Dec 242013
 
Labour crisis in apparel industry Is costly technology or humane HR best practices the solution?

The era of the closed economy of the left oriented state of 1970- 1977 saw only the domestic garments under the Brand names of Hentley, Maxim, Benhur and later the Duro products of Dasa Industries.

Then came the liberalized economy under the JRJ government and awakened the Export oriented garment industries in the first Free Trade Zone with a workforce of 30000 female workers under the GCEC the present BOI at Katunayake.

The social implications and other infrastructures were not geared to meet the sudden change in the area. Health & Safety standards were thoroughly inadequate in a snake infested locality. Basic Human needs were neglected and the Iron fisted administration were naïve and forceful. The young members of the Armed forces roamed the area and young female workers who lived in Boarding houses were easy prey. Resulting pregnancies of unmarried singles and medical clinics springing up like mushrooms in the Katunayake and Negombo areas were the talk of the day. The scandals pouring out was the beginning of the irreparable permanent damage to the character of the female garment worker.

Availability of manpower
The mainly Sinhala adult females from all over the country which comprised the  workforce was freely available and queues of 1-2 kilometers length of young females thronged to the BOI Job bank from the BOI office to beyond perimeters of the zone fighting for a placement in any Garment factory in the Katunayake Zone. Applicants who possessed references from the State politicians were given pride of place while many were turned down to return to their villages.

Factory Managers’ authority
The Board Room and Business acumen focused only on shipments and profits and the Factory Administration possessed absolute power to deliver the goods at any cost. This disastrous empowerment resulted in the neglect of basic Human and personal domestic needs of the largely female workforce.
Performances of Factory Managers were recognized and rewarded by the Board Room on the money spinning revenue brought in and the factory staff shamelessly trod on the female workers bullying and battering them at every corner to get the optimum production at minimum costs aided by the ignorance of the top management to provide the basic facilities for Personal needs.

Personnel/HR Manager’s role and status
The Personnel Managers were goaded by the top management and had to play the role of running round the factory hunting for wrongdoers and being used as the cats’ paw or the scape goat. The Personnel Managers now the HR Managers are the underdogs.

Except for a one or two companies the position of the HR Manager in the hierarchy is far below the average with no status or clout and report directly to the misdemeanors. Their salaries are below that of the other junior level staff resulting in low status and no respect from others for this very reason. Their indirect contribution to achieve company goals is not recognized nor are they consulted on any main issues. They are commanded to act on poor HR practices and these orders cannot be disobeyed or explained as incorrect.

The final say lay with an ignorant Factory Manager or General Manager whose interests are personal rewards and the good books of the top Management. The Top Management gropes in the dark and HR Issues are decided on hearsay of the Factory Manager or General Manager’s information. It was and still is a case of the blind leading the blind. Appreciation or confidence in the HR Manager or recognizing his/her capabilities does not exist.

Depletion of workforce
This scenario which continued for decades is still prevalent in the present day factories except for a few. HR continues to be blamed while the factory management continues to bully and batter the workers. Basic needs are granted but the most important personal domestic requirements are not recognized. The workers who migrated first from one factory to another within the Katunayaka Zone opted for other factories in other zones in later years. Thereafter the workers who rushed to garment industries for poverty and relief now find that earnings are not worth the sacrifice of their family life at home. They shun the garment industry.

Parents are reluctant to release their children to the industry as they are aware that they will lose their children forever and will not be able to get them close in times of illness or need or for any of their Personal family events. The already existing stigma on the characters of the garment workers added to the disregard of their domestic requirements have now made the entire country to shun the industry. Only the Estate labour who are way below poverty levels opt to work for a very short term temporarily in the industry.

The once long queues of the Sinhala workers are no more. A very thin margin of the Tamils are lured by company staff dishing out handbills on the roads in and around Colombo and in the distant and remote hill country competing with others in the industry to grab a would be recruit.  

The Tamil workers from the hill country comprise 40 percent of the work force. The Sinhala workers are diminishing day-by-day. This estate labour now in the apparel industry is also getting depleted day by day as their personal wants and access to their families in the distant areas at times of need are not realized. Recognition of the
Tamil workers personal needs as relative to their place of abode and culture of the hill country is not taken into consideration. Many decades ago the December Holidays for Christmas was planned for. This slowly changed over to the Sinhala/ Hindu New year. However, no provision or planning is made for the mostly celebrated Tamil Deepavali festival.

Production planning
Production and shipments are planned in keeping with the European Climatic seasons but no provision is made to include any planning for HR requirements affecting the labour whether seasonal or otherwise. While only a handful of the Top management go that one step further to put things right the apathy of the Top Brass of the rest of the companies continue. Realistic absenteeism percentages arising from the Social needs of a mixed workforce are not recognized.

