Features
Acquisition of AF Jones, my very first business venture – Differences with S. Nadesan, QC
(Excerpted from the autobiography of Merrill J. Fernando)
The new political climate and the State-orchestrated business direction seemed calculated to discourage the continuity of foreign investment presence in the country. In this environment, in 1962, the Jones family, unsurprisingly but with great reluctance, decided to sell and move out of the country. They had been in business since 1912, when their ancestor, AF, had arrived in Ceylon from Batavia and launched the company under his name. The decision to sell out was compelled by adverse circumstances beyond their control.
They offered the company to me, at the reasonable price of Rs. 600,000. However, it was still beyond my means on my own and I turned to my friend, Sarath Wijesinghe. He agreed to join me in my investment and we decided to take a third each. It was my intention to split my share with members of my family. For the balance share of the company, I approached S. Nadesan, a well-known lawyer and senator, for whose legal skills I had developed a great respect, on account of his successful representation of my interests in a legal issue with a relation.
He agreed to come in as the third partner. In retrospect, my decision to take over A. F. Jones was both bold and risky in the context of the political environment then, which seemed clearly unfriendly to large-scale private enterprise. However, I was young and, with the confidence of youth, not averse to risk. That apart, I had great faith in my competence in the tea export industry, reinforced by the knowledge and experience of overseas markets I had acquired by then, along with very useful business contacts in a number of tea-importing countries. Underpinning all those considerations, there was my sublime faith in God.
Irrespective of the risk inherent in my maiden entrepreneurial venture, the other factors which worked in my favour were the strong trade links that AFJ had established by then with Iran, Iraq, and Libya, USA, and South America. I had been actively involved in many of those initiatives. I was also singularly fortunate, in having been able to establish early direct links with major international packers and blenders, often bypassing the latter’s agents in Colombo.
With my dedicated and resourceful team I was able to provide the buyer with an exceptional service, shipping out over the weekend the tea that had been purchased at the auctions on the Tuesday before. None of the larger firms operated with that degree of efficiency then. As the owner-operator of a small firm, I was also able to take business risks and also employ operational strategies that the larger firms were not prepared to consider. That apart, I was fortunate in being able to command the complete loyalty of my small group of employees, who willingly shared with me the stress and pressure generated in the business.
However, business operations require funding and, with the departure of the Jones family and the company now being entirely in ‘native’ hands as it were, I was apprehensive that bank facilities would be restricted. The company had been operating on an overdraft of Rs. 1.1 million around the time I acquired control. The Jones family had been trying for some time, without success, to increase it to Rs. 2 million.
An unexpected offer
A. F. Jones banked primarily with National and Grindlays Bank, Colombo, the local subsidiary-associate of the National Bank of India. The Managing Director of the Ceylon branch then was a British national, W. L. Gash, whom I had met on a couple of previous occasions. Even in those brief meetings he came across as a fair-minded, reasonable person. Once the transfer formalities were concluded and the company operations were in my hands, I went to meet Gash in order to update him on the changes in the company. Before the meeting, as was my custom in all important situations, I visited the All Saints’ Church in Borella and spent a few minutes in prayer.
I explained to Gash the circumstances under which I had taken over responsibility for the company and requested him to continue the financing facilities that existed earlier. To my very pleasant surprise he asked me whether I would like it increased to Rs. 2 million, as per the pending request made by the Jones family. Frankly, I was at a loss for words at this unexpected blessing. Naturally, I accepted with thanks and immediately went back to All Saints’ Church to thank God for his benediction. Included in my prayer was Mr. Gash, my new benefactor on earth.
To a great measure, my early success at A. F. Jones was due to the assistance of Mr. Gash. He always accommodated my requests, even when they seemed unreasonable. In fact, some of the senior managers at the bank used to be very surprised at the enhancement of the bank’s exposure to my business, extended with minimum collateral and mortgages and sans personal guarantees.
Around this time I was offered a very nice house in Colombo at a reasonable cost, of which I would have been able to meet only about 20% from my personal resources. I went to Mr. Gash and inquired whether he would loan me the balance 80%. Again, to my utter surprise, he loaned me the full value against an undertaking to mortgage which, finally, was not required.
