03rd – 09th January 2011 alerts/en/2011/January 9, 2011.pdf · eritage and the Galle Lit Fest ....

03rd – 09th January 2011

FCCISL News Alert Weekly Business Highlight


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Content Page 1. DEVELOPMENT ECONOMICS

CB to focus on low inflation 05 Growth expected to dip this year 07 Global air traffic dipped in November 12 Why the Rich Are Getting Richer 15 Ageing population and economic effects 20 Two-speed recovery to extend into 2011 - IMF 22 Overheating East to falter before the bankrupt West recovers 26 Revision of inflation index 29 Dousing Cost of Living Fires 30 Inflation - are we hit? 33

2. MANAGEMENT

Time management 37 Communication and public relations 39

3. TRADE & MARKETING

10 Brand Disasters in the year ’10 45 Entrepreneurial marketing 49 Vending takes new role in marketing 51

4. MONEY & BANKING

Two-speed recovery to extend into 2011, says IMF 55 CB: inflation in 2010 remains at a mid-single digit level 59 Central Bank forecasts for 2011: Economy to grow 8.5% this year 61 Role of financial management in our day to day lives 63

5. TOURISM Spice industry benefits from tourism 65 Road map for a tourist paradise 66 Tourism and tea, beaches, h 69

6. EXPORTS & IMPORTS

Challenges and confusion in rubber business 72 John Keells Tea Market Report 79

eritage and the Galle Lit Fest

Tea industry overview 2010 82 Tea promotion brings rich dividends to industry 86



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7. STOCK MARKET Bourse ends benchmark year 88 MBSL revises MidCap for 2011 90 Retailers drive bourse to recent high 92 Big trades in Laugfs, Richard Pieris & Pan Asia 93

8. BUSINESS

Challenging the myths of entrepreneurshi 95 p Women in NE reconstruction 98

9. AGRICULTURE

New world order will see farmers and miners in charge 102 10.ICT

The ICT and BPO Era of Sri Lanka 105 11. FCCISL PRINT IN MEDIA

More avenues for economic growth 110 Leema Creations wins Bronze award 114 Chinese delegation visits FCCISL 116



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Development Economics



The Island – January 3, 2011

CB to focus on low inflation

* Strengths: Improved macroeconomic fundamentals, better fiscal discipline * Risks: Rise in external commodity prices, especially il o The Central Bank would focus on low inflation this ate sector year and there is enough room for privcredit to build up to bolster economic growth without having to tighten monetary policy rates to curb the increase in general price levels, a senior Central Bank official told The Island Financial Review.

"Sri Lanka’s bigges raged over 12 t strength is its strong economic fundamentals. Inflation, which avepercent for the thirt e Central Bank is y years since 1978 has been brought down to single digit levels. Thgoing to focus on maintaining low inflation this year," Central Bank Deputy Governor Dharma Dheerasinghe told The Island Financial Review.

The 12 month moving average inflation has steadily creased since reaching 3.1 percent in March, inending 2010 at 5.9 percent. The year-on-year change f the official inflation index, the Colombo oConsumers’ Price Index computed by the Department of Census and Statistics, fell marginally to 6.9 percent in December from 7 percent in November. It was 4.3 percent in July. The rise in inflation over the second half of 2010 was attributed to increases in food prices.

Dheerasinghe said the ‘Road Map: Monetary and Financial Sector Policies for 2011 and Beyond’, which would be presented by the Central Bank tomorrow (4), will focus on low inflation. "On the fiscal side, the government has been able to maintain fiscal discipline fundamentally stronger than in previous years and this year the budget deficit to GDP is expected to reach 6.8 percent. Last year we saw government revenue increase while expenditure has grown at a much slower pace. This trend is vital to maintain macroeconomic stability which is vital to economic development," Dheerasinghe said.

The government deficit for ten months ending October 2010 has contracted by 2 percent to Rs.376.8 billion from the previous year’s Rs.384.5 billion, Central Bank data showed. Total revenue grew 12.60 percent to Rs.671.9 billion from Rs.596.7 billion a year ago, while total expenditure grew by 6.87 percent to Rs.1,048.7 billion from Rs.981.2 billion. Tax revenue grew by 14.66 percent to Rs.580.3 billion during the ten month period from Rs.506.1 billion the previous year. Non tax revenue increased by 14.77 percent to Rs.80 billion while grants declined by 44.76 percent to Rs.11.6 billion. Recurrent expenditure during the ten month period grew 3.07 percent to Rs.787.4 billion from Rs.763.9 billion a year ago while capital expenditure increased by 20.24 percent to Rs.261.3 billion from Rs.217.3 billion a year ago.

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Last year, the budget deficit ballooned to 9.9 percent of GDP, deviating significantly from the targeted deficit of 7 percent of GDP, but the data up to October indicates the government is on track to achieving a deficit of 8 percent of GDP for 2010. "If this trend continues, the Central Bank would be in a better position to control inflation because in the past, a major contributor to high inflation was the high budget deficits of successive governments," he said.

With growth in exports, tourism arrivals and workers’ remittances, Dheerasinghe said foreign currency reserves would continue to remain at healthy levels. "We should be able to bring down the current account deficit in the Balance of Payments to around 3.5 percent of GDP from the near 10 percent levels in May 2008," he said. Gross official reserves stood at US$ 6.6 billion by end November, which was enough to finance imports for a little more than 6 months. Total export earnings grew by 13.2 percent during the ten month period up to October 2010 to US$ 6,505.5 million from US$ 5,748.2 million a year ago. The total imports bill for the ten months up to October grew faster than total export earnings at 32.8 percent to US$ 10,862.6 million from US$ 8,179.5 million a year ago.

Workers’ remittances grew by 21.9 percent to US$ 3,380.4 million during this period. The trade deficit expanded 79.2 percent to US$ 4,357.1 million during the ten months up to October 2010 from US$ 2,431.4 million a year ago. He said the economy is expected to show stronger growth based on the sound macroeconomic fundamentals. "Sri Lanka does face risks which stem from the external sector. Oil prices are expected to rise along with other commodity prices. At the moment oil is just over US$ 90 a barrel but if it increases to US$ 100 per barrel, we may have to reconsider our strategies," Dheerasinghe said.

He said there was still plenty of room for private sector credit growth. "The growth in private sector credit we saw last year is coming off a low base the previous year (2009) when credit growth was in contraction. We believe there is space for healthy money supply growth this year without having to worry about inflation," Dheerasinghe said.

Credit to the private sector from domestic banking units grew by 22.7 percent in October to Rs.1.25 trillion from Rs.1.02 trillion a year ago.

A year ago net credit to the private sector had declined by 6.6 percent with loans from the domestic banking sector declining by 6.1 percent.

Net credit to the government grew at a much slower pace at 8.2 percent, reaching Rs.656.5 billion in October from Rs.606.7 a year ago, but it is a decline compared with Rs.693.1 billion the previous month, September 2010.

Net loans to corporations grew by 71.5 percent to Rs.121.2 billion in October from 70.6 billion a year ago.




Growth expected to dip this year

A senior economist says Sri Lanka’s economy could dip this year as the global economy is set to decline. Executive Director of the Institute of Policy Studies Dr. Saman Kelegama said Sri Lanka’s growth, estimated between 7.5 percent and 8 percent for 2010, could decline this year along with the global economy. "With the global economic growth predicted to decline from 4.8percent in 2010 to 4.2percent in 2011, and growth rate of Asia-Pacific predicted to decline from 8.3percent in 2010 to 7.0percent in 2011, Sri Lanka will also show a decline in its growth from the 7.5percent level of 2010," Dr. Kelegama said in an interview published on page 8 of this edition of The Island Financial Review.

"With the good rains the country received in 2010 and which is predicted to continue in 2011, agriculture will show a good performance in 2011. The services will show the most promising growth performance with tourism, communication, transport and banking showing high growth rates. The North/East reconstruction will also contribute to stimulating the services sector growth. Manufacturing growth may decline with slackening demand for exports in developed country markets, but we will have to see how the 2011 Budget package will work in reviving the manufacturing growth," Dr. Kelegama said.

"In order to achieve the 8percent growth target, Sri Lanka will have to focus on factors that will enhance the level of investment to 32 – 36 percent of GDP. In this context, improving the "Doing Business Indicators" and giving the correct signals to the private sector will go a long way in attracting more domestic and foreign investments," he said.

According to the Central Bank, the economic growth is estimated at 7.6 percent for 2010 and 8 percent for 2011. However, in a recent report the Central acknowledged the fact that the global economic growth would dip in 2011. It said the global economy would grow 4.8 percent in 2010 and 4.2 percent in 2011. Advanced economies would grow by 2.7 percent and 2.2 percent in 2010 and 2011 while emerging economies would grow by 7.1 percent and 6.4 percent in 2010 and 2011. ................................................... Global Economic Outlook for 2011 and Emerging Concerns for Developing Countries

The Island, Financial Review, spoke to Dr. Saman Kelegama, Executive Director of the Institute of Policy Studies of Sri Lanka (IPS), on the global economic outlook for 2011 and emerging challenges.

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Q: After the 2008/2009 global economic slowdown we are now seeing a gradual economic recovery. What are the main characteristic of this recovery ?

A: The recovery that took place in 2010 was quite swift and better than what was expected earlier. But all indications are that there will be a slowdown in the recovery process in 2011 due to the sluggish demand and growth in the developed countries. Two factors need to be emphasized:

(1) The developed countries came out of the crisis by using a large fiscal stimulus in 2009. But now, these countries have abandoned the use of fiscal policies to stimulate their economies, fearing high budget deficits and the ballooning public debt. Now most of these developed countries are using a relaxed monetary policy with very low interest rates to increase liquidity in the market and sustain the recovery. The USA calls this policy Quantitative Easing (QE -‘quantitative’ because the US Fed is changing the quantity of money in the economy, and ‘easing’ because it is easing the pressure on the market), and it is nothing but increasing liquidity by putting more currency into the market . But the desired impact of this policy is slow to manifest in the real economies of all these developed countries.

(2) The EU debt crisis manifested after the lagged impact of some of the EU country investments in US toxic assets. First, it was Greece and then it was Ireland, and now it is said that Spain and Portugal may also face a serious debt crisis. A Euro 110 billion rescue package by the IMF and European Central Bank was put in place in May 2010 for Greece, and a Euro 85 billion package was put in place for Ireland in November 2010. How long these two countries will take to recover is not clear, but what is very clear is that the contagion of the European debt crisis will be felt by the rest of the world, in particular, developing countries whose exports are heavily dependent on the EU market.

So these factors basically point to a lower economic growth in the global economy compared to that of 2010. The global economic growth is predicted to decline from 4.8% in 2010 to 4.2% in 2011, US growth is predicted to decline from 2.8% in 2010 to 2.5% in 2011, EU growth is predicted to stagnate at 1.3% in 2010 and 2011, and Asia Pacific region’s growth is predicted to fall from 8.3% in 2010 to 7.0 % in 2011. Thus, the type of economic recovery we will see is not be a straight forward ‘V’ shape but a disturbed’ V’ or a lop-sided ‘W’ shape. Marxian economists say that there will be triple dips as this is a deep rooted problem of capitalism manifesting in the global economy. However, I think after the second dip, growth will become sustainable like during the 1930s Great Recession, where we had the first dip during 1929 to 1933 and the second dip during 1937 to 1938.

Q: What type of economic growth will we see in 2011? Will it be driven by a particular region and will it be driven by a new economic strategy?

A: This crisis has put the Asian region in the global map as it is the region that is giving the lead to the global economic recovery process, in particular, the two large economies, China and India. China grew at 9.1% in 2009 and increased the growth to 9.8% in 2010, and the growth predicted for 2011 is 9.0%, while India grew at 7.4% in 2009 and increased the growth to 8.7% in 2010, and the growth predicted for 2011 is around 8.5%. Thus, we see that despite decline in growth in US and EU, the two giants in Asia, although growing at a lower rate than in 2010, will still show relatively high growth rates in 2011 and provide the lead to the global recovery process.

We will also see less emphasis being paid to the pure export-led growth model in the coming years, and developing countries will use a combination of export-led growth and domestic demand driven growth



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model. The latter works best in large countries like China and India, and that is how these two economies managed to show high growth during the global economic crisis by focusing more on domestic demand driven growth than excessively relying on export-led growth. This model also works for smaller developing countries if they are able to reap economies of scale via deep economic integration in the region with larger markets. For the renewed export-led strategy, developing countries will increasingly look for Southern markets and in this context, again the regional markets become important.

Q: What are the major concerns for developing countries like Sri Lanka in the coming months in the context of the global changes that are taking place ?

A: I think the major concern is that the recovery strategy put in place by the USA is incurring a huge cost on all developing countries. In other words, the monetary easing while not effectively reviving the private sector sentiments in the developed countries and not making the desired economic impact, is causing problems for developing countries. Here, four points could be highlighted.

1) The QE strategy has increased liquidity in the US market but a portion of this capital is not invested in the US market (in Banks, Treasury Bonds, Real Estate, etc.). Rather it is taken out of the US market in search of more attractive returns overseas. In this context, developing country share markets and Guilt Edge Securities have become prime sources of investment. These flows have been accommodated by most developing countries by boosting their reserves, but some countries like Brazil and Thailand have restricted such inflows by imposing capital controls. Accommodating these capital inflows by boosting the reserves have adverse consequences, viz., appreciation of the local currency, generating asset price bubbles, creating inflationary pressure, and creating financial instability. In many developing countries, we have clearly seen the appreciation of the exchange rate – from January 2009 to November 2010, Indonesia, Korea, Thailand, and Malaysia have seen their currencies appreciate by 22.7%, 17.4%, 16.5%, and 12.4% — while in some other countries, we have seen consequences such as asset bubbles and inflation due to incomplete sterilization of capital inflows.

2) If we are to expedite the global economic recovery, what we need to do is some rebalancing of the global economy. As is well known, the US growth during 2000-2008 was maintained by a debt driven investment and consumption boom, and the debt capital came mainly from Asia. The US incurred a large trade deficit as a result of this growth. This model is no longer workable for the USA and it must reduce its large trade deficit, and the trade surplus countries like China, Japan and Germany have to bring down their surplus. In other words, the US has to reduce domestic consumption-led growth and focus more on export-led growth to bring down the trade balance, while surplus countries should encourage more domestic consumption-led growth and focus less on export-led growth to bring down their massive surpluses. This was what the G-20 was supposed to implement and give the IMF the surveillance power to ensure that such rebalancing was taking place.

However, the G-20 never empowered the IMF to do the surveillance so what has now manifested is not trade rebalancing but a potential ‘currency war’. This is because the QE strategy is basically depreciating the value of the US dollar to support the policy of the Obama Administration to double the US exports by 2015. And the US is arguing that the Chinese Yen is artificially depreciated and putting pressure on China to readjust the Yen. This pressure is not seen favourably by China, which argues that the Yen has already appreciated and that the US should further reduce domestic consumption to fully recover, rather than pointing the finger at the Chinese currency. These verbal exchanges are laying the foundation for a potential currency battle with tit-for-tat devaluations. Some developing countries are



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now contemplating devaluing their currencies to make their exports more competitive. This may lead to "competitive devaluations" among countries and it will generate currency instability which will be very detrimental to attracting FDI to developing countries.

3) With USA following an aggressive export boosting strategy, the likelihood of the WTO Doha Development Agenda (DDA) coming to an end, is very bleak now. The G-20 only pays lip service to the DDA, and nothing happens with the key issues in the DDA such as reducing the agricultural subsidies in developed countries, and improving market access in developed countries for exports of developing countries. The USA will now use all the agricultural subsidies at its command to drive its agricultural exports and use anti-dumping and other non-tariff barriers to restrict imports, and this does not augur well for developing countries. Since the on-set of the global economic crisis, the USA and EU have already implemented 240 and 299 protectionist measures, respectively.

4) The depreciation of the dollar has led to looking for alternative sources of investment by speculators like the commodity markets. Consequently, the food and oil prices are on the increase once again. The price of an oil barrel has increased from $ 33 per barrel in December 2008 to US $ 90-plus in December 2010. Wheat, sugar, pulse prices are on the increase in the global market. This is not a healthy situation for net food importing countries like Sri Lanka.

Q: What are the key lessons from the global economic recovery that we saw in 2010 ?

A: Basically, the recovery has shown that without a regulatory framework in place we cannot have profound faith on the market mechanism to bring about economic recovery. The tax cuts are not necessarily self- financing and deregulated financial markets are not necessarily self-correcting. The world still does not have an international financial architecture in place to govern global financial flows, and without such a framework we have to be very careful in opening up the capital account of the balance of payments further to allow the inflows and outflows of capital.

Another lesson that has emerged with the ongoing global recovery, is the less effectiveness of monetary policy in bringing about economic recovery. Despite loose monetary policy, demand has still not picked up either in the US or EU. While monetary policy is effective in terms of curtailing demand, controlling credit and bringing down inflation, it is not that effective in expanding demand and expanding credit flows because it is a highly private sector sentiment dependent policy tool. Whereas fiscal policy, which is government-led, with its multiplier impacts, is a more effective tool in bringing about economic recovery.

In fact, Nobel Laureates, Paul Krugman and Joseph Stigltz argued that developed countries are making a big mistake in moving too quickly from the consensus in 2009 that they should undertake a ‘fiscal stimulus’ to get out of recession, to the present consensus that they should now go on a "fiscal austerity" drive. The withdrawing of the fiscal stimulus before recovery becoming sustainable, will make the overall recovery very difficult. In fact, Krugman, criticized the George Osborn Budget of the UK in October 2010, saying that the premature fiscal austerity will lead to a renewed economic slump in Britain. The Krugman argument is that the turning point at which fiscal stimulus is withdrawn in favour of monetary policy easing, should be carefully identified because creating sustainable growth is important over and above short-term fiscal consolidation. A large fiscal package, although it would lead to a budget deficit and increase public debt, will generate sustainable recovery, and the growth from such recovery will increase revenue to pay back debt and bring down the budget deficits. This is how the world came



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out of recession in the 1930s based on the formula suggested by the well-known economist John Maynard Keynes.

The third lesson from the recovery, is that developing countries should no longer depend too much on the Northern (developed) country markets but explore new markets in the Southern countries. In this context, the regional markets become important and the case for regional integration becomes stronger.

Q: What are the prospects for the Sri Lankan economy in 2011?

A: Sri Lanka will record a growth rate between 7% and 8 % in 2010. In the first quarter of 2010, Sri Lanka grew at 7.1%, 2nd quarter at 8.5%, 3rd quarter at 8.0% and the estimate for the 4th quarter is around 6.4%. So this will give an average growth of about 7.5% for 2010. With the global economic growth predicted to decline from 4.8% in 2010 to 4.2% in 2011, and growth rate of Asia-Pacific predicted to decline from 8.3% in 2010 to 7.0% in 2011, Sri Lanka will also show a decline in its growth from the 7.5% level of 2010.

With the good rains the country received in 2010 and which is predicted to continue in 2011, agriculture will show a good performance in 2011. The services will show the most promising growth performance with tourism, communication, transport and banking showing high growth rates. The North/East reconstruction will also contribute to stimulating the services sector growth. Manufacturing growth may decline with slackening demand for exports in developed country markets, but we will have to see how the 2011 Budget package will work in reviving the manufacturing growth.

In order to achieve the 8% growth target, Sri Lanka will have to focus on factors that will enhance the level of investment to 32 – 36 % of GDP. In this context, improving the "Doing Business Indicators" and giving the correct signals to the private sector will go a long way in attracting more domestic and foreign investments.



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Global air traffic dipped in November The International Air Transport Association (IATA) announced international scheduled traffic results for November showing 8.2% year-on-year passenger traffic growth and a 5.4% increase for freight. The passenger load factor for November averaged 75.6% while the freight load factor stood at 55.2% for the month.

November saw traffic growth slow from the 10% increase recorded in the passenger business and the 14.5% growth in freight in October. The slowdown in 2010 is partially skewed because of the exceptionally rapid rise in traffic volumes recorded during the fourth quarter of 2009. However, when viewed in absolute terms, air travel fell by 0.8% and air freight fell by 1.1% between October and November 2010.

This slower growth does not necessarily signal a negative trend. Even with the decline in November, passenger and freight traffic are still expanding at annualized rates of between 5-6% which is in line with the industry’s historical growth trend.

"The industry is shifting gears in the recovery cycle. Growth is slowing towards normal historical levels in the 5-6% range. Relative weakness in developed markets is being offset by the momentum of economic expansion in developing markets. We see a strong end to 2010 that boosted the year’s profit forecast to $15.1 billion. Slowing traffic growth is in line with our projections for a reduced profit of $9.1 billion in 2011. That’s a 1.5% margin. More hard work will be needed in the New Year to achieve sustainable levels of profitability," said Giovanni Bisignani, IATA’s Director General and CEO.

International Passenger Demand * The level of international air travel is now 4% above the pre-recession peak of early 2008. All regions, except Africa, reported a slowing in year-on-year growth rates from October to November.

* Europe’s carriers recorded 7.3% growth in passenger traffic, below the 9.4% recorded in October. Overall travel performed by the region’s carriers is only slightly ahead of the pre-recession levels of early 2008. In absolute terms there was a 1.7% fall in traffic volumes for the region’s carriers between October and November. Industrial labor action and adverse weather conditions particularly affected Europe’s carriers at the very end of the month. The impact of these will continue to be seen in December traffic.

* North American carriers saw their growth slow from 12.4% in October to 9.5% in November. Capacity growth in November was 9.5%, resulting in a load factor of 78.1%, the highest among the regions. November passenger traffic levels for North American carriers equaled the pre-recession levels of early 2008.

* Asia-Pacific carriers saw their growth slow from 7.3% in October to 5.8% in November. Capacity expanded relatively in tandem (5.9%) for a load factor of 75.6%. Despite the region’s strong economic growth and financial performance, November traffic levels were still 2% below pre-recession levels.



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* Latin American carriers showed the most dramatic decline in growth rates—from 4.9% in October to virtually zero in November. The lingering impact of the Mexicana failure is the largest contributing factor in this decline which resulted in a 2.1% absolute contraction of travel performed by the region’s carriers between October and November. Adjusting figures to eliminate the impact of Mexicana, the region would be experiencing growth in the low double digits. The region’s load factor stands at 77.5%.

* Middle East carriers saw their growth rate decline from 17.8% in October to 16.7% in November. The region’s carriers handled 16% more traffic in November than at the pre-recession peak in early 2008, showing that they have gained market share over the course of the recession and the recovery. The region recorded a load factor of 74.3%, below the global average of 75.6%.

* African carriers were the only region to show an increase in growth rates from October (12.6%) to November (16.4%). The region’s carriers moved 11% more travelers in November than they did at the pre-recession peak in early 2008.

Freight Demand * The air freight recovery hit a peak in May 2010. Compared to that peak, volumes have fallen 7%. The volume of air freight in November was equal to pre-recession levels of early 2008.

* November’s year-on-year growth of 5.4% is a significant shift from the 14.5% recorded in October. This was exaggerated by the exceptionally strong performance in November 2009. In absolute terms, there was a 1.1% fall in freight volumes from October to November. All regions, except Africa, showed dramatic drops in year-on-year growth rates from October to November.

* November freight carried by Asia-Pacific carriers showed a 4.1% year-on-year increase. The region’s carriers moved a similar amount of freight in November that they did at the pre-recession peak of 2008.

* Middle Eastern carriers saw 12.4% year-on-year growth for November. The region’s carriers handled 14% more freight in November than they did at the pre-recession peak in early 2008.

* North American carriers showed 1.5% year-on-year growth in November, but overall volumes remain 7% below the pre-recession levels of early 2008. European carriers experienced a similar pattern with 6.6% year-on-year growth in November but overall volumes remaining 12% below pre-recession levels.

"The year-end holiday season has been tough for travelers and for airlines. Exceptionally adverse weather conditions in Europe and the US resulted in travel chaos. Passengers were inconvenienced. Airlines saw lost revenues and saw costs rise. As the backlogs of stranded passengers clear and the situation normalizes, there are two opportunities that must not be lost. The first is to learn and apply lessons from this difficult season so that all stakeholders in the industry’s infrastructure are better prepared for future exceptional situations," said Bisignani.

"The second opportunity is to evaluate the regulatory world in which aviation operates. In 2010, the Icelandic volcano and the year-end adverse weather made the value of air transport crystal clear.



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Modern life and the global economy depend on aviation. Whether you are a business person operating in the global market, families keeping in touch across distances or heads-of-state on important foreign missions, aviation is critical. While memories of the travel chaos are still fresh, it’s time to evaluate a long list of government imposed industry handicaps, including excessive taxation, out-dated ownership restrictions, over-regulation where market forces could do better, under-investment in infrastructure and generally poor regulation of monopoly suppliers. We must not let governments forget all of this while waiting for a change of seasons," said Bisignani.

"For our part, IATA is launching Vision 2050—a dialogue on the industry’s future among strategic thinkers from government, industry and academia. We will meet in Singapore this February with an important mission to build a vision for a successful and sustainable industry in four decades. The group will be guided by the inspirational support of Singapore’s Minister Mentor Lee Kuan Yew and the expertise on competitiveness of Harvard University’s Professor Michael Porter. Our common goal is to fortify the foundations of the industry to support its ever-growing role in supporting modern life in our global world," said Bisignani.



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Why the Rich Are Getting Richer * American Politics and the Second Gilded Age

By Robert C. Lieberman

The U.S. economy appears to be coming apart at the seams. Unemployment remains at nearly ten percent, the highest level in almost 30 years; foreclosures have forced millions of Americans out of their homes; and real incomes have fallen faster and further than at any time since the Great Depression. Many of those laid off fear that the jobs they have lost — the secure, often unionized, industrial jobs that provided wealth, security, and opportunity — will never return. They are probably right.

