BUSINESS

Donor agencies adopt 'wait and see' policy

By Mandana Ismail Abeywickrema

Donor agencies, namely the International Monetary Fund (IMF) and Asian Development Bank (ADB), have raised concern over the United People's Freedom Alliance (UPFA) government's failure to present its economic policy for the country a month after being voted into power on April 2.

Therefore, funding of projects by these institutions too is on hold as a result of the 'wait and see' policy adopted by them.

Resident Representative, IMF in Sri Lanka, Jeremy Carter said the IMF would first have to review with the government its overall economic plan as so far they have only come across material published in newspapers. "These are just statements in newspapers and nothing has officially reached us," he said.

Speaking of the implementation of the immediate relief measures mentioned in the UPFA's 'Rata Perata' manifesto, which include the increasing of the fertiliser subsidy and the most recent being the employment drive to lessen the number of unemployed in the country, he said that one would have to look at the whole picture.

"The fertiliser subsidy is something modest and we would have to see whether it would affect the budget. However, the budget is much bigger than Rs. 1 billion and spending money on subsidies would not affect the bigger economic picture if it is well balanced," Carter said.

Carter however admitted that the newly formed UPFA government has not yet met with IMF officials except for a delegation led by the Central Bank Governor.

"If the new government wants to discuss matters with the IMF, they could do so by presenting their economic policies," he said.

However, the IMF official reiterated that the disbursement of US$ 80 million would be on hold till the funds disbursed under the first disbursement - another US$ 80 - is properly reviewed. "Until a review of the first disbursement is done and until the terms for the second disbursement are discussed the money would be held back," Carter asserted.

The first disbursement done under the previous UNF regime was based on its economic policies and terms agreed upon by the government and the IMF. Carter noted that such a disbursement could only happen when the new government has gone through the terms and presents its economic policies, which have not been done so far.

There is another tranche that is held back as the ADB too reported that its US$ 30 million loan tranche for the energy sector is in the balance if power sector reforms are shelved, with a clear policy on the direction of reform still in limbo.

The continuance of power sector reforms would be the only way that would clear the path for the country to receive the US$ 30 million tranche.

Speaking of the remainder of US$ 3.5 billion donor funds of the US$ 4.5 aid pledged at the Tokyo donor conference, Carter explained that the money would come into the country through the IMF, ADB, World Bank and the Japanese aid agency.

Out of the money some are earmarked for the north east region. However, the flowing of the fund would depend heavily on the continuity of the peace process, the introduction of effective reforms and the continuity of the infrastructure programme. According to Carter, the IMF however, has not disbursed any funds to the country since last year.

When asked about the donor review meeting scheduled to be held in June this year, Carter said that it would be held with the participation of the representatives of the European Union (EU), USA, Norway, Japan and the government of Sri Lanka if they so wish. However, he noted that the IMF would not take part in the meeting.

Country Head, ADB, John Cooney while admitting that the government has not yet officially met with ADB officials, said that they have a number of projects scheduled for this year.

The areas that the ADB plans to look into include education, revenue management, private sector programmes, project support and north east rehabilitation. Cooney noted that projects involving education, north east rehabilitation and road development programmes would continue.

However, the ADB would be reviewing its strategy this month when Cooney expects the government would hold discussions with the ADB on its new strategy for the country.

Speaking of the implementation of the immediate relief measures to the masses as pledged by the government, Cooney said that these would not directly affect the ADB's funding for the country.

Cooney explained that it is important to look at the broad macro-economic prospects and see whether it would create a budget deficit. He went on to say that although the ADB has no idea of the government's economic policies, it is important for the government to maintain a balance as an increase in the expenditure in one sector would mean less money spent on another sector.

"We don't know what the government has in mind, but it is important to maintain a balance so as to not create a large budget deficit," he said.

However, Cooney noted that the government's plan to engage in a large-scale recruitment drive would not be a wise move as a matter of principle. Explaining further, he said that the country already has a far too large civil workforce and increasing the number would have adverse effects in the future.

"You have to look at the overall picture. To spend money you have to increase revenue or cut down expenses in some sectors," Cooney said.

As for an introduction of a new tax regime, Cooney said that reviving and revamping the tax regime would be beneficial for any economy.

Cooney noted for the government to continue with the fiscal deficits as agreed with the IMF is to continue, the government should pay extra attention in maintaining a balance between income and expenditure.

Speaking of the donor review meeting, Cooney said that although there won't be any monetary pledges made, the participants would discuss the country's situation and how best to support the peace process.

When asked about the ADB's report released recently, which states that the country's economy is expected to grow by 5% in 2004 and 5.5% in 2005, Cooney said that they are estimations based on the continuity of the peace process, introduction of reforms and maintaining a balance in the budget.

