Archives

Investment and the Rule of Law

While reports of a doubling of the inflow of Foreign Direct Investment to Sri Lanka over the past year should have warmed many a heart, the presentation in Parliament on Tuesday of the Securities and Exchange Commission of Sri Lanka (Amendment) Bill by Finance Minister K.N. Choksy should have served as a reminder of the need to ensure the transparency of the operations of the Colombo Stock Exchange in particular and of those relating to the local and foreign investment field in general.

The steady ticking of the Colombo bourse since the advent of the current peace process is a cause for rejoicing among those who have the interests of this country at heart but every precaution should be taken to ensure that the rekindling of private enterprise does not occur at the expense of the common good. In fact this was a principal point made by Minister Choksy at the time of the presentation of the SEC Amendment Bill in Parliament. He explained that the increase in the All Share Price Index, for instance, "highlighted the need for further amendments to the Securities and Exchange Commission Act to facilitate market development in a properly regulated environment".

While there is no justification for an advocacy of rigid State control of the private investment sector, we believe it would be in the national interest for the State to keep a close tab on it and to facilitate the beneficial growth of private enterprise through its agencies. Accordingly, we welcome the allocation of wider powers to the Securities and Exchange Commission.

The elimination of malpractices from and the ensuring of transparency in stock exchange transactions being entirely in the public interest, we welcome this widening of powers of the SEC, which is the relevant regulatory authority.

The salience of these issues has been highlighted by an allegation of "insider dealing" in relation to the sale of shares of a leading local bluechip company. The problem was compounded by the fact that some top members of the directorate of the company had also figured in the SEC. While the legal process has to take its course to bring out the truth of the matter we welcome the pronouncement by the Finance Minister that the Attorney General's advice should be adhered to by the SEC on this issue.

This is at it should be because, the AG, being the foremost legal officer of the State, should be seen as exercising the right of providing definitive advice on questions of this nature. In other words, the pronouncements of the AG need to be adhered to for the purpose of upholding the Rule of Law. If not, vested interests could come to wield a decisive influence in the investment and related fields, thus throwing them open to a plethora of irregularities and vices.

As brought home by the South East Asian currency crisis of the late Nineties, the foreign and local investment field could be both volatile and explosive on account of its vast vulnerability to malpractices of the most damaging kind. It must be remembered that a cluster of vibrant economies which were at one time dubbed "miracle economies" crumbled like a deck of cards on account of the machinations of racketeers and conmen.

We do not predict such dark happenings in this country but the currency crisis needs to be regarded as an eye-opener by those states which are opening their markets to increased foreign direct and local investment. The principal point to be remembered is that these transactions need to take place transparently, within a clearly defined legal framework.

News | Business | Features | Editorial | Security
Politics | World | Letters | Sports | Obituaries |

Produced by Lake House
Copyright 2001 The Associated Newspapers of Ceylon Ltd.
Comments and suggestions to :Web Manager