st th alerts/en/2010/February 7...FCCISL News Alert Weekly Business Highlight 01st – 07th February...

01st – 07th February 2010

FCCISL News Alert Weekly Business Highlight


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Content Page

1. DEVELOPMENT ECONOMICS 1.1 JAFFNA SHOWCASES PROJECTS WORTH 367M 05 1.2 2010: A YEAR OF TRANSFORMATION 09 1.3 POLICY RATES WILL STAY LOW FOR GROWTH: DEALERS 14 1.4 CRISIS, FINANCE AND GROWTH 16 1.5 SRI LANKA’S OLDEST COMPANY 18 1.6 CREDIT, KNOWLEDGE, INFRASTRUCTURE - A WINNING MIX IN BANGLADESH 19 1.7 PROPERTY SECTOR TO BOOM IN MEDIUM TERM : ANALYSTS 21 1.8 'DOLLAR POSES DANGER TO GLOBAL ECONOMY' 23

2. MANAGEMENT

2.1 SELF MOTIVATION TECHNIQUES 26

3. TRADE & MARKETING

3.1 AMERICANS SKEPTICAL OF ASIA-PACIFIC TRADE DEAL 28 3.2 MARKETING AND SELLING IN TOUGH ECONOMIC CONDITIONS 29 3.3 FADING TRADING 31 3.4 SOCIAL NETWORKING CHECKLIST FOR CAREER SCHOOL

MARKETING 33 3.5 CERAMIC INDUSTRY MOVES INTO NICHE MARKET WITH

QUALITY 35

4. MONEY & BANKING 4.1 IMF REVISES UP GLOBAL FORECAST TO NEAR 4 PERCENT FOR 2010 37 4.2 RISK SENSITIVE CAPITAL MODEL FOR INSURANCE INDUSTRY

SUPERVISION 39 4.3 GROWTH IN LOAN REPAYMENTS IN 2009 40 4.4 NEW BANKING REGULATION - PROPRIETARY-TRADING 41 4.5 DIRTY MONEY AMOUNTS TO 5% OF WORLD ECONOMY 42 4.6 INTELLIGENT INVESTOR 43

5. TOURISM

5.1 SMALL AND MEDIUM HOTELIERS REQUEST 47 5.2 CULTURAL VALUES FACE THREAT AS TOURISM GROWS 48 5.3 MYTHS IN TOURISM MARKETING 50

6. EXPORTS

6.1 EXPORTS TO CHINA SEE A REMARKABLE INCREASE 53 6.2 TAP PEPPER EXPORT POTENTIAL 55 6.3 2009 TEA EXPORT EARNINGS TO TOP US$ 1 BILLION 56



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7. CLIMATE CHANGE 7.1 NO OPTIONS FOR LANKA BUT RENEWABLE ENERGY 58 7.2 IMF PROPOSES ‘GREEN FUND’ FOR CLIMATE CHANGE FINANCING 61 7.3 IMF PLANS $100 B FUND TO HELP POOR MITIGATE CLIMATE IMPACT 62 7.4 IMF PROPOSES "GREEN FUND" FOR CLIMATE CHANGE FINANCING 63

8. LABOUR 8.1 REWARD SYSTEMS BASED ON PRODUCTIVITY

FOR WORKERS IN TEA PLANTATIONS 65 8.2 MORE ACTION NEEDED TO DEVELOP LABOUR MARKET IN NORTH PUSH FOR SECURE JOBS 70 8.3 LABOUR POLICIES, INTERVENTIONS LESS LIKELY TO SUCCEED 72

9. STOCK MARKET

9.1 EUROPEAN STOCKS EDGE HIGHER BEFORE US GROWTH DATA 75 9.2 INDICES REMAIN HIGH WITH POLLS OUTCOME 76 9.3 MARKET ENDS HIGH ON RETAIL PARTICIPATION 78 9.4 SHARE MARKET REGAINS MOMENTUM 79

10. BUSINESS 10.1 US GDP SURGES TO 5.7 PERCENT, LED BY BUSINESS 81 10.2 INFLUENCING PEOPLE IN BUSINESS 83

11. EMPLOYMENT 11.1 STRUGGLING WALL STREET EYES JOBS DATA 89 11.2 ILO ANNUAL GLOBAL EMPLOYMENT TRENDS REPORT 91 11.3 RIGHT PERSON FOR THE RIGHT JOB 93 11.4 EMPLOYEE ORIENTATION 95

12. CONSTRUCTION INDUSTRY 12.1 GREEN BUILDING CODES TIMELY 98



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Development Economics



Daily News – February 1, 2010 JAFFNA SHOWCASES PROJECTS WORTH 367M Rohantha Athukorala When I recommended to the core committee of the Business for Peace Association (BPA) that we need to stage the next investment forum in Jaffna instead of Trincomalee, I was having some reservations as at that time the A9 was not opened for civilian traffic. But the reality after the program was actually staged in Jaffna, was a resounding success based on the feedback with over 200 participants coming from different parts of the country and the world, with all media carrying the opening as a headliner making the effort of organizing worthwhile. When I was heading the Economic Affairs Unit for the Government Peace Secretariat, together with the security forces of Jaffna we organized the first ever Trade and Education Exhibition in Jaffna in December 2008 at the height of terrorism which attracted almost 168 private sector companies from Colombo and almost half the Jaffna peninsula visiting the function.

At the Biz Pact in Jaffna

The only difference was that it was organized under very strong security precautions but this year’s Biz Pact Investment Forum was held with almost zero presence of security forces made an impact on the participants. End of the day if the fruit of peace is not seen and felt by an ordinary civilian all the pomp and glory on media does not mean anything. Let me capture the essence of the Investment session that had a group of entrepreneurs from Jaffna who were leading businessmen. The session was co chaired by the Maharaja Corporation Executive Director Nimal Cooke myself and we wanted to make it clear that this was not just a business opportunity but building bridges between the North and the South that was well accepted by the audience.

Investment sessions The highlight of the Investment Forum was the showcasing of the key projects that can attract local and global funding where the underlining objective was peace building. There were almost 367 million rupees worth of projects that was on offer, ranging from commodity businesses to fast moving consumer business

segments that captured the interest of the participants specially the Indian and Australian contingent.

Jaffna business prospects

* Tourism booms in Jaffna with 19 hotels already * Biz Pact identifies four companies to be developed to Atchuweli Industrial Zone * Jaffna can be developed to be the Bali of Sri Lanka

I felt the session communicated to the world that Jaffna is open to business. But a point that needs to be highlighted is as a senior citizen said that

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Jaffna is open for business but kindly respect the culture of the community and preserve it rather than making it a another Katunayake Industrial Zone. It may have been said with decorum but the essence of the statement was very well understood by the participants and subsequently when I met the Government Agent(GA) the same sentiments were echoed that I felt were warning bells that we should not look at rapid development as there is a lot of healing that had to be done to recover from the 30 years of war that the people had gone through. In fact one Chamber heads mentioned that at one time there were five governments ruling the peninsula and it can be a case study on how these businesses survived in Jaffna during this time period.

Agricultural products The first project that we showcased was a 57 million partnership opportunity where Vesta Industries offered a development partnership to take the popular Jaffna Nelli Crush brand across the country and into selected overseas markets where the Sri Lankan Diaspora was domiciled. The company has been in existence since 1995 and the current product range includes jams, cordials and sauces and now has 700 outlets and the probable partner must have a fast moving consumer business experience with some exposure to above the line and below the line advertising and managing a sales force. This kind of partnership can help Vesta move to at least 50,000 outlets within a two year time horizon so that a serious competitor comes into brand like MD that had dominated the Sri Lankan market for years. I strongly feel the consumer proposition that can be unique and appealing to a Sri Lankan housewife can be something like ‘Natural product from the people of Jaffna.’ This proposition can be also appealing to the Diaspora in the global market and can target cities like Melbourne, Toronto, Los Angeles and the Maldives. Jaffna’s primary industry contribution to the economy * 10.5 percent share of the national red onion production and the largest producer in the Northern Province * 8.7 percent share of the national fish production and the largest producer in the Northern Province * 4 percent share of the national milk production and the largest producer in the Northern Province * 3.5 percent share of the national egg production and the largest producer in the Northern Province * 2 percent share of the national chilli production * 0.7 percent share of the national paddy production * 0.6 percent share of the national potato production and the largest producer in the Northern Province * 17.5 percent share of the national tobacco production and the largest producer in the Northern Province

PET bottles The next project on show was the manufacturing plant for PET bottles. Apparently, the Jaffna peninsula imports around 400,000 PET bottles from Colombo on a monthly basis. An eminent Business Chamber Head mooted the idea of setting up a PET manufacturing plant with an investment of 10 million rupees. The proposition was unique given that it will be partnered by the Yalpanam Business Chamber so that the demand is secured from the membership that consist of producers of jam, cordial, cordials, mineral water, jellies and different oils that require PET canisters. The company that a probable partner will tie up with will be Star Industries that has a strong reputation for quality electrical, mechanical and refrigeration services across the Jaffna peninsula. The company has been in operation since 2001. I would recommend that a probable investor plough in an additional ten million rupees so that the demand can be met across the Vanni which includes Mankulam, Mullaitivu and Killinochchi industrial areas which will be the future business hubs in Sri Lanka.



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Ceramic tiles factory The biggest investment opportunity that was on offer, which attracted the Indian contingent’s interest was when a Rupees 200 million partnership was asked for targeting the manufacturing of tiles for the Jaffna market. Given that almost 80,000 plus new consumers have come into Jaffna peninsula from the camps in Vavuniya, housing will be a key need and the proposed tile factory will the most prudent business decisions that one can make. Since the Jaffna peninsular had a tile factory before the conflict escalated, people with the necessary skill set was available for quick activation of the project. In my view, may be a Vocational Training Centre can be concurrently set up in Jaffna so that modern skill training can be done to move this factory to a new level of operation. Who knows it can be a model factory for Sri Lanka and a breeding ground for the 188,000 youth who are below 18 years of age living in the peninsula. I believe that with this kind of approach, peace building and integration of the civil community into the economic process of the country is the only way to drive reconciliation in Sri Lanka between the North and the South. This incidentally was the objective of the BPA President Suresh de Mel who hails from the southern business chamber of Hambantota.

Electric motor and car pumps The next project on show was the 100 million rupee project of setting up of a motor/water pump company that will unearth the technical competency of the people of Jaffna. The markets that can be targeted India, Pakistan and other SAARC countries as Sri Lanka’s electronic exports to the South Asian region has been gathering momentum in the last couple of years. The Sri Lanka Export Development Board (EDB) that was in attendance agreed to look for the buyers that made this opportunity a Private-Public-People(PPP) partnered project that gave the correct vibes to the people who attended from Jaffna.

Jaffna Industrial Zone The strategic objective for me personally from the organization I work for was to identify some key companies that can be developed to be housed in the Atchuweli Industrial Zone that we propose to set in Jaffna. Since the Board of Investment(BOI) was setting up an office in Jaffna this development program that we wanted to facilitate for the people of Jaffna was easier and more realistic in my view. At the end of the day if we can make four-five companies that are small and medium size become a large scale enterprises in Sri Lanka within the next five years then we have done our duty. Who knows a company like Vesta can be the next taker of the National Business Excellence award or even the National Chamber of Exporters awards in the future. If this does not happen then I feel we have failed as a nation after bringing peace to the country after 30 years. Separately the forum also gave an opportunity for people to freely mingle and savour the unique culture of Jaffna as I saw many people visiting the homes of the participants from Jaffna that was delightful to see. I am sure if the Bishop of Jaffna was there he would have been the most happiest person as I remember meeting him in 2008 when I had to travel in a Unicorn from Jaffna to the Palaly camp due to the fear of a LTTE attack given that I was instrumental in organizing many a business and sports venture in Jaffna. The best revelation that got unearthed was when we realized that the fish that we buy from a Keells outlet came from the catch from Jaffna which means that the Jaffna economy is already getting linked to the top end consumer families in Colombo. I wish a new brand can emerge so that we can give identity to Jaffna.

Jaffna - the Bali of Sri Lanka I am proposing that Jaffna be developed to have a tourism identity of its own just like Bali in Indonesia. The underlying reason being that it has a unique culture and already there are over 5,000 visitors from the South



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to Jaffna on daily basis that gives us an idea that latent demand existed and now it is beginning to surface overtly. A point that needs to be highlighted is that in May 2009, there were only four small guest houses in the Peninsula but today, there are over 19 hotels some having the capacity to meet the demands of almost 50 guests that gives us an idea of the potential that Jaffna has. May be a luxury yacht in the Jaffna lagoon can be offered to the discerning top end traveller for a lifetime experience just like in the Carribean. Who knows the Star Cruisers next stop can be in the Northern tip of Sri Lanka, Jaffna. The Casuarina Beach can be developed in the likes of Unawatuna to be the Northern Beach Resort in Sri Lanka that can host the next Beach Fest in the likes of Hikkaduwa that we staged that has become one of the most demanded products of Sri Lanka Tourism. The time has really come where we ask what we can do for Sri Lanka than what the country can do for us. In my last five years of public sector life I have seen so many who selflessly work for the betterment of the country. The challenge is, how about you?



Daily News – February 1, 2010 2010: A YEAR OF TRANSFORMATION FOR THE WORLD AND FOR ASIA: Over the past decades, Asia has become a major player in the global economy. Today, Asia is leading the world in terms of economic recovery from the crisis. And over the coming decades, the region’s continued dynamism will give it an even greater role. As economic power grows, so too does Asia’s interest in promoting the successful performance of the global economy. And as the region enhances its role in the global policy debate, I see great potential for the world to benefit from Asia’s ideas and experience. We all have a lot to learn from Asia. Speaking for the IMF, one of our priorities is to deepen and indeed renew our engagement with Asia. We recently established an advisory group of eminent persons from across the region. We are also seeking to strengthen our ties with regional groups, such as ASEAN and EMEAP. This July, the IMF and the Government of Korea will be co-hosting a high-level conference, focusing on the region’s economic dynamism, and what I believe will be Asia’s leadership role in the 21st century. 2010, of course, is going to be a crucial year - the first year after the crisis when countries can lift their eyes to the longer term-horizon. A year of transformation for the world.

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And, I might add, a year of transformation for the IMF. To speed our ability to respond to crises, the Fund has changed a lot over the past two years - reforming lending instruments, streamlining conditionality, and improving governance. But we recognize that to serve our membership even more effectively, we must go further. In broad terms, we are looking at a fundamental reform of our mandate; focusing more on systemic, not just country-level risks, especially in the financial sector; and on developing financing instruments that provide the kind of insurance needed to tackle modern crises.

International Monetary Fund Managing Director Dominique Strauss-Kahn

I will not say more on this transformation of the IMF today, but promise that you will hear more about it in the year ahead. Today, I want to touch on three issues. First, to set the backdrop, I will present the IMF’s view on the global economic outlook. Second, I will highlight some of the key priorities for building a stronger post-crisis global economy. And third, I will share my thoughts on how Asian leadership can help bring about the changes needed to secure a successful new economic order. I. Global economic outlook Beginning with the outlook, the global recovery appears to be stronger than previously anticipated. We expect growth in 2010 to exceed our previous projection of three percent - this will be updated later this month. That is the good news. I would emphasize, however, that the situation remains fragile and recovery is proceeding at different speeds in various regions.



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In most advanced economies it is likely to be sluggish, and still dependent on government support. High unemployment, in particular, is a major concern - especially in Europe and the U.S. This is why policy support should be maintained until there are clear signs of a recovery in private demand and employment growth. Also, to tackle the jobs crisis, governments should shift part of their stimulus spending to support employment. Turning to emerging market economies, the outlook is considerably better. As I said, the recovery is being led by Asia, thanks to the resilience of domestic demand, sound economic frameworks, and a swift policy response to the crisis. For the Asia region (excluding Japan), growth is likely to exceed seven percent this year (which was our forecast last October). This means that many emerging market economies will be able to exit from crisis support measures sooner than the advanced economies - with monetary tightening generally preceding fiscal tightening. The differing speeds in economic recovery have been reflected in the performance of financial markets. As you know, there has been a resurgence in capital flows to emerging markets, with Asia receiving a large part. These flows appear to be driven primarily by fundamentals, reflecting the favourable outlook for these economies. Expectations of future currency appreciation are also playing a role. The return of capital to emerging markets is generally a positive development. Let us not forget that as the crisis unfolded, there was tremendous concern that these flows would cease altogether, or even reverse. Understandably, however, policymakers in recipient countries are concerned now with how to manage these flows - their impact on exchange rates, domestic demand, financial stability - and the danger of asset bubbles. What tools can policymakers use to respond to surges in capital flows? In many countries, exchange rate appreciation should be the key response - especially in those where the exchange rate is undervalued based on medium-term considerations. Other policies include lowering interest rates, accumulating reserves, tightening fiscal policy and prudential policies in the financial sector. Capital controls can also play a role, particularly where the surge in capital flows is expected to be temporary, or where exchange rate overshooting is a real danger. The right policy mix, of course, depends on each country’s circumstances. I see this as a pragmatic issue. II. Building a stronger global economy Turning to my second issue - building a stronger global economy - let me begin with financial sector reform. A. Financial sector reform In Asia, banking systems have on the whole proved resilient. But worldwide, progress in this area is critical for building a global economy that is less prone to crises in the future. The lessons of this crisis are clear: regulation and supervision must be stronger - and smarter. Closer scrutiny of financial firms is needed at the institutional level. We also need significantly better monitoring and management of systemic risks.



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Already we have seen good progress in devising proposals for how to reform the financial sector. But I see two major problems for achieving lasting reform. First, as financial markets and economies recover, there is a real danger that political momentum for reform is lost. Second, the financial sector itself seems to be going back to business as usual. This must not be allowed to happen. We cannot return to the financial system of yesterday. An important question is who should bear the costs imposed by the financial sector’s more risky activities. One thing is clear: we must move away from a system that privatises the gains and socializes the losses. As you may be aware, the G-20 has asked the IMF to look into this issue. Our work is being guided by two objectives. First, how can we make the financial system safer, so that it poses less systemic risk? And second, what can be done to reduce the financial burden on taxpayers of a financial crisis? In this context, we are looking at a range of options - including financial sector taxes, as well the formation of resolution funds, and the possibility of capital charges. We have not ruled anything out. We will present our initial analysis at our Spring Meetings in April. B. New sources of growth Looking ahead, as you in Asia are so good at doing, new sources of growth are needed in most of the world’s economies to ensure a robust global economy. What does this mean? First and foremost, strong growth must be restored. This will require a rekindling of private demand. In many countries, structural reforms will be needed. In particular, labour and product market reforms can boost productivity, and speed the transition. Efforts to boost the ‘green’ economy can also support this restructuring effort. A second goal is for growth to be sustainable. That is, to restore and sustain private demand, both consumption and investment will be needed. For sure, this will require dealing with pending fiscal challenges. Third, global growth should be balanced. For this to happen, economic policies must be consistent with healthy external positions. This means maintaining sound fiscal, monetary, and exchange rate policies, and also avoiding domestic market distortions. To achieve this, all countries will need to play their part. Countries that have traditionally run large current account deficits recognize that they need to raise saving - often both private and public - and boost productivity. In the United States, for example, this is beginning to happen, with the household saving rate already up sharply since the start of the crisis, to about 5 percent in 2009. It could rise even higher. Countries that have traditionally run large current account surpluses and relied heavily on export-led growth recognize that new growth drivers, in their own countries, will need to be found. In China, for example, the government is taking steps to boost private consumption. These major shifts in growth patterns will not be easily achieved - and certainly not overnight. But if we can move in this direction in the coming year, we can have a “win-win” situation, with more sustainable global growth for all. C. Stronger international policy collaboration For this economic transformation to be successful, international policy collaboration will need to be more effective.



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The recent experience in dealing with the crisis gives cause for hope. The nations of the world pulled together to respond to a profound economic - and potentially human - calamity. Governments worked together on many fronts-undertaking concerted and significant monetary easing; implementing large fiscal stimulus, where possible; and shoring up ailing financial sectors. This spirit of cooperation has produced a much strengthened framework of international collaboration. The G-20 - in which Asia is playing a major role - has emerged as a key forum for the world’s major economies to discuss policy priorities. These priorities have then been taken forward to the IMF, where its 186 members have provided the broad-based international endorsement needed to make them truly global in spirit and in commitment. So-much has already been achieved in terms of strengthening the international policy dialogue. But we can - and must - do even more. The G-20’s new Mutual Assessment Framework is an important step. Through this process, the world’s largest economies will be accountable - to each other - for adopting the policies needed to ensure strong, stable and sustainable growth over the medium term. The IMF is providing analytical support for this innovative approach to multilateral cooperation. And I believe that this new framework can be one of the keys to the transformation of the global economy in 2010 and beyond. Let me also add here one other issue that is of immense importance to the long-term welfare of us all - the tackling of climate change. A major challenge emerging from last month’s meeting in Copenhagen is how the large amounts of resources needed to finance adaptation and mitigation efforts will be financed. This is a very complex subject that will require the highest level of international collaboration. The IMF will do everything in its power to contribute to a solution. III. Asia’s role in the new economic order My final - and most important - topic today is Asia’s role in the new economic order. The transformation that has taken place in Asia over the last decade has been truly remarkable. Rapid growth has raised the region’s share in the global economy to a third, and has allowed hundreds of millions to escape poverty. The strength of Asia’s economies has helped them weather the recent crisis and lead the world into recovery. Continued strong growth has the potential to lift a billion people out of poverty and into the global economy. To sustain this performance, Asia - like the rest of the world - will need to adapt to new challenges presented by the post-crisis economy. From my conversations with Asian leaders, I can tell that this imperative is widely recognized. They are moving rapidly to identify the key elements of a new model that can deliver sustained economic growth. In particular, they realize that because there are limits to the pace of export growth, domestic and regional demand will need to play an increasingly important role in underpinning Asia’s growth.



