Features
Aitken Spence goes public, LOLC takes off and July 1983 riots hit
by Charitha P. de Silva
1982 was an historic year for Aitken Spence. It was the year that we went public. Earlier in the years I had received a lot of prominence as a result of my photo appearing on the cover of “Asian Business,” a Hongkong-based magazine. I had been invited to deliver a lecture in Hongkong on “How a Traditional Agency House was converted into a Conglomerate”.
The business tycoon Upali Wijewardena had also been invited to speak at the same forum. Unfortunately, he and a small group of his key men went down in the Malacca Straits in his private Lear Jet. There was a lot of speculation that the accident had been engineered in some way. The upshot of this unfortunate accident was that the meeting in Hongkong was canceled.
It was with some misgivings that I promoted the idea of our going public. There were undoubted tax and financial advantages in going public. However, we would lose our privacy and some of our freedom and the feeling of being a close-knit family. In balance, it was a good move and well timed because we had grown to be one of the three biggest conglomerates in the country – the other two being John Keells and Hayleys who were friendly rivals. They were already public companies.
I consulted my good friend M.T.L. Fernando, senior partner of Ernst & Young (a leading firm of auditors) and he looked at our accounts and thought that we should revalue our assets (which had not been done for many years) and have a three for one bonus share issue to existing shareholders before we offered our shares to the public. During the 10 years that I had been Chairman any shares that became available had not been appropriated by the directors. At my urging they were distributed at par to senior executives on a paternalistic basis.
We – Michael (Mack), Norman (Gunawardene), GC (Wickremasinghe) and I – decided who would get the shares and how many each would get. That itself was a generous action because we were a private company and had every right to appropriate the shares ourselves. There was nobody to question us.
Looking back I realize that I must have exercised considerable moral authority over my senior co-directors because they never once demurred at my proposals which involved sacrifice on the part of all of them.
The most extraordinary suggestion I made was when we were planning the Bonus Issue. It struck me that the junior directors, Stanley Wickremaratne, Ratna Sivaratnam and Lal Karunanayake had much fewer shares than the senior directors. I therefore suggested that we should sell them one tenth of our shares before the Bonus Issue. And what was unbelievable was that I suggested that we sell them at par! This was the very antithesis of Insider Dealing. Here was I suggesting that we give them a huge gift before a Bonus Issue! What is incredible is that not one of my senior co-directors protested or demurred! I remember Walter Wimalachandra telling me later that he was thrilled to see, in my actions, the finest principles of Buddhism being implemented.
I had a major decision to make myself. As a private company with a special set of Articles of Association we had a special class of shares called Management Shares. Each Management Share carried a hundred times the voting strength of an Ordinary Share. It thus gave total control of the Company to the holders of Management Shares. This would have been a device that the British owners had adopted to protect themselves. It happened that as a result of the departure of Roy Hinton and Eldsworth Van Langenburg and the death of Louis Samarawickrema, I was the holder of the largest number, by far, of Management Shares.
As they had the same dividend rights as an Ordinary Share and the question of votes had never arisen in the past I had never paid any attention to the fact that I had virtual control of the company. My style of control was based on my ability to persuade, and we had always made all our decisions on a consensual basis. I realised that if the voting rights of Management Shares were ever brought into play it would have been the end of the unity and camaraderie that I had built up over 10 years completely wiping out the memory of the attempted coup by Michael and Norman in 1972 when I was elected Chairman.
Now I was faced with the problem of how the Management Shares should be valued before we went public after which there would be only one class of shares – Ordinary Shares. It might easily have been argued that each Management Share was worth a hundred Ordinary Shares. Such a thought did not even strike me. I would have found it embarrassing. Looking back I cannot but realize that my attitude was positively saintly, and completely unbusiness like. Detractors would say that I was foolish – in the extreme! I decided that without any attempt to have the shares professionally valued I would place a value of eight times that of an Ordinary Share. There was no reaction from my co-directors. They may have secretly thought I was a little soft in the head.
The public Issue was a great success. At about this time LOLC also went public with Orix Corporation of Japan having 30% of the shareholding with the other large shareholders being Bank of Ceylon, National Development Bank, and Development Finance Corporation of Ceylon. Once again I gained no personal advantage from the fact that I was the first chairman of the company. My failure to look after myself can be judged from the fact that when I eventually retired in 2003 (21 years later) I owned less than 5% of the shares! This would sound incredibly foolish to any businessman. I can only attribute it to my abnormal lack of acquisitiveness, all part of my upbringing, and the example of my parents and brothers. This is my only excuse for depriving my children of the opportunity of inheriting great wealth.
