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Domestic Debt Restructuring – An Alternate View

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by Romesh Bandaranaike, Ph.D.

There have been substantial and wide spread criticisms of the recently instituted Domestic Debt Restructuring (DDR) scheme carried out by Central Bank of Sri Lanka (CBSL), to reduce the Sri Lanka Government’s requirements for funding. In this article I argue that the scheme, as structured and carried out by CBSL, is appropriate, given the ground realities in the country, and that the critics have ignored a number of factors which forced CBSL to design the scheme as it did. I then suggest additional steps the Government could take to further improve its financial position in connection with past Bond issues.

The DDR Scheme

Faced with massive shortfalls in revenue, the Government recently carried out a “restructuring” of the debts it owed on Sri Lanka Rupee denominated Treasury Bills and Bonds in an effort to substantially improve Government finances, including the funds needed to service these Bills/Bonds. The two key elements of the DDR are a) Converting all Treasury Bills presently owned by CBSL to longer term Treasury Bonds, thereby substantially delaying the payment dates on these Bills; and b) Effectively “forcing” the Employees Provident Fund (EPF) and other superannuation funds to exchange most of the Bonds they hold for 12 year Bonds with somewhat lower interest payments.

They did this by threatening to increase the tax rates that EPF pays on its annual income to 30% from the present 14%, if they did not accept the Bond exchange. Since such an increase was financially worse for EPF compared with the Bond exchange, EPF opted for the latter.

CBSL estimates that the scheme would reduce the Gross Financing Needs (GFN) of the Government by 1.5%, 1% by the CBSL Bill-Bond exchange and 0.5% by the EPF Bond exchange.

The Criticisms

The principal criticisms of the DDR, from the public, Trade Unions, Economic Think Tanks, and numerous “Experts,” is that the entire burden of the DDR is being placed on the backs of the retirement savings of “poor workers” who are the members of EPF.

CBSL has justified the proposed increase in the tax rates for EPF and other superannuation funds to 30% from the present 14% on the basis that the banks have to pay the higher tax rate of 30% plus VAT. Dr. Wijewardena, a former CBSL Deputy Governor, has written several articles criticizing CBSL for not presenting the correct picture in this regard and not disclosing full information on the impacts of the restructuring on EPF members’ returns. Dr. W’s main argument is that, in the case of the banks, the tax rate applies to “net interest”, whereas, in the case of the EPF, it applies to “gross interest.” For the banks, net interest is interest earnings on its loans less the interest it pays to depositors.

In the case of EPF, Dr. W points out that EPF is not allowed to subtract the interest it pays to EPF account holders to determine its income and tax liability, and that CBSL comparison of bank and EPF tax rates is therefore misleading. In a subsequent article by Dr. W, he criticizes CBSL/EPF for not fully disclosing the cost to EPF holders of accepting the proposed DDR compared with an increase in EPF’s tax rate to 30% and the justification for accepting the Bond exchange rather than the tax increase to 30%. He goes on to add that CBSL has a conflict of interest as both the developer of Government policy and as the administrator of EPF.

My Responses to the Criticisms

The criticism that the entire burden of the DDR is on the backs of workers is factually incorrect. As stated above, two-third of the 1.5% reduction in GFN (1%) is being achieved by exchanging the Treasury Bills held by CBSL for long term Bonds. Only 0.5% of the reduction is from the exchange of Bonds held by the EPF and other superannuation funds. In other words, 67% of the restructuring cost is borne by CBSL (in effect by all citizens), while only 33% is borne by EPF account holders. Furthermore, only workers in the formal private sector contribute to the EPF/ETF, while workers in the informal private sector (e.g. farmers, fishermen, small transporters, traders and construction workers) and Government employees do not.

As a result, only about 25-30% of the workers in the country have EPF accounts. Therefore, 70-75% of workers in the country will not suffer any burden due to the EPF bond restructuring. Finally, the workers with EPF accounts also include middle and senior management of companies who cannot be called “poor workers” as referred to in the various criticisms of the present DDR scheme. It is true that this category may only be a very small percentage of those holding EPF accounts. However, their account balances are likely to be very much higher than other EPF members and the impact of the restructuring on them will be proportional to these balances.

It would be ideal if the EPF could release statistics in this regard which will allow an assessment of this element. For example, the fraction of the total EPF funds held by those with EPF balances of over Rs 5 million (say), since such persons cannot be classified as “poor workers.” Workers who have balances in EPF/ETF, built up as a result of deductions from their salaries and additional higher contributions from their employers, at least have a retirement fund they can turn to, even if it is somewhat less because of the DDR. It could conceivably be argued that the 70-75% of workers who do not have such balances, mostly working in the informal sector, are worse off or poorer than those with EPF balances. This would be a justification for placing the burden of part of the DDR on EPF account holders rather than on other, even “poorer”, workers.

In response to Dr. W’s criticisms that EPF and bank tax rates are not comparable the way CBSL has done; each year, EPF determines a percentage it will pay/accrue to the account of each EPF account holder based on the earnings by the EPF that year. This percentage is not an interest similar to that paid by banks to its depositors and is not a cost that is deductible by EPF to calculate its tax liability each year. It is simply a percentage decided by the EPF administrators to allocate the profits after tax earned by the EPF during the year. Calling this percentage an “interest” is a misnomer. Account holders in EPF are akin to shareholders in banks and not depositors.

