The Nation GAIN

Tuesday, November 9, 2010

Gold climbs to all-time highs above $1,400/oz

Gold powered to an all-time high above $1,400 an ounce on Monday, despite a bounce in the dollar, as investors sought an inflation hedge from the Federal Reserve's massive bond-buying programme.

Gold has risen almost 6 percent since just before the Federal Reserve detailed its plans last Wednesday to buy $600 billion worth of Treasuries to revive the economy.

Palladium rose 3 percent to break above $700 an ounce for the first time since April 2001, and silver also gained 3 percent to its third consecutive 30-year high on the back of speculative buying after gold's midday rally.

"As long as (investors) feel like there is no other recourse except buying precious metals, gold is going to keep going up," said Miguel Perez-Santalla, vice president of sales at Heraeus Precious Metals Management.

In early trade, gold looked set to drop following its largest two-day gain in a year at the end of last week, but remained near record highs even as the dollar rallied against the euro on renewed budget problems in Ireland.

Spot gold rose 0.8 percent to $1,406.10 an ounce at 12:31 p.m. EST (1731 GMT), after setting a record at $1,407. U.S. December gold futures climbed $7.30 an ounce at $1,405.

Underlying support helped lift the metal after comments from World Bank president Robert Zoellick in the Financial Times calling for leading economies to consider readopting a modified global gold standard to guide currency movements, although most analysts deemed it unrealistic.

"Gold could potentially play a small role in the overall framework, but I don't think we are in a position to go back to a gold standard," said commodities strategist Nic Brown of Natixis.

"The world economy has moved too far from there and it would need to be one that was built around a more inclusive range of currencies," he said.

Zoellick called for a system that "is likely to need to involve the dollar, the euro, the yen, the pound and (yuan) that moves towards internationalization and then an open capital account."

"I can imagine what he meant was asset inflation as measured by the gold price should be an indicator that should be considered by the central banks when they make their interest-rate decisions," said LBBW analyst Thorsten Proettel. The consensus among precious metals analysts was that the gold market is also simply too small to absorb such demand.

"Unlike the World Bank, we do not believe that a form of the gold standard will return. Very simply, there is not enough gold supply in the world for the metal to perform in this role," said Edel Tully, precious metals strategist at UBS.

Evidence of a cooling in investor interest in gold put the price under pressure earlier in the session, with holdings of gold in the SPRD Gold Trust falling.

Silver hit a fresh 30-year peak at $27.63 an ounce and traded up 3.2 percent at $27.47 an ounce, and palladium surged 3.4 percent to $710.72, up for a fourth day in a row, while platinum eased 0.1 percent at $1,764.49 an ounce, marking a second successive day of declines. (Reuters)

Monday, November 1, 2010

Govt should use mobile phones to tackle poverty: UNCTAD

By Azhar Razak

Governments and policymakers in developing countries should take full advantage of Information and Communication Technologies (ICTs) to combat poverty reduction, a recent research report has highlighted. ‘The Information Economy Report 2010’ prepared by the UN Conference on Trade and Development (UNCTAD) highlights that mobile phones will be the best medium to combat poverty, as the penetration rate for this medium of communication is significantly higher than that of other ICTs and is even used by the people at the Bottom of the Pyramid (BOP).

“A recent study by LIRNEasia of some farmers near Dambulla found that they were able to obtain a premium of 23.4% on the average daily market prices at the Dambulla Dedicated Economic Centre (DDEC) by having access to timely and accurate market price information via their mobile phones,” the senior research manager at the regional policy think tank LIRNEasia, Sriganesh Loganathan, told a recent press conference organised to release the UNCTAD report.

He said that poor people often lack information that is critical for their work, for example, market-prices (such as the service offered by Tradenet in Sri Lanka), income earning opportunities, crop advisory, weather forecasts, agricultural best-practices, health, finance and even information on disaster risk reduction.

“There is an informational dimension to poverty. Lack of access to information increases the vulnerability of the poor. However, the rapid diffusion of mobile phone technology is making it possible for poor people to have access to this information as well as to engage in interactive communication,” Loganathan said.

Meanwhile, Founding Chair and CEO of LIRNEasia Professor Rohan Samarajiva outlined the UNCTAD report that micro-enterprises in low-income countries are rapidly adopting mobile phones as key tools for advancing their commercial activities.

