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Monday, September 27, 2010

Britannia to wind up ‘unviable’ Lanka operation

Britannia to wind up ‘unviable’ Lanka operation

The Nusli Wadia-promoted biscuit maker, Britannia Industries, has decided to wind up its ‘unviable’ Sri Lankan operations, according to foreign media.

Britannia entered the Sri Lankan market in 2008 by launching a range of biscuits under the brand name Britannia Lanka.
“The company had decided to withdraw from the operations in Sri Lanka as they were not found to be viable. The right thing for a management to do was realise and recognise something and act on it and it is precisely for this reason that the company decided to withdraw,” Wadia told shareholders of the company recently.

Britannia could not turn around its business in the island nation , thanks to stiff competition from the local and already established brands in that counrty, sources said.

Friday, September 24, 2010

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Welcome

The Bottom Line always provides quality content that is surely 'worth reading'. So please keep posting and do keep reading

GSP crisis prompts top apparel firms to look beyond Lanka

The loss of the Generalised System of Preferences Plus (GSP+) facility offered to Sri Lanka and the wages board’s recent decision to raise the minimum salary of garment workers by 20% have prompted some top industry players to look for alternatives in other countries.
Industry sources said some major apparel manufacturers in the country were considering the possibility of shutting down their factories here and open then elsewhere to cut costs.
“This is the case at present with factories that have a greater exposure to Europe since they are reluctant to lose the higher margins that could be made through buyers in these markets,” a top industry official told The Bottom Line.
The sources said some players were contemplating on relocation based on the fact that costs of labour and raw materials were much lower in those countries.
It is learnt that some major players are conducting feasibility studies to operate from regional countries such as Bangladesh and the Maldives.
Joint Apparel Association Forum (JAAF) secretary-general Rohan Masakorala said the industry was facing a ‘tough situation.’
“There’s a grave threat of GSP-related orders moving out of Sri Lanka and to countries like India or Bangladesh. Exporters will feel the pinch by late September or October. However, it’s too premature to comment on this.”
He said the turnover forecast for apparels would be around Rs 333bn or US$ 3bn.
According to Masakorala, the minimum wage has risen to Rs 7,900 for a garment employee, starting without any skills.
“I can’t tell what the exact impact would be but certain industrialists will definitely feel the pressure. Although industrialists wanted the Wages Board to have January 1, 2011, as the implementation date the government wanted it to be
October 1, 2010.”
“It will affect within the trade and across the trade although we still haven’t heard of retrenchment or layoffs so far.”
Another top official, meanwhile, said the industry was currently trying to mitigate the loss of the GSP plus by portraying Sri Lanka as a country that is serious about its ethics in manufacturing standards such as employing greener production methods and adhering to accepted labour standards.
Sri Lanka’s garment industry is a US$3.2 billion export business and accounts for around 46% of the country’s export revenue.
Sri Lanka has nearly 300 garment factories including major suppliers such as Brandix, Hirdaramani and MAS Holdings.
Until recently, Sri Lanka had been one of the two Asian countries which enjoyed the GSP Plus benefits for trade with EU countries.
Sri Lanka was awarded the GSP Plus to facilitate its recovery from the Tsunami disaster in 2004.

