While trade policy is given importance little has been asked about how trade liberalisation effects the poor of our country," said Dr Saman Kelegama, Executive Director, Institute of Policy Studies. "After opening up our economy in 1977 many reforms have taken place which have led to growth in trade, and today imports and exports add up to 70 percent of our GDP," he told the Island Financial Review. Does trade work for the poor? Can we make trade work for the poor? If there are links between imports and exports and poverty, what are these links? Does trade work for the poor? "Opinion is divided. The UN for example had a slogan that said, ‘Making Trade Work for the Poor’ and some economists and activists had a slogan that said, ‘Trading out of Poverty’. In-between them are those who say that trade will work for the poor only if certain conditions are met. But what exactly are these conditions," he asked. He pointed out that poverty in Sri Lanka had reduced from 22 percent in 2002 to 16 percent in 2007. "Is this a result of trade, or is it a result of government policies, or even worker remittances?" These questions are being asked by economists, academics and policy-makers world over. The Institute of Policy Studies and the Friedrich Ebert Stiftung, Colombo, organised a two day conference on Trade-Poverty Nexus in South Asia to try and find commonalities between the experiences of each country of the region, in relation to trade policy and poverty, in a bid to shed more light on the issue. South Asia is home to 46 percent of the world’s poor while being the second fastest growing region. Finding a link between trade liberalisation and poverty is all the more important in light of the Millennium Development Goals, where poverty is hoped to be halved by 2015. The oil and food crisis’s are a major setback to achieving this goal. Furthermore, the socio-economic consequences of poverty are a driving factor behind finding the elusive link as governments and global institutions strive to bring down poverty levels. In his introduction to the conference, Dr Kelegama said that the direct link between trade liberalisation and poverty is difficult to measure because trade liberalisation and poverty are themselves difficult to measure. Poverty is heterogeneous with many dimensions and with many reasons which contribute to poverty; it is difficult to measure such a complex and multidimensional concept. Trade liberalisation affects relative prices of goods, services and factors of production which in turn affect household, investment and saving decisions. It affects government income and expenditure. Rural infrastructure and market structures also determine the affects of trade liberalisation on an economy. "Because of all these complexities, there is debate over the trade-poverty link in literature. As reviewed by many authors, establishing the trade-poverty nexus is an even more difficult task," Dr Kelegama said. The delegates of Afghanistan, Bangladesh, Bhutan, India, Maldives, Nepal, Pakistan and Sri Lanka presented preliminary drafts on trade-poverty nexus studies based on each country’s experience which are to be published later in the year. The elusive link Jayatilleke Bandara, Associate Professor, University of Griffith Department of Accounting, Finance and Economics, presented a paper on the evidence of previous studies on trade-poverty nexus in the South Asian region. He said that the studies showed contradictory results. While some studies showed that trade liberalisation reduced poverty, others showed that it had increased poverty. He pointed out for instance, that three global studies on poverty gave three different figures. One said 24 percent of the world’s population lived below the US$ 1 a day poverty line. Each of the other two studies claimed it was 6.7 percent and 32 percent respectively. The effect trade liberalisation had on poverty filtered down through many chanelles and it was difficult to capture the effect each channel had on poverty and contradictory theories floating around did not make things easy either. His study on previous works drew the following conclusions. The link between trade liberalisation and poverty was not clear and proved to be difficult to study due to complexities in assumptions and calculations. While some countries in the region had managed to reduce poverty as a result of trade liberalisation some segments among the poor were adversely affected. Trade liberalisation alone would not reduce poverty but would need to be complemented by other policies (such as safety nets for domestic segments, proper public service delivery in rural areas, investment in rural infrastructure and domestic commodity and factor market reforms) which will reduce poverty while implementing trade policy reforms. And importantly, "Good governance is important to spread the benefits of trade liberalisation across society and regions," Prof Bandara said. Conclusions Prof Premachandra Athukorala presented the conclusions derived from the conference. He reiterated the conclusions drawn by Prof Bandara that the link between trade liberalisation and poverty was difficult to establish and that trade liberalisation needed complementary policies in order to benefit the poor. "While trade liberalisation had a favourable impact on growth, employment and poverty reduction across the region, there is no unique relationship that can be identified. The degree that trade has impacted on poverty varies from country to country." "Macro economic policies, liberalising the role of foreign direct investments and labour market reforms are key areas that need to be looked at if trade liberalisation is to benefit the poor," Prof Athukorala said. |
Saturday, May 31, 2008
Thursday, May 29, 2008
Awarding of oil exploration rights soon
"It is up to the Cabinet now. They should soon make an announcement awarding exploration rights to the successful bidder," said Dr Neil De Silva, Director General, Petroleum Resources Development Secretariat (PRDS).
Altogether, six bids were received for three exploration blocks carved out in the Mannar basin. The bids were made by three oil companies.
The first block (SL2007 -01-001) received bids from Cairn India Limited, Niko Resources (Cyprus) Limited and ONGC (Videsh) Limited. The second block (SL2007-01-002) received bids from Cairn India Limited and Niko Resources (Cyprus) Limited and the third block (SL2007-01-003) received one bid from Niko Resources (Cyprus) Limited.
The Cabinet of Ministers decided to evaluate only the first block for petroleum exploration on the grounds that no sufficient bids have been received for the other two blocks.
"Once the award is given for exploration, it would mark the beginning of oil exploration in Sri Lanka after a lapse of some 25 years," he said.
Dr De Silva said that oil exploration in Sri Lanka began about 40 years ago with acquisition of the first offshore seismic reflection survey by Compaigne General de Geophysicque (CGG) performed on behalf of the Ceylon Petroleum Corporation in 1967.
Between 1967 and 1983 close to 18000 km of 2D seismic data were acquired and seven wells drilled. Although hydrocarbon shows were encountered in one of the wells in Pesalai no commercial hydrocarbon accumulations were discovered.
