LP gas prices likely
to rise shortly
By Asgar Hussein
The rise in world oil prices due to the proposed US
military action against Iraq may compel local LPG producers to
increase the price of gas cylinders. The market leader Shell Gas Lanka
has stated they may have to increase prices in mid-October.
Laugfs Lanka Gas is also considering raising LPG prices.
"Given the manner in which the international oil market is
behaving, if prices go up
further we will be compelled to raise our gas prices," said
Chairman, Laugfs Lanka Gas, W. K. H. Wegapitiya.
The company currently markets a 12.5 kg cylinder at Rs.
396, while Shell's price is Rs. 528.
Mundogas recently stated they will offer a cylinder at Rs.
350, but some expressed doubs whether this would be possible given the
trend in oil prices.
World prices have increased significantly in the recent
past, and this trend continues as another Gulf war looms closer. The
price of a metric ton increased from US Dollars 228 in August to US
Dollars 256 in September.
It is likely that the prices in October may
go up to US Dollars 300, according to Wegapitiya. He added that
the 'spot price' presently stands at US Dollars 309, indicating that
prices will rise further next month.
LPG is a by-product of crude oil and is composed of 70%
butane and 30% propane.
Wegapitiya believed that prices will continue to increase
until February next year because of purchases for the winter season.
He said if a war in the Gulf begins, prices will rise due
to two reasons. Firstly, it would create a panic situation, and large
consumers like Japan, Korea and China will start filling their
inventories. This would result in demand exceeding supply, thereby
pushing up prices.
Secondly, if a war takes place, there will be a supply
shortage as oil facilities in the Middle East (including major
producer Saudi Arabia) will be affected. Such a situation will be
aggravated if Saddam Hussein attacks Gulf states perceived to be US
LPG World -
an authoritative source on the LPG market - stated that the spectre of
US military action against Iraq is keeping LPG prices high. It stated,
"The LPG market is maintaining a close link to bullish but
volatile crude prices. US benchmark crude WTI continues to hover just
under $30/61 - boosted by uncertainty over what will happen next in
president George Bush's policies towards Iraq. Crude strength in turn
is supported by low stocks in the US midcontinent, uncertainties about
opec's output intentions, and rising product prices.
It added that the strength in crude is keeping LPG prices
firm and at their highest levels for the year.
According to LPG World, the most dramatic rise has been
in large cargo propane from the Middle East heading east. Price are
currently around $310/t delivered into Asia, the highest levels of
2002. Butane has followed suit.
It added that state-owned Saudi Aramco's first monthly
"T1" tender is expected to attract sharply stronger bids -
at just under $ 300/t fob - fuelling expectations that the monthly
Saudi contract price (CP) - which is partly determined by the tenders
- is due for a steep jump in October.
Sri Lanka-USA double
taxation treaty concluded
The Protocol Amending the Convention between the
Government of Sri Lanka and the Government of the United States of
America for the Avoidance of Double Taxation and the Prevention of
Fiscal Evasion with Respect to Taxes on Income (1985) was signed on
September 20 at the US Department of State, Washington DC.
Milinda Moragoda, Minister of Economic Reform, Science &
Technology and Christina
B. Rocca, Assistant Secretary of State for South Asia, signed the
agreement on behalf of their respective governments. Ambassador Ashley
Wills, US Ambassador to Sri Lanka & The Maldives was also present
at the signing.
The text of the new protocol, which has been long
outstanding, was finalized at official level discussions during the
visit of the Prime Minister Ranil Wickremasinghe to Washington D. C.
in August 2002.
The protocol reflects changes in the laws and policies of
both countries since the signing of Double Taxation Convention in
1985. It contains provisions to facilitate investment between the two
countries by addressing the issue of taxation of cross-border
payments, investment income, business profits, capital gains and other
types of income. The convention and the protocol also provide for the
exchange of information on tax matters.
The conclusion of the Protocol to the USA Double Taxation
Convention is expected to generate greater confidence in USA investors
wishing to invest in Sri Lanka and would strengthen the existing legal
framework for the promotion of US investments, such as the bilateral
Investment Promotion and Protection Treaty and the Trade and
Investment Framework Agreement (TIFA) which was concluded during the
Prime Minister's visit to Washington D. C. in August.
The peace dividend
By Dinesh Weerakkody
Influenced by the peace process and a successful round of
peace talks in Thailand, the Colombo bourse has been soaring to record
levels helped of course to some levels by the waning resistance of the
PA and the JVP to the on-going peace process, a major issue some
Despite the positive public sentiment and the general
buoyant mood, the real economic position according to IMF does not
look so good. It was however not anticipated that the economy would
show any marvellous results in the first half of the year after last
year's disastrous performance. But nobody really expected the exports
to decline by 18% in the first half, however the pick up so far in the
second half is slower than expected.
