Sri Lanka Newspapers 22/01/2012

Huge potential in agri businesses
by Lalin FERNANDOPULLE

CIC Agribusinesses (CICAB) will set up a dairy sector in the eastern province and increase egg, fruit, and vegetable production this year. 'We will also introduce seed coating technology for the first time in Sri Lanka' said CICAB Managing Director/CEO, Keerthi B. Kotagama. He said the technology will provide benefits to farmers by protecting seedling from pests and diseases at the early stages, thus giving rise to healthy plants and more yields." We will also focus on more rice exports as there will be an excess production this year.

CICAB exports to Australia, Canada, USA and is currently exploring the possibilities to commence exports to Europe.

CICAB will invest on value addition to agri- based products such as rice,flour, packed foods, milk products, fruit and vegetable and grain storage to support farmers.

"We have commenced jojnt ventures with Bangladesh, Qatar and UAE for agricultural production which will focus expanding overseas agri-business.We have already set up four agri extension services centres in Thirunvelli, Kilinochchi, Vavuniya and Vellankulam in the North and two in the East.

We have also initiated a red onion seed production program with outgrower farmers.

We have commenced a maize production program in the North with 1000 farmers and seed paddy production with100 farmers", Kotagama said.

"CICAB will set up a storage and purchasing centre for rice and grain in the North next year. We have initiated a vegetable seed production program in the Vellankulam farm and provided employment.to over 150 people.

The company plans to set up a grape vineyard on a 100- acre land in Kilinocchi to start a Vinery in 2 014. Sri Lanka has resources that are needed for agriculture such as soil, water and human capital but still far behind the productivity levels that of other Asian countries and the world due to the lack of innovative technologies and professional management. Seventy percent of our population live in rural areas where 90 percent of them are dependent on agriculture for a livelihood", he said.

Agriculture development is a must to alleviate rural poverty and the development of other sectors such as industrial and service sectors is also vital.

It also provides food security as the world is experiencing a food scarcity due to the increasing population and climatic calamities.

http://www.sundayobserver.lk/2012/01/22/fin06.asp

Dutch TV firm Endemol has deal with most creditors
THE HAGUE Jan 19, 2012 Dutch TV producer Endemol, creator of "Big Brother" and other hits, said it had outlined an agreement with most of its creditors to restructure debts of more than two billion euros.

"A significant majority, representing more than two-thirds of lenders, have reached agreement in principle regarding a restructuring of the Group's capital structure," said a company statement.

"In the coming weeks, the company and its lenders will continue discussions and work towards finalising documents for the legal implementation of a successful restructuring," the statement added.

The Amsterdam-based company has been in talks with its banks for several months to restructure its more than two billion euro ($2.5 billion) debt Endemol is controlled by Mediaset, Wall Street giant Goldman Sachs and Cyrte Investments, an investment fund belonging to Endemol's founder John De Mol.

http://www.sundayobserver.lk/2012/01/22/fin07.asp

Vavuniya: Best in poverty at 2.3 percent
by Rohantha ATHUKORALA

It's true that there are many ways in which poverty can be calculated and each one has its own merits and disadvantages. However, going by the last Department of Census and Statistics Household Income and Expenditure survey report released on August 3, 2011 on poverty, the best performing district is Vavuniya at 2.3% on head count and 2.0% on the attribute poor households.


Rohantha Athukorala

The data amazed me as it beat Colombo which is reporting a headcount of 3.6 percent and Gampaha at 3.9 percent

Sri Lanka
Panning out on Sri Lanka's performance last year, the economy closing on $60 billion and the Brand Sri Lanka being valued by Brand Finance at $23 billion was interesting, especially when the country is registering an eight percent plus GDP growth. Incidentally this is the fourth best performing economy globally on growth.

Coming from a multinational brand marketing background, my bosses always warned me not to paint a pretty picture as people love attacking a perfect situation but I guess when facts are being highlighted, it's time that we as a nation must be proud of our performance.

We must not forget that over seventy-five percent of our economy is led by the private sector and these same sentiments must be mirrored in their P&L. If not, the script can be under attack.

Vavuniya even though the best in poverty levels, the average income is only Rs.33,063 as against Colombo at 51,070

http://www.sundayobserver.lk/2012/01/22/fin20.asp

Developing world should prepare for shocks - WB
The World Bank has warned developing countries they need to be prepared for shocks as global economic growth slows.

The organisation has slashed its growth forecasts, and is now predicting a 0.3 percent contraction for the eurozone in 2012.

"Developing countries need to evaluate their vulnerabilities and prepare for further shocks, while there is still time," said World Bank chief economist Justin Yifu Lin.

"Escalation of the crisis would spare no-one," the report's author warned.

Referring to the eurozone crisis and its potential to impact growth in rich and poor countries, Andrew Burns said: "Developed and developing-country growth rates could fall by as much or more than in 2008/09. "The importance of contingency planning cannot be stressed enough." The World Bank is predicting growth of 5.4 percent for developing countries in 2012 and 1.4 percent for high income countries, down from its forecasts of 6.2 percent and 2.7 percent in June.

The World Bank's Global Economics Prospects report says that slower growth is already visible in global trade and commodity prices.

It said that declining commodity prices were better news for the developing world, although food security for the poorest countries was still a major concern.

Food prices are down about 14 percent from their peak in February 2011.