The IMF too in its macro-economic framework from 2001-2008 highlights that if everything runs smoothly, Sri Lanka could achieve a 6% growth in real GDP for 2004 and 6.3% in 2005. However, all these figures are projected to reach these levels if the country's growth momentum continues unhindered.

The World Bank was not available for comment as the Country Head, Peter Harrold was out of the country.

GDP growth of 5.9% in 2003 - CB

Sri Lanka's economy recorded a real Gross Domestic Product (GDP) growth of 5.9%, for the year 2003, higher than the projected growth of 5.5% the Central Bank announced on Friday. The comparable rate of growth for 2002 was 4%. The growth for 2003 indicated the progress made by the country to improve economic growth and macroeconomic stability.

This was achieved through a continuation of the ceasefire agreement, sound macro economic management, deepening structural reforms and strengthening international support.  The Central Bank of Sri Lanka (CBSL) released its annual report for 2003 on Friday.

Director, Economic Research Department, CSBL, Dr. A.G. Karunasena pointed out that the two significant factors were the continuation of the economic growth over all four quarters in 2003 and the more broad based economic recovery, with growth in all three sectors, namely, agriculture, industry and services.  The services sector has contributed the highest at 70%.  On the production side, economic growth was continuous, 5% in all four quarters.

On the fiscal front, in 2003, the budget deficit declined to 8% of GDP from 8.9% in 2002. The reduction in 2003 was entirely due to measures adopted to contain expenditure. The reduced deficit and increased foreign financing decreased the government's net domestic borrowing significantly, by about Rs. 47 billion, enabling the government to reduce its overall debt to the banking sector by Rs. 17 billion.

The improvement in the external sector was further strengthened in 2003 with a recovery in exports and a continuation of the growth in tourism, port services, worker remittances, and financial and capital inflows.

Money supply grew by 15.3% in line with the monetary programme aimed at containing inflationary pressures, while supporting the economic recovery, with demand coming in particularly from the north and east.

The lower public sector credit utilisation enabled the accommodation of the expanding private sector credit demand without creating additional inflationary pressure.

The annual report of the CBSL states that Sri Lanka's future is marked by favourable economic prospects but points out that downside risks shadow its future, while the issues to be resolved pose new challenges.

It states that the main challenge faced by the country is to attain permanent peace and lay the foundation for sustainable high quality economic growth. The success for these endeavours will depend mainly on the progress in the ongoing peace process, strengthening macro economic management, the speed and effectiveness of implementing structural reforms, development of infrastructure facilities, particularly power and transport, effective utilisation of foreign donor assistance, a conducive external environment and favourable weather conditions.

An early and lasting peace is essential to ensure the country's future economic prosperity. Any delay on that front will deny the nation the immense potential benefits of peace. A reversal of the ongoing peace process will exert even greater economic, political and social costs, which the country cannot afford to bear, the Central Bank notes.

In its report CBSL recommends the outward looking, market oriented economic policy framework introduced in 1977, which has served the country relatively better than the inward looking, public sector centered, economic policy regime that had been adopted earlier.  CBSL projects a GDP growth rate of 5.5% for the current year. According to Dr. Karunasena, a lower rate was projected because of the drought, which would result in a 20% reduction in agricultural yield and the higher costs involved with power generation, where thermal power generation will have to be increased by 70%.

Governor, CBSL, A.S. Jayawardena, assured that the fiscal consolidation and growth policies will remain intact. "The new government is currently working on the economic policies which will be released during the month of May," said Jayawardena.  "The finance minister is making every effort to work within the budgetary framework and an increase in the budget deficit would be prevented," he added.

According to Jayawardena, the emphasis of the new government will be on more equitable distribution of income and the reduction of wastage. "According to what we heard when we met with the finance minister on April 30, there will be more efficient use of resources and they will make a determined effort to increase the government revenue," he said.

UPFA: can it deliver? 

By Dinesh Weerakkody 

In the last five years Sri Lanka has had three general elections and three brand new governments. Looking back on the face of it there wasn't much of a difference between the UNP and the PA when it came to economic policies, governance and appointing of ministers.

This time the newly formed UPFA government is promoting the mixed socialist economic model, a deviation from the 1994-2000 pro PA private sector policies.

The change is attributed to the JVP's influence over the alliance. On the other hand the UPFA also says they will loosen spending controls resulting in a wider budget deficit and possibly increased borrowing.

Spending by the government on populist economic programmes may also destabilise the economic recovery that was underway, fuel inflation, increase price levels and push interest rates up.

So the UPFA must realise the country cannot run high budget deficits and populist policies for too long because it could result in destabilising the economy.

With regard to the resolution of the ethnic conflict, the JVP has gone back on what the PA preached while in office while Chandrika says they will get back to the negotiating table and has requested the Norway government to get the peace process restarted. So it seems with the JVP-PA we are all in for a new economic and social order.

If the alliance attempts to re-negotiate the MoU purely to satisfy the electorate, the peace process may end in chaos. It is only peace that can change the lives of our people in the years to come.