And yet a curious thing has happened in the midst of all this misery. The wealthiest Americans, among them presumably the very titans of global finance whose misadventures brought about the financial meltdown, got richer. And not just a little bit richer; a lot richer. In 2009, the average income of the top five percent of earners went up, while on average everyone else’s income went down. This was not an anomaly but rather a continuation of a 40-year trend of ballooning incomes at the very top and stagnant incomes in the middle and at the bottom. The share of total income going to the top one percent has increased from roughly eight percent in the 1960s to more than 20 percent today.

This is what the political scientists Jacob Hacker and Paul Pierson call the "winner-take-all economy." It is not a picture of a healthy society. Such a level of economic inequality, not seen in the United States since the eve of the Great Depression, bespeaks a political economy in which the financial rewards are increasingly concentrated among a tiny elite and whose risks are borne by an increasingly exposed and unprotected middle class. Income inequality in the United States is higher than in any other advanced industrial democracy and by conventional measures comparable to that in countries such as Ghana, Nicaragua, and Turkmenistan. It breeds political polarization, mistrust, and resentment between the haves and the have-nots and tends to distort the workings of a democratic political system in which money increasingly confers political voice and power.

It is generally presumed that economic forces alone are responsible for this astonishing concentration of wealth. Technological changes, particularly the information revolution, have transformed the economy, making workers more productive and placing a premium on intellectual, rather than manual, labor. Simultaneously, the rise of global markets — itself accelerated by information technology — has hollowed out the once dominant U.S. manufacturing sector and reoriented the U.S. economy toward the service sector. The service economy also rewards the educated, with high-paying professional jobs in finance, health care, and information technology. At the low end, however, jobs in the service economy are concentrated in retail sales and entertainment, where salaries are low, unions are weak, and workers are expendable.



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Champions of globalization portray these developments as the natural consequences of market forces, which they believe are not only benevolent (because they increase aggregate wealth through trade and make all kinds of goods cheaper to consume) but also unstoppable. Skeptics of globalization, on the other hand, emphasize the distributional consequences of these trends, which tend to confer tremendous benefits on a highly educated and highly skilled elite while leaving other workers behind. But neither side in this debate has bothered to question Washington’s primary role in creating the growing inequality in the United States.

It’s the government, stupid... Hacker and Pierson refreshingly break free from the conceit that skyrocketing inequality is a natural consequence of market forces and argue instead that it is the result of public policies that have concentrated and amplified the effects of the economic transformation and directed its gains exclusively toward the wealthy. Since the late 1970s, a number of important policy changes have tilted the economic playing field toward the rich. Congress has cut tax rates on high incomes repeatedly and has relaxed the tax treatment of capital gains and other investment income, resulting in windfall profits for the wealthiest Americans.

Labor policies have made it harder for unions to organize workers and provide a countervailing force to the growing power of business; corporate governance policies have enabled corporations to lavish extravagant pay on their top executives regardless of their companies’ performance; and the deregulation of financial markets has allowed banks and other financial institutions to create ever more Byzantine financial instruments that further enrich wealthy managers and investors while exposing homeowners and pensioners to ruinous risks.

In some cases, these policy changes originated on Capitol Hill: the Ronald Reagan and George W. Bush tax cuts, for example, and the 1999 repeal of the Glass-Steagall Act, a repeal that dismantled the firewall between banks and investment companies and allowed the creation of powerful and reckless financial behemoths such as Citigroup, were approved by Congress, generally with bipartisan support. However, other policy shifts occurred gradually and imperceptibly.

Hacker and Pierson’s second important point is that major policy shifts do not always happen in such obvious ways. Many of the policies that have facilitated the winner-take-all economy have just as often come about as a result of what Hacker and Pierson call "drift," which occurs when an enacted policy fails to keep up with changing circumstances and then falls short of, or even subverts, its intended goal. The American system of separated powers — with its convoluted procedures and bizarre rules, such as vetoes and the filibuster — is especially conducive to drift, particularly compared to more streamlined parliamentary systems in other countries that afford majorities relatively unimpeded dominance over the policymaking process. Policies in the United States, once made, tend to be hard to overturn or even to modify.

Sometimes drift occurs through simple neglect or inertia. An example is the phenomenon known as "bracket creep," the process by which prior to the indexing introduced in 1981, inflation pushed incomes into higher tax brackets. But Hacker and Pierson particularly zero in on instances of intentional policy



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drift, when policymakers deliberately sidestepped or resisted available policy alternatives that might have reduced inequality. Allowing corporate executives to be compensated with stock options is one such case; stock-option compensation tends to bend incentives toward the short-term maximization of share prices rather than planning for long-term growth. Consequently, such compensation has allowed top managers to capture jaw-dropping gains despite their companies’ often dismal performances. The long-term cost of corporate failure is borne not by CEOs and their executive minions, of course, but by rank-and-file employees, who get laid off when companies need to cut costs and whose pension investments are wiped out when companies’ stocks sink.

In the 1990s, the Financial Accounting Standards Board, which regulates accounting practices, noticed this practice, correctly predicted the damage it would do to the economy, and then sought to curtail it. But Congress, spurred on by the lobbying efforts of major corporations, stopped the FASB in its tracks. As a result, Americans spent the 1990s and the first decade of this century living under 1970s accounting rules, which allowed top executives to more or less help themselves and, through the mutual back-scratching habits of corporate boards, help one another.

Similarly, labor law has failed to keep up with the times. Policymakers have repeatedly failed to enact reforms that would have accommodated new union-organizing techniques and empowered unions to counter the growing power of business to resist labor’s demands. In this realm, the United States is running a twenty-first-century economy under 1940s rules. A clearheaded understanding of the power of drift in policymaking puts the Republican congressional minority during President Barack Obama’s first two years in a fresh light. Obsessive obstructionism is not just a symptom of general crabbiness; it is a shrewd and sensible part of a larger strategy to enrich corporations while gutting long-standing protections for the middle class.

The dramatic growth of inequality, then, is the result not of the "natural" workings of the market but of four decades’ worth of deliberate political choices. Hacker and Pierson amass a great deal of evidence for this proposition, which leads them to the crux of their argument: that not just the U.S. economy but also the entire U.S. political system has devolved into a winner-take-all sport. They portray American politics not as a democratic game of majority rule but rather as a field of "organized combat" — a struggle to the death among competing organized groups seeking to influence the policymaking process. Moreover, they suggest, business and the wealthy have all but vanquished the middle class and have thus been able to dominate policymaking for the better part of 40 years with little opposition.

The business backlash... In pursuing this argument, Hacker and Pierson revive the old academic tradition of pluralism to shine a bright light on some of the pathologies of American politics. The contemporary study of American politics emerged from pluralism, the post-World War II view that in the shadow of the two totalitarianisms of midcentury Europe — communism and fascism — democracy could be rendered stable and progressive through a politics of mutual accommodation among relatively evenly matched groups.



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Rather than titanic conflict between workers and capitalists, so the argument went, pluralist democracy would produce solid incremental policy changes that would inch American society forward toward security and affluence. The dramatic and decidedly no incremental events of the 1960s and 1970s — the civil rights movement, the Vietnam War, and broader cultural upheaval — punctured this view.

Critics of pluralism began to note its limitations, emphasizing the primacy of individual motivations rather than group affiliations. Since then, the study of American politics has largely turned away from questions of organized interests and their role in policymaking and has focused instead on the ways in which individual attitudes and behavior combine to produce policy. Yet if one assumes that people vote based on their economic interests and that election outcomes influence policy through something like majority rule, how can one account for a generation of policies that promoted the interests of the wealthy few at the direct expense of everybody else?

Another critique of pluralism is that it underestimated the lopsidedness of political organization. As the great political scientist E. E. Schattschneider wrote in 1960, "The flaw in the pluralist heaven is that the heavenly chorus sings with a strong upper-class accent." Schattschneider, it turned out, did not know the half of it. To most observers, the 1960s seemed the height of American liberalism, and the decade’s policy developments — upgrading the basic New Deal package of social protection and labor rights to include extensive protection of civil rights and civil liberties and additional benefits such as limited health insurance — seemed to bear out this view. But to business elites, the 1960s marked the nadir of their influence in American society, and they did not react passively. The era saw the stirrings of a conservative counterrevolution marked by ideological, political, and organizational developments, and particularly by the political awakening of business.

American conservatives, increasingly empowered by effective organization and lavish funding from their patrons in the business community, began to actively resist the politics of pluralist accommodation. Rather than accepting the basic contours of the New Deal and the Great Society and seeking to adjust them step by incremental step, conservatives assumed a newly confrontational posture and turned their efforts toward dismantling the legacies of Franklin Roosevelt and Lyndon Johnson.

The economic crisis of the 1970s, which heralded the end of a generation of U.S. economic dominance, helped their cause by laying bare the limitations of the New Deal order. The country’s economic and social policy regime — which relied heavily on the private provision of important social protections, such as pensions and health insurance — may have been adequate for a globally dominant industrial economy that generated 30 years of widely shared growth and stable employment for millions of industrial workers. But in the 1970s, it began to prove thoroughly inadequate for an era of globalization, deindustrialization, and economic dislocation, as displaced workers found themselves unable to rely on the government for economic protection. This, in Hacker and Pierson’s parlance, was policy drift on a massive scale.

Ascendant conservatives seized on this state of affairs to argue that the whole New Deal edifice of social protection, financial regulation, progressive taxation, and civil rights should be dismantled rather than reinforced. Beginning with the Carter administration, the expanding business lobby successfully defeated



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proposal after reform proposal and aggressively promoted an opening round of tax cuts and deregulation — mere down payments on the frenzy to come.

Curing the disease... If there is a flaw in their telling of this grim tale, it is that Hacker and Pierson perhaps underestimate the actual discontent of the American middle class over the period they discuss. In the 1960s and 1970s, Americans came increasingly to distrust their government, and not without reason. Their leaders had led them into a distant war that proved unwinnable and tore the country apart; a criminally corrupt president was exposed and forced to resign; cities were going up in flames, exposing the deep racial rift that remained in American society despite the triumphs of the civil rights movement. Democrats and Republicans began to diverge on racial issues. The Republicans became the party not only of the wealthy but also of the whites (no Democrat since Johnson has received a majority of the white vote in a presidential election).

Even in the age of Obama, racial inequality remains an acute and intractable problem, and the forces of racial resentment, mingled with legitimate discontent over the government’s abandonment of the middle class, infect American politics down to the present day (as the Tea Party movement’s more lurid fulminations suggest). So by the late 1970s, dissatisfaction with the state of the government, politics, and policy was rampant across the board, among the wealthy and the middle class alike and the conditions were ripe for a turn against the political status quo. Conservatives, on behalf of the wealthy, were ready with ideas and organization to seize the moment. Progressives and the middle class were not, and so began the spiral toward the winner-take-all game that Hacker and Pierson describe.

Like many social critics, Hacker and Pierson are long on diagnosis and rather short on treatment. Not surprisingly, they emphasize rebuilding the organizational capacity of the middle and working classes as the place to start repairing the infrastructure of American politics, neither a terribly precise prescription nor a route to a quick cure. But if they are right — and theirs is a compelling case — the task of restoring some sense of proportion and balance to the winner-take-all political economy is essential if the American body politic is to recover from its current diseased condition.



Daily News – January 5, 2011

Ageing population and economic effects

ng

se

the budget deficit. All these undermine the importance of a

are. In the midst of the global economic crisis another casualty

al d a lth

fe. In the Western world health care

of pension funds and retiring gratuities were initiated during the colonial

on. In

two far reaching legislations bringing about the Employers rust Fund (ETF) contributed fully by the employers now valued at Rs 103 billion. Private Provident unds account for Rs 122 billion. The Gratuities Act was also enacted in 1982 ensuring reasonable

etirement package. All these mechanisms to date cover only the formal sector. In realizing the need to provide retirementbenefits to a wider section of the population Government proposed in the 2011 budget. Sri Lanka too isfacing issues of an ageing population due to birthrate decline and an increase in old age dependency ratioThis ratio is expected to rise further. In recent times the Government has invested heavily in health careby upgrading hospital facilities in most parts of the island, this certainly has made a useful contributionto rural folk who previously had to travel long distances to base hospitals for specific ailments. Howeverit's unfortunate that health insurance facilities are not available to those over 65 years, except insuranceprovided by foreign insurers that's affordable only to a minority.

Sunil Karunanayake The economy of a nation depends on people. Economy drives on consumer demand generated both locallyas well as external and the purchasing power that's generated by the people. This phenomenon was clearly demonstrated during the downturn and the global economic crisis that adversely affected leadieconomies in US and Europe due to restricted purchasing power.

Mass layoffs and consequent unemployment seriouslyreduced consumer spending leading to a vicious cycle. Theforced Governments to initiate bail outs at a cost to

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healthy and cared population that's not an economicburden. Healthy population could bring in long-term benefits through higher productivity and improved quality of life reducing Government expenditure on health c

was the external demand. China on realizing declining export demand amidst globeconomic crisis took serious steps for fiscal expansion anrange of policies aimed at improving pensions and hea

are creating a social safety net aiming at improving the quality of li

Sri Lanka too is facing issues of an ageing population

cand pension took a heavy beating within the financial turmoil. Sri Lanka's health and education policies over the years have made a significant contribution in maintaining physical quality of life people aheadof many developing countries.

etirement benefits by wayRadministration. However they were mostly confined to private establishments under European ownership. It was in 1958 that the Government legislated the contributory Employers Provident Fund(EPF) that has now become the largest superannuation fund with assets valued at RS 772 billi1982, the then Government went ahead withTFr

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The over 65 year sector is the most vulnerable to health care needs. Ths 18 companies in the insurance business of

try with a value of RS 180 billion. Given ivate health insurance facilities most citizens save adequate funds to meet lnesses in old age. A well managed insurance scheme would minimize such

rance currently in the process of going throuretirement age from 60 to 62; full pension benthe increase in per capita economic output dby a decline in adult mortality, according to Leukhina of the University of Washington. Aknowledge to the next generation, thus condeclined from about 40 percent at the end of century. (Harvard Business Review) China now a global superpower and a prosperous econoh las cimedical services too must take an

ing population private sector has increasingly invested in health care

ine steps to improve the quality of health care and cleanliness through participation

is should be a matter for the regulator, the Insurance Board of Sri Lanka. Sri Lanka ha

hich seven are listed in the Stock Exchange. This is an induswthe absence of developed pr

edical needs for chronic ilmprecautionary needs channelling the savings to promote consumption. Retirement is another matter for Sri Lanka as 55 years (reduced from 60 in 1970) is considered reasonably low with most employees reaching their peak performance during 55 to 60 age range. Most countries have extended the retirement age beyond 60 years. F gh major pension reforms is planning to raise the statutory

efits too are to be extended from 65 to 67. The 90 percent of uring England's 1680-1880 productivity booms is explained Michael Bar of San Francisco State University and Oksana dults who live longer have more years in which to transfer

tributing more to economic development. Adult mortality the 17th century to less than 10 percent at the end of the 19

my is planning to implement a reliable affordable ealth care system covering the entire popuervices in the rural area, encouraging parti

. Sri Lanka

tion through a series of steps such as building up health care pation in health insurance schemes and reducing the costs of example of the measures taken by the developed countries

and further strengthen health care systems to build a healthy population that would not be dependent. Adequate insurance schemes, reasonable pension schemes and revision of retirement age are some examples.

o be in readiness for the ageTreaching a wider sector of the masses. A proper regulatory mechanism should be in place ensuring reasonable pricing of services and quality control mechanisms are in place. Another issue is to avoid industrial disputes through good governance to ensure the services are not interrupted in the public sector. In Sri Lanka despite the upgrading and equipping of most government hospitals there has been much controversy and concern over shortage, poor quality and high prices of drugs. These shortcomings should not be allowed to expand to larger proportion at a cost to the people. The National Hospital in Colombo

as taken many genuhof voluntary bodies and the private sector. The Friends of Accident Service is one such voluntary group that has been performing a yeoman service particularly during the conflict times when large number of casualties had to be brought in unexpectedly.



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Global Economy in 2011: Two-speed recovery to extend into 2011 - IMF Jeremy Clift- IMF Survey online Two-speed recovery to dominate 2011, with growth remaining slow in advanced economies In emerging economies, challenge for some is to manage possible overheating and capital flows

umber of countries in Europe face tough and long macroeconomic adjustment

tries should continue to focus on rebalancing their economies in the coming year, including ge rate adjustments. "Without this economic rebalancing, there will be no

ealthy recovery," he told IMF Survey, the online magazine of the International Monetary Fund (IMF).

online: What is your assessment of how the global economy turned out in 2010? What went etter than you anticipated, and what does not look so good?

anced countries, we were right on the dot for the United States. Things turned out a bit better han expected for core Europe, Japan had higher growth than we had anticipated, but it looks like a one-

anced countries, fast in emerging market countries, is striking nd its features are increasingly stark. They will probably dominate 2011, and beyond.

lanchard: Emerging market countries were affected by the crisis through both trade and financial hannels. The turnaround in trade has been nearly as sharp as the earlier collapse. But while trade has ot yet fully recovered, most emerging market countries have been able to increase domestic demand so s to return to high growth. In turn, their good performance has led capital flows to come back, in some

N The two-speed global economic recovery is likely to dominate 2011, with weak growth in advanced economies barely enough to bring down unemployment and emerging markets facing the challenges of success, including how to avoid overheating and handle strong capital inflows, the IMF's Chief Economist, Olivier Blanchard, said. In an assessment of the global economy at the end of 2010, and the prospects for 2011, Blanchard said that counstructural measures and exchanh In an interview, Blanchard talked about the central role of the Group of Twenty (G-20) advanced and emerging market economies in helping during the global crisis and the need for continued cooperation to build on the recovery, as well as the prospects for both Europe and low-income countries. Following is the text of the interview: IMF SurveybBlanchard: The short answer is that there were no major surprises. We had forecast positive but low growth in advanced economies, fast growth in emerging economies, and, lo and behold, this is how the year has turned out. Indeed, I just went back and compared outcomes to our forecasts as of last January. For advttime phenomenon. As for emerging countries, we were right on the mark for China; India did better than we had forecast. To say that there were no major surprises, however, is not the same as saying that things are fine. They are not. The two-speed recovery, low in adva IMF Survey online: What do you mean? Tell us more about this two-speed recovery. Bcna



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cases, with much force. For many of these countries, the challenges are no

pse." In many advanced economies, he crisis damage was much deeper. The financial system was badly broken. Securitization has to be

kets are still uncertain about the true health of banks and nancial intermediation is not working well.

ment and is is painful but not that

urprising. The evidence, which we had documented in a chapter of the World Economic Outlook last

e stand? lanchard: It should remain the mantra. Rebalancing, internal and external, continues to be crucial.

his could not go on. Those countries must rely on other sources of demand. Until now, they have used

.

sustain demand and growth for some time.

MF Survey online: What about exchange rate adjustments? Some argue that there is too much pressure on

provide more social insurance, in the United States, reforms of the financial termediation system. But exchange rate adjustment is an integral part of the process.

ppreciation, they elp shift countries away from external demand toward domestic demand. And, by making it easier and

ing market countries

w how to avoid overheating and how to handle capital flows. "The turnaround in trade has been nearly as sharp as the earlier collatreinvented. In many of these countries, marfi Combine this with the need to correct past excesses, from low saving to excess housing investthe result is a slow recovery, barely strong enough to decrease unemployment. Thsyear, is that recoveries from financial crises are long and slow. IMF Survey online: For the past couple of years, the need for economic rebalancing has been the mantra of the IMF. As we begin 2011, where do wBWithout this economic rebalancing, there will be no healthy recovery. The argument is very simple: Before the crisis, growth in many advanced countries came from excessive domestic demand, be it consumption, or housing investment. Tfiscal policy to prop up domestic demand. This was needed, but it is not sustainable. The deficit countries must rely more on external demand, on exports. And, by symmetry, surplus countries, many of them emerging markets, must do the reverse, shift from external demand to domestic demand and reduce their dependence on exports This is not to say that without rebalancing, the recovery cannot continue. Continued fiscal expansion, or a return by U.S. consumers to their old, low-saving ways canBut they will recreate many of the problems that were at the root of the crisis. And guess what will come next... IChina to allow its currency, the yuan, to appreciate. Blanchard: Rebalancing is a complex process. No single measure, no one country holds the solution on its own. Structural measures are required: for example, in Asia, measures to improve financial intermediation orin IMF Survey online: Aren't capital inflows to emerging market countries a growing worry? Blanchard: If well used, these capital flows can help rather than hurt. By leading to an ahcheaper to borrow, they can boost domestic demand. This being said, some emergrightly worry that capital flows will come and go. They worry about their ability to intermediate the high flows and in some cases they worry about the risks of over-appreciation as well as overheating. So far, we have not seen the tsunami of flows that is



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sometimes described in the press. But, agreeing on broad "rules of the road" that take into account both country circumstances as well as global links will be one of the major challenges in the year to come.

ntries has pushed up commodity prices, many of them are oing well.

s. And private domestic demand typically as also been quite strong.

's the outlook there, particularly for some of the countries

ly makes it tougher. "For those countries in the euro and thus perating under a fixed exchange rate, this is going to be a long and tough slog.

xchange rate, this is going to be a long and tough slog. Stronger growth in core urope, if it comes, will strengthen their exports and help the adjustment. But, based on past experience,

vey online: What about fiscal and banking problems? lanchard: Except for Greece, the fiscal woes are the result of the macro slump, not of irresponsible fiscal

uch dramatic cuts now but medium-term anchoring,

st, by putting a eiling on the interest rate at which governments can borrow, the programs eliminate the risk of multiple

ng it impossible

n addition to fiscal worries are the current fears about the banking system. I suspect these are

burden sharing: How much of the losses will be absorbed by creditors, by national governments, by the

IMF Survey online: What about low-income countries? What are their prospects? Blanchard: Because of their more limited financial integration with the world economy, low-income countries were mostly affected by the crisis through the trade channel. As trade has largely recovered, and as strong growth in emerging market coud Sub-Saharan Africa, for example, grew at more than five percent in 2010, and we forecast roughly the same for next year. Their performance, however, is not only due to exports. Previous sound policies allowed many to use fiscal measures to support their economieh IMF Survey online: Let us turn to Europe. Whaton what is termed the periphery Europe? Blanchard: There is no question that a number of countries in Europe face a tough and long macroeconomic adjustment. In most cases, they would have had to do so whether or not the global crisis had taken place. The global crisis ono " They had, based on what turned out to be unduly optimistic expectations, increased domestic demand excessively, and some had run very large current account deficits. Like others, but more so than others, they must shift from domestic demand to external demand. For those countries in the euro and thus operating under a fixed eEa full return to health will likely take a long time. Social programs are essential, both for their own sake and to maintain broad political support. IMF SurBbehaviour. Can the countries achieve fiscal sustainability? They can, but another IMF fiscal mantra should be repeated here: What is essential is not so ma credible path to debt stabilization, and eventually debt reduction. Can they do it on their own? I fully understand the reluctance of countries to ask for a joint program from the European Union and the IMF. But such programs can help, in two ways: Fircequilibria - that is the risk that investors, right or wrong, ask for high interest rates, makifor the countries to repay, and making the investors' fears self fulfilling. Second, even if the programs do not ask for more than the country intended to do on its own, they reinforce the credibility of these commitments, and reassure markets about the medium run. Ioverstated. But, the only way to decrease those fears is increased transparency, and, for this, the sooner the better. In practice, this means new, more credible stress tests, together with clearer rules about



25

EU. There is a lot of loose talk about bailouts. My belief is that the bailout component, either by national governments, or the European Union, can be quite limited. But we shall only know that once the

omework has been done.

was acute, it provided just the right forum for strong and fast action. Now that the crisis is ss acute, and countries increasingly face different problems, agreement is clearly harder to achieve, and,

s, in which the Fund acts as an expert consultant to the G-20, can play a entral role. It can give national policymakers a sense of the world economy landscape, show the

gue. This does not guarantee success. But it surely improves the

h IMF Survey online: You have talked about rebalancing, and what countries have to do. What can we expect from the G-20, and in particular from the G-20 mutual assessment process, the so-called MAP? Blanchard: There is no question that the Group of Twenty has played a central role in the crisis. So long as the crisis leas we saw in the buildup to Seoul, discussions can be intense. But discussions take place as part of the G-20 process, both in public view and behind the scenes. And here, the G-20 MAP procescimplications of current policies, show the dangers of an unbalanced recovery, explore alternative policies, and make for a much more informed dialoodds.