The Mannar basin is under-explored, De Silva said, with only one exploratory well situated on the north-eastern shallow present-day continental shelf of Sri Lanka.
"No deep-water drilling has occurred to date. Two speculative seismic data acquisition programmes were conducted in the Mannar Basin in 2001 and 2005 and subsequent studies performed on the data acquired indicate areas of significant petroleum potential with large scale structural and stratigraphic traps present in the basin," Dr De Silva said adding that that the chances of finding oil, as earlier reported, had been calculated at 60 percent.
Speaking to the Island Financial Review Dr De Silva said that the bidders had to bid for a minimum exploration work programme, the amounts offered as signature bonus, production bonus, the percentage share of profit petroleum based on a investment multiple and the extent of participation of the National Oil Company.
Simply put a signature bonus is a payment the oil exploration company is expected to pay the government once the award to explore for oil is given, a one-off payment along with a production bonus.
The investment multiple is widely used in the oil extraction industry and is calculated by dividing Pre Tax Revenue with the investment.
According to Dr De Silva the share of profit, smaller at the initial stages, should increase significantly as time progresses.
"A life time of an oil field is about 20 years. Towards the latter stages Sri Lanka could end up with a major share of the profit," he said.
Once oil is found and commercial extraction commences, the oil company is allowed up to 70 percent of the revenue to cover its investment. The government expects a 10 percent royalty, the profit share based on the investment multiple, taxes (currently at 15 percent) and the revenue of the participating National Oil Company.
The Exploration licence is valid for eight years and divided into three stages of three, two, and three years.
To progress from one stage to another the oil exploration company would have to complete whatever it laid down in the work programme, for which the government would charge a 25 percent guarantee.
The second and third stages should result in at least one well in each stage while 30 percent of the territory must be relinquished back to the state after eight years.
"This will also ensure that the oil exploration company will then concentrate on areas they think are more likely to have oil," Dr De Silva pointed out.
An extension is possible after the fourth stage if a potential discovery is made. The entire territory is to be handed over to the government, except the areas where oil is discovered.
"Everything had been thought of. We studied contracts between other governments and oil exploration companies and have selected the best profit sharing concept."
"If oil is discovered, the agreement between the oil exploration and government would be to address the country’s oil needs before exporting is even considered," Dr De Silva said.
Prior to investing in any area, Dr De Silva explained that oil companies would evaluate the political risk, marketing risk and geological risk.
"Political risk is the potential for major policy changes, such as nationalisation while marketing risks involve factors such as production profiles and marketability of the produced petroleum."
"Assuming these risks are negated, the risk of finding oil in the Mannar Basin boils down only to the geological risk that can be estimated at 60 percent," he said.
Another factor that would have been considered by the bidding parties is that the Mannar Basin has had no oil discoveries to date and Sri Lanka has to compete with countries that have already discovered oil such as India, Bangladesh, Africa and the Middle East.
Saturday, May 24, 2008
‘Learn and Lead’ uplift for bright, under privileged students
Bright students from poverty and conflict affected areas can now win an opportunity of studying in private schools in Colombo, Kandy and Galle.
Thanks to a ‘Learn and Lead’ scholarship programme launched by Sri Lanka’s network of regional business chambers, Business for Peace Alliance (BPA) these students can now study for their Advanced Level exams in these three cities.
The programme will also ensure that the students are taken care of and well provided for in the big cities.
Accommodation in the hostels of participating schools will be arranged for while clothing, books, stationery, medical care and insurance will also be provided.
The students will have special coaching in extra curricular activities, leadership development and psycho-social support.
Each student will also be appointed a guardian who will see to their needs. Special arrangements have been made to ensure that guardians do not take over the role of parents. An agreement between the parents, guardian and participating school clearly define the roles and boundaries.
Mentoring programmes will be carried out by human resources professionals in the private sector while a programme to develop mentoring skills among the students of the participating schools to complement the Learn and Lead programme has already commenced.
Learning to walk
The pilot phase of the project saw the BPA chambers of the Anuradhapura, Badulla and Trincomalee promote the programme in these districts where over 250 students responded.
A special orientation programme was held recently for the 21 short listed candidates who met with representatives of the Steering Committee, heads of leading private schools, guardians and mentors.
This would be the first batch. Due to funding constraints only six of them were enrolled in private schools in Colombo.
Three boys have been enrolled at S. Thomas’ College, two girls at Ladies College and one at Methodist College.
There are three other students, two boys and girl, who are awaiting conformation of places.
"This is just the beginning. The costs are very high and the regional chambers and a few individuals have provided the funding, it is not enough, but this is just the pilot stage," Manique Mendis, Secretary General/CEO, Business for Peace Alliance said.
"Many organisations have their own CSR projects. But there can be better results if we work together to make a better tomorrow for these bright students who come from difficult regions in the country. All they need is a chance," she said.
She said, however, that it was imperative that priority be given to quality and not quantity.
"We will continue to raise the necessary funds and next year we will select the next batch of students. It’s going to be a long term commitment on our part," Mendis said.
Building bridges
While breaking down the barriers of geographical divides, the BPA said in a statement, that it hoped Learn and Lead would bridge the barriers of race, religion, class and creed that are the root causes of the conflict and poverty in our country.
The BPA has undertaken to spearhead the initial operations and set up a Trust Fund and will monitor students’ welfare.
According to the Concept Paper, 50 students from Jaffna (all Tamil students), Mannar (Tamil), Vavuniya (Tamil and Muslim), Trincomalee (Sinhala, Tamil, Muslim), Ampara (Tamil, Muslim), Batticaloa (Tamil, Muslim), Anuradhapura (Sinhala), Polonnaruwa (Sinhala), Puttalam (Muslim, Sinhala), Badulla (Sinhala, Tamil) and Monaragala were to be selected for the first phase based on their performance at the Ordinary Level Examinations.
