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An alternative to inflation?

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By Usvatte-aratchi

There is much concern about and discussion over inflation. We all realise that the rapid rise in prices, unmatched by a similar rise in incomes in recent months, creates problems for most of us. On the one hand, that process cuts down our real incomes. My income is Rs.100 a day and the price of mangoes goes up from Rs.25 a piece to Rs.50 a piece; my income falls from four mangoes a day to two mangoes a day. In gross fashion, that is what people are complaining about. On the other hand, all cash holders become poorer as prices rise. I own Rs.1,000 and the price of mangoes is Rs.25 each. So I am 40 mangoes rich one day. The price of mangoes doubles the next day. At Rs.50 a piece I am only 20 mangoes rich the next day, no fault of mine. Inflation makes money holders poorer. That is the second common complaint. Some other strange things happen in inflationary processes but let us not complicate matters for now.

It is common to blame the central bank for ‘printing money’. It is even more fashionable to demand that the central bank should act independently of government. Much ire is expressed at the provision that the Secretary to the Ministry of Finance is a member of the Monetary Board which statutorily controls monetary policy and financial system stability. I want to articulate that these arguments are misguided and that when you consider an alternative to inflation, there is none in our specific circumstances.

Mandate from the electorate

In November 2005, Rajapakse was elected President of the Republic by a very small margin over Wickremasinghe. In 2004 political parties led by UNP leadership lost the majority in Parliament. The loss in 2004 was mostly because Prime Minister Wickremasinghe’s government had followed fiscal policies which did not greatly raise inflationary pressure. That administration did not raise government employment. They kept expenditure on the war under control after having signed a cease-fire agreement (CFA) with the terrorists in the north. In 2005 he lost to President Rajapaksa in that part of the island that mattered because he had signed the CFA and could not match President Rajapaksa in the promises held out for larger expenditure on a variety of programmes including subsidies to the poor. Candidate Wickremsinghe came on the band wagon later competing with Candidate Rajapaksa to raise government expenditure. However, Rajapaksa prevailed on both counts, although by a slim margin. In several districts, President Rajapaksa received close to 60 percent of the votes cast. In Hambantota, Matara and Galle that percentage was close to 70 percent. Among postal voters, mostly civil servants, close to 80 percent voted for Mr.Rajapaksa.

The mandates for President Rajapaksa and his administration were quite clear: they must increase government expenditure and they must prosecute a serious war against terrorists. Now, neither party had put forward proposals as to how this increased expenditure by government both for war and for other purposes was to be met. There was only one newspaper commentator who raised the question at all and nobody cared two hoots for him. No party or candidate raised questions about higher taxes or higher borrowing locally or overseas. All parties, the electorate and university men and women were utterly irresponsible when they failed to consider how these expenses were to be met. It appeared as if resources did not matter. All that was necessary was the will to raise government expenditure and to conduct war against terrorists. Candidate Wickremasinghe was vilified as someone who had sold himself to the ‘international community’ and the LTTE and was too beholden to the IMF and World Bank in matters of economic policy.

Choices available to government

Now the reality is a little bit different from the fancy imaginations of the electorate and the political parties. Government had somehow to get hold of resources to keep the promises made to the electorate. After all, they had been elected on that platform and to go back on them would be both immoral (not that that mattered to our silly politicians) and politically suicidal (that mattered). Government expenditure (in current prices) rose from roughly Rs.600,000 million in 2005 to Rs.900,000 million in 2007, about 50 percent, from 25 percent of GDP in 2005 to 28 percent in 2007. Interest payments rose by about 40 percent and expenditure on defence by about 67 percent between the two years. Salaries and wages bills rose by about 45 percent from 2005 to 2007. Net increase in employment was about 50,000, about 5 percent; most of the increase in expenditure was on higher wages. Subsidy and other benefit payments, in fact, fell by about 7 percent between the two years. President Rajapaksa kept his promise that he would both increase employment as well as prosecute the war with greater vigour. It is these measures that pushed him to seek more resources.

What did that ‘somehow’ comprise? First, government could raise tax revenue. But recall that government had made no such promise to the electorate nor had the electorate demanded such policy. Yet tax revenue was higher in 2006 than in 2005 and was probably higher in 2007 than in 2006. Why could the government not collect more revenue from taxes? Because higher taxes may mean more unemployment in the private sector and that is something the government did not want.

