buys bus companies' equity
The British-led IBIS
consortium on Thursday acquired a 39% equity of 6 of the 13 state-run
bus companies. It was one of the largest transactions in the history
of the Colombo Stock Exchange.
As there was only one bidder
for the purchase of the shares, the price was determined at the
minimum purchase price required by the government, which amounts to Rs.
The British-led consortium
includes IBIS Transport Consultants, with technical collaboration from
Transbus International (part of the Mayflower Corporation Plc). The
local partner for the consortium is Latec Engineering &
Management Services (Pvt) Ltd.
The investors were identified
for Public Private Partnership Arrangements (PPPA) in the 6 state-run
bus companies on the All or Nothing Board of the stock exchange.
The consortium will
incorporate three companies within two weeks to run the bus companies.
They include the Western Bus Company (Pvt) Ltd., Southern Bus Company
(Pvt) Ltd., and New Central Bus Company (Pvt) Ltd.
The Western Bus Company will
operate the Colombo Metropolitan Bus Company, Gampaha Bus Company and
Kalutara Bus Company. The Southern Bus Company (with Free Lanka
Trading Company as the management company) will run Sabaragamuwa Bus
Company, while the New Central Bus Company, (with Free Lanka Trading
Company as the management company) will handle Mahanuwara Bus Company
and Rajarata Bus Company. All these companies are expected to be under
the new management in mid-November.
The government will have a
51% shareholding of the 6 bus companies, the investors 39% while the
balance 10% will be held by employees.
Ian Bulley, project director
of the consortium said, "We are very pleased to have acquired a
39% shareholding in these companies. We are looking forward to working
with our partners in the government of Sri Lanka, Free Lanka Trading
Company and the existing management and staff of the bus companies.
Together we will deliver a modern, reliable, safe and efficient bus
network for the people of Sri Lanka."
Informed sources said the
government will form a monitoring body to overlook the affairs of the
privatised bus companies. As such, matters like fare increases and
transport concessions will be determined only after negotiations with
The investors have agreed to
abide by the terms and conditions set out in the Shareholders
Agreement and the Management Agreement issued by the Public
Enterprises Reform Commission(PERC) issued prior to bid date.
The six bus companies
together have a fleet of around 5400 buses with 23000 employees and an
annual turnover of approximately Rs. 4.5bn. The new PPPA will infuse
new capital, efficient management and add value to the companies
through a realistic business vision, the benefits of which will be
passed on to the public and the employees of the companies. The board
of directors will consist of up to 10 directors out of whom 5 will be
government directors. The chairman shall be appointed from among the
"The PPPA is designed to
enhance the service and efficiency levels of the bus companies in
order to meet the needs of the public. This includes all remote and
rural routes, first bus, last bus, school trips and other priority
trips which are currently operated by the companies. Special
concessions on season tickets for schools, universities and technical
institutions will continue to be made available under the supervision
of the government," PERC sources said.
Under the provisions of the
agreements to be signed with the investors, a golden share will be
allotted to the Secretary to the Treasury which carries special
powers. The approval of the golden shareholder will be required for
many of the activities of the companies such as procurement procedures
and guidelines, lease, mortgage or charge on the assets, establishing
or investing in associated or subsidiary companies. Under the terms of
the agreement, to government will establish a Bus Monitoring Unit (BMU)
that will monitor among other things, the provision of the service
levels and quality of service provided by the bus companies under the
ABB close to collapse as
shares reach a record low
ABB, Europe's second biggest
engineering group, was on the brink of collapse last night after a
shock profits warning cut its share price by nearly two thirds.
Prices of the group's bonds
also fell sharply, leading many analysts and investors to warn of
possible default if it failed to refinance $3.7 bn of debt due to be
repaid over the next 12 months.
Jurgen Dormann insisted the group would survive but admitted there had
been a breakdown in internal reporting procedures that encouraged
managers to underestimate problems.
"I really have to sort
out what is wishful thinking and what is reality," he said.
"I have to change the culture, especially to encourage more
openness and transparency internally, and this makes me cautious
(about making promises)."
ABB's problems have been
triggered by mounting asbestos losses in the US and its failure to
block additional compensation claims through an appeal to the US
But further details of ABB's
deteriorating trading position are expected in third-quarter results
due tomorrow. Following a board meeting today, Dormann is expected to
announce plans to accelerate a stalled cost-cutting programme and add
further companies to an existing list of disposal candidates. He also
hopes to persuade friendly banks to come to the company's rescue for
the second time this year.
insistence that its $5.2 bn debt mountain was under control failed to
reassure investors yesterday. Moody's and S&P cut their credit
ratings for ABB and warned of further downgrades.
