28 October, 2020

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Monopoly Building In Sri Lanka

By Ravi Perera – 

Ravi Perera

The recent acquisition by Dhammika Perera the Sri Lankan business mogul (with related parties) of Lanka Ceramics, a large public quoted company, brings into focus once again the gaping lack of laws and regulations concerning commercial activities in this country. Not only do we not have laws governing vital areas of the economy but more importantly suffer from an obvious ignorance in such matters at the highest levels.

Mr. Dhammika Perera also owns Royal Ceramics which is another public quoted company in the same business as Lanka Ceramics, namely tiles. With the acquisition last week of Lanka Ceramics he is now in a near monopolistic position in this area of economic activity. It is well known that Mr. Perera, who is undoubtedly one of the richest men in this country, also has controlling stakes in large companies such as Hayleys, Amaya leisure, Fortress resorts, Vallibel Finance, LB Finance and New World Securities.

Given this background, in a more advanced country Mr. Perera would be subject to various regulatory regimens. His wide business interests make him an interested party in many economic activities/policies of the country in a significant way. As such,  in a country with developed systems his activities would be monitored and regulated by the State in the greater interest of the public. But leave alone monitoring his activities, it is an astonishing fact that this government thought it fit to appoint him at one time as a Secretary of a Ministry and also the Chairman of the vital Board of Investments (BOI).In these positions Mr. Dhammika Perera was wearing the hats of an administrator, policy maker and in a way a regulator. As a Secretary of a government ministry, he would be privy to policy considerations and other concerns of the government at the highest levels. In the shoes of a senior public servant he also has direct access to decision makers in the government.

It may well be true today that our senior public servants are poor quality, their spirit broken by years of relentless politicizing and corruption. Although politicians who are responsible for this state of affairs would hate to admit it, even they have to accept the reality and bring people from outside to fill various posts including the Secretary posts of the various ministries. But this does surely mean appointing persons with potential conflict of interests’ situations to these sensitive positions.

The main function of the Board of Investments is that of a facilitator for foreign investors. It has the power to grant various incentives to investors such as   tax holidays, preferential tax rates, exemptions from custom duty and foreign exchange controls among other things. For a businessman competing with his many rivals locally, this would be a very tempting opportunity indeed to reward friends and deny competitors.

We have nothing personal against Mr.Dhammika   Perera who by all accounts is a success story which should be admired. By any means this is not the first time that businessmen with potential conflict of interest situations have been appointed to high public posts in this country , the appointment of Harry Jayawardena to various government Boards by the previous government being one. But what concerns us is a style of government which completely ignores fundamental economic/legal/moral concerns such as conflict of interest situations, influence peddling and monopoly building which are concepts fundamental to good governance.

With such an attitude of indifference prevailing, the fact that we do not have an anti-trusts authority as in most countries is not surprising. Although we eagerly seek   respect from the rest of the world, to put the house in order is not a priority for us. Whatever institutional steps we have taken to curb   harmful economic activity in the past   have turned out to be toothless tigers because of corruption and political influences.

It is basic economics that a monopoly is bad for the consumer because of the arbitrary pricing power it commands as well as its tendency to lower the quality of the product as the consumer really has no choice in the matter. Monopoly power in sectors such as banking and media can have other ill-effects as well. Overall, monopolies and cartels are considered anti-competitive and harmful to a market economy.

There are certain situations where monopolies become inevitable for reasons such as very high start-up costs and practical difficulties in competition. It is very difficult to conceive of a large city having several water or power suppliers. Similarly a sewerage system cannot have too many suppliers due to problems such as providing multiple sewer lines etc. Equally, in a very small or remote area we cannot have several supermarkets competing for a few customers. Then we also have legally created monopolies by way of intellectual property, generally patents and trademarks.

However in the bigger scheme of things governments are mindful of the dangers that monopolies can pose to the economic well fare of a country. They put in place monitoring and regulating bodies such as fair trading and competition commissions.

A few years back the giant Microsoft Corporation was ordered to de-merge their Microsoft Internet explorer from the Microsoft Windows products as it was considered a monopoly activity. It is noteworthy that in this case the customers had other options. There were other products in the market and the customers were   not compelled to buy Microsoft products. Yet the authorities broke up the behemoth Microsoft on the basis of anti-competition laws and it is said the loss to the company was something like US $ 70 Billion!

We also have the example of the iconic AT and T of the USA which was broken into smaller entities popularly called baby bells sometime in 1982 again due to anti-trust litigation.

Certain shopping centres in the Developed countries now even have restrictions on the number of shops that one company may have in a geographic area.