Education standards of the district, income level of families and the effects of the conflict (loss of parents, displaced etc) will be other criteria, apart from the Ordinary Level Examination results, which will be weighted to award merits when selecting the students. Each district will have a district-specific system in this regard.
Gender balance will be strictly followed in selections.
National Steering Committee
A National Steering Committee was formed headed by Former Under Secretary, United Nations, Jayantha Dhanapala and Mahen Dayananda, Chairman Ceylon Chamber of Commerce, as its Vice President, to guide and monitor the progress of the programme.
The steering committee meets once a month, the Island Financial Review learned, and with so many eminent members in its fold no doubt the future of Learn and Lead will bring better tomorrows to many of our children already torn by poverty and conflict.
Other members of the Steering Committee; Dr Hiranthi Wijemana, Adviser, Child Protection Authority, Rotarian Thariq Thulba, Governor, Rotary Movement, Rev Dr. Theodore Warnakulasuriya, Senior Lecturer Open University of Sri Lanka, Rev, Dr. W. Wimalaratne, Senior Lecturer, University of Colombo, Dr Devanesan Nesiah, Member Presidential Committee on Human Rights, Deshabandu Jezima Ismail, Chancellor, South Eastern University, Mohamed Halith, Attorney –at-Law, Ms Anushya Kumaraswamy, former Group Director, John Keells Holdings, Prof Rajiva Wijesinha, Seceretary General, Secretariat for Coordinating the Peace Process, SCOPP, Ms Manique Mendis, Secretary General, Business for Peace Alliance, Dr Markus Mayer, Country Director, International Alert and Dr David Ponnaiah, Warden St Thomas’ College, Mt Lavinia.
The members of the National Steering Committee will market the programme to the business community and to individuals willing to sponsor students and take the ‘Learn and Lead concept to the boards of private schools, the Concept Paper states.
Govt doing its best, but apparel industry should not depend on GSP – President
President Mahinda Rajapaksa met representatives of the Joint Apparel Associations Federation (JAAF) last Thursday to brief them on what the government was doing to secure an extension of GSP+ and the challenges the government was facing in this regard, the government Media Centre said.
He had said that the written submission which has to be delivered to the EU headquarters at Brussels before October 31 this year was being prepared.
The ministries of Export Development and International Trade, Foreign Affairs, Justice, Human Rights, Environment and Labour together with the Attorney General’s Department were meeting regularly to develop the content of the submission.
"The noteworthy achievement of the apparel sector, which had won recognition in this country as well as internationally, should be taken into account as a crucial component of Sri Lanka's case," the President had said
"As far as other criteria are concerned, evidence relating to ratification and implementation of 27 International conventions is being prepared and will be presented," he said.
The Government, for its part, the President had assured them, would do everything appropriate to secure GSP+ benefits while upholding the country's sovereignty and dignity.
"A great deal of work is continuing in earnest to achieve this, However," the President stressed, "The industry should make all efforts to strengthen its own capability in a spirit of self-reliance, since dependence on GSP+ benefits for an indefinite period will not serve the interest of either the industry or the country."
During the meeting the President had shown the JAAF delegation a letter dated 07 March 2008 sent by the Leader of the Opposition addressed to Ms Benita Ferrero-Waldener, Commissioner of European Commission for External Relations, that the apparel industry had requested the government to change the Constitution.
The Opposition Leader’s letter had said that the UNP had decided to support a proposal made to the government by the apparel industry to amend the 1978 Constitution in order that the International Covenant on Civil and Political Rights (ICCPR) and the First Optional Protocol to the Covenant be incorporated into the Constitution.
In a recent case before the Supreme Court, the UNP said, the Court ruled that the ICCPR had no legal effect in the country since the rights outlined in the ICCPR had not been given statutory status, a ruling the Supreme Court subsequently withdrew as the ratification of the convention in 1980 (and the ratification of the First Optional Protocol in 1997) by Sri Lanka meant that no domestic legislation is necessary to give effect to ICCPR.
The UNP wrote to the EU saying that although the government passed a law in 2007 with regard to ICCPR it was inadequate as many provisions had been omitted and said that the Constitution needed to be amended.
The President, in the presence of Professor G. L. Peiris, Minister of Export Development and International Trade, Attorney General C. R. D. Silva, Central Bank Governor Mr. Ajith Nivard Cabraal, Secretary of Defence Ministry of Gotabhaya Rajapaksa and Secretary to the President Lalith Weerathunga, asked the JAAF delegation whether they had indeed made such a recommendation to the government, to which they replied in the negative, the Department of Government Information said.
The President admonished the UNP for making matters worse for the country’s case for an extension of GSP+ and said that JAAF had a duty to make their own effort to combat such adverse propaganda of this nature.
Friday, May 23, 2008
SriLankan CEO breaks the ice Sri Lankan management to focus on mitigating costs, managing revenue
National carrier SriLankan Airlines will not focus on growth in terms of expanding destinations, as it does not have the capacity to do so, but will instead implement an action plan to reduce costs and manage revenue; this is the airline’s short term focus, Manoj Gunawardena, CEO, SriLankan Airlines, said in an interview with the Island Financial Review.
"We will try to increase the frequencies to more profitable destinations and if we are compelled to, with reluctance we may reduce frequencies to unprofitable destinations," he said.
For an industry that can no longer charge relatively exorbitant rates, to recover fuel costs, wherever in the world, Gunawardena said that an action plan was being formulated to reduce costs and manage revenue within the next six months, without having to pass the burden on to the flyer.
With the advent of budget airlines, people have begun to consider air transportation as a commodity and therefore, are unwilling to accept high airfares. So in order to be profitable other methods must be adopted.
"We will implement an action plan and the results will have to be in millions of dollars," he said.
Last year’s fuel budget was US$ 200 million and no airline would have envisaged that the price of oil would rocket to US$ 130 a barrel. Gunawardena said that if each and every aspect of IATA’s programme was followed a 5 percent savings can be made. Based on last year’s rates, it would amount to US$ 10 million.
