An international civil service on the pay roll of the IMF and World Bank are advising the government on how to run the economy in a secretive fashion, a veteran trade union leader has charged.
Today there is an international civil service and this includes central bank people, our treasury people and our task forces, SSP General Secretary Batty Weerakoon said.
Recently a question had been asked in Parliament from the Minister of Finance regarding some persons who were responsible for preparing a report on the economy. The questioner had wanted to know who was paying the authors of the report.
The Minister said very truthfully that the government does not pay them, Mr. Weerakoon said. But the minister had also disclosed that he did not know if the World Bank or IMF paid them .
We still do not know whether our advisors are being paid or not by these international organizations, Mr. Weerakoon said. He recalled the time when he had requested from the Finance Minister to table the agreements the Sri Lankan Government had reached with the IMF during the past five years. He was addressing a seminar on privatization in Colombo.
The moment my question appeared in the order book I was telephoned by the top man in the Treasury at the time, he said. Mr. Weerakoon had been told that while the first three agreements could be shown the last one could not be shown because there were budget secrets in it.
The Minister of Finance in turn had said to Mr. Weerakoon that the last agreement could not be tabled because the Treasury boys won't allow me to show it to you.So we do not know what is good for us, Mr. Weerakoon claimed. It is not I or you who is deciding what is good for us, it is the IMF that is prescribing
The actual GDP growth rate of the Sri Lankan economy in 1995 may have been as low as 4.7 per cent an economic research firm has suggested.
The official 5.5 per cent growth number for 1995 may have been the result of overly optimistic estimates which are traditionally not reliable, Econsult (Pvt) Ltd., has said.
Up to 60 per cent of the GDP growth number is usually thought to be made up of these non-reliable estimates.
This component include areas categorised under other agriculture, fishing, forestry, small industry, other industry, domestic trade transport storage and communications, Econsult said.
In the past the component considered non-reliable tended to follow the growth trend of the component considered to be reliable.
A comparison of the growth rate of the reliable component with the crudely estimated component shows that, for the most part, the growth rate of the latter follows the former, at least in direction, Econsult noted.
This was the case in the period under review starting from 1989.
In 1995, the growth rate of the non-reliable component actually rises while that of the reliable component falls sharply, casting doubt once again on the veracity of the 5.5 per cent GDP growth figure.
If the growth rate of the non-reliable component in 1995 was set at the same rate as the official 1994 growth rate for the non-reliable component, the overall growth figure for 1995, falls to 5 per cent, Econsult found.
On the other hand if the 1995 growth rate for the non-reliable component was set to represent the rate of growth of the reliable component in 1995, the rate of GDP growth fell to only 4.7 per cent.
The possibility that the 1994 growth rate for the non-reliable component was also an overestimate suggested that the actual growth rate in 1994 may be below the published figure.
The Public Enterprise Reform Commission would adopt a new strategy for disposing of remaining stakes in privatized entities, PERC chief, Rajan Asirwatham said last week.
This followed criticism of its former strategy of selling off minority stakes in calling for underwriting bids. Under the former method the underwriter who offered to sell the shares in a public issue at the highest price was given the contract.
However in practice the pricing turned out to be too high and such issues have been a failure, with the underwriters being forced to take up most of the issue.
The only successful issue so far has been the Tea Smallholders Factories Ltd., where the subscription price was the same as the price paid by the majority holder several years ago.
The bids submitted by the state owned Bank of Ceylon and its subsidiary the Merchant Bank of Sri Lanka which were accepted by the PERC were thought to be unrealistic by other market participants .
One new method being proposed is widely used in the USA, market participants say.
This involves the calling for bids for part or whole of the issue from merchant bankers and fund managers. This however is not a firm commitment but it is generally expected that at least a majority of bidders would take up the allotments as indicated. The issue manager would then decide on a price based on the bids received at which all of the shares would be taken up. This price would most likely be lower than the highest bid received .
However the major advantage of this method is that it will give an opportunity to test the market reception of any potential public issue with some degree of assurance and not be dependent on the arbitrary decision of a single market participant as it was in the case of issues underwritten earlier.
Mr. Asirwatham said in future such a method was most likely to be followed. He was responding to a proposal made at a seminar on privatization conducted by the Sri Lankan chapter of the Society for International development. We are learning from the experience of what had transpired in the past, Mr. Asirwatham said.
The largest privatization that was carried out so far was in respect of the Gas company. The Shell company which was one of the largest, conglomerates of the world, had made a very attractive offer, where they paid US $ 39m for 51 per cent of shares. In addition a new terminal was to be constructed at a cost of US $ 40 m which had the potential to reduce the price of L.P.gas when completed in 1997. The project cost had now escalated to US $ 50 m.
But I must say there has been a drawback because the price of gas has been increased, and that has definitely affected the consumer. There is no point in concealing the fact, Mr. Asirwatham said.
The company which was given a monopoly for five years had raised the price by 10 per cent in April 1995 just after the new year, barely less than six months after the sale agreement was signed on December 8.
"The timing of the increase was insensitive and caused a lot of unhappiness, Mr. Asirwatham said. This was the maximum annual price rise permitted by the sale agreement.
The company had then attempted to do so again in 1996 claiming that the previous price increase was for 1995. This was flatly turned down, he said.
.Mr. Asirwatham said that no employee would lose his job as a result of privatization, because that was one of the primary conditions of all sale agreements.
Market Focus
By Analyst
Lethargic trading during the review period, was mainly due to low foreign participation, local institutions on the sideline. But retail investors emerged as the biggest component in the 'CSE'. The ASPI AND SPI held on to previous week levels, giving somewhat of a stability to the 'CSE'.
If there are no further bombshells in the economy/war front; the indices should stabilize and appreciate in the coming months. Long term investors ( 5 year term) now have the ideal opportunity to invest, as no other investment could give a weighted average return of 40% or more per year. Company's share prices which have dropped (60-70%) without any fundamental reasons should be ideal, and if dividend is paid every year, this would cover the cost of the share over the ( 5 years) period.
Privatization invitation for a 40% stake in AirLanka and controlling interest of four regional plantation companies were on the board, namely, Hapugasthanna, Balangoda, Agrapathana and Udapussellawa. Privatization being a necessity, it should be implemented with very long-term focus, which cannot be undertaken hastily, as the country will be the loser in the long run. Privatization is expected of all utilities except water and Colombo/Galle ports which will be outright /bot, boo.
Management of the country's resources are lacking. In the present government the previous regime in comparison had short-comings in human-rights and honesty. But management of the country's limited resources was far better. This may be due to excellent bureaucrats with experience in the with operational level (ground-level) people rather than top academics without operational level experience managing the resources. With inefficiency, and lack of responsibility/disipline, (eg. electricity crisis) the economy could get worse before it gets better. With the unemployment rate climbing and social disorder a possibility, we can only hope that history will not be repeated.
The Treasury-bill rates are expected to move up 20-22% levels by the end of the year.
Indecision on the labour charter is also hampering new-ventures being set-up under 'BOI' which could further dampen the economy.
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