Good governance activist and former chairman of the Ceylon Chamber of Commerce, Chandra Jayaratne has warned President Maithripala Sirisena that due to the bad governance at Central Bank, the good governance government is facing its biggest credibility threat.

Chandra Jayaratne

In a letter addressed to Sirisena, Jayaratne reminded how civil society and media protested early in the administration under his leadership, when a purported bond scam was reported at the end of February, 2015.

“Despite investigations by a Committee appointed by the Prime Minister and later by COPE, the elections of August 2015 intervened and there was no further progress despite several promises of further action. Civil Society efforts to have a Judicial review via a fundamental rights petition was also frustrated by not gaining the right to proceed. Financial media, financial analysts, securities management professionals and intellectual voices of advocacy prevailed long after these initiatives but regrettably brought forth no redress. The Monetary Board did not actively investigate nor initiate necessary additional controls and process changes to reverse the several weaknesses pointed out by civil society advocates and professionals,” Jayaratne said in his letter.

He also highlighted about the strong possibility where the latest bond issuance this year is also riddled with continuing bad governance practices. “These include facilitation of interests of third parties via information leakages and questionable collusive transactions by managers in State-controlled entities. These deficiencies in ethical conduct and professional integrity are believed to have resulted in avoidable losses to the State, State institutions, the public at large and stakeholders of institutions such as the Employees Provident Fund,” he said.

Jayaratne warned Sirisena that the continuation of such practices reflects poorly on his administration and leadership.

We publish below the letter in full;

President Maithripala Sirisena,
President of Sri Lanka,
Janadhipathi Mawatha,
Colombo 1.

Dear Mr. President,

MAINTAINING PUBLIC CONFIDENCE IN “YAHAPALANAYA” IN THE FACE OF PURPORTED CONTINUING MAL PRACTICES IN BOND ISSUES

We in civil society are heartened by your May Day speech and recognize your commitment to good governance and to take hard action against actors and actions that are detrimental to peace, harmony and equitable socio-economic development.

We are unanimous in our view that the purported bad governance practices occurring in the issuance of long dated bonds by the Central Bank remains the biggest potential threat to the credibility of good governance by the government under your leadership.

Civil society and media protested early in the administration under your leadership, when a purported bond scam was reported at the end of February, 2015. Despite investigations by a Committee appointed by the Prime Minister and later by COPE, the elections of August 2015 intervened and there was no further progress despite several promises of further action. Civil Society efforts to have a Judicial review via a fundamental rights petition was also frustrated by not gaining the right to proceed. Financial media, financial analysts, securities management professionals and intellectual voices of advocacy prevailed long after these initiatives but regrettably brought forth no redress. The Monetary Board did not actively investigate nor initiate necessary additional controls and process changes to reverse the several weaknesses pointed out by civil society advocates and professionals.

Unfortunately, there is a strong public perception that long dated bond issues in 2016 are also riddled with continuing bad governance practices. These include facilitation of interests of third parties via information leakages and questionable collusive transactions by managers in State-controlled entities. These deficiencies in ethical conduct and professional integrity are believed to have resulted in avoidable losses to the State, State institutions, the public at large and stakeholders of institutions such as the Employees Provident Fund.

The stubborn rejection of transparency by the Monetary Board/Central Bank regarding large State transactions with private entities is a sad reflection of the commitment and integrity of those leading the relevant State institutions. The continuation of such practices too reflects poorly on your administration and leadership.

In the light of above, I urge you to please take immediate executive action outlined hereinafter;

Presidential Commission:

Appoint a Presidential Commission with terms of reference to review the issuances by the Central Bank of bonds of duration 4 years or longer during the period 1st January 2015 to 30th April 2016. This review should also include such bond issues which were cancelled or where all bids were rejected.

The Commission should determine whether

• the yields offered on issued bonds were in keeping with prevailing market interest rates and whether bonds were issued at abnormally high yields and were subsequently sold to State-controlled entities within a short period at much lower yields thereby unjustly enriching persons or institutions in the private sector, at the expense of the State, State institutions or the public.
  sources within the Central Bank or outside have colluded with any parties in the private or public sector and leaked confidential information regarding such Bond issuances prior to bids being closed.
• any official of the Central Bank, the State, State institutions, State banks, State-controlled financial institutions, any provident, pension or thrift fund managed by the State is directly or indirectly responsible for any malpractice that caused a loss or opportunity cost to the State unjustly enriching any persons or institutions in the private sector
• the members of the Monetary Board have been provided with adequate information by the Central Bank staff and whether the Monetary Board has taken specific actions from February 2015, when the public outcry on this issue commenced to date in order to ensure best practices in the issuance of Treasury Bonds

Panel of Professionals:

Appoint a Panel of Professionals with integrity, in-depth practical knowledge, capability and experience in treasury management, bond market operations, fund management and other relevant fields to advise the Presidential Commission on all aspects of their investigation and also on change management processes, enhancing controls and compliance mechanisms

Right to Information:

Instruct the Monetary Board to honour the public’s Right to Information Requests and issue executive instructions to the Central Bank to provide full information about actions taken in the service of the people, once the actions have been implemented. Acceding to requests for detailed information about issuances of Treasury Bonds, after the event, are in no way unethical or detrimental to the interests of the State.

Police investigation:

Issue executive instructions to the Inspector General of Police and the Bribery Commissioner to begin inquiries to ascertain whether any financial crimes or acts of corruption have taken place in respect of the Treasury Bond auctions of

• 27th February 2015
• 8th January 2016
• 5th February 2016
• 29th March 2016 and
• 31st March 2016.

Alert Public Servants:

Highlight the provisions of Section 70 of CHAPTER 26 of the LEGISLATIVE ENACTMENTS –BRIBERY to make all public servants aware of their responsibilities.

Appointment of the Governor of the Central Bank:

Secure bi-partisan Parliamentary approval for the Constitutional Council’s mandate in nominating persons to high office to be expanded to include the appointment of the Governor of the Central Bank

Facilitation and Non Interference

Issue executive instructions to the Central Bank and other State Institutions subject to investigation to facilitate investigations by providing all necessary information and explanations and also not to interfere and place barriers to the conduct of independent investigations.

I trust that this appeal made purely in the interest of maintaining the credibility of the government led by you with its commendable commitment to good governance will receive your kind attention.

Yours Sincerely,
Chandra Jayaratne

CC.
Prime Minister
Finance Minister
Secretary to the President and Snr. Presidential Advisors-Please review this submission with the President
Secretary to the Prime Minister and Snr. Advisors-Please review this submission with the Prime Minister
The Secretary to the Treasury,
The Secretary to the Monetary Board- for the Governor an Members of the Monetary Board of Sri Lanka
The Inspector General of Police
Director General of the Bribery Commission
Auditor General
Chairman Securities & Exchange Commission
Chairman COPE Committee of Parliament
Resident Director, International Monetary Fund

Editors of Financial Media –for public information and debate