21st May,  2006 Volume 12, Issue 45

First with the news and free with its views                                     First with the news and free with its views                             First with the news and free with its views                                    


Economy grew by 6.5% in 1st qtr.

The Sri Lankan economy grew by between 6.5-7% in the first quarter of this year according to provisional estimates.

All three sectors of the economy, Agriculture, Industry and Services experienced a year on year (YoY) growth, however firm figures will be ready only by the end of next month, Central Bank sources who did not want to be named said.

They said that this growth was buttressed by a low 4.4% growth rate in the corresponding quarter last year, coupled with the recovery of the fishery sector (a 200% YoY increase) and remittances which had grown by over 20% YoY.

The tourism sector too recorded a substantial growth in the quarter under review. The country’s balance of payments (BoP) supported by remittances recorded a $ 150 million surplus in the first quarter.

Asked whether the government would have to resort to commercial borrowing in order to meet its import bills, in particular oil, the sources said that with a surplus BoP, coupled by a decline in oil prices during the past few days, the question of raising money from the international market to meet the government’s commitments do not arise.

Asked whether there is a possibility of the Central Bank reducing its policy rates, the sources said that that was not possible due to monetary expansion on account of the growth of private sector credit.

Credit to the private sector has grown by over 20% YoY in the first quarter, the sources said.

They further said that though the garment sector which faired poorly in the first quarter, was however expected to recover in the coming months due to growth in the country’s major garment importing markets, the USA and EU.

The sources further said that the reason why high oil prices did not stunt the country’s growth performance was because such increases had "across the board" effect among Sri Lanka’s competitor countries.

"If Sri Lanka’s cost of production went up due to rising oil prices, then our competitors, which are net oil importing countries also suffered likewise," the sources said. What is important in import growth is whether that growth is spurred by investment imports, which then would not impact on the economy, they said.

On the security situation? The sources said that its deterioration was relatively faster now, than in the first quarter. As such it did not have an impact on Sri Lanka’s first quarter growth figures.

But signs are that with pressure on the EU by the USA to ban the LTTE, the security situation would improve in the future, the sources said. Discounting the possibility of a further deterioration of the country’s security situation, Sri Lanka would achieve a growth rate of 6.5-7% this year, they said. "It is now the norm for the country to achieve a 6% growth rate," the sources added.

Spence to invest in city hotel, but not Hilton

Aitken Spence, one of the country’s key investors in the leisure sector is looking at investing in a city hotel.

"The Colombo Hilton is out of the question because it is too expensive," the company’s managing director J.M.S. Brito told the press on Wednesday.

The government has plans to sell the Hilton through the Colombo Stock Exchange after obtaining majority control over it. Hilton, which has some 45 million shares, finds these shares trading in the Rs 80 levels, dropping from peak Rs 130 levels that was there a few months ago.

"We have identified a property for development in Colombo, but we are keeping options open," said Brito. Managing Director Aitken Spence Hotel Management Malin Hapugoda said that the company was looking at a Rs 2.5-3 billion investment in their city hotel project which will have between 175-250 rooms.

Visitors from new tourism generating markets like India and China prefer city hotels to that of resorts, said Brito.

Spence, which has no hotels in the city, however has some 12 hotel properties outside Colombo and four in the Maldives. The company rebranded three of their local hotel properties, Triton, Kandalama and Tea Factory as "Heritance" catering to the upmarket hotel clientele, recently.

Together with this rebranding, the company has upped the rates in these hotels by between 20-40%. "If not for the country situation, the rates may well have gone up by 100%," said Hapugoda.

Spence has invested some $ 12 million in refurbishing Triton (which was also affected by the tsunami) and another $ six million on Kandalama. Refurbishment costs on the "Tea Factory" are being worked out, he said.

"Just as we were recovering from the tsunami, the current security situation has buffeted our industry," said Hapugoda. "Things were looking good at the ITB tourism promotion festival in Berlin in March, but it has now changed," Brito said.

It is bad because bookings for the forthcoming winter season begin from now onwards, he said. But despite bombings in Egypt and Bali, their tourism sectors have recovered because of positive media publicity, Brito said. Even Maldives was going through a bad patch for some eight months, but it has since recovered and their hotels are full, he said. "65-70% of the company’s leisure sector profits come from the Maldivian theatre," said Brito.

