JKH poised to create a world class brand
Sri Lankan politicians from all parties are prone to a common malady: shooting from the hip. They rarely stop to think the consequences of such actions on society, to the economy and the country at large.
All politicians, be they from the ruling party or the opposition, are guilty of this at some point or other in recent years. This is most often seen in parliament where the behaviour of members is generally sans decorum or dignity.
Many are the times verbal diarrhoea and shouting matches have taken place while students, mostly from the outstations, watch in awe from the galleries, in a visit aimed to see how parliament is conducted and the dignity of such an 'August assembly'. 'August' or veneration is the last thing this place portrays for Sri Lankan society today.
That's one of the reasons why a Parliamentary Committee was recently set up to recommend measures for the 'maintenance of propriety, discipline, traditions, and security of parliament' in which public representation has been called for. The public has a lot to say about today's politicians and much of the proposals won't certainly be to their liking: In essence, society demands that parliamentarians keep their 'mouths' shut if they have nothing to say rather than mouth expletives and the Speaker repeatedly cautioning members or directing that the uncouth or defamatory remarks be struck off the Hansard (and media reporting).
In recent times, those guilty of shooting from the hip have been government ministers Mervyn Silva, Wimal Weerawansa, Bandula Gunawardene and Mahinda Samarasinghe. Samarasinghe's announcement that India promised to oppose the USbacked resolution at the UN Human Rights discourse in Geneva, made a week before the event, eventually was to Sri Lanka's disadvantage. Even if it was a fact, rather than keep it a secret, disclosure of one's voting plans boomeranged on Sri Lanka with India - pressurised by the southern Indian, pro-tamil lobby - changing tact and supporting the resolution.
It was a typical 'shoot from the hip' comment aimed at showing who Sri Lanka's friends are, but alas worked against the country; poor strategy. Other statements from Mervyn Silva ('I will break unpatriotic journalists' bones"), Bandula ("a family of three can live on Rs 7,500 per month") and Wimal ("boycott US goods") are also working to the government and Sri Lanka's disadvantage. Furthermore to justify their claims (when challeged by the media), these politicians press ahead with more statements.
This week, Bandula's challenge saying he is prepared for a debate to prove his 'Rs 7,500 per month for a family of three' theory has been accepted by at least two opposition politicians. In last week's Business Times poll on Bandula's claim, one respondent wryly commented; "we should not take too seriously these idiotic comments by government ministers.these are just sideshows to distract attention from the real issues."
It was a reflection of the times where the public views with contempt and cynicism modern day politicians. Anger against the US is not going to do Sri Lanka any good and Wimal's call for a boycott of US goods is doing more harm than anything else. In the first place, the US is least concerned for the simple reason that the margin of exports to Sri Lanka is minimal compared to billions of rupees worth of goods particularly garments sold there. In fact, visiting US trade official Michael Delaney told a seminar in Colombo this week that the US was Sri Lanka's biggest employer and that exports could increase further if 'the right policies are in place'. It is in this context that the stony silence by the Central Bank Governor Ajit Nivard Cabraal and other officials on the prospects of tomorrow's board meeting (see story on previous page) of the International Monetary Fund (IMF) to consider the report of a recent fund review mission on the $2.6 billion loan, is probably a good thing. While the media is looking for that 'hot' story, Sri Lanka's external reserves position might be better placed in the 'silence is golden' strategy being adopted prior to the meeting. Cabraal is one of the most outspoken officials - often speaking and defending the government and its economic policies - and drawing criticism from economists particularly opposition parliamentarian Harsha de Silva.
This time however, Cabraal has refused comment on the meeting and Sri Lanka's stand on whether or not it has requested the balance US$800 million tranche which (if given) is at a higher interest rate. On previous occasions, Cabraal has freely expressed his views ahead of such meetings.
The Governor has gone on record in the past (a few months back when the IMF mission was in Sri Lanka) as saying that while there is no immediate need for further assistance, a 'whether or not to request the balance money" decision would be made closer to the meeting of the fund's board of governors. The Central Bank says US dollar reserves are not under threat and have stabilized because of the Bank's withdrawal from market intervention rather than using up reserves to prop up the Rupee. However any additional foreign inflows (at still lower than the commercial market interest rates) would be a welcome addition to the country's coffers at a time when a major economic crisis is brewing and state revenue is far below expenditure.
John Keells Holdings (JKH), on the back of the peace dividend is bullish on Sri Lanka and is focusing on creating a world class brand in all sectors they are upbeat on from leisure to property development, according to top officials.
