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Purchasing Power Parity

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by Kumar David

Why is the Russian economy not crumbling despite sanctions? In an analysis carried in Quora.com French economist Jacques Sapir wrote: ‘The reason for this miscalculation is exchange rates. If you simply convert Russia’s GDP from rubbles to dollars, you see it as an economy only as large as Spain’s. However, such comparisons are spurious without adjusting for Purchasing Power Parity (PPP) which accounts for productivity and living standards, and thus per capita welfare and resource use. In fact, PPP is the preferred metric of most international institutions from the IMF to the OECD.

Note by this columnist. [A very good plate of rice and curry for a worker costs Rs 600 in Sri Lanka, that is about US$1.62 at the official exchange rate of Rs 370 to the US$. But you cannot get an equivalent meal at that price in the US; it will cost at least $5. But if you take the exchange rate as Rs 120 to the US$ you get $5 for your Rs 600. Therefore, the PPP exchange rate is Rs 120 to one US dollar, not Rs 370 to a dollar].

When you measure Russia’s, GDP based on purchasing power parity it is like Germany’s in size; Russia about $4.4 trillion versus Germany $4.6 trillion. From a small sickly-looking economy to the largest European and one of the largest in the world, this is not a comparison that can be ignored. Sapir also encourages us to ask: “What is the share of production and industry compared to services?” In his view, today’s services sector is grossly overvalued compared to industries and commodities such as oil, gas, copper and agricultural commodities. If we deduct the role of services as a proportion of the global economy, Sapir says, “Russia’s economy is much bigger than Germany’s, maybe five or six percent of the world economy”, more like Japan’s.

This makes intuitive sense. When times are tough we know it’s more valuable to provide people with the things they need, like food and energy, than intangible things like entertainment or financial services. When a company like Netflix trades at a price-to-earnings ratio three times higher than Nestle, the world’s largest food company, that is a reflection of frothy markets not reality. Netflix is a great service company, but when 800 million people in the world are undernourished Nestle offers more value. The current Ukrainian crisis helps clarify why what were regard as “archaic” parts of the modern economy, such as industry and commodities whose prices have soared this year are more important than overvalued services and “technology” companies whose values have declined recently.

The scope an economy is further distorted by ignoring global trade flows, of which Mr Sapir estimates Russia “may account for 15 per cent”. For example, while Russia is not the world’s largest oil producer, it is the largest oil exporter, surpassing even Saudi Arabia. The same is true of many other basic products, such as wheat, the world’s most important food crop, of which Russia controls about 19.5 per cent of global exports, as well as nickel (20.4 per cent), semi-finished iron (18.8 per cent), platinum (16.6 per cent) and frozen fish (11.2 per cent). Such an important position in the production of so many basic commodities means that Russia, along with several other similarly placed countries are linchpins in the global production chain. Maximum sanctions” on countries like Iran or Venezuela trying to cut Russia of world markets are phoney and likely bring about rearrangement of the global economy to the disadvantage of the West.

Much of this has been proved by the war in Ukraine. Controlling oil, gas, food and other commodities, the war of sanctions waged by the United States and its Allies in Europe and Asia has become a headache for the West. Corroborating this view JPMorgan says Russia’s economy is stronger than expected and will only suffer a shallow recession despite sanctions. The Wall Street bank said business sentiment surveys from the country “are signalling a not very deep recession in Russia and therefore imply an ‘upside risk’ to our growth forecasts.

The Russian economy has so far fared better than expected under tough sanctions and is likely to suffer only a shallow but drawn-out recession according to JPMorgan. The bank told clients last week that the country’s economy is in better shape than expected, judging from business surveys and indicators such as electricity consumption and financial flows. “The data at hand therefore does not point to an abrupt plunge in activity at least for now. GDP in the second quarter would likely be better than predicted in March”.

Purchasing power parity (PPP) is the rate of currency conversion that equalises the purchasing power of different countries by eliminating differences in price levels of essential goods. According to this concept two currencies are in equilibrium—known as the currencies being at par—when a basket of goods is priced the same in both countries taking into account the said PPP exchange rates. The importance of this point is emphasised in the Table below and has significant implications for Sri Lanka.

