Sops for Nissan, Kyron & Amby

The government is pulling out all the stops in a bid to attract foreign automobile majors to assemble cars in Sri Lanka. At least two rounds of discussions were scheduled during the week to iron out certain impediments and improve the feasibility of such a move.

Speaking to The Sunday Times FT, Kumara Welgama, Minister of Industrial Development, highlighted one significant change that would attract the motor industry to invest here…

Foreign manufacturers have already rejected the minimum local value addition norms of 30% that had been stipulated. The local auto ancillary industry is at a nascent stage, they say, and components are not available to that extent. They have sought that the norm be relaxed to 15%, which would make investment worth considering because tyres, batteries and upholstery are available locally.

Indicating a refreshing sense of flexibility, Welgama expresses willingness to concede the concession. He says, “We can gradually increase the local value addition to 30% later”, as ancillary industries develop and grow. Another positive fallout of such a move would be the generation of employment at the assembly units that would be set up.

It is expected that, once that is approved, motor companies would seriously consider biting the bait. There are a few companies that are already lining up to set up assembly lines. These include Nissan Motor Company and some Korean carmakers – including SsangYong, which launched the ‘Kyron’ last year.

Hindustan Motors is also in contention. The company’s most visible product is the Ambassador, which has been ruling Indian roads for generations and is a quaint sight on Indian roads even today. Originally based on the Morris Oxford (UK, 1948), its dependability, spaciousness and comfort factor have made it Indians’ most preferred car for generations.

"Down with Trade Unions!"

Causes of Conflict at Workplace
The root cause of conflict at the workplace, where Trade Unions (TUs) are concerned, is that most of them have political agendas. Neville Joseph, Supreme Court Advocate, elaborated on this and other themes in an interview with The Sunday Times FT last weekend. He indicated that the trend was traceable to a slogan that TUs thrived on: “Down with capitalists! Down with employers!” That was a Marxist concept that permeated into our system, was blindly followed by the workers and has now boomeranged on us.

TUs can carry out a very important function in Sri Lanka, he affirms. They should be social partners whose role is to ensure productivity and enhance workers’ standard of living. However – excepting the Mercantile Union and the Bank Employees’ Union (“the educated lot”) – they have become political stooges of the government. As a consequence, even legitimate rights of workers are subjugated for political reasons, to appease the government.

What to Do When Management Is Unreasonable?
The main weapon that workers have is strike action, confirms Joseph. But, it is only as an ultimate resort that workers should strike work.

Before engaging in strike action, responsible TUs must agitate before the Commissioner of Labour for a settlement. There is a conciliatory process where workers can complain to the Commissioner and ask that the matter be referred to arbitration. While arbitration is going on, workers are working and livelihoods are secured.

Adequacy of Labour Legislation in Sri Lanka
Labour law is the most dynamic area of law in the world today because - unlike civil and criminal legislation - labour law affects the entire society through the working class. Being the ‘living law’, it must necessarily be dynamic, not static.

However, our labour legislation, being over fifty years old, is outmoded, opines Joseph. India has a National Labour Commission (NLC) under the stewardship of a retired Chief Justice. The NLC continuously measures changes in global labour standards, based on which it makes amendments and places them before the government for consideration. Hence, labour legislation in India is brought upto the required standard through amendments that are appropriate for the evolving environment.

An NLC on the footing of the Indian model is imperative. Sri Lanka has many erudite scholars, judges and TU leaders who can serve on the commission and evolve a law that is compatible with the changing circumstances.

The high cost of living is a matter for national debate, but a related aspect is the wage structure... Today, we are faced with a market where the buyer calls the shots. Employers say, ‘Paying Rs 6,000 or Rs 12,000 is not a problem, but will the buyer pay us? Or will we lose the market to China and India?’ A National Wages Commission can play a role by examining the problem holistically; establishing such an agency is the onus of the government. Before doing that, the private sector must improve productivity, says Joseph.

Luminaries Speak On Industrial Relations
Three space travellers aboard a rocket to the moon were explaining the reasons for their voyage:
The American astronaut says, “My country intends to dominate outer space.”
The Russian astronaut says, “My country must compete against the Americans.”
The Sri Lankan trade unionist says, “In my country, full moon days are holidays and – on the moon, every day is a full moon day.”