Leasing became extremely popular, and a number of independent companies, finance companies and banks started leasing as a lucrative activity. What particularly attracted the banks was the fact that they could set off the depreciation on leased assets against their other income. The specialized leasing companies themselves did not have much other income against which they could set off their depreciation, so that they were in a permanent state of having taxable losses. They therefore did not pay any income tax which infuriated some tax officials who did not concern themselves with the thought that they paid large sums as Turnover Tax.
I saw the need for the leasing industry to protect itself from government action particularly in taxation. I therefore took the initiative in forming a Leasing Association. Quite naturally I was the Chairman and chief spokesman. All those involved in leasing became members. Thus there were representatives from banks in our membership, and our interests were not always congruent. I was not happy about the advantage that banks had with their ability to use depreciation (which could be set off against their other income) to make themselves more competitive.
Specialist leasing companies like ourselves were at a competitive disadvantage because we were dependent on banks for long-term funds, and we had no other income of any magnitude. I decided to do something about it. I made inquiries from the Asian Leasing Association that we had joined by that time, and discovered that Pakistan had introduced legislation that prohibited depreciation being set off against other income. Through Orix Pakistan I got the text of the legislation and wrote to our own Department of Inland Revenue strongly recommending it. It was seized on eagerly as an excellent source of revenue. The banks that had gone into leasing (like Hatton National Bank and the DFCC) were very upset, and Maxi Prelis (DFCC) and Rienzie Wijetilleke (HNB) wrote strong letters to Government attacking me and LOLC.
The Asian Leasing Association (ALA), headquartered in Singapore, had as its head, Mr Miyauchi, the CEO of ORIX Corporation that had created us and still had their representative, Mr Yoshio Ono as our Managing Director. Mr Miyauchi who had developed a healthy respect for me invited me on to their governing council.
LOLC had performed very creditably with A.F. Nizar as Ono’s deputy ever since its inception, doing much better than projected and expected. At this stage I came to the conclusion that we did not need a Japanese MD any longer. I felt that Nizar was ready to take over provided ORIX would agree to it. Under the original agreement with ORIX and the IFC (International Finance Corporation – a World Bank affiliate), ORIX which had 30% of our shares had the right to have their own MD.
When I sounded out the IFC director on our board, P.M. Mathew, he scoffed at the idea saying that Japan would never agree to it. ORIX had associate companies like us all over the world and in every one of them they had a Japanese as the MD. Ours was one of the youngest of these associate companies and it was most unlikely that they would change their worldwide policy for us. I had confidence in myself, and decided that I would broach the question with Miyauchi with whom I had an excellent relationship.
I did so on the next occasion that we met, and was not at all surprised when he agreed to my proposal that Nizar should take over from Ono when his term was over. He obviously had great confidence in my judgment, and the fact that I would be there as Chairman.
And there were obvious cost advantages to them in that they would save on Ono’s salary which would have been much, very much, more than Nizar’s. And so it came about that LOLC was the first associate company in the ORIX empire that did not have a Japanese as its MD.
Meanwhile at the ALA Miyauchi indicated that he wanted to retire. Among the other council members were representatives of South Korea, Taiwan, India, Hong Kong, Pakistan, Phillipines and the other important countries in Asia. Miyauchi wanted me to take over from him (I had been making a bigger contribution than the others at council deliberations) but thought it would be wiser not to rush it as it would appear to be nepotism and I was probably the most junior council member there. So Kenneth Lo of Taiwan was elected President. When Lo indicated that he could not go on for more than two years the Council unanimously decided that I would be President thereafter.
This was a great honour (indirectly) for Sri Lanka which was the newest and smallest country in the Association. It had of course more to do with my ability as a committee man than with Sri Lanka’s economic significance in Asia. In 1988, I took over as Chairman of the ALA and continued for two years which became the standard term.
In July, 1983, I was presiding as Chairman of the fifth Joint Committee Meeting of the Sri Lanka-Japan Business Co-operation Committee at the BMICH. Sejima was by my side, as Co-Chairman and we were approaching lunch time. Suneetha Jayawickrama who was joint Secretary-General came to me and whispered in my ear that Colombo appeared to be burning. The now infamous “July Riots” had broken out and smoke was visible on the skyline in the direction of Fort. We bundled our Japanese visitors into vehicles (I had Sejima in mine) and drove them to the Hilton Hotel.
I remember being stopped at the Bullers Road, Galle Road junction by bands of youth who were collecting petrol in cans for their deadly work. The meeting was aborted, but I will never forget how calm Sejima was. At a hastily summoned Press Conference he described the whole affair as “children’s fireworks”. Despite his effort to play it down, the violence in the streets made the climate for investment in this country unhealthy.
The pogrom that followed was the provocation for the formation of the Liberation Tigers of Tamil Eelam (LTTE) and the warfare that was to plague the country until 2009 when President Mahinda Rajapakse succeeded in crushing the movement militarily.
(Extracted from the Memoirs of CP de Silva)
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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