Government support needed

To drive bond market growth:

Privatization of infrastructure projects, rise in private financing activities, disintermediation and Government support are key factors driving the bond market growth. The bond market allows corporations to have wider access to credit to finance viable projects. It will reduce over-dependence on the banking sector for corporate debt financing and will also reduce the funding mismatch, RAM Holdings Berhad Executive Deputy Chairman / Group CEO C Rajandram said.

Speaking on benefits of ratings and bond market financing at a CEO Breakfast Meeting hosted by ACCA Sri Lanka and RAM Ratings, he said ratings provide a common yardstick to measure credit risk and to signal market changes in credit quality of bonds.

“This will also bridge the information gap between borrowers and lenders, issuers and investors and enhance financial disclosure and information efficiency,” he said.

Responding at the ensuing panel discussion chaired by CEO RAM Ratings Adrian Perera, Rajandram reiterated the relationship between the Government and private sector terming it a “necessity for liberal understanding between both.”

The panel comprising United Motors Chairman Ranjith Fernando, Cargills Ceylon Deputy Chairman Ranjit Page and SEC Director General Channa de Silva were debating on the issue of why the bond market had failed to take root in Sri Lanka.

“What was lacking in Sri Lanka was awareness on how the private sector worked,” Ranjith Fernando said. “This shortcoming resulted in cementing the State and private sector dichotomy as the Government did not realise the value of private funds”, he said.

He mentioned that the indiscipline of the market would not foster the climate necessary for bond market growth.

SEC DG Channa De Silva commented on the necessity of business plans as our country’s neighbours begin to play a larger role in the international economy.

He termed the current effort, “mediocre”, while emphasising the need to allow SMEs access to lending facilities.

There was also a suggestion for taxes to be reduced from 33 percent to 15 to 20 percent as it impeded Sri Lanka’s competitiveness when compared to the Middle East or Africa.

Cargills Deputy Chairman Ranjit Page while agreeing in principle, highlighted the lack of unity within the private sector especially in Sri Lanka’s new environment of peace and that the private sector as a whole needed to unite to, realize its potential.