This joke was narrated at a seminar on ‘Conflict Resolution at the Workplace’ last weekend, to indicate the prevailing work ethic of trade unions in our country. The seminar was organised by Knowledge Agent, a company that offers a suite of training inputs through a faculty that includes professors and professionals.

Sri Lanka has witnessed an unprecedented wave of strikes in the public and plantation sectors recently. These highlight the adversarial nature of the relationship between managements and trade unions (TUs), which is a vestige of the country’s colonial past. In this context, the effective and tactful handling of TUs by employers would contribute towards minimising industrial unrest.

G Weerakoon, retired Commissioner of Labour (1982 – 1994), said that a major problem in dealing with TUs is the multiplicity of unions and their political affiliations. In a country with eight million workers, less than 30% of them are organised into unions. Nevertheless, there are as many as 1,600 TUs in operation. Unlike in South Korea and Japan, very few of these are enterprise-based TUs.

Many unions are controlled by outsiders with political connections and most employers would prefer not to deal with - or even recognise - them. This is perfectly legitimate, avers Weerakoon, because present labour laws do not compel employers to recognise TUs. The amendment to Industrial Disputes Act (No 56 of 1999) merely mandates employers to bargain with a TU having membership strength of at least 40% of the workforce.

After a country has ratified any Convention of International Labour Organisation (ILO), there is an obligation for organisations to comply with it. Sri Lanka has ratified ILO Convention 87 on ‘Freedom of Association and Protection of the Right to Organise’. Sharing information with the workforce helps in building up greater rapport between the two sides, observes Weerakoon. This is typically done through in-house bulletins and newsletters, to avoid disinformation and miscommunication.

In an address peppered with humourous anecdotes, Neville Joseph covered a wide range of issues. He identified two challenges confronting human resource management - to maintain harmonious relations and to have a contented workforce.

Thatcher’s Conservative government implemented labour legislation that curbed TU power. A classic example of the hard negotiation stance adopted was the twelve-month Miners’ Strike in 1984/85 that led to the rout of the union. In countries like Switzerland and Germany, public servants cannot strike. Joseph draws a stark contrast with the situation in Sri Lanka where “all strikes are legal.”

Joseph also narrated the case where the Joint Apparel Association Forum obtained a favourable Supreme Court verdict against the Port Trade Unions.

Caeving a Niche for Tourism

“We need to broaden tourism beyond the ten-day, three-city, operator-driven business… There is an economic rationale for attracting a higher percentage of niche tourists,” says Thilan Wijesinghe, Chairman of the advisory panel on Niche Tourism Products. In conversation with the Sunday Times FT, he identifies the Middle East, India and UK as markets in which he have the greatest opportunity to succeed.

Research on the niche segment reveals that getting from place to place by car is the foremost cause for dissatisfaction. While the time consumed is the stated reason, the root cause is poor connectivity and road conditions. Driving standards – or lack thereof – have also come in for some ridicule.

To cater to this segment, therefore, the need of the hour is infrastructure. The panel proposes that internal regional airports be upgraded “without spending big money”. While calling for domestic airlines to be encouraged, the panel recognizes the existence of security issues, due to which some aircraft have been grounded.

A programme to upgrade rail services through a public-private partnership is also under serious consideration. In addition, the upgradation of selected train stations is on the anvil. The panel has met Dullas Alahaperuma, Minister of Transport, in this regard.

Wijesinghe believes that a policy framework needs to be created and an enabling environment put in place first. Then, when times improve, the private sector will dive in and funding will be made available. There are also steps being taken for hotels and restaurants: de-bottlenecking approval processes for environmental clearances and liquor licences, for instance.

The advisory panel on niche tourism products includes stalwarts like Geoffrey Dobbs, Viren Perera and Nayantara Fonseka. “We plan to educate, inform and advise the Ministry of Tourism on a public relations campaign,” discloses Wijesinghe.

Hotelier’s Guide to Success

An eye-catching poster outside the Chairman’s office at Aitken Spence Hotels reads: “The key to happiness is having dreams; the key to success is making dreams come true.”

So, how does Aitken Spence Hotel Managements (ASHM) intend to make the ‘third dimension’ dream come true? The Sunday Times FT spoke to Anil Udawatte, Director – Sales and Marketing, to find out. Explaining the background, Udawatte said, “Our Director, Gemunu Goonewardene, came up with the health dimension concept and we sounded out the head chefs, who found it exciting.”

