Financial Times

Harry J’s growing empire
So Harry Jayawardena, the influential tycoon who is quietly building a business empire that is spreading its tentacles into a growing number of sectors of the economy, has finally done it. His ouster of DFCC Bank chairman Nihal Jinasena after building up a controlling stake in the bank means that his grip on the one-time development finance institution with access to cheap foreign loans is now complete. Jayawardena’s bid for control of DFCC has long been speculated by the market and business community and this newspaper drew attention to it early on in the game.

The next target in Harry Jayawardena’s sights is said to be the Commercial Bank. Jayawardena’s move to take control of DFCC Bank and speculation that he plans to do the same with Commercial Bank raises interesting questions about the control of our banking institutions and how the rules will be interpreted and applied. The regulators do not have an easy task determining Jayawardena’s extent of control over some of our top banks given the complicated and murky nature of the ownership structures of firms in his growing business empire. And while the rules restrict concentration of ownership in banks, the Central Bank has also said it wants to encourage consolidation in the banking sector to ensure stronger banks and reduce the kind of fragmentation that is seen today. It remains to be seen how the regulators, the Central Bank and the Securities and Exchange Commission will react.

Jayawardena is known to be well connected and currently serves as a senior advisor to President Chandrika Kumaratunga and is also believed to be an important contributor to party coffers, just like many other businessmen who use their wealth to gain influence. He keeps a low profile and avoids the media although his deals and predatory moves cannot but focus the spotlight on him. He is believed to have got the deal for the Norochcholai coal power plant project by becoming the agent for the Chinese firm given the contract.
Jayawardena’s detractors portray him as a ruthless corporate raider out to build a business empire by exploiting his influence with the ruling political party of the day and earnings from his cash cow, Distilleries Company of Sri Lanka, which is now being seen as the holding company for his widening business interests. In fact his raid on Sampath Bank, which raised a storm of protest from shareholders and employee trade unions some years ago, is seen in certain business circles as a dummy run – to test the waters and see how the regulators would react.

The ousted chairman of DFCC Nihal Jinasena has made a statement crying foul over the move and alleging that such “interference”, as he calls it, by shareholders in the DFCC board is unacceptable and immoral. Jinasena cannot take the moral high ground as such actions are quite the norm in developed markets and he himself is alleged to have interfered with the running of the SEC secretariat in its investigation into insider dealing in shares by its then chairman and another retired director of a well known listed company.

While some may not like Jayawardena’s style of business and his growing corporate power, the fact is such predatory actions and struggle for control of listed companies is perfectly normal and legal in a free market, open economic system to which most probably even the tycoon’s severest critics are committed. It is not even immoral. A free market economy with a thriving stock market allows, indeed, even encourages and admires, concentration of power and wealth to some degree as seen by how rich businessmen like Bill Gates are almost idolized in Western countries.

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