Overheating East to falter before the bankrupt West recovers

From the overheating East to a troubled West, Ambrose Evans-Pritchard offers his predictions on the global economy next year. This bear is not for turning. It would be joyous indeed if a fresh cycle of global growth were safely underway, but I don’t believe it. Sorry. Policy levers in the US, Europe, and Japan remain set on uber-stimulus with the fiscal pedal pressed to the floor and rates near zero everywhere, yet OECD industrial output has not regained the peaks of 2007-2008 by a wide margin. Leading indicators are tipping over again. We are one shock away from a liquidity trap. The East-West trade and capital imbalances that lay behind the Great Recession are as toxic as ever. Surplus states are still exporting excess capacity with rigged currencies — the yuan-dollar peg for China and, more subtly, the D-Mark-Latin peg within EMU for Germany. Dangerously high budget deficits of 6pc, 8pc, or 10pc of GDP in countries with dangerously high public debts near 100pc may have prevented an acute depression, but they have not prevented the weakest rebound since World War Two, and they cannot continue, whatever the assurances of New Keynesians and pied pipers of debt. Cyclical bulls may see the surge in 10-year US Treasuries — and therefore mortgages rates — as a sign that growth is about to blast off: structural bears suspect it may be the first convulsive shudder of bond vigilantes dismayed at the easy willingness of Washington to spend $1.4 trillion above revenues next year, with no credible plan to contain the monster thereafter. Can bond yields rise on "sovereign risk" even as core prices grind lower towards deflation? Yes, they can, and this baleful possibility is not in the textbooks. Ben Bernanke made a fatal error by launching QE2 too early, with an incoherent justification, by dribs and drabs for fine-tuning purposes. The QE card cannot easily be played a third time. If he now tries to print money on a nuclear scale to crush all resistance and hold down Treasury yields, he risks exhausting Chinese patience and invites the wrath the Tea Party Congress. Alas, my neck-sticking predictions for 2011 must be as grim as ever. This does not exclude further bear rallies over the Spring on Wall Street and Euro-bourses as institutional mammoths seek to extract themselves from bonds. Europe’s insurers have as little as 5pc of assets in stocks, against 15pc or more in

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the 1990s. Yet it is a double-edged sword if big funds switch en masse into shares. Bond dumping has economic consequences. Japan will slip back into technical recession. It cannot keep raiding its foreign reserve fund to pay bills. Public debt will spiral up to 235pc of GDP. Interest payments will approach 30pc of tax revenues. Fresh debt issuance will outstrip fresh private savings this year. Dagong, Fitch, and S&P will have to act. Downgrades will come thick and fast. This time they will hurt. Yes, I thought Japanese bonds would buckle in 2010. The obsolete paradigm survived another year. The longer it takes, the worse it will be. China and India are over-heating, faced with a 1970s choice between choking credit or the onset of stagflation. If they choose the latter buy time, the politics of food will turn on them with a vengeance. to Vietnam will have to rescue its banking system, kicking off the Asian hard-landing of 2011-2012. The Aussie dollar will come back to earth. Dylan Grice’s rule of thumb at SocGen is that regions coming off a "good crisis" — Japan in 1987, the US during East Asia’s 1998 blow-up, Chindia this time — typically pop about two and half years later. The reason they have a good crisis when others bleed is because momentum from credit follies and/or hubris overpowers the external shock, but that contains the seeds of its own destruction. Speaking of rules, the Atlanta Fed’s law is that every year of debt-based boom is roughly offset by equal years of debt-purge bust, which means a Lost Decade for the old world. I doubt the West will recover soon enough to pick up the growth baton before the East hits tires. We may then have a "sub-optimal equilbrium", that modern euphemism for a trade depression. Europe is hobbled by its Delors Error. The region makes things that world wants to buy. Its external accounts are in balance. Fiscal policy is more responsible than in Japan, America, or Britain, yet the whole is less than the parts. A dysfunctional currency union engenders chronic crisis at a lower threshold of aggregate debt. Frazzled investors will seize on China’s foray into Iberian debt markets to thin their own holdings, denying the Portugal and Spain much interest relief. Lisbon may last unit on until March before being forced by yields above 7pc to accept its debt servitude package. At that point the EU will order its €440bn rescue fund to buy Spanish debt pre-emptively, hoping to draw a final line in the shifting sand, with half-hearted solidarity from the European Central Bank. As usual, Frankfurt will fall between two stools, failing either to satisfy Germany by immolating EMU on an altar of Bundesbank purity, or to satisfy everybody else by blitzing QE to save the system. Bond yields will not fall enough to stop to the vice from tightening in every EMU state south of Flanders. It will become clear that Europe’s scorched-earth rescues cannot work because they offer no means by which victims can clear debt and claw their way back to health.



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Ireland’s Fine Gael-Labour coalition will take its revenge on Europe for imposing such ruinous terms under Berlin’s Diktat. It will restructure senior bank debt, setting an irresistible precedent for the PASOK backbenchers in Greece, the Left wing of the Partido Socialista Obrero Espanol, and America’s insolvent cities. From bank debt to parastatal debt is a hop, and from there to quasi-sovereign debt is a skip. Nobody will utter the word default. They never do. Bondholders `volunteer’. Pudding bowl haircuts will set off the next wave of distress for Europe’s banks as they try to refinance $1 trillion by 2012, in competition with hungry sovereigns. Gold may slip at first as casino funds cut leverage to meet margin calls, before punching higher to €1300 an ounce as investors seek gold bars in a precautionary move. Talk of capital controls will grow louder. Year III of the Long Slump is when we confront the Primat der Politik in tooth and claw, the phase when states become erratic, victims fight back, and dissident intellectuals start to inflict damage on failed orthodoxies. The dog that hasn’t barked yet is the jobless army in Spain, the 43pc of youths without work. Bark it will when the €420 dole extension expires in February. The cruelty of Europe’s `internal devaluations’ will become clearer. Wage cuts are tectonic events. They set off the protests that forced Britain and then France off the Gold Standard in the 1930s, and smashed Argentina’s dollar peg a decade ago. What we need is an iTraxx European Wage Index to navigate EMU’s treacherous waters from now on. Spain’s Jose Luis Zapatero has barely begun to cut, yet he has already had to impose the first state of emergency since Franco to keep airports open. Certainly, this is the year when Europe’s unions will remember their own warnings twenty years ago that EMU was a "bankers’ ramp", a scheme for the convenience of elites. They will ask louder why crucifixion on a Deutschmark cross is in their interests. Those few and reviled Iberian economists who dare to suggest that monetary union itself is the reason why Spain and Portugal cannot take action to fight the slump, will find a voice in the press at last. Once debate is engaged, it will be impossible to contain. It would be a mercy if the German constitutional court brought this unhappiness to a swift close by ruling in February that Europe’s rescue machinery is a breach of EU treaty law, and therefore of the Grundgesetz. But it cannot happen, can it? A court order forcing Berlin to suspend payments would drive a stake through the heart of German foreign policy, and for that reason the eight judges must recoil, and the law be damned. One presumes. © Telegraph Media Group Limited 2011




Revision of inflation index ‘Govt attempts to understate CoL’

The Central Bank wants the inflation index updated, but analysts worry this would lead to lower inflation numbers leading to an understated Cost of Living (CoL) as the government battles rising food prices, but people would still continue to feel the pain. Central Bank Governor Ajith Nivard Cabraal said Tuesday (4) that it was time for the Colombo Consumers’ Price Index (CCPI), the country’s official inflation index’ to be revised according to a household expenditure survey for 2006/07 carried out by the Department of Census and Statistics.

He said this would reflect spending patterns more accurately and help the Central Bank carry out its mandate of ensuring price stability more affectively. The original CCPI was based on a survey carried out in 1952 which was revised in 2008 based on a 2002 survey. Food items consisted of 68.3 percent of total expenditure based on the 1952 survey. In the new index food items are given a weight of 46.71 percent. On the other hand the following increases can be seen in the weights assigned to the current index from the old: Communication—4.42 from 0.16 percent; Transport—9.47 from 1.76 percent; Electricity—4.09 from 0.43 percent.

Economists and trade unions argued, and still argue, that the present inflation index was understating inflation. Unions and employers still have problems computing the Cost of Living allowance based on the current CCPI. The old index showed an inflation rate of 28.1 percent in March 2008 while the new index showed 23.8 percent for the same period. Both indices were published each month before older version was dropped altogether. Analysts said the government’s decision to revise the index could again lead to inflation being understated. "People would feel the pain but headline inflation would be low, like in the US where there economy is still recovering, unemployment is near 10 percent but inflation is low," an analyst said.

In recent months, food prices have been raising and analysts warn a possible commodity price rise in the global market could make life unbearable. "Revising e index would make sense for a government losing thpopularity when it comes to the cost of living. But th again it would be alright. If the new survey is engoing to accurately reflect spending patterns so be it. Whether or not inflation would be overstated or understated would not matter, because the people would feel it anyway," an economist said.

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Sunday Island – January 9, 2011

Dousing Cost of Living Fires By Upali Cooray Former General Manager CWE

I cannot recall any period of time when the cost of living issues, specifically the exercise of thwarting the escalating prices of essential food commodities has been handled so badly due to lack of timely, sensible decision making resulting in a frenzied mess up. As very strongly pointed out in the media, the entire effort depicts amateurism, confusion and frenzy. The unrealistic high prices in many essential foodstuff during the festive season is not a phenomenon which occurred due to "unavoidable circumstances" or "unforeseen" reasons. It is a situation which has occurred on account of lack of vision, ignorance and downright manipulation. The government machinery is equipped with more than adequate resources to forecast market trends fairly accurately and this crisis situation could have been avoided if timely action was taken. "Preventing fires" is a safer option than "dousing fires"

The Cost of Living and Food Security Coordinating Committee (COLFSCC) now headed by the President himself has as its members all relevant heads of ministries, departments and other government institutions to advise and guide the decision making. The cost of living is a phenomenon which cannot be held down but market distortions resulting in sudden unrealistic prices can conveniently be avoided by constantly monitoring and adjusting the upward trends by timely action.

The COLFSCC was first headed by that eminent bureaucrat G.V.P Samarasinghe during the post 1977 JRJ government. The committee met like a prayer every Friday for a review of the market situation and forecasts. The decisions were conveyed to the relevant ministries for compliance. To name some of the Secretaries who were entrusted with the responsibility of food procurement and distribution were men such as M.D.D Peries, Lakshman de Mel, late Gaya Kumaranatunga, T.P.G.N Leelaratne and late R.A.P Goonatillake.

These senior officers were very experienced in internal and external trade and the so called private sector mafia could not hoodwink them. They knew how to avoid unnecessary crisis in the market and advised the ministers well in advance to take timely action. The COLFSCC is the most crucial arm the government can make use to forecasting and planning strategies to prevent market distortions. It is difficult to understand how a country which was able to completely eradicate terrorism by an immaculate planned war, with correct, bold and innovative strategies fails tragically in managing the cost of living? There does not appear to be any long term or short term plan including a contingency plan in respect of supplies, prices, marketing and distribution of vital food items required by the masses.

The knee jerk response to the high prices of coconuts from the minister in charge for example; was to take some lorry loads of coconuts and sell the stock himself making it a mockery. Then he goes on to blame the previous governments for allowing coconut lands to be blocked and sold for residential purposes. The fact remains that fragmentation of coconut land is not the only reason for the poor harvest but it was the neglect of existing estates due to high cost of fertilizer and inclement weather this year. The threat of importing coconuts could not materialize on account of a disease to coconuts in Kerala. Coconuts should never ever be imported to this country. What is necessary is to inculcate among growers and give incentives for practicing modern methods such as use of organic fertilizer and drip



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irrigation to grow coconuts in new areas. The subsidized artificial fertilizer could be issued for a limited period only. The ban imposed on felling coconut trees will only have a very minimal effect.

It should be mentioned here that this is not the first occasion the government was called on to ensure stabilization of prices of coconuts. There was an impending escalation of coconut prices noted at the weekly co-ordinating committee when late Kingsly Wickramaratne was the Trade Minister. He knew the answer was not importation but distributing through the CWE. The CWE with its vast regional network headed by regional managers for each district was able to procure stocks from state farms and other growers thereby thwarting a price hike during the festive season. The operation was planned in advance because the impending crisis came to light over a month earlier.

It is also not the first occasion chicken was imported to the country on a contingency basis. It was in early eighties that Minister Lalith Athulathmudali took a bold step to flood the market with imported Chinese chicken through the CWE. Items such as cigarettes, safety matches were also imported when the situation demanded such action. It was no one else, but Minister Athulathmudali’s policy of importing onions and potatoes only through the CWE during local lean season and stopping imports during peak local season enabling customer satisfaction as well as good prices for the farmer. The imported onions and potatoes were sold at margins which gave the CWE adequate profits and fair prices to the consumer. The close relations the CWE had built up with National Co-operative Agriculture Marketing Federation of India (NAFED) enabled the CWE to obtain stocks even when there was a ban of exports from India.

Notwithstanding the short term solution of importations, the long term solution should be import substitution which has only been the catchphrase of many a government since independence not yielding satisfactory results due to lack of political will of populist policy makers. Yearly escalation of prices of rice during the last quarter and first quarter of every year is reflected very clearly for the last 35 years and this is not an unexpected rise in prices. However steps should have been taken this festive season well in advance to stabilize rice prices by evaluation of options available, without procrastinating till the crisis became full blown. The failure to take timely action is a severe setback and a condition this government is afflicted with when it comes to cost of living. The previous trade minister was on a wild goose chase in trying to buy rice from Burma when rice was available at lower prices from other sources such as India. The stocks arrived belatedly and had to be sold at a loss. The same would happen to chicken and eggs. The festive season is now over and January and February are slack months where consumer demand is concerned. Thus the sale of these products would come down, thereby Lanka Sathosa will have to carry large unsold stocks. The likely scenario is that stocks would have to be disposed of at substantial losses.

The state has never ever bought more than 10% of the total paddy harvest because it doesn’t have the finance and the logistics to do so. This was so even during the time when the Paddy Marketing Board was in full fly. Even what is procured by the state as buffer stock is the lower quality rice. The best quality is either hoarded by the traders or farmers themselves with a view to making unconscionable profits during the off season. It is interesting to know why the Trade minister is not threatening to import rice when local prices are so high. The "Rice Mafia" is within the government itself, thus probably is the silence.

The trade minister is now talking about setting up the largest paddy mill in the country while two large mills set up when late Kingsly Wickramaratne was trade minister on an Indian line of credit are already in the hands of the CWE. They are mismanaged. As the two projects were set up directly under



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my purview, I am aware that the mill at Hingurakgoda which is a parboiled rice mill is now milling only raw rice due to breakdown in the boiler and lack of expertise. The setting up of these two mills was not welcome by the millers of the area. It would be a revelation if one takes a tour of the major paddy growing areas in this country, how colossal the amounts of funds and foreign aid have been busted over the years by every government. The remains of huge silos can be seen on entering the Polonnaruwa and Mahiyangana towns. Large paddy mills have been allowed to run to rack and ruin in Ampara and Mahaweli areas. The rusting paddy stores previously owned by the PMB is sordid evidence of lack of policy, absence of planning and political muddling from time to time. The trade minister is reported to have plans of setting up yet another large paddy milling complex which is very likely to suffer the same fate that befell other such projects.

The best option I can see is to get the government paddy milled by the private millers because there are more than thousand millers not getting sufficient work because the big timers have almost a monopoly on milling.

The indications are that the cost of living crisis would worsen towards Sinhala and Hindu New Year with more price escalations, especially in respect of vegetables. The CWE had a wide network of vegetable purchasing centers all over the country including a one at the Dambulla Economic Center. This enabled the farmers to sell their stocks directly to the wholesale traders without going through a middleman. In 2002, then Trade Minister Ravi Karunanayake thought it was best to handover the operation to a private contractor thus ruining a key network which was developing as a deterrent to the middle men in the trade. Some of the supermarket chains now have taken a leaf from the CWE’s pioneering exercise with great success.

The criteria, according to my belief, that are necessary to have an effective mechanism to avoid continuation of the cost of living crisis towards Sinhala New year could be summarized in the following manner:

First and foremost the Ministry of Trade under any government is a vital ministry and it should not be considered a disposable ministry which is given for the sake of giving a ministry to any Johnny who the government has to please for favors done. Similarly the officers manning the ministry from secretary downwards should be people whose voice is given serious consideration by the political decision makers.

The institutions such as the CWE should have short term plans and long term plans to ensure food security in the country including a well rehearsed contingency plan. What now happens is a desperate attempt to "douse fires" than "prevent fires". A comprehensive database of suppliers and supply sources with market trends should be developed for use in regular purchases, especially imports. The recent purchases of chicken and eggs were done in such haste that it lacks transparency. It is interesting to find out whether competitive bids were called and whether a bid evaluation was done. Whatever the emergency may be, there should not be room for manipulation. "Urgent purchases" are corrupt words used by many for enriching themselves.

There has also to be professional officers with experience who know what re-order levels, re-order quantities and lead times are. Just establishing letters of credit can be done by any clerical hand with commonsense. International trading is a field for the qualified and experienced professionals.



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Sunday Island – January 9, 2011

Inflation - are we hit? By R.M.B Senanayake

The Department of Census & Statistics explains the increase in the Cost of Living Index as due to changes in prices of individual goods in the household basket like Bombay onions, coconuts, rice, red onions, eggs , vegetables etc. It is like saying the inflation (which is the change in prices) is due to price changes - a tautology. Perhaps the department is implying that the inflation is due to cost push rather than demand drive. But what is inflation? It refers to a continual increase in prices- month after month and not to one-off price increases. We have seen such price increases for the last 3-4 months. Economists provide two explanations for inflation. One is demand driven inflation and the other cost push inflation. There is also the role that expectations play in creating inflation. If people expect inflation (continual increases in prices), then they will adjust their behavior to cope with inflation.

The normal expectation of a buyer accepting currency against goods and services is to be able to exchange that currency at a later time for goods that he wishes to buy, assuming the same purchasing power will be unchanged - the money illusion. But the value of money is its purchasing power and a thousand rupee note at the end of the year may not buy the same quantity of goods as at the beginning of the year. We are referring to the whole gamut of goods & services and not only to particular goods in the Cost of Living basket. So those who anticipate inflation will adjust their behavior. They may for example hoard goods which they expect to rise in price due to inflation. They may buy assets like houses and property or invest in the stock market. They may spend more rather than save.

Money Supply and Inflation Milton Friedman referred to the helicopter drop of a large volume of currency notes in a small area. The supply of goods in that area cannot increase immediately and the prices of all the goods bought and sold there would rise. But goods will come in from outside (imports) and the prices may decline although the old price level cannot be regained. Similarly if there is a large expansion of money in a situation where aggregate supply (the total sum of all goods & services) cannot increase, then the price level will increase. This is the quantity theory of money.

Keynesians don’t go along fully and they cast their theory in terms of Aggregate Demand and Aggregate Supply. An increase in money supply will cause an increase in price level only if the economy’s capacity for production has been reached and there is full employment. So whether increases in the quantity of money will cause inflation will depend on the capacity of the economy to produce- called the "potential capacity" of the economy. The difficulty is that there is no way to estimate the potential capacity of the economy.

It is true that if there is unemployment, supply can be increased if the jobless are put to work. But how can that be done? Labor alone is not enough to produce output. There must be other factors of production like land, capital and entrepreneurship. We are short of capital. We lack technology and entrepreneurship. There are also institutional obstacles to the achievement of the potential output. Of course the government can employ all the unemployed but what does the government produce? Services, but consumers want goods. So what is the potential capacity of the economy? Is it 8, 10 or 15%?



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Assume it is 10%. What would happen if the money supply is increased by 30%? Our money supply in 1951 was Rs 1.09 billion. But in 2008 it was Rs 1,282.19 billion. This is an annual compound rate of growth of 12%. Did we have average rate of economic growth of 12%? No, we never averaged such a growth rate. A part of the money supply went to bid up prices and another part to pay for higher imports. The link between money supply growth and inflation can be established empirically in the case of high inflation or hyper inflation, a condition where prices can double in a month or less.

But what of moderate inflation? It is thought to play a major role in determining even moderate levels of inflation, although there are differences of opinion on how important it is. Monetarist economists believe that the link is very strong; Keynesian economists, by contrast, typically emphasize the role of aggregate demand in the economy rather than the money supply itself. Demand-pull theory centers on the supply of money: inflation may be caused by an increase in the quantity of money in circulation relative to the ability of the economy to supply (its potential output). Keynesians would say the money has to be spent to have an impact on inflation.

Who increases the money supply? Is it the Central Bank? Keynesians would say the money supply is endogenously determined by the demand and supply for credit. But the Central Bank and commercial banks can create new money and hand it over to the government to be spent when they subscribe to Treasury securities in the primary or secondary market.

Commercial Banks create money by making loans. Bank deposits are part of the Money Supply. But the aggregate volume of these loans diminishes as real interest rates increase. So the Central Bank can raise interest rates and restrict credit to the private sector. But if the interest rate is held down by the Central Bank when there is rising inflation then real interest rates decline( nominal rate minus inflation rate). The business sector will not borrow merely because real rates of interest have declined if there are no economic opportunities. But speculators are willing to borrow and leverage to buy assets which will increase in price due to inflation. So there are asset bubbles in consumer durables –in vehicles, in land and property and the stock market. These asset bubbles are mistaken for economic growth. But they burst at a point and then the economy could enter a deflationary phase.

The central bank can influence the money supply by printing money or making money cheaper or more expensive, but if inflation rises too much to render real interest rates negative, then the policy will produce asset bubbles rather than sustainable economic growth. This situation has not yet arisen since with 7% inflation the real interest rate earned by the banks is still a positive 5% when the prime rate of lending is at 12%. Banks profits are determined by the net interest income since they also pay interest on their deposits. With higher inflation this margin may be squeezed since depositors will take their money elsewhere and to retain them the banks may have to pay higher interest rates squeezing their margin. If the authorities go easy on inflation they may achieve a temporary boost to growth but it will not be sustainable.

So does an increase in the money supply cause inflation? When money is expanded — i.e., created out of "thin air" — the holders of the newly created money can divert their funds to goods without making any contribution to the production of such goods. As a result, wealth generators who have contributed to the production of goods (workers) discover that the purchasing power of their money has fallen.

Ministers, public officials, policemen, the Armed Forces will see their incomes rising but what contribution to do they make to production? Suppose you own a house. You find that the price of your



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house has doubled or trebled. Why? Has the demand increased or supply decreased? Or is it due to an increase in the money supply? Could such doubling of price take place without an increase in money supply? The answer is a definite no. So economists say that sustained inflation cannot take place without an increase in money supply.

Does it mean that an increase in money supply is the cause of inflation? Economists argue about it. Whether it is a cause or not it certainly makes inflation possible and probable. If we think of inflation as a reduction in purchasing power of money, then if the prices of houses have doubled it means that the purchasing power of the rupee in terms of housing market has halved. Similarly if a whole basket of goods have doubled in price, then the purchasing power has halved.

Cost-push inflation: This has two elements- cost and cost pushing. The good whose price has risen must enter into the production of other goods & services as a raw material or input. It must also push the price of such good higher. This happens in the case of oil, which would increase the prices of several goods since transport is an element in costs of many goods & services including bus and train fares. But a one–off price increase will not mean cost push inflation. Cost-push inflation happens when costs increase independently of aggregate demand and tends to push up prices on its own. So it is important to look at why costs have increased, as quite often costs are increasing simply due to the economy booming.

If the items which went up in price in December were due to supply shortages in relation to the demand, their prices should fall in January. If instead they continue to rise can we conclude that the inflation in December was demand driven not due to supply shortages?



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Management




Time management Wijedasa Kariyawasam

Time is a unique resource which his freely available to all of us. Some manage their time beautifully, and have a smooth flow of activities which brings good health, happiness, successful goal achievement and converts him to a successful positive personality.

Few others who adopt a negative attitude to life eternally complain of time problems even for day to day activities resulting in irritability, stress, fatigue, emotional imbalance like arrogant behaviour and even health problems such as high blood pressure.

Their demands trigger off more than their capacity. “The issue is not so much lack of time ut lack of awareness of what is important and productive. “They are fighting a losing battle”.

Tim is essentially linked to one’s pattern of life management. One has ork, sleep, leisure and hobbies,

irituality and interpersonal relations and social contacts.

Balanced life concept “Doest thou love life? Then do not squander time, for that’s the stuff life is made of – Benjamin Franklin. A person with a balanced life approach has to develop a life vision, i.e. What type of a future” I am aiming at” ? Development of a balanced life is based on each one’s philosophy of his life, comprising hivalues, attitudes and interests. Successful people in the world view balanced life in the followindimensions: (a) Health, nutrition, physical activities and exercises. (b) Fair source of earning job and career path) (c) Spirituality-religious observations and beliefs, (d) Leisure activities and hobbies (e) Interpersonal relations and social contacts

Accordingly, allocation of time for each such activity depends on the philosophy of his life, and his vision. The essence of successful time management depends on how much Planning he is effecting for management of his time. Planning is basic principle of management. “Planning is looking ahead.” If you Fail to Plan, you Plan to Fail.” Planning makes life easy and comfortable. Successful time management techniques Prime time and Energy time The time conscious person should endeavour to understand his own prime time,

b

e alone cannot be managed and it to plan his time as to how much for w

sp

s g

a

Identify your time wasters and eliminate

them.

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which is also the energy time of the day. This may be early morning or eve d he is energetic, when his creativity and fresh ideas emerge. Difficult and ndled during these hours when his capacity is tremendously increased.

Know your time wasters Identify your time wasters and and you realize you lost your vpowerlessness, procrastination an

A. Develop a flexible work scheduB. “To do” listing on priorities anC. Master activity list, D. Annual colendar of events (e.gE. Maintain a filing system for your personal activF. Make use of modern simple off Confine your work to importantsubordinates and even grown up childr a bit of training.

bbies, etc cial contacts and

Record everything I diaries, (Brain-writing) s,

n during the course of the daywhere his capacity is more an

mplicated tasks could be haco

eliminate them. Record your time wasters during the last few months, aluable time because of these time wasters. (e.g. Bad habits, assumed d passive behaviour.)

Time saving techniques le, and establish a habit of maintaining diaries; d action list,

. Forthcoming events, birthdays, holidays,) ities,

ice equipment.

and urgent work and delegate less important and less urgent tasks to en. They should be empowered perhaps and given

Use of saved time Allocate more time for -

Relaxation, physical exercise, gardening, games, sports, ho** Family harmony and so religious activities * Acquisition of new skills, knowledge and improving your professionalism. Time Management in brief using Five Ds. D1 Do-important and Urgent work – Paying attention to Energy Time (Prime Time) D 2 Delegate – Less important and less urgent work, with Assertivity

3 Diarize –DD 4 Delay – Not procrastination, but for justified reasonD 5 Develop – Develop your personality.




Communication and public relations Dr K Kuhathasan CEO: Cenlead

seeks to create and maintain a positive image and an ongoing

relationship between ization and those who

are in any way concerned with

ations. Depending on the issue, the public relations function will determine which

winning goodwill and receiving positive endorsement and approval.

blic relations is among the tant in internal and external

its very nature, PR must not be loud or appear to be self-

‘experts’ who can mpany besides customers. As an

blicity and promotion. It is concerned with

Public relatio s objectives Public relations objectives should be measurable and as specific as possible. The planning process starts with an understanding of current public perceptionof organization or a specific purpose within the organization. Definition of the problem (or opportunity) at hand is the first step. The PR objective should include: the target audience, the timperiod of the desired action and the desired outcomof your actions. A critical factor in setting objectiveis the budget. Realistic objectives should be seaccordingly. Timing is also an important factor. Generally, if PR is expected to change existing

gative perceptions, a longer campaign will be cessary.