Wouldn’t a concerted, Tourist Board-backed effort have had the potential for greater success? “As a commercial organization,” explains Udawatte, “we have to be commercially responsible. If everyone had been involved, things would not have been as smooth as just one company taking the decisions. ASHM now has the first-mover advantage. We will make a start and we would like everyone to get onto the bandwagon.”

ASHM has ten properties in Sri Lanka, of which Kandalama and Ahungalla are Heritance brand properties. The company has five properties in the Maldives. This month, it also opened two in India - a 68-room hotel in Trivandrum and an 18-room boutique property in the Andaman Islands.

Speaking of the target audience, Udawatte says, “We are initially targeting Sri Lankans and will gradually take the promotion across the world.” At the Heritance properties, 75% of the guests are foreigners, and 25% are locals. However, the company is focusing on the domestic clientele first “because it typically takes longer for foreigners to get accustomed to our cuisine.”

“Over the coming month,” says Udawatte, “we will implement a special buffet corner with indigenous cuisine, in addition to the existing buffet. This will be kicked off at our Heritance properties”, where occupancy is currently at sub-40% levels and rooms are available at LKR 8500 (approx US$ 77) per day.

Upmarket, widely-traveled tourists from the West look for authentic experiences when visiting countries on holiday. Their palate adjusts to cuisines from Thailand, Vietnam and India. However, Sri Lanka is not attracting these top-end customers at the moment. “What we do get are low-end tourists who prefer cornflakes, butter and jam, cheese and cold meats. We are basically serving Western food to Westerners,” says Udawatte. “On the contrary, Indians promote their food well. There, 75% of the buffet is Indian, with very little cold meats and salads.”

Talking of the ‘third dimension’ promotion, Udawatte says, “Most people in Colombo do not know how to prepare authentic Sri Lankan cuisine, what spices and ingredients to use and what benefits can be derived.” The promotion will be backed by in-room publicity on TV channels, with menu cards detailing the health benefits. Over time, ASHM will also advertise this USP with ‘healthy weekend’ packages.

“You have two options,” Udawatte concludes, “Either you can eat or you can dine. Eating can be done anytime, anywhere, even on the wayside. But fine dining will never go out of fashion.”

"Growth as a Panacea"

On the sidelines of the Sri Lanka Economic Summit 2007 (SLES-07), Mahen Dayananda, Chairman, The Ceylon Chamber of Commerce, spoke exclusively with The Sunday Times FT. Some excerpts:

Objectives of SLES-07
The main objective is to address the huge mismatch in regional development. The Western Province has a per capita income approaching USD 2,000, which is very impressive. However, the situation is very different in the regions. Moneragala is at USD 600; we cannot justify this disparity any longer.

The main issue that we intend to address is the development of infrastructure, which is so important in addressing imbalance. The more regional imbalances there are, the more the potential for dissatisfaction.

The Western Province is so active and productive because we have much better infrastructure than the regions do. We have the port; the only international airport in the country is 45 minutes from Colombo. We want to come to some affirmative action to address these issues.

Widening growth will address several issues apart from economic development - social issues, most definitely. It can contribute to a rapid settlement of our ethnic problem; with economic prosperity, the people’s mindset changes.

SLES: History and Achievements
There have been five ‘business conventions’ previously. This is only the second economic summit. The significant difference is that we have been upgrading. The main point of departure is the increased number of participating ministers. We are doing this with a chosen partner - the Board of Investment, to add value by encompassing a much wider spectrum.

We are looking at the Indian model where CII (Confederation of Indian Industry) has an annual economic summit that is on a public – private partnership basis. Most leaders relevant to economy participate at the forum: Prime Minister, Finance Minister and Commerce and Industry Minister. That is what we are trying to replicate.

Foreign Investment: Sectors
Foreign investment is definitely required to develop our infrastructure. We most definitely need inputs - not always investment, but foreign technology.

We also need to add value to a number of our commodity exports. Tea and spices are classic examples of where we need to go up the value-addition chain. For that, we need foreign technology, specifically for upgrading quality standards. Today, tea has moved from being a bulk commodity to being an ISO-certified product. That’s no longer enough; we have to be HACCP-certified. All this means investment, technology, and foreign inputs.

On IT and BPO: HSBC, ‘the world’s local bank’, has a BPO facility in Colombo that was entirely driven by foreign input in terms of how it was set up. Similarly, the font of IT in Asia is India, whose input is going to be essential.