In Sri Lanka we live in ignorant bliss about issues such as monopolies. Even a casual glance at some of our economic activity will reveal a worrying   degree of monopoly activity both horizontal as well as vertical. We have for example only two large supermarket chains in the country. Between the two they probably command about 50-70 % of the supermarket consumers. Some of these supermarkets also have their own supply chains in the form of farms and manufacturers feeding the supermarkets. By restricting the products of outside manufacturers at their supermarkets they can easily cutoff the markets for outside manufacturers. Once the other manufactures are destroyed these supermarkets can well end up with the power to demand predatory prices for their products, which they produce and market through their monopolistic supermarkets.

Usually on Sundays I used to enjoy a packet of lamprais at a popular fast food chain. They were selling a packet at Rs. 330/ This Sunday I was astonished to discover that it had been raised to Rs. 400/, a 20% plus jump in the price! As we know nothing happened in recent times in the local economy to justify such a jump. Of course this food chain is not a monopoly and it is not essential for a person to have a lamprais for lunch. But in a case of a monopoly in a vital area the consumer will have nowhere to turn.  Predatory pricing and shoddy quality may well become his daily reality.

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Latest comments

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    Conflict of Interest ???? Sorry never haerd of it dont know what it stands for.

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      Does anyone know who Dammika Perera is? His background and his meteoric rise? To whom he acts as a front? I wonder!

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        Gamini

        You know everything. Please enlighten us as well.

        I was amazed this guy was appointed to BOI. And to a ministry as well.

        At Bamba he has a Casino. Only admits foreigners.

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    I request the weekend papers to copy this article for the information of the public.

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    Cowboy capitalism! Like in Russia after collapse of Soviet Union.

    Rajapassa clan is creating corrupt Oligarchs loyal to the regime.

    Scream as much as they want. Nothing will change. Opposition is asleep!

    Sri Lanka belongs to the Clan, their cronies and henchmen now. And 18th amendment is handy.

    Give yourselves a round of applause Sri Lankans. Be happy.

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    Fair competition undoubtedly is a condition necessary at least to safeguard consumer interests. All democratic countries although they operate on the basis of private or capitalist enterprises do have such legislation. There are anti-trust laws in the US. Australia while following the US example has gone even beyond in the implementation mechanisms of fair competition legislation. Some of the matters raised by Mr Ravi Perera could for example be brought before the courts of law or initially before the Australian Competition and Consumer Commission.

    What can be seen in Sri Lanka during the last decade or so not only the absence of such clear legislation but also the promotion of monopolization of industry and enterprises increasingly in few hands under political patronage. The Stock Market manipulations were one example. The broad socialist or welfare policies of the SLFP or its coalition (with the left parties in it) have become a major farce and mockery.

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      Dr Laksiri Fernando, and indeed Ravi Perera are living in their imagined worlds of dutiful people, where there are democratic states with the right regulations. What ever regulations that existed were dismantled by Reagan and Thatcher, and done to death by Bush and Cheney. Look at how Blackwater, Halliburton, Carlyle Inc etc operate with same same oil men (e.g., Rumsfeld, Dick Cheney) as chairmen or strong stake holders. Look at the following movie {aired on the venerable Canadian broad casting service (CBC) telling you have Bush, Clinton, Blair, the King of Spain (to name a few) cooled cool millions each in comfort money allowing Glencore (the biggest copper miner in the world} to do what ever they wanted. Hasn’t Ravi perera and Laksiri Fernando heard of Rupert Murdoch and his purchases all over the world. Only the Chinese were smart enough to handle Murdoch correctly (disburse his purse in china, make him marry a pretty chinese enchantress and go home empty handed)! The crookery and corruption in Lanka are pea nuts compared to what is going on in the West, or in the UN. But our fellows will naturally catch up and become world players in corruption too, given enough time. However, half-way up, if they have brown skins working in the west, they can be put to jail just for show, as happened to the Stock-market inside-trader Rajaratnam.
      The Western leaders, Kofi Ananan, and probabaly Ban-ki-Moon and such types have crafted corruption to a fine art and do it in tuxedo style, with the connivance of the completely illegal statke known as Switzerland. Our guys are still doing minor stuff in amuda style. That is the only difference. Just give them time.

      see the movie:
      http://www.whypoverty.net/en/video/34/

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        Kautilya: I hope yo are not justifying the corruption is Sri Lanka as acceptable for it is minor compared to else where?? I do not think we should accept it becuase it happens in other countries too. At the same time there are many other countiers, like Singapore, which we are trying to emulate, not corrupt at that scale. Why do not you compare with that country instead of the west which the Rajapaksa clan is aginast anyway?