The PA and JVP both carried out a vigorous campaign against the UNP's MoU. In fact the allegation that the UNP was giving into the LTTE was the primary reason given by the President to take over three key ministries.

It is very clear that the alliance in an effort to woo Sinhala Buddhist nationalists will continue to oppose a power sharing solution with the LTTE. However, the entry of the venerable monks to parliament has also changed the entire political climate within and outside parliament.

Unclear strategy

What an alliance government will do is still very unclear; their strategy has now done a 180-degree change in their public posturing. This new willingness for a solution could be just a media gimmick, given the hardline attitude of the JVP.

Today most Sri Lankans believe without durable peace, there is no economic prosperity. The possibility that under a UPFA government, we could once again go back to war is also a very frightening prospect for most Sri Lankans.

If the UPFA fails to address this issue effectively in the next three months we will once again destabilise the economic recovery.

Apart from the peace settlement, the PAs capacity and competence to manage the economy will be the other key factor that will decide our economic fortune. In 2001, on the face of a collapsing economy, rampant corruption and an unprecedented power crisis Sri Lankans threw out the PA from office in disgust.

Decline in per capita

The disastrous handling of the north east war coupled with the mismanagement of the economy, resulted in the per capita declining from U$ 881 in 2000 to U$ 826 in 2001.

The bungling of the economy destroyed all that was achieved during the early PA days and President Premadasa's era. In fact in 1988 our per capita income was around US$ 865, by 2001 it had come down to US$ 826.

Countries that were behind us in 1988 such as India, China and even Bangladesh made vast strides, while our economy got into a reverse gear for the first time since independence.

The UNF, which over the years had built a solid reputation of good economic management, did very little to live up to this reputation in the last two years, even though on the fiscal front great progress was achieved.

The UNP was given a mandate to rescue the nation from an entangled mess. This mandate was given despite many Sri Lankans believing that the UNP had a secret agenda with the LTTE. When Ranil Wickremesinghe took over the country, he took over an economy that was second only to what J.R. inherited in 1977. GDP growth was minus 1.5%; inflation was running at 14.2%. By the year 2000 international community had given up, refusing to give any aid.

Then poor military strategies had resulted in the state losing vital camps such as Elephant Pass, Pooneryn and Mullaitivu. The military expenditure, which was around Rs. 60 billion, continued to escalate despite allegations of inferior equipment being purchased.

In fact Ranil Wickreme-singhe commented that even if we do not fire a single bullet, the Sri Lankan government would continue to pay for the equipment already purchased for the next eight years.

Economic turn around

In the latter stage, economic mismanagement was a hallmark of the PA administration, even though the PA inherited this war from the UNP. The country was on its knees in 2001. The UNP administration managed to get the economic ship floating again and turned around an economy which was in shambles within a single year.

Ranil ensured that government expenditure was effectively controlled, however at the expense of some sections of the community, which resulted in the UNF being voted out of office.

On the other hand, even though we are still far away from a permanent solution, it's clear that the LTTE is still looking to work out a solution to the crisis.

The lesson for the UNF therefore is that development and peace must travel together and therefore Sarath Amunugama was very correct when he said that his ministry should do away with what he called its obsession with lowering the budget deficit and adopt a more development oriented focus.

Confidence

In 2003, the future looked so hopeful, business confidence was gradually rising, and the private sector started to be positive about expansion. In the tourist industry, which went through a disastrous era, for the first time since 1983, there was talk of upgrading and expanding of facilities.

Tourist arrivals broke the all time record as it reached the 500,000 plus mark in December. The industry boldly expanded.

Today, the industry is at the crossroads due to the political uncertainty and the UPFA should do whatever is required to sustain business confidence by saying the right things and by delicate economic balancing.

The challenge for the UPFA will therefore be to convince the international and local business community that they have the competence to manage and unite Sri Lanka while ensuring that its spending brings about a more immediate impact on the lives of the ordinary people.

Finally, it's upto us to ensure that the government fulfils its election pledges.

Southern nations demand more power in IMF, World Bank 

As several thousand people protested outside the World Bank and the International Monetary Fund (IMF) last last week, a coalition of developing countries also complained loudly about the democracy deficit at the two institutions.

"We are greatly disappointed by the lack of visible progress in respect of voice and participation and voting power of developing countries in the two Bretton Woods institutions," Sudanese Finance Minister, al-Zubeir Ahmed al-Hassan told reporters as he read a statement on behalf of African countries.

Others said they were alarmed at how the two organisations responded to developing countries' calls for democracy in the IMF and World Bank.

"There is also the issue of principle," Governor, Central Bank of Trinidad and Tobago, Ewart Williams told reporters.

"We are either universal institutions or we are not. You cannot on the one hand say this is a participatory institution, that democracy should be the order of the day, that transparency and accountability should be the order of the day, and then on the other hand say that there should be sacred cows."

