BUSINESS

Dark cloud over growth estimates for 2004

By Ann Nicholas

Financial analysts believe the political turmoil which began in November last year is likely to affect the GDP estimates for the fourth quarter of year 2003 and hence affect the estimated figure of 5.5% growth for the year, but have a bigger bearing on estimates for 2004.

The Central Bank of Sri Lanka (CBSL) had projected a GDP growth rate of 6% for 2004. Chief Executive Officer, Citibank NA, Kapila Jayawardena pointed out that the full impact of the political crisis triggered in November last year would be felt only in the current year.

Future expansion in investment will ultimately depend on factors such as political stability, securing a lasting peace to the civil conflict and further improvements in macro-economic management. "There is a possibility that the growth rate will fall short of the estimated 6% growth due to delayed investment decisions," said Jayawardena.

However, he noted that a stable government coupled with a peaceful atmosphere would definitely see the achievement of a 6% growth in GDP.

However speaking to The Sunday Leader, Deputy Governor, Central Bank of Sri Lanka (CBSL), W.A. Wijewardena said, "The GDP estimates are unlikely to change and will remain at 5.5% for 2003," notwithstanding the developments in the last two months of the year.

Wijewardena refrained from making a comment on the GDP forecast for 2004, stating that it will have to be made only once it is adequately researched.

Central Bank figures  show that Gross Domestic Product (GDP) had recorded a growth rate of 5.6% for the third quarter of the year 2003.

The estimated  GDP figure for the year 2003 is 5.5%.

Meanwhile according to Central Bank statistics, the estimated per capita figure for year 2003 indicates Rs. 91,762, which is a 10% increase as compared with the figure for 2002 of Rs. 83,380. The per capita rates from 2000 onwards have shown a constant growing trend of at least 10% each year.

According to the CBSL, the growth achieved during the past two years reflects the positive response of the economy to improved macro-economic conditions prevailing since the latter half of 2002.

CBSL points out that the main contributory factors to this recovery were the continuation of the ceasefire and the peace initiative, improved macro-economic management with greater fiscal discipline, declining interest rates, a stable foreign exchange market, falling inflation amidst prudent monetary management, increased capital flows, strong foreign donor support, improved business confidence and recovery in the world economy.

Wijewardena stated that the 5.5% GDP growth was also supported by the 10% increase in exports in the year 2003 in US dollar terms compared to the previous year.

"The contribution from the agricultural sector in terms of good harvests in the yala season and all other agricultural products other than coconut, helped to sustain the growth rate," Wijewardena explained.

Another factor pointed out by Wijewardena that facilitated the maintenance of a stable growth rate was the significant increase in private sector credit, which grew from 7% in 2002 to 17% in 2003, mainly due to the low interest rates. This situation resulted in building up an appetite for investment prompted by cheap borrowing rates.

"A mixed economy" - UPFA tells JBiz

The United People's Freedom Alliance (UFPA) told the business community that it promotes 'a mixed economy with a ban on importing unessential goods,' at a presentation and discussion of its national, economic and social programmes held last Tuesday.

However the business community that attended the programme was not left particularly reassured on the economic and trade policies that will be adopted by this new alliance. Speaking to The Sunday Leader, Chairman, Joint Business Forum (J-Biz), Mahendra Amarasuriya said, "The discussion failed to deliver an in-depth understanding of their policies due to the time restriction. Even to the question raised on the FTA with the United States, Dr. Sarath Amunugama could not respond because he was not familiar with it." However the alliance had stressed on in-country production and the protection of local agriculture.

Speaking to The Sunday Leader on the 'mixed economy' policy, Commerce Minister Ravi Karunanayake came out strongly, referring to it as a "recipe for disaster," where the economy of the country was concerned.He pointed out that the outcome of a union between a communistic oriented party like the JVP and of one that supports open economic policies as the PA would not be healthy.

In order to bring about more clarity in the policies that will be adopted by the various parties, the J-Biz has forwarded a comprehensive questionnaire to the President and the Prime Minister.

Amarasuriya stated, "Until there is a reply to the questionnaire, it is difficult to form an opinion on the policies of the Freedom Alliance."

Seylan Bank Group tops Rs.1 bn mark 

The Seylan Bank Group has reported a profit after tax of Rs.1.026 billion for the financial year ended December 31, 2003. The past year's profitability reflects an increase of 5 % over the figure of Rs.0.977 billion recorded the previous year.