The amounts credited by EPF to a member’s account each year, based on EPF’s earnings during the year, is not a cost incurred by EPF in generating these earnings. It is something closer to a dividend paid by a bank to its shareholders in the form of additional shares. If EPF is allowed to determine its tax liabilities by subtracting these accrued amounts, banks should be able to deduct dividend costs in determining their tax liabilities. Dr. W’s criticism of the non-comparability of bank and EPF tax rates cannot be sustained.

Dr. W uses CBSL/EPF’s own numbers on the differences in returns under the two scenarios EPF has been offered and simply multiplies it by the total EPF Bond holding value to arrive at the cost to EPF of accepting the Bond exchange. This is something that could have readily been done by anyone and Dr. W’s implication that CBSL/EPF is hiding/not fully disclosing something in its statement cannot be sustained.

The CBSL/EPF analysis is simply to show that the return to EPF is better under the scenario where it accepts the DDR option, compared to rejecting the DDR option and being subject to a 30% tax rate. This information is more than sufficient for EPF to recommend to its Board that it should accept the DDR. Dr. W than goes into the past history of taxation rates applicable to the EPF and points out that as originally envisaged EPF earnings were to be tax exempt.

He shows calculations of the losses to EPF holders of the present DDR, compared with a situation if EPF earnings were tax exempt. This is a straw man put up by Dr. W to be knocked down as part of his criticism of CBSL/EPF. It is the tax rates that are applicable to EPF today, before the DDR, that are relevant and it would have been nonsensical for CBSL to show calculations based on what if the tax rates were those that existed many years ago.

With respect to the criticism that CBSL has a conflict of interest in both being the administrator of EPF and the policy advisor recommending the DDR, I do not see any conflict. CBSL, as advisor to the Government, has made the DDR proposal which allows EPF to choose between two options, accept the proposed DDR Bond exchange or reject it and be subject to a 30% tax rate. As the administrator of the EPF, CBSL has simply analysed these two options and clearly shown that the EPF is better off accepting the Bond exchange compared with rejecting it and being subject to a 30% tax rate.

Other Relevant Issues

It is telling that none of those criticizing the present process have offered any viable alternative DDR arrangement to achieve the same objectives as the present exercise. In saying this, I am ignoring the suggestions by some parties who say there would be no need for the exercise if “The money stolen by the Rajapaksa’s is recovered” or “The large corruption in Government is reduced,” and so on. Such actions, even if they were possible, are not alternatives, because they cannot be achieved in the short or medium term, which is one of the key objectives of the DDR. Verite Research did, some time ago before the announcement of the present DDR, present some analysis on a possible DDR which included sharing the cut across all Bond holders, but, for the reasons I refer to below, this is not a viable arrangement.

CBSL in its original presentation to the Cabinet, and subsequently to the public, argued that it would be prudent to exclude the Banks from the DDR exercise, because these institutions were already under stress as a result of COVID related business failures and because the banks would also be taking a hit from the future restructuring of USD Bonds, some of which are held by them.

CBSL was of the view that such an exclusion was essential to ensure financial system stability. None of those criticizing the present DDR arrangements have objected to this and I concur with that view. Even if the banks are able to bear the burden of some restructuring of the domestic bonds they hold, bank stability is also dependent on public perception, and excluding them from the DDR has certainly had a positive impact on such perception.

There are two unstated conditions applicable to the DDR exercise which have received no mention in the ongoing discussions. First, the DDR should be concluded in a short time frame since it will be a pre-condition to the restructuring of foreign currency debt. Second, it must be carried out in a legally valid manner. A Government Bond is a legal contract between the Government and the holder of the Bond.

The Government is legally obligated to pay the interest coupon and the principal of the Bond on specified dates according to this legal contract. The Government has no legal authority to change the conditions of this Bond. It could, of course, pass a new law in Parliament giving itself the authority to make changes to existing Bonds. In doing so, however, if all Bond holders are not treated equally (in particular, if the bank holdings of Bonds are excluded), there are bound to be legal challenges in the Courts to any such changes, and the changes may well be struck down by the Courts.

Even if such changes are not struck down, this process can take considerable time to be determined and would not be achievable in the time frame required for the DDR process to be concluded as discussed previously. The present DDR has finessed the issue of different treatments of Bond holders by making it “voluntary”, albeit by holding a gun to the head of the EPF and superannuation funds in the manner detailed earlier. This is draconian, but effective.

As per CBSL statistics presented in connection with the original DDR proposal, the total outstanding amount of Treasury Bonds at that time was Rs. 8,700 billion. Of this amount Rs 1,644 billion is held by “Others”, after excluding the banks and EPF and superannuation funds being subject to the DDR. Even if the banks are excluded from the DDR to ensure “financial system stability” reasons mentioned previously, it would have been ideal if the “Others” holding the Rs 1,644 billion in outstanding Bonds were subject to some “restructuring”, in the form of cuts in coupon rates and/or face value, or an extension of the tenor of these Bonds.