He said the airline’s top ten cost items had been identified: They include fuel, ground handling, IT and logistical costs and an action plan would be set to reduce them and it would involve the entire 6,000 odd workforce to put the action plan into effect. Gunawardena said that targets would be finalised for each cost sector before the end of May.
Instead of increasing prices to such an extent that people cannot afford to fly, SriLankan has invested in a complex revenue management system which will create the right mix. 50 percent of flights on the airline’s network are beyond the country with half its flights touching down in Colombo. This system will monitor bookings across the airline’s network of flights so that appropriate decisions on pricing can be made.
"We will also have to engage the unions because while we acknowledge that they are highly skilled and specialised in each of their areas, because of which they are in high demand from other airlines, we want them to adopt a system where remuneration will be linked to productivity."
Giving wings to its core
business
"SriLankan Airlines’ core business has made marginal losses, but revenue from SriLankan Catering (Pvt) Ltd, ground handling and duty free sales have ensured that as a group, the airline is profitable. However this needs to change.
"We have talked about it as a team and we cannot go on making losses in our core business of transporting people and cargo. We should breakeven 18 months from now," Gunawardena said, "a goal the action plan is expected to achieve."
Moving to Katunayake
In a bid to cut down on costs and for better coordination, the headquarters of SriLankan will be relocated to Katunayake. At present, three floors of the World Trade Centre are used to house its offices.
Mihin Lanka
SriLankan will develop commercial co-operations with the country’s budget airline, Mihin Lanka.
"The government has given us a clear directive that we should work together. There is no necessity for us to compete. We will look at coordinating our schedules, so that different departure times to similar destinations can be worked out," he said.
"We have not had detailed discussions about Mihin Lanka and it is not likely that its ownership will change," Gunawardena said.
Losing pilots to other airlines
Commenting on the many pilots who had left SriLankan for greener pastures (or bluer skies?), Gunawardena said that it was a common problem the entire airline industry was facing.
"The number of pilots we have with us now is quite adequate," he said.
"We have lost many experienced pilots to other airlines in the region but this is nothing new. We continue to recruit new pilots and we have two batches of pilot cadets entering our International Aviation Academy each year."
Emirates
Gunawardena said that Emirates’ management of SriLankan had both positive and negative implications.
"The debate had been going on for sometime, and now the matter is settled. SriLankan is now managed by Sri Lankans. If anything goes wrong, we will only have ourselves to blame so it is important for us to do the simple, basic things the right way," he said.
No honeymoon
"I am in a special position. This is the first time that a CEO has been appointed from within the organisation. I have been with SriLankan for 26 long years. I started out as a cargo agent and have handled 15 different jobs since then.
"Expectations are high, my colleagues and I have grown with SriLankan and they will expect a lot from me, so will the stakeholders and the public," said Gunawardena.
"Unlike other CEOs I have no honeymoon period. I have been with SriLankan for a long time. I already know the organisation and I already know what’s happening. I am here to deliver," he said.
Trade deficit in March widens, BOP in surplus US$ 3.5 billion in reserve as at end March 2008, sufficient for 3.5 months’ imports
The trade balance widened from US$ 222 million in March 2007 to US$ 449.4 million in March 2008, the Central Bank said yesterday.
This was after expenditure on imports recorded a year on year increase of 32.5 percent which amounted to US$ 1.129 billion in March 2008, as against US$ 852.7 million for the same period the previous year, it said.
Earnings on exports grew by 7.8 percent to US$ 680 million in March 2008 from US$ 630.7 million for the same month last year.
Imports of consumer goods grew by 37.1 percent to US$ 255.3 million from US$ 186.2 million due to large increases in several categories of food imports such as rice, milk products and wheat.
"The surge in the price of petroleum, which increased by 70 percent to US$ 100.6 per barrel (in March), led the expenditure on petroleum to contribute more than half of the growth of imports in March 2008," the Central Bank said.
Driven by an increase in building material imports, the imports of investment goods recorded a 6.2 percent growth to US$ 240.9 million from US$ 226.8 percent.
Cumulative imports during January-March 2008 amounted to US$ 3.264 billion, an increase of 37.6 percent from US$ 2.373 billion for the corresponding period the previous year.
Significant increases in export earnings from tea and other minor agricultural products led to 29.1 percent growth on Agricultural export earnings from US$ 118.6 million in March 2007 to US$ 153.1 million in March 2008.
Export earnings from tea increased to US$ 106.5 million, an increase of 35.4 percent from US$ 78.7 million.
Industrial export earnings grew by 3 percent to US$ 516.5 million from US$ 501.4 million. Export earnings from the apparel sector grew by 8.2 percent to US$ 293 million in March 2008, from US$ 270.8 million.
"Apart from textiles and garments; rubber products, machinery and equipment were among the other industrial exports which have contributed significantly to the growth in exports," the Central Bank said.
Earnings from mineral exports increased by 2.8 percent to US$ 10.6 million from 10.3 million in March 2007.
Cumulative export earnings grew by 10.2 percent to US$ 1.878 billion for the period January-March 2008 from US$ 1.073 billion for the same period the previous year.
The trade deficit increased by 102.4 percent from US$ 222 million in March 2007 to US$ 449.4 million in March 2008.
The cumulative trade deficit had increased to US$ 1.386 billion for the period January-March 2008 from US$ 669.3 billion the previous year, an increase of 107.2 percent.
The Central Bank said that the negative impact of the trade deficit was mitigated by worker remittances which increased by 22.7 percent to US$ 261.7 million in March 2008 while the cumulative amounted to US$ 752.2 million for the period January-March, an increase of 23.5 percent from US$ 609.1 for the same period last year.
"The overall balance of payments recorded a surplus of US$ 416 million for the period January-March 2008, resulting in the gross official reserves increasing to US$ 3.518 billion by end March 2008, which is sufficient for 3.5 months of imports," the Central Bank said.