The bank's new Director/General Manager/CEO, Ajita Pasqual said the bank was able to achieve this level of growth and also improve on the previous year's performance even despite the difficult conditions in the country and the turbulent financial markets experienced internationally.

There was a significant contribution from both banking operations and as well as treasury functions, with the result that the bank alone recorded a profit after tax of Rs. 699 million, which reflected an increase of 4.7% over the figure achieved a year ago.

The bank's subsidiaries, Ceylinco Seylan Development Ltd. and particularly Seylan Bank Asset Management Ltd., and Seylan Merchant Bank Group contributed significantly towards the overall profitability of the group because of improved market conditions enabling these subsidiaries to take advantage of the emerging opportunities.

An analysis of the group's overall figures reveals that its deposits have increased by 13.22%, while advances have grown by 15.57%. The bank's results reflects an overall reduction in cost/income ratio from 68.75% to 59.39%. The return on equity of the group shows that profitability has decreased from 30.87 % to 20.00 % as a result of the bank's issued capital increase.

Tokyo co-chairs call for resumption of talks

The co-chairs of the Tokyo Conference on Reconstruction and Development of Sri Lanka, that is the United States, European Union, Japan and Norway met in Washington on February 17.

According to a statement released by the co-chairs, the group while being appreciative of the fact that the parties have largely upheld the ceasefire in Sri Lanka for two years, called for the earliest possible resumption of peace talks, which have been suspended since April 2003.

The co-chairs expressed their disappointment at the breakdown of 'cohabitation' efforts. They called on all political figures to work to ensure that parliamentary elections scheduled for April 2 are free, fair and peaceful and conducted in an atmosphere free of political violence throughout the country.

The co-chairs reiterated their continued determination to implement the assistance pledged at the Tokyo Conference, based on the principles of the Tokyo Declaration, which makes clear that assistance by the donor community must be clearly linked to substantial and parallel progress in the peace process. The co-chairs hope to convene a meeting at an early date after the elections.

Planters mark 150 years 

By Jamila Najmuddin 

"The cream of our youth shuns the plantation trade despite the many benefits the plantation industry offers. This is a serious concern amongst the plantation industry today because if we do not find the right managerial youth to head the plantation industry, the Planters Association is going to fall flat very soon."

Chairman, Planters Association of Ceylon, Rohan Fernando expressed these sentiments at the 150th anniversary celebrations of the Planters Association, last week.

Chief guest at the event, Prime Minister Ranil Wickremesinghe in his speech said the plantation industry had to be changed into an agro based industry with value added products to reach international competition.

"The plantation industry must be replaced by agro business, with people who are willing to take the risk because only if risks are taken can results be achieved," the Prime Minister stated.

He added that in the 21st century, more agricultural products had to be produced in order to modernise the economy.

The Prime Minister also said that tea was the drink of the 21st century and it certainly had a future, but Sri Lanka had to make it competitive in the global economy. "The US introduced coffee ice cream and the Japanese introduced green tea ice cream. By introducing these flavours they have managed to build up a taste for green tea and coffee amongst its people. What has Sri Lanka done other than develop the teacup?," said Wickremesinghe.

He added that creating the right environment for investment was no longer in his hands but that it could be done in a few weeks time.

Compared to 50 years ago, today the plantation industry has become less competitive internationally. However, it continues to be an important sector in Sri Lanka's economy.

Fernando said that over the years, planters have faced several tragedies, numerous problems and natural calamities, but had managed to overcome them. According to Fernando though there had been an increase in growth in the plantations sector over the years, there was also a decline in competitiveness.

A commemorative stamp was issued along with the launching of a book by the MJF Group to mark the 150th anniversary of the association at the end of the ceremony.

Insolvency professionals meet at 'Colombo Conclave'  

A joint conference titled 'The Colombo Conclave' by INSOL India and Business Recovery and Insolvency Professionals of Sri Lanka (BRIPASL) was held last weekend. The theme for the conference was 'Balancing Recovery, Restructuring and Liquidation -The Emerging Challenges In Asia.'  INSOL India is an association of the members of the legal fraternity, chartered accountants and other persons, bodies and institutions desirous of the development, diffusion and advancement of law relating to insolvency and other fiscal laws.

The association conducts research, holds seminars, conferences, workshops and discussions for development and growth of the law relating to insolvency and related laws in India. It also undertakes comparative studies of legal developments in other countries in cooperation with persons, bodies and institutions in different parts of the world. INSOL India is a member association of INSOL International.

