Business Times

Hurrah for justice and SEC courage

It would be unfair to take all the credit but the Business Times (BT) deserves some credit, at least, for the events that led to the resignation of the entire board of directors of the National Savings Bank (NSB).
NSB Chairman Pradeepa Kariyawasam had defiantly resisted trade union calls to quit, along with the rest of the directors, over the flawed transaction involving a 13 % stake in The Finance Co (TFC).
While trade unionists flexed their muscles preparing to expand their protest action, the BT ran a poll last week seeking the views of a cross section of readers and the public. The result: The majority demanding that Kariyawasam and the board of directors must resign.

Treasury Secretary Dr P.B.Jayasundera acknowledged, at a press conference on Thursday, that the government had learnt some bitter lessons from this event and said stringent measures would be put in place to ensure more accountability in investment decisions in state banks and other related institutions to ensure board directors don’t exercise full control in such matters.

The BT poll drew outrage and condemnation and also shock that the directors at the NSB were ‘glued’ to their seats without resigning or face the sack. But mere resignations alone won’t suffice for the huge damage to the reputation of the country’s primary savings bank in which a bad decision would have resulted in millions in depositors’ monies being abused.

The government must continue the inquiry into the flawed transaction and action taken against any wrongdoing. Any attempt to abandon the inquiry will further erode the government’s wilting credibility on issues of this nature, where the authorities have allowed culprits to resign (rather than sack them) with the rest of the process dying a natural death.

The selection of the Postmaster General as the acting chairman is also a peculiar choice. How do you restore credibility in a bank that has been in the news for the wrong reasons? By appointing a non-banker! That triggers more questions than public relief. On the other hand, the Securities and Exchange Commission must be applauded for its bold move to place restrictions on NSB investments, and suspend a key player in the transaction – Dinal Wijemanna, CEO of Taprobane Securities – until an inquiry into his role in the deal is completed.

The SEC, whose chairperson Tilak Karunaratne is thankfully following in the footsteps of his illustrious, no-nonsense predecessor Indrani Sugathadasa in going after the sharks (not only the sprats), also placed strict controls on brokers who invest in the market. That move had a negative impact in the market on Friday but the SEC must not be cowed down by such a response. The market in any event had been affected by lower retail activity due to lack of confidence over action against manipulators and insider trading, which is what the SEC and the Treasury are separately probing in the NSB-TFC deal.

A level playing field for all investors is what is required and this week’s BT poll suggesting the formation of an association to protect the rights of small and minority shareholders is one way of achieving such an objective.

The poll drew tremendous support for the creation of such an association and also saw requests for the BT to facilitate such a process, which the paper hopes to do until such a grouping finds its own feet and is able to operate as an independent body sans any vested interests. Its main role apart from protecting investors should be to help the SEC nip in the bud market manipulation, insider trading and also act as whistle-blowers when confronted with wrongdoing. The BT will provide all its backing for such an organization which eventually, if properly run, should bring confidence to the market and take it to greater, more accountable and transparent heights.

PBJ at it again?
The resignation of Nalaka Godahewa in three of the four state tourism agencies this week didn’t come as a surprise to many in the industry. While the Sri Lanka Tourism chief’s explanation for his resignation was more of a conciliatory nature, the real reason for his decision boiled down to one simple factor: a prolonged clash with Treasury and Economic Development Ministry Secretary P.B. Jayasundera.

The biggest problem faced by the state tourism sector was the refusal by Jayasundera to release funds, which were available in plenty through the cess money, for vital international promotion and marketing of the destination in the post-war period. The industry has repeatedly complained that Sri Lanka was not being properly marketed as a destination. The increasing number of travellers was more out of the curiosity factor which is likely to die down in the next few years, amidst strong competition in regional tourism markets.

Jayasundera has often put a spanner in the works on many issues over his long unbroken career – broken briefly when he was reprimanded by the Supreme Court - as the Treasury supremo. While some of his decisions have been linked to funding issues, many are to do with personality clashes which have nothing to do with money allocation.

The issues at the Board of Investment which has been forced to play second fiddle to the Ministry of Economic Development despite being the main state agency promoting investments and the conflicts between Jayasundera and its chairman M. C. Ferdinando are well known.

The Treasury boss is one of Sri Lanka’s greatest survivors – working in the R. Premadasa administration, under Ranil Wickremasinghe (in a different capacity), under Chandrika Kumaranatunga and now Mahinda Rajapaksa. How the latest turn of events vis-à-vis the Godahewa saga will evolve, remains to be seen in coming weeks.

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