If this was done, the benefit of these cuts could have been passed on in the form of a reduction in the burden passed onto EPF and superannuation funds. However, such an unequal treatment where some Bond holders (the banks) are excluded, even if the necessary legislation is passed, would certainly have resulted in legal challenges which would, at the least, have delayed the process as I have pointed out earlier, or even been found unconstitutional by the Courts.

Further Actions in Respect of Bonds

Very high yield rate Bonds (over 20% yield) were issued by the Government during the period prior to the announcement of the DDR (April 8, 2022 to March 13, 2023) as a consequence of severe financial shortages faced by the Government. Bidders for these Bonds added a premium to the bid yield rates, expecting a future restructuring of these Bonds as part of the DDR they knew was coming. By being excluded from the DDR, these Bond holders have enjoyed a “windfall profit.” It is not possible to specifically target these Bonds for a cut in coupons or face value, because many of the original holders may have sold some of these Bonds and have already earned the windfall profits.

[The buyers of the Bonds would only receive a “normal” profit in the form of coupon payments and final redemption.] Furthermore, in the case of individual Bond holders, their windfall profit would be in the form of a capital gain, which only attracts a tax rate of 10%. Corporates/ banks in the same situation would be paying a tax of 30% on their capital gains. I propose that the Government should “claw back” some of these profits by imposing a special windfall tax rate of 50% applicable to all profits derived from these Bonds. If the original purchaser has not sold the Bonds, the coupon interest and the capital gains on final face value redemption should also be taxed at 50%.

There would be some complications in structuring this tax, since some high yield Bonds may have changed hands within the period that high yield Bonds were still being issued, which means that the initial purchaser would only have made a small capital gain and the next buyer would still be enjoying the high coupon rate or subsequently selling the Bond for a large capital gain. A proper structuring of the 50% windfall tax can ensure that the taxes fall on those making the windfall profits. A tax of the type proposed will clearly be borne by the wealthy, who would have been the purchasers of these Bonds, and go some way towards balancing the burden imposed on less wealthy parties as a result of the DDR.

To place this suggestion in perspective, between April 8, 2022 and March 13, 2023 all Bonds issued by CBSL had yield rates in excess of 20%. The total face value of such Bonds was Rs 1,233 billion. The weighted average yield on these Bonds was 27.89% and the weighted average coupons in these Bonds was 19.09%. The latest four-year Bond yield rate is approximately 15% and this is likely to drop further.

As a result, any seller today of an average high yield Bond would make a significant capital gain on the sale and would need to pay substantial taxes to the Government at the proposed 50% windfall tax rate. As per CBSL statistics in the original CBSL presentation to the Cabinet, approximately 63.5% of all Bonds at that time were held by the banks and the “Other” category. If this percentage is also applicable to the high yield Bonds referred to above, the banks and the “Other” category would be holding Rs 777 billion of these Bonds.

Advocata has recently analysed EPF’s Bond portfolio prior to the DDR Bond exchange and concluded that EPF’s share of high yield Bonds was proportionately much less than for other Bond holders. Therefore, banks and “Others” would probably be holding even more than the above mentioned Rs 777 billion in such high yield Bonds which, in turn, will mean that a 50% windfall tax on the profits from these Bonds will result in substantial tax revenues for the Government.

An aside at this point is that for some unclear reason there is no withholding tax (WHT) applied to the interest earnings on Bonds as in the case of interest earnings from deposits in banks and finance companies. I have made inquiries as to why this is so from several senior Government officials and have not received any explanation for the practice.

It may well be that some Bond holders do not even have income tax files and that they are evading all taxes payable on Bond interest. Since Bond holders are all likely to be at the highest tax bracket given the minimum sizes of Bond investments, I suggest that a WHT of 30% be applied to all Bond interest payments. Holders are free to file tax returns and seek a refund if they have been taxed in excess of their liability due to such a WHT. I have been told there is some complication in applying WHT to Bond interest held by foreigners. If that is indeed the case, foreign holdings of Bonds could be excluded.

Conclusions

The economy of the country is in dire straits as a result primarily of bad/foolish policies of recent past Governments (including those by CBSL under its previous two Governors and Monetary Boards at that time) coupled with the endemic corruption inherent in the system. The present Governor of CBSL and his professional colleagues are facing very difficult conditions and are striving to get the country’s finances back on track.

I can understand trade unions, workers and other similar entities objecting to the implementation of policies which directly impact them, irrespective of whether such policies are needed to solve the country’s issues. But, why is it that so called “experts” and think tanks do not recognize the ground realities of what is practically achievable and support the efforts of CBSL rather than criticizing these efforts in print and at discussion forums?

(The author is an economist with wide experience in policy formulation and implementation in the Ministry of Finance and has worked at CEO level in both public and private sectors.