We all know the state coffers are empty. The money the
government collects is enough to only meet our current expenditure.
The world is talking of the need to reconstruct the north-east and
they are for peace.
The government at current levels of economic growth
cannot fund the reconstruction and rehabilitation process. Therefore,
prospective donors should not wait for peace to release their funds. Lack of funds can endanger the very peace process that they
What this country needs is development and peace to
travel together. This is the only way Ranil Wickremesinghe can rally
all Sri Lankans to support the peace process. Therefore, Sri Lanka
needs all the support it can from the donor community to put the
economy back on track.
Today a mutually beneficial resolution to the north-east
problem is some thing that all citizens truly desire. But the
expectation of a large peace dividend is truly high.
As important as it may be, it will certainly not be the
panacea to all the economic and political ills ingrained in the
country. Therefore, the government needs to simultaneously work on
removing the road blocks that have impeded the growth process.
Ranil Wickremesinghe is today one of the most experienced
political leaders in the Asian region and has demonstrated that he has
the ability to forge political consensus.
The public, investors and businessmen are confident that
the prime minister is setting the foundation to create an effective
political and economic system that can pave way for a new generation
of leaders who are incorruptible and have the will to bring about
substantial progress to bring the country back from crisis.
In fact, the UNF administration comprises an excellent
blend of experience and youth and there is evidence that there is
clear focus on policy impelmentation and strengthening of the
institutional framework. This
has been well acknowledged by the local and international business
In the past, when many South Asian countries like India
and Bangladesh won back the hearts of investors, Sri Lanka suffered
neglect. Analysts say
political consensus, ongoing pace of reforms, economic revival and the
ability of the UNF leadership to take tough decisions has created a
new wave of confidence.
In fact, even though many of our private sector companies
have suffered losses due to the economic slump in 2001 and due to deep
falls in production in the non export sector, they are now gearing up
for the revival.
Therefore, the developed world could help Sri Lanka
immensely by providing greater access to their markets. This in fact
will help the economy to grow and to provide employment to those
On the other hand, the banks should also support the
economic revival by taking calculated risks.
They should not be allowed to spread their margins further to
avoid a drop in profitability.
Today, like other companies banks also should be forced
to find ways to save money and re-think the way they do business
without being allowed to exert undue pressure on their borrowers in
today's buoyant business mood.
The banks' lending has to be more competitive if the
engine of growth, the private sector, is to exploit this new found
confidence. After all, the financial sector can be described as the
heart of modern economic life. Therefore, it is high time our leaders
in the financial sector came forward to assist the government to
promote macro economic development, because, it is companies that make
up the economy.
Ranil Wickremesinghe unlike any other leader in the last
15 years has pushed the peace process further than ever before. His
approach to break the cycle of violence has been commendable.
He has in the last six months proved that any crisis is
manageable by holding firm and by sticking to clean government. Therefore, as investors regain their enthusiasm for venturing
across Asia and the world becomes one market, Sri Lanka would need a
new breed of political leaders who can articulate a clear vision,
display an exemplary commitment to the law and deliver sound policies.
It is obvious that only enlightened leaders can calm
jittery markets, deliver sound policies and pull our nation together
to cope with today's challenges.
In the final analysis, what Sri Lanka urgently requires
is foreign funding to consolidate the peace process and provide the
people of north and east a peace dividend. They will not wait till a
final settlement to the conflict is reached for the economic revival
to take place.
People expect the government to deliver in the short
term. The government more
than ever needs resources to meet the needs of the people in the north
and east. Therefore, Sri Lanka needs assistance from friendly
countries to begin the process of reconstruction and to maintain the
momentum of the peace process.
Obviously, to rebuild the economy, we will not get all
the resources we need from outside so the economy too will have to
grow fast to generate the additional resources we need to fund the
Lastly, if we want to become the next Singapore in
another 20 years from now we need to get our act together. Rhetoric
will not get us anywhere.
Prima celebrates 25
By far the biggest foreign investment in the country,
Prima Ceylon Ltd., (PCL), last week celebrated 25 years of successful
operations in Sri Lanka.
Within 25 years, Prima has established itself as a major
food group offering a wide range of quality products and providing
direct and indirect employment for thousands of people.
Prima (which in 1961 pioneered the first flour mill in
Singapore) in 1977 entered into a Build-Operate-Transfer (BOT)
agreement with the Sri Lankan government to set up a modern mill to
help the country produce its entire requirement of flour; with the
government controlling wheat grain imports, flour distribution and
pricing. This arrangement also provided valuable foreign exchange
savings for the government through not having to import flour. The
historic agreement between the government and Prima was signed on
September 17, 1977, the birthday of the then President J.R.
Prima's initial investment in Sri Lanka was US$ 54
million and it built the world's largest flour mill under one roof in
Trincomalee within 32 months. President Jayewardene ceremonially
opened the complex in November 1980.