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This does not mean that Asia should become inward looking. Rather, it means reinvigorating domestic demand and boosting intraregional trade. Such a recalibration of Asia’s growth model is in the region’s self-interest, since it would reduce the region’s dependence on demand from outside Asia. As I indicated previously, it is also in the global interest. What should this recalibration look like? In many Asian economies, stepping up public investment is an important part of the solution. Asia has significant long-term development needs, including in infrastructure and education. Investment in low-carbon, or ‘green’ growth would also be useful. Technological innovation is key to managing climate change at a reasonable cost. And innovation in Asia is already making major contributions. And as I already noted earlier, in China a shift towards stronger private consumption will be essential for developing new sources of growth. The region’s long-term success will also depend critically on the active participation of Asian nations in international efforts to build a stronger global economy. As Asia’s economies have risen in global stature, so too has their voice on the international stage-and their responsibility to help find solutions to global policy challenges. As I mentioned, Asia is represented at the G-20 by six countries. And as you know, Asia will host the G-20 Leaders Summit in November. At the IMF too, Asia’s role is rising. As our governance reforms proceed, Asia’s economic voice - reflected in its quota at the IMF - is being brought more into line with its weight in the global economy. Now is the time for Asia to use its stronger voice to contribute even more to the shaping of the post-crisis global economic landscape. Potentially, this is a historic moment for Asia. A moment of transformation. Let me conclude by setting in context the challenges facing the world in the coming period: 2008 was a year of humility: our confidence in markets, institutions, and the status quo turned out to be complacency; we learned how fallible, fragile, and interconnected we are. 2009 was a year of unity: the world pulled together to collaborate and redeem the promise of international cooperation. 2010 must be a year of transformation - we must complete the global project to address the failings in regulation, economic policy, and governance that lay behind the crisis. The challenges are great. But the rewards are even greater. And Asia has a crucial role to play. Working together, I am confident that we will find the way to secure economic success - for Asia, and for the world. IMF



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The Island – February 1, 2010 POLICY RATES WILL STAY LOW FOR GROWTH: DEALERS INFLATION TO INCREASE AS GLOBAL FOOD PRICES PICK UP By Devan Daniel

Inflation and benchmark Treasury bill rates moved upwards last week and dealers said inflation could pick up as global food prices increase but were confident the Central Bank would keep policy rates unchanged so as to fill the growth gap, hopeful the government would not expand its expenditure beyond the IMF mandate adding further inflationary pressure.

The government statistics office announced last week that headline inflation had increased to 6.5 percent in January 2010, from 4.8 percent in December 2009 as food prices increased by more than four percent year-on-year.

Meanwhile, benchmark Treasury bill rates continued to inch upwards at last week’s primary auction. Since last November these rates kept picking up marginally each week.

The three-month Treasury bill rate increased marginally to 7.95 percent last week from 7.86 percent a week earlier. The rate of the six-month bill moved up to 8.90 percent from 8.86 percent while the one-year bill saw its rate pickup marginally to 9.46 from 9.41 percent.

The three-month, six-month and one-year Treasury bill rates were 7.25 percent, 8.33 percent and 9.17 percent respectively as at end November 2009.

"We expected inflation to pick up because global commodities and food prices are on the rise. India is already hit by food inflation, prices increasing by a much as 14 percent, and its reserve bank has increased policy rates in a bid to curtail inflation generated by credit growth.

"Sri Lanka is already experiencing the results of high global food prices and that is why inflation has picked up. We expect headline inflation to reach close to 10 percent by October or November. This could be higher unless domestic agriculture volumes pick up and government stays within fiscal targets as set out with its agreement with the IMF," a dealer said.

Sri Lanka entered 2010, a year of presidential and general elections, with a fiscal position the Central Bank termed ‘precarious’ warning against reckless spending and public sector wage increases during the year as this could lead to inflation and curtailment of private sector credit.

"We feel the Central Bank would keep policy rates as they are because government policy at the moment is to cover the growth gaps in the economy by encouraging private sector credit growth.

"The election cycle is bound to inflate government spending but once the general election is held the fiscal position should consolidate and the government would have to contain its budget to 6.5 percent in 2010 according to the agreement with the IMF. If this is the case, then inflation would be still manageable and there would not be pressure on interest rates," another dealer said.



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"For the moment, we believe the Central Bank’s forecast would hold and inflation would not exceed beyond single digit figures," a dealer said.

Because of high global food and commodity prices 2008 was a bad year with inflation peaking at 28.2 percent in July that year but it gradually declined to 0.7 percent in September 2009 only to pick up again to the current level of 6.5 percent.

As inflation began to ease, the Central Bank eased its tight monetary policy stance in a bid to encourage private sector credit growth, but commercial banks were too slow to respond prompting a presidential directive to slash lending rates to a maximum of 12 percent to selected sectors like agriculture, tourism and SMEs.

As market interest rates began to adjust downwards, credit to the private sector began to improve as well.

Credit to the private sector continued to grow month-on-month since September 2009, reaching above one percent last November. As at November 2009, credit to the private sector was Rs.1.188 trillion, up from Rs.1.176 trillion during the month before, a positive but marginal 1.02 percent growth, Central Bank data showed.

However, year-on-year, private sector credit growth was still a negative 5.8 percent for November 2009 with growth for November 2008 a positive 7.6 percent.

After recording negative growth each month since May 2009, credit to the private sector gained a marginal 0.35 percent from Rs.1.17 trillion in August to Rs.1.18 trillion in September, but this was still in the negative range after recording 5.2 percent growth in September 2008.

The Central Bank earlier this month said private sector credit growth would be in the range of a positive 13 percent.

"Given policy directions of the government a tightening of policy rates is likely to send the wrong signal to the market," a dealer said.

Dealers said the Central Bank could use other instruments to control inflationary pressure, such as imposing a penal rate on commercial bank borrowings from the Central Bank.

"But the crucial step out of this is for government to stay true to its fiscal commitments," a dealer said.



Daily News – February 2, 2010 CRISIS, FINANCE AND GROWTH UPDATED WORLD BANK ANALYSIS: Globally, GDP growth is improving, but it will be a long road to full recovery. * The strength of the recovery will depend on private-sector demand and the pace of withdrawal of fiscal and monetary stimulus. * An estimated 64 million more people may be living in extreme poverty by the end of 2010 due to the crisis. * Developing countries need to anticipate scarcer and more expensive capital. Nit Ponpaengpa, a widowed grandmother who works as a massage therapist in Bangkok, had her wages cut by a third at one of the city’s spas last year. After a difficult search, she found a new job and things have improved. She is on call to work three times a week for a former client, in return for which she earns a decent retainer fee, school tuition for her grandson, and the flexibility to take on other clients. “It was really hard to live on 200 baht (around six USD) a day when I had to buy food and milk for a child, and still had to pay rent as well as other expenses,” said the 50-year-old grandmother, recalling the difficulties of reduced wages before she found her new job. “I never had any money left back then. Now I can relax a little bit and save a little bit every month.” Unfortunately, this situation is not permanent. Nit’s new employer says she will soon have to cut down on Nit’s services and wages. When that happens, Nit’s income will fall significantly. At age fifty, Nit is no longer competitive in the job market, yet a full ten years away from qualifying for senior benefits. She faces a perilous future for herself and her young grandson.

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Rising poverty, shrinking funds

Across the world, there are tens of millions of stories such as Nit’s-and some far worse-each echoing the pain of a historically deep and synchronized recession, in which virtually no country has remained untouched by the bursting of a global financial bubble, and the poorest remain the most vulnerable. A new World Bank report, “Global Economic Prospects 2010: Crisis, Finance, and Growth,” notes that the crisis is having serious cumulative impacts on poverty, with 64 million more people expected to be living in extreme poverty by the end of 2010 than would have been the case without the crisis, according to updated analysis. “An increase in poverty has serious implications for the governments of poor countries, who face shrinking revenues at the very time when demands on them are growing,” said Andrew Burns, the report’s lead author. “Just when a bigger effort is needed to protect vulnerable people, some governments may be forced to scale back existing programs.”

The World Bank headquarters



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In fact, the poorest countries-those that rely on grants or subsidized lending-may require an additional $35 billion to $50 billion in funding just to maintain pre-crisis programs, according to World Bank chief economist and senior vice-president for development economics, Justin Lin. The tragic human cost of the financial crisis is already becoming painfully apparent. Researchers Jed Friedman and Norbert Schady estimate, for instance, that between 30,000 and 50,000 additional children may have died of malnutrition in Africa in 2009 because of the crisis.

Recovery under way, but a long road ahead While the world economy is now emerging from the crisis, and GDP growth rates are starting to improve, the report warns that growth may in fact slow later this year as the growth impact of stimulus packages wanes, and that it will be years before jobs are restored and spare industrial capacity reabsorbed. Global GDP, which declined by 2.2 percent in 2009, is expected to grow 2.7 percent in 2010 and 3.2 percent in 2011. World trade volumes, which fell by a staggering 14.4 percent in 2009, are projected to expand by 4.3 and 6.2 percent this year and in 2011, according to the report. “The strength of the recovery will depend on consumer and business-sector demand picking up and the pace at which governments withdraw fiscal and monetary stimulus,” said Burns. “If this is done too soon, it might kill the recovery; yet waiting too long might re-inflate some of the bubbles that precipitated the crisis.” Developing countries are expected to make a relatively robust recovery, with 5.2 percent GDP growth in 2010 and 5.8 percent in 2011-up from 1.2 percent in 2009. Rich countries, which declined by 3.3 percent in 2009, are expected to grow less quickly-by 1.8 and 2.3 percent in 2010 and 2011. Performance across the developing world has been varied. The recession has been severe in Europe and Central Asia, while, in contrast, growth continues to be relatively strong in East Asia and the Pacific. South Asia and the Middle East and North Africa have escaped the worst effects of the crisis, while Sub-Saharan Africa has been hard hit, with the outlook for the region remaining uncertain. In Latin America and the Caribbean, where stronger fundamentals have helped the region to weather this crisis much better than past ones, the devastating earthquake in Haiti is bound to have a huge economic cost for that country, although it is too early to make specific estimates. Complete regional outlooks

Boom, crisis, and beyond: implications for developing countries The report finds that very relaxed international financial conditions from 2003 to 2007 contributed to the boom in developing country finance and growth seen just before the crisis. With inexpensive capital, developing countries were able to sustain high growth without generating significant inflation. However, these conditions were clearly unsustainable in the long run, the report notes, and it is neither desirable nor feasible to recreate them after the crisis. International capital costs will therefore be higher and investment rates lower over the next several years when compared with the pre-crisis boom period. Foreign Direct Investment (FDI) inflows are projected to decline from recent peaks of 3.9 percent of developing country GDP in 2007 to around 2.8 to 3 percent over the medium term. This has serious implications, as FDI represents as much as 20 percent of total investment in Sub-Saharan Africa, Europe and Central Asia, and Latin America. “While scarcer, more expensive capital is unavoidable for the foreseeable future, developing countries would benefit strongly in the long term from reducing domestic borrowing costs, and promoting local capital markets by expanding regional financial centres and improving competition and regulation in local banking sector,” said Hans Timmer, Director of the Bank’s Development Prospects Group. Although such reforms might take time to yield results, they could put developing countries back on a higher growth track, Timmer concluded. World Bank



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The Island – February 3, 2010 SRI LANKA’S OLDEST COMPANY GEORGE STEUART’S CELEBRATES 175 YEARS George Steuart & Company, Sri Lanka’s oldest commercial establishment founded in 1835, marked its entry into the milestone of 175 years in commercial operation with a multi-religious ceremony and unveiling of bronze cast busts of its founders at its head office, Steuart House in Fort recently. Attended by the company’s directorate, management and team members, this highly diversified blue chip company, saw a historic chapter unfold in the company’s history with a sombre, yet brief ceremony that included invocations by the four religious clergy representing Buddhism, Hinduism, Islam and Christianity, followed by the unveiling of two sculptures of James Steuart and George Steuart. Summarising the journey since it began when James Steuart stepped onto Sri Lankan soil at the Galle Port in 1818, spurring a series of events that saw him found the company on his seeing the immense potential for economic development and commerce in the then Ceylon, Group Chairman Jayantha Wimalagooneratne was quick to point out that the company has remained true to the time honoured tenets of maintaining integrity and an unblemished record after all these years. "I don’t think however that James Steuart, even in his wildest dreams would have imagined that his company would survive 175 years, continuing as one of the leading companies in this country. I do believe we have served this nation well, being the oldest mercantile establishment and I’m sure, each of you Steuartians is proud to be a part of the history not only of the company but of corporate Sri Lanka." He added that in starting this historic year of commemoration and celebrations with multi-religious devotions and prayers, "There isn’t a better way to offer thanks and merit to our founder, his brothers, their successors and all those who contributed in no small measure to safeguard the reputation of the Company and to ensure its continuity." He further clarified that when James Steuart secured the business to his brother George and named the firm after him as his substantive position as Master Attendant of the Colombo Port precluded him from engaging in any trade, the fundamentals of governance, ethics and values were already well founded. "With this he ensured that the company was well run, possessed high levels of integrity and secured an unblemished reputation. Our founder had sterling qualities. He was a courageous man who worked for the downtrodden, was forthright and had expansive vision. Reading from history, I know that he felt for the Sinhalese peasants and the Tamil workers in the plantations and was always trying to make their lot better." The sculpture of James Steuart was unveiled by Jayantha Wimalagooneratne as Group Chairman and Group Deputy Chairman K Neelakandan, while that of George Steuart was unveiled by Group Joint Managing Directors Dubsy Kanagaratnam and Duleep Daluwatte. George Steuart & Company currently operates a highly diversified portfolio of twelve subsidiaries involved in a plethora of business activities, from tea to pharmaceuticals, to travel and recruitment, to telecommunications and education, real estate, insurance, advertising and financial services, while also holding the GSA for two international airlines. In addition, the Group also has an associated company in the Philippines, which is a distribution channel for Steuart Tea in the Philippines and the Far East.



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Daily Mirror – February 3, 2010

CREDIT, KNOWLEDGE, INFRASTRUCTURE - A WINNING MIX IN BANGLADESH By Tsukasa Maekawa

Niyamatpur Village, Bangladesh - Spinach, mangoes, ginger, and a vast array of other vegetables, fruits, and spices are turning around the lives of tens of thousands of small-scale farmers and their families in northwestern Bangladesh.

Growing rice has been the traditional small farming activity in one of the country's poorest regions for as long as anyone can remember. But the Northwest Crop Diversification Project (NCDP), supported by the Asian Development Bank (ADB), is helping households switch to more lucrative crops by providing production know-how, extension services, and credit.

Until the project got underway in 2001, small-scale farmers typically eked out a marginal living by growing mostly rice on plots with an average area of 1.2 hectares, and some livestock. The farmers lacked the knowledge and opportunity to produce higher value crops that could increase their incomes.

"Ignorance of new business opportunities and a lack of support made farmers stick to their tradition of growing rice," said Abu Hanif Miah, project director, NCDP.

The farmers were also hamstrung by a lack of access to rural credit services, with banks unwilling to lend without significant collateral and nongovernment organizations (NGOs) focusing on helping marginal farmers, with much smaller holdings, and landless agricultural workers.

An Integrated Approach The NCDP has helped thousands who were left out. About 180,000 farmers have received credit through a partnership between the government and NGOs. Along with start-up micro credit, the project-which is being implemented by the government in partnership with NGOs-is providing farmers with training, crop research data, and up-to-date price information to help them maximize returns and increase the output and quality of produce.

Physical infrastructure is being developed with improvements to market access roads, and the provision of covered sales, storage, and loading/unloading facilities. Marketing groups have been established to organize the sale and transport of goods both locally as well as to Dhaka and other major cities.

About 250,000 small-scale farmers, roughly half of them women, are now producing crops that can earn them more than even high-yielding varieties of boro (winter) rice.

"I have already paid back initial loans of 30,000 taka (US$430) which I used to produce eggplants, spinach, country beans, and other vegetables and we have a far better life now with the extra income," says 25-year-old Hazera Begum, a member of the marketing group in Niyamatpur village.

Hazera Begum, who has three children, earns about 3,000 taka (US$43) a month from her new enterprise, double the amount that her husband brings home as a rickshaw driver.

"We are very happy now as my children can go to school, we have renovated our house, and I am looking for an extra lot to produce leeks, tomatoes, and other high value vegetables," she said, adding that she is also selling composite soil to other project farmers.

Partnering with NGOs "This is a model project and through it we want to show other small-scale farmers how to cultivate many different crops which can help them earn extra income," said Abu Hanif Miah.

http://www.dailymirror.lk/print/index.php/business/127-local/2746.html



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A total of 33 high-value crops have been identified for project support including potatoes, maize, cabbages, tomatoes, country beans, spinach, okra, pumpkins, cucumbers, mangoes, tamarind, ginger, and onions.

Among the NGOs involved in the project are Bangladesh Rural Advancement Committee (BRAC), Grameen Krishi Foundation (GKF), PROSHIKA and Rangpur Dinajpur Rural Service (RDRS) Bangladesh. NGOs are estimated to have provided about US$25 million in credit to farm households by the end of 2009.

A Bridge to Opportunities The project area covers 3.2 million farming families, of which more than half live below the country's poverty line, and in the past their plight has been exacerbated by the physical isolation of the region which is separated from the rest of the country by the Jamuna River to the east and Padma River to the south.

The opening of the Jamuna Bridge in 1998, however, now provides a vital link between the northwest and the rest of Bangladesh, and has also opened up a broad range of new economic opportunities. The Jamuna Bridge was built with financial assistance from ADB, World Bank, Overseas Economic Cooperation Fund, and the Government of Bangladesh.

The project seeks to take advantage of the region's increased accessibility, and an ADB study has identified agricultural development as one of the main ways northwestern Bangladesh can promote economic growth and reduce poverty.

ADB's contribution accounts for 70% of the US$66 million NCDP, with the rest made up by the government and project beneficiaries.

Empowered Women The project also seeks to ensure women are fully included in income-generating activities, given the crucial role they play in rural communities in Asia, particularly in small landholding families.

More than 10% of households in the project area are headed by women and a major focus is put on ensuring they have access to training, information, and credit programs.

In Gochirampur village, where the project beneficiaries are nearly all women, weekly meetings are held where they can discuss their enterprises, pay back loans, and talk about other issues of concern.

"These weekly meetings give us opportunities to talk about our children's education, health, irrigation, and other matters, and we try to help each other solve problems," said 40-year-old Zaheda Islam.

"With this advice from other women I have been able to improve my business and for the first time I have been able to engage in discussion with my husband about important family matters," she said.



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Sunday Times – February 7, 2010 PROPERTY SECTOR TO BOOM IN MEDIUM TERM : ANALYSTS By Duruthu Edirimuni Chandrasekera Sri Lanka’s real estate market and the property sector are slated to outperform in the medium term due to the economic prospects after the war, according to analysts. Sarath Rajapakse, Director Capital Trust told the Business Times that since the property sector is one that is very vulnerable to any recessionary pressures, as soon as the global economic crisis broke out property sector got a beating, but it will be one that will turn around fast. “Two things have happened – the global economic recession is easing and Sri Lanka was only marginally affected by this and Sri Lanka is recovering fast and there are investments flowing into this country. Just as the property sector receives a beating during a recession they are the first to recover and recover significantly during a recovery phase,” he said. Srimal Liyanage, Lead Analyst, Investor for Securities, a Kuwait investment company said in an e-mail communication from Kuwait that after the end of war there is lot of opportunities emerging in the country. “With the global economy seeing some turning around, many investors will gradually start moving out from the wait and see strategy and trigger their expansion plans,” he said. He said this will result in an increase in demand for commercial properties. “At this point there is a short supply in commercial properties to meet the expected demand. Therefore within the next five years the demand for commercial properties will exceed the supply,” he said. He said that the property sector has underperformed in the second half of 2009 when compared to the All Share Index. “The property sector showed a decline in 2009 due to the economic difficulties faced by the investors. They were focusing on cost reduction and long term investment and expansion opportunities were kept a side (wait and see strategy). During the period 2003 to 2006, Commercial properties of the country increased 75-80% in value, however was slowed down drastically after that due to industry reaching maturity,” he noted, adding that from 2006 to 2008 the sector only recorded a marginal growth of 5-10% and estimated to have recorded a decline in 2009. Jaliya Wijeratne, Director SMB Securities said that the high leverage in the property sector made it more susceptible to the global and local economic downturn. He noted that the substantial reduction in the purchasing power of the urban middle class and upper income groups together with the unhealthy security situation and the low business momentum badly affected the demand for commercial real estate in the Colombo City. “These things badly affected the profitability of the property sector companies and it was reflected in the market performance of the companies as well,” he said. However, he noted that in the post war scenario, the security issues in the Colombo city have been minimized and Foreign Direct Investments (FDIs) are expected to flow to the country. “The untapped market in the North and East part of the country will also play a critical role. The real estate market too will benefit from this climate of hope and renewal. As a result, the future outlooks for the residential and commercial real estate sectors are positive,” he said.



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He also noted that despite the supply of premium office space is limited in the Colombo City, World Trade Center (WTC), Access Tower, HNB Tower and few other buildings located in Colombo are providing high quality office space. “The major residential real estate development projects which are under construction are Trillium Residence in Elvitigala, Colombo-05 (300 units), Fair Way Residency, Rajagiriya (71 units), Emperor Colombo-02, Ceylinco Celestial Residencies, Hydepark Corner, Colombo-02, Ocean Edge Residencies, Kollupitiya (49 units), Iceland Tower, Colombo-03 (110 units) and Prominent Residencies - Nugegoda etc. Apart from that, several companies have already commenced building of small scale housing projects. Therefore, the demand for real estate sector will escalate in time to come,” he added.