Ewart was reading from a statement by finance and economy ministers from the Group of 24 (G24), which operates as an association of minority shareholders in the IMF and World Bank. It said, "the under-representation of developing countries in the decision-making processes of these institutions should be seriously and promptly addressed."

The ministers called for a more equitable form of representation and said the executive boards of the IMF and the World Bank should appoint an expert group to work on the issue and produce a report within six months.

Decision-making in the two financial bodies is far removed from the principle of one country-one vote.

The 46 sub-Saharan African countries, for example, have only two executive directors representing them at the World Bank and IMF, while eight northern nations have a single executive director each.

Directors from countries of the Group of Seven (G7) most industrialised nations now control more than 60 percent of votes at the bank and fund, while the US administration has veto power over any extraordinary vote.

The World Bank and IMF each have 184 board members from developed and developing countries and 24 members who represent countries or groups of nations.

That system has deprived more populous nations like India and China, which combined represent more than 2.3 billion people of the world's six billion people, of an influential say while givinga countries like the United Kingdom, France and the United States greater clout.

But officials from the two bodies and from the G7 have argued that the poverty reduction strategy papers - policy documents that borrowing countries must prepare before they can qualify for loans - already give borrowers "a voice in bank-fund assistance programmes in their countries."

The calls for reform come as the World Bank and IMF hold their bi-annual spring meetings, which coincide this year with their 60th anniversary. The Washington-based organisations were founded in July 1944 at Bretton Woods in the US state of New Hampshire.

Their critics were meeting here all week, distributing 'unhappy' birthday cards and holding demonstrations. Protesters banged on pots and pans outside the IMF and bank buildings in downtown Washington, imitating past protests in Argentina.

The demand also come amid renewed accusations that the selection process for the top jobs within the financial bodies is opaque and non-democratic.

The IMF is set to decide on a new candidate to replace Horst Koehler, who resigned on March 3 after being nominated for the German presidency.

Developing countries and civil society groups have argued the selection process gives rich nations a monopoly on nominating and selecting the leaders of the two institutions.

Traditionally, a European has led the IMF while the World Bank presidency is given to an American.

"Ministers are particularly concerned that the selection process for the managing director of the IMF continues to fall far short of the standards of good governance, transparency and inclusiveness widely advocated by the IMF and the World Bank in their relations with member countries," said the G24 statement.

"This is inimical to the legitimacy, accountability and credibility of the institutions."

The strongly worded statement demanded an open and transparent selection process to "attract the best candidates regardless of nationality."

That, added the group, would simply follow recommendations made in April 2001 by a World Bank-IMF joint working group on how to choose the managing director.

But although the two organisations' executive boards adopted the recommendations as guidance for the future, they were never implemented.

The European Union has already settled on a candidate, former Spanish Finance minister Rodrigo Rato, to head the IMF. Rato, who served as a minister in the conservative government of former Spanish Prime Minister Jose Maria Aznar, was scheduled to arrive in Washington on Sunday.

He must be officially named to the post by the IMF executive committee. The nomination debate is likely be repeated next year, when World Bank President James Wolfensohn is due to end his second term in office.

- IPS

Changes at CDL

Several key changes have been effected in the board of Colombo Dockyard Limited (CDL), on conclusion of its 21st Annual General Meeting (AGM), on April 22.

Chairman Koichi Yamanaka retired from service in the company and was replaced by Shinichi Tatebe.

Tatebe, who had an illustrious service at Mitsui Ship building & Engineering Co., Ltd. of Japan (MITSUI), is an expert on shipbuilding and particularly on sales and business development. For over 15 years, he has been involved in ship building sales and marketing and has had over eight years experience in power plant sales and marketing at MITSUI.

He held the post of general manager of the Diesel Power Plant Department at the time of his retirement from MITSUI.

His association with Colombo has been long standing and he was instrumental in setting up Colombo Power (Pvt) Limited, a subsidiary company of Mitsui, which operates the only barge mounted power plant in Sri Lanka and was its chairman, until his retirement.

Tatebe was also appointed as a director of Dockyard General Engineering Services (Pte) Limited, Sri Lanka and Ceylon Shipping Agencies (Pte) Limited, Singapore, in addition to his chairmanship of CDL.

The General Manager of the company, Mangala P.B. Yapa, was nominated to the board of directors as a nominee director of Onomichi Dockyard Co., Ltd.; the majority shareholder and was appointed as the managing director and chief executive officer.

Yapa, who holds a Masters Degree in Marine Engineering started his career at Galle Slipway & Engineering Services (Pte) Limited, as a trainee engineer; a subsidiary of Colombo Dockyard (Pvt) Limited, in 1984, upon return to Sri Lanka and has continued to be in the employment of CDL since then.