There is no unity in the industry beginning at the tourism ministry level to dispel the negativism that has befallen the local leisure industry, he said. This makes it difficult to counter adverse media publicity. "The industry is however bringing down journalists from our major tourist generating markets so that they could have a first hand impression of the situation in the country," Brito said. But reporters like sensationalism, he added.

Meanwhile Spence is involved in a joint venture with Six Senses, Thailand, in a billion rupee project to build a spa and resort hotel comprising chalets. This project is being executed close to Triton. "These will be priced at $ 350-500 a night," said Brito.

Removal of farm subsidies will hit SL

As Sri Lanka is a net food importer, the removal of agriculture subsidies by major exporting countries would have an adverse effect, said Commerce Minister Jeyaraj Fernandopulle.

Foods such as sugar and wheat are subsidized by Sri Lanka’s major suppliers like the EU and the USA, thereby making it available to the Sri Lankan consumer at subsidized prices.

Fernandopulle who was the chief-guest at a two day seminar on "WTO and South Asia" which began on Thursday said that on the other hand net food exporting countries such as India would stand to benefit from the liberalisation of the agriculture sector.

At the WTO Ministerial Conference in Hong Kong last year, member countries agreed to do away with agriculture subsidies by 2013. Fernandopulle also urged India to remove farm subsidies.

He further said that as Sri Lanka has a low agriculture tariff base, it should not be pressured to reduce tariffs further, particularly in the agriculture sector.

UNESCAP (United Nations Economic and Social Commission for the Asia and the Pacific) Director Dr Ravi Ratnayake in his speech said that studies have revealed that if trade liberalisation, complemented by trade facilitation is practiced, prices will go up by only 2-3%. In this regard, he said that bureaucracy increases costs.

Ratnayake said that trade works for the poor. Trade enhances growth and he gave as examples the success stories of East Asian and South East Asian economies. "Trade related growth was instrumental in reducing poverty in those regions," Ratnayake said.

He further said that out of the 680 million poor in the Asia-Pacific region, 430 million of them were from the SAARC area. Ratnayake said that in South Asia six million children die every year, 775 million lack access to electricity and 233 million lack access to safe drinking water.

"Despite high growth levels in South Asia, poverty remains high. There, therefore, needs to be a mechanism to ensure that the benefits of growth percolates to the poor," he said.

Ratnayake said that if the Doha Development Agenda (that includes the elimination of tariffs of non agriculture market access (NAMA) products is implemented, it would result in 140 million of the world’s poor, coming out of poverty.

Ratnayake was of the opinion that bilateral and regional trade agreements would only lead to cost escalation in the long run. He said that in the liberalization of the services sector, Sri Lanka should push for NAMA and for the free movement of natural persons. "Overseas remittances, an example of services liberalisation in this score, raked from Sri Lanka’s labour abroad, $ 1.9 billion last year," said Ratnayake.

IPS Executive Director Dr Saman Kelegama said that the WTO’s July 2004 package, in the run-up to the Hong Kong meeting and beyond identified five issues as priority areas for negotiations.

They were agriculture, NAMA, services, trade facilitation and the ‘development dimension.’ In Hong Kong there was no deal, but there was an agreement on a draft text on which the WTO General Council was supposed to work on and establish modalities for agriculture and NAMA negotiations, among others by April 30 of this year.

"Had the text come out on schedule, we could have discussed it in the context of South Asia, however, this deadline was missed," Kelegama said.

Kushan attracts FDI

Fully Sri Lankan owned electrical switch and socket manufacturing giant Orange Electric Managing Director Kushan Kodituwaku has been successful in attracting big time Australian investors to Sri Lanka.

A press release said that he has convinced Australia’s second largest electrical switch manufacturer Herman Plastic Mouldings (HPM) to consider Sri Lanka for a joint venture manufacturing plant for export to Australia.

HPM is a 120-year-old family business in Australia. A top management team from HPM Australia was in Sri Lanka recently to make a country assessment for their new investment, which will be their first in Asia. This will be one of the largest foreign direct investments (FDI) in Sri Lanka by an Australian company. BOI has already allocated a 10 acre block of land in Horana for Orange Electric for their new factory expansions under the 300 Factory Programme.

