Sri Lanka to revive Sathosa with help from Singapore

Sathosa

Oct 09, 2015 (LBO) – Sri Lanka’s state owned retail chain Lanka Sathosa aims to get support to revive from Singapore as the retail chain is making continues losses, ministry of industry and commerce said in a release.

Lanka Sathosa owned more than 310 outlets around the island.

“We are restructuring LAKSATHOSA and are still experiencing monthly losses,” Rishad Bathiudeen, minister of industry and commerce was quoted as saying in the release.

In 2014, Singapore became the fourth in exporting products and services to Sri Lanka representing 6.6 percent of Sri Lanka’s total imports.

Sri Lanka imports petroleum oils, milk & creams, fertilizers, iron, steel and plastics from Singapore at around 1.2 billion dollars.

“I recommend you to follow Singapore’s NTUC Fairprice Co-operative model for LAKSATHOSA. NTUC Fairprice is Singapore’s largest retailer with multiple retail formats,” Chandra Das, High Commissioner of Singapore and the former Member of Parliament of Singapore from Chong Boon was quoted saying.

“I see that SATHOSA too is basically a cooperative model. I was NTUC Chairman for 33 years therefore I can see that it’s a good model you can adopt. We have made NTUC Fairprice shops world-class. NTUC Fairprice competes on a ‘patronage rebate and a 10 percent lower price than comparable popular brands’ model of retail, which brought it a revenue of 2.2 billion dollars in 2014.”

“NTUC Fairprice belongs to workers and trade unions and NTUC profits are given back to Singaporeans who buy its shares.”

“I notice that there is no central warehouse for LAKSATHOSA! You need to establish central logistics,”

Das had asked to send a study team from Sathosa to Singapore for a NTUC Fairprice training.

“We’ll do this for Sri Lanka. Singapore is pleased to support LAKSATHOSA.” He added.

Since it was founded by the labour movement in 1973, NTUC Fairprice today sells more than 2000 house-brand products across 120 outlets in Singapore serving more than 400,000 shoppers daily.

However in June the industry and commerce ministry said the Lanka Sathosa, will be given a 7.5 billion rupee bail out from the treasury and audit firm  KPMG has been appointed to look into ways of re-structuring it.

“The Finance Minister Ravi Karunanayake had agreed to give 7.5 billion rupees from the treasury to keep the firm out of trouble,” Rishard Bathiudeen, Minister of Trade and Commerce said in June.

“Lanka Sathosa owes 10 billion rupees to two state banks and three billion rupees to suppliers and we are facing problems to keep it profitable,”

“KPMG is expected to find ways to sustain Lanka Sathosa in a profitable manner.”

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Tilak
Tilak
6 years ago

Divide 10 billion rupees by 20 million people(Population of SL).Every child,every,man,every women irrespective of their age has to bear a burden of LKR 500/- per person just for this one entity?(average earnings less than LKR 200 a day).Don’t this commercial venture had a board & a senior management?

Sumith
Sumith
6 years ago
Reply to  Tilak

What senior management, the minister robbed from Sathosa.

Rupe
Rupe
6 years ago
Reply to  Sumith

Previous one Jonny. Also Ravi K did it big time in 2002. Ravi’s one, I know very personally. All of them are rouges. Please don’t try to justify them. Anyway, the principal remains, what has the government got to do with running a business? Their tole is NEVER to run ANY business. Why? Because the incentive system does not encourage anything other that inefficiencies and stealing.

Rupe
Rupe
6 years ago

We are not Singapore and should not try this model here. People don’t steal in Singapore because they are very scared of the consequences. Anyway, what is the reason for the government to run a retail
shop? Don’t we have enough competition in retail trade to ensure that the consumers have a choice? We have an oversupply of retailers in Sri Lanka. We are still thinking like how Soviet Russia thought during the Communist era in the 60s, 70s and 80s. If you want to give poor something cheap, give the food stamps.

Dirty Harry
Dirty Harry
6 years ago

All you have to do is have one Costco or Walmart and all of a sudden the cost of everything will be fair. Lankans get gouged by a system of highly inefficient protectionist retail trade.

We pay a high price for crappy stuff. It is really backward.

Suji
Suji
6 years ago
Reply to  Dirty Harry

The country as a whole will lose if foreigners are controlling the retail market. Sri Lankan manufacturers will find it really hard to put any of their products in the shelves while foreign brands will flood the market.

