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FINANCIAL CHRONICLE™ » DAILY CHRONICLE™ » Conflict of interests Sri Lankan-style

Conflict of interests Sri Lankan-style

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1Conflict of interests Sri Lankan-style Empty Conflict of interests Sri Lankan-style Sat Jun 16, 2012 8:05 pm

CSE.SAS

CSE.SAS
Global Moderator
Some years ago, when the head of an Indian state agency involved in nuclear energy retired, he was quickly offered a highly-paid position with a non-governmental organization (NGO) that has been campaigning against such policies.

The head of agency was also in repeated confrontation with the NGO concerned. All that changed however when he accepted the new, post-retirement job and became a convert! In Sri Lanka, some years back the powerful head of a state agency continued to be a dominant player in the stock market, through a multitude of companies that he either owned or controlled. Some of the decisions in the stock market must surely have been based on confidential information that he was privy to.

The latest case of conflict of interests is in the controversial National Savings Bank (NSB)--The Finance Co (TFC) stock market deal which turned sour. While both the buying and selling broker was Taprobane Securities which is permitted by regulation, the issue at stake is that the broking company CEO Dinal Wijemanne was himself the main seller of TFC stock and, did this conflict of interest violate any rules?
Then there are a number of recent cases where senior Central Bank officials retired and immediately joined banks, some as chairpersons or deputy chairpersons – armed with a lot of knowledge and ‘secrets’ about banks in general! In some countries, retiring central bankers are permitted to join other organisations after what is called a ‘cooling’ period of 2-3 years which is considered adequate to ensure that such ‘secrets’ or confidential information is no longer considered material information.

On the positive side, there are those who are honest enough to decline positions or entry into organisations where they have a perceived conflict of interest. Last week, the Business Times which is guiding the formation of a forum for independent, minority investors in the stock market, received a letter from one investor who was keen to join but said this would come into conflict with his involvement as a non-executive director in many listed companies. Declining the invitation to be a member for this reason, he wished the forum well and agreed the need for a grouping to protect the ‘sprats’ from the ‘sharks’.

It is in this context that reports from India (see story on this page) on the presentation of a Conflict of Interest Bill India's upper house of parliament, is a very interesting and positive development. One that Sri Lanka can learn from (or are we asking too much from our ‘legislators’ and high society?).
The report said that, “among the many things that have proliferated in the economic boom of the brash new India is conflict of interest. So widespread, comprehensive and many-tentacled has this feature become that it is often no longer even recognised to exist, much less to be a problem. The practice is now so common that it is even hard to single out just a few cases or to get more outraged about some compared with the overall pattern of behaviour.”

This is a similar case scenario in Sri Lanka where it is an often ‘kill the messenger’ response rather than tackling the issue head-on. And just like in India, conflict of interest has seeped into every corner of Sri Lankan society. But when it happens at the highest levels in the public and private sectors, it becomes a much more serious issue with severe negative impact on the people.

More than two decades ago, the then deputy treasury secretary was also serving as acting chairman of a top state corporation. This was perfectly okay until he wrote a letter as corporation chairman to the Treasury asking for a tax concession. Then wearing his treasury hat, the letter came to him for approval, and he promptly refused the request.

A similar case is emerging in the case of Treasury Secretary P.B. Jayasundera who is also Secretary to the Ministry of Economic Development. There are many conflicts here, for that matter when a treasury secretary serves as a head of any ministry.

The common grouse in state tourism circles is that Dr Jayasundera is unapproachable (in the context of listening to another official’s point of view rather than making decisions on only his - Jayasundera’s - view). However another problem that may have arisen (or probably would in the future) is that when tourism officials present a budget say for instance promotion and marketing, to the economic development ministry secretary, he immediately puts on his ‘treasury’ secretary and looks at it, in that perspective. Thus if the government is tight for funds, projects are prioritized and funding for such a promotion budget would be considered non-priority from a treasury viewpoint. Whereas if Jayasundera was only holding one portfolio (economic development), his decision would be based on the tourism viewpoint and need.

There are many, many cases of conflict of interest in the public and private sectors which has impacted on the economy and raised serious issues of governance, transparency and ethics. One immediate case that comes to mind is Sri Lanka Cricket Board Secrtary Nishantha Ranatunga also serving as CEO of Carlton Sports Network (CSN). The rules bar any individual involved in the print media from serving in the committee which Thilanga Sumathipala was confronted with when he was cricket board chief. However whether its print or electronic, media is media and Ranatunga’s position is a clear conflict of interest.

Often these issues are swept under the carpet and inevitability results in the messenger being at the receiving end of some harsh treatment. A Right to Information Act, which campaigners are struggling to enact, will go a long way in reducing such conflicts in society. India has shown the way with a ground-breaking Conflict of Interest Bill which is in Sri Lanka’s own interests to follow with its own version.
http://www.sundaytimes.lk/120617/BusinessTimes/bt07.html

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