The World Bank has a warning for the developing world: prepare for the worst. In its Global Economic Prospects, the bank does forecast continued growth, but warns there is a risk of a worse outcome: of another crisis as bad as what followed Lehman in 2008. So could the developing countries cope? After all, they weathered the previous global recession relatively well.

The Bank's view is that they, for the most part, are in better in shape than the rich nations.

Some have scope to boost government spending and should identify now what would most help development and the poor. But others don't have that room for manoeuvre and will need to make cuts if there is a prolonged downturn.

Andrew Burns, manager of global macroeconomics at the World Bank, told the BBC there was a danger that the downturn could be longer lasting than the one which followed the collapse of Lehman Brothers in 2008.

"This time, going in, [developing countries] will be in much better condition than high income countries, but that said, we are concerned," he said.

"They are going to be operating in a situation where high income countries aren't going to to offer the same type of counter fiscal policy and the same type of support to the financial system as they did in 2008/9."

BBC

http://www.sundayobserver.lk/2012/01/22/fin21.asp

GISM offers degree programs
by Gayan KANCHANA

The first batch of students from the Graduate Institute of Science and Management (GISM) completed their final year of the degree in New Zealand. The annual awards ceremony was held last week.

This is the first time that students have been transferred to a New Zealand University as part of an articulation program conducted with a Sri Lankan Education Provider.

The Assistant Vice Chancellor and a high ranking panel of Professors from New Zealand's premier Massey University were also present.

Founder and President of GISM Campus Prof. G.G. Senaratne said, "The GISM campus, which is situated away from the city, seeks to provide excellence in academic standards by adopting state-of-the-art teaching techniques.

Prof. Senaratne said, "GISM offers degree programs in Engineering, Business, Science and Languages.

Students will be able to complete the first year of the degree in Sri Lanka before going to New Zealand to complete the remaining second and third years of their degrees.

http://www.sundayobserver.lk/2012/01/22/fin22.asp

Galle Literary Festival partners with iPhone App
The Galle Literary festival launched its own free iPhone App on the Apple App Store today to provide a more interactive experience for festival visitors.

The App provides festival-goers access to the latest festival schedule, participant list and utilizes the device's GPS capability to provide an interactive map of the Galle Fort to help attendees find events, restaurants, shops and hotels.

The App was developed by Appwolf (Pvt) Limited, Sri Lanka's leading mobile App development company.

Appwolf CEO Gehan Dias said "We are proud to be a part of the Galle Literary Festival and am certain that the App will add a new dimension of mobility, interactivity and personalization to the festival experience.

Appwolf has been in the business of App building for a while now, with clientele as diverse as Sesame Street and Odel, however this particular App presented us with its unique set of challenges as it needed to allow the festival coordinators to update attendees with up-to-the-minute information including schedule changes, cancellations, location changes and so on". He said that "A mobile App is the perfect tool for any festival as it provides a direct link allowing festival coordinators to both instantly update participants as well as capture key data from them such as feedback, confirmations, analytics and even personal experience such as photographs and video".

http://www.sundayobserver.lk/2012/01/22/fin23.asp

Transport sector to be brought on par with emerging economies
by Gamini WARUSHAMANA

The quality of the transport service in Sri Lanka will be improved in the next two years and brought on par with emerging economies in the world, Deputy Minister of Transport Rohana Dissanayake told the Sunday Observer. Following are excerpts of the interview.

The Sri Lankan economy is growing at a rapid pace and during the past six years, socio economic conditions of the people have improved.


Deputy Minister of Transport Rohana Dissanayake

Over one-third of the population has a vehicle, at least a bicycle, and this causes traffic congestion on roads. A good public transport service is vital to reduce this burden and save energy and working time. The per-capita GDP has doubled and therefore people demand better services in all sectors.

Transportation is one of the key factors that determines the quality of life of the people and it contributes to the productivity of the workforce. Recognising these factors the government is gradually improving the quality of train and bus services.

The ministry has received Rs.41,850m for this year and investment in the transport sector will be higher this year. Train delays and cancellations, strikes and trade union action of workers that paralysed services in the past are reported very rarely now.

He said that tangible results can be seen in the quality improvement in the train services.

New trains and power- sets have been added and another 11 powersets are to be received this year. We have recognised that with the increase of the per-capita income, people earn higher incomes and are ready to pay more for better services. We have launched special luxury buses and train services targeting high income upper middle class groups.

These initiatives have been successful and there is an increasing demand. The demand for the Rajadhani and Expo luxury train services on the Kandy intercity train and luxury bus services between Kottawa Colombo and Moratuwa Colombo as well as the new luxury bus service between Maharagama and Galle on the Southern Expressway is on the increase.

Today four buses operate on the Southern Expressway and each bus runs six turns or 688 km a day. The total revenue from a bus is around Rs.105,000.

The Government's policy is that the state-owned SLTB should have 40 percent of the share in the public bus transportation and intervene into the market to regulate, set standards and maintain the quality of the service. Today the State has only 5,500 buses compared to 20,000 private buses. The SLTB will import 2000 new buses and engines and repair 500 buses to increase its fleet.

The Deputy Minister said that the bus service in rural areas have to be improved further and the fact there was a wide gap. Private bus operators were reluctant to run buses in the night and by 6 pm, 50 percent of private buses are off the roads and after 8 pm only a few private buses ply the roads.

The SLTB has to provide a night service and services on uneconomical routes. The SLTB has ordered 200 E-type small buses for rural roads.

