Sri Lanka Newspapers Tuesday 08/05/2012

May 07, 2012 (LBO) - Profits of Taj Lanka Hotel Plc, a unit of India's Taj Hotels and Resorts Ltd, plunged 87 percent to just 6.7 million rupees in the March 2012 quarter due to exchange losses from a dollar loan.

Taj Lanka's revenues rose 6 percent to 450 million rupees in the December quarter and gross profits rose 25 percent to 142 million rupees from a year earlier, but finance costs rose 400 to 66.5 million rupees.

In the year to March 2012, revenues rose 19 percent to 1.64 billion rupees and cost of sales rose only 9 percent to 1.16 billion rupees, allowing gross profits to rise 55 percent to 475 million rupees.

But finance costs rose 371 percent to 97.5 million rupees. The hotel's cashflow statement showed a foreign exchange loss of 71.9 million rupees, during the past year.

Sri Lanka's rupee is pegged to the US dollar but it fell from around 110 to 130 levels over the past year as the Central Bank engaged in heavy sterilized sales of foreign currency and kept interest rates down.

Sri Lanka has a so-called soft-peg with the US dollar where the Central Bank tries to control both the exchange rate and interest rate, triggering periodic balance of payments crises, when credit growth, - especially government deficit spending - goes up.

During the 1990s Sri Lanka saw increasing deposit dollarization as people kept money in foreign currency accounts to help them escape foreign exchange controls and guard against currency depreciation.

But as tighter policy reduced currency depreciation, firms started to borrow in dollars as foreign currency interests were lower. The phenomenon known as 'liability dollarization' is symptomatic of soft pegged regimes, that start to gain credibility.

However a soft peg can break at any time, because the Central Bank can sterilize its interventions by printing fresh money, forcing a steep depreciation of the currency and massive losses to those who borrowed in dollars.

Taj Lanka has a loan from its parent and also a Sri Lanka based bank according its last annual report.

Hotels, however can price their services in dollars, and gain enough extra rupees to pay off loan installments over time.

Taj Hotels Plc closed at 30.10 rupees on Friday. The stock rose over 80 rupees during the 2011 stock market bubble.
http://lbo.lk/fullstory.php?nid=772729620

Void NSB-TFC deal raises more questions
By Mario Andree

After President Mahinda Rajapakse cancelled the controversial deal of the National Savings Bank (NSB) purchase of The Finance Company (TFC) shares above the market price, which raised many concerns, the Securities and Exchange Commission has assured brokers a fair investigation.

On what grounds NSB purchased shares of TFC at Rs. 49.74 per share when the then market price was at Rs. 30 per share needed to be revealed.

According to brokers the market performance on Friday (25th) was justifiable for TFC share price close at Rs.44 after the controversial deal.

However with the President intervening on the deal more concerns are now being raised, especially on how the trades would be reversed? Brokers told The Island Financial Review the possibility was higher on the cancellation of the four cross trading, but there was a chance that the whole days trading to be cancelled as well.

Whatever the decision the CSE makes the transactions, would have to be reversed tomorrow, brokers said.

Brokers pointed out that the trading which took place through Taprobane Securities was unethical as other applications which were received got rejected, but not of those of the four directors who managed to make their profits when the markets were down.

Brokers fear that the cross trading which took place between four TFC directors and NSB was due to a possibility that TFC had made losses which only they knew since the financial results have so far not been published.

Securities and Exchange Commission Chairman Dr. Tilak Karunaratne has asssured a fair investigation following data from April 30 and further on the deal, which questions the credibility of both NSB and TFC, brokers said.

According to market sources Sampath Bank which holds some of the Custodian Accounts had paid the TFC directors despite NSB failing to deposit the troubling several broking houses who had not received their receivables on Friday.

SEC officials were not available for comment.
http://www.island.lk/index.php?page_cat=article-details&page=article-details&code_title=51334

*Despite painful but necessary policy reversals in Feb.
*Fitch says steps taken in right direction, but throws in caution

Export earnings recovered in February after falling in January but import growth continued to be strong resulting in the trade deficit bloating up further despite Central Bank policy reversals implemented at the beginning of February to contain import growth and arrest the running down of official reserves.

During the month of February 2012, export earnings grew 7.6 percent from a 0.6 percent decline the previous month, imports grew 27.9 percent from 20.1 percent in January and the trade deficit expanded 67.5 percent, up from 49.7 percent the previous month.