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Opportunity for govt. to confirm its commitment to reconciliation

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Minister Herath at UNHRC

by Jehan Perera

The international system, built at the end of two world wars, was designed with the aspiration of preserving global peace, promoting justice, and ensuring stability through a Rules-Based International Order. Institutions such as the United Nations, the UN Covenants on Human Rights and the United Nations Human Rights Council formed the backbone of this system. They served as crucial platforms for upholding human rights norms and international law. Despite its many imperfections, this system remains important for small countries like Sri Lanka, offering some measure of protection against the pressures of great power politics. However, this international order has not been free from criticism. The selective application of international norms, particularly by powerful Western states, has weakened its legitimacy over time.

The practice of double standards, with swift action in some conflicts like Ukraine but inaction in others like Palestine has created a credibility gap, particularly among non-Western countries. Nevertheless, the core ideals underpinning the UN system such as justice, equality, and peace remain worthy of striving towards, especially for countries like Sri Lanka seeking to consolidate national reconciliation and sustainable development. Sri Lanka’s post-war engagement with the UNHRC highlights the tensions between sovereignty and accountability. Following the end of its three-decade civil war in 2009, Sri Lanka faced multiple UNHRC resolutions calling for transitional justice, accountability for human rights abuses, and political reforms. In 2015, under Resolution 30/1, Sri Lanka co-sponsored a landmark commitment to implement a comprehensive transitional justice framework, including truth-seeking, reparations, and institutional reforms.

However, the implementation of these pledges has been slow and uneven. By 2019, Sri Lanka formally withdrew its support for UNHRC Resolution 30/1, citing concerns over sovereignty and external interference. This has led to a deepening cycle with more demanding UNHRC resolutions being passed at regular intervals, broadening the scope of international scrutiny to the satisfaction of the minority, while resistance to it grows in the majority community. The recent Resolution 51/1 of 2022 reflects this trend, with a wider range of recommendations including setting up of an external monitoring mechanism in Geneva. Sri Lanka today stands at a critical juncture. A new government, unburdened by direct involvement in past violations and committed to principles of equality and inclusive governance, now holds office. This provides an unprecedented opportunity to break free from the cycle of resolutions and negative international attention that have affected the country’s image.

KEEPING GSP+

The NPP government has emphasised its commitment to treating all citizens equally, regardless of ethnicity, religion, or region. This commitment corresponds with the spirit of the UN system, which seeks not to punish but to promote positive change. It is therefore in Sri Lanka’s national interest to approach the UNHRC not as an adversary, but as a partner in a shared journey toward justice and reconciliation. Sri Lanka must also approach this engagement with an understanding of the shortcomings of the present international system. The West’s selective enforcement of human rights norms has bred distrust. Sri Lanka’s legitimate concerns about double standards are valid, particularly when one compares the Western response to Russia’s invasion of Ukraine with the muted responses to the plight of Palestinians or interventions in Libya and Iraq.

However, pointing to hypocrisy does not absolve Sri Lanka of its own obligations. Indeed, the more credible and consistent Sri Lanka is in upholding human rights at home, the stronger its moral position becomes in calling for a fairer and more equitable international order. Engaging with the UN system from a position of integrity will also strengthen Sri Lanka’s international partnerships, preserve crucial economic benefits such as GSP Plus with the European Union, and promote much-needed foreign investment and tourism. The continuation of GSP Plus is contingent upon Sri Lanka’s adherence to 27 international conventions relating to human rights, labour rights, environmental standards, and good governance. The upcoming visit of an EU monitoring mission is a vital opportunity for Sri Lanka to demonstrate its commitment to these standards. It needs to be kept in mind that Sri Lanka lost GSP Plus in 2010 due to concerns over human rights violations. Although it was regained in 2017, doubts were raised again in 2021, when the European Parliament called for its reassessment, citing the continued existence and use of the Prevention of Terrorism Act (PTA) and broader concerns about rule of law.

The government needs to treat the GSP Plus obligations with the same seriousness that it applies to its commitments to the International Monetary Fund. Prior to the elections, the NPP pledged to repeal the PTA if it came to power. There are some cases reported from the east where trespass of forest had been stated as offences and legal action filed under the PTA in courts which had been dragging for years, awaiting instructions from the Attorney General which do not come perhaps due to over-work. But the price paid by those detained under this draconian law is unbearably high. The repeal or substantial reform of the PTA is urgent, not only to meet human rights standards but also to reassure the EU of Sri Lanka’s sincerity. The government has set up a committee to prepare new legislation. The government needs to present the visiting EU delegation with a credible and transparent roadmap for reform, backed by concrete actions rather than promises. Demonstrating goodwill at this juncture will not only preserve GSP Plus but also strengthen Sri Lanka’s hand in future trade negotiations and diplomatic engagements.

INTERNATIONAL PARTNERSHIP

The government’s recent emphasis on good governance, economic recovery, and anti-corruption is a positive foundation. But as experience shows, economic reform alone is insufficient. Political reforms, especially those that address the grievances of minority communities and uphold human rights, are equally critical to national stability and prosperity. There is a recent tendency of the state to ignore these in reality and announce that there is no minority or majority as all are citizens, but which is seen by the minorities as sweeping many issues under the carpet.