Sunday Times – February 7, 2010 'DOLLAR POSES DANGER TO GLOBAL ECONOMY' By Phil Thornton

The World Economic Forum has often served as a launch pad for attacks on the dollar. At Davos two years ago, the billionaire financier George Soros predicted the dollar's status as the world's reserve currency of choice was under threat. Last year, Russian Prime Minister Vladimir Putin claimed the world's over-reliance on the dollar posed a danger to the global economy.

There is little sign of that reliance diminishing just yet. In the year following the collapse of Lehman Brothers, foreign holdings of U.S. Treasuries rose 15.6% to $2.38 trillion. But currencies trade heavily on confidence and there are worries that such attacks are having a cumulative effect. Although the dollar has risen recently against the euro, the U.S. currency has lost over a quarter of its value since reaching its peak trade-weighted exchange rate eight years ago this month. Prof. Joseph Stiglitz of Columbia University and a former World Bank chief economist, wants to see an "orderly transition" from a dollar-based global economy. "It is peculiar that we still have the dollar system when we are so globalized," he says. "[There is a] need for a new global reserve system to replace the dollar-based system." With the U.S. government committed to spending trillions of dollars underpinning the financial system and supporting the economy, inflation remains a real possibility. This would further debase the value of the greenback. This is a worry for many countries, especially emerging-market nations that hold vast quantities of dollar-denominated debt, often in the form of Treasury securities. Not only has the value of the dollar fallen, but with official interest rates close to zero and yields on bonds at record lows, the dollar has started looking like an unappealing asset to hold. Some central banks have acted on their worries. In December, South Korea signaled its intention to restructure its $245 billion of reserves and diversify out of the dollar while both China, which holds $2.2 trillion, and India have mulled plans to swap dollars for gold. Figures from the International Monetary Fund show that the share of foreign-exchange reserves held in dollars by central banks resumed a downward trend in the third quarter of last year. The dollar's share has declined to 61.6% from 71.6% in the first quarter of 2002, when the currency hit its peak. Prof. Benjamin Cohen at the University of California, Santa Barbara, believes the dollar's prospects are being driven by the relative economic out performance of developing nations. "Some movement away from the greenback can be expected as the center of gravity in the world economy shifts towards China, India and the other emerging markets," he says.

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Ann Pettifor, executive director of Advocacy International, who campaigns for debt-relief for poor countries and wrote the 2006 book "The First World Debt Crisis," argues that this re-distribution of economic power requires a radical reform of the global financial architecture. "We have to end the role of the U.S. dollar as the global reserve currency," she says. "It is a large injustice that poor countries are obliged to hold Treasury bills." But what could replace the dollar as the global reserve currency of choice? One option would be for existing currencies' the euro, Japanese yen or Chinese yuan to take a more prominent role. Each has problems. Although the euro represents 25% of Central Bank reserves, it is not backed up by the political, military and diplomatic clout that investors look for in a reserve currency. The same goes for the yen. China may have those three attributes in spades but won't achieve reserve status until the yuan is allowed to float and is traded beyond the country's borders. Another option is the Special Drawing Right, the international reserve asset created by the IMF. This is an idea that has the backing of both China and Russia. However, the SDR is not a currency in its own right. Instead, it is a potential claim on the currencies of IMF members. Prof. Cohen describes it as the "dark horse" in the race against the dollar, pointing out that it would have difficulty attaining "even a minimal level of credibility." Ms. Pettifor opposes using the SDR because she believes that the IMF is too tightly controlled by the Group of Eight, the forum of large developed nations, to the detriment of emerging economies. She favours an idea set out by the U.K. economist John Maynard Keynes for a truly independent global central bank with its own currency. IMF Managing Director Dominique Strauss-Kahn warns that the idea of an independent global currency has been around for 65 years but nothing has been done about it. The dollar's rise to dominance took time slowly taking over from sterling between the end of World War I until the U.K. Government devalued the pound by 30% in September 1949, when its exchange rate against the U.S. dollar was slashed to $2.80 from $4.03. Prof. Cohen believes the decline of the dollar's reserve status is also likely to take decades rather than years. He worries that this will create a monetary vacuum that would present the constant risk of instability for global finance and world trade. "The economic and political impacts of a more fragmented currency system could be considerable," he says. Strauss-Kahn is also convinced that we are moving from a single-currency world into a multicurrency environment. "But I don't see the role of the dollar changing rapidly in the direction of a smaller role," he says. "[That] does not mean that over the coming decades the role of other currencies including the euro cannot be bigger." Strauss-Kahn adds that an alternative to the dollar has been debated since the IMF was founded 65 years ago. "Maybe it will happen before the end of the next 65 years," he says. "But certainly not during the next 65 weeks."



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Management



Daily News – February 2, 2010 SELF MOTIVATION TECHNIQUES Self esteem is an internal sense of worth. Self esteem reflects an inner confidence and self-respect and shines outwardly by the actions one takes. What evolves on the inside is usually reflected on the outside. Your internal self worth which consists of your self esteem, self confidence and self respect will become your external net worth. Its a matter of pride in who you are and the mentor you can be. Compare an individual with a high net worth to another with a low net worth. What are the obvious differences? Does self esteem play a major role? Is it possible that a positive viewpoint is the basis for a celebrated mindset? A mindset is an attitude. Each individual attitude is the result of particular beliefs. What you believe to be true about yourself usually generates equivalent self esteem, self confidence and self respect. On a scale of 10 (low to high), how would you rate your level of self esteem, self confidence and self respect? Calculate the average level of the three senses of worth? The conclusion is your self worth which ultimately determines your level of net worth.

Please note there is a way to increase your level of self worth. I believe we all came into this world at a level ten. We were equal human beings regardless of race, religion, colour, nationality, sex, title or role. However, our exposure to the outside world - family, religion, education, politics, etc. permits outside influences to over shadow our true inner beliefs. We have fashioned our own fears, limitations and boundaries on what we experience, see and hear. Overtime our personal perceptions have been altered. Our worth suddenly has limitations. We are smart, educated adults and should be able to distinguish between fact and fiction. We need to go back and review our values. We need to remove some of the baggage that has been holding us back, lowering our self esteem, self confidence and self respect. Simply by changing our internal thinking, we can reclaim our self esteem, self confidence and self respect and strive for level 10 as our standard. A level from which to begin not end. It is a known fact that if we do not believe in ourselves, no one else will either. How we feel about ourselves is reflected in our daily conversations, our body language and our abilities. We are responsible for our destiny and anything is possible. What results are you looking for? What actions must you take? What sort of an attitude do you need to experience self worth? You must believe in yourself - the most important person in the world. You are the all inclusive package of self esteem, self confidence and self respect. All three attributes equal your self worth and in turn, your self worth will translate externally into your net worth. What are you worth? Courtesy: Bob Urichuck

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Trade & Marketing



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Daily Mirror – February 1, 2010 AMERICANS SKEPTICAL OF ASIA-PACIFIC TRADE DEAL WASHINGTON (AFP) - Its share of trade dwindling in the Asia Pacific, the United States is scrambling to drum up support from a skeptical public for a regional trade deal that can boost exports and create jobs. President Barack Obama wants the Trans-Pacific Partnership (TPP) linking the United States with an initial group of seven nations -- Australia, Brunei, Chile, New Zealand, Peru, Singapore and Vietnam -- to be the engine for a “high-standard, broad-based” regional trade agreement, officials said. But pushing trade deals in the powerful Congress and among Americans at large is no easy task. Three free trade pacts that were signed with South Korea, Panama and Colombia under Obama’s predecessor George W. Bush remain in limbo as lawmakers from Obama’s Democratic party attempt to reopen talks for more concessions. More than one third of Americans feel trade agreements are bad for America, and more than 40 percent believe such pacts have hurt their personal financial situation, according to polls cited by the office of the US Trade Representative (USTR). Surveys also show that only 13 percent of Americans think trade agreements create jobs, while over half think these pacts lead to job losses. But with Obama setting a bold goal last week to double US exports over the next five years, an increase that will support two million new jobs in America, his administration is giving a rare push to the TPP deal. Officials are “beginning an unprecedented 50-state domestic outreach strategy” and holding consultations to “remedy the deep skepticism on trade and to rebuild solid bipartisan support for trade,” said Demetrios Marantis, Obama’s deputy trade representative. Marantis said negotiations for a TPP agreement with rapidly growing Asia-Pacific economies could be “complex and challenging but this watershed moment in trade policy demands our focus and ambition. “If we are to set an enduring anchor to the world’s future drivers of economic growth, we must raise the stakes and push the envelope.” The first round of negotiations for the TPP deal is expected to be in March and experts say more countries could eventually come aboard, including possibly Canada, Japan, Mexico and South Korea, and Malaysia or Indonesia. “It is the first major proactive initiative that the Obama administration has put forward in the trade front,” Jeff Schott, a senior trade expert at the Washington-based Peterson Institute for International Economics, told AFP. Although the current partners in the deal are not among the fastest growing economies or do not have sufficiently large economies, the US can still have a long term benefit, Schott and institute head Fred Bergsten said in a report to Obama’s top trade official Ron Kirk last week. “The US payoff thus depends on extending the TPP to other major economies of the Asia-Pacific region, starting with Canada -- and probably Mexico -- in the very near future and hopefully adding Japan and South Korea within the next year or two,” they said. The Asia-Pacific region is a huge market for the United States. Even given the deteriorating global economy, US goods exports to the region totaled 747 billion dollars in 2008. But “America faces the daunting prospect of getting locked out of the Asia-Pacific,” Marantis warned, pointing to China’s rapid trade inroads in the region.

http://www.dailymirror.lk/print/index.php/business/107-international/2543.html



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Daily News – February 2, 2010

MARKETING AND SELLING IN TOUGH ECONOMIC CONDITIONS: FAQ’S IN MARKETING COMMUNICATIONS Prasanna Perera Marketing and Management Consultant Chartered Marketeer CIM U.K. In this article, I will address a series of questions that have been posed to me over several years, relating to the area of marketing communications. For the record, marketing communications address all forms of communication that takes place between an organization and its stakeholders (key publics). The primary purpose is to communicate the virtues of a product or service. Is promotions and sales promotions both the same? No, it is not. The term ‘promotion’ is used loosely to refer to advertising or communication. Basically, the word ‘promotion’ if used in marketing, should be utilized in the context of marketing communications. Sales promotions on the other hand, is an integral part of marketing communications. It is an element of the marketing communications mix. Hence, it is always better to use the term ‘marketing communications’ since it incorporates all elements of marketing communications. Is marketing communications an investment or a cost? It is technically both. An investment because the benefits of marketing communications are generally reaped in the long term. It is also a cost, since a financial consideration is involved. What are the elements/tools of the marketing communications mix? The list is quite exhaustive. The main elements would be advertising (all forms), sales promotions, public relations (PR), personal selling, sponsorships, events, direct marketing and all e based (internet) communication medium. Communication utilizing mobile devices should also be included. (SMS, MMS, GPRS, WAP) What is the best method to determine marketing communication budgets? There are several methods used. The most common is the percentage of past or future sales method. However, this is not ideal since it puts the cart in front of the bull!! Why? Marketing communications is needed to generate sales. Not the other way around! Hence, the best method is to decide on marketing communications objectives and strategies and then work out the budget. If it is not affordable or realistic, then revisit the objectives and strategies, and make the necessary changes. What are the different forms of advertising available? In today’s modern world several forms of advertising can be observed. Mass media (TV, Radio, Press), magazines, outdoor, transit (vehicles), POS (point-of-sale), on-line banners, transit hubs (bus stands, railway stations) to name a few. Also there is advertising using mobile devices, search engines and social networking sites. Hence, the menu available to marketeers is exhaustive and careful selection is a must. Does Sri Lanka need so many Radio and TV Channels? Sri Lanka is a media rich country and as long as self sustainability is possible, the number of channels will not be a problem. What the individual channels need to do, is to “position” themselves clearly, in order to achieve a competitive advantage.



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For marketeers, the number of channels available is both an opportunity and a threat. An opportunity, since a wider target audience can be reached. A threat, since a larger marketing communications budget will be required to overcome the high level of clutter. Are Sri Lankan Marketeers utilizing modern marketing communication tools adequately? Partly Yes. I do observe a growing trend towards e communication, utilizing search engines, websites and social networking sites. However, the growth of e communications will depend on the IT infrastructure improving in the country. e based communication will not work for all products and services. Hence, the challenge to modern marketeers would be to achieve a balance between off-line and online marketing communications. (Depending on the nature of the product/service and target audience profile). Why are finance professionals so uncertain of marketing communication related expenditure? Finance professionals are analytical in nature and expect all expenditure to be justified. (Quite rightly). However, marketing communications related expenditure is not that easy to justify. Why? Firstly, the impacts are felt long term in most instances. Secondly, certain expenditure cannot be measured in terms of impact. (For example how much sales would increase based on an outdoor advertisement placed). Thirdly, it is a well-known fact that a certain percentage of marketing communication expenditure is wasted. (It is not possible to quantify at all). “I do know that 50 percent of my marketing communication expenditure is wasted. But the problem is, I do not know which 50 percent.” (John Wannermaker) “Quantify the impacts of marketing communication expenditure, for good accountability.” (Anonymous)




FADING TRADING

AFTER A SHARP REVIVAL, GLOBAL TRADE GROWTH IS SLOWING

AGAIN:

In, out, shake it all about. Last year was a terrible one overall for global trade. Volumes fell by 14.4 percent, according to the World Bank. But that figure masks whipsawing activity throughout the year. The Netherlands Bureau for Economic Policy Analysis reckons that the volume of world exports fell by 10.6 percent in the first quarter of 2009, grew only slightly in the second and bounced by 3.5 percent in the third quarter. Bernard Hoekman, director of the bank’s trade group, says the three months to September saw a “sharp V-shaped recovery”.

There are two worries to spoil this improving picture. One is what happened after the third quarter. Hoekman believes that there was a “distinct slowdown” in the pace of recovery towards the end of 2009. Preliminary figures suggest that the volume of world trade expanded by just 1.1 percent in November, less than the October increase of 1.4 percent and much less than the 5.4 percent rise in September. The bank reckons that the value of world trade (which is also affected by price and exchange-rate fluctuations) fell slightly in November.

A rebound in shipments in and out of some of the world’s busiest ports also faded. Why would the resurgence have fizzled? The best explanation is that third-quarter growth was buoyed by the rebuilding of inventories, which were slashed in the depths of the crisis. That effect may have ebbed.

The second worry is for the rich world. Growth in global demand in recent months has come disproportionately from emerging economies. True, everyone has benefited from China’s remarkable stimulus spending. The World Bank’s economists point out that China’s share of world imports has grown from around 10 percent in mid-2008 to over 12 percent last year. This has pulled along leading producers of capital goods, like Germany, whose exports grew by a healthy 3.3 percent in the three months to September.

Chinese demand has also boosted Japan’s exports, which grew by 12.1 percent in the year to December. China has replaced America as Japan’s biggest market.

But stronger growth in developing markets is on the whole better news for producers of basic consumer goods than it is for rich-world exporters.

The ten countries whose foreign sales grew fastest in the three months to October were all developing and emerging economies, including several eastern European countries, Indonesia and South Africa.

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The fastest-growing rich exporter was Australia, which sends nearly a quarter of the goods it sells abroad to China and India. Nine of the ten countries whose imports grew most rapidly were also emerging economies.

This may change if rich-world growth picks up, increasing demand for the more sophisticated goods that industrialized countries export.

According to the IMF’s latest projections on January 26, rich countries’ GDP will grow by 2.1 percent this year and 2.4 percent in 2011, after shrinking by 3.2 percent in 2009. The fund now expects the world economy as a whole to grow by 3.9 percent this year, up from its October prediction of 3.1 percent.

Faster expansion is good for all exporters although growth in both output and trade will be hurt unless calls for protectionism, which are likely to increase if unemployment remains high, are resisted. Even so, the V-shape may prove to have been a one-quarter phenomenon.

From The Economist print edition




SOCIAL NETWORKING CHECKLIST FOR CAREER SCHOOL MARKETING Gayla Huber

Social sites provide communication, resources, or entertainment to a varied audience for multiple reasons, including research, networking, or community building. Current students and graduates use social networking as a means to stay current with their school. By now, your school either is using social networking as a marketing tool, or wondering what you need to do to get in the game.

Making the decision to launch a social networking program requires a commitment to post and update content on an ongoing basis. Schools should have an enthusiastic and dedicated associate overseeing the program. Editorial content should be updated weekly, while blogging requires more dedication than beyond a weekly to-do list. “Tweets” or blogs should be posted at least twice per week. Blog about informational and interesting topics. Let your audience know what you are doing, and don’t be afraid to put some personality into it. Like any other advertising, it needs to be appealing and informative. Career Schools should look to be on five to ten of the top social sites their target market populates. Depending on the site, content varies, with editorial, photo, and video all being part of the mix. Some questions to ask about your organization prior to launching a social marketing program are: 1. What are five reasons prospective students would want to attend our school? 2. What local events, charities, or sponsorships are we involved in? 3. What extracurricular or community activities do we offer? 4. What industry associations do we belong to? 5. What branding elements do we want to incorporate? How are you going to get your message across? Content, content, content! Some additional news and information you can use to promote your school could include: * Admissions contacts. * Photos of admissions representatives. * School events. * School calendar. * Open house dates. * Program awareness nights. * Financial aid nights.

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* High school events. * Programs list. * Services. * Campus photos. * Photos of campus events. * Published articles. * News articles associated with your campus. * List of blogs the school’s instructors and students are associated with. * Professional e-zines/e-publishers the school’s instructors and students can subscribe to. * Newscasts of your campus programs and events. * Prerecorded audio programs. * Radio or TV commercials. * Videos. After your content is posted, it is imperative to keep it up to date. Ultimately, you want to make a connection with your audience and build the relationship with potential students with a positive message. You also should keep the connection with current students and alumni to encourage community that will bring in future enrolments. Social networking is not just a buzz word; it is an integral part of the career school marketing plan. Whether your school already is socially savvy or looking to build its first page, get new content and get it out there. salesandmarketing.com



Sunday Observer – February 7, 2010

CERAMIC INDUSTRY MOVES INTO NICHE MARKET WITH QUALITY

By Lalin Fernandopulle

The ceramic industry has a brighter future provided manufacturers focus on exporting quality products with value addition to niche markets, said ceramic industry sources. The industry is poised to make a fresh start with signs of an early recovery from the global economic crisis which slammed the brakes on export demand.

The United States and Europe, the primary markets for Sri Lanka’s ceramic products were adversely hit by the financial crisis.

Sources said there is a gradual improvement in export orders and the industry anticipates a full revival this year.

Exports orders slumped sharply during the past two year forcing factories to close down.

The recession was also a blessing in disguise to the ceramic industry which was compelled to move into niche markets with more sophisticated products.

The ceramic industry is affected by the surge in gas prices due to the unusual and prolonged winter in the USA and Europe.

Industry experts are confident that there would be a stable market for ceramics in the near future.

Industry sources said a pay hike to all sector employees is a good move but a gradual increase would be much welcoming.

Sri Lanka is world renowned for manufacturing quality and some of the finest designs of table and sanitaryware products.

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Money & Banking


01st – 07th February 2010 Daily News – February 1, 2010 IMF REVISES UP GLOBAL FORECAST TO NEAR 4 PERCENT FOR 2010 The global economy, battered by two years of crisis, is recovering faster than previously anticipated, with world growth bouncing back from negative territory in

2009 to a forecast 3.9 percent this year and 4.3 percent in 2011, the International Monetary Fund said in its latest forecast.

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But the recovery is proceeding at different speeds around the world, with emerging markets, led by Asia relatively vigorous, but advanced economies remaining sluggish and

still dependent on government stimulus measures, the IMF said in an update to its World Economic Outlook, published on January 26.

* World economy bouncing back, but advanced economies drag. * Global recovery from recession led by emerging markets. * Countries should maintain stimulus measures while recovery not well established.

“For the moment, the recovery is very much based on policy decisions and policy actions. The question is when does private demand come and take over. Right now it’s ok, but a year down the line, it will be a big question,” IMF Chief Economist Olivier Blanchard said in an IMF video interview.



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IMF Managing Director Dominique Strauss-Kahn has warned that countries risk a return to recession if anti-crisis measures are withdrawn too soon. The IMF said it had revised upwards its earlier forecast for global growth by 3/4 percentage point from the October 2009 forecast.

Risk appetite returning Along with the update to its forecast, the IMF also released a new assessment of global financial conditions in its Global Financial Stability Report (GFSR). It said that financial markets have rebounded since the lows of last March, the result of improving economic conditions and wide-ranging policy actions by governments. “Notwithstanding the recent sell-off, risk appetite has returned, equity markets have improved, and capital markets have reopened,” Director of the IMF’s Monetary and Capital Markets Department Jose Vinals said. But policymakers still face extraordinary challenges as they seek to unwind the unprecedented fiscal, monetary, and financial support they provided to keep their economies and financial markets from collapsing, the GFSR update pointed out.

Strength of U.S. consumption The WEO forecast said that in advanced economies, the beginning of a rebuilding of corporate inventories and the unexpected strength of U.S. consumption had contributed to a rebound in confidence, and inflation was expected to remain contained. But high unemployment rates, rising public debt, and, in some countries, weak household balance sheets present further challenges to the recovery. The IMF report said that the varying pace of recovery across countries called for a differentiated response in the unwinding of measures used to stimulate the economy and combat the crisis. Due to the still-fragile nature of the recovery, fiscal policies need to remain supportive of economic activity in the near term, and the fiscal stimulus planned for 2010 should be implemented fully. However, given growing concerns about fiscal sustainability, countries should also make progress in devising and communicating exit strategies.