Public relations is the organizational function that

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two-wayan organ

the organization’s working or oper

publics to target with a positive communication, with the objective of getting attention,

Pu

ost invisible functions within the company, yet it is one of the most impormcommunications of the company. Due toserving, and thus must stay away from unnecessary ‘hard sell’. While most communication programs target the ultimate consumer or customer, PR programs can effectively target thosehave a tremendous influence on many other key audience of the coelement of marketing, PR is really a combination of pucommunication, creativity and ethics.

n

s

e e s t

nene



40

Negative attitudes develop very quickly and, once formed, take a long tim n, the PR plan follows the following five steps:

objectives. e public segments that the organization wishes to

maintain. 3. Developing strategies or an action plan to achieve the objectives. 4. Developing tactics to bring strategies to life and executing them. 5. Evaluating the effectiveness of the program and making further recomm

PR effectiveness and tracking Tracking the success or failure of PR executions is critical to building your target audience as well as understanding the message’s viability aprograms relates directly to the stated objectives. It is not an easy tamanagement to know whether the cost of any program has been justifiquestions can be developed, to which custom-made questions can bespecifics. The standard set should include the following four questions; 1. Was the quantity media exposures acceptable? 2. Did the message effectively reach your target audience? 3. Was the message communicated clearly and understood by your target 4. Did your message have the desire impact on the target group? Public relations professionals should look into the following aspects.

the need for broader understanding and professional ommunications skills.

e channels of communication.

have made the world the province of public

ok inward creates a pressing need for those able to earn “goodwill” of their organizations.

e to change. After the role ofPR has been defined and articulated, in a given situatio 1. Defining the problem at hand and setting 2. Conducting research to obtain insights into th

endations, if applicable.

long-term communication with nd delivery. Evaluation of PR sk. Yet it is important for the ed. A standard set of evaluator added according to program

group?

*The growth of people’s influence all over the world makes essential the role of public relations as a detector, interpreter, and communicator. *The growing diversity of people and their interests demands greater sophistication and skill to deal with them.

Growing specialization in all fields is increasing*c *The decline in writing skill in society increases the need for those who have such skills. *There is a growing number of media and voices using th *Technology and the spread of knowledge increasinglyrelations. *Finally, the tendency for leaders of organizations to loprovide outside viewpoints and reach outside groups to



Scope of the practice The duties and responsibilities of public relations practitioners are as diverse as the public with whom

t institutions deal.

For example, here is a partial list of potential public

ernal means, including news-letters, television, and meetings.

le has emphasized “news-oriented”

responsibility includes arranging and monitoring press interviews, writing news releases

d related press materials, organizing press s, and answering media inquiries and

A good deal of media relations work is spent attempting

ain favourable news coverage for the firm.

rs gislative research activities and public p

Orchestrating interaction with the community.

designed to reflect the upportive nature of the organization to the

Coordinating the institution’s “printed voice” to

statements, and product and company rochures.

groups such as suppliers, educators, students, nonprofit organizations, and competitors. *Managing the “institutional” - or non prodadvertising image. Increasingly, public relat

differen

relations duties: *Reaching the employees through a variety of int

Traditionally, this rocommunications rather than “benefits-oriented” ones, which are usually the province of personnel departments. *Coordinating relationships with the print and electronic media. This

anconferencerequests.

to

41

g *Coordinating activities with legislato includes

olicy

its

uction

leformation. *Activities might consist of open houses, tours, and employee volunteerismscommunity. *publics through reprints of speeches, annual reports, quarterly b *Coordinating relationships with outside specialty

-s



practitioners are being called upon to assist in the management of the more traditional product

tions, of culture and history,

how they work, of communications

st advantage, and how to maneuvre in a politically-charged

the public. They should practice the belief that “the

ers stand for. While they should never istort, lie, or hide facts, occasionally it may be in an

their employer, their most honorable urse is to quit.

such as balance sheets, costs per thousand, nd cash flows. Public relations practitioners

advertising. On the technical side, these five skills *Knowledge of the field An understanding of the and of philosophy and social psychology. *Communications knowledge An understanding research, and, most importantly, of how to write. *Business knowledge An understanding of hoknowledge of one’s company and industry. *Knowledge of bureaucracy An understanding ofhow to use and gain power for beenvironment. *Management knowledge An understanding of hvarious pressures on and responsibilities of senior In terms of attitude, public relations professionals *Communications orientation - A bias towarddisclosing rather than withholding information. relations professionals should want to communicate to

are important:

underpinnings of public rela

of the media and

w business works, a bottomline orientation, and a

how to get things done in a bureaucratic organization,

ow public policy is shaped and an appreciation of the managers.

ought to possess the following four characteristics.

Public

public has a right to know.” *Advocacy A desire to be advocates for their employers. Public relations people must believe in what their employdorganization’s best interest to avoid comment on certain issues. If practitioners don’t believe in the integrity and credibility ofco *Counselling orientation A compelling desire to advise senior managers. Top executives are used to dealing in “tangibles,”aunderstand the “intangibles,” such as public opinion, media influence, and communications messages.

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Practitioners must be willing to support their beliefs-often in opposition to lawyers or personnel executives. They even must be willing to disagree at times with management. Far from being “yes men,” the public relations practitioner often must have the gumption to counsel, “no”.

Personal confidence A strong sense of honesty and ethics, a willingness to take risks, and, not

e to represent proudly a curious-yet critical-role in any rganization.

gs. In marketing it’s the four Ps: Product, price, place, romotion. In public relations, try the eight Cs:

have confidence, trust, belief in its sender Context communication should be appropriate to the environment in which it is made

Continuity communication is a continuing process in which repetition is helpful to the memory and

Consistency is needed for credibility

Capability the nature of the recipient, their habits, culture, ability, must be taken into account.

*unimportantly, a sense of humour. In sum, public relations professionals must have the courage of their convictions and the personal confidenco The alphabet comes in handy for remembering thinp *Credibility the recipient of a message must **Content the message must have meaning for the recipient and fit in with their social and cultural values *Clarity the message must be in simple terms so that it can be understood *understanding. **Channels use channels of communication familiar to, and respected by, the Recipient *



44

Trade & Marketing




10 Brand Disasters in the year ’10

Brands are facing surprising disasters more than ever – we shall look at some of them which brought in a whole flood to its brand and the organization in the year 2010.From an Oil spill, recalls, CEO statements through to allegation and lawsuits, these organizations have managed to keep up but yet lost their brand value significantly in 2010. The brand valuations are from the two largest brand valuations firms in the world – BrandZ and Interbrand.

1. British Petroleum’s oil spill British Petroleum once known as ‘Beyond Petroleum’ is tarnished for its spill in the Mexican Gulf. The spill was the worst ever when combining its size and location. While it may not be the biggest, it certainly will be one of the most economically damaging and costly, simply because it occurred in some of America’s most productive waters.

The BP’s brand value which was valued at $20bn n 1st Jan, 2010 declined by 100% to $0 in June 30th 2010

2. Toyota’s Prius recall worldwide Toyota’s Prius recall worldwide damaged the brand significantly. What was then known for its lean management practices with their objective of providing safety drive for customers now in turn actually killed them due to the technical issues with the models in the Prius range.

The recalls, negative PR allegations and liability suits resulted in a loss of 20% of the brand’s value – from a $30bn on 1st Jan to $24bn on 20th June, 2010.

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3. Johnson and Johnson children’s product recalls On April 2010, McNeil Consumer Healthcare, a subsidiary of Johnson & Johnson voluntary recalled of 43 over-the-counter children’s medicines. Medications in the recall included liquid versions of Tylenol, Tylenol Plus, Motrin, Zyrtec, and Benadryl. This was due to not fully meeting the required manufacturing specifications". This recall has affected at least 12 countries.

The official FDA report which was released on May 4 said that the investigators found thick dust, grime, and contaminated ingredients at the manufacturing plant located at Fort Washington, Pennsylvania, United States. The plant was shut down. Since now, there are still recalls. The brand valued at $45bn on 1st Jan plunged into a 27% decline to $33bn on 30th June, 2010.

4. Research in Motion’s (RIM) Blackberry What was then the name for dominating the smart phone business (from the year 2002 – 2009), is now losing out its biggest share to Apple’s Iphone, Google based Android handsets, as well as a range of introduced smart phones from LG, Samsung and Motorola. Recent statistical data from Changewave, a well-known wireless research firm, showed in June 2010’s poll that only 6% would go for a Blackberry device whilst 52% stating for an Iphone followed by 19% preferring to go for an Android mobile device.

The brand value plunged to $16bn on 20th June from a $25bn value as at 1st Jan – that’s almost a 36% drop in just six months.

5. Dell’s lawsuits and allegations Dell has been sliding since 2007. In 2007, Dell disclosed an accounting scandal aimed at inflating its financial performance. As a result, it was forced it to restate financial results. In 2008, federal investigators found that it had a relationship with Intel that federal, EU and NY State authorities claimed helped the chipmaker maintain an unfair advantage in the PC market and artificially inflated Dell’s earnings performance.

Another lawsuit claims that Dell shipped as many as 12 million computers containing faulty electrical components - for the worst some e-mails stated that employees were even aware of the problems.

The brand plunged to $9bn on 30th June from a value of $16bn as of 1st Jan 2010.

6. Apple CEO’ Statement Apple has damaged Adobe particularly more than any of its other companies. Its Adobe Flash’s shift to migrate to mobile devices is being refused whereby refusing to allow Flash software onto its iPhones, iPods and iPads.

In April this year, Apple’s CEO Steve Jobs wrote: "Flash was created during the PC era for PCs and mice. The mobile era is about low power devices, touch interfaces and open Web standards, all areas where Flash falls short." I could say that this statement is highly an Ouch for the users!

Adobe’s stock declined from $35 the day that Jobs wrote the statement to $32.50 five trading days later. Apple also refuses Adobe’s Creative Suite software to run on its devices.

This has caused the brand value to decline to $4bn as of 30th June from $7bn in 1st Jan, 2010.



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7. Sony’s loss in the video game market Once the name that was knows in consumer electronics, in its fiscal 2010 ending to March, it recorded various high losses, and revenue fell significantly for the three years continuously TVs and digital cameras sales continued to drop.

Sony’s market leadership in the video-game market has also exploded by competition from Microsoft and Nintendo – in which according to the measurement firm BrandZ, the PS3 device’s brand valuation of $426mn compared to the Wii’s $10bn and the Xbox 360’s $4.6bn.

The overall brand dropped to $7bn on 30th June from $12bn on 1st Jan, 2010.

8. Goldman Sachs The SEC investigation and settlement has put off some current and potential customers, but Goldman also has other challenges to deal with – face legal charges from authorities from the NY State Attorney General.

Analysts state the new regulations could cut $1.5 billion from Goldman’s profits. In its second-quarter earnings report on July, Goldman reported that revenue from investments and trading had plunged 40% year over year.

The brand value that stood at $16bn on 1st Jan 2010 dropped to $10bn to six months on 30th June.

9. Nokia’s miss-out in the smart phone category Though Nokia is the largest player of mobile handsets globally, claiming up to 37% of the global market share, it has failed to gain a share in smart phones. Its shares declined to 67% in the three years since the iPhone.

In June this year, it projected the second-quarter revenue for its mobile devices and services division will be below its previous forecast of $8.2bn to $8.8bn.

The brand valued at $40bn on 1st Jan 2010 plunged to $27bn in Jun 30th.

10. Google Google’s decision to largely abandon China, the fastest-growing Internet market in the world, and slowing growth in its search engine business have taken a toll on the company’s brand value this year.

After disputes from the Chinese government and Google’s accusations that its servers were broken into by a government-supported group, Google decided to move its operations to Hong Kong. Google lost its competitive advantage in the Chinese search market to local search company Baidu and Microsoft’s Bing.

Google’s core search engine business has also started to slow, and expenses have increased more sharply, from $3.6 billion to $4.5 billion during those periods.

The staggering brand value which stood at $100 billion on 1st Jan declined to a -26% to $74bn on June 30th 2010.



Conclusion There are many things to be learnt from these big corporates – some who manage to twist and win, and some who lose out big. A brand need to be harnessed carefully with marketers having a birds-eye view in the latest happenings in the industry, changes in the market, behavioral of the consumers, and the wider stakeholder management.

The whole globe is integrated – something happens elsewhere does have an effect in the local community – this is the world we live in. Brands have the power of attraction – both positively attracted and if mismanaged leads to negative attraction which is of course we marketers understand it’s deadly.

Even though these organization listed out are the top most value branded companies with a wider range of the best brands, they still make mistakes somewhere or rather – no one can be perfect, but there is an option of trying your best to be perfect. Understand the gravity of this – many corporates take it easy on their brands and once they lose out, they just put it all on the marketing department – this is not how it works. It works in an integration basis; we all know that marketing and branding needs to be practiced across the whole organization from the top to the very most bottom in a wider 360 degree angle. Save your brand now, or face your own death.

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Entrepreneurial marketing Prasanna Perera

arketing and ManagemeM

nt Consultant, Chartered Marketeer, CIM UK

is to e views

expressed are

Three o Custom ness is growing. What is the secret of the success of Sansaal? From a marketing point of mix is u es are ava t market y highwa

Prices are above market norms asically,

have been on value, rather than merely costs. With regard to promotions, calised hoardings are used to create awareness. However, the biggest publicity is created through word-

f-mouth. (WOM). In my opinion, the promotional area needs to be improved. Loyalty cards and special promotions, should be looked at. The people (staff) dimension is a mixed situation. Some members of th staff are customer focused, whilst some others are not. This is an area that must be improved, since excellent customer service is a must and not an option for Sensaal.

Sandwich Factory pecialising in sandwiches, in the Colombo City, catering to an urban need. Colombo City did not have a ood sandwich outlet, except Five Star Hotels. Sandwich Factory identified and captured that market

opportunity. They have also focused on delivery and captured the at home and office consumption market. Another outlet is needed to maximise the market potential.

Sizzle An excellent example of entrepreneurial marketing. of cooking and presentation of food - Sizzling hot!. The brand nam simply brilliant and communicates the brand promise i.e. sizzling hot food. Besides the food ery focused advertising and promotions are carried out. Advertisements in newspapers and magazines are supported by the loyalty club program. Sizzle runs the loyalty club program successfully. Members are sent birthday cards with a special discount voucher, to celebrate at Sizzle. Membership upgrades are possible, based on the expenditure at Sizzle. The customer service is good and up to standard. However, there is room for further improvement, in terms on consistency. It is probably a good idea to ve a single outlet, so that a certain exclusiveness and uniqueness is maintained.

Many entrepreneurs have succeeded with their small businesses in Sri Lanka by practising the principles of marketing. In this brief article, my endeavour explore such businesses and identify the secrets of their success. Th

my own, based on what I have experienced.

Sensaal utlets were established in Thimbirigasyaya, Battaramulla and Nawala.er traffic is heavy in all outlets and the busi

view, the productnique and extensive. Meal options, snacks, breads, deserts and beveragilable. The range of breads available is innovative and caters to differen segments. The locations of the three outlets are excellent. On busys, where the vehicle flow is extensive throughout the day.

, which as created a perceived advantage (of better quality). B

Prasanna Perera

pricing of the productsloo

e

Sg

Sizzle pioneered an unique forme “Sizzle” is , v

ha

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50

Lucky Yoghurt n brand, that has made great strides to become a leading player

urt has succeeded due to the commitment of the llent quality at all times. The positioning of the

build consumer loyalty. y in the outstations. The

“Entrepreneurial Market

Rainco Is a leading player in tmosquito nets and raincRainco brand, which is Rainco. This has helped“lifestyle” in protectio ,the tr ped thlocations has helped the

ainco brand. Rainco ha

and promotional s nitiative to build customer and consumer

aff training and develop d building in-house capability in all areas of

help

routine.” (Author)

A home growin the market. Lucky yoghfounder, to provide excebrand as a Sri Lankan, has also helped toDistribution has been the key strength, speciallbrand has also built up intermediary loyalty, by providing incentives to the trade. A certain degree of innovation has also been displayed, with new products being introduced periodically. This brand is an excellent example of

ing” in action.

he protection market in Sri Lanka. The Rainco brand represents umbrellas, oats. Visionary thinking and a commitment to quality, creating the birth of the proud to be Sri Lankan. Innovative products have always been the hallmark of the brand to stay ahead of the competition. The positioning of the brand as a has carried out an unique mindset amongst consumers. Good relationships with e brand to improve availability and dealer loyalty. Outdoor branding of dealer brand to improve visibility. Creative advertising has also been a hallmark of the

s been able to make boring products exciting, through creative advertising and

nade has hel

Rpromotions. Based on the given organizations and brands highlighted, the following are the key learning points of Entrepreneurial Marketing. 7.1 Vision of the founder or leader is a key factor. In every example, the leader not only had a vision, but was willing to take calculated risks. 7.2 Commitment to product and service quality. This is evident in all the examples. 7.3 Innovative marketing trategies including iloyalty. 7.4 Building good relationships with all stakeholders, in order to operate the business without undue interference. 7.5 A commitment to st ment anoperations. In most instances this has helped to create a loyal, motivated and competent workforce. 7.6 Sound cash flow and working capital management, together with an eye on rationalising costs. (Minimising wastage) Entrepreneurial Marketing is flourishing in Sri Lanka, with the desire among the younger generation to

ecome “Entrepreneurs.” In my opinion, an entrepreneurial culture in the country, will undoubtedly bSri Lanka achieve the vision of becoming the “Wonder of Asia.” Entrepreneurship should be taught in schools, specially as a subject at Advanced Level.

Entrepreneurs challenge the status-quo. “They are bored with the




Vending takes new role in marketing

usiness Studies Faculty Jaffna University

quietly to generate sales round the clock, 365 days a year, taking no trike or leave

Vending machine operations are not successfully adopted in Sri Lanka. There are only few vending achines that are installed in the major

Piriyanthy Manokar BVavuniya Campus Vending machines work holidays, never going on s

cities in Sri Lanka. But there are millions of vending machines perating in the worldwide and the companies earn more profit and integrate latest technology in this

ing impulse and

hosiery, cosmetics,

trol pumps, hotels, restaurants, and many other

ry attractive.

and

rs - inside or outside stores, in office and hotel corridors, at railway platforms and

ns, a lot of new innovations are being incorporated into

monew innovative venture. A vending machine is essentially “A coin-operated machine for selling certain kinds of merchandise and refreshments”. It is an automated retail solution that, with one stroke, eliminates the need to browse through messy outlets, ensures exclusivity, extends reach, provides round-the-clock convenience and triggers impulse purchases. Today, vending machines are operated by thousands of companies worldwide. These machines range from relatively simple to highly sophisticated ones, offering a diverse array of products, includconvenience products like cigarettes, soft and cold drinks, chocolates and confectionery, newspapers and hot

everages. Other products includebfood snacks, hot soups, paperbacks, records, T-shirts, insurance policies and fishing worms.

These machines are found in factories, offices, large retail tores, pe

51

slocations. They offer customers the advantage of quick, 24-hour service and no handling by people. The convenience and ease of such non-store retail outlets make them ve

Advertising in vending machines is cost effective

Significant features of vending machine in marketing

ending is a retailing format that dispenses goods - such as beverages, chocolates and snacks - Vservices (such as ATMs) through coin, note or card-operated machines. It does away with the need for a salesperson and enables round-the-clock sales of products. Machines can be placed wherever they are most convenient for consumebus stations or even on high-traffic street corners. Vending machines are used for foods ranging from sandwiches to simple chocolates and wafers as also for hot and cold beverages. The greatest sales volume can be achieved in offices, school and college lunchrooms, refreshment areas, hospitals, high traffic public places and any other highly visible and popular sites. To improve productivity and customer relatiovending machines.



52

Why it should be installed? f retailing.

ll them. Nowadays,

s vending machines go, brand visibility is completely exclusive. In companies

acing machines at locations where its products are not normally available,

ying decisions and choices. Unmanned automatic vending machines are the and new packaging.

les round the clock, 365 days a year, taking duplication and adulteration. Many leading ration of their products. This is not only bad venue. Now, for the first time customers can

nuine and not an inferior duplicate.

rchandising automatically positions the d and forward-minding.

an n

ting.

There are several reasons to concentrate on this avenue o Unbeatable product visibility: The machines not only display the products but also secustomers are bombarded with a huge number of brands and options when they enter an average retail

utlet. However, as far aoacross the world, the budget for purchasing vending machines is shared by the advertizing department and distribution and sales. Impulse purchases: Due to their striking visibility, automatic vending machines generate impulse purchases. The common marketing principle is at work here: the more they see, the more they buy.

ider distribution: By plWmanufacturers instantly create a new distribution outlet. Hygienic and protected storage a closed environment ensures that the product sold to a customer is always clean and undamaged. Vehicle for unbiased customer response: A retailer typically promotes products that offer larger returns by nfluencing the customers’ bui

ideal vehicle to test the customer’s response to new products Silent salesman: These machines work quietly to generate sano holidays, never going on strike or leave. Eradication of companies faces the problem of duplicates, copies and adultefor their brand image; it also leads to a big loss of potential rebe absolutely sure that the product they are purchasing is ge Enhanced brand image: Using this sophisticated method of meompany and its brands as sophisticatec

Incremental sales vending: machines have been used as network and increase sales. Deeper market penetration: This method allows companies to tap newer locations and move one step loser to the customer.

effective tool to enlarge the distributio

c Advertising and promotions: The side panels and the top and bottom of the machine can be used for valuable point-of-sale advertizing and promotions. The latest cold-drink machine designs also incorporate LCDs used in the vending machines to continuously play advertisements. Helps to promote the product: Any vendor can serve as an advertiser, promoter or brand maker Traditionally Product, Price, Place and Promotion are called the 4Ps of marketing mix. In any kind of marketing activities, marketers and manufacturers integrate those components to make their marketing efforts successfully in the consumers mind. The blend of promotional mix includes advertising, sales

romotion, publicity, personal selling and direct markep



Advertising in vending machines is a cost effective and also vending-operator machine is

orking and making a profit for them. The body of the machine is the ideal

replacement of dvertisements. Vending machines of Coco-Cola, Pepsi and some other

y those slogans. Vending machines also offer sales promotional opportunities

f a new product can be installed into a vending machine, the buyers pay attention to appearance and

Choosing reliable equipment suppliers

Getting the right product mix

ng operator is required

ecomes a habit. There are numerous potential growths waiting for marketeers nd manufacturers to install the machines at a location. For many marketeers promoting products

does not need to pay for the use of these advertizing tools-the wplace to attach advertisement. Depending on the type of the machine, companies can use front panel, side panels or whole body. One of the advantages of the advertisements on the machine body is simplicity of its replacement, comparatively small charge for making and acompanies are the examples of effective use of vendor surface for promotional campaign.

Machines can be

mers

placed wherever they are most convenient for consu

Further a purchase via vending machine is mostly impulsive. That’s why advertising on vending machine contains such slogans as “now”, “right now”, and “hurry up”. Children and youngsters are very sensitive and easily captured bto consumers. Consumers can receive redeemable coupon, sweep takes, price off, free offers through the purchasing of such items. Ialso keep the brand name in their mind. The vendor will serve as a promoter of a new product. Factors ensuring successful vending: The following factors should be considered in vending machine operations that successful one * Identifying the vending need ** Ensuring strong service support * Getting the strategic location of machine ** Ensuring strategic placement of brands in the machine * Ensuring an efficient vendi Vending machines are relatively new but still it has novelty value. As is typical in all countries, convenience gradually bathrough vending machines the aim is to reach the final stage as soon as possible.

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54

Money & Banking




Two-speed recovery to extend into 2011, says IMF

* Two-speed recovery to dominate 2011, with growth remaining slow in advanced economies * In emerging economies, challenge for some is to manage possible overheating and capital flows * Number of countries in Europe face tough and long macroeconomic adjustment

The two-speed global economic recovery is likely to dominate 2011, with weak growth in advanced economies barely enough to facing the challenges of bring down unemployment and emerging markets success, including how to av the IMF’s Chief oid overheating and handle strong capital inflows, Economist, Olivier Blanchard, said.

In an assessment of the global economy at the end of 2010, and the prospects for 2011, Blanchard said that countries should continue to focus on rebalancing their economies in the coming year, including structural measures and exchange rate adjustments.

"Without this economic rebalancing, there will be no healthy recovery," he told IMF Survey.

In an interview, Blanchard talked about the central le of the Group of Twenty(G-20) advanced and roemerging market economies in helping during the global crisis and the need for continued cooperation to build on the recovery, as well as the prospects for both Europe and low-income countries. Following is the text of the interview:

Q: What is your assessment of how the global economy turned out in 2010? What went better than you anticipated, and what does not look so good? Blanchard: The short answer is that there were no major surprises. We had forecast positive but low growth in advanced economies, fast growth in emerging economies, and, lo and behold, this is how the year has turned out.

Indeed, I just went back and compared outcomes to our forecasts as of last January. For advanced countries, we were right on the dot for the United States; things turned out a bit better than expected for core Europe; Japan had higher growth than we had anticipated, but it looks like a one-time phenomenon. As for emerging countries, we were right on the mark for China; India did better than we had forecast.

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56

To say that there were no major surprises, however, is not the same as saying that things are fine. They are not. The two-speed recovery, low in advanced countries, fast in emerging market countries, is striking and its features are increasingly stark. They will probably dominate 2011, and beyond.

Q: What do you mean? Tell us more about this two-speed recovery. Blanchard: Emerging market countries were affected by the crisis through both trade and financial channels. The turnaround in trade has been nearly as sharp as the earlier collapse. But while trade has not yet fully recovered, most emerging market countries have been able to increase domestic demand so as to return to high growth. In turn, their good performance has led capital flows to come back, in some cases, with much force. For many of these countries, the challenges are now how to avoid overheating and how to handle capital flows.