Examples give are the appointment of large number of persons from the majority community to the council of Eastern University whose faculty is mainly from the minority communities or the failure to have minority representation in many high level state committees. Neglecting these dimensions risks perpetuating internal divisions and giving ammunition to external critics. The government’s political will needs to extend beyond economic management to genuine national reconciliation. Instead of being seen as a burden, meeting the EU’s GSP Plus obligations and those of UNHRC Resolution 51/1 can be viewed as providing a roadmap.

The task before the government is to select key areas where tangible progress can be made within the current political and institutional context, demonstrating good faith and building international confidence. Several recommendations within Resolution 51/1 can be realistically implemented without compromising national sovereignty. Advancing the search for truth and providing reparations to victims of the conflict, repealing the Prevention of Terrorism Act, revitalising devolution both by empowering the elected provincial councils, reducing the arbitrary powers of the governors as well as through holding long-delayed elections are all feasible and impactful measures. The return of occupied lands, compensation for victims, and the inclusion of minority communities in governance at all levels are also steps that are achievable within Sri Lanka’s constitutional framework and political reality. Crucially, while engaging with these UNHRC recommendations, the government needs to also articulate its own vision of reconciliation and justice. Rather than appearing as if it is merely responding to external pressure, the government should proactively frame its efforts as part of a homegrown agenda for national renewal. Doing so would preserve national dignity while demonstrating international responsibility.

The NPP government is unburdened by complicity in past abuses and propelled by a mandate for change. It has a rare window of opportunity. By moving decisively to implement assurances given in the past to the EU to safeguard GSP Plus and engaging sincerely with the UNHRC, Sri Lanka can finally extricate itself from the cycle of international censure and chart a new path based on reconciliation and international partnership. As the erosion of the international rules-based order continues and big power rivalries intensify, smaller states like Sri Lanka need to secure their positions through partnerships, and multilateral engagement. In a transactional world, in which nothing is given for free but everything is based on give and take, trust matters more than ever. By demonstrating its commitment to human rights, reconciliation, and inclusive governance, not only to satisfy the international community but also for better governance and to develop trust internally, Sri Lanka can strengthen its hand internationally and secure a more stable and prosperous future.

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The Broken Promise of the Lankan Cinema:

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Asoka and Swarna’s Thrilling Melodrama – Part II

“‘Dr. Ranee Sridharan,’ you say. ‘

Nice to see you again.’

The woman in the white sari places a thumb in her ledger book, adjusts her spectacles and smiles up at you. ‘You may call me Ranee. Helping you is what I am assigned to do,’ she says. ‘You have seven moons. And you have already waisted one.’”

The Seven Moons of Maali Almeida

by Shehan Karunatilaka (London: Sort of Books, 2022. p84)

(Continued from yesterday)

The Promise of a Multi-Ethnic National Cinema

The Colombo premiere of Broken Promise (1947) was a national event, attended by D. S. Senanayake and business leaders as it promised much – the possibility of a popular national cinema that addressed a multi-ethnic polity and a profitable business. People were bused into Kandy, where the film was screened in a large tent, and screened in several cinemas in Colombo and the suburbs. Certainly, from its inception the Lankan cinema was multi-ethnic in the composition of its creative artists (musicians, singers, actors, directors), technicians and producers, theatre and studio owners who provided the capital.

Sumathy Sivamohan’s 2018 film Sons and Fathers explored this multiethnic creative hybrid ecosystem of the industry during the 1983 pogrom against the Tamil citizens of Lanka. She modelled the musician in the film on the creative spirit of Rocksamy’s life and work so integral to the success of Lankan cinema. Sumathy researched the film by speaking to Mrs Rocksamy and incorporated a scene with her in the film. She spoke to impoverished old Tamil editors and the children of a musician to understand in some detail its multi-ethnic ecosystem and ethos of its lower-middle class creatives. She then crafted these ethnographic musical insights into an intricate poetic film.

Between Fact & Fiction: A Membrane/Skin

Sons and Fathers is a film that straddles the permeable boundaries between Documentary and Fiction films with a certain ease and confidence derived from its solid ethnographic research on the national film industry, its multi-ethnic artists and their lives. Sumathy does not proceed, as Asoka Handagama does, on the assumption that Documentary cinema is an entirely separate genre from Fictional genres. She is aware of the over one hundred-year history of Documentary cinema itself, its diversity, cross-cultural richness and its play between categories. For example, take the case of Basil Wright’s award winning ‘Poetic-Documentary’ The Song of Ceylon (1933). Lionel Wendt provided the research for this film and his tender voice-over poetic commentary, and took Kandyan drummer Suramba to London to record his sounds for the film’s ‘Devil dancing’ spirit possession ritual sequences which make the film catch fire. The film still has the power to haunt and vibrate us with its poetic cinematic intensity, the fictionalising power of its montage of sounds and images unchained from dogged documentary facts and realism.

Asoka Handagama surely must know this Lankan film history too, but tactically insists on the absolute separation between the genres of Documentary (reality), and Fiction (prabandaya), in defending Rani against strong criticism that it distorts the real lived experience of Manorani and Richard. Swarna laughingly dismissed this valid criticism as ‘Nephew and Niece criticism’, in an interview she gave in Australia, when the film was screened here in private screenings at multiplexes. But scorn and ignorance are not what we expect of senior artists of the calibre of Asoka and Swarna. They set a very bad example for the young, but perhaps young Lankans are cooler in their appraisal of such irresponsible behaviour and know it for what it is, ‘Neo-liberal ‘market-speak’.