The cumulative investment by Prima Group during the past
25 years, is estimated at US$ 231 million, making it the biggest
foreign investment project in Sri Lanka to date.
This large investment made in stages was to ensure
technology of the flour mill is constantly upgraded and expanded in
addition to strategic diversification into new and related industries
to meet the growing consumer needs of Sri Lankans.
The single mill concept with large economies of scale was
a key factor for PCL's success in providing an economically produced
flour for the Sri Lankan government.
Under this operating concept, Sri Lanka was able to benefit
from 'Government-to-Government' wheat aid of more than US$ 800 million
The original capacity was 1,850 metric tons of wheat
flour per day and today it has been expanded to 2,500 metric tons of
wheat flour per day, with the fully integrated mill served by a
transport network of road, and sea.
Prima diversified into feed business in 1982 by setting
up a modern feed processing plant by incorporating Ceylon Grain
Elevators, which has invested US$ 45 million to date. The company was
instrumental in adding value to the animal feed industry and raising
the quality of livestock industry and was proud to expand its product
portfolio of offering affordable protein for the people. Prima's
confidence in Sri Lanka further improved and in 1992 it invested US$
20 million on Ceylon Agro Industries to launch the state of the art
noodles and poultry processing plant.
Prima's commitment to Sri Lanka was further cemented in
April 2001 when the PCL was converted from a BOT to a
Build-Own-Operate (BOO) agreement which saw a further investment of
US$ 65 million.
Prima's unwavering confidence in Sri Lanka's encouraging
investment climate and growth encouraged the company to further invest
an additional US$ 30 million in 2002 to double the silo capacity,
install a new state-of-the-art flour mill, expand the jetty and wharf
and launch a modern professional baking industry training centre.
More recently Prima ventured into direct transportation of its
flour by introducing 25 Mercedes Benz Prime Mover trailers with an
investment of Rs 220 million. This
cost efficient move was combined with a unique scheme of
self-employment under which the driver-operators of the Prime Movers
would eventually own the vehicles after five to seven years.
The expansion of Prima Group activities has provided
valuable employment to over 3,000 persons directly while its
activities are supporting the income of thousands of more people,
especially in the rural sector. Prima
also offers scholarships to needy children of employees to further
their higher education. Incidentally, Prima's magnanimous gesture to
hand over donations received from well wishers to the government in
1980 to mark the launch of the flour mill inspired President's
Jayewardene to launch the President Fund.
Prima's vision is to provide Sri Lanka with a constant
supply of a wide range of food products that are affordably priced yet
offer good nutritional value. With its excellent infrastructure and
facilities, Prima is poised to become a leading food manufacturer not
only in Sri Lanka but in Asia as well and in the process it will
continue to seek excellence in product quality, innovation,
affordability and delivery to the best satisfaction of all its
stakeholders, especially the people of Sri Lanka.
Karu chief guest at
Shipbrokers prize giving
Minister of Power and Energy Karu Jayasuriya was the
chief guest at the Institute of Chartered Shipbrokers annual prize
giving luncheon held in the famous Drapers Hall in London on September
26. He was accompanied by the Chairman, Institute of Chartered
Shipbrokers, (ICS) SL, Maxwell de Silva.
According to Ilmi, the secretary of the institute, this
is the first time a Sri Lankan was honoured by the institute and
Jayasuriya being the most senior member deserves the recognition and
it gives Sri Lanka much prominence in the shipping industry worldwide.
This shows the importance placed by ICS London for Sri Lanka and the
Sri Lanka branch.
The annual prize giving is well attended by ship owners,
brokers, agents, underwriters worldwide, academics, and foreign
dignitaries, and Sri Lanka is once again on the world map at a time
when the peace process is in full gear. The publicity gain in the
Maritime Center in London is worthwhile mentioning and this is rare
honour bestowed to an individual by ICS London.
When the high powered delegation visited Sri Lanka in
January headed by James Freeland, president of ICS, they were very
much impressed with the initiative taken by the branch, particularly
over the web site developed by ICS SL and the delegation complemented
ICS SL when they met Karu Jayasuriya whilst in Sri Lanka. The Sri
Lankan branch went on to record books by releasing their examination
results through the website which was not done by most of the
professional bodies though all talk about the net and communication.
Mirantha Perera of the British High Commission will be
receiving 'Medite Shipping Co., UK Award" for the Liner Trade
(world prize for overseas student) to the value of Stg. 500 from the
minister. The classes for ICS examinations were conducted by the ICS
panel of lecturers and it gives a lot of strength to the branch in
producing world class products in Sri Lanka, and incidentally,
Mirantha created history by completing the full examinations in two
ICS is the only professional body (member of OPA) in the
field of shipping conducting professional examinations and is now
embarking on a new project to train advanced level qualified school
leavers, thereby making them employable.