The removal of taxes for the import of buses, lorries and tyres will also help to improve the transport service.

Due to many reasons the development of the transport sector has been lagging behind. The poor condition of the roads was also an issue. Today the road network has improved tremendously. Therefore the improvement of the quality of the service is not a difficult task.

The ministry will introduce standards for buses including the condition of seats, space between the seats, ventilation, duration of the journey, stops as well as the quality of hotels and restaurants that long journey buses halt considering the convenience of passengers.

"An attitude change of employees of the transport sector too is important for a good service. There are a lot of issues and complaints against bus conductors and drivers in the SLTB and the private sector. We will pay attention to these aspects as well this year", he said.

Today the government has a single policy framework, Mahinda Chintana - Forward Vision, that all sectors and aspects of the economic development

http://www.sundayobserver.lk/2012/01/22/fin30.asp

Wayamba Plantations Graduates AGM
by A.W. Gunawardhana - Matara Central Corr

The Alumni Association of Wayamba University Plantation graduates held its second Annual General Meeting at the Villa Ocean View Hotel, Wadduwa recently.

The Alumni Association was inaugurated in December 2009 with the primary objective of promoting professional advices, conducting symposiums, inculcate to use best technologies and assist the policy-makers to develop the plantation industry in Sri Lanka. Lal Perera Regional Director, Plantation Human Development Trust,

http://www.sundayobserver.lk/2012/01/22/fin31.asp

Europe's four big dilemmas
In October, Europe's leaders reached yet another wide-ranging deal to prevent economic problems from causing financial meltdown in the eurozone.

For many onlookers, the issues they face may seem complicated and interconnected.

But essentially they boil down to four big dilemmas.

How these dilemmas are resolved will decide whether the eurozone stays together, or ultimately unravels despite the latest agreement.

So the question is, how much gets written off, and who picks up the tab? For the eurozone as a whole, the debt problem is comparable with that of the US, and potentially manageable.

The problem is that some eurozone countries are much more heavily indebted than others.

In October's deal some private sector lenders have already agreed to write down the value of Greek debt by half.

Investors also think the Portuguese, Irish, and even the Spanish and Italian governments, may eventually follow suit.

But when bad debts get written off, someone has to take a loss.

While some of those debts are held in the US, UK or elsewhere overseas, most of it is held by the European banks, and increasingly by the European Central Bank (ECB).

This is the primary reason for the recent loss of confidence in the European banking system.

.

The October package calls for banks to invest more than 100bn Euros building their capital, but it is not yet clear if they will be able to do so without intervention from governments. If other European countries join Greece in writing off their debts, banks may need even more money. Ultimately Germany and other less-indebted countries may have to bear much of the cost of rescuing the eurozone's banks as well as its weaker governments.

Like everywhere else, most European governments have seen their borrowing balloon during the recession and anaemic recovery.

At the same time, fears over southern European governments' ability to repay their debts mean their borrowing costs have also gone through the roof.

Under pressure from Germany and the ECB, all of these countries have been pushing through painful spending cuts and tax rises.

Rate at which markets are willing to lend to governments for 10 years: Germany: 2.05 percent France: 2.83 percent, Spain: 4.95 percent , Italy: 5.56 percent, Irish Republic: 7.41 percent, Portugal: 10.80 percent , Greece: 22.14 percent To set a good example, Germany has even donned the hairshirt itself, promising to eliminate its own modest deficit by 2013.

But here's the problem: austerity is killing growth throughout Europe.

And with less profits to tax and more dole cheques to write, weak growth makes it even harder for governments to cut their borrowing and repay their debts.

To turn the slowing eurozone economy around, the ECB now looks set to slash interest rates from their current 1.5 percent.

The Central Bank considered buying up more Italian and Spanish debt, pumping cash into the financial system and easing the pressure on those countries to slash their borrowing.But this move has always been strongly opposed by German members of the ECB.

Another option to stimulate growth is for the few other countries that markets are still willing to lend to to borrow and spend more, offsetting spending cuts in southern Europe.

Yet for Germany, who can currently borrow at unprecedentedly cheap interest rates, borrowing is anathema.

Germany’s view on the eurozone crisis is simple.

Southern European governments borrowed recklessly at the cheap interest rates available inside the Euro.

Now they are being punished by markets, and must learn discipline.

Germany wants other governments to incorporate strict budget rules into their constitutions to stop such recklessness in future.

But rules, with penalties attached, may not be credible. Imposing a fine on an over-indebted government is rather like kicking someone when they are down.

Indeed, just such a “stability pact” of budget rules, insisted on by Germany at the Euro’s creation, was quickly broken with impunity by Germany itself.

Moreover, the focus on discipline misses a bigger point. While Germany’s view may be apt for Greece - whose government cheated on its borrowing statistics to qualify for the Euro in the first place - it is grossly unfair for Spain.

Before the financial crisis, Spain’s government had lower debt levels than Germany’s, and (unlike Germany) actually spent less than it earned in taxes. But the country experienced a property bubble that then burst spectacularly, leaving its economy high and dry.

Wages, inflated during the good years, are now uncompetitive, and unemployment has shot up to 20 percent.

Yet, inside the Euro, Spain cannot devalue to regain a price advantage.

Nor can it necessarily expect the ECB to cut interest rates or buy up its debts.

Being put a fiscal straitjacket as well just makes things worse.

