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Barking up the wrong tree

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Economic downturn due structural weaknesses and not ‘open economic’ policies

by Jayampathy Molligoda

This article makes an attempt to present few socio-economic factors and indicators reflecting Sri Lankan economic downfall and examine whether it has some bearing on our failure to address serious structural weaknesses in the economy for the last 45 years.

My view is it’s not the open economic policy that has contributed to the downfall of our economy. It’s due to the fact that successive governments have failed in undertaking much needed structural reforms in the economy. As a result, our export performance has drastically declined and thus widening the trade deficit. It should be clearly understood that large fiscal (government budget) and external ‘current account’ deficits, popularly known as the ‘twin deficit’, are the two key structural problems in Sri Lanka identified as core weaknesses of the economy for many decades. In addition, the socio-political issues also would have contributed to the deterioration of the quality of life of the majority of people and thus eroding ‘rich value systems’ prevailed in the Sri Lankan society for a long period of time.

Socio-political issues:

The political analysts had been critically commenting on the manner in which President JRJ managed the country’s political system and governed the country during the initial period of the Presidential system under 78 Constitution. His governance style had created some kind of impression that JRJ government had made attempts to use tactics to undemocratically oppress the legitimate opposition by, first taking out the civic rights of the Leader of opposition, Mr Sirima Bandaranaike and suppress the trade union instigated general strike in 1980 and then postpone the Parliamentary elections by six years through a referendum, thus playing into extreme terrorism of LTTE, JVP and breakdown in law & order.

As a result, there has been a gradual deterioration of the economy of this country, although, both President JRJ and later President Premadasa were able to transform the socio-political system in the country and spur economic growth paving way for employment creation through private investments. Since 1978, the government of the day has been following an aggressive open economic policy framework and until 2014 there has been some progress in much needed infrastructure development with the participation of foreign and local enterprises in the private sector. However, no attempt has been made to evaluate the efficacy & effectiveness of such investments to the economy. Even after the war was successfully ended by 2009, we couldn’t establish trust & understanding among communities to establish a long- lasting peace and sound national security & defence system and political stability which are necessary pre-requisites for economic development on a sustainable basis.

Examine few key economic indicators:

(A) Government debt and depreciation of rupee:

Our total government debt was only Rs. 80 billion by end 1982, which includes some of the foreign loans obtained for the acceleration of Mahaweli development programme completed within six years. As for rupee depreciation- by end 1977, it was Rs 15.56, and by end 1982, it was Rs 21.32 for one US $. As can be seen, it was a gradual upward movement of the value of US $ and not very high rupee depreciation during the period-1977 to 1982. Since then, government debt had been increasing at a much faster rate and at the end 2014, it has gone up to Rs. 7, 486 billion, and by end 2019, it has further increased up to Rs. 13,031 billion. Our total external debt as a % of GDP by end 2010 was only 38% and it had increased to 67% by end 2019. As for rupee depreciation- by end 2004, it was Rs. 104.61 for one US$ and by end 2014 it was Rs. 131.05, now it’s Rs. 204/ but in the black market, it’s around Rs235-Rs 240/=.

(B) Poor export performance:

Compared to other regional counterparts, Sri Lankan export performance has been declining and it can be concluded that the investments made in infrastructure projects are giving diminishing returns. During the two decades in 1980’s and 90’s, we saw our export performance commencing from 1980 at one billion US$ (in the year 1980) going up to US$ 4.6 billion in the year 1999 and US $ 11.9 billion in 2019. The export performance reflects 26% of the GDP during the two decades ending 1999. However, the next two decades commencing 2000 to end 2019, the export performance of Sri Lanka has drastically declined to 16% of the corresponding GDP figures. (See table)

As can be seen, our trade deficit during the period 2010 to ‘19 has widened to 78% of total exports and our exports as a % of GDP has also decreased from 28% during the period 1990-99 to 14% during the ‘10 years period’ of 2010 to ‘19. In fact, it was an average of only 13% during the period 2015 to ‘19. The export revenue has been stagnating at an average of US$ 10. 9 billion and the trade deficit has widened to an average of US $ 8.5 billion during the period 2010 to ‘19. Repeated attempts to offset the trade deficit through tourism proceeds and remittances have not been successful without having corresponding forex inflows from export proceeds and FDI. Further, the exchange rate policy has created competitiveness issues for exporters, as external trade counterparts have become more competitive at the global market place due to their currencies are getting depreciated at a faster rate. Just to give an illustration, one cannot hold by his two hands four rubber ball in the water simultaneously for a long period of time; similarly, (i) our bank interest rates, (ii) inflation rate, (iii) rupee exchange rate and (iv) expecting large inflows of FDIs, cannot be held back for a long period of time – it’s a recipe for disaster in economic sense