In many advanced economies, the crisis damage was much deeper. The financial system was badly broken. Securitization has to be reinvented. In many of these countries, markets are still uncertain about the true health of banks and financial intermediation is not working well. Combine this with the need to correct past excesses, from low saving to excess housing investment and the result is a slow recovery, barely strong enough to decrease unemployment. This is painful but not that surprising. The evidence, which we had documented in a chapter of the World Economic Outlook last year, is that recoveries from financial crises are long and slow.

Q: For the past couple of years, the need for economic rebalancing has been the mantra of the IMF. As we begin 2011, where do we stand? Blanchard: It should remain the mantra. Rebalancing, internal and external, continues to be crucial. Without this economic rebalancing, there will be no healthy recovery. The argument is very simple: Before the crisis, growth in many advanced countries came from excessive domestic demand, be it consumption, or housing investment. This could not go on. Those countries must rely on other sources of demand. Until now, they have used fiscal policy to prop up domestic demand. This was needed, but it is not sustainable. The deficit countries must rely more on external demand, on exports. And, by symmetry, surplus countries, many of them emerging markets, must do the reverse, shift from external demand to domestic demand and reduce their dependence on exports.

This is not to say that without rebalancing, the recovery cannot continue. Continued fiscal expansion, or a return by U.S. consumers to their old, low-saving ways can sustain demand and growth for some time. But they will recreate many of the problems that were at the root of the crisis. And guess what will come next …

Q: What about exchange rate adjustments? Some argue that there is too much pressure on China to allow its currency, the yuan, to appreciate. Blanchard: Rebalancing is a complex process. No single measure, no one country holds the solution on its own. Structural measures are required: for example, in Asia, measures to improve financial intermediation or provide more social insurance, in the United States, reforms of the financial intermediation system. But exchange rate adjustment is an integral part of the process.



57

Q: Aren’t capital inflows to emerging market countries a growing worry? Blanchard: If well used, these capital flows can help rather than hurt. By leading to an appreciation, they help shift countries away from external demand toward domestic demand. And, by making it easier and cheaper to borrow, they can boost domestic demand.

This being said, some emerging market countries rightly worry that capital flows will come and go. They worry about their ability to intermediate the high flows and in some cases they worry about the risks of over-appreciation as well as overheating. So far, we have not seen the tsunami of flows that is sometimes described in the press. But, agreeing on broad "rules of the road" that take into account both country circumstances as well as global links will be one of the major challenges in the year to come.

Q: What about low-income countries? What are their prospects? Blanchard: Because of their more limited financial integration with the world economy, low-income countries were mostly affected by the crisis through the trade channel. As trade has largely recovered, and as strong growth in emerging market countries has pushed up commodity prices, many of them are doing well. Sub-Saharan Africa, for example, grew at more than 5 percent in 2010, and we forecast roughly the same for next year. Their performance, however, is not only due to exports. Previous sound policies allowed many to use fiscal measures to support their economies. And private domestic demand typically has also been quite strong.

Q: Let us turn to Europe. What’s the outlook there, particularly for some of the countries on what is termed the periphery Europe? Blanchard: There is no question that a number of countries in Europe face a tough and long macroeconomic adjustment. In most cases, they would have had to do so whether or not the global crisis had taken place. The global crisis only makes it tougher.

They had, based on what turned out to be unduly optimistic expectations, increased domestic demand excessively, and some had run very large current account deficits. Like others, but more so than others, they must shift from domestic demand to external demand. For those countries in the euro and thus operating under a fixed exchange rate, this is going to be a long and tough slog.

Stronger growth in core Europe, if it comes, will strengthen their exports and help the adjustment. But, based on past experience, a full return to health will likely take a long time. Social programs are essential, both for their own sake and to maintain broad political support.

Q: What about fiscal and banking problems? Blanchard: Except for Greece, the fiscal woes are the result of the macro slump, not of irresponsible fiscal behavior. Can the countries achieve fiscal sustainability? They can, but another IMF fiscal mantra should be repeated here: What is essential is not so much dramatic cuts now but medium-term anchoring, a credible path to debt stabilization, and eventually debt reduction.

Can they do it on their own? I fully understand the reluctance of countries to ask for a joint program from the European Union and the IMF. But such programs can help, in two ways: First, by putting a ceiling on the interest rate at which governments can borrow, the programs eliminate the risk of multiple equilibria—that is the risk that investors, right or wrong, ask for high interest rates, making it impossible for the countries to repay, and making the investors’ fears self fulfilling. Second, even if the



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programs do not ask for more than the country intended to do on its own, they reinforce the credibility of these commitments, and reassure markets about the medium run.

In addition to fiscal worries are the current fears about the banking system. I suspect these are overstated. But, the only way to decrease those fears is increased transparency, and, for this, the sooner the better. In practice, this means new, more credible stress tests, together with clearer rules about burden sharing: How much of the losses will be absorbed by creditors, by national governments, by the EU. There is a lot of loose talk about bailouts. My belief is that the bailout component, either by national governments, or the European Union, can be quite limited. But we shall only know that once the homework has been done.

Q: You have talked about rebalancing, and what countries have to do. What can we expect from the G-20, and in particular from the G-20 mutual assessment process, the so-called MAP? Blanchard: There is no question that the Group of Twenty has played a central role in the crisis. So long as the crisis was acute, it provided just the right forum for strong and fast action. Now that the crisis is less acute, and countries increasingly face different problems, agreement is clearly harder to achieve, and, as we saw in the buildup to Seoul, discussions can be intense.

But discussions take place as part of the G-20 process, both in public view and behind the scenes. And here, the G-20 MAP process, in which the Fund acts as an expert consultant to the G-20, can play a central role. It can give national policymakers a sense of the world economy landscape, show the implications of current policies, show the dangers of an unbalanced recovery, explore alternative policies, and make for a much more informed dialogue. This does not guarantee success. But it surely improves the odds.

Courtesy IMF Survey



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CB: inflation in 2010 remains at a mid-single digit level The annual average rate of inflation, as measured by the Colombo Consumers’ Price Index (CCPI) (2002=100), computed by the Department of Census and Statistics, was 5.9 per cent in 2010. It is noteworthy that this is the second lowest annual average (end year) inflation rate observed since 1999. The year-on-year inflation stood at 6.9 per cent in December 2010, the Central Bank said in a statement last Friday (31).

"Favourable domestic supply conditions due to improvements in the agriculture sector as well as increase in supply of food commodities, mainly from the North and East helped contain price pressure to a certain extent, although seasonal increases of prices of some commodities were experienced during some months of the year.

"In the international market, commodity prices increased with the recovery in the global economy. However, the impact of these price changes on the domestic inflation was arrested by import duty revisions. Further, the unchanged prices for petrol and diesel during the year helped contain inflation. Prudent monetary policy also supported preventing inflation from rising," the Central Bank said.

Price Movements in 2010... "The contribution to the annual average change of 5.9 per cent in the index arose mainly from sub category of Food and non-alcoholic beverages which increased by 6.8 per cent. All other sub categories of Clothing and footwear; Housing, water, electricity, gas and other fuels; Furnishing, household equipment and routine household maintenance; Health; Transport; Communication; Recreation and culture; Education; and Miscellaneous goods and services also caused upward pressure on the index. However, pressure from Transport sub category was very marginal in 2010, since prices of petrol and diesel and public transport charges remained unchanged during the entire year," the Central Bank said.

"Paddy production in 2010 improved when compared to that of the previous year and the average price of rice recorded a drop in 2010 compared to 2009. To check the rising rice prices during the closing months of the year, the government re-imposed the price ceiling w.e.f. 10.12.2010 which was removed w.e.f. 26.10.2010, and started releasing paddy stocks to millers and distributing rice through Co-operatives and Sathosa outlets at a lower price.

The prices of vegetables were generally higher compared to the previous year, though seasonal decreases were reported during the course of the year. The average price of coconut and coconut oil increased sharply by 28.9 per cent and 24.0 per cent, respectively in 2010 compared to 2009, owing to the sharp drop in coconut production and this contributed substantially to inflation.

The average prices of fish and sea food increased by around 10.2 per cent in spite of the improved fish production during 2010. Adverse weather conditions contributed to price increases during the middle of the year. However, fish prices decreased towards end of 2010.



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There was an increase of around 3.4 per cent in the Housing, water, electricity, gas and other fuel sub index, recorded in 2010 compared to the last year. This was mainly due to the net impact of revision of LP gas prices affected during the period.

Although the import prices of crude oil increased by over 25 per cent during the year compared to 2009, domestic prices were not adjusted. Stable fuel prices had a favourable direct and indirect impact on domestic prices.

Unlike in 2009, prices in the import category in the CCPI basket contributed to inflationary pressure in 2010. Import duties were adjusted on imported items from time to time to reduce the impact of high import prices on domestic inflation. The contribution of imported items to annual average inflation, increased from negative 10.0 per cent in 2009 to 14.8 per cent in 2010, while the contribution of domestic items decreased from 110.0 per cent in 2009 to 85.2 per cent in 2010. Accordingly, the average domestic prices of wheat flour and milk powder decreased while the price of sugar increased, compared to 2009.

The impact of high import prices on consumer prices was somewhat mitigated by the slight appreciation in the exchange rate. The Sri Lankan rupee appreciated by about 1.7 per cent against the US dollar on average in 2010.

The annual average core inflation, which is derived by excluding food and energy items from the CCPI basket, declined to 6.3 per cent in 2010 from 9.2 per cent in 2009. The year-on-year core inflation also followed a declining trend reaching 5.6 per cent at the end of 2010 compared to 5.9 per cent at the end of 2009."




Central Bank forecasts for 2011: Economy to grow 8.5% this year

* BOP surplus US$ 350mn, 2010 surplus US$ 900mn * Private sector credit to expand 16% * Broad money growth 14.5% * Net credit to government Rs. 42bn * World Bank Doing Business ranking to be improved to 30th position from 102

The Central Bank estimates economic growth to reach 8.5 percent in 2011 and accelerate to 9 percent in 2012 and 9.5 percent in 2013 and said it would follow a duel approach of carrying out an economic analysis and monetary analysis to a secure low and stable rate of inflation in years to come. Central Bank Governor Ajith Nivard Cabraal announced these growth projections while delivering the ‘Road Map: Monetary and Financial Policies for 2011 and Beyond’, and said economic growth for 2010 is estimated at 8 percent. He said broad money growth had declined during the first half of 2010 but then picked up to record a growth rate of 15 percent which enabled the economy to grow by 8 percent. He said the increase in private sector credit led to growth in broad money.

For growth to reach 8.5 percent in 2011, broad money would have to grow by 14.5 percent while a growth rate of 9 percent in 2012 and 9.5 percent in 2013 would also require broad money to expand by 14.5 percent each year. Sri Lanka’s economy grew by 3.5 percent in 2009.

Cabraal said the 8.5 percent economic growth this year, would be broad based across the agricultural, services and manufacturing sectors. He said the economic and monetary analysis would be carried out simultaneously while a multipronged strategy, not dependent on policy rates alone, would be used in the event inflation was to rise.

Private sector credit... Cabraal said credit to the private sector is expected expand by 16 percent this year. Net credit to the to private sector increased by 20.3 percent to Rs. 1.41 tr ion in October from Rs. 1.17 trillion a year ago. illIn September, credit to the private sector amounted to Rs. 1.36 trillion.

Credit to the private sector from domestic banking units grew by 22.7 percent in October to Rs. 1.25 trillion from Rs. 1.02 trillion a year ago, while credit from domestic banks amounted to Rs. 1.21 trillion in September.

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Credit from foreign sources to the private sector grew much slower at 4 percent, reaching Rs. 156.3 billion in October from Rs. 150.2 a year ago. In September 2010, loans from foreign sources amounted to Rs. 150.1billion.

A year ago net credit to the private sector had declined by 6.6 percent with loans from the domestic banking sector declining by 6.1 percent. Cabraal said lending rates had declined by 2 percent in 2010 and 2.7 percent in 2009.

Net credit to government... Cabraal said net credit to the government would amount to around Rs. 42 billion this year (2011). Net credit to the government grew at 8.2 percent, reaching Rs. 656.5 billion in October from Rs. 606.7 a year ago, but it is a decline co 1 billion the previous month, September 2010. mpared with Rs. 693.

BOP surplus... The Central Bank Governor said the Balance of Payments would record a US$ 350 million in 2011. He said the surplus would amount to US$ 900 million in 2010 on higher inflows of worker remittances, estimated to grow by 24 percent in 2010 to US$ 4.1 billion. FDIs in 2010 are estimated at US$ 500 million, reflecting declining global capital flows, but FDIs and inflows to the private sector are expected to reach US$ 1.5 billion this year. Cabraal said long term inflows to the government this year is expected to reach US$ 1.7 billion. He said relaxation of exchange controls and the improving investment climate would also attract portfolio investments in to the country. He said steps have been taken to improve Sri Lanka’s sovereign ratings and also improve its World Bank Doing Business ranking from the current 102nd position out of 183 countries to 30 by 2016.

GDP deflator... Unlike an inflation index, the GDP deflator reflects the rate of increases in prices of all goods and services produced in a country for a given year.

The GDP deflator for 2010 is estimated at 7 percent, it is 6 percent for this year, 5.5 percent in 2012 and 5 percent in 2013.

Cabraal also said the rupee would appreciate against the dollar this year, but not at the expense of exchange rate stability (see elsewhere on this page).



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Role of financial management in our day to day lives By Abdul Qadir

For a layman, the term financial management is an art of managing finance. In other words, it is all about managing finances aimed at realizing financial objectives. It is not just confined to a business or organizations, as even individuals can benefit from it. It covers an integral part of our daily lives. People familiar with finance management aspects know exactly how to manage their monetary resources in the right manner. Judicious management of finance helps us in identifying the probable flaws and the Opportunities for improvements. You will also be able to foresee the prospects that are more likely to come your way. It is always wise to analyze your historical financial data, in order to decide the expected future outcome. Effective management of funds is the only way to stay gainful. It is your responsibility to recognize and execute plans in such a way that you meet your monetary responsibilities, and also to make sure that you have enough surplus cash to meet future unforeseen contingencies.

These are some of the integral part of financial management: Make a financial plan: Planning your money is quite essential, and it is a very indispensable step of financial management. It is very important that you have sufficient knowledge about your revenue and expenditures. You’ll also need to think about the expenses that you will incur along with your possible sources of income. This will also help you to pinpoint your unnecessary expenditures.

Prioritize your expenses: Learn to prioritize your requirements. Try to know more about your short term and long term financial needs, and manage your finances accordingly. Set a financial target for yourself and strive to achieve it. Your financial goal can be anything like a car, a foreign locale etc.

Be specific about what you want: Once you have the financial goal in mind, try to be very specific about your needs. Prepare a list of thing that you need, and prioritize them as per their need basis. Sometimes you might even need to decide between your needs and desires, Car or foreign locale.

Formulate a plan: Planning another down the gap between where you are now, and where you want to go. Prepare a complete list of financial need & plan it consequently. Make a note of the money you have in hand, and how much you need to meet your goals.

Scrutinize: It is extremely crucial to compare your plan with your goal, as it will help in figuring out the deviations. Try and analyze if you are progressing towards your target, and also find out if you would be able to reach your goal within the stipulated timeframe. In nutshell, if you want to successfully handle your a financial responsibilities, then you’ll need to make a sound, realistic, & challenging budget to access the actual amount that you need, and the amount of money that you will need to keep it going.



64

Tourism




Spice industry benefits from tourism Demand for fresh herbs and spices increase: Sanjeevi Jayasuriya The country’s spice industry could benefit from the xpected influx of tourists as its products could be

. Spices and iation Chairman Business. The spice and derivatives market is booming because

rvadic medicine, beverages and hygiene products. of a variety of spices and Sri Lanka could position

lier both locally and internationally, Fernando said.

ng phenomenon growth rates both in the international and domestic nge in the li tyle pattern of consumers all over the world,” he

There has b in use of fresh herbs and spices due to an increased demand in the hotel industry. The change of consumers towards leading a healthy lifestyle has

s for natural

The use of spice derivatives like essential oils are being widely used internationally in food and beverage industries for flavouring and fragrances. This market provides a good opportunity for Sri Lanka. The global mand of spices has increased due to an increase in

demand and consumption of ethnic food, a sharp growth in the processed food consumption and an increase in the demand for natural fragrances for various health therapies. “Our endeavour is to regain the lost leadership in the Asian region in supplying spices. We can achieve major export status by exporting cinnamon as we are the only true cinnamon producer in the world. Not only cinnamon but also other varieties of spices are gnificant contributors to the global spice trade as cinnamon, Fernanedo said. A new strategy to increase productivity should be in lace supported by increase in the export volumes. The quality of local products is of high standard an the country needs to maintain this level, he said. The growers, producers, traders and exporters of spices need to have an integrated action plan to increase foreign exchange. The spice industry could be a vibrant industry in coming years with the proper implementation of policies to support its growth. T ntinuous demand for Sri Lankan spices in the global market needs to be sustained with vigorous plication of different dimensions to support value addition. Measures to obtain geographical indication on is an encouragement for growers and we could concentrate more on producing increased olumes. However, the Government needs to take action to arrest pilferages of agricultural products, he said.

e Allied Product Producers’ Assocmade use to promote health tourism

Christopher Fernando told Daily Newstheir products find applications in pharmaceutical, aCountries in the Asian region are the major producers as a leading ayurvedic medicinal supp “The spice industry has been witnessimarkets. This is mainly due to the chasaid.

yu

fes

een a substantial increase

increased the use of herbs and natural spiceflavouring.

Increased demand for Lankan spices de

si

pd

he coap for cinnam

v

65




Road map for a tourist paradise

arath Wijesinghe Ambassador to the UAE S

ourism is an act of travel fT or the purpose of recreation, education, sight-seeing, exploration and various

Tourism has become one of the main sought after industries to many countries. Sand some environmen Some even without beautthe top in t ena. One country of this type is the UAE which has used the deand malls tenjoyment,income in U

of income.

ecause there can be a sudden

and Brazil are doing well in tourism, there are underlying dangers linked to

other purposes and reasons. It is human and animal instinct to explore and to change territories for food and various other purposes.

Today, the world has developed so much due to technology especially information technology that the world has become small and news travels instantaneously with the click of a button. But, for the human being it is nothing like seeing for himself. Even though the football match could be watched clearly on the television screen, the fan will spend any amount to watch the match with his own eyes at the arena.

ome countries heavily depend on tourism as a source of income countries are fortunate to be blessed with beauty and

t.

y explore the available resources and has reached e tourism arh

Immigration officers should be friendly and appropriately dressed

sert to introduce desert safaris because they have only deserts o show the tourists. But, tourists are flocking round Dubai for pleasure, shopping and sight-seeing even though oil is the main AE, tourism too has reached to become one of the main sources

Tourism promotes country’s economy and the image in the family of nation. Both rich and poor countries depend on and promote tourism. It is important to make sure that the local population does not depend

n tourism alone. It should be a bonus and additional income at some stage boupward trend such as in the Bali incident or there can be many unexpected scenarios, but generally many countries in the world today prosper due to proper management of tourism. Tourism has disadvantages as well. Pollution, waste, cultural situation and drugs are some of those. For xample, though Philippinese

it. Sri Lanka is one of the most beautiful countries in the globe with the ability to reach different climatic regions in a few hours. Sri Lanka is blessed with beauty, a fine environment, excellent climatic conditions, wildlife, jungles, 250,000 historical and archaeological sites accepted by the UNESCO and moreover an educated and smiling nation supposed to be one of the happiest nations next to Bhutan. The rivers start from the hill and end in different parts of the country embracing the sea after having travelled golden sands with surrounded by thick jungles and wildlife.

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67

The wealth bestowed on Sri Lanka by way of beauty and dle East. The irony

atural that there

cruel

ditions of employment are of below tandard. The plight of th

disturbing. We hear of pathetime that we take back thecountry to be with their fami But, this cannot be done oveis to improve our tourist tradwe need is a catalyst visionheartening to note that Preshas directed Economic Develaunch the program of target It is also happy to note thatsecurity, stability and the hig

ing pl

rldwide make use of this facility which is situated in one of the 38 free trade zones which are

rican and Asian

archaeological sites and historical, religious places of worship for all religions. Sri

that give fear to tourists on the punishment of the possession of drugs need to be exhibited to the public and for tourists.

environment is more valuable than oil in the Mid that Sri Lanka has not still explored and made use of this nis

gift, wealth for the benefit of the nation. The sorry state is self destruction of the forests, the wildlife, sand, rivers by is

and man-made destruction. Currently, the nation’s main income is the sweat of the labour

igrant workers whose con ms e domestic housekeepers is extremely

tic and sorry stories very often and it is se millions of our women who were protected and respected back in the

which are now in disarray.

Tourists enjoying surfing at Arugam Bay

ly

rnight and there should be an alternative remedy. One of the main remedies e which we can make use of as a vehicle for our prosperity because all what and a program to explore our available resources on this direction. It is ident Mahinda Rajapaksa has taken serious note of this factual reality and lopment and Tourism Minister Basil Rajapaksa to take this burden and to ing to make Sri Lanka the best tourist destination.

steps are being taken to create an image on the world of our availability, h standard for genuine tourists to explore Sri Lanka. Tourists explore other

e of the main reasons is for sight-seeing, explorations and many other lly situated and qualified. Educational tourism is to a short and long

Lanka is famous for education and is geared to invest on education. There ace to establish private universities. We learn from our mistakes and success

of others. The Knowledge Village in Dubai has outlets for almost all the universities in the world and the tudents wo

countries for various purposes. Onreasons for which Sri Lanka is ideaterm in the host country. Sri are a lot of changes tak

sdoing very well. Sri Lanka could be a centre of education for SAARC countries from which currently disturbed Pakistan, Nepal, Afghanistan and other countries will send their students to Sri Lanka if quality education is offered for which we are qualified. It is sad that we are remitting billions of foreign exchange for the ducation of our children not only to the West but to other developed Balkan, Afe

countries. We are ideally suited for health tourism. Our doctors and the health system are of high standard. Patients from the Middle East and even the West will seek help from the private health sector in Sri Lanka.

ri Lanka has 250,000 SLanka is ideal for exploration. Art and culture, water sports, beaches, climbing, swimming, golf, cricket, agriculture and various other attractions which we have yet to explore. In this competitive world, they have to maintain standard and try to be on par with others or to be above others. Our outlook and attitudes have to be changed. We should not rip off tourists. We must give them a quality service for an appropriate remuneration. We must make the stay pleasant, safe and enjoyable. The airport should be clean as it is the first impression that counts. Notices



68

Immigration officers should be friendly and appropriately dressed. Theand other languages. The taxi drivers should not harass tourists. ThGuaranteeing safety and a standard taxi service should be monitoredcounter should be vibrant and active. The tourists must be given first on shopping, on hotels, on culture by the officers at the airport itself. Hhigh standard and the websit

y should be conversant in English ere should be a proper taxi service. by the Tourist Board. The tourist hand information on consumerisms otels must be clean and must be of

es must be properly maintained.

ects of tourism on our culture, our ious ulterior purposes such as sex

s already promoted.

reate an atmosphere for ourists to visit Sri Lanka whilst maintaining our identity, culture, environment and the beauty.

are in the right direction. the world talks about us, world respects us. We have proved hat our country has the most powerful government in the world. We have proved stability and security

We need to learn from other countries and take precautions on side effyounger generations, as there are tourists who visit countries for vardrugs and many other nefarious activities. It is time to achieve thedestination in the world. We don’t need any further promotionsTherefore it is time that we do away with all the PR companies appointed to promote Sri Lanka with the cost of millions of taxpayers’ money.

, set targets to be the best tourist

, Sri Lanka i

Sri Lankan embassies worldwide must take the responsibility for the promotion of tourism, investment, employment promotion and also to enhance the image of the country and to fight terrorism. Our embassies should not act as traditional inert outlets and must be geared and act to promote the country and implement the policy decisions by enhancing tourism, economic promotion, investment, employment promotion and other sectors. There is a responsibility and a task on the community the mission and Government institutions to get together and flock together on this mission to ct We are told that we need 50,000 hotel rooms but we have only 15,000. This shows that the path is not very easy. There is the need for hard work and find new strategy. They can think of tea estates and bungalows to be used as tourist destinations. Owners of large houses can be encouraged to convert mini resorts. Investors should be encouraged by easing the procedures by cutting down red tape. One stop shop in Dubai free trade zone is a concept we should learn from where the investor can obtain clearances from one office. In Sri Lanka, this is a draw-back to be looked into carefully. On the whole, wetto the world. The Government is investor, friendly and for freedom for business and investment preserving the identity and safety of the country is important.




*Tourism and tea, beaches, heritage and the Galle Lit Fest ‘Cohesive planning key to success’

Chairman, Sri Lanka Tourism, Dr. Nalaka Godahewa spoke to The Island Financial Review’s Steve A. Morrell about the tourism sector and the need for comprehensive planning.

‘The war is over. But that does not mean everything has fallen into place. Tourism suffered over the past many years. We had our 600, 000th tourist visit the Island recently. I was there to meet them when they disembarked. They did not know they had that distinction; and were surprised to realize they were special arrivals.

That was a big plus; but having reached that level of foreign visitor influx we cannot under any circumstances be smug and think to ourselves they will come. Sri Lanka has to have intense exposure to foreign markets and be effectively proactive to exigencies of the times to relate to visitor needs’. Said Chairman Sri Lanka Tourism, Dr. Nalaka Godahewa.

We met Dr. Godahewa recently who subscribed to the concept of exposure for potential for the tourism sector.

He said although normalcy was restored, the hard part was intense planning to realize the President’s goal of approximately 2.5 million Tourists by 2016. The Tourist Board would play a supportive role in developing the sector but the main influx for physical improvement would be the private sector. There would be no inert influences that would in any way stifle progress.

