Strong capital market - a must for infrastructure growth - Executive Director Ernst & Young Malaysia

Hiran H.Senewiratne

CAPITAL MARKET: Sri Lanka should have a strong capital market especially to fund major infrastructure projects in the country. At present Sri Lanka’s capital market is not strong as the banking sector, Executive Director Ernst & Young Malaysia, Chow Hoe said.

He said that in developing countries, the capital market’s contribution towards the economy was 150 per cent over the banking sector. But in Sri Lanka capital market’s contribution is less than 25 per cent to the GDP, which is quite inadequate, he said.

Hoe who is in Sri Lanka to assist the SEC to implement a Capital Market Master Plan said that in USA capital market’s contribution towards the GDP is very much higher than the banking sector while in Malaysia it is 50 per cent to the GDP, he said.

To implement the Master Plan in a proper manner, the Asian Development Bank appointed Ernst and Young Malaysia would assist the SEC he said. In Malaysia we raise funds for infrastructure projects through the capital market and those funding agents are listed in the stock market, he said.

The SEC now is in the process of implementing the Capital Market Master Plan to enhance the development and performance of the Sri Lankan capital market, sources said.

To design the Capital Market Plan, the SEC has appointed a full team with Malaysian expertise. It also set up an operational zone with a competent director to handle its activities and to monitor it, Director General, SEC, Channa de Silva told the Daily News.

He said this master plan will be completed in two years, and setting up the Financial Services Academy is part of the Master Plan. For the first time in Sri Lanka it would introduce derivatives in Sri Lanka.

Further as a part of the plan they are in the process of grooming 5-10 large companies to be listed in the Stock Exchange. The Sri Lankan capital market would play a pivotal role in enabling State-owned enterprises to raise funds, either through equity or debt for building socio-economic infrastructure to improve the standard of living in the country, especially outside Colombo, he said.

In addition, public listed companies will also raise most of their capital through equity and private debt securities, which will also be a significant employer paying competitive salaries to attract top talent, he said.