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.
I think that we think that words of politicians actually matter, ‘good governance’ for instance – its total BS when it comes to sri lankan politics and the pipe dreams of a few in leadership including the majority of people including this sad blogger who so eloquently placed faith on my3 and his ‘team’. We all failed to release we bet on the wrong generation yet again.
The disappointments dont seem to end and seem to be snowballing from My3 entrusting the future of sri lankan youth to great chaps like duminda silva in public to this sort of fraud.
This is normal and it was prevalent in the last regime and its also here in the current one. The company being discussed has corrupt links to both regimes. I think coincidence is a bit amusing to assume at this early stage and how audacious to have another crack at it thinking no one would notice.
The reason no one reports this it is probably 90% of sri lankans wont read on this topic beyond the names. Financial instrument fraud takes a sharper mind to process and an even dumber mind to invest in to begin with in a low confidence governed nation both past and present. I hope that a majority of these instruments were owned by other crooks as well – maybe wishful thinking there.
What we are all forgetting is that no matter what tax is levied on biz, what fraud is committed etc – the consumer will always pay! That price is increasing very fast!
Not to mentions that telcos have been forbidden from passing the tax down onto customers. They’re hit pretty bad.
Finally someone willing to elaborate on then one thought I had when that ridiculous budget was announced.
Impractical and highly un-intelligent is my take on it, and of course now a days one cannot fault the #Yahapalanaya without getting massacred on FB so, I’ve learned to shut up.
For the masses : Reduction in prices for Essential items ? Remember the saying ‘pol sambol uy bath uy kaala jeewath vemu’ (meaning to say our economic situation.is so bad we have to eat rice and Coconut to live) anyone checked prices lately?? Both a kilo of Samba and a coconut have gone up by 20/- Rs respectively. So much for surviving on Rice and Coconut.
For Business: We were already taxed for putting money in the bank, (Debit tax) and for a while it seemed like the only thing MR didn’t tax was sex … but now we’re taxed if we do well and tun a profit? So in effect let’s discourage businesses, and encourage unscrupulous behavior and undeclared profits??? How does this help a country still crawling and not even limping back from 30years of economic turmoil?
Mansion Tax and Luxury Tax : Seriously ? Punish me for doing well in life ?? If the intention is to weed to out dirty money and corrupt gain, then get the Income Tax department to do its job. Check if the dubious individuals have paid their income tax and declared their earnings that make them capable of affording luxury cars and houses. If they have fair dinkum, if not, tax them !! Why is it a blanket punishment ?
Economics: Seriously ?? Seriously?? Pay off a 500b rather than roll over and save the reserves, thereby bringing our Foreighn reserves down by 75% ?? And writing of debts of farmers, seriously, how do you expect the banks to absorb the npl losses without showing losses ?? and let’s not even delve into the social suicide of encouraging debt at micro level.
I don’t know much about much. But this government is simply going to create a platform for MR to sweep back in not only as the saviour of the nation in terms of the war, but the saviour from a huge economic fire.
Things were better in the frying pan.
The official statement does not really address the fundamental questions, which are:
1. Was the rate move too high?
2. When only 1bn was offered why was Rs.10bn accepted?
Granted, rates were too low and indications had been given that rates would rise, and indeed had been inching up. Yet 200 basis points is a massive move- why so much inone day? When the GoSL could have borrowed cheaper why not take the lower rate going?
In past auctions they have sometimes accepted more than what was initially offered. NOT a good practice, but there is precedence-but 900% more? If more funds were needed why not have a larger auction in the first place, rather than altering the goal posts arbitrarily?
The bland, shifty statement from the Governor does not ispire confidence and the whole thing looks very fishy.
http://www.economynext.com/Sri_Lanka_Policy_Planning_Ministry_explains_controversial_bond_auction;_mentions_probe-3-1229-3.html
indi,
Seems like a job for the SEC? Mr.Thilak Karunaratne was screaming about insider dealings in the past, so I guess he got his chance now. ;)
I think this is outside the purview of SEC, which only regulates the stock market. The Sunday Times has a good story as well,
http://www.sundaytimes.lk/150308/news/cb-governor-faces-family-company-charges-calls-mount-for-probe-139578.html
And there is nt good governance as many think. MR openly did corruption, wastage new government follow a covert action