falls, depositors howl
By Suren Gnanaraj
The Central Bank last week announced it had decided to close Pramuka
Savings and Development Bank (PSDB) with immediate effect, drawing
howls of protest from depositors and the management of the bank.
Bank staff and depositors gathered outside the bank on Friday after
news of the closure.
Bank’s Director of Bank Supervision P.T Sirisena said in a
statement that a lack of commitment by the Board of Directors and
the shareholders of Pramuka to inject additional funds to help revive
the bank, compelled the Monetary Board to request the Director of
Bank Supervision to cancel Pramuka’s license and liquidate
the first bank in Sri Lanka to be liquidated.
Sirisena, who has been appointed as the liquidator, has said that
the Monetary Board could not allow Pramuka Bank to be resuscitated
through the funds of the tax-payer.
Pramuka Chairman Udaya Nanayakkara, responding to the Central Bank’s
decision to liquidate the bank, said that the Central Bank had not
considered its proposal to obtain a Rs.600 million credit line for
a period of two years. He said he was unaware of the whereabouts
of the bank’s former chairman, Rohan Perera, who is believed
to have fled abroad.
Bank Depositors Association (PBDA) President Ranjith Arambawela
blamed the Central Bank for Pramuka’s downfall, saying it
had not fulfilled its role as an independent supervisor.
why the Central Bank did not take action against the loss incurred
by Pramuka in 1997. “Did they not know that the losses would
accumulate?” He described the Central Bank’s decision
to liquidate the bank as “heartbreaking.”
The PBDA, which
strived untiringly to bring about an understanding between the then-Chairman
Rohan Perera and the Central Bank, said that this shocking decision
has cast a doubt in the minds of the depositors as to whether they
will ever see their money again. “Mercantile Credit Leasing
company has been in liquidation for the past 14 years and some stakeholders
are still to receive their money.”
other banks could be in similar trouble without the Central Bank’s
knowledge. Reyaz Mihular, Senior Partner of auditing firm KPMG Ford
Rhodes & Thornton Co. said the auditors had qualified five issues
in Pramuka’s accounts and drawn attention to 15 matters for
the year 2001 in August that year.
had drawn their attention to the involvement of 15 related parties
in the bank, and had also qualified the controversial staff provident
fund monies which were drafted into the bank’s own shares
and unsecured debentures.
that the Central Bank should have acted on the auditor’s report
in August. “We are not regulators. It was up to the Central
Bank to act on our report.”
Mihular said that audits were based on judgments, unlike investigations,
and therefore could never be 100 percent accurate.
When asked why
they had not qualified Pramuka as a going concern, Mihular said
that the Balance Sheet for 2001 did not reflect a negative net asset
position. International Auditing Standards required that only if
a company had a Negative Net Asset position could the auditors have
qualified it as a going concern.
made an Emphasis of Matter (drew attention) on certain transactions,
which could have brought about a collective net asset.” Mihular
said that since banks operated on confidence, a qualification on
its position as a going concern could immediately trigger a collapse.
“Therefore we had to be cautious, because any misjudgment
on our part could have resulted in expensive litigation.”
said that despite the Director of Bank Supervision saying that a
sum of Rs.600 million was inadequate to revive the bank, Pramuka’s
Board had looked at a worse case scenario and come up with the figure
of Rs 600 million, taking into account the amount of withdrawals
that can be made through savings and demand deposits up to December
Bank in response had submitted its investigation report on Wednesday,
December 11 at 6.00 pm to the Directors of Pramuka, requesting them
to respond to its findings by 4.00 pm on Friday, December 13.
only respond to 80 percent of the findings of the report, during
which time we could only respond on the face of the findings,”
Nanayakkara said. He said that the time allocated was insufficient,
and the Central Bank did not give the Board access to refer certain
documents, which were within the premises of Pramuka.
He said that
the Board had invited the Central Bank to appoint a nominee of their
choice to the Pramuka Board, to over see the interest of the bank
during the two year period, by which time the entire credit of Rs.600
million would have been paid back.
When asked why
the Board was not willing to raise the amount through their private
funds, Nanayakkara said that the time frame given to the Board to
provide its assurance to the Central Bank was grossly insufficient.
report comes in on Wednesday evening, and they wanted us to give
them a commitment of Rs 600 million by Friday 4.00 pm. That was
Nanayakkara told the Sunday Times FT previously that the bank was
indeed stable and that he was hoping to resume operations in a couple
He also accused
the media of misrepresenting Pramuka’s true financial position.
Nanayakkara said that he had informed the Central Bank that it would
find guarantees to safeguard Pramuka’s securities worth Rs.2
billion, if Pramuka was re-opened, but he said there was no response.
