In Defense Of Arjuna Mahendran

From Colombo Telegraph -By Sarath de Alwis 

“I am time, the destroyer of all; I have come to consume the world. That one is dear to me who runs not after the pleasant or away from the painful, grieves not, lusts not, but lets things come and go as they happen.” The Gita

Money markets need laws, rules and regulations. The integrity, competence and judgment of the Monetary Authority is what is at stake today. Lee Kwan Yew in his memoirs describes how he set up the capital market in Singapore and dismissed critics who complained of overregulation. ‘In Hong Kong what is not expressly forbidden is permitted; in Singapore what is not expressly not permitted is forbidden’.

Arjuna Mahendran

To take up the assignment, Arjuna Mahendran gave up a lucrative career in International Banking and his Singapore Citizenship. When he sought more time, he was persuaded to take over immediately and his nationality issue was resolved by fast tracking the process.

Had he waited till April to take over, the bond fiasco would have been under the watch of someone else or there would have been no fiasco at all.

The rocket science of bond trading is explained by a central banker in a paper presented in 2008. The Additional Superintendent of Public Debt Department Central Bank of Sri Lanka Mr.C.P.J. Siriwardene explains the growth of the Bond Market.

Treasury bonds are traded through competitive auctions conducted by the Central Bank on a regular basis. Primary dealers who have been involved in the government debt market since 1992 have direct access to the primary auctions. According to the present regulatory framework, primary dealers should subscribe the entire sale and single primary dealer minimum investment level is set at 10 per cent of the volume of sale to avoid any possibility of under subscription. The present auction system is on multiple price basis. Since 2000, all auctions are conducted electronically using an on – line system. Before each auction, the debt authority accesses the potential investors via primary dealers to make sure the availability of funds for the full subscriptions. Private placements of Treasury bonds also take place as a contingency to accommodate unexpected borrowings to avoid market shocks by offering large volumes to the auctions and cancellation of planned bond auctions. Successful 21 bidders are informed on the same day of the auction and the settlement is two days after the auction (T+2 system). Since the establishment of the primary dealer system, the Central Bank continued its role as a debt manager to develop the primary dealer system. They include streamlining of dealers (removing nonactive dealers, appointing new dealers, etc.), introducing necessary regulatory framework for dealers and building up close relationship between primary dealers and the Central Bank.

Dr. Harsha De Silva the Deputy Minister of Planning has announced that the committee of three lawyers will examine all issues and trace any irregularities up to 2012. His erudite posturing and justifying of three mediocre lawyers on a voyage of discovery tracing misdeeds up to 2012 amounts to bottom trawling for red herrings.

This writer did not know who Mr. Gamini Pitipana was until learning that he was to be the chairman of the probe committee. These days Google does much more than Dunn & Bradstreet. So the name was googled. What  appeared was mind goggling. Royal College Class of ’72. Attorney at Law. Apollo foods Private Ltd. In the absence of any further information from the usually expansive ,Dr.Harsha what should we make of the meagre information? That Mr.Pitipana is learned in the law and could cook? Is that what is expected of an old Royalist buddy? Cook a report?

Let us get back to the world of bond trading. A basis point is a hundredth of a percentage point. To make it simpler, if a yield moves from 5.5% to 5%, it has moved 50 basis points.

Obviously Prime Minister Ranil Wickremesinghe thinks that the average quantum of gray matter which serves to process information in the brain of the average Gamarala’ in Sri Lanka is far less than one basis point! But ‘Gamaralas’ are beginning to run out of patience. Moving from bad governance to good governance the ‘Gamaralas are now experiencing a spell of ugly governance. Indeed very ugly governance at that.

It would be grossly unfair to accuse Governor Mahendran of withholding any information pertaining to his son in law. Sri Lanka is a small country. The incestuous world of the money market knew about the two Arjunas. Ranil Wickremesinghe decided to play Sri Krishna and persuaded the elder Arjuna to battle in the harsh world of greed.

Arjuna Mahendran is only a man. Power is not of a man. Wright Mills the author of ‘Sociological Imagination’ the seminal study of twentieth century society identifies five problems we face today in a free market economy; alienation, moral insensibility, threat to the spirit of democracy, disregard to human freedom and most significantly the conflict between bureaucratic rationality and human reason.

The problems such the one that is discussed are commonplace.

“Wealth does not center in the person of the wealthy. Celebrity is not inherent in any personality. To be celebrated, to be wealthy, and to have power requires access to major institutions.” What is nauseating with the governance style of the Prime Minister is that he reminds us of the commandant of Auschwitz who insisted “I never got complaints!”