One Perspective of why Sri Lankan Banks suck! They don't care about Country

Thinking about what Thusitha Wijayasena, Chairman and CEO of Kandy City Center told me on the 28^th August about the role of banks to facilitate Government Policy to grow the Economy, not just short term profits!

One of Mr W’s beefs was about the fact that the roads were full of vehicles, 7 million of them, perhaps 3M too many in reality, due to poor policy decisions.  

One of the reasons he attributed for this increase is the easy credit granted by banks and quasi banks (leasing companies) for the purchase of vehicles, that do not add value to the economy. Bikes, Three Wheelers, and Cars! Banks feel as the loan is secured on vehicles which don’t lose their value in a world where the SL rupee is constantly depreciating against the US$, it is a GOOD RISK! This money in his opinion, should have gone into productive investment financing, that will grow the economy, and the CBSL is also complicit in this crime.

We must immediately stop the leasing and financing of such vehicles, as a stop gap measure, concomitant with an immediate improvement in Public Transport, so the public will appreciate this act is in the public interest. Monay will automatically be available for productive investment purposes, unlike at present, and the potential for the cost of capital falling also exists.

What are the failed policies? One reason for the public amassing of vehicles despite the high rates of duty, are the permits given to many government servants and doctors, that only encouraged them or by selling them, others to import high value vehicles. Another is that we are the ONLY country where vehicle values rise with use, so it is also used as an investment against inflation.

Secondly, due to the appalling state of Public Transport,(PT) the first thing people think about when they can afford, is to buy a set of wheels to get to work in a quicker or more comfortable manner than using PT. If this had been developed with different pricing tiers for different modes, with incentives for the private sector, we would not be in this mess. Additionally a night bus service at a higher price structure too would reduce the need for vehicles.

Finally the incapability due to politics, to BAN the import of three wheelers in future, and phasing the existing fleet for a maximum of 7 years ONLY, will take 1M gas guzzling, high dangerous, polluting vehicles off the roads.

It is still not too late to implement these policies in the interests of safety, reduction in air pollution, speed of travel, and the public good. The lack of will of elected representatives to take this route, in the public interest is at the heart of why we need people in power who really care about Sri Lanka

Another allied issue was his outright condemnation of the Boards of Banks, who put short term profit against the long term interest of the State. The problem with private banks, DESPITE a significant Govt holding in them, including DFCC, NDB, Com Bank, Hatton National, is the Boards’ belief that they are judged, and the MD and Chairman are also judged by the profits earned during their tenure. Hence the expected increased share value! They do NOT want to think in the long term interest of the Nation as a whole.

There is NO equity stake that the Bank takes in lending for the long term, and Private Equity does not exist in Sri Lanka. This prevents infrastrucurally sound investments from taking off, in the public interest, but privately financed. It is only the State that can therefore invest in such projects, and unfortunately their projects are unsound in practical terms, and are fraught with corruption and so are overpriced and not necessarily in the public interest either.

I am sure he was also referring to his grand plan for the KCC as originally submitted to the govt. that required even Cabinet Approval to succeed! In my opinion, he was planning an integrated development for Kandy City, that would have seamlessly allowed convenient interchange from rail to bus in one integrated Terminus, and like in many countries in the world, have as its focus a shopping complex, complete with Cinemas, Shops, Restaurants, Entertainement Activity, and Parking, which will both ease the traffic situation greatly, reduce air pollution, and be more convenient both for the residents of Kandy, and the very high number of short term visitors to Kandy from all over the Country, who currently endure very inconvenient travel and trying conditions.

I believe that there is NO ONE better than a private sector developer to comment on this matter, as he sees both profit and benefit, without the Public being burdened with loans, and interest, on wasted projects for personal interest.

Within this argument was the fact that there was lack of direction and demand from the Central Bank, that regulates Banking in Sri Lanka to FORCE banks into lending practices that will be beneficial to the Country in the long term, and carry out Government infrastrucuture targets and policies, using private sector financing with incentives to the private sector to take on long term projects, which are currently discouraged by the same policies referred to earlier.

In conclusion, I am of the opinion “self made businessmen have a sixth sense of what is important, follow that in their life, and business practice. Obviously, they do it with profit motive, but with it is an execution that results in the MOST efficient allocation of resources. The value for money principle is always paramount in spending. Something that is completely absent in Govt., which wastes more than it saves due to corrupt practices.