Second: Government could borrow in local and foreign markets. Total outstanding public sector debt rose from Rs. 2.2 billion at the end of 2004 to Rs. 2.7 billion at the end of 2006. Heavier, borrowing entailed higher debt servicing costs. Interest payments in 2007 were higher roughly by 40 percent over 2004. Interest payments on domestic debt in 2007 were higher by about 30 percent and on foreign debt by about 200 percent when compared to 2004. As government borrowed more in the domestic market, money became tight and interest rates climbed in the local market; interest rates on 91-day government bills rose from about 7 percent per year in 2004 to about 17 percent in 2007. Government borrowed heavily from the Central Bank which wanted to accommodate the government. Central Bank’s holdings of government obligations rose from Rs. 109 billion at end 2004 to Rs. 119 billion at end 2006.

Now imagine that the Central Bank did not accommodate the government at lower interest rates than would have prevailed in the market. Imagine further that if the Central Bank had not lent to government, market rates on government paper would have risen perhaps to 20 percent per year. Then loans to business may have hit 35-40 percent per year because of tight conditions in the bond market and the uncertainty that would have come with such interest rates. Two results would have followed: first, cost of government debt would have risen further and the screw on the government budget would have got tighter every year; second, economic activity would have collapsed with high-interest rates robbing much remunerative employment. Among other things, that would have negated the government’s promise to the electorate to raise employment. If government had borrowed overseas, interest payments cost in foreign exchange to government would have been lower. However, there would have been severe speculation against the rupee in foreign exchange markets bringing down the value of the rupee against foreign currencies. Without considering other complications of that result, the rupee cost of servicing the foreign debt perhaps would have been of the same order as if government had borrowed in local markets. That would have raised the volume of rupee resources government needed to service foreign debt. On a balance of considerations, it was prudent for the government to have financed expenditure by borrowing from the central bank, that is by printing money, as it did, causing inflation.

Expenditure without taxation?

What was imprudent was for the electorate to demand higher expenditure without agreeing to be taxed higher. Now, the opposition parties cannot go around the country proclaiming peoples’ sovereignty from one end of their mouth and from the other end demanding that the ruling government renege on the mandate given to them by that same sovereign people. They cannot have it both ways. MPs who crossed over to government do have it both ways: their party proclaims that the government is wrong but they implement that wrong policy and even speak eloquently for it.!

Thirdly, government could borrow from the Central Bank and cause inflation and that is what the government chose to do. Inflation is a form of gaining resources for government without formal taxing or borrowing. And the way government gets hold of those resources is by reducing the real value of cash and cash-like assets that the public hold.

According to my understanding, the Central Bank has no business thwarting a government from implementing a programme of action for which government had received repeated mandates, two years running. If the Central Bank stood in the way of government, the latter had every right to pass legislation to compel the Central Bank to let government have its way. There is no widespread protest against polices of government which have caused high inflation. One cannot protest against inflation without opposing government’s programmes. In my judgment, the Central Bank has acted responsibly.

‘Freedmanites’ may repeat ad nauseam that inflation is always and everywhere a monetary phenomenon. However, if they lift that veil of money they will read in shining bold letters in Chapter 21 of Keynes’ General Theory “When a further increase in the quantity of effective demand produces no further increase in output and entirely spends itself on an increase in the cost-unit fully proportionate to the increase in effective demand, we have reached a condition which might be appropriately designated as one of true inflation’. That increase in effective demand coming from a commitment by government to the public to spend more money is not sensitive to the rate of interest and the central bank loses its weapon to fight inflation.

Independence of the central bank

That lands me exactly in the line of fire from those who argue for a central bank independent of government. They would fire at me bullets made of the independence of central banks in many countries. In all these countries, central banks work as a bank to the banking system with the added responsibility of maintaining both price stability and system stability. The central banks’ main concern there is with financial markets: money markets, where banks and similar other organisations principally trade and money, debt and capital markets, where both financial and real sector operators trade. Governments happen to be one party in the debt market. Those who sell government paper in secondary markets and all who buy them have choices to deal with them as they fit government paper into their portfolios after taking into account the risks and returns from government obligations. Government paper is one of the assets available in the market. Contrast that with the situation in Colombo. There is no corporate debt market. The stock market is puny, thin and illiquid. The Central Bank of Sri Lanka has no modus operandi by which it can work in the money market, as in most other countries, to change prices in debt markets and eventually in capital markets and so influence real sector activity. In Colombo financial markets, there is only one boy in town: government. Total outstanding government debt in the domestic market at end 2006 was Rs. 1,500 billion and market capitalisation of the Colombo Stock Market at end 2006 was Rs.835 billion. He had better be accommodated in the best hotel in town. The Secretary to the Ministry of Finance had better have a seat on the Monetary Board.

