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Asia Progress Forum backs Port City project, but points out major shortcomings

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The CPCEC (Colombo Port City Economic Commission) Bill has been designed to encourage foreign currency inflows which would have a positive effect on GDP, BOP and the stability of the Sri Lankan rupee’s exchange rate, the Asia Progress Forum (APF) said yesterday.

However, the APF was concerned that the Bill did not address the risks of high volumes of outflows, which would have the counterintuitive effect of increasing volatility in the economy. The APF therefore called on policymakers to specify a cap on outflows to protect the national economy and involve the Central Bank in designing a framework for monetary stability in the Special Economic Zone ( SEZ),    Prof. K. D. N. Weerasinghe (Member – Presidium, APF),     Dr. Vagisha Gunasekara (Academic and Independent Researcher of Political Economy, Member – Secretariat,  APF) and  Percy Samarasinghe (Researcher, Member – Secretariat,  APF)) stated.

The following is the full text of their statement: “APF notes the recent gazette of the Colombo Port City Economic Commission (CPCEC) Bill, which seeks to establish a SEZ in 269 hectares of land reclaimed from the sea, which in turn will be governed by a President-appointed Economic Commission and feature a Single Window Investment Facilitator to increase the ease of doing business in the Port City.

“The APF unequivocally condemns the virulent Sinophobia and claims of “Chinese colonialism” made by various public figures in the guise of critiquing the CPCEC Bill. Such statements are factually incorrect, grossly misleading to the public, and deeply insulting to one of our oldest and most steadfast allies.    APF also observes the striking similarities in the anti-China rhetoric advanced by these political actors and the statement by the American Ambassador to Sri Lanka that was covered by the press prior to the gazette notice of the CPCEC Bill.

“Sri Lanka has maintained friendly relations with China since the visit of Bhikku Faxian in the year 410. The Rubber-Rice pact of 1952 was arguably the most favourable trade agreement in our country’s history, signed by a right-wing Sri Lankan government that set aside ideological differences with the People’s Republic of China (PRC) and collaborated on mutually beneficial economic grounds. Despite mounting pressure from reactionary pro-imperialist forces from both within and outside the country, the forward-thinking decision-makers of Sri Lanka at that time established partnership with the PRC. Establishing formal diplomatic relations with the PRC in 1957 was the result of decades of activism by the Left movement. The PRC has since remained a close friend and consistently stood for the sovereignty and territorial integrity of Sri Lanka, through war, natural disasters and imperialist aggression.

“Port City Colombo was initially conceptualized by Sri Lankan policymakers, and the CPCEC Bill is also the product of Sri Lankan policymakers. Land reclamation for the Port City was not debt incurring but instead came through a direct investment of 1.4 billion US dollars – the largest in Sri Lanka’s history. The land itself is an inalienable part of Sri Lanka and was officially vested with the Urban Development Authority (UDA) in 2019. The CPCEC Bill stipulates that the SEZ will be under the centralized rule of the democratically elected President of Sri Lanka, and not any foreign country, let alone China. The Bill also stipulates that land in the SEZ cannot be sold on a freehold basis.

 

Organic effect

“APF acknowledges that Port City Colombo is an organic effect in this age of economic globalization and integration. Sri Lanka is a small island nation that is in a deep economic crisis. With limited natural resources, under-developed human resources, low purchasing power and high national debt, our country cannot run counter to this unstoppable historical trend and “decouple” from market principles. APF views Port City Colombo as an opportunity to gain much-needed foreign investment, which in turn would stabilize the rapidly depreciating Sri Lankan Rupee. We envisage that the services-driven SEZ will provide opportunities for young Sri Lankan entrepreneurs drive innovation and reduce brain drain.  In a country with a rapidly growing service sector that rarely follows international standards, the SEZ will introduce important benchmarks for the Sri Lankan service sector. The service establishments within the SEZ will also provide much-needed big data on customer preferences, which in turn could be productively used to innovate products and services offered by Sri Lankan companies.

 

Anti-China rhetoric

“In light of the aforementioned benefits, we emphasize that anti-China rhetoric serves little purpose except to manufacture consent for the misinformation campaign and new Cold War being waged against the PRC and its people by the US and its allies, including India. This rhetoric could be construed as an attempt by the imperialist camp headed by the US, to prevent Sri Lanka from taking its rightful place in the growing Asian economy led by China’s market socialist model. Furthermore, such rhetoric prevents rational, constructive debate on the merits and demerits of the already existing Port City to the national economy. APF is of the view that Port City Colombo is an important development intervention to stabilize the Sri Lankan economy and that further steps could be taken by the Government of Sri Lanka to complement the establishment of Port City Colombo. What follows are the APF’s observations on the weaknesses of the CPCEC and steps required to address them.