The Galle literary festival an event in point has grown to be synonymous with Sri Lanka. Sri Lanka Tourism will continue to support this initiative. It is now an annual event that progressively advanced to garner international clout. Its reputation has had lateral expansion to command intense visitor incursion. This is one example where we have had coordinated interests, working to ensure its success. Decidedly the Galle literary festival moved forward. International interest, particularly the UK, developed; and is now an event in the visitor calendar that is keenly anticipated.

Sri Lankan, our air carrier, and Sri Lanka Tourism work closely. This time round our team effort will extend to the newer concept of air taxies. We did run into a problem in Negombo but rather than resort to conflict, we resolved that issue relocating our activities to Koggala.

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70

‘Sri Lankan’ and Sri Lanka tourism have always worked together. I think now our relationship is even better. We are both national institutions and we work more or less in a coordinated manner and decide if we are to support various events or not. For example if either is not interested then that would be a ‘no-go’ area.

What we do is that we do not ‘own’, an event or some such. But support such innovation. It could be financial support it could be infrastructure. Call it what you will; but the main ingredient should be that eventually, in say, a year or two, such schemes should be self sustaining.

What if you coordinate with the Sri Lanka Tea Board? Think that would result in positive progress? I cannot tell you what it was in the past, but the future looks good for such coordination. Yes we will be working closely with them. You would also have noted from the budget, HE The President stressed the need to work as a unified team. The Foreign missions, the Tourist Board, all, to work closely.

I see that interesting trend now. The ADB, Sri Lankan, The Tea Board, there is now sharing of ideas. We are talking to each other. More than ever I see most Government organizations working closer, and that could only improve. For instance Susantha Ratnayake, Chairman Tea Board, Nishantha, Sri Lankan, we are all meeting at various government fora. There will be a cohesive plan to move forward. The Tea Board fits perfectly with what we want to do. We have agreed on eight types of categories of products.

Such as? Beaches, heritage, festivals, sports and adventure, body and mind wellness, scenic beauty, wild life and essence. Meaning people and everything that revolves round them; culture, values, now Tea fits in two areas, its authenticity; and scenic beauty. Tea, like Cricket is one of two things we are known for world wide.

Malaysia, ! their income from tourism is about 20,Billion Dollars annually. Could we get there? And how soon?

Answering that question has to be in a structured manner. The Malaysia campaign is 10 years old. Today they are talking of 23 million tourist arrivals. It did not happen overnight. Of the 10 years their big-spend started five years ago. I was in Malaysia, I was told their expenditure is about 100 million Dollars. Now that’s a huge amount of money.

The Sri Lanka context is different. We are talking of about 600,000 to 700,000 tourist arrivals. That number will occupy about 80 to 90 percent of our present hotel accommodation. So, for hotels to come up and beat the potential it would take about two or three years. Even if we have money, and spend that money it is not going to help. My thinking is that our real campaign has to start 2012 or 2013.People are not happy to hear this.

What we have to concentrate on at this point in time is build our PR, visiting journalists, let people come see the country and write. That does not cost much money. And build our credentials. We need to find money. That part is clear. Definitely we need to plan for 2012, 2013. I have told the minister and the secretary of these essentials. We hope they would work on this. Assuming we have to hit the 2.5 million tourist arrivals. Structure this correctly, and the tourists will come. If Spain could have more tourists than their population, why can’t we?



71

Exports & Imports




Challenges and confusion in rubber business Dr N Yogaratnam, Chairman, Tree Crop ro Consultants It is said that civilization, as we know it today, is wholly dependent upon rubber. It is an agent that follows us literally from the cradle to the grave. This eems to be becoming all the more true, considering its wide-ranging applications in the real world.

The Natural Rubber (NR) prices touching US $ 5 and expected to be still higher in the near future, has caused a certain amount of uncertainty in the industry at large. Prices of Thai RSS 3, Indonesian SIR 20, Malaysian SMR 20 and Indian RSS 4 are already at record highs in the region of US $ 4.60 to 4.93. Sri Lankan auction price for crepe rubber is in the region of US $ 5.25 per kg.

ntering season, prices are expected to be still higher due to short fall in crop. This is confounded by the adverse fallouts of climate change (a complex problem), high cost of inputs like

labour, shortage of tappers and non-availability of cultivable land. NR production in Thailand may fall by about 30,000 tons a year in the next six years or so because of damage from floods, according to a Reuters report quoting an industry source. Further, high price of Natural Rubber (NR) is compelling manufacturers to switch to synthetic rubber in many applications. Some companies have completely replaced NR with SR in the production of items like mouldings. The use of Synthetic Rubber (SR) will increase due to pri , consistency and technological advancements that allow it to be used as a substitute for NR. Many companies are pursuing alternatives to both NR and SR. Good year for example, has already produced concept tyres using a BioIsoprene compound and expect to have sufficient quantities to support the production of test tyres in mid-2011.

s Ag

s

With the nearing of the wi

Global NR consumption reached 10.4 million tonnes in the year to September 2010

ce

72



73

It is however, felt that although the synthetic alternatives will continue lance of

out stimulus programs ng the global financial crisis.

Crude oil prices rallying to another new two- yeathe last week of December, 2010, and expected to $ 100 a barrel in early 2011, is another factor for consideration. Can the global economy withstand such increases?

Global Consumption The International Rubber Study Group (IRSG(October- December, 2010) indicates that global demand of rubber nearspre-recession level. Over the twelve months to rubber consumption reached a moving annual tothan at the same point in 2009.

ery in deminventory rebuilding during the first half of the ye

to around 20 percent YOY by the end of the third quarter;

build-up in 2009, followed by a drawdown of these stocks in 2010. By the end of the third quarter, Chinese demand reached 7.9 million tonnes MAT, at which point YOY consumption growth was 10.6 percent. In Japan, consumption growth has been accelerating steadily during 2010, reaching 14.1 percent YOY by the end of the third quarter; demand at

y off the pre-2009 level, however.

to be developed and occupy niche positions, NR still has a baroperties which the synthetics will find difficult to match for a long time, p

if ever. Environmental virtues of NR is another huge contribution which tends to be ignored. Also, the UN in its year-end forecast says that Asia’s economic growth will slow in 2011 because of lacklustre growth in Europe and the

S and the governments around the world closingUinitiated duri

r peak of US $ 93.60 in turn higher towards US

The ongoing shift in geographical composition of rubber areas within each country will also have an

) in its latest report

ptember 2010, global impact on supply Setal (MAT) of 23.7 million tonnes, 15.2 percent higher

The strong growth reflects the recov and for vehicles and tyres as well as manufacturer’s

ar. The data suggest that global rubber consumption is now virtually restored to its mid-2008 levels.

Regional consumption Asia is by far the largest rubber consuming region, with demand of around 14.8 million tonnes MAT at the end of the third quarter of 2010. Compared to other regions, Asian rubber demand was less severely

pacted by the 2008/09 global recession, and over the first nine months of 2010 demand growth in the imregion averaged 12.6 percent on a YOY basis.

Consumption growth in Europe and the Americas soared

Increasing proportion of aged trees is amajor factor that can affect the futureglobal supply of NR

however, in some regions actual demand is yet to fully recover to the levels seen in early- to mid-2008. China’s consumption estimates considered the larger NR stock

1.7 million tonnes MAT is still some wa



74

Supply and Demand NR market remains in deficit. The latest production and consumption datadeficit was -169,000 tonnes in the year to September 2010 (Table 1 ). The lasurplus t

suggest that the NR market test data also point to a wider

han previously estimated in 2009 (425,000 tonnes vs. 237,000 tonnes in the last quarterly report) ue mainly to the adjustments made to Chinese NR demand and inventory carryover. (a) Moving Annual

at around 1.6 million tonnes

rn, SR production and consumption both staged a strong ecovery in the twelve months to September 2010, growing at a YOY rate of 16.5 percent, production

ith SR balance remaining at ns.

Outlook he world rubber economy depends heavily on the world economy. The e

semi-annual World Economic Outlook, released in October 2010 indica

The tyre sector otal world tyre production is forecast to increase by 13.1 percent in 2010, with 2011 output expected to

R consumption lobal NR consumption is forecast to rise by 15 percent to 10.7 million tonnes in 2010; in 2011, NR

demand is expected to rise by a further 4.6 onnes (Table 3).

ent to 14.7 million tonnes.

PGlobal NR production is forecast to rise by 5.3for the first nine months of available trade aimpact of higher prices, and assuming normexpand by a further 7.4 percent to 11.0 million

NR supply and demand balance With NR production forecast to expand by 7.4 percent in 2011, compared to consumption growth of 4.6 percent, the sizeable deficit of -446,000 tonn

virtually restored to its

dTotal to September 2010. Global NR stocks are estimated to have remainedon an annual moving average (AMA) basis over the third quarter of 2010.

Synthetic Rubber (SR) recovers Following the late-2008/early-2009 downturfrom 12170 (000 tonnes) to 13595 and consumption from 11802 to 13297, w298. Synthetic alternatives will continue to develop and occupy niche positio

T conomic outlook of the IMF’s tes that the world economic jection has been estimated at

, which is expected to move growth rate forecast for 2010 is estimated at 4.8 percent, while the 2011 pro4.2 percent. Asia’s economic growth in 2010 is projected at 6.2 percentdownwards to 4.8 percent in 2011.

Texpand by a further 6.7 percent (Table 2).

NG

percent to 11.2 million t

SR Consumption Global SR consumption is forecast to rise by 15.6 percent to 13.6 million tonnes in 2010; in 2011, SR demand is expected to rise by a further 7.6 perc

roduction of NR percent to 10.2 million tonnes in 2010; this figure accounts nd production data (Table 4). In 2011, partly due to the al growing conditions, global NR output is expected to tonnes.

e180,000 tonnes in 2011 (Table 5). To summarubber consumption reached 23.7 million tonGlobal demand is now

s implied by the 2010 forecasts is expected to narrow to -rize, over the twelve months to September 2010, global nes, 15.2 percent higher than at the same point in 2009. mid-2008 level.



75

Global NR consumption reached 10.4 m year to September 2010, with YOY

ith YOY production growth unning at 9.9 percent, while SR supply reached 13.6 million tonnes, a 16.5 percent increase.

ade further gains in the hree months to November 2010, tracking the future market on firm support from strong fundamentals of

tight supply and steady demand.

yield profile significantly varies across clones and that the growers creasingly adopt a mixture of clones.

act on supply. There is now increasing prominence for non- raditional regions and agro-climatically less suitable areas for growing rubber.

ere is yet no definite nswer to the question as to whether the influence of climate change on NR supply is negative or

positive.

ystematic replanting of aged trees with high yielding clones is likely to improve Sri Lanka’s output significantly in the coming years. About 66 ting undertaken during 2003 to 2010 had

verage yield in Sri Lanka, is poised to improve considerably. A part of the new supply arising from the planting undertaken during 2003 - 201 of the existing trees for replanting.

, to transform the developing favourable atures of the rubber industry to a sustainable long term growth through creation of a perfect business

environment and culture to address the deficiencies in the plantation systems through human and

illion tonnes in theconsumption growth accelerating to 13.5 percent compared to 7.1 percent in June; at the same point, global SR consumption was 13.3 million tonnes, registering consumption growth of 16.5 percent, compared to 14.8 percent three months earlier. Global rubber production reached 23.9 million tonnes in the year to September 2010, 13.6 percent higher than at the same point in 2009; NR output was 10.3 million tonnes, wr

The NR market deficit was -169,000 tonnes in the year to September 2010, at which point global NR stocks were estimated at around 1.6 million tonnes. With higher production, global NR exports reached 6.97 million tonnes in the year to September 2010, a YOY increase of 14.4 percent; global SR exports continued to increase, reaching 7.84 million tonnes. NR physical market prices mt

Related issues

Increasing proportion of aged trees is a major factor that can affect the future global supply of NR. Age is the most important single factor determining the yield for a given clone. Agro-climatic setting also plays a major role. It may be noted thatin

This is expected have an impact on output. The ongoing shift in geographical composition of rubber areas within each country will also have an impt

There are other issues too, such as lower yield, longer immature (unproductive) period and marginalization of holding size. The climate- yield relationship is a complex one. Tha

Sri Lanka’s output

Spercent of the plan

been with high yielding RRISL clones made available to the industry over the last 15 to 20 years. The expected output from year 2010 in areas planted since 2003 in Sri Lanka and all ANRPC countries taken together are given in Table 6. A

0 will be offset by the uprooting However, although in relation to global supply, the new supply may be insignificant, yet, increase in domestic supply would certainly help the local rubber products manufacturing sub-sector. Production in the non-traditional areas is unlikely to have a significant effect on supply. The challenge to the Sri Lankan rubber industry is, thereforefe



76

technological up-gradation, land and crop development strategies etc. for the rubber industry to contribute its share as a partner to attain macro-economic stability in the country. The ANRPC says that the global NR supply may remain somewhat tight in the coming decade despite he increase in re-plantings and new plantings in major NR producing countries. This is mainly because of

n the other hand, the demand for NR is bound to go up with the phenomenal growth of the tyre and

ncerns as to whether the production of NR will catch up with the rojected demand.

n any case, if the forecasts of IMF, IRSG, ANRPC and other relevant sources are realistic, NR prices would be expected to be sustained at a rea level, say US $ 2.5 to 3.0, for few more

producer - consumer profitability will be a difficult task. Consumers are till struggling to pass on the rise in the raw material cost to end users.

tthe lower yield expected from the new plantations in the non-traditional areas and massive uprooting of aged trees that are likely to take place in the next few years. Oautomobile industries. The IRSG has predicted that NR share of the global elastomer consumption will increase from 42 percent in year 2010 to slightly above 46 percent in year 2020. The negative side however indicates that unpredictability of climate and the consequent fall in latex yield, shortage of skilled manpower, rising labour cost and non availability of suitable land for extending rubber cultivation have raised cop

Notwithstanding the many challenges facing natural rubber, experts do not yet foresee a significant drop in NR use in the coming years. Various countries are adopting different strategies to meet the challenges facing NR. A question that arises now is will the current high prices of NR trigger a surge in new planting and replanting of rubber? It has been pointed out that the rise in NR prices during the 2005-2008 periods had led to a dramatic increase in new planting by 11 Asian countries, with more than one million hectares added during this period. The current high prices will definitely be a stimulus for further new planting, but presumably not at the scale seen during 2005-2008 in view of limited availability of land (and labour) for such massive new planting now. I

sonably attractive years. However, if NR supply is negatively affected by weather and climate change it may go beyond US $ 5.00 at least in the next two years. The challenges and threats in NR business will therefore continue in the coming decade and possibly beyond. Achieving a balance ins



Table 1 World NR supply and demand balance (‘000 tonnes) 2008 2009 % change 2010 % change (a) NR Production 10128 9702 -4.2 10277 9.9

R Consumption 10203 9277 -9.1 10446 13.5 NNR Balance -75 425 -169

Table 2:

assenger Cars 954230 1079432 1151836

13.8% 7.7%

World production of tyres by vehicle type (‘000 units) 2009 2010 2011 PLC Vehicles 223545 256695 280332 M/H C Vehicles 142482 165797 185434 Total 1320256 1501924 1617601 % change -8.3%

ubber consumption, ‘000 tonnes)

orth America 790 1047 1046

116 atin America 482 615 600

Table 3 Natural r ( 2009 2010 2011 NEurope 1000 1341 1377 Asia 6871 7460 7912 Middle East 66 57 61 Africa 100 114 LOceania 19 12 15 WORLD 9277 10664 11151 % change - 9.1% 15.0 % 4.6 %

77

able 4: roduction of natural rubber (‘000 tonnes)

2009 2010 2011

hailand 3164 3245 3467 ndonesia 2440 2703 2940 alaysia 856 970 1099

TP TIM



India 821 853 893

ietnam 724 770 780

razil 127 133 143

71 Latin America 251 264 281

9702 10219 10970

change - 4.29 % 5.3 % 7.4%

China 644 651 678 VCote d’ Ivoire 206 220 238 Sri Lanka 137 143 149 B Asia 9056 9632 10345 Africa 425 449 4

World %

able 5

change

tion .4% NR Consumption 10664 11151 4.6%

R Balance -446 - 180

TNatural rubber supply/demand balance, world (‘000 tonnes) 2010 2011 % NR Produc 10219 10970 7

N

from area planted, 2003-2010 ountry New Re- Cumulative

output

tonnes) (‘000 tonnes) (‘000 tonnes)

57 4546

Table 6: Expected outputC Planting Planting (‘000 Sri Lanka 15 29 ANRPC Countries 2002 953

78




ls t:

John Keel Tea Market Repor s re all e record levels Elevation ach tim

ri Lanka ended 2010 on a positive note with the National Total Tea average for the year as well as all 00

he production figure when compiled is also expected to be an all time record in excess of 320 million kgs, the h kg harvested in 2008. Due to the increase in the prices

nd production, the gross turnover for the Colombo auction reached a record level of Rs 118.7 billion, gur 102 billion.

Despite the tighter controls on importation of teas for

and re-export and despite the rupee appreciating 3.1 percent against the dollar during the

ar, the export value both in Rupees and in dollars can also be expected to have gone above the records, the latter which was at 1.2 billion dollars, achieved in 2008. When looking to forecast, it can be observed that other commodities too had a good run last year, with rubberprices in Sri Lanka advancing well above previous

d levels. Latex rubber 1X grade reached Rs 598 ubber RSS 1 advanced to Rs 540.

Lanka’s economy would have achieved a etwe percent in

but a senior economist has indicated that growth has

iven this scenario, it is difficult to forecast an improved performance for tea in the new year. evertheless, the sales have commenced on a positive note, with a lot of buyer inquiry around, and it is

likely that the market will be buoyant, in the first quarter. For the rest of the year, weather and world crop situation will have a significant effect on prices. It was evident last year that around the world, climatic conditions were moving towards extremes, be it rain or sunshine. This will not assist Tea growing, as excessive rain or sunshine will not be conducive to growth. On the Marketing of tea, it is good to learn that Sri Lanka urism will work closely with the Tea Board, for a win -win situation. There is much for both industries to benefit through a cohesive program. The 1.1 mkgs. of Ex Estate teas on offer this week m t with fair demand being firm to Rs 5 easier at the commencement and improved by Rs 5 to Rs 10 towards the latter part of the sale. Western High Grown BOPs were Rs 5 to Rs 10 easier, however ended the sale being firm to Rs 5 to Rs 10 dearer, BOPFs too

Sthe elevations reaching all time record levels. This is despite world production improving by around 1million kgs over the previous year. Tcompared with previous igh of 318.7 millionaimproving on last year’s fi e of Rs

blending

ye

recorwhilst sheet r It is good to learn that Sri Lanka Tourism will

in situa on Sri work closely with the Tea Board, for a win -satisfactory growth of b en 7.5 and 8 w ti2010

may decline this year, based on a similar scenario of the global economy. The central bank however, targeted 8.5 percent growth and inflation to be below 5 percent. GN

To

e

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80

which were initially lower, concluded being firm to deuality whilst BOPFs were Rs 5 to Rs 10 easier.

nd Medium PF1s were Rs 15 to Rs 20 dearer,

Rs 10 on average. Select Best BOPFs were barely steady, other good voices shed Rs 10, but gained as the sale progressed, Below Best sorts which were firm to easier at the

a Eliya Teas few bright BOPs were firm, others declined Rs 5. BOPFs eased Rs 5 to Rs 10 on average.

BOPs declined Rs 10. Coloury BOPFs advanced BOPs declined Rs 5 to Rs 10, whilst the BOPFs w

Select Best Low Grown PF1s advanced Rs 10, o shed Rs 10 on average. BP1s declined Rs 10. High and Medium PF1s advanced Rs 5 as the sale prog

LFair demand. Select Best OP1s were firm to Rs 5lower by a similar margin, clean Below Bes an rs were

t types declined sharply by Rs 30 to Rs 50 and more at s

Select Best OPs were steady, Best types were ir

elect Best OPAs eased Rs 10 to Rs 20, Best types were firm to Rs 3 to Rs 5 lower at times, Below Best

Teas. Select Best and Best OP/BOP.SP advanced Rs 5 to Rs 10, Below Best types maintained last levels, poorer types gained Rs 5.

ded a little regular poorer types shed Rs 5 to Rs 10. Select Best and Best tippy varieties met with good demand and

arer. Nuwara Eliya BOPs were irregular following q Uva BOP and BOPFs too were irregularly lower. High awhilst Low Grown invoices were mostly firm.

Western Teas Select Best BOPs declined Rs 20, other good invoices shed Rs 5 to Rs 10, Below Best sorts eased Rs 10 and more, plainer varieties declined incommencement advanced Rs 5, plainer varieties were firm to easier. Select Best Medium BOPs advanced Rs 15 to Rs 20, others declined by a similar margin. BOPFs eased Rs 10.

NuwarA

Uva Teas Rs 5 to Rs 10, others were firm to easier. Udapussellawa ere firm.

CTC Teas thers ressed. BP1s were firm to irregular.

ow Growns to Rs 10 dearer, however the Best types were irregularly d poor types advanced Rs 10 on average, othet

mainly firm. Select Best BOP1s along with the Btimes, Below Best and poor sorts were firm to R

es 5 to Rs 10 lower.

regularly dearer by Rs 5 to Rs 10, Below Best and poor sorts were firm on last levels. Sand poor sorts were irregularly lower by a similar margin. Select Best Pekoes were lower by Rs 30 to Rs 50, however the balance maintained last levels. Shotty Pekoe1s appreciated Rs 20 to Rs 40 and more at times, Best types too were dearer by Rs 5 to Rs 10, Below Best and poor sorts were steady. Excellent demand for TippyB Select Best and Best FBOPs advanced Rs 5 to Rs 10, Below Best types tended irregular, poorer varieties eased Rs 5 to Rs 10. Select Best and Best FBOPF1s moved up to Rs 5, Below Best types teniradvanced above last, Below Best types were irregular, poorer types were lower by Rs 5 to Rs 10



81

Off Grades Select Best liquoring Fngs1s were lower by Rs 10, whilst the Best and the Below Best types depreciated

s 5 to Rs 10, poorer sorts were lower by Rs 10. Select Best BMs appreciated by Rs 10, whilst the Best

ll BPs appreciated Rs 10. All Low Grown Fngs depreciated Rs 10. Select Best BOP1As were firm to last levels, whilst the Best and Below Best were f s 5 on average, poorer sorts however were

n secondaries appreciated Rs 5 o Rs 10, whilst the balance were firm, poorer sorts appreciated Rs 10 to Rs 15 and more at times. Clean

Low Grown Dust1s were firm at last, whils elow Best types gained Rs 5 to Rs 10 on

Rand the Below Best types were irregularly dearer by Rs 5, poorer sorts appreciated Rs 5. A

irm to dearer Reasier by Rs 5 to Rs 10.

Dust Select Best Dust1s declined Rs 5 to Rs 10, whilst the others in the Best and Below Best category too shed Rs 10 to Rs 15 and more at times, poorer sorts declined Rs 3 to Rs 5. Cleat

t the Best and the Baverage.




Tea industry overview 2010

In the backdrop of a global shortfall of around 70 m/kgs at the beginning of the year, 2010 commenced on a positive note with auction averages being much higher than the previous year, coupled with a much greater volume being offered compared to the corresponding sales of last year.

As predicted, the momentum which was evident in the 4th quarter of 2009 continued into the 1st quarter of 2010. By end January 2010 total auction average of Rs.389.74 recorded a growth of Rs.109.25 vis-a-vis Rs.280.49 of January 2009. This however, is not a true yard stick to gauge the market conditions as in January 2009 prices were recovering after the 2008 global melt down.

Demand for tea continued well into 1st quarter although the Western quality season was a disappointment in terms of quality, primarily due to the erratic weather conditions that prevailed. Average price of all grades of tea recorded an increase in almost all auction centres. Another noteworthy feature is the increase in production during the 1st quarter by 47% or 23.4 mKgs YoY. In 2009 the 1st quarter national

production was 49.7 mKgs. This increased to 73.0 mKgs in 2010 recording a significant gain. All elevations recorded increased production with Low Grown in particular gaining 16 mKgs YoY.

Total exports too during the 1st quarter showed a growth of 2.5 mKgs in volume whilst in value terms earnings increased to Rs.34.9 bn recording a gain of Rs.7.3 bn over Rs.27.6 bn recorded during the

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corresponding period of 2009 showing a growth of 24.6% YoY. 2nd quarter, a revival in production was recorded in all major producing countries. Cumulative production to end June showed an increase of approx. 30% with Kenya and Sri Lanka contributing the most.

Notwithstanding the increased volume, Orthodox tea prices continued strong, particularly for the large leaf teas. CTC prices showed a decrease in May following quality, however strengthened by the

end of the quarter. Yet another noteworthy feature during this period was the revenue generated from tea exports. Total exports revenue increased to Rs.71.3 bn showing a gain of Rs.13.6 bn or 23% gain YoY. This figure is the highest ever realized for the period Jan-Jun. 3rd quarter, tea production during this period stabilized totalling 76.6 m/kgs during the quarter. In comparing with the corresponding period last year Low growns recorded a decline of 1.6 m/kgs (3.3%) whilst Mediums recorded a growth of 2.5 m/kgs (24.8%) and High growns recorded a growth of 1.2 m/kgs (8.2%). Prices at the Colombo auction were more stable but did not surpass the buoyant price levels experienced during the same period in 2009.

By the end of the 3rd quarter, revenue from total exports reached Rs.113 bn showing a gain of Rs.16 bn YoY. This also signified the highest revenue recorded for the 1st nine months of a calendar year. It is also pertinent to note that by the end of September, whilst export volumes increased, ie: from 215 m/Kgs in 2009 to 231 m/Kgs in 2010. The FOB value too increased by Rs.40.35 per Kg YoY showing a gain of 9% YoY. From a global perspective too prices for black tea continued to show a growth. As detailed below Sri Lanka continued to maintain a clear distinction in terms of pricing.