Obligation to explain

Let us recall that central banks were not invented to discipline government fiscal policy. In contrast the Bank of England gained its special privileges from William and Mary in 1694 by accommodating their request for money. Central Banks were invented and work to discipline money and debt markets and indirectly capital markets. The discipline of government fiscal policy is the responsibility of elected representatives of the people. If the electorate puts in power a group of people with a mandate to spend without raising taxes, what can a government do but tax them with inflation? What right has a bunch of bureaucrats to stand in the way of a government implementing the mandate it was elected to implement? A central bank can advise but so can the Department of Economics of the University of Colombo or the Chamber of Commerce. And a government with a majority in Parliament is under no obligation to accept anybody’s advice, even if it understood it. Now, an economist may consider it imprudent, but what is an economist or the whole bunch of them counted against the people? Economists and other pundits may argue that the people were misguided or worse in giving that mandate. Then, it is their responsibility to have guided the people. Journalists, academics and economists all fail people when they do not explain these things to the public. Let’s try.



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The NPP’s Constitutional Reforms: Purposes and Processes

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Participating at the All Party Conference that then President Jayewardene convened in January 1984 in the aftermath of the watershed violence of 1983, Dr. Colvin R de Silva characteristically perorated that the structure of the Sri Lankan state is incongruent with the country’s sociopolitical reality. He said it more as Historian than as a Lawyer or the architect of the 1972 Constitution.

This gap between state structure and political reality was somewhat bridged by the 13th Amendment that came three years later, with all due credit to President Jayewardene no matter how begrudgingly he may have done it and even if it was under Indian duress as JRJ’s critics have been alleging ever since.

In this backdrop, it is fair to say that the NPP’s constitutional proposals, even if they may not have been drafted with this specific intent, could contribute to further bridging the structural-reality gap and potentially transform Sri Lanka into an ethno-equal state and an ethno-equal nation. The rub, however, is in the ability of the government, as well as its intention, to fulfill in practice what is otherwise a very laudable purpose. The experience so far with the Provincial Council elections and the absence of any manifest effort by the NPP government towards implementing any of its main constitutional proposals do not allow room for too much optimism.

As I cite below, the NPP’s Manifesto fulsomely promises to hold all provincial and local government elections within one year after coming into office. Now with all the ministerial and prime-ministerial explanations in parliament as to what and what pre-steps this overworked government is apparently constrained to take, the PC system would consider itself lucky if the next provincial elections end up being held at the same time as the next parliamentary elections. That is the reality. It could be much better and that too by a government that promised to be much better.

The NPP’s Constitutional Purpose

Section 4 of the NPP Manifesto, A Thriving Nation, A Beautiful Life, is entitled A Dignified Life – A Strong Country, and includes nine subsections, viz. 1) A new constitution – A united Sri Lankan nation; 2) An efficient public service – A skill based professionalism; 3) Rule of law – A judicial system with equal access; 4) Public security assuring – People friendly service; 5) A humanitarian prison – A lawful confinement; 6) A drug-free country – A healthier citizen life; 7) A dignified diplomacy – A sovereign state; 8) High level of national security – Secured state; and 9) A Sri Lankan Nation – The Universal Citizen. These subheadings and sections are indicative of the NPP’s vision for the Sri Lankan State, a Sri Lankan Nation, and the equality of all its citizens.

The Section specific to the constitution (Section 4.1) includes the NPP’s promise to usher in “a new constitution” for “a united Sri Lankan nation.” The process for introducing the new constitution is described thus: “A new constitution will be drafted and passed through a referendum with the necessary changes, if there any, after going through a public discourse.” In addition, Section 4.9 – A Sri Lankan Nation – The Universal Citizen, elaborates on the premise and the purpose of a new NPP Constitution which are outlined as follows:

“Introduce a new constitution that strengthens democracy and ensures equality of all citizens. This initiative will build on the constitutional reform process started in 2015 which remains incomplete. The proposed constitutional reforms will guarantee equality and democracy and the devolution of political and administrative power to every local government, district and province so that all people can be involved in governance within one country. Provincial councils and local government elections, which are currently postponed indefinitely, will be held within a year to provide an opportunity for the people to join the governance.”