BRIPASL has been established less than a year ago, with the objective to promote and play a leadership role in connection with and in relation to corporate turnarounds and insolvencies in Sri Lanka. "We hope to provide the necessary skills and services that will resurrect businesses and industries that have fallen into difficulty," stated President, BRIPASL, Nivard Cabraal, addressing the gathering at the inaugural session.

Members of BRIPASL include legal experts, chartered accountants, bankers and other professional from different jurisdictions. BRIPASL recently became a member association of INSOL International.

Cohabit or perish 

By Dinesh Weerakkody 

The confrontational attitude of the President has come under heavy fire from investors and analysts, saying it is a compromise of principles for political survival and the President should realise that there is nothing called a free lunch - it's the tax payers who bear the burden for extravagant tastes and irresponsible action by our leaders.

In fact, she gave full vent to her frustration by dissolving parliament and giving absurd reasons for the dissolution, virtually sealing the fate of cohabitation between the legislature and the executive even at a future date.

We all know she wrote to the Speaker on August 21, 2002 stating that she would not dissolve the present parliament unless the party which presently commands the confidence of the House loses its majority and an alternative government cannot be formed from among the members of the present parliament.

Many people in the private sector feel that the President missed a golden opportunity to co-exist with the UNF and that she should have struck a JVP-style deal with Ranil to support the UNF government while remaining outside it.

People in fact want to know why the President did not display the same patience she had with the JVP when it came to the UNF. Now that the President is on the war path with the UNF, the most important thing for the UNF according to analysts is after the election to implement or support a common programme with the PA to pull this country out of this current mess.

Desperate

We all know that our economy was in shambles in 2001. We recorded a -1.5% GDP growth for the first time in the post independence history of our country. The election in 2001 offered a respite to the people - under the UNF the economy grew and a ceasefire was established. The economic growth was fueled by lower interest rates, a stable rupee and increased investment.

There is no doubt that the President's action dealt a severe blow to the UNF development plans, especially the infrastructure development plans. The plans envisaged an increased investment in roads, highways and power projects. These projects according to the UNF would have been funded through the $ 4.5 billion pledged at Tokyo.

The implementation of these projects would have created an enormous amount of job opportunities. It seems the JVP outfoxed the UNF and blocked Ranil from cohabiting with the President. Sadly we have only succeed in turning the clock back two years.

Private sector

However, one thing is clear - the private sector, the engine of economic growth, is not happy with either the PA or the UNP for missing a golden opportunity to work together to find a way out of the November 4 impasse.

Furthermore, even though the political uncertainty that had gripped Sri Lanka has come to an end with the dissolution, as far as the private sector is concerned, the shotgun marriage between the PA and the JVP has raised fears of new unfriendly economic policies, emergence of employee centered labour laws and Marxist policies like price fixing which could disrupt fiscal targets set for 2004 and add further misery to them.

Today, many business groups are urging the President and Prime Minister to get back to the negotiating table with the LTTE and thereby ensure the war that bled the economy dry for over 20 years is not restarted. The private sector is also keen to ensure that bribery and corruption is minimised in the future. They want the commission to be established as soon as possible.

Peace process

A future JVP-PA government will have to re-start the peace process. The country is crying for peace and we all know that the cost of no peace is higher than the cost of war. The war has already cost more than Rs. 610 billion in the past 15 years. Therefore the new government would have to do what is necessary to put the peace talks back on track.

The Norwegian effort to bring the parties back to the negotiating table is also on hold. Now that the PA has clinched a deal with the JVP, a future PA-JVP or UNF government would still have to work towards reconciling their differences by taking on board the concerns of each in a two way process, firstly by reactivating the peace process with the LTTE that is needed to move the country forward.

Many of the surveys carried out by various professional organisations have revealed that the majority of the business community in Sri Lanka puts peace on top of their agenda, even ahead of economic reform. Therefore, all political parties must realise that this is the best possible moment to formulate a bipartisan approach to address the most difficult problems facing this country.

Factor

The war has been the key factor that has prevented Sri Lanka from realising her full potential. How effectively the resources have been or are being utilised in the last 10 years to execute the war has also been of concern. In fact, our country today exists on the various taxes drawn from the people and on temporary IMF facilities.