Orange Electric is Sri Lanka’s only electrical switch and socket manufacturer and complies with SLS mark and PSB certification of Singapore, SIRIM of Malaysia and ISI of India.

Orange offers a lifetime warranty on their switches and sockets which no other brand offers. The company has an 85% market share in Sri Lanka with monthly sales for switches and sockets of over Rs100 million. Orange Electric exports switched sockets to Australia averaging Rs 20 Million a month. "The company helps our country to save over Rs.100 million monthly in foreign exchange by manufacturing switches and sockets locally.

Orange Electric is the Associate Strategic Sponsor of the Sri Lanka Institute of Architects (SLIA), Institute of Engineers Sri Lanka (IESL) and The Engineers Guild, Sri Lanka. It has over 800 employees in their two factories and eight local offices.

Bridging the gap

Staff training is "good business" in Sri Lanka and one such woman who is involved in this profession is Diane Inman (52), a Sri Lankan domiciled in Australia.

"I see that there is a gap in Sri Lanka, from leaving school to joining a workplace, where there is no training institute inbetween to prepare the school-leaver for the working environment, this is the gap that needs to be filled," Inman said.

Inman who has no formal training to be an HR trainer said that she honed in this attribute while attached to the HR Division of a law firm in Sydney. "It was my duty to recruit the support staff (not lawyers) to this firm and sometimes even fire them," she said.

"It was there that I had my exposure to HR, I learnt my HR training in the school of life," said Inman, who then joined an HR training firm in Australia. Inman has been involved in HR training in Sri Lanka as well.

Her first assignment was training the middle level staff at Maharajas which was in 1992. HR training was relatively new to Sri Lanka at that time, said Inman. "My speciality is in the impartation of soft skills, like e-mail writing, developing communication and inter-personal skills," she said.

Inman has been involved in staff training in other local corporates as well, companies like Hayleys, JKH, Dialog and Celltel.

"Celltel was a five month inhouse training programme when they were market leaders in mobile telephony," recalled Inman. But Inman, with two teenage chidren in Australia plus a job as a parent counseller at a leading private school in Sydney, hardly has time to conduct anymore inhouse training programmes in Sri Lanka now.

Before flying back to Australia, she will be conducting two one day training sessions for secretarial staff at the Inter-Continental (the workshop for the first seminar which had 40 vacancies has already been taken up) and a one day inhouse training programme for the secretarial staff of James Finlay this week.

"English is the lingua franca for business, for the internet, but our people are shy to speak English, which thereby makes it difficult for them to progress," said Inman. "I have travelled all over the globe, but the difference I find in other countries is that they are not afraid to speak in English, even though the English they speak is "broken" English, said Inman.

"Unfortunately I have no time to teach English, though some companies feel that my training programmes include the teaching of English," she said.

But teaching English is a subject by itself, it is a six months course which I have no time to devote, said Inman, who is planning to return to the Island during Christmas and hopefully be involved in the conducting of more workshops.

Have capacity before seeking markets

While Sri Lanka seeks access to international markets, it should also ensure that it has the capacity to meet its commitments once these markets are opened.

Sri Lanka Economic Association (SLEA) President Professor A.V. de S. Indraratne speaking at a seminar on "Sri Lanka in the WTO" on Friday said as an example that under the Indo-Lanka Free Trade Agreement a number of export items from Sri Lanka to India have been given zero or near zero duty status by India. "But due to capacity constraints, Sri Lanka has been unable to exploit these advantages," Indraratne said.

However a foreign delegate who also participated at these sessions disagreeing with Indraratne told The Sunday Leader that Sri Lanka should not wait till it has capacity to meet the requirements of new markets. "It should go ahead and take the plunge, capacity will follow," he contended.

Indraratne also spoke of the importance of product diversification. Sri Lanka’s basket of exports is limited to a few products like garments, there should be greater diversification, he said. Institute of Policy Studies (IPS) Research Officer Amrit Rajapakse who made a presentation on "Sri Lanka in the WTO," said that Sri Lanka’s tariff policy was a paradox. "On the one hand while the government wants to reduce its tariff regime in keeping with WTO objectives, but with the other it raises tariffs to meet its revenue commitments," he said.

