The Central Bank's Spot Rates for transactions with Commercial Banks announced on the morning of November 12, 1998 were as follows:

The approximate middle exchange rates of following currencies calculated on the basis of cross rates quoted by Gulf International Bank, Bahrain as it appeared in Reuters Financial Information System on November 12, 1998 were as follows:

Average rates at which the following currencies were quoted by Commercial Banks in Colombo for Telegraphic Transfers at mid-day on November 12, 1998 were as follows:

Average Weighted Prime Lending Rate (AWRP) and Lowest Prime Rate (LPR)
The Average Weighted Prime Lending Rate (AWPR) during the week ended November 06th, 1998 was 14.4 per cent for all banks. The Lowest Prime Rate among banks during this week was 13.3 per cent.

Average Weighted Deposit Rate of Commercial Banks (AWDR)
The Average Weighted Deposit Rate (AWDR) of Commercial Banks for the month ended October 31st, 1998 was 9.2 percent.

Investing EPF/ETF in Equities

The need to invest Employees Provident Funds in equities was recognised as early as 1960 in the U. K. and introduced the Trustee Act 1960 in order to allow Fund Managers to hedge against depreciation of the value of employees' funds due to inflation by restricting its investment only in gilts interest bearing securities. The Act, however, provided for several mandatory safeguards to ensure that these funds were invested with due care and upon expert advice.

The main features of this Act was to allow only 50% of the fund to be invested in equities by dividing the fund into Wider Range and Manpower Range. The Wider Range represented funds invested in equities and the narrower range represented investments in Gilts, i.e. government bonds. The 50% ratio had to be maintained at all times while allowing switching from one range to another. All such investments in the Wider Range had to be recommended by a recognised merchant bank before the investment is made.

The important fact to remember is that these funds are the only source to which employees could look forward to at retirement and it is the bounden duty of those responsible for the management of these funds to obtain the best available returns while safeguarding the capital of the employees. What the Trustee Act in the U.K. did was to enable the funds to be invested to obtain the best returns particularly at times of rising inflation by investing in equities but it was left entirely to the Pension Funds to decide whether to invest in equities and if they decide to do so, then all the strict provisions and procedures of the Act had to be complied with.

Regarding the employees' funds that have been invested in the equity market, Prof. Peiris said in the course of the budget speech:' I also encourage long term funds such as EPF ETF, Insurance and NSB to provide equity capital to companies which are already listed or seeking listing. Accordingly EPF has invested Rs. 232 million during the year while ETF has invested Rs. 2671 million and was encouraging those institutions to increase their investments in 1999'.

The EPF and ETF Fund managers, as I mentioned above, has the grave responsibility of safeguarding the money's belonging to the employees and also to increase the returns on these investments with a view to increasing the wealth of the employee. The Fund managers' position is that of trustees and should not be influenced by any other considerations other than the interest of the employees. This responsibility becomes all the more grave due to the severe drop in share prices in the Stock Exchange and also the Asian debacle which has caused the loss of billions of dollars in stock values. It would be useful to know the extent to which the capital invested by the EPF and ETF has depreciated due to the fall in share prices.

In the UK well established Merchant Bankers are available to profer investment advice to fund managers but do we have such established expertise in whom our Fund managers could look upto. This may be why the EPF managers i.e. the Central Bank has been cautious by investing only Rs. 232 million which is less than 10% of what the ETF has invested during the year of Rs. 2671 million.

I outlined broadly the provisions of the 1960 Trustee Act (which must have been amended further) to show the extent to which they have gone to safeguard the employees funds by requiring every investment decision is backed by expert advice and minimising risks.

These employees funds are not meant to provide Equity Capital to the quoted corporate sector, disregarding the employees' interest. The establishment of a settlement guarantee fund and compensation fund to provide investor confidence may be good, but if ay compensation that may have to be paid has to again come from public funds. I do not know whether any legislative enactments governing the investment of Employees Provident Funds are in force. If such legislation is available then the Minister is not justified in saying 'I also encouraged long term funds such as EPF, ETF, Insurance and NSB to provide equity capital to companies which are already listed or seeking listing'.
P. O. Mahawatte.

Reintroduction of reverse repurchase facility by Central Bank

The Central Bank has re-introduced a Reverse Repurchase (Reverse Repo) Facility as part of its Open Market Operations with effect from 9th November, 1998 with a view to stabilizing the short-term interest rates in the money market at a desirable level. All commercial banks and non commercial bank primary dealers for government securities are eligible to make use of this facility. Treasury bills and treasury bonds will be accepted as collateral.

Under this facility, the CBSL will buy Treasury Bills and Treasury Bonds from the eligible participating institutions at a price determined by the Bank with an agreement to sell back at a price on a date agreed upon by the two parties. The Reverse Repo Rate at which the rupee funds are available from the Bank will be determined by the Central Bank on a daily basis and will be announced to the market. It will be equivalent to the re-discount rate of the CBSL's secondary window. This facility is provided in addition to the existing re-discounting facility where underlying securities are purchased outright. Initially, Reverse Repo will be available for overnight funds only and there is no maximum limit fixed on the amount of rupee funds that can be borrowed by the eligible institutions from the Central Bank under this facility.

With the introduction of the Reverse Repo Facility together with the existing Repurchase (Repo) Facility of the Bank, it is expected that the call money rates would be stabilized within the range of Central Bank repo and reverse repo rates. It is expected that this facility would bring a greater stability in the money market.

Boost and recognition for local suppliers to the Apparel Industry

The Sri Lanka Apparel Institute has announced that a limited number of free or discounted stalls will be made available for young local entrepreneurs with innovative ideas and products useful to the apparel industry. Software developers, workplace engineering experts, manufacturers of high tech appliances are encouraged to contact the Sri Lanka Apparel Institute or CDC Conventions (the exhibition secretariat for AISEX '99) or further information.

According to Prof. Lakdas Fernando, Chairman, Sri Lanka Apparel Institute Sri Lanka already has a number of small but established suppliers to the local garment industry with a potential to move into the SAARC region and AISEX '99 as an international exhibition would provide them an ideal platform to show their products which are of good quality and highly price competitive.

Local manufacturers of embroidery and label, computer and electronic companies with numerous software packages, manufacturers of stainless steel attachments and small innovative pieces of equipment should come of age by taking part in an international exposition such as AISEX. who could greatly benefit to vend their products to manufacturers in the SAARC region mainly because of their innovativeness and prize competitiveness.

According to Prof. Fernando these small enterprises can never hope to take their product to Atlanta, Cologne or Tokyo where the major exhibitions for the industry are held. Therefore Internationalisation of AISEX has brought an international exhibition to the doorstep of Sri Lankan manufacturers.

Former World Bank Director joins Deutsche Bank

Deutsche Bank on November 11 announced the appointment of Javad Shirazi as Regional Country Head of India, Pakistan and Sri Lanka. He will join the Bank on November 16, and will be based in Mumbai. He will be responsible for Deutsche Bank's operations in India and will be the bank's senior representative with regulators in India, Pakistan and Sri Lanka. Deutsche Bank's country managers in Pakistan and Sri Lanka will report directly to him.

As of January 1, 1999, Mr. Shirazi will assume management responsibility for India from country manager Mr. Harkirat Singh. Mr. Singh informed the bank earlier this year that he would leave the organisation, following a hand-over period to successor, to pursue other interests.