07th – 13th March 2011 alerts/en/2011/March 13, 2011.pdf · FCCISL News Alert Weekly Business Highlight 07th – 13th March 2011 3 7. BUSINESS • A business perspective of cricket

07th – 13th March 2011

FCCISL News Alert Weekly Business Highlight


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Content Page

1. DEVELOPMENT ECONOMICS

• IMF strengthens influence of emerging economies, low income countries 05 • Good governance cannot be enforced through Codes and Rules alone 08 • High oil price cuts airline profits by almost 50% 10 • Storage maps: The future of digital data 13 • Sri Lanka gears to face challenges of emerging food crisis 15

2. INVESTMENT

• Investing in Growth 18 3. TRADE & MARKETING

• Sri Lanka trade deficit expands 66.7% in 2010 25 • Insights to advertising agencies in Sri Lanka: MNC Study 27 • Modern retailing takes root 31

4. MONEY & BANKING

• Central Bank loans to govt down 29.5% 34 • Banking giant gives Sri Lanka a boost 36 • Making Public Servants Liable for PAYE Tax 38 • Financial market expects policy rates to be held steady 42 • Monetary policy: which way do we move? 44

5. EXPORTS & IMPORTS

• Spice industry not affected 48 • John Keells Tea Report 49 • Will synthetics be threat to natural rubber? 51 • Natural rubber market dips 54 • Can Fairtrade spruce up export growth for SL? 60

6. STOCK MARKET

• Foreign investors boost bourse 65 • Stocks tumble on selling to raise cash for IPOs 67 • SEC facilitates retail investors 68 • CSE recovers slightly after 3-day decline 69



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7. BUSINESS • A business perspective of cricket 71

8. CLIMATE CHANGE

• Tree plantations in dispute over climate change 75 9. AGRICULTURE & PLANTATION

• Growing Coconuts on "Coconut Lands" – Another Look 78 • Food from Plants Rice and Wheat 83

10. ICT

• Going mobile: the future of computer technology 87 • Have you successfully managed IT in your company? 91

11. ENVIRONMENT

• New energy frontier 93 12. FCCISL PRINT IN MEDIA

• AITT, FCCISL collaborate 97 • Kelaniya University with FCCISL launch

'Future Entrepreneurs ' program 98



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Development Economics



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The Island – March 7, 2011

IMF strengthens influence of emerging economies, low income countries Governance reforms

Apackage of measures, agreed in 2008 to strengthen the representation of dynamic economies in the IMF, has entered into force. The reform provides for quota increases for 54 countries, with the largest gains going mainly to dynamic emerging market countries, ranging from Korea, China and Turkey, to Brazil and Mexico. The reform will also enhance the influence of low-income countries in the IMF’s decision-making, including in its 24-member Executive Board.

Following calls by IMF Managing Director Dominique Strauss-Kahn for member countries to formally ratify the agreement, which was backed by the IMF’s Governors in April 2008, the package has now been signed into law in 117 member countries, representing 85.04 percent of total voting power in the IMF. This pushes the package above the required 85 percent majority of voting power and approval by at least 113 member countries, which are needed for approval of these types of reforms.

"I commend our members for taking the required action to ratify this package of reforms adopted in 2008," said IMF Managing Director Dominique Strauss-Kahn. "The implementation of this reform reflects the membership’s commitment to strengthening the IMF’s effectiveness, credibility, and legitimacy."

The 2008 reforms were followed by another governance reform package agreed by the IMF’s membership in December 2010 that, once effective, will lead to a combined shift of about 9 percent of quota shares to dynamic emerging market and developing countries. It will also protect the quota shares and voting power of the IMF’s poorest member countries.

Once both packages are implemented, IMF representation will better reflect the world economy as it looks today.

"It means we will have the top 10 shareholders that really represent the top 10 countries in the world, namely the United States, Japan, the four main European countries, and the four BRICs," Strauss-Kahn said.

The term "BRICS" collectively refer to Brazil, Russia, India, and China.



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Road to reform In order to be effective and legitimate, the IMF must be seen as representing the interests of all of its 187 member countries. The 2008 reform package, and the subsequent 2010 agreement, followed extensive consultations involving member governments and outside stakeholders to find a way to give dynamic emerging market countries a greater say in the running of the institution, which was created in 1944 to further global economic cooperation.

Unlike the General Assembly of the United Nations, where each country has one vote, decision making at the IMF was designed to reflect the position of each member country in the global economy. The current reforms are intended to reflect the larger role that emerging market and developing economies now play.

Agreement reached in 2008 Efforts to increase the voice and representation of emerging market and developing countries date back to 2006, when a process to realign member countries’ quotas and voting power received the backing of the membership at the IMF-World Bank Annual Meetings in Singapore. This process resulted in the 2008 agreement, which has three main building blocks:

•Quota increases for 54 member countries amounting to about SDR 20 billion, equivalent to US$30 billion, come on top of initial increases of almost SDR 4 billion approved for China, Korea, Mexico and Turkey in 2006. Emerging market countries are the main beneficiaries of this aggregate shift in quota shares of 4.9 percentage points. For example, Korea will see its quota increase by 106 percent; Singapore by 63 percent; Turkey by 51 percent; China by 50 percent; India by 40 percent; Brazil by 40 percent; and Mexico by 40 percent.

•The tripling of basic votes will enhance the voice and participation of low-income countries in the IMF. Basic votes were designed to reflect the principle of equality of states and give the IMF’s smallest member countries? many of which are low-income countries? A greater voice in the institution’s deliberations. IMF member countries also agreed that the share of basic votes in total voting power would be maintained in the future, thereby preserving the gains made in this reform and preventing an erosion of basic votes through future quota increases.

•Flexibility for the African chairs at the IMF Executive Board to improve their representation by appointing a second Alternate Executive Director. The two chairs representing the countries of sub-Saharan Africa are by far the largest constituencies in the IMF, and this reform recognizes both the need to improve representation for this group of countries, and the demands placed on the offices of their Executive Directors.

Paving the way for the 2010 agreement In October 2009, the IMF’s policy steering committee, the International and Monetary Committee, endorsed a call by the Group of Twenty (G-20) industrialized and emerging market economies for a shift in quota share to dynamic emerging market and developing countries of at least five percent from over-represented to under-represented countries using the current quota formula as the basis to work from. In addition, a commitment was made to protect the voting share of the poorest member countries.

In November 2010—following extensive consultations involving member governments and outside stakeholders—the Executive Board agreed on a doubling of total quotas and a shift of more than 6 percent of quota shares to dynamic emerging markets and developing countries. As a result of the quota rebalancing, India and Brazil will join China and Russia as part of the top 10 shareholders of the IMF. Other emerging markets will also see their quotas increase.



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The quota shift was made possible mainly by reducing the shares of a number of advanced economies and oil producing countries.

The doubling of quotas will preserve the IMF’s quota-based nature. The agreement also answers the call of the IMF’s steering committee, the International Monetary and Financial Committee, to protect the voice of the poorest member countries: an ad hoc quota allocation to this group of countries will preserve their voting shares.

The agreement also restructures the composition of the IMF’s Executive Board, paving the way for an increase in the representation of dynamic emerging market and developing countries in the day-to-day decision-making at the IMF. There will be two fewer Board members from advanced European countries, and all Executive Directors will be elected rather than appointed, as some are now. The size of the Board, which will remain at 24, will be reviewed every eight years. For these changes to become effective, the membership must accept an amendment to the IMF’s Articles of Agreement.

In addition, IMF Governors will consider further flexibility for other multi-country constituencies to appoint a second Alternate Executive Director, joining the two sub-Saharan African chairs, while taking steps to ensure that voting power at the IMF continues to reflect changing global realities.

The Board of Governors, the IMF’s highest decision-making body, ratified the package on December 15, 2010.

Next steps Following approval by the IMF’s Board of Governors, the proposed quota increases and the amendment will have to be accepted by the membership. This requires acceptance by three-fifths of the IMF’s 187 member countries, having at least 85 percent of total voting power.

This acceptance process will in many cases involve parliamentary approval. Member countries have agreed to make best efforts to complete the process by the IMF-World Bank Annual Meetings in 2012.

"The next step in this process will be for governments to ratify speedily the 2010 Amendment on the Reform of the Executive Board and to implement the quota increases to further align representation in the IMF with global economic realities," Strauss-Kahn said. "This will represent the most fundamental governance overhaul in the IMF’s 65-year history and the biggest-ever shift of influence in favor of emerging market and developing countries."

(Courtesy IMF Survey)



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Good governance cannot be enforced through Codes and Rules alone By Franklyn Amarasinghe and Dinesh Weerakkody

Attempts to improve corporate governance in Sri Lanka in the past have been through the adoption of voluntary codes. We have generally followed the British methodology of enunciating principles rather than rules. The issue of governance has much to do with a value system and unless the values are clearly accepted, perhaps the only other way in which the end could be achieved is through imposition, although this is distasteful.

Some of our companies have chosen to interpret these principles in a manner that gives them the flexibility to ignore the principles when it suits them, especially when they look around and see others in other institutions not respecting the principles of good governance. Several years ago the Central Bank published a voluntary code for banks to adopt.

The Code outlined principles… Positive results were not visible although there were many inspiring essays, albeit theoretical in nature, on the subject in the Annual Reports of banks. Thus, in the context of Sri Lanka, the introduction of a mandatory code, which incorporates Principles and Rules to be followed, was timely, desirable and commendable, especially because banks occupy a special position of trust in the national economy. It is emphasized that they have broader responsibilities that go beyond their shareholders and employees by virtue of the role they play, as the dominant financial intermediaries in Sri Lanka.

The Code sets out in detail the responsibilities of the Board. It is abundantly clear that a board is not intended to merely rubber stamp the proposals of management. If the responsibilities are to be effectively discharged, it is important that persons of the right caliber are appointed to boards. While high integrity is an essential pre-requisite, this alone is not sufficient and directors must be people who are alert and have the capacity to understand the inherent risks assumed by an institution and objectively analyze the proposals submitted by management on various aspects of a firm’s operations.

However, it is equally important that the board has competence within it which embraces other disciplines such as Law, Economics, marketing, Human Resource Management and Technology, so that a multidisciplinary approach is taken to managing risks and developing the business. It would be unfortunate if the board has abilities limited to finances alone.

Compositions of Boards… Looking at the composition of many boards, it appears that some of the directors may not fit the bill. However honest, educated and capable a person may be, advancing age and familiarity bred through long stints as directors work against the ability of a director to play the required objective role and to this end the maximum term of 9 years and the age limit of 70 years for directors imposed by the code is welcome. There may unhappiness from incumbent directors of some financial institutions stating that age and length of office should not be criteria but in a country where there is reluctance for proper succession planning at management and leadership levels, it is far better to have a mandatory mechanism to progressively infuse new blood than to risk running board rooms as clubs of those one is comfortable with.

This also leads to a consideration of an important aspect of governance, which is diversity of opinion. Many boards are reluctant to tolerate dissenting opinions.



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Dissent can be healthy for any organization as it leads to better scrutiny of the affairs of the organization and yes men can be as dangerous as those who are reluctant to challenge management in a constructive manner. Of course, the point to be emphasized is that everyone should see the opportunity to challenge a proposal as a means of constructive criticism rather than an opportunity to delay or sabotage worthwhile initiatives.

Independent directors… One of the key factors on which the regulator has sought to build a better governance framework is by having a number of "independent" directors on boards. While this is commendable in theory, it needs to be borne in mind that mere "independence" as defined in the code will not ensure that the director concerned will or can make the required contribution. In fact, given the incestuous corporate relationships prevalent in our small country, the Chairman’s golfing buddy who fits the code’s definition of "independence" may in reality be less independent than someone who is "not independent" in terms of the code.

It is also a matter for debate whether so-called "independent" directors who receive fixed and rather nominal fees for their services and have no real stake in the business are sufficiently motivated to enhance enterprise value.

In the final analysis, true independence and effectiveness of an "independent" director can only be measured by the director’s actions in the board room and the freedom and willingness to leave the board if he is forced to compromise on the principles of good governance and not merely through the application of rules.

In summary one could say that our experience is that Rules could make the difference in terms of bringing about the required standards, but the mental attitude towards implementation in a manner, which enhances values, is what is most needed.



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High oil price cuts airline profits by almost 50% The International Air Transport Association (IATA) downgraded its airline industry outlook for 2011 to $8.6 billion from the $9.1 billion it estimated in December 2010. This is a 46% fall in net profits compared to the $16 billion (revised from $15.1 billion) earned by the industry in 2010. On expected industry revenues of $594 billion, the $8.6 billion 2011 profit equates to a net profit margin of 1.4%.

"Political unrest in the Middle East has sent oil over $100 per barrel. That is significantly higher than the $84 per barrel that was the assumption in December. At the same time the global economy is now forecast to grow by 3.1% this year—a full 0.5 percentage point better than predicted just three months ago. But stronger revenues will provide only a partial offset to higher costs. Profits will be cut in half compared to last year and margins are a pathetic 1.4%," said Giovanni Bisignani, IATA’s Director General and CEO.

Forecast highlights include: Fuel: IATA raised its 2011 average oil price assumption to $96 per barrel of Brent crude (up from $84 in December), in line with market forecasts. Including the impact of fuel hedging, which is roughly 50% of expected consumption, this will increase the industry fuel bill by $10 billion to a total of $166 billion. Compared to levels in 2010, oil prices are now expected to be 20% higher in 2011. Fuel is now estimated to represent 29% of total operating costs (up from 26% in 2010).

Growing economies give airlines the opportunity to recover some of these added costs with additional revenues. For example, since early 2009, rising oil prices added 25% to unit costs while average fares (excluding surcharges) rose 20%. But in 2011 higher revenues are not expected to be sufficient to prevent the rise in oil prices from causing profits to shrink by 46% from 2010 levels.

Demand: An increase in global GDP forecasts to 3.1% (from 2.6% in December) bodes well for continuing strong demand for air transport. In line with this, IATA revised its passenger demand growth forecast to 5.6% (from 5.2%) and its cargo growth forecast to 6.1% (up from 5.5%). Overall, this will generate a 5.7% expansion in tonne kilometers flown.

Capacity: Published airline schedules indicate a capacity increase of 6%, slightly lower than the 6.1% previously forecast. Of this, 5% will come from the 1,400 new aircraft being introduced to the fleet over 2011. The additional 1% is expected to come from the normalization of underutilized capacity in the twin-aisle fleet.

Yields: With capacity expected to increase by 6% in 2011 and demand by 5.7%, the gap is 0.3 percentage points. This has narrowed from the previously forecast gap which was 0.8 percentage points. While there has been some weakening in passenger load factors, as of January they remained near record levels at a seasonally adjusted 77.7%. Freight load factors are also high compared to previous cyclical peaks. These tightening supply and demand conditions give scope for yield improvements. Passenger yields are expected to grow by 1.5% (up from the previous forecast of 0.5%) and cargo yields by 1.9% (up from the previous forecast of no growth).

Premium Travel: Premium traffic is an important contributor of a network airline’s profitability. urchasing managers’ confidence is a leading indicator for business travel. In January, the JP Morgan/Markit Purchasing Managers Index hit a record high. Moreover, strong corporate reporting at the end of 2010 and expanding world trade will continue to drive business travel in 2011, albeit at a slower pace than we saw during the 2010 post-recession rebound.



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Risks: Rising oil prices are always a challenge for airline profitability. If they are accompanied by strong growing economies and world trade, airlines have some opportunity to command prices that can offset the rising fuel costs. If, however, rising energy prices stall global economic growth there is a strong downside risk to this forecast. With oil prices now being driven by speculation on geopolitical events in the Middle East rather than strengthening economic growth, this is a significant downside risk.

"This year the industry is performing a balancing act on a very thin tight-rope of a 1.4% margin. It is a structural problem that the industry has faced with an average margin of just 0.1% over the last four decades. There is very little buffer for the industry to keep its balance as it absorbs shocks. Today oil is the biggest risk. If its rise stalls the global economic expansion, the outlook will deteriorate very quickly," said Bisignani

IATA also highlighted the risk of increasing taxation, particularly in price sensitive leisure markets. In 2010, the industry saw new and increased taxes in the range of 3-5% of ticket prices in the UK, Germany and Austria. Recently, Iceland, India and South Africa have joined with plans for additional taxation. "This is a price sensitive business. Aviation has the power to stimulate economies. But that ability is being compromised by adding taxes at a time when we are struggling to cope with high fuel prices just to maintain anemic margins," said Bisignani.

Regional highlights follow: Asia-Pacific carriers are expected to deliver the largest collective profit of $3.7 billion and the highest operating margins of 4.6%. This is down substantially from the $7.6 billion that the region’s carriers made in 2010 and from the previously forecast $4.6 billion for 2011. While the strong economic growth in the region is still driving profitability, inflation fighting measures in China are slowing trade and air cargo demand. The key reason for the downgrade from December’s forecast is that the region is more exposed to higher fuel prices, due to relatively low hedging on average.

North American carriers are expected to deliver $3.2 billion profit, unchanged from the previous forecast and down from the $4.7 billion profit made in 2010. Higher oil prices will damage profitability in 2011, but earlier cuts in capacity have led to much stronger conditions for yields than elsewhere. The US economy has also been stronger than expected. Compared to our December forecast, better revenues in 2011 will offset higher fuel costs.

European carriers are expected to make a $500 million profit. This is up from the $100 million previously forecast, but well below the $1.4 billion that the region’s carriers made in 2010. It is the carry-over from better than expected 2010 second-half performance that has led to forecast revisions. The ongoing banking and government debt crisis are keeping domestic home markets fragile. But the weak Euro is continuing to provide stimulus to export industries, outbound freight and long-haul business travel which is driving the upgrading of the region’s profit forecast. Even so, Europe’s carriers remain the least profitable among the major regions with an EBIT margin of 1.1%.

Middle East carriers are expected to return a profit of $700 million. This is considerably better than the $400 million previously forecast, but down from the $1.1 billion profit that the region posted in 2010. Political instability in the region is expected to take its toll in Egypt, Tunisia and Libya which combined account for about 20% of the region’s international passenger traffic. This is balanced by the Gulf area which benefits from economic activity related to high oil prices and whose hubs continue to win long-haul market share. Load factors have also improved significantly for these airlines, as new capacity is being added at a slower pace than demand increases.



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Latin American carriers are forecast to post a $300 million profit. This is down sharply from the $1 billion that the region made in 2010 and from the previously forecast $700 million. Strong economic growth and international trade in the region are driving travel and cargo demand and the region’s profits for airlines. Exposure to higher oil prices is the key reason for the expected deterioration in the region’s profitability this year.

African carriers are expected to break even. This is unchanged from the previous forecast but down from the $100 million profit that the region posted in 2010. Strong economic and transport demand growth on the back of foreign direct investment and rapidly growing trade links with Asia is keeping the region’s carriers out of the red. However, they face intensifying competition from Middle Eastern carriers and others for lucrative business traffic.



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Storage maps: The future of digital data By Ahsen Javed, Managing Director, Oracle Pakistan and South Asia Growth Economies, Pakistan

The one consistent theme in the digital world is that growth is a constant. It is estimated that from 2009 to 2020, the size of the digital universe will have increased 44 fold[1]; that is a 41 per cent increase in capacity every year. Storing, locating and extracting value from high volumes of data will become increasingly complex.

As the digitally-enabled business world evolves, the mix of data and its anticipated usages are going to change as well. Already, there is an increased diversity of data types with 80 per cent[2] of today’s data being unstructured and the reuse of data is shrinking, with 80 per cent of data never being used after 90 days[3]. However, regulation and compliancy dictates that data is adequately archived for long periods of time, sometimes up to triple digits in number of years.

The fall out of the way data storage is currently handled is massive – the impact on the environment is one of these factors. Storage already consumes 40 per cent of datacentre power and it is predicted that within ten years the total energy consumed by storage solutions could increase to more than six times what it is today. Based on these predictions, storage could represent over 75 per cent of the energy consumed within the datacentre and if you consider that 80 per cent of data is never looked at again after three months, storage is a major IT trigger for energy burn out.

Another fallout is cost and the added expense of managing growing volumes of data. The business critical nature of data is driving up storage management costs by 25 per cent per year[4], so in the long term it will become the number one cost within many datacentres. Therefore, it’s becoming increasingly more important to align the value of data with the capabilities and cost of the storage it is stored on.

Looking forward, the future of storage management must be simple, easily accessible, cost efficient, environmentally friendly and streamlined, so organizations can function and perform quicker and better.

Striving for nirvana… There are three essential elements that must be considered when formulating a storage strategy to meet growing data demands – the evolving function of the datacentre, business drivers, and the ‘nirvana’ storage solution.

Today’s typical datacentre is migrating from a physical, static, and heterogeneous set-up, to a grid-based virtualized infrastructure to a cloud computing environment that enables self service, policy-based resource management, and capacity planning. Along the way, the storage solution must be able to support this style of datacentre, so it is critical that the storage system is dynamic enough to support the difficult to predict demands of these application environments through a tiered approach.

Reducing cost was at the top of the CIO’s agenda yesterday, now business growth and profitability is. The storage strategy must fall in line with these objectives. So, regardless of an organization’s size, the storage solution must be able to scale to solve the larger, more complex business problems and it has to perform in real-time so organizations can react and make business decisions immediately. Likewise, the infrastructure has to be efficient so complex business problems can be effectively solved at a reduced cost and improved speed, and there must be data integrity built in to meet long-term business and regulatory compliancy.



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Finally, there is the liberating act of creating a ‘storage nirvana’, should cost and incumbent infrastructure not be an object. For a CIO, this would probably include on-demand secure data access, application aware storage optimization, unlimited capacity, scalable performance, appliance-like rapid deployment, and integrated application, system and storage management. Although, this nirvana is a distance away, these ideas must be taken into consideration to guide organizations onto a path of accelerated performance, profitability and lower IT costs.