Saturday, May 17, 2008
* Mega property development project AMW, JKH, Finlays join hands
John Keells Holdings PLC, Associated Motorways PLC and Finlays Colombo PLC signed an MOU Thursday evening to conduct a feasibility study that would lead to the development of a city within the city on the properties belonging to the three companies that lie side by side in Colombo 2.
The extent of the combined properties is 1,060 perches, 480 perches of JKH, 280 of AWM and Finlays, 300 perches. The feasibility study will be conducted to establish the details and extent of the building construction to be carried out on the property, the required investments etc
Although the sole purpose of signing the MOU was to establish the details, it was revealed that the development of the combined site may require an investment of US$ 250 million, Susantha Ratnayake, Chairman John Keells Holdings PLC said.
In keeping with the concept of developing a city within the city, the buildings that would come up on the property overlooking the Beira Lake are expected to be used for commercial, retail, residential and recreational purposes. The number of buildings to be built on the property—in fact the entire concept of the project—will be finalised through the feasibility study.
While valuations are yet to be carried out the land value is roughly estimated at Rs. 6 billion.
The good neighbours (JKH, AMW and Finlays), who occupy the land that will be used for this project which is accessed through Union Place and Vauxhall Street, will have to relocate their offices once the development phase kicks off and the sheer magnitude of the project in the heart of the city is going to require a whole gamut of approvals, which means that the implementation of the plans that emerge from the feasibility study will commence about two years from now.
Once the feasibility study is concluded a joint venture company will be set up to proceed with the development work in a phased-out approach.
"We will be able to do much more together when the scale of the project is considered than what we could do on our own. The purpose of this project is to unlock the potential of the properties we hold and with a combined effort we can create a differentiation with other property developments in the city," said Kumar Jayasuriya, Chairman Finlays Colombo PLC.
JKH, with its property development arm Asian Hotels and Property PLC (Crescat City), and Finlays, whose parent company Swire Group specialises in property development in the Asia Pacific region, are expected to play lead roles in the planning and implementation stages of this project.
Ajita De Zoysa, Chairman Associated Motorways PLC, Susantha Ratnayake, Chairman John Keells Holdings PLC and Kumar Jayasuriya, Chairman Finlays Colombo PLC signed the MOU on behalf of their companies.
The big three were not particular about the number of buildings, or their height, nor were they concerned to divulge intricate details of all that is in store. They just wanted to say that the project is expected to maximise the potential of their property and create a city within a city.
We don’t have much details until the feasibility study is concluded but of one thing we can be sure, the landscape in the heart of Colombo is about to change. (DD)
Friday, May 16, 2008
Oil from Mannar Basin - even chances
There is a 60 percent possibility that the Mannar Basin will have oil, said the Director General of Petroleum Resources Development Secretariat in a public lecture Wednesday.
"Oil exploration is a high-risk venture with a 10 percent success rate of finding oil, but things might be different in Mannar," Dr Neil De Silva said.
He said that oil exploration began in the ’70s and seven wells had been explored after 18,000 km of 2D seismic data of the Mannar basin was collected but no oil was found.
The technology was not very accurate and the wells were drilled in places that should not have been drilled but now with 3D seismic data a more accurate survey can be done and the chances that the Mannar Basin on the Sri Lankan side of the maritime border will contain oil has a probability rate 60 percent, Dr De Silva said. India is producing oil from wells discovered on its side.
The Mannar Basin was divided into eight blocks and the government decided to open three of them for bids, which closed on 31 January this year.
Block SL-2007-01-001 received bids from Cairn India, ONGC Videsh and Niko Resources. Block SL 2007-01-002 received two bids, Cairns India and Niko Resources while the third block SL 2007-01-003 received a bid from Niko Resources.
The government decided to evaluate the bids for SL 2007-01-001 only, as it felt that the other two blocks did not receive enough bids. He said that only the cabinet would know why such a decision was taken. The exploration contract is eight years in duration and is divided into several stages with each stage having certain requirements which need to be met in order to qualify for the subsequent stages.
Sri Lanka had road shows in London, Houston USA and Kuala Lumpur prior to calling for bids with many heavy weights in the field of oil-exploration expressing their enthusiasm. 5,000 emails, 200 faxes and 100 phone calls to top executives in oil exploration companies were made in order to market the bids. A total number of 42 companies had responded and showed interest in exploring for oil in the Mannar Basin.
"But we had several challenges. One was the security concerns and political uncertainty. But on a technical ground the slots were too small. They would have preferred to explore a wider area as it would naturally increase the chances of discovering oil.
"Oil exploration in the Mannar Basin will take place in relatively deep waters where a single well is estimated to cost US $30 million to drill (US $ 10 million in shallow waters) and oil exploration companies wanted to be able to conduct a more meaningful exploration and wanted a larger area.
"Sri Lanka continues to compete with countries such as India, Bangladesh, Africa and the Middle East to attract oil explorers and the disadvantage Sri Lanka had is that its competitors had proven that they did have oil deposits.
"We have a high country risk, the whole world knows the situation in the country. We have a marketing risk, an unproven basin with no oil. And there is the geographical risk, there is a 60 percent chance of finding oil in the Mannar Basin " Dr De Silva said.
According to historical data on existing offshore oil wells, commercial oil production is expected to begin by 2014, Dr De Silva said, if oil is found.
South America, Australia, Africa including Arabia, South Asia and Antarctica were once locked together in a single land mass about 550-500 million years ago called Gondwanaland and these regions today have oil reserves and since Sri Lanka shares its geographical history, Dr De Silva believes that Sri Lanka too could have oil resources.
Monday, May 12, 2008
What’s in a number? Bad perceptions keep out potential garment factory workers
Thirty five to 50 thousand vacancies exist in the apparel industry according to an official of the 200 Garment Industries Programme.
