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Are they two peas in a pod?

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Economic policy and foreign policy:

By Neville Ladduwahetty

The general practice of governments of most nation states is to treat Economic policies and Foreign policy as two separate components of their national interest. Consequently, while the field of economics is littered with economic specialists, the field of foreign relations is confined to a relatively few. Perhaps, the tendency to do so is because of the popular understanding that economics is driven by market forces, while foreign policy is driven by a different paradigm, that being how nations conduct their relations with other nation states, even in matters that could include economics. This has resulted in the two subjects being handled by most governments as separate branches.

For instance, the financial crisis that Sri Lanka is currently facing is due to a combination of misguided economic policies, one of which was the lowering of taxes, causing the internal economy to be seriously impacted to a degree that caused budget deficits, and inflation to skyrocket, as a result of printing money, and the other being indulging in indiscriminately excessive dollar borrowings, from readily available sources, to develop infrastructure projects, where the returns were mostly in local Rupees. These lending sources took advantage of their bilateral relations to tempt Sri Lanka, because the significance of the island’s strategic location was critical to further their geopolitical interests. What Sri Lanka is experiencing currently is primarily due to these factors.

BLURRING of ECONOMIC and FOREIGN POLICIES

The nexus between Economic Policies and Foreign Policy is manifesting itself most prominently with neighbouring India. In April 2022, Sri Lanka’s debt to India was USD 1.041 billion. Today, it is nearly USD 5 Billion. While the need for India to engage in Sri Lanka’s internal and external affairs is motivated by self-interest, the fact that it would impact on Sri Lanka’s economic dependence is indisputable. Furthermore, it would also be a fetter to Sri Lanka’s sovereignty and independence to further relations with other countries with the view to furthering Sri Lanka’s own interests.

Sri Lanka is currently seriously campaigning for the importance of “economic integration between Sri Lanka and India”. Whether such a policy has been approved by the President and the Cabinet of Ministers, who, incidentally, are Constitutionally “charged with the direction and control of the Government”, is not known. As an extension of this policy, “India’s Prime Minister Narendra Modi’s administration, since July 2022, has been exploring the possibility of bringing countries that are short of dollars into the Rupee settlement mechanism. Designating the INR as a legal currency in Sri Lanka has provided Sri Lanka much needed liquidity support to tide over its economic crisis amid inadequate availability of US dollars …” (Sunday Observer, May 7, 2023).

While designating the INR as the legal currency in Sri Lanka would be favourable to India, it would amount to Sri Lanka piling up stacks of Indian currency, through trade and tourism, not knowing what to do with it all, because the Indian rupee is not only a non-convertible currency but also because the distortion between exports from India being five times the exports from Sri Lanka to India, as stated herein. would seriously disadvantage Sri Lanka. For instance, “During the last 26 years the exports of India to Sri Lanka have increased at an annualized rate of 10.1%, from $397M, in 1995, to $4.87B, in 2021. In 2021, India did not export any services to Sri Lanka. In 2021, Sri Lanka exported $1B to India (https://oec.world › bilateral-country › ind › partner › lka)

The experience between India and Russia, in respect of oil exports from Russia, was no different. Russia realizing that they would be stuck with Billions of Indian Rupees, for bilateral trade with India, suspended negotiations “after months of negotiations failed to convince Moscow to keep Indian Rupees in its coffers. This will be a major setback for Indian importers of cheap oil and coal from Russia who were awaiting a permanent rupee payment mechanism to help lower currency conversion costs …. Russia is not comfortable holding rupees and wants to be paid in Chinese yuan.” (The Island, May 5, 2023).

“Since Russia’s invasion of Ukraine, on February 21, last year, India’s imports from Russia have risen to $51.3 billion, until April 5, from $10.6 billion in the same period in the previous year, according to another Indian government official” (Ibid). The fact that Russia is prepared to accept such a large outstanding debt, to be settled in Chinese yuan ,reflects the strength of the bilateral relationship between Russia and China, at the expense of India. This underscores the power of bilateral relationships that could at times influence economic issues and vis-a-versa.

Drawing a lesson from this Russian/Indian experience, Sri Lanka should test the strength of its relationships and explore settling its outstanding debts to China, India and Japan, in their respective currencies, instead of settling them in US Dollars.