At CDL, Yapa having been involved in production, business development and marketing, quality assurance, engineering and project management, is experienced in all sectors of the business of CDL, and was promoted to the post of general manager, on unplanned retirement of the former managing director/CEO in October 2001.

While in the service of CDL, Yapa has completed his Masters in Business Administration from the Post Graduate Institute of Management, Sri Lanka.

In addition, he is also a chartered engineer and a member of the Institution of Engineers, Sri Lanka (IESL) and The Institute of Marine Engineering, Science and Technology (IMAREST), UK.

In addition to the appointment of the MD/CEO of CDL, he was also appointed as a director and chairman of Dockyard General Engineering Services (Pvt) Limited and a director of Ceylon Shipping Agency (Pte) Limited of Singapore.

With the acquisition of over 21% of the stake of the company by Hayleys Limited and Maritime Holdings Limited in latter part of 2003, Chairman/CEO, Hayleys Group of Companies, Sunil Mendis and Managing Director, Maritime Holdings Ltd. and a Director of Hayleys Limited, Mohan Pandithage became directors of the CDL.

With the above changes, the new Board of CDL now constitutes the following directors: Chairman Shinichi Tatebe, Vice Chairman Sarath de Costa, Managing Director Mangala P.B. Yapa, Director Y. Hamane, Director S. Ohashi, Director Sunil Mendis, Director A.M. Pandithage, Director Lalith Ganlath, Director H.A.R.K. Wickramathilake, Alternate Directors for Y. Hamane, Y. Imai and T. Nakashima and Alternate Director for Sunil Mendis and A.M. Pandithage, S.R. Sadanandan.

CSE certification a must for investment advisers 

By Ann Nicholas 

Even though not in a professionally qualified capacity to do so, many individuals are found to have the designation of investment adviser, providing recommendations on investment decisions to investors.

One such investor is Nizardeen, who has been trading in the Colombo Stock Exchange (CSE) for the past 20 years or so, mostly on behalf of his brother. The sad thing is that these so called 'investment advisers' are employed by some of the more reputed stock brokering firms.

Nizardeen has been dealing with a brokering firm for the past six years or so and his investment slips were signed by an investment adviser of this broking firm.

Subsequently, Nizardeen had queried from the firm on the professional qualifications of this person to sign as investment adviser (and in some instances for investment adviser), with regard to which the company has not made any clarifications to date.

Nizardeen had called for clarification from the CSE and the Securities and Exchange Commission (SEC) with regard to this issue. These were made around April 2003.

The Sunday Leader made specific inquiries from the SEC and the Director-Legal and Enforcement, SEC, Marina Fernando. Excerpts of the interview follow:

Q: Does the SEC make it mandatory that those who advise clients on investments should follow the certification course conducted by the CSE?

A: The term 'those who advice clients' in your question is referable to many categories identified specifically by the Securities and Exchange Commission (SEC) Act. For instance, an investment manager is defined in the SEC Act as a person who for a fee or commission engages in the business of managing a portfolio of listed securities on behalf of an investor or engages in the business of advising any person on the merits of investing, purchasing or selling listed securities, but does not include a licensed managing company of a unit trust. However, investment managers do not have to follow the said certification course. Where the course is not a requirement there is alternate criteria re. qualification which have to be fulfilled.

The requirement vis-…-vis stock brokers and stock dealers is that all executive directors and emplo- yeesÿdealing with clients on behalf of the stock broker/stock dealer company, have to be trained and certified as such by the licensed stock exchange (Colombo Stock Exchange).

Q: If so, if a client has doubts on the qualification/certification of his/her adviser, can he/she refer to any records in the SEC or CSE with regard to such?

A: If a client has a doubt on the qualification/certification of his/her investment advisor he/she may refer same to the SEC/ Colombo Stock Exchange (CSE).

Q: In the event that there are such unqualified persons dealing with clients, can the client make a complaint to the SEC and what is the procedure with regard to such?

A: In the event that there are personnel who appear to be dealing with clients without the requisite qualifications, the client may make a complaint to the SEC/CSE. Additionally, it is likely that such deficiencies would be identified by SEC's continuous monitoring of compliance with SEC requirements.

Q: Following the complaint, what kind of action will be taken against them by the SEC?

A: Where the complaint merits it, SEC shall conduct an inquiry into the matter with a view to making a determination thereon. The CSE has its own laid down procedure, which is followed.

Q: What kind of protection is given to client/investor to prevent such situations?

A: Rules and regulations of both the CSE and the SEC are available to the public in order that they may be informed in that respect and assert compliance. The licensing / registration of such personnel is carried out subject to SEC being satisfied that these requirements are met. As continued compliance is mandated in terms of the law, SEC monitors compliance.

Regaining Sri Lanka's coconut industry 

Among the plantation crops in Sri Lanka, coconut is one of the most economically important tree crops due to it is versatility of uses. Coconut is a major component in the Sri Lankan daily diet, providing 20% of the caloric intake of the population. The total area under coconut is about 440,000 hectares and is only second to rice.

