Professional Documents
Culture Documents
by Laksiri Fernando
I promised that the consultative committee of my Ministry would be summoned to
discuss the contents of this report. As far as this report is concerned the committee
said there was no loss to the Treasury. This report has also criticised the shady
transactions that took place from 2012-2015. It is there on the third page of this report.
This report is not only about Arjuna Mahendran but also about the pervious Governor.
Why not bring Ajith Nivard Cabraal to COPE to ask him how he approved borrowing
without a tender committee? Are you protecting him?
( May 23, 2015, Sidney, Sri Lanka Guardian) The above is what, unfortunately, Ranil
Wickremesinghe has said about the Report of the Bond Issues of the Central Bank
2015 in Parliament, the day before. I quote from the Daily FT, 22 May 2015. It is
unfortunate, because when people actively supported the ousting of the former
President, Mahinda Rajapaksa, and appointing of Wickremesinghe as the Prime
Minister, the hope was for a clean and transparent government or Yahapalanaya.
Many people still believe it should be the case, and any return of Rajapaksas would be
a disaster and a reversal of the difficult victory gained on the 8th January.
There is no question that Vasudeva Nanayakkara was provocative and blatantly
abusive in his interactions with the PM, but even that is not a reason to deny the
responsibility on the part of the Government or the PM on the bond issue. It is not
merely a question of discussing the contents of the report in Parliament, but acting
upon what has transpired through the Report although it has not accused the Central
Bank Governor directly for the bond fiasco. It was beyond the mandate of the
appointed Committee.
Arguments
It is also not correct for the PM to say that the committee said there was no loss to the
Treasury. To asses the loss or gain was not within the Terms of Reference (TOR) of
the Committee and in fact the members were not at all competent to do so. Corruption
is not merely a matter of loss or gain, but about social ethics and rule of law of the
country. It is true that the report has also criticized the shady transactions that took
place from 2012 to 2014, which Wickremesinghe has ironically stated as from 20122015, which particularly includes the recent bond fiasco.
The PM has said This report is not only about Arjuna Mahendran but also about the
pervious Governor. While it is partly true, he should have remembered that the main
thrust of the Committee appointed by him were to investigate into (1) the reasons for
the recent issue of bonds, initially declared as Rs. 1 billion and (2) the sequence of
events with respect to each Primary Dealer in respect of the final allocation. It is to
contrast the bids and allocations of the bonds, at the last instance, that the previous
auctions and private placements were asked to be reviewed from 2012.
Wickremesinhe has asked from the opposition that Why not bring Ajith Nivard Cabraal
to COPE to ask him how he approved borrowing without a tender committee? In fact
this should have been done primarily when Cabraal was the Central Bank Governor.
That time Wickremesignhe was the Leader of the Opposition. Now Cabraal is out, the
best option is to bring him before the Financial Crimes Investigation Division (FCID), or
the Bribery Commission, which is in fact happening. The ball now is in the
Wickremasinghe court to do the right thing in respect of the recent bond fiasco. I am
naming it as a fiasco even based on the report of the Committee that
Bid
15,000
4,900
Average
15,000
326
Accepted Bid
10,000
3,800
Average
10,000
259
Figures are in
approximate millions
Over to the Prime Minister
It is strange that the Report (that I have seen, Colombo Telegraph) does not give a
date even with the signatures of the Committee members. I assume that it was out
early this month. It is true that the Synopsis to the Report states the following in
respect of the Governor of the Central Bank. However it is within brackets as follows.
(In terms of the above there is no evidence at this stage to the effect that the Governor
of the CBSL had direct participation with regard to the activities of the PDD and the
Tender Board Committee as aforesaid other than to issue central directives based on
the decisions of the Monetary Board and the Operational Manual of the PDD). (My
emphasis).
We need to note: no evidence at this stage about direct participation.
It is also important to note what the Governor had to say on this matter, as reported by
theSunday Times (8 March 2015). Mr. Mahendran said there were other dealers who
had also offered bids in excess of Rs. 1 billion adding that the regulator in the past too
had accepted bids over and above the requested amount.
However, as I have noted before, there was only one dealer bidding 1.2 billion, slightly
over the amount, and it was Seylan Bank. In addition, Referring to the allegations
against his son-in-law, an issue that also delayed his appointment last month, the
Governor said Arjun Aloysius resigned from the family firm and was no longer
involved. Then the Sunday Times further reported the following.
However when pressed that these issues would continue to nag the Governor in
future money market transactions, Mr. Mahendran pondered in his response: Well I
dont know. My son-in-law resigned from the firm when the issues arose during the
time my appointment was being formalised. I dont know maybe I should ask them
(the company) to close or not operate in the market.
This is a clear acceptance of at least a conflict of interest or its perception, if not an
insider trading, I must note to the credit of Arjuna Mahendran. What is strange is the
inaction on the part of the Prime Minister, whatever the reason. Whatever the
weaknesses of the Committee, on the other hand, they have made a clear
recommendation to follow up by the Prime Minister as follows under
Recommendations. I am breaking the main recommendation into three parts for
clarification.
1. The Committee at this stage can only make an observation that the bidding pattern
of Perpetual Treasuries and securing 50% of the accepted bid as unusual.
2. Given the limited scope of the TOR this Committee is not empowered to make any
assumption with regard to the aforesaid.
3. However, in the interest of the public since the said transaction involves public
funds and fiscal regulations of the Government, the Committee observes that a fullscale investigation by a proper Government Authority is warranted. (My emphasis).
Over to Mr. Prime Minister, Sir!
Laksiri Fernando is former Senior Professor in Political Science and Public Policy
(University of Colombo), with a strong economics background, and also was a Director