In the first week of February, the Central Bank floated the rupee, raised key policy interest rates and slapped a ceiling on commercial bank lending to the private sector in a bid to contain a balance of payments crisis.

However, by end February reserves had fallen to US$ 5,522 million from US$ 5,806 million a month earlier, latest data released by the Central Bank showed.

Total export earnings for the first two months of the year grew 3.3 percent to US$ 1,796.6 million and imports grew at a faster pace, 24.7 percent to US$ 3,495.7 million. The trade deficit expanded 59.7 percent to US$ 1,063.8 million.

Workers’ remittances grew 22.4 percent to US$ 943.1 million, earnings from tourism grew 28.5 percent to US$ 194.5 million and inflows to the government was up 125.1 percent to US$ 807.6 percent, Central Bank data showed.

The rupee was trading at Rs. 113.89/90 before the Central Bank floated the rupee in the first week of February.

Economists and analysts have heavily criticized the Central Bank and government for acting too late to avert a balance of payments problem. The recent policy reversals have been welcomed, but the late adjustments have only compounded the pain.

The rupee fell slightly last Friday on importer demand, currency dealers said. The rupee closed at Rs. 127.80/128.10 against the greenback, falling from Rs. 126.90/127 the previous day. The rupee fell to an all time low of Rs. 133 in April.

Authorities are blaming speculators for the rupee’s unprecedented fall, but currency dealers said low net open positions prescribed by the Central Bank is the reason for the sharp market volatility.

A recent ratings report by Fitch said "the authorities have taken the appropriate action to correct recent pressure on the balance of payments and place it on a more sustainable trajectory".

"Given the weakened state of Sri Lanka’s external finances and a heavy external debt refinancing schedule through to 2013, the authorities’ ability to persist with policies that address existing macroeconomic imbalances and improving external liquidity is crucial."

"The pace of deterioration in external buffers, rather than their level, is Fitch’s main focus. The level of FX reserves meets with international conventions and does not indicate an immediate risk of substantial balance of payments stress. However, Fitch believes the rapid depletion of FX reserves in H211 has heightened the vulnerability of the Sri Lankan sovereign credit profile to a spike in global risk aversion.

"Therefore, the resumption of IMF tranche disbursements following the implementation of policy measures aimed at macroeconomic rebalancing is a positive development. More importantly, measures implemented by the Central Bank of Sri Lanka and the government since February 2012 have tightened monetary conditions and could help Sri Lanka to return to a more sustainable GDP growth trajectory over the long-term.

"In the near-term, certain policy measures have resulted in adverse risks to both growth and inflation that have the potential to impact policy consistency. Due to the authorities’ pro-growth bias and the fragile balance of payments, Fitch believes developments in the coming months warrant close monitoring.

"Fitch notes that the government has been able to rationalise expenditure and continue consolidation efforts despite lower-than-expected fiscal revenues. As a result, the fiscal deficit (including grants) narrowed to 6.9% of GDP in 2011 from 8% in 2010 and public debt declined to 78.5% of GDP from 81.9%. Further simplification of the tax system could bolster measures announced in previous budgets and aid in the attraction of greater foreign direct investment inflows.

"Successful implementation and persistent application of policies aimed at improving external liquidity, including further monetary tightening if required, would support the ratings. Concerted efforts to persist with fiscal consolidation, by both enhancing the tax revenue base and rationalising expenditure, in tandem with lowering public debt would be supportive of Sri Lanka’s ratings.

"Conversely, reversal of policy measures leading to further balance of payment pressure would be negative for the ratings. Further FX reserve depletion, resulting from domestic policy or an external shock would likely have the same effect. Deterioration in public debt and budget deficit ratios owing to revenue shortfalls and/or failure to rationalise expenditure would also be negative for the ratings," Fitch said.

Fitch has affirmed the sovereign rating at BB- with a ‘stable’ outlook.

On the other hand, the Asian Development Bank has said the recent policy reversals would have a telling impact on inflation and public debt servicing.

The full text of the Central Bank’s external sector performance report for the month of February 2012 follows:

"In February 2012, earnings from exports increased by 7.6 per cent to US dollars 879 million while the expenditure on imports increased by 27.9 per cent to US dollars 1,581 million over the corresponding month of the previous year.