Coconut is predominantly a smallholder crop with 75% of the area consisting units less than 8 ha. Approximately 700,000 are smallholdings covering an area of 309,900 ha. During the last decade, annual coconut production fluctuated within 2300-3080 million nuts. Since the early 90s, coconut production, on average, increased by 1-2%. In the past seven years nearly 10% increase in coconut production was reported except in 2002.

The decline in production in 2002 resulted due to the lagged effect of the severe drought that prevailed in the previous year.

The production increase experienced in the past seven years is possibly due to the improved varieties introduced since 1960 onwards, marginally improved input use and technology adoption, in addition to the well distributed rainfall experienced in some years.

Sri Lanka maintained its position as a main producer of coconut-based products such as desiccated coconut, copra, shell and activated carbon, coir and coir based value added products. In 2002 total contribution from the exports of kernel based products was Rs. 3,957 million and from non-kernel products was Rs. 4,052 million.ÿ Percentage contribution from coconut to the Gross Domestic Products (GDP) was 2%.

According to the recent coconut statistic, domestic household demand remains within an average of 1700-1800 mn nuts.ÿWhen the coconut production decreased below 2500 nuts, it constrained heavily on the supply of nuts for the processing industries.

To maintain coconut as a viable industry, it is important to ensure stable production which meets average national household demand of 1800 million nuts and another 1200 million or more for various coconut based industries.

Therefore, it is very important to increase the coconut production to a level of three billion nuts within next few years following possible short and medium-term strategies and to reach four billion mark by 2010 and sustain the production thereafter.

In keeping with government policy in 'Regaining Sri Lanka' a task force was appointed by the government comprising the following members to look into potential, critical issues and strategies to meet the future challenges of the industry.

The task force consists of Convener, Prof. Lakshman R. Watawala, Convener, Dr P G Punchihewa, President, Sandalankawa Coconutive Corporative Unions, Asoka Subasinghe, Chairman, Coir Council International, Indrajith Piyasena, President, Sri Lanka DC Millers Association, Sunil Watawala, President, Coconut Product Trader's Association, Murtaza Lukmanjee, Member, DC Millers Association, Jeyam Wijeratnum, President, Coconut Grower's Association, J.V.R. Dias, Coordinator, Policy Planning Ministry, R.M.R. Ratnayake, Chairman, CDA and observer member, H.A. Tilakarathne, Chairman, CCB and observer member, Lincoln Fernando, Chairman, CRI and observer member, Dr. S.S.B.D.G. Jayawardena, Director (Planning), Plantation Industries Ministry, A.B. Leelasena and Director (Rubber and Coconut), Plantation Industries Ministry, K Samaraweera.

Vision

For Sri Lanka to be a major grower of coconut and producer of quality coconut products in the global market

Mission

Achieve optimum coconut production to maintain equilibrium in the raw material availability for fresh coconut consumption, domestic and export based industries.

Goals

To achieve and maintain production at three billion nuts per year byÿ2005, to reach four billion nuts per year by 2010 by maintaining annual growth rate of 20% and sustain at this level beyond that year and to improve productivity from its current level of 2500 nuts/ac/annum to 4000 by 2010

- Action PlanÿReport prepared and submitted by the Coconut Task Force

CTC contributes Rs.  450 mn. more to govt. in first quarter 

Ceylon Tobacco Company recorded a Rs. 450 million (7%) increase in government revenue during the first quarter ended March 31, 2004, mainly attributed to the declining volumes of illegal and counterfeit products in the local market. The group recorded an operating profit of Rs. 330 million, recording a marginal growth against the same period last year.

The company stated that government revenue has grown from Rs. 6.3 billion during the three months ended March 31, 2003 to Rs. 6.7 billion during the same period 2004.

The contribution to government revenue constitutes of high incidences of excise and sales related taxes paid to the government, representing 80% of the consumer sales price.

The growth of 7% in government revenue comes in the wake of CTC law enforcement authority's efforts in adopting effective strategies to minimise the impact of counterfeit and illegal trade of cigarettes. The estimated volumes of these illegal products mainly 'Gold Seal' have seen a decline during the period under review.

The company will work closely with the authorities, to ensure the elimination of illegal products and will continue to pursue strategies in this direction which poses a significant threat to government revenue and the legal tobacco industry.

The marginal growth in operating profit was a result of the increase in the group's net revenue, primarily due to increased sales volumes of CTC's mid prices and value for money brands.

Ceylon Tobacco Company declared an interim dividend of 10% on April 2 which will be paid on April 29.

e-Learning courses for business professionals  

The Society of Certified Management Accountants of Sri Lanka (CMA Sri Lanka) has partnered the world's leading management accountancy body, the Society of Certified Management Accountants of Canada (CMA Canada) and VUBIZ Canada to provide powerful e-learning courses on strategic management, IT and  business development.