Fifteen “activities” are included as making up the constitution making process: 1) Recognizing and enacting the rights mentioned in the International Covenant on Civil and Political Rights as basic rights; 2) Broadening the constitutional law about the rights of children, women, and people with disabilities according to international conventions; 3) Safeguarding the voting rights of immigrants within and outside of the country; 4) Abolishing the executive presidency and appointing a president, without executive powers, by the parliament; 5) Introducing a new parliamentary electoral system; 6) Limiting official presidential residences to one; 7) Abolishing the pensions and special privileges given to retired presidents and their families; 8) Appointing 25 ministers and corresponding deputy ministers to 25 logically determined ministries and abolishing State Ministerial posts; 9) An advisory council consisting of specialists on the subject will be appointed to each ministry; 10) Introducing a code of ethics, including not allowing members of parliament (MPs) and ministers to appoint their immediate family members to their personal staff; 11) Abolishing allowances made to MPs for participating in parliamentary sessions; 12) Abolishing the pension offered to MPs after 05 years; 13) Preventing MPs or their close family members from directly or indirectly engaging in businesses or contracts with the government; 14) Removing the tax-free vehicle permits for MPs; and 15) Giving only one vehicle for Ministers /Deputy Ministers to be used during their period of office.

Interestingly, while the aborted 2015 constitutional reform process that the NPP was a part of is acknowledged, there are no references in the proposals – to the 1972 Constitution or the 1978 Constitution, and missing in the proposals are some of the signature terms that were/are both the badges and burdens of the two constitutions viz., the republic; unitary state; socialist (1972) and democratic socialist (1978); and special status for Buddhism. On the other hand, the proposals (Activity #1 & #2) include the commitment to enshrine and enforce rights and freedoms of Sri Lankans in accordance with international covenants and conventions. This inclusion is refreshingly open in contrast to the 1972 and 1978 constitutions which were rather averse to embracing anything ‘foreign’ due to the misplaced fear of diluting the island’s sovereignty, which is more theoretical than concrete.

Sovereignty and territorial integrity are duly emphasized in Section 4.7 of the proposals: A Dignified Diplomacy – A sovereign State, and in Subsection 4.8: Sovereignty and Territorial Integrity. Section 4.9: A Sri Lankan Nation – The Universal Citizen, underscores national reconciliation, equality of citizens in religion and language, and the vigorous operationalization of the Provincial Council system even though the 13th Amendment is not mentioned in the proposals. There is, however, specific reference to the 16th Amendment and the promise to implement the National Language Policy that is enshrined in 16A. Sri Lanka’s ethnic diversity is acknowledged and various measures are identified for achieving national reconciliation and a free and equal society.

Among these measures are: establishing an Inter-Religious Council consisting of all religious leaders and religious scholars to resolve inter-religious issues; releasing all political prisoners and ensuring their free socialization; abolition of all oppressive acts including the Prevention of Terrorism Act (PTA); regularization of civil administration in a way that the civil rights of the people in all parts of the country including the North and East are guaranteed; providing educational and employment opportunities to all ethnicities based on merit without political influence; providing relief to war widows, internally displaced persons, people with disabilities and people with trauma in need of relief and shelter; settlement of existing land related issues by a National Commission on Lands and Settlements; and ending resettlement programmes that operate with the aim of changing population composition; and addressing the wages, land, housing, education, and health issues of the Malaiayaka Tamils based on the NPP’s Hatton Declaration of 2023.

This is an impressive list by any comparison and it will be all the more impressive if the NPP government were to seriously and capably set about achieving most or all of them.

The Constitutional Process

While the Manifesto indicates that “a new constitution will be drafted and passed through a referendum with the necessary changes, if there are any, after going through a public discourse,” it is not clear if the NPP intends to comprehensively amend the current (1978) constitution, or repeal and replace it based on a referendum. Similar to its 1972 predecessor, the 1978 Constitution provides for repealing and replacing itself but requires the people’s endorsement in a referendum. Although the referendum requirement is limited to specific provisions of the constitution, an interpretive judicial culture has since evolved widening the referendum net to capture other provisions that are not stipulated in Article 83 of the constitution.

Opposing and, in my view, more persuasive voices have been heard from experts like Dr. Nihal Jayawickrema, and long before that from Dr. Colvin R.de Silva during the controversy over 13A referendum requirements, that a referendum requirement should be limited to changing only the provisions that are specifically to the provisions mentioned in Article 83. By this interpretation, a referendum is required to extend the term of a president or of parliament, but not for abolishing the system of elected executive presidency itself.

At the same time, a synthesizing view has also evolved that if the constitution were to be changed in a substantial manner, let alone repeal and replace it even without changing any of the Article 83 provisions, it would be prudent to have a referendum and be done with it. The latter is also the NPP’s position but seemingly taken from a more positive and democratic standpoint than a narrow interpretive standpoint. But there are questions as to how and when the NPP government will have a constitution package ready and when will it likely call for a referendum. It is not necessary to detail the amending processes in an election manifesto, but with nearly two years in office it is time for the government to indicate what is going to be its new constitution and how is it going to be achieved.