4th quarter, based on the available data for October and Novemb gs in er and anticipating approx. 25 m/kDecember (i.e. similar to 2009 production), we would end the qua ual rter with 80 m/kgs totalling an annproduction of approx. 320 m/kgs plus, bettering the previous reco tion on the available rd. Global producstatistics indicate a further narrowing of the excess in recent months primarily due to the increasing shortfall emerging from India.

Tea prices have remained static or improved on the 3rd quarter levels whilst from the Sri Lankan perspective a distinct improvement has been recorded in all eleva tion tions. The overall Colombo aucaverage which totalled Rs.362.26 per kg during the period July-September, moved upto Rs.381.07 per kg during October-December, possibly a reaction to the significantly lower crops harvested in India. A notable trend particularly in November/December was the improved demand for Orthodox Rotorvane teas and CTC teas vs. Low grown type leafy teas.

SUMMARY – 2010

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84

Tea Production Poised to reach All Time High of 320 m/kgs plus, improving on the previous High of 318.6 m/kgs in 2008. Low growns would account for approx. 59% of the annual crop this year whilst High growns approx. 24% and Mediums at 17%.

Tea Prices Colombo auction average tea prices reached All Time Record of Rs.370.61 per kg vis-a-vis the previous all time high of Rs.360.45 per kg established in 2009, a gain of Rs.10.16 per kg (approx. 3%) notwithstanding the appreciation of the SLR vs. USD by approx. 3%.

High growns have moved up from Rs.319.70 per kg in 2009 to Rs.337.82 per kg in 2010, a gain of Rs.18.12 per kg (5.7%).

Medium growns have moved up from Rs.315.47 per kg in 2009 to Rs.330. ain of 88 per kg in 2010, a gRs.15.41 per kg (5%).

Low growns have moved up from 388.16 per kg in 2009 to Rs.393.40 per kg in 2010, a gain of Rs.5.24 per kg (1.5%).

Tea Exports Revenue generated from tea exports would also reach a new record this year and possibly touch the US$ 1.5 bn mark.

In analyzing the major importers of Sri Lankan tea, it is clearly evident that approx. 72% of the exports are between the Russia/CIS and the Middle East. The top 10 destinations account for almost 78% which includes 8.9 m/kgs from Japan.

Sri Lanka Macro Economic Update for 2010 2010 was the first full year of peace in the country after 3 decades. This alone gave optimism for high economic growth, moderate inflation and positive business sentiment.

As at the end of the year, the projections are that the economy would grow beyond the expected 7% having seen growths of 7.1%, 8.5% and 8% in each of the 1st three quarters of 2010. It appears that inflation too would be contained within the targeted levels.

Sector wise GDP growth is seen in all three sectors, although the growth in agriculture has slowed from the high levels achieved at the beginning of the year. In terms of the overall contribution to the national GDP agriculture still maintains its relevance, contributing over 12.5% to the national GDP.

The only negative factor in the economy stems from the trade account where the gap between imports and exports is seen expanding. The trade deficit which was USD 2,798Mn in 2009 is set to touch over USD 5,000Mn by the end of 2010. The inward remittances from the expatriate workforce would not be able to cover this deficit thus leading to a negative balance of payments. The main contributor to this is due to the increase in import cost for intermediate goods. On the basis, that these are for the development projects, the light at the end of the tunnel will only be seen once these projects show the desired productivity increases.



85

From the point of view of the exporters the 3% appreciation of the Rupee would be of concern. Of course, the traditional devaluation of the LKR has not been seen in recent years and therefore the impact may be mitigated. However, further strengthening would be of concern. The lowering of interest rates and low inflation are very positive for both the producer and exporter sectors in the tea trade. The reduction in unemployment is positive from a national point of view although this could lead to pressures on the producer sector who are large scale employers. They would, no doubt, have to move towards selective mechanization.

Market outlook 2011 In an attempt to analyze a possible market outlook for 2011, a rational basis would be to look at the past particularly from the post global financial crisis period and equate with the supply/demand scenarios that existed and are likely to emerge during the year.

In analyzing the global tea production in 2010 it would reveal that Sri Lanka is + 37.6 m/kgs (upto end November 2010) YoY, Kenya + 81.4 m/kgs (upto end October 2010), South India + 5.6 m/kgs (end October 2010), North India -22.3 m/kgs (end October 2010). This must be viewed taking into consideration the shortfall of approx. 70 m/kgs at the beginning of this year.

It has been encouraging to observe that world tea prices have held firm in all major producer countries despite excess production. The increase in consumption around the world being one of the main contributory factors, particularly absorption of tea by producing countries themselves and to a great extent the increasing consumption in India and China. Other larger tea importing nations such as Russian Federation, Iraq, Egypt, Pakistan, Japan etc. are also consuming more. In addition, the low inventory levels maintained by most importing countries in 2009 would also have helped to absorb the increased volumes. Yet another factor that needs due consideration is the steady growth in oil prices which would have a positive impact particularly on Sri Lankan tea prices.

Tea export volumes from China for the first nine months of the year totalled 220 m/kgs vis-a-vis 233 during the corresponding period of last year, approx. 6% lower compared with the first nine months of 2009. This could be attributed to higher domestic consumption. Similarly, tea consumption in India is expected to rise to 870 m/kgs in 2010 compared to 850 m/kgs in 2009, thereby reducing the surplus for exports. As we close the year Indian tea prices are positioned to move up following the recent crop shortfall in North India which as of now totals a negative variance of approx. 23 m/kgs. These factors combined with the customarily lower volumes during the 1st quarter would brew up a strong story for tea in 2011. Nevertheless, the optimism for the tea market in 2011 must be linked with the accent on maintaining a reasonable and consistent quality throughout the year.

- Forbes & Walker Tea Brokers (Pvt.) Ltd.



Sunday Observer – January 9, 2011

Tea promotion brings rich dividends to industry By Lalin Fernandopulle

romotion of ceylon tea as a 'symbol of quality' has paid rich dividends to bring Sri Lanka tea to the fP ore-tor-Promotion, Sri Lanka Tea Board, Hasitha de Alwis.

of Ceylon Tea linked to the lion trade mark which had been advertised for many ye

Sri Lanka is the fourth largest producer

s. De s premium

to e

by

3 has

een overtaken by Kenya.

er r

of f S as i us o his

some main tea producers in the people on tea plantations and estates. The humidity, cool

ral highlands provide a favourable climate for the roduction of high quality tea. De Alwis said total tea exports last year was around 305 to 310 million

kilos which is a significant achievement for the year pure Ceylon Tea up to end October 2010 was 230 million kilos and with re-export of imported teas the total exports reached around 260 million kilos. "The tea industry anticipates exports to reach around 315-320 million kilos of pure Ceylon and foreign teas this year" he said. "Cess funds helped boost tea exports but since 2008 the funds were not received to plough back to the industry as were somewhat different. The Cess collection last year was approximately Rs. 1.3 billion", he said.

front of the global tea world, said DirecHe said the promotion

ears as a symbol of quality helped the tea industry to achieve the feat bringing the much needed foreign xchange to the country.

86

of tea in the world and the industry is amain foreign exchange earner and amajor source of income to familieAlwis said Ceylon Tea fetcheprices and added that during 2009/2010 prices were on an average of US$ 0.50 US$ 0.75 per kilo, higher than thsecond best price which was obtainedKenya. Sri Lanka was the world's leading exporter of tea in the mid 1990s with 2percent of total world export, but since then b"The average price of Ceylon Tea reached a historical high of US$ 3.20 pkilo in 2009 and maintained a similaprice level last year. Many years

ocused promotion of Ceylon Tea contributed to the favourable position", the Director said.

ri Lanka has maintained its prestige for exports of quality tea for over a century since tea wntroduced to the country by the British planter James Taylor in 1867. He said the tea industry will focn promoting tea in Russia/CIS and Middle East/Gulf regions this year. The new target markets for tear are China and USA. Sri Lanka, Kenya, India and Vietnam arey

world. The tea sector employs over one million temperature and rainfall in the country's centp

. The export volume of

government priorities



87

Stock Market




Bourse ends benchmark year It was an encouraging year end week with positive end at 6635.87 up by 1.18 percent. Milanka added 76

indices all through the week. ASPI gained 78 points to ints to rise by 1.09 percent and closed at 7061.46.

Nearly all sector indices recorded an increase week on week.

Aggregate value of turnover was Rs.6.5 billion down by 8 percent of earlier week’s value of Rs.7.1 billion. The average daily turnover for the week was Rs.1.30 billion vis a vis Rs.1.77 billion last week while the share volumes escalated by 59 percent. Market Capitalization improved to Rs.2210 billion as against Rs.2184 billion in the previous week while the market P/E Ratio and PBV remained at 25.2 and three respectively. Banking, Finance and Insurance dominated the turnover statistics with 26.96 percent share followed by

Beverage, Food and Tobacco at 17.54 percent and Manufacturing at 16.48 percent. Total Banking turnover for the w r contribution from Commercial and HNB (Non Voting). Distillerie rms added to the Beverage, Food and Tobacco while Manufacturing ors. Banking, Finance and Insurance at 54.54 percent was also the foremost contributor to the market volumes with SMB Leasing both voting and non vo g and Amana Takaful Insurance being the major contributing counters. Total volumes marked in the sector were at 208 million shares. Dialog sustained the Telecom sector with 14.67 percent share in volumes with nearly 56 million shares. Several crossings in Dialog placed the scrip at the top turnover chart for the week with 10.14 percent of the total turnover a Rs.664 million. Commercial Bank was second in place with 7.27 percent share adding Rs.475.83 million to weekly turnover with the share closing at Rs.260.9. Distille ith Rs.347.8 million and nearly 2 million shares. Dialog remained the most traded stock with volumes of 55.4 million. SMB Leasing both voting and non voti traded 42.6 million and 38.85 million shares respectively.

he selling pressure of foreigners continued in this week with net selling at Rs.297.43 million. The foreign tivities became less attractive during the week with a dip of 26.4 percent and 40.4 percent of foreign

purchase and foreign sales against last week. The average foreign purchases were recorded at Rs.205.1million as against Rs.278.83 million last week while average sales were accounted at Rs.264.63 million acompared to Rs.443.93 million last week. Malwatte (Non Voting) emerged as the top gainer of the bourse with the scrip closing at Rs.62.50 recording an increase of 37.06 percent from last week. Agalawtte and Kahawatte followed highlighting

po

The Colombo Stock Exchange

eek was at Rs.1.76 billion with majos, Bairaha Farms and Three Acres Fasector was supported by Grain Elevat

tin

t

ries added 5.31 percent to the total turnover w

ng

Tac

4 s

a

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89

growth of 26.51 percent and 24.44 percent over last week. Agalawattepectively.

he year to date return of the Colombo bourse rstock exchange for 2010. It being a benchmarksectors at bourse showed a robust growth highlalso indicated YOY increase of 83.42 percent. Aggregate market turnover and volumes reflectMarket P/E at 25.2 as against 16.55 in 2009. Dmarket cap of Rs.6.2 billion. In the ensuing week the bourse commences its participa r end, s

and Kahawatte contributed turnover of Rs.30.7 million and Rs.22.4 million res Parquet appeared as the major loser of the week, scrip closing at Rs.21.1 showing a dip of 27.24 percent over previous week. Confifi Hotel and Blue Diomands were other loses in the bourse slipping the price by 12.93 percent and 12.82 percent respectively. T emains at 96.01 percent making it Asia’s best performing

year with peak index of 7147.8 in early October. Key ighting an upward movement in all sector indices. MPI

ed growth of 299 percent and 277 percent respectively. uring the year nine new listings were made with total

ation as witnessed towards yea

ctivity following new set of guidelines. Backed with retail ound earnings potential, estimated 75 new IPOs in the

coming year and with the positive macro economic outlook, infrastructure developments, favourable scal and monetary policies we expect the bourse to remain a lucrative investment hub. fi




MBSL revises MidCap for 2011

The MBSL Midcap Index which recorded 125 percent growth for the year ended 31 Dec 2009 and sustained a growth rate of 70 percent for the year ended 31 Dec 2010, has been revised.

MBSL constructed a Stock market Index: the "MBSL Midcap Index", which measures the aggregate price level and price movements of medium size companies listed on the Colombo Stock Exchange (CSE).

The All Share Price Index (ASPI) measures the share price movements of all the stocks listed on the CSE whilst the Milanka Price Index (MPI) measures the price movement of highly capitalized companies listed on the CSE.

There was no index to measure the price movement of medium sized companies listed on the CSE. The MBSL Midcap Index filled the vacuum.

MBSL Midcap Index can be used as the benchmark index by individual and institutional investors who prefer growth but are prepared to with stand only conservative levels of volatility in their equity investments.

It can be used as the benchmark index for the introduction of Midcap linked Index funds.

The Midcap Index, together with the Milanka Price Index (MPI) generate valuable signals for portfolio managers for switching between larger-cap more sensitive stocks and the midcap less sensitive stocks in response to changing capital market conditions.

The MBSL Midcap Index is revised annually. The last revision was effect on 1 January 2011. The composition of the revised MBSL Midcap Index is as follows:

Banking, finance & insurance 1. L B Finance PLC 2. Pan Asia Banking Corporation PLC 3. Merchant Bank of Sri Lanka PLC

90



91

4. Janashakthi Insurance Company PLC 5. Nations Trust Bank PLC Beverage, food and tobacco 6. The Lion Brewery Ceylon PLC 7. Renuka Agri Food PLC 8. Bairaha Farms PLC

Manufacturing 9. Royal Ceramics Lanka PLC 10.Tokyo Cement Company (Lanka) PLC 11. Chevron Lubricants Lanka PLC

Healthcare 12. Asiri Hospital Holdings PLC

Chemicals and pharmaceuticals 13. Chemical Industries (Colombo) PLC

Land and property 14. Overseas Reality (Ceylon) PLC 15. Colombo Lanka & Development Company PLC

Footwear and textile 16. Odel PLC

Trading 17. C.W. Mackie PLC 18. Brown & Company PLC

Diversified holdings 19. The Colombo Fort Land & Building Company PLC 20. Sunshine Holdings PLC 21. Hemas Holding PLC

Investment trust 22. Renuka Holdings PLC

Construction and engineering 23. Colombo Dockyard PLC

Power and energy 24. Vallibel Power Erathna PLC 25. Hemas Power PLC




Retailers drive bourse to recent high

Retailers drove the Colombo bourse to a recent high on a turnover of Rs.2.63 billion, up from the previous day’s Rs.1.97 billion, with both indices gaining sharply in a day of volatile trading with large quantities of PC House, Citrus (Reefcomber), Grain Elevators and Richard Pieris traded. "There were very big volumes of these stocks which were chased mainly by retailers," Prashan Fernando of Acuity Stockbrokers said. "PC House was the day’s top turnover generator contributing Rs.274.8 million with nearly 17.7 million shares done gaining Rs.2.70 to close at Rs.15.90." The counter traded yesterday between Rs.13.90 and Rs.16.80, substantially higher than its issue price of Rs.12 about August last year. The stock slumped to a low of Rs.8.50 after the IPO but has now gained steam, brokers said.

Citrus too saw a hefty Rs.21.60 increase to close at Rs.67 on nearly 3.6 million shares done between Rs.49.90 and Rs.69.10 contributing Rs.221.8 million to turnover. Grain Elevators gained sharply with the share moving up Rs.16 to close at Rs.95.40 on over 2.1 million traded between Rs.77.90 and Rs.95.40. Though well below heights reached by Bairaha Farms, also a chicken producer, yesterday’s was the sharpest single-day gain by Grains after the run on poultry stock began.

Richard Pieris was up a rupee to close at Rs.11.80 on nearly 14.4 million shares done between Rs.10.70 and Rs.11.90 while Citrus warrants gained Rs.5 to close at Rs.16.40 on 7.6 million done between Rs.12.40 and Rs.17.70.

JKH was down 40 cents to close at Rs.299.90 on nearly 0.3 million shares done between Rs.297 and Rs.300 with one crossing of 156,000 shares at Rs.298.

"We saw some movements in plantations too with Kelani Valley up Rs.4.90 to Rs.165 on over 80,000 shares, Agalawatte up Rs.4.10 to Rs.74 on 0.1 million, Kegalla up Rs.3.30 to Rs.174.50 on over 0.1 million, Kotagala up Rs.2.30 to Rs.129 on 0.1 million shares and Horana up Rs.2 to Rs.39.40 on 0.6 million shares," Fernando of Acuity said.

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Big trades in Laugfs, Richard Pieris & Pan Asia Bourse closes week on upbeat note

The upward movement on the Colombo bourse continued yesterday with a turnover of Rs.4.14 billion, down from the previous day’s Rs.4.2 billion, with both indices gaining tidily – the All Share by 82.23 points (1.25%) and the Milanka by 92.38 points (1.28%) with 117 advancers outpacing 66 decliners.

The big business generators were Laugfs Gas, both voting and non-voting, Richard Pieris, Pan Asia Power which began trading yesterday, Environment Resource Investments and Grain Elevators.

Useful contributions were also made by Sampath Bank, Odel, NDB, Commercial Bank and JKH.

"Retailers drove the market upwards and the expectations are that this trend will continue into next week," Prashan Fernando of Acuity Stockbrokers said. "While much of the business was on second tier stock, some of the big ones like Sampath, NDB and Commercial Bank also moved."

Fernando noted that decliners were relatively few and far between.

Laugfs continued its upward run generating the day’s top turnover of Rs.392.1 million with nearly 11.2 million shares traded between Rs.31.50 and Rs.37 gaining Rs.6.30 to close at Rs.37 for the voting shares. The non-voting shares too were up Rs.5.30 to close at Rs.30 on 7.3 million shares done between Rs.25.90 and Rs.30.50.

Richard Pieris closed 20 cents up at Rs.13.40 with nearly 27.1 million shares done between Rs.13.30 and Rs.14.10 while Pan Asia Power rose 60 cents above its Rs.3 issue price to close at Rs.3.60 on 63.3 million shares traded between Rs.3.50 and Rs.4.

ERI was up a substantial Rs.13.90 to close at Rs.99.30 on over 1.9 million shares traded between Rs.87.50 and Rs.99.80. Analysts attributed part of the interest in the stock was to a news report that its parent company had done well overseas.

Among the chicken stock, Grain Elevators gained while Three Acres and Bairaha declined – Three Acres by 20 cents to Rs.105 on 0.5 million shares done between Rs.101.50 and Rs.115 and Bairaha by Rs.20.30 to Rs.410 on over 0.1 million shares done between Rs.405 and Rs.421.50.

Analysts said that some foreign outflow has been noted in recent days but there was substantial domestic interest. They said that foreign buying generally comes late in January after fund managers return from vacation and take decisions on allocations to various markets.

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94

Business




Challenging the myths of entrepreneurship

The Global Entrepreneurship Week (GEW) is celebrated in November every year. GEW showcases current entrepreneurs and innovators all over the world, making examples of them to encourage budding entrepreneurs. Entrepreneurs are those who spot opportunities in the market that others may have missed or not considered before. Their enterprise contributes to business growth, the development of the economy and can operate to the wider benefit of communities everywhere. Given the right open and dynamic business environment - entrepreneurship can flourish. However many people have mistaken ideas about entrepreneurship. Take the following examples:

Entrepreneurs are born Entrepreneurial skills can be taught. Aidentify the gap in the market, have the wn company and the determination to succeed. 'Ideators' is an annual reality TV program, based on a competition to demonstrate enterprise. It is run by the British Council as part of the global annual National Entrepreneurship Week. The aim of the program is to recognize and reward Graduate Entrepreneurship in Sri Lanka and the UK. Teams from Sri Lanka and the UK take part in 11 entrepreneurship challenges, to test every aspect of

their business skills and culturalunderstanding. British entrepreneur David Howath was one of the UK's participants in the 2010 show. His idea was to sell louver blinds as an equally versaalternative to curtains. David is hoping to secure a worldwide patent and put his new businetraining to good use. The UK issupportive incubator for new busines

ideas, small (like David's) or large. Foreign investors will have no difficulty in finding profitable businesses in which to invest. At the SrLanka Design Festival 2010 craft communities from across the island displayed the results of months osuccessful close collaboration with 13 top UK designers, as well as other European and USA desig

95

ll you need is to initiative to start your o

Certain situations produce more conflict than others. By knowing the antecedents ofconflict, managers are better able to anticipate conflict and take steps to resolve

t becomes dysfunctional

it, if i

tile

ss a

s

i f n



professionals. The 'new' products on show were the outcome of the skil

to encourage

Fathima is an example of the fact that it is possible for women to be successful in business without losing their social, cultural or religious identity. Her company, Ramsi Fwhich appeal to a wide market, not only locally but in other coun

Only about profit? In 2009, Sri Lanka's Dr Wijaya Godakumbura won first prize at Bottle Lamp' project. Dr Godakumbura, a surgeon who witnessed the results of unsafe kerosene lamps in many parts of rural Sri Lanka, designeda fire. The BBC World Challenge competition, organized annually by

world that have shown enterprise and innovati

ls of Sri Lankan craftspeoplecoupled with the design perspective of foreign designers.

For example, traditional lacemaker, Kamala Uyanage of Anuja Lace worked with British designer Emily Barnard to produce unusual lace necklaces. This not only gave Kamala access to Emily's international experience but also insight into ways to further develop her craft. In 2006, the Export Development Board of Sri Lanka launched a rolling program to help Sri Lankan giftware and craft entrepreneurs develop niche export markets. The latest intake of SME crafts

t will travel all over the countrymanufacturers and artisans are now part of a road-show thaand promote design innovation and new export market linkages.

Fit a stereotype? athima Nisreen, a young wife and mother in Hambantota recently won the top prize for Youth BusinessF

International Entrepreneurship, beating competitors the world over. Her prize included travel to Mexico, Europe and the UK, where she was presented to Prince Charles as an inspiring role model for women in her Sri Lankan community.

ashion, produces ladies' bags and clothes tries too, such as the UK.

the BBC World Challenge with his 'Safe accidents involving

a lamp that cannot roll over and cause

BBC World News Limited, promotes small businesses from all around the on at grass roots level. With his simple, inexpensive but effective design, Dr Godakumbura saves thousands of Sri Lankans from terrible burns and injuries due to unstable oil lamps. The BBC initiative celebrates entrepreneurship that makes a difference to communities all over the world.

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Although the UK is primarily and successfully a knowledge based economy, it does not own the patent on good ideas and supports them wherever it finds them. Sri Lankan entrepreneur Dayasiri Warnakulasooriya started anof just Rs 50,000, on a small premises with a hand-pressed clay k Today, his company, Midaya Ceramics, employs several hundred remises in Maharagama - and records a multi-million rupee annual turnover. Midaya ceramic finds it relatively easy to win contracts from prean estimated 65 percent of all the high quality goods it produretailers in the UK. Midaya's customers range from Marks & Spencer, John Lewis atop end outlets such as Harrods. The underlying strength of the UK economy means that UK cfair price for the best quality goods.

export company in 1968, with a capital iln and four employees.

people on its own large factory p

stigious and niche companies in the UK: ces are commissioned by designers and

nd home-ware designer, Susie Watson to

onsumers will always be willing to pay a




Women in NE reconstruction Chamber promotes partnership programs: Sanjeevi Jayasuriya The Chamber of Construction Industry Sri Lanka focuses on post-disaster reconstruction with special

n will benefit the local construction industry, Chamber of Construction Industry Sri anka Secretary General and CEO Dakshitha Thalgodapitiya told Daily News Business.

he Chamber of Construction Industry of Sri Lanka

ustries has focused its ioritized attention on capacity building of the

construction contractors in the Northern region as well as in the Eastern province. With post disaster reconstruction and infrastructure development receiving the highest priority of the Government the demand for skilled labour will conti The Government has recognized the need to create a construction skilled labour manpower reserve pool of 25,000 in the immediate future. The CCISL has launched an ambitious craftsmanship program in the North and East to support this effort. The Chamber has succeeded in obtaining assistance on funding from Germany to undertake training programs design to produce 5,000 construction craftsmen in Batticaloa. This three year program will be implemented with collaboration with GTZ. The targeted deliverable output is expected to be achieved through the establishment of seven construction craftsmanship centres in Batticaloa. Similar programs has been promote in the partnership with USAID in the Northern region covering Vauniya, Mannar and villages in th The training programs are designed to in terms of curriculum development by the Tertiary and Vocational Education Commission (TVEC) at the completion of three month class room raining. The CCISL will facilitate on the job training for a further period of three months using the Chamber's membership base. The trainees will be assessed after the six month training program after independent assessment and NVQ level 3 accreditation by the TVEC will be provided. For those craftsmen who have obtained NVQ level 3 accreditation the Chamber will act as the facilitator to the employer with

emphasis on empowerment of women. The Chamber realizes the importance of empowering women, especially in war torn areas. It conducts a number of training programs to enable women to become self sufficient. This in turLHere are excerpts of the interview. T

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(CCISL) which has been continuously advocating the need to develop regional construction indpr

nue.

Female participation in NE development vital

d e Anuradhapura District.