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    This is why we are the “Wonder of Asia”. Anything can be done here that has not been done anywhere else!!Our fatalistic attitude does not help our development process but the resilient nature of our people to go through tough situs-(most of them brought upon by ourselves)) is something to admire.What is the solution-carry on as we are till we cannot handle it and a situation erupts.Which is generally once in about ten years roughly.Where are our electoral colleges? Having had the vote for so long no one has thought that you need to ‘train’ to be a politician.!!!

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    The use of company funds to acquire other companies needs to come under closer scrutiny. Very often there are combines of individuals who occupy the boards of one company getting together to acquire another. Some individuals are on the boards of private and commercial banks and have access to bank funds to effect such acquisitions. One company can be just a stepping stone to acquiring others. Minority shareholders have no say in such deals which are controlled by the directors of companies and a few big fish in the stock market.

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    This show the fall of total business communities & all under Grambling head. Up to now Dammika pereras in & out act’s are very civilized. The weakness is MANDATORY OFFER’S CERAMICS LANKA PLC TO PURCHASE ALL THE REMAINING ORDINARY SHARES. This vanish the poor share holders rights. This must need to amend.

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    Lanka Ceramics is a company that has under performed for many years and hence a target for an acquisition. I don’t know what they produced in Sri Lanka.

    Sri Lanka is a small market with an over valued currency. An export oriented company must be forward and backward linked to survive in this hostile environment where exports have practically halved within last five years. As an astute businessman, Dhammika has strengthened the ability of his local raw material oriented company to survive and grow. There is no monopoly created by the acquisition of a company without a market share in any commodity.

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    This person is the major share holder in Asian Alliance Insurance. He has recently bought Delmage Insurance Brokers! As far as I know, according to an act of IBSL ( Insuarance Board of Sri Lanka) no single person can have both? Did IBSL amended it’s act to accomodate Dhammika Perera?

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    speaking on supermarkets the govt.must limit the numbers in one area as the corner shops will loose business and close shop.since
    there are no govt. jobs people started to open retail outlet shops and did a good job also gave on credit.Kadawata town has Keels,food city and arpico all in close vicinity and two retail shops closed down last month.

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    Grapes for the Capitalists, cucumber for the masses.

    Grapes for the Law Breakers, Budu Bala Sena, Cucumber for the Christians, Tamils and Muslims

    Look, even Monkey’s, Capuchin Monkeys, do not put up with such blatant discrimination.

    Arrest Assath Salliue and NOT arrest the Real Terrorist Law Breakers, Budu Bala Sena.

    Is this Buddhism? State Sponsored Ethno-Nationalism? Lrd SoulBury Where are you? Can your British Ghost come back.?

    Fairness Study. Cucumber and Grapes.

    http://www.youtube.com/watch?v=lKhAd0Tyny0

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      Amarawiri:What does this topic have to do with Buddhism? Do not mix things up!

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    Every night, as he sips his invigorating malt, Dhammika must be contemplating his good fortune to live in the wonder of asia where new standards are being set in public life. Many an evening have I spent in a very comfortable chair on the terrace of the GFH, caressed by the warm evening zephyr, counting the benefits accruing from a bit of insider trading. So why begrudge Mr Perera? The trouble is SL is full of knockers resentful of anyone who has the ‘get up and go’ to take advantage of a opportunity that presents itself. Dhammika, nice work if you can get, and if you get it, tell us how. Let the knockers write their copy – copy breaks no bones, so who cares?

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    Please be informed that Lanka ceramic is a manufacturer of Ceramic ware , and also the main supplier of basic raw materials to other ceramic and porcelain manufacturers in Sri Lanka, and it supplies materials such as Kaolin , feldspar and quarts which are very basic materials for the ceramic and porcelain industry.
    Now you could decide whether this acquisition would create a monopoly or not

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      I remember when Dammika Perera was the Chairman of the BOI, he stopped the import of duty free tiles and aluminum for BOI Projects, saying it was to safeguard and improve local industries in these sectors. Now he monopolizes both these sectors.

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    “In Sri Lanka we live in ignorant bliss about issues such as monopolies. Even a casual glance at some of our economic activity will reveal a worrying degree of monopoly activity both horizontal as well as vertical. We have for example only two large supermarket chains in the country. Between the two they probably command about 50-70 % of the supermarket consumers.”

    This is an Oligopoly.

    The Maras have a Monopoly.

    They have have licensesd the monopoly to Budu Bala Sena, the “Buddhist” terrorist organization, according to Rev. Dalai Lama.

    Monk M<ahanam Myth also said aboyt the Monopoly.

    Sinhala Buddhism- the cursde of Lanka.