To Avoid ‘Talk Shop’ Label
Extensive notes will be maintained by the CCC throughout the summit. We will extricate the important issues that emerge from the deliberations. Having done that, we will prepare a document encompassing them all and present it to the government, who will take it very seriously.

Stopping a Galloping Beast

A good economist is a lot like inflation – difficult to keep down. And Harsha de Silva, Lead Economist, LIRNEasia, was as irrepressible as they come when The Sunday Times FT cornered him on the sidelines of a public event for an exclusive chat.

During de Silva’s presentation earlier, he had highlighted a graph indicating a high correlation between inflation and the Central Bank’s (CBSL) net credit to government. That represents extra money that was printed, he explained, which resulted in inflation.

In Zimbabwe, inflation rockets skyward at the incredible rate of 3,700% per annum. “In such an economy, it is more appropriate to measure inflation by the day,” quips de Silva. While Sri Lanka’s inflation – at 16% - seems tame in comparison, it is still the country’s economic enemy number one.

“Prices have been going up because of irresponsible printing of money by the CBSL,” says de Silva. “Since January, they have stopped printing money because they were forced to.” The good news is that if printing money pushes up inflation, stopping will bring it down as fast. That will happen “if Cabraal and crowd walk the talk”, says de Silva.

Explaining that monetary policy has also been tightened, de Silva says, "There are two things CBSL can do to reduce inflation: stop printing money – which they have done – and increase interest rates – which they are now doing.”

The flip side of the coin is that borrowings are becoming more expensive for corporate entities. “Even the prime lending rate is in excess of 20% - and that can be accessed only by AAA-rated companies like Hayleys and John Keells. Small-timers have to pay 30%-plus.” Doing some crystal ball-gazing, de Silva predicts that interest rates will descend only when inflation declines to 10%.

The Indians Are Coming!

Prema Cooray, Chairman – Sri Lanka Convention Bureau, describes India as “the obvious place to go to promote tourism”. He will be leading a team to that country to tap the corporate meetings and conferences potential there. Prior to his forthcoming departure, however, he is in a reflective mood, casting his mind back ten years, when - during the late 1990s, “There were three problems - Flights were very few and always full; Indian Airlines had an older fleet and couldn’t increase capacity.

“Secondly, any Indian had to obtain a visa to come to Sri Lanka and it used to take three or four days to get a visa. Today, of course, Sri Lanka is the only country in SAARC where a leisure tourist gets a visa on arrival.

“Third, India’s currency regime was restrictive, not allowing people to take foreign exchange out, even on the current account. We worked on clearing those impediments and we have no problems in those three areas today.”

Besides, travel packages to Sri Lanka were very expensive compared to available options like Singapore, Malaysia Thailand or Mauritius. At that time - in November 2001, Udaya Nanayakkara, the former SLTB President, and Cooray recognised that people had a huge fear of traveling. (This was four months after the LTTE attack on the Katunayake International Airport and two months after 9/11.)

“SriLankan Airlines was approached to make an attractive offer. They asked us to put a package together - and they gave us a thundering ‘Buy One, Get One Free’ offer. You won’t believe what price does to people… 20,000 Indian leisure travelers visited in four months! Since that day, we have not been able to stop the Indians from coming,” says Cooray contentedly.

But Cooray believes that we have not touched even the tip of the iceberg yet and that it makes sense to go to India at this time… Taj has more than 60 to 70 rooms booked on meetings; which itself is a ready-reckoner that the market has potential… We have done our research with our Indian counterparts, with Taj and with the corporate community.

Tourism Feeds A Million

Tourism does not appear in the national accounts because it is a ‘demand-side activity’. Unlike manufacturing and agriculture (both supply-side), demand-side activities are defined in terms of who consumes the product. When any industry sells to a tourist, that is ‘tourism activity’, explains UNWTO Consultant, Stan Fleetwood, in conversation with The Sunday Times FT.

“If you understate it, it’s not recognised,” Fleetwood says, justifying the purpose of Tourism Satellite Account (TSA). TSA addresses the problem by giving tourism statistics the same official recognition as supply-side activities have.

