Sunday Observer Online


Sunday, 22 November 2015





Marriage Proposals
Government Gazette

Voluntary merger of banks welcomed

Following the presentation of the 2016 Budget, banking and financial sector analysts have commended the proposal to encourage the voluntary merger of banks.

Deputy Chairman, Commercial Bank, Preethi Jayawardena, said many global banks have merged to build strong and vibrant banks, enabling them to reduce costs.

"With mergers, there will be less competition. The NDB Bank and DFCC were to merge but that did not take place. It is a good move to merge and create large banks to support development," he said.

Immediate past president, Institute of Chartered Accountants of Sri Lanka, Sujeiva Rajapaksa, too commended the move which he said could "help create a strong banking sector that is vibrant and stable."

He said it was vital to have strong banks than many small banks that had mushroomed. Big banks being merged will help them to canvas business overseas. "Though the proposal is not mandatory, it will set the precedence for mergers."

Through the 2016 budget, voluntary mergers are encouraged. It is proposed that HDFC Bank be merged with the State Mortgage and Investment Bank to create a National Housing Bank. Similalry, Lankaputra Bank to be merged with the Regional Development Bank to create Lanka Enterprise Bank and Sri Lanka Savings Bank to be merged with National Savings Bank.

The budget also proposes that banks have to cease leasing activities from mid next year.

In this backdrop, senior banker and financial analyst, Mangala Boyagoda, said the move to merge two housing development entities to create a single strong entity for housing was a welcome decision that will help boost the housing industry in the country.

The merger of the Lankaputra Development Bank with the Regional Development Bank to create a Lanka Enterprise Bank is a commendable move to boost development, he noted.

Financial analyst Rajive Senanayake also hailed the call for mergers, claiming that it will help create a strong banking sector in the country and stabilize the financial sector.

"Merging large scale banks with small banks will help to develop the respective areas. This will prevent banks from running into difficulties and help build confidence among customers," he added.

Vice President, National Chamber of Commerce of Sri Lanka, Sujeewa Samaraweera, holds the view that voluntary and not forced mergers is a sound decision that will help banks to have a strong financial base to attract foreign investors who look for financial stability of a bank.

Another banking expert, speaking on the basis of anonymity said, the country's financial system needed urgent structural changes to ensure banks and non-banking financial institutions (NBFIs) to be well-positioned to achieve the envisaged US$ 100 billion economy by 2020.

The regulatory framework should be designed to monitor the emerging business models of banks and NBFIs, the analyst said.

During 1988 to 1990, some 13 financial institutions had failed with only two being revived with new investments. In 2002, a prominent bank collapsed and in 2007, the deposits of the bank were transferred to a new savings bank.

Banks and NBFIs account for around 65 percent of the financial system assets of the country. Malaysia and Singapore have consolidated banks and NBFIs to create a vibrant and stable financial sector in the country, experts said.

General Manager/CEO, LankaPay, Sunimal Weerasooriya, said having strong balance sheets is essential for banks and financial institutions to finance large scale projects.

"The operational aspects should be looked into thoroughly, if mergers are to be successful. The technology should also be ready."

Chairman, HVA Group, Rohan Fernando, said bank mergers was proposed sometime ago. "It is good for any business to look at mergers and acquisitions at a time the operating costs are increasing year on year. To be competitive and to reduce excess overheads, the best way forward is to merge.

Hence the proposal made by the Finance Minister is in the right direction.

- LF

A novel Budget -Rohitha Bogollagama

Former Foreign, Enterprise Development and Investment Promotion Minister Rohitha Bogollagama,

From a broader perspective, this Budget provides a wide spectrum both politically and economically. This is a novel budget in that context, because they have brought in many policy associated proposals.

When you get policy framework simultaneously implemented it may involve a period of time more than what is meant on a given year.

Balancing act by the government may be greater here to ensure what they meant and what they meant well for the people.

The responsibility of the Finance Minister is to ensure that there is no deviation of the policy introduced today and the revenue generation measures.