Another technicality is that when it drafted the manifesto promising constitutional changes subject to a referendum, the NPP may not have been expecting a two-thirds majority in parliament. So, what was its thinking about meeting the initial amendment requirement of a two-thirds majority in parliament without having sufficient numbers in the government. It would have had to find common ground with opposition parties in parliament. That is the very purpose of the two-thirds majority in parliament – to achieve interparty consensus as opposed to using a steamroller single-party majority.

The question to the government is why is it not being consultative with at least some, if not all, of the parties in opposition. As well, inasmuch as the Manifesto refers to a continuation of the 2015 constitutional reform process, why is the government not consulting with those individuals and organizations who were significantly involved in that earlier process. Some of them were directly associated with the NPP. But none of them is in the scene now, while the current Minister of Justice was politically unheard and unseen at that time.

The double burden of Justice and Constitutional Affairs is too much for even the most experienced and equipped political leader. It is too much to saddle a first time MP and Minister with such heavy responsibilities. As well, there is much talk about the government inviting non-NPP experts to play lead roles in institutions and agencies involved in running the economy. Why not extend this approach to implementing the NPP’s constitutional reform process?

To hark back briefly to the making of the 1972 Constitution, neither Colvin R de Silva nor the United Front were banking on winning a two-thirds majority in the 1970 elections. Instead, they were relying on Colvin’s legal theory that the new constitution will be a total rupture from the Soulbury Constitution and that its making will follow its own path based on an electoral mandate from the people.

“Not merely despite the Queen, but in defiance of the Queen and her Crown,” was Dr. Colvin’s platform pitch. The two-thirds majority that the United Front turned out to be a curse in disguise. While the NPP is now saddled with a two-thirds majority it doesn’t have Colvin’s legal theory to ignore the amending procedures of the 1978 Constitution. JR Jayewardene faithfully followed the amending procedure of the 1972 Constitution, but created a more rigid constitution than its far more flexible predecessor.

Ushering new constitutions are easily done on the morrow of independence or a revolution. Midlife constitutional changes are extremely difficult in any country and there are only a handful of countries that have successfully achieved this feat. The successful making of the 1972 and 1977 constitutions in Sri Lanka were almost entirely due to the power and competence of their two architects, Colvin R de Silva whose power was entirely intellectual and professional, and JR Jayewardene who in addition had absolute political power after the UNP’s landslide victory in 1977.

Sri Lankan politics has not been able to replicate their circumstances ever since, and the circumstances of the NPP are no different, its two-thirds majority notwithstanding. If the government is serious about drafting a new constitution, conducting public consultation, and holding a referendum, it should have started the process the day after it was sworn into office. It could start the process right away even now. The task deserves a separate ministry and supporting expertise. It cannot be the part time job of a first time Minister of Justice.

All that said, many of the NPP’s reform proposals can be implemented without introducing a new constitution. Few have already been introduced and many more can be introduced by simple legislation or through amendments without a referendum. For the super majority the government has in parliament, its legislative record has not been sufficiently impressive. The government has given priority to implementing proposals that it considers to be more resonant with the voters at large.

They include, the taking away the manifestly undue perks and privileges of former presidents, and the proposals to end the more offensive perks and privileges of parliamentarians. The reform of parliament itself is to be achieved by implementing a new electoral system; by limiting cabinet size to 25 and appointing an advisory council for each ministry; and introducing a code of ethics for MPs. These measures will also go down well with the public, but they can all be implemented through simple legislation without having to change the constitution through a referendum.

The most glaring omission is the continuing foot dragging over the repeal of the Prevention of Terrorism Act (PTA). There are already new victims of this continuation. What is the point in indefinitely detaining people like Retired Major Gen. Suresh Sallay under the PTA? It only vitiates however plausible a case the government might have against Gen. Sallay. More importantly, it flies in the face of the NPP’s promise to abolish the PTA, and its promise of custodial and prison reforms under Section 4.5 of the Manifesto: A humanitarian prison – A lawful confinement. The PTA only keeps the door open for police abuse and overreach.