GDP by Purchasing Power Parity vs Nominal GDP

GDP by PPP which is based on a basket of goods is a fairer comparison between countries. In the table below Tr stands for trillions of US$.

Source: International Monetary Fund

The difference is very big in the case of countries outside the global capitalist market system. In the case of India GDP in PPP terms is an astounding 3.87 times (10.5/2.71) larger than the conventional GDP. This is a bit of a paradox because India is visibly very poor so where is all the wealth hiding? The answer lies in the huge disparity of wealth and income between the filthy rich and the dirt poor. This disparity in India is much larger than the disparity between the top 10% (or 1%) and the average person in the US.

I am not smart enough nor adequately statistically well informed to make anything but broad generalisations about Sri Lanka. My view is that; (a) in terms of living standards the true exchange rate is about Rs 120 (not Rs 370) to a US$, (b) the importance of domestic finance-capital (investment and mutual funds etc.) should be heavily discounted in policy decisions, (c) the hard-core productive sectors must be given far more attention and (d) other productive sectors like SMEs and the informal economy must be supported far more than now.

These economic factors will play out through the political dimension. Ranil Wickremesinghe (RW) has made himself a pariah in the eyes of every strand of democratic and liberal opinion, the diplomatic community in Colombo and international human and democratic rights movements. The Catholic Church is known for conservatism, when its Cardinal sees the RW and the previous government as cussed curs what more is there for anyone of us to say?

Concurrently Batalanda Ranil, his other avatar, has unleashed his military on protestors, journalists (local and foreign), reappointed alleged human rights violators in the Defence Ministry and deployed unlawful goon squads. Reactionaries in the State machine have trapped him into a spiral of violence. Ranil blundered when he played his Batalanda card for a second time; his baton wielding goons spared neither protestor nor public. Meanwhile the Mahinda clan which cut a path to the top for RW, basks in their billion-rupee (or $?) sunshine. Ranil must be criticised mercilessly till he is compelled to reverse course on democratic rights. He may then be able to chug along as a compromise president.

We the people have to exercise the utmost vigilance till Ranil is house-tamed and he has capitulated on the danger he poses to a free society. An early election will clear the decks of a lot of crap and let the people know where every political actor and party stands. After that the country can decide how it will adjust to inevitable belt-tightening (we have consumed for 70 years without producing the equivalent) and decide how to deal with our internal fiscal deficit and our foreign account indebtedness. The two are intimately interconnected; we do not have two problems but one tightly interconnected problem.

And there is the related matter of how much to relax exchange controls in order to attract FDI and capital flows. This is in the face of the 10-year Treasury Bond yield exceeding 25% at this moment and interest rates having to be correspondingly high. The IMF has demanded Central Bank independence, it has also demanded future debt sustainability and wants China on board for a haircut. These are tough issues to be addressed in this column in their own right at another time.

Ranil has decided to fly a kite about turning Sri Lanka into a Social (sic!) – he seems unaware that the accepted usage is ‘Socialist’ – Market Economy. What on earth is a “Social Economy” anyway? Does he appreciate what he is pontificating? I have been long engaged with the topic and published a paper in the Hector Abhayavardhana 80th birthday celebration volume issued in year 2000. After 22 years it still remains relevant and can be purchased from Marshal Fernando’s Ecumenical Institute on Havelock Road.



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More state support needed for marginalised communities

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A landslide in the Central Province

Message from Malaiyaha Tamil community to govt:

Insights from SSA Cyclone Ditwah Survey

When climate disasters strike, they don’t affect everyone equally. Marginalised communities typically face worse outcomes, and Cyclone Ditwah is no exception. Especially in a context where normalcy is far from “normal”, the idea of returning to normalcy or restoring a life of normalcy makes very little sense.

The island-wide survey (https://ssalanka.org/reports/) conducted by the Social Scientists’ Association (SSA), between early to mid-January on Cyclone Ditwah shows stark regional disparities in how satisfied or dissatisfied people were with the government’s response. While national satisfaction levels were relatively high in most provinces, the Central Province tells a different story.