This would place severe
pressure on ABB's attempts to issue new bonds next year and negotiate
a back-up bank facility with bank lenders. An existing $3 bn facility
- put in place via Barclays Bank, Citigroup and Credit Suisse during a
rescue in March - is due to expire in December.
Head, Credit Research,
Gartmore Investment Management, Karl Bergqwist said: "It comes
down to credibility. The company has a history of relentless
disappointments and investors just don't know if they can trust the
numbers any more."
ABB's attempts to limit
future asbestos liabilities by seeking bankruptcy protection for a
troubled US subsidiary were also called into question.
US lawyers, including those
behind the recent appeal to the US Supreme Court, said flaws in the
legal system meant some states would allow alleged victims to sue the
parent company regardless of any bankruptcy by its local subsidiary.
ultimately may not be effective as long as states like West Virginia
can hear cases from all over the country," said Walter Dellinger,
lawyer at O'Melveny and Myers, who led a recent supreme court
challenge involving 250 companies.
ABB shares closed down 62% to
a record low of SFr2.05 in Zurich.
- Financial Times(Asia),
to become more customer focused and market oriented
Sathosa, the retail arm of
the Co-operative Wholesale Establishment (CWE), recently enlisted the
support of two of Sri Lanka's leading advertising agencies - Q&E
Advertising and Masters Advertising - in their effort to become more
customer focused and market oriented.
With an annual turnover of
around US$ 210 million, Sathosa markets a range of essential
commodities from food to hardware and sport goods at comparatively low
prices. In order to expand its image and customer base , the Ministry
of Commerce and Consumer Affairs is in the process of implementing a
The existing Sathosa retail
stores - all 157 of them - will be upgraded into super malls. In
addition, 200 Sathosa supermarkets and 100 'A' grade Sathosa outlets
are scheduled to open by the year 2005.
Commenting on the expansion
programme, Minister of Commerce and Consumer Affairs, Ravi
Karunanayake stated, "Sathosa has come to the government's rescue
in the past to keep prices of essential commodities at reasonable
levels. And the retail outlets also offer opportunities to small and
medium scale industrialists to sell their produce under better terms
According to Acting Chairman,
CWE, Lal Wickramatunge, the restructuring process will enhance the
service quality in terms of price, products and customer care. To that
end, the ministry's consumer care unit is already involved in keeping
strict tabs on service levels and handling customer complaints.
Subsequently, the ministry
has assigned their advertising agencies, Q&E Advertising and
Masters Advertising with the task of conveying the government's
message more effectively whist uplifting the perception of Sathosa as
Sri Lanka's largest retail store network.
The two agencies were chosen
after a rigorous selection process. Q&E Advertising - Sri Lanka's
largest independent advertising company will handle corporate
advertising, while Masters DDB and Media Maps will take on the
responsibility of event marketing. Commenting on their choice of the
two agencies, Director, Media and Marketing Communications, CWE, Jumar
Perera said, "five agencies pitched for the account. After strict
evaluation, we settled for these two agencies, given their strength in
corporate brand building and event marketing."
Association of Travel & Tourism (SLATT) to be launched
The Travel Agents Association
of Sri Lanka (TAASL) and the Sri Lanka Association of Inbound Tour
Operators (SLAITO) will team up shortly to jointly form a new
association named Sri Lanka Association of Travel & Tourism (SLATT)
encompassing all travel agents and tour operators into one
This is indeed a landmark in
Sri Lanka where all travel agents and tour operators will be united
under one association to work for the betterment of tourism in Sri
Lanka and to represent the industry with one voice.
The new association will also
help to streamline the inbound and outbound sector activities to
prevent a conflict of interest between them and to facilitate the new
provisions that would come into effect through the proposed Tourism
Development Law, mainly the new marketing bureau to promote Sri Lanka.
Although the new association
will link the two main sectors, inbound and outbound, their activities
will be run independently by two executive committees comprising 12
members per committee and headed by an independent chairman for each
Each sector is further
divided into three levels, large, medium and small, in order to ensure
equal representation for all segments. Membership varies from Rs.
18,500 for the lowest category to Rs. 60,000 for the large scale
The committee of management
of the new association will consist of a president, vice president and
the two chairmen of the destination management and outbound sections.
Membership in the Sri Lanka
Association of Travel & Tourism will consist of three categories,
inbound (destination management), outbound and associate. Current
members of TAASL and SLAITO can join as inbound or outbound members
and will be exempt from paying the entrance fee if joining before
March 31, 2003.
