‘Kalpanakaranna’; savers in Sri Lanka use different modes to place their nest eggs. Of course there are the Bank Savings accounts and the National Savings Bank, which have given interest rates well below the rates of inflation which have resulted in most of the middle class eroding their principal. Hitherto they have been safe from collapse as the Banks can lend the money thus deposited at high rates of interest to make profits and thereby strengthen their balance sheets and capital base.
Those who consider themselves wiser, have invested their money in regulated and unregulated Finance companies because the rates of interest offered are higher. There is no real difference between the two except that there are certain guidelines the regulated once have to adhere to, and in that respect pay a slightly lower rate of interest to the savers. Many as we have seen have invested their funds in Sakvithi and their ilk and Golden Key (technically this is a credit card company and not a finance company) because of the stellar rates of interest offered. Does this saver realize that along with high rates of interest go higher risk of failure?
Surely the principal of investing is that higher the expected return therewith goes a higher level of risk of losing one’s money, and hence investment advisers recommend a diversification of one’s portfolio to take risk into account. Those who have now lost money are resorting to the courts for redress, because of the element of trust placed on the enterprise to safeguard one’s funds has been broken.
Needless to say if there is proven fraud, and the law has some redress, then the normal legal procedures should take place to hold those responsible accountable. However that does not for a moment mean that one can get one’s money back.
The investor also must be rational. How can anyone today earn a rate of return above 30% in order to pay the depositor that amount as interest? It is just not possible on the scale of the alleged Rs28B, which is the sum of the depositors funds. One must be a super genius to earn that return on that amount of money. Is it any wonder that this company failed? It did not fail earlier as it should over three years ago, because the management delayed the inevitable, by unethical means to cover the losses as they saw their unrealistic promises evaporate.
Admitting a loss in a company of this nature is tantamount to a run on the bank. So they were caught up between a rock and a hard place. They just continued to operate until the funds ran out, as some high profile people withdrew large sums of ill-gotten gains just before the collapse.
This is not the first time it has happened nor will it be the last and there are still more collapses in the offing. Just think again (kalpanakaranna) All companies who are offering high interest are in trouble, because they just cannot earn that themselves. Property on which some of the investments were made are falling in value, leases on which some of the investments are made are not being paid because the lessees are not earning enough to make the lease payment. They have all gone cap in hand to the Central Bank for help. Short of printing money, the Central Bank cannot help as we are all caught up in the world economic crisis whether the Government wants to admit it or not.
Lets just then look ahead and plan our strategy of how to cope with the fall out of the failure of another 10 Finance Companies within the next six months. People will lose their savings, consumption will decrease, they will keep their remaining funds in Banks or under the pillow, or the rich will keep it in overseas banks. What does this mean for the economy? Very serious stagflation, with no growth, no money for growth, unemployment and substantially reduced economic activity as people will not have money to buy what is produced affecting even the most productive enterprises.
I continue to maintain as I have done in the past, that we have leaders without the intellectual capacity to understand the problems we are facing, only basking in the glow of a military victory whose costs we are yet to fully understand, and the country is going to face a collapse of a magnitude hitherto unseen.
It is not too late to remedy this, if the powers are able to realize and stave off the impending collapse. It does not take a rocket scientist to prescribe what is needed to stabilize the markets. Helping the productive enterprises, the elimination of wastage, and prudent bribe free investments in infrastructure. Immediate action to improve international reaction to the deteriorating Human Rights record is also a must. Confidence to invest will return both locally and from international investors both private and government. We are not and cannot be isolated from the outside world as long as we have overseas remittances as the principal source of foreign exchange.
Saturday, February 28, 2009
Sunday, February 15, 2009
'Kalpanakaranna' or thinking is essential in everything we do or say, as otherwise we just become passive acceptors of everything presented to us at face value. A healthy dose of skepticism is essential, so that one can reason out information that is being conveyed, by the media, friends, and by our own observations. Remember two people even viewing the same action, may interpret that in different ways, based on their personal prejudices and experiences.
In the same vein those reading my blog could have diametrically opposing opinions about what I write and, often what I meant and what they interpret can also be far apart. It is partly what one wants to read into what is written and partly by failure in writing fluently enough in explaining my point of view.
Do many of you remember when we read poetry and then analyze that in class. The very different interpretations can even make the author blush, as most of it is a far cry from the poet's actual message.
What all this boils down to is that we are all unique, we have independent minds, and we should be able to freely engage in exchanging our thoughts and ideas, and this format of blogging is a great way to get opinions from people of different mind sets, in different parts of the world.
I am very hopeful that this medium of communication, will enhance the quality of life of those who engage in it, and also educate all of us to the fact that there are so many people with so many differing opinions, which we must respect, even though we may not agree with some of the interpretations.
I have seen the quality of the bloggers improve over time and I honestly feel that there is an incredible talent in the Sri Lankan based Blogosphere, that is helpful to all of us. I certainly hope this will be a positive force in bringing about harmony amongst our very vocal and opinionated community who hold uncompromising views on matters of national importance, once they can see that a different point of view that has some merit, also exists.
Friday, February 6, 2009
Bisokotuwa, in Galebedda, Moneragala
Just think ‘kalpanakaranna’, for a moment. Sri Lanka is in the cusp of a moment in history (once again the skeptics would say) to take up the challenge before us to unite as a Nation and work towards building on making real the ever mentioned programs and idealistic notions of leaders. We have great thinkers, and armchair pontificators but few doers and implementers.
Taking on President Barak Obama’s theme, “yes we can” I will explore just one idea. The country has 500,000 men and women in the Armed Forces, including the 40,000 in the Home Guard. They have their work cut out for the next six months to provide security to the Nation, lets take these 6 months to put a super plan in place to make use of this National asset.
Those who know can vouch for me when I say, it is desperately difficult to instill discipline into our youth who are now in a world of TV inspired desires, but little of parent inspired work ethic to achieve these desires. The youth in the Armed Forces however have discipline forced on them as part of their contract, and have been able to achieve the targets set before them.
I recommend the setting up of Corps out of the Regiments and Battalions, that cover many vocations and put these young men and women into them, within the existing hierarchy so it does not compromise loyalty to their respective units. Something akin to the Army Corps of Engineers in the US who to this day take care of the building of dikes and berms. The larger requirement at present is for them to immediately set about the task of building the roads, which I am sure they can perform at a greater speed than if left to other means, due to the ability to act under direct orders.
As a farmer I would like a unit to create and run large, say a couple of thousand acre Agricultural projects especially in the vast stretches of the Northern areas that are currently uninhabited, to plug the massive shortfall in our food production. Large-scale requirements include, Forestry, Sugar cane and Maize, which is practically grown in only large extents to make mechanization and productivity optimal. What more plan to reduce dependence on imports than these three products. Of course Red Onion and Grapes are other options suited to this Northern terrain. More importantly, they will be trained in planned production and disciplined farming something our peasant farmers lack for some obvious obstacles they face.