Fleetwood continues: “In Australia, before we got TSA in 2000, the Treasurer didn’t believe the figures that our consultants put together. After TSA, the Minister for Tourism could say, ‘Tourism is 4.5%... bigger than coal exports, bigger than wheat.’ The Treasurer couldn’t argue with that because it was produced by Australian Bureau of Statistics (which comes under the Treasurer)!”

“Visitor arrivals and earnings in foreign currency are only one part of the story”, elaborates Prema Cooray, Chairman of USAID’s Tourism Cluster. In the local context, Cooray says, “There is a huge informal sector in tourism - handicrafts, curios, gems & jewellery, spice gardens, batiks... Suppliers of these items live on tourism. There are 60,000 persons directly employed in the tourism sector.

“But for every direct employee, there are at least three or four indirect employees. If four, that means 300,000 people altogether. Multiply that by a family unit and you will realise that tourism feeds one million people.”

From Kandalama to Sinharaja

The stunning architecture of Kandalama Hotel has been described as Geoffrey Bawa’s ‘best expression’. Testifying to the genius of the man, Prema Cooray recollects his first impressions of the site, “When I landed by helicopter with Geoffrey Bawa, I couldn’t imagine how you could even build a house there.”

The process of building the hotel was accompanied by unprecedented protests. "Environmentalists took us to task,” says Cooray. “But we managed to survive the onslaught of protests that came in from NGOs, environmentalists and even the Opposition - and built this hotel. There were more than 600 newspaper articles during that controversy.” Cooray is writing a book about his experiences with Kandalama, which is expected to be on the shelves in about a year’s time.

The Sinharaja Rainforest project, of which Cooray is Chairman, is an extension of the vision to take nature tourism forward. A world class eco-lodge is being put up, which will adopt best practices in planning and construction, materials used and preservation of environment. The eco-lodge is being designed by international experts and will have a canopy walk at the treetop level. There will also be a research facility for thirty scientists.

Competitors in the tourism industry – Aitken Spence, John Keells, Jetwing and Hemas - have joined forces to invest in this venture. “USAID is chipping in with a grant of US$ 900,000 for the environmental side,” indicates Cooray.

Balanced Duet: Maldive Fish..!

Mohammed Jaleel, the Maldives’ Minister for Economic Development and Trade, spoke to The Sunday Times FT on the sidelines of the inaugural meeting of the Sri Lanka – Maldives Bilateral Business Council.

“Presently, we import a large proportion of our requirement of vegetables, meats and fruits from Sri Lanka. However, we also import our requirement of high value-added food products from Australia, Europe and Singapore,” Jaleel said. The challenge, according to him, lies in identifying those areas of the supply chain where the Maldives and Sri Lanka can work together to increase trade.

This would not necessarily tilt the balance of trade - already in favour of Sri Lanka – further “if these are joint ventures“, opines Jaleel. Besides, “We are also looking to increase our exports, mainly of fish and fish products, to Sri Lanka,” says Jaleel. “There’s plenty more that Sri Lankans can take.” Maldive fish already constitutes 72% by value of the Maldives’ export basket to Sri Lanka.

Trade barriers seem to be a bigger concern for Jaleel: “We have issues about putting certain items on a sensitive list. For small countries like ourselves, it’s no good for either.”

“The way forward is to have a reciprocal dialogue to eliminate trade-distorting tariff barriers in a time-bound manner,” says Jaleel, “We can then work together on creating trade-enhancing measures… In any case, we are all bound by SAARC and SAFTA rules on eliminating trade tariffs within a particular period.”

J Kehelpannala, the newly-elected President of the Executive Committee, is Executive Vice President at John Keells Holdings. In his opinion, there has been a lot of investment made by Sri Lanka in the Maldives – which ought to be reciprocated. “We should also look at new initiatives in other areas,” he said.

Media: Impartial Assessor?

Al Ries, the father of Positioning, wrote: “Marketing is not a battle of products; it’s a battle of perception.” Perceptions are built by communication – and communication is a lot more than what a company says about its products. It’s more about what consumers say.

In an exclusive conversation with The Sunday Times FT last week, Jayantha Sittampalam, Managing Director of Cameron Pale & Medina, elaborated on this theme. “The logic is simple”, he said. “Advertising works better if it is believed because then it would be acted upon.” This ‘believability factor’ can be increased by using third party endorsements.

YES
People do not believe advertising but look at the media as good intermediaries who will test products/ services. “If you have a product that is original or different, it should be in the news. This works best with PR”, says Sittampalam, “Advertising should serve as a reaffirmation of your value statement.”