Compare this with the US state of Michigan, where the collapse of the US car industry has spelled disaster.

Unlike in Europe, the US has a federal government that can tax other states in order to help out Michigan, by paying for unemployment benefits and rehabilitating the big car companies.

If the Euro is to function in the future, economists warn, then a similar system of centralised fiscal transfers will be needed there too

- BBC

http://www.sundayobserver.lk/2012/01/22/fin35.asp

Lanka eyes Japanese investments for handloom industry
The apparel and handloom sectors have immense potential for foreign investors. Sri Lanka will open these sectors for Japanese investors said Industry and Commerce Ministry sources.

He said the $ 13 m handloom sector has strong investment potential.

The country has skilled labour in the apparel sector compared to other manufacturing destinations providing low cost labour.

Sri Lanka’s human resource capacity has resulted in high quality apparel exports.

The demand for Sri Lankan handloom has been growing at a rapid pace in local and international segments.

Sri Lanka’s booming tourism factor has become a key driver in the handloom surge. To strengthen the sector, the Ministry of Industries set up a high priority national Handloom Task Force.

The task force, will upgrade the sector with product diversification, new training, design development and marketing. District level handloom centres will be set up under private sector management.

“Our promising handlooms can utilise valuable Japanese support in this new direction. Sri Lanka is keen to increase its share of apparel exports to the Japanese market”, he said.

The handlooms sector will help develop the rural economy.

The Divineguma, program will support rural development. The next Divineguma exhibition will be held in Mannar on January 21.

According to the Department of Commerce of Sri Lanka, Foreign Direct Investment (FDI) by Japanese companies into Sri Lanka dates back to the 1970s; the first milestone was in 1972, with the establishment of a joint venture between Noritake of Japan and the Ceylon Ceramics Corporation.

Since 1996, a number of large multinational conglomerates including NTT, Mitsui Group, Kawasho Corporation, and YKK have committed substantial investments in large infrastructure and manufacturing projects.

At present, there are about 60 enterprises with Japanese investment, operating in Sri Lanka under the BOI Law at end of 2009, having invested about US$ 350 million, and providing more than 12,000 employment opportunities.

Among the leading Japanese projects in Sri Lanka under BOI are Ceyquartz M B I (Pvt) Ltd, Colombo Power (Pvt) Ltd, Colombo Dockyard, Dankotuwa Porcelain, F D K Lanka, Koolair Venture Power, Noritake Lanka porcelain, Tokyo Cement, Uchihashi Lanka, and Okaya Lanka.

Currently, Sri Lanka handlooms, in addition to the domestic market, are readily absorbed by Italy, the Maldives, Germany, France, United Kingdom, Thailand, Netherlands and Norway.

According to the Exports Development Board (EDB) under the Ministry of Industry and Commerce, the handloom exports valued $ 0.90 m in 2009 rose in 2010 to $ 1.5 m and in January-October 2011, stood at $ 1.17 m. The EDB expects handloom exports to hit $ 2.24 m in 2015.

The handloom textile export target for 2011 set by the EDB under the Ministry of Industries was $ 1.29 m (Rs 146 million). Sri Lanka’s handloom sector is a low cost but high earning industry.

Its annual production exceeds six million metres of loom with an estimated annual production value of Rs. 1500 m ($ 13.19 m) and absorbed by local and international demand.

The production is labour intensive and the industry consumes less electricity and utilities while generating higher employment.

At present, there are 511 weaving centres with 2,971 weavers and more than 10,000 looms in Sri Lanka assisted by 22 dyeing houses. Over 10,000 personnel are engaged in the handloom industry.

According to NEDA, there are 919 private sector handloom operators of which 536 are based in the East, operating 2454 looms.

In the cooperative sector, there are 925 handlooms in 110 centres and under the Provincial Councils there are 5169 handlooms in 511 centres. The key Lankan provinces for handloom are the Wayamba, Western, and Central provinces.

The eastern regions of Sri Lanka too were reputed for handloom but the 2004 tsunami disaster inflicted damage on eastern production, however, but despite this, eastern handlooms continue to command buyer appeal.

http://www.sundayobserver.lk/2012/01/22/fin36.asp

Aussies keen on Lankan handlooms
Sri Lanka's handloom sector holds strong promise.

In the aftermath of tourism boom, our handlooms too have begun to surge.

"Any future support from Australia to introduce Private Public Partnership model to our handloom will be most welcome" said Minister of Industry and Commerce sources said.

He said: "We have now set up a national level, high priority task force on handlooms which will spearhead the new handlooms roadmap of the country.

The demand for Sri Lanka handlooms has been steadily growing in both local and international segments.

Sri Lanka's booming tourism has become a key driver in the handloom surge.

We are now preparing to upgrade the sector with product diversification, new training, design development, and marketing.

We are planning to establish District level handloom centres under private sector management.

With the Australian government's support, we can infuse the Private Public Partnership model in this sector.

"Sri Lanka is thankful for the support extended by Australia and AusAid to 3,785 returnee families to reconstruct or repair their damaged houses in the districts of Vavuniya, Mullaitivu and Killinochchi under the 'Shelter Support to Conflict Affected IDPs in Northern Sri Lanka' Project" he said.

Currently, Sri Lanka handlooms, in addition to the domestic market, are readily absorbed by Italy, Maldives, Germany, France, United Kingdom,

Thailand, Netherlands and Norway.

http://www.sundayobserver.lk/2012/01/22/fin37.asp

Protests highlight inequality debate
Until protectors took to the streets last year, first in New York and then in financial centres across the world, inequality had been a low-key issue.

