December 29, 2012
Reposted from Lanka Business Online
Sri Lanka will list more state firms in the Colombo Stock Exchange as well as encouraging more privately owned companies list, international monetary co-operation and deputy finance minister Sarath Amunugama said.
Listing more companies “both private and public” are among a series of initiatives that the state will pursue in the next two to three years, minister Amunugama said in a speech at a award ceremony held by Sri Lanka’s Securities and Exchange Commission.”The primary reason for small capitalization at the CSE is the fact that there are only 288 listed companies though there are more than 10,000 registered and operationally active companies in the country,” minister Amunugama said in the text of a speech.
“We need to identify the reasons for why companies are reluctant to get listed and encourage them by creating more awareness of the benefits involved.
“We must show companies that CSE in an ideal forum to raise capital and make the listing process less cumbersome.
“We are hoping to increase to double the number of companies listed on CSE by 2016. The market liquidity can be increased by increasing the number of listed companies.”
Others however have said that a key reason for the smaller capitalization is large sections of the economy such as energy and banking, which makes up a significant portion of stock markets in countries with more economic freedom are owned by the state in Sri Lanka.
Amunugama said unit trusts (mutual funds) could help mobilize savings.
“The development of the Unit Trust industry is important because it is one of the conduits to mobilize savings of the less sophisticated small investors,” Amunugama said.
“When people are encouraged to save for long run these savings can flow as capital to industrialists who are in need of capital. The resulting investments create employment opportunities and contribute to the economic growth of the country.”
Economic analysts have pointed out that Sri Lanka has a lower savings ratio than in East Asia primary because the state is a net spender running a deficit in the current account of the budget and not because citizens save less.
The current account deficit in the budget depresses the overall domestic savings number, with private savings being actually higher than the total domestic savings number.
Sri Lanka’s rulers also speculate in many businesses with people’s tax money and make huge losses.
Because loss-making state enterprises are classed as ‘private sector’ in national accounting in the country, Sri Lanka’s ‘private domestic savings’ are dragged down further and a proper private sector savings number is not available for comparison.
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