Organisations in the tourism
industry that are not current members of either TAASL or SLAITO can
join as associate members and this category also provides membership
to overseas tour operators, hotels, restaurants, airlines, tourist
shops and the media.
The new association will be
launched at the BMICH on November 25 and the Prime Minister is
expected to grace the occasion as the chief guest and also address the
gathering of approximately 500 tourism professionals. The Minister of
Tourism will be the guest of honour. After the launch of the
association, a cocktail party will be held at the same venue where the
entire travel trade will be represented.
Further details of the Sri
Lanka Association of Travel & Tourism could be obtained from the
secretariat functioning under the aegis of the Ceylon Chamber of
Milk - latest entrant to the market
With competition growing with
the large variety of milk powder available in the market, consumers
have become more choosy regarding the milk powder they buy.
However, for those who are
familiar with the brand name of well known products, choosing the
correct milk powder wouldn't be a problem.
Whether a new name or an old
name, it is always the quality and high standards that attract the
consumers to a product.
This is why many consumers
have started purchasing Diamond Full Cream Milk Powder, the latest
addition to the market. Diamond Best Foods, as the company is known
today, was originally started as P.M. Mohamed Ali and Co in 1959.
Diamond Best Foods is owned
by Mohamed Fawmey, who is a partner of P.M. Mohamed Ali and Co.
Diamond Best Foods, while producing items such as sugar, dhal,
basmathi rice and tin food among other products decided to go ahead
with the packeting of milk powder as their success in the market kept
According to Mohamed, the
milk powder imported from Australia having passed the required
standards and hygiene, is packed in Sri Lanka. The Diamond milk powder
has a one year shelf life. This is the first time the company has
ventured into the milk powder business.
With a 28% cream intake that
is good even for children, Diamond milk powder conforms to the high
standards and hygiene required in the Sri Lankan market.
According to Mohamed, their
competitors have started spreading rumours that Diamond milk powder
doesn't maintain the high standards required by the food hygiene
However, Mohamed guarantees
all his customers that all they have to do is taste the product to see
the difference in taste. "Our prices are reasonable compared to
other milk powder in the market and we can assure our customers that
we will continue to maintain the high standards they require,"
The advertising agency
promoting the new brand is 7 Plus.
to be exported to Sri Lanka
Following a British Potato
Council (BPC) inward mission at the end of May, the Sri Lankan
government has agreed to phytosanitary measures that will allow
exports of GB seed to Sri Lanka for the first time in several years.
At present Sri Lanka imports
12,000 to 15,000 tonnes of seed each year. These seeds are largely
sourced from the Netherlands with the balance brought in from
Even though Desiree was the
dominant variety in Sri Lanka it is now been replaced by newer red and
white varieties. R.E.W. Ritchie Seed Potatoes is the new seed
Owner Bob Ritchie of
Cairnandrew has for the past 20 years been exporting potatoes to Saudi
Arabia, Spain, Turkey and Thailand. According to Ritchie a delegation
from Sri Lanka met him as they too were interested in the Desiree
In order to educate the Sri
Lankan officials on the product the BPC organised a week long
programme with the specific objective of opening up this potentially
lucrative market for GB seeds.
During their visit Director
General of Agriculture, Dr. Jayawardena and Director of Seed
Certification and Plant Protection, Dr. Weerasena got a good overview
of seed production and classification in Britain.
The awareness program
included inspection and pest and disease testing together with an
overview of the disease pressures faced by seed growers in Sri Lanka.
The Sri Lankan officials also
had a look at the seed production in the fields, as well as grading,
storage and packing facilities.
Notably, the Desiree variety
includes the removal of the need for post harvest virus testing which
will be required for seed supplied from countries other than Britain.
The post harvest virus test
will be replaced by growing crop sampling and testing for virus which
will not therefore take the additional time needed for the original
test which makes it very difficult when supplying to Sri Lanka in time
It is hoped that by
encouraging farmers to grow their own potato seeds and start their own
business, the importing of food would be lessened, thereby solving
part of the unemployment problem in the country.
president of ACPM
Sam Stembo took over the
presidency of the Association of Certified Professional Marketers (ACPM)
with effect from October 2002. ACPM is a global association of
certified professional marketers, founded in March 2002. Sam, a
certified professional marketer and a chartered marketer (UK) counts
over 20 years in marketing and management. He is a founder fellow of
the ACPM, member of the Sri Lanka Institute of Marketing, Chartered
Institute of Marketing (UK), Canadian Institute of Marketing and
Institute of Marketing Management, South Africa.