Not any more. With the political temperature rising, a stream of new analysis is revealing how sharply inequality has been growing.

In October, the US Congressional Budget Office (CBO) caused a storm by revealing how big a slice of income gains since the late 1970s had gone to the richest 1 percent of households.

The message was dramatic. Over the 28 years covered by the CBO study, US incomes had increased overall by 62 percent , allowing for tax and inflation.

But the lowest paid fifth of Americans had got only a small share of that: their incomes had grown by a modest 18 percent . Middle income households were also well below the overall average with gains of just 37 percent . And even the majority of America's richest households saw gains of barely above the overall average at 67 percent .

How does that make sense?

Because the CBO found most of the income gains over the past 30 years had gone to the top 1 percent of US households. Their incomes had almost trebled with rises of 275 percent. In Britain, Danny Dorling, Professor of human geography at Sheffield University, has looked back even further into history. He's charted the share of national income going to the richest 1 percent since 1918, the end of World War I.

After falling for more than half a century, Prof Dorling said, the share of Britain's richest 1 percent started rising sharply and inequality is now on course to return to what it was in 1918.

Even within the richest 1 percent, inequalities are now enormous. At the lower end of this tiny group of high earners, Prof Dorling said you find people earning £120,000 a year. But the richest thousand individuals leave them far behind.

They saw their wealth increase on average in 2010 alone by £60m. That was a 20 percent gain, following 25 percent the previous year.

In November, the revelation of the size of the increases enjoyed by chief executives of the 100 largest companies on the London Stock Exchange triggered the most political anger.

The High Pay Commission reported that these executives' total pay had risen by 49 percent during the previous year alone, compared with average increases of less than 3 percent for their employees.

The rise left the chief executives with average pay of £4.2m. That was 145 times the average pay of their employees and 162 times the British average wage.

Responding to the High Pay Commission report, Prime Minister David Cameron this month promised government moves against undeserved high pay awards. Internationally, vastly more information on incomes is now readily available.

Last year, the Paris School of Economics launched an ambitious project: the World Top Incomes Database, providing resources online to allow anyone to examine income inequality.

For The Wealth Gap series, we used that data to examine pay at the very top of the British income scale between 1997 and 2007. We then compared that with the average income of the vast majority - represented by the bottom 90 percent .

This simple analysis reveals striking differences between the rich and most of the rest of the population. In 1997, the entire bottom 90 percent had average income of just over £10,500. The top 1 percent had incomes 18 times bigger.

At the very top - the top 10th of one percent - the multiple was far higher. In 1997, their income was more than 60 times the average of the bottom 90 percent. - BBC

http://www.sundayobserver.lk/2012/01/22/fin38.asp

Plantation industry needs to rationalise land, labour and management
Sri Lanka needs to change traditional land and labour use and management models applicable to Regional Plantation Companies (RPCs), to enable RPCs to clear the current tea industry crisis, a former Director of Planning at the Ministry of Plantation Industries and immediate past Chairman of the Ceylon Chamber of Commerce Anura Ekanayake said.


Anura Ekanayake

"Sri Lanka needs to facilitate greater non-plantation employment opportunities for plantation populations, to reduce production costs of plantation companies. Land use diversification, into areas such as forestry cultivation, where tea cannot be cultivated, should also be encouraged, to maximise plantation industry land productivity," Dr Ekanayake said.

Dr Ekanayake, who did his doctoral research on economics of human capital, at the Australian National University in mid 1980s, said although plantation populations are generally seen as fixed labour resources of estates, and estates are obliged to employ all estate residents of working age seeking employment, this model may not be sustainable into the future. Many RPCs are currently experiencing large-scale losses and say the current cost structure is not sustainable. Much of the concern is to do with meeting the increasing labour costs.

"Under the current collective agreement, RPCs are required to provide 300 days of work for its workforce, at a set daily wage, and must also pay an attendance incentive. They must also provide a fixed, so-called, price share supplement, which was originally intended to be linked to tea prices, but is now given regardless of price increases or reductions.

All of these are fixed costs, and this inflexibility becomes a problem when work forces are very large, running into the thousands, as in the case of resident employees in many high grown tea estates," said Dr Ekanayake. While the cost of maintaining large estate workforces and their resident families, have increased, tea prices have declined in recent times and are not expected to see significant increases in the near term.

"The political instability in many major tea buying Middle Eastern countries and slowing growth of western economies would imply that a sharp increase of tea prices in the near term, is unlikely.

We also cannot expect global tea prices to keep rising, to counter the rising cost of production in Sri Lanka," Dr. Ekanayake said.

While increasing outputs could help increase plantation industry revenues, this is not seen as a sustainable long-term solution.

"Our major plantation crop, tea, is a commodity. So prices depend on demand and supply. For instance, if there is a supply shortfall due to adverse weather in other tea producing countries, prices for Sri Lankan tea will go up.

Currently Sri Lankan tea is seen as a high priced speciality product, due to limited production. But if we suddenly increase our yields by large amounts, this will increase supplies and cause prices to drop," said Dr Ekanayake.

Sri Lanka also has physical limitations to production increases.