“In more and more low-income countries, it has been found that people at the BOP such as farmers, fishermen and small-time entrepreneurs are using mobile phones to assist their livelihoods, as the technology is now simple and affordable enough,” he said adding that new jobs have arisen catering to local demand for mobile phones and the associated applications and services.

“Many low-income people are selling airtime or mobile money services on the street or in shops as this work can be done by people with few formal skills,” Professor Samarajiva analysed.

Over the past few years, the penetration rate of mobile phones in the world’s least developed countries (LDCs) has surged from 2 to 25 subscriptions per 100 inhabitants.

In Sri Lanka, it has been estimated that more than 75 percent of households have some kind of phone in them.

“However, during our survey in Sri Lanka we also found that only 50 percent of the time spent on mobile phones is being used for productive purposes whereas in countries like Bangladesh and Philippines it is over 90 percent,” LIRNEasia Senior Research Manager Ayesha Zainudeen said.

Therefore, she suggested that the attitude towards mobile phones need changing in Sri Lanka and that we should encourage the evolvement of trade facilities (through mobiles) such as Cellbazaar in Bangladesh to make productive use of mobiles.

Multiple SIM usage

Meanwhile, Professor Samarajiva commenting on the recent decision taken by the Telecommunications Regulatory Commission of Sri Lanka (TRCSL) to limit the number of SIM cards registered under one individual to five, said that the authority should not have placed such a restriction since it curtails consumer choice but should put in place a central database where mobile users can check on how many SIM cards have been registered under their specific names which could increase the overall transparency in the system.

“Pakistan has now put in place such a database and it is now possible for users there to check how many SIM cards are registered under their names,” he said.

He elaborated that during a survey in Pakistan, it was revealed that a person who was using only two SIMs for himself had found that another 90 SIMs were registered falsely under his name when he had checked the database.

“It as an issue for national security as well,” Professor Samarajiva noted.

LIRNEasia launched UNCTAD’s Information Economy Report 2010: ICTs, Enterprises and Poverty Alleviation in Colombo last week. It is learnt that senior researchers from LIRNEasia had also been involved in the preparation of the UNCTAD’s report.

Mihin Lanka eyes more destinations with new plane

By Azhar Razak

Sri Lanka’s low cost carrier Mihin Lanka, which currently services five destinations, is planning to add three more destinations, following the lease of a new aircraft expected to come on-board in November 2010. According to a senior official of the firm, Mihin Lanka will commence flights to Male in the Maldives, Dhaka in Bangladesh and Jakarta in Indonesia, commencing from next month.

“We will be getting a new A320 aircraft next month in the form of a dry-lease with Airbus Financial Services. We plan to deploy this aircraft to carry passengers to the three new destinations,” Mihin Lanka director cum CEO Kapila Chandrasena told The Bottom Line.

He says the new aircraft, which could carry about 210 passengers, would fly three frequencies to Dhaka, three frequencies to Jakarta and four frequencies to Male in a week.

“This new addition to our fleet is a welcome move, since of late we have been experiencing heavy demand from customers to fly to more destinations,” Chandrasena said.

He said the carrier was making good progress by utilising its single aircraft in fleet at the optimum level.

Elephant House to introduce ‘ground-breaking’ product

While planning to give a new look to its fizzy drink products following its recent rebranding efforts, Elephant House (Ceylon Cold Stores PLC) is getting ready to launch a new product which would be something ‘ground-breaking’, a source attached to the company said.

However, the source was reluctant to disclose whether the new product would be an addition to their already popular fizzy drink portfolio or a completely new product that represents non-fizzy category, such as fruit juice.

The new look for the fizzy portfolio is supposed to include mainly new bottles and colourful wrappings.

