A Note On The Potential Risks & Negative Implications Of The Proposed Foreign Exchange Bill

By Chandra Jayaratne –April 24, 2017

Chandra Jayaratne

From the Perspectives of the Government, the following are the Key Components of a Check List for Assessment and Validation Prior to Enactment of the Bill;

Does the Bill in its present form, post enactment;

1. Advance the Delivery of Election Promises of the Government? ie. Promote the delivery of sustainable and inclusive macro economic growth and monetary stability, attracting new foreign and local investments, creating new job opportunities, encourage technology transfers and reverse brain drain, advance good governance, rule of law and justice processes, advance transparency and minimize corruption and waste?
2. Become a key enabler of the governance capability to meet the current and future challenges of the emerging socio political and economic environment and effectively manage potential emerging risks?
3. Become a priority reform facilitation pillar in the governance structure and in meeting the set of key delivery objectives of the government, including any planned strategic initiatives in the governance yet in the pipeline eg. Key economic zones, offshore financial city operations, infrastructure and associated legislative reforms etc.?
4. Have lessons from the past (local and foreign) been taken cognizance in the bill?
5. Be acceptable in terms of International Conventions and benchmarks and best practice standards looked up to by international agencies, funding institutions and foreign investors?

For the undernoted key reasons, it appears that the Bill in its present form fails to meet the assessment bench mark criteria listed above;

1. This Bill, along with the

1. proposed laws and regulations governing key economic zones, foreign investments, off shore financial city operations, and connected policy framework and associated incentive structures,
2. proposed provincial and regional development and state infrastructure development policies and incentives
3. framework for public private partnerships, laws and regulations governing state procurement and associated procedures for major capex and revenue spends,
4. laws and long term policy framework  applicable to land and  labour,
5. principles and proposed  reforms governing taxation, customs and excise,
6. other key administrative reforms advancing ease of investment and doing business, and
7. legal reforms including those addressing minimizing laws delays and perceived high levels of bribery, corruption and waste

should have been published as white papers and green papers and adopted by parliament following transparent intellectual and stakeholder debate and thus this Bill not seen as a standalone priority in governance advancing any specific interest groups.

2. Introducing the reform Bill in the back drop of

1. Low country credit ratings
2. A looming debt crisis
3. Possible higher levels of early exists by foreign bond and equity market holders
4. The option of rollover of foreign debt being in an environment of high risk premiums
5. In the midst of an IMF Extended Fund Facility
6. Some high level announcements of inward private fund transfers and significant foreign direct investments not being realized
7. Financial market credibility negatively impacted by purported high level conflicts of interests led bond scams
8. Media highlights of possible high level money laundering and market manipulations and resultant financial institution failures

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