Whilst this drama continues to unfold the Buyers or Customers and the European community keep on increasing the pressure to keep strictly within the outdated labour laws for the betterment of the workers welfare and by doing so unwittingly contribute to an ever increasing predicament of the workers.

Financial loss
Little does the Top Management realize that continuous idling of 40 sewing machines per day deprives 40 m/cs X  10hours production X dollars of loss per day. In addition expenditure on maintenance of Dormitories and meals provided by the companies are colossal and Costs for extensive recruitment campaigns are unimaginable with no permanent returns.

Change
If the industry is to be prevented from going over the cliff to the quagmire by the death knell of the labour crisis an input of a drastic about change thinking is an urgency. If Kerry Packer could change the drab white uniformed game of cricket to a thrilling quick match then the Board Room should change attitudes to consult HR and not direct them and develop HR best practices to the highest levels to avert this crisis.

Nov 062013
 
A critical analysis of equity investments in foreign coal mining companies by GOSL
Two recent  articles in a weekly newspaper  reported that the government of Sri Lanka  has been advised  equity participation in coal mining companies after the Board of Investment (BOI) had contacted  20 potential coal producing companies in Indonesia , China  and particularly in Australia and include three companies Orpheus Energy Ltd. Australia, Shanxi Coking Coal Group China and Yancoal Australia all of whom have  agreed to supply coal on a long-term basis, and trial shipments of 20, 000 to 80 ,000 tons are available at current prices. It is not clear whether this is a commitment prior signing long-term contracts and from which company /ies trial purchases will be made.

Before I deal with the three companies above, I shall review the demand of coal. The use of coal continues to grow rapidly and will continue together with other fuels, to support world economic and social development particularly in rapidly developing world economies such as China and India.

The consumption of coal in China increased from 1.5 billion tons in 2000 to 3.8 billion tons by 2011,  almost a threefold increase and the electricity production from coal in 2009 was 79 percent.

India consumed 122.9 million tons in 1980 and 721.4 million tons in 2011 a six fold increase and electricity production from coal was 66 per cent with an additional 3 per cent from lignite in 2009.

At present China consumes nearly as much coal as the rest of the world combined and the growth of world consumption increased from 3billion tons in 1970 to 6.9 billion tons in 2011.

However the IEA’s Energy Technology Perspectives 2010 target reduction in non renewable energy related (coal, oil and gas, shale gas) CO2   emissions by 50 per cent and such emissions from power generation are projected to be reduced by 76 per cent. Renewable energy (wind, solar and hydro) will account for 48 per cent of power generation and nuclear 24 percent.

It must be stressed that expansion of electricity generation by commissioning coal power plants will increase   emissions of CO2 resulting in global warming and eventually climate change. The construction of coal power plants from 2010 to 2035 should aim at a path to achieve near –zero emissions by retrofitting the coal plants with Carbon Capture Storage (CCS)   in 2015 and   commercial Integrated   Gasification Combined Cycle (IGCC) by 2020 and finally Retrofit Pulverized Coal Plants with CCS by 2035.Accordingly the cost of construction of coal power plants will increase dramatically if we are to reduce CO2 emissions.

According to International Energy Agency (IEA) the deployment of some technologies to use renewable energy such as   wind, solar, wave etc for generation of electricity will increase  carbon price   to US$ 175 /ton of CO2.

 Since substantial natural and financial resources are needed to   develop alternative sources of electricity at a scale to replace coal, it is stressed the importance of CCS in mitigating CO2 reductions and thus global warming.

Sri Lanka’s projected electricity generation mainly from thermal and hydro   was 960 GWh  in the year 2000 and was 96 percent and 4 percent respectively.  In 2011 it was  4968  GWh  where thermal contributed to 86 per cent , hydro 12 percent and others (solar, wind ) 2 per cent .The installed capacity of power generation mix was 186 MW at  94 percent thermal and 6 percent hydro  in 2000 which increased to 1081 GWh in 2011 (an increase of nearly 6 times within 10 years) with a mix of 78 percent thermal, 18 percent hydro and 4 percent others. It is also reported that the private sector contributed to 43 percent of the power demand at the end of 2011. (Source RAM Ratings (Lanka) Ltd.-Sri Lanka’s Power Sector –Firing the Rain August 2012).


