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by Channa Kasturisinghe

Commerce and Consumer Affairs Minister Ravi Karunanayake has sought Cabinet approval to convert the Sri Lanka Export Credit Insurance Corporation (SLECIC) into a public company.

SLECIC, a statutory corporation was set up 25 years ago to protect Sri Lanka's exporters against the failure of overseas buyers by providing indemnities against buyers' financial default or insolvency. It comes to the rescue of exporters when buyers fail to pay for consignments in times of economic downturn or political instability in the respective countries.

The Minister's proposal has been made under the Conversion of Public Corporations or Government Owned Business Undertakings into the Public Companies Act No. 23 of 1987.

SLECIC was set up by the Sri Lanka Export Insurance Corporation Act No.15 of 1978. In terms of the Act the start up capital for the establishment of SLECIC was provided by the Sri Lanka Insurance Corporation (SLIC) and the Central Bank of Sri Lanka.

With the impending privatisation of the Sri Lanka Insurance Corporation, the Ministry of Finance had requested that the investment of the SLIC in SLECIC be divested. Simultaneously it was proposed that the Central Bank divests its shareholding in SLECIC upon its conversion into a company.

The conversion of SLECIC into a company would enable the withdrawal of SLIC and the CBSL capital participation in SELCIC without disturbing the capital structure of the new Company.

The conversion will also give the new company a share structure and permit the entry of desirable strategic and institutional investors into its ownership structure and such investors would infuse added professionalism and managerial expertise into the new company. The Memorandum and Articles of Association of the new company will be drafted to give it greater operational flexibility.

The Minister in his proposal has also pointed out the need for a mechanism for SLIC and the CBSL to surrender their investments in SLECIC. The investment by the two institutions cannot be obviated by the mere Act of the conversion of SLECIC into a public company with its entire share structure being vested in the Secretary to the Treasury.

In order to achieve this purpose the Minister has proposed the option of SLIC and the CBSL declaring dividends in specie favouring the Treasury and thus transfer their investments to the Secretary to the Treasury following the conversion. Another option proposed by the Minister is that the two institutions gift their respective investments to the Secretary to the Treasury.

The Minister also proposed that safeguards stipulated in the SLECIC Act including government guarantee, income tax exemption and the power to act as an agent for the Government in providing insurance and guarantees be transferred to the new company.

The Minister has stressed the need to form an ad hoc committee of representatives of the Finance Ministry, the CBSL and the SLIC to examine the proposals and make recommendations on the disposal of investments made by the two institutions in SLECIC.

According to a SLECIC senior official the Corporation which presents itself as the catalyst to Sri Lankan exporters need to be repositioned in a way that will open markets to new entrants and widen the horizons of those already in the business.

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Copyright 2001 The Associated Newspapers of Ceylon Ltd.
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