The film Rani by Asoka Handagama presents the 1990 political assassination of the popular journalist-actor-poet Richard de Zoysa, (the ‘bi-racial’ child of a ‘mixed marriage’ between a Sinhala father and a Tamil mother), and ‘theatricalises’ or ‘dramatises’ its impact on his mother Dr Manorani Saravanamuttu, during an era of extreme political terror in the South of the country, between the UNP Government and the JVP. In naming the film Rani, Handagama appears to signal something because the ad tells us Sinhala folk that it means ‘Queen’. This metonymic displacement (a rhetorical strategy of taking a part for the whole), of the actual person’s proper name, ‘Manorani,’ into the dramatis-persona ‘Rani’, is further amplified and complicated by what Swarna Mallawarachchi has said about the character she played.

Swarna’s 28-year-old Promise

Swarna has said that she had met Manorani four times after her son’s assassination, beginning in 1996 and that she had promised her that she would tell her story and that of her son to the world. In this way she creates a certain gravitas, an ethic for her work on Rani, a sign of authenticity of a ‘true story’, testifying to a historical crime at the time of state terror and counter terror. True to her promise, she has said in recent interviews that she sustained her desire to play the role of Manorani for 28 years, at last realised in 2025 through the Indian production company LYCA’s capital.

Tamil Entrepreneurship and Sinhala Cinema

Subaskaran Allirajah, the CEO of LYCA films based in Chennai, is a Sri Lankan Tamil born in Jaffna and now a British citizen. LYCA film production is a subsidiary of a Telecommunication company for sim cards he runs from Britain. His film list includes Mani Ratnam and many major directors working across popular Tamil, Hindi and Telugu films in India, with an immediate global reach with the large Indian diaspora.

So, what sweet irony (after the violence levelled against Tamils who powered the Lankan film industry, burning the director Venkat in his car during July ‘83, but also later, with the assassination of Gunarathnam in his car, burning down of Tamil studios with Sinhala films stored therein and the proletarian movie theatres) that a Tamil business man from Jaffna has once again come to the rescue of the Sinhala cinema! As with Kadawunu Poronduwa in 1947, an Indian company, headed by a Lankan Tamil CEO has come to the rescue of a Sinhala film, with a Neo Liberal business model, kindling hope yet again for a national film industry, but this time with global dreams of access to streaming services such as NETFLIX and the like. It would appear that Lanka’s Sinhala language cinema cannot do without Tamil enterprise.

But it’s worth noting what S. Janaka Biyanwila says in his Polity essay:

‘Lyca has also been a major donor to the Conservative Party in the UK. In 2023, a French criminal court fined the company for tax fraud and money laundering. In 2024, the UK tax authorities demanded the company declare bankruptcy in order to pay overdue taxes. In 2018, LYCA acquired the EAP group in Sri Lanka with interests in media and entertainment, including television and radio channels and movie theatres. Last year (2024), the Sri Lankan government blocked LYCA from bidding for ownership shares in Sri Lanka Telecom and Lanka Hospitals.’

These monopolising moves of LYCA seeking ‘vertical integration’ of the film industry, should be front and centre even as some fans swoon over Rani and dream of a ‘quality’ Sinhala film industry revived by LYCA.

The Unconscious of the Sinhala Cinema Genealogy

(Vanshakathawe).

It is the Sinhala cinema’s unconscious, its ‘Other’ if you like, as expressed in Rani that I wish to render conscious in this piece. Let Rukmani Devi’s amaraneeya (undying) Shoka Gee (melancholy songs), and also that of Mohidin Baig’s Bhudu Gee once again cut through our sedimented Sinhala prejudices as we look back, both at our film history and its future at this critical moment.

Asoka’s Sovereign Right to ‘Self-Expression’

However, in contrast with Swarna’s promise to Manorani, Asoka Handgama says that as an artist (not a maker of documentary), he has exercised his ‘right to self-expression’ and has presented his own version of both Richard and his bereaved mother Manorani; in short, it is not a documentary, it’s fiction. It’s obvious that these two views, (on one hand, that of the actor keeping to a solemn promise to be true to what happened (through a ‘bio-pic,’ as the Head of Production, Janaki Wijerathna maintained in an interview), and on the other, that of the director expressing his own creative artistic-self), contradict each other. The film anticipates the criticism that it falsifies the biographical true story by providing a pre-emptive defence through a sentence, before the opening of the film, that it’s a work of fiction based on fact. This defensive move is part of its publicity, it anticipates controversy, provides the terms for it. I wish to side step this dynamic and shift the critical terrain, which is the professional task I set myself as a film theorist and scholar.

The actress and the director seem to have two different understandings of their intentions and what it is that they have done. Swarna then obfuscates matters further by saying, ‘film is a director’s medium and as an actor my work is to follow his wishes’. But Asoka has said that Swarna brought this project to him when LYCA came up with the money and he wrote it within 3 months with her in mind. It was not a film he had wanted to make, he said. He appears to have written a skeletal generic structure for Swarna to embody as she wishes, in her familiar high intensity, award winning mode of performance.