"The government and the industry initiated an awareness programme early this year to attract young people to the apparel sector because we found that factories had a ‘severe’ shortage of labour. When the planning was done for Abhimani we calculated the number to be 35,000 but since then it has increased to about 50,000," S. Ravindran, Executive Committee Member of the government’s 200 Garment Factories Project, told The Island Financial Review.
"If we can attract another 50,000 apart from the shortfall, many investors will be willing to open up more garment factories. However, everything will depend on GSP+," he said.
However, the Joint Apparel Association Forum maintains that this is a misleading figure. According to JAAF it stands at around 10,000 and is the accurate figure coming from the apex body of the industry which comprises the apparel manufacturing sector and other sectors supporting the apparel industry.
Certain unions had in fact used these numbers game and compelled their members to take a tough stand for their demands believing that the industrialists could do nothing but concede or lose precious labour and to further their claims that the industry needed to get its act together with regard to the implementation of labour laws.
The industrialists are unhappy about any number being quoted above the 10,000, as the shortfall in labour is attributed to bad perceptions.
So while Ravindran said the shortfall is almost 50,000 and that when Abhimani was first mooted they had wanted the campaign to fill 35,000 vacancies. JAAF says its 10,000.
Saturday, May 10, 2008
A whale of a time after Eastern elections
Sri Lanka has the potential to enter into the US $1 billion dollar international whale watching industry and has already entered into a joint venture with John Keells Holdings on a profit sharing basis to promote tourism in whale watching off the West, South and East coasts.
"We have already started the project in Galle, Kirinda, Mirissa and Panadura. The harbour in Chilaw will be ready in two months, and then whale watching will be introduced there as well. We hope to introduce it to Trincomalee soon after the provincial council elections," said Neomal Perera, Deputy Minister of Fisheries and Aquatic Resources.
Perera said that the National Aquatic Resources Research and Development Agency (NARA) will provide the vessels and technology.
"There are whales living in Sri Lanka’s waters and they are not migratory whales as the tropical conditions are more to their liking and they have been living in pods in our waters. The Blue whale is one of them. NARA had documented the whales and their behaviour and also the necessary technology to locate the whales," he said.
Perera pointed out however that the present situation in the country is not going to make it possible to attract enough tourists.
"Because of the country’s situation, the tourists who arrive to Sri Lanka are not the high spenders. Whale watching is a whole-day affair and will be costly. You need to locate the whales before putting off to sea and this requires the use of technology, which NARA will provide, so maintenance is going to be high."
He said that the Fisheries and Aquatic Resources Ministry is spearheading this campaign although it should be done by the Tourism Board.
"We don’t have the financial resources to carry out an advertising campaign to attract the high-end tourists. But if the Tourism Board could join JKH and the Fisheries and Aquatic Resources Ministry, this could easily be solved," Perera said.
A spokesman for JKH told the Island Financial Review that as far as introducing whale watching to Chilaw and Trincomalee was concerned that it was not part of the joint venture, "The government may go on their own perhaps," he said.
As far as marketing was concerned JKH is confident that they can attract the numbers through their network of tour operators worldwide.
"We are handling the sales and promotional aspects of the joint venture and all our foreign tour operators are all on board to promote Sri Lanka as a whale watching destination. We will also promote this at special focus international fairs," he said.
Whale watching is seasonal because of the monsoons which makes it unsafe to go out to sea so JKH will be filling in reservations for the November 2008-April 2009 season. Promotions will also be done locally because JKH hopes to establish a corporate clientele as well.
Scientists are debating on whether Sri Lankan waters are indeed host to resident whales, or are they migratory visitors on their way to calmer waters.
Friday, May 9, 2008
IFS, hSenid - creating synergies will take ICT closer to US$1 bn mark
"There is a perception that India is more capable to handle IT related industries but the truth is we are way ahead of India in many aspects. What is missing is the marketing aspect. We have not marketed the country as an ICT destination even though the ICT sector hopes to become a US $1 billion industry by 2012 said Jayantha De Silva, Vice President South Asia, IFS Solutions Asia Pacific Pvt Ltd (IFS).
He said that this perception was a problem which the industry is trying to change by working closely with embassies. "We are also working closely with the government more than ever before," he said.
De Silva pointed out that apart from marketing the biggest problem is attracting the right kind of people.
"Over 100,000 students who qualify to enter university do not get the opportunity to actually enter the university system because of space constraints. This is a captive force. If they can do a part time IT degree (such as BIT which is outside the conventional university structure, where students pay) they can easily be integrated into the ICT sector.
"The industry of 300 ICT companies have agreed to employ at least 10 students a year on a part time basis so that they can be trained and by the time they finish their degrees they will also have experience," De Silva said.
He said that 120 university students are currently sponsored by IFS and that the universities need to change their curriculum and modules to make the university students work-ready.
Several recent forums highlighted the fact that our university graduates are not work ready even though they are technically competent because they lack communication skills, particularly in English.
"English is not a problem. The industry has a shortage of software engineers and youth armed with just a diploma will suffice. They can be trained. The problem is that young people seem don’t seem to be aware just how lucrative it is to be employed in this sector," said Dinesh Saparamadu, CEO, hSenid Software International (hSenid).
IFS and hSenid entered into a technical partnership to develop software that will give businesses enterprise resource planning and human resources solutions.
Lack of competent marketing and negative perceptions can be combated if companies in the ICT sector created synergies and partnerships so that, relying on each other’s strengths, accessing global markets will be much easier and viable rather than going in alone.
Wednesday, May 7, 2008
Mawbima Lanka to announce how SL can become first-world country
If consumers gave preference to locally manufactured products and services Sri Lanka could be a first-world country in four years time, Chairman of Mawbima Lanka Padanama told The Island yesterday.
"The Mawbima Lanka Padanama (MLP) will today make public facts and figures on which we have made this declaration. A saving of about US $2 billion can be made and this will significantly reduce the budget deficit," A. Wickramanayake said.