The most recognizable and much talked about proposal is for “Abolishing the executive presidency and appointing a president, without executive powers, by the parliament.” If only the NPP government can deliver on this promise during its current first term, it can justifiably claim to have fulfilled its constitutional promise almost in entirety. No one will likely ask for anything more from the NPP, constitutionally speaking. But that seems unlikely to happen and this gets clearer as each day goes by. The talk inside the NPP and outside would seem to suggest that President Dissanayake will seek a second term as an elected Executive President and renege on what was made out to be a historic promise. It will become another daydream, so to speak.

by Rajan Philips

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Inside Xi’s Pyongyang Doctrine

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Soon after Pyongyang unveiled a new facility to produce nuclear bomb fuel, with Kim Jong Un reaffirming plans to expand the country’s nuclear forces “at an exponential rate”, President Xi Jinping crossed the border after seven years to visit his neighbouring state. Before his arrival, Xi published a carefully crafted message, couched in the deeply rooted lexicon of diplomacy and carrying layered meanings for a North Korean audience, in which he argued against hegemonic politics and the erosion of international rules. It was not merely a gesture of goodwill but a calculated act of strategic signaling, written in the language of stability while echoing the rhetoric of geopolitical rivalry that increasingly shapes the international order.

The visit itself, staged with extraordinary ceremony across Pyongyang’s grand civic spaces, was presented as an affirmation of friendship between socialist neighbours. Yet beneath the choreographed spectacle lies a more complicated reality. China is no longer speaking to North Korea as a problem to be solved, but as a condition to be managed within a fragmented international system. Xi’s carefully chosen phrases — “shared destiny”, “mutual assistance” and “unbreakable friendship” — were not decorative flourishes. They were assertions of permanence in a relationship that has survived war, sanctions and decades of strategic ambiguity.

At Kim Il Sung Square, where formations of soldiers, students and citizens performed beneath fluttering flags, the language of unity concealed an underlying imbalance. China’s diplomatic doctrine, repeatedly articulated in Xi’s writings, presents both states as “fellow travellers on the socialist road”; yet the material reality is more hierarchical. Beijing is not merely a partner to Pyongyang. It is the centre of gravity around which much of the North Korean system revolves economically, diplomatically and, increasingly, strategically. This is not openly acknowledged, but it is reflected in trade patterns, energy dependence and the tightly managed permeability of the border regions.

Xi’s article, published ahead of the visit and carried by North Korean and Chinese state media alike, reveals the intellectual framework behind this engagement. It speaks of “top-level strategic guidance”, a phrase that in Chinese political language denotes the primacy of leader-to-leader diplomacy over institutional negotiation. It also reiterates opposition to “hegemonism and power politics”, a formulation that simultaneously criticizes Western strategic dominance while offering ideological reassurance to Pyongyang. The brilliance of the wording lies in its dual purpose. It reassures North Korea while signaling to the United States without ever mentioning it directly.

Less visible, but widely recognized among regional specialists, is the dense network of economic activity that sustains the frontier between China and North Korea. Officially, trade remains constrained by sanctions and regulatory controls. Unofficially, the border operates through a mixture of state-approved commerce, local barter arrangements and carefully managed informal exchanges. Chinese provinces adjoining the frontier depend on this controlled permeability, particularly in sectors such as food supplies, textiles and consumer goods. In return, North Korea provides labour, access concessions and selected resource exports. This is not a “shadow economy” but a tolerated grey area maintained by both governments because it preserves stability without allowing the relationship to descend into crisis.

It is within this grey area that stories of “secret networks” frequently emerge. Yet the reality is often more bureaucratic than clandestine. Trade is driven less by rogue actors than by overlapping permissions, discretionary enforcement and shifting instructions from the centre. The notion of a handful of powerful profiteers orchestrating cross-border commerce oversimplifies a system in which benefits are dispersed through layers of administrative authority, provincial intermediaries and sanctioned enterprises. The defining feature is not secrecy but carefully managed ambiguity.

Xi’s emphasis on “jointly upholding the international system with the United Nations at its core” becomes particularly revealing when viewed alongside these frontier realities. On the surface, it is a reaffirmation of multilateral order. In practice, it reflects China’s preference for a world in which legitimacy flows through established institutions, even while bilateral relationships such as that with North Korea operate according to a different set of political calculations. This dual-track approach enables Beijing to retain strategic flexibility without formally dismantling the international framework from which it continues to benefit.

The visit also took place against a wider shift in global diplomacy. The Financial Times has noted the growing number of world leaders traveling to Beijing rather than Xi traveling abroad. Some interpret this as evidence of a China-centred diplomatic sphere. Whether viewed as modern statecraft or, more controversially, as a distant echo of tributary-era symbolism, one fact remains evident. Xi Jinping has built a diplomatic model in which China is less a participant in international gatherings and more a focal point through which bilateral relationships are channeled.

