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Business


 

Rising remittances: An Indicator of poverty and misery

Dr. Sirimal Abeyratne University of Colombo
Some people with high degree of responsibility proudly quote how increasing private remittance of Sri Lankan workers abroad cushion the growing current account deficit of the balance of payments. This is a shameless statement because increasing remittance reflects poverty and misery, not the prosperity of Sri Lanka.

Private remittance now accounts for over USD 2 billion as a source of foreign exchange earnings. This helped in 2006, as the Table shows, to cushion the huge trade deficit of about USD 3.4 billion by two-thirds so that at the end current account deficit was only USD 1.3 billion. Private remittance is secondary only to the exports of garments which earned USD 3.1 billion in 2006. All other export sectors remain far behind private remittance in terms of their foreign exchange earning capacity. The third largest sector – tea exports generate less than USD 1 billion and, the tourism sector less than USD half a billion.

Private remittance will soon become the top foreign exchange earning sector by pushing away the garments sector to the second position. As the Chart shows, the gap between private remittance and garments exports has been getting narrowed down over the years. As the trend continues to remain as such, it will take only few years more for private remittance to exceed garments exports. Balance of payments thus remains increasingly dependent on private remittance. And politicians and policy makers will start boasting about the achievement

Private remittance comes from about 1.5 million Sri Lankans working abroad as of now. Every year about 200,000 - 250,000 Sri Lankans are said to be leaving the island as migrant workers. A large part of the work force is going to the Middle Eastern countries as unskilled and semi-skilled workers, including housemaids. There is no question that the majority of them leave for Middle East due to poverty and misery in the home country. Provided that they get jobs and same wages here at home, most of them will definitely return back because for most of the people there is no place other than home.

The scenario can be looked at in relation to the long-term growth prospects of Sri Lanka as well. Countries looking ahead far away design their immigration policies to get the best human resources available in the world opening up doors for people with good education, skills, and investment funds. Students who read the alphabet of economics can tell that potential output (production boundary) of a country will grow due to the increase in productive resources and technology development.

Productive resources are human resources and man-made resources. Even for technology development these two types of resources provide the basis as technology development requires both material artifacts (man-made) and knowledge (education and skills). Sri Lanka is one country that builds human resources by spending public money and chases them away from the country for the benefit of another. There is an increasing trend of migration of educated and skilled people as well as people with potential investment capacity due to both economic and political reasons.

Therefore, increase in the number of migrants and migrant workers, leaving the country is an indicator of the increase in poverty and misery in the country. It is our own stupidity to boast about increasing remittance because it shows the rest of the world how we sustain poverty, misery and insecurity in the home country.

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JKOA introduces next generation Toshiba notebook PCs

By Quintus Perera
John Keells Office Automation (JKOA) partnering with Toshiba Computer Systems Division, Toshiba Singapore Pte. Ltd. jointly announced the introduction to the Sri Lankan market the value packed, new generation Toshiba range notebook PCs with greater capabilities in mobile and multimedia computing as well as enhanced security features.
The announcement was made at a function held at Cinnamon Grand Hotel, last week.

The product range announced included the sleek, extra thin and lightest models like QOSMIO G40, Protégé R500, Protégé M600, TECRA M9, Satellite M200 and Satellite A200.
QOSMIO G40 features an HD DVD Writer and a total 14W 2-way speaker system with subwoofer together with Intel’s latest Centrino Duo Processor technology among other things. Protégé R500 is the world’s thinnest and lightest notebook PC with 64GB Solid State Drive for mobile computing to the next level in super lightweight notebook PCs. It weighs only 799 grams.

TECRA M9 is designed for the elite professionals, and it offers enhanced productivity, reliability and performance to address the needs of a growing number of on-the-go professionals. The 14” Wide notebook PC designed to specifically meet the needs of high durability, provides exceptional performance and outstanding mobility. PORTEGE M600 starts at a weight of 1.89kg and sports a new attractive glossy onyx blue or titanium silver casing, Intel’s latest Centrino process technology and an exciting 13.3” Wide Clear Super View TFT display.
Other products introduced also have exceptional features.

Chaminda Perera, CEO, JKOA and Vice President, John Keells Holdings PLC speaking on the occasion said that the Toshiba ranges introduced will truly fulfil mobile computing experience. He said that JKOA has represented Toshiba notebooks in Sri Lanka for the last 15 years and are synonymous with quality, reliability and superior customer care.
Ivan Kam, Manager, Distributor Business (South Asia), Toshiba Singapore, said that the latest Toshiba launch provides powerful notebooks that can handle a wide range of tasks from entertainment to productivity. These notebooks come in stunning new designs and are built to meet modern needs such as mobility and shock resistance.

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Shipping Line as Port Operator

Will it destroy Port of Colombo as the Gateway to South Asia?