The largest contribution to the export earnings in February 2012 was from industrial exports. Industrial exports grew by 3.3 per cent, year-on-year in February 2012 mainly driven by gem, diamonds and jewellery and rubber products. Export earnings from gems, diamonds and jewellery increased by 34.1 per cent. Earnings from rubber based products increased by 17.5 per cent due to the continuous high demand from major export destinations, particularly from the USA. Earnings from textiles and garments exports, which accounted for about 40 per cent of total export earnings, increased moderately by 1.4 per cent. Earnings from petroleum products, transport equipment, food, beverages and tobacco, leather, travel goods and footwear and ceramic products declined in February 2012.

Earnings from agricultural exports declined in February 2012, as a result of lower performance recorded in traditional agricultural exports of tea and rubber. Earnings from tea exports declined by 11.6 per cent, year-on-year, to US dollars 105 million mainly due to geo political uncertainties in major tea importing countries in the Middle East. Rubber exports declined by 32.9 per cent to US dollars 18 million due to elevated demand from the domestic rubber manufacturing industries. However, coconut exports increased by 46.5 per cent in February 2012, mainly due to higher production and favourable prices in the international market. Among the non-traditional agricultural exports, earnings from spices declined by 40.4 per cent in February 2012 due to a decrease in the volume of cinnamon, pepper and cloves exports. Vegetables and minor agricultural exports also declined during this period, while unmanufactured tobacco and sea food performed well.

Expenditure on imports increased by 27.9 per cent in February 2012 compared to the same month of the previous year. Expenditure on intermediate goods increased by 36.8 per cent to US dollars 947 million mainly due to higher petroleum imports. Expenditure on petroleum imports increased by 111.7 per cent to US dollars 506 million in February 2012 compared to that of February 2011, reflecting substantial increase in both price and volume of imports.

The average price of crude oil imports increased by 16.2 per cent to US dollars 119.86 per barrel in February 2012. Expenditure on imports of textiles and clothing, fertiliser, diamond and precious stones, vehicles and machinery parts and food preparations declined in February 2012. Reflecting continuous expansion in economic activities, investment goods imports grew by 41.3 per cent to US dollars 380 million in February 2012. All three major categories of investment goods; transport equipment, building materials and machinery and equipment recorded growth rates of 74.4 per cent, 38.6 per cent and 25.6 per cent, respectively.

Expenditure on imports of consumer goods declined by 7.5 per cent to US dollars 251 million in February 2012. Import expenditure on food and beverages declined as prices of major imported food items such as sugar, lentils, onions, chilies and potatoes were lower in the international market.

In cumulative terms, earnings from exports increased marginally by 3.3 per cent to US dollars 1,797 million during January - February 2012 compared with the same period of 2011. Industrial exports, which accounted for 74.2 per cent of total exports, increased by 1 per cent during the first two months of 2012. Among the industrial exports, the textiles and garments and rubber products grew by 1.5 per cent and 19.1 per cent, respectively. Cumulative expenditure on imports during the first two months of 2012 increased by 24.7 per cent to US dollars 3,496 million. Expenditure on investment goods imports increased by 57.8 per cent to US dollars 903 million, mainly on account of machinery and equipment and transport equipment. Expenditure on imports of intermediate goods increased by 22.2 per cent to US dollars 2,044 million during the first two months of 2012. Expenditure on petroleum imports increased by 58.1 per cent to US dollars 1,021 million. However, expenditure on imports of textiles and clothing and gold decreased by 4.8 per cent and 37 per cent, respectively.

Expenditure on consumer goods during the first two months of 2012 decreased by 2.2 per cent to US dollars 539 million. The trade deficit during the January-February 2012 stood at US dollars 1,699 million.

Tourist arrivals in February 2012 increased by 27 per cent to 83,549 while earnings from tourism grew at a healthy rate of 35 per cent to US dollars 86 million compared to the corresponding month of 2011. Worker’s remittances amounted to US dollars 470 million in February 2012 compared to US dollars 393 million in February 2011, recording a year-on-year growth of 19.6 per cent.

By end February 2012, gross official reserves, excluding Asian Clearing Union (ACU) balances, amounted to US dollars 5,522 million. Further, by end February 2012 total external reserves, which include gross official reserves and foreign assets of commercial banks amounted to US dollars 6,774 million. In terms of months of imports, gross official reserves and total external reserves by end February 2012 were equivalent to 3.2 months and 3.9 months, respectively."
http://www.island.lk/index.php?page_cat=article-details&page=article-details&code_title=51332

SINGAPORE (AP) — Oil dived below $97 a barrel Monday in Asia, bringing its fall over three trading days to about 8 percent, as a slowdown in U.S. hiring and election results in Europe dimmed expectations of stronger economic growth.

