It’s under-reported, but in a recent bond issue the Central Bank Governor’s son-in-law made out like a bandit while everyone else bidding lost out. Arjun Aloysius and Perpetual Capital somehow ‘guessed’ the rates the Central Bank was going to issue while no one else did. It’s not proven that insider information was leaked, but it doesn’t look good. This government may be talking about good governance, but it hasn’t been especially friendly to business.
Whether the Central Bank Governor Arjuna Mahendren is clean is one thing. Let’s hope that this is somehow a coincidence. The UNP led government, however, is overall not especially friendly to business.
On one level, their budget broadly penalized any company earning (and declaring) profits by retroactively applying tax. It also directly targeted telcos with industry-specific taxes. In public statements they’ve implied that anyone making profits during the past 8 years was dubious, but that simply doesn’t make sense, and certainly not from a formerly business-friendly party (the UNP). The people making dodgy money are not really declaring it, and a lot of the loose cash was flowing through construction, not telecom. It wasn’t a very business friendly or even intelligent budget.
To this you can say ‘fuck business, win elections’, but we’re not an established economy where there’s some huge pot of money to redistribute. Nor are we an economy without competition. As shitty as it is, regulated capitalism has been the greatest engine for lifting people out of poverty and Sri Lanka needs business and growth to progress to become a high income country.
This is not to say that businesses shouldn’t be taxed, but what’s more important is to set clear rules and a level playing field. Hence regulated capitalism. For the government to come in and change the rules after the fact discourages investment, hurts the economy and loses elections in the long-run.
That’s one level. I don’t know the whole story behind the bond issue because no one’s reporting it (though people are talking). Perhaps it’s a coincidence and hey, I suppose a son-in-law can get lucky. However, if there is insider information being exchanged, you have a situation where the rules, indeed, the laws of this country are both unpredictable and unfair. That’s not good for business, it’s not good for the country, and it’s definitely not good governance.
UPDATE: Economy Next has a comprehensive report on this, and they say that the government is investigating any possible insider trading.
The artwork above is by Nigel Sense, photo’d at the Colombo Art Biennale.