Financial sector repair Crucially, there remains a pressing need to continue repairing the financial sector in advanced and hardest-hit emerging economies. In these cases, policies are still needed to tackle bank’s impaired assets and restructuring. Unwinding the financial sector support measures gradual; it can be facilitated by incentives that make measures less attractive as conditions improve. Policymakers will also need to move boldly to reform the financial sector with the objectives of reducing the risks of future instability and rethinking how the potential fallout of financial crises would be borne in the future, while at the same time making the sector more effective and resilient. At the same time, some emerging market countries will have to design policies to manage a surge of capital inflows. Macro-prudential policies can be used to address the potential for bubbles at an early stage by limiting a build up in risks.



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RISK SENSITIVE CAPITAL MODEL FOR INSURANCE INDUSTRY SUPERVISION The insurance industry in Sri Lanka is closely monitored and regulated by the Insurance Board of Sri Lanka (IBSL) under the Regulation of Insurance Industry Act due to its high impact towards the economy and the society. An efficient, competitive and reliable insurance industry greatly contributes to the economic development of a country. Therefore, the existence of an effective regulatory and supervisory framework which takes into account the modern developments taking place in the insurance industry both locally and internationally is essential for the operation of a healthy insurance market in the country. With the objective of achieving its mission of "ensuring that the insurance business in Sri Lanka is carried on with integrity and in a professional and prudent manner with a view to safeguarding the interests of the policyholders and potential policyholders" in a more effective manner, the IBSL has embarked upon a revision process to its supervisory system.

The current supervisory system which is commonly known as the "Rules Based Supervisory System" is focused on establishing reasonable rules that scrutinize aspects such as the solvency margin, investments, minimum capital requirement, etc. However, this supervisory approach is perceived to be insufficiently reflective of varying risk profiles of different insurers, inconsistent with a risk based approach to management and considered as out of line with international best practices and emerging standards of the International Association of Insurance Supervisors (IAIS).

The IBSL after carefully analyzing the international experience on insurance supervision has taken a decision to carry out a modernization process to its supervisory system which focuses on the concepts of risk sensitive capital model for insurance industry supervision with the assistance of the World Bank. The main objective of this project is to develop and support the implementation of a risk sensitive minimum capital regime which is consistent with the industry risk profiles, practices and market dynamics for the insurance industry in Sri Lanka in consultation with the industry and under the collaborative control of the IBSL.

At the inauguration of the project held on 30th November 2009 at the IBSL, the World Bank consultants educated the staff of IBSL on various processes involved in the programme. The Chairman of the IBSL, Mr. Udayasri Kariyawasam delineated the project parameters set out by the World Bank at this meeting. The IBSL has appointed Mr. Damitha Narangoda, Director-Supervision, as the Project Head of IBSL who is currently serving as a member of the International Association of Insurance Supervisors (IAIS) Sub-committee for Solvency and Actuarial Issues. Subsequently, the consultants carried out a series of meetings with the industry representatives in order to understand and analyze the local insurance market and to ensure that the basis for the development of this new model is focused on the industry business profiles, practicalities and realities. A comprehensive report on Market Analysis ensuring that the project is consistent with the local market conditions is expected to be handed over to the IBSL by the consultants before the end of February 2010.

With the implementation of this new risk sensitive capital model for the insurance industry supervision, it will enhance the ability of insurance companies and the supervisory authority processes to focus on "risk rather than rules" and to provide a more flexible framework for maintenance of the regulatory minimum capital regime. Further, it will contribute to strengthening the risk management system of insurance companies and to have a supervisory system in line with international standards which supports a risk oriented management of insurers.

http://www.dailymirror.lk/print/index.php/business/127-local/2647-risk-sensitive-capital-model-for-insurance-industry-supervision.html



Daily News – February 3, 2010 GROWTH IN LOAN REPAYMENTS IN 2009: BANKING INDUSTRY PERFORMS WELL HUNDRED NEW BRANCH OPENINGS IN NORTH, EAST: Charumini de Silva Despite the global economic downturn the banking industry has performed outstandingly last year. The Central Bank has pursued strict regulation on the banking sector during the global economic meltdown. As a result there was not much impact on the banking sector of the country. The banking, insurance and real estate sectors also contributed nine percent to the Gross Domestic Production (GDP), a senior official of the Central Bank told Daily News Business.

Customers at a bank. Picture by Saliya Rupasinghe

She said the entire banking system has maintained a fine liquidity, capital and profit ratio compared to the internal and external factors during the last year. There was a slight impact on the non-performing loans as the interest rates were high during that time. Since the Central Bank had to continue a strict regulation to have a minimal impact from the global economic downturn and with the reduction of the interest rates the Central Bank has noticed that there is a growth in loan repayments. There will be more economic activities in the country with the positive economic environment. The Central Bank has given approvals for over 100 new bank branches to open in the Northern and Eastern province to expand bank services. It is important for banks to expand their services in rural areas or new banks to commence their operations targeting the rural community and to provide more access for credit,” she said. She said that the financial market should approach the market with innovative products. The Central Bank is keen on novel products that suits to the customers needs, which are not commonly seen in the banking sector so that there will be competition among the banks and there would be healthy competition which would benefit all stakeholders in the industry. The banking industry is adopting simple approaches of the Basel complaints to reach the advance level in a progressive manner. “Setting up of the mandatory deposit insurance scheme will enhance depositors’ confidence and it will be a self-corrective mechanism where companies would not have to take it as a burden. This will also help to strengthen the financial system,” the senior official said.

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Daily Mirror – February 3, 2010 NEW BANKING REGULATION - PROPRIETARY-TRADING ACI The Financial Markets Association (ACI), the leading global association of wholesales financial market professionals, is following with great interest the ongoing discussions and statements made by some senior international officials on their call for additional banking regulations e.g. towards 'Prop-Trading' (Proprietary Trading). ACI represents a huge part the FX (Foreign Exchange) and Money Market traders' from the financial industry (including Derivatives) and raises concerns on the mainly shallow discussions held so far. The actual financial crisis is a huge puzzle of occurrences which need to be carefully examined. Of course there will be some envisaged advantages from new regulations but generic and politically motivated statements are less helpful in these days. The diversity of products, the variety of different investment strategies and also the different backgrounds/demands within the financial markets became too big for simply unifying all markets. Precisely the traders of ACI, the Financial Markets Association particularly helped at the peak of the crisis to lead their banks through and to enable the balancing of liquidity in the most difficult times. This just was possible because of our international trader's network, because of trading positions for own account (prop-trading), and also because of our international education/certification programme as well as of our 'Model Code' - the codex of behaviour and closing of business/tickets in the OTC ('over-the-counter') markets. Prop-Trading and arbitrage within authorized limits (mainly regulated by the local banking supervision) remain imperative for well functioning markets. Additional and unqualified regulations on prop-trading risk again the erosion of liquidity within the financial markets only to become solved again by massive funding of liquidity via Central Banks - this cannot become the goal of new regulatory innovations again. 15/09 (the start of the Lehman crisis) eroded the trust in the financial markets and led to a massive reduction of interbank limits (which caused enormous difficulties in the shifting of liquidity between the international markets/operating banks). This automatically caused a reduction in trading. The current discussions put all banks under one umbrella - with some negative sentiments towards all operating banks. ACI stresses the importance to differentiate between quasi investment banks and ordinary business banks and the enormous importance of Treasury/Liquidity departments and their necessity in any future configuration. The global financial markets changed dramatically during the past 10 years. The enormous boom in commodities (increase of exploration, increased revenues) etc. increased the money flow and with that demand for investments. Volumes in different currencies held by Sovereign Wealth Funds, and also other asset classes like Pension funds, the Currency Reserves by Central Banks etc. have risen dramatically and are demanding for a huge variety of investment policies. These challenges were needed and still needs to become mastered by the (mainly) banking industry. Prop-Trading helps to maintain the markets liquidity - if this is not the case anymore, politicians will also have to change the whole social and economic system. FX and Money Markets did not induce the financial crisis. Conversely, both product groups helped considerably in managing the crisis and were crucial in helping their bank to survive. A cut in prop-trading or even the implementation of a financial transaction tax on these products would have massive impacts on the overall-liquidity within the financial markets. All considerations towards such trends have to be lead with utmost reservation. Such discussions will not only need the highest degree of data accuracy, and discipline and neutrality in talks; but also reservation as well as specific quality and ethical public reporting (by press and other media). The global economy still will face difficult times ahead. Starting from now the best heads have to accept the challenges of the enormously grown economies (industrial and financial ones) to adjust them, analyzing the needs and adapting new regulations. ACI is the leading, global association of wholesales financial market professionals and counts some 13,000 international members - www.aciforex.org




The Island – February 5, 2010 DIRTY MONEY AMOUNTS TO 5% OF WORLD ECONOMY The Head of Compliance and Training of Standard Chartered Bank India and South Asia P. Ananthakrishnan says, citing International Monetary Fund (IMF) data, money laundering, whereby monies gained through crime and other illegal means are infused into formal circulation, is a global problem amounting to two to five percent of the world’s economy. "Money-laundering refers to the proceeds of crime that are run through the financial system to disguise their illegal origins and make them appear to be legitimate funds. Most often associated with organized crime, money laundering can be linked to any crime that generates significant proceeds," Ananthakrishnan said. "With the evolution of financial markets, money laundering today has become increasingly evident in the financial industry. Sectors and areas such as casino and gaming, securities transactions, real estate, gem and jewellery, money transfer business, internet payment systems and tax havens are found to be more susceptible to money laundering," he said. While technology in the form of systems which filter ‘unusual’ transactions and suspect names has definitely helped spot suspicious activity, it is important for industry to focus on anti-money laundering training aimed at sharpening the skills of business managers so as to quickly detect a suspicious activity or transaction that could otherwise go unnoticed. "It is important to make Suspicious Activity Reporting a mandatory and a serious control measure rather than a routine reporting exercise," he added. Many regulatory and governmental authorities quote estimates each year for the amount of money laundered, either worldwide or within their national economy. According to the International Monetary Fund, a frequently cited figure is 2 percent to 5 percent of the global economy. Ananthakrishnan made these comments at training programme for financial professionals organized Standard Chartered Bank Colombo last week. The program titled ‘International Trends on Suspicious Activity Reporting (SAR) and Money Laundering’ aimed at training industry experts to effectively counteract a globally recognized threat, not only to the banking sector but to a country’s economy as a whole. He stressed the importance of a banker’s vigilance which is pivotal in supporting FIU and other law enforcements authorities in fighting this menace. The training session provided an outline on the various modes of money laundering and offered useful and important tips on how to identify suspicious activity. Ananthakrishnan also highlighted the importance of building relationships with customers and enhancing the knowledge about customers which is vital to safeguard both the bank and its customers from suspicious financial transactions. In addition to many case studies, he shared some of Standard Chartered Bank’s best practices which have helped the bank detect and curb such activity. He shed light on new sectors that have fallen prey to suspicious activity and stressed the importance of looking beyond the obvious in terms of transactions as well as sectors affected by the problem. Nearly 55 legal and compliance professionals representing local and foreign banks, the Financial Intelligence Unit of the Central Bank of Sri Lanka, Insurance companies and other financial institutions attended the session. Ananthakrishnan counts over 27 years of banking experience, 16 of which has been with Standard Chartered Bank. He held the position of Head of Compliance and the Country Money Laundering Prevention Officer for India, prior to taking up his current position, as the regional head of compliance training for the Standard Chartered Group in the South Asia region.

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Sunday Times – February 7, 2010 OVERSEAS MIGRATION: WISDOM OF CROWDS OR EXTRAORDINARY POPULAR DELUSION? INTELLIGENT INVESTOR By Kajanga Kulatunga Overseas migration has been touted as the ultimate fix for all of life’s problems, especially financial problems. Sri Lankans seem to have bought this story at face value and voted with their feet by using any method at their disposal to try and get to countries where, apparently no problems exist and millionaires are born overnight. If only it was that simple. It is true that immigrants from the previous two decades have done economically well in their new host countries. But as with all things the global financial crisis of 2008 has turned many previous assumptions on its head. In fact in many of the destination countries the economic landscape began to change earlier in the last decade, right after the collapse of the technology bubble. The economic performance of migrants in the main destination countries which has a skilled migration intake (Australia, Canada, New Zealand and the United Kingdom) makes for an interesting study. While data from the United States of America was considered, their lottery based migration system skews the comparison. As with higher education, the story has two distinct halves to it. Those who migrated prior to 2000 have on average had a better financial outcome as opposed to those who made the decision later. The economic outcomes of those who are planning of coming in the future may be the worst of all groups.

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Perhaps the single issue that has made overseas migration unattractive are highly elevated house prices in many countries. Elevated house prices always follow higher rents, which have made the total financial return for new immigrants to be significantly less than those of their compatriots of the early 90’s in particular. Financial stability (defined as the ability to save 15% of disposable household income) took on average 6 years (best case, with assumption that wages are 25% higher for skilled immigrants than those for the whole country) to achieve for immigrants in the early 90’s. This has now blown out to more than 11 years. Removing the rosier assumption and assuming median wages, the 11 years goes to a wider 16 years. The main culprit here is elevated house prices, which require a larger savings amount in the first few years, in order to secure a mortgage. Declining real wages have made the task harder still.

The most common strategy employed by new immigrants who face financial stress, or even those well settled when their consumption needs increase is to dispose fixed assets in their home countries. While sensible during an emergency, this may be a wealth destructive strategy in the long run, especially if the market they sell out of substantially outperforms the market in which they buy the new asset. Consider the plight of someone who sold property around Colombo in 1995, to buy a house in a destination country.



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The value of the property in Colombo increased by 8.5% per annum over this period (in $US terms), compared with 6.5% overseas. On one hundred thousand dollars that is a difference of over seventy thousand over that period. The return from overseas halves if the property in Colombo was owned outright, and the overseas property was on a mortgage, thus magnifying the loss. Migration like any other investment decision needs to be one built on sound due diligence. While predicting the future is an inexact science, not doing proper homework in this “Google” age is unforgivable. The current frenzy to migrate overseas has all the ingredients of a bubble; a plausible story using historical data, media hype by those with a vested interest encouraging participants further and finally a feedback loop made complete by selective “success stories”. There are some important financial considerations that are best understood before you decide to dispose all your local assets and say goodbye to Sri Lanka, for good.

• Don’t forget the sample size. Most stories about going overseas will highlight successes and tend to underplay difficulties. This works both when it comes to media representation as well as personal examples from friends and family. Thus it may seem that all the people you know claim to be “financially successful” after migrating. The chances however are that they represent less than 0.01% of the total migrants to these countries in any given year.

• Understand the difference between being asset rich and having significant cash flow. Most migrants

are asset rich as more than 90% of all their wealth is accumulated via housing, mostly just the one residential property. And if they have a mortgage on the same, it actually belongs to the financial institution providing the loan, and not those who occupy the property. Many have been tapping into their increasing home prices to sustain their lifestyles. This is a liability not an asset.

• Purchasing power is everything. Purchasing power parity or the “law of one price” is perhaps the

most important economic variable that prospective immigrants need to understand. Very simply put, the purchasing power parity shows the value of a bundle of goods in two countries, adjusting for exchange rate differences. Using this definition one $US goes (or buys) 2 to 3 times more goods and services in Sri Lanka, compared with many of the destination countries. This is crucial to keep in mind as many calculate their lifestyle by converting potential dollar income, and imagining life in Rupee terms. On the flip side, many underestimate the true power of their earnings in Sri Lanka. For example a hundred thousand rupee monthly income would actually translate to approximately $US 2,200 in the purchasing power of goods and services that could be bought in the destination countries, and not simply $US 877 (using an exchange rate of 114).

• Understand the risk of making assumptions around meritocracy. The migration myth with the most

severe financial consequences is based on talent being rewarded on performance as opposed to politics and personalities. Who you know matters more than what you know. This is a universal truth. The “glass ceiling” is alive and well in every democracy around the world, and is not limited to Sri Lanka. It would be extremely unwise to build an investment strategy pinning all your hopes on “what” you know (i.e. technical skills). Recent surveys across many countries with large migrant intakes have shown that over 95% of all senior level positions are filled without being advertised to the general public, and with the candidate coming from those already known to senior managers.

• Compare lemons with lemons, not melons. Unaffordable housing has led most new immigrants to

live on the fringes of many cities. This is the case for those who wish to have some savings at the end of each month.

Except for small pockets, most of these fringes are 30-50 kilometres away from the main city. Most countries have made no major investments in core infrastructure over the last 15 years, making the



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commutes from these neighbourhoods approximately 45 minutes to 1.5 hours. Time wise this is the equivalent of Negombo, Gampaha, Homagama or Panadura. Distance wise, this would amount to Chilaw, Nittambuwa, Hanwella and Kalutara. For someone based in and around Colombo, the question is the desirability of lifestyle moving from Colombo to the previously mentioned cities. This would approximate the lifestyle in the “fringe” suburbs of the destination countries. A comparison of Colombo, with whatever her shortcomings, with a fringe city overseas is thus void. • Flowing on from the point above is the myth about education. A public education is a public

education, anywhere in the world. The public education system in a fringe suburb overseas is equivalent (if not worse) to that of similar areas of Sri Lanka. The perverse logic is to compare the cost of a private education in Sri Lanka with the “free” education in the public system overseas, simply because the medium of instruction may be English. Thus a sensitive emotional sale is made to many parents by the promised riches of a “free” English education. Again, lemons need to be compared with lemons. Cost, value and outcomes of the non-religiously affiliated private education system in Sri Lanka needs to be compared with similar institutions overseas. If you think Rs.500,000 a year for an international school is expensive, try forking out on average $US 20,000 for a similar education in the destination countries.

• The very same logic applied to education is also valid to some extent in health care.

Although medical care may be touted as “subsidized” or worse “free”, there still remains hidden costs. Many confuse health care with palliative care. The former may come under universal coverage in most countries, but the latter has costs, which can at times be prohibitive. Simply put, it’s much cheaper to hire a private nurse and qualified health attendant in Sri Lanka, if such an unfortunate case arises, than in many destination countries.

• Overlook the rise of India and China over the next 20 years at your own risk. It would be an

extremely brave person who would bet against the benefits that can accrue to Sri Lanka as a result of the changing geo-political landscape of the world. Overall, the analysis shows that temporary overseas migration, without asset disposal in Sri Lanka still has an attractive financial outcome.

For temporary migrants, using a base case median wage assumption, the optimum length approximates to six years for dual income couples without children, going to 8-10 years for those on a single income or families with children. Permanent migration is economically looking more unattractive for the masses with the exception of a handful of professionals on the extreme right tail of the distribution. The most optimal financial outcome from temporary migration is still found in high skilled roles in the Middle East.

Democracy allows people to freely move and live in geographies of their choice, subject to administrative laws. The decision to migrate is thus one left solely to the individual, should they choose to exercise that choice. Hence the reason this article is limited purely to the economic and personal financial case of immigrants. Sometimes migration is unavoidable on non-economic grounds including but not limited to fleeing persecution, family politics, or an unfortunate alignment of planets at the time of one’s birth. These people have my sympathies.

Others who take the plunge from a comfortable financial situation in Sri Lanka, to a world of uncertainty have no one to blame but themselves. As with any investment decision, think twice, independently, to avoid the cognitive pitfalls of the herding crowds.

(The writer is an Investment Specialist based in Sydney, Australia. You can write to him at [email protected]).



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Tourism



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SMALL AND MEDIUM HOTELIERS REQUEST:

MARKETING MECHANISM, STRATEGIES FOR TOURIST INCREASE

Sanjeevi Jayasuriya

Sri Lanka has become one of the most interesting countries for foreigners to visit. The tourist industry will increase with the peaceful environment prevailing at present. It is important to have a proper marketing mechanism and strategies to attract tourists that will provide an impetus for industry growth, the Association for Small and Medium Enterprises Travel and Tourism Sri Lanka (ASMET) President, Siri de Silva told Daily News Business.

The ASMET is an association of diversified membership comprising different sectors of importance for the tourist industry. The contribution of its members is significant. The association seeks assistance from the Government by way of low cost funding and incentives to upgrade their properties. The funds are necessary for refurbishment, importation of items and adding value, he said.

Members of the Association who have hotels with less than 25 rooms need to support the tourist industry. Most of the members are proprietors or owners of family businesses with their private money invested in the tourism sector. “Government assistance to improve their properties will benefit the industry.

We are satisfied with the standards maintained by our members,” he said. The tourism industry would be able to achieve the targets set by the Government.

The level of tourist inquiries is on the rise and there is an increase in the tourist arrivals from non-traditional countries such as Israel, Spain and Portugal. There has been an increased number of tourists arriving from Russian countries. The indications are there for a better season this year, he said.