Rajapakse also said that lowering of tariffs would help bring down the cost of living. But the government raises agriculture tariffs in order to protect the farmer at the expense of the consumer. He however said that with 33% of the country’s labour force engaged in agriculture, there was a reason for this dilemma. But Professor of Economics Sri Jayewardenepura University Upali Wickremasinghe, another speaker at this event said that what is bothering the farmer are not issues concerning tariff, but problems such as market accessability.

He also disagreed with Rajapakse’s view that Sri Lanka’s Agriculture Sector was protected. Rajapakse in his speech said that Sri Lanka’s domestic agriculture sub-sector is protected through relatively high applied tariff rates (28%), ad valorem and specific duties. He said that agriculture imports are subject to the top tariff band applicable of 35% in order to protect domestic agriculture where applicable. Wickremasinghe also disagreed with Rajapakse’s view that Sri Lanka maintains a number of subsidies.

"Subsidies given to the local farmer are comparatively low compared to farm subsidies given in other countries," he said. Wickremasinghe also disagreed with Rajapakse’s view that the country’s key stakeholder in "WTO liberalization," the private sector, showed a lack of interest in WTO issues.

Central Bank’s Director Economic Research Dr H.N. Thenuwara making his comments on the seminar said that the session lacked direction. "It should have focused where Sri Lanka is today vis-à-vis the WTO, to which direction it’s heading, but where exactly should Sri Lanka be going," he said. Otherwise it’s a waste of time, Thenuwara added. There was no counter to Thenuwara’s point of view from the seminar participants.

IPS Research Assistant Jayanthi Thennakoon in her speech said that under GATS, Sri Lanka has made initial offers for various requests made by other WTO members and have already made a series of commitments in the telecoms sector, banking and insurance sub sectors, travel related services and tourism, while possible offers in other sectors are being examined by an inter-ministerial committee on services.

Sri Lanka has also submitted its request lists to 18 countries mainly in areas of professional services, computer, communication and health related and social and transport services. However, as ensured at the Hong Kong Ministerial, Sri Lanka is not required to undertake any new commitments in the areas against the country’s wish such as on health, education and water.

Vajira, over 90 year expertise in construction

By Ann Nicholas

Vajira House Builders (Pvt) Ltd is one of the pioneering companies involved in the construction of individual houses. The insight that led to the formation of Vajira House began way back in the 1915s when the country was still under British rule.

During this time an enterprising young man by the name of Charles Fernando began working along with British construction companies of the day. Having been a keen and capable worker, he seemed to have had won the confidence of the British engineers and other authorities.

This dependability in him paved the way for his son C.U. Fernando to subsequently join his father in the construction arena. In time he surpassed the already admired capabilities of his father. This factor is clearly evident by the gesture of the British authorities who entrusted him with the handling of some of the chief construction projects at the time, such as the construction of the Police Department Head Office at Fort, Air Force base, Katunayake and the Kalubowila Government Hospital.

His son, Saman Fernando, the present Chairman of Vajira House is carrying on the family tradition with distinction, since the incorporation of the company 32 years ago. He is being assisted by his daughter Shirmila Fernando. Already several of her concepts are in practice at Vajira House.

Speaking to The Sunday Leader, Vajira House Marketing Manager Bharatha Abeykoon said, "We are one of the first companies to focus on the need for individual housing, which is a market on the rise, along with the increase in population. The working people of today have limited time to engage in building houses. They also lack expert knowledge on the subject. Therefore it is wiser to hand over the building of your house to a company experienced in the construction of such."

The package of benefits offered by Vajira is quite comprehensive, furnishing the customer with over a 100 different house designs, easy payment schemes, loan facilities, special arrangements for Sri Lankans living abroad and many additional benefits.

"We have around a 100 different house designs with a construction price of Rs. 700,000 and upwards. The variety of designs includes the standard house, even going upto six bedrooms, studio apartments, holiday bungalows, chalets, Walauwwa styled houses, as well as European and Japanese designs," said Abeykoon, adding: "Customers are welcome to come to our office and discuss with us the design they prefer and work out a solution within a viable financial plan. However, if the customer has an already approved plan, we undertake to construct according to it, provided that it does not exceed his budget."

According to Abeykoon, a person can start building a house with a mere payment of Rs. 100,000. The balance payment can be made within one month or if the customer wishes to go for a bank loan, the company can arrange a speed loan in seven days on his behalf.

