Harry
J’s growing empire
So Harry Jayawardena, the influential tycoon who is quietly building
a business empire that is spreading its tentacles into a growing
number of sectors of the economy, has finally done it. His ouster
of DFCC Bank chairman Nihal Jinasena after building up a controlling
stake in the bank means that his grip on the one-time development
finance institution with access to cheap foreign loans is now complete.
Jayawardena’s bid for control of DFCC has long been speculated
by the market and business community and this newspaper drew attention
to it early on in the game.
The
next target in Harry Jayawardena’s sights is said to be the
Commercial Bank. Jayawardena’s move to take control of DFCC
Bank and speculation that he plans to do the same with Commercial
Bank raises interesting questions about the control of our banking
institutions and how the rules will be interpreted and applied.
The regulators do not have an easy task determining Jayawardena’s
extent of control over some of our top banks given the complicated
and murky nature of the ownership structures of firms in his growing
business empire. And while the rules restrict concentration of ownership
in banks, the Central Bank has also said it wants to encourage consolidation
in the banking sector to ensure stronger banks and reduce the kind
of fragmentation that is seen today. It remains to be seen how the
regulators, the Central Bank and the Securities and Exchange Commission
will react.
Jayawardena
is known to be well connected and currently serves as a senior advisor
to President Chandrika Kumaratunga and is also believed to be an
important contributor to party coffers, just like many other businessmen
who use their wealth to gain influence. He keeps a low profile and
avoids the media although his deals and predatory moves cannot but
focus the spotlight on him. He is believed to have got the deal
for the Norochcholai coal power plant project by becoming the agent
for the Chinese firm given the contract.
Jayawardena’s detractors portray him as a ruthless corporate
raider out to build a business empire by exploiting his influence
with the ruling political party of the day and earnings from his
cash cow, Distilleries Company of Sri Lanka, which is now being
seen as the holding company for his widening business interests.
In fact his raid on Sampath Bank, which raised a storm of protest
from shareholders and employee trade unions some years ago, is seen
in certain business circles as a dummy run – to test the waters
and see how the regulators would react.
The
ousted chairman of DFCC Nihal Jinasena has made a statement crying
foul over the move and alleging that such “interference”,
as he calls it, by shareholders in the DFCC board is unacceptable
and immoral. Jinasena cannot take the moral high ground as such
actions are quite the norm in developed markets and he himself is
alleged to have interfered with the running of the SEC secretariat
in its investigation into insider dealing in shares by its then
chairman and another retired director of a well known listed company.
While
some may not like Jayawardena’s style of business and his
growing corporate power, the fact is such predatory actions and
struggle for control of listed companies is perfectly normal and
legal in a free market, open economic system to which most probably
even the tycoon’s severest critics are committed. It is not
even immoral. A free market economy with a thriving stock market
allows, indeed, even encourages and admires, concentration of power
and wealth to some degree as seen by how rich businessmen like Bill
Gates are almost idolized in Western countries.
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