A pyramid strategy… To make the strategy a reality, companies must shift away from the traditional approach of managing islands of storage and move to an automated, tiered and unified storage infrastructure. By adopting a formula whereby certain data to be stored is assigned to certain storage pools, organizations will improve the price, performance, capacity and functionality of their storage infrastructure.

A typical tiered storage model has four tiers. Newly emerged, tier 0 uses flash memory storage, is extremely high performing and stores high value information that needs to be captured, analyzed and presented at high speed. Primary storage, classified as tier 1, is based on fiber channel disk systems and should have high performance, high availability with near zero-downtime and fast recovery to support customer-facing and revenue-based applications. Tier 2 storage should be managed on low cost high capacity disks, with the capability to manage broad business applications such as databases, backup, email, and file systems. Finally, tier 3, which is based on the more cost effective, energy efficient tape technology serves the purpose to store high volume archival data for regulatory purposes and doesn’t require immediate access.

To optimize the tiered storage architecture, companies must classify and value the data of the business, then map and assign it to the best-fit tier. Data can be classified into four categories with I/O intensive data, being assigned to tier 0 storage; mission critical data, such as revenue and customer based applications to t! ier 1; vital data that doesn’t require immediate recovery for the business to continue operating to tier 2; and archival data with low activity, long term retention periods to tier 3.

Leveraging economic prosperity… Leveraging upon a tiered storage environment has significant economic advantages. Research has shown that a single tiered storage environment has an average lifetime cost of $15,000 per terabyte; a dual tiered one of $8,000 per terabyte; and a four tiered storage structure, $4,000 per terabyte[5]. With the majority of the data residing in the archival data tier 3, which is built on tapes, costs will naturally depreciate. Likewise, an automated systematic data-value mapping and distribution approach requires less administration and maintenance at the low end of the storage pyramid, thus reducing costs and freeing up staff time to focus on the mission critical data.

Such an approach to storage also reduces compliancy risk and improves business continuity as organizations will be able to more easily satisfy legal and audit requirements, which in turn, improves service levels. Ultimately, organizations will witness their performance improve as upgrades will become easier, stale data will be removed from production resources and there will be less disruption to the production environment.

With growth, performance and profitability high on the C-level agenda, storage management can play a significant role in helping organizations to achieve these objectives.



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Sunday Observer – March 13, 2011

Sri Lanka gears to face challenges of emerging food crisis By Lalin Fernandopulle "Several measures have been taken to develop agriculture and increase food production to face the global food crisis", said Minister of Agriculture Mahinda Yapa Abeywardena. He said there is no need to panic as there are adequate stocks of paddy and added that the price of rice will not be increased. He said maize cultivation has been affected and import permits have been issued to meet the requirement of animal feed. The country needs around 225,000 tons of maize a year and around 15,000 tons a month for animal feed. Large extents of paddy land and animals were destroyed by the recent floods. Estimates revealed that around 157,000 hectares of paddy, 45,000 hectares of field crops, 5,000 hectares of vegetables and

around 100,000 animals had been washed away by the incessant rains in the East. "We have taken steps to provide four bushels of seed paddy per hectare and field crop seed for half a hectare free. Rs. 4,000 will be given per acre of land to affected farmers", Abeywardena said. The government launched one million home garden units under the Gewathuwagawa program to boost agriculture to reach self-sufficiency in food. "The program will help increase agricultural production and provide additional income to households",

Abeywardena said. Senior Lecturer, Department of Economics, University of Colombo, Prof. Sirimal Abeyratne said that food inflation is a global problem, and certain local factors have worsened it. He said there is a short-term supply shortage in many parts of the world due to bad weather and climatic conditions. "There are long-term demand factors causing a rapid increase in the need for agriculture produce particularly due to the rise in demand for bio-fuel and food from emerging economies", he said. Prof. Aybeyratne said however, Sri Lanka's food inflation is significantly higher than that of the region, which is a result of domestic and global factors. Inflation which has been below five percent rose to mid single digit this year following the escalation of world and local food prices. The price of basic staple food has risen sharply in less than a year: rice by 74 percent, soya 87 percent and wheat by 130 percent. "Food prices are usually high during the early part of the year due to seasonal factors. A large part of production was also destroyed by bad weather conditions", Prof. Abeyratne said. The recent floods swept vast swaths of paddy land and killed thousands of animals. Official estimates revealed that the country lost around 20 percent of the harvest due to the catastrophic weather that wreaked havoc to farm land. Around 26 people were killed and 300,000 were displaced by the

Minister Mahinda Yapa Abeywardena

Prof. Sirimal Abeyratne



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freak weather that lashed across the East and Northern parts of the country. The actual loss to property is yet to be estimated. Prof. Abeyratne said that the food market has deep rooted weaknesses under which producers and consumers are at a disadvantage due to unprofessional practices along the value chain. Market manipulation by traders has turned out to be a major problem causing a huge burden on consumers who are at the mercy of exploiters. Hoarding of stocks to boost prices, non-display of price tags and exploitation by middlemen are common today. "Domestic economic policies also contribute to higher long-term general inflation of the country. The impact of food inflation is widespread across the country and most importantly the impact on interest and exchange rates affect long-term economic growth, investment and trade", he said. However, the negative repercussions of higher inflation on the economy are difficult to quantify and identify as the link between inflation and macroeconomic variables is less explicit. The more explicit impact is on the living standards of the people and poverty reduction. "Is Sri Lanka geared to face global food inflation and sustain economic growth" has been a key concern among economists and analysts. Analysts believe that Sri Lanka is sitting on a volcano that could erupt any moment provided drastic measures are taken to increase food production and mitigate the impact of climate change. Prof. Abeyratne said that Sri Lanka has been doing so much but all seems to be aimed at deriving little benefit at a high long-term cost. When the market is weak there is a justification for government involvement but it should be to improve the market. "Diverting development strategies and government resources to uplift the standard of domestic agriculture is needed but it is not the long-term solution for high food inflation. The long-term solution is rapid economic growth which translates into high income on which the country can improve its capacity to face the challenges of high food prices", he said. The Food and Agriculture Organization has cautioned that the shortage of food and its soaring prices which is a growing reality in many countries could encompass the world within the next year or so. The looming global food crisis has taken the world by storm with many emerging countries grappling to survive the severe shortage of food and sky-rocketing commodity prices. The recovery of the global financial crisis and rise in domestic consumption in merging economies have led to a sharp rise in commodity prices. World food production has been affected by adverse weather conditions across the globe. Brazil and Australia which contribute a major share of the world food production have been affected by extreme weather conditions. Prof. Abeyratne said countries that are affected most by the world food crisis are poor agricultural countries. Agriculture's share in the USA is only one percent of the GDP but it is four times higher than the GDP of Sri Lanka. "Despite rhetoric Sri Lanka is among the top 10 countries according to population density and therefore expansion of agricultural land is not an option for the country. Urban concentration without congestion is suitable to promote agricultural production by protecting the country's forest and wildlife", he said. The rise in world oil prices fuelled by the turmoil in the Middle East and Libya are also major contributors to the surge in global food prices. Oil prices rose above US$ 105 a barrel last week with speculation that supply to OPEC from Libya, an oil rich country would be reduced sharply. Estimates suggest that around 25,000 people die daily by hunger, a crisis that has grown due to shortage of food and rise in prices. Violent protests against rising food prices are threatening peace and stability in many countries in Asia and South America. Protests led by left parties in South India urged the government to slash food prices and assure a stable price for commodities.



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Investment



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Investing in Growth Revisiting the debate over whether public investment in infrastructure is productive By Serkan Arslanalp, Fabian Bornhorst, and Sanjeev Gupta

POLICYMAKERS in developing countries often point to insufficient infrastructure—inadequate highways, airports, maritime facilities, and the like—as a constraint on their countries’ growth prospects. So it’s not surprising that these policymakers seek ways to find room in their budgets for greater public investment in infrastructure without saddling their country with unsustainable debt.

But they can find this difficult to achieve. For various political reasons, these countries are often unable to cut less productive current spending—for example, on general subsidies for fuel—to increase public investment. They can seek funds from external sources, but may face limits on how much their country can borrow—particularly if it has benefited from debt relief in recent years or if additional borrowing is available only on no concessional terms. Moreover, a long legacy of failed public projects in a number of countries further complicates decisions about external borrowing.

But more important than whether a country can expand its public investment in infrastructure is whether it should. Underlying the debate over increasing public capital is the question of the productivity of public investment—whether it aids economic growth. If public investment is productive, it is easier to justify external borrowing to support it. Unfortunately, the results of studies on public investment’s impact on growth are unclear, leading many to conclude that it is unproductive. However, some recent studies—for example, by the World Bank (2007)—conclude that public spending on infrastructure, education, and health yields positive effects on growth. The report from the Commission on Growth and Development (2008) notes that fast-growing countries are characterized by high public investment, defined as 7 percent of gross domestic product (GDP) or more. This article revisits this debate and, using estimates of the total amount, or stock, of public capital (be it bridges or highways), it studies the impact on economic growth for 48 advanced and developing economies during 1960–2001. It finds that public investment generally has a positive impact on growth. Mixed results Some of the discrepancy in existing findings relates to what is being measured. Many studies look at the investment rate—the percentage of GDP devoted to adding to the capital stock. We find that the more important focus is the rate of growth of the capital stock itself. The discrepancy between the two suggests at least three reasons for the mixed evidence on the relationship between public investment and overall economic growth:



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=Public investment and public capital can grow at different rates, depending on the initial level of capital stock. For example, public investment in a given year may not be large enough to replace the depreciated capital stock—the amount of capital "used up," say by the wear and tear on a highway or a bridge from automobile and truck traffic. One cannot expect public investment to have a positive impact on growth if it is not big enough to keep the country’s capital stock from declining.

=There is a two-way relationship between public investment and growth that makes it difficult to isolate the effect of one on the other: public investment affects growth, but it is also affected by growth. For example, public investment may fall during an economic downturn simply because of a lack of resources, which is typical in many countries. =Most studies do not take into account that governments face a budget constraint—they must finance higher investment spending either by raising taxes or borrowing or by cutting other spending. Higher taxation to finance public spending could introduce distortions in the economy and offset some of the productivity gains from public investment. Economic theory suggests that the level of output is determined by the capitalstock employed in production, rather than the annual investment flow.



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Although the two variables are closely linked, the capital stock—together with other production factors, such as labor and technology—determines an economy’s production potential. The investment flow in any given period, by contrast, determines how much capital is accumulated and therefore available for production in the subsequent period.

Focus on public capital growth As a result, we focus on the growth effect of public capital—the stock variable that corresponds to public investment. In particular, we developed a production function (see box) that includes inputs of labor, private capital, and public capital to determine the total output of an economy. We modified the production function to allow the productivity of public investment to vary, depending on the initial amount (stock) of public capital. For example, maintaining and/or expanding the existing capital stock may require higher tax rates, which could be distortionary—that is, discourage some good economic activities—and lead to lower growth. In our specification, we indirectly allow for the effect of such financing constraints.

To test our model, we needed estimates of public and private capital stock. But such estimates are difficult to obtain. Some are available for advanced economies, but there are few for developing economies. In our study, we filled this gap by estimating the public and private capital stock for a group of middle- and low-income countries during 1960–2001 using a methodology proposed by Kamps (2006). Our data set is novel in several ways: it combines capital stock estimates for both advanced and developing economies, differentiates between public and private capital, and applies depreciation rates that vary by time and by the economy’s income level to capture the nature of the underlying public and private assets.

Specifically, the value of the capital stock is calculated using the perpetual inventory method. In this method, the net capital stock—public and private—is determined by adding gross investment flows from the current period to the depreciated capital stock of the previous period. As a result, the stock data account for the wear

and tear on assets. The choice of depreciation rates presents perhaps the biggest challenge to tallying the capital stock data—mainly because country-specific estimates of depreciation rates (how much of the capital stock is used up in a period) are typically not available. Instead of applying a uniform rate to all countries, we differentiate the assumed depreciation by groups of countries reflecting different types of assets typically available in those countries. These assets have different life spans, resulting in different depreciation rates. For example, concrete structures are typically estimated to last longer than assets related to technology, whose investment life may be only a few years. As countries become richer, the share of assets with shorter life spans rises, thereby raising the overall depreciation rate.



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The U.S. Bureau of Economic Analysis estimates that overall depreciation rates for public capital in the United States were about 2½ percent per year in 1960 and 4 percent in 2001 (Bureau of Economic Analysis, 2010). We extended this assumption to the public capital stock estimates for all advanced economies in our sample. For middle-income countries, we used a time-varying profile in which the depreciation rate starts at 2½ percent in 1960 and reaches 3½ percent by 2001. We assumed a constant rate of depreciation of 2½ percent for low-income countries throughout the sample period. We confirmed our findings using other plausible depreciation rates. To construct the capital stock data set we used internationally comparable investment series from the Penn World Tables (PWT—Heston, Summers, and Aten, 2006) combined with the IMF’s World Economic Outlook (WEO) database. The PWT provide data on output and investment based on national accounts and adjusted for purchasing power parity. One drawback of the PWT is that they do not break down investment into its public and private components, an essential ingredient for our analysis. For that, we turned to the WEO database, whose data are broken down according to public and private investment. We used this share of public and private investment in total investment to split the PWT investment series into public and private components. Public investment and capital stock divergence On average, GDP grew by 3.4 percent in advanced economies and 4.4 percent—1 percentage point more—in developing economies from 1960 to 2000 (see table). Despite the higher growth in developing economies, the average public investment rates in advanced and developing economies were similar during this period. In particular, average public investment was 3.6 percent of GDP for advanced economies and 3.9 percent for developing economies. Although the investment rates were similar, the capital stock itself grew almost twice as fast in developing economies as in advanced economies during 1960–2000, because much of the investment in advanced economies replaced worn-out capital stock. This difference in capital stock accumulation helps explain much of the long-term growth differential across countries.



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Chart 1 shows a scatter plot of the average GDP growth, public investment rate, and public capital growth during 1960–2000 for all countries in the sample. It shows that cross-country differences in public capital growth explain much of the difference in long-term GDP growth during this period. In particular, the correlation between average public capital growth and average GDP growth is much higher than between the average public investment rate and GDP growth.

Chart 2 plots the average GDP growth, public investment rate, and public capital stock for advanced and developing economies from 1960 to 2000. It shows that the public investment rate has been on a downward trend since the early 1970s in advanced economies. In contrast, the public investment rate increased significantly in developing countries in the 1970s, although it returned to its earlier levels in the 1980s. Public capital stock, as a percent of GDP, peaked for advanced economies in 1983 and for developing economies in 1985. The peak levels were 60 percent of GDP for advanced economies and 61 percent of GDP for developing economies. The bottom panel of the chart shows the behavior of real GDP growth during this period. In both advanced and developing economies, there was a downward shift in real growth of almost 1 percentage point on average around the time capital stock peaked.

Growth impact of public capital varies We first tested a production function that relies on investment flows instead of capital stock. As argued above, the net capital stock is the key determinant of productivity, and investment flows do not provide any information on the share of investment required to replace depreciating capital stock. Unsurprisingly, then, these models do not demonstrate a relationship between investment flows and growth.

But when we tested a production function that relies on capital stock, we found that public capital has a positive effect on growth. We then found that the growth impact of capital stock varies with the level of public capital in the economy. In countries with public capital stock valued at less than 60 percent of GDP, an additional unit of public capital has the highest impact on growth (Chart 3). The effect diminishes thereafter, and for countries with very high public capital stock the growth effect is close to zero, possibly reflecting the inefficiencies that arise from financing public capital, such as high taxation. These results are robust under a variety of assumptions and with the inclusion or exclusion of outlier countries.

We also explored public capital’s growth impact over time intervals. Long-term effects of public capital accumulation on growth may not be captured sufficiently in annual data. For example, some public investment may take more than a year to complete, and even when completed, the payoff may accrue over a longer period. Hence, longer time horizons, such as five-year intervals, may be better suited to capture the lumpiness of investment and lags in its effectiveness. We found that in advanced economies, the effects of public capital on growth, although significant over the short term, diminish over long time horizons. For developing countries, on the other hand, the effect increases as the time horizon lengthens, and is largest for five-year intervals. These results suggest that some developing countries may not be able to handle significantly higher capital investment immediately because of their limited capacity to absorb investment and/or their slow implementation of investment projects. Furthermore, the results indicate that advanced economies use public investment more as a demand management tool—to counter the business cycle—than do emerging and developing economies, where it is more likely used to boost long-term growth.

Policy implications Increases in public capital stock are associated with higher growth, especially after controlling for the initial level of public capital. The short-term effects are stronger for advanced economies, the long-term effects stronger for developing economies. These findings help explain why previous studies that focus on the investment rate as the explanatory variable produced mixed results. At the same time, we found that in some countries the positive impact of public capital on output is partially or wholly offset if the initial



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capital stock in relation to GDP is high. However, these considerations do not seem to matter in countries with relatively low public capital stock.

These results suggest two broad policy implications. First, debate over how much additional debt a country can take on has centered on creating room in the budget for higher public investment, but our results show that certain types of constraints—for example, financing—can limit higher capital stock’s benefits on growth. Second, developing countries can gain from nonconcessional foreign borrowing to finance new investment; however, the benefits from such investment may accrue only over time.

References: Arslanalp, Serkan, Fabian Bornhorst, Sanjeev Gupta, and Elsa Sze, 2010, "Public Capital and Growth," IMF Working Paper 10/175 (Washington: International Monetary Fund).

Bureau of Economic Analysis, 2010, "Fixed Asset Tables," available at http://www.bea.gov/national/FA2004/SelectTable.asp

Commission on Growth and Development, 2008, The Growth Report: Strategies for Sustained Growth and Inclusive Development (Washington: World Bank).

Heston, Alan, Robert Summers, and Bettina Aten, 2006, "Penn World Table Version 6.2," Center for International Comparisons of Production, Income and Prices at the University of Pennsylvania (Philadelphia: University of Pennsylvania, September).

Kamps, Christophe, 2006, "New Estimates of Government Net Capital Stocks for 22 OECD Countries 1960–2001," IMF Staff Papers, Vol. 53, No. 1, pp. 120–50.

World Bank, 2007, Fiscal Policy for Growth and Development: Further Analysis and Lessons from Country Case Studies (Washington).

Serkan Arslanalp is an Economist in the IMF’s Monetary and Capital Markets Department. Fabian Bornhorst is an Economist and Sanjeev Gupta is Deputy Director, both in the IMF’s Fiscal Affairs Department.

Courtesy Finance & Development, a periodical published by the International Monetary Fund



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Trade & Marketing



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Sri Lanka trade deficit expands 66.7% in 2010 * Exports, imports record highest monthly values in December 2010 * Remittances up 23.6 percent, not enough to offset trade deficit unlike in 2009

Sri Lanka’s trade deficit expanded 66.7 percent in 2010 to US$ 5,204.7 million from US$ 3,122.1 in 2009 and although remittances grew 23.6 percent during the year it was not enough to offset the trade deficit as it did in 2009.

The trade deficit expanded on faster import growth, 32.4 percent, reaching US$ 13,511.7 million in 2010 from US$ 10,206.6 million in 2009. Export earnings during the year amounted to US$ 8,307 million, up 17.3 percent from US$ 7,084.5 million. Remittances reached US$ 4,116 million, up 23.6 percent from US$ 3,330.3 million.

As reported previously in The Island Financial Review, the International Monetary Fund said Sri Lanka’s exports earnings have been declining as a percentage of GDP for more than a decade and it said the island economy has to explore new markets, boosting ties with region and other emerging economies. It said rising global commodity prices could put pressure the trading account this year.

The Central Bank said the rupee would appreciate 3.2 percent on increased foreign capital inflows and dealers said this could help reduce the impact of rising commodity prices. This would also help the government finance foreign loans.

Releasing the trade for December 2010, the Central Bank said, "Gross official reserves continued to remain above the targeted level and stood at US$ 6.6 billion by end January, 2011 without Asian Clearing Union (ACU) balances. Based on the previous 12-month average expenditure on imports of US$ 1,133 million per month, the gross official reserves without ACU balances, were equivalent to 5.9 months of imports."

"Both exports and imports recorded the highest ever monthly values in December 2010. Earnings from exports increased by 34 per cent, year-on-year, to US$ 968 million and expenditure on imports rose by 30.8 per cent to US$ 1,429 million," the bank said.

"The largest contribution to the growth in exports in December was from the industrial sector, led by significant increases in exports of textiles and garments, food and beverages and rubber products. Earnings



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from garment exports to EU and USA increased by 33.9 per cent and 31.4 per cent, respectively, in December 2010.

"Exports of food, beverages and tobacco products increased by 74.3 per cent, year-on-year, mainly due to higher earnings recorded by exports of fruits, vegetables and animal fodder. Rubber product exports consisted mainly of new pneumatic tyres and articles of apparel and clothing accessories (mainly gloves).

"However, earnings from machinery and equipment and diamonds and jewellery exports recorded year-on-year declines in December 2010. Earnings from agricultural exports increased in December 2010, reflecting a healthy growth in all major sub sectors, mainly due to higher prices recorded by major export crops in the international market. The average export prices of tea and rubber continued to remain high at US$ 4.56 per kg and US dollars 4.26 per kg, respectively in December 2010. Earnings from minor agricultural exports increased by 28.8 per cent to US$ 30 million in December, 2010 mainly due to significant increases recorded in the export volumes of cocoa, essential oils, cashew nuts and cardamoms.

"Expenditure on imports of intermediate goods increased in December 2010, led by higher expenditure incurred on petroleum imports. The average import price of crude oil increased by 16.5 percent to US$ 90.37 per barrel in December 2010. Textile imports also increased substantially in December 2010, indicating a better outlook for the garment industry.