"We cannot keep increasing outputs and yields indefinitely, because Sri Lanka has a limited land area to cultivate tea. Also, fertility levels of tea lands in the hill country have been eroded due to mono cropping for over a century," said Dr Ekanayake. Value addition efforts, while benefiting the country, may not address the problem faced by tea plantations.

"Revenues from value additions generally accrue to the value adding party, which, in the tea industry, is often a third party and is not the producer. In many cases RPCs may not be able to directly get involved in value adding. So value addition will not, by and large, address the need for sustained revenue increases by tea growers," Dr Ekanayake said.

However, production factors that can be addressed are labour and land.

For instance, currently, some estates have an oversupply of labour, while others have a shortage. "In the upcountry estates, where this problem of wage costs is most acutely felt, there is a labour surplus in most estates. However, there is a labour shortage in low and mid country estates, because in these areas there are alternative employment for estate populations," he said. Estates with labour shortages however, are weathering the current cash crunch well.

"A larger labour force does not necessarily guarantee a larger output. In fact, in estates where there is a labour shortage the current difficulties are felt less, because they do not have to employ large numbers even at times of low output.

These estates can also resort to over-time work when there is excess plucking, which is less costly. So labour productivity tends to be higher in such estates and unit costs are lower," Dr Ekanayake said. Given the current conditions, one solution is for policy-makers and plantation industry stakeholders to facilitate labour mobility between estates and encourage estate labour integration with the rest of the labour market.

"It might be possible to facilitate labour mobility between estates that have labour shortages and estates with labour surpluses. We also need to encourage and help estate populations find employments outside estates," he said.

Another option available for plantation companies is to increase their incomes by increasing land use efficiency.

http://www.sundayobserver.lk/2012/01/22/fin39.asp

Tenability of beyond budgeting for Sri Lankan corporates
As pressure mounts for better corporate performances, with shareholders demanding firms to be among the top of their industry peer group, renowned Prof. of Management Accounting, Prof. Danture Wickramasinghe of the University of Hull, UK recently explored the tenability on how Sri Lankan corporates can move out of conventional budgeting and focus on a more productive mechanism which will bring long-term success for companies.

Addressing a CPD seminar titled 'Beyond Budgeting: Can this be Tenable in Sri Lanka?,' organised by the Institute of Chartered Accountants of Sri Lanka (CA Sri Lanka), Prof. Wickramasinghe emphasised that the old command-and-control management style is out of tune with the new need for agile and adaptive leadership and the need to transfer more power and authority to people closer to the customer.

He said that today budgeting is out of kilter with the competitive environment and no longer meets the needs of either executives or operating managers.

"Budgets are rarely strategically focused and often contradictory, Budgets concentrate on cost reduction and not on value and Budgets constrain responsiveness and flexibility and are often a barrier to change; among much other negativity," Prof. Wickramasinghe said.

The principles of Beyond Budgeting offer a new coherent management model.

It assumes that front-line managers are able to regulate their own performance.

Senior executives provide a supportive role. They challenge and coach, but decisions are taken locally within a clear governance framework based on principles, values and boundaries. In the new coherence, relative improvement contracts, strategic models, rolling forecasts and service-level agreements make sense.

As an alternative he proposed that companies should, instead of setting a fixed sales/profit target, should trust everyone to maximise profit potential by continuously improving against an agreed upon benchmark and remaining in the top of the industry peer group.

http://www.sundayobserver.lk/2012/01/22/fin40.asp

NCE to appoint trade representatives in overseas markets
The National Chamber of Exporters (NCE) has embarked on a program to appoint trade representatives in important overseas markets to assist member companies to develop export business.

The appointments are being made from several qualified and experienced applicants in the particular markets with good credentials and business contacts.

The objective is to enable NCE member companies to make use of the services of the trade representatives for business and market development to enable them to promote and expand the export of their products and services in overseas markets.

The Chamber will also make use of their services for logistical support when participating in trade fairs and related trade promotion activities, such as the organisation of inward and outward business promotion delegations, contact promotion programmes and buyer seller meetings.

The terms and conditions on which appointments are being made, and the work to be carried out by selected trade representatives have been defined by the Chamber. The Chamber has entered into MoUs with the selected trade representatives incorporating such terms and conditions. Member companies who make use of their services are required to conform to terms and conditions.

The Chamber has already appointed trade representatives for the USA market, South African market and the Australian market.

Appointments are also proposed to be made shortly for certain countries in the Middle Eastern market.

New and emerging markets which will be of strategic importance to Sri Lanka in the evolving world trade scenario will also receive particular attention of the Chamber when appointing Trade Representatives.

This program is expected to be a boon to member companies in entering new markets.

It underlines the continuing effort of the Chamber to formulate and implement new value added services to expand the range of services that are offered to member companies.

http://www.sundayobserver.lk/2012/01/22/fin41.asp

China data shows cooling economy
The latest economic data from China have backed up the view that the economy there is cooling.

New home prices in 52 out of 70 Chinese cities fell in December from the previous month, the National Bureau of Statistics said. Foreign direct investment also fell for the second straight month in December.

Investment into China has surged in recent years with international investors looking to profit from China's booming economy.

The National statistics bureau said home prices rose 1 percent in Beijing from a year earlier and 1.8 percent in Shanghai. Both figures are lower than readings for those cities in November.

Chinese property data does not give a national average, however Reuters news agency calculated that home prices rose by 1.4 percent in December, down from 2.2 percent in November.

That would be the lowest reading in 2011.