Internal strife at AFJ
The company’s business progressed well, though there were difficult issues I had to contend with from time to time. At one stage Nadesan, now a Director of the company, persuaded me to take two of his family members on to the Board and to employ other relatives as well. One such was an individual recommended as Personnel Manager, married to a lady heavily involved in Leftist party politics. Unaware in these connections I appointed him, but, to my dismay, soon found that he was trying to unionize the company’s workforce. Since this was clearly against the company’s interests, I was compelled to persuade him to leave.
When the Jones brothers finally left, they offered me the balance shares they still held in the company. I immediately turned to Mr. Gash who very kindly agreed to arrange a loan at low interest for the purchase. When I mentioned this to Nadesan, he advised me against obtaining a loan and, instead, offered to buy the shares and to hold them in trust for me, to be sold to me at a future date. Mr. Gash was strongly against this arrangement and tried to persuade me to take the loan instead, pointing out that my personal acquisition of the shares would tip the balance of power in the company in my favour, automatically conferring on me greater authority in operational matters. However, trusting the word of my fellow Director, I agreed to the latter’s proposal.
As we moved on with the business of the company, Nadesan brought both his son and brother on the Board and also prevailed on me to employ more of his relatives. His son, somewhat arrogant and confrontational, tried to impose his will in business matters he was not familiar with. In 1962, at a Board meeting, he presented some proposals which I considered to be against the company’s interests. Since I was in disagreement, at that point I requested Nadesan to transfer to me, for a proportionate payment, the shares he was holding in trust for me. He agreed and we adjourned the Board meeting.
To my dismay, later on in the day, at my home, he admitted to me that he had purchased the shares in his son’s name and that the latter would not part with them on any condition. However, he tried to appease me with the assurance that I would be permitted to run the company without interference.
I exit the company
I realized that I had been deceived by a man I trusted, respected, and looked upon as a mentor. However, in view of the circumstances, unfortunately, I had no choice but to carry on. The business did continue to grow but the working environment became steadily more unpleasant and, at a Board meeting on September 4, 1962, 1 announced my firm intention to resign, but under certain conditions.
I requested that the flat I had leased out eight years previously and transferred to the company, in order to get a tax benefit, be transferred back to me, and that the motor car I was using also be transferred to me at book value. I also asked that all my other dues be settled within two weeks. All my requests were approved by the Board and we parted on those conditions.
The next day I received a letter from the company giving me just seven days to leave my apartment and requesting me to send the car to the agents for valuation. Whilst I had no difficulty in the re-transfer of the lease of the apartment, I was advised that the car would not be sold to me.
My experiences with A. F. Jones and the manner of the conclusion of that relationship, made me realize that trust is not always reciprocated. It was also an early lesson to me in the potential for duplicity, even amongst those who work closely with you. Another experience whilst at A. F. Jones provides a good example of the latter.
In the Imports arm of A. F. Jones – Eastern Agencies – there was an executive named Chuck Wijenathan, who was ,to all outward appearances, a very nice man. When I was appointed Managing Director of A. F. Jones, I proposed that he too be appointed a director. Nadesan initially opposed the idea but my wish prevailed and Wijenathan was brought on to the Board a few months later. Wijenathan was present at the meeting of September 1962, when the Board agreed that I could move out of the company on my terms. However, no sooner the meeting was concluded, Wijenathan was the first person to call up various people and announce that I had been fired from the company.
Despite such disenchanting early experiences, I have continued to operate on the assumption of mutual trust, although being frequently cautioned by my sons and close friends against being too gullible. -My philosophy is that if you maintain integrity on your part, human decency will prevail and the good will eventually outweigh the bad. Notwithstanding a few disappointments over the years, I am still firmly of the same view.
Along with several other principals, Eastern Agencies Ltd. also represented the famous drug manufacturer, Merck Sharp & Dohme Inc. and Rowntree’s Chocolates Ltd. Since import volumes were low, I once placed a large order for chocolates, without realizing that the company had minimal reserves. When the consignment arrived in the port, to my great embarrassment, I was advised by the wharf clerk that we had no money to pay the duty.