Within this arrangement, North Korea occupies a uniquely delicate position. It is at once a liability, a buffer and a strategic asset. Its nuclear programme complicates China’s relations with much of the international community, yet its existence also serves as a geopolitical barrier on the Korean peninsula. Xi’s language avoids direct reference to nuclear weapons, concentrating instead on “regional stability” and a “peaceful environment”. That omission is deliberate. Silence, in this context, is not avoidance but the management of contradiction.

One of the most closely watched questions following Xi’s visit is whether North Korea’s rapid nuclear expansion will become less visible, or simply retreat further from public view. Xi later stated that he and Kim had reached an “important consensus” and agreed to safeguard regional and global peace, a formulation that may signal a preference for restraint in presentation rather than any fundamental change in Pyongyang’s strategic ambitions.

Under Xi, Chinese foreign policy has increasingly prioritized stability over transformation and management over resolution. Nowhere is this more evident than on the Korean peninsula, where the objective is not denuclearization through coercion but the containment of escalation within predictable limits. In this sense, North Korea is not being pushed towards change.

Rather, it is being held within a carefully maintained balance that serves broader regional interests.

The wider geopolitical setting, including Russia’s deepening alignment with Pyongyang and the fluctuating approach of the United States towards Asia, further complicates this balance. Xi’s diplomatic language — with its emphasis on multi-polarity, opposition to “power politics” and the creation of a “community with a shared future for mankind” — is intended to place China at the centre of an alternative vision of international affairs. Yet that vision is not merely ideological. It is expressed through trade agreements, infrastructure investment and selective political partnerships.

What emerges from the Pyongyang visit is not a straightforward story of alliance, but one of carefully calibrated interdependence. North Korea retains leverage through its strategic unpredictability, while China retains influence through economic indispensability. The border between them is not merely geographical. It is a political and economic mechanism composed of regulated flows of goods, labour and messaging. It is this managed interdependence that allows both governments to preserve autonomy while avoiding collapse or confrontation.

Xi Jinping’s rise in global politics, therefore, cannot be understood solely through military strength or economic weight. It rests upon the construction of a diplomatic order in which China functions simultaneously as host, mediator and stabilising force. Foreign leaders travel to Beijing not as supplicants, but as negotiators entering a system where outcomes are increasingly shaped through bilateral and asymmetrical relationships. Within that framework, North Korea remains both an exception and a participant, its nuclear status complicating but not excluding its place within China’s strategic sphere.

Xi’s visit to Pyongyang reflects a world in transition, where the old certainties of alignment and isolation no longer fully apply. In their place is emerging a more complicated pattern of selective cooperation, managed tensions and carefully cultivated historical memory. Xi’s diplomacy does not resolve contradictions. It arranges them. And within that ability to arrange competing interests lies much of his contemporary influence. Whether that model ultimately proves durable or fragile remains one of the defining geopolitical questions of our age.

by Nilantha Ilangamuwa

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The Examiner at lunch: Nihal Jayawickrama, architect of justice

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Illustration Hashan Ranatunga

Justice Ministry secretary and attorney-general at 33, Nihal Jayawickrama was the architect of the justice system’s most radical overhaul. Over a leisurely lunch at Tintagel we talk about the speed of justice, an independent public prosecutor, and the 1972 constitution.

“Tintagel” was Nihal Jayawickrama’s reply when I asked him where we should lunch. I smiled. The former secretary to the Justice Ministry, appointed at the tender age of 33, and now 88, hasn’t lost his mojo.

No restaurant — even Bawa’s studio, now become the Gallery Café — can claim anywhere near Tintagel’s pedigree. It was the home of the three Bandaranaike prime ministers. If the waiters’ intelligence is on point, it will be home to one of them again soon. Yes, Tintagel’s lease is up. Lunch while you can.

I’ve reserved one of two verandah tables, a few meters away from where S.W.R.D. Bandaranaike, the former prime minister, was assassinated by Talduwe Somarama, “a foolish man in robes”. Thinking Jayawickrama is a few minutes late, I wander to the sitting room. But he is waiting for me. I’m surprised that, at 88, he has come alone.

We make our way to the verandah and sit down. I break the ice, asking Jayawickrama when he first came to Tintagel.

Jayawickrama pauses to think, then with twinkling, mischievous eyes, says it was 70 years ago, in 1956. He had come to Tintagel to invite Bandaranaike to speak to the Royal College literary association. Jayawickrama said there was no security, save for maybe a sole policeman at the gate. He had walked to the verandah, and sat on one of the many chairs where the public would sit in the mornings, waiting for the prime minister to talk to them.