's t



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construction contractors. The Chamber has also recognized the need to sup lf employed by providing them with business development skills. The Chamber has included formation

g skilled workers who could act as small scale contractors in e of females in the construction ning program to facilitate female

articipation in the construction industry.

ith 27,000 female headed households in Batticaloa the Chamber will apart from providing training in

he Government ent of a women's entrepreneurship development fund to provide

nancial assistance to enhance self employment amongst women.

elihood development and empowerment of nly from the Government, local authorities,

struction industry such as vendors and ll these endeavours are designed to enhance

n to the regional construction industry in the North and the East, to facilitate eployment of local contractors in regional development, a number of other initiatives is required. Such

nnel and training of senior craftsmen with al vocational educational framework. The

raftsmen to level 4 or 5.

ociation in Batticaloa to use its state-of-the-5 institutional training will be provided as

rnment, GTZ and the USAID for providing rative assistance to undertake this program is in the process of establishing long term

artnerships with Vocational Training Authority and other tr gh livelihood deve t. Increasing the d self- employment opportunities is key to

of gender balance and sensitivity in post-disaster reconstruction.

vince.

port craftsmen who wish to beseof community based organizations by groupinthe development of rural infrastructure. With no significant presencindustry, the Chamber has specific gender strategy included in the traip Wconstruction crafts such as carpentry, masonry, plumbing, electrical wiring and aluminium fabrication, the CCISL intends promoting entrepreneurship development services particularly to widows affected by war. A number of business models have been identified to promote the development of women in construction related activities such as the manufacture of concrete hollow blocks, compressed soil blocks, pre-cast concrete products among others. The Mahinda Chintana policy document of tspecifically identifies the establishmfi The Chamber is confident that its programs to provide livwomen in the Batticaloa district will receive the support not odonor community, but also of key stakeholders of the conmanufactures of construction input including cement. While athe supply of craftsmedinitiatives include upgrading of technical and managerial persoa clear career development path now designed under the nationChamber will also set up facilities to upgrade NVQ level 3 c A partnership is already been put in place with Red Cross Assart technical education facility where both NVQ level 3,4 or well. The Chamber while being grateful to the German Govefinancial and collabop aining providers to ensure availability of

affected areas. The Chamber is committedlopmen

skills to the construction industry particularly in the conflictto support the regional industries and peace building throuparticipation of women by providing training, employment anmaintenance The participation of conflict affected people in post-disaster re-construction and regional infrastructure development will facilitate accrual of benefits to those who have suffered in the conflict. The Chamber will act as a catalyst to build capacities of regional construction contractors and to promote formation of construction consortia among regional contractors. It will also promote establishment of joint ventures between contractors in the North and the East region and the large scale contractors outside the region with majority of major contractors coming from the Western Pro The Chamber has already promoted a dialogue between these major contractors and small and medium scale contractors in the region to join hands in the undertaking of construction contractors in the region. With over 95 percent of the regional contractors falling within the definition of micro and small scale enterprises lack of access to finance will become a major constrain. The Chamber intends promoting a



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campaign among the banks who are active in this region to provide funding where the Chamber could provide its professional inputs virtually playing the role of a surety agent and a business development service provider. It has also proposed to multinational development banks regarding promotion of a specialized machine leasing company from where those who do not own or have the capacity to acquire machinery could

btain plant, machinery and equipment on operating lease or on hire purchase basis.

ilding should be considered as the esponsibility and obligation of every citizen.

o The post-disaster reconstruction building resilient societies and building peace, re-integrating those affected communities socially and economically requires concerted efforts and commitment from all sectors of the industry. The current environment has provided large number of business and income generating opportunities to every living being in this country. Therefore, supporting the efforts of the Government in the infrastructure development, post-reconstruction and peace bur With the construction industry being forerunner to every development endeavour, industry stakeholders have greater responsibility to discharge, it should be viewed as a window of opportunity. Equal access to economic and livelihood opportunities putting in place participatory and inclusive decision making mechanisms are cornerstones of sustainable development.



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Agriculture




New world order will see farmers and miners in charge

* Commodities look set for another bull run this year, driven by fundamental demand from emerging economies – principally China

By Garry White and Rowena Mason

"All these people who got MBAs made a mistake," a ording to Jim Rogers, the commodities investor, at ccthe Reuters Investment Outlook Summit last month. "The City of London and Wall Street are not going to be great places to be in the next two or three decades. It’s going to be the people who produce real goods in charge – the farmers and th pc since the beginning of last e miners." With commodities up 42year, according to a basket tracked b true for 2010. An array of metals y Reuters, his words certainly ringfrom gold to copper have hit record highs, while d silver is up 83pc. palladium has doubled an

Coal, potash and other mining companies have also en a key target of merger and acquisition activity. beWe believe this isn’t just a short-term rally, and would argue that commodities will have another bull run this year, driven by fundamental demand from emerging economies – principally China.

Among the specific trends to look out for: Commodities will decouple from the dollar

It’s an old assumption that commodities will do well when the dollar is weak. But this quarter, oil, copper and gold have begun to move in tandem with the US currency. Investment tends to flow out of commodities when the dollar is doing well. But the new theory is that demand for raw materials from Asia and other emerging markets is so strong that it ill override this trend. w

Gold and silver will be supported by worries on sovere n debt igIt’s not inconceivable that gold could break through $2,000 per ounce within a few years. Gold has proved a safe haven asset class again and again, endi the 12 months up for the tenth year in a row. ngMeanwhile, silver is not only regarded as a "store of value" investment against inflation but, unlike gold, it also has industrial uses to boost demand.

Corn is top of the crops Analysts from Barclays Capital, Credit Suisse and Rabobank all choose corn as one of their top commodities for 2011. The drought in Russia, causing crop failure in corn and wheat, supported the price

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last year. Analysts at Rabobank believe a combination of tightening supply, "heightened political risk amid tightening food supplies" and rising investor interest in agricultural will continue to boost the price.

"Fundamentals are only part of the story," they claim. "With agriculture and agricultural futures markets increasingly being viewed as an attractive asset class by investors, the role of outside macro drivers, including currencies, energy correlation and speculative money, are becoming more important in shaping agricultural price movements."

Cotton is also one to watch, with inventories are likely to fall to a record low at the end of the season in July 2011.

Oil will hit $100 All the signs suggest that oil will break out of the $70-90 trading range seen this year. There is little suggestion that OPEC, the world’s powerful cartel of producing countries, will act swiftly to increase production and dampen prices.

Meanwhile, runaway Asian demand continues apace. Some analysts are worried about the economic consequences of this. Credit Suisse research notes: "If energy prices were also to break significantly higher, we would be concerned about the potentially destabilizing consequences for corporate profitability and the recovery trend."

Chinese will remain hungry for base metals China may raise interest rates again – and again – in an attempt to halt price inflation. This may cause a correction in industrial metal prices in the first half. But its fundamentally rampant demand for raw materials will continue to fuel the copper, zinc, nickel, tin and aluminum prices. These metals will also be supported by the launch of multiple physically-backed exchange-traded funds by the banks.

However, we’re not convinced about Oleg Deripaska’s plan to launch an aluminum based fund, owing to the cost of storing the light metal and predict that this may not get off the ground in 2011 as planned.

Weather woes will increase volatility This year has seen a slew of meteorological quirks causing supply problems in the commodities markets. Most recently, floods have forced Australian coal mines to shut, while rains affected production in Indonesia and Colombia. Then there were the Russian crop failures in the summer. And this winter extreme cold across Europe and the US has boosted energy commodities. In Brazil, the world’s top sugar producer, lack of rain has limited cane yields, while orange juice has risen on fears that frost will damage crops.

Amrita Sen, a commodities analyst at Barclays Capital, said: "There have been some very clear weather patterns emerging different to what we’ve seen in the past. It will be an important theme, especially in the first quarter for coal."

© Telegraph Media Group Limited 2011



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ICT



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ICT industry: changes to watch out for The ICT and BPO Era of Sri Lanka

First of all let me wish you a very happy new year. I wish it will be a year where your personal, professional and business related dreams come true. It is the development era of the country and we are lucky to be free of the disturbing war. So, there is no reason why we can’t make our dreams true.

Today happens to be a special day for this column too. It is the twentieth consecutive weekly column of the "ICT and BPO Catalyst - To Make Sri Lankan Economic Dreams a Reality!". This is the place where we discuss about Information and Communications usiness Process Outsourcing Technology (ICT) and B(BPO) sectors.

Thanks for following us so far. I get feedback from readers regularly and that helps me to adjust it to suit your needs. Some kind words almost every week from our readers have encouraged me to write continuously. Truthfully speaking, writing a weekly one page column is very time consuming but when we consider the benefit for the readers, I have no doubt that it is worth it. So, we will be with you in this new year as well through "ICT and BPO Catalyst - To Make Sri Lankan Economic Dreams a Reality!" column.

Riding the Wave of Change As it is the beginning of a new year, I wanted t t about future and trends in ICT. If the ICT o discuss a biindustry is defined by anything, it is the constancy of change. From month to month, week to week and even day to day, new trends emerge and old ones go the way of OS/2 and COBOL.

So what are the trends to watch and where do we need to focus our attention as we move towards a new decade?

With the world increasingly engaging online thanks to the power of Web 2.0, it’s time to look to the future, where Web 3.0 promises to organize information in a dramatically more logical way than is currently possible with today’s search engines. The semantic capabilities offered in Web 3.0 will allow machines to actually comprehend and make conclusions about the information they receive rather than simply matching keywords. Information will be delivered in a much more tailored and personalized way to meet the needs of different people and this will clearly have a huge impact on the way we use the internet to find resources.

Businesses will change the way they market and package services in order to take advantage of these new capabilities and leverage the growing impact of the virtual world. Improvements in the way we organize and process information on- and off-line will also enable businesses to operate more efficiently and effectively.

Globalization ICT is truly a global industry and offers those working within it an international career. I myself am a classic example of this, having already worked in four different countries (US, UK, Australia and Sri Lanka) and been trained in the US and Malaysia.



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We’re sure to see more globalization of the industry over time. ICT work can easily be moved from one geography to another. This is why we speak so fondly of outsourcing due to the economic benefits it could bring for Sri Lanka. The environment is supportive of bringing more and more work from western countries to provide outsourced services from Sri Lanka.

Green ICT One clear global trend has been the green agenda and environmental sustainability. The Australian Computer Society of which I have been a part of, played a key role in contributing to the green debate when it undertook the first audit of carbon emissions resulting from Australian business, giving the industry the first clear data about the environmental impact of business use of technology. This document not only quantified the contribution of technology usage at approximately eight million tonnes of CO2 per annum, or 1.52 per cent of the total emissions from total energy consumed, but also encompassed a range of strategies to help reduce carbon emission, helping ICT vendors and users alike to make more informed choices about their handling of technology.

There are almost unlimited ways in which responsible businesses can reduce their impact on the environment, such as:

•Using green data centres and server virtualization to maximize efficiency; •Strategies to optimize and reduce travel and use of vehicles for distribution etc;

= PC optimization policies around turning off PCs overnight, using sleep mode and off-peak processing;

= Effective monitoring of technology resources and facilities to ensure they are operating at optimal efficiency and not wasting power;

= Use of telecommuting and remote access in preference to face-to-face meetings and support sessions;

= Strategies to collect, recycle and safely dispose of PCs are also an essential part of the technology life-cycle.

If we are to make a significant improvement to our carbon footprint, then businesses need to explore these and other issues prior to making purchasing decisions. The pay-off is that most of these strategies are not only environmentally sustainable, but they often involve a significant reduction in costs as well.

As always, new gadgets will continue to storm the market and offer new ways of doing things. e-Book readers, laser virtual keyboards and smart phones are just a few devices on the near horizon. Their success or otherwise will doubtless be debated in future commentaries by myself and others.

Top Ten Trends The analyst firm IDC has announced top ten ICT trends for 2011 for Asia/Pacific in a media statement issued earlier this month. Below is extracted from that.



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1. Socialytic Applications Will Transform the Collaboration Market IDC predicts that 2011 will be the year where the trend of combining social media with business analytics will make its mark across most of the key enterprise applications in use today.

2. Mobilution - Mobility Will Make A Leap Into IT Tablets, iPads and large-screen smartphones can now run almost fully functional versions of all enterprise software and services. With the move towards cloud computing, we are now seeing many of these IT systems being delivered in virtualized environments minimizing the importance of device-based computing power.

3. "Less for Less" - Self-Service Customer Portals Will Spearhead Low-Cost Customer Centricity 4. Analytics Will Accelerate the Chase For Asian Consumption Competition is expected to intensify in Asia with more businesses entering into the region given its growth potential. As a result of its ability to improve decision-making and drive revenue growth, business analytics is predicted to take center stage as the technology is increasingly viewed as an enabler for organizations to compete more effectively.

5. Apple’s iPad Will Catalyze Interest in Client Virtualization

6. Services and Federation Will Lead "Enterprise-Class" Cloud Deployments The tak e e-up of private cloud technologies and services in medium- and large- enterprise will acceleratfurther in 2011 due to lingering concerns about security, reliability and performance of public cloud services.

7. Smart Enterprises Will Adopt Catalog-Based IT The users will become more demanding for IT resources. Shorter time to market and instant provisioning of comp ns uting resources are becoming compulsory requirements. The only way to meet these expectatiois to track and provide IT resources through a catalog-based ICT.

8. Business-as-a-Service: The answer to IT-business integration? Business-as-a-Service is an offering that focuses on business processes rather than on technology replacement. It is a trend that illustrates the importance and impact on not only the IT space but the whole business process outsourcing space in general.

9. Telecom Services Providers Will Return to IT

10. Telecom Service Providers Will Look to Cloud Computing for Operations

Until Next Week If you have any questions, you can contact me and I am more than happy to discuss topics and questions you may have through this column. Enjoy the festive season. Take a break if possible and revitalize yourself to face the New Year stronger. Let’s together make Sri Lanka the best place for ICT and BPO. That is my New Year wish!



The Columnist

The columnist Yasas Vishuddhi Abeywickrama is a professional with significant experiences in the BPO activities mainly in the ICT sector both in onshore and offshore roles. He was recognized in 2003 by CIMA (UK) as an up and coming business leader for the future. In 2009 he was named the Young Professional of the Year by Professions Australia. He has worked in the USA, UK, Sri Lanka & Australia, being trained in the USA & Malaysia

and worked with clients such as British Telecom, Telstra & Siemens. He has worked for companies that are significant players in the ICT/BPO industry such as Accenture and Virtusa. He works on a BPO human resource capacity building venture for Sri Lanka called The Lanka BPO Academy (www.lankabpoacademy.lk). Yasas is happy to answ

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er ICT/BPO related questions via this column – email him at [email protected] .



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FCCISL in Print Media




More avenues for economic growth FCCISL has important role to play: Message from the former President Federation f Chambers of Commerce and Industry of Sri Lanka Kosala Wickramanayake for Annual Report 2009 Following the defeat of terrorism at the banks of andi Kadal, Sri Lanka stands at the cusp of a momentous new era. Peace has returned after three long decades and with it a renewed sense of purpose. There is optimism everywhere. The opportunities for the growth of business are immense. We live in a land of great potential and the FCCISL - as the apex body representing the chambers of trade and commerce - has an important role to play. The accelerated economic development now underway brings with it a promise of prosperity. We must ensure that its full potential is harnessed. This is not an easy task, but our organization, with its scope and reach, can do much to overcome the challenges.

Given the country’s recent economic perforhopeful. Despite the financial, fuel and food crises around the world, which turned into a full-blown economic recession, our ec omic demonstrated its resilience by recording a 3.5 percent growth in 2009. Even more remarkably, it achieved a growth of 6.2 percent in the final quarter of the year. This, in my opinion, is the beginning of a new era of economic prosperity. Other indications are also promising. Inflation was brought down to 3.4 percent, and the exchange rates were maintained at relatively stable levels. The benchmark interest rate saw a sharp decrease to 7.5 percent. Foreign exchange remittances by our expatriate community grew to US $ 3.3 billion, while timely government interventions in the financial and fiscal markets had a positive impact at the macro-economic level. As expected, the country’s tourism industry received a great boost with the defeat of terrorism. It grew by 49 percent during the year, compared to an average of just 14 percent in the Asia-Pacific region. Meanwhile, the infrastructural bas for an economic takeoff is being laid. This is evident in the large-scale investment in ports, airports, highway networks, power, railways irrigation and water supply. It has created an environment conducive to attract both foreign andomestic investment. Also, the proposed reforms in the spheres of education, health and social safety wil hopefully, lead to significant strides in the progress and well-being of our people.

Private sector There are other encouraging developments. Among these is the decision of the International Monetary Fund (IMF) to help place the country’s macro-economic fundamentals on a sound footing by grantinBOP support of US $ 2.6 billion under a stand-by arrangements facility. We hope that the Government will, as a matter of priority, initiate reforms in certain important areas.

o

N

Economic performance mance, there is good reason to be

on

Kosala Wickramanayake

e

,d l,

g

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These include the higher education system, the rigid and complex labour laws, the public service, the tax stem and the investment regime. Assistance to the Small and Medium Enterprises (SMEs) is also

is are vocational training, agriculture and agro-resources and human capital necessary for cy framework is in place, we can achieve an

conomic growth of 8-10 percent.

y. With 50 chambers of trade and industry nd business associations affiliated with us, and over 12,500 member businesses, we can do more than any

ean Union. Our main partner in this initiative is the reputed NGO, Oxfam GB.

ian project. It entails us ct. We will collaborate to

rove the unsanitary conditions in the camps for internally displaced ersons. Training continued to be an important aspect of the Federation's activities. Our Chamber

Academies upgraded the sk ployees and job seekers in various regions. They theoretical and practical

e National Construction uctured as profit making

played a role in nstruction industry as

asonry, building painting, carpentry, welding, electrical wiring and air-conditioning. Those who

was designed to recognize, reward and motivate the country's ntrepreneurs, was a great success. Aimed at promoting innovative entrepreneurship and good business

entrepreneurs. Some of hem have transformed their businesses into textbook examples of success stories. They have been able to

showcase their products internationally, and h ld-class players. We also continued to focus

synecessary. Other areas that need greater emphasprocessing. Sri Lanka is fortunate in possessing the natural progress. In fact, I believe that if the proper Government polie As I stated earlier, the Federation has an important role to plaaother organization in the private sector. Today, we are present in every region via this extensive network, and so can harness its strengths to spur the economy forward.We launched a number of important initiatives in 2009. The most ambitious among these is the Chamber-Network Engagement in Economic Rehabilitation (CHEER) project. This Rs 266 million project, which focuses on rehabilitation efforts in the North and East, is funded by the EuropI During the year, we also partnered with Oxfam GB on another humanitarworking together to reduce the vulnerability of civilians affected by the conflireduce the risk of disease and impp

ills of entrepreneurs, emconducted a range of certificate and diploma courses that covered essential knowledge.

Entrepreneur of the Year Meanwhile, the Handwerk Centres - which we run in collaboration with thAssociation of Sri Lanka and Handwerkskammer Koblenz, Germany - were restrentities. We also increased the intake of trainees to these centres, which haveskills development. They have trained many individuals in co

notable-related fields such

msuccessfully completed their training have received locally and internationally recognized certificates. It is imperative that we enhance the expertise of our workers, so that they receive a higher pay here and abroad. In 2009, the Federation organized the Sri Lankan Entrepreneur of the Year event for the 14th consecutive year. This event, whichepractices, the Sri Lankan Entrepreneur of the Year Award is the most prestigious honour bestowed for entrepreneurship in the country. I believe that this awards scheme has done much to encourage our homegrown t

ave become woron the Small and Medium Enterprises (SMEs). We have for many years emphasized that the SME sector is the backbone of the national economy. Many SMEs have today become prominent players in business largely due to the advice and support extended by our Small and Medium Enterprise Development (SMED) division.



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Peace building Our Regional Chambers Sri Lanka (RCSL) program will certainly go a long way in empowering the SMEs. It aims to create a sustainable regional chamber movement that can cater to the changing needs of the private sector, particularly the numerous SMEs in the outstations. Key areas of the program are the development of organizational capacities and professional competencies, lobbying and policy advocacy, service development, income generation and peace building. It is pertinent to mention here that there is

n imbalance between the development taking place in the Western Province and the other regions. This

ration continues to follow a dynamic approach on international trade affairs. We ave extensive international connections and have used them for the benefit of local businesses. Among

deration was established 37 years ago, it has accumulated much experience in all aspects of ommerce and industry. If we take into account the collective knowledge and expertise of our member

chambers as well, then this experience w rmore, we have always been in touch

akers - has proved very useful in this regard.

e proactive approach in rebuilding the lives shattered during the long rawn-out war. Our partnership with Oxfam GB to help the people of the North and East has proved

asituation needs to be remedied if we are to avoid social instability. We must never again be confronted with the spectre of another youth uprising. The private sector needs to engage with the State authorities as well as international organizations and donors to ensure that development takes place more evenly in all areas. Multilateral institutions such as the International Monetary Fund (IMF) and the Asian Development Bank (ADB) can also play an important role.

Restructuring program Meanwhile, the Fedehour activities in this sphere are the facilitation of trade delegations and missions, trade promotion and the signing of MoUs with foreign chambers. I must also mention our internal restructuring program, which commenced in August this year. I truly believe it will transform the Federation into a more vibrant, efficient and cost-effective organization. Our aim is to make all units self-sustaining and income generating, rather than relying on donor funds. Since the Fec

ould be immense. Furthewith the ground realities. It is by acting as a forum for the expression of diverse views that we have been able to make informed decisions. This is why the Government always considers our opinions seriously when formulating policy. In fact, our recommendations are often incorporated into the budget. Over the years, we have built a strong rapport with influential Government officials in important institutions, including the Central Bank and the Treasury. Our Key Person's Forum - which was initiated to maintain a dialogue with senior decision m

Vocational training projects Looking ahead, I believe the Federation has to play a greater role in the development of market-oriented agricultural practices. This must be done with the objective of empowering the farmer as an entrepreneur in his own right. Such as initiative will ensure that consumers get a better product at a better price. I also believe we must take a mordvery promising, but more needs to be done. Ideally, our future efforts in these areas should focus on large-scale vocational training projects. This will enable the war-affected people, including the ex-LTTE combatants, to find sustainable employment and contribute to society as part of the new Sri Lanka. Such projects are imperative to build ethnic harmony and achieve a lasting peace.



113

We must also create a greater rapport between munities of the North and South, thereby

the business comfacilitating trade links. This will not be a difficult task, for commerce speaks a common language and breaks through cultural barriers. In conclusion, I must state that the Federation will continue to remain a dynamic organization. With our professional approach, we will expand our scope, reach and influence to steer the growth of business. We will harness the inherent strengths and potential of our country. I wish to thank the Board of Directors, the Executive Council and staff of the Federation for all the support extended to me. I must also acknowledge the contribution of our donors, whose assistance enabled us to implement our projects so successfully.



Daily Mirror – January 6, 2011

Leema Creations wins Bronze award Entrepreneur of the Year 2010 Awards

Leema Creations Managing Director Channa Wijesekera is seen here receiving the award from Lal

ayawardena Director/Consultant of Wijeya Newspapers Ltd. Also in the picture is Sujith Pathirannahe GM Brands Wijeya Newspapers Ltd. at the Entrepreneur of the Year Award 2010 awards ceremony

rganized by the Federation of Chambers of Commerce and Industry of Sri Lanka (FCCISL) held at the MICH.

eema Creations won a Bronze award at the Entrepreneur of the Year 2010 competition organized by the ederation of Chambers of Commerce and Industry of Sri Lanka (FCCISL). Leema Creations, a company ngaged in interior designing of houses, offices, hotels, restaurants, shopping complexes and exhibition talls, secured this award for the excellence of their products and services.

eema Creations designs the interiors of houses, offices, hotels, restaurants, shopping complexes, xhibition stalls and other buildings using modern furniture and other fashionable material of high uality according to the wishes of their clients. The company has a fully equipped factory with all odern machinery situated in Dompe to manufacture the furniture and other material necessary for terior designing.

eema Creations, a fully Sri Lankan company, supplies products and supplies such as office furniture, ffice chairs, fabric partitions, glass partitions, MDF partitions, aluminum cladding, suspended ceilings, antries, kitchen units, bedroom furniture, living room furniture, dining room furniture, blinds, arpeting, wallpapers and main doors among others.

he company's head office is situated at No. 112/2, Maya Avenue, Colombo 05 and the showrooms are ituated at No. 4B, Pagoda Road, Nugegoda. Their website is www.leemalk.com Leema Creations unded in year 2000 has completed interiors of leading institutions in state & private sectors. Leema reations carries out interiors designed by it's design team and also interiors designed by reputed rchitects. Some of the projects completed by Leema are Reckitt Benckiser, Hilton Hotel, Hotel Trans

JAoB LFes Leqmin Lopc TsfoCa

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Asia, the Elephant Corridor, the British Council, ODEL, KFC, Cargills Foe Bandaranaike International Airport, Katunayake.

ecialist in interior decoration and timber - the management of the company has local and

ternational qualifications, training and specialist knowledge. Channa Wijesekera, the holder of a iploma in Civil Engineering from the University of Moratuwa, is a teacher trained in interior decoration

and furniture manufacturing in Germany. He has obtained further training in the relevant field from Thailand and Philippines. He also Visiting Lecturer at the University of Moratuwa and several higher education institutions. He has authored two books in Sinhala and English languages on timber technology. Channa Wijesekera is the present Chairman of the Wood and Wood Based Industry Advisory Committee of Ministry of Industrial Development and the Deputy Chairman of the Wood and Wood Based Products Manufacturers' Association.

od City, Commercial Bank and th Leema Creations was founded by Channa Wijesekera, a sptechnology. This marks the specialty of Leema Creations inD




Chinese delegation visits FCCISL

At the Invitation of the Federation of Chambers of Commerce and Industry of Sri Lanka (FCCISL) a delegation led by Yao Yunxiang, Vice Chairman – China Council for the Promotion of International Trade (CCPIT) Yunnan Sub-Council, China made a visit to Sri Lanka and had a meeting with Tissa Jayaweera, President, Board Members and senior officials of the FCCISL. During this meeting a Memorandum of Understanding for Friendly Corporation was also signed to strengthen friendly relationship and corporation in economic, trade and investment, based on the principles of friendliness, equality and mutual benefit between China – South Asia Business Council (CSABC) and the FCCISL.

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03rd – 09th January 2011 alerts/en/2011/January 9, 2011.pdf · eritage and the Galle Lit Fest ....

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Transcript of 03rd – 09th January 2011 alerts/en/2011/January 9, 2011.pdf · eritage and the Galle Lit Fest ....