http://www.thebottomline.lk/2010/09/05/page1.html

Economic implications of the 18th Amendment

By Azhar Razak

Although certain sections of the government claim the implementation of the 18th Amendment last week could lay the foundation towards an accelerated economic growth derived from the political stability, a senior economist from the main opposition party says it could pave the way for a more politicised and autocratic economic culture.
“The Sri Lankan economy is certainly going to face dire consequences by the implementation of the amendment as it would make regulators such as the Central Bank of Sri Lanka to be completely managed by politicians and questions being asked over its independence,” economist and UNP MP Dr Harsha de Silva told The Bottom Line.
He charged that since the Constitutional Council, which earlier had a say in the appointment of the three non-executive board members to the Central Bank’s Monetary Board, is now replaced with the parliamentary council set up, the President would now get exclusive powers to appoint all five members to the board.
“Earlier although the non-executive board members are appointed by the President on the recommendation of the Minister of Finance, the approval of the Constitutional Council was also required for the appointment of these non-executive board members. However, since the Constitutional Council has now been repealed, additional approvals would no longer be needed in future with the President having powers to appoint anyone as he wishes,” de Silva explained.
He added that the 18th Amendment only required the President to seek observations from the Parliamentary Council, which does not necessarily mean he has to abide by the decisions taken by the council.
The Central Bank has a unique legal structure in which the Central Bank is not an incorporated body. In terms of the Monetary Law Act, the corporate status is conferred on the Monetary Board, which is vested with all powers, functions and duties and the Monetary Board is responsible for making all policy decisions related to the management, operation and administration of the Central Bank.
Meanwhile, heads of universities and academics who met at a recent discussion stated that the 18th Amendment to the Constitution could lay the strong foundation that is required to accelerate economic development in the country. Speaking to journalists, University Grants Commission chairman Professor Gamini Samaranayake said Sri Lanka suffered from both political and economic instability since independence due to the war.
“We believe that the 18th Amendment would give the long felt political stability to achieve the economic stability that is required to accelerate the country’s development process while ensuring the People’s right to appoint a president according to their wish,” Samaranayake pointed out.
He said Sri Lanka was able to record average growth rates of around six percent even during the war and with the political stability it derives from the implementation of the 18th Amendment, it could well mean that we could be heading towards ‘double digit growth rates’ in the future.
“In the past 40 years, although Sri Lanka tried to reduce inflation, unemployment, etc to single digits it had failed in the attempt due to the lack of political stability. Around 47,000 graduates were recruited to the Public Service in 2005. The 18th Amendment is a must for the country’s economic development and that is why even the entire private sector supports it,” Strategic Enterprise Management Agency (SEMA) Financial Service Cluster Director, who is also a senior economic advisor to the President said.
The 18th Amendment was also supported by the Vice Chancellor of the Open University Sri Lanka, Professor Upali Vidanapathirana and the Vice Chancellor at the University of Colombo, Professor Kshanika Himburegama, at the press briefing held at the Sri Lanka Foundation Institute.
One of the objectives of the 18th Amendment to the Constitution is to replace the Constitutional Council by a Parliamentary Council consisting of five members of which three are ex-officio (The Speaker, the Prime Minister and the Leader of the Opposition).
The other two members will be separately nominated by the Prime Minister and the Leader of Opposition to include ethnic groups not represented by the three ex-officio members.
President Mahinda Rajapaksa had earlier said that the Constitutional Council in the 18th Amendment to the Constitution will better assure the supremacy of the Parliament as there will not be a presidential representative in the proposed council and will only consist of parliamentary members.

http://www.thebottomline.lk/2010/09/12/biz_feature3.html

Turnaround at BOGA’s marketing subsidiary

The marketing subsidiary of Bogawantalawa Tea Estates (BTE) Plc, BPL Teas Private Ltd., which used to be a loss making entity over the years, has showed a positive turnaround during the year ended March 31, 2010, a senior official of the firm said.
According to the group’s chairman, tea manufacturer and green tea exporter, BPL Teas made a profit after tax of Rs. 6.9 million during the recent financial year.
“As a result of the continuous efforts made during the recent past, the marketing subsidiary has begun to give positive results as evidenced by declaring a profit after tax of Rs. 6.9 million for the year under review,” BTE Plc chairman D J Ambani highlighted in his message written to the shareholders at the release of BTE’s 2009 annual Report last week.
He said that the company had made a considerable progress during the year and was able to increase the market share especially in highly competitive markets such as Europe and the US.
“In addition to the positive financial results shown by the company, the firm continued to enhance the facilities at the processing centre to meet the high International Standards,” the chairman said.