He is currently the managing
director/CEO of Institute of Global Resource Development (INGRED). He
has held the positions of managing director of Panlanka Networking
(Private) Limited and Specetonet (Private) Limited, director,
educational projects of Worldview Global Media Limited,
director/general manager of Worldview Institute, executive director of
Sri Lanka Institute of Marketing, marketing director of Family
Planning Association, marketing manager of GTE Directories Lanka
(Private) Limited, account planner of Mel Ads Limited and director of
Business Support Services (Pvt) Limited before he took over the
current position in September 2002.
Sam is a teacher and a
trainer in marketing and management. He has functioned as a resource
person is training programmes and workshops conducted in Singapore,
Malaysia, Philippines, Hong Kong, Thailand, Taiwan, Japan, India,
Bhutan and Nepal.
He has also presented papers
at numerous professional forums and contributed articles to various
journals and magazines including the South Asian Journal of
Management. The case study co-authored by him won the second position
in the case study competition conducted by the Association of
Management Development Institutes in South Asia (AMDISA).
forges ahead successfully
If their performance in
today's intensely competitive insurance market during only the first
six months of 2002 is the standard to judge success by, then
Janashakthi Insurance is surely on its way up among the key players in
the industry and poised to forge ahead and increase their present
significant share of the market.
The company has recorded a
31% growth in the first six months of this year in comparison with
2001, from Rs. 130 million to Rs. 170 million in life business.
The growth in first year
premiums, or FYP as it is commonly known in the industry, stood at 53%
for the same period. In terms of financial statistics, FYP grew from
Rs. 58.6 million to Rs. 89.5 million.
Director, Marketing, Tryphon.
R. Mirando said, "The growth in FYP is very satisfying, since it
is a clear indication of a greater number of customers preferring
"As in most other areas
of our business, we adopt the more realistic approach in measuring
progress. Hence, the choice of FYP to measure progress," he
With regard to general
insurance, the company continues to maintain its steady progress. Once
again, it has proved to be a very formidable source in the local
insurance industry by posting a 26% growth over the previous year from
Rs. 343 million to Rs. 432 million.
Janashakthi's total gross
written premium from January to June 2002 increased from Rs. 473
million to Rs. 602 million. This reflects a 27% growth over the same
period in 2001 in respect of life and general business.
The key factors behind the
success trends are stronger focus on customer service that ensures
retention of their business, restructuring and consolidation of
company network and enhancing the quality of field sales operations
and greater public confidence consequent to the acquisition of the
National Insurance Corporation.
Mirando added that the
company is now in the process of installing a highly advanced computer
system networked to all branch offices. This is expected to enhance
the overall quality of service standards considerably.
acquires commercial banking operations of AEB in Sri Lanka
Nations Trust Bank made local
banking history when they took over the commercial banking operations
of international banking giant American Express Bank (AEB) in Sri
Lanka, having successfully negotiated its purchase.
Nations Trust Bank, a public
quoted company backed by three main shareholders, the premier local
blue chips John Keells Holdings Ltd, and Central Finance Co. Ltd, and
the International Finance Corporation (IFC) of the World Bank,
declared open this latest addition to their banking operations at 104,
Dharmapala Mawatha, Colombo 7, in the presence of chief guest,
Governor, Central Bank, A.S. Jayawardene, Chairman Vivendra
Lintotawela, directors of Nations Trust Bank, customers and well
Nations Trust Bank, which has
embarked on a dual strategy of expansion through acquisition of
related strategic businesses and branch openings, presently operates
16 state-of-the-art branches in strategically important locations.
The bank's acquisitions
include Standard Chartered Kandy branch, Waldock Mackenzie Ltd.,
Deutsch Bank retail operations and now Sri Lanka's commercial banking
business of American Express Bank.
Director/CEO, Nations Trust
Bank, Moksevi Prelis said that both American Express and Nations Bank
were committed to a smooth transfer of operations, with the least
possible inconvenience to the customers.
Prelis also said that they
would ensure the provision of the highest standards of service,
augmented by greater accessibility and a broader product range
"Our online connectivity gives our customers the flexibility to
transact their business at any of our 16 branches, including those
that offer everyday banking."
Nations Trust would also make
available to all AEB customers the advantages of multi-channel
accessibility which include ATMs, NTB's online internet banking and
telephone banking. NTB's ATM cards which are linked to the world-wide
Cirrus Maestro network, enables customer transactions both locally as
well as internationally.