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The Island – February 2, 2010 CULTURAL VALUES FACE THREAT AS TOURISM GROWS By Mario Andree A survey by Sri Lanka Tourism Development Authority (SLTDA) has highlighted the possibilities of a major impact on national cultural values with a large number of tourists visiting the country. "Potential negative cultural impacts are more generally related to areas that had been less attractive to tourists earlier," it says. "Although tourism revenues help maximize economic benefits to local communities, a continuous growth in this sector places a great stress on remaining biologically diverse habitats and indigenous cultures," says the study. "It is, however, necessary to protect this resource base as tourism is one of the world’s largest and fastest growing industries, "Tourism can contribute in a positive manner to socio-economic development and environmental protection, as Sri Lanka is focusing on tourism to be the third largest foreign exchange earner by 2016," SLTDA Director-General S Kalaiselvam told the Island Financial Review. Uncontrolled tourism growth can also cause environmental degradation, destruction of fragile ecosystems, and social and cultural differences, undermining the basis of tourism. Export Development and international Trade Minister Prof. G. L. Peiris said last year "the government is not prepared for the negative effects which might occur due to mass tourism". He also said Sri Lanka has no fear in case of ‘sex tourism’ as the country’s culture does not approve such trade, and the government would step forward to prevent such events if necessary. Impacts… According to the SLTDA survey, "the possible cultural issues are primarily of two kinds, namely, tourists engaging in culturally inappropriate behaviour due to their lack of awareness about local cultures, and the risks faced by local citizens due to increased associations with tourists". Increased influx of tourists into an area may also pose threats to tourists due to petty theft and harassment, it said. Tourists may not be aware of local customs and traditions and they may not be informed of cultural differences and what is deemed acceptable behaviour within a traditional Sri Lankan community, said the survey. As an example, the report said: "Proper attire for visiting religious sites, acceptable attire for beach areas, asking permission before taking pictures of local people, may not be familiar to tourists. "Such seemingly inappropriate behaviour, largely due to ignorance, may be perceived as lack of respect for local cultures or as invasion of privacy by residents," it said. "Harassment of tourists is also a possibility in a situation where the influx of tourists increases to an area. In such situations, the harassed individuals can call up the tourism hotline based in Colombo. SLTDA can



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assign the task of sorting the matter to relevant police divisions through the tourist police in Colombo," the report added. "At the same time, the local community will be made aware of the sexual risks that are usually associated with tourism? "Risks of paedophilia and STDs such as HIV/AIDS in areas where tourism is currently a flourishing industry are some examples, "The case of ‘beach boys’ in the Western and Southern coastal areas has been documented as providing services largely of a sexual nature, "Though individuals seem to be voluntarily engaging in these activities, it is usually poverty and the environment around them that push them towards these sexual trades" "Drug addiction through associations with tourists may also be of concern for communities," the survey pointed out. Management… The report adds: "The proposed project will pay careful attention to these possibilities because the negative impacts involved here can cause long-term social problems that can affect Sri Lankans in general. These risks can also lead to a decrease in the number of tourists wanting to visit a certain area if the issues accelerate to an extent of giving that particular area a bad reputation, Therefore controlling these risks as much as possible will not only benefit the local community but will also safeguard the sustainability of the tourism industry in a given location, the report showed. SLTDA’s project intends to develop sustainable tourism and as recommended at the World Summit in 2002, to develop community-based initiatives on tourism to build the capacities to diversify tourism products, while protecting culture and traditions and effectively conserving and managing natural resources. The proposed project shall formulate master plans and a product development strategy to ensure that the local communities can engage in and benefit from tourism related activities. "Community participation at the different stages of planning, implementation and evaluation of the project is emphasized in the project design," Kalaiselvam said. "Community participation will be vital for ensuring that the project benefits are equally distributed among the different segments in the country," he added. The product development focus will be to build on traditional areas like Ayurveda, natural and cultural heritage unique to Sri Lanka, survey pointed out.



Daily News – February 3, 2010 MYTHS IN TOURISM MARKETING Vipula Wanigasekera Tourism universities and institutions produce hundreds of marketing professionals into the markets and industries and they enter the business arena brimming with new concepts, strategies, ideas, and tactics to turn things around to generate results overnight. Their bosses eagerly await monthly P and L accounts thereafter. Then the magic wand first hits the visible confusion arising over entanglement in differently interpreted managerial and marketing terms from vision, mission, objectives, strategies, tactics, communications, promotions and branding colorfully appearing on screen which sometimes tend to push aside a real need for a particular action, activity or even a direction that may go begging for immediate attention.

The macro-environment is so uncertain, unpredictable and uncontrollable. Tourism organizations can face difficulties when areas that are not within their control hamper their plans. Not being geared or prepared for elements emanating from unmanageable areas may force organizations to halt or drop their plans that have no chance of being pursued.

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Often, the reason is the over enthusiasm without giving much thought to operational hazards that should also be given due consideration at preliminary discussions. It is always necessary to review why plans have not proceeded as discussed. Many middle managers initially fail to

comprehend the cultures of various organizations whether they are private or State, that are often governed by the individualistic thinking of their superiors in spite of detailed discussions on short and long term plans discussed from time to time for collective decisions. Eventually, the subordinates become cogs in the wheel and simply do ' what they are asked to do' to avoid the wrath from the top.

Training session organized by the Sri Lanka Convention Bureau in Kandy.

At a time many countries are striving to come out of the recession (some are succeeding while others are not so lucky), experts keep hammering on the need to increase marketing activities, do things out of the box, and exploit opportunities in the vacuum caused by competitors' inaction. However many complain that marketing also increases cost and not the ROI. Others argue that doing any marketing at all, is better than doing nothing, marketing must be smart enough to create a substantial ROI, or otherwise it is said to be just a way to camouflage the act of throwing thousand dollar bills out of the window. This raises the question the extent to which tourism marketing is driven by rational and personal preferences. In tourism, advertising and promotions are expected to create awareness and interest among the target audience or target market. When they do not trigger direct business deals, the stakeholders begin to question the correlation between the promotions and the generation of business.



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Marketing emphasizes educating the target market through advertising, direct marketing, Internet marketing, events, public relations, or networking. The surge that Sri Lanka expected soon after the war was really seen in statistics so far but travelers have many other options with the recession hitting their long haul travel. Is there anything else to be done other than all the marketing gimmicks that are known and widely practiced today? Will lower prices encourage more people to travel to Sri Lanka?. This is argued both ways. The upscale traveler with adequate disposable income would not mind as long as he or she realizes the expectations promised through promotional efforts. The answer lies in the value of the product to the visitor and not exactly the price. For others, Sri Lanka is yet to offer the night life, entertainment etc as our neighbors do. Can too many options confuse the travelers? The diversity in compactness, just as much as a strength to any country, can pose a difficult task for marketeers when allocating resources based on product market strategies where the focus tends to get diluted. Do the research studies precisely reveal exactly which product, is to be targeted at which market and at any given time. This is doubtful in a vast environment when every country is striving to have a reasonable share from their markets. Many DMCs and tour operators are experts in their ideas and promotional approaches but their creativity sometimes goes waste when the sale is dependent upon a middleman who acts as their agent overseas. These agents have many countries in their catalogues and what Sri Lanka can offer in terms of value is not truly reflected through a few pictures and prices. e marketing is said to be successful only if it is done purposefully. Most emails are considered spam and deleted at first sight by receivers. The e marketers say 'lots of email reach people who are not interested in what you have to offer hence considered. In the eagerness to use internet marketing for all businesses today prospective customers should not be underestimated. But marketeers often refer to "integrated marketing" plans because it is the integration of many different types of activities that drive visitors to a web site. Consistency is said to be tourism marketing's best friend provided the product fulfils the promise. With the development of infrastructure, Sri Lanka is expected to move away from the numbers game into more value based tourism such as eco, spiritual, cultural and heritage tourism, as it is unlikely that Sri Lanka's culture will ever warrant Sri Lanka Tourism to be on par with her neighbours in terms of entertainment, night life, etc. The vision of tourism being discussed at various for a should take these realities into account. Partnerships and alliances are extremely important for tourism marketing. At least policy makers tend to believe so, when they question why all sectors that deal with overseas markets cannot join hands with tourism and go along together for synergistic efforts and results. The BOI, the EDB, the Tea Board and Foreign Missions were mentioned as partners. For instance, ' Ceylon Tea' is carrying a very high level of awareness throughout the world, a brand that Sri Lanka was gifted with for decades.



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Exports



Daily News – February 1, 2010 EXPORTS TO CHINA SEE A REMARKABLE INCREASE Sri Lankan exports to China has increased remarkably during the past three years from US$ 37 million in 2006 to US$ 70 million in 2009. This impressive growth within a span of three years came despite the world economic downturn and China herself showing a negative export growth to Sri Lanka in 2009. The structure of Sri Lankan exports to China has changed substantially during 2007 - 2009 adding more products to the basket of exports. Sri Lanka, during this period undertook a focused promotional strategy in introducing a basket of targeted export products to the Chinese consumer market. Earlier, most of the exports were in the form of raw materials such as zirconium ores and titanium ores accounting for more than 40 percent of the total exports. As a result of this targeted promotional campaign there has been a significant shift towards the export of tea, rubber based products, coir fiber, gems and jewellery, activated carbon and fish products to China in the recent period. As a main tool for promotion of these products, the policy-makers for trade and development in Sri Lanka together with the Mission in Beijing after careful scrutiny identified a selected number of trade fairs held in China to showcase Sri Lanka products. Upon closely working with the Chinese Business Support Organizations and inking with them over 12 Memoranda of Understanding the Embassy was able to gain concessionary facilities for the participation at these Chinese trade fairs obtaining the exhibition space free or at very nominal rates in a number of occasions. As such during the three-year period Sri Lanka participated in a record number of trade fairs, totaling 52 out of which 25 trade fairs were singularly for 2009, with a large number of exhibitors showcasing Sri Lanka potential products in many provinces in China. The two South Asia Trade Fairs held in 2007 and 2009 stand out significantly where Sri Lanka participated with 53 and 60 exhibitors respectively. Sri Lanka Mission’s efforts of proposing to have this trade fair as an annual event has finally paid off as from 2009, Commerce Ministry of China has announced the holding of this event in conjunction with the Kunming Fair each year. Further the cooperation between Business Support Organizations of Sri Lanka and Chinese counterparts were improved to a greater extent in a variety of areas mainly using the MoUs signed as a basis in promoting a number of two-way trade and investment delegations, in enhancing trade and investment relations and facilitating the exchange of technical know-how in many areas for the development of targeted industries in Sri Lanka. With the increase of the average income of the middle income group of China, the concentrated efforts taken by the Mission in Beijing for the development of an export destination for Sri Lanka gems in the Chinese consumer market has yielded productive results by September 2009, elevating Sri Lanka to the 19th position from that of the 32nd position which prevailed in 2006 as availed of by the statistics of the Gem and Jewellery Authority of Sri Lanka.

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December statistics is expected to further elevate this position due to very successful participations at the Gem and Jewellery Fairs both in Beijing and Shanghai in November. A record number of 20 companies from the gem and jewellery industry participated in the Beijing show. Apart from this Sector Sri Lanka tea exports to China grew at a swift pace during the past three years thus exceeding 1 million kg for the third year in succession from 700,000 kg in 2006. Although a huge demand for imports from China is visible, which has hitherto caused a trade imbalance for Sri Lanka, an analysis of the structure of imports will show that Sri Lanka has mainly imported fabrics, tractors, vehicle spare parts, machinery and chemicals etc and that a large portion is concentrated in the investment and capital goods segment thus bringing in further benefits indirectly to Sri Lanka due to the competitive pricing structure of such goods. On a more substantive level The Mission in Beijing has also organized together with the Department of Commerce the Joint - Economic Commission in April 2008 after a lapse of eight years. The Mission has also actively joined hands with the Department of Commerce in promoting further tariff concessions to Sri Lanka export products in the Chinese market under the negotiations on Asia Pacific Trade Agreement (APTA). China as a member of the Asia Pacific Trade Agreement has granted duty concessions to Sri Lanka products including tea, gems and jewellery, coconut based products, fruits, spices, electrical parts and accessories. The corridor is open for many other top 50 Sri Lanka exports items to the international market to seek further concessions. The Business Support Organizations ought to create awareness among the Exporters of Sri Lanka about the unexploited market opportunities in China especially the concessions granted under the APTA. The reduced duty structure has given a distinct advantage for Sri Lanka exporters and in utilizing this advantage, it is important that all consignments (APTA Concessions list) to China include the rules of origin certificate issued by the Department of Commerce in Sri Lanka. Further, APTA also paves the way for promotion of investments and joint ventures with China. Based on the cumulative rules of origin many joint venture opportunities are available for the manufacture of light industrial products including household electrical appliances, leather goods, agricultural machinery, motorcycles, marble, copper items, aluminium products, garments, footwear etc. With the 4th round of negotiations coming into effect from 2010 it is expected that Sri Lanka would get more concessions for potential exports to the Chinese market. The year 2007, glow in letters of gold in the history of bilateral relations of Sri Lanka and China as the two countries had witnessed the celebration of the 50th Anniversary of the establishment of diplomatic relations. Since his visit to mark the occasion, President Mahinda Rajapaksa visited China on two other occasions during the past three years giving a higher political impetus to the existing friendly ties between the two nations closely followed by the visit of Prime Minister Wickremanayaka on two more occasions. The visits by both Foreign Affairs Minister and the Export Development and International Trade Minister in 2009 further consolidated the existing ties, thus taking, the partnership between Sri Lanka and the PRC, to greater heights.



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Daily Mirror – February 2, 2010 TAP PEPPER EXPORT POTENTIAL By Nizla Naizer With an annual global demand of over 250,000 tonnes of pepper, spice exporters are calling for a greater focus on developing the crop within Sri Lanka. "Currently Sri Lanka produces close to 12,000 tonnes of pepper but only around 9,000 tonnes are exported as there is also a strong local demand," former Spices and Allied Products Traders Association (SAPPTA) Chairman Gulam Chatoor explained. "However, there is a greater potential to tap in to the global demand." Chatoor's firm Saboor Chatoor & Co has been exporting spices out of Sri Lanka for close to a century and he explained that the prices of Sri Lankan pepper are competitive in the global market. "Currently prices for pepper are around Rs.250-260. It dropped from Rs.300 per kg in previous weeks but it is still competitive in the international market." He added that the biggest challenge faced by spice exporters was the production crunch. "There is always a demand for spices from Sri Lanka and because of the Free Trade Agreement we have with India, the majority of our exports go to the subcontinent. But we do not have the production to meet the growing demand." The International Pepper Community last year, estimated that world pepper consumption is growing at a rate of 3.46% each year with USA remaining the single largest importer taking a share of 23% of the world market. Apart from Vietnam which has increased its output to become the world's leading pepper producer at close to 80,000 tonnes annually, most pepper producing nations have seen stagnation of production leading to tight global supplies Chatoor added that since the global economic crisis in the last quarter of 2008 to the first quarter of 2009, prices for cinnamon, cloves and pepper have stabilized. "Sri Lanka exports over 90% of clove and cinnamon production, but with these spices too we are seeing a constraint in production," he explained. He said that with the cinnamon industry, the biggest issue was the shortage of peelers. "Cinnamon peeling is an arduous process and in the past although it was a job passed from generation to generation, most cinnamon peelers prefer to send their children to other sources of employment." While the more specialized peelers come from the Ambalangoda region in the country, Chatoor said producers have set up peeler training centres to give the opportunity for more rural inhabitants to learn the process as a source of employment. Sri Lanka produces closte to 90% of the world's cinnamon with over 12,000 tonnes annually, followed by India and Vietnam and is in high demand because of its very thin, smooth bark that has a light-yellowish brown color and a highly fragrant aroma. Tight supply may push prices Tight global supply situation may push the pepper prices to a positive side, Indian media reported. They said that in India pepper ended weak as new crop arrivals weighed on prices. Export demand also remained weak along with poor domestic off take which further hurt sentiment. Arrivals are already delayed this year and even the harvest from Vietnam which comes in the month of March is expected to be delayed this year. Spot pepper fell by over Rs.38 to end at Rs.13,524.1 per 100 kg in Kochi. February delivery dropped Rs.111 and settled at Rs.13328/quintal. The contract touched the intraday high of Rs.13,500/quintal while low of Rs.13240/quintal. Now support for the pepper is seen at 13,212 and below could see a test of 13,096. Resistance is now likely to be seen at 13,472, a move above could see prices testing 13,616.

http://www.dailymirror.lk/print/index.php/business/127-local/2640-tap-pepper-export-potential.html



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Sunday Times – February 7, 2010 2009 TEA EXPORT EARNINGS TO TOP US$ 1 BILLION By Dilshani Samaraweera Sri Lanka’s tea export incomes for 2009 are expected to cross the US$ 1 billion mark, despite a large output drop of 29 million kilos within the year. “We expect export earnings for 2009 to be around US$ 1.3 billion despite the drop in export volumes,” said the Director of Promotions at the Sri Lanka Tea Board (SLTB), Hasitha de Alwis. The Tea Board says the strong export earnings are due to higher prices fetched by Ceylon Tea in international markets. Tea prices did well in 2009 because of a global shortage of tea. In Sri Lanka too, tea outputs nosedived in 2009 because of extended drought in tea growing areas. “Our tea export volumes reduced in 2009, compared to 2008, because of the nearly 29 million kilo production drop. But, on the other hand, we also saw good prices for tea. So the drop in production will not cause a loss in value terms. We exceeded the US$ 1 billion mark by November 2009,” said Mr de Alwis. Marketing plan Meanwhile the Tea Board is also investing Rs.3 million to develop a strategy to increase tea export incomes. This week the Tea Board signed an agreement with MTI Consulting, a boutique management consultancy, to develop a marketing strategy for Ceylon Tea. “We are investing Rs.3 million into developing a new marketing strategy. The strategy will be developed by researching into export markets, to look at how and where we can increase our export incomes. We hope to have a draft strategy document ready after about 3 months of starting the project,” said the Chairman of the Tea Board, Lalith Hettiarachchi. The main focus is on increasing value addition and brand building. “The main objective of the strategy is to increase value added exports and to build Sri Lankan brands. At this point we still have very few globally recognised Sri Lankan tea brands. So we will see how this can be increased because the returns are much higher than generic exports,” said Mr de Alwis. MTI says it will start strategy development with a global scanning process. “Our process starts with an intensive global scan that will cover consumers, the demand chain, channels, supply chain, brand owners and tea producers, including relevant cross-industry learning’s. Based on the scan, the strategy formulation process will begin, with active involvement by the industry and will evaluate all the strategic routes available to SLTB and Ceylon Tea. Sustainability as a strategy driver will be an integral part of this exercise,” said a statement from MTI.



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Climate Change



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The Island – February 1, 2010 NO OPTIONS FOR LANKA BUT RENEWABLE ENERGY COAL NOT CHEAP NOR CLEAN, EXPORTERS WOULD NOT BE ABLE TO COMPLY WITH ‘GREEN’ STANDARDS, SAYS ENVIRONMENT MINISTER. By Ifham Nizam Sri Lanka has no alternative but to improve renewable energy sector, as soon as possible. The Sustainable Energy Authority of Sri Lanka (SEASL) under the leadership of Dr. Krishan Deharagoda is on an ambitious target of 10 per cent of renewable energy by 2015. And through efficiency consumption pattern an eight per cent achievement by 2015. We sincerely hope that Dr. Deharagoda without giving into the whims and fancies of certain officials under him to carry out his task as planned. It is common knowledge that certain officials who claim that they were trained in Sweden etc. don’t do justice to motherland but simply catering to their needs and of course to needs of their sidekicks. It has been identified that Sri Lanka has 726MW of mini hydro potential with another 300MW of large scale hydro power projects. In pursuance to the feasibility studies that need to be carried out to ascertain the most suitable alternate or supplementary sources of energy, solar and wind capacity maps have already been prepared. Although, these are considered to be very costly exercises, one cannot help the authorities leaving no stone unturned. Environment Minister Patali Champika Ranawaka, a product of University of Moratuwa and a qualified Engineer believes as a tropical country our main source of energy should be biomass. And our slogan should be `grow our energy – grow our food’. He said: "We cannot depend on fossil fuels anymore; the biggest challenge we will have to meet during this decade would be to find ways and means of producing our own energy needs. Therefore, to work towards our economic prosperity and sustainable development, it is of paramount importance for us to analyze our energy situation." Ranawaka says if we consider the share of primary energy supply in 1980, nearly 70 per cent of the total energy was coming from biomass and nearly five per cent of energy was coming from hydro power. Therefore, 75 per cent of the total energy needs were generated from renewable sources. In 1990 the share of biomass remained 70 per cent and the hydro power share had risen to 10 per cent thanks to Mahaweli Scheme thereby, 80 per cent of the total energy being generated from renewable energy sources. When the whole world was depending on fossil fuels for energy needs, (86 per cent of total energy was generated by fossil fuels where 36 per cent from oil, 28 per cent from coal, 22 per cent from natural gas- Sri Lanka had a very sustainable eco-friendly energy usage pattern, which was diametrically opposite to what the world had practiced. After 1990, the situation had dramatically changed by more and more fossil fuel being used to generate energy, completely neglecting the enhancement of hydro power, biomass energy or other renewable energies. As a result, in year 2000, the share of the bio mass to primary energy was reduced to 50 per cent –at present it is 48 per cent- and the share of hydro power was reduced to eight per cent. However, as the petroleum share was increased to 42 per cent, Sri Lanka’s energy security and sustainability had eroded and since then we have been heavily depending on oil exportation.