Reduction on thermal energy reliance
The latest report published by the ADB indicated that Sri Lanka needs to reduce its reliance on thermal energy. “It may not be wise to rely on thermal energy due to environmental concerns and status of future world markets”. Energy outlook for Asia and the Pacific notes that Sri Lanka’s   electricity   demand is projected to grow by 3.6 per cent a year. The ADB recommends that “Sri Lanka must utilize hydro energy for power generation while increasing the role of renewable energy in the country’s power generation mix.”

BOI Report on Three Coal Mining Companies for Equity Investment
In the backdrop of the above analyses, my comments on the above are as follows:

Orpheus Energy Ltd. (OEG ASX) is a junior coal producer engaged in acquiring exploring and developing projects in Indonesia and Australia. In March 2012 the company secured 50 per cent interest in the JV partner PT Mega Colt’s ADK operating coal mine located in South Kalimantan, Indonesia. The revenue was 4.32 M AUS$ and with a net income of   – 4.12 M Aus $ incorporated in 2006 with 394 employees. This revenue could be compared to Tiaro Coal of 189 M AUS$ and market capitalization of Orpheus is only 9 million AUS $ as compared to other coal mining companies going up to AUS $ 1,662 million. (Financial Times as of 2013)

  •  Shanxi Coking Coal Group

Shanxi is the largest coking coal producer  in China with  a wide variety of products   and  28 mines and 18 coal –washing plants and a production capacity of 65.8 million tons . The company   trades with  South  Korea, India and Taiwan in  coal  and  sells large excavation equipment to Romania, the Philippines, Russian Federation , Nigeria , Pakistan, Malaysia and Thailand.
Yancoal was incorporated in Australia in November 2004 as a wholly owned subsidiary of Yanzhou Coal Mining Company Ltd(Yanzhou) in China and is publicly listed in Shanghai, Hong Kong and New York stock exchanges. Yancoal was formed with the intention of   acquiring and further developing Australian coal assets and to introduce underground mining technology Long Top Coal Caving (LTCC) .

Yancoal manages on behalf of Yangtze applying   LTCC and Ultra Clean Coal (UCC) technologies and other exploration assets and operates seven mines located in New South Wales and Queensland.

Conclusions
According  to media reports,  the BOI has indicated that the total annual coal  demand mainly for generating electricity  in Sri Lanka is 3.75 million metric  tons by 2017  and  the Norochcholaii Plant  presently consume about 600,000 -700,000 metric  tons and the proposed  Trincomalee   Sampur  Plant  projected to 1.5 million metric  tons  per year.

With the uncertainty of the projected  utilization of coal for electricity generation  in the short , medium and long-term  as analyzed above and the profiles of the three identified  foreign  companies involved in a diversified  mix of mining , exploration and due diligence review of projects  and  suppliers  of machinery,  it would not be advisable for the GOSL  to take equity  in these  companies  for long term supply of coal. Further with the market   showing downward trends it is possible that long term contracts negotiated at present prices, GOSL will be at grave risk as international trading practice is to enter into “take or pay “contracts. Moreover if 15 per cent equity  envisaged by GOSL as recommended by BOI, it will be a disaster as mining costs and other technologies will lead to additional capital costs, overheads and  production costs..

It must be stressed that investments in coal mining in Australia are mainly by Chinese companies with a majority shareholding and sometimes wholly owned by China and   Yancoal a Chinese company is an example.. Also the off shore companies’ especially in Indonesia will not guarantee security on investment by third parties.
Further most of the coal output will be channeled to China to meet its insatiable demand  and countries like Sri Lanka will be   given the second choice.
My contention is that the GOSL should call for worldwide tenders annually   for our projected  coal  requirements   from 2015 on a CIF basis. If the proposal of the BOI is accepted it will be another disaster like the hedging deal of the Ceylon Petroleum Corporation, a few years back.

Finally, dependence on coal should be minimized by a more acceptable energy mix as recommended by ADB for electricity generation.

(The writer is a retired Economic Affairs Officer United Nations ESCAP and a senior mineral economist and can be reached through fasttrack@eol.lk )

Jul 112013
 
No agreement signed with Packer directly so far: BOI
Despite the controversy surrounding the potential social degradation and the massive tax concessions granted for James Packer’s proposed US $ 350 million resort and casino in D.R. Wijewardena Mawatha, the Board of Investment (BoI) said it had so far not entered into a formal agreement with the casino kingpin.

“No proper agreement has been signed yet. We have reached an agreement only in principle. But that is also not with James Packer,” said Dr. Lakshman Jayaweera.

According to Dr. Jayaweera, BoI has signed the agreement with a company by the name ‘Lake Leisure’ which was established by a consortium of investors of which Packer is not the major shareholder.

“We have approved the project in principle subject to Parliament approval. So, once it is approved by the Parliament, the formal agreement will be signed within the next 2 to 3 weeks,” he said.