BTE Plc reported a profit after tax of Rs. 120.4 million for the year ended March 31 2010, a complete turnaround from a loss of Rs. 126.4 million recorded during the corresponding period in the previous year. Gross profit shot up by 144 percent to Rs. 331.8 million helped by a sharp increase in revenues from Rs. 2.8 million a year ago to Rs. 3.56 million. However, the group has not allocated a management fee this year although it spent Rs. 4.4 million on it last year.
The chairman said that BTE Plc has embarked on Agroforestry, Dairy farming and Tea-based tourism projects this year.
“One of the impediments for effective implementation of the above is the lack of clear-cut policy guidelines. Policy consistency is an area in which the plantation sector has had a poor record,” Ambani pointed out.
He said union demand for wage hike also remains an issue considering the long-term viability of the industry as well as the competitiveness of Ceylon tea in international markets.
“There has been almost a 40% wage hike at the last round of wage negotiations which had around Rs. 402 Mn. impact (Incl. gratuity provision) on the cost of production of our company (Rs. 49 per kg of Made tea). It is therefore important that the companies and the trade unions agree to look at the industrial relations issues with a fresh and open mind in the best interest of the industry. This is because the sector cannot sustain any further ad hoc wage increases without linking such increases to productivity and product quality or in other words to “Value Addition”, he outlined.

Meanwhile, BTE Plc which is Sri Lanka’s largest supplier of iced tea to the United States entered into a Joint Venture (JV) agreement in June 2010 with US based, Walters Bay International by incorporating a new BOI company “Walters Bay Bogawantalawa Estates (Pvt) Ltd”.
This JV company has already set up a state of art processing centre at Welisara to manufacture iced tea in packaged form for export to US, in fulfillment of its contractual obligations with the global multiple brands.(AR)

http://www.thebottomline.lk/2010/09/12/biz_news.html

MphasiS Lanka sets ambitious growth targets

By Azhar Razak

The newly opened Sri Lankan unit of Indian IT firm, MphasiS is presently finalising a contract with a large multinational that could immediately require the company to hire about 500-1,000 employees, a top official of the firm revealed.
MphasiS, a leading IT services provider headquartered in India, kicked off its operations in Sri Lanka last week following the opening of its Global Delivery Centre in Orion City, Colombo 9, to provide Applications, Business Process Outsourcing (BPO) and IT infrastructure and Outsourcing (ITO) services to clients worldwide.

“We are presently negotiating with a large multinational firm to get outsourcing work for the new Sri Lanka unit. We will be doing a presentation today and if the contract materialises, we are talking about employing anywhere between 500 to 1,000 people,” MphasiS, Chief Executive Officer Ganesh Ayyar disclosed at the inauguration ceremony held at the company’s new office last week.
He said that over the longer-term the company plans to hire 3,000-5,000 people in the space of 36 months.
“As we are speaking, a contract is already being finalised with a large multinational to move its work to Sri Lanka. The work will be shifted in about four weeks,” Ayyar said.

The outsourcing unit presently has a 250-seat office space and has already hired 55 IT graduates to manage infrastructure and application services. Ayyar said that MphasiS has been working on hiring local talent as well as setting up infrastructure since it announced its intention to set up the delivery centre end last year.
“The three main reasons why MphasiS chose Sri Lanka compared to another country in the region – which I do not want to name – are because of the strength of the island’s IT talent pool, the government’s hunger for an accelerated post war growth drive and Sri Lanka’s Board of Investment,” Ayyar claimed.
The new centre was formally inaugurated on Monday by Minister of Economic Development Basil Rajapaksa along with the participation of a large number of other senior officials.

With over 38,000 employees and a global presence across America, Europe, Australia, Asia Pacific, Japan and India, MphasiS has been India’s fastest growing IT company in the year 2009, with a growth rate of 43 percent.
It is learnt that employees at the new Sri Lanka centre will be part of MphasiS Global Talent Pool and groomed as a part of MphasiS Talent Development Programme.

“Sri Lanka’s vibrant talent pool is of strategic interest to us and we hope to expand our footprint here. Our focus in Sri Lanka is holistic. Our aim is to develop the larger ecosystem and be a responsible corporate citizen. We want to build deeper roots into the talent supply chain in Sri Lanka, partnering with academia, industry bodies and the government,” MphasiS Chief Information Officer M G Raghuraman.

MphasiS is a leading provider of applications services, remote management services and BPO services. The company delivers real improvements in business performance for clients through a combination of technology know-how, domain and process expertise. MphasiS services clients are in financial services, healthcare, communications, transportation, consumer and retail industries and governments around the world