I sought help from Mr. Gash who, despite being unaware of our import operations, loaned the sum of Rs. 410,000 that was needed to clear the cargo. However, our wharf clerk, a man who had been a company employee for several years, carried out a ‘black-market’ operation with the consignment, compelling us to claim from insurance in order to repay the bank. Despite these marks the company was able to restructure its financing model and start making money.
The Nadesans eventually transferred the Eastern Agencies business to the Satyendra family and thence to the Maharaja Group, the manner of the transaction depriving AFJ of a valuable asset at no great benefit to its shareholders. My first exposure to the ‘modus operandi’ of supposedly-reputed legal luminaries was an eye-opener.
by Dr Gotabhya Ranasinghe
Senior Consultant Cardiologist
National Hospital Sri Lanka
When we sought a meeting with Hon Dr. Ramesh Pathirana, Minister of Health, he graciously cleared his busy schedule to accommodate us. Renowned for his attentive listening and deep understanding, Minister Pathirana is dedicated to advancing the health sector. His openness and transparency exemplify the qualities of an exemplary politician and minister.
Dr. Palitha Mahipala, the current Health Secretary, demonstrates both commendable enthusiasm and unwavering support. This combination of attributes makes him a highly compatible colleague for the esteemed Minister of Health.
Our discussion centered on a project that has been in the works for the past 30 years, one that no other minister had managed to advance.
Minister Pathirana, however, recognized the project’s significance and its potential to revolutionize care for heart patients.
The project involves the construction of a state-of-the-art facility at the premises of the National Hospital Colombo. The project’s location within the premises of the National Hospital underscores its importance and relevance to the healthcare infrastructure of the nation.
This facility will include a cardiology building and a tertiary care center, equipped with the latest technology to handle and treat all types of heart-related conditions and surgeries.
Securing funding was a major milestone for this initiative. Minister Pathirana successfully obtained approval for a $40 billion loan from the Asian Development Bank. With the funding in place, the foundation stone is scheduled to be laid in September this year, and construction will begin in January 2025.
This project guarantees a consistent and uninterrupted supply of stents and related medications for heart patients. As a result, patients will have timely access to essential medical supplies during their treatment and recovery. By securing these critical resources, the project aims to enhance patient outcomes, minimize treatment delays, and maintain the highest standards of cardiac care.
Upon its fruition, this monumental building will serve as a beacon of hope and healing, symbolizing the unwavering dedication to improving patient outcomes and fostering a healthier society.We anticipate a future marked by significant progress and positive outcomes in Sri Lanka’s cardiovascular treatment landscape within the foreseeable timeframe.
by Fr. Emmanuel Fernando, OMI
Jesuit Fr. Aloysius Pieris (affectionately called Fr. Aloy) celebrated his 90th birthday on April 9, 2024 and I, as the editor of our Oblate Journal, THE MISSIONARY OBLATE had gone to press by that time. Immediately I decided to publish an article, appreciating the untiring selfless services he continues to offer for inter-Faith dialogue, the renewal of the Catholic Church, his concern for the poor and the suffering Sri Lankan masses and to me, the present writer.
It was in 1988, when I was appointed Director of the Oblate Scholastics at Ampitiya by the then Oblate Provincial Fr. Anselm Silva, that I came to know Fr. Aloy more closely. Knowing well his expertise in matters spiritual, theological, Indological and pastoral, and with the collaborative spirit of my companion-formators, our Oblate Scholastics were sent to Tulana, the Research and Encounter Centre, Kelaniya, of which he is the Founder-Director, for ‘exposure-programmes’ on matters spiritual, biblical, theological and pastoral. Some of these dimensions according to my view and that of my companion-formators, were not available at the National Seminary, Ampitiya.
Ever since that time, our Oblate formators/ accompaniers at the Oblate Scholasticate, Ampitiya , have continued to send our Oblate Scholastics to Tulana Centre for deepening their insights and convictions regarding matters needed to serve the people in today’s context. Fr. Aloy also had tried very enthusiastically with the Oblate team headed by Frs. Oswald Firth and Clement Waidyasekara to begin a Theologate, directed by the Religious Congregations in Sri Lanka, for the contextual formation/ accompaniment of their members. It should very well be a desired goal of the Leaders / Provincials of the Religious Congregations.
