| HOME PAGE | FRONT PAGE | EDITORIAL/OPINION | NEWS / COMMENT | TIMESPORTS
In what is described as the most important experiment in institutional innovation, the government this week formally launched a company to provide long-term loans to private-sector infrastructure projects.
Established in 1995, the company known as the Private Sector Infrastructure Development Company Ltd., (PSIDC), is a fully government-owned concern with all its shares vested in the secretary to the Treasury.
The country's infrastructure development has been neglected over the years and World Bank statistics show Sri Lanka among the lowest performers in the region. This is probably ironical for a country that once reached out for the coveted Newly Industrialising Country (NIC) status.
According to World Bank estimates, only 10% of Sri Lankan roads are in good condition. India has 20%, Pakistan 18% and the Phillipines 31% good roads. In Sri Lanka, 33% of people have access to electricity. The percentages in India, Pakistan and the Phillipines are 54%, 31% and 46% respectively. About 60% of Sri Lankans have access to safe water while 73% of Indians, 55% of Pakistanis and 81% of Filipinos have access to safe water. Every 12 out of 1000 Sri Lankans have a telephone while the figures for India, Pakistan and the Phillipines are 8, 16 and 10.
The awareness gradually built up that no development plan however grandiose would work out if the necessary infrastructure was not in place. In Sri Lanka, with insufficient public saving and the state unable to divert sufficient public funds into infrastructure development, it became imperative that the private sector steps in to fill the void.
The culmination of this line of thinking was the PSIDC the launch of which was held at Colombo Hilton amidst a large gathering of the business community.
PSIDC chairman Gaya Cumaranatunge described the company as "dynamic and compact" which outsources most of its skills and experience. The Economic Advisor to the President and Deputy Chairman National Development Council, Dr. Lal Jayawardena, termed it "the most important experiment in institutional innovation undertaken by the government."
Chairman/Director General Board of Investment, Thilan Wijesinghe dwelt on the importance of PSIDC in fulfilling an important need of the country while allowing the release of public funds for urgent social needs like health, education and environmental protection.
PSIDC General Manager Rohini Nanayakkara said the company intended to supplement rather than replace traditional funding sources, focussing specially on PSIDC's vision to lead Sri Lanka to the global economy of the 21st century.
World Bank Country Manager Roberto Bentjerodt said after five decades of working with governments of the world, the World Bank now asks "Why not private infrastructure?'
PSIDC obtains funding from the World Bank and KfW, a donor agency in Germany. As Mr. Bentjerodt said the World Bank can lend directly to private institutions or provide a range of guarantees to various loans that commercial banks make available to private infrasturure developers.
PSIDC incentives broadly extend to four areas - the power sector for generation and distribution, transportation for highways, ports and railways, telecommunications and urban environmental services for solid waste management, water supply and drainage.
PSIDC funds focus on two types of investment - the build-operate-own (BOO) type and the build-operate-transfer (BOT) type. ASIDC can finance up to 40% of total project cost while the privae investor needs to provide at least 20% of equity as his stake in the venture. The remainder has to be funded through commerical sources.
Loan maturity is decided on the merits of each venture with a maximum maturity of 22 years and a maximum "grace period" of 8 years. The loans provided in US dollars are repayable in US dollars or rupee equivalent with the private investor bearing the foreign exchange risk.
There are several projects already in operation through PSIDC. These include telecommunications, hydro and thermal power projects and environmental projects.
BOI Chief Thilan Wijesinghe said the greatest success in private sector investment could be seen in the telecomunications field. The two players are Lanka Bell and Suntel wireless telephone companies. Several more projects like the Colombo Port and a barge-mounted power project are under negotiation.
Mr. Wijesinghe said 74% of total infrastructure expenditure was estimated to be in the transport sector. All future thermal power projects are to be undertaken by the private sector.
With massive doses of private investment in infrastructure planned in the coming years, the World Bank expects a high degree of dynamism, efficiency and commitment from PSIDC which is cast in the role of a catalyst for reliable infrastructure development in Sri Lanka.
The District Court of Colombo has extended the enjoining order restricting Seylan Bank from acquiring property belonging to Dayantha Fernando till April 28, when both parties involved are expected to make written submissions to the court.
In the case, Mr. Fernando, Managing Director Pramuka Management and Financial Services Ltd., is suing Seylan Bank Limited for Rs. 100 million.
Mr. Fernando was formerly employed at Seylan Bank and thereafter served as Managing Director of the Seylan Merchant Bank Limited, a subsidiary of Seylan Bank. The plaint claims that the advertisement in the Daily News of March 10, 1997 caused a serious loss of reputation to the plaintiff and was defamatory of him and also caused grave pain of mind and suffering to him.