"The expenditure on fertilizer imports increased by 119.4 per cent to US$ 29 million reflecting higher import volumes due to the extended acreage cultivated in the Northern and Eastern provinces and extension of fertilizer support scheme to coconut cultivations. Import expenditure on food and drink increased in December 2010 mainly due to higher food prices in the international market. Expenditure on non food consumer import category also increased mainly due to higher imports of motor vehicles. All categories of investment goods imports increased in December 2010," the Central Bank said.

pic Containers being loaded on to a vessel in the Port of Colombo. Sri Lanka’s trade deficit expanded 66.7 percent in 2010 as imports grew faster than exports. Pic by Dimuthu Premaratne



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Insights to advertising agencies in Sri Lanka: MNC Study

Thanzyl Thajudeen, CE of MNC

Advertising agencies, which we call now as marketing communications or brand building agencies, are changing grounds globally with digital and social media playing a major role whilst some traditional still remaining. Mark and Comm Limited (MNC), an integrated strategic marketing, reputation communications consultancy and a boutique think tank recently carried out a survey during the month of February 2011 titling ‘Digital and Social Media Study [Agency side] in Sri Lanka’ on how digital and social media is trending in Sri Lankan agencies, and how the landscape of the traditional tools, taking into account the present and future demand of their clients. There were very useful and valuable insights.

The study revealed from 22 respondents consisted senior key executives throughout agencies in Sri Lanka such as Chairman, CEO’s, COO’s, and directors and managers involved in branding and client services. The study was highly focused and narrowed, with a clear audience. The below were the results and insights.

Thanzyl Thajudeen, Chief Executive of MNC, said ‘it’s my pleasure in bringing and sharing this insight. The study has revealed that agencies in Sri Lanka are moving towards the whole new digital and social media with Facebook suggested mostly taking social networks into account, and that there is an increasing consideration towards integrating these two mediums to bring out a wonderful mix in place. However there needs to be healthy, ethical competition and an essence to work together with the whole ecosystem in Sri Lanka – not fight and pitching in for projects’

Critical mediums for Sri Lankan agencies at present When asking as to whether has digital media particularly pointing out social media hit the Sri Lankan advertising industry as a whole, 55 percent confirmed yes followed by 36 percent stating ‘maybe’ and ‘it will’, along with a 9 percent being pessimistic saying ‘no, it hasn’t’. Interestingly, when asking whether digital and social media has hit their agency in particular, 55 percent confirmed ‘yes, it surely has’ followed by 36 percent stating ‘somewhat yes’ and a 9 percent stating ‘no’.



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When surveying what their clients overall are giving priority to in the current context (Illustration One), there were some very interesting insights. Yes, as we all know – the traditional is the priority for now, along with the new media being somewhat a priority. Print, Television and Radio ranked the highest priority with a 100 percent score, followed by Outdoor with 81 percent confirming a priority whilst 21 percent stating somewhat or not at all a priority, and Sponsorships and Endorsements with 82 percent confirming a priority whilst 18 percent stated it’s somewhat or not at all a priority.



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Email marketing received a 60 percent confirming somewhat yes, followed by 32 percent stating not at all a priority at the moment. A 50 percent said it’s somewhat a priority when it came to Online advertising (banner ads, etc), with 9 percent stating its priority whilst 41 percent stating not at all a priority. A 69 percent stated that Blogs and Online forums are not at all a priority, with 31 percent considering it’s somewhat a priority. Finally, coming to Social media, 59 percent responded that this area is somewhat a priority when it came to their clients’ demand, with 36 percent stating it’s not at all a priority, and 5 percent stating high priority.

Critical mediums for Sri Lankan agencies in future to meet with clients’ demand When surveying about the critical tools the agencies will use in the future (Illustration Two), and to meet the requirements of their clients’ demand, the new media – Social media, Online advertising, and Blogs and Forum along with Email marketing was highly scored yet with traditional such as Outdoor, Television & Radio, sponsorships and endorsements, as well as print still remaining high.

Social media was scored 95 percent as important; Blogs and Online forums hitting up 82 percent as important followed by 14 percent stating it’s somewhat not important and 4 percent stating not applicable; 86 percent responded that online advertising is important with 14 percent stating it’s somewhat not important; 69 percent stated Email marketing is important followed by 23 percent stating it’s somewhat important and 10 percent stating not at all important or applicable; Outdoor caught a 86 percent importance rate with 4 percent stating its somewhat important; a 95+ percent stated that Television and Radio as well as the Print medium will continue to remain as a priority tool along with sponsorships and endorsements gaining a 83 percent importance rate with 18 percent stating it’s somewhat not important.

Sri Lankan agencies will suggest Facebook the most: LinkedIN on a downside Interestingly, when asking out as to which tools will they suggest their clients taking Facebook, Twitter, LinkedIn and an own Blog site into consideration, Facebook received a 90 percent critical rate followed by having an own Blog site which scored a 57 percent stating that it’s critical with the rest stating that it’s



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somewhat critical; 36 percent stated that Twitter, the micro-blogging tool, is critical yet with another 36 percent stating it can be somewhat suggested with the rest stating out that it’s not critical; and finally, LinkedIn was on a downside with 41 percent stating it’s not at all critical and not suggested yet with 32 percent stating it’s critical and 27 percent stating that it’s somewhat critical.

Facebook even hit up the frequency rate when asking the respondents how often they themselves get into social networking sites with options of Facebook, LinkedIn and Twitter. 55 percent stated that they login on a daily basis, with a 27 percent once in 12 hours and 18 percent on a weekly basis. Twitter followed up the second place with 9 percent logging in once in 12 hours, 23 percent on a daily basis, 9 percent on a weekly and 23 percent again on a monthly basis – yet 36 percent said they never login Twitter. LinkedIn again got the worst place with half of the respondents saying never, 9 percent on a daily, 14 percent on a weekly, and 27 percent on a monthly basis.

Conclusion All advertising agencies surveyed stated that they already have a Digital unit in place, and have already trained people overseas and getting projects on the way, with a very few seriously thinking about having a Digital unit within their agency. Each and every respondent stated that Digital and social media is a key player and is the future of advertising and brand building though many relying on the traditional mediums – there is optimism to integrate them.



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Daily News – March 9, 2011

Marketing and selling in favourable economic conditions: Modern retailing takes root By Chartered Marketeer Prasanna Perera The retail industry is the largest industry globally and many are not aware of this fact. In Sri Lanka, we are observing a boom in the retail industry with the rapid expansion of supermarket chains, clothing chains, electronic stores, footwear stores and IT stores. In this brief article, my endeavour is to examine the factors that are triggering this resurgence of the retail industry.

Sri Lankan economy The growth of the Sri Lankan economy in the post conflict phase, has been a major driver for the retail industry. With the boom in the tourism industry, the entire economy has received a tonic, with investment benefits spreading across communities. The rapid infrastructure developments across the country has resulted in new townships and opportunities for setting up retailing business.

Consumer lifestyles Sri Lankans are travelling overseas more regularly and are also exposed to global trends through television and satellite and cable networks. This has made Sri Lankan consumers westernized in their thinking to shop at modern retail establishments. Consumers are preferring one-stop-shopping destinations, which offer convenience, choice and comfort. (3 C's). The result is a boom in modern retailing, with rapid expansions across different retail formats and locations.

Expansion of retail establishments We are beginning to see the advent of Hypermarkets (Mega Supermarkets), through the expansion of Arpico Supercentre's . The latest in Wattala is truly a hypermarket with over 60,000 sq.ft. of retailing space. Cargills Big City and K-Zone (managed by Keells) are also good examples of hypermarkets.

The number of supermarkets are growing rapidly with Cargills Food City (150 outlets) Keells Super (45 to 50 outlets), Arpico Supercentre's (08 outlets), Laugfs Supermarkets (25 to 30 outlets) and Lak Sathosa (over 225 outlets). The supermarkets have changed the face of retailing forever in Sri Lanka. In general, a supermarket mainly focuses on food and beverage and should have app 4,000 sq.ft. of retailing space. Clothing chains have also grown across the country with NOLIMIT (12 outlets), Glitz (four

outlets), ODEL (14 outlets), Fashion Bug (15 outlets) Kandy's (eight outlets) Cool Planet (three outlets), Cotton Collection (three outlets) to name a few.

Prasanna Perera

Mega supermarkets growing rapidly



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Even in Consumer Durables, Singer, Abans, Softlogic and Browns have expanded their showroom network. Singer has developed a multi channel retail network, namely Singer Plus, Singer Mega, Singer Homes and Sisil World. Abans has the Elite showrooms and Abans showrooms. Softlogic has the Softlogic Max showrooms. Based on the evidence I have provided, you would no doubt agree that there is a definite retail boom in the country. What Impact will modern retailers have on the traditional retailers (Kade's) ? Traditional retailers will need to upgrade their entire offering, or else they will simply disappear! There is definite evidence of traditional retailers upgrading with many 'Super' outlets emerging. For example Kamal Stores has become Kamal Super and Nihal Stores has become Nihal Super etc., These traditional retailers have been forced to upgrade, with the supermarkets being set up, in close proximity. Traditional retailers who refuse to upgrade are gradually disappearing from the market. My view is that modern retailers have helped upgrade retailing standards across the country. The Future Modern retailing has come to stay in Sri Lanka, thereby offering a better quality of life to Sri Lankans. My belief is that the future will see global retailing chains entering Sri Lanka, such as Tesco, Walmart, Courts, Big Bazaar, Shopper's Stop, Mohamed Mustafa to name a few. Together with the Shangri-La's, Movenpick, Four Seasons and other star class hotel chains, these retail chains will change the landscape of Sri Lanka forever. Marketeers of all categories of products and services will do well to ride the retail bandwagon , or else run the risk of being left behind. There are new skills that Marketeers of today need to harness to capitalize on the retail boom. These skills include merchandising and displays, category management, sensory marketing and branding, loyalty marketing, eTailing to name a few. With the rapid growth of the modern retailing industry, the balance of power will shift to the consumer. With traditional retailers (Kade's) the mudalali and shop keeper had the power. This is a significant strategy perspective for marketeers, in terms of the marketing mix and budgets. "The world is driven by the retail industry, the largest Industry globally." (Author)

A busy supermarket aisle



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Money & Banking



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Bank lending to private sector in 2010 up 27.8%, new loans Rs. 290bn Central Bank loans to govt down 29.5%

The domestic banking sector making huge profits on wide interest rate margins (difference between lending and deposit rates) has increased its lending to the private sector by 27.8 percent, creating new loans amounting to Rs. 290 billion in 2010, latest data from the Central Bank showed. But coming from a low base, there is room for more credit growth without further fuelling inflation, already under severe stress.

Domestic banks total lending to the private sector as at end December 2010 reached Rs. 1,333.8 million, up 27.8 percent from a year earlier which was Rs. 1,043.8 billion. Foreign banking sources gave loans amounting to Rs. 10 billion, with total credit amounting to Rs.160.4 billion, up 6.6 percent from Rs. 150.4 billion a year ago.

Net credit to the government declined 2.1 percent during the year. Credit from the Central Bank declined 29.5 percent to Rs. 76.9 billion from Rs. 109 billion a year earlier. Credit from domestic banks increased 3.2 percent to Rs. 417.9 billion from Rs. 404.8 billion a year ago while credit from foreign banking sources amounted to Rs. 132.4 billion, up 4.7 percent from Rs. 126.5 billion.

Domestic bank increased their lending to public corporations by 25.5 percent during the year, reaching Rs. 91.9 billion end December 2010 from Rs. 73.2 billion a year earlier. Foreign banks lent Rs. 49.6 billion during the year.

Although inflation pressures are mounting, due to external pressures as global food and commodity prices continue to increase exacerbated by the recent flooding, the Central Bank, and International Monetary Fund (IMF) are confident a policy response is not needed at this stage as Sri Lanka’s economy is not showing signs of overheating, unlike in other emerging economies.

The countries banking sector also believes this and dealers told The Island Financial Review that interest rates should remain stable, while some suggested another policy rate was not unlikely. Policy rates at present are 7 percent for overnight commercial bank excess liquidity parked at the Central Bank and 8.5 percent for overnight borrowing from the Central Bank.

The high growth in credit to the private sector is not worrying the Central Bank, nor is it worrying the IMF. They believe this lending growth would not cause the economy to overheat (too much money chasing after too few goods) partly because it is derived from a low base, 2009 when credit to the private sector contracted.



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The Central Bank wants commercial banks to reduce their interest rate margins further this year so that the private sector would have access to affordable credit and thereby foster economic activity.

Central Bank Governor Ajith Nivard Cabraal earlier this year said the interest margin of the banking system was 4.5 percent. "It will be possible to lower the margin to around 3.5 percent to 4 percent by end 2011, given the stability in interest rates," he said announcing the ‘Road Map: Monetary and Financial Policies for 2011 and Beyond’ at the Central Bank auditorium.

The Central Bank wants to keep inflation low, the obvious reason is to keep the cost of living down but also wants a low inflation rate regime to discourage short term capital inflows to the country.

However, banking sector analysts warn too much consumer lending could be dangerous. They also warn the government should not resort to printing money. Just before global food and fuel prices peaked in 2008, causing inflation to soar near 28.2 percent in June that year, the banking sector came under fire by the Central Bank for excessive lending. In January 2010, the Central Bank also said the government should not resort to reckless spending as it could put pressure on inflation and interest rates.



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Banking giant gives Sri Lanka a boost * HSBC concerned about reconciliation, democracy but authorities unfazed

Sovereign rating up from BB- to B+ Although raising concerns about reconciliation and democracy, global banking giant HSBC has given post-conflict Sri Lanka a boost by suggesting in a recent report that ratings agencies may be in a position to improve the island economy’s ratings by one notch as the government targets to contain the historically high budget deficit to 6.8 percent of DGP this year. The bank is also a ratings advisor to the government of Sri Lanka.

"The Sri Lankan government’s focus has been squarely on bolstering economic growth in 2010 by stimulating private sector investments and rebuilding war-ravaged public sector infrastructure. As a result, HSBC Economics projects real GDP growth in 2010 doubling to 7% from an anaemic 3.5% a year earlier. From the external credit metric side, HSBC Economics projects import coverage to rise to 5.3 months in 2010 from a low of 2 months in 2008 on the back of rapid foreign exchange reserves accumulation," the HSBC report said adding that growth is expected to exceed 7 percent this year (the Central Bank forecast in 8.5 percent, the IMF forecasts 7 percent).

"These were the key two factors triggering S&P to lift Sri Lanka’s rating by one notch to B+/stable and encouraged Fitch to raise the outlook to ‘positive’ from ‘stable’ on its B+ sovereign rating," HSBC said.

"Looking to 2011, the HSBC sovereign model upgrades Sri Lanka’s credit rating to BB-/stable from B+/positive to reflect initiatives on fiscal consolidation and continued efforts to stimulate private sector capital formation. To be specific, the government projects a budget deficit of 6.8% of GDP compared with an 8% shortfall in 2010, although HSBC Economics see risks to this target due to the planned tax cuts. Apart from the headline budget deficit improvement, we view favourable simplifying of the tax structure and broaden the tax base to increase revenues as a share of GDP. On the expenditure, we believe the IMF has influenced the government to slow recurrent expenditure while holding public sector investment steady as share of GDP. These budgetary steps should persuade Fitch to upgrade Sri Lanka by one notch in 2H1," the bank said.

"However, we are concerned by the lack of concrete programmes to integrate the minority Tamil population back into the broader society. Also, we are troubled that the political institutional framework has been weakened by the parliament abolishing presidential term limits, eliminating the supervisory Constitutional Court and gives the president authority to directly appoint officials," HSBC said.



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Central Bank Deputy Governor Dharma Dheerasinghe speaking to The Island Financial Review said the Central Bank was not concerned about these comments. HSBC was entitled to its views but he said the report, overall, gave a positive picture.

"There were many positives in the report and they suggested our ratings should be one notch higher which is a good thing. Ratings agencies will be looking at several factors to determine sovereign ratings, but the government’s fiscal performance would be the main area of focus," Dheerasinge said, adding that the Central Bank was confident Fitch, Standard & Poors and Moody’s would upgrade their ratings by mid June.

The Central Bank said several steps have been taken both by the government and the bank to reconstruct the once war-torn regions of the North and East, restore livelihoods and stimulate economic activity.

Rs. 300 billion in public investments have been planned for the North and Rs. 200 billion for the East.

The Central Bank said it has facilitated over 21,000 commercial bank loans for the people of the North and over 20,000 in the East.

"The Bottom line," HSBC concluded, "the peace dividend from the end of the war is expected to deliver strong growth in excess of 7% next year. However, there are a number of risks on the horizon. Inflation could rise more than anticipated. Moreover, the fiscal consolidation strategy face risks related to a tax strategy, which may not pay off. If these risks materialize, it will raise concerns about macroeconomic stability and could hurt growth prospects."

Sri Lanka is planning to achieve investment grade status by 2015.



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Making Public Servants Liable for PAYE Tax: Ending the Exclusive Exemption, but what Implications for Revenue?

*Extending PAYE (Pay As You Earn) tax to public employees can raise revenue by 23%, but simultaneous raising of the tax free threshold drops revenue by 40% * Yet, restores private-public employee tax equity and helps expand the tax base by Anushka Wijesinha* and Nethmini Perera (Research Officers - IPS)

Sri Lanka began to impose taxes on income in 1932, and witnessed several amendments to these regulations over the years. Among these, one of the more prominent changes was in 1979 when public servants were made exempt from paying any income tax on their official salary emoluments. Over three decades have passed since this was introduced, and the issue emerged strongly in the national debate last year in the context of a new post-war budget, the severe strains on government finances, the fiscal tightening required under the IMF package, and the appointment of a Presidential Commission on Taxation to look at ways of increasing tax revenue and expanding the tax base. It became a key moot point in the context of the Government needing to broaden the tax base to bolster revenue, bridge the continuously high budget deficits of the recent past, and provide more elbow room for the post-war reconstruction and recovery efforts.

The announcement in the Budget 2011 presented in November, to extend the income tax ‘net’ to include public servants, is a decisive move towards broadening the base and re-introducing tax equity between public sector and private sector workers. This article takes a brief look at the historical context of the initial

exemption, how the exemption affects government revenue, and makes a preliminary assessment of what the extension could do towards improving the country’s fiscal position.



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A Thirty Year Exemption

With the liberalization of the economy in 1977, the government at the time, led by President J. R. Jayewerdene believed that for post-liberalization growth to truly take-off, and for the country to capitalize on the new opportunities, a strong and capable public sector was a

key. With this in mind, the tax-free status for government servants was granted in 1979 to compensate for the unattractive salaries compared to the private sector, and in the hope of putting a halt to the drain of talent from the public service to foreign countries, and to the private sector. However, since then, the validity of this policy has been questioned, in the light of the various pay revisions that have been granted to public sector workers. Various other incentives given to public sector employees such as vehicle permits, generous pensions, etc., have been argued to offer similar or more benefits compared to various extra-salary allowances enjoyed by the private sector. Moreover, private sector employees are often subject to performance-based pay schemes unlike public employees. Working harder is likely to bring higher incentives in the former unlike in the latter, and therefore the question arises as to whether it is fair to tax the extra income earned due to hard work.

Another criticism of the exclusive exemption was that it provides the opportunity for public employees to evade paying taxes on privately earned incomes, outside of their official emoluments, as they do not open tax files with the Inland Revenue Department citing the salary exemption as the reason for it. In many cases, these incomes can be a couple of times higher than the official salary, which in turn could make a public servant’s total earnings parallel to that of mid-level private sector employees, and often, even higher.

However, some refute these claims arguing that the tax exemption has been an indirect income benefit for government servants as salaries have not risen sufficiently and also helps to retain talent in the sector.

Gains to the Government vs. the People The benefits of tax reforms are often two-fold, flowing to the government and the people. Governments gain by way of increased tax revenue while the people may gain through progressive tax distribution.

Government revenue in Sri Lanka over the past years has comprised of over 80% of tax revenue and 20% of non-tax revenue. In 2009, tax revenue was 88% of total revenue. Within this, the revenue from direct taxation (e.g., income tax and PAYE tax)) has been a mere 20%, while indirect taxation (e.g., VAT, customs duty, excise duty, etc.) brought in the rest.

As per previous tax regulations (pre-budget), the tax-free annual allowance of an employee was Rs.300,000, and thus, all employees whose monthly taxable income (after making relevant adjustments to earned income based on Inland Revenue guides) exceeded Rs.25,000 became liable to tax. The public employees’ tax contribution was waived by the tax exemption, where a rough estimation according to Labour Force Survey 2006 indicates that tax contribution has been made only by the semi-government and private sector employees who have accounted for around 74% of all employees earning over Rs.25,000 monthly salary (Table 1).

With the new tax reforms, the government employees falling into the tax liable category, currently accounting for 26% of the labour force and thus far been excluded from income taxation, will become liable.



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Impact of the Change - Preliminary Assessment The impact of including public servants in income tax on revenue generation and the number of newly tax liable employees can be examined using the data in the latest available Household Income and Expenditure Survey (HIES) 2006/07 and analyzed using the statistical software STATA.

For the purpose of our analysis, we can look at three scenarios, using the data from the HIES 2006/07.

* Scenario A: What was the PAYE tax situation (number of persons and revenue generated) under the previous tax policy which exempts public servants from PAYE tax?

* Scenario B: What is the change in the PAYE tax situation by extending PAYE tax to cover public servants (as per Budget 2011 announcement) with the existing taxable income thresholds?

* Scenario C: What is the change in the PAYE tax situation by extending PAYE tax to cover public servants along with the new taxable income thresholds (as per Budget 2011 announcement)?

Accordingly, an initial assessment shows the following. Under Scenario A, 4% of private sector employees (amounting to 123,747) and 17% of semi-government employees (amounting to 38,617) were liable to pay PAYE tax, resulting in revenue of approximately LKR 6.5 bn (Table 2).