Public relations is better than advertising at building a brand, argued Laura and Al Ries in their 2002 book, ‘The Fall of Advertising and the Rise of PR’. The media’s role, therefore, is to make fair assessments. Citing the ‘Top Gear’ programme on BBC, Sittampalam says, “That presenter, James May, can sell cars like this (snaps his fingers)!”

NO
Dr Dannielle Blumenthal has held positions at Young & Rubicam's futuristic trend consultancy and served as director of the Institute for Brand Leadership. Writing in brandchannel.com, she offers a counterpoint: “At that time, they were right; advertising had indeed lost credibility while the media still had it.

“But today, one can no longer be so sure,” Dr Blumenthal continues. “In an age when news releases regularly substitute for real news, people have learned to be skeptical about the media’s objectivity.”

Who Will Bell The Cat?

M B S Fernando, Chairman of the Road Development Authority (RDA), has views that are somewhat radical but certainly worthy of consideration. Talking to The Sunday Times FT last week, he said, “To solve our transportation problem, we need to invest on public transport systems instead.”

The occupancy of an average car plying on the roads is only 1.3 passengers. A bus built for forty, however, carries one hundred commuters. Fernando points out that this represents uneconomical utilization of available road space – and leads to traffic congestion. The problem is that we are not paying adequate attention to improving public transport and infrastructure.

Who will foot the bill? Fernando proposes that the money be raised from private car owners. “We import 400 million litres of petrol,” he says, “most of which is consumed by car owners... Charge higher prices for petrol and invest the extra proceeds in public transport.”

If we were to increase the price of petrol by Rs 100 per litre, Fernando suggests, that could generate Rs 40 billion. Even with lower demand, we would generate Rs 20 billion to invest in state-of-the-art buses and trains, which are clean and run according to timetables.

The only reason why such a price increase would not be popular is because chairmen of corporations and heads of departments decide policy. These are the very persons who enjoy free cars and petrol as a perquisite! But Fernando has a sugar-coated solution for that too…

It costs Rs 75,000 per month to maintain a car for a public servant. Instead, Fernando suggests that Rs 50,000 be added to his salary in lieu of the perquisite. If the public servant uses public transport, he will still be able to save Rs 35,000. Any takers?

Tourism on the Front Foot

Mahela’s scintillating stroke-play and Murali’s mesmeric bowling were the cynosure of all eyes during the World Cup semi-finals and finals. However, amidst the spectators, one could not help noticing an enthusiastic group of supporters. They were flaunting boards emblazoned with traditional Sri Lankan masks and were prominent enough for the cameras to focus on time and again.

Therein lies a tale of innovative Marketing and creativity. The attractive blue boards featuring cricketers and masks were developed in Colombo and dispatched to the West Indies. The package also contained Sri Lankan flags, Sri Lanka Tourism Board (SLTB) caps, T-shirts and banners. The messages on the boards were subtle and understated. Anything more overt would have been considered ‘commercial’ – which cameramen have been trained not to focus on.

The group of thirty Sri Lankans studying in the USA was upgraded so that they could be together in one enclosure, to enhance their collective visibility. This initiative was the brainchild of the SLTB, implemented in collaboration with our embassy in Washington.

To incur this expenditure – albeit small - soon after March 2007, in which month tourist arrivals declined by 36%, takes foresight and guts. A multiplicity of factors – from adverse travel advisories to the Cricket World Cup - had contributed to the decline.

In his wood-paneled office, Renton de Alwis, SLTB’s Chairman, exuded optimism while talking exclusively to the Financial Times on Thursday. “When you’re not doing well,” he proclaimed, “be seen in the best of places!” There is a palpable sense of excitement in his voice as he describes the board as ‘dream sellers’ whose “business is to be positive.”

Immediately after the famous victory over New Zealand, the SLTB released a message congratulating the Sri Lankan cricket team at 4 o’clock in the morning!

Single-Digit Inflation?

Sooner Than You Think!

Over the past year, prices – as measured by the Colombo Consumers’ Price Index (CCPI) - have increased by 19.5%. Against this backdrop, the words of Leon Henderson, the American economist, sound ominous. He said, “Inflation is like pregnancy. If you don’t do something about it quickly, it costs you twice as much.”