Only 35.2% of Central Province residents reported that they were satisfied with early warning and evacuation measures, compared to 52.2% nationally. The gap continues across every measure: just 52.9% were satisfied with immediate rescue and emergency response, compared with the national figure of 74.6%. Satisfaction with relief distribution in the Central Province is 51.9% while the national figure stands at 73.1%. The figures for restoration of water, electricity, and roads are at a low 45.9% in the central province compared to the 70.9% in national figures. Similarly, the satisfaction level for recovery and rebuilding support is 48.7% in the Central Province, while the national figure is 67.0%.

A deeper analysis of the SSA data on public perceptions reveals something important: these lower satisfaction rates came primarily from the Malaiyaha Tamil population. Their experience differed not just from other provinces, but also from other ethnic groups living in the Central Province itself.

The Malaiyaha Tamil community’s vulnerability didn’t start with the cyclone. Their vulnerability is a historically and structurally pre-determined process of exclusion and marginalisation. Brought to Sri Lanka during British rule to work for the empire’s plantation economies, they have faced long-term economic exploitation and have repeatedly been denied access to state support and social welfare systems. Most estate residents still live in ‘line rooms’ and have no rights to the land they cultivate and live on. The community continues to be governed by an outdated estate management system that acts as a barrier to accessing public and municipal services such as road repair, water, electricity and other basic infrastructures available to other citizens.

As far as access to improved water sources is concerned, the Sri Lanka Demographic Health Survey (2016) shows that 57% of estate sector households don’t have access to improved water sources, while more than 90% of households in urban and rural areas do. With regard to the level of poverty, as the Department of Census and Statistics (2019) data reveals, the estate sector where most Malaiyaha Tamils live had a poverty headcount index of 33.8%; more than double the national rate of 14.3%. These statistics highlight key indicators of the systemic discrimination faced by the Malaiyaha Tamil community.

Some crucial observations from the SSA data collectors who enumerated responses from estate residents in the survey reveal the specific challenges faced by the Malaiyaha Tamils, particularly in their efforts to seek state support for compensation and reconstruction.

First, the Central Province experienced not just flooding but also the highest number of landslides in the island. As a result, some residents in the region lost entire homes, access roadways, and other basic infrastructures. The loss of lives, livelihoods and land was at a higher intensity compared to the provinces not located in the hills. Most importantly, the Malaiyaha Tamil community’s pre-existing grievances made them even more vulnerable and the government’s job of reparation and restitution more complex.

Early warnings hadn’t reached many areas. Some data collectors said they themselves never heard any warnings in estate areas, while others mentioned that early warnings were issued but didn’t reach some segments of the community. According to the resident data collectors, the police announcements reached only as far as the sections where they were able to drive their vehicles to, and there were many estate roads that were not motorable. When warnings did filter through to remote locations, they often came by word of mouth and information was distorted along the way. Once the disaster hit, things got worse: roads were blocked, electricity went out, mobile networks failed and people were cut off completely.

Emergency response was slow. Blocked roads meant people could not get to hospitals when they needed urgent care, including pregnant mothers. The difficult terrain and poor road conditions meant rescue teams took much longer to reach affected areas than in other regions.

Relief supplies didn’t reach everyone. The Grama Niladhari divisions in these areas are huge and hard to navigate, making it difficult for Grama Niladharis to reach all places as urgently as needed. Relief workers distributed supplies where vehicles could go, which meant accessible areas got help while remote communities were left out.

Some people didn’t even try to go to safety centres or evacuation shelters set up in local schools because the facilities there were already so poor. The perceptions of people who did go to safety centres, as shown in the provincial data, reveal that satisfaction was low compared to other affected regions of the country. Less than half were satisfied with space and facilities (42.1%) or security and protection (45.0%). Satisfaction was even lower for assistance with lost or damaged documentation (17.9%) and information and support for compensation applications (28.2%). Only 22.5% were satisfied with medical care and health services below most other affected regions.