Keppel Land in town

By Indika Sakalasooriya
A team of officials from Keppel Land, the property arm of the Keppel Corporation, Singapore, one of Asia’s premier property companies, has visited several Sri Lankan blue chips last week, including, Hayleys PLC, Aitken Spence and John Keells, The Bottom Line learns.According to sources, Keppel Land seems to be very much interested in property development prospects in Sri Lanka and is in the hunt for recognised conglomerates to establish partnerships in order to engage in property developments, both residential and commercial.
According to the firm’s website, set up in 1890, Keppel Land is one of Asia’s premier property companies, recognised for its sterling portfolio of award-winning residential developments and investment grade commercial properties, and high standards of corporate governance and transparency. It is also one of the largest listed property companies by total gross assets on the Singapore Exchange. Its total gross assets amounted to $6.6 billion as at end-June 2010.
Even though the entrance of firms like Keppel Land to Sri Lanka in the post-war scenario is obviously a positive development, it is not clear whether the country’s policy-front is ready to facilitate companies of such calibre.
Number of foreign and local companies who were interested in property development in Colombo have failed to do so or were compelled to abandon the idea due to the lack of land available for property development, as nearly 50 percent of the lands within the Colombo city limits is owned by the government.
Keppel Land is geographically diversified in Asia, with current focus on Singapore, China, India, Vietnam and Indonesia. The company has a strategic focus on two core businesses of property development and property fund management. The firm is also well known for its landmark developments such as Ocean Financial Centre and Marina Bay Financial Centre in the Central Business District (CBD).

DEBENTURE ISSUE TO PARTLY FUND ‘PORT CITY’ PROJECT

By Azhar Razak

Following the example set out by the Urban Development Authority (UDA), Sri Lanka Ports Authority (SLPA) is likely to opt for a debenture issue to fund the much exaggerated ‘Port City’ project, which plans to change Sri Lanka’s map.

SLPA, which is in charge of building a new ‘port city’ adjacent to Colombo’s Galle Face Green, is expected to raise part of the required funding for the project through a debenture issue, of which the number are yet to be disclosed, a source close to the project said. The rest of the funds are expected to be raised through foreign borrowings, the source added.

UDA, another state run organisation successfully issued debentures to the Colombo Stock Exchange recently to raise Rs.5 billion to fund a housing project in the city of Colombo.

The proposed US $400 million ‘Port city’ project, which aims at expanding out to sea on reclaimed land with material dredged to build the Colombo South Harbour will add a further 300 acre land to the city’s western sea front.

“We are hoping that the project will kick off by at least the middle of next year and take around two to three years to complete,” SLPA Chief Engineer Planning and Development, Susantha Abeysiriwardena told The Bottom Line. He, however, declined to disclose anything material regarding the financial side of the project.

According to Abeysiriwardena, the sea is to be dredged up to one and a half kilo metre distance from the shore and would remain in parallel horizontally with the vertical length of the existing breakwater that is being built adjacent to the site, when complete.

“It has been projected that out of the 300-acre land that we can reclaim, around 200 acres will be utilised as useful area providing the basic infrastructure while the remaining 100 acres could be used to construct the high rise and low rise buildings for a commercial centre,” Abeysiriwardena said.

Sources said that Lanka Hydraulics Institute, providers of hydrographic and modelling services and the Moratuwa University are also involved in the planning.

Also envisaged is the extension of the Marine Drive (a road running parallel to the main Galle Road) from the Colpetty municipal ward into the land reclaimed from the sea, providing another approach road into the city.

Ailing IFL to be recapitalised

The troubled Industrial Finance Limited will be re-capitalised within the next three months, thereby redeeming the nearly 50-year-old institution in danger of going bust, Central Bank Governor Ajith Nivard Cabraal said. He also said the Central Bank was holding regular meetings with the management the IFL and they are hopeful that the finance house can be taken out of danger.
“The management agent we’ve appointed to help the IFL for a turnaround, People’s Leasing Company is still very much involved in the matter and slowly IFL is expected to come out of trouble,” Cabraal said.

With the run on deposits of the Golden Key Credit Card Company, IFL also felt the heat as depositors started to pull out their deposits despite it being a registered finance company, regulated by the Central Bank. Unable to manage the institution with the looming threat of defaulting depositors, the owners of IFL at that time, the CIFL Group sold their ownership to a company called Rock Millennium (Pvt) Ltd, run by UK based Sri Lankan investor, Upul De Zoysa.

With the acquisition, the new management of the IFL promised the depositors to bring Rs700 million by mobilising foreign funds and restructuring the company.
However, the depositors currently claim that although they have surrendered their matured FD certificates they’ve been unable to obtain the due payments.
Even though the Central Bank appointed People’s Leasing as the management agent, sensing the crisis, the depositors say that the management agent also has failed and currently everything is in the doldrums.