By Kamanthi Wickramasinghe
The fourth Annual Certificates and Diploma awards ceremony organised by the Capital Market Education and Training (CMET) of the Securities and Exchange Commission (SEC) was held recently. The chief guest at the event was Policy Planning and Economic Affairs Deputy Minister Dr. Harsha de Silva. In his keynote address Dr. de Silva spoke about how to rebuild the investor confidence in the country’s capital market and the economic plan his party intends to implement, if elected, for the next five years.
Excerpts of Dr. de Silva’s speech are as follows:
We are really at crossroads today. Sri Lanka changed its course on January 8. Some of us left our professional careers to fight for something we really believed in. We believed that after the war this country should get on the road to win the peace, which is much more difficult than winning the war and by winning the peace, create the conditions for hard-working people to succeed. I believe that if you work hard and play by the rules, you will be able to get ahead in life. The problem seems to be that only those connected and related have the opportunity. Only those who had the wealth, the disposable income had the opportunity.
That is why I left a professional career at the age of 45. Money you must make; if you don’t make money you can’t provide for your family. First comes your family; and only after that comes everybody else. You cannot mix up doing social work and at the same time trying to earn for your family; it doesn’t go together and is not practical. In this ugly political and corrupt environment you are always incentivised to do the wrong thing. Unless you clearly demarcate and separate the black and white from what you are doing, you will inevitably get dragged into politics no matter what you do.
So, when I decided that I am leaving a professional career, I also decided that I am not going to do anything else but to devote my entire time to do what I decided and chose to do. Therefore, I don’t hold a day job. I don’t double around in doing contracts or playing the stock market, because all those must be left for other people to do. My investments are never short-termed or dynamic, they are passive and long-term. I can get back to the market after I leave office. So, it is a decision that I made that I would not mix my personal enrichment and the politics that I am engaged in doing.
Ethics are paramount
Ethics is something that I am sure you learn during your course of studying and it is something that is very difficult to teach. It must come from within. Who you are, what are your values, what did your parents teach you when you were small? Did you throw garbage on the streets? When you open a bottle of water what do you do with the little plastic seal? How many of you put it in your handbag or pocket? How many of you throw it on the street? These are just trivial things but that is just the beginning of doing the right thing.
So when you are a stockbroker or investment adviser you have an ethical responsibility equal to a professional responsibility of advising the investors of what stock to buy, what stock to hold. That I must stress here, we have seen some bad days. Numerous allegations have been levelled against stockbrokers complicit with investors, manipulating the market, pumping up shares and dumping them to various state-induced constitutions and so on.
I oppose what I call white-collar crime. When I saw it I spoke against it. I’m strict. I will say what I have to say directly to your face. I am disappointed and we still have not made sufficient progress in making sure that we have done the expected job in dealing with those people who acted in ways that contravened the Securities and Exchange Commission Act. Where are the cases filed against these people? Some are now turning around and saying none of these allegations were ever true. I think the Commission itself, the Colombo Stock Exchange (CSE) and the Attorney General’s Department must try and see how we can speed up this process, so that we can rebuild the confidence in the market.
So, ethics is absolutely essential in doing the right thing or more appropriate I think is not doing the wrong thing. Therefore, it is your responsibility, if together we want to build the capital market, to build that confidence in the market. If there’s lack of confidence in a market, if people think there is no point in investing in this market because I don’t have a fair chance of making money, then people will not invest in this market. The allegation is that it is cornered by a few and may be a couple of 100 people. They essentially are the main players in this market.
Creating an asset-owning middle class
When the Malaysian minister was here, I rang the bell for the CSE about six months ago. That day I said I wanted to see farmers in Anuradhapura holding John Keells stocks. I still say the same thing, because I want to create an asset-owning middle class in this country. I am particularly happy that I was invited by the prime minister (PM) to be his deputy minister to run the Policy Planning and Economic Affairs Ministry to come up with our game plan for the next five years. I am proud to note that the project that I undertook to outline what I called was a ‘social market economy’. The idea planted by none other than the PM has now become the economic game plan for the United National Front coalition. I am happy to note that we have been able to come to a very solid understanding of what it means with all our coalition partners including Patali Champika Ranawaka, Rauff Hakeem and the rest.
Knowledge-based economy
The document that we presented talks of creating a knowledge-based, highly competitive social market economy. If you analyse those words, each word has a very deep meaning. Knowledge-based meaning that our focus will be education, not just school and tertiary education as we have it now, but we have already committed to set up a whole bunch of colleges of technology. For example, students who go to German Tech are able to find jobs all over the world. But think about how many German Techs were we able to open during the last 10 years in the Colombo District? How many vocational training institutes came up during the last decade? Where was our focus? Our focus was on brick and mortar, concrete.