Restoring services proved nearly impossible in some areas. Road access was the biggest problem. The condition of the roads was already poor even before the cyclone, and some still haven’t been cleared. Recovery is especially difficult because there’s no decent baseline infrastructure to restore, hence you can’t bring roads and other public facilities back to a “good” condition when they were never good, even before the disaster.

Water systems faced their own complications. Many households get water from natural sources or small community projects, and not the centralised state system. These sources are often in the middle of the disaster zone and therefore got contaminated during the floods and landslides.

Long-term recovery remains stalled. Without basic infrastructure, areas that are still hard to reach keep struggling to get the support they need for rebuilding.

Taken together, what do these testaments mean? Disaster response can’t be the same for everyone. The Malaiyaha Tamil community has been double marginalised because they were already living with structural inequalities such as poor infrastructure, geographic isolation, and inadequate services which have been exacerbated by Cyclone Ditwah. An effective and fair disaster response needs to account for these underlying vulnerabilities. It requires interventions tailored to the historical, economic, and infrastructural realities that marginalized communities face every day. On top of that, it highlights the importance of dealing with climate disasters, given the fact that vulnerable communities could face more devastating impacts compared to others.

(Shashik Silva is a researcher with the Social Scientists’ Association of Sri Lanka)

by Shashik Silva ✍️

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Crucial test for religious and ethnic harmony in Bangladesh

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A political protest that led to governmental change in Bangladesh mid last year. (photograph: imago)

Will the Bangladesh parliamentary election bring into being a government that will ensure ethnic and religious harmony in the country? This is the poser on the lips of peace-loving sections in Bangladesh and a principal concern of those outside who mean the country well.

The apprehensions are mainly on the part of religious and ethnic minorities. The parliamentary poll of February 12th is expected to bring into existence a government headed by the Bangladesh Nationalist Party (BNP) and the Islamist oriented Jamaat-e-Islami party and this is where the rub is. If these parties win, will it be a case of Bangladesh sliding in the direction of a theocracy or a state where majoritarian chauvinism thrives?

Chief of the Jamaat, Shafiqur Rahman, who was interviewed by sections of the international media recently said that there is no need for minority groups in Bangladesh to have the above fears. He assured, essentially, that the state that will come into being will be equable and inclusive. May it be so, is likely to be the wish of those who cherish a tension-free Bangladesh.

The party that could have posed a challenge to the above parties, the Awami League Party of former Prime Minister Hasina Wased, is out of the running on account of a suspension that was imposed on it by the authorities and the mentioned majoritarian-oriented parties are expected to have it easy at the polls.

A positive that has emerged against the backdrop of the poll is that most ordinary people in Bangladesh, be they Muslim or Hindu, are for communal and religious harmony and it is hoped that this sentiment will strongly prevail, going ahead. Interestingly, most of them were of the view, when interviewed, that it was the politicians who sowed the seeds of discord in the country and this viewpoint is widely shared by publics all over the region in respect of the politicians of their countries.

Some sections of the Jamaat party were of the view that matters with regard to the orientation of governance are best left to the incoming parliament to decide on but such opinions will be cold comfort for minority groups. If the parliamentary majority comes to consist of hard line Islamists, for instance, there is nothing to prevent the country from going in for theocratic governance. Consequently, minority group fears over their safety and protection cannot be prevented from spreading.

Therefore, we come back to the question of just and fair governance and whether Bangladesh’s future rulers could ensure these essential conditions of democratic rule. The latter, it is hoped, will be sufficiently perceptive to ascertain that a Bangladesh rife with religious and ethnic tensions, and therefore unstable, would not be in the interests of Bangladesh and those of the region’s countries.

Unfortunately, politicians region-wide fall for the lure of ethnic, religious and linguistic chauvinism. This happens even in the case of politicians who claim to be democratic in orientation. This fate even befell Bangladesh’s Awami League Party, which claims to be democratic and socialist in general outlook.