By- A Concerned Shipper
The Sri Lanka Ports Authority Act No. 51 of 1971 envisages, that all Ports in Sri Lanka continue to operate as Common User Ports. The concept of a Common User Port has enabled the Port of Colombo to emerge, as the pre-eminent trans-shipment hub of South Asia. The concession Agreement concluded between South Asia Gateway Terminals (SAGT) and the Sri Lanka Ports Authority (SLPA), has acknowledged the fact that rules for allocation of individual berths within the Port, may be made by the Minister pursuant to the Ports Authority Act and further, the Minister may also prescribe the time and manner in which vessels may enter and leave the port.
The survival and the growth of the Port of Colombo depend on its trans-shipment traffic, which is approximately 75% of the total container throughput. Trans-shipment cargo, particularly container cargo, is a major market pursued by many, if not almost all major ports throughout the world. Trans-shipment has the advantage of generating additional traffic, but has the weakness of being footloose. Sri Lankan exporters and importers have benefited immensely from low freight rates due to the Port of Colombo maintaining its position as the trans-shipment hub of South Asia. However, the penalty for changing ports of call for transit traffic is not very severe, and therefore, carriers tend to switch their trans-shipment ports with little provocation.
Maersk Shipping Lines, the world’s largest shipping line has increased its stake in SAGT to 26.25% and in the recent past has been receiving preferential treatment from this privately managed container operator- SAGT, thereby undermining the interests of many shipping lines. Due to the congestion prevailing in the Port of Colombo, whilst many shipping lines idle outside the port incurring considerable cost, Maersk Line vessels are berthed on arrival at SAGT. This arrangement contradicts the position envisaged in the SLPA Act and moreover, undermines the position of the Port of Colombo, as a Common User Port.
Now Hanjin Shipping is also in the fray, to build and operate Sri Lanka’s newest and most competitive terminal in the Colombo Port. Traditionally, governments have refrained from privatizing ports, due to the danger of discriminating between customers. It is a known fact, that global carriers have sought to secure their competitive edge, by concluding long term contracts for dedicated container terminals in major strategically located ports. Their reasoning being, that they need to control all stages of the transport chain, in order to remain competitive.
It must be emphasized however, that full control of the transport and logistic chain by one shipping line, is not in the best interest of our external trade. Competition between major carriers is intense, and with larger vessels coming on stream, and in order to fill these vessels, shipping lines try to secure local control of port facilities, and also feeder operations. Port handling charges are considered as of secondary importance, in achieving these goals.
Potential leasing partner for a Ports Authority are:

• Independent Terminal Operators
• Cargo Handling Companies
• Shipping Lines
• Forwarding Agents
• Inland Transport Operators

The World Bank in its publication titled ‘Alternative Port Management Structures and Ownership Models’, has highlighted the danger of shipping line driven container terminals creating a monopoly, and has stated, that the creation of a monopoly may conflict with the interest of the port, as well as the national economy. The report further goes on to state that:

1) Shipping lines may at any point in time decrease, re-route or altogether halt their services, as a result of changes in financial conditions or shifts in pattern of trade.
2) Shipping lines often merge or enter into cooperation agreement with other shipping lines, and such practices may result in changing sailing schedules, or the establishment of special ties with other ports.
3) Shipping lines may re-organise their sailing schedules for reasons of internal policy.
4) With consolidation and alliances amongst shipping lines, there is a growing concern of dominant market shares or monopolies or oligopolies developing within the local Port Industry, to the detriment of the national economy.
One may conclude by stating, that the principal objective of the Port of Colombo, is to maximize throughput and provide maximum benefits to the local economy, through reduced freight rates, more sailing opportunities and increase employment.

Can the Port of Colombo and our economy, be at the mercy of a shipping line, whose prime interest may be to drive out other shipping lines, through its Port management company and maximize profits, by increasing freight rates? As an island nation, are we willing to be held to ransom by a shipping line?

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Govt. to continue with niche market tourism

At the third monthly discussion with the media and the officials of the Tourism Ministry held last week at the Sri Lanka Hotel School auditorium it was conceded that there is no improvement in the tourist arrivals and the authorities are increasingly pursuing the niche market tourism on culture and on ancient Buddhist monuments

At the third monthly discussion with the media and the officials of the Tourism Ministry held last week at the Sri Lanka Hotel School auditorium it was conceded that there is no improvement in the tourist arrivals and the authorities are increasingly pursuing the niche market tourism on culture and on ancient Buddhist monuments within the countries of the Asian region.
George Michael, Additional Secretary to the Ministry of Tourism, said that despite many setbacks many things with regard to tourism are in place in Sri Lanka. He said that in Sri Lanka there are standards with regard to hotels, travel agents, tour operators and tour guides. He also said that they are intending to bring in standards in other areas like Ayurveda etc. where there is room for misuse.
Thilan Wijesinghe, Member, Tourism Advisory Committee spelling out the mode of operation of the niche market said that though it has been the practice of going for big hotel projects of 50 rooms and above, now they are promoting the kind of ‘boutique hotels’ by converting and upgrading old houses which have historical and cultural background with around five to six rooms.
Maxi Proctor, SSP, Tourist Police Division (TPD) answering media queries on paedophiles infiltrating Sri Lanka said that as various sellers approach the tourists to sell their ware and pester them to buy, sometimes among them there could be drug peddlers and paedophiles. He said that the police have received around 300 complaints of harassment from tourists in 2005/06.
He said that the TPD is not yet fully geared to meet the challenges as they are still awaiting resources and once the division is fully set up, there would be a number of officers trained for handling matters connected with tourism and they would be conversant in English and even some foreign languages.
- (QP)

