Business, Drinks and Leisure


It is extremely rare to be able to talk to the Chairman of DCSL; Knight of the Order of Dannebrog and celebrated entrepreneur Deshamanya Harry Jayawardena, one-on-one at leisure about business, the economy and specifically about the flagship DCSL Group. Following are his thoughts about his wish-list for Sri Lanka’s economic future, challenges facing the country and the future of DCSL.

Q: As a home-grown, patriotic entrepreneur and committed investor in Sri Lanka’s economy, how do you perceive the government’s efforts to woo foreign investors?

A: Sri Lanka definitely needs foreign investment in order to meet its needs for infrastructure and manufacturing projects. But it is important to keep in mind at all times that foreign investors have their profitability and bottom line as their topmost priority and that the capital they generate will eventually be moved out of the country after they have made maximum use of all the tax benefits and other financial incentives they are offered by Sri Lankan authorities. These investors don’t invest in our country for the love of it, but for pure material gains. While scouting for foreign investors, the government must simultaneously recognize the contribution of local entrepreneurs to the national economy. When a local entrepreneur invests in the country, those funds remain within the country and that investment remains as a measure of the entrepreneur’s commitment to the nation. It is up to the government to ensure that there is equal opportunity for both local and foreign investors; a level playing field that offers the same incentives to keep alive the local spirit of entrepreneurship. Sri Lanka has a lot of talent and promise and the right support from the government will go a long way,

Q: Free trade agreements are often frowned upon and viewed with suspicion. What in your view is the right attitude with which to approach these confusing trade treaties?

A: Free Trade Agreements (FTAs) are very important in the global context and can help leverage the growth of local economies. The European Union (EU) and the South Asian Association for Regional Cooperation (SAARC) bodies are examples of what fair and equitable FTAs can achieve - forging enduring trade links, creating new markets, and ushering in growth and prosperity for all parties to the agreement. In the same spirit, Sri Lanka should not shy away from establishing FTAs with other markets provided that the agreements offer equal benefits. All FTAs need to be deliberated and analyzed to see how we can draw maximum benefit from them. Sri Lanka is a small market and can gain significant economic advantage by entering into treaties with larger countries/markets. Once a FTA is deemed favourable for Sri Lanka, then we must not step back.

Q: How do you see the suspension of the GSP+ concessions by the European Union (EU) impacting our exports?

A: There is no doubt that Sri Lanka will feel the effects of the loss of the GSP+ arrangement with the EU. Although the government has assured the industry that alternate arrangements will be made, until such time that these arrangements are implemented, the industries facing the loss of this preferential agreement will suffer greatly. The loss of GSP+ will result in many export items out-pricing themselves out of the market. It is a bit too premature to speculate about the extent of unemployment that might arise out of this development, but the government must come to the aid of those industries impacted by the loss of GSP+.

The need of the hour is to explore non-traditional export markets and ensure that our indigenous products gain lucrative markets abroad. The government needs to reduce duties on raw material imports so that value addition can be achieved within the country before being exported out.

Q: What are the barriers to foreign investment and how can they be removed?

A: The lack of long term policy-making and shifting regulations make it difficult tor investors to plan out their investment in Sri Lanka for a longer period. We need to have a sense of stability in our policy-making and economy. The labour laws of the land are another instant deterrent, for example, the Termination Act in our statute frightens investors from setting up factories in Sri Lanka. Unlike Malaysia and China, Sri Lanka protects workers’ rights at the cost of being uncompetitive. No investor wants to be caught up in trade union unrest and court battles, and therefore shy away from investing here. The fact remains that despite having the right ingredients of a promising investment destination, we keep on sending out mixed signals to the world. These barriers to investment are common knowledge and all that is needed is a will to reverse them.

Q: The echoes of ‘privatise or perish’ in recent years seem to fading fast. What does this augur for the economic future of our country?

A: As global experience has shown us, countries that practiced closed economies for decades until very recently have realized the failure of the system and opened up their markets to the world. By privatising public sector institutions and opening up the country to Foreign Direct Investment (FDI), these countries have fed the growth of their economies, rapidly transforming into ‘Asian Tigers’ within short periods. It is time for Sri Lanka too, to decide what course its economy will take. Sitting on the fence will invite no economic gains and we have to take those final steps in the direction we want to go. In countries such as Singapore, India, China, Malaysia and Indonesia, it is the private sector that has taken the lead in driving the economies of those countries and so it should be in Sri Lanka as well.

Q The possibility of privatisation of public sector organisations seems to have been ruled out by the current government. In that case, what is the way out to make these leviathans profitable?

A: In the absence of privatisation, the next best step to take is to enhance the efficiency and productivity of these institutions. This can be achieved by a concerted effort from the top, whereby the senior management drives a new-found culture in the company. In my view, the only way a decades-old mindset of mediocrity can be changed is by hiring professionals from the private sector to manage these public sector institutions, as many of these institutions have the potential to compete head to head with private sector counterparts on a level playing field - all they need is a new direction.

Q: Now that the markets of the north and east have opened up, should it be business as usual or should these areas establish a new legacy of business with a difference?