These online courses deliver what today's professionals need for skill and career development providing high impact low-cost learning for business success. The flexibility of studies and registering at any time are some of the other distinct advantages for busy executives and professionals.

CMA Sri Lanka has negotiated very concessionary pricing with its partners CMA Canada and VUBIZ Canada for all the courses providing a distinct financial benefit for both members and non-members.

The CMA Canada strategic management courses include six courses comprising balanced scorecard, strategic cost management, customer profitability analysis, target costing, redesigning the finance function and environmental costing offered to members and non members at a very special price.

All those interested could log into the web site www.cma-srilanka.org  and click on 'e-Learning Courses' and go into the VUBIZ web site and select the applicable category either the member site or non member site. Members could log in by entering their registration number and non- members could go in direct to their site.

After selection of the courses payment could be made online by credit card or those who wish to pay by TT could contact the CMA Sri Lanka office. Those registering for the courses will be subject to online testing and on the completion of each of the courses they will be eligible for a certificate which will entitle them to earn continuing professional development (CPD) credit hours.

Associate members would be eligible to utilise these CPD credit hours to apply for their fellowship provided the requisite training requirements are met with.

Malaysia Airlines closes books on "good numbers" 

MALAYSIA Airlines System Bhd (MAS) closed its books for the year ended March 31, 2004, on what its new Managing Director, Dato' Ahmad Fuaad Mohd Dahlan described as "good numbers." MAS is ready to fly into active competition once more, some of its most turbulent years behind it now.

"The momentum from the third quarter looks good. We hope to do well," he told the Malaysian Business Times on his first day as Managing Director of the national carrier. MAS posted a net profit of RM 339.09 million for its year ended March 31, 2003, compared with a net loss of RM 835.56 million the year before. For the third quarter, the airline posted a net profit of RM 230.08 million.

Ahmad Fuaad said expansion plans have taken over rehabilitation work led by his predecessor, Datuk Md Nor Yusof. On top of the list is the search for a global airline link or a mega alliance with other carriers to extend its reach, something the airline has not been able to do during its restructuring period.

MAS has engaged a foreign consultant to assess the viability of joining alliances and it expects to make a decision in the next two months. There are only three alliances around - SkyTeam, One World and Star Alliance. Thai International and Singapore Airlines are already in Star Alliance.

"You would not want to join where your friendly competitors are and they will also not want it because there's no advantage for the alliance to ask MAS to participate," he said.

As it already has a code-share agreement with Dutch carrier KLM, there is the likelihood of MAS participating in the SkyTeam alliances since KLM is already a member. Ahmad Fuaad could not confirm this.

MAS is also looking at increasing flight frequencies to several of its destinations including China and India, the last two considered growth passenger and cargo areas within the region. It is also looking into the needs to intensify relationship with Indonesian carrier Garuda, possibly by forming a regional alliance.

Besides network expansion plans, Ahmad Fuaad said the airline wants to improve its service quality and also focus on product development.

Its managers will look into improving passenger comfort and upgrading its reward programmes. Safety is also at the very top of Ahmad Fuaad's plans. "We need to upgrade safety and security measures and ensure that the aspects of health and cleanliness are well taken care of," he said. The national carrier's seat factor has improved to 75% from 65% during the Severe Acute Respiratory Syndrome (SARS) outbreak last year.

Ahmad Fuaad said he will continue implementing the company's existing five-year plan.

"We have a five-year plan which started in 2001 (During Datuk Md Nor's time). We will review this every year and discuss strategic issues and adapt it to the changing time and environment," he said. Malaysia Airlines is represented in Sri Lanka by their general sales agent, Hemas Air Services (Pte) Ltd.

It's boom time for Colombo's restaurants 

By Ann Nicholas 

From Colombo's Duplication Road - Dickman's Road junction to Colpetty junction - the distance is approximately three kilometers. On this stretch today there are around 90 food outlets. So, the end result works out to around three restaurants every 100 yards! One could even call Colpetty the restaurant capital of Sri Lanka, second probably to Fort.

Under such conditions one would have thought that the restaurant industry in Sri Lanka must have reached a saturation point by now, but not so.

With continuous complaints of the ever-rising cost of living, one would think that people lived on bare essentials. While regarding a good part of the population the picture may actually be so, restaurants continue to thrive in business. Even when looking at the new restaurants that have sprung up, there is no shortage of those who patronise them.

Speaking to The Sunday Leader, Assistant Manager, German Restaurant, Nicholas Fernando, stated, "You find that eating outlets are springing up all over Colombo and the suburbs, just like mushrooms," but added that if they do not maintain cleanliness and the quality and quantity demands they are likely to disappear in a short while.