Moving from Scenario A to B, in addition to those liable under Scenario A, 11% of public sector employees are liable to pay PAYE tax. Under this scenario, the improvement on tax revenue is evident. The total number of tax liable employees increases from 162,364 to 244, 731 (a 51% increase), which in turn raises tax revenue from LKR 6.5 bn to LKR 8.0 bn (a 23% increase in revenue). Distributional analysis within this preliminary assessment further reveals that the distribution of tax contributions among all tax liable employees becomes more progressive, i.e., the rich paying a larger share relative to the poor, highlighting the positive impact of tax reforms on improving equality in taxation and income distribution.

However, according to the Budget 2011 announcement, the tax liable thresholds will also be revised, taking us to Scenario C. The tax free income threshold per month has been raised from LKR 27,000 to LKR 50,000 and tax rate bands have been reduced from 5%-35% to 4%-24%. Accordingly, only 3.5% of all employees are liable for PAYE taxes. Under this scenario, tax revenue falls dramatically from the initial LKR 6.5 bn to LKR 4.0 bn (a near 40% drop), and the number of tax liable employees falls from the original 162,364 to 148,080.

Revenue Hit, but Equity and Expansion Achieved Hence it is clear that the tax policy reform announced in the Budget 2011 to extend PAYE tax liability to public sector employees, combined with the overall raising of the tax free threshold for all employees results in a decline in tax revenue compared to the status quo of the pre-Budget scenario. However, the key anomaly under the previous tax policy regime - the lack of tax equity – is corrected under the new policy. This provides a positive signal to private sector employees that they are no longer treated in a discriminatory manner with regard to tax liability. The question that arises, though, is will this positive signal incentivize more people to comply with taxes, as a key contention earlier by private employees was "why should we accurately declare tax liability, when public servants are completely exempt from tax?"



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Additionally, under this reform, a key objective of the government will be achieved, which is expanding the tax base and ensuring that more people become compliant with their tax obligations to contribute to national development.

The key question, moving forward is, given the reduction in revenue with this proposed policy change, coupled with the reductions in corporate and individual income tax rates, can the government bridge the immediate drop in revenue buoyancy? Raising sufficient revenue to fund post-war reconstruction is a pressing need, and it will be interesting to see how these progressive reforms impact on it.

(This article is open for discussion at www.ipslk.blogspot.com) *Anushka Wijesinha was Research Officer to the Presidential Commission on Taxation 2009-10.



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Financial market expects policy rates to be held steady Central Bank to announce Monetary Policy review today

* Mixed expectations about future as inflation mounts

With inflationary pressures mounting on rising global commodity prices and the effects of the recent flooding telling on domestic food prices, Sri Lanka’s financial market believes the Central Bank should continue to hold policy interest rates steady for now, but the market is divided as to whether rates would be cut or increased later this year.

The Central Bank is expected to announce its Monetary Policy review today and commercial bank dealers told The Island Financial review that they expected the Central Bank would keep the repurchase and reverse-repurchase rates unchanged.

The repurchase rate which applies to overnight commercial bank deposits with the Central Bank, is currently at 7 percent while the reverse-repurchase rate for commercial bank overnight loans from the Central Bank is at 8.50 percent. A year ago, these rates stood at 7.5 percent and 9.75 percent respectively.

"We believe the Central Bank would hold these rates steady even though there are considerable inflationary pressures, but this has nothing to do with the monetary policy. We believe the Central Bank could announce another interest rate cut, but this would not happen this month," a dealer said.

Dealers said policy rates could be further reduced this year as authorities try to bring Sri Lanka’s high interest rate regime in line with other economies in the region. But with the recent flooding, and global food and oil price spikes, this reduction could be delayed.

"Private sector credit growth has room to pick up further so a rate cut would only stimulate it," a dealer said.

However, some dealers were cautious. "We expect rates would remain steady for now, but with inflation building, and as government expenses mount, there is a risk of fuelling inflation further through money printing, although we hope this is avoided. Also, banks are increasing their consumer lending and this could also lead to problems. If inflation increases then the Central Bank may end up increasing policy rates further," a dealer said.



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Inflation accelerated to its highest position in 25 months to 7.8 percent in February 2011 from 6.8 percent in January with food prices contributing 83 percent to the overall increase. However, according to the Central Bank, the country’s core inflation index (excluding volatile items such as food and oil) has declined to 2.9 per cent from 3.6 percent, suggesting that overheating is still at bay. Demand pressures could build According to a recent report published by global banking giant HSBC, inflation has been increasing in Sri Lanka, primarily in response to rising food prices.

"However, with the economy rebounding as quickly as it has, there is a risk that broader demand-led prices could build up," it said.

According to HSBC, a stronger rupee and improved agricultural performance in the North will help slow inflation.

"However, the domestically generated demand pressures are expected to become more prominent this year and could push inflation above the comfort zone," it said, adding that the Central Bank could begin to tighten monetary policy interest rates during the second half of this year.

According to the Central Bank and IMF, the signs of domestic demand building so as to push inflation beyond the ‘comfort zone’ were yet to become manifest.



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Sunday Island – March 13, 2011

Monetary policy: which way do we move? By R.M.B Senanayake

We have come out well from the global financial crisis of 2008/2009 with a growth rate of 3.5% in 2009 and prospects of a 7.5-8% growth in 2010. What was noteworthy is that this growth was accompanied by low inflation as well. This was partly due to the collapse of oil prices and reduction of food prices globally. It gave room for the Central Bank to loosen monetary policy which it rightly did.

Low Interest policy served its purpose The Central Bank enabled the private sector to come out of the recession caused by the global financial meltdown because it persuaded and then pressurized reluctant bankers to reduce interest rates on their lending. It went further to sustain the reduction by flooding the markets with cash created through its policy of pegging the rupee to the U.S dollar at more or less a fixed price. This excess liquidity helped keep the interest rates down and also benefited the Treasury which is the largest borrower from the markets.

Thus investment has revived in the private sector and several listed companies have reported significant increases in both total revenues as well as profits after tax. These returns are above the growth rate in nominal GDP and are therefore not entirely due to inflation.

Pessimists would refer to the spending increases mainly in the import of vehicles and consumer durables for 2010. Bank lending has recovered more or less to pre-recession year and bank credit is still expanding. Recently the banks also funded purchases of IPOs (Initial Public Offers of quoted companies) through collateral free bank guarantees.

Some pessimists think that a bubble has arisen in the stock market. The Market P.E ratio during the Japanese growth phase in the 1980s was over 70. In China the PE ratio for "A" shares is 20. So one can’t depend only on the PE ratio to determine market sustainability. But the risk of price bubbles will grow unless policy is tightened soon and there is a need to either raise interest rates or the reserve ratio.

As the IMF has stated the rupee should be allowed to float both ways and the Central Bank should supply dollars to the market only at a penal rate (more rupees to the USD) The rupee is being held at an unrealistic level adversely affecting particularly industrial exports on which our future employment prospects depends particularly if the migrant workers have to return for good.

The impossible Trinity But economists say that free capital inflows, a fixed exchange rate and an independent monetary policy are an ``impossible trinity.’’ But this is exactly what we have been doing in 2009 and 2010. The independent monetary policy accorded with the requirements of the economy. Low interest rates would discourage short term inflows of foreign capital to the money markets. They would promote growth without too much inflation and it would help to build up Official Foreign Reserves as targeted by the IMF. So there was no need to review the low interest and fixed exchange rate policies of the Central Bank.

But 2011 may pose challenges to the continuation of these policies since fiscal policy, although restrictive, is still a way out of what is required by way of a budget deficit. Inflation has already quickened due partly to supply side problems but also to some extent due to the liquidity overhang in the market. When demand expands due to more government spending without an increase in domestic supply, prices will rise and they can be checked only by low priced imports.



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But the government has been using tariffs and other levies on imports to gather revenue to bridge the budget deficit which keeps on increasing owing to the expansionary investments of the government. But now oil prices are going up and crude oil price has jumped $100 and is likely to stay up given the revival in the global economy and the social unrest in Libya and the Middle East. World food prices are also expected to go up due to the crop failures in Russia and adverse weather conditions in India which have reduced the wheat crop. Sri Lanka has also suffered from the floods which have destroyed about 200,000 acres of paddy land.

Foreign remittances from migrant workers are also likely to suffer owing to the civil unrest in the Middle East. Nor will foreign capital flow in as freely as before if the western economies revive and their central banks raise interest rates there. So the Central Bank will need to find the foreign exchange for the widening current account deficit. The current account deficit in 2009 was low being only USD 214 million. But 2009 was a year of slow growth and with economic conditions now returning to normal the current account deficit will be like what we encountered in 2008 which was USD 3,886 million.

The 2011 current account deficit will have to allow for higher world prices on our imports and larger import of rice. Fortunately our export prices are good but we are unable to increase the production volumes so as to increase export earnings. The recent social unrest in North Africa could spread to the Middle East and then our remittances from migrant workers are unlikely to increase and are more likely to fall if the unrest in Bahrain spreads to Saudi Arabia and the Gulf countries.

What are the policy options for the Central Bank given that there is no flexibility in fiscal policy as we have to reduce the budget deficit to 6.5% of GDP under the IMF Agreement? Any change will have to be in monetary policy. Will the foreign capital inflows continue on the same scale as in 2010? Probably not, since the western economies are improving and their interest rates are also likely to rise. U.S Treasuries (bonds) are falling in price because third world Central Banks are buying less of them and yields are likely to rise. Yields are also likely to rise in Sovereign Bonds and if the government plans to borrow, it will probably have to be at higher rates of interest.

Can the Central Bank continue with its low interest rate and fixed exchange rate policies? CITICORP Investment Bank of Singapore has sold Rs. 1 billion out of the Rs. 3 billion worth debentures it purchased from the UDA debenture issue to the Bank of Ceylon. The transaction which took place last Friday has been conducted via the secondary market. The DGM, Investment of the Bank of Ceylon, Mr. P.A. Lionel, has said the debentures were bought at a yield of 10.80%.Given such a high yield, why did the Citi Corp sell? Foreign investors in our stock market have also been net sellers for most of 2010 and are continuing to do so this year as well. They have a problem since they can’t find buyers locally for the quantities they hold. Why are foreigners selling? Perhaps they do not think the Central Bank can hold the rupee at the current level. They brought in their funds at more or less the current rate of exchange and if the rupee depreciates they are likely to suffer a capital loss. If they think the rupee will depreciate by more than 10%, they will be net losers. So they are perhaps selling out because they think the present interest and exchange rate policies are unsustainable.

With the quickening of inflation and inflationary expectations rising, the Central Bank will find it difficult to hold the interest rates low despite the surfeit of liquidity. This is particularly so if investors think that the Central Bank is either unwilling or unable to hold interest rates at their present level. So the bond market and foreign investors in the stock market may think that interest rate cuts by the Central Bank are over. If they think interest rates will rise, they will sell out both bonds and stocks and wait to see how interest rates will move in the immediate future.



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But the Central Bank cannot afford to allow interest rates to rise for it would affect the budgetary funding. It would of course affect bank lending to the private sector businesses which in turn will adversely affect private sector investments. That would affect the GDP growth rate. Unless the growth rate is high there is less possibility of satisfying the IMF target for the budget deficit. So the Central Bank cannot afford to raise interest rates.

Our banks are well capitalized and strong. But our finance companies suffered from the collapse of the Golden Key Credit Card Co of the Ceylinco Group. The finance companies that collapsed have their assets largely in the form of loans granted for building houses or apartments. The land market has not recovered and they are insolvent. They cannot be revived without pumping capital. In my view they are fundamentally redundant and unstable because they lend long on funds obtained for short periods. They borrow from the banks at high rates of interest and have to charge higher rates from their customers. A solution is required for this mismatch.

The time to review monetary policy may have come. Since the Central Bank can do nothing about fiscal policy it will have to watch the rate of credit growth against the rate of growth in nominal GDP.



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Exports & Imports



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Recent adverse weather: Spice industry not affected Idunil Hewage Export of spices from Sri Lanka has maintained its momentum in the world continually. However, Lankan spice industry sees a significant gap between export market demand and the local supply in terms of quality and quantity. Branding Sri Lankan spices in the international markets while capturing niche markets would have been identified as urgent needs for the betterment of the industry.

Sri Lanka is looking at markets in the European Union for value added products and Geographical Indicator Protected Spice. Countries such as Mexico, Gychillie Islands, Brazil, Madagascar and Egypt are to best markets. “The total spice cultivation in the country has not been affected to a great extent due to the recent floods” Spices and Allied Products Producers’ and Traders Association Chairman Christopher Fernando said. “The best thing for the relevant authorities in the industry is to determine the condition that will be in areas of spice cultivation according to the geographical base,” he said.

However, the continuous rains punctuated by occasional sunshine have deprived the plants of flowering, which in turn has reduced the output by around 50 percent from the previous season, especially cloves, pepper, cardamom and nutmeg. But the outlook is still positive, the reason being spices are seasoning for food that come from the bark, buds, or flower parts, fruits, seeds or stems of various aromatic plants and trees, he said. The increased higher power tariff in the country has impact on the manufacturing point of the spices. However, it still has not created a bigger impact on the spice industry. Giving some kind of special concessionary rates for the long-term running of the industry including other agricultural products will have to take place immediately. Fernando said no Sri Lankan geographical indications has yet been regularized nationally, regionally or internationally especially on Ceylon cinnamon. If this could have been initiated much earlier, that will give legal protection, and higher prices through price premiums. “There is a lot of potential for the spice industry in the country after opening up of the Northern and the Eastern parts of the country. However it is vital to verify the variety of spices, which will be suit these areas through the Export Agriculture Department,” he said.

Sri Lankan spices



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John Keells Tea Report: UK, Japan, Continental buyers active Sri Lankan Tea Sale Averages for the month of February which has just been released, shows positive variances for the month as well as todate compared to the corresponding period of 2010. The total National Average for February 2011 at Rs 393.67 is Rs 13.31 above 2010, and Rs 8.93 to date. Significant gains have been recorded from High Grown (4.94 percent) followed by (3.50 percent) from the Low Growns. Medium Grown on the other hand has recorded a marginal increase of 1.24 percent for February. As expected January Tea Crop of 20.6 Mkgs recorded a 23 percent drop compared to the 26.8 Mkgs the previous year. February Crop too is likely to fall short of last year due to the inclement weather experienced during the month. The 0.9 mkgs. of Ex Estate teas on offer met with lower demand with fair weight remaining unsold. A few improved select Best BOPs sold well appreciating in value, whilst the others were barely steady. BOPFs too which were Rs 5 to Rs 10 easier at the commencement declined further as the sale progressed with a number of invoices being difficult of sale. The few Nuwara Eliya invoices of BOP and BOPFs appreciated by Rs 10 to Rs 15. Uva BOPs were irregularly dearer following quality, whilst BOPFs were lower. Except for a few Select Best Low Grown CTC PF1s that were mostly firm, others along with the Below Best declined Rs 15 to Rs 20 and more. High and Medium PF1s were lower, but to a lesser extent. The tea bag sector was somewhat selective whilst Russia was mostly quiet. UK, Japan and Continental buyers were active following quality. The 3.2 mkgs of Low Growns that were on offer this week, met with good demand but at lower levels. The turmoil in the Middle East had an impact at the Colombo Auctions this week with most overseas buyers requesting to go slow with the shipments and also with the impending Iranian New Year, activities in this market too slows down. Unless the unrest settles down soon, we could see a further decline in prices. The weather continues to be very dry with very hot days which has brought about a reduction in crop intakes. Western Teas A few Select Best BOPs sold well on special inquiry, other good invoices were barely steady, Below Best and plainer sorts advanced Rs 5 but eased as the sale progressed. Select Best BOPFs advanced Rs 10 to Rs 15 following special inquiry, other good invoices declined Rs 10, Below Best sorts shed Rs 5 to Rs 10 as the sale progressed, plainer varieties were firm to easier. Medium BOPs declined Rs 5 to Rs 10, whilst BOPFs eased Rs 10 to Rs 15 on average. Nuwara Eliya Teas Brighter BOPs advanced Rs .10, whilst others gained Rs 15 to Rs 20. BOPFs advanced Rs 10 to Rs 15 on average.

Tea Pluckers



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Uva Teas BOPs advanced Rs 5 to Rs 10, whilst BOPFs declined by a similar margin. Uda Pussellawa BOPs advanced Rs 10 to Rs 15, whilst BOPFs shed Rs 5 to Rs 10. CTC Teas A few Select Best Low Grown PF1s were firm, others were Rs 15 to Rs 25 lower. BP1s were firm to irregular. High and Medium PF1/BP1s declined Rs 5 to Rs 10 as the sale progressed. Low Growns Lower demand. Select Best OP1s eased Rs 10 to Rs 20, Best types maintained last levels, Below Best and poor sorts declined Rs 5 to Rs 10. Select Best and Best BOP1s shed Rs 10 to Rs 20, Below Best and poor sorts were irregularly lower by Rs 5 to Rs 10. Select Best along with the Best OPs eased Rs 10 on average, Below Best and poor sorts too were lower by a similar margin. Select Best OPAs declined Rs 10 to Rs 20 and more following quality, the balance eased Rs 5 to Rs 10. Select Best Pekoes were lower by Rs.30/- to Rs 50, Best and Below Best types tended lower by Rs 10 to Rs 15, flaky types too were lower by Rs 5 to Rs 10. Shotty Pekoe1s were firm to Rs 5 to Rs 10 dearer at times, Below Best and poor sorts eased Rs 5 to Rs 10. Select Best and Best BOP/SP eased Rs 5 to Rs 10, Below Best and poorer sorts too declined by a similar margin. Select Best and Best FBOPs shed Rs 5 to Rs 10, Below Best and poorer sorts were lower by a similar margin. Select Best and Best FBOPF1s were lower by Rs 10 per kg, Below Best and poorer sorts were lower by Rs 5 to Rs 10. Select Best and Best Tippy varieties declined substantially on last levels, Below Best and poorer sorts too were lower to last. Off Grades Select Best and Best liquoring Fngs1s depreciated Rs 10, Below Best and poorer sorts eased by Rs 10 to Rs 15. Select Best and Best BMs were firm to dearer by Rs 10, Below Best and poorer sorts appreciated Rs 10 to Rs 15. All BPs appreciated Rs 10. All Low Grown Fngs were dearer by Rs 15 to Rs 20 Select Best BOP1As were to dearer by Rs 5 to Rs 10, Best and Below Best too were firm to dearer by Rs 5 on average, poorer sorts were firm on last levels. Dust Select Best Dust1s were firm, whilst balance along with the poorer sorts declined Rs 20 to Rs 25. Clean secondaries shed Rs 15 to Rs 20, whilst the Below Best types declined further, poorer sorts were firm. Best Low Grown Dust/Dust1s declined Rs 5, whilst the balance gained Rs 10 to Rs 15.

Tea



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Daily Mirror – March 7, 2011

Will synthetics be threat to natural rubber? By Dr N Yogaratnam A war-born material (war being the catalyst), synthetic rubber (SR) has become indispensable to the modern world, mainly due to its wide- ranging applications and the volatility of natural rubber (NR) prices (Figure 1) and supply. NR price exceeding 25 marks/kg ( US$3/lb) in 1909, prompted the development of isoprene in1910, methyl butadiene in 1911-1925, Thokol in1924- 1930, butyl rubber in 1937, styrene butadiene (SBR) in 1935 and in 1940 Soviet Union had the largest SR industry - mostly of polybutadiene rubber. Now, SR has a large market share and mostly competes with NR (now around US$ 6.30/kg) in just a few applications, such as in tyres. Around 80% of SRs are used in the automotive industry. Synthetic rubbers Styrene butadiene rubber (SBR) is the largest volume synthetic rubber (SR). Compared to natural rubber, SBR has better processability, heat aging and abrasion resistance, but is inferior in terms of elongation, hot tear strength, hysteresis, resilience and tensile strength. With over 70% being consumed in the manufacturing of tyres and tyre products, demand is very much dependent on the automotive sector. SBR's share of total synthetic rubber consumption declined in the 1980s and 1990s as radial tyres, which use less SBR, replaced biased belt tyres. The conversion to radial tyres is essentially complete and should no longer limit growth. On a positive note, growing use of low rolling resistance tyres should increase SBR demand. In non-tyre applications, there has been faster growth in other synthetic rubbers such as ethylene-propylene-diene monomer (EPDM) and nitrile rubbers as a substitute for SBR. However, non-tyre uses for SBR are growing with applications including conveyor belts, gaskets, hoses, floor tiles, footwear and adhesives. There are two major types of SBR; emulsion SBR and solution SBR, based on different processes. In the past emulsion SBR has been favoured due to its better processing properties while consumers can switch easily between suppliers without any need to reconfigure their processing machines. Emulsion SBR is typically produced on a continuous process, making it cost effective. Solution SBR can be produced on both continuous and batch processes with the batch route allowing for easier 'fine tuning' of the reaction conditions and the characteristics of the polymer. Producers of solution SBR have also been improving its processing properties. Tyre manufacturers, facing increasingly stringent specifications, have found no alternative to solution SBR for the highly specified components in high performance tyres. In addition, the need to reduce fuel consumption has led to the development of low rolling resistance tyres. Since these performance improvements cannot be achieved with emulsion SBR, there is a trend towards the increasing use of solution SRR. Some companies say, solution SBR is the fastest growing segment of the rubber market with an anticipated growth rate of 5-6%/year over the next several years.