Besides being a formator/accompanier at the Oblate Scholasticate, I was entrusted also with the task of editing and publishing our Oblate journal, ‘The Missionary Oblate’. To maintain the quality of the journal I continue to depend on Fr. Aloy for his thought-provoking and stimulating articles on Biblical Spirituality, Biblical Theology and Ecclesiology. I am very grateful to him for his generous assistance. Of late, his writings on renewal of the Church, initiated by Pope St. John XX111 and continued by Pope Francis through the Synodal path, published in our Oblate journal, enable our readers to focus their attention also on the needed renewal in the Catholic Church in Sri Lanka. Fr. Aloy appreciated very much the Synodal path adopted by the Jesuit Pope Francis for the renewal of the Church, rooted very much on prayerful discernment. In my Religious and presbyteral life, Fr.Aloy continues to be my spiritual animator / guide and ongoing formator / acccompanier.
Fr. Aloysius Pieris, BA Hons (Lond), LPh (SHC, India), STL (PFT, Naples), PhD (SLU/VC), ThD (Tilburg), D.Ltt (KU), has been one of the eminent Asian theologians well recognized internationally and one who has lectured and held visiting chairs in many universities both in the West and in the East. Many members of Religious Congregations from Asian countries have benefited from his lectures and guidance in the East Asian Pastoral Institute (EAPI) in Manila, Philippines. He had been a Theologian consulted by the Federation of Asian Bishops’ Conferences for many years. During his professorship at the Gregorian University in Rome, he was called to be a member of a special group of advisers on other religions consulted by Pope Paul VI.
Fr. Aloy is the author of more than 30 books and well over 500 Research Papers. Some of his books and articles have been translated and published in several countries. Among those books, one can find the following: 1) The Genesis of an Asian Theology of Liberation (An Autobiographical Excursus on the Art of Theologising in Asia, 2) An Asian Theology of Liberation, 3) Providential Timeliness of Vatican 11 (a long-overdue halt to a scandalous millennium, 4) Give Vatican 11 a chance, 5) Leadership in the Church, 6) Relishing our faith in working for justice (Themes for study and discussion), 7) A Message meant mainly, not exclusively for Jesuits (Background information necessary for helping Francis renew the Church), 8) Lent in Lanka (Reflections and Resolutions, 9) Love meets wisdom (A Christian Experience of Buddhism, 10) Fire and Water 11) God’s Reign for God’s poor, 12) Our Unhiddden Agenda (How we Jesuits work, pray and form our men). He is also the Editor of two journals, Vagdevi, Journal of Religious Reflection and Dialogue, New Series.
Fr. Aloy has a BA in Pali and Sanskrit from the University of London and a Ph.D in Buddhist Philosophy from the University of Sri Lankan, Vidyodaya Campus. On Nov. 23, 2019, he was awarded the prestigious honorary Doctorate of Literature (D.Litt) by the Chancellor of the University of Kelaniya, the Most Venerable Welamitiyawe Dharmakirthi Sri Kusala Dhamma Thera.
Fr. Aloy continues to be a promoter of Gospel values and virtues. Justice as a constitutive dimension of love and social concern for the downtrodden masses are very much noted in his life and work. He had very much appreciated the commitment of the late Fr. Joseph (Joe) Fernando, the National Director of the Social and Economic Centre (SEDEC) for the poor.
In Sri Lanka, a few religious Congregations – the Good Shepherd Sisters, the Christian Brothers, the Marist Brothers and the Oblates – have invited him to animate their members especially during their Provincial Congresses, Chapters and International Conferences. The mainline Christian Churches also have sought his advice and followed his seminars. I, for one, regret very much, that the Sri Lankan authorities of the Catholic Church –today’s Hierarchy—- have not sought Fr.
