But in India it is 27%, Pakistan 32%. Countries like Thailand and Malaysia which have undergone substantial industrialisation have much higher urban populations. In Malaysia the proportion is 43%.

The population in Colombo was 362,074 in 1946. In 1984 it was 643,000. The rate of growth in the city population has been varying. In the 1960’s and 1970’s growth was insignificant. In the 1980’s it grew by about 10%, although there was an outward migration as well with the middle classes leaving for the suburban towns like Mount Lavinia, Moratuwa and Kotte.

It has been estimated that almost 50% of the city population now live in slums and shanties. It also means that the informal economy is very important in the overall economy of the city.

The organised sector traders use pavement hawkers to retail their foods because they would thereby evade taxes. There is no clear separation between the formal organised sector and the informal sector. Often pavement hawkers and itinerant vendors are subcontractors or service providers. Even the large garment industries utilise the services of the informal economy.

Failing urban infra-structure

The former Mayor of Colombo Karu Jayasuriya stated that the infrastructure of water service, drainage and sewerage for the city were under great strain. They were originally laid out for a city with less than half its present population. These utility services will break down unless there is more investment to upgrade them.

Garbage collection and disposal is one serious problem. Environmental groups have protested against a site outside the city selected as a dumping ground. Some environmentalists talk of re-cycling. But the scale of the problem is too large to be dealt with by simple solutions like re-cycling.

Any large scale recycling requires massive investments and modern technology. Garbage collection itself is thoroughly inefficient. Then is the problem of managing labour. Since 1956 no one is able to control and manage labour. Labourers all a law into themselves, not amendable to any discipline. Privatisation is the obvious answer but politicians will then lose a source of patronage, an outlet to give jobs to their supporters.

Nor any municipal regulations regarding constructions enforced. Municipal planning regulations are ignored by all and sundry. The municipal administration is as inefficient and corrupt as the central government administration.

Meanwhile there is greater industrial, commercial and service activities in the city. Large residential and office complexes are built without any improvement in water service and severage services, so there is a tremendous strain on the water service, drainage and garbage collection sevices.

Socialisation

Some writers have argued that cities are "theatres of accumulation" where the infrastructure is available for the introduction of modern capitalism. They are also said to "diffuse the culture and values of westernisation. They act as canters of operation for modern commerce, finance and industrial activity and providers of appropriate environment for capital expansion and deepening.

"Cities are the arena in which foreign and local capital markets, advertise and sell the philosophy of modernisation, efficiency and growth through initiative life styles and consumerism and in so doing undermine non-capitalist production systems and values" — W. Armstrong and T. G. McGill. "Theatres of Accumulation: Studies in Asian and Latin American Urbanisation.

It is correct that cities and urban areas provide favourable investment conditions for investors given the large accessiable market and the available labour force. But there are also nagative factors. Lack of adequate resources to upgrade the infrastructural capacities is one serious problem.

The increasing demands for urban services such as the water supply, drainage, sewerage, electricity, garbage collection, public transport etc., cannot be met owing to lack of resources. Their services soon deteriorate owing to poor maintenance and failure to re-invest.

Social break-down

Sao Paulo in Brazil is a fine example of what happens when a city keeps on expanding while the public services fail. A quarter of the population of over 10 million lives in shanty towns. Unlike the earlier migrants from the rural areas, the later migrants could not make good.

Economic growth slowed down and grounded to a halt. Unemployment increased and with its crime and violence escalated, especially in the poorer districts. In a short period of 3 months of 1998, 2,129 people were murdered or roughly one each hour. Add to that pollution, traffic congestion and general chaos and 60% of the inhabitants wanted to leave the city.

The city’s air and water ways are polluted and its drains overwhelmed by storms, producing floods that stop traffic for hours. Municipal management has collapsed. The upper class inhabitants of the city live in a fortified enclave. If they venture out after dark they are mugged. The enclave has its own security staff.

If no action is taken to stop encroachments by squatters and crime not checked its only a matter of time before Colombo becomes like Sao Paulo. We already have high pollution of the atmosphere and regular flooding of the roads with every downpour of rain. In the coming months the economy is expected to slow down considerably. Urban unemployment is likely to increase and with unemployment crime and violence will increase.

Drug trafficking is already high. Rising prostitution could lead to the spread of AIDS. When the economy slow down those on the margin will find it hard to make ends meet and will resort to crime and violence. The signs of a breakdown in law and order are already evident.

Local politicians have to reflect the demands of the squatters. Since they operate in the informal economy they must represent their interests and support their demands for deregulation pavement hawkers have to the protected. So also squatter settlements. Leftist politics, the politics of the working class, are irrelevant.

Control Migration

Two governments, China and North Korea have long established severe restrictions on population mobility and have succeeded. The population of Pyonyang, the North Korean capital has not changed for 10 years. The population of Shanghai in China has remained constant.

Controlled over the mobility of the people is established by a system of passes. Temporary visits to Chinese cities is allowed but permanent or long term residence is illegal and requires registration with the appropriate governmental authorities. The system of control of peoples movement is effective. Of course such controls are possible only under authoritarian rule. So we have to turn to other methods.