Avro Garments (Pvt) Ltd., a BOI registered company of which Mr. Fernando was a Non-Executive Director in 1991 obtained a Small and Medium Scale (SMI) Industry loan of Rs. 1.85 million. As part of the loan gaurantee, a mortgage of the director's private property valued at Rs. 7.5 million was also offered.
Mr. Fernando in his plaint, alleges that the resolution published in the Daily News of March 10, 1997 is not a resolution that Seylan Bank was entitled to pass in terms of the recovery of loans by Banks (Special Provisions) Act and that it is null and void and invalid for the purpose of any steps to be taken under the said Act.
The plaint to the District Court also states that the Bank is not entitled to advertise or give notice of the resolution.
The plaint also states that Avro Garments has been doing business with the Bank since 1991, and as at present has an overdraft facility with the Bank in addition to a term loan, a SMI Loan and a series of packing credits granted to it. Although there had been some arrears of instalments due from Avro Garments, the Company had been negotiating with the Bank to re-schedule the ouststanding amount owed to the Bank.
Avro Garments under a letter dated March 10 requested details of the sums owed by it to the Bank. The plaint alleges that the Bank deliberately and with the intent of denying the company the required information wrongfully and unlawfully included details of export bills purchased as sums outstanding to the Bank. Thus Mr. Fernando does not accept the accuracy of the statement.
The government is taking a big gamble in not imposing power cuts immediately, a CEB official said. The hydro electricity capacity in the main reservoirs has dropped to one fifth and the CEB is considering measures such as curbs in the use of air-conditioners and compulsory use of generators by firms, he said.
He said the Ministry of Power and Energy was now pinning its hopes on monsoon showers in May, but if that also failed the country would face a major crisis.
The appeal to curtail the use of air-conditioners and for industrialists to use their own generators could come before the national New Year and a token half hour power cut might be likely soon after that, he said.
He said the CEB had been advocating power cuts from the start of the year but government leaders and the Ministry of Power and Energy had opposed the move. He pointed out that President Kumaratunga in an apparent bid to avoid power cuts had even suspended environmental regulations to allow a power generation plant in Etul Kotte.
Asia Capital Ltd has written to the directors of Forbes Ceylon asking them to respond to certain questions relating to the proposed transaction between Global equity corporation and Vanik, and waned that they may seek the compulsory winding up of Forbes Ceylon.
Asia has also questioned the conduct of Forbes Director Ajith Jayeratne who is also a director of Vanik Incorporation.
Asia said it may have to seek legal remedies if the transaction goes ahead in the manner it was rumoured to be carried out. This is believed to involve the use of Forbes cash reserves to pay off the Canadian owners of the company, which Asia says will devalue the shares of Forbes Ceylon.
"A remedy available in law to us and to the other minority shareholders of Forbes Ceylon in these circumstances is to move Court to compulsorily wind up Forbes Ceylon on the ground that is just and equitable to do so," Asia Capital's letter said.
Asia alleged that Mr. Jayeratne owned 310,907 shares in Global Equity worth approximately Rs 38 mn at the current price of Global Equity share of Canadian $ 2.91 and prevailing exchange rates, while he owned only 60,000 shares in Forbes Ceylon, worth Rs 285,000 at the current price of Forbes Ceylon of Rs 4.75.
Asia alleged that Mr. Jayeratne's major financial interest is in Global Equity and not Forbes Ceylon.
"Mr. Jayeratne the seniormost director of Forbes Ceylon and of other[companies in the Forbes Group, is also a director of Vanik," Asia Capital said.
"Mr. Jayeratne went to the United States of America at the expense of Vanik, to conduct the negotiations for the sale of Global Equity holding in the Forbes group to Vanik."
Asia Capital said it had raised this matter in a case at the Colombo District to which Vanik had replied saying Mr. Jayeratne had participated as a director of Vanik and din not represent the interests of Forbes & Walker Ltd.
Asia alleged that at a recent Extraordinary General Meeting of Forbes Ceylon requisitioned by them, Asia's representative, duly appointed in terms to section 132 of the companies Account had been illegally prevented by Mr. Jayeratne from speaking at the meeting.
Asia alleged that Vanik did not have the financial capacity to purchase Forbes Ceylon and if the transaction went ahead as was rumoured it would be to the detriment of the minority shareholders.
Asia said the proposed transaction may also contravene section 55 of the companies Act.
Asia said they were copying the letter to SEC, Attorney General, Central Bank, the stock exchange and securities regulation bodies in US and Canada.
If not reply was received they were taking legal action to protect their investment in Forbes Ceylon.
Asia said a compulsory winding up of Forbes Ceylon for example would ensure that ass shareholders got a better deal as the liquidation value appeared to be higher than the current share price of the company.
Continue to Business page 2
Go to the Business Section Archive
Please send your comments and suggestions on this web site to
firstname.lastname@example.org or to