THE SRI LANKAN EXPERIENCE

Although Sri Lanka, then Ceylon, started out with Foreign affairs being linked with Defence, Foreign relations came under the jurisdiction of an independent Ministry, with the passage of time, thereby causing economic policies and foreign policy to function under two separate Cabinet ministers. However, during the early stages of this separation, bilateral relations had a significant influence on the determination of economic priorities.

For instance, the impetus to manufacturing was initiated with the introduction of the steel and tyre factories, from Russia. The flour mill from Russia contributed to meet the food needs. Another was the textile mill, at Athurugiriya, from The German Democratic Republic (GDR). It was the strength of bilateral relationships that contributed to further the economic development of Sri Lanka. Likewise, the urgent power needs of Sri Lanka, in the late 1970s and 1980s, compelled the then government to initiate the Accelerated Mahaweli Programme. The Implementation of the programme depended on harnessing the needed funds.

To secure the funds, the late Gamini Dissanayake invited all the Ambassadors ,and local heads of aid missions in Colombo, to a detailed discussion because “the raising of foreign funds for the construction of the Projects and the implementation of the downstream development programmes”, presented themselves as the most formidable task. It was the bilateral relations with countries such as “the USA, the UK, Canada, the Federal Republic of Germany, Sweden, the Netherlands, Belgium, Kuwait, Saudi Arabia, Japan, and from international funding agencies, like the World Bank, through outright grants, such as from the UK, and soft loans that became the key for Sri Lanka to find the needed financial resources to implement the Accelerated Mahaweli programme.

These infrastructure projects did not impose financial strains on the economy, not only because the cost of funding was low but also the return on the investment, which was in the form of Dollar savings for power generation, was almost immediate. However, the more recently implemented projects were funded with high cost short term loans, where the return on investment was over too long a period to justify their viability. For instance, there are several grounds on which the network of expressways constructed can be justified, but not the funding through Dollar loans at high interest rates. Instead, they should have been funded through a gasoline tax, as was done in the U.S.A. following WWII, because at the end of the day, it is the user that foots the bill, similar to any Value Added Tax.

What was the motivation for the strategy adopted? Was it corruption, or was Sri Lanka tempted by the creditors into taking advantage of bilateral relations with a view to seeking a foothold in order to exploit its strategic location to pursue their own geopolitical interests? Whatever the reason, or reasons, the fact remains that the current crisis is because Sri Lanka was not astute enough to be aware of “Greeks bearing gifts.”

CONCLUSION

It is evident from the foregoing that Economic Policies and Foreign Policy do not work in isolation of each other. Instead, the material cited above demonstrate that Foreign Relations and Foreign Policy have a significant influence over Economic Policies even to the point of outwitting Economic Policies that have negative consequences. For instance, the offer of three 100 MW Nuclear Reactors, by Russia, is motivated by bilateral relations and certainly not by economic considerations, because it would amount to importing uranium instead of oil. The Light Rail Project, at a reported cost of USD 2.0 Billion from Japan, that has soured Sri Lanka/Japan relations, is similar in vein, because the loan is in Dollars and the benefits are in Rupees.

The clear reason for this is because Sri Lanka does not have an Economic Plan. If it had, Sri Lanka would be in sounder position to politely say NO to bilateral unsolicited offers, without an impact on Foreign Relations.

One guiding principle of such an Economic Plan should be that if the funding for a project is in International convertible currency, the return on the investment should be in the same currency, or, the equivalent reduction in imports should be in a convertible currency.

Not only does Sri Lanka NOT have an Economic Plan, she does not have a clear Foreign Policy either. There is no more talk of being Non-Aligned. There is not much talk of being Neutral, either. This vacuum is tempting all the major powers to seek a foothold in Sri Lanka because of its relevance to Indo-Pacific confrontations; a trend that would make Sri Lanka’s sovereignty and territorial integrity vulnerable. The lack of a clear Foreign Policy gives the opportunity for the Government to respond to each situation and to every offer, individually. Such an individualized approach not only allocates too much power to the President, and a few others close to him, but also could change with a change of Government. This approach is not in the best interests of Sri Lanka, particularly because of global uncertainties in terms of currency related economic issues, as well as the other maneuverings going on around Sri Lanka, arising from Indo-Pacific tensions.