Bandaranaike’s response to the invitation had been clever rather than candid. He said it would be a great honour to address the Royal College literary association, and that he would be so happy to drop by. But the prime minister had only one problem: he’d have to go to the one at his own school, S. Thomas’, first. But they hadn’t invited him. Thus nothing ever came of the invitation.

We move on to more important business, lunch. Jayawickrama eschews the wine, we settle on thambili, almost always the best value drink on a Colombo resto menu. A veggie, he orders his usual, the parmesan gnocchi. I’d have ordered the pumpkin gnocchi, for many years my Paradise Road staple, but sadly they dropped it years ago. Good. For having taken up the pen, the purse won’t permit me anyway. Really wishing for Caribbean ox tail, I reluctantly settle for the osso bucco.

I’m too impatient for subtlety, so launch right into one of my burning questions: how did Jayawickrama become both secretary to the Ministry of Justice and attorney-general at such a young age. The answer is found in Balangoda, where Sirima Bandaranaike’s brother contested the 1965 election. He faced a few court cases, but the SLFP was strapped for cash. So, the party asked Jayawickrama to represent him. Jayawickrama went on to represent other members of the Ratwatte family, and then eventually, Mrs. Bandaranaike started consulting him too. He also served as her election agent and ended up drafting her prime ministerial acceptance speech in 1960.

A few days after her victory, Mrs. B called him and asked if he could be the permanent secretary to the justice ministry. Jayawickama said he was a lawyer, not a public servant. She responded:

“No no no no, you had been complaining for a long time that absolutely nothing had been done about law reform. I am telling you now come and do whatever you want to do — all the reforms you have been talking about. You have a free hand; we have got a two-third majority so the legislation can be passed. So come and do that.”

The Justice Ministry secretary’s monthly take-home at the time was around 1,800 rupees, which more than covered the 500-rupee rent onof his Park Road flat. Today, the secretary’s entire salary wouldn’t even pay for half the rent of such a flat.

Jayawickrama’s work was cut-out for him. The tale sounds familiar. The civil procedure and criminal procedure codes — the backbone of court work — were from 1880. Two distinguished commissions, chaired by Justices Noel Gratian and C. Nagalingam respectively, had already figured out what needed to be done. They produced “excellent reports” but “no government had done it”, Jayawickrama said rather ruefully.

When the attorney-general died, an acting attorney-general was identified. But he had to finish some cases he was presiding over. As the country needed to have an attorney-general, Bandaranaike appointed Jayawickrama to the office on his 33rd birthday. His contemporaries were the most junior state counsel. It was not a friendly atmosphere. Luckily for him, he had friends who warned him of the files which contained traps and snares.

He set up a research division in the Justice Ministry for law reform, consisting of five or six bright young things. The division included Dhara Wijetilleke, who became the planning ministry secretary, Suri Ratnapala, who became a distinguished constitutional law professor, and Priyani Wijesekara who became the Parliament’s secretary-general.

Unclogging justice

This team was the moving force behind the Administration of Justice Law of 1973, which overhauled the justice and courts system.

Among the many changes brought by the act was a recommendation from the Gratiaen Commission of 1952. The attorney-general’s role was almost bifurcated by creating the office for a director of public prosecutions.

The key reason Jayawickrama pushed this initiative through was to de-clog and speed-up the justice system by eliminating “non-summary proceedings”, where the police would present evidence to a magistrate to decide which court would hear a case. The public prosecutions director would instead direct the police’s inquiry and decide whether to file a case in the magistrate’s court, or at a higher court.

The team also introduced pre-trial conferences for non-criminal cases and mandated day-to-day hearings for trials, with postponement only granted in the event of family bereavement.

These initiatives faced massive protest from the Bar, as they “would change their lifestyles” and affect them financially. Not all his reforms succeeded. When he tried to regulate lawyers’ fees, the cabinet paper leaked and a lawyer representing the prime minister barged into Temple Trees, left his briefs on the breakfast table, said “you appear for yourself”, and went off. Mrs. Bandaranaike told Jayawickrama to withdraw the cabinet paper.

The Bar also refused to participate in the legal aid scheme. Jayawickrama’s response was to say that he would create a brigade of “barefoot lawyers” like barefoot doctors. Years later he said the proposal wasn’t a serious one, the remark was made in terrorem, meant to frighten the bar into becoming more generous with legal aid.

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