The 'spending part' of the matter is generally easier but how do you generate the money, that is the paradox, I see the government will get into unless they become conscious and equally responsible to ensure the smooth implementing process associated with budgetary recommendations. That is one aspect of the budget I wish to highlight.

The other area is to provide for a friendly investment climate in Sri Lanka, the fact that they are liberalizing the sectors for foreign investment and equally encouraging the local entrepreneurship is commendable.

Now to do so, it is equally important that material provisions has been provided for the local entrepreneurs, particularly in terms of easy and cheap capital. The capital market has become more investor and entrepreneurship friendly and due to this the government will be able to consolidate some of their banking instruments.

The agriculture sector I have an issue. If they withdraw the subsidies for fertilizer from those other than small scale farmers, the other plantation sectors are going to get affected, because coconut tea and rubber are not yielding the best prices at present.

When the fertilizer subsidy gets withdrawn, they may equally suffer with the high cost of fertilizer in the open market. That part the government will have to immediately address because the production base has to be retained and encouraged. Fertilizer has been a major input to get high yields in Sri Lanka. These are some of the things the government must immediately consider.

I think the government has laid a good foundation for a conducive environment for investment, I wish them well when it happens. Right now the environment for foreign investment is right. I think transparency and corruption free governments are very important for greater investment flow. There is political stability and when it continues to establish, the foreign investment will flow in.

The investment on land by foreigners have been encouraged by the the 2016 budget, it is another stimulating point.

With these proposals, the government, if they stand by what they have said with greater responsibility I am sure, expected results of the Budget can be generated in the course of 2016.

Not futuristic -Ceylon Teachers' Union

Attention paid through the 2016 budget to the education sector was sorely inadequate with funds only being allocated for old projects with no provisions being made for new initiatives, General Secretary, Ceylon Teachers' union, Joseph Stalin, said. Commenting on the allocations for the education sector, Stalin said it is just an icing on an old cake.

"The money is allocated for old project and no attention is paid to current needs such as improving human resources in the sector," Stalin said..

Stalin said that the public sector employees, including teachers, expected the Rs. 10,000 allowance provided, to be added to their basic salary. "This did not happen," he noted.

The allocations have increased but only to improve primary education,school development programs and to build teachers' quarters and so on.

There is a need to go beyond this and look for new initiatives to upgrade education services, Stalin noted.

He alleged that the budget has failed to pay due attention to both teachers and principals.

"Attention has not been paid to address salary discrepancies," he emphasized.

The previous government proposed to draft a new minute for the setting up of a teachers' service which would address grievances of both teachers and principals. The current plans do not include this.

"Issuing vouchers for school uniforms is another blunder. More problems will crop up due to this," he said.

A complete sham - Ceylon Mercantile Union

The 2016 budget has paid more attention to employers' concerns than concerns of the working class, alleged General Secretary, Ceylon Mercantile Union. Sylvester Jayakody.

Commenting on the Appropriation Bill presented by the National Unity Government, Jayakody said that each time it was a bitter pill that was presented in the guise of a sweet. "The government talks of relief but brings in price controls," he charged.

He noted that the proposed increase of working hours from eight hours to nine hours would amount to a violation of international labour laws.

"The stipulation of eight hours of work was the result of working class struggles," he said.

"In Sri Lanka, people are already working 45 hours per week and comparatively, Chinese work 40 hours per week with 11 statutory holidays. It is the same in the United States. In the Sri Lankan private sector was already working more hours than workers from China or the US. "The government must reconsider whether the working class, already working long hours should be compelled to work an extra hour."

He also insisted that the private sector too has not gained anything through this budget. "When the government came into power, the CMU demanded a Rs.5000 salary increase for private sector employees. Following discussions, we reduced our demand to Rs. 2500. Until now, the private sector has not got an additional cent. This government has failed to keep its promise," he added.


Daily News & Sunday Observer subscriptions
eMobile Adz

| News | Editorial | Finance | Features | Political | Security | Sports | Spectrum | World | Obituaries | Junior |


Produced by Lake House Copyright 2015 The Associated Newspapers of Ceylon Ltd.

Comments and suggestions to : Web Editor