So, the Central Bank of Sri Lanka (CBSL) has been doing something about it quickly… On the sidelines of a public lecture on Thursday, H N Thenuwara, CBSL’s Assistant Governor, explained: “The very tight monetary policy that we are now adopting will have an impact on future inflation.”

With the CBSL having met reserve money targets during Q1 of 2007, prices have actually come down during this period! This fact has not been reflected in headline inflation numbers, which are typically reported on an annual point-to-point basis.

The removal of the oil subsidy last year resulted in a one-off increase in the administered price of petroleum products. Largely due to this bold decision and consequent trickle-down effects, inflation for the three months March to June 2006 stood at a whopping 12.4%.

“Removal of the oil subsidy helped bring down the budget deficit and was a favourable monetary policy measure in the medium- to long-term”, explains Dr P Nandalal Weerasinghe, Director of Economic Research at CBSL. The subsidy cost the exchequer Rs 23 billion during 2005 and Rs 9 billion during 2006. Weerasinghe also expects that CBSL’s monitoring mechanisms will help reduce inflation to a desirable, single-digit level by end 2007.

With the statistical blip caused by the subsidy removal being factored out by June 2007, analysts are predicting a gradual decline in reported inflation data. Indications are that, barring unforeseen circumstances, inflation will tend towards 10% by June itself.

"Plumber Earns More than Engineer"

We have, in recent months, observed increasing attention being paid to Sri Lanka’s education system. The US Ambassador recommended that private universities be allowed to exist alongside public universities. Last week, the CEO of Imperial Institute of Tertiary Education echoed these views, views that are valid and fairly universal.

However, while we focus on the tip, we have been ignoring the iceberg… There is mainstream tertiary education (represented by colleges and universities). And there is also education off the beaten track – vocational education. In the latter case, the obstacle is not so much the lack of earning potential or opportunity, but the lack of social status associated with many vocations.

Take construction craftspersons, for instance. A member of the National Education Commission confirms that “a mason, carpenter or plumber is able to earn more than a graduate civil engineer”! This has much to do with the distorted demand-supply position. The Minister of Construction & Engineering Services rightly seeks to remedy that by certifying and glamourising the low-supply trades. Call a mason a ‘Masonry Technician’, he suggests; apparently, a rose by some other name would smell sweeter.

For a training certificate to infuse that elusive social status, it needs to be ‘recognised’. That’s where the National Vocational Qualification (NVQ) system comes in. Dr T A Piyasiri, Director General of Tertiary & Vocational Education Commission, opines that the NVQ system addresses this concern by:
(a) Making the courses relevant, so that institutes churn out competent craftspersons for various occupations and
(b) Formulating a unified qualifications framework, wherein competency standards will be specified for 100 different occupations by 2008.

Dr Piyasiri confirms curricula, standards and assessment criteria have already been formulated for 45 of these occupations. These include masons, carpenters, plumbers and household electricians.

Craftsmen: From A Lack to A Lakh

The number of masons and carpenters in Sri Lanka has been dwindling, and successive governments have failed to adequately address the problem. The recent appointment of a Minister for Construction & Engineering Services – Dr Rajitha Senaratne - is, however, expected to stop the decline and bring about resurgence.

Interestingly, the obstacle is not of earning potential associated with these crafts, but of social status (or lack thereof). “A mason, carpenter or plumber is able to earn more than a graduate civil engineer”, confirmed Prof. Dayantha Wijeyesekera, member of the National Education Commission, while delivering a lecture on ‘Tertiary Education Opportunities in Sri Lanka’ on Thursday.

Talking to Sunday Times FT about his vision, the new Cabinet Minister, Dr Senaratne, recently said, “I would like one lakh people to be trained for the local as well as foreign market in two to three years.” He also envisages that workers and contractors be registered, so that their welfare could be better looked after.

The Chamber of Construction Industry Sri Lanka (CCI) has an onerous responsibility in this regard, playing – as it does - the lead private sector role in the training of construction craftsmen. Dakshitha Talagodapitiya, CEO of CCI, explained the importance thus, “To attain a GDP growth trajectory of 8%, an immediate enhancement of construction capacity is called for.”