We have it on the authority of Taslima Nasrin in her ground-breaking novel, ‘Lajja’, that the Awami Party was not of any substantial help to Bangladesh’s Hindus, for example, when violence was unleashed on them by sections of the majority community. In fact some elements in the Awami Party were found to be siding with the Hindus’ murderous persecutors. Such are the temptations of hard line majoritarianism.

In Sri Lanka’s past numerous have been the occasions when even self-professed Leftists and their parties have conveniently fallen in line with Southern nationalist groups with self-interest in mind. The present NPP government in Sri Lanka has been waxing lyrical about fostering national reconciliation and harmony but it is yet to prove its worthiness on this score in practice. The NPP government remains untested material.

As a first step towards national reconciliation it is hoped that Sri Lanka’s present rulers would learn the Tamil language and address the people of the North and East of the country in Tamil and not Sinhala, which most Tamil-speaking people do not understand. We earnestly await official language reforms which afford to Tamil the dignity it deserves.

An acid test awaits Bangladesh as well on the nation-building front. Not only must all forms of chauvinism be shunned by the incoming rulers but a secular, truly democratic Bangladesh awaits being licked into shape. All identity barriers among people need to be abolished and it is this process that is referred to as nation-building.

On the foreign policy frontier, a task of foremost importance for Bangladesh is the need to build bridges of amity with India. If pragmatism is to rule the roost in foreign policy formulation, Bangladesh would place priority to the overcoming of this challenge. The repatriation to Bangladesh of ex-Prime Minister Hasina could emerge as a steep hurdle to bilateral accord but sagacious diplomacy must be used by Bangladesh to get over the problem.

A reply to N.A. de S. Amaratunga

A response has been penned by N.A. de S. Amaratunga (please see p5 of ‘The Island’ of February 6th) to a previous column by me on ‘ India shaping-up as a Swing State’, published in this newspaper on January 29th , but I remain firmly convinced that India remains a foremost democracy and a Swing State in the making.

If the countries of South Asia are to effectively manage ‘murderous terrorism’, particularly of the separatist kind, then they would do well to adopt to the best of their ability a system of government that provides for power decentralization from the centre to the provinces or periphery, as the case may be. This system has stood India in good stead and ought to prove effective in all other states that have fears of disintegration.

Moreover, power decentralization ensures that all communities within a country enjoy some self-governing rights within an overall unitary governance framework. Such power-sharing is a hallmark of democratic governance.

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Celebrating Valentine’s Day …

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Valentine’s Day is all about celebrating love, romance, and affection, and this is how some of our well-known personalities plan to celebrate Valentine’s Day – 14th February:

Merlina Fernando (Singer)

Yes, it’s a special day for lovers all over the world and it’s even more special to me because 14th February is the birthday of my husband Suresh, who’s the lead guitarist of my band Mission.

We have planned to celebrate Valentine’s Day and his Birthday together and it will be a wonderful night as always.

We will be having our fans and close friends, on that night, with their loved ones at Highso – City Max hotel Dubai, from 9.00 pm onwards.

Lorensz Francke (Elvis Tribute Artiste)

On Valentine’s Day I will be performing a live concert at a Wealthy Senior Home for Men and Women, and their families will be attending, as well.

I will be performing live with romantic, iconic love songs and my song list would include ‘Can’t Help falling in Love’, ‘Love Me Tender’, ‘Burning Love’, ‘Are You Lonesome Tonight’, ‘The Wonder of You’ and ‘’It’s Now or Never’ to name a few.

To make Valentine’s Day extra special I will give the Home folks red satin scarfs.

Emma Shanaya (Singer)

I plan on spending the day of love with my girls, especially my best friend. I don’t have a romantic Valentine this year but I am thrilled to spend it with the girl that loves me through and through. I’ll be in Colombo and look forward to go to a cute cafe and spend some quality time with my childhood best friend Zulha.

JAYASRI

Emma-and-Maneeka

This Valentine’s Day the band JAYASRI we will be really busy; in the morning we will be landing in Sri Lanka, after our Oman Tour; then in the afternoon we are invited as Chief Guests at our Maris Stella College Sports Meet, Negombo, and late night we will be with LineOne band live in Karandeniya Open Air Down South. Everywhere we will be sharing LOVE with the mass crowds.