He accused the
Central Bank of not giving Pramuka a fair hearing, and said that
the Board would be meeting soon to discuss the decision. Meanwhile,
the Sri Lanka Accounting and Auditing Standards Monitoring Board
(SLAASMB), which launched its own investigation into Pramuka’s
past accounts, said that it was unable to say anything conclusive
at present because its investigations were still in its preliminary
said that SLAASMB was investigating as to whether Pramuka had violated
Sri Lanka Accounting Standards and also whether its auditors KPMG
Ford Rhodes Thornton carried out the audit according to Sri Lanka
tea market under threat
tea industry has expressed fears of being priced out of its biggest
market, Russia and some other CIS countries, following moves to
impose high customs duty on value-added imports by these states.
Siyaka Commodities warned that the industry could expect a “tough
time” in the new year in two of its main markets, Russia and
the Ukraine. Russia is one of the biggest markets for tea bag exports.
Association has been lobbying for entry barriers to value-added
teas into Russia and had supported the allocation of separate customs
commodity codes for tea bags, packets and bulk tea.
This, the brokers
said, was to selectively increase the minimum value of tea in customs
declarations. If the move goes ahead effective duty on value-added
teas could double, they warned. Ukraine too is considering adopting
tea prices helped counter higher duties but we feel that by next
year the establishment of higher minimum FOB levels by Russia could
be the beginning of the end,” Asia Siyaka said.
The CIS imported
56.9 million kg of Ceylon tea up to October this year, from 52.5
million kg in the same 2001 period. Given the threat to the Ceylon
tea market in Russia, the efforts to forge free trade deals with
Pakistan, a big tea consumer, and Egypt, once one of the biggest
buyers of Ceylon tea, will become “increasingly significant,”
they said. These markets are largely supplied by African tea producers,
The Ceylon tea
industry has been worried about falling value-added tea exports
in recent years despite pronouncements by both government and private
sector officials about the need to move way from being a mere commodity
exporter and the importance of increasing value-added exports. .
export figures up to October, the share of value-added tea exports
in total tea exports fell to 35 percent (88 million kg) from 40
percent (97 million kg) in the same period last year.
performance from value addition has come exclusively from the packet
tea segment, which declined to 58 million kg from 69 million kg
the previous year,” Asi Siyaka Commodities said.
Tea bag exports
bucked the trend increasing a healthy seven percent to 11.6 million
kg from the previous year. The brokers described this as a significant
achievement given the “discriminatory” tariffs imposed
by Russia with the aim of blocking imports in value-added form.
industry facing severe crisis
The desiccated coconut industry is facing a severe
crisis with the loss of key overseas markets and skilled workers
moving out of the sector owing to the serious shortage of raw material
to operate DC mills as a result of the drought that has reduced
the coconut crop.
of the DC industry looks bleak with this present crisis,”
said Saman Gunasekera, President of the DC Millers Association.
Competitors such as the Philippines and Indonesia have captured
markets supplied by Sri Lankan millers due to the prevailing production
shortfall, he said.
Even new players
in the DC trade have exploited this opportunity. Sri Lankan DC is
sought after in world markets because of its distinct characteristics.
Mars Chocolates of the UK had stopped buying DC from Silvermill
Holdings Ltd because of the inconsistent nature of the supply, according
to Suresh Silva, a director of Silvermill Holdings.
Up to 80 percent
of the island’s coconut crop goes for local consumption and
less than 20 percent is available for use by the DC industry. There
are nearly 20,000 people directly and indirectly employed in this
sector but many of them are now moving out of the industry due to
the volatile situation, Gunasekera said.
This was another
serious repercussion stemming from the present crisis, he added.
For the DC industry to survive, country should produce 2.5-3 billion
nuts a year. However, this year’s total coconut production
is less than two billion nuts.
Nut prices in the local market have soared because of the shortfall
in production. Local coconut prices are almost double the price
in international markets, industry sources said.
said that there are 60 DC mills in the country, out of which 20
mills have already been closed. The others are operating either
once a week or once in two weeks due to the shortage of raw material.
As a result,
the industry is on the verge of collapse, he added. Urgent measures
to protect the industry were required since the DC industry was
a key foreign exchange earner, he said.