To Eat the Cake and Have It

To put it differently, they want to both ‘eat their cake and have it,’ which is of course very good PR for the box office success of the film. ‘Eating the cake’ implies maximising and gratifying their own pleasure as artists, and ‘having it’ as in keeping the cake intact, means that the names of the historical mother and son are used as a strong historical referent both within the film and in its PR, but get distorted when it gets in the way of the artists’ own ‘self-expression’ and self-gratification. That there is an ethical dilemma here, as many have pointed out, is a point I wish to explore further by theorising the aesthetics of the film. The invective one hears goes nowhere intellectually, but just feeds the publicity machine. Controversy is very good for promoting a film, creates a buzz, people want to see what all the fuss and excitement is about.

The exceptional box office success of the film is no doubt also linked to Swarna Mallawarachchi’s stature as a serious actress with a proven track record of award- winning work with some of Lanka’s main auteurs. And in being identified with Rani as Queen, at least one critic announced that Swarna is now a ‘golden super-star’. The logic of such hyperbolic marketing is of interest to me as a film scholar studying the public reception of films within the robust subfield of ‘Reception Studies’ and the kind of ‘public-spheres’ that competing discourses on a film generates, now especially, within a digitally powered virtual mediascape which is our democratic ‘commons’.

As well, importantly Asoka Handagama is one of Lanka’s major playwrights and an unusual modern filmmaker in that he has developed an idiom of his own, with a distinguished body of work which in turn has created an educated cine-literate audience who followed it keenly over a significant period of time. Therefore, Lankans are eager to see Swarna and Asoka present Dr. Manorani Saravanamuttu and Richard de Zoysa, a mother who was a Tamil professional woman and single parent and her very well-known and loved son, a journalist, actor and poet from the Lankan Anglophile upper-middle class, caught up in the extraordinary violence in the South, of the 1987-1990 era of extra-parliamentary politics of our island nation.

Political Theatre

The other draw card is the explicitly political representation of key political figures of the era represented by actors resembling the politician more or less. A thrilling novelty, it makes it structurally possible for Asoka to sketch the drama of the mother and son within the real-politic of the Premadasa era and even dramatize the bomb blast by the LTTE suicide bomber on a bicycle, which annihilated the president and others. LYCA’s Indian currency would have helped in staging the blast, as such destruction requires lots of money to execute with even a little credibility. This effort by Asoka is, in my opinion, a ‘third-world’ example because stage destruction, which cinema has perfected for profit in the genre of ‘Disaster movies’, requires much more than was available. He was pandering I feel to our desire to see President Premadasa being blown up, along with the senior cop who Manorani unequivocally identified as the one who arrived with lumpen thugs to her house, to abduct Richard, to torture and kill him according to, as widely believed, the President’s command.

This kind of violence, staged to excite and thrill, is the very stuff melodrama feeds on. The sonic ‘reverberation’ technically added to the sound of the abductors crashing into Richard’s house amplifies the melodramatic tension and suspense. In contrast, the three firm taps on the infamous heavy-wood teak Jaffna door, in Sumathy’s A Single Tumbler, chills the sensorium of the viewer, where fear and thought commingle as one quiet voice ‘signifying the boys’ announce their intent to take the son away for questioning. In contrast, Melodrama disarms our thought processes as it works with orchestrating (with loud sound and manic editing), suspense and thrilling action, its raison d’etre. This is the source of its global attraction and popularity as a genre.

(To be continued)

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Decolonising education – a few critical thoughts

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Harshana

For many postcolonial societies education has historically been one of the primary sites of decolonisation. This is not accidental, since education was a key instrument of colonisation – particularly British colonisation. However, as I argue below, while we pursue decolonisation in its broadest sense as priority in reimagining education we must also be critically cautious of how the idea of decolonisation can easily tip over into parochial nativism that is intellectually debilitating rather than liberating.

In the colonial context, policymakers, like Thomas Babington Macaulay, who was part of the colonial government in 19th century India, held strong views about using education to ‘modernise’ what they saw as backward colonial societies. Macaulay held particularly strong views about the relative value of providing education in English as opposed to vernacular languages and infamously claimed that a single shelf of a good European library held more knowledge and value than all the learning in local languages, like Sanskrit. Similar views about the value of English medium education and the necessity to use education as a tool for social and cultural modernisation were influential in Sri Lanka as well. Sri Lankan historians, like G.C. Mendis, saw the policy changes implemented by the Colebrooke-Cameron reforms of 1831, which also included proposals about anglicising the medium of instruction, as vital to Sri Lanka’s future and modernisation – though, in practice, English-medium instruction in colonial Ceylon was limited to a few elite schools. But the fact that G.C. Mendis, writing in the 1950s, well after independence, held views like this, suggests the deep and pervasive influence of colonial education in Sri Lankan society.