Therefore, the new government once elected urgently needs to do something to temporarily tide over the crisis and work on long term strategies. The country is heading towards a bloody election campaign and is in for the ride of its life. The UNP today cannot blame the PA for resorting to such cheap tactics to safeguard its existence because it was the UNP under J.R. Jayewardene  that created the powerful presidency.

Sadly, Sri Lanka will virtually grind to a halt in the next few weeks. Whichever party that can demonstrate a working majority in parliament in April must use Margaret Thatcher's election slogan in the seventies titled 'Put Britain back to work,' which contributed largely to her election and also led to her making many friends from a society that saw little economic or social progress.

That is what the new government needs to promote, backed up by a process of reforms and liberalisation to ensure there is some light at the end of the tunnel.

The current state in the country reminds me of a statement made by a former US President, Ronald Reagan in a presidential debate in 1984 where he said, "There are so many candidates on the platform that there are not enough promises to go around."

In the final analysis, what we need from our public servants at this election in general is impartiality, decency, discipline and accountability to prevent Mother Lanka becoming the biggest loser.

Seylan bags Western Union award 

At the recently concluded Western Union South Asian Regional Conference held in Rajasthan, India, Seylan Bank was awarded the trophy for 'Pioneer in International Diaspora Initiatives 2003.'

Over the years, the bank has promoted Western Union as the most convenient money transfer service for the large number of Sri Lankan expatriates domiciled and employed globally.

Because total inward remittances into Sri Lanka exceed Rs. 100 billion, the importance of a fast, safe and efficient money transfer system is sought after by many Sri Lankans who remit funds to their loved ones back here.

The importance of such an efficient money transfer service cannot be underscored from the point of view of the economy and the balance of payments of the country. Transmission and access time is less than 15 minutes and remitters have the comfort of knowing that the beneficiary has access to the intended finances almost instantaneously.

Seylan Bank was recognised for its untiring efforts in promoting Western Union among the Sri Lankan diaspora who are in various parts of the world.

Seylan Bank was also recognised for its promotion of the product locally by the Sri Lanka Institute of Marketing 'Brand Excellence Awards' by awarding the bronze award for 'Service Product of the Year' in year 2002.

OCB to conduct University of London BSc courses 

The Oxford College of Business (OCB), a leading institute of higher education in Sri Lanka, has been recognised by the University of London to conduct courses leading to the prestigious BSc in Accounting and Finance, BSc in Economics and Management and BSc in Business.

According to Managing Director, OCB, Upul Daranagama, the OCB initially offered a range of carefully selected courses in business management, accounting, law, secretarial studies and human resource management, while maintaining rigid standards in all aspects of education.

"However, we soon realised there was a necessity to conduct courses leading to a university degree. With this in view, we negotiated with the University of London, which is one of the oldest and largest universities in the United Kingdom. It is a federation of 18 colleges and 11 institutions," Daranagama explained.

The University of London will be granting internal degrees to the students who follow classes at OCB and will also provide the structure, contents, study material, set the examination papers and mark the scripts - a range of responsibilities that no other university takes on, on behalf of its undergraduates who are following off-campus courses. This in turn enhances the value of the degree awarded by the University of London.

"The advantage of these courses is that while studying in Sri Lanka, the students are getting an equivalent degree to internal students there. And while the same quality is maintained, it will also cost them a lot less. We expect a good response for these courses. In addition, we have a fully qualified lecture panel and all our staff members have completed their MBAs," Daranagama said.

The BSc in Business course provides the student with a solid understanding of different functional areas of business and lays the foundation for a lucrative career in management. It will also develop excellent analytical skills in valuable to decision making.

The BSc in Economics and Management is a degree with a strong emphasis on social science theory and practice and will give students a thorough understanding of a range of issues on international management.

The BSc in Accounting and Finance provides a thorough grounding in accounting and finance, within a strong science framework.

"At OCB any student who has completed 17 years and passes in specified subjects in GCE O/L and A/L can enter the access route leading to an honours degree," said Daranagama, who has earned a name for organising similar courses.

The degree courses will have five semesters and classes will be conducted on weekends so that those who are employed will also have the opportunity to follow the courses offered. Classes for the access route however will be held on weekdays.

OCB has made arrangements to receive, process and forward applications for the degrees to the University of London.

OCB is also affiliated to the Institute of Commercial Management, London (ICM) and the Association of Business Executives (ABE). St. Patrick's College in London is its partner school in the United Kingdom.