The President has repeatedly commented on these tensions. The most recent being at the BMICH when he stated that Sri Lanka “doesn’t want to get caught between escalating US-China tensions…. We are now being asked to choose sides”. However, he had stated that Sri Lanka would not succumb to the pressures (Daily Mirror, May 11, 2023). If Sri Lanka is not to take sides and/or succumb to pressures, the policy to pursue vigorously the policy of “integrating” with India would be a contradiction.

The President’s recommendation has been to rely on a strengthened ASEAN in the coming decades. Reliance on a future strengthened ASEAN misses the most critical point that the strategic location of Sri Lanka is unique in comparison to that of other ASEAN countries. Consequently, the pressures on them would be significantly less and different to that of Sri Lanka. This fact alone requires Sri Lanka to develop its own policy as to how it handles these escalating tensions.

Therefore, it is imperative that clear bipartisan policies be developed in respect of the link between economic and foreign policy issues. In addition, because of this inevitable interplay between economic policy and foreign policy, the separate institutional arrangements that currently exist should be reformed and reorganized to include an overarching arrangement in order to foster greater integration between economic and foreign policies, when making decisions that impact on both sectors, and eventually, the country.



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Ranking public services with AI — A roadmap to reviving institutions like SriLankan Airlines

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Efficacy measures an organisation’s capacity to achieve its mission and intended outcomes under planned or optimal conditions. It differs from efficiency, which focuses on achieving objectives with minimal resources, and effectiveness, which evaluates results in real-world conditions. Today, modern AI tools, using publicly available data, enable objective assessment of the efficacy of Sri Lanka’s government institutions.

Among key public bodies, the Supreme Court of Sri Lanka emerges as the most efficacious, outperforming the Department of Inland Revenue, Sri Lanka Customs, the Election Commission, and Parliament. In the financial and regulatory sector, the Central Bank of Sri Lanka (CBSL) ranks highest, ahead of the Securities and Exchange Commission, the Public Utilities Commission, the Telecommunications Regulatory Commission, the Insurance Regulatory Commission, and the Sri Lanka Standards Institution.

Among state-owned enterprises, the Sri Lanka Ports Authority (SLPA) leads in efficacy, followed by Bank of Ceylon and People’s Bank. Other institutions assessed included the State Pharmaceuticals Corporation, the National Water Supply and Drainage Board, the Ceylon Electricity Board, the Ceylon Petroleum Corporation, and the Sri Lanka Transport Board. At the lower end of the spectrum were Lanka Sathosa and Sri Lankan Airlines, highlighting a critical challenge for the national economy.

Sri Lankan Airlines, consistently ranked at the bottom, has long been a financial drain. Despite successive governments’ reform attempts, sustainable solutions remain elusive.

Globally, the most profitable airlines operate as highly integrated, technology-enabled ecosystems rather than as fragmented departments. Operations, finance, fleet management, route planning, engineering, marketing, and customer service are closely coordinated, sharing real-time data to maximise efficiency, safety, and profitability.

The challenge for Sri Lankan Airlines is structural. Its operations are fragmented, overly hierarchical, and poorly aligned. Simply replacing the CEO or senior leadership will not address these deep-seated weaknesses. What the airline needs is a cohesive, integrated organisational ecosystem that leverages technology for cross-functional planning and real-time decision-making.

The government must urgently consider restructuring Sri Lankan Airlines to encourage:

=Joint planning across operational divisions

=Data-driven, evidence-based decision-making

=Continuous cross-functional consultation

=Collaborative strategic decisions on route rationalisation, fleet renewal, partnerships, and cost management, rather than exclusive top-down mandates

Sustainable reform requires systemic change. Without modernised organisational structures, stronger accountability, and aligned incentives across divisions, financial recovery will remain out of reach. An integrated, performance-oriented model offers the most realistic path to operational efficiency and long-term viability.

Reforming loss-making institutions like Sri Lankan Airlines is not merely a matter of leadership change — it is a structural overhaul essential to ensuring these entities contribute productively to the national economy rather than remain perpetual burdens.

By Chula Goonasekera – Citizen Analyst

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Why Pi Day?

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International Day of Mathematics falls tomorrow

The approximate value of Pi (π) is 3.14 in mathematics. Therefore, the day 14 March is celebrated as the Pi Day. In 2019, UNESCO proclaimed 14 March as the International Day of Mathematics.

Ancient Babylonians and Egyptians figured out that the circumference of a circle is slightly more than three times its diameter. But they could not come up with an exact value for this ratio although they knew that it is a constant. This constant was later named as π which is a letter in the Greek alphabet.

