By Mahesh Senanayake
In an environment where the much-discussed bond scam has emerged as a major topic for political and social discourse, concealing the truth and manipulation of accurate information and wrong interpretation of such details have taken centre-stage.
The experts in the industry are reluctant to discuss and express frank opinion for the fear of being identified and having to face subsequent criticism hurled by persons with vested interest while politicians and politically-motivated activists hinge on the issue to grab a couple of popular slogans so that they can indulge in protecting some of the crooks of yesteryear and concocting a best-selling story for any upcoming election. This is quite evident when serious attention is given to the matter and how it has been proliferated for political expediency.
A complicated subject matter which needs years of experience and expertise and some knowledge of finances is discussed in a much lighter note without fair and substantiated conclusions. Worst yet is, some of the veterans in this trade present uncorroborated arguments and present the complete antithesis of the practices they had followed and the systems adopted when they were holding sway in an industry which they could manipulate.
One such critic is W.A. Wijewardena who was a Deputy Governor of the Central Bank of Sri Lanka under Ajith Nivard Cabral management – a period marked with many stains in the history of the Central Bank. Some of the arguments put forth by Wijewardena seem to contradict the practices he followed when he was a key figure in the Central Bank.
One of the main features that has been ignored in discussions related to the bond issue is whether the use of auction system or direct placement system is transparent. It is a very well-known fact that the auction system is accepted as the most transparent method in contrast to the direct or private placements where only the two parties i.e. borrower and the lender engage in the transaction.
A simple example for laymen to understand the degree of transparency associated with the two systems is availability of all details pertaining to bonds issued through auctions and absence of all details pertaining to direct/private placements on the CBSL website. If these two systems are equally good and transparent why would not CBSL make all information available to the public?
Surprisingly, some of the commentators now praise the direct/private placement where they argue that it is the best way for the Government to furnish debt requirements at low costs. The question that begs an answer is, how could private placement ensures transparency when only two parties are involved in deciding the amount, interest rates and the tenure?
In the history of issuing bonds in this country, the direct placements were mostly used either to snatch the captive sources that belong to the public at low interest rates thus depriving the contributors of such funds of the due returns or to pamper the private parties at the behest of the borrower who in turn would probably have expected a reward.
The so-called bond scam has undoubtedly given an impetus, beyond anyone’s expectation, to the political opportunists and some bankrupt politicians and political parties who were looking for topics to foster their self-centred political agendas. Irrespective of being elected or rejected by the people or being able to secure higher or smaller number of seats in the Parliament by the party they represent, the political protagonists with varied intentions have had recourse to make use of the opportunity underpinning the nature of the Sri Lankan politics.
Examining on the matter with some serious thoughts reveal the degree to which these protagonists are manoeuvring the country’s polity with sinister motives in a scenario where the two main rival political parties have entered the same platform under an arrangement for Consensus Government.
These vociferous critiques are often being supported by two fractions. Firstly the wheeler-dealers whose malpractices in the financial markets are crippled due to absence of State patronage, protection and now prevailing and relatively improved stringent rules and regulations. Secondly, the key public officials who were immensely benefitted by aiding and abetting white collar crimes. Both these factions work in tandem, probably reminiscing the favourable climate that they enjoyed during the UPFA regime or yearning to see the dawn of the same era wherein daylight robberies were not seldom.
The comments made by these critiques purportedly to advise the President and the Prime Minster only leave a question mark in the public domain as their degree of integrity is quite questionable. Their intentions either to topple the Government or usurp the control while posing as pro-Government elements are well uncovered by their behaviours.
Some SLFP members of the Government have been making statements in order to create a political punch line and convince the public that they are with the President to create a corruption-free country by raising their voices against corruption while being in the Government. Ironically the majority of this group are responsible for major financial scams that occurred during the UPFA Government and have been accused of self-aggrandisement. They seem to believe the bond issue will help them to dilute their bleak past, protect their friends who are in the Joint Opposition and be useful in forming a SLFP-led government in the near future and sadly they are not worried about the disharmony that they attempt to create between the two factions in the Government and for that matter between the President and the Prime Minister.
The JVP with a very low number of seats in Parliament and seemingly with no practical strategy to win the public seized the opportunity to reach the limelight and the leadership in COPE has been used as an instrument to exaggerate their corruption-free track record. However, they were deprived of the limelight by the UNP since the UNP-appointed COPE members were the first to break the news that they demanded an impartial inquiry to the bond issue and punish anyone if found guilty.
The JVPers have been pushed to a corner where they have made a series of erroneous statements in relation to well-accepted norms in the financial industry or economic theories and are now seemingly unable to retract their earlier position. Several statements made by them to the effect that a discount bond is a loss to the Government, the CBSL should have controlled the interest rates without allowing the market forces to decide rates and sheer ignorance of the theory of time value of money have left them seemingly in difficult terrain where they are likely to lose logical arguments to defend their position.
The JVP even recommended that funds should be obtained from captive sources to control the interest rates, thus approving of using captive sources at well below the market rates, mainly through direct placements. Isn’t there a contradiction with their policy of appearing for the working class? On one hand they demand the assurance of prudent management of captive sources and due returns to the contributors and on the other hand they recommend use of captive sources at low interest rates, thus creating a platform to pay less to the working class.
Their tendency to question the transparent auction system again contradicts their demand for accountability and responsibility. The public, especially the EPF and ETF members, should realise that it is their savings which will be invested at a lower yield to control the rates. The JVP’s MP Sunil Handunnetti was the first to opine prejudicial comments when the issue was made public knowledge.
He, along with his other comrades, continued to attack the then Governor of the Central Bank, the Prime Minister and the Government, for which they were applauded by the public. They held a public trial and determined the punishment even before the COPE chairmanship was given to the party. After the appointment, the right-thinking public thought he would not preside over the COPE inquiry as his approach towards the matter was immensely prejudicial. However he decided otherwise and while being in the COPE continued to make statements distorting the ethical approach the public would expect from the COPE Chairman.
The UNP faction of the Yahapalanaya Government was lacklustre except for a few senior ministers and junior MPs taking the lead to protect the Government, their Leader and the party. Surprisingly, and to the utter dismay of the party followers, some of the seniors who were well versed in the subject matter did not rise to the occasion and instead allowed the situation to get ramified either for personal interest or clashes within the party.
This led to a malicious campaign to attack Premier Ranil Wickremesinghe who had never been accused of corruption. Silence on the part of the UNP paved the way for political opponents to tarnish the Mr. Clean image of the Premier and some financial pundits to advise him through the media and at public forums. Nevertheless, the general public have not dwindled their trust in the Premier as a person who has not swindled public money and are well aware that it is the result of vilification of a statesman with no corruption track record.
In the backdrop of every possible action as per the law of the land having been taken to address the bond issue, it is no surprise that political and business animosity still continue to prevail. As much as vilification continues, the factions with vested interest have not given up. Their only intention to topple the UNP-led Government and usurp the power to hand it over to the corrupt politicians of yesteryear is now public knowledge. Nevertheless, the public will react at the right time.