Kay Jay (Singer)

I will stay at home and cook a lovely meal for lunch, watch some movies, together with Sanjaya, and, maybe we go out for dinner and have a lovely time. Come to think of it, every day is Valentine’s Day for me with Sanjaya Alles.

Maneka Liyanage (Beauty Tips)

On this special day, I celebrate love by spending meaningful time with the people I cherish. I prepare food with love and share meals together, because food made with love brings hearts closer. I enjoy my leisure time with them — talking, laughing, sharing stories, understanding each other, and creating beautiful memories. My wish for this Valentine’s Day is a world without fighting — a world where we love one another like our own beloved, where we do not hurt others, even through a single word or action. Let us choose kindness, patience, and understanding in everything we do.

Janaka Palapathwala (Singer)

Janaka

Valentine’s Day should not be the only day we speak about love.

From the moment we are born into this world, we seek love, first through the very drop of our mother’s milk, then through the boundless care of our Mother and Father, and the embrace of family.

Love is everywhere. All living beings, even plants, respond in affection when they are loved.

As we grow, we learn to love, and to be loved. One day, that love inspires us to build a new family of our own.

Love has no beginning and no end. It flows through every stage of life, timeless, endless, and eternal.

Natasha Rathnayake (Singer)

We don’t have any special plans for Valentine’s Day. When you’ve been in love with the same person for over 25 years, you realise that love isn’t a performance reserved for one calendar date. My husband and I have never been big on public displays, or grand gestures, on 14th February. Our love is expressed quietly and consistently, in ordinary, uncelebrated moments.

With time, you learn that love isn’t about proving anything to the world or buying into a commercialised idea of romance—flowers that wilt, sweets that spike blood sugar, and gifts that impress briefly but add little real value. In today’s society, marketing often pushes the idea that love is proven by how much money you spend, and that buying things is treated as a sign of commitment.

Real love doesn’t need reminders or price tags. It lives in showing up every day, choosing each other on unromantic days, and nurturing the relationship intentionally and without an audience.

This isn’t a judgment on those who enjoy celebrating Valentine’s Day. It’s simply a personal choice.

Melloney Dassanayake (Miss Universe Sri Lanka 2024)

I truly believe it’s beautiful to have a day specially dedicated to love. But, for me, Valentine’s Day goes far beyond romantic love alone. It celebrates every form of love we hold close to our hearts: the love for family, friends, and that one special person who makes life brighter. While 14th February gives us a moment to pause and celebrate, I always remind myself that love should never be limited to just one day. Every single day should feel like Valentine’s Day – constant reminder to the people we love that they are never alone, that they are valued, and that they matter.

I’m incredibly blessed because, for me, every day feels like Valentine’s Day. My special person makes sure of that through the smallest gestures, the quiet moments, and the simple reminders that love lives in the details. He shows me that it’s the little things that count, and that love doesn’t need grand stages to feel extraordinary. This Valentine’s Day, perfection would be something intimate and meaningful: a cozy picnic in our home garden, surrounded by nature, laughter, and warmth, followed by an abstract drawing session where we let our creativity flow freely. To me, that’s what love is – simple, soulful, expressive, and deeply personal. When love is real, every ordinary moment becomes magical.

Noshin De Silva (Actress)

Valentine’s Day is one of my favourite holidays! I love the décor, the hearts everywhere, the pinks and reds, heart-shaped chocolates, and roses all around. But honestly, I believe every day can be Valentine’s Day.

It doesn’t have to be just about romantic love. It’s a chance to celebrate love in all its forms with friends, family, or even by taking a little time for yourself.

Whether you’re spending the day with someone special or enjoying your own company, it’s a reminder to appreciate meaningful connections, show kindness, and lead with love every day.

And yes, I’m fully on theme this year with heart nail art and heart mehendi design!

Wishing everyone a very happy Valentine’s Day, but, remember, love yourself first, and don’t forget to treat yourself.

Sending my love to all of you.

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