Archimedes

It was the Greek mathematician Archimedes (250 BC) who was able to find an upper bound and a lower bound for this constant. He drew a circle of diameter one unit and drew hexagons inside and outside the circle such that the sides of each hexagon touch the sides of the circle. In mathematics the circle passing through all vertices of a polygon is called a ‘circumcircle’ and the largest circle that fits inside a polygon tangent to all its sides is called an ‘incircle’. The total length of the smaller hexagon then becomes the lower bound of π and the length of the hexagon outside the circle is the upper bound. He realised that by increasing the number of sides of the polygon can make the bounds get closer to the value of Pi and increased the number of sides to 12,24,48 and 60. He argued that by increasing the number of sides will ultimately result in obtaining the original circle, thereby laying the foundation for the theory of limits. He ended up with the lower bound as 22/7 and the upper bound 223/71. He could not continue his research as his hometown Syracuse was invaded by Romans and was killed by one of the soldiers. His last words were ‘do not disturb my circles’, perhaps a reference to his continuing efforts to find the value of π to a greater accuracy.

Archimedes can be considered as the father of geometry. His contributions revolutionised geometry and his methods anticipated integral calculus. He invented the pulley and the hydraulic screw for drawing water from a well. He also discovered the law of hydrostatics. He formulated the law of levers which states that a smaller weight placed farther from a pivot can balance a much heavier weight closer to it. He famously said “Give me a lever long enough and a place to stand and I will move the earth”.

Mathematicians have found many expressions for π as a sum of infinite series that converge to its value. One such famous series is the Leibniz Series found in 1674 by the German mathematician Gottfried Leibniz, which is given below.

π = 4 ( 1 – 1/3 + 1/5 – 1/7 + 1/9 – ………….)

The Indian mathematical genius Ramanujan came up with a magnificent formula in 1910. The short form of the formula is as follows.

π = 9801/(1103 √8)

For practical applications an approximation is sufficient. Even NASA uses only the approximation 3.141592653589793 for its interplanetary navigation calculations.

It is not just an interesting and curious number. It is used for calculations in navigation, encryption, space exploration, video game development and even in medicine. As π is fundamental to spherical geometry, it is at the heart of positioning systems in GPS navigations. It also contributes significantly to cybersecurity. As it is an irrational number it is an excellent foundation for generating randomness required in encryption and securing communications. In the medical field, it helps to calculate blood flow rates and pressure differentials. In diagnostic tools such as CT scans and MRI, pi is an important component in mathematical algorithms and signal processing techniques.

This elegant, never-ending number demonstrates how mathematics transforms into practical applications that shape our world. The possibilities of what it can do are infinite as the number itself. It has become a symbol of beauty and complexity in mathematics. “It matters little who first arrives at an idea, rather what is significant is how far that idea can go.” said Sophie Germain.

Mathematics fans are intrigued by this irrational number and attempt to calculate it as far as they can. In March 2022, Emma Haruka Iwao of Japan calculated it to 100 trillion decimal places in Google Cloud. It had taken 157 days. The Guinness World Record for reciting the number from memory is held by Rajveer Meena of India for 70000 decimal places over 10 hours.

Happy Pi Day!

The author is a senior examiner of the International Baccalaureate in the UK and an educational consultant at the Overseas School of Colombo.

by R N A de Silva

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Sheer rise of Realpolitik making the world see the brink

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A combined US-Israel attack on Iran.(BBC)

The recent humanly costly torpedoing of an Iranian naval vessel in Sri Lanka’s Exclusive Economic Zone by a US submarine has raised a number of issues of great importance to international political discourse and law that call for elucidation. It is best that enlightened commentary is brought to bear in such discussions because at present misleading and uninformed speculation on questions arising from the incident are being aired by particularly jingoistic politicians of Sri Lanka’s South which could prove deleterious.

As matters stand, there seems to be no credible evidence that the Indian state was aware of the impending torpedoing of the Iranian vessel but these acerbic-tongued politicians of Sri Lanka’s South would have the local public believe that the tragedy was triggered with India’s connivance. Likewise, India is accused of ‘embroiling’ Sri Lanka in the incident on account of seemingly having prior knowledge of it and not warning Sri Lanka about the impending disaster.