Aloy’s expertise for the renewal of the Catholic Church in Sri Lanka and thus have not benefited from the immense store of wisdom and insight that he can offer to our local Church while the Sri Lankan bishops who governed the Catholic church in the immediate aftermath of the Second Vatican Council (Edmund Fernando OMI, Anthony de Saram, Leo Nanayakkara OSB, Frank Marcus Fernando, Paul Perera,) visited him and consulted him on many matters. Among the Tamil Bishops, Bishop Rayappu Joseph was keeping close contact with him and Bishop J. Deogupillai hosted him and his team visiting him after the horrible Black July massacre of Tamils.
Sri Lanka-Singapore Free Trade Agreement
By Gomi Senadhira
senadhiragomi@gmail.com
“You might tell fairy tales, but the progress of a country cannot be achieved through such narratives. A country cannot be developed by making false promises. The country moved backward because of the electoral promises made by political parties throughout time. We have witnessed that the ultimate result of this is the country becoming bankrupt. Unfortunately, many segments of the population have not come to realize this yet.” – President Ranil Wickremesinghe, 2024 Budget speech
Any Sri Lankan would agree with the above words of President Wickremesinghe on the false promises our politicians and officials make and the fairy tales they narrate which bankrupted this country. So, to understand this, let’s look at one such fairy tale with lots of false promises; Ranil Wickremesinghe’s greatest achievement in the area of international trade and investment promotion during the Yahapalana period, Sri Lanka-Singapore Free Trade Agreement (SLSFTA).
It is appropriate and timely to do it now as Finance Minister Wickremesinghe has just presented to parliament a bill on the National Policy on Economic Transformation which includes the establishment of an Office for International Trade and the Sri Lanka Institute of Economics and International Trade.
Was SLSFTA a “Cleverly negotiated Free Trade Agreement” as stated by the (former) Minister of Development Strategies and International Trade Malik Samarawickrama during the Parliamentary Debate on the SLSFTA in July 2018, or a colossal blunder covered up with lies, false promises, and fairy tales? After SLSFTA was signed there were a number of fairy tales published on this agreement by the Ministry of Development Strategies and International, Institute of Policy Studies, and others.
However, for this article, I would like to limit my comments to the speech by Minister Samarawickrama during the Parliamentary Debate, and the two most important areas in the agreement which were covered up with lies, fairy tales, and false promises, namely: revenue loss for Sri Lanka and Investment from Singapore. On the other important area, “Waste products dumping” I do not want to comment here as I have written extensively on the issue.
1. The revenue loss
During the Parliamentary Debate in July 2018, Minister Samarawickrama stated “…. let me reiterate that this FTA with Singapore has been very cleverly negotiated by us…. The liberalisation programme under this FTA has been carefully designed to have the least impact on domestic industry and revenue collection. We have included all revenue sensitive items in the negative list of items which will not be subject to removal of tariff. Therefore, 97.8% revenue from Customs duty is protected. Our tariff liberalisation will take place over a period of 12-15 years! In fact, the revenue earned through tariffs on goods imported from Singapore last year was Rs. 35 billion.
The revenue loss for over the next 15 years due to the FTA is only Rs. 733 million– which when annualised, on average, is just Rs. 51 million. That is just 0.14% per year! So anyone who claims the Singapore FTA causes revenue loss to the Government cannot do basic arithmetic! Mr. Speaker, in conclusion, I call on my fellow members of this House – don’t mislead the public with baseless criticism that is not grounded in facts. Don’t look at petty politics and use these issues for your own political survival.”
I was surprised to read the minister’s speech because an article published in January 2018 in “The Straits Times“, based on information released by the Singaporean Negotiators stated, “…. With the FTA, tariff savings for Singapore exports are estimated to hit $10 million annually“.
As the annual tariff savings (that is the revenue loss for Sri Lanka) calculated by the Singaporean Negotiators, Singaporean $ 10 million (Sri Lankan rupees 1,200 million in 2018) was way above the rupees’ 733 million revenue loss for 15 years estimated by the Sri Lankan negotiators, it was clear to any observer that one of the parties to the agreement had not done the basic arithmetic!
Six years later, according to a report published by “The Morning” newspaper, speaking at the Committee on Public Finance (COPF) on 7th May 2024, Mr Samarawickrama’s chief trade negotiator K.J. Weerasinghehad had admitted “…. that forecasted revenue loss for the Government of Sri Lanka through the Singapore FTA is Rs. 450 million in 2023 and Rs. 1.3 billion in 2024.”