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Overall, global growth rates for SBR are predicted to be around 2-3%/year. There is a need for more solution capacity, as demand is outpacing that for emulsion grade. SR production/consumption Following the late-2008/early-2009 downturn, SR production and consumption both staged a strong recovery in 2010, growing at a YOY rate of 16.5% (Table 1). Market trends According to IRSG, in Asia, in line with monomers, SBR and BR prices have increased in the three months to October 2010, rebounding from three- and two-month long downturns, respectively. The initial turnaround in prices were a result of the return of demand from upstream producers building their inventories, while specific seasonal-driven demand from China, coupled with surging natural rubber prices and increasing monomer prices, accounted for the rise in September-October. The SBR price jumped by 29.3% in July-October, while the BR increased by 16.1%, over the same period. The US, SBR and BR price continued to decrease in the three months to November 2010. The falling butadiene price was behind the decrease in synthetic rubber prices. The magnitude of the BR price movement was almost identical to that of butadiene over the September-November period. The latest SBR and BR prices are 6.1% and 7.1% down, respectively, on their peak levels reached in July 2010. Out look Asia butadiene (BD) prices may surge in the first quarter and rise above $2,300/tonne in March as demand is expected to outstrip supply. New downstream synthetic rubber plants in South Korea and China are expected to start up just when BD supply is likely to tighten with the onset of the cracker turnaround season in February and the closure of the arbitrage window from Europe, according to some traders. Spot offers for January have already jumped to $2,150/tonne CFR (cost and freight) northeast (NE) Asia, up $100/tonne from the previous month. December BD spot prices were assessed at $2,040-2,070/tonne CFR NE Asia by the close of business on 24th December. "The minimum spot offer for January shipments is $2,150/tonne CFR NE Asia and we expect BD spot prices to climb to $2,300-2,400/tonne CFR in March as deep-sea BD supply from Europe has dried up and demand in Asia is expected to increase just when supply tightens," a Korean trader has said. Asia's largest synthetic rubber maker, Korea Kumho Petrochmical Co (KKPC) was scheduled to start up a new 120,000 tonne/year butadiene rubber (BR) plant in Yeosu, South Korea, in February. Two new styrene butadiene rubber (SBR) plants in China, Tianjin Lugang Petroleum and Rubber in Tianjin, and Fuxiang Chemical in Fujian, each with a capacity of 100,000 tonnes/year, are also expected to commence commercial production in the first quarter, according to industry sources. The synthetic rubber producers are major consumers of BD. However, BD supply is expected to tighten from February to May, with several crackers including LG Chem, Samsung Total and Yeochun NCC Co (YNCC) shutting down for maintenance during this period. Asian downstream synthetic rubber makers usually turn to Europe to procure BD spot cargos if supply in Asia is limited. However, BD spot cargos from Europe have been diverted to the US where prices have risen significantly.



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The Korean traders expect BD spot prices in the US to hit 100 cents/lb or $2,200/tonne soon which will make it more attractive for European BD suppliers to ship their cargoes to the US instead of Asia. The arbitrage window from Europe to Asia has closed, which means upward pressure on BD prices in Asia. According to some suppliers, apart from rising demand and tighter-than-expected supply, another factor that is providing support to the anticipated upward BD price spiral in the first quarter is the soaring downstream synthetic rubber prices. The downstream synthetic rubber makers have big margins and can afford to pay higher BD prices, as the downstream BR and SBR prices have gone up significantly since early December. The derivative butadiene rubber (BR) spot prices had surged to $3,700-3,800/tonne CFR NE Asia, up $250/tonne since early December, while the other downstream non-oil grade 1502 SBR prices had increased to $3,000-3,100/tonne CFR NE Asia, up $200/tonne in the past month, according to data from ICIS. Conclusion The market share of SR and NR has hovered at around 60:40 respectively for the last several years. While economic forces may influence this ratio, a major shift is not expected unless there is some unforeseen geopolitical event, or an agricultural shift from NR to another more profitable commodity product. Demand for both NR and SR is expected to expand continuously at a strong pace, with the division of the market share remaining unchanged in the near future. Environmental virtues of NR will be an insignificant issue (Reference, ICIS report, 2011).



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Natural rubber market dips Dr N Yogaratnam Natural rubber (NR) prices at the Colombo Auctions have dipped by 10-17 percent, since the third week of February from their historical high (Table 1 & Figure 1) and similar tendencies were observed in the other NR markets too. While the tightness in the supply continues, crude oil and currencies of NR exporting countries provide further support to the market in absorbing the bearish sentiments caused by a weak demand and a strong Japanese yen.

Production Total production of NR from Member countries of the Association of Natural Rubber Producing Countries (ANRPC) is projected to rise this year first quarter by 6.0 percent on year. This is a remarkable growth as the comparison is with a big base. The first quarter in the year before was a period of abnormal growth (17.9 percent) as detailed in Table 2. Normally, yield is low during the wintering season, but attractive prices will induce growers to continue to tap, which some, particularly the smallholders in some countries, normally avoid during wintering. Meanwhile, delayed occurrence of wintering this year and more rains received in January help Vietnam to continue tapping until end of February. The country used to enter wintering off season in the first week of February every year. In Indonesia, the second largest producer, about 70 percent of the tappable rubber area is in the south of the equator where wintering comes only in July every year. Supply from only the north of the equator is affected by the present wintering. The total area under tapping in the ANRPC is estimated to expand this year by 200,000 ha as young trees attain tappable maturity and a



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limited extent of aged low-yielding dormant trees opens for tapping. The expansion in tappable area will be more pronounced in Thailand where 114,000 ha of trees planted during 2004 and a portion of 173,000 ha planted during 2005 are expected to attain tappable maturity this year. However, yield from these trees would be low, as rubber tree attains peak-yielding phase only by the tenth year of planting. Moreover, the new trees to be opened for tapping this year are concentrated in the country’s north and north-east which are agro-climatically less suitable compared to the traditional region in the south. While the new trees attain tappable maturity, a portion of existing aged trees is expected to be uprooted this year. As countries revised their earlier-reported preliminary estimates, ANRPC’s total supply in 2010 now stands at 9.322 million tonnes, at 4.7 percent rise from the previous year. In line with ANRPC’s indication given before, Malaysia produced only 0.939 million tonnes as against 1.0 million tonnes targeted. Thailand also has revised down the figure on finalization of data for 2010. Revised figures for 2010 and targets for 2011, of respective governments are indicated in Table 4. It may be noted that the annual figures for 2011 are governments’ optimistic targets fixed by assuming favourable weather conditions and continuation of high prices during the whole year. An assessment made by the ANRPC points to the supply rising by 4.8 percent during 2011, 5.2 percent during 2012, 6.3 percent during 2013, 7.0 percent during 2014 and 7.5 percent during 2015.

Average yield The trends in average annual yield (table 3) indicate that Sri Lanka is forging ahead with significant yield increases, now in the region of 1610 kg/ha, which is not far away from the Indian and Vietnam yields.

Key Economic Developments It would be useful to examine the emerging economic trends, as reported by ANRPC, as they are crucial in determining the pace of NR’s demand growth ANRPC reports that speculative investments aimed at short- term returns, popularly called “hot money”, continue to flood Asia’s emerging economies, putting upward pressure on their currencies and thereby reducing export

competitiveness. Malaysia’s ringgit touched a 13-year high to the U.S. dollar and the Thai, Philippines and Singapore currencies have all gained substantial strength, The general perception is that the U.S. Federal Reserve’s decision to massively pump liquidity into the U.S. economy has accelerated capital flows into property and other assets in emerging economies, as interest rates in the U.S., Europe and Japan remain at near-zero levels. The resultant appreciation in currencies has forced governments in many Asian countries to intervene in foreign-exchange markets during the past few weeks. Unlike foreign direct investment in long-term projects, short-term investments can be a burden for the economy by boosting liquidity and thereby putting upward pressure on asset prices.



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Adding further to the inflationary pressure caused by the inflow of “hot money”, crops in many countries have been damaged by bad weather, keeping prices high across the board. Floods in Australia and damage to China’s wheat crop have added difficulties for governments in effectively controle inflation. At the same time, soaring food prices have assumed a political dimension, compelling governments to defuse unrest among the people, especially in the context of developments in Egypt, Tunisia and other countries. The United Nation’s overall food price index in January shows a 28.3 percent annual increase, with cereals up 44.1 percent.

Inflation High inflation adds pressure on many countries to allow their currencies to gradually appreciate. A stronger currency can help in reining in inflation by making imported food staples and fuel cheaper. But, priorities vary across countries. For example, China does not want the yuan to appreciate freely against the dollar in

view of its possible damage to the country’s export sector. The government’s strategy is to allow the yuan to appreciate, but at a slow pace. Chinese yuan has gained about 3.5 percent against the U.S. dollar since June 2010. Central banks in Asia, on their fight against accelerating inflation, have raised interest rates in successive steps and increased the reserve deposit to be kept by banks. Peoples Bank of China raised its benchmark lending and deposit rates for the third time in four months, by 0.25 percentage point effective from second week of February. China is likely to make further tightening moves in coming months which may possibly hurt Chinese demand for commodities. The country’s consumer prices in January were up 4.9 percent from a year earlier, faster than 4.6 percent in December. The food inflation jumped as much as 10.3 percent in January.

USA The U.S. economy appears to have returned to the levels that prevailed before the Lehman Brothers meltdown in 2008. The GDP rose to a record high in the fourth quarter of 2010. But the recovery has been fuelled to a large degree by aggressive government support. As a result, investors are worried about the situation when government support begins to wane in a few months. High unemployment, badly damaged housing market and fragile government finances pose serious threats to a sustained growth in the U.S. economy. Budget deficit for 2011 is expected at 11% of the GDP, which is the highest since World War II.

Japan Japanese economy shrank in the fourth quarter of 2010 at 1.1 percent annual rate whereas Chinese economy surged 9.8 percent during the same period. Japan’s GDP in 2010 stood at 7 percent smaller than China’s. Consequently, China passed Japan to become the world’s second largest economy after the U.S., a position which Japan stood solidly since overtaking West Germany in 1967.



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China’s imports in January were up 51 percent from a year earlier whereas exports jumped 38 percent. Surging imports reflect robust economic activity within the country as well as higher prices for imported commodities.

India India’s overall inflation slowed to 8.2 percent in January from 8.4 percent in December. Government expects inflation would ease to below 7 percent by the end of the March. The Reserve Bank of India raised its lending and borrowing rates by 0.25 percentage point each in January, the seventh increase since March 2010. India has slightly raised its economic growth forecast to 8.6 percent for the current fiscal ending March 2011. However, the country runs a high current-account deficit as approved foreign direct investment fell 27 percent between April and November 2010 from a year earlier. The deficit current-account for the fiscal year ending March 2011 is expected to hit 3.5 percent of the GDP, which is the highest in two decades. As high global commodity prices will further strain the country’s balance-of-payments, Indian rupee is likely to lose its strength against the dollar further.

Indonesia Indonesian economy grew at its fastest rate, 6.9 percent on year, in seven years in the last quarter of 2010 mainly driven by exports which were up 16.1 percent. The government forecast the economy to grow 6.3 percent in 2011. Surging inflation led the Bank of Indonesia to raise interest rate for the first time in a year and a half.

Thailand Thai economy emerged from a brief recession by posting 3.5% annualized growth in the fourth quarter of 2010 in spite of damages caused by widespread flooding during the quarter. The economy which grew 7.8 percent in 2010 is expected to moderate in 2011 at 4.4 percent rate. The key driver of the growth in 2010 was the 28.1 percent rise in exports. The government forecasts export growth will slow to 10 percent this year due to high base and sluggish economies in some of Thailand’s key trading partners. The economy faces a few risks this year which include continued debt problems in Europe, a weak Japanese economy, rising interest rates, higher oil price and possible political uncertainty ahead of early elections.

Vietnam Vietnam, devalued its currency (dong) on February 11th to 20,693 dong to the US dollar from 18,932. This suggests that the government’s top priority is fostering economic growth by pumping up exports rather than cooling inflation. A weaker currency makes the country’s exports more competitive abroad, but makes imports expensive and thereby fuels inflation. Consumer prices which soared 12 percent in January 2011 from a year earlier, is likely to worsen further. However, Vietnam government is working on ways to curb inflation by scaling down the country’s credit growth to below 20 percent from an earlier 23 percent.

Demand for NR China, India and Malaysia, the three major consumers of NR in the ANRPC, account for 48 percent of the commodity’s global demand. The growth rates worked out for the first quarter this year point to a slow down or decline. This is partly due to comparison with a big base as first quarter of 2010 was a period of abnormally high growth in import and consumption in all the three countries. However, China’s further policy moves aimed at cooling inflation could affect demand from the country. At the same time, a further appreciation in yuan could work on the other way. The government’s policy is to allow the yuan to appreciate only slowly without affecting the country’s export sector. Indian automobile market, which is Asia’s third-largest, weathered the global economic



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downturn better than the rest of the world. Passenger car sales rose 26 percent over year to 184,300 numbers in January 2011 reflecting rising personal income among the middle class as the economy grows. Availability of new models and easy bank loans encouraged people to spend more on new vehicles. The country’s total production of automobile tyres rose 28 percent during 2010, with passenger car tyres posting 39 percent growth. Moreover, India exported 23 percent more automobile tyres (all categories together) during 2010 as compared to the year before. Export of passenger car tyres recorded 32 percent rise during 2010. The demand seems to have taken a slow pace so far during the first quarter. However, Chinese buyers are likely to actively enter the market after a strategic short withdrawal. Apart from demand and supply, a host of others factors have been influencing market. Influence of NR exporting countries’ currencies Nearly 80 percent of the global production of NR is internationally traded in U.S. dollar terms. As such, currencies of NR exporting countries influence NR prices significantly. NR prices, quoted in the dollar terms, are expected to gain support from an appreciation in currencies of the exporting countries. The opposite is expected when the currencies weaken. Given this background, let us attempt to examine the current trends in NR market with reference to relevant currencies which have been dynamic mainly on account of huge inflow of speculative investments from abroad. The movements of Thai baht, Malaysian ringgit and Indonesian rupiah against U.S. dollar during the period from December 1, 2010 to third week of February, 2011 indicate that the currencies sharply strengthened on the US dollar from February 1 onwards. Malaysian ringgit, for which the strengthening phase began much earlier, gained further strength until the Bank Negara, the country’s central bank, intervened causing a short-lived reversal of the trend. About 87 percent of the global export of NR (including NR-rich compounds) originates from the above three countries. With their sharp strengthening, the three currencies have been exerting strong upward pressure on NR prices from the beginning of February.

Influence of Japanese Yen Japanese yen influences physical NR prices through TOCOM futures, which are traded in terms of Japanese yen. Investors normally speculate on TOCOM rubber futures with reference to the yen’s strength against the dollar. A weak yen makes TOCOM futures less expensive and thereby helps in attracting investors. Therefore, NR futures in TOCOM are expected gain support when the yen weakens. The opposite is expected when the yen gains strength on the dollar.

Influence of crude oil Crude oil price influences NR market through speculation on possible substitution between NR and synthetic rubber (SR). Synthetic rubber, being a petroleum-derived product, can become more expensive on a rise in crude oil price. Although the actual substitution between the two elastomers is insignificant in the short-run, on account of technical reasons, speculation works on the possible substitution and thereby influences NR market. Crude oil market has been bullish from the end of 2010. It gained further momentum as political turmoil in Libya, followed by Egypt, disrupted crude supplies. As several oil companies in Libya are pulling personnel from their companies, about 50,000 barrels a day production has been shut down. The country which produces 1.58 million barrels a day is the seventh-largest oil producer in the OPEC. However, OPEC does not see any reason for concerns over supply as Saudi Arabia alone has 3.5 billion barrels a day spare capacity to comfortably cover any shortfall in Libya. On the other side, oil industry analysts point out that replacement oil from other countries is likely to be of poorer quality.



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Conclusion The current developments in NR market indicate that: 1. A 6 percent rise in supply is anticipated for the first quarter of this year. 2. The demand stays weak as dominant buyers strategically stay away from the market. 3. Currencies of Thailand, Indonesia and Malaysia support NR prices. However, a continued support from the currencies seems to have faded since mid February. 4. A sharp official devaluation in Vietnam dong has made the country’s NR exporters more competitive, forcing exporters in other countries to reduce offer prices. 5. Japanese yen, although supported NR market during the first half of February, but appears to exert downward pressure on the market, thereafter. 6. Surging oil prices continue supporting NR market. However, due to weak demand and the yen’s strengthening, NR could not gain from the spurt in oil market. 7. NR prices may continue to be volatile, but likely to stabilize at Rs. 350.00 to 400.00 in Colombo. 8. It is unrealistic to judge NR prices on demand and supply alone. There are many interacting factors. (Reference; ANRPC Report, January - February, 2011)



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Daily FT – March 8, 2011

Can Fairtrade spruce up export growth for SL? * Export value in 2010 similar to 2008 performance of $ 8 billion plus * Trade deficit expansion by 66.7% in 2010 to $ 5.2 b a worry * December exports growth by 34% to $ 968 m very positive Whilst Sri Lanka is registering strong economic growth at seven per cent plus with export revenue crossing 8.3 billion dollars at 17.3% growth performance as per the Central Bank, a new report coming in has revealed that there are many product categories in Sri Lanka that can command a high price based on the principle of dialogue, respect and greater equity in international trade which is a new revelation that is worth investigating to determine what benefits it can bring into Sri Lanka’s revenue mechanisms.

National importance The logic of this strategy from a country perspective is that whilst many other initiatives are at play to increase export revenue by reshaping the basket of goods and by a deeper trade penetration by way of the Indo-Lanka FTA as well as the very attractive APTA, these must also be pursued as the overall trade deficit in 2010 has expanded by 66.7% to $5.2 billion. Given the price spike of oil that we have experienced so far this year, this gap can widen in 2011 with the import bill expanding unless export revenue and remittances can be pegged up considerably. Middle East woes Whilst being upbeat on Sri Lanka’s progressive economy in the last two years, it’s important for us to understand the serious issue that is developing in the Middle East and North Africa and its ramification on international trade. Post the financial crisis, the world has been struggling to get back on its feet even with the massive stimulus drives that large economies have been introducing. In economic terms it’s called a fragile economic recovery. At this juncture wrong policy, adverse weather or a economic shock like a oil price hike can once again take the global economic to recessionary mode, meaning a double dip. This is exactly what the world did not want happening, but with the uprising in the Middle East and North Africa that has shot oil to cross 100 plus dollars, there can be a situation where the global economy can head to a toss, which is unfortunate as it’s man-made and could have been in fact avoided. Hence we will have to see how this situation will evolve and keep it on our radar.



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Exports at $ 8 b The ramification of this development in the Middle East and North Africa can be to our export revenue of eight billion dollars, which is skewed to the US and EU market by over 50 per cent if the world goes into a double dip. Apart from the challenges at the demand end due to the looming global economic shock, Sri Lanka has also been challenged in the first two months of 2011 on the supply chain end with the La Nina phenomenon hitting in January and then repeating itself in February, which is estimated to have shaved of 50-75 million dollars or one per cent of GDP earlier in the year. From a more outside perspective it’s important for Sri Lanka to register seven per cent plus growth this year even with all these challenges at the demand and supply ends because as a country recovering after a 30-year conflict, we need to attract the investment and this will not materialize unless an attractive return can be justified. On a separate note, we need to manage the inflationary pressure hitting a consumer purse that has already gathered momentum from 6% to 7% as at end February 2011. The danger is that with the supply chain hit on fruits and vegetable being the cause for the upward movement in inflation so far, if the cost push inflation takes place due to the oil prices going up, it can take the shine off Budget 2011.

A point to note is that whilst we can be upbeat on the export performance of $ 8.3 billion, way back in 2008 we registered a similar number at $ 8.1 billion, which means we may have just about won back our lost customers last year or it could have been price point driven growth. However, the December performance of $ 968 million at 34% growth is commendable by the export community and if this trend can continue with strong policy backing, Sri Lanka’s export perspective can be very positive for 2011.