Benchmark oil for June delivery was down $1.87 to $96.62 a barrel in electronic trading on the New York Mercantile Exchange. The contract plunged $4.05 to settle at $98.49 in New York on Friday. Brent crude for June delivery was down $1.81 at $111.37 per barrel in London.

Crude has slumped about 8 percent over the last three trading sessions amid signs oil demand may be weaker than previously expected.

The Energy Department said last week that U.S. crude inventories have risen to the highest since 1990. That was followed by the Labor Department on Friday announcing the economy added 115,000 jobs in April, far fewer than the 165,000 analysts were expecting.

"Economic indicators both in the U.S. and Europe are taking on a more negative appearance," energy trader and consultant Ritterbusch and Associates said in a report.

Investors are also concerned political upheaval in Europe could derail government austerity measures and worsen the region’s debt problems.

French Socialist Francois Hollande, who promised during the presidential election campaign to boost spending, defeated President Nicolas Sarkozy. In Greece, the pro-austerity coalition parties suffered a sharp decline in support, which might undermine efforts to keep Greece in the euro currency bloc.

Oil traders often look to global equities as a measure of overall investor sentiment, and stock markets in Asia were down sharply Monday.

In other energy trading, heating oil was down 3 cents at $2.98 per gallon and gasoline futures fell 2 cents to $2.96 per gallon. Natural gas was up 1.5 cents at $2.29 per 1,000 cubic feet.
http://www.island.lk/index.php?page_cat=article-details&page=article-details&code_title=51335

Singer Finance announced impressive financial results for 4Q FY 2011/2012, recording a net profit of Rs. 46 mMillion, which is a growth of 106 percent over the same quarter of the previous year in the midst of a challenging business environment during the latter part of the quarter, the company said in a statement.

The company’s income increased by 47 percent in the fourth quarter from Rs 245.3 million to Rs 360.2 million. The income for the year ended March 2012 increased by 30 percent from Rs 970.6 to Rs 1,263.3 million. Profit for the full year increased by 79 percent, from Rs. 112 million to Rs. 201 million.

The company’s numbers were buoyed by an increase in the Leasing and Hire Purchase portfolio, which accounted for 61 percent of revenue for the last quarter and 58 percent of revenue for the year ended 31st March 2012.

Further, the costs in relation to revenue, demonstrated by an operating costs-to-income ratio of 42 percent - down from 44 percent for both the last year same quarter, and year on year.

Further augmenting the numbers were the company’s low Non-Performing Loans (NPL) Ratio, which stood at 0.47 percent during the FY 2011/2012. The NPLs are among the lowest in the industry. The Risk Weighted Capital Ratio of 17.36 percent too is well above the minimum regulatory requirement of 10 percent.

Singer Finance has zero exposure to shares and the stock market and is totally unaffected by the decline in share prices experienced currently, the company said.

Singer finance (Lanka) PLC was listed on main board of Colombo Stock Exchange and currently 24.94 percent of Shares are held by the public.

The company’s asset base currently exceeds Rs 6 billion.
http://www.island.lk/index.php?page_cat=article-details&page=article-details&code_title=51336

*Pathfinder Economic Alert
*For the Attention of Bankers and Financiers

Sri Lanka, which was a low-income country (per capita income below $2,000) until a few years ago, has now reached lower-middle-income country status ($2,840). Of course, while Sri Lanka can be proud of this achievement, middle-income country status requires it to operate within a new paradigm. In the 80’s and to a lesser extent in the 90’s Sri Lanka was the ‘Darling’ of donor agencies who were generous in providing concessionary financing to poor countries which had liberal economies and polities. However, as a lower-middle-income country Sri Lanka is no longer entitled to such finance. The country is now more dependent on international capital markets to finance its development work.

In such situations, a high premium should be attached on being innovative in financing our economic development i.e. infrastructure; skills and educational advancement; promoting Sri Lanka as an international service centre for shipping and aviation; and power and energy. Furthermore, at a time of global and domestic financial uncertainty, Sri Lanka needs to be innovative in raising external finance. One such mechanism that that is able to mobilize financing over and above the accepted sovereign ceiling (the country’s limit of exposure) at lower cost is technically known as ‘Asset Backed Securitization of Future Flow of Receivables’ such as remittances. Securitization is a form of secured borrowing involving the transfer of assets to a Special Purpose Vehicle (SPV) that finances the assets with securities backed by the value of the assets.