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Unfortunately, we are now saddled with the problem of borrowing money from foreign sources to settle our oil bills. "If we consider our electricity sector, the situation is much worse than the total energy sector. In year 1990, 99.8 per cent of total electricity was generated using hydro power and our per unit cost (Kwhr) was Rs.2," Ranawaka added. However, subsequent years showed development of two trends. One was the electricity sector planners being more and more inclined towards using fossil fuels as oil and coals had being their only options. The second one was for them to ignore the generation plans due to various political pressure. The result was blackouts and power cuts. Then the CEB introduced a new scheme to buy power from the private sector producers (PPP) on emergency basis. In year 2000, our hydro power share was reduced to 47 per cent whereas; the thermal power was 53 per cent of the total value. Accordingly, our selling price was raised to Rs.5 although its generation cost had been much more, causing heavy losses to the CEB and our economy. Now our unit cost has been raised to Rs.14/ per unit and the CEB planners hope that by year 2015, when the first phase of the Norochcholai plant is in full operation, we would recover the losses incurred by the electricity generation. When our planners designed coal plants for Sri Lanka in early 1990s, coal was very cheap and the plant cost was also remained comparatively very low. But as the oil production capacity reached its maximum limits, coal was naturally treated as the complimentary source of energy, especially to generate electricity. During the two decades from 1990 to 2010, the consumption of coal had increased, resulting in series of exorbitant price escalation for coal. So it cannot be considered a wise decision for us to have changed into coal as a solution to our growing energy demands. As one analyst had clearly shown, if we were to use coal as our main electricity generation source, the average unit cost would be Rs.30 per unit for the coming 30 years time. This will clearly show that coal is not cheap and not clean either. "If we look at the carbon footprint or direct CO2 emission to generate one unit of electricity (Kwhr) coal emits nearly 1000 grams of CO2, whereas natural gas or LNG emits 450gm, oil emits 600gm, solar PV 32gm and wind mills emit 9gm respectively. If we compare consumption of water per mega watt hour, coal needs 1485 – 2475 litres, gas plants needs 531-904 litres, solar PV about "0" (zero) litres, wind about "0" (zero) litres respectively. So, if we incorporate all the factors, the real cost, CO2 emission, water usage emission of, sulphur and residue ashes, coal is not cheap and clean as mentioned earlier," added Ranawaka. On the other hand, he said one could not be able to export goods and services which are being produced by coal power electricity due to the proposed green tariffs which are to be imposed by the western countries in the time to come. The decade, 2010 to 2020 is considered to be vital to all human beings as it would be the period within which, the oil production will reach its peak and then decline, triggering unprecedented serious economic and social repercussions. On the other hand, endorsing pessimistic forecasts, environmentalists and physical scientists have collectively warned that the failure on our part to shift towards sustainable development would result in irreparable damage being done to the global environment. If we allow the present trends to take its course, some parts of the African continent may become permanent deserts, some countries may remain permanently inundated by oceanic waters, some glaziers and ice caps may permanently melt down and hot water and air may force some species to face extinction. Therefore, the scarcity of fossil fuels and the global warming caused by fossil fuels on the other hand have compelled us to change our development pattern.



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Ranawaka said when he recently read the latest bumper issue of The Economist which carried details of the world economic situation in 2010, he was relieved. It showed that most of the countries affected by the global recession would recover by 2010 and even the debt ridden the US and EU countries may achieve positive growth rates amidst serious financial crisis. "I was proud to see that our country, Sri Lanka, ranked among the top growers, being eighth in the world! As the global economy would emerge from the recession, it is predicted that Sri Lanka would record a 6.3 per cent GDP-Gross Domestic Product- growth rate which is second only to China, which will record 8.6 per cent in the Asian region. Our stock market was ranked second in the world! It is also predicted that the oil prices will wary from 80-74 during the period of 2010 to 2012. He said that there is every sign of Sri Lanka having a great leap forward in the sphere of economic prosperity. Having established sound security and political stability with significant infrastructure development, we may reach to a stage of a global hypo centre for energy, navel, aviation, commercial and knowledge. He believes with determination, Sri Lanka must regain what she has lost. The strategic value of our geographical position, our natural resources on our continental shelf and our very literate learned human resources should be treated as great opportunities, which are needed to be exploited for our benefit. Also, it has been predicted that we would be able to double our per-capita income level -from US$ 2,500 to US$ 5,000 during the period of 2010 to 2016. However, Ranawaka believes that Sri Lankans should not forget the fact that we would not be able to follow the same path that the western countries had followed in the past. Since we are now entering a new decade, which could be the turning point in our history, we have to build structures which could one day be transformed into sustainable development.



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The Island – February 1, 2010 IMF PROPOSES ‘GREEN FUND’ FOR CLIMATE CHANGE FINANCING

The world must adopt a low-carbon model for growth as it rebuilds from the global economic crisis, Dominique Strauss-Kahn, Managing Director of the International Monetary Fund, said at the World Economic Forum in Davos.

To help finance this shift in the global economy, the IMF is working on a set of proposals to create a multi-billion dollar "Green Fund" that would provide the huge sums — which could climb to $100 billion a year in a few years — needed for countries to confront the challenges posed by climate change.

During a panel discussion on the future of the world economy, Strauss-Kahn said it was obvious that developing countries don’t have the cash to finance the measures needed to tackle climate change while developed countries were saddled with enormous debts from combating the global economic crisis.

There was a need to think outside the box and come up with innovative ways to provide the money. "I can’t believe we don’t have the solution to this huge problem," he told the audience in Davos

Taking it forward

The IMF will start discussions with central banks and finance ministers on the feasibility of creating this Green Fund, possibly partly financed through the issuance of additional Special Drawing Rights (SDRs), a reserve asset created by the IMF.

Strauss-Kahn said that climate change financing was such a big issue that "it cannot be seen as a problem that cannot be solved." But because of the debt overhang from the global crisis it clearly needed alternative solutions. The IMF will release a paper in a few weeks setting out ideas on how the proposal can be financed. Earlier during the session, chaired by Martin Wolf of the Financial Times, Strauss-Kahn told the high-level panel that the global crisis had created a problem of fiscal sustainability for many countries that could take up to seven years to fix because of the huge debts built up during the crisis.

IMF reserve assets

The SDR is an international reserve asset, created by the IMF in 1969 to supplement its member countries’ official reserves. Its value is based on a basket of four key international currencies. SDRs can be exchanged for freely usable currencies.

With a general SDR allocation that took effect in August last year and a special allocation last September, the amount of SDRs in use by countries around the world is now SDR 204.1 billion (currently equivalent to about $324 billion).

The Managing Director’s proposal would require the release of additional SDRs.

-Courtesy IMF



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IMF PLANS $100 B FUND TO HELP POOR MITIGATE CLIMATE IMPACT The International Monetary Fund is planning a 100 billion dollar fund to help countries mitigate the effects of climate change, the agency's head said. "The new growth model will be low carbon," Dominique Strauss-Kahn, managing director of the IMF, told political and business leaders meeting at the World Economic Forum in the Swiss ski resort of Davos this weekend. Efforts to deal with climate change could not be blocked "just because we cannot meet the financing needs," he said. Developing countries do not have the funds for these adaptation measures, and developed countries' ability to pay is also limited as they are now weighed down by debt after funds were used to deal with the financial crisis. It was therefore necessary to "think out of the box" on the issue of funding, the IMF chief said. "We'll have to find innovative ways to finance it," Strauss-Khan said on Saturday. "We're going to provide some ideas, built around a Green Fund devoted to finance 100 billion dollars (72 billion euros) a year which is the figure currently accepted for addressing the problem based on the capitalization coming from central banks, backed by special drawing rights issued by the fund," he said. Special drawing rights are an international reserve asset created by the IMF in 1969 as a supplement to member states' official reserves. They can be exchanged for common currencies. The IMF said on its website that it would issue a paper detailing ideas on how the fund would be financed. The United Nations has said that governments should invest in the green sector as they try to create new jobs in the wake of the economic crisis, as it would also help move towards a greener society. Azim Premji, who chairs India's Wipro corporation noted that the issues of tackling climate change and reducing poverty could be addressed together. "To me, if you combine these two challenges, they present an opportunity. The key is to look at the very fundamental fact that the developing world has still to build most of its energy infrastructure (and) physical infrastructure, and to buy most of its consumer goods," he said in remarks published on the WEF's website. "This very simple fact - that the developing world does not have these things - is the great opportunity for tackling climate change and ecological sustainability." Jamie Drummond, Executive Director of campaign group ONE which was co-founded by U2 singer Bono, said the IMF's move for a green fund was a "significant and positive development which, if approved in its most positive form, could seriously help catalyze the financing of a transition to low-carbon economic growth in developing countries." However, the advocacy group said that large sums of financing are still needed on top of the IMF fund to help poor countries deal with the effects of climate change immediately. "As the fund would give concessional loans this does not replace the need for significant additional grant financing to help the poorest countries adapt right now to the impacts of climate change," said the group. The IMF's plans must be "urgently analyzed ... and then the solutions must be urgently implemented," it said. DAVOS, AFP



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IMF PROPOSES "GREEN FUND" FOR CLIMATE CHANGE FINANCING The world must adopt a low-carbon model for growth as it rebuilds from the global economic crisis, Dominique Strauss-Kahn, Managing Director of the International Monetary Fund, said at the World Economic Forum in Davos.

To help finance this shift in the global economy, the IMF is working on a set of proposals to create a multi-billion dollar "Green Fund" that would provide the huge sums-which could climb to $100 billion a year in a few years-needed for countries to confront the challenges posed by climate change.

During a panel discussion on the future of the world economy, Strauss-Kahn said it was obvious that developing countries don't have the cash to finance the measures needed to tackle climate change while developed countries were saddled with enormous debts from combating the global economic crisis.

There was a need to think outside the box and come up with innovative ways to provide the money. "I can't believe we don't have the solution to this huge problem," he told the audience in Davos The IMF will start discussions with central banks and finance ministers on the feasibility of creating this Green Fund, possibly partly financed through the issuance of additional Special Drawing Rights (SDRs), a reserve asset created by the IMF.

Strauss-Kahn said that climate change financing was such a big issue that "it cannot be seen as a problem that cannot be solved." But because of the debt overhang from the global crisis it clearly needed alternative solutions. The IMF will release a paper in a few weeks setting out ideas on how the proposal can be financed.

Earlier during the session, chaired by Martin Wolf of the Financial Times, Strauss-Kahn told the high-level panel that the global crisis had created a problem of fiscal sustainability for many countries that could take up to seven years to fix because of the huge debts built up during the crisis.

The SDR is an international reserve asset, created by the IMF in 1969 to supplement its member countries' official reserves. Its value is based on a basket of four key international currencies. SDRs can be exchanged for freely usable currencies.

With a general SDR allocation that took effect in August last year and a special allocation last September, the amount of SDRs in use by countries around the world is now SDR 204.1 billion (currently equivalent to about $324 billion). The Managing Director's proposal would require the release of additional SDRs.




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Labour



Daily News – February 1, 2010 REWARD SYSTEMS BASED ON PRODUCTIVITY FOR WORKERS IN TEA PLANTATIONS: DR. N. YOGARATNAM CHAIRMAN, TREE CROPS AGRO CONSULTANTS Profitability and productivity of an industry always becomes key issues, whenever worker wages are discussed, inflation takes a back seat. Tea industry is no exception. This article examines the concept of, productivity - linked wages or in other words "Reward systems and worker productivity", as numerous debates have emerged around this concept in tea business.

Conventional plucking Among the operations in tea plantations, which lend themselves to a productivity- based approach in the matter of wages and incentive systems is, plucking. Apart from being the most costly component of production, plucking has the advantage that the output of

pluckers can easily be measured for the calculation of payment. Once the concept of productivity-linked rewards is accepted, implemented and perfected, it could be extended to other operations.

Time-rate wage payable

Five pruners at Rs.300 for one day Rs.1,500 Standard task to be fulfilled 200 bushes x 5 1,000 bushes Task actually completed 1,400 bushes Percentage increase over standard 40 percent Incentive payable at 40 percent of the time-rate wage Rs.600 (to be shared by five workers).

A productivity approach for pluckers cannot, however, be successfully implemented in isolation; it has to be part of a wider package involving a parallel development of the field to generate a bigger crop, thus facilitating its handling by the worker.

Agronomic considerations Some of the field-level prerequisites for bigger crop are: Improving soil fertility, Modifying the micro-climate, Maximizing the yield, Choosing planting material, Ensuring more pluckable shoots; Rationalizing and predicting plucking intervals, to facilitate advance planning and deployment of workers; for instance, temperature data are used to predict the time taken for the expansion of a leaf in crop shoots and hence to determine plucking intervals - this concept is called the leaf expansion time (LET) and involves dividing cumulated daytime temperature during the expansion of a leaf by the cumulated temperature in a day during a given season. Also, following a management approach to pruning, will reduce the "come-back" period to plucking; enable pruning to be undertaken during periods of reduced plucking activity; ensure that product consistency - an important marketing consideration - is not at risk because of pruning a smaller area of one or more varieties; time the activity with an eye on the market - as noted above, it would be a retrograde step if pruning were to reduce the quantity and quality of tea available for sale at a time of high demand and remunerative prices. Training the plucking surface -for plucker efficiency and Integrating plucker intake with field responsiveness are beneficial. For instance, a plucker assigned to a recently pruned field will, despite the best of efforts, be unable to harvest the quantity plucked by another plucker entrusted with a second or third year field, there is thus a need to maintain morale by giving pluckers a fair mix of fields; another reported feature is that a plucker repeatedly assigned a given set of fields will look after the bushes with greater care and attention, although the time spent in the process could even be the expense of the extra gain in crop.

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Worker acceptance Having prepared the field to facilitate the introduction of a productivity-linked wage system, the next step is to secure the cooperation and agreement of the workers. Experience has shown that the key factors in this regard are: the simplicity of the scheme; its ease of implementation; evident fairness to both parties; and ensuring a speedy reward.

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Indian experience

A brief description of the experience of a productivity incentive scheme for tea pluckers in South India may be useful at this juncture to serve as a guide for similar schemes in Sri Lanka.

A tea estate

Initially, tea pluckers were paid a fixed daily wage plus a cost-of-living allowance (revised every quarter, based on published index numbers). In return, they had to harvest a minimum quantity of green leaf per day. For any excess quantity harvested above the norm, they were paid a plucking incentive. This was a constant amount per kilogram of leaf but, in due course, the system was refined by having two incentive slabs (categories). The general feeling among the management was that the incentive scheme was defective in that the minimum quantity was the same in both the high and lean cropping months, and that the rate of incentive was not attractive to the worker. Accordingly, after collecting monthly data, going back ten years, from over 100 estates, in regard to yields and plucking averages, a scheme was formulated by the Association of Planters and taken up for internal consideration among its members. Several of them had reservations on the grounds that managements who adopted long plucking intervals and were thus able to achieve higher plucking averages, would stand to lose by the scheme. In the light of comments and suggestions, the minimum quantity of leaf to be plucked as well as the incentive slabs and rates were modified, and a compromise was reached within the management camp, it being evident from the calculations that all managements would stand to gain from the proposed incentive system. The essence of the scheme is that tea estates are classified into four categories depending on the green leaf yield for the month, (1) 1-400; (2) 401-800;(3) 801-1600 and (4) 1600+ , kg green leaf per month. The base output to be plucked per day and the incentive slabs and rates are different for the four classes. The same scheme is applicable both to hand plucking and to plucking with shears, thereby securing acceptance of the use of tools without payment of a differential wage. The scheme comprised the following aspects:


01st – 07th February 2010 * The green leaf yield was worked out by dividing the field weight of green leaf plucked for the month for the estate by the total area of mature tea; the area would include the pruned/skiffed area as well as the area under "tipping". * Green leaf yield per hectare was rounded off to the nearest kilogram. * The base output was not the task as such but only the indicator above which the incentive wage was to calculated; all pluckers were expected to work normally and diligently for a full day and harvest the maximum output.

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* On the first working day of each month, the management displayed on the muster notice boards an indication of the probable Base Output applicable for the month, having regard to the yield of the same month in the previous year and the weather conditions, favourable or otherwise. The management could alter the indicated base output at any time during the course of the month or at the close of the month, to take account of changes in the cropping pattern.

Tea pluckers on morning parade

* For calculating the month's yield, any crop plucked on holidays was excluded. * A joint implementation committee comprising representatives of the employers and workers was appointed to oversee the implementation of the scheme and to examine worker's grievances concerning the correctness of the yield and other parameters.

Incentive structure The negotiated incentive scheme for tea pluckers based on productivity indicated that the base output per day for category 1 (1-400 kg) was 12 kg and the incentive slabs were ; 13-15, 16-30 and 31+ kg for the 1st , 2nd and 3rd slab respectively. On the other hand, the base output per day for category 4 ( 1600+ kg) was 16 kg and the incentive slabs were, 17-35, 36-60 and 61+ kg for the 1st , 2nd and 3rd slabs respectively. The other too categories fell within these two limits. The incentive rates paid when this scheme was first introduced were, Indian Rs.0.27, 0.35 and 0.40 for the 1st, 2nd and 3rd slabs, respectively. These incentive rates, however, require up-dating .In Sri Lanka, the productivity-linked wages now stand at Rs.30 of the total wage of Rs.405. An evaluation of the scheme indicated that it has been implemented with fairness and transparency and, in the process, has gained credibility in the eyes of the trade unions. The existence of a grievance redressal process has added to the successful working of the scheme. Both management and workers have gained, albeit to a different extent. According to one estimate - which was from a highly productive and well-managed group - a combination of programmed plucking based on leaf expansion time (LET), selective use of shear harvesters and the adoption of the new incentive system has led to a 36 percent improvement in the plucking average over a five year period, since the scheme has been in operation.



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It is also reported by the same group that, as a consequence, 10 percent of the total leaf harvested came from pluckers in the 50 kg plus slab. In terms of incentive earnings, the benefit to pluckers during the five-year period had gone up by 25 percent.

Deficiencies It is important to point out, however, that workers share was a lower proportion of productivity gains under the scheme. This perception existed among some of the trade unions and a demand for a larger share for labour was raised. It is also important to draw attention to a tactic that labour might adopt. If all the workers were to act in concert and pluck just above the minimum specified quantity, management would have to employ temporary labour to harvest all the available leaf, especially during the high cropping periods. If yields were to increase, more permanent workers would have to be pressed into employment. Paradoxically, estates are finding it difficult to recruit the required labour force. Possible reasons are the reluctance to take on hard physical work, the spread of education, and migration to cities in pursuit of higher wages and better living standards. In such a situation, workers see the new incentive scheme as an opportunity rather than a threat and have not resisted it.

Productivity measurements Two questions arise. First, how is the gain in productivity measured? A simple approach is as follows. Calculate the workdays (and hence, the wages, suitably adjusted for the associated welfare costs, both capital and revenue) assuming labour productivity at the previous level. Deduct from them the actual workdays (and the actual wages, again adjusted for the associated welfare costs). The difference is taken to be the gain in productivity. As is well known, not all the leaf available on the bush is harvested. Under the incentive scheme, there is a better chance that the plucker will harvest the leaf morefully. In other words, the yield will include leaf which would ordinarily not have been plucked. For a true valuation of productivity gain, it would be necessary to add the value of the extra leaf harvested. As estimation of the extra leaf is largely a matter of conjecture, this is not taken into account. Second, what is a fair share of productivity gain for labour? This again is a matter of opinion and the share accorded to workers in practice depends on the relative bargaining strengths of management and labour. Several productivity agreements have been in practise in the region (in manufacturing industries) on the basis of labour getting a sizeable share of the gains from productivity improvement, sometimes as much as 60 per cent. That figure seems to be a fair limit.

Mechanical or shear harvesting Looking ahead, a shortage of plucking labour is bound to continue with more seriousness in Sri Lanka. At present, such a shortage exists mainly during the heavy cropping period both in the estate sector and in smallholdings. The resultant unplucked green leaf implies not only a loss of revenue to the producer but also to the nation, bearing in mind that every unsold kilogram of black tea (the equivalent of 4.5 kg of unplucked leaf) means a loss of potential foreign exchange of the order of US$3.00. To prevent such a loss, it is advisable to make selective use of shear harvesters during the rush season; this is already being done in on limited scale in Sri Lanka. The industry's fear is that widespread application of



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shear harvesting would be detrimental to quality. While this is admittedly a valid consideration, a trade-off has to be established between quality and allowing the harvest to go unplucked. Furthermore, one aspect which is invariably overlooked is that the limited use of shear harvesters will improve worker output and reduce costs to the management. Another is that male workers in Sri Lanka who have hitherto viewed plucking as lacking in job enrichment (unlike their counterparts in East Africa), are now reportedly inclined to venture into plucking so long as it involves a combination of quasi-mechanical activity and higher earnings, which the use of the shear entails. It is, perhaps, appropriate for Sri Lanka to venture into large-scale mechanical plucking, which has worked satisfactorily in Japan, Australia and South Africa but not so successfully in Papua New Guinea and Uganda.

Other field activities In the debate on field productivity improvements, the overwhelming emphasis has been on plucking, so much so that other operations where such gains are necessary and achievable tend to be neglected. One possible approach is to develop a group incentive scheme, the concept being that, in a given operation, for a certain percentage of output above the standard, the corresponding percentage of extra wages would be paid as incentives. These incentive payments would be shared by the individuals in the group, either equally or on a pro rata basis. A hypothetical example (arbitrary rates used) will clarify the working of such a group incentive scheme. Take, for instance, the case of pruning where the standard daily task is fixed, say, at 200 bushes. Suppose that this is equivalent to a time-rate wage of Rs.300. A field of 1,400 bushes is to be pruned and the work is assigned to a group of five pruners who complete the work in one day. The incentive payable to them is given in table 1. Working at the standard task rate, the same number of pruners would have taken about one-and-a-half days to prune 1,400 bushes, resulting in a wage payment of Rs.2,250. Because of their improved productivity, the management will be able to effect a saving of Rs.750 in wage payments and the workers will be able to earn an incentive of Rs.600. A group incentive scheme thus offers a monetary inducement to a group of workers voluntarily to enhance their productivity within prescribed work norms. This approach can be extended to all task-related operations, such as spraying, fertilizing, shade regulation, weeding, leaf loading etc. The advantages of this concept are: that field operations planned for the year or season can be completed economically and rapidly, so that labour (particularly men workers) can be deployed for plucking during the heavy cropping season; that the recruitment of casual workers can be avoided; that production costs can be controlled; and that a better team spirit and level of responsibility is encouraged. In conclusion, it is emphasized that a productivity based reward system for pluckers cannot, however, be successfully implemented in isolation, it has to be part if a wider package involving a parallel development of the field to generate a bigger crop for the system to be fair by the workers. Also, it is crucial that a tripartite wage arrangement, involving the employers, workers (trade unions) and the Labour Department (Government) is negotiated, for the agreement to be recognized as a formal settlement, as is being done in the plantation sectors elsewhere.