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The issue Whilst understanding the challenge domestically, I guess the increased hydropower can somewhat offset the oil price surge but a piece of statistic to note is that a 10 dollar oil price hike shaves off half percentage of GDP value, which is a luxury that Sri Lanka cannot afford at this juncture. May be its worth seriously considering a ‘hedge’ being evaluated but avoiding the fiasco that Sri Lanka got into the last time it used this instrument. On a global end the issue at hand is that in the event the world moves into a double dip, how Sri Lanka can protect its market share globally, which stands at less than one per cent at the best estimate. One option is to move into a niche strategy so that we have a stronger chance of consumer demand not getting hit. This strategy can also survive a demand pull inflationary situation to a great extent. A point to note is that even today we are pursuing a niche strategy by way of the ‘Garments without Guilt’ proposition for our three billion dollar apparel industry and the ‘Ozone Friendly Ceylon Tea’ theme for the 1.5 billion dollar tea industry, which is carefully watching the Libya crisis that can throw out many issues as its borders give vent to Ceylon Teas penetrating many Middle Eastern markets. What is Fairtrade? One such strategy that Sri Lanka pursue on the strategy of niche marketing is Fairtrade. A recent study has revealed that there is potential for certain Sri Lanka merchandise to command a better price globally on the ethos of alleviating poverty, which is what the Fairtrade dialogue is all about. If I am to pick a definition for Fairtrade, my pick is that it means better prices, decent working conditions, local sustainability and fair terms of trade for fairness. This will also mean companies having to pay higher prices for goods purchased (which are never lower than the market price), which addresses the injustice of conventional trade. It’s an interesting concept given that the Fairtrade label sales last year has crossed the two billion dollar mark at a growth of 41%, which means that there is a group of consumers who continue their behaviour of purchasing products based on a certain value system that I strongly feel is an opportunity Sri Lanka can seriously pursue. Fairtrade minimum price? If I may throw light on this concept, Fairtrade minimum price is the lowest price that a buyer can pay for products under this label based on a consultative process that includes the market dynamics of supply and demand at a moment of time. I guess this is the reason for the 41% growth momentum that the world has seen in this brand category. However, a point to note is that currently only certain products can go under this umbrella but the system is open for consultation on any new categories provided that its values can be adhered to, which is interesting. (The author was the Executive Director of Sri Lanka’s National Council For Economic Development under the Treasury Secretary when the country averaged 7.4% GDP growth and export revenue crossed six billion dollars. A marketer by profession, he twice won the Marketing Achiever Award, Business Achiever Award from PIM Alumni, University of Sri Jayewardenepura, whilst also winning a global leadership award from Johnson Lever. Rohantha is actively involved in the growth agenda of the Sri Lankan economy and sits on many public and private sector director boards, whilst serving the international public sector in the South Asian region.) Can Fairtrade spruce up export growth for SL? The current product portfolio includes bananas, fruit and vegetables, tea, juices, nuts/oil seed, honey, cut flowers, ornamental plants and spices to name a few, but as I mentioned many others can take this proposition of the business model, which can be shaped to the procedures. May be the bee honey project in



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Badulla can be test-marketed on this concept before being rolled out to other product sectors in the Sri Lankan export basket. Fairtrade premium? This is another interesting rule on Fairtrade that can actually be attractive to Sri Lankan exporters. It’s called Fairtrade premium. What this means is that one agrees to pay money on top of the minimum price point that has to be directed to such causes of social, environmental or economic developments of the community by which the merchandise is produced. This is a ideal fit for the ethically manufactured handloom industry of Sri Lanka where a pilot project is currently in progress in Maruthumune and being rolled out to other key towns in the north and east of Sri Lanka, coming under the ‘Peace Collection’ brand. May be the ‘ethical eco label’ in the apparel industry can be modelled under this concept, having been launched recently at the Sri Lanka Designer Festival second edition. Why Fairtrade? Once a producer meets the requirements as stipulated under the Fairtrade certification, one can agree to a licence agreement. As per the Fairtrade mark any product that comes under this umbrella can use the two concepts of ‘Fairtrade minimum price’ and ‘Fairtrade premium price’. I would argue that Sri Lanka should test this concept given the looming double dip economic scenario and our export basket being skewed to the US and EU apart from the other strategies that are being pursued by the export community of Sri Lanka such as perusing business under the Indo-Lanka FTA as well as APTA. Demand for Fairtrade? Apart from the 41% increase in sales under the Fairtrade label and its flexibility of branching out to specific positioning like ‘Garments without Guilt’ or ‘Ozone Friendly Tea’ that Sri Lanka is already pursuing, we also see a trend in modern trade that commands almost 60 per cent of share of wallet globally where priority space is allowed for products under this banner. Separately we have seen many promotional opportunities that are afforded to Fairtrade label products in the traditional media of TV, radio and press and in the recent past the viral social media platforms have also joined the fray, which is encouraging given the penetration of these new methods of communication being diffused at a very strong pace. I guess the time is right to test this opportunity that is hip in the global marketplace. It is all the more attractive given that the Fairtrade business model is people centred trade that effectively reduces poverty and also improves the standard of life in the developing world. Fairtrade and climate change We also see that Fairtrade is continuously addressing the key issues of the world and changing its business model, which keeps the brand consumer-oriented. The latest is the inclusion of reducing energy consumption by the use of renewable energy, which Sri Lanka as a policy has agreed to be 10% of energy in the long term. This adds to the argument to pursue this strategy. Next steps for Sri Lanka: Study the value chains of the export basket of Sri Lankan products and identify which items can best fit the Fairtrade business agenda. Analyse if the Fairtrade label will add value to these identified product categories not only from an export value perspective but from an economic and social agenda. May be some products from the ‘Divi Negamu’ one million economic units drive can fall under this mandate. The logic being that Fairtrade is all about poverty alleviation. May be some quick win products can be targeted so that we understand the practical challenges when implementing the business model of Fairtrade. Thereafter it can be rolled out. Once the test phase is completed, it can be incorporated into the overall national game plan of achieving 20 billion dollars by 2020.



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Stock Market



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Foreign investors boost bourse The four day week at Colombo bourse ended with slipping indices. ASPI shed 46.9 points down by 0.61 percent to end at 7,664.72 while MPI dropped by 139.93 points to close at 7,029.42. The weekly turnover clocked at Rs 15.28 billion with major contribution of Rs 7.68 billion coming in towards the close of the week. The daily average turnover was strengthened to Rs 3.82 billion as against Rs 2.54 billion of the previous week. Healthcare, Banking and Manufacturing were the driving sectors for the market turnover. The healthcare segment added 31.04 percent to the total turnover with Rs 4.74 billion while Banking Finance and Insurance and Manufacturing shared 15.91 percent and 13.87 percent in weekly turnover with Rs 2.4 billion and Rs 2.12 billion respectively.

Lanka Hospitals rallied high turnover in Health sector with 30.19 percent share amounting to Rs 4.6 billion. Banking sector was supported by Commercial and Sampath Bank while Grain Elevators and Piramal Glass were the counters that added to the Manufacturing sector. Healthcare ruled the market volumes with 29.27 percent share while Banking and Manufacturing sectors stood at 23.25 percent and 13.2 percent of the total volumes. Investment Trust index reflected a positive week on week change of 5,140.86 points. Market capitalization was recorded at Rs 2.56 trillion at the close of the week.

Lanka Hospitals topped the market price this week closing at Rs 51.80 witnessing an increase of 37 percent as compared to previous week. The increased price was on account of strategic foreign buying. Capital Development and Investment Company noted a climb of 36 percent closing at Rs 225 compared to Rs 165 in the previous week. Commercial Development closed the week at Rs 78.70 reporting a rise of 33 percent, generating a turnover of Rs 3.2 million. Top loser for the week was Eastern Merchant closing at Rs 600 recording a dip of 21 percent in comparison with last week. Colombo Pharmacy closed at Rs 3,080 accounting a decline of 19 percent. Morisons (Non Voting and Voting) and Sinhaputhra Finance reported a decline of 18 percent, 17 percent and 15 percent respectively. After a long haul of three months substantial foreign buying was witnessed in the bourse. The weekly inflow was recorded at Rs 4.7 billion as against selling of Rs 1.28 billion making the net foreign buying at Rs 3.4 billion. The big chunk of foreign buying was observed in Lanka Hospitals where Fortis Healthcare bought 28.6 percent stake of Distilleries. More foreign participation is indicated in the market by way of investment to the tune of Rs 2 billion via private placement route by three UK based funds in the equity of CT Holdings.

Trading at Colombo bourse



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Healthcare segment topped the weekly volume charts with Lanka Hospitals and Nawaloka contributing 21 percent and 8 percent to total volumes. The aggregate volumes for the week for Lanka Hospitals and Nawaloka were marked at 76 million and 29 million shares respectively. The other scrips that drive the volumes were Piramal Glass, Laugfs, SMB Leasing (Voting and Non voting) and Dialog. Activity level at the Colombo bourse was regained towards the end of the week resulting in healthy rise in turnover and volumes. The retailers continued to dominate the market and profit taking was noted across several counters. The market bounced back with renewed foreign interest as witnessed in the week's highlight of foreign investment in healthcare stock and also likely entry of foreign funds through private placement route. We expect the positive drive to persist in the coming week with interest in counters relating to key growth sectors.



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Stocks tumble on selling to raise cash for IPOs

LBO: Stocks fell sharply Monday with investors selling to make way for the forthcoming Initial Public Offerings, brokers said.

The All Share Price Index closed at 7,582.55, down 1.07 percent (82.17 points) while the Milanka Price Index of more liquid stocks closed at 7,582.55, down 0.19 percent (13.55 points), according to stock exchange provisional figures.

Turnover was 3.1 billion rupees. There were 56 gainers and 119 losers.

"Because of IPOs, people are selling," Thilini Yatawara of Bartleet Mallory Stockbrokers said.

"There was a mix of institutional, high-net-worth and retail investor participation in the market trading."

A flood of IPOs are expected on the Colombo bourse in the weeks ahead as companies move to capitalize on investor enthusiasm over the end of the island’s ethnic war and economic growth.

Nawaloka Hospitals closed at 4.50, up 0.20 cents with over 62 million shares done. There was a crossing of five million shares at 4.50 rupees.

A stock exchange filling said T.Senthilverl has acquired a 10.8 percent stake in the Nawaloka Hospitals including Monday’s tranactions.

Laugfs Gas voting shares closed at 53.10, down 0.10 cents and its non-yoting shares closed at 42.00, up 0.60 cents. There were four crossings, two at 44.00 rupees, one at 42.00 rupees and another at 42.50 rupees.

The Lanka Hospitals closed at 52.00, up 0.20 rupees with over 1.2 million shares done.

National Development Bank closed at 354.50, up 4.00 rupees with over 1.1 million shares done. There were three crossings with two of 500,000 and one of 91,000 done at 353.00 rupees.



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SEC facilitates retail investors Approves new rules to broad-base share ownership: The Securities and Exchange Commission of Sri Lanka (SEC) decided to facilitate a fair allocation of shares to retail individual investors and licensed Sri Lankan unit trusts during Initial Public Offerings (IPOs), a SEC press release said yesterday. The SEC has observed that the recent Initial Public Offerings (IPOs) were heavily oversubscribed due to investors using the bank guarantee option to submit IPO applications for a very large quantity of shares.

This has resulted in a majority of retail investors being allotted a small portion of the shares applied and has not created a level playing field in the Primary Market thereby hindering the process of broad basing share ownership in the country, the press release said. The Commission approved several rules to mitigate this situation. Under these new rules a minimum of 40 percent of the offered shares (for a particular share class) in a public offer has to be initially made available for allotment to retail individual investors.

A retail individual investor shall be defined as an individual investor who applies (for a particular share class) for up to a maximum of 3,000 shares or for a value of not more than Rs 100,000 whichever is higher. Applicants submitting applications under other investor categories shall not make applications under the retail individual investor category. A minimum of 10 percent of the offered shares (for a particular share class) in a public offer is to be initially made available for allotment to Sri Lankan growth or balanced unit trust funds licensed by the Securities and Exchange Commission of Sri Lanka (SEC) comprising not less than 500 unit holders resident in Sri Lanka making up of at least 50 percent of the fund (unit trust investor category). This rule will be subjected to compliance with SEC Directive made under Circular No. 01/2009 dated January 7, 2009. In the event of an under-subscription in the unit trust investor category and an over-subscription in other investor categories, the oversubscription in the retail individual investor category shall be given first priority in allotment of under-subscribed shares, the statement said. In the event of an under-subscription in the retail individual investor category and an over-subscription in other investor categories, over-subscription in the unit trust investor category shall be given first priority in the allotment of under-subscribed shares. These rules will be effective from March 15, 2011, the statement said. Subsequent to a consultative process with the Colombo Stock Exchange (CSE), the Colombo Stock Brokers Association (CSBA) and IPO Managers, the SEC has decided to facilitate a fair allocation of shares to retail individual investors and licensed Sri Lankan unit trusts during IPOs.

CSE trading floor



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CSE recovers slightly after 3-day decline Lankem Dev. caught up in price band The Colombo bourse yesterday recovered some lost ground after three straight days of correction earlier this week with the All Share Price Index up 40.46 points (0.55%) and the Milanka up 31.91 points (0.47%) on a turnover of Rs.1.7 billion, down from the previous day’s Rs.2.34 billion, with 54 losers trailing 130 gainers.

"We saw a positive development in the market after a three-day losing streak," a broker said requesting anonymity. "There was a little selective buying on some blue chips with some investors looking at buying opportunities on the back of the dip."

Lankem Development which had announced a rights issue the previous day was the biggest turnover generator with nearly 3.7 million shares done between Rs.48 and Rs.68.60 gaining Rs.16.40 to close at Rs.64 contributing Rs.217.1 million to the day’s business volume.

However, this stock was captured by the SEC’s price band formula effective from Friday.

``We have to watch and see if the market stabilizes at these levels,’’ a broker said. ``If not, there will be further correction. There was no aggressive buying as turnover levels, compared to the recent past, indicate.’’

PC House came next on the turnover league with over 7.3 million shares done between Rs.17.50 and Rs.19.10 gaining 80 cents to close at Rs.18.50 while Colombo Fort Land and Buildings lost Rs.7.10 to close at Rs.420 on nearly 0.3 million shares done between Rs.420 and Rs.447.50.

JKH, Royal Ceramics and Richard Pieris were among yesterday’s gainers showing volume while Piramal Glass closed flat at Rs.11.70 on nearly 5.5 million shares traded between Rs.11.60 and Rs.11.90.

JKH was up Rs.2.40 to close at Rs.279 on 0.3 million shares done between Rs.273.60 and Rs.279, Royal Ceramics up Rs.3.10 to close at Rs.155 on over 0.5 million shares done between Rs.151.80 and Rs.156 and Richard Pieris closed 20 cents up at Rs.14.10 on nearly 5.3 million shares done between Rs.13.60 and Rs.14.20.

Grain Elevators was up Rs.5.50 to close at Rs.185 on nearly 0.3 million shares and Kapila Heavy (MTD Walkers) showing volume after a long absence on the trading boards gained Rs.5.90 to close at Rs.72.10 on nearly 0.7 million shares.



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Business



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A business perspective of cricket Hilmy Cader With the commencement of the Cricket World Cup and given the socio-economic and business significance of cricket globally, we reproduce extracts from MTIs 11 C Cricket Strategy Model. The business of cricket is estimated at US $ four billion globally, growing at 15 percent per annum and could be easily classified as a FMCG (Fast Moving Consumer Good).

Not only does it touch the hearts and minds of over two billion consumers worldwide, it accounts for a significant proportion of the consumers’ television and web surfing time, not discounting the enormous amount of casual consumer chat. It is argued that this form of unscripted entertainment is capturing share from other forms of leisure and entertainment. It is now opening up new frontiers, from Afghanistan to Argentina, from Canada to China and from Namibia to Netherlands.

The innovation curve has just begun, with the likes of IPL, and it is expected to capture an increased percent of the consumers and the advertisers wallet. Many in the industry still see it as a competitive sport. Consumers see it as a form of entertainment, Cricketers see it a viable career. Above all it is among the most competitive and dynamic industries, that rivals many conventional industries. Given the many facets of the cricket industry (players, spectators, TV viewers, sponsors, advertisers and boards) it requires a holistic business strategy framework, that can benefit from proven strategy formulation models, yet captures the very essence of cricket. MTIs 11C Cricket Business Model has been developed as a framework (with relevant tools) to help cricket authorities to analyze, strategize and realize greater heights for the cricket as a business.

Currency, community and champions The strategy formulation process starts by analyzing crickets performance (in a given country or territory) based on the end results by which the success of the industry must be measured. In the case of cricket, this includes three equally important success criteria i.e., Currency: How much funds has cricket been able to attract from consumers via ticket sales, television viewing, sponsorships and endorsements and converging segments like memorabilia, coaching etc. The argument being that the more satisfied the consumers are, the more time they will spend consuming cricket and this in turn means a greater share of their wallet towards cricket. Champions: How has the country performed in this globally competitive industry, as measured by the team and individual performances, which influenced the currency. There is a direct co-relation between a country’s performance at sports and the currency factor it attracts. Community: Unlike some conventional industries, cricket (and most sports for that matter) has a strong social aspect that is interwoven into it. Therefore, it needs to play a role in linking citizens and different cultures and promote healthy values.



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Competition and collaboration At this stage of the strategy formulation process, based on specific KPIs (Key Performance Indicators), the country’s historical performance is analyzed and provides the basis of setting the vision and goals for the next one to three years (which is done at the end of the process, whereby these three components of the model are re-visited). The consumer has a finite amount of time, discretionary income (and passion) that different types of leisure activities compete for. Some of these could be between sports and some from other forms of entertainment. For instance, TV ratings and ticket sales of Bollywood movies dropped during the IPL. It could also be between different types of sports, for instance the decline of cricket in the Carribean attributed to the intensified marketing of baseball and basketball in the Americas. Cricket as a product needs to be constantly researched and evaluated if it is providing value to consumers and if competitive activities and sports are making inroads. Based on these findings, like in conventional industries, the product (in some cases the brand) needs to be fine-tuned. This is an on-going process. As in the case of West Indies Cricket, it may take many years to see the consumer impact on the game, however once this happens it will take as many more years to reverse the trend. So the key is on-going research and feeling the pulse of the consumer who consumes this product on a daily basis. Given that a significant part of cricket consumed is still between countries (unlike soccer), the production of cricket requires the collaboration of two or more countries. Hence this calls for the need to factor in all the bi-lateral and multilateral negotiations between boards at this stage of the process. Like in soccer, with the advent of the likes of IPL, the type of collaborations will change, and this needs to be monitored and factored into the strategy formulation process. There is bound to be competition within different formats of cricket competing for the consumers cricket dollar.

Core formats and consumption This effectively is the way in which cricket is consumed and equates to product development in the conventional sense. It includes everything from six-a-Side to Tests and all forms of experimentation with the core product, from referring umpiring decisions to day-night test matches. The findings from the competitive scan and the expert opinions (effectively the R and D and Innovation lab) will be the basis on which existing products are fine-tuned and new products developed. If this is carried out on a continuous process, it will signal the challenges well in advance well before it hits the bottom-line of cricket. For instance, the alarming low level of in-stadium spectators for test cricket could have been signaled by such timely research and analysis. The module on consumption will focus on how cricket is consumed, beyond just in-stadium spectators and television viewing. Potentially, it can cover a diverse range of applications, from web applications to degrees in cricket management to a cricket version of American Idol, where raw talent can emerge outside the formal school and clubs. Put it another way, Slumdog Cricketers (no insult meant) in the words of Steve Waugh.

Cricketers and chain of supply The modules on core formats and consumption will help determine the demand for cricketers based on the demand for cricket - very much like a typical manpower planning exercise in a business. Like in the movie industry, the stars (the cricketers) hold the key to cricket-entertaining audiences, which determines the financial health of the industry. The module on cricketers will intensively focus on the total development and welfare of the cricketers, applying relevant human resources management principles. The appearance of

MTI Consulting

CEO Hilmy Cader



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your favourite and successful cricket star on stage is the end of a long supply chain process, that starts with identifying talent as early as a toddler and grooming them through the process and ensuring their welfare through to retirement. The module on chain of supply will cover all the aspects that support the total development of the cricketers and will include aspects relating to coaching, education, infrastructure and even a cricket culture in the society.

Capital Given that cricket has no equity investors in the conventional sense, it has to use the power of its brand (this includes that of the country, the authorities, the players, the venue and the cause) to generate capital, the threshold for which substantially increased. At this stage of the strategy formulation process, every opportunity to en-cash the power of cricket is pursued, in addition to the main revenue streams of television rights and sponsorships. A battery of financial analytics will be run at this stage that measures the power of Brand Cricket and how it is translated to the bottomline. Cricket authorities can also wear the hat of an Investment Banker and ask the question What do we need to invest to win the World Cup (Champions) and achieve a quantum increase in revenue (Currency) and what will be the ROI? For instance a Cricket Bond or other financial instruments that can be traded on capital markets. The emergence of the Virtual Cricket Stock Exchange of India could well be the fore runner.

Control Finally, the other ten components of the model needs to be proactively and interactively managed, not just administered. The organizations responsible for managing cricket need to align their structures, competencies and processes based on findings from the other 10Cs. Here there is a case for cross-industry learnings, while recognition of a technical specialist with hardcore cricket experience, MTI Consulting, as part of their thought leadership initiatives, have conceptualized, researched and published MTIs 11C cricket Business Strategy Model, which provides a strategic planning model for cricket as a business and is ideally suited for cricket authorities around the world. The development process used a blend of sports business models and best practices in business strategy models, benefiting from strategy work carried out by MTI in over 40 countries. Last year, MTI along with UKs Intangible Business, carried out a pioneering study to financially value the eight IPL Franchises. MTI Consulting is a fast growing boutique management consultancy, with operations in Bahrain, Bangladesh, Dubai, India, Malaysia, Pakistan, Sri Lanka and associates internationally. Since our inception in 1997, MTI has worked on 350 client-specific projects in 35 countries across five continents, helping clients to Analyze > Strategize > Realize profitable business initiatives. MTI’s core focus is on Strategy Consulting and this augmented with specialized solutions on corporate finance, human resource management, marketing and research and analytics.



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Climate Change



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Daily Mirror – March 11, 2011

Tree plantations in dispute over climate change By Dr N Yogaratnam A new negotiation round on climate change under the UN Climate Change Convention (UNFCCC) ended in Bonn on August 6 and another in Cancan at the end of last year. The protracted UNFCCC process which is crucial for the future of mankind has become a very complex scenario full of technical jargons and rather difficult to follow by non “experts”. The main danger of such a tangled structure is that it hides vested interests, powerful lobbies, bullying attitudes and unilateral decisions from the more powerful sectors and countries. The process allegedly advanced towards an agreement that was to be reached at Cancun containing the guidelines that the world countries would adopt to deal with climate change. Two main tracks of this negotiation processes were: (1) the Ad Hoc Working Group on Further Commitments for Annex I Parties, under the Kyoto Protocol (AWG-KP) that deals with the future commitments for industrialized countries, and (2) the Ad Hoc Working Group on Long-term Cooperative Action under the Convention (AWG-LCA) to enable the implementation of the Convention. Whether such long names can be convincing or not, it is important to know that in those areas of negotiation crucial things are being pushed, including the expansion of monoculture tree plantations under the guise of “forests” or under the so-called “Clean Development Mechanism”, namely projects in the South that generate windfalls for major polluters in the North. Forests in the carbon market Another controversial issue is the inclusion of forests in the carbon market under the concept of “reduction of emissions from deforestation and forest degradation”, named REDD, which by no means would be a solution to climate change as long as it allows polluter countries to “offset” their carbon emissions thus evading the responsibility of cutting them at source. Those negotiations were also considering that under what is called REDD+ large scale tree plantations may well be a form of “enhancement of forest carbon stocks” and so could receive funding. And, on the top of that, tree plantations are being treated as “forests.” Though the UNFCCC provides very narrow and restricted space for intervention of social groups, in the last Bonn round some voices managed to raise their challenging views regarding the trend of negotiations. Paradigm change The UNFCCC Women and Gender Constituency in a press release stated that (1) where they upheld the need of a paradigm change which requires a better understanding of the gender aspects of the issues. This includes an analysis of power relations within societies and institutions at all levels; local, regional and global. An example is the definition of forests that is currently being discussed in the negotiations. The on-going destruction of forests creates CO2 emissions, and mechanisms to avoid deforestation are currently under debate.



