PERC closure fuelled by media ‘leak’

The Public Enterprises Reform Commission (PERC) was ordered to close after ‘top officials’ were angered by a sensitive PERC document on the SLT-Maxis deal leaking to newspapers, The Sunday Times FT reliably learns.

“Higher ups at the President’s office were furious with the leaking of this document which discussed the pros and cons of the proposed sale of a SLT (Sri Lanka Telecom) stake to Maxis Communications of Malaysia that they immediately ordered its closure … assuming that someone at PERC was responsible,” a reliable telecom industry source told the paper.

Ultimately a cabinet paper was presented for the closure of PERC on the grounds that since there was no more privatisation to be undertaken under the Mahinda Chintana programme, the need for such an office doesn’t arise.

The proposed sale of 25.3% SLT shares to Maxis, which has triggered a major furore with allegations of bribery and corruption against some government higherups, eventually led to a fundamental rights petition being filed in the Supreme Court by former Minister Sripathi Sooriyaarachchi alleging corruption and the loss of revenue to the country based on the observations of PERC.

A subsequent judgment was handed down by the Supreme Court to temporarily stop the sale of shares, thereby bringing any further action to a virtual standstill until the case is heard in September 2007. Maxis’ has declined to comment on the matter in view of the court case.

The discussion paper by PERC, handed out to the seven member committee in charge of evaluating the proposed agreement by Nippon Telegraph and Telecommunications (NTT) of Japan which has 35.2% stake in SLT and Maxis had been leaked to the media with sections of the paper being published, showing serious doubt and points of contention on claims made by the parties involved in the proposal and the suitability of the parties to effectively manage SLT.

The source also said that no PERC officials were on the committee even though it was said that the committee was made up of the Chairman of PERC, Chairman of SLT, Chairman of the Board of Investment (BOI), the additional secretary of the Defence Ministry, Secretary to the Ministry of Finance, Secretary to the Ministry of Port and Telecommunications as well as the Director General of the Securities and Exchange Commission (SEC) of Sri Lanka. PERC's role was mainly to act as a facilitator and to submit supporting documentation.

In fact, the source said that before the first committee meeting, PERC was given instructions to submit their observations. Through an investigative process, they were able to ascertain details on Maxis and on the highly controversial Global Telecommunications Holding (GTH), a company recently incorporated in the Netherlands. It has been widely speculated that its only purpose was to get hold of the SLT shares from NTT. GTH is a wholly owned subsidiary of Usaha Tegas Sdn Bhd (UTSB), a Malaysian investment holding company which is involved in everything from telecommunications to property development. UTSB has claimed that Maxis is a subsidiary but in the discussion paper, PERC had raised doubts as to whether that was true.

The Sunday Times in a report in May quoted analysts as saying that Maxis was aiming for a much higher percentage of SLT shares and were using GTH as a front company to acquire as much as a 50% stake. In fact, a lot of the questions raised by PERC revolved around the qualifications and suitability of GTH.

In order to complete the discussion paper, PERC obtained the buyer data and evaluated the credibility of the companies and had submitted a discussion draft with their views and points for clarification. The source said the report was given top priority because instructions for it were given directly by President Mahinda Rajapaksa. After the discussion paper was circulated among the committee members but prior to the report being finalized, one member (whose identity is now known to the government) had leaked a copy to the media.

A cabinet decision was also recently taken to transfer PERC to the Public Enterprises Division (PED) under the Treasury Department but a final decision is still pending. If PERC shifts under the purview of the Treasury Department, the Strategic Enterprise Management Agency (SEMA) will no longer be taking over the PERC portfolio. Currently, the PERC website states they are in the process of restructuring 17 public institutions and is handling approximately 25 major issues pertaining to 15 divested public enterprises.