The disparity in incomes between urban, rural and estate sectors must be reduced. There is a gap in medium income at constant prices between urban and rural areas. It increased from Rs. 75.00 in 1978/79 to Rs. 82/- in 1981/82 and to Rs. 156/- in 1986/87, according to the Consumer Finances and Socio-Economic Survey.

The policies of liberalisation and deregulation have strengthened the urban bias in the country’s development. The gap between urban and estate sectors was even more pronounced. It increased from Rs. 197 in 1978/79 to Rs. 269 in 1986/87. Narrowing this gap in urban, rural and estate sector incomes is important.

Increasing rural incomes alone is not enough for then more villagers will be able to afford to migrate, so urban incomes must be stabilised by holding them at correct levels. Narrowing the gap in urban and rural incomes is an effective way of reducing the flow of migrants to the urban areas.

The productivity levels of rural areas must be increased. More funds have to be diverted to rural areas for development. The rural sector contains most of the poverty, and most of the low cost sources of potential advance but the urban classes are more articulate and organised and governments have capitulated to the letters demands.

Scarce investment resources go to build expressways instead of rural infrastructure. Doctors, teachers, engineers reside in urban areas even if they were born and bred in the rural country-side. Most of them attained their positions owing to the urban-based educational system bat are reluctant to give up the comforts and luxuries of city life for the relative discomforts of the villages; unless they are sent there by the government to serve in rural hospitals. But it is the city and urban hospitals that are well staffed with doctors, nurses, teachers etc.

The educational system does not train youngsters to become better farmers, better craftsmen. They are not taught animal husbendry or other pertinent subjects. Instead they are taught about the national heritage about monuments, about the lives and careers of political leaders.

The little substantive training prepars bright villagers for urban jobs. The devolution of power to provincial councils should help to check the urban bias in resource allocation. But a breed of irresponsible and corrupt politicians in these councils are not held accountable by the rural people.

It is necessary to strengthen the weak accountability provisions in the law, laws must be passed to surcharge local politicians who misuse their office. Merit must be laid down for recruitment. And the councils should be allowed to raise their own revenue.

Aitken Spence gets LOI for 40 MW power projects

Aitken Spence and Co. Ltd. which plans to take a 51% slice of two new 20 MW power plants to be located at Anuradhapura and Matara have just been informed that the cabinet appointed negotiating committee has approved the issue of a letter of intent subject to cabinet approval.

This project which Aitken Spence Chairman/CEO Ratna Sivaratnam said would make a useful contribution to the group’s bottom line was opened for bids in October 1996 and offers made by eight bidders were evaluated and assessed. Thereafter a short list of two preferred bidders were identified.

Aitken Spence originally intended to go into a joint venture with the Tomen Corporation of Japan on this project. But Tomen, affected by the Japanese economic crisis, pulled out.

``We are now talking with Wartsila Power Developers of Finland who will be coming in. The Commonwealth Development Corporation will also come in,’’ Sivaratnam said.

Eighty percent of the US $ 40 million project to be established on a BOOT (build, own, operate and transfer) basis will be funded by a group of international investors expected to be led by the International Finance Corporation (IFC), the Commonwealth Development Corporation and a consortium of local banks, Sivaratnam said.

The price at which the electricity generated in the two plants will be sold to the CEB has been agreed on and the project is considered ``most viable.’’

Leicestershire businessmen back for seventh visit

The Leicestershire Chamber of Commerce & Industry will be making its seventh visit to Sri Lanka in 5 years from July 19 to 23 - this visit being only 10 months after the last.

The British High Commission in Colombo said that 26 companies will be represented on this delegation seeking customers, agents and joint venture partners.

"They will be offering a wide range of goods and services ranging from machinery, accessories and consultancy services for the apparel industry, to renewable energy systems and scientific instruments. Previous missions have resulted in the forging of a large number of business relationships, and several members of earlier missions have successfully established manufacturing bases in Sri Lanka which are now producing goods and services for both the local and export markets,’’ a High Commission news release said.

The Leicentershire Chamber is the leading business organisation for the English county of Leicestershire. It represents 2,000 businesses employing over 120,000 people engaged in providing a wide range of products and services. The economy of Leicestershire is diverse, but is particularly well known for its engineering and textile related activities.

The news release said that Mr. Keith Horton, Chief Executive of the Leicestershire Chamber and Secretary to the UK - Sri Lanka Business Council, will lead the mission which will be based at the Taj Samudra Hotel.

"Mr. Morton will be available for consultations throughout the week and will be pleased to meet with local companies during his stay. The Trade Mission Co-ordinator is Ms. Stephanie Albon who will be pleased to assist local companies wishing to making contact with individual mission members. General assistance may be sought from the Commercial and Economic Section at the British High Commission,’’ the release said.

home.gif (305 bytes) | NEWS | PROVINCIAL | POLITICS | EDITORIAL | DEFENCE | FEATURES | LEISURE | BUSINESS | ADS |