Securitization: Lower Cost & Longer Maturity

Securitization is particularly useful when a country is confronted with liquidity constraints and heightened sovereign risk. The adverse developments in Sri Lanka’s balance of payments makes it timely to explore this option for raising much needed foreign financing at this time. As the money raised would be backed by a regular flow of remittances that is ear-marked to fund the repayment of the amounts borrowed through the creation of SPV’s, the costs involved are less than those associated with borrowing from international capital markets through unsecured bond issues. The interest rate differential tends to be greater when the risks associated with the economy are elevated, and bond yields are higher. This means that securitization can be particularly useful in uncertain market conditions similar to that confronting Sri Lanka today. Furthermore, securitization enables borrowing with longer maturity. Sri Lankan banks are well placed to explore securitization due to their healthy balance sheets and ratings.

There is already a strong track record of financial institutions leveraging the value of the cash that emigrant workers remit to their home countries. It has been widely practiced in Latin America, in particular. The size and stability of worker remittances have caused a surge of interest among financial institutions, academics and others in recent years. Banks in developing countries have securitized remittance cash flows Remittance securitizations - or, issuances of remittance-backed bonds - involve parties in remittance-receiving countries harnessing the value of remittances in order to access capital markets. Remittance flow securitization can enable developing country banks to raise funds at advantageous rates. These future-flow transactions present an opportunity to ensure better services and lower costs to remittance senders and receivers because they depend upon the bank’s capacity to retain or grow its market share of the cash flow securitized. Remittance securitization could, therefore, provide strong incentives for improving the banking services offered to migrant workers, particularly the poor women who contribute so much to the country’s economy.

On the downside, the earmarking of future remittance flows for debt repayment constrains the flexibility involved in the use of a country’s foreign exchange earnings. However, as these borrowings need to be repaid anyway, the advantages of lower costs and longer maturity outweigh any loss in flexibility. It is also noteworthy that the country and individual banks currently have significant headroom before they reach the danger level on this front. Furthermore, there are relatively high fixed costs associated with such operations (please see 5 below). Here again, this can be more than off-set by lower interest costs/longer maturity.

Research Findings

The main findings of a research study on this subject by Suhas Ketkar and Dulip Ratha published by the World Bank include the following:

Securitization of future flows and existing receivables (e.g. remittances) can provide a way of raising development finance for developing countries which are no longer eligible for concessional aid, especially during times of low liquidity and heightened perception of sovereign risk. Future-flow securitization is a foul-weather friend for investment grade entities in countries where sovereign risk becomes elevated.

1. Such transactions can be structured to mitigate sovereign risk so that a developing country borrower can access longer-term financing at lower interest rates than unsecured bonds. Typically such benefits of lower interest rates or longer maturity far outweigh the high fixed costs of undertaking future flow securitization, especially in an environment of elevated economic risk.

2. The size of future receivables of developing countries that are suitable for securitization is much larger than (more than ten times) the current level of issuance at under $10billion annually. In South Asia the potential for securitization lies in remittances, credit card vouchers and telephone receivables.

3. However, future flow securitization increases the level of inflexible debt of the issuer at the micro level, and of the nation at the macro level. However, the current level of securitizing future flows is nowhere near the danger level in any country.

4. Governments may find this asset class attractive because, when planned and executed ahead of time, it can provide a way of assessing markets during times of liquidity crisis. There are also significant externalities associated with future flow deals.

5. However, securitization transactions can be very costly to an issuer, because such transactions are relatively new and (so far) less amenable for standardization. Fees for obtaining investment banking expertise, legal services and credit rating can be very high, and preparation times very long in undertaking a future flow securitization deal.

Let’s Explore

In view of the country’s current needs and developments in the international financial markets the Pathfinder Foundation recommends that the financial sector authorities in Sri Lanka explore the feasibility of promoting the securitization of remittances, in order to secure relatively low cost and long term financing for development purposes.

This is the Twenty – Eighth in the series of Economic Alert articles published by the Pathfinder Foundation. Readers’ comments are welcome at www.pathfinderfoundation.org. Economic Alert, Economic Flash & Economic Dialogue articles can be viewed at www.pathfinderfoundation.org you can also find us on facebook and follow us on twitter.
http://www.island.lk/index.php?page_cat=article-details&page=article-details&code_title=51337

The president of the Asian Development Bank (ADB) yesterday urged the transformation of the region through inclusive, green and knowledge-led growth.