A: The opening up of the north and east after almost three decades is a long-awaited and welcome development. It is high time that these economically backward regions of the country are brought into the mainstream economy and business. The government should ensure that these regions can enjoy the same benefits as their brethren in the south. These regions need reconstruction and financial support for building livelihoods, and this helping hand has to be extended to them. Already, agriculture in these areas has shown a positive trend and if we can add further value to this asset of fertile lands by encouraging farmers there to shift to organic cultivation, they can generate higher demand and prices, not to mention export demand. While rebuilding these areas, it is important to harness the skill and opportunity that is already present and ripe for the picking, for example, a mango pulp manufacturing plant in Jaffna would make use of the delicious mangoes that grow there in abundance. The water problem that has cropped up there should be tackled immediately with the installation of desalination plants, so that the momentum that the agricultural sector has gained is not affected.

On DCSL’s Operations

Q: How do you react to the recent rise in taxation on alcohol and spirits, and how will this impact the company?

A: The government must realise that by raising the taxes, the levels of illicit alcoholic products by way of duplication, adulteration and imitation are increased, not to mention a direct increase in the consumption of kasippu or country liquor. While sporadic efforts are made at policing unlicensed operators, it is not a fully-fledged action plan, thereby enabling many illegal operators to continue their illegal brewing and turn their small scale operations into sustainable ventures. The government’s revenue is negatively impacted by allowing these illegal operators to thrive as they make no contribution to the state coffers. Furthermore, by using unregulated and unsafe ingredients, they brew liquor which has inherent health risks and could even prove fatal. It is important to note that the illicit alcohol market has doubled in size compared to the legal liquor market in which DCSL operates. Moreover, the illegal production of artificial toddy is now threatening the livelihoods of half a million toddy tappers and others who are engaged in this business for generations.

Q: How does the National Authority on Tobacco and Alcohol (NATA) Act impact the sale and distribution of alcohol?

A: In my view, the NATA Act is a failure, as it has emerged as a law without teeth. Today, few alcohol manufacturers such as DCSL are adhering to the tenets of the NATA Act by policing ourselves when it comes to the advertising and marketing of alcoholic beverages, but the act has not stopped leaflets and posters being displayed openly by other manufacturers. In fact, some manufacturers even operate liquor stores, which should not be allowed. Unfortunately, the NATA Act has failed to infuse adequate discipline and regulation in the sector.

Q: The telecom segment of DCSL Group’s business suffered during the year under review. What were the causes for the sector’s dismal performance?

A: The telecom industry has gone through a turbulent time over the last year and I am glad to see that the government stepped in eventually to stabilise the situation. As is evident, the call tariffs have dropped down to unrealistic and unviable levels. Operators such as Lanka Bell had to operate under a pressure cooker atmosphere of reducing margins and shrinking profits, under severe pressure from price undercutting for call rates by competitors. Moreover, new players entering the market are employing unethical practices to skew the level playing field, a trend that must be checked by the regulator before it harms the market further.

Q: What are the future prospects for the DCSL group’s activities in the financial sector, against the backdrop of recent global financial instability?

A: I sincerely believe that a mutual fund management company like NAMAL has first mover advantage in an industry which is seeking newer and risk-free forms of investment. In fact, NAMAL is on the verge of introducing new products to the market and will soon embark on a mass market campaign to reach out to a wider audience. Unfortunately, due to the several financial scams in the country, investors are suspicious about financial companies. NAMAL has taken on the challenge of educating the public about the efficacy and wisdom of investing in unit trusts, which are safeguarded against risk or fraud. I am confident that NAMAL will enter the big league in a matter of time supported by the strong financial backing of the DCSL Group and DFCC as well.

Q: Your thoughts on the SLIC takeover by the government?

A: It is public knowledge that SLIC was taken over by the government by order of the Supreme Court citing irregularities in the privatisation process. We were disappointed by this ruling as within a short span of six years, SLIC had been built into a company with strong financials and dynamic profitability. While this loss has impacted overall group profitability in the year under review, I see this as a temporary setback. Firstly, we are still awaiting the compensation for the loss from the government, which is in the pipeline and should be paid to us in full soon as per the court order. Putting this behind us, I was touched by the fact that the universal demand from former SLIC clients and the management of the company was to embark on an insurance venture of our own, since we had the necessary expertise and skilled professionals. This support and backing from loyal stakeholders inspired us to form Continental Insurance. The business of insurance is about credibility and trust that people place in your credentials - and the early success of this fledgling company leaves me in no doubt that it will move from strength to strength to become a leading player in the insurance sector in time to come.

Q: How receptive is the DCSL Group to new ventures?

A: The strategic acquisitions and establishment of synergistic business that DCSL has displayed underscores our success. Today, we have diversified into hydro power generation at Madulsima Plantations. We have also participated in a port management tender floated by the government in keeping with our prior experience in management of ports by our associate company Aitken Spence and await its decision. DCSL will continue to seize opportunities that will enhance the profitability of the group in keeping with shareholders’ expectations.

Q: What are the secret ingredients that fuel the Midas touch of DCSL?

A: I believe that strengths of the company are our workforce, the vision and guidance that comes from the top, the direction the company is headed in and the strict discipline and ethics that defines our existence. Our waste management initiatives and strict financial prudence has driven profits for us during the period under review, while calling on one and all to exhibit further productivity and efficiency. DCSL is driven by a powerful vision and all of us will do everything in our power to make this vision a reality.

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