He said rice shortages could easily have been avoided but an apparent lack in effective policy has left acres upon acres of rice fields barren and uncultivated. He said that Sri Lanka has the capacity to be self sufficient in milk but too much reliance in international brands had led to there not being a need to develop the local milk industry, until now.
"We can easily produce enough bio-fuel through sugar cane ethanol which can be used as a substitute for petrol, but the government still has done nothing about it. The need for a port in Hambantota was mooted 10 years ago and it is only now that it is materialising. We cannot wait ten years more for the state to look into the possibilities of producing bio-fuel in the country.
MLP introduced a voluntary accreditation policy for companies with a local equity ownership of 51 percent and above.
"While MLP strives to encourage people to purchase local products we also emphasise the need for local manufacturers to improve product quality and standards and reach international standards so that we could gain from exports as well," Wickramanayake said.
Monday, May 5, 2008
Apparel sector SMEs struggle with GSP+, plight and concerns
The apparel industry of Sri Lanka, which contributed more than 45 percent to the country’s export earnings in 2007, is struggling to stay alive. Inflation, an acute labour shortage, the end of the Multi Fibre Arrangement and financial and marketing constraints are making it ever so hard for the industry to remain competitive and consolidate its market share in the international sphere, except for the large companies who have expanded beyond our shores. With all these issues, if Sri Lanka loses GSP+ the industry will be pushed further down the hole it is already in. The Executive committee of the Sri Lanka Chamber of Garment Exporters (SLCGE) spoke to the Island Financial Review about the plight and concerns of the apparel industry, particularly those of the SMEs. Post MFA and GSP+ era issues Over the years as competition from the region intensified, especially after the Multi Fibre Arrangement (MFA) expired, the SMEs have become indirect exporters because they lack both financial and marketing resources to compete with the region. Many of the SMEs are subcontractors to the large manufacturers and have little choice but accept the prices offered to them in order to stay alive. While many SMEs closed down, others found it extremely hard to survive and could only do so because the larger players contracted their orders to the SMEs. The SMEs are already making low profits as result of being ‘price takers’ and inflation, high electricity and fuel costs have further forced down margins. "While the SME sector is still recovering from the adverse effects of the suspension of the MFA, if the country loses GSP+ it will be a terrible blow and the industry will find itself in a deeper hole," the Executive Committee (ExCO) said. "Leaving the possibility of losing GSP+ aside, after the post quota era (MFA), the industry has been struggling to stay alive because rising inflation, rising interest rates and high manufacturing costs, which are the highest in the region, forced our margins down just so that we can compete with the region. We are still in the process of addressing these issues," they said. Protecting GSP+ government’s responsibility The ExCo said that it was concerned that GSP+ will be lost for reasons beyond the control of the apparel industry and for a reason that had nothing to do with the industry, which they said was not a reasonable or fair thing to happen to an industry directly and indirectly employing up to a million people while accounting for almost half the country’s export earnings. They said that it was the governments responsibility to understand the situation and do all it can to safeguard the industry. The government, they said, should build faith with the EU on the human rights matter. They said however, that according to what they had heard the government is still finding it difficult to convince the EU that the country’s human rights record was untarnished. Exports to the EU sector amounts to about US$ 1.4 billion, out of US$ 3.2 billion in total exports of garments and if Sri Lanka loses GSP+, the country will lose up to US$ 100 million in export revenue, they said. Every month, Sri Lanka had been losing its hold on the US apparel market because of stiff competition driven by prices but has made significant gains in exports to the EU because Sri Lanka has earned credibility by meeting international quality and delivery standards and complying with international conventions on labour and ethical working conditions. The duty concessions of the GSP+ scheme itself, helped bring the buyer to Sri Lanka. The benefit of GSP+ is that buyers from the EU get duty concessions to import garments, and over 7000 other items, from countries possessing GSP+ certification. Without GSP+, the ExCO is sceptical that buyers will continue to want to base their purchases solely on quality and ethical standards in manufacture. Buyers will demand for the same prices, and this is expected to reduce margins by a further 10 percent. For as long as we have had GSP+ and with the duty free concessions in the GSP+ scheme, buyers have still haggled and pressured our apparel manufacturers to bring down prices. Banks create more worries Banks too have begun to show an interest in the GSP+ issue and are reluctant to finance apparel projects or even finance the working capital requirements of the SMEs, because they (the banks) are unsure, just like everybody else, whether Sri Lanka will get an extension. The ExCo said that banks have begun to question them on how existing loans would be settled if GSP+ is lost, because the apparel sector had been scoring in favour of the banks when GSP+ brought in the desired results. And true to form, banks are not there for anyone who needs financing the most, like Bob Hope once said, a bank will always lend to those who don’t need money. Possible price war Twenty five to 30 percent of all apparel exports are accounted for by the SMEs, but this does not take into account the outsourced productions carried out for the larger companies, which many of the SMEs depend on for sustenance. If GSP+ is lost, it will prompt a price war amongst the SMEs seeking contracts from the larger companies and here too many SMEs may find that they are no longer able to sustain themselves. And even the large companies will have to cut margins in order to stay competitive or they may even consider taking their operations to countries where production costs are cheaper. Life support GSP+ it seems, is just about keeping Sri Lanka’s apparel industry alive in an extremely competitive environment, to lose it will no doubt spell the beginning of the end. Only the fittest survive and only time will tell who the fittest are. Large companies have done well because they have had large resources. SMEs were handicapped after the phasing out of the Multi Fibre Arrangement and are still finding it hard to stand comfortably—without financial resources to build capacity and market themselves, the SMEs have come this far thanks to GSP+. However, the ExCo feels that the duty free concessions will not be removed entirely because the country is in compliance arguably with all but one of the requirements, the most important one at that too it seems. Human rights.
Saturday, May 3, 2008
Bulk of expenditure on manpower, inadequate funds for materials and machinery......
