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Government fails to support social entrepreneurship Central Bank too heavily biased towards regulation and controls A veteran Sri Lankan corporate leader last week lambasted the authorities for failing to recognise companies and groups that have played an important role in the country’s economy, business and growth. “ … despite this contribution towards the economy and the employment we have generated, I feel sad that we are not given a voice when it comes to development plans or even in our own growth. We are constantly shunned and viewed as villains. I feel this is wrong because it is entrepreneurs like us who help grow the economy and to have had this much success, we must be having something more that we can contribute within the overall picture of development,” noted Seylan Bank and Ceylinco Consolidated chairman Lalith Kotelawala in the bank’s latest 2005 year report. Kotelawala has often raised concerns about lack of government support for industries and companies that have played a key role in Sri Lanka’s development, and the latest issue with the authorities refers to Ceylinco’s role in the economy. He said while his vision at Seylan is to make sure the bank as far as possible reaches the downtrodden people of Sri Lanka, the criteria for the success of a bank unfortunately are its profitability, ROIs and NPLs. “Ratings are based on criteria used in developed countries and not on the appropriateness for an emerging economy like ours. These aspects only make the rich richer and poor, poorer. We need to look at things differently because we must develop the whole country and not just a segment. Ratings should be based on facets like poverty alleviation and contribution to humanity. For me, a bank’s very existence is about social responsibility – that’s the pivot but this most important aspect is not even given one mark when it comes to ratings. We are on the wrong path when it comes to the concept and vision for the economy of Sri Lanka,” he said. Ratings by ratings agencies in Sri Lanka are a compulsory requirement for banks and financial institutions. He said Seylan and the financial institutions under Ceylinco umbrella have caused a change – a change however fraught with challenges. In the last four years, Seylan has been restricted by the Central Bank in opening branches, student savings centres and even ATMs. “When I took over the reins at Ceylinco in the 1960s, I had just three companies and 1,000 workers. Today, we are one of the biggest conglomerates in the country with 250 companies employing over 30,000. We are also one of the few companies in the world to pay every single depositor at BCCI (bank) after we took over that bank. We also resuscitated three failed fiancé companies and paid all those depositors in total,” he added. Ajita M. Pasqual, the Bank’s Director/General Manager and CEO, in the report welcomed some of the moves the Central Bank has taken to strengthen and improve the efficiency of the financial sector, risk management, enhanced access to finance, strengthening the payment and settlement systems and improve supervision and regulation but noted that the Central Bank should also be a facilitator to economic growth rather than be heavily biased towards regulations and controls. He said taxation for banks in the fiscal budget had a negative impact on Seylan’s profitability with withholding tax and VAT increasing from 15% to 20%, making the total amount of taxation paid by the banking sector nearly 60% of its bottom line, considerably steep in any situation. “However, if the increased taxation contribution will assist in overall national development, then we are extremely honoured to be a part of it. Our expansion plans to increase the presence of the Bank in order to mobilise savings and cultivates the banking habit in difficult parts of the country have been caught up in the quagmire of bureaucracy which makes it difficult for Seylan to reach out to those who need our services,” he added. Grameen loans which assist the poorest of the
poor, increased this year with a disbursement of Rs 1 billion and
Grameen deposits showcasing at Rs 1.5 million. Pasqual said if the ceasefire agreement continues to hold despite its shaky stance, “politically we remain unshaken and favourable weather conditions continue, I remain optimistic that Sri Lanka will achieve its forecasted GDP.” If the reforms and policies in the pipeline are implemented, economic growth will be broad-based and output is projected to grow at 6% in 2006. While the apparel industry struggled to right itself post MFA this year, some of the bigger players had already moved to value addition and branding and Seylan has had a strong presence in some of these ventures, namely knit fabric, lingerie and specialist bridalwear, he noted adding that the Bank will continue to consolidate some of these areas and expand on others.
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