A majority of AEB's staff
would be part of the Nations Trust Bank's team, thus ensuring
continuity of operations and service to their clients.
Corporate customers too will
be able to avail themselves of the full range of trade, lending, money
market and foreign exchange products, as well as investment banking
products through Nations Trust's fully owned subsidiary Waldock
Nations Trust Bank will soon
house its private banking business at the Dharmapala Mawatha branch.
After the take over of the
commercial banking business of AEB, NTB will continue to operate the
American Express foreign exchange services in Sri Lanka as the
American Express foreign exchange representative. The customers of NTB
can now have access to over 1700 travel service and foreign exchange
officers world wide. NTB will continue to operate the foreign exchange
booths at Gabo Travels, Ceycan, Hemtours and Jetwing Travels.
Outgoing Country General
Manager, AEB, Akbar Khan said following a strategic review of its
worldwide operations, the board of directors of American Express Bank
Ltd. (AEB), has decided to sell its Sri Lanka commercial banking
operations to Nations Trust Bank Limited.
The decision to sell this
business to NTB was taken after a careful review of all interested
buyers keeping the interest of clients and staff as the leading
In conclusion, Prelis said
that this was indeed a landmark event in local banking and said it
augured well for the economy of the entire country, whilst reinforcing
the fact that Sri Lankan banks had now assumed their role as major
players and a force to be reckoned with in the local as well as
foreign financial markets.
Cumberbatch profits up
Carson Cumberbatch &
Company Limited has reported a notable growth in consolidated turnover
and profit before tax in the half yearly review for the six months
ended September 30, 2002.
This growth was brought about
by increases in both business volumes and profitability in their core
businesses, namely, brewery, investment holdings and palm oil, based
in Sri Lanka and the South East Asian region, whilst real estate and
leisure sectors have not performed up to expectations.
Consolidated turnover was Rs.
2 billion and consolidated profit after tax Rs. 327 million while the
shareholders' funds including minority interest as at September 30,
was Rs. 6.9 billion. The half yearly results for the current year
reflects almost the entire profitability of the last financial year.
The recovery in palm oil
prices in global markets strengthened the performance of the
plantation business. These prices are expected to hold for the next
few months, enabling the sector to generate a reasonable return this
year. The new plantation project in Indonesia, PT Agro Indomas (PTAI),
which currently has over 3,000 hectares of immature area representing
22% of the total planted area, will attain full maturity during the
year 2003/04. PTAI recorded a turnover of Rs. 489.77 million during
the period under review.
The performance of PTAI is
expected to improve towards the end of the financial year, given the
steady world market prices and high cropping period projected towards
the latter part of the year.
A planned replanting
programme is presently being done in the Malaysian plantations of the
group in order to ensure competitiveness and productivity in the long
A modest growth in sales,
together with the cost savings resulting from consolidation of
operations at one location, account for the improved performance for
the quarter, when compared with the previous year. Nevertheless, low
consumer purchasing power and regulatory constraints continued to
affect shareholder returns. Brewery sector reported a turnover of Rs.
1.18 billion during the first half of the current financial year,
while the profit after tax was Rs. 263 million. The group's brewery
business continues to emphasis the need for speedier implementation of
reforms in the regulation of the soft alcohol industry.
During the six months under
review, the market value of the Guardian Group portfolio grew by 36%
while market value as at September 30 stood at Rs. 2.3 billion. A
consolidated profit after tax of Rs. 128.97 million was posted by the
Guardian Group. The recovery in the local stock market presented more
opportunities for this sector to enhance the value of its holdings.
Moreover, the proceeds of the
rights issues at the beginning of the year by this sector were also
utilised to secure the benefits of the revival in the stock market.
The group's investment holdings sector is activity focussing on
diversifying its portfolio into viable long-term infrastructure
projects as a future strategy.
The real estate business
turned in a satisfactory performance while the leisure sector was
affected by unattractive market conditions.
Carsons reports that it is
greatly encouraged by the new direction that the Sri Lankan economy
appears to be taking and the progress of the peace initiatives.
It is hoped that the revival
in investor confidence and the wide ranging economic reforms that have
been initiated will provide a better foundation for businesses to
operate in future.
The Guardian Group has posted
a consolidated post tax profit of Rs. 128.97 million, for the six
months ended September 30, 2002, an increase of 220% compared with the
corresponding period of the previous year.