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The Island – February 2, 2010 MORE ACTION NEEDED TO DEVELOP LABOUR MARKET IN NORTH PUSH FOR SECURE JOBS By Devan Daniel

More has to be done to develop the labour market of the North and bring it on par with the rest of the country and while infrastructure development could provide jobs, farming and fishing communities should be given access to markets in other parts of the island while increasing capacity for value additions such as transport, packaging, storage and processing of produce, Country Director of the Sri Lanka office of the International Labour Organization, Ms. Tine Staermose, said.

A lot of work has to be done to develop the labour market in the North. The first would be to try and develop skills of the youth to match business requirements. The other would be to formalize the labour market where EPF/ETF contributions are paid in and other statutory labour regulations are implemented and monitored by the Department of Labour.

"There is a lot that needs to be done. When the region opens up fully to investors from the rest of the country and overseas we must ensure the jobs various projects would create are taken up by the youth in the region. So it is crucial to identify these sectors and then build capacities to build a capable labour force," Ms. Staermose said.

Sri Lanka is signatory to the eight core conventions of labour rights of the ILO: Freedom of Association and Protection of the Right to Organize (Convention No. 87, 1948), Right to Organize and Collective Bargaining (Convention No.98, 1949), Force Labour (Convention No. 29, 1930), Abolition of Forced Labour (Convention No.105, 1957), Minimum Age (Convention No.138, 1973), Worst Forms of Child Labour (Convention No. 182, 1999), Equal Remuneration (Convention No.100, 1951) and Discrimination (Convention No.111, 1958).

These conventions are also called fundamental conventions as in these are the basic rights of workers and countries are treated as having ratified them, irrespective of whether or not they have been ratified.

The ILO is based on social dialogue and has tripartite representation from governments, employers and workers. Annual reviews are held and each country is allowed to put forward their grievances and issues and Sri Lanka has had issued particularly with regard to enforcement of these labour conventions at one stage or another.

Before industries move into Jaffna, enforcement of labour laws and monitoring capacities should be strengthened to protect the rights of workers and ensure decent working environments so that the true dividends of peace can be reaped.

A labour data base...

"One of the first things we did after the war was to set up an Employee Services Database in the North. This we did working closely with the Department of Labour and database is maintained in the department’s



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office in Vavuniya," ILO Sri Lanka Emergency Livelihood Recovery Advisor, Dr. Mazahim Hanifa told the Island Financial Review.

"This database would go along way to match prospective employees with jobs available in the region. As time goes on, there would be a comprehensive database which would help an investor find employees with the required skills," he said.

The Employee Services Database was designed by the ILO and is now maintained by the Department of Labour.

"There is a lot we still do not know about with regard to the composition of the labour force in the North and this database could help us. Of course, the Department of Labour could conduct a labour force survey at any time they wish, but this database would help employees and employers match each others’ requirements more efficiently," he said.

Nurturing skills...

Nurturing skills is important and higher education, professional education and vocational training capacities need to be improved in the North.

"As far as creating jobs are concerned. the construction sector is crucial. Infrastructure development is set to boom in the region and there is going to be demand for unskilled, skilled and specialized labour so education and training facilities need to be implemented in the North so that the youth can avail themselves of the jobs this sector would generate.

Agriculture and fisheries are important communal industries in the North and were the first to breathe some life soon after the war providing immediate livelihood means to the people.

"What needs to be done now is to increase the capacities and value additions of these industries. While access to other markets in the rest of the island is crucial for produce, technology, processing, storage and packaging facilities could take agriculture and fisheries to the next level.

"Support services to repair boats and other machinery such as tractors, freezers and water pumps would go along way in helping these industries grow further," Dr. Hanifa said.

"The most important thing, however, is to find out how youth could transit to other industries. And then education and vocational training programmes for the region could be formulated accordingly," he said.



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The Island – February 5, 2010 IN THE ABSENCE OF EFFECTIVE DIALOGUE LABOUR POLICIES, INTERVENTIONS LESS LIKELY TO SUCCEED ENTERPRISES WITHOUT UNIONISED STAFF NEED TO BE MONITORED CLOSELY By Devan Daniel

Three state agencies, in a report on Sri Lanka’s labour, say the absence of an open and effective dialogue between workers, employers and the government would mean that labour market interventions and efforts to reform labour policies are less likely to succeed and recommend the monitoring of non-unionized enterprises.

The Central Bank, Ministry of Labour and Department of Census and Statistics in a report titled ‘Labour and Social Trends in Sri Lanka 2009, released recently, said the country’s industrial relations system is not without need of improvement.

The report says social dialogue is crucial at enterprise, industry and national levels but the prevailing system had several problems.

"The system lacks flexibility and transparency with workers and employers often taking an adversarial stance. Training and development needs are not emphasized sufficiently enough. Measures to enhance productivity are difficult to implement and industrial relations over emphasizes dispute settlement rather than the prevention of disputes," the report said.

On productivity, the private sector contends that it is always striving for productivity improvements whereas the public sector was structurally inefficient.

Latest data from the Central Bank showed that the Public Sector Major Industrial Output Index decreased by 15.4 percent from 100.2 points in October 2008 to 84.8 points in October 2009, while the Private Sector Industrial Production Index grew by 3.4 percent to 181.9 points in October 2009 from 176 points in October 2008.

Labour analysts, speaking to the Island Financial Review, said while the private sector chooses to ignore workers’ rights to form into unions, in the public sector where unions are much vocal are politicized, which means the government only acknowledges those unions affiliated to its politics.

"This is a sad situation for labour rights in Sri Lanka, especially in the freedom to association where workers can join a union of their choice so that workers can bargain with employers on an equal footing," a labour analyst said.

The labour trends report also said that the affects of the global financial crisis on Sri Lanka had skewed the balance of bargaining power in the favour of employers and said the "time was right for the government, employers and workers to cooperate to establish stronger industrial relations to enhance the country’s competitiveness while ensuring that social progress is not reversed".



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The report added: "Policy reforms and labour market interventions are far less likely to succeed in the absence of open and effective dialogue between workers, employers and government."

The Central Bank, Ministry of Labour and Department of Census and Statistics made two recommendations in this report which would improve labour relations in the country.

"Measures must be taken to enhance the monitoring activities of the labour authorities in the field, concentrating on enterprises which do not have unionized workers," the report said.

Trade unions charge that on-site inspectors of the Department of Labour have difficulty accessing BOI-approved companies in export processing zones a matter which went up before the tripartite conference of the International Labour Organization last year.

The report also called for the insulation of the labour authority from outside pressures by developing a clear separation of the processes of lodging complaints, of monitoring and investigating and decision making about terminations and other relief measures.

"Above all," the three state agencies said," it is essential to ensure that fundamental rights at work remain at the centre of industrial relations."



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Stock Market



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EUROPEAN STOCKS EDGE HIGHER BEFORE US GROWTH DATA Europe’s main stock markets rose on Friday in cautious trade before publication of crucial US economic growth data and amid stubborn concerns about Greece’s debt crisis, analysts said. London’s benchmark FTSE 100 index of leading shares added 0.59 percent to 5,176.20 points in late morning deals. Frankfurt’s DAX 30 won 0.76 percent to 5,582.29 points and in Paris the CAC 40 gained 0.60 percent to 3,710.93. The DJ Euro Stoxx 50 index of top eurozone shares increased by 0.68 percent to reach 2,755.96 points. In foreign exchange trade, the euro hit a fresh six-month dollar low as worries deepened about the state of European economies in light of Greece’s debt woes, dealers said. The euro sank to 1.3913 dollars — the lowest point since July 14. It later stood at 1.3965 dollars, down from 1.3966 in New York late on Thursday. “Some early bargain hunting has been the main theme ... but investors are likely to remain a little cautious as we run up to the US GDP announcement,” said analyst Joshua Raymond at financial spread-betting firm City Index. “It is the first release of the fourth quarter US GDP and so naturally it will maintain a big focus for investors. “Considering the jitters that now exist after the last few weeks of heavy equity falls, investors will be looking for a positive figure this afternoon to reaffirm the recovery theme.” In Asian trade on Friday, Tokyo stocks sank 2.08 percent as investors took their cue from an overnight slump on Wall Street and Toyota shares continued their slide. Wall Street fell hard on Thursday as the tech sector was hammered by a weak forecast from chip maker Qualcomm. The market also gave a lukewarm response to President Barack Obama’s economic comments in his State of the Union address, where he called for more efforts to create jobs and also ordered caps on spending. The Dow Jones Industrial Average slumped 1.13 percent to finish at 10,120.46 points. Global equities were rattled on Thursday after international ratings agency Standard & Poor’s said it no longer viewed Britain’s banking system “among the most stable and low-risk” in the world. “We no longer classify the United Kingdom among the most stable and low-risk banking systems globally,” S&P had said in a report. “This is due to our view of the country’s weak economic environment, the reputational damage we believe has been experienced by the banking industry, and what we see as the high dependence on state-support programs of a significant proportion of the industry.” AFP



Daily News – February 1, 2010 INDICES REMAIN HIGH WITH POLLS OUTCOME Stocks rose modestly on early trading amidst the outcome of the presidential election. The growth trend continued even after poll results were announced on Thursday pushing ASPI (All Share Price Index) to breach the previous high held on Friday. The ASPI ended the week with a gain of 3.0 percent or 104.7 points at 3636.4 points while the MPI (Milanka Price Index) rose by 3.4 percent or 137.0 points to close at 4181.8 points on Friday. JKH was the highest contributor to the week’s turnover, contributing approximately Rs.533.0 million, witnessing active trading throughout the week. JKH volumes for the week stood at 3.1 million, improving substantially compared to 1.8 million traded last week. The counter closed at Rs.176.50 per share, with the share price appreciating by 1.6 percent Week-On-Week. Apart from the above, Touchwood and Commercial Bank (COMB) contributed considerably to the week’s turnover. Touchwood contribution was approximately Rs.400.0 million and COMB was Rs.344.0 million to the total turnover, with approximately 3.6 million Touchwood and 1.9 million COMB shares trading respectively during the week.

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Both counters saw major portion of their volume, being traded on early part of the week. Touchwood saw its price appreciate significantly by 24.7 percent to close at Rs.116.25 per share this week, while COMB ended the week at Rs.190.25 per share up by 2.8 percent Week-On-Week. Environmental Resources (GREG) gained renewed retail interest this week, resulting in 1.3 million of its shares trading for the week with high interest seen on Friday. The counter contributed Rs.167.6 million while trading within a wide range of Rs.117.00 and Rs.136.00 per share for the week. The share price appreciated by 12.6 percent compared to last week, to close at Rs.134.00 per share.

The Colombo Stock Exchange set to bounce back after the election.

Turnover for the week totaled Rs.4.3 billion this week, falling by a moderate 29.0 percent compared to last week due to trading being limited to two and a half days for the week. Conversely, average daily turnover for the week increased by 18.4 percent to Rs.1.4 billion during the week. Foreign investors remained net sellers for yet another week, standing at a net amount of Rs.1.0 billion. The month of January saw high foreign sales amounting to a total of Rs.2.9 billion net foreign outflows. Total Foreign purchases for the week stood at Rs.443.6 million, while foreign sales totaled to Rs.1.5 billion.



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Foreign participation was high at 22.2 percent of total activity, compared to last week’s participation level of 16.4 percent. Among the highest traded stocks during the week were Seylan Merchant (Non Voting), Kshastriya Holdings, Seylan Merchant and Seylan Bank (Non Voting) and Lanka Cement. The market still moving up The two and a half day traded week ended 28.01.10 saw the ASPI moving 104.7 points (2.96 percent) up. With the said climb the ASPI has reached a level of 3636.4; the biggest contribution for the climb came from today’s trading (contributing to the tune of 45 points up). The market has been moving based on sentiments prior to the elections, and the first day of trading subsequent to the elections saw the bourse pushing further up. As mentioned repeatedly on previous ‘Weekly Reports’, the bourse seems to be entering ‘Overheated’ territory (based on fundamental grounds); surging at current levels. Albeit, the market getting heated up (based on fundamentals), there are strong counters one could look to invest other than the overheated speculative counters. Based on a Sectoral perspective; sectors such as banking and plantation still remains to be undervalued. Hence we expect the investors to profit out on the over heated speculative stocks. (The information contained herein has been compiled from sources that Acuity Stockbrokers (Private) Limited (ASB) believes to be true and reliable but we do not hold ourselves responsible for its completeness or accuracy. No matter published herein create any liability of any kind on ASB. All opinions, views, findings and conclusions included in this report constitute ASB’s judgment of this date and are subject to change without notice. ASB has the sole copyright for this report and the information and views contained cannot be reproduced or quoted in part or whole in any form whatsoever without the written permission from ASB.)



Daily News – February 2, 2010 MARKET ENDS HIGH ON RETAIL PARTICIPATION The indices at the Colombo Stock Exchange closed higher with high level of retail participation. The ASPI, which tracks the price movements of all the stocks at the CSE gained 55 points (+1.5 percent) to close at 3,691, after briefly touching life high of 3,704.20.

The more sensitive MPI gained 77 points (+1.8 percent) to close at 4259. Turnover for the day came to Rs.3 billion, on the back of active institutional and retail participation. John Keells Holdings saw Rs1.1 billion in business with nine crossings totaling 5.5 million shares at 176.00.

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A total of 6.2 million shares of JKH were traded between Rs.176.00 and 178.25. Considerable interest was also seen in Lanka Cement with the share closing up once more by to Rs.31.25 on turnover of Rs.178 million. Seylan Bank non-voting shares gained Rs.2.200 to close at Rs.22.00 on turnover of Rs.124 million. Seylan Bank’s voting shares gained Rs.2.25 to close at Rs.48.75. Sampath Bank announced a share consolidation and split, in effect issuing one (1) new share for every ten (10) held. The share closed up higher at Rs.23.00 from the previous close of Rs.22.00, after having peaked at Rs.260.00. Tokyo Cement voting shares commenced trading today after the one (1) for

ten (10) split came into effect.

The Colombo Stock Exchange

The share gained Rs.4.50 to close at Rs.37.75 while the non-voting share closed down 75 cents to Rs.22.00. Of the sectors, Plantations gained 8.7 percent while the Banking, Finance and Insurance Sectors gained 2.2 percent. The Hotels and Travel sectors gained 1.9 percent while the Diversified Holdings Sector saw an appreciation of 1.1 percent. In international markets, sentiments were mixed with the Nikkei Index of 225 stocks gaining just 0.07 percent while the other Japanese market indices were in the red. The Hang Seng Index of Hong Kong stocks gained 0.6 percent, China’s CSI Index lost 1.6 percent. Singapore’s Straits Times Index lost 0.3 percent of market value for the day. In India the Bombay Sensex lost 0.01 percent while National Stock Exchange’s Nifty Index gained 0.4 percent. First Guardian Equities



Sunday Observer – February 7, 2010 SHARE MARKET REGAINS MOMENTUM

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By Lalin Fernandopull

e The Colombo Stock Market regained momentum this week following the completion of the Presidential Elections reviving hopes of polit ical and economic stability . The market revived this week with shares recording a all-time high of close upon three billion rupees on Monday supported by retail buying. Trading on Tuesday brought Rs.1.58 billion. The main contributors for the turnover were JK Holdings, Lanka Cement, Kshatriya Holdings, Overseas Reality, Richard Peiris and Seylan Bank. The turnover topped Rs.1.5 billion on Friday. The All Share Price Index gained 8.92 points to close at 3,706.78 and Milanka gained 29.61 points to

close at 4,269.18. Around 95.99 million shares changed hands. Two crossings took place on HNB with a total of 560,000 at Rs.1.73 and one on Asia Capital 32,984,200 at Rs.10. Brokers said the market regaining momentum toward the end of the week showed positive investor sentiments following post poll calm in the country. "There were mixed reactions from investors on the polls with some disregarding the outcome while others taking a cautious step to be on cash", brokers said. Market analysts said investors could capitalize on weaknesses when the market is volatile. "A rise in election violence could adversely affect the market sentiments. Market growth would depend on a stable environment", analysts said. Tourism, construction and telecommunication are some of the key sectors that would attract large investments to the country with more opportunities for development in the North and the East. Manager Research, Bartleet Mallory Stock Brokers, Rakshitha Perera said investors showed interest in the market irrespective of whoever is elected. "The market sentiments have been positive since the war coming to an end mid last year. The upward trend at the Colombo bourse would continue", he said. Sri Lanka's Stock Market was rated as one of the best performing markets last year. The All Share Price Index recorded an all time high closing at 3,188.8 points. This was the highest achieved by the index in the history of the Colombo Stock Exchange, surpassing the previous record of 3,139.7 points in October.



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Business



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US GDP SURGES TO 5.7 PERCENT, LED BY BUSINESS

The US economy roared back to life with a 5.7 percent growth pace in the fourth quarter, led by brisk business spending to restock inventories and for new equipment and software, official data showed Friday.

The Commerce Department report on gross domestic product (GDP) showed the strongest growth in six years, even though consumer spending, the traditional driver of economic activity, remained sluggish.

The figures showed growth accelerated from the 2.2 percent annualized pace in the third quarter, when the economy expanded for the first time after four quarters of contraction and the deepest recession in decades.

Even with the rebound, gross domestic product contracted by 2.4 percent for the full year 2009, the worst performance since 1946, due to the collapse in economic activity in the early part of the year.

Still, the robust growth in the October-December quarter was the best since 2003 and significantly better than the 4.7 percent pace expected by analysts.

“This suggests pretty good momentum heading into the first quarter,” said Sal Guatieri, economist at BMO Capital Markets. “It suggests the recovery is gaining legs.”

The White House hailed the new report as “the most positive news to date” on the recovering economy.

President Barack Obama said the GDP growth estimate “affirms our progress and the swift and aggressive actions that made it possible,” arguing that his economic policies have staved off the threat of a second Great Depression.

“Just to give you perspective there, that’s the fastest economic growth in six years, and it’s a stark improvement over the rapid and terrible decline that we were experiencing one year ago.”

But Obama noted that although the economy was growing, a swift rise in job creation was lacking, meaning initiatives like the new hiring incentive were needed, as he unveiled a 33-billion-dollar job creation effort.

The big GDP gains came in large part from businesses ramping up production to rebuild inventories, which economists say may skew the picture of overall activity but is a normal part of recovery. Inventories accounted for 3.39 percentage points of GDP.

Stripping out inventory adjustment, real final sales — a reflection of the underlying pace of growth — was at a 2.2 percent rate, the report showed.



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GDP, or the output of all goods and services in the economy, was an annualized 14.46 trillion dollars based on the fourth-quarter data.

“GDP is certainly not as strong as it looks,” said Scott Brown, chief economist at Raymond James & Associates.

“Underlying domestic demand was pretty soft, positive but moderate... We’re not seeing a sharp V-shaped recovery.”

Augustine Faucher at Moody’s Economy.com said the report offered a mixed picture.

“With so much of the expansion coming from inventories, it remains to be seen if the economy can maintain strong growth in the quarters ahead, and the labor market remains a worry,” he said.

“Growth will weaken in the first half of 2010, before accelerating in the second half of this year and into next.”

Other factors helping fourth-quarter GDP included auto production, which accounted for 0.61 percentage points of the total. A slowing pace of imports also boosted the growth rate.

Capital spending on equipment and software surged 13.3 percent, another significant contributor. Ian Shepherdson at High Frequency Economics called this a “key upside surprise” but added that “we can’t see where this comes from and think a downward revision is likely.”

The data showed exports surged 18.1 percent, making trade a positive contributor to GDP since exports increased more than imports, which were up 10.5 percent.

Consumer spending, which is traditionally the key driver of economic activity, rose at a 2.0 percent pace, down from 2.8 percent in the third quarter, and accounted for 1.44 percentage points of GDP.

But Guatieri said consumer spending remained on a positive track, pointing out that the third-quarter figure was boosted by the “cash for clunkers” incentives for automobiles that prompted a surge in car buying.

Economists say the key to a more sustainable pace of growth will be a rebound in consumer spending, which accounts for around two thirds of economic activity. Many have argued that the underlying pace of expansion may be too weak to help bring down unemployment, currently at 10 percent.

WASHINGTON, AFP



Daily News – February 3, 2010 TALKING YOUR WAY TO SUCCESS INFLUENCING PEOPLE IN BUSINESS:

The Institute of Bankers of Sri Lanka recently organized a training of trainers program in micro-f inance. CENLEAD CEO Dr K. Kuhathasan made a presentation at the program on ‘Presentation Techniques’ . Here are excerpts from his address.

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As a business leader, you may have to be an effective speaker. You should be able to communicate your ideas in the most efficient manner at various meetings and conferences. A good speech does not happen. It has to be planned. The skilful impromptu speech is seldom impromptu. Every good speaker consciously or unconsciously adheres to certain fundamental rules of arrangements in any kind of speech. What are components of any speech? A speech consists of a beginning, a body and an ending. The beginning is the point of contact. The body contains the real kernel

of what the speaker wants to get across. The ending is the conclusion to which the speaker wishes to lead his audience. Obviously, a speech is not a series of disconnected jerks, but an easy and gradual progression, not an aimless meandering, but a journey leading to a definite destination.