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The way that forests are defined and treated through such mechanisms will affect women and their communities. In a statement read at a closing session, women groups expressed their strong concerns that the current definition of forests includes large-scale monoculture tree plantations that have devastating impacts on women’s livelihoods and communities in general. Incentive schemes Women and gender organizations reject incentive schemes that reduce ecosystems to their carbon value alone, ignoring the important socio-economic, cultural, spiritual and ecological values of forests, which are of essential importance to women and their communities. Also some members of Climate Justice Now, and members of the women and gender constituency submitted a statement (2) objecting attempts that would allow countries to increase their emissions instead of reducing them. They say that they would like to reiterate their strong concern in this respect that the forest definition that is currently used for LULUCF [land use, land-use change and forestry activities] includes the good, the bad, and the ugly. That is, it includes real, biologically diverse forests, which are an essential source of livelihood for women and their families, but it also includes monoculture tree plantations, including large-scale monoculture tree plantations that have a devastating impact on women’s livelihoods and communities in general. It is said that these plantations destroy ecosystems and subsistence agriculture, cause rural unemployment and depopulation, deplete soils and water resources and violate Indigenous Peoples’ rights. That is why they insist that the definition of ‘forests’ is revised jointly with the Convention on Biological Diversity (CBD) so as to exclude monoculture tree plantations. Moreover, it should be ensured that forest degradation is fully taken into account in any scheme to conserve forest. The strong claim that Tree Plantations Are Not Forests is getting into the UNFCCC corridors .The World Rainforest Movement, has also taken the stand that Climate negotiations are more effective if guided by long-term vision – this must include social and gender justice.



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Agriculture & Plantation



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Growing Coconuts on "Coconut Lands" – Another Look By L.C. Arulpragasam

In 1958 I attended a lecture in Colombo on coconut cultivation given by a well known coconut planter. The speaker, meaning to be facetious while also delimiting the scope of his lecture, started by stating what seemed obvious: "The duty of a coconut planter is to plant coconut, on coconut land". But this set me thinking: "who gave him the duty to plant coconuts?" From the planter’s point of view, he should grow the crop/s which would give him the greatest return. From the country’s point of view, he should plant the crop/s which would provide the greatest return per unit of land in terms of income, foreign exchange earnings/savings and employment. A more recent concern is that such planting and its returns should also be ecologically sound and sustainable. Besides, who decided that these were "coconut lands"? Was this not a terminology ("tea lands", "rubber lands", "coconut lands") which we had inherited from the British who favoured these export crops mainly because they could be grown on a plantation scale?

A couple of years later (in 1960) when I headed the agriculture sector in the Department of National Planning and again when I came with the ILO World Employment Mission to Sri Lanka in 1974, I had an opportunity to revisit these questions. If coconut was to be a monocrop on these "coconut lands" it was important to verify whether it could in fact meet the above criteria of greater employment, greater income and greater foreign exchange earnings/savings compared to other crops.

As was well known, at that time, coconut brought much lower financial returns than tea or rubber, while the same can be said of its earnings/savings of foreign exchange. As for employment, figures available in 1970 showed that while one acre of tea employed 1.1 persons per acre per year, and one acre of rubber employed 0.4 persons per acre, one acre of coconut employed only 0.1 persons per acre per year. That is, only one worker was employed for every 10 acres of coconut, which was four times less than that employed in rubber and 10 times less than that employed in tea.

This meant that the so called "coconut lands" were underutilizing the land not only in terms of income but also in terms of employment. This underutilization can also be seen in physical terms. Assuming that the coconut is planted in rows of 8m x 8m, and assuming that the root system of the coconut spreads 2 metres around each tree, the trees and their root systems would still leave 78% of the land untouched and unutilized. This is a luxury which this country, with a shortage of good agricultural land can ill afford, especially when it includes some of the best lands, as in the "coconut triangle".

This brings us back to the previous question. Why should these lands be called "coconut lands"? Is coconut the best crop, or is it the only crop that can be grown on them? Undoubtedly they are well suited to coconut. Moreover, it is almost the only crop (with the exception possibly of cashew) which could profitably be grown in the sandy coastal tracts of the intermediate and dry zones, while also being a most useful crop for our people. But to categorize the fertile land in the "coconut triangle" with the broad-brush of "coconut land" has only served to relegate them to a relatively low-paying mono-crop without consideration of alternative higher paying crops or of intercropping between the rows of coconut.

One would suspect that the nomenclature of "coconut lands" was adopted in British times by the companies that grew coconut as a monocrop on a plantation scale – which was the only means by which they could economically operate this relatively low-paying crop. But this system of plantation and management made it a land "extensive" and labour "extensive" crop - as opposed to a land-intensive and labour- intensive crop. This suited the British who needed a plantation crop. But it does not suit the factor endowments of



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Sri Lanka which demand a greater return from land (the scarce factor) through more intensive cropping (intensive land use) by applying more labour (our abundant factor) in more labour-intensive production. On theoretical grounds, therefore, it is difficult to find a justification for coconut as a monocrop, though it must obviously be grown because of the broad demand by the people for coconut and its by-products. Not for nothing has it been called "the tree of life". Hence this article is not against the planting of coconuts: it is against the planting of coconuts as a monocrop on lands which are capable of yielding much more by way of intercropping.

The system of management of "coconut lands" during the period 1960-1980, speaks for itself. Whereas tea and rubber estates were managed by resident estate superintendents or managers, coconut estates were "looked after" by a "conductor" or "watcher" armed with a torch and gun. The focus was on preventing the theft of coconuts rather than on increasing yields or output. Thus large extents of these "coconut lands" were locked in a cycle of low expectations, low investment, low-level management, low income and low employment. There were of course many exceptions, but even these were aimed mainly at achieving higher yields from coconut and not at maximizing returns from the land – as could be achieved through higher value crops or intercropping. This is a serious concern since it applies to some of the best lands in the country (as in the coconut triangle), which are capable of much higher returns.

The Coconut Research Institute (CRI) in 1974 was of the opinion that the optimum stand of coconut was some 64 trees per acre, with adequate distance between the individual trees and the rows in which they were planted. It was argued at that time that the inter-planting of other crops between the rows of coconut (which were planted eight metres apart) was not technically desirable. It was argued, from the point of view of the coconuts, that the intercrop would deprive them of needed nutrients. From the point of view of the intercrops, it was stated that their growth would be impeded by the shade of the coconut fronds. This was the conventional wisdom at that time. However, after long technical discussions, the CRI experts ultimately agreed to the following propositions (in 1974), which are summarized below.

First, it would be technically possible to interplant other crops during the first five years of replanting/new planting of coconut without any adverse effects either on the new planting or on the intercrop, since the coconut palms would be too small to block out the sun from the intercrop. (It is now accepted that this would apply up to six years of any new planting of coconut). This in itself was a big breakthrough, since an average of 9,300 acres was replanted or newly planted to coconut each year. Since intercropping would be possible for the first five years, the total acreage available for intercropping in the newly planted/replanted acreage in any particular year would be 46,500 acres (that is 9,300 acres x five years). From this total should be deducted the 22% of land that is actually occupied by the newly planted coconut, including adequate space for their roots. This would leave a net acreage of 36,000 acres to be used annually for growing food or other crops. For purposes of comparison, this annually available acreage is more than double the extent of land opened up under colonization schemes in the country each year, prior to the Mahaweli Scheme. The fact that such a large extent of agricultural land was available but not used, shows the extent to which we have been held in thrall by the concept of "coconut lands" – which would not permit other use. Second, the CRI (in 1974) ultimately agreed that in older stands of coconut (more than twenty five years old), the trees would have grown so tall that their branches would not in practice block out all the sun from an inter-planted crop. This represented a technical breakthrough at that time, since it would theoretically allow inter-planting on a significant land area of "coconut lands" with older stands.

But it was necessary to push the thinking even further. Wider spacing between the rows of coconut should result in less shade between rows, which in turn should enable inter-planting between rows. The technical



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officers of the CRI initially objected to this idea on the grounds that it would reduce the total number of trees that could be planted per acre, resulting in an overall decrease in coconut production.

I therefore enquired what would happen if we increased the space between rows, but planted the coconut trees closer along the rows such that the total number of 64 trees per acre could still be attained. The CRI researchers came back with the answer that this would indeed be possible without sacrificing either the total number of trees per acre or total coconut production.

This meant that if we adopted this new pattern of planting for all new planting/replanting of coconut, we would be able to get an additional inter-crop in between the rows of coconut without sacrificing the total number of trees per acre. Although the possibility of such wider spacing is set out in a recent circular of the CRI, this option is not specifically recommended nor accompanied by a recommendation for inter-planting. It is interesting to note, however, that such (further apart) planting of coconut rows is now actually practiced in Kerala and the Philippines together with intercropping. Since it is now accepted that intercropping is possible (without detriment to the coconut or its yields) for the first five years after planting as well as from the 20th year onwards, and since this would make intercropping possible for 40 years of the trees’ productive life of 55 years, there is now really no reason to push for the wider spacing of coconut rows.

There remained the question of what could be grown as possible inter-crops. There was already a tradition in Sri Lanka by 1974 of having livestock (especially cattle) under coconut, with some estates doing this on a systematic basis. The CRI and the Agriculture Department provided a list of crops that could be intercropped on the "coconut lands" of the wet zone. Suffice it to say that when I later traveled for FAO in Asia in the 1960s and 1970s, I found pineapple, bananas, sisal, maize and manioc already inter-planted with coconut in the Philippines and even cocoa planted under coconut in Indonesia, while livestock under coconut was common in most countries. Thus Sri Lanka lagged behind many South East Asian countries in this regard in the 1970s and still continues to do so.

Obviously the possibilities of intercropping would be more limited in many parts of the country with poorer soils and little rain. However, I suggested (in the Short Term Implementation Programme of the Department of National Planning in 1961) that groundwater was likely to be available at fairly shallow levels in the coastal area north of Puttalam (going northwards towards Mannar and Jaffna), which could be pumped up for higher value crops. I noted also the possibility of using windmills for such irrigation, which could be powered by the steady winds that blow during the dry season in the coastal areas of the dry and arid zones. The inter-planting of cashew trees (pruned low) between the rows of coconut also seemed a possibility – which has subsequently been successfully adopted in this country. Also in the long run, the possibility of drip irrigation for the coconut trees needs to be considered.

This has already been economically undertaken in parts of the Philippines and also under our own Mahaweli Scheme (System B), resulting in earlier bearing and higher yields of coconut. What is proposed is limited drip irrigation (cheap systems are now available), delivered specifically to each plant at the height of the dry season, as a means of reducing stress and increasing yields. (It is also high time that we thought of irrigating other high value tree crops which can produce higher returns than paddy while using only one-fifth of the water currently used for paddy).

In 1994, I was able to revisit this question of intercropping in the drier areas, when I was called upon to evaluate an IFAD project for micro-credit to women’s groups in the dry north of the Puttalam District. The women’s group I visited had used its loan to purchase a pump to irrigate an inter-crop on sandy infertile soil, which had recently been replanted with coconut. They found groundwater at a depth of only four feet (which I could only hypothesize in 1961 for lack of groundwater data), which they pumped to



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irrigate chillie plants cultivated between the new coconut. Their net return of Rs. 30,000 per acre (within a four month period in 1994) was much higher than the return from coconut for the whole year. Moreover, far from adversely affecting the newly planted coconut palms, the intercrop actually benefited them through its weed control and fertilizer use.

In view of the above, it would seem profitable both for the owners as well as for the country if such intercropping between coconut were undertaken wherever technically feasible. It is heartening to note that such intercropping is becoming more and more common in this country. Great strides have also been made in research into possible intercrops, their interaction with existing coconut stands (in regard to light, nutrients and moisture) and the economics of their cultivation. Recent studies and experience have confirmed my contention of nearly 40 years ago that: 1) inter-planting between newly planted or replanted coconut can be done without prejudice to the newly planted coconut palms for the first 5-6 years of their life. 2) inter-planting among older coconut stands of over 20 years can be undertaken without detriment to the coconut or to the intercrop for a total of 40 years of the 55 year (productive) life of a coconut plantation. 3) Such intercropping can be done even in the drier regions using intercrops suited to the drier conditions, while irrigation could provide an added bonus. 4) Such intercropping far from reducing the yields of coconut, in fact, increases them. A recent study showed that different combinations of intercrops -specifically cocoa, coffee, pepper, clove and cinnamon - increased the yields of existing coconut trees by an average of 22%: H.A.J. Gunathilake, 2007. 5) Recent research also shows other advantages of intercropping - by way of reducing run-off and soil erosion, retaining moisture in the soil, providing biomass for fertilizing and fixing nitrogen in the soil.

The most common intercrops in the country are reported to be the following: 1) Perennials (over 10 years): coffee, cocoa, pepper, clove, cinnamon, rambutan, lime, lemon, cashew, tea, vanilla and fodder for livestock. 2) Semi-Perennials (2-5 years): banana, pineapple, passion fruit, betel. 3) Seasonal Crops: tubers, yams, pulses, cereals, turmeric, chillies and vegetables (Ibid). According to a survey done by the Coconut Research Institute in 2006, cashew was the most popular intercrop in the Dry Zone, while pineapple, betel and pepper were common in the Intermediate Zone. In the Wet Zone, tea, cinnamon and ginger tended to predominate, while bananas and livestock were common in all regions. Agro-forestry using tree crops (such as glyricidia) has also been recently recommended, aimed at providing fodder for animals, wood for fuel, nitrogen fixation in the soil, biomass for fertilizer, soil moisture retention and reduction of erosion.

Despite the fact that it has now been proved both by research as well as in practice that intercropping is both feasible and profitable, it was reported as late as 2007 that "in Sri Lanka, most of the coconut holdings are maintained as monocultures" (H.A.J. Gunathilake, 2007). If intercropping is practicable and profitable, the question is why it has not been more widely adopted since 1974, when its feasibility and desirability were highlighted by the ILO World Employment Mission.

Whereas the problems of intercropping in the drier areas seem to be largely technical (e.g. of finding suitable intercrops that can survive the poor rainfall), the problems of intercropping in the wet zone seem to be more structural and institutional. As previously seen, the main advantage of intercropping is its more intensive use of labour, which results in higher returns per acre. There are, however, practical problems in achieving this higher labour input, because of the pattern of absentee ownership and level of management of the larger estates – which raises a problem of how to supervise the casual, non-resident labourers needed for intercropping. As one of my estate-owner friends reacted: "Are you mad? The b———-s will steal my coconuts!" Thus, although many large owners admit that intercropping is feasible and profitable, they are not willing to accept its implicit condition – that of hiring outside labour to tend the intercrop. Thus the prevailing agrarian structure (absentee landlords with large holdings, not prepared to accept outside labour) seems to be one of the factors inhibiting the wider adoption of intercropping in the larger estates.



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In addition to absentee ownership, the larger size of holding in the "estate sector" seems also to be discouraging the use of outside labour for intercropping. According to figures from the 2002 Agricultural Census, the "estate sector" (comprising estates over 20 acres) constituted 18% of the total area under coconut, covering an extent of 176,300 acres. If the landownership and management pattern cannot to be changed, a technical solution will have to be found to encourage intercropping in these larger estates. This could possibly be achieved by adopting perennial or semi-perennial intercrops which do not involve much outside labour, except at harvest time. The increasing use of perennial intercrops in some of the larger estates seems to demonstrate that progress is being made in this regard.

Coconut is, however, largely a smallholders’ crop in this country, with 80% of the "coconut lands" in the "Small Holding Sector" (holdings under 20 acres in extent), covering an area of almost 800,000 acres. More significantly, as much as 54 % of the total area under coconut is made up of holdings of less than three acres, covering an extent of 433,370 acres. Intercropping should be possible in the latter area with the use of family labour, without the use of outside workers. Although comparative studies of coconut yields between large and small coconut farms are not available in Sri Lanka, it is very likely that the total value of agricultural production per acre in the coconut smallholdings of three acres and less (including the usual banana, lime and papaya trees, vegetables and livestock) is higher than the total value of production per acre of the large well-managed coconut estates.

This is because the coconut smallholder invests more labour per unit of land to intensify and diversify his production (by intercropping), in order to maximize his income from his little land. In fact, he actually attains this higher level of total productivity per acre only by treating his land as more than just a "coconut land". His cultivation is, however, on a haphazard basis. Hence, a comprehensive extension programme is required in the total area of small holdings (covering 80% of all land planted to coconut) to encourage and support intercropping on a more scientific and sustainable basis.



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Food from Plants Rice and Wheat By Damitha Rajapaksa and E. R. Jansz

About the Authors Damitha Rajapaksa is a Senior Research Officer of Industrial Technology Institute, A Food Technologist with special expertise on Central Processing. E. R. Jansz was Formerly CEO of CISIR (now ITI) and is Professor Emeritus of the University of SriJayawardenepura with expertise on Food and Nutrition.

Introduction Rice and wheat are globally the main starchy staples. Rice is the traditional food of Sri Lanka but more recently wheat, mainly in the form of bread, has become popular due to its convenience.

Rice The nutritional value of rice varies depending on variety and its mode of processing. The most common varieties of rice consumed in Sri Lanka are Bg 300, Bg 352, Bg 358 etc. The main forms of rice depend on processing. Wet processing entails par boiling where paddy is heated in water to 80 - 100?C (past the gelatinization point of starch so that vital nutritional ingredients present in the outer layers, namely the pericarp (high in dietary fibre) and the alurone layer (high in protein and vitamins B1, B2 and B3) are taken into the grain and not lost.

Common parboiled varieties (samba) are Bg 358, Bg 360 etc. The outer layers may be red/brown or white. Earlier this was thought to be nearly a pigment with no nutritional significance but more recently research has shown that this red colour is due to one or more of a family of Compounds known as anthocyanins which slow down the breakdown of starch in the intestine and therefore decrease the rise of blood glucose. This and the retention of dietary fibre makes red parboiled rice the best type for diabetics. It is possible that white parboiled rice has compounds similar to anthocyanins and as there is no loss of dietary fibre it too can be helpful to diabetics.

The other type for rice comes from dry milling. Here some of the pericarp and aleurone layer is lost but not all. Rice milled in this manner is called Kekulu rice. Depending on the variety the rice may have red or white pericarp. Typical varieties the consumer prefers are Bg 300, Bg 352 etc. Highly polished (white) rice is often imported here and the nutritional outer layers are lost.

Basmathi is an aromatic long grain white rice which is imported from countries like India and Pakistan. Average nutritional composition of rice is - protein 7.5%, fat 1%, carbohydrate 76% and energy 346%.

Rice is traditionally eaten boiled but may be milled to flour to make traditional Sri lankan preparations such as hoppers, pittu etc. However bread cannot be made from 100% rice as it has no gluten (see below for details) forming proteins.

Wheat Wheat is not a crop grown in Sri Lanka. It is totally imported and used as wheat flour for preparation of bread, biscuits, buns and other bakery products. Whole wheat is most nutritious and has a composition; Protein 12-14%, Fat 1.5%, Carbohydrates 69.0, Energy 340 Kcal.



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Atta flour is made of whole wheat and this is used for the preparation of Chapathi in India. Brown bread which is not popular in Sri Lanka is supposed to contain a certain percentage of whole wheat flour together with wheat bran, kurakkan flour etc. Generally the outer layers of wheat are progressively removed and the extent of removal is inversely proportional to what is known as extraction rate. That is, if 25% of the outer layers are removed the extraction rate is 75. A major wheat flour processing company moved into Sri Lanka in the 1970s and negotiations with the Government made it compulsory that extraction rate was 72 and moisture content was specified. This was unlike what happened prior to this agreement which was virtually a "free for all".

Now there are two wheat flour producing factories in Sri Lanka and the government imports and supplies the wheat grain to them. The resulting wheat flour is distributed to the consumers by the government. This wheat flour is of 72% extraction rate.

The importance of extraction rate is in the fact that the lower the value, the more nutrients are lost. There are critical values for rapid loss of each nutrient. These are called critical extraction rate values. For example for vitamin B3, Iron (ferrous) and Vitamin B1, the critical extraction rates are 85, 80 and 75 respectively. Other disadvantages of losing the outer layers of the wheat grain are lowering of vitamin B2, calcium, lysine (essential amino acid) and dietary fibre.

The advantages are the white colour of the wheat flour produced, which consumers prefer, lowering of fat, increase of energy and lowering of a compound called phytate. Phytate is known to be a metal nutrient binder, but it is not so serious a problem in the region as many Asians like Sri Lankans who have an enzyme called phytase in their intestine which destroys it, releasing the metal ions.

Wheat flour can be made into bread because it has the ability to form a tough, elastic protein called gluten. Gluten traps the carbon dioxide from yeast in bread and allows the loaf to rise to give the characteristic texture of bread. Among the starchy staples only wheat and rye have gluten forming proteins. Maize (corn), Sorghum, Kurakkan, Rice, Manioc, Potato and other starchy staples do not have gluten.

Therefore in the event of rising prices of wheat and a rice surplus it is not possible to make bread with 100% rice unless gluten or a gluten substitute is used. It is also interesting to note that gluten is a by product in the western world where wheat starch is produced in large quantities. Therefore there is a possibility to add gluten to indigenous flours in baking. However there are people who are allergic to gluten who develop a condition called celiac disease. Therefore gluten free bakery products are getting popular in certain countries.

For Sri Lanka the solution is the use of composite flours. A composite flour is a mixture of wheat flour and an indigenous flour combined in correct proportions which could be used in the preparation of bread and other bakery products. The composition of composite flour depend on the types of cereals, pulses and root crops available in the country. A drawback in the implementation of a composite flour programme is the non availability of indigenous flours in adequate quantities in correct quality.