"Sri Lankans living abroad can access our website that displays our varied house designs from which they can select one for construction. On appointment of a relative in Sri Lanka to handle correspondence, we will see to the transfer of the power of attorney and start work on the house," said Abeykoon.

In terms of additional benefits, the company undertakes to build houses anywhere in Sri Lanka at no extra charge. Customers are also eligible to become recipients of free offers of furniture and consumer durables.

One of the most useful features is the land bank facility carried out by the company. Commenting on this, Abeykoon said, "Most people find it hard to secure a suitable land to build a house, addressing this need we have started a land bank where we list the available lands in and around Colombo on our database. All that the customer has to do is to register with us, following which we will inform them when a suitable land becomes available. This service also benefits land owners who are looking out for prospective buyers. Through this we guarantee that a good title is passed on to the customer. In addition we provide free legal services such as detailed title searches and deed transfers."

Speaking on the advantages of handing over the construction of a house to a veteran construction company such as Vajira House, Abeykoon observed, "This gives you total peace of mind which allows you to focus on your other daily activities, since we monitor the entire construction process it saves you time and resources, the total payment for the house is inclusive of all charges so there is no risk of overspend, furthermore we provide other ancillary services free of charge."

In view of its 32 years in operation, the company will grant a bonanza of Rs. 50,000 to any one of its existing or prospective customers, on introducing a new customer to the company.

Armed with the experience of four generations and enriched by professionalism of over three decades, "Vajira" boasts of a depth of knowledge in the field of construction like no other company, which is converted into a unique strength ultimately beneficial to the customer.

Suntel launches "reload" facilities

Suntel unveiled an innovative service with the launch of their "Fixed Line Chat Reload," offering a "convenient" reload facility to their customers, said a press release.

Suntel is the first to offer reload service on fixed line phones in Sri Lanka. hSenid Software International, a global human resources management (HRM) and mobile solutions and software outsourcing services provider has successfully implemented this facility for Suntel CDMA Network.

The new service which will be available through all Suntel and regional dealer centres, enables Suntel chat customers to reload their fixed line phone. They could also re-load any other Suntel chat phone by providing the phone number at the point of reloading.

hSenid services a large customer base in Sri Lanka and overseas and have provided customized solutions to its clients, addressing their specific requirements. HBS – hSenid Business Solutions (Unit of the hSenid Group for HR information systems and customized business solutions), BeyondM (hSenid Group’s unit for mobile solutions), and business process outsourcing (handling all outsourcing projects). The company has offices in the USA, Singapore and its research and development centre in Colombo.

ACCA scheme for undergrads

The Association of Chartered Certified Accountants introduced a new scheme to support Sri Lankan under graduate students doing business related studies at the Nawaka Prabodhana 2006 held at the BMICH recently.

A press release said that "ACCA Accelerate" is a scheme whereby undergraduates can register to receive study support and other benefits currently available only to ACCA students. The annual subscription for this support scheme is only £15 and there is no registration fee involved. Undergraduates registering on this scheme will receive copies of student accountant, the quality ACCA students’ magazine which provides study support and a range of features designed to assist-in forging a successful career path.

They will also be able to participate in the activities of the ACCA Students’ Society including networking evenings, technical sessions and soft-skills training. Other privileges available currently only to ACCA students such as the use of the library and study rooms and copies of ACCA Sri Lanka’s monthly student magazine student focus will also be extended to the undergraduates under this scheme.

A monthly email newsletter accelerate containing career advice specially tailored for undergraduates will also be sent to them. A key financial benefit will be the waiver of the registration fee (currently £59) upon completion of the degree. They can also gain exemptions from related papers in accordance with ACCA’s exemption scheme for finance related degrees. University students who wish to register can do so by visiting or seek assistance at the ACCA Office at Rosmead Place, Colombo.

Nawaka Prabodhana was organized by the third year students of the Management and Finance Faculty of Colombo University to welcome first year students. It was co-sponsored by ACCA.

"Mahout" wins Gold for conservation

The Mahout Adventure Club has won a Gold Award at the 2006 PATA Annual conference in Pattaya, Thailand.

A press release said that the award winning project carried out by Mahout Club involved the conservation of snakes and minimizing human-elephant conflict in the vicinity of Giritale and Polonnaruwa where its first Club is located.