If these numbers are correct, as tariff liberalisation under the SLSFTA has just started, we will pass Rs 2 billion very soon. Then, the question is how Sri Lanka’s trade negotiators made such a colossal blunder. Didn’t they do their basic arithmetic? If they didn’t know how to do basic arithmetic they should have at least done their basic readings. For example, the headline of the article published in The Straits Times in January 2018 was “Singapore, Sri Lanka sign FTA, annual savings of $10m expected”.
Anyway, as Sri Lanka’s chief negotiator reiterated at the COPF meeting that “…. since 99% of the tariffs in Singapore have zero rates of duty, Sri Lanka has agreed on 80% tariff liberalisation over a period of 15 years while expecting Singapore investments to address the imbalance in trade,” let’s turn towards investment.
Investment from Singapore
In July 2018, speaking during the Parliamentary Debate on the FTA this is what Minister Malik Samarawickrama stated on investment from Singapore, “Already, thanks to this FTA, in just the past two-and-a-half months since the agreement came into effect we have received a proposal from Singapore for investment amounting to $ 14.8 billion in an oil refinery for export of petroleum products. In addition, we have proposals for a steel manufacturing plant for exports ($ 1 billion investment), flour milling plant ($ 50 million), sugar refinery ($ 200 million). This adds up to more than $ 16.05 billion in the pipeline on these projects alone.
And all of these projects will create thousands of more jobs for our people. In principle approval has already been granted by the BOI and the investors are awaiting the release of land the environmental approvals to commence the project.
I request the Opposition and those with vested interests to change their narrow-minded thinking and join us to develop our country. We must always look at what is best for the whole community, not just the few who may oppose. We owe it to our people to courageously take decisions that will change their lives for the better.”
According to the media report I quoted earlier, speaking at the Committee on Public Finance (COPF) Chief Negotiator Weerasinghe has admitted that Sri Lanka was not happy with overall Singapore investments that have come in the past few years in return for the trade liberalisation under the Singapore-Sri Lanka Free Trade Agreement. He has added that between 2021 and 2023 the total investment from Singapore had been around $162 million!
What happened to those projects worth $16 billion negotiated, thanks to the SLSFTA, in just the two-and-a-half months after the agreement came into effect and approved by the BOI? I do not know about the steel manufacturing plant for exports ($ 1 billion investment), flour milling plant ($ 50 million) and sugar refinery ($ 200 million).
However, story of the multibillion-dollar investment in the Petroleum Refinery unfolded in a manner that would qualify it as the best fairy tale with false promises presented by our politicians and the officials, prior to 2019 elections.
Though many Sri Lankans got to know, through the media which repeatedly highlighted a plethora of issues surrounding the project and the questionable credentials of the Singaporean investor, the construction work on the Mirrijiwela Oil Refinery along with the cement factory began on the24th of March 2019 with a bang and Minister Ranil Wickremesinghe and his ministers along with the foreign and local dignitaries laid the foundation stones.
That was few months before the 2019 Presidential elections. Inaugurating the construction work Prime Minister Ranil Wickremesinghe said the projects will create thousands of job opportunities in the area and surrounding districts.
The oil refinery, which was to be built over 200 acres of land, with the capacity to refine 200,000 barrels of crude oil per day, was to generate US$7 billion of exports and create 1,500 direct and 3,000 indirect jobs. The construction of the refinery was to be completed in 44 months. Four years later, in August 2023 the Cabinet of Ministers approved the proposal presented by President Ranil Wickremesinghe to cancel the agreement with the investors of the refinery as the project has not been implemented! Can they explain to the country how much money was wasted to produce that fairy tale?
It is obvious that the President, ministers, and officials had made huge blunders and had deliberately misled the public and the parliament on the revenue loss and potential investment from SLSFTA with fairy tales and false promises.
As the president himself said, a country cannot be developed by making false promises or with fairy tales and these false promises and fairy tales had bankrupted the country. “Unfortunately, many segments of the population have not come to realize this yet”.
(The writer, a specialist and an activist on trade and development issues . )
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