"There's a significant change from the way we operated in the past. For example, in the past we aggressively acquired under-valued assets and turn them into profitable businesses. Instead, in the post war environment we changed our strategy in to growing our business. In addition we will focus on Sri Lanka as opposed to focusing outside the country or in the region," Ajit Gunewardene, Deputy Chairman, JKH told the Business Times.
Looking inwards
JKH, at the height of the conflict expanded into Maldives (leisure) and India (IT, logistics and consumer food) to sustain its growth momentum. "But most of our businesses are in Sri Lanka and this is the turf that we know best," he said, adding that JKH is now concentrating more inwards (in Sri Lanka) and anything complimentary to its Sri Lanka strategy.
He said that the group is strengthening its presence in Sri Lanka to reap the benefits of the resurgence in local tourism. To meet these demands, JKH has committed US$ 175 million in the last 2 1/2 years alone in the last two and a half years alone, he said, noting that a significant part of JKH'S investments will be to grow its existing dominant businesses. In such a backdrop, Mr. Gunewardene noted that much of the conglomerate's recent investment has been ploughed into tourism pertaining to massive refurbishment and rebranding its existing properties.
"Chaaya Bey, a 200-room hotel costing US$ 31 million (including land) in the prime Beruwela beach front will be opened this September. A 245 - room business hotel project under a new brand will be completed by end of next year at Greenpath in Kollupitiya. We closed Chaya Wild at Yala and Chaya Trans at Hikkaduwa and reopened them after a complete rehaul last year," he said, adding that Cinnamon Lakeside and Chaya Blu in Trincomalee were also refurbished.
Controlling 40% share of the city's 5-star room supply and a 7% share of graded resort rooms, JKH'S leisure sector earnings growth has immense potential, Mr. Gunawardena noted. "In May we'll close Citadel, for a complete refurbishment, to be reopened in September. We completed the Emperor apartments and handed it to the residents."
JKH is the largest private land owner in Colombo with 25 acres of free-hold land at prime locations in the city and more than 120 acres (excluding existing hotel lands) outside Colombo. He added that a significant portion of this city land portfolio presents immense potential for value-unlocking and JKH is currently in the planning stage for developing these sites.
Bigger picture
The 25-storey, business hotel at Greenpath, Colombo, with an in- vestment of US$ 25 million is a joint venture partnership with Sanken Lanka. Mr. Gunewardene noted that this venture is set to enhance its brand portfolio in hotel management. JKH would have a minority stake in this business hotel in the city, which is expected to be completed in 33 months. He said that JKH also launched the largest single apartment construction in Colombo with three apartment towers totaling 465 apartments at US$ 75 million.
He noted that JKH is currently at the development stage of its 10acre Glennie Street project where its head office is housed. "We are engaging with designers, potential contractors and the authorities in relation to this project," he said.
Mr. Gunewardene noted that they will develop further leisure assets, reiterating that this sector where JKH has a strong footing would be a key growth catalyst. "We see Colombo becoming the next 'hot' destination of Asia," he said.
Mr. Gunawardena noted that all these investments depict the momentum of JKH during the last two years. "We take a long-term view of the country and going forward we're extremely bullish on the potential of Sri Lanka during the next 10 years. Continuing our investment in leisure, we not only want to simply build hotels, but manage them and create a brand that is world class," he added.
Bid to become world class
The lucrative Sri Lankan tourism sector has attracted international brands like Shangri La, Marriot, Six Senses, Movenpick and Minor International of Thailand and Mr. Gunawardena pointed out that local brands in a bid to compete with them need to be world class. "That is the reality and that is what we are concentrating on now. In whatever we do, it has got to be world class, because essentially the war, which was a barrier to entry for the international operators is now well behind us," he noted, adding that surviving profitably in the face of tough international competition is difficult without world class standards in service, quality and output.
He further noted that this was one of the main reasons for JKH to place a huge focus on investing in its people, process and productivity and that in the last two years some US$ 1 million was spent in training the hotel staff. "We are taking the harder route of creating our own brand be it in hotels, property development or retail, which will be more than brick and mortar. We want this to be our competitive advantage which will give us that margin of sustainability in our return," he added.
But he stressed that JKH will 'not rush off to do everything'. "We will invest only in what we are good at in terms of our capability and where we can scale upto international standards. We fine- tuned our portfolio to take that into account. As such the focus of our investments will be in leisure, property, retail and logistics," he added.
The Central Bank's maximum single shareholder limit in a bank will see JKH reducing its current 30% holding in NTB by May. "We are negotiating with some parties to divest a part of this," Mr. Gunawardena noted. JKH owns 95.6% of Union Assurance Limited (UAL), and he added that the group is very pleased with the progress in this industry.