Addressing the opening of the 45th annual meeting of the board of the governors of the ADB in Manila, Haruhiko Kuroda said the successful economies of the future would be well-governed economies, with broad access to opportunities and services to promote the well-being of their people and enhance their quality of life.

"In short, tomorrow’s successful economies will focus not on growth alone, but on transforming themselves through growth that is inclusive, green and knowledge-led."

He said Asia needed strong growth to continue making headway against poverty.

While the region can be proud of its record on poverty reduction, much remains to be done, he said.

Several hundred million Asian people still live on less than US$1.25 a day. And growing inequality and polarisation exacerbate the problem.

"Growth in itself is therefore not enough; only through inclusive growth will this tremendous challenge be met," he said.

Most countries in Asia are now pursuing an inclusive growth agenda, helping more households, farmers and small-business owners to participate in and benefit from growth, Kuroda said. These countries are investing more in health, education and skill development.

The ADB has worked with the governments of Cambodia and Laos to implement social safety nets, community-driven development and smallholder development projects, he said.

In the Philippines, the ADB-supported conditional cash-transfer programme is transforming the lives of poor children and poor families, Kuroda said.

He added that a better quality of economic growth must be not only inclusive, but also environmentally sustainable.

"Green growth recognises that environment, social and economic development complement - rather than compete with - one another," he said.

He praised efforts made by India and China, saying that the latter country had become one of the world’s top installers of wind-turbine and solar photovoltaic systems for power generation. Meanwhile, India is strongly encouraging the rapid expansion of biogas, solar and other forms of renewable energy.

Many countries in Asia and the Pacific are adopting plans to reduce the intensity of carbon-dioxide emissions and improve resilience to climate change.

(ANN)
http://www.island.lk/index.php?page_cat=article-details&page=article-details&code_title=51338

Thank you CSE.SAS!!!!

Vesak is a time to revisit and refocus on the core of Buddhism. It is also the time to see how Buddhist principles of truth, peace, honesty and kindness can be promoted in the country.

At the start of the week, just a cursory glance at the newspapers reveals many things that could do with a touch of the Vesak message. Perhaps the most crucial of these events is the upcoming full-day debate in Parliament on the Committee on Public Enterprises or COPE as it is better known.

The accounts of State institutions examined by COPE included State banks, Ceylon Petroleum Corporation, Sri Lanka Telecom (SLT) and the Ceylon Electricity Board. It was found that all these institutions violated financial guidelines set out for them.

Among the issues highlighted in the report is the need for more teeth for the oversight committee, including powers, to summon former heads of State-run institutions, as well as bring under its preview, private limited companies incorporated under the Companies Act. The report has also called for more scrutiny of the eligibility of persons appointed as heads of State corporations, departments and authorities, saying that they should not only be academically qualified, but professionally too.

The committee categorised the institutions into four groups, namely those functioning profitably, those functioning at break-even, i.e. avoiding loss, but failing to make a profit, those institutions whose revenue is dwindling and those institutions running at a loss.

“The most alarming fact is the decreasing revenue of institutions such as the State Mortgage and Investment Bank, Sri Lanka Rupavahini Corporation and SLT, which was around 90% by 2009,” the report elaborated.

These are clear areas where the Government has to impose more accountability mechanisms. This level of gross wastage and corruption cannot be allowed to continue. It is hoped that this debate will not disintegrate to finger pointing and name calling as most debates are wont to do these days and that the politicians make a genuine attempt to fix these problems.

If at least part of the COPE report institutions can be fixed, there is hope for the other to be resurrected as well. The fact that around two per cent of the country’s GDP is being leaked out by these institutions, together with the prevailing economic challenges, provides more than enough reason for a cleanup – the bigger the better.

One COPE headache is the Ceylon Petroleum Corporation (CPC), which has once again imported contaminated jet fuel and a massive disaster was averted only in the nick of time. This is the second time such transgressions have taken place but officials continue their foray blind. Even though a report was commissioned by the CPC during the last fracas that damaged thousands of vehicles, it was not made public and key posts within the CPC that could stem the rot, such as a competent financial director, remain vacant.