The improvement in
performance is attributed to the recent progress in share market
activity which responded to a series of positive events such as
progress in the peace process, clear focus on economic and fiscal
reforms, revival in foreign direct investment and re-activation of the
privatisation process. As at September 30, 2002, the group's portfolio
with a market value of Rs. 2.3 billion, recorded a significant
improvement of 36% against the previous year. This increase can be
compared against the increase in the ASPI of 39% during the first half
of the year.
The enhanced liquidity
position as a result of the group's successful rights issues during
the last financial year, is now being utilised to benefit from this
revival in the market. In the six months under review, the group's
portfolio was enhanced by adding shares at a cost of Rs. 143.74
million. Disposals during this period enabled the group to acquire
other liquid stocks with good performance potential at attractive
TMC at Mt. Lavinia Hotel
"Though dreaming is
something that is easy to do, making those dreams a reality, which
requires hard work and team building is the difficult task," said
the Minister of Economic Reforms and Scientific Affairs, Milinda
Moragoda speaking to a large gathering of members of The Management
Club as the chief guest at the launch of their newly set up extension
at the Mt. Lavinia Hotel.
He indicated that the skills
and resources available in Sri Lanka should be shared across the
country through institutions like The Management Club and said that
only such contributions will make ours a better country than now in
The British High
Commissioner, David Evans stressed on the importance of Sri Lanka as a
regional hub where more than 120 joint ventures of Britain and Sri
Lanka operate. The Director, British Council, Tony Obrien, patron, CMI,
expressed his appreciation of the social welfare activities undertaken
by The Management Club.
Chairman, Management Club,
Fayaz Saleem indicated that the success story was a result of a
collective effort of a set of individuals with a multitude of diverse
the People's Bank be rescued?
Is there a different way out
other than the arguments advanced by the trade unions and other
people's organisations against privatisation? Do we have any other
option other than privatisation of state banks? How would the
privatisation of People's Bank which was established through the
Cooperative Movement with a view to serve the masses impact upon the
President, Sri Lanka
Cooperative Council and Vice President, Asia-Pacific Health
Cooperative Federation, Lionel Samaras- inghe's views on the issue are
The privatisation process of
state institutions has, of late, become the hotly debated issue in Sri
Lankan society. The basic objective of this exercise is the
utilisation of the proceeds accrued from privatisation of state
entities in the economic development process since the aspects of
management and entrepreneurship of the private sector remain more
efficient than the public sector.
Notwithstanding the various
shortcomings observed in the privatisation process, it has resulted in
more benefits to society when comparing the benefits accrued during
the period of state ownership.
In this context, one may
argue whether it is not possible to build up a strong management
within the state sector without resorting to privatisation of state
entities. But, our past experience indicates the failure of such
attempts. Most of the state sector employees lack business acumen.
They always attempt to accord priority to their trade union rights.
A similar situation does not
prevail in the private sector. The operation of this sector is based
on the decisions and findings of the management. A case in point here
is the Sri Lanka Salt Company. When it was under state ownership it
almost become bankrupt and with privatisation a turnaround occurred.
It had been listed as a loss making state institution. With the
introduction of private entrepreneurship in to the Salt Company with
the collaboration of Cooperative Council, it recorded an annual profit
to the tune of Rs. 18.5 m.
The collapse of the state
institutions has been caused by the excess politicitation. Although
there are persons in the state sector with required management skills
and business acumen they remain helpless as the writ of the
politicians run in these institutions. This results in the
deterioration of these institutions.
The People's Bank remains the
prominent institution among the ones listed for privatisation. It was
established in 1961 by the Cooperative Movement. Cooperative Federal
Bank was acquired by the government under the People's Bank Act No. 29
Subsequently, it became the
People's Bank and during its initial period operated as a bank for the
common people. Particularly, it catered to the needs of the farming
community. It marched forward with joining hands with the Cooperative
Movement. However, gradually it distanced itself from the Cooperative
Movement. In 1986, when Ronnie de Mel was holding the portfolio of
finance, 51% of the shares of the People's Bank was owned by the
Cooperative Movement. However, at a later stage the stake of the
movement was reduced to 8% even without giving proper notice to that
The trade unions which play
an active role today remained silent at that time over this issue.
They did not launch any action to register their protest against this
move. Had they taken any action at that time against this move most
probably the People's Bank would not have suffered this fate today.
When the bank distanced
itself from the Cooperative Movement and its original mandate at the
insistence of few persons including politicians, the responsible
stakeholders should have protested against that deviation. If not for
the silence of these parties, the interventions made by the
politicians would have been somewhat milder. Out of the total exposure
of the bank around 23 billion has been granted to 4 borrowers.