Dirty
Dirty
6 years ago
Reply to  Suji

The country will not lose, the people will win. Sri Lankan manufacturers are selling us crap, at inflated prices. That is because they are in a protectionist regime. They provide low paying crappy jobs, and the fat cats make all the money. They propogate unsustainable business models at the expense of the people. Some people like the manufacturers will lose, but the country will amass huge benefits by directing resources to more productive areas.

Let the people decide what brands they want to buy.

Rupe
Rupe
6 years ago
Reply to  Dirty

Yes Dirty, agree that we need more competition, foreign or local. But we also need to find out the cause of our high cost and crappy products. Our costs are high due to high import and other taxes, silly regulations, inflexible labor markets, high transport costs, 30% post harvest losses and various economic reasons. Supermarkets are also subjected to other special taxes. These are structural problems we have to solve first.

Dirty
Dirty
6 years ago
Reply to  Rupe

Walmart would figure all those things for us, and give us competitive prices. They would also be able to lobby the government where needed so that the regulatory/legislative issues could be ironed out. Local retailers are too comfy, and just want to use monopolistic position to gouge consumer.

So I say, let Walmart come in. The margin they make and extract from the country would be far outweighed by the economic benefits they provide.

Jehan
Jehan
6 years ago
Reply to  Dirty

Dirty, this is not 80s or 90s where poor countries made their doors wide open for multinationals and 2 decades later poor countries are in the same level while multinationals are making hefty profits. If our local producers are producing shitty things (which is just bullshit, multinationals make noodles with cadmium in it and still get away bc they have the muscle power to exert pressure on third world governments by lobbying the powerful governments back home) foreign companies are free to setup shop here and make quality products. It is not as same as opening our retails industry to foreigners.

example: Let’s say we allow in Wallmart, they crush Keells, Food City and all the ordinary retailers with families to feed. What if Nestle invests in Wallmart next year? Wouldn’t Sri Lankan Wallmart shutdown the door on all other competition and flood their stores with Nestle products?

Don’t spell the word “protection” like it’s a bad thing. First world countries do protect their economic interests while lobbying for poorer countries to open their doors wide open. That is how they left their former colonies but still maintained the profiteering channels intact.

Dirty
Dirty
6 years ago
Reply to  Jehan

This is an argument where people are just in denial. All you have to do is look at the successful models. For anyone who has spent time abroad, we know that the retail experience is far more advanced than what we have here.

The retail industry here and in other backward countries know this, and they realize they can not compete with better managed entities. That is why the keep them out.

You put an international standard retailer in Colombo, you, I and everyone else would flock there. It is just better value for money.

You misunderstand the model of a global retailer. Unlike food city who uses its monopoly power to keep out products, the global retailer uses economies of scale to negoitiate with producers for the best terms, they keep their global margin and push volume.

Also, sadly, National products are crap. In fact, we don’t even know how crappy they are because of lack of regulation, standards and litigation.

If they were good, they would be bought out and taken global.

Sri Lanka needs to change its attitude and join the civilized world. Otherwise we will be doomed to be a poor country.

Jehan
Jehan
6 years ago
Reply to  Dirty

Oh please just because we were profiteered for centuries by your well intentioned invaders and ended up in poverty we are not uncivilized. We are just under-developed. You know what that sums up? We don’t produce enough. And inviting Wallmart here isn’t going to increase our production by a penny. Sure you will be able to go to wallmart and grab a pringles for Rs 50 less but that will not add up to anything here.

You don’t throw a well trained grown up man and an improvised child into a boxing ring and then call it competition. Sure the kid may learn a trick or two but that’s before been killed on the stop.

Your idea about opening up everything to the “superior” foreigners and they making it better for the clueless natives had a following in late 80s. It’s been 3 decades now. Did it deliver anything other than widen the income inequality? Aren’t even the god fathers of open economy in Sri Lanka are forced to talk about a “social market” economy now?

Dirty
Dirty
6 years ago
Reply to  Jehan

Look, this is not about colonialism or the Dutch east India company.

This is about economic efficiency. If Walmart comes here and duties are normalized tomsingapore standards, the price of lots of stuff will drop by half! It is a game changer, not 50 rupees on a can of Pringles.

This will put extra money In the hands of consumers to improve their lives.

Foreigners are not superior, some foreign companies have just discovered how to make the retail process more efficient. Remember, Walmart has revolutionized the retail industry in the U.S., and Costco is opening up in new towns and revolutionizing them one by one. These are great companies, and you know what, their gross margin is way less than our local retailers.