For a country like Sri Lanka a mixture of wheat and rice mixed in correct proportions subjected to strict quality control would be the answer for the rising wheat flour prices. Here mixing in the correct proportions are the keywords which has to be done under strict scrutiny in order to obtain a loaf of bread acceptable to the consumer in appearance. Ideally mixing could be done in centralized locations. A



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substitution level of 10-20 percent of indigenous flours could be recommended provided the correct training and technology is given to the bakers.

When local grains are used in food preparations, there is a possibility of using unpolished grains adding more fibre to the diet which is beneficial for diabetics. It is interesting to note that recent research has revealed that of the Sri lankan traditional breakfast foods, "roti" is best for diabetics - better than pittu, hoppers etc, no matter the source of the flour.

Pioneering efforts to introduce indigenous flours to bakery products were done by Ceylon Institute of Scientific and Industrial Research (now Industrial Technology Institute). Twenty percent rice incorporated bakery products were formulated and introduced to bakery industry in the seventies.

Several open days, seminars and exhibitions were held at ITI in order to promote this concept but the fluctuating prices of rice discouraged the bakers to continue it indicating the need for a strong national policy to implement this program.



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ICT



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Going mobile: the future of computer technology

The ICT and BPO Era of Sri Lanka Welcome to the twenty ninth edition of the regular column "ICT and BPO Catalyst - To Make Sri Lankan Economic Dreams a Reality!" Here in this column, with the support of The Island – Financial Review, we are on a journey to increase the awareness on Information and Communications Technology (ICT) and Business Process Outsourcing (BPO) sectors that are set to play a crucial role in our economy in this new development era of our country.

Our industry is lucky to have some school children who are keen to study more about ICT/BPO and do events in relation to it. I feel like some seeds have already been planted so that we will have big trees in the future. Tomorrow, on March 8th, the ICT Society of Visakha Vidyalaya is organizing their 2011 ICT Day where over 30 schools have been invited with an exciting program in place. The theme of the event is Mobile Technology. The Visakhians have invited me as their Chief Guest at this event, and I am looking forward to it. Today’s column is to mark this event and is presented on the same theme.

Mobile Technology Mobile technology is a collective term used to describe the various types of mobile (movable) communication technologies. Mobile technology is exactly what the name implies - technology that is portable. A simple two-way pager marked the entry of mobile technology at the beginning of this millennium. But today it has come a long way and evolved into things such as GPS navigation systems, web browsing, Instant Messenger clients, and hand-held video gaming systems. Many experts argue that the future of computer technology rests in mobile/wireless computing.

Examples of mobile ICT devices include:

=Laptop and Netbook computers =palmtop computers =Personal Digital Assistants (PDA) =Mobile phones and Smart phones =Global Positioning System (GPS) devices =Wireless debit/credit card payment terminals



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Personal Digital Assistants (PDAs), are devices that run cut-down versions of ‘standard’ office software packages. The small size of handhelds can make extended use inconvenient, but they’re ideal for remote access to email, schedules and documents. Some PDAs can also be used as mobile phones.

Most laptop computers and netbooks would give you the full functionality of a desktop PC and can handle the full range of software. If you need to access the internet and check emails while travelling, or connect to your office network, you can connect a laptop or netbook to the internet via a landline, a mobile phone, or wireless data services. Handheld computers can often be linked to a mobile phone for exchanging information with other computers.

Mobile devices use a variety of communications technologies such as:

=wireless fidelity (WiFi) - A type of wireless network connectivity technology =Bluetooth - Connects mobile devices without physical wires

=Third Generation’ (3G), Global System for Mobile communications (GSM) and General Packet Radio Service (GPRS) data services - Data services for mobile phones

=Dial-Up Services - Data networking services using modems and telephone lines =Virtual private networks (VPN) - Secure access to a private network

With above technologies, it is therefore possible to network the mobile device to a home office or the internet while travelling.

Mobile computing can improve the service that businesses offer their customers. For example, when meeting with customers sales people can access the Customer Relationship Management system - over the internet - allowing them to update customer details whilst away from the office. Alternatively, companies can enable customers to pay for services or goods without having to go to the store.

More powerful solutions can link you directly into the office network while working off site, for instance to access a database or accounting systems. Following are some examples:

=View bills/invoices =Check prices and stock availability =Place online orders

This leads to great flexibility in working. Enabling working from home or working while travelling are some examples for such flexibility. Networking ‘hot spots’ can be seen in public areas in western countries that allow connection back to the office network or the internet. The growth of cloud computing that we discussed last week has also impacted positively on the use of mobile devices, supporting more flexible working practices by providing services over the internet.

Drawbacks There are costs involved in setting up the equipment and training required to make use of mobile devices. Mobile ICT devices can expose valuable data to unauthorized people if proper security measures are not taken to ensure that the data are kept safe. Data security can be an issue with mobile devices if those devices get stolen as well. So, appropriate password protected security measures needs to be in place but still has significant risk.



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Smartphones A smartphone is a mobile phone that offers more advanced computing ability and connectivity than a usual mobile phone. They are in fact like handheld computers integrated with a mobile telephone. I have used one of them and it has really helped in my personal and professional work.

The next generation of smartphones is expected to be context-aware, taking advantage of the growing availability of embedded physical sensors and data exchange capabilities. One of the main features applying to this would be that the phones are going to start keeping track of personal data, but adapt to anticipate the information the user will need based on their intentions. Smart phones offer a wide range of additional premium applications, such as the GPS functionality, the ability to watch television and access the Internet, which is becoming a more common feature of mobiles.

Open Source in Mobile Phones One interesting phenomenon among many mobile products is the Google Phone, and its role in driving adoption of Open Source Software.

The first Google phone, called the HTC G1 or Dream phone, was released in 2009, marking a new era in mobile communications.

Developed for Google’s Android operating system for mobile devices, this handset was designed to compete with Apple’s iPhone by offering a wide array of Internet tools and connectivity features.

What makes Android so significant is that it was developed using the Open Source Linux platform and Google has released most of the Android code under Apache, a free software and Open Source licence.

Open Source software differs from proprietary software in that it makes its source code freely available to users for inspection, modification, re-use and distribution. This allows new, free applications to be developed by anyone with the interest or skill, with open source applications ranging from operating systems and web servers through to email, word processors, communications utilities, games and much more.

Once considered anti-establishment, open source has gained credibility and momentum in recent years, with both corporations and governments investing in open source technologies.

Google incentivized the first wave of Android applications with $10 million in prizes for the best submissions, attracting offerings that do everything from calling the nearest taxi to calculating your carbon footprint.

Google paved the way for professional developers to consider projects for the Android platform with the announcement of the Android market, a commercial store where approved applications can be sold and downloaded.

M-Commerce M-Commerce (Mobile Commerce) is the buying and selling of goods and services through wireless handheld devices such as mobile telephone and personal digital assistants (PDAs) by connecting to the internet or other computer related networks. This is similar in concept to e-Commerce where we buy and sell things over the internet using computers. Key difference in M-Commerce is its mobile in that it can be done anywhere! It’s also known as next-generation e-commerce. I hope to discuss e-Commerce and M-Commerce in more detail in the future.



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Interesting Facts According to US data, consumers use their mobiles for:

1. calls 2. SMS 3. Mobile web 4. Applications 5. Games 6. Social Networking 7. music.

A Motorola study conducted during the 2009 holiday shopping season indicated that 51% of shoppers used their mobile device to help make an in-store purchase decision.

A study by Facebook indicates that out of Facebook’s 500 million users, more than 100 million are using mobile phones to browse FaceBook.

Studies by Nielsen Mobile indicate 97% of mobile users will read an SMS message within 15 minutes of receiving it; 84% will respond within 1 hour.

Worldwide sales of SmartPhones increased by 24% (172.4 million units) in 2009 according to Gartner.

Nielsen found that 13.2% of US households accessed their bank account via a mobile device in Q2 2010 compared to 20.8% who accessed their bank account via the bank’s customer service call centre.

See you next week!

The Columnist

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

Telstra & Siemens. He has worked for companies that are significant players in the ICT/BPO industry such as Accenture and Virtusa. He leads the BPO training organization, Lanka BPO Academy (www.lankabpoacademy.lk). Yasas is happy to answer ICT/BPO related questions via this column – email him at [email protected] .



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CMI Sri Lanka Branch poses the question... Have you successfully managed IT in your company? Chartered Management Institute – UK, Sri Lanka Branch organized another in their regular evening presentations, on Thursday 3rd March at the Galle Face Hotel, where the main speaker Dr Dileepa De Silva addressed their members on the theme "Successfully managing IT in enterprises". In his presentation Dr De Silva addressed the following very pertinent questions an IT user should seek answers for.

1. Are you satisfied with the IT Solutions in your enterprise? 2. Are you making maximum use of IT in your enterprise? 3. Does IT deliver what it has promised? 4. How does IT impact your bottom line?

The presentation covered the aspects of why managing IT in enterprises is essential, the importance of aligning the IT strategy with the Business Strategies of an organization to gain the optimum return on investment in IT. Dr De Silva also stressed on the importance of being aware of emerging technologies and touched on the vital aspects of Risk Management and IT Security Policies. He explained why securing operations to prevent fraud within the organization is as important as preventing threats from outside.

He made the following recommendations for successfully managing IT in any enterprise.

* A very strong IT Strategy which aligns with Business Strategy should be available

* Innovations in IT Strategy should be woven throughout the strategy and not tagged on as a separate section

* Focus on innovation should be where it matters most in order to have the greatest impact

* IT should be represented and heard at the Board level

The presentation was followed by a very interesting panel discussion moderated by Mr. Ramesh Shanmuganathan, Executive Vice President and Group CIO of John Keells Holdings with Mr. Kamal Nanayakkara, Head of IT of Sri Lankan Airlines and Mr. V Vijayakumar, Chief Manager IT of Hatton National Bank as panel members together with Dr Dileepa de Silva. The panelists gave some interesting insights from their respective sectors which turned out to be a useful and thought provoking session to all participants.



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Environment



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Daily FT – March 10, 2011

New energy frontier The Bengal Sea Fan is the world largest elongated sea fan that occupies an area of 3 million square kilometers underneath the Bay of Bengal, bordered by Sri Lanka India, Bangladesh, Myanmar and Andaman and Nicobar Islands and Sumatra. The fan spreads to an area of about 2800 -3000 kilometres in length and 830 -1430 kilometres in width. At the northern end of the Bay, the sediment cover is estimated to be more than 16 kilometres in thickness and just over 1 kilometre south of the equator. The submarine feature of the Ninetyeast ridge divides the fan into two major lobes namely the main Bengal Fan and the Nicobar Fan which is also known as the eastern lobe. The fan extends from 20 degrees N latitude and based on recent sedimentological and channel system studies to beyond 9 degrees south latitude closer to the south eastern seaboard of Sri Lanka. The great size of the Bengal fan is attributed to the history of collision of the Indian tectonic plate with Eurasia and subsequent uplift of the Himalayas which occurred about 50 million ago during the Eocene period. But extensive sedimentation began only in early Miocene period (17 million years ago). Containing gas The eastern and southern off shore areas of India and Bangladesh are known to contain significant amounts of gas, and the western off shore area of Andaman Islands to contain gas hydrates and frozen methane gas. Large deposits of natural gas and oil are also known from the Rakhin continental shelf of Myanmar beyond the Preparis and CoCo Islands group. However, no proper assessment of the potential of these energy resources have been made so far due to conflicts between these States on their maritime boundaries and also delimitation of the continental shelf and the overlapping claims of the Exclusive Economic Zones (EEZs) beyond the 200 nautical mile limit. The potential for oil and gas is so significant that it might turn out to be the North Sea of South Asia if collaborative efforts are made by these three countries to exploit these renewable energy resources. Law of the Sea convention The United Nations Convention of the Law of the Sea (UNCLOS) which came into force in 1994 after receiving 60 ratifications provides for, in Article 76, the delimitation of the continental shelf beyond the 200 nautical mile EEZ if certain criteria such as natural prolongation of the land off shore and sediment thicknesses are satisfied. The extended continental margin under these circumstances will not include the deep ocean. Such extensions of the continental margin will be up to a maximum distance of 350 nautical miles. Accordingly under the provisions of Article 76, a Commission on the Limits of the Continental Shelf (UNCLCS) beyond 200 nautical miles was established and Annex 11 of UNCLOS outlines the composition and functions of UNCLCS. Article 4 of UNCLCS requires coastal States to submit the supporting scientific and technical data within 10 years of the entry into force of UNCLOS. This deadline was extended up to 2009 as the scientific and technical guidelines were finalized by UNCLCS only in 1999 and the 10 year period was from this date. Accordingly most countries submitted their claims to UNCLCS before May 2009 This time period was also extended for a State Party that was unable for lack of technical capacity to comply in good faith to the time limit. Accordingly Myanmar, India and Bangladesh submitted their claims to UNCLCS in accordance with Article 76 on 23 December 2008, 14 May 2009 23 February 2011 respectively. Sri Lanka submitted its claim under Article 76 of UNCLOS and Article 3 of annex 11 of the UNCLOS on 13 May 2009. The submissions of Myanmar, Sri Lanka and India were taken up for consideration during the 24 and 25 sessions of UNCLCS at New York between August –September 2009 and March –April 2010 respectively.



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Bangladesh made its submissions on 26 February 2011and will be taken up for consideration at the 28 session of the UNCLCS from 1 August -2 September 2011. Unresolved dispute In a note verbale dated 23 July 2009 addressed to the Secretary General United Nations (SG UN) by Bangladesh on the submission by Myanmar, indicated that there is a dispute over the continental shelf and the unresolved delimitation in the Bay of Bengal is considered as a dispute between the two countries. Further Bangladesh was of the view that having no competence over questions of baselines from which the breadth of the territorial sea is measured the UNCLCS should not be perceived as endorsing disputed baselines. Further Myanmar claimed a natural prolongation of its landmass through the outer edge of the Rakhine continental margin on the basis of morphology, geology and tectonics and this claim is disputed by Bangladesh. Another note verbale addressed to SG UN on 29 October 2009 Bangladesh had stated that the delimitation of the continental shelf as well as the EEZ between India and Bangladesh remains unresolved and subject to conflicting claims and ongoing negotiations. Bangladesh has rejected and continues to reject all delimitations claimed by India in the Bay of Bengal to the extent they infringe on the claims of Bangladesh as they are inconsistent with UNCLOS and general principles of international law. India’s landmass into Bay of Bengal Further, Bangladesh challenges the natural prolongation of India’s landmass into the Bay of Bengal from the western Andaman sector and the eastern Indian coastline and has initiated arbitration proceedings against India pursuant to Article 287 of UNCLOS and Annex V11. Sri Lanka and India in its notes verbale to the SG UN have maintained that Annex 11 of the final Act of UNCLOS which is an alternate method of delimiting the continental shelf is applicable only to India and Sri Lanka disputing Myanmar’s interpretation and application. In another note verbale to SG UN, Kenya considers that the “formulas “ in Annex 11 of the Final Act of UNCLOS can be applied to any coastal state upon valid demonstration by that State of the special conditions and the inequity that would otherwise derive from it rather than its geographic location. Sri Lanka’s claim of the continental shelf under Annex 11 of the Final Act of UNCLOS consisting of 60 turning points extending from the tri junction point of the maritime boundaries between India, Sri Lanka and Maldives will overlap with the area claimed by India under Article 76 of UNCLOS. The area that overlaps including the off shore western Andaman Islands is over 600 000 square kilometres. The submission by Maldives of the extended continental shelf in July 2010 will partly overlap with Sri Lanka in the south east. Bangladesh in its submission to UNCLCS in February 2011 maintains that the extended continental shelf is a natural prolongation of its landmass into the Bay of Bengal with its required supporting technical and scientific data and the areas are subject to disputes with India and Myanmar. Arbitral proceedings under Article 287 and Annex111 of UNCLOS were initiated on 8 October 2009. Proceedings were also instituted before the International Tribunal for the Law of the Sea on dispute of the maritime boundary with Myanmar and listed as case 18 of the Tribunal. SL’s continental shelf issue Sri Lanka also will have difficulties to extend its continental shelf as it is not a natural prolongation and also the challenge by Kenya on the restriction to any particular geographical area. It is quite evident that the above disputes clearly indicate the complexity of the scientific and legal interface where the UNCLCS can only interpret the scientific and technical data but not the legal connotations.



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It is also noted that since a large number of submissions have been received by UNCLCS by the deadline of May 2009 and the consideration of the determinations will span a period of over 15 to 20 years! UNCLCS is of the view that during this intervening period States may wish to take advantage other avenues such as provisional arrangements of a practical nature provided in Annex 1 of the rules of procedure of UNCLCS. The countries bordering the Bay of Bengal has a population of over 1.5 billion and are all developing states with enormous energy requirements that are expected to grow exponentially. There are compelling domestic factors that would influence sub regional cooperation in the future such as the ability of Myanmar to open up its hydrocarbon sector to foreign investment and trade. Similarly the possibilities of export of natural gas from Bangladesh to India have to be thought of seriously and diplomacy has to take political realities into account to achieve energy security. To this end the Bay of Bengal Initiative for Multi Sectoral Technical and Economic Cooperation (BIMSTEC) can play a significant role in practical arrangements by way of Joint Ventures between India, Bangladesh, Myanmar and Sri Lanka to exploit the hydrocarbon resources in the Bay of Bengal in disputed areas specially beyond the EEZs. The potential for hydrocarbons in the Bengal Sea Fan is enormous and with cutting edge technology, it will be possible to exploit even frozen methane gas as well gas condensates around the western Andaman Sea for the benefit of all the countries bordering the Bay of Bengal sometimes referred to as the Bengal Community. (The writer is a retired Economic Affairs Officer United Nations ESCAP and can be reached at [email protected] e-mail address is being protected from spambots. You need JavaScript enabled to view it )



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FCCISL Events



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AITT, FCCISL collaborate For capacity building : The Federation of Chambers of Commerce and Industry of Sri Lanka entered in to a Memorandum of Understanding (MoU) with Sri Lanka Freight Forwarders’ Association (SLFFA).

The collaboration between FCCISL and Academy for International Trade and Transport (AITT), the training arm of SLFFA is to develop and promote Professional Capacity Building Programs (PCB) towards the process of developing Knowledge and Industry Skills to Increase Effectiveness in Job Performance and Productivity in the Transport, Logistic and Supply Chain Sectors island wide and conduct the training programs through FCCISL Training Center Network. “Education and Training” continues to

be a vital component in addressing socio-economic development issues faced in many developing countries such as Sri Lanka. In this context FCCISL with an impressive track record in this field for over 14 years is committed to workforce development with special emphasis on the SMEs at the regional levels. With FCCISL’s regional network and close interaction with state sector establishments, FCCISL Training Centre Network will build upon work already done by the FCCISL-Chamber Partnership, in expanding its scope, and will also create important linkages between public and private industries. FCCISL having wide experience in the field of Education and Training since 1993, continues to be one of the leading private sector training providers. SLFFA was established in 1981 in association with the International Federation of Freight Forwarding Associations (FIATA), Switzerland with the objective of bringing all Freight Forwarders under one umbrella and with a view to institutionalizing and professionalizing the trade.

FCCISL President Tissa Jayaweera and SLFFA Chairman Tony De Livera exchanging the MoU. FCCISL Secretary General Dr Thusitha Tennakoon AITT CEO Peter Barbut and staff members of FCCISL were also present.



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Kelaniya University with FCCISL launch 'Future Entrepreneurs' program: Job seekers made job providers Industry leaders' experience to be shared: Carrier Guidance Unit (CGU) of the University of Kelaniya introduces a novel program to State Universities converting theory into practical scenario by making the university students as job providers not merely job seekers of the country thus changing the hardcore negative perception towards them as majority a burden to the country once they are out from the universities. This unique program is named "Future Entrepreneurs" and planned to implement with the support of the Federation of Chambers of Commerce and Industry of Sri Lanka (FCCISL) and the launch will be held on March 14, 2011 at the Kelaniya University Auditorium with blessings of Prof. Sarath Amunugama, Vice Chancellor University of Kelaniya and the University Grants Commission of Sri Lanka. The program will educate them on the concept of entrepreneurship, enterprise development, marketing in related fields, business and human capital management, legal aspects of business and many other required areas to be aware of by an individual who is aspired to be an entrepreneur. FCCISL will share their expertise in the entrepreneurship building exercise and facilitate students to listen to the success stories of leading entrepreneurs of the country who are great products of the Sri Lankan university system which may be unaware by the students. FCCISL believes that sharing experiences of these business heroes will be a definite energizer and a booster to strongly cultivate the idea to become a successful entrepreneur in the country after a few years of university education. Many leading entrepreneurs who can be role models of aspiration, success, achievement and resilience have joined hands with the FCCISL through its "Sri Lankan Entrepreneur of the Year" awards program in which helped to be known to the country after being awarded as the Sri Lankan Entrepreneur of the Year. About 500 students have given consent to participate at the launch from different universities which is more than expected by the organizers. Fifty students will be selected for further entrepreneurship training and competition based on the business plans submitted by them. Selected 50 students will be further given opportunity to undergo training on highly practical situations such as legal aspects, working with people, dealing with problems, preparing strategic business plans, sustaining and development of business. They will be covered via workshops, industrial training for experience and exposure and mentorship. As the second phase and sustainable initiative, CGU of the university and FCCISL plan to start a comprehensive program with second year students guiding them gradually to craft future entrepreneurship goals and guide them to be skilled in the required background such as obtaining related knowledge through different courses in addition to what they study at present and obtain exposure through interaction with industry leaders.

Documents

07th – 13th March 2011 alerts/en/2011/March 13, 2011.pdf · FCCISL News Alert Weekly Business Highlight 07th – 13th March 2011 3 7. BUSINESS • A business perspective of cricket