Chinese authorities introduced a host of measures last year to try and prevent speculative bubbles in the property market.

Curbs included bans on buying second homes in some cities and raising the minimum deposit as well as property taxes.

"Our major progress is that speculative-based investment in the property market has been curbed," Statistics Bureau Chief Ma Jiantang said at a news conference in Beijing according to reports.

Overall, property investment increased 27.9 percent to 6.17th Yuan ($980bn; ú640bn) in 2011, slowing from 33.2 percent growth in 2010, the Statistics Bureau said.

Some analysts have warned that the cooling property market is putting downward pressure on the overall economy.

"The property market correction is providing the greatest downside momentum," said Alistair Thornton from IHS Global Insight in Beijing in a note.

Foreign investment in China fell as the global downturn and financial volatility dampened investor appetite for spending.

Overseas investment dipped 12.7 percent to $12.24bn in December from a year earlier, the Ministry of Commerce said. It fell 9.8 percent in November, its first decline since 2009.

On 30 December the Commerce Ministry said the outlook for foreign investment this year was "not optimistic".

- BBC

http://www.sundayobserver.lk/2012/01/22/fin42.asp

Interior Design Mall provides interior designing services
Prime Minister D.M. Jayaratne and Minister deleted Dissanayake opened the 'Interior Design Mall' at Alexandra Place, Colombo.

Interior Design Mall Managing Director Mohammed Rushmi Sacquaff said, "We never expected the response we received. We cater to foreigners, diplomats and hoteliers in addition to locals. We thought it was seasonal demand that we were experiencing in December; but there have been inquiries even after the festive season." This is our first interior studio and is the first time that this concept was introduced, Sacquaff said.

Interior Design Mall Managing Chairman Jagath N. Wijeratne said, we provide customers with interior designers who will visit their homes and provide advice with regard to designing their homes, and provide the best solutions to suit their budget as well.

http://www.sundayobserver.lk/2012/01/22/fin43.asp

NDB Aviva to revolutionise wealth management
NDB Aviva Wealth Management Limited manages over Rs. 50b or $ 500m of funds for institutions and individuals.

All client savings are in clients names, with a custodian bank, which provides NDB Aviva Wealth clients with safety of title.

A joint venture between National Development Bank PLC, Sri Lanka and Aviva Asia Holdings (Pvt) Ltd, NDB Aviva Wealth Management is independently owned and managed by a qualified and experienced team of professionals and assisted by top class systems. While the specialists, who are made up of Relationship Managers care for any client need, the Fund Managers, Investment Analysts, and Traders takes care of the client's wealth.

http://www.sundayobserver.lk/2012/01/22/fin44.asp

Expolanka leverages on SharePoint
Expolanka's decision to transform its business process and move to an electronic document with Microsoft's SharePoint 2010 has delivered superior customer service and deriving real business value for the company.

Expolanka Head of IT, Asitha Kaggoda said: "Our Company is experiencing the multiple benefits of migrating to the SharePoint platform.

We have managed to significantly improve document collaboration and information exchange, search information relating to a customer Job or business context, enable version control, save considerable amount of real-estate and improve overall productivity enhancements."

http://www.sundayobserver.lk/2012/01/22/fin45.asp

NTB and Sampath Bank to share ATM network
Taking yet another step in the Banking Industry, Sampath Bank and Nations Trust Bank have come together to enhance customer convenience.

The two institutions are joining hands to provide customers access to over 1,500 ATM's across the island. Having introduced the concept of ATM's to Sri Lanka in 1987, Sampath Bank revolutionised the banking industry.

They were also responsible for pioneering the strategy of sharing the ATM network in Sri Lanka. Such efforts substantiated a significant saving for customers in the form of fees paid to foreign financial institutions for ATM use. Partnering with NTB, the islandwide ATM network which is powered by Sampath Bank will now include the 61 ATMs of NTB as well.

http://www.sundayobserver.lk/2012/01/22/fin46.asp

Mark Weinberger Global Chairman, CEO of Ernst & Young
Mark Weinberger has been named Global Chairman and CEO of Ernst & Young.

Weinberger will succeed current Global Chairman and CEO Jim Turley, who said recently that he will retire on June 30, 2013, having led Ernst & Young since 2001. Ernst & Young Global Executive and its Global Advisory Council, the organisation's highest management and governance bodies, unanimously support Mark's selection.

Ernst & Young recently recorded a revenue of $22.9b for its fiscal year ended June 30, 2011 and a global headcount of 152,000 people in 144 countries.

Mark, 50, has had a distinguished career with a track record of leadership inside and outside Ernst & Young. He currently sits on the Global Executive, the firm's highest governing body, and runs the organisation's Global Tax practice. Mark has previously served on America's Executive and US Operating Committee and run America's Tax practice
http://www.sundayobserver.lk/2012/01/22/fin47.asp

ARPITEC rewards dealer
ARPITEC launched an innovative initiative titled- Arpitec Supiri Wasi in 2009 to select the best performing dealers and as gratitude to strengthen the relationship between Arpitec and its dealer-network. The year 2010/2011 due to the glowing performance, Arpitec selected 256 dealers who outperformed and of them chosen 65 dealers that were star performers and the others were gifted with valuable gift items.