Top accounting expert
Sri Lanka will take an important step closer to adopting
international accounting standards when one of the world's foremost
authorities on the subject conducts an international workshop in
Colombo next month at the invitation of the Institute of Chartered
Accountants of Sri Lanka (ICASL).
Dr. Paul Pacter, the author of International Accounting
Standards 39 (IAS 39) dealing with principles for recognizing,
measuring and disclosing information about financial assets and
liabilities, will cover the intricacies of the standard on financial
instruments, at the workshop on October 5 and 6, the institute said.
Explaining the relevance of the workshop, President,
ICASL, Asite Talwatte said increased investment activity spurred by
the improving prospects for peace could see the corporate sector
moving to innovative financial instruments which are new to this
The workshop is intended to provide accounting
professionals with the technical know-how and the level of expertise
required for such financial instruments.
"Moreover, Sri Lanka will have to compete with other
countries in the region to attract foreign capital and synchronizing
with international accounting standards would be a critical factor in
our success in this area," Talwatte said.
"The timing of the workshop will send a clear signal
to the investor community about Sri Lanka's efforts to adopt IAS 39,
as best practice in Sri Lanka. This standard has not as yet been
adopted by countries in the South Asian region."
He said the ICASL, as a member of the International
Federation of Accountants (IFA) was committed to promoting
international best practice in accounting standards in Sri Lanka. The
institute has also been given the responsibility of formulating Sri
Lanka Accounting Standards (SLAS) by the Sri Lanka Accounting and
Auditing Standards Act, and intends adopting International Accounting
Standards as SLAS, he disclosed.
IAS 39, the subject of the Colombo workshop, covers all
financial assets and financial liabilities including all derivatives,
hedging instruments, securitisation, repurchase agreements and equity
It is the International Accounting Standards Comm-
ittee's first comprehensive standard on these subjects.
Dr. Paul Pacter served as international accounting fellow
on the International Accounting Standards Committee and as project
manager for IAS 39 was involved in all stages of the development of
the standard. A founder employee of the US Financial Accounting
Standards Board, he has also served as vice chairman of the Advisory
Council to the US Governmental Accounting Standards Board. He is
currently director of the Global International Accounting Standards
Office of Deloitte Touche Thomatsu in Hong Kong.
Governor, Central Bank of Sri Lanka, A. S. Jayawardena,
and Chairman, Sri Lanka Accounting and Auditing Standards Monitoring
Board, W.A. Wijewardena, will
also speak at the workshop.
The two-day workshop at the Taj Samudra Hotel is jointly
hosted by the ICASL and the Sri Lanka Accounting and Auditing
Standards Monitoring Board.
UML joins hands with
Sri Lanka's No: 1 automobile company United Motors Lanka
Ltd., has joined with Valvoline International Inc., to market the
world's first lubricant, Valvoline in Sri Lanka.
Valvoline International Inc., situated in Lexingtion, KY
U.S.A. commenced operations in 1866 and is in fact the oldest
trademark in the lubricant industry.
Valvoline has been dedicated to the development of
quality, innovative and high performance products and services for
more than 135 years. However, one thing that has remained consistent
throughout is Valvoline's commitment to quality. Today, Valvoline is
the leading supplier of automotive and industrial lubricants,
performance chemicals, coolants and radiator chemicals to more than
140 countries around the globe through 26 manufacturing facilities
meeting the requirements and demands of its global operations.
Valvoline is the only motor oil company with its own industry
certified automotive laboratory. This technological leadership
provides customers a competitive edge.
United Motors, market leaders for well over a decade in
the Japanese brand new market segment, will market Valvoline.
The product portfolio will include automotive and
industrial lubricants, appearance products under the sub-brand Eagle
One, synthetic chemicals under the sub-brand SynPower, performance
chemicals belonging to sub-brand Pyroil and also Coolants and radiator
chemicals with patented technology offered under the sub-brand Zerex.
Sri Lanka has a sophisticated vehicle car park and
automobile enthusiasts, who like maintaining their vehicles. In line
with the vision and mission of the company, United Motors Lanka Ltd.,
plan to provide premium and high quality Valvoline product that would
meet the expectations of the consumers in terms of quality.
Amongst the new entrants in the lubricant trade post
liberalisation, Valvoline is the only brand in Sri Lanka that can
effectively meet the overall requirement of industrial clients,
institutions, and also automobile owners-lubricants, appearance
products, performance chemicals, coolants and radiator chemicals. As
the sole distributor in Sri Lanka, United Motors will initially
concentrate in making this product available throughout Colombo.
However, with the proposed expansion plan, United Motors will make use
of its established branch offices, dealer network, dealer garages and
service stations to spread the distribution of Valvoline island-wide.