We put money in concrete but we didn’t put money in developing the brain. Therefore, we lost competitiveness and we have fallen in the rankings globally. We can’t compete with Malaysia, we are trapped. We can’t even compete with Bangladesh. No amount of concrete can get us out of that trap. The only way we can do it is if we build our human resources, give them the ability and the capacity to compete with Malaysians and the only way you can do it is by creating opportunities for kids who are coming out of school at 19 and 20 to be able to get that skill. But it is the responsibility of the government to induce that skill in children.
So I am indeed encouraged by the fact that through the education programme provided by the SEC we have been able to bring all these individuals to a platform where they can practice new skills while being given the chance to participate in a new field of work. Every person has a dream. Development doesn’t mean how deep the port is; it doesn’t mean how expensive a hopper is. Development is all about how my family will do well in life. I believe that the only way we can do it is by giving opportunities to young people. If we don’t put that money to create those colleges of technology, to create those schools of vocational training, to give them the opportunity of excelling in their dream professions. How many people have dreams of doing their dream profession but how many of them are able to achieve it? This is due to the lack of prioritization within governments.”
We have absolutely no doubt about coming in as the next government and we have given a head start to our projects. For instance, no child will drop out of school until they do their A/Ls from next year. That is our thinking. Every child in this country will have a holistic and guaranteed free education for 13 years. So at the end of the 13 years, he or she can decide on what they want to do. We will put in so much money for creating opportunities for vocational and technical training fields of study. That is a promise. If we are able to do that then we will be able to create that competitive economy that we are longing to create. If we don’t, we will never be able to do that.
Look at the jobs that are getting created right now? A child helping a Grama Sevaka to mark the ballot paper will not contribute to productivity. It makes us less productive and less competitive when so many people do the same thing. Perhaps you are not aware of all those people who are of the same footing of you in economic power. People in low-income households lease a three-wheeler and become a three-wheeler driver. I have seen so many people in Avissawella, Homagama are very upset because their children have become drug addicts. As a politician I asked them what are the opportunities that these children have once they come out of school. The answer was “nothing”. Unless we think out of the box and think that we need to change this system that education is the only way that we can get ourselves out of this pit we are in. Or else we will crash and burn. That is something I strongly believe. That is why we are calling it a highly competitive market. Because the jobs we want to create are jobs that will pay well, that children who become first-time job holders will be connected internationally. These jobs will not only feed your pockets but it will also bring you satisfaction.
Social market
The other side of our policy is the social market. UNP is a capitalist party and we are not moving away from that. We want markets to work. I am not going to say that we are going to be able to do better than the market. Nothing can do better than the market. The only viable means of allocation of resources is the market. The problem is that the markets are not working right. The agriculture, information markets have asymmetries in them. Even in the stock market there are issues and that is where the government and the SEC come in and therefore, we can create the equity in the market. We want to create equity in the market, society and in political ideology and politics in general. Political, social and economic justice needs to be confirmed and that is how the UNP now thinks.
We are not moving away from the fact that we believe that markets are the most efficient way of allocating resources but we are consciously bringing in the idea, the fundamental requirement that government intervention is necessary to ensure equity for everyone. I will end with this point. Something I have been fighting for a long time is how the Employees’ Provident Fund (EPF) is managed. I have been very vocal about the conflict of interest keeping the EPF with the Central Bank. We have proposed in our manifesto to merge the EPF and the Employee Trust Fund (ETF) and we will create a bigger fund so the management of that fund will not be the same as it is now. The new entity will certainly be owned by the government but there will be certain changes in the way it is managed and the combined fund will be responsible directly to parliament and those who sit on their boards will have to be those with the concurrence of the Constitutional Council.
Pension funds
We are making sweeping changes to the pension funds because we are not happy with the way these funds have been managed. I hope this gives an indication about what our thinking is and this is to ensure greater accountability and meet the objectives of the pension funds. At the end of the day, these funds belong to its members and they should not be used for political purposes. That must be and will be understood by everyone hopefully once we take office on August 18. That, hopefully would mean greater participation of the combined fund in the equity market, which would hopefully mean greater participation in the debt market. We will also be very careful in the investment policy of the new entity, what it can and what it shouldn’t be investing in. For instance, it is appalling to note that when the Investment Committee of the EPF strongly recommending against the EPF investing in Rs.5 billion of members’ money in Canwill Holdings, the company whose files have now been directed to the Criminal Investigation Department (CID) after the audit.
When the Investment Committee strongly recommended that the EPF should not invest in Camwill Holdings, how the then management of the Central Bank and the EPF overruled those recommendations and went an invested Rs.5 billion due to political influences. So, we don’t want the money of the members that is held in with their trust to be used once they are old. After August 17, we will be much stricter in terms of misuse and we will punish those who misuse public money. It means before August 17 we will deal with all complaints. We have broader objectives for development and increasing the quality of life in the average Sri Lankan household.
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