The short listed dealers were rewarded with a fully-paid local family tour, where the others were flown to India and the others had the unique privilege to visit Malaysia, with food and lodging facilities provided. The dealers who visited Malaysia were given an opportunity to visit the Puthraja Administrative city of design.
http://www.sundayobserver.lk/2012/01/22/fin48.asp

Frontline is the bottom-line
Frontline is the bottom-line; if sales fail the business fails

There is an old saying that everyone lives by selling something either a product or a service.

This is true from labourer to politician, from entrepreneur to CEO. The only exception would probably be religious leaders or genuine voluntary workers who do not typically complete a transaction but yet offer a service.

Business success solely depends on sales success- an argument that has no opposing view. Revenue is the key driver for any business and it is sales that generate the all important revenue. So the number one priority for any organisation should be sales.If the customer is king, make sales the controlling function.

The ideal functional model is where the organisation places the sales function as the controlling function and all other functions as supporting functions to do one thing right; creating value for the customer through quality and productivity to deliver the targeted bottom-line. Believe in the fact that the frontline is the bottom-line; If you have a strong frontline your business will always have a strong bottom-line.

Understand the fears entertained by sales people and create the right sales culture. Accept that selling is the hardest job in business. We'd all be multimillionaires otherwise, selling products or services to one another.Understand the fears of your sales people, they often receive a 'no' than a 'yes'.

The emotional pressure of this rejection is enormous. Build self reliance among your salespeople. Sell them the images of sales excellence for motivation.

It's also important to adjust your sales culture to the customer's culture to be able to forge a greater bond between the organisation and customer for long-term business health. Praise the sales people when they perform - what is required of them, rather than applauding the results -encourage them to adopt the behaviour of success to a greater degree than they do now. Let improved sales be an outcome of the right behaviour and actions by the sales force.

Create the notion that sales people bring profits not revenue Demonstrate the discipline you expect of your sales people. You should address their issues with energy, urgency and purposefulness.

Use 'sales stars' to influence the rest which you would find in any sales team. Leaders set the selling price and control expenditure; so you know what percentage is profit.Set the right tone at the top and lead by example.

CEO's role
Conventional CEO's think that selling is not their job. Some do not realise the concepts that have been discussed. But the reality is that a CEO's ultimate goal is to sell more to be able to deliver the expected bottom-line for shareholders. CEOs have to spend a significant amount of time talking about customers and sales people to better understand and extend support to the sales leadership. Let everyone know that the sales target is the priority in your job. Set team challenges, when problems occur.

Involve the entire team in their solution. CEOs should go out regularly with the sales staff and I must confess that I love doing it. This would give you the insight you need to make the right business decisions. Fix the problems for them fast. Surprise the team occasionally.

Sales people who are on top in every forum within the organisation should be a regular feature to live the culture. Recognise every significant achievement and celebrate success.

It's this feeling that will keep the sales staff continually motivated.

http://www.sundayobserver.lk/2012/01/22/fin70.asp

CSE.SAS wrote:By Ravi Laduwahetty

The president’s two elder sons, Namal and Yoshitha, are listed among the top 20 shareholders of Ascot Holdings PLC according to the company’s interim financial statements.

According to this list, Mr. Y.K. (Yoshitha) Rajapaksa owns 100,000 shares and Mr. L.N. Rajapaksa (Namal) 92,000 shares as at Sept. 30, 2011.

Although in the top 20 list, in percentage terms their shareholding is a modest 1.25% and 1.15% though they are the 12th and 13th largest shareholders in the company which is fairly closely held.

Previously Asian Cotton Mills Ltd., the Jayewardene family had interests in the company founded in the middle sixties to spin cotton yarn. It had extensive property at Ratmalana but was in difficulty for many years due to a number of factors, many of them outside the company’s control.

Mr. A.Y.S. Gnanam, the well known tycoon, ran Ascot for a number of years but could not turn it around. Later control passed to the Kuwaiti investor, Al Nakib. Thereafter a group led by Mr. Rohan Iriyagolle took control, sold off machinery and land and invested the proceeds in a Colombo property development project at T.B. Jayah Mawatha (Darley Road).

The company now operates mainly on the rental income of this property.

Mr. deleted Perera, financial advisor to Mr. Dhammika Perera and on the boards of companies controlled by him, is also in Ascot’s Top Twenty list with 269,200 (3.37%)and is ranked the sixth largest shareholder.

Axis Financial Services (Pvt) Ltd. with 3 million shares (37.57%) and Boston Capital Pvt. Ltd with 649,500 shares (8.13%) are the two largest shareholders of Ascot with these shares held through two banks. Their individual accounts follow with Axis having a further 358,092 shares (4.48%) and Boston 314,864 shares (3.94%).

Some directors of Ascot are believed to have beneficial interests in shares held by holding companies.

The Ascot share traded at a high of Rs. 207.70 and a low of Rs. 99 in the Sept. quarter 2011 against Rs. 80 and Rs. 47 a year earlier. It closed at Rs. 151.80 on the CSE last Friday.

Total assets as at Sept. were Rs. 1.25 billion and liabilities approx. Rs. 600 million.

The group posted a small loss of Rs. 5.9 million in the period ended Sept. 30, 2011, translating to a loss of Rs. 0.73 per share.

The directors of the company are Messrs. V.P. Malalasekera, Chairman, Rohan Iriyagolle, N.D. Gunaratne, N.A. de Mel, Chanaka de Silva and Deleted. Gunaratne.
http://island.lk/index.php?page_cat=article-details&page=article-details&code_title=43669