This only goes to show that people are increasingly getting used to the idea of 'dining out.' Ironic as it might seem, with the low interest on savings more people are tempted to spend their money. People are no longer hung up on 'saving for a rainy day' as it were, and are instead more open to enjoying life. Hence, people seldom think twice when opting to dine out.

Another aspect is the convenience factor. Following the hassle of preparation of food people are more receptive to the idea of ready made food.

Speaking to The Sunday Leader, Marketing Manager, McDonalds Sri Lanka, Fahim Hsarook said, "What we see in Colombo is that most people are really pressed for time. It is easier and more economical to eat out. This is why we see an increase in the number of people who opt to eat out and the level of consumer spending. A few years ago, we had what we called an extended family concept. In such an environment, there inevitably will be someone to cook and clean for you. But in today's context people move out right after marriage or even before. Given the fact that both partners are employed there is a heavy constraint on time."

"Both husband and wife are employed and added to the risk of employing a servant nowadays, they find it easier to buy food from out," said Fernando.

Consumers have grown to appreciate the ambience, service etc provided at a restaurant as opposed to dining at home, and find the premium worth paying for. The awareness level of the consumer is also increasing.

"People are more influenced by TV and the press, and we have a consumer that is more aware. This was more than evident during the fear of 'bird flu.' Consumers are also becoming more adventurous and are willing to try out new things," said Hsarook.

"Apart from those who dine out on a regular basis, there are also those who like to enjoy different types of food and live a more enriched life. They make a conscious choice on the place they wish to dine at," added Fernando.

One thing's for sure, as long as man continues to live there will be no cessation in the want for food. With the increasing population, demand for food is ever on the increase. So technically, the restaurant industry has a certainty of bringing in business. So although there may be so many in the business, entering it and making profits should pose no major challenge.

Goverment major beneficiary of private sector value addition 

Over 60% of the value added by the private sector is distributed to the government in the form of taxation and to employees as emoluments. In sharp contrast, shareholders collect a mere 4% of the value added by the private sector in the form of dividends.

These are the findings of a recent study carried out by the Ceylon Chamber of Commerce (CCC) on the listed companies in Sri Lanka. Of the 239 companies listed with the Colombo Stock Exchange (CSE) as at March 31, 2003 they have analysed the annual accounts of 207 companies for the year ended March 31, 2003 (or for year ended December 31, 2002, whichever applicable).

This representative sample was made up of all sectors covered by the CSE such as financial services, food and beverage, plantations, IT, manufacturing, etc. These findings put to rest the commonly held view that the country's much-maligned private sector is only concerned about its 'bottom line.'

The study - the brainchild of CCC Chairman, Tilak de Zoysa - was carried out to counter the often repeated allegations leveled by politicians that the private sector was motivated solely by profit. However, as these findings prove, the contribution made by the private sector to the development of the country and to improve the standard of living of its citizens is substantial.

The value added by the 207 companies alone amounts to over 9% of the country's GDP for 2002 (at current market prices).

Of the 207 companies, 158 companies had employment data, providing direct employment to 370,000 people. It is pertinent to note that this study does not cover all registered limited liability companies in the country. For instance the apparel sector and other BOI companies based in the Katunayake and Biyagama Free Trade Zones (FTZs) - most of which have high levels of employment - are not captured in the study.

According to the fourth quarter 2002 labour force survey of the Census and Statistics Department, over three million people are employed by the private sector, constituting 45% of the total employed population of the country. Thus it can be said that eight million of the Sri Lankan population is dependent on the private sector.

Analysis of value added by 207 listed companies

From the value added of the 207 companies included in the study, 34% had been remitted to the government as taxes thus contributing to the development of education, health, transport, infrastructure, etc., in the country. Indeed, this represents 22% of the total tax revenue of the government in 2002. 27% of the value added was paid to employees as remuneration and retirement benefits. The third largest slice of 13% was paid to financial institutions as interest. 12% was accounted for by depreciation leaving a balance of 14% at the discretion of shareholders.

Over 70% of this balance - or 10% of the total value added - was re-invested in the organizations for purposes of research and development, modernisation, expansion, etc., thus creating a platform for sustaining economic growth. Thus, the annul cash return to shareholders in the form of dividends was a mere 4% of value added or less than 2% of turnover of the companies in the study.

It is also pertinent to mention that shareholders receive their dividends usually once or in some instances twice annually. On the other hand both the government and employees receive their share of an organisation's value added on a monthly and / or quarterly basis.

This study has not attempted to quantify other contributions made by the private sector towards the development of the country and the community. For instance private sector led foreign exchange earnings, sponsorships of sports and the arts, donations and other forms of assistance to charitable causes, etc., have not been considered for this study.

The CEO/Secretary General, CCC, Prema Cooray states that the Sri Lanka office of PriceWaterhouseCoopers has performed agreed-upon procedures on the above statement in accordance with Sri Lanka Auditing Practice Statement (SLAPS) No. 4 and has issued to the CCC their detailed report on factual findings.