    Lanka should have remained Jain or Hindu. What a shame. Now the country have to deal with the overheads and terrorism of 100,000 crazy monks.

    Actually, monkeys are much fairer than the Sinhala "Buddhist" Monks.

    Here is the Link and proof.

    Look, even Monkey’s, Capuchin Monkeys, do not put up with such blatant discrimination.

    Cucumber for the Muslims, Grapes for the Terrorist BBS!

    Arrest Assath Salliue and NOT arrest the Real Terrorist Law Breakers, Budu Bala Sena.

    Is this Buddhism?

    Fairness Study. Cucumber and Grapes.

    http://www.youtube.com/watch?v=lKhAd0Tyny0

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      With his two comments Amarasiri has exposed himself! He is tamil, probably a LTTE remnant, under an asusmed name criticizing Buddhists, lot stock and barrel ignoring that the majority of buddhists are NOT in Bodu Bala Sena!

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    Conflict of interest?
    One person or family monopolising an industry?
    Fairness and competition?
    Public interest?

    The entire Rajapaksa family is riding rough shod over all the above that are part of any democratic country. The Rajapaksa family and their “ape minihas” don’t give two hoots to what decent people consider acceptable, fair and legal.

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      Fair comment. The Government is a monopoly! Which is why it is bad for the consumer!

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    It is noticable that many of our political appointees to high government posts have only their o level qualification. Generally to be a secretary you must be a graduate. Look at Dammika Pereras,Gotabaya Rajapakses and Harry Jayawardenas . What is their education ? But they are successful people in the jungle of business and politics. Maybe practical men. But do they really understand more complex issues like integrity, political abuse, family bandyism and power brokering ?They can bark orders but can they make a country into a legitimate one? That is the question we muct all think about .

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      Look at all our parliamentarians most of whom are graduates of our universities. Do they understand integrity? It is not education we should look at but their values.

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    The major shareholder of Asian Allince is Ashok Pathirage of Asiri Group and not Dhammika Perera.

    Lanka Wall Tiles in Balangoda have their own kaolin plant. I presume Lanka Tiles are in a similar position, hence, there does not appear to be any cornering of a raw material resource. Under our Stock Exchange regulations CSE has the power to investigate the creation of any monopoly situation.

    According to the December 2012 financials filed by Lanka Ceramics, the company turnover for 9 months had declined from Rs. 204 million to 108 million in December 2012. The Group earnings per share had declined from 8.90 to 5.47. The share price had declined from Rs. 104 to Rs. 72.30. These are conditions that lead to takeovers, thereby enhancing shareholder value.

    CT Holdings who did not have any strategic interest in the ceramic industry had taken the correct decision to sell their interest at an attractive price and focus on their core businesses.

    Under the Stock Exchange regulations the new buyer has to make a mandatory offer to buy all the shares offered by the minor shareholders at the highest market price. Minor shareholders will consider the outlook of the company under the new management and decide whether to sell or retain their shares.
    This is just good business!

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      For your information, the CSE only looks at monopolies and mergers from the view point of shareholders (minority interest, mostly) and that also only in the case of public listed companies. The CSE does not have a mandate beyond that.

      Prior to 2003, The Fair Trade Commission was the regulator for monopolies and mergers. It had the power to intervene to prevent a likely monopoly that could harm consumers and intervene in the case of predatory practices by existing monopolies or oligopolies.

      However, with the establishment of the Consumer Affairs Authority in 2003, the Fair Trade Commission was abolished. For whatever reason, the power to deal with monopolies and mergers were not passed on to the newly established Consumer Affairs Authority.

      Since then, in the construction industry alone, monopolies have been created in copper wire, tiles, sanitary ware, aluminum as far as I know.

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      I an sorry! . Dhammika Perera is a directer of Sri Lanka Insurance. I hope he is still there.

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    I remember when Dammika Perera was the Chairman of the BOI, he stopped the import of duty free tiles and aluminum for BOI Projects, saying it was to safeguard and improve local industries in these sectors. Now he monopolizes both these sectors. Before monopolizing casinos (3 out 4 in colombo), he was the king of jackpot machines with over 80% market share before President Premadasa banned them.