“The APF notes that Section 7 of the CPCEC Bill states that five to seven members can be appointed by the President to the Economic Commission that will form the main governing body of the SEZ. While acknowledging the need for foreign expertise to operate the SEZ up to an internationally competitive standard, we feel it is equally import to include Sri Lankan talent. We therefore call on policymakers to include a quota of majority Sri Lankan citizens in the Economic Commission.

“The APF notes that the CPCEC Bill has been designed in such a way as to encourage foreign currency inflows which will have a positive effect on GDP, BOP and the stability of the Sri Lankan rupee’s exchange rate. However, we are concerned that the Bill does not address the risks of high volumes of outflows, which will have the counterintuitive effect of increasing volatility in the economy. We therefore call on policymakers to specify a cap on outflows to protect the national economy and involve the Central Bank in designing a framework for monetary stability in the SEZ.

“While all citizens of the country will benefit from high GDP, BOP and currency stability, this alone is not enough to push the domestic economy towards agricultural revitalization and industrialization. The APF emphasizes that the Port City can only be one aspect of Sri Lanka’s economic development. A broader plan and institutional framework are needed to harness the potential short-term macroeconomic benefits of the Port City for the advancement of the real economy. We therefore call on policymakers to formulate and implement a long-term plan that specifies how the capital inflow vis-à-vis Port City Colombo will be reinvested to rejuvenate industrialization and agricultural development in Sri Lanka.

 

Tax exemptions

“APF recognizes that sweeping tax exemptions in the CPCEC Bill are necessary to incentivize foreign currency inflows. We also recognize that the main source of government revenue in the SEZ will be through leases, sales and license fees. Therefore, it is the APF’s position that the residents of the SEZ, should not be eligible to the same subsidized services as the mainland. We therefore call on policymakers to specify that profitable rates will be charged for state services such as water, electricity, communications and other services in the SEZ, which in turn will have a positive effect on the balance sheets of our SOEs.

“The APF appreciates provisions in the CPCEC Bill to prevent investment via Domestic Foreign Currency accounts, thereby incentivizing strictly foreign inflows. While liberal critics of CPCEC bill argue that equal opportunity should be provided for local and foreign investors, we note that local investors may abuse Port City Colombo to evade taxes that they owe to the national economy. The Sri Lankan people have enjoyed a generous welfare state since our country’s independence in 1948. The provision of free healthcare and education is our pride and a national priority. It is imperative that the income tax regime that is applicable to Sri Lankan businesses continue in order to fund the welfare state. We therefore call for stronger auditing mechanisms, including involvement of the Auditor General’s Department, and surveillance on transactions to ensure that local companies do not find loopholes and abuse CPCEC to evade taxes due in the mainland, which in turn would diminish government revenue.

“The APF notes that the CPCEC Bill makes local labour laws inapplicable in the SEZ, while workers will receive salaries in foreign currency. While recognizing this as a trade-off, APF calls for minimum standards including a minimum wage and standardized working hours in the SEZ. Moreover, we are concerned about possible loopholes which may allow manpower agencies to collect foreign currency while remunerating contract workers in rupees. Stronger safeguards are required to ensure every worker in the SEZ receives competitive salaries in foreign currency.  

 

Employment generation

The APF notes studies which project that the Port City will generate a significant number of jobs during the construction and operation phase. However, we are concerned that the CPECEC has no provisions for ensuring that a quota of such jobs is allocated for Sri Lankan workers. Currently, the Sri Lankan labour force is in a crisis characterized by a mismatch of skills, competencies and attitudes required by the private sector and those acquired by workers from educational and/or technical training institutions. We therefore call for a comprehensive plan for human resource development which entails an urgent revision and improvement of current skills development facilities to ensure that Sri Lankan workers are able to compete against international standards by the time the Port City is functional in 20 years.”



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Parliament prorogued

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by Saman Indrajith

Parliament has been prorogued with effect from midnight yesterday (27) by President Ranil Wickremeisnghe under Article 70 of the Constitution. The Department of Government Printing issued the Gazette notification annoucing the presidential order yesterday evening.The new Parliament session is scheduled to commence on Feb. 08.

A prorogation, which is a temporary recess of Parliament, should not extend to a period of more than two months, However, such date for summoning Parliament may be advanced by another Presidential Proclamation, provided it is summoned for a date not less than three days from the date of such fresh proclamation.

When Parliament is prorogued, the Proclamation should notify the date for the commencement of the new Session of Parliament, under Paragraph (3) of Article 70 of the Constitution.