Mahout Club is a concept of "Soft Adventure Tourism" which was created by Lalin Michael Jinasena, CEO ‘LMJ’ (L.M. Jinasena and Company Pvt Ltd) an enthusiast of wildlife and the outdoors. The Club offers a wide range of excursions for guests of its partner hotel, The Deer Park, Giritale. Guests get to explore the expansive jungles surrounding the region with professional guidance of qualified and highly trained ornithologists, herpetologists and naturalists. These naturalists include some leading experts on wildlife in the country. Likewise they are accompanied to various well known and some newly discovered heritage sites of the region by archeologists giving their guests an informative and entertaining experience into the facets of Sri Lanka. Each tour is individually carried out for couples or family groups and involves a personalized level of service and care.

The Snake Awareness and Conservation Programme was carried out because Mahout Club team realized that there was needless killing of snakes being carried out in the region. This was mostly due to a lack of knowledge of the varieties of snake species and an inability to identify which species are venomous and non venomous. Mahout Club’s awareness programme involved its own team members carrying out lectures and training programmes to local schools, hospitals, at temples and for the general public on identification of snake species and on the importance of snakes in maintaining ecological balance.

People were also advised to inform the Club if snakes were found in their homes or fields. The Club’s snake handlers then capture and release the snakes into jungles at a safe distance from human habitation. The capture and release programme still continues to save about 30 to 40 snakes monthly which would otherwise have been needlessly killed. The awareness programme is believed to saved many more by creating an understanding of the importance of snakes and the survival of all forms of fauna for the ecology.

Mahout Club, whilst providing exceptionally thrilling excursions involving natural and ancient treasures of Sri Lanka, is consciously working in a manner that doesn’t unduly harm or hinder these very same treasures. As a policy it does not carry out the very profitable elephant back rides for tourists, on the grounds that it is inhumane. The Club as part of its wildlife conservation programme also carried out an awareness programme to educate rural farmers on how to minimize confrontation with elephants by using natural methods of protecting their fields. This programme was aimed at preventing and reducing the sad losses that occur to both people and elephants due to the growing human-elephant conflict in that region of Sri Lanka.

The Club has gained international recognition due to its revolutionary approach to "Soft Adventure," "knowledge Tourism," guest satisfaction and award winning conservation programmes and is now a Sri Lankan Brand product which is being established internationally as a high-end "Soft Adventure" service provider to hotels around the world.

"The Mahout Club provides a unique opportunity for visitors and local stakeholders to gain respect and understanding of indigenous wildlife. Man and Animal do not always comfortably co-mingle; the Mahout Club creates greater harmony between the two." – Comments made by the PATA Judging Committee at "Gold Awards 2006."

Former Hutchison head at CIMA seminar

Simon Murray, Chairman GEMS Ltd and Asia Corporate Finance, Macquarie Group of Companies, Hong Kong, will make a presentation at this year’s CIMA Business Leaders’ Summit, "Creating a Galaxy".

A press release said that Murray will draw on his many achievements from both his professional and personal life to illustrate his own view of the conference theme, "Unleash your potential".

Murray is also the director of a number of other companies including Hutchison Whampoa, Cheung Kong Holdings and Compagnie Financiere Richemont SA, Murray’s working life had humble beginnings. He joined the British Merchant Navy at 18, but after returning home he soon craved more excitement and ran away to join the French Foreign Legion. He later wrote a best-selling book, Legionnaire, about his experiences which has sold more than a million copies.

After his stint in the Foreign Legion, Murray arrived in Asia with just GBP27 in his pocket. He has now lived in the region for over 40 years. He first worked at the Jardine Matheson Group where he ultimately ran their engineering business and their trading operations. Thereafter, he founded Davenham Investments and later sold the firm and became the Group Managing Director of Hutchison Whampoa.

He pioneered the Hutchison Group’s entry into the mobile telecommunication business. He also developed the Group’s energy business and expanded its container operations. After leaving Hutchison Whampoa, he co-founded Distacom, a mobile telecoms operation in India, Japan and Hong Kong. Murray has served as chairman of numerous companies, including Hong Kong Electric, Hong Kong International Terminals, Husky Oil Canada and Asia Satellite Telecommunications.

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