Alexis Lovell Pic by Waruna Wanniarachchi
Sri Lanka must change rules and regulations pertaining to the financial sector, veteran industry players said.
“Banking regulations say that you can’t own more than 15 percent of a bank. In Malaysia and other places, it’s quite open. In Malaysia if you want to own 51 percent of a bank, you’re allowed to do so,” National Asset Management Limited and UB Finance Chairman Alexis Lovell said.
Laws state that a single shareholder can only own up to 10 percent in a bank. However, most large shareholders in banks have gotten exemptions from the Central Bank to increase their ownership to 15 percent.
Lovell was the Chairman of Union Bank, and was involved in the Singapore-based TPG Group acquiring 70 percent of the ownership of Union Bank. TPG had expressed interest in acquiring over 75 percent in the Bank.
However, TPG is forced to decrease its shareholding in Union Bank to 15 percent over the next 15 years.
Lovell said that unless the government gets such infrastructure laws corrected, getting investments would be hard, no matter how well economic diplomacy is conducted to attract investments.
“I think this will have to change to be progressive. Whatever effort the government puts in, unless they get the infrastructure right, it would be extremely difficult,” he said.
Meanwhile, Expolanka Holdings Chairman Hanif Yousuf said that the country must also remove limitations placed on outflow of funds.
“If India’s Tata and Reliance can buy overseas companies, time for Sri Lankans to do the same thing,” he said.
He noted that Expolanka has companies abroad due to the Board of Investment’s Section 17 allowing service companies to acquire foreign businesses.
According to him, some export businesses have avoided the strict rules by setting up companies in Singapore to raise capital through international funds.
He noted that when innovative Sri Lankan companies export, they would want to expand and invest in their foreign operations.
“But I was told by someone in the Central Bank, that to change with rupee and the balance of payment right now, there’s no chance. But if I want to go, I want to go,” he added.
This seems to have created a paradox, as exports are required to uplift the balance of payments.
Finance Minister Ravi Karunanayake wants to make Sri Lanka a financial hub, in which case, such regulations must be reviewed. However, the Central Bank and the Securities Exchange Commission which account for such financial regulations now fall under the Prime Minister’s purview.