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      I posed the question above, whether anyone knows who this Dammika Perera is and for whom he runs a front. Dammika Perera was Joe Sim’s driver and confidant before he became a Billionaire who manages Joe Sim’s empire. R. Premadasa declared him persona non grata, when he realised that his earstwhile comrade Sirisena Cooray had brought in Joe Sim and there were many plans they had. Fearing the obvious what would happen to R Premadasa he quickly got rid of Joe Sim. Thereafter R Premadasa fell victim to his Cook Babu’s parcel that contained the bomb which was hand delivered, given by none other than his best friend, who washed the scene of murder to erase any tell tale marks and put it on the LTTE. Thereafter Sirisena Cooray had other plans allowing RW and DB to take over for a while, but the gamble did not pay as GD forced his way back in to the UNP against much resistance through DB and after GD’s demise, RW closed the door of the UNP for this violent element, the moment RW consolidated his position. Is it any wonder RW has been at the receiving end not from the Opposing SLFP but from forces within to destabilise RW.

      What has to be taken note of this Monopoly is that it has it’s roots outside this country, although Dammika Perera handles the front. I have no qualms at all if it was all Dammika’s alone, as we need more Dammikas in this country to uplift the economy of this country. How condusive this arrangement is, I do not know.

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    I wish our newspapers ran more articles of this quality. Most writers just abuse others in an emotional tone. But there is very little rationality in them. But this article is a very well presented argument for us to take legal steps to control monopolys. After reading this article I have begun thinking about various businesses in our country like supermarkets, airlines, buses,apartment building etc etc. Do we have laws to protect the poor customer ? That example about the lumpraise is very correct. I think he is referring to Fab. Why should prices just go up like this ? Thank you Mr. Ravi Perera for putting up a case for the millions of unrepresented people who are exploited daily by a corrupt system.

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    We must be able to admire Mr. Dhammika Perera’s “Entrepreneurship” and wish him well, provided, of course he manages these enterprises with “good governance” in relation to economy and the general public. I believe he has a “worthy” Financial Advisor by the name Nimal Perera and he knows “how and where” to put the money and also most importantly to “establish correct connections”. Perhaps the listings of the Ascot Holdings will reveal all that.

    Anyway, I do hope and suggest on a matter of “Public Interest” to Mr.Dhammika Perera and the Government, to consider taking and handing over of Mihin and SriLankan Arilines and save us from a “colossal waste” of National Wealth. These two ventures are “beyond resurrection” and so long as these are under the “almighty” there is no light at the end of the tunnel. So it is better to entrust it to a Sri Lankan Entreprenuer rather than an “outright sale” to a foreign party.

    Mr. Dhammika Perera how about getting ivolved in National Aviation?

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      Yaeh, Make him President ;-)

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    In the Seventies, the Ceramics industry in Sri Lanka was an empire by itself due to the dynamic efforts and efficiency of Dr Anura Weereratne. Dr Weereratne also known as the father of Ceramics in Sri Lanka introduced and guided Sri Lanka into the big league by starting Lanka Porcelain and subsequently Lanka Wall tiles as well. During that golden era the government retained a 75% stake in these joint ventures headed by Dr Weereratne. They also held a healthy balance sheet by way of their remarkable performances every year for over a decade. This is something virtually unheard of in today’s day and world.

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    https://www.colombotelegraph.com/index.php/monopoly-building-in-sri-lanka/
    Sri Lankans must be grateful to have fearless public spirited thinkers like Ravi for highlighting this.
    What percentage of people in Sri Lanka even know there are laws against monopolies that goes some way in controlling capitalism. My guess not even 0.01% – so these persons must be taken note of.
    To quote Mr Jayasekera in the same string above –
    “As I remember when Dammika Perera was the Chairman of the BOI, he stopped the import of duty free tiles and aluminum for BOI Projects, saying it was to safeguard and improve local industries in these sectors. Now he monopolizes both these sectors.
    Jayasekara – May 14, 2013 – 10:28 am
    Unquote”

    Not only is there a 30% Import Duty on Ceramic Tiles to protect this monopoly – there is as of last week a NON TARIFF BARRIER – Importers of Tiles now have to obtain a certificate from the SLIS – Sri Lanka Institutes of Standards to Certify “That the Tiles being Imported are not made in Sri Lanka” – For a start – has this got any thing to do with standards ?

    This was sprung upon us by the Customs Division of the BOI when a consignment of Tiles arrived in Colombo Port for the Construction of the 200 bed Room Marriott Hotel in Weligama.

    Our Consignment would have had to incur the delays due to the never ending serial holidays in getting over this Non tariff barrier – but was released on an assurance the this certificate would be provided as soon as possible after these holidays.

    All the major Hotel Projects on Stream better watch out – we have already out-priced our selves in construction costs and productivity compared with India.
    These Monopoly and Barriers must be brought to the notice of those who understand these – not too many is the fear.
    Nahil Wijesuriya – Chairman Weligama Hotel Properties Ltd
    https://www.colombotelegraph.com/index.php/monopoly-building-in-sri-lanka/

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