During the prorogation the Speaker continues to function and the Members retain their membership, even though they do not attend meetings of Parliament.The effect of a prorogation is to suspend all current Business before the House, and all proceedings, pending at the time, are quashed, except impeachments.

A Bill, motion or question of the same substance cannot be introduced for a second time during the same Session. However, it could be carried forward at a subsequent Session, after a prorogation.

“All matters which having been duly brought before Parliament, and have not been disposed of at the time of the prorogation of Parliament, may be proceeded with during the next Session,” states the Paragraph (4) of Article 70 of the Constitution.

In the light of this constitutional provision, a prorogation does not put an end to pending Business. Thus, a pending matter may be proceeded with from that stage onwards after the commencement of the new Session. At the beginning of a new Session, all items of Business which were in the Order Paper of Parliament, need to be re-listed, if it is desired to continue with them.

At the end of a prorogation, a new Session begins and is ceremonially declared open by the President. He is empowered, under the Constitution, to make a Statement of Government Policy in Parliament, at the commencement of each Session of Parliament, and to preside at ceremonial sittings of Parliament, in terms of the provisions stipulated in Paragraph (2) of Article 33 of the Constitution.

The President is empowered to make a statement of Government Policy at the commencement of each new Session. In the past, it was known as the Throne Speech which was delivered by the Governor-General.

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LG elections may turn violent – CPA

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By PRIYAN DE SILVA

Executive Director of the Centre for Policy Alternatives (CPA) and co-convener of the Centre for Monitoring Election Violence (CMEV) Dr. Paikiasothy Saravanamuttu has warned that the March 9 LG polls (if held) may turn violent as political parties are fighting for their survival as the results of the election may be considered as a referendum. He said it was doubtful whether the election would be held.

Dr. Saravanamuttu sounded this warning at the conference on Campaign Finance Regulations, convened by the CMEV, and Transparency International Sri Lanka (TISL), which was held last Thursday (26). He recalled that once when he asked former President Mahinda Rajapaksa about campaign and party finances, the latter’s reply had been as follows: “I am not going to tell you the whole story, I cannot tell you the whole story and I will not tell you the whole story”

The Campaign Finance Regulation Act became law last Tuesday (24) and Dr. Saravanamuttu pointed out that the former President’s quip highlighted the challenges of collecting information on exactly how much is actually being used. “It is important that the public should know, whether it be cash or kind, from where the money comes from. And the information be made available to the public.”

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President: Cabinet has agreed to implement 13A fully

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President Ranil Wickremesinghe, on Thursday, informed the All Party Leaders Conference on Reconciliation that the Cabinet was agreeable to fully implementing the 13th Amendment.Issuing a statement on Friday, the President’s Media Division (PMD) said the President is bound to implement the laws of the land and the 13th Amendment is a part of the Constitution.

“The 13th Amendment has been in existence for over 30 years. I must implement it. If anyone is opposed, they can bring in a constitutional amendment to change it, or abolish it,” he said.

The President said that the country has to decide whether to fully implement the 13th Amendment or abolish it. “We can’t decide to do neither. Any MP can bring a private members motion to abolish the 13A. What happens when most people don’t support the motion? We will have to fully implement it,” he said.

The President said that he is working, according to a Supreme Court decision, on 13A. “We have to look, especially at the decision given by Chief Justice Palinda Ranasinghe. We are still in the bounds of a unitary state. I am against a Federal state but I support the devolution of power to provinces. The provincial councils don’t even have the powers enjoyed by the City of London. So we can’t call this a federal state,” he said.

Wickremesinghe added that former President J.R. Jayawardane and his lawyers took great pains to prevent the 13A from leading to a federal state. He added that at the end of the war, against the LTTE, a large number of lands in the North and the East, that belonged to private owners, were under the control of the Army. However, most of it had been returned to the people, under presidents Mahinda Rajapaksa and Maithripala Sirisena.

“Only about 3000 acres are under the security forces. The forces must be given the opportunity to release these lands, without hindering national security. The Land Commission, too, must be immediately established. The draft on that can be presented by March. The Commission will have nine members, from each province ,and 12 will be appointed by the President. The we can come up with a national land policy and the Commission can implement the land policy,” he said.

The President said that 30 percent of the land will be allocated for forests. Large swaths of forests, in the upcountry, and in the catchment areas, for rivers, have been destroyed.

“We must increase the forest cover and the Land Commission must be entrusted with this,” he said.

The President added that he will provide further information, on February 08, on how the amendment will be implemented. He urged political parties to submit their proposals by February 04, the Independence Day of the country.

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