Sri Lanka spends Rs. 200 million on road development each month—the highest in the region—with the bulk of this spent on wages, leaving very little to be spent on materials and maintenance on machinery and vehicles the Secretary of the Ministry of Highways and Road Development said yesterday.
Secretary Sirisena Amarasekera said that the Road Development Authority (RDA) had 10,000 employees in its payroll, while the National Highways Authority (NHA) of India had about 700. He said that the monthly road development bill was high because a large workforce had to be maintained, where as the NHA outsourcers most of its work.
"The two country share similar cultures and both inherited similar institutional structures from the British. While we had changed and reformed our institutions, with the establishment of the RDA and Urban Development Authority, 30 to 40 years before India, we have made little progress but when India made those changes they have been able to progress, their road network is much better than ours," he said.
He said that while Sri Lanka made institutional changes, the changes were poorly managed.
"Change is resisted wherever it is, but it is particular to Sri Lanka. We share similarities in culture, environment and institutions with India and we are lagging behind.
"Sri Lankan’s are more reluctant to change. They like to think that what ‘was’ is better than what ‘will be’ and like dwelling in history. Do not resist change. Adapt. Learn," Amarasekera said addressing officials of the RDA who gathered for a workshop on Technical and Scientific Cooperation between Sri Lanka and India.
"It is an inherent problem we have. We have 10,000 staff for the 11,600km of major highways. Our road maintenance cost is the highest in the region because we have to maintain this large workforce and the workforce is unable to adapt to change," he said.
The RDA and NHA signed a MOU yesterday which will focus on technical and scientific cooperation in highway construction, maintenance and management of roads which will facilitate the exchange of expertise, developments in research and knowledge.
While the agreement is valid for five years, the Ministry of Highways and Road Development hopes to establish a long term technical collaboration.
The expected outcome of the MOU is to enhance the capacity of the RDA to have best-connected, optimally designed and maintainable road network. In order to overcome the capacity constraints in the road sector, the government has planned a 10 year development programme, The RDA said in a release.
Amarasekera said that according to the National Road Master Plan, 4,000km of major highways, out of about 11,600km, will be improved during the next ten years.
"One might ask how this will be done when for the past 20 years only 2,000km have been improved. There will be challenges and difficulties. We cannot change overnight, but we can change gradually," he said and urged the RDA staff to learn from India’s experience and expertise.
"We must learn how to outsource and our procurement system needs to be examined as well," he said.
Sri Lanka would be the main beneficiary of the technical collaboration while India too has something to gain.
"India can learn from Sri Lanka, at least from the mistakes we have made," said M. B. S. Fernando, Chairman, RDA.
The Asian Development Bank, World Bank, JBIC and other agencies have infused a total of US $450 million to develop Sri Lanka’s roads and highways, an official of the Treasury said.
"The US $450 million are loans, so we have to make them viable and beneficial," he said adding that successive governments and their policy initiatives had not fully got to grips with road restructuring and rehabilitation effectively.
Friday, May 2, 2008
IMA shifts focus to peace building
Two apartheid abolitionists and a Noble Peace Prize laureate will address the first CIMA World Conference to be held in Sri Lanka this month.
A member of Nelson Mandela’s ANC party and a member of F. W. de Klerk’s National party will be in Sri Lanka to talk about peace, the apartheid experience and how peace could be achieved which will result in development.
Mandela and de Klerk, who shared the 1993 Noble Peace Prize for their roles in avoiding a blood bath, abolishing apartheid and ushering in peace in South Africa, have shown the world how peace could be realised through dialogue.
Dave Steward (National party) and Prof Kader Asmal (ANC) will head a panel discussion at the CIMA World Conference to be held in Sri Lanka in May this year.
John Hume, Second Leader of the Social Democratic and Labour Party (SDLP) of Northern Ireland, the only recipient of the three major peace awards, the Nobel Peace Prize, Gandhi Peace Prize and the Martin Luther King Award, will also share Ireland’s experience of realising peace through dialogue.
"These are people who have delivered peace, and apart from what they will share at the conference we hope to felicitate a focussed dicussion group with policy makers, government and opposition groups, so that the three peace makers can share their experiances, trials and triumphs," Said Bradley Emerson, CEO, CIMA Sri Lanka Division.
"Despite the negative situation in the country today, the corporate sector is still steering ahead.
Many companies have recorded profits last year and many BPO have established operations in Sri Lanka as well. This is because we still have the talent pool and intellectual capacity.
"It is a pity that we are losing our children and youth who should be here to meet the demands for the future to the ongoing conflict.
Peace comes before anything else. We have and continue to miss out on so many opportunities. India and Bangladesh, whose per capita income is double than that of Sri Lanka, are making vast gains in the industrial and services sector and the conflict is keeping us from keeping pace with the region," he told the Island Financial Review.
"Tourism for example has so much to offer. We have the right mix in beaches, dry zones, hill country, and friendly people and this is why peace is important if we are to realise our potential," he said. The conference themed, Igniting Passion, Blazing Trails, will be based on four pillars. Peace Building, Innovation, Global Branding and Leadership.
The conference will also feature several speakers from India, Pakistan, Malaysia and Singapore who have specialised in their respective fields and have gained world recognition.
CIMA divisions have organised several international conferences on their own in the past, including the Sri Lanka Division. This conference will be the first time CIMA, with over 158,000 students and members in 161 countries, will have an official international conference and Sri Lanka has the honour of hosting the first CIMA Global conference.
Malaysia will host the conference next year.
We expect to attract about 1,200 delegates which will include 200 to 300 delegates from CIMA’s global membership.
While the expectation is to disseminate knowledge and help local members establish links, it is hope that the conference will help promote Sri Lanka as a destination for meetings, international conferences and events, Bradley pointed out.
CIMA World Conference, Sri Lanka will be held on 28 to 31 May, 2008.
