CSE as a medium for SOE listings?

President Ranil Wickremesinghe 

Ranel Wijesinha

Ranel Wijesinha’s take on President Ranil Wickremesinghe’s comments

Against the backdrop of President Ranil Wickremesinghe’s statement questioning the appropriateness of the Colombo Stock Exchange as a medium to list State Owned Enterprises, immediate Past

Chairman of the Securities and Exchange Commission, Ranel Wijesinha, expressed his regret and had this to say through the following statement.

I can identify with the concerns of President Wickremesinghe. Yes there has been a perception, that since early 2020 in particular, the capital market is not adequately regulated and that a small group of people dominate the market and even perhaps abuse it. This is also manifested by the news reports of investigations being done by the SEC but I have not seen conclusions.

Baby and the bath water

However, our response, whether we are in political leadership, or are entrusted with the responsibility as legislators, regulators, public officials, or others, is not to throw the baby out with the bath water let alone ridicule it. The CSE has good precedent, it is led by persons of experience, maturity and integrity. The CSE as an institution is fighting below its weight class, so let’s not create any parallel or second medium. Let’s leverage the unrealised potential of the CSE. The SEC has a clear role to play. The new SEC Act, which we all helped draft, is now passed. I am confident we can build a better capital market, which earns the trust and credibility of President Wickremesinghe and all stakeholders, on and offshore.

Communication and dialogue 

The SEC must have a better communication strategy and a more frequent, open and transparent dialogue, with all stakeholders. I have always maintained that an audience with the political leadership will help bridge perception vs. reality gaps while serving as a deterrent to lax regulation or market development. We did as much as we can in this regard between June 2018 and November 2019.

Credibility regained

We certainly restored the independence and objectivity, the integrity, the accountability and responsibility, the credibility, the trust and confidence in the capital market, the SEC and CSE, from 2015-2019, when Wickremesinghe was Prime Minister. He can well make it happen again. More so because he is now the President. Thus it would have been better if he had engaged the SEC and CSE first. I hope he does so at least now. He has every right to do so. They in turn have a right to be heard.

If it aint broke in totality

I believe in the maxim, “If it aint broke in totality, we do not have to fix it in its entirety.” The opportunity is his, to ensure the strengthening of what is weak, to surface any irritants and undo them, to plug the holes and bridge the gaps.

In the public domain

Regretfully though, his comment is now in the public domain locally and globally, among individual and institutional investors, whose “portfolio investment” interest we urgently need. Their interest is essential if we are to succeed in our possible new listings. Additionally, his comment takes away from the wholesomely earned attractiveness of a number of well governed, credible, profitable local and multinational corporates, who are listed on the CSE and have global shareholders.

Apex political leadership

Given my three decades long association with Mr, Minister, Prime Minister, and now President Ranil Wickremesinghe, while I would have preferred if he did not say what he said, about the CSE, I know full well, the catalytic role he played as an up to date, aware, proactive, parliamentarian, then Minister and Prime Minister. We now need an apex level political personality, with the knowledge and capability to propel the CSE to the yet unrealised next level, while transitioning eligible SOEs to an acceptable level of stability, profitability and sustainability. He fits the bill.

Long experience must be leveraged – I have confidence, and that indeed is justifiable confidence, that President Ranil Wickremesinghe, given his long parliamentary, ministerial and prime ministerial insight into all SOEs on the one hand and a clear understanding of the Capital Market, the regulator, the SEC, CSE, the successes, merits and demerits of privatisation, listings, part listings, etc., on the other hand, clearly has the ability, to make the long overdue and now compellingly necessary, State Owned Enterprise Reform (SOE) and listing or part listing, happen. This is an opportunity he must not miss to achieve his own unrealised potential. 

From frontier to emerging 

We need to transition from a Frontier Market to an Emerging Market, which requires sufficient meat in our Market Capitalisation, if we are to realise the full potential of our three plus decades old capital market and the CSE. The only way we can do so is to list major SOE’s which are clearly eligible for listings, and their listing will be game changers to Colombo’s capital market.

He has been there and done it:

As Minister of Industries, he was the architect of the Strategy for Industrialisation of 1989/90, through which most of the incentives for the capital market were designed, deliberated and indeed implemented, within months, after regular submissions and presentations to, question and answer sessions with President Ranasinghe Premadasa and then the Cabinet took swift decisions. I served as a member on three advisory committees of the Strategy for Industrialisation, Investment Promotion, Fiscal Incentives, Investment Incentives, when we designed, capital gains and wealth tax exemptions on capital market transactions, qualifying investment relief for the setting up of unit trusts, venture capital companies, incentives for research and development, pioneering ventures and expansion of industries and much more. These may need revisiting or fine tuning now, but the framework, the legislation, the institutions, are all there.

Privatisations, Public Private Partnerships, SOE listings are now an imperative

We can leverage precedent or kick the can down the road. It was in the post 1989-1993 period, yes as far back as that, during President Ranasinghe Premadasa’s action oriented regime, when today’s President Wickremesinghe was Minister of Industries that privatisations of for example, the Cinnamon Grand and Cinnamon Lake, once the Oberoi and Trans Asia, the NDB, United Motors, Distilleries, the Regional Plantation Companies, and many more, and about 5-6 years later, under the President Chandrika Bandaranaike Kumaratunga regime, the Sri Lanka Telecom, and many successful privatisations, and subsequent listings were made to happen. Thus the CSE has a track record. Creating a parallel institution, which will clearly require legislation, will only be kicking the can down the road. Time is of the essence. We are all equal shareholders or stakeholders of this country, we have a proprietary interest in its balance sheet, its SOEs, its Capital Market and much more.

Political interference

While I cannot comment on the period of my predecessor, between 2015 January and 2018 May, I can say without fear of contradiction from any quarter, and all Commissioners, 10 in all will unanimously agree with me that, during the brief 15-18 months that I was Chairman of the SEC between June 2018 to November 2019, (excluding the gap during what I term the October Revolution and constitutional coup) neither he, the then President, nor any member of the cabinet, directly or indirectly attempted to interfere with our independence. Thus there was no “Political Interference leading to Regulatory Forbearance.” 

We were just and fair, uptodate and aware, and certainly proactive. We structured and imposed fines upon brokers, we fined board members who did not disclose rating downgrades, this and much more, were for the first time in the history of the SEC. We filed action against insider traders. We investigated, studied long and hard, and finally did all that we did, based on guidance from the office of the Attorney General and with unanimous approval of a full commission.

A future that is his to shape

So, as I said, shaping a future CSE as a medium to list eligible SOEs is well within the jurisdiction of the President and the Government and I am sure all at the SEC, CSE and market participants will fall in line.

Flies in the ointment

He must seek out the flies in the ointment. Just as he should differentiate between the disruptive, anti-establishment, violent, bad eggs posing off as wholesome participants in the Aragalaya and the genuine activists. I am sure he can well demand and achieve a weeding out of the bad eggs in the capital market, who bring the SEC and the CSE into disrepute. That is the job of the regulator he and we all expect.”

His legacy. His moment

The longer it takes for SOE reforms and possible listings, the longer will this be a distraction during his Presidency, which he could well do without. He now has a long list of many to do’s, which he did not have the opportunity, or the courage, or the collective political will, to do as Prime Minister. Hence, there clearly is a lot on his plate now. I have no doubt at all that he knows what his agenda is and needs to be. He must make things happen now. That will be his legacy. This is his moment.