Financial Times

2004 - the year in retrospect
The year that's ending has been a pretty hectic one for the capital markets and all signs point to the coming year being no less active. Stock market players appear to be in a bullish mood with the all share price index hitting a new high, fuelled by the high-octane performance of the Lanka Indian Oil Corporation IPO whose shares debuted last week.

A number of issues this paper highlighted during the year have had a positive outcome. A most notable example is that of pyramid scams. We can take satisfaction in the fact that it was The Sunday Times FT and Lanka Business Report television programme which broke the story in a joint investigation.

This early exposure of the scam and subsequent Central Bank warnings succeeded in raising public awareness of the dangers of putting their money in such risky ventures and prevented the scam spreading further. Even so, public ignorance and greed for quick money did lead to substantial losses. President Chandrika Kumaratunga herself has condemned such pyramid scams and said one such scam had led to the loss of $50 million in foreign exchange.

One such prominent scam appears to have all but dried up with hardly any transactions being recorded and it is heartening to note that, at long last, legislation to ban such pyramid schemes has finally been approved by parliament.

Another issue this paper took up was the pathetic plight of Pramuka Bank depositors. The courts have repeatedly held in favour of depositors and compelled the Central Bank to continue its efforts to revive the failed bank.

The Central Bank has had to bear the brunt of the criticism over the bank failure, on the grounds that they should have taken action sooner, although, as the regulators have taken pains to point out, their options were limited by the strenuous efforts by bank executives to hide their crimes. The depositors themselves must accept part of the responsibility for their plight because they were lured by the prospect of high returns from the high interest rates offered by Pramuka. High returns come with high risks.

One significant point that has got overlooked in all the hand wringing about the plight of depositors and criticism of regulators is the fact that the culprits who ruined the bank appear to have got away scot-free. The whereabouts of the controversial head of the bank, Rohan Perera, who fled abroad, still remain unknown, despite his claims that he would not run away.

Obviously he must be having the means to sustain himself overseas. The authorities owe it to the public to say what is being done to catch the culprits. Another regulator, the Securities and Exchange Commission, was also embroiled in controversy and internal bickering - a state of affairs that did no good for its image nor helped investors gain confidence in the capital markets.

The unprecedented probe into insider dealing allegations against its own chairman demonstrated the independence of the regulators. But the whole affair ended with many questions unanswered as the accused was able to compound the offence. It also revealed deep divisions with the SEC and alleged conflict of interest among commissioners.

This was followed by another unseemly dispute between the present Director General and the commissioners which has now ended with a settlement. The government needs to appoint a replacement without much delay and, hopefully, this could be a new beginning.

Our reportage on our own cola wars also ends on a positive note with the local entrepreneur, My Cola, scoring a notable victory against Coca-Cola International USA in the Commercial High Court over the use of similar plastic bottles.

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