How to structure your talk A good talk should have four parts: * Introduction * An indication of the structure (make points or divisions) * The body of your talk (major points or arguments) * Conclusion

Preparing a speech Identify your purpose: To inform, to entertain or to persuade. Gather information: Using such techniques as observing, questioning, interviewing and reading, take notes and gather information which you may want to use in your speech. Organize the speech: Summarize in a few sentences the main thought you want to communicate. * State your central idea concisely. * Design an introduction that will draw the audience’s attention and interest. * Develop the body of the speech by outlining in a logical form the main ideas to be included in the speech. * Conclude by emphasizing or summarizing points already made in the speech. * Create a title. Practice: As you rehearse, talk from notes as you would if you were addressing an audience. Record your speech.



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* Listen to your recording, and observe ways in which your speech may be improved. You might use the rating sheet as a guide for this. * Make a second recording of your speech. Make improvements. Present the speech to the audience for the purpose it was prepared. Ask at least one person to rate your speech objectively so that you may benefit by the suggestions of others. By observing the speech of others, you can get ideas to improve your own speaking habits.

Essential steps for preparing talks effectively Careful planning is essential for successful speeches, short or long. The better you prepare in advance, the more confidence you will have on stage. Preparation usually requires the following seven steps. Most of them include important concepts similar to those for writing letters, memos and reports. * Determine the purpose * Analyse the audience and the situation * Choose the main ideas for your message * Research your topic thoroughly * Organize the data and write your draft * Plan visual aids if desirable * Rehearse the talk and revise where necessary

Determine the purpose Each speech can have a general and a specific purpose. The most common general purpose - or ‘mega purpose’ - of business talks is one of these to inform or instruct to persuade, to entertain. The specific purpose - more narrow, or micro is to achieve a definite, specific result. To inform or instruct: You may be asked to make an idea clear, explain the results of an investigation, demonstrate a process, give instructions to new employees, or report on surveys. Your purpose is to promote understanding. To persuade: The goal of persuasive speaking is to get your listeners willingly to act or accept your ideas. Introduction: Your opening statements should capture the listeners’ attention and help create confidence in you. An introduction is of special importance, for it assists in getting your listeners into the right frame of mind, gives some background to the topic and sets the direction for the rest of your talk. Gaining audience interest and attention may be accomplished using some of the following. * Purpose statement * Quotation * Question * Starting statement * Personal story * Reference to the occasion * Humorous story

Body The main part of your speech must present whatever material is necessary to achieve your specific purpose.



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Conclusion With a good conclusion, the speaker will underline his main points and will ensure that the audience will remember and think about what he has said.

Checklist for decreasing stage fright * Know your subject well: Prepare with the attitude that ‘on that subject on that day you know more than anyone else.’ * Rehearse your talk several times: If possible, rehearse in the same room where you’ll speak. This can be done easily within your company. But if your speech is outside your company, try to arrive at the place early and take a look around. (Actors frequently have a short rehearsal in the hall where they will later appear). * Request - in advance - a lectern: It helps to hold not only your notes but also, occasionally, a trembling hand. But avoid leaning on the lectern excessively. * Precheck any equipment you’ll need - projector, screen, extension cord etc. * Take an object with you - a pen, your notes, a marking pencil. Of course one should not play with the object, but use it as a pointer and as something to touch has helped calm some speakers. * Breathe deeply and slowly before speaking. Try moving a little in your chair; cross and uncross your legs. Even a slight movement decreases some muscle tenseness. * Move during the speech: Some movement holds the audience attention and releases nervous energy. Even behind a lectern one can move sightly or use a lavarliere mike and, thereby, increase the possible range of movement. If you’re seated, shift positions in your chair or gesture a bit more with your arms. * Approach the lectern with assurance and enthusiasm. Know your audience * The audience are your listeners. They are ‘us’ not ‘them’ * Treat them with respect * Talk to them as equals * Relate your speech to their experience * Assess their mood and outlook Never fail to see in your audience, whether * The audience is disinterested * The audience is confused * The audience is prejudiced * The audience is indifferent * The audience is having a different experience. You must know your audience and feel the pulse. You should reinforce these experiences and values, among your audience. You should therefore, organize your speech to suit your audience. One of the ways of organizing your speech could be. * Tell them what you are going to say. * Tell them what you want to say * Tell them what you have told them



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* Tell them what you want them to do

Give power to your words Your spoken communication can be effective only if the words you choose are powerful and are used selectively in a systematic method. Your word can have the power according to the strength you add to it. Here are some hints: * Be articulate * Pronounce the words in the right way * Use the right language suitable to your audience * Use short sentences * Use the language which your audience can understand, can relate to their experience and has a feeling for * Modulate your voice for effect * Change the pace of speaking according to need. Use pauses and silence for dramatic effect (pitch, pace, pause). * Vary your voice according to the need. If you wish to be serious, humorous, sympathetic, sarcastic, strong, get the required quality in your tone. * Change pitch and pace of your speech according to the need. If you want the effect of swaying away your audience, angering them, frightening them or pacifying them, use the appropriate technique. To help those who are listening to you * Slow the speed of delivery of your speech * Maintain eye contact with all sections of the audience. * Build pauses in your speech * Use repetition where necessary * Vary level of voice and speed * Provide emphasis to points when necessary

Some tips * Master your subject * Be really interested and enthusiastic about your subject. * Speak slowly, clearly, crisply. * Do not drag-on in the same tone. Vary your tone. Use high pitch and low pitch skills. Give emphasis to your words. * Have eye contact with the entire audience and establish rapport. * Know the need and level of the audience. Audiences are not alike. * Prepare well. In the beginning write out your complete speech. * Do your homework. Practise, practise and practise. * Listen to others’ speeches * Build a good command over the language. * Do not be offensive. Do not get angry. Maintain self-control. * After gaining some experience, use jokes and anecdotes, to break the monotony and keep the audience interested.



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Also remember * When a speaker has a real message in his head and heart, he is almost sure to deliver it. A well prepared speech is already nine-10th delivered. * Think of success in your public speaking. You will then develop the confidence and determination. * The opening of a talk is difficult. It is also highly important, for the minds of our listeners who are fresh then. * The speaker may be able to win the immediate attention of his audience by: * Arousing curiosity * Relating an important and interesting business incident. * Beginning with a specific illustration * Asking vital questions. * Opening with a striking quotation. * Opening with shocking facts. The close of a speech is really its most strategic element. What is said last is likely to be remembered for long. Plan your ending carefully. Do not end with ‘that, is all I have to say’. Seven suggested ways of closing. * Summarize the important points * Appeal for action * Pay compliments to the audience * Close with a joke * Quote the experience of other institutions. * Build a climax. * Quote from a successful business leader.



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Employment



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STRUGGLING WALL STREET EYES JOBS DATA

With Wall Street struggling to keep upward momentum, investors will keenly await a report on the US labor market in the coming week that could be a key driver of market action.

Friday’s data on US unemployment and job creation may provide clues on whether the economy, which is showing strong growth, can sustain its recovery.

In the week to Friday, market action was choppy, sending the Dow Jones Industrial Average down 1.04 percent to 10,067.33, as the market closed January with its worst performance in 11 months.

The technology-dominated Nasdaq composite slipped 2.63 percent to 2,147.35 the broad Standard & Poor’s 500 index declined 1.64 percent to 1,074.87.

Many analysts say the latest declines are the start of a “correction,” which is usually a pullback of around 10 percent that can take some of the froth out of the market, rather than an end to the bullish period.

“The current correction is coming hard and fast, which is more typical of corrections than bear markets, which in the beginning tend to sneak down without much notice or fanfare,” said Bob Dickey at RBC Wealth Management.

“We expect the correction low will come over the next week or two... However, the Dow first may have to go below the psychological floor of 10,000 in order to trap more of the bears out in the cold.”

Fred Dickson, market strategist at DA Davidson & Co., said Friday’s report on US gross domestic product surging to a 5.7 percent pace in the fourth quarter was a big positive for Wall Street.

The GDP data “report reinforces our assessment that the economy hit the bottom point of the recession late last summer and is slowly gaining traction,” Dickson said.

“In addition, the report reinforces the notion that the current stream of positive earnings reports hitting the tape this month are real and should be sustainable going into the first half of 2010. Bottom-line, this is bullish news for the stock market.”

Others noted that GDP was boosted by special factors such as inventory adjustment and that the economy may not be growing fast enough to create jobs.

Augustine Faucher at Moody’s Economy.com said it will take more time for the economy to get on a sustainable track.



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Based on the latest data, he argued that “growth in the first half of 2010 will be below that needed to keep pace with an expanding labor force, and the unemployment rate will move higher, peaking at close to 11 percent in the fall.”

The upcoming employment data thus becomes critical to the outlook for the economy and the markets, say analysts.

The consensus forecast calls for the report to show a net gain of 50,000 jobs, following a loss of 85,000 in December. That would be a big positive, although not enough to bring down the unemployment rate from its level of 10 percent.

“For the first time in a very long time, the consensus is expecting a gain in employment,” said Gina Martin at Wells Fargo Securities.

Dean Maki at Barclays Capital said he expects the economy is gaining momentum, highlighted by strong business spending, that will translate into job growth.

“We view this improvement in business fixed investment spending as a clear signal that a self-sustaining recovery is underway, as businesses are feeling confident enough to spend more,” Maki said.

“We think this confidence will translate soon into steady job growth; we look for consistently positive job growth starting in the first quarter.”Avery Shenfeld, economist at CIBC World Markets, said Wall Street nerves are being frayed by a variety of issues, ranging from moves in China to cool an overheating economy to Greece’s fiscal woes to President Barack Obama’s effort to curb risky bank actions. But he said these may have been excuses to sell “after a nice run-up in stocks that has investors feeling that they have priced in a lot of good news.”

AFP



Daily News – February 2, 2010 ILO ANNUAL GLOBAL EMPLOYMENT TRENDS REPORT: CONSTITUENTS AGREE ON ‘GLOBAL JOBS PACT’ The number of jobless worldwide reached nearly 212 million in 2009 following an unprecedented increase of 34 million compared to 2007, on the eve of the global crisis, the International Labour Office (ILO) said in its annual Global Employment Trends report. Based on IMF economic forecasts, the ILO estimates that global unemployment is likely to remain high through 2010. In the Developed Economies and European Union, unemployment is projected to increase by an additional 3 million people in 2010 to 8.9 percent (up from 8.4 percent in 2009 and 6.0 percent in 2008). Overall, despite comprising less than 16 percent of the global workforce, the Developed Economies and European Union region accounted for more than 40 percent of the increase in global unemployment since 2007. Asia and the Pacific will fare slightly better than elsewhere in the world, the report predicts. Still, the region as a whole can expect an average unemployment rate in 2010 ranging from 4.3 percent - 5.6 percent (Southeast Asia and Pacific at 5.6 percent while East Asia and South Asia predicting slight declines to rates of 4.3 percent and 4.9 percent respectively).

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A rapid improvement in the Chinese domestic market, as well as the positive spill-over effects to neighboring countries, led to an improvement in the economic and labour market figures for the region. However, the ILO also said the number of unemployed youth worldwide increased by 10.2 million in 2009 (to 13.4 percent) compared to 2007, the largest hike since 1991, with East Asia and Southeast Asia and Pacific showing some of the steepest increases. In East Asia, from 1999 - 2009, youth participation in the labour force declined 9.3 percent in East Asia and 5.3 percent in Southeast Asia and the Pacific, compared with a global average decline of 3.4 percent for the same period.

ILO estimates global unemployment likely to remain high

The report says that coordinated stimulus measures have averted a far greater social and economic catastrophe; yet millions of women and men around the world are still without a job, unemployment benefits or any viable form of social protection. “As the World Economic Forum gathers at Davos, it is clear that avoiding a jobless recovery is the political priority of today” said ILO Director-General Juan Somavia. “We need the same policy decisiveness that saved banks now applied to save and create jobs and livelihoods of people. This can be done through strong convergence of public policies and private investment”, he said. Somavia said, “With 45 million young women and men entering the global labour market every year, recovery measures must target job creation for our young people.”



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According to the ILO, the share of workers in vulnerable employment worldwide is estimated to reach over 1.5 billion, equivalent to over half (50.6 percent) of the world’s working population. The number of women and men in vulnerable employment is estimated to have increased in 2009, by as much as 110 million compared to 2008. The report also says that, worldwide, 633 million workers and their families were living on less than USD 1.25 per day in 2008, with as many as 215 million additional workers living on the margin and at risk of falling into poverty in 2009. The ILO report says that it is urgent to establish wide coverage of basic social protection schemes to cushion the poor against the devastating effects of sharp fluctuations in economic activity. Other key findings: * The global unemployment rate rose to 6.6 percent in 2009, an increase of 0.9 percentage points over 2007. However it varied widely by region, ranging from 4.4 percent in East Asia to more than 10 percent in Central and South-Eastern Europe (non-EU) and Commonwealth of Independent States (CSEE and CIS) as well as in North Africa. * The global youth unemployment rate rose by 1.6 percentage points to reach 13.4 percent in 2009 relative to 2007. This represents the largest increase since at least 1991, the earliest year for which global estimates are available. * The overall impact of the economic crisis on women and men is far more important than the differences in impact between these groups. * Preliminary estimates of growth in labour productivity, measured as output per worker, indicate that productivity levels fell in all regions except East Asia, South Asia and North Africa. The largest decline in output per worker occurred in Central and South-Eastern Europe (non- EU) and CIS, - 4.7 percent, thus reversing part of the gains that were made in the first half of the decade. * As a result of declining output per worker, working conditions are deteriorating especially in regions where labour productivity was already low preceding the economic crisis. To address these issues, the ILO constituents which represent the “real economy” have agreed on a Global Jobs Pact that contains a balanced set of tried and tested measures to promote a robust response to the employment challenge by focusing on accelerated employment generation, sustainable social protection systems, respect for labour standards, and strengthening social dialogue. The Pact has received strong backing from the G20 heads of state and from the UN General Assembly. Rethinking policies is essential because we will not get out of the crisis by applying the same policies that lead to the crisis in the first place, Samavia said. ILO News



Daily News – February 3, 2010 RIGHT PERSON FOR THE RIGHT JOB... Levasana Douglas - Eastern University, Sri Lanka The job interview Make adequate preparation for the interview. Get ready for the interview with questions based on the job description and job specification. This way, you will not miss any important matter. As the Human Resource Manager, you determine the way the interview is conducted. Asking the short-listed candidates the right questions will reveal the candidates' suitability for the job. Emotion and irrelevant factors sometimes creep in. Avoid such temptations. Where necessary, remind the other interview panel members.

Selecting the right candidate Engaging the right person for the job will ultimately pay dividend. He or she will require minimum supervision right from the beginning. Select a candidate based on the qualification, experience, competence and other attributes required for the job.

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The selection process with all the guides that you need are found in your employee selection policy. If there is one. If there is none, take immediate action to prepare one, have it vetted, and submit for your board's approval.

Appointment Once the right candidate is identified and selected, prepare the appointment letter as soon as possible. Do not delay this beyond one month. Select a "reserved candidate" in case the prospective new employee rejects the offer. Obtain the agreement of the other panel members on the reserved candidate(s) and have this put on record.

Make adequate preparation for the interview. Get ready for the interview with questions based on the job description and job specification. This way, you will not miss any important matter. As the Human Resource Manager, you determine the way the interview is conducted. Asking the short-listed candidates the right questions will reveal the candidates’ suitability for the job. Emotion and irrelevant factors sometimes creep in. Avoid such temptations. Where necessary, remind the other interview panel members.

Job re-assignment

Even with all the preparation, it may sometimes occur that the new employee does not truly fit into the job. You may decide to re-assign him or her to a different but equivalent job. But do this with care. By doing this, every employee will contribute to the productivity of your company. What happens to unsuccessful candidates? You have selected the best among many good applicants. Have the names of the "short-listed good candidates" entered into your database. You may want to get in touch with some of them when the need arise in future.


01st – 07th February 2010 Inform candidates who have not been selected as well as applicants who were not short-listed. In writing! This shows the efficiency of your company.

This creates a good impression. They will remember your company and will try their luck again.

Recruitment of new employees is done for the right reasons! These include

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Review of employment policy and

process As "an employer of choice", you can attract the right candidate for a vacant job. A well-drafted employment policy can ensure that this happens. In this way, the human resource function contributes to

organizational productivity! If you are the Human Resource Manager, you may want to review your recruitment policy at regular intervals.

*An important job has fallen vacant *Your organization has just undergone a re-organization whereby new employees are urgently required *Your organization has amalgamated with another company *Your organization is venturing into a new sector *You are adopting a new approach to human capital management *You are extending the area of operations of your present activities

Head-start in implementing strategic human resource system

Line managers and your HR people can assist you with this review. Do this and you will ensure the effectiveness of your human resource recruitment policy, allowing you to find people who have the right qualities to perform well on the job. There are organizations who fail to conduct their recruitment activities well. The interview panel asks the wrong or irrelevant questions. This is a waste of valuable time, effort and money. Avoid doing this. Recruit the right person for the right job from the beginning. If you do this, you will have made a head-start in implementing a strategic human resource management system.



Daily News – February 5, 2010 EMPLOYEE ORIENTATION HELP FOR MANAGERS AND HR: N. Gowsalya, Department of Management, Eastern University

Here’s a short article to help both managers and human resource professionals think a bit more about employee orientation, why it is so important to both employee retention and productivity, and how to go about it .

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We would not be understating the case if we said that orienting employees to their workplaces and their jobs is one of the most neglected functions in

Government. Countless horror stories exist about how a new employee has received a ten minute talk with the manager and directed to his or her office position, with no further guidance or instruction. Not only is this exceedingly stressful for the employee, but it virtually guarantees a very long period of unproductiveness for the employee. We present an overview of the orientation process and a checklist that you can use when orienting new staff. As you read the article, keep in mind that orientation is also important for existing employees if a) They have never received proper orientation or b) There have been many changes in the organization and its purpose and function. Purposes of orientation Orientation isn’t a nicety! It is used for the following purposes: 1. To reduce startup-costs Proper orientation can help the employee get “up to speed” much more quickly, thereby reducing the costs associated with learning the job. 2. To reduce anxiety Any employee, when put into a new, strange situation, will experience anxiety that can impede his or her ability to learn to do the job. Proper orientation helps to reduce anxiety that results from entering into an unknown situation and helps provide guidelines for behaviour and conduct, so the employee doesn’t have to experience the stress of guessing. 3. To reduce employee turnover Employee turnover increases as employees feel they are not valued, or are put in positions where they can’t possibly do their jobs. Orientation shows that the organization values the employee and helps provide tools necessary for succeeding in the job. 4. To save time for supervisor and co-workers Simply put, the better the initial orientation, the less likely supervisors and co-workers will have to spend time teaching the employee.



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5. To develop realistic job expectations, positive attitudes and job satisfaction It is important that employees learn early on what is expected of them, and what to expect from others, in addition to learning about the values and attitudes of the organization. While people can learn from experience, they will make many mistakes that are unnecessary and potentially damaging.

Two kinds of orientation There are two related kinds of orientation. The first we will call overview orientation, and deals with the basic information an employee will need to understand the broader system he or she works in. Overview orientation includes helping employees understand: * Government in general, the department and the branch * important policies and general procedures (non-job specific) * information about compensation and benefits * safety and accident prevention issues * employee and union issues (rights, responsibilities) * physical facilities Often, overview orientation can be conducted by the personnel department with a little help from the branch manager or immediate supervisor, since much of the content is generic in nature. The second kind of orientation is called Job-Specific Orientation and is the process that is used to help employees understand: * function of the organization, and how the employee fits in * job responsibilities, expectations and duties * policies, procedures, rules and regulations * layout of workplace * Introduction to co-workers and other people in the broader organization. Job specific orientation is best conducted by the immediate supervisor, and/or manager, since much of the content will be specific to the individual. Often the orientation process will be ongoing, with supervisors and co-workers supplying coaching.

Some Tips 1. Orientation should begin with the most important information (basic job survival). 2. Orientation should emphasize people as well as procedures and things. Employees should have a chance to get to know people and their approaches and styles in both social and work settings. 3. Buddy an employee to a more experienced person, but make sure the more experienced person wants to buddy up, and has the inter-personal skills. This provides ongoing support. 4. Introduce employees to both information and people in a controlled way. A new employee can’t absorb everything at once, so don’t waste your time. Space out introductions. Orientation (or lack of it) will make a significant difference in how quickly an employee can become more productive, and also has long term effects for the organization. To help you in the orientation process, we have included a checklist for the Job-Specific Orientation. Note that any complete program will include other elements...those that would be included in the overview orientation.



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Construction Industry



Daily News – February 1, 2010 GREEN BUILDING CODES TIMELY Charumini de Silva Introduction of green building codes and implementing them by the Environment and Natural Resources Ministry with the vested authorities is timely and significant.

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The benefits of Green Building cover the categories of environment, economy, health and safety and community benefits, University of Moratuwa Faculty of Architecture, Prof. Chitra Wedikkara told Daily News Business. She said there will be many projects in with regard to the North and East developments where we could use green principles to build new cities and urban centers. Modern cities are built environments for market and wealth, so it is essentially related to the economic and financial spheres as well.

Prof. Chitra Wedikkara

Therefore, creating sustainable urbanism and building greener cities would be the foundation of the new model, sustainable pattern and green economy. “There is a tremendous demand for local quantity survey consultants in the international market especially from countries in the Middle-East.

Many local quantity survey consultants are performing well in the global arena,” she said. Behind every construction project whether it is large or small, quantity surveyor is a person whose responsibility is to determine its cost. His or her professional advice is essential to architects, contractors, engineers and developers. It is all about the effective utilization of resources in the construction process. The quantity surveyor plays a vital role as the manager of the resources in the development, production and maintenance of built environment. Therefore, it is essential to increase the need for value that all customers face in today’s rapidly transforming construction industry, Prof. Wedikkara said.

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