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Thriving under uncertainty: A secret of success for businesses under pressure

By Andrew Rohanaraj
The beginning of the 21st Century has been manifested by a series of tumultuous changes in both the internal and external environment in a number of countries around the world. The concept of contentment has been replaced by unlimited degree of uncertainty that impacts on all areas of human life. The scenario has converted the conventional planning processes of the business establishments upside-down and has forced the decision makers to move into a new level of awakening. The paradigm shift has forced the organizations to push strategic planning for the future to take into account not only a greater number of factors but also known factors with unsubstantiated impacts and an increasing number of “wild cards” or unknown elements. The status of the business environment could very well vary from near certainty through some uncertainty to full uncertainty or wild cards such as an unexpected environmental disaster or an unwarranted terrorist activity.
The question of how to survive under uncertainty begs complete analysis and total study of the whole situation. Fighting hard to overcome or manage an uncertain future requires most of the organizations to re-evaluate their role in the global market. What does the organization do and What does the organization do well will be the two most important questions that needs answering to understand and identify the strategic path that need to be taken for survival, by the organization. As part of the strategy, we are witnessing the increase in companies retrenching their core competencies and outsourcing all other activities to other organizations which could do it better or at low cost. This choice enables management time and effort to be focused and allows for greater flexibility of operation within the organization. The concept of outsourcing has enabled the organizations to specialise, to focus on doing a small number of tasks extremely well rather than looking to cover a wide range of tasks, most of which are not directly connected with the company’s core business and do not add enough value to the organization.

Modest amount

More lessons could be learnt from analyzing the deal between two computer giants IBM and Lenovo. The significance of the deal may exceed the relatively modest amount that Lenovo has paid : a total of $1.75 billion in cash, stock and debt. The transaction points to the rising global aspirations of corporate China as it strives to become a trusted supplier to Western companies and consumers. The sale also signals a recognition by IBM, the prototypical American multinational, that its own future lies even further up the economic ladder in technology services and consulting, in software and in the larger computers that power corporate networks and the Internet.
Though the future was quite uncertain, IBM understood that all those businesses are far more profitable for IBM than its personal computer unit. The company decided that its management and investment resources would be better used in its other businesses like software and services to help customers use information technology to help automate business tasks from product design to procurement. The move also signals an acknowledgment by the American computer giant that its future in China may be best served by a close partnership with a local market leader — particularly one, as in Lenovo’s case, that is partly owned by the Chinese government. As for Lenovo, the deal became the opening for the organization to move into the American market, even though its American rivals were of the view that Lenovo’s purchase would create uncertainty among customers and provide opportunity for them to take over IBM’s client base..

Business scenario
The present business scenario in the developing nations has entangled itself closely with the concept of uncertainty. Sri Lankan scenario also is not quite different from the above situation. Excessive uncertainty over the future has led the organizations to be more concerned about their spending by cutting the cost at every level. The economizing or cutting costs is one way that allows an organization to relate itself to an uncertain environment. It eliminates wasted effort while its flexible approach allows it to change and come out with new ideas as the environment dictates. Lean, mean and highly flexible nature has become the pre-requisite for an organization to thrive in a world of uncertainty.
The situation also compels the organizations to re-look at the way their strategies are developed. A more detailed and flexible approach is quite important to ensure that the organization is able to change the course of its strategy, or at least the implementation part of it, as and when the environment changes and presents new challenges to the businesses . Chief strategists should make sure that the strategies developed look to copy the manner of the Internet protocol where it is able to take a number of different implementation routes if one way is blocked. While the long-term strategy should be relatively stable, the paths to implementation or short-term strategy priorities can be very fluid. Such flexibility explains the need of scenario planning, through which the chief strategists come out with different scenarios and identify the implementation routes under each scenario.

New environment
It should be understood that uncertainty is a factor that will always exist although the level of uncertainty and the implications of unknown or partly known factors will vary according to the changes in the environment. This is the new environment in which marketers and business managers need to operate and not merely a temporary phase. The factors that work together to promote this uncertainty are both macro and micro issues that impact on the business environment in ways that are different from market to market. As a result businesses will have to rethink and reinvent their planning processes so that uncertainty is built in and the business is able to take a flexible and adaptable approach
Making the businesses thrive under uncertainty requires the managers to do all in their power to help their business units thrive throughout their natural lives. In some cases that could mean ceding control of a business to another company whose managerial skills are better suited to the next stage of the business’s life span. Some companies could be very efficient at managing businesses at their early stages while others could be more adept at shepherding aging ones.. The challenge for the senior executive is to know the firm’s strengths and its limits, so that he could make the right decisions at the right time, as attempts to prolong a unit’s life beyond its natural term are likely to be unrealistic and absolutely destructive.

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