The CCI has therefore entered into collaboration with Lyons-based Bioforce Development Institute, a French agency that imparts training. The agency offers experiential training in masonry and carpentry skills. ”We pay the trainees Rs 100 to 300 per day as stipend, to learn”, says Talagodapitiya. This initiative is being facilitated by the French Red Cross, and is partly funded by Suntel - as a corporate social responsibility initiative. Two training centres, in Galle and Matara, are already operational. The CCI intends to start the next one at Hambantota.

The CCI is also involved in training supervisory staff for the construction industry, in association with City & Guilds.

But will this training be recognized and will it provide the much-needed social status? Dr T A Piyasiri, Director General of Tertiary & Vocational Education Commission, opines that the National Vocational Qualification (NVQ) system will address the recognition concern by:

(a) Making the courses relevant, so that they churn out competent and certified craftsmen for various occupations and

(b) Formulating a unified qualification framework, wherein competency standards are specified for 100 different occupations by 2008.

Dr Piyasiri confirms that the Commission has already provided curricula, standards and assessment criteria to the CCI. These have been made available for masons, carpenters, plumbers and household electricians, upto four different levels of competency. This will ensure that the training imparted will fall squarely within the ambit of what the NVQ system is attempting to establish.

Even from the viewpoint of livelihood development, training of construction craftsmen is an opportune initiative. Training can be imparted to even vulnerable sections, thus providing them with the opportunity for gainful employment in a relatively short time.

The craftsmen are coming... So, go ahead - plan that dream house!

MAS Holdings' Own Label in August-07

Decides Against Buying Vanina Vesperini Brand

Sri Lanka’s US$ 2.5 billion clothing industry finally seems poised to make the transition from tailoring to also building brands. This is a subtle but very significant move. It is common knowledge that margins at the front end of the value chain, viz in retailing, are more attractive than manufacturing margins. However, exporters have steered clear of investing in building or acquiring brands, preferring instead to invest in less risky fixed assets. Until now…

Ajay Amalean, Managing Director of MAS Corporate Solutions, revealed that MAS Holdings intends to launch its own signature lingerie label in India. The launch is scheduled for this August, perfectly timed to capitalize on India’s Diwali season, which is characterized by high retail spending.

Amalean added, “India is a growing market and the Indian woman deserves better… Our basic philosophy is to cater to customers’ requirements.” He was speaking exclusively to the Sunday Times FT on the sidelines of an event recently.

“And what about the Sri Lankan woman?” we queried… The same label will be launched locally during October/ November this year, in time for the Christmas shopping spree. Amalean also indicated that some marketing elements would be in place by May, at which time he would be willing to disclose further details.

MAS was, until recently, in talks with Vanina Vesperini of France to buy her brand outright. However, Amalean disclosed that MAS has shelved that plan since, finding it infeasible. “We have decided against buying the brand”, he disclosed, “but will use her skills as and when we need designs.”

MAS Holdings, the largest supplier to Victoria’s Secret, has a presence in eight countries. With a turnover of US$ 700 million, it is Sri Lanka’s largest intimate apparel manufacturer. It has forged an international reputation for making upmarket lingerie.

"Small Enough, Your Excellency?"

It appears that US Ambassador Robert O Blake, Jr is trying to play down his high-profile, accessible image. At a lecture recently, he prefaced the Question-and-Answer session with the uncharacteristic request that his comments be kept off the record.

“If any of the members of the press would like to write something,” Blake said, “you’re free to send me an e-mail saying that you’d like to use a quote. But I’d rather not have large, flashy headlines.”

This came close on the heels of a public difference of opinion between Blake and the government. The previous day, The Sunday Times had quoted Blake as asserting, “I do not believe the LTTE intended to target diplomats and UN officials” when it shelled Weber ground. The government responded, saying that it had enough evidence to prove that the Tigers had deliberately targeted the diplomats.

Earlier, Prakash R Mirchandani, President – Sri Lanka America Society (SLAS), was ostensibly unaware that the press would be present. He appeared inclined to evict the presspersons present from Blake’s talk, but wiser counsel prevailed. It was a classic example of the left hand not knowing what the right hand is doing. Tita Nathanielsz, Co-Chairperson of SLAS, had specifically invited – nay, requested – that a journalist and cameraman be assigned for the talk to be addressed by Blake.

The final denouement was that Mirchandani, in a gesture that reeked of condescension, permitted the press invitees to remain after obtaining Blake’s conditional consent. Whether the initial volte-face was at the behest of the US Ambassador remains a matter of conjecture.