What is happening in the multi-million-rupee Colombo Stock Exchange is not only a scandalous fraud and plunder of public funds but a clear sign of the breakdown of the rule of law.
Within one year two chairpersons of the Securities and Exchange Commission which is expected to regulate the Colombo Stock Exchange have resigned because they say that a mafia comprising billionaire business people are manipulating the stock market and they are being protected by politicians at the highest level.
Some months ago SEC chairperson Indrani Sugathadasa, wife of Presidential Secretary Lalith Weeratunga resigned because she could not control the manipulation of the stock exchange. Later the President appointed the highly-qualified businessman Thilak Karunaratne as the Chairperson of the SEC. But after a few months Mr. Karunaratne was also virtually forced to resign because his inquiries on the stock market mafia might expose the corruption of highest level politicians. After Mr. Karunaratne resigned, the President decided to appoint Nalaka Godahewa as the chairman of the SEC. It is widely known that Mr. Godahewa, who headed the Sri Lanka Tourism Development Authority, was also the chairman of a private company involved in tourism development and the building of luxury hotels. This was a clear case of conflict of interest, but who cares? There is no rule of law and little by way of law and order. The state media, carrying out crude and ridiculous propaganda these days with stooges and sycophants violating the basic principles of journalism, are claiming the stock market has reached the number three spot in the world.
According to the highly-respected economist and UNP parliamentarian Harsha De Silva, what is really happening now is the pumping process of the stock market mafia. For instance the mafia’s agent A will buy shares from agent B for Rs.20 and sell them back to agent B for Rs.30. Then the mafia agent B will sell the shares to agent C for Rs.40 and buy it back for Rs.50. Scores of small investors who believe the share market has soared and are unaware of the manipulation behind it, start pumping millions into the stock market. This is the pump and dump operation of the mafia. When the small investors pump millions into the stock exchange, the mafia companies start dumping their shares earning millions at the expense of the small investor. Indeed it is not only number three in the world stock market. It may be the number one racket.
Accountability, transparency, good governance and proper regulation have little or no place in this billion-rupee scam, but the foreign direct investors especially can see through it. If there is no rule of law in the Colombo Stock Exchange, FDIs will diminish and the economy will plunge to breaking point. What happens when the artificial balloon bursts may be dreadfully calamitous.