Plantation Industries Lakshman Kiriella told the Sunday Times FT
that the coconut industry should return to its normal state by early
next year given the current favorable weather in the country.
have enough coconuts for the DC industry. This will improve by early
next year,” he said. Up to a million coconut trees had been
destroyed by the combined
effects of drought and the fighting in the north and east between
government forces and Tiger terrorists, he said.
had put into operation a series of measures to revive the entire
coconut industry. Minister Kiriella also emphasised that with the
introduction of the drip irrigation method in coconut estates in
Sri Lanka the situation should improve with trees giving a better
The drip irrigation
system is being initially introduced to the high yield areas, especially
in the “coconut triangle”. It is supported by the Indian
line of credit.
Coconut industry officials said the present crisis had been made
worse by increased of fragmentation of coconut land, particularly
in the “coconut triangle”.
A DC mill owner,
Sunil Watawala, said that the industry produced 60,000-70,000 MT
of DC for the export market last year. But it had been able to produce
less than 27,000 MT for the whole of this year owing to the tremendous
shortage of nuts throughout the country.
is the immediate past president of the DC Millers Association, said
that Indonesia and Philippines are able to export DC at half the
price of Sri Lankan DC because local prices had increased as a result
of the raw material shortage.
He also said that 95 percent of the Middle Eastern DC market held
by Sri Lankan millers had been lost as a result.
would be quite difficult to recapture even if the industry returns
to its previous state, he said. The exodus of skilled labour from
the industry due to the highly volatile situation had created a
serious problem, he added.
considers “second opinion” on inside dealing probe
and Exchange Commission is considering the ‘second opinion’
given by an independent panel which reviewed the SEC’s investigation
into the sale of Aitken Spence shares by its own chairman Michael
Mack and other ex-directors of the conglomerate.
The report on
the alleged ‘inside dealing’ issue attributed to three
directors of Aitken Spence and Co., including the chairman of the
SEC Michael Mack was tabled at a special meeting of the SEC last
of the 20-page report are currently under study, acting chairman
of the SEC Nihal Jinasena said. He declined further comment. The
two-man panel consisted of a retired Justice of the Supreme Court
and an eminent member of the accounting profession, the SEC said.
The SEC probed
the sale of Aitken Spence shares in May and June this year by the
three former directors of the company and their relatives.
coal firm clinches big supply contract
Coke and Power Ltd., the Indian firm that plans to build a metallurgical
coal plant and a power station in Trincomalee, has clinched a long-term
contract to export its output to a big German supplier of raw material
to steel mills.
has set up a subsidiary called Venkatesh Industries Ceylon Ltd and
intends to invest around $220 million (Rs 21 billion) on a plant
that will produce 750,000 metric tonnes of low ash sulphur Metallurgical
Coke per annum and generate electricity for a 110MW power station.
The plant would
convert coal to coke, a raw material that goes to make steel, which
would be exported, said Duminda Jayatilake, a director of Venkatesh
is different from thermal coal used to produce electricity. It has
a sulphur content much lower than that of thermal coal and is therefore
more environmentally friendly, he said.
the fly ash content in thermal coal is very high. We’ll be
using low ash coking coal from Australia.” Venkatesh Industries
Ceylon plans to import 1.2 million metric tonnes of coking coal
a year and produce and export 750,000 metric tonnes of coke.
The company’s export markets are mainly India and South Africa.
met coke (metallurgical coal) is being presold for the next 15 years,”
Jayatilake said. “We have a sale contract with RAG of Germany,
one of the biggest buyers of metallurgical coke, which they will
sell to steel mills.”
The coal would
be shipped in big bulk carriers to Trincomalee, one of the few ports
with the draft of at least 13.5 metres required to handle big cargo
The power plant to be built at Trincomalee by Venkatesh Industries
will add 805 million kWh units of electricity to the national grid.
project is a reflection of more private sector initiative than government
contribution,” Industries Minister Rohitha Bogollagama told
a news conference recently.
is sponsored by Venkatesh Coke and Power Ltd of India and Angleton
Ltd, of the Isle of Man, U.K. The Venkatesh Group is assisted by
Thyssen Krupp and RAG from Germany and Belships from Norway.
has been given “Preliminary Clearance “ by the authorities.
“This has also been given under conditions as it was needed
to get the site cleared and to proceed with the basic needs to build
it,” said R.A.D.P.Samaranayake, Director of the Coast Conservation
for Venkatesh Industries told the Sunday Times FT: “This is
an environmentally friendly project and it saves 8000 tonnes of
carbon dioxide (CO2) a year. So it does not need the Environmental
Impact Assessment (EIA).” The project will generate employment
for over 3,000 people during the construction of the plant and nearly
300 once it is set up.
is expected to earn Rs 6.65 billion per year and nearly Rs 133 billion
over the time span in which the project lasts. The project could
exceed the foreign investment for last year, which totalled just