The pejorative phrase ‘Macaulay’s children’ that derives from the colonial education history has some validity because colonial policies did succeed in creating a class of so-called “brown sahibs”. Therefore, across the formerly colonial world, as countries became independent, a key priority was what Ngugi wa’ Thiongo, the Kenyan writer, termed ‘decolonising the mind’. Reimagining education was a major part of this decolonisation process. Though we inhabit a very different historical moment today, I would argue that decolonisation remains a key priority for different reasons. While formal colonialism ended more than half a century ago, global inequalities in knowledge production have led educationists to see decolonisation as a continuing priority. In many academic disciplines the content, curriculum, assessment systems and knowledge agendas tend to be set by ‘centres of knowledge production’ – often, though not always, corresponding to a long-since-disappeared colonial map of the world where the division between the global north and south continues to replicate old colonial hierarchies.

However, my focus in this short reflective piece is somewhat different. While I recognise that decolonisation remains an important policy priority in education, I would also like to sound a note of caution about how a singular fixation on decolonisation can feed into parochial and nativist nationalist ideas that are detrimental to postcolonial societies like Sri Lanka. At least since the 1950s Sri Lanka has had a discourse about decolonising education which has manifested itself in different ways. One powerful political and policy-related expression of this was the Official Languages Act of 1956 – or more commonly known as the ‘Sinhala Only Act’. While there is little argument that the vernacular languages needed to be elevated and given official status to give meaning to political independence and that English needed to be displaced from its privileged position, there were at least two negative consequences of this policy which could have been potentially avoided. At one level due to political expediency Tamil was not granted official status – though the discussion on changing the official language since the 1940s included both Sinhala and Tamil. This in turn significantly impacted ethno-nationalist politics in Sri Lanka for well over half-a-century.

At another level, though official status was granted to Sinhala, English continued to function as a language of privilege, both institutionally and socially – a situation that has become sharply apparent today where English remains a coveted form of social and cultural capital. Parallel to such policy-level changes in education, there has also been an intellectual critique of education, particularly from Sinhala nationalist thinkers. For instance, in the writing of a number of Sinhala intellectuals, such as Gunadasa Amarasekara, there has been a sustained critique of the Sri Lankan education system – particularly university education. They have characterised the university as a space that creates a self-alienated individual – a kind of cultural misfit who is socialised into ‘western’ ways of thinking and is, therefore, unable to meaningfully relate to their own local reality. This is not significantly different to the kind of critique that Ngugi makes in “Decolonising the Mind”. This strain of thinking has had a significant impact in Sinhala intellectual discourse and later, in the 1970s and 80s, found expression in the form of jathika chinatanaya – or what can be loosely translated as ‘national thought’ or ‘national thinking’. Other scholars, such as Nalin de Silva, have also extended these arguments into the realm of science – arguing, for instance, that the ‘scientific method’ is a fallacy and that we need to seek out ‘local’ systems of knowledge.

I am conceptually sympathetic to such a decolonial approach and conceptual orientation. Global knowledge hierarchies systematically exclude certain kinds of knowledge. We also have to recognise that ‘knowledge’ is not the preserve of one culture or society, but unfortunately ‘knowledges’ from our societies are often disregarded or marginalised. However, any such decolonial critique has to be also critically conscious that whether it is the English language, science or democracy – so-called ‘western’ ideas or ‘western’ legacies – have long and complicated histories in our societies. We need these ideas and ‘tools’ for our day-to-day struggles for social justice. Therefore, when we speak of decolonising our education systems we must not forget that certain normative ideas need to be retained. We can critically engage with them and negotiate their meanings and how we implement them in our societies so that they are sensitive to our local needs and realities but we should not pursue a romantic vision that there is some kind of ‘pure’ pre-colonial knowledge that will magically resolve the problems of our societies. For instance, both in Sri Lanka and India, and Asia, in general, there have been views that democracy is not suited to our societies and that a more centralised form of governance is necessary, given the nature of our societies. We are now living through the damaging consequences of such thinking, both in Sri Lanka and neighboring India, which has ended shoring up popularly sanctioned authoritarianism.

We have also witnessed, along with the onset of the Coronavirus pandemic, an upsurge in various kinds of indigenist thinking – ranging from miracle COVID cures to romantic notions about a ‘pure’ life in pre-colonial Sri Lanka. Frantz Fanon, a key thinker and activist in decolonisation, warned about this fascination with a romanticised past in his classic text Wretched of the Earth. He warned that many nationalist thinkers will turn to such a romanticised past and in doing so will be unable to see the complexities of their contemporary existence. I think in Sri Lanka as we think of decolonising our education – whether it is the content of the curriculum or how our formal education systems are structured – we need to remember that the effects of colonisation or the deep-seated ideas and practices that we inherited from colonialism cannot be simply wished away. We have to learn how to critically negotiate with our colonial and ‘western’ legacies and live with them rather than imagine we can choose to simply step outside them. Decolonisation is not a ‘metaphor’ – it is a hard, sustained and committed struggle with our contemporary existence and trying to retreat into some kind of idealistic past will be self-defeating.

Kuppi is a politics and pedagogy happening on the margins of the lecture hall that parodies, subverts, and simultaneously reaffirms social hierarchies.

By Harshana Rambukwella

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