Being the richest Australian, Packer’s involvement in Sri Lanka in the capacity of an investor has significantly boosted the country’s profile among other international investors.

During the recent months, Packer has made several visits to Sri Lanka and met senior government ministers.

“He is very much involved and currently is working with other parties on the project,” Dr. Jayaweera said.

(DK)

Jul 012013
 
Oceanpick to introduce marine fish farming to Sri Lanka

Minister of Investment Promotion Lakshman Yapa Abewardena formally presenting the BOI Certification of Registration to Irfan Thassim, Founder and Director of Oceanpick Ltd. Omar Kayaam, Director of Oceanpick Ltd is also present

Oceanpick is set to embark on Sri Lanka’s first ever oceanic farm for finfish this August with an investment of approximately US$ 2.5 million.

The project aims to focus on “responsible farming” of high quality marine fish, providing a platform to cater to a growing appetite for quality seafood without overly pressurizing wild stocks.

As per FAO statistics, nearly 50 percent of fish production world wide comes from farmed sources, where as Sri Lanka lags far behind in reaching a sustainable equilibrium and relies 90% or more in wild capture, thus risking depletion of wild stocks beyond sustainable levels in the longer run. Oceanpick hopes its endeavors will trigger a change that will lead Sri Lanka in the direction of reaching a more equitable balance.

The agreement was signed by Irfan Thassim, Founder and Director of Oceanpick and Dr.Lakshman Jayaweera, Chairman of the Board of Investment of Sri Lanka.

The project will set up its farms in the open sea off the Trincomalee coast – the first such cage system to be set up in the country with an ambitious plan to reach nearly 1,000 tons over the next several years. Partnered by a Scottish farming company who pioneered oceanic farming in the North Atlantic some 40 years ago – producing salmon, rainbow trout and halibut, Oceanpick plans to operate Trinco farms per world class standards of their partners.

Whist Sri Lanka’s previous attempts at aquaculture have been mostly been concentrated in brackish water lagoons, fresh water bodies or in land based ponds, Oceanpick recognized the superiority of sea grown produce. This coupled with the greater depth and tidal current profiles offered by the oceans, Oceanpick has handpicked pristine locations in the Trincomalee open seas for its activities.

The first choice specie that Oceanpick will produce will be Barramundi or Asian Sea Bass, locally referred to as Modha. Barramundi has been a preferred fish for its mild buttery taste and Omega 3 content. To ensure peak freshness of all its produce, the project intends to vertically control the entire cold chain process.

Jun 252013
 
More FDIs, tax revenue critical for growth to continue: Mathai
International Monetary Fund (IMF) resident representative Koshy Mathai reiterated the need to attract Foreign Direct Investment (FDI) to the country in order to continue the growth path Sri Lanka has set herself with the end of the 30-year long conflict.

“Sri Lanka has to attract more FDI’s because apart from its extolled virtues, it also brings in the new technologies and know-how to the country,” he said, while calling the country to focus on exports to emerging economies such as China.

Sri Lanka was not able to attract the amount of FDIs as it would have liked in 2012 and according to Board of Investment (BOI), the country achieved US $ 1.3 billion in FDIs, falling short of the US $ 1.75 target set. BOI expects to attract US $ 2 billion FDIs in 2013.

Speaking at the Annual General meeting of the Sri Lanka Chamber of the Pharmaceutical Industry, Mathai further noted that Sri Lanka has to reverse the current trend in exports.

“We have always focused on the EU and the US, but its time now to focus on emerging markets such as Chin, the ASEAN and India. Since the late 90’s, exports have dropped from 30 percent to 17 percent and this trend must be reversed,” he said.

Sri Lanka’s trade gap widened 19.2 percent Year-On-Year (YoY) in the month of April to US $ 825.4 million amid a fall in export earnings and a reversal of subdued import expenditure in the first three months of the year.

The export earnings during April fell 6.87 percent YoY to US $ 696.6 million with all three export categories reporting YoY declines in earnings. Meanwhile, the cumulative export earnings in the first four months of 2013 dropped 7.8 percent to US $ 3 billion.

Mathai went on to state that despite Sri Lanka doing well to curb inflation and control its foreign reserves, the country has to focus on increasing revenue.

“The tax revenue relative to the GDP is 11 percent and that is a very low figure” he said and called for the Inland Revenue Department to focus on collecting more taxes in order increase revenue. “You can’t starve the beast owing to discrepancies. Revenues must increase for further growth” he quipped.

Matahi also commended the Central Bank’s decision to remove the fixed exchange rate policy permitting the rupee to fluctuate according to its true value.

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