Social market economy is a term developed for political expediency. People have become scared into stagnation by the past regime. The bottom line is that the government has to make the loves of the people better.

Who are we protecting in the boxing ring by the way?

Local kade or Pola – realistically these will disappear as our country advances.

Keells – the majority of JKH is owned by foreigners anyways?

Food City – ??

Arpico – owned by a Lankan who lives in Switzerland (basically a foreigner)

The jobs will move to the foreign retailers who will pay better and offer better benefits?

Why is national pride being used to protect businesses who do not act in the national interest? People have been brainwashed and the fat cats are laughing all the way to the bank.

Rupe
Rupe
6 years ago
Reply to  Dirty

We have to open up our economy, including the retail sector to increase the competition. But, the government has to get out of these stupid businesses in the first place. Sathosa should be one of the first to get rid of. Only a few governments ( like Singapore) can run a business without corruption and requiring tax payers to pocket the losses. We are not Singapore, and should never even dream about being one.

expat
expat
6 years ago
Reply to  Dirty

first of all this argument maybe farcical simply becoz srilanka may not have the critical mass for walmart to invest. however there maybe other smaller chains that might show an interest.

secondly, it is strange that bigger shops or super markets as they call themselves are selling at higher prices than the wayside shops. being of super size they do have economies of scale which shud translate into lower prices of all items. for example if u go to any big retailer in australia or middle east, their prices are lower than the smaller one off roadside shops.

i guess it is only a “POSH” experience for people in sri lanka to shop at a super market and pay higher prices. in countries like austalia and the middle east the norm is for all to go to the mega retailers like carrefour, spinneys, woolworths, meyers, big w, sultan center… because everything is cheap compared to smaller shops.

normally people go to smaller shops for specialist requirements (like say sri lankan food in australia). the sri lankan experience is all due to market forces and seller power.

Jehan
Jehan
6 years ago
Reply to  Dirty

Oh please just because we were profiteered for centuries by your well intentioned invaders and ended up in poverty we are not uncivilized. We are just under-developed. You know what that sums up? We don’t produce enough. And inviting Wallmart here isn’t going to increase our production by a penny. Sure you will be able to go to wallmart and grab a pringles for Rs 50 less but that will not add up to anything here.

You don’t throw a well trained grown up man and an improvised child into a boxing ring and then call it competition. Sure the kid may learn a trick or two but that’s before been killed on the stop.

Your idea about opening up everything to the “superior” foreigners and they making it better for the clueless natives had a following in late 80s. It’s been 3 decades now. Did it deliver anything other than widen the income inequality? Aren’t even the god fathers of open economy in Sri Lanka are forced to talk about a “social market” economy now?

Libtard
Libtard
6 years ago
Reply to  Dirty

The 1977 free economy mindset! Multinationals with million dollar marketing budgets will easily crush local producers even if they produce higher quality products. These bullshit theories are created and propagated by west so their multinationals can make more profit.

Dirty
Dirty
6 years ago
Reply to  Libtard

Multinationals will compete against other multinationals, as well as local producers for our consumers. The competition will give us choices on the price/quality spectrum and consumers will decide. Many Local producers will get crushed, but the consumer will win. This is the case in any modern economy. We can choose to stay backward or choose to advance.

The sad part is, the protectionists do not realize that local producers are adding little value to the economy. Much of their inputs/cap ex goes to imports. They pay slave labor wages, and extract maximum profit for their fat cat owners. Why should the people even protect these businesses?

SAs
SAs
6 years ago

Sathosa needs to be renamed start a new

Rupe
Rupe
6 years ago
Reply to  SAs

And what difference will that make? More waste, corruption and inefficiency? What is the role of Sathosa in today ‘s environment?

rookie
rookie
6 years ago

why cant the Govt sell off Sathosa? let there be more competition in the retail industry? just because there is sathosa – is there any competition with Keells or Cargils?

Rupe
Rupe
6 years ago
Reply to  rookie

We can sell Sathosa, but we won’t because of stupid ideology and corruption.

Nirmalan Dhas
Nirmalan Dhas
6 years ago

…Those who cannot afford Keells and CARGILLS need SATHOSA. We can of course change the name and list the thing on the CSE to raise capital. Only Ravi knows where the concept of using the SATHOSA as a mechanism to cushion the lower middle class people – those who earn less than 500,000/- per month – from the pressures of the rapid growth ahead came from. The same source can very well set it up smoothly and only Ravi knows why he needs someone from Singapore to do the job….of course we can guess…