It is plain that a process is once again afoot to raise anti-India hysteria in Sri Lanka. An obligation is cast on the Sri Lankan government to ensure that incendiary speculation of the above kind is defeated and India-Sri Lanka relations are prevented from being in any way harmed. Proactive measures are needed by the Sri Lankan government and well meaning quarters to ensure that public discourse in such matters have a factual and rational basis. ‘Knowledge gaps’ could prove hazardous.

Meanwhile, there could be no doubt that Sri Lanka’s sovereignty was violated by the US because the sinking of the Iranian vessel took place in Sri Lanka’s Exclusive Economic Zone. While there is no international decrying of the incident, and this is to be regretted, Sri Lanka’s helplessness and small player status would enable the US to ‘get away with it’.

Could anything be done by the international community to hold the US to account over the act of lawlessness in question? None is the answer at present. This is because in the current ‘Global Disorder’ major powers could commit the gravest international irregularities with impunity. As the threadbare cliché declares, ‘Might is Right’….. or so it seems.

Unfortunately, the UN could only merely verbally denounce any violations of International Law by the world’s foremost powers. It cannot use countervailing force against violators of the law, for example, on account of the divided nature of the UN Security Council, whose permanent members have shown incapability of seeing eye-to-eye on grave matters relating to International Law and order over the decades.

The foregoing considerations could force the conclusion on uncritical sections that Political Realism or Realpolitik has won out in the end. A basic premise of the school of thought known as Political Realism is that power or force wielded by states and international actors determine the shape, direction and substance of international relations. This school stands in marked contrast to political idealists who essentially proclaim that moral norms and values determine the nature of local and international politics.

While, British political scientist Thomas Hobbes, for instance, was a proponent of Political Realism, political idealism has its roots in the teachings of Socrates, Plato and latterly Friedrich Hegel of Germany, to name just few such notables.

On the face of it, therefore, there is no getting way from the conclusion that coercive force is the deciding factor in international politics. If this were not so, US President Donald Trump in collaboration with Israeli Rightist Premier Benjamin Natanyahu could not have wielded the ‘big stick’, so to speak, on Iran, killed its Supreme Head of State, terrorized the Iranian public and gone ‘scot-free’. That is, currently, the US’ impunity seems to be limitless.

Moreover, the evidence is that the Western bloc is reuniting in the face of Iran’s threats to stymie the flow of oil from West Asia to the rest of the world. The recent G7 summit witnessed a coming together of the foremost powers of the global North to ensure that the West does not suffer grave negative consequences from any future blocking of western oil supplies.

Meanwhile, Israel is having a ‘free run’ of the Middle East, so to speak, picking out perceived adversarial powers, such as Lebanon, and militarily neutralizing them; once again with impunity. On the other hand, Iran has been bringing under assault, with no questions asked, Gulf states that are seen as allying with the US and Israel. West Asia is facing a compounded crisis and International Law seems to be helplessly silent.

Wittingly or unwittingly, matters at the heart of International Law and peace are being obfuscated by some pro-Trump administration commentators meanwhile. For example, retired US Navy Captain Brent Sadler has cited Article 51 of the UN Charter, which provides for the right to self or collective self-defence of UN member states in the face of armed attacks, as justifying the US sinking of the Iranian vessel (See page 2 of The Island of March 10, 2026). But the Article makes it clear that such measures could be resorted to by UN members only ‘ if an armed attack occurs’ against them and under no other circumstances. But no such thing happened in the incident in question and the US acted under a sheer threat perception.

Clearly, the US has violated the Article through its action and has once again demonstrated its tendency to arbitrarily use military might. The general drift of Sadler’s thinking is that in the face of pressing national priorities, obligations of a state under International Law could be side-stepped. This is a sure recipe for international anarchy because in such a policy environment states could pursue their national interests, irrespective of their merits, disregarding in the process their obligations towards the international community.

Moreover, Article 51 repeatedly reiterates the authority of the UN Security Council and the obligation of those states that act in self-defence to report to the Council and be guided by it. Sadler, therefore, could be said to have cited the Article very selectively, whereas, right along member states’ commitments to the UNSC are stressed.

However, it is beyond doubt that international anarchy has strengthened its grip over the world. While the US set destabilizing precedents after the crumbling of the Cold War that paved the way for the current anarchic situation, Russia further aggravated these degenerative trends through its invasion of Ukraine. Stepping back from anarchy has thus emerged as the prime challenge for the world community.

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