Truth and honesty are at the core of addressing these issues, which grow year after year in this “land of Dhamma,” but without any justice. Public and private enterprises need to concentrate on simple honesty to really live their faith.
http://www.ft.lk/2012/05/08/living-the-faith/

Talk of reversing the controversial NSB-TFC transaction carried out a fortnight ago could spell doom for the Colombo Bourse, analysts have warned.

“Authorities can fire people who could be responsible for this controversial transaction but reversal must be avoided in the best interest of the Colombo stock market,” they said.

“Technically the transaction cannot be reversed since the sellers have been settled irrespective of whether it was by default. If at all NSB after completing the transaction can divest the stake to another willing buyer,” they added. “This is not a private transaction but an open one carried out in a well-regulated market with various safeguards and inbuilt systems ensuring security and confidence. Reversal will have serious implications on investor confidence and create a precedence, causing uncertainty on all future trades in the Colombo Bourse,” it was opined.

On 27 April a total of 7,982,705 million voting shares of TFC traded for Rs. 394 million via 17 trades. NSB bought the bulk or 98.5% (7.986 m for Rs. 391) of the total. An existing shareholder Devi Trading bought 1150,050 shares via two trades. Apart of Taprobane Securities which handled 11 trades, Arrenga Capital handled three trades, Bartleet Mallory Stockbrokers (Religare) handled two and NDB Stockbrokers one.
http://www.ft.lk/2012/05/08/reverse-and-be-doomed/

Whilst the NSB Chairman or General Manager/CEO are yet to officially respond to allegations surrounding the purchase of TFC shares, especially by deleted MP Dr. Harsha De Silva, Presidential Spokesman Bandula Jayasekara told the Daily FT yesterday that President Rajapaksa had instructed officials to look into the transaction.

In response to an inquiry on the same, Finance Ministry Secretary Dr. P.B. Jayasundera told the Daily FT that the Treasury Representative on the NSB Board, P.A. Abeysekera, who is a Deputy Secretary to the Treasury, had called for a report on the transaction.

“As we (Treasury) are answerable to Parliament, proper procedures must be followed by all State institutions and NSB is no exception. Until such procedure is completed, I have requested the (NSB) General Manager to suspend the transaction,” Dr. Jayasundera added.

Meanwhile the ill-fated deal of NSB buying into The Finance Co Plc (TFC) from a consortium of sellers as well as the post-purchase development involved several high profile personalities.

NSB Chairman Prasad Kariyawasam is a popular figure on his own right having served both private sector and public sector in recent years apart from being the husband of Chief Justice.

The Finance Plc after it ran into difficulties following the Golden Key fiasco saw the Central Bank stepping in to ensure stability and continuity with Governor Nivard Cabraal hand picking some of the new appointees to its Board.

They included Preethi Jayawardena, Anura Fernando and Ajith Devasurendra.

High net worth investor Dr. T. Senthilverl salvaged TFC originally buying nearly a 30% stake after he was introduced to Governor Cabraal by EDB Chairman Janaka Ratnayake, who has had experience in revitalising several troubled Ceylinco Group companies.

It is said that NSB trade unions had complained to the Treasury Secretary Dr. P.B. Jayasundera about the ill-effects of the purchase, which had resulted in the share market deal going to Temple Trees as President Mahinda Rajapaksa is also the Finance Minister.

Speculation that the NSB Board did approve the decision to go ahead with the purchase and that the NSB Investment Committee headed by General Manager/CEO Hennayake Bandara wasn’t aware exposes the possible rift within NSB. The fact that even after the transaction went through, NSB hadn’t remitted funds for which GM/CEO sanction is required underscores the latter as well.

deleted MP Dr. Harsha De Silva last week (see Daily FT issue of 30 April) raised a host of issues over NSB risking public deposits by paying a premium (Rs. 50 per share when it was trading around Rs. 30 level) for a 13% stake in TFC which has a negative net worth of around Rs. 3 billion and saddled with Rs. 9 billion retained loss.

TFC, the oldest finance company with an asset base of Rs. 20 billion, badly needs fresh capital infusion and has justified NSB’s entry saying it would be beneficial, especially at a time when the company is being turned around.
http://www.ft.lk/2012/05/08/high-profile-stakes/

The cheif justice should be resigned immediately since its her husbands involvement which is root cause for all this. After all they all are political appointees!

KAROSH9 wrote:The cheif justice should be resigned immediately since its her husbands involvement which is root cause for all this. After all they all are political appointees!

In Sri Lanka ????? it will never happen...Who has resigned so far for any wrong doing ???