It indicates the bank's
preparedness to serve a handful of individuals rather than to cater to
the needs of the Cooperative Movement and the masses. Politics was the
basic factor contributing to this situation. A directive coming from
the office of the Secretary of the Ministry of Finance was capable of
superceding the actions of the management of the bank.
A close scrutiny of the
present structure and the asset base of the People's Bank would reveal
that no option other than privatisation is available at this moment.
The only other way out is once again injecting of funds by the state
to rescue People's Bank. However, it is a well known secret that the
state does not have adequate funds for such an investment. The World
Bank and IMF in their proposals indicate their willingness to provide
aid subject to the fulfillment of their conditions.
Privatisation remains as
their basic condition. Appointment of a chairman and the board of
directors does not mean that their writ runs in the bank. It is being
controlled by the Ministry of Finance. In matters such as circulars,
conditions and reforms the board of directors does not enjoy a free
In privatising People's Bank,
first of all the views of its real owners should be obtained. The
Cooperative Movement remains the owner of the bank. In establishing
People's Bank under the patronage of the Cooperative Movement certain
conditions were laid.
The basic condition was
paying due attention to the Cooperative Movement. What has happened to
the close relationship that once prevailed between the Rural Bank and
the People's Bank? The People's Banks were able to mobilise Rs. 990 m.
within two and a half hours time during the previous Sinhala new year
day transactions. No indigenous bank was capable of such an
achievement. This justifies the continued existence of the People's
Under the guise of
privatisation, if the ownership of the People's Bank is transferred to
an individual such a move would never get our support. Invariably we
should resist such moves. At one time the Cooperative Movement held
51% shares of the bank.
Once again along with a
proper assessment we should go back to that position by transferring
required number of shares to that movement. This should be carried out
according to the provisions of the Company Law. This could be done
through accumulating the shares of the private sector, state sector
and the cooperative sector.
The basic objectives of the
People's Bank never tallied with the objectives of the politicians in
power. The stake of the Cooperative Movement in the People's Bank was
reduced to 8% from 51% in 1986 as per a parliamentary act. With that
change, People's Bank became a hotbed of political meddling.
Trade unions advance an
argument to the effect that privatisation of People's Bank to fulfill
the conditions of the World Bank/IMF would result in various
injustices to the masses. Let us examine this fact here. In case we
dare to defy their conditions, we should refrain from seeking their
aid. We need a self-sustaining action programme in order to go against
their terms. Sri Lanka does not possess such a programme.
Large volumes of public
deposits are being held by the People's Bank. Therefore, it needs a
proper programme to maintain such deposits. Employees of People's Bank
and Bank of Ceylon remain the most privileged group among the bank
employees. They should also realise this fact. Had the trade unions
acted properly in 1986 when the shareholding of the Cooperative
Movement in the People's Bank was reduced to 8% from 51%, perhaps this
situation would not have emerged.
Another factor that
contributed to the deterioration of the People's Bank was its
haphazard recruitment policy. We know this fact by experience. There
are a considerable number of persons in the bank who were appointed
through 'chits' sent by the politicians during election times. Their
professional competency and educational qualifications had not been
taken into consideration.
However, in case of the
private sector such a situation does not exist. An accepted age limit
is considered in recruitments to the private banks. Normally in such
appointments top priority is accorded to the highly qualified
innovative youth. It has enhanced the efficiency and the profitability
of such banks.
In the recent past the
People's Bank did not operate as the bank of the masses. Neither was
it the bank of the customers. It operated as the bank of the
employees. It operated within a capitalist framework. This conversion
resulted in the collapse of the objectives associated with the
The bank tends to acquire the
properties of the small borrowers of Rs. 100,000 when they fail to
repay their loans. However, it seem to be reluctant to take any action
against large defaulters who have borrowed billions of rupees. Mainly
political interventions have created this situation.
A need exists for an
alternative programme to rescue People's Bank, the main option being
the resolving of issues through negotiations. Accordingly, a 51% share
holding of the Cooperative Movement should be reintroduced. After
carrying out an assessment an opportunity should be given to the
public to buy such shares. An independent board of directors needs to
Then it should be taken ahead
as a people-friendly enterprise. Most of the people tend to assume
that privatisation of state institutions naturally results in the
retrenchment of employees. If it is implemented according to the norms
of the Company Law there is no possibility for such untoward
Various reasons could be
assigned for this belief. Prominent among them being deprival of undue
privileges enjoyed by the workers and inability of the trade unions to
interfere in the management. In this context the politicians have
emerged as a prominent group among the elements who protest against
During the previous regime
two salt companies owned by the government were sold. One was bought
by the Cooperative Movement while the other went to Employees
Provident Fund. In the first case Rs. 10 shares were bought by the
Cooperative Movement at Rs. 40. However, we did not suffer a loss by
this deal. The proper management was instrumental in enhancing the
profitability. One needs to act according to the Company Law to
achieve such results. Competent employees need to be recruited.
Certain structural changes
should be carried out in privatizing a state institution. So far such
structural changes have not been fully implemented within the People's
Bank. A conducive environment could be built for this purpose. Under
this programme measures such as adequate autonomy, required training
recruitment of suitable employees and retrenchment of surplus
employees by paying compensations need to be introduced.
Most countries of the world
are engaged in closing down of state banks. All financial operations
are being transferred to the private sector. The role of the trade
unions in this exercise in confined to safeguard their rights. Their
actions are not intended to rescue the bank. With the increase of the
inefficiency of the bank profits have begun to dwindle.
For this inefficiency the
employees also should be held responsible to a certain extent. If the
bank becomes efficient the profit too would increase. Then it can be
distributed not only among employees but also among the customers.
Bank employees should ponder over this issue.
The private sector employees
are bound to complete their day's work assigned to them within that
day. However, such a situation does not exist in the state banks. This
matter needs to be considered both by the employees as well as trade
unions. They should realise that they can indulge in any thing until
such time the bank is in existence.
A bank which was established
for the sake of the masses should stand for their cause. Nothing will
be accrued to the common man if the bank seeks to serve interests of
the few individuals. Therefore, the trade unions should consider these
They should stage meaningful
agitations. They should give their consent for retrenchment of surplus
employees. They should take measures to enhance efficiency. They
should prevent the customers from leaving the bank. As of now pawning
business remains the main source of income of the People's Bank. It
has become most popular among our masses.
In case there remains an
alternative to privatisation there is no question of taking it into
consideration. Funds are required to continue People's Bank under
state ownership. Is the state sector capable of supplying such funds?
Whether the trade unions have the capacity to supply such funds?
Besides, people's confidence in the state sector need to be
A decades experiences show
that state institutions instead of making profits as targeted
continuously tend to record unexpected losses. Ultimately such
institutions are closed down with retrenchment of workers with
compensation. My personal feeling is that People's Bank should not
suffer a similar fate.
Only way out available to
rescue the People's Bank is allotment of shares to the institutions
which represent masses instead of allotting shares to few individuals.
The bank's shares should be allotted to all groups such as Cooperative
Movement, masses and bank employees. Political meddling should be
It should be provided with
the authority to enable it to function as an autonomous institution.
That remains the only rescue measure to be taken to protect the bank
that was built up by the monies of the masses to serve them well.
host fifth LBR LBO CEO forum
Vanguard Management Services
(Pvt) Ltd. has announced its plan to host the fifth Lanka Business
Report-Lanka Business Online CEO Forum on November 14 at 36th Level,
East Tower, World Trade Center.
LBR LBO CEO Forum provides an
unparalleled opportunity for senior executives to interact and discuss
issues pertaining to contemporary business. The CEO Forum is designed
to be a rich mixture of keynote address by an eminent personality and
interactive sessions to share ideas. Numerous Sri Lankan CEOs with
diverse backgrounds and experience have graced the previous events.
The keynote address of the
upcoming forum titled 'The Changing Regulatory Framework in Sri Lanka'
will be delivered by Prof. Rohan Samarajiva, consultant to the
Ministry of Policy Development & Implementation and Ministry of
Economic Reform, Science & Technology. It will be followed by a
Professor Rohan Samarajiva is
currently assisting the government of Sri Lanka as team leader of the
public interest program unit of the Ministry of Economic Reforms. He
also serves as visiting professor of economics of infrastructures at
the Delft and director of University of Technology in the Netherlands.
He was director general of the Telecommunications Regulatory
Commission in Sri Lanka (1998-99) and associate professor of
communication and public policy at the Ohio State University
At this forum Prof Rohan
Samarajiva will discuss the changing role of regulators in the
contemporary governance in Sri Lanka. This will facilitate the
business executives to gain a sound understanding on the likely
scenarios that may arise due to changing regulatory framework, and
accompanied business opportunities.
Participation at the forum is
restricted to the invitees only. Those who wish to receive an
invitation could e-mail firstname.lastname@example.org. The CEO forum will
be followed by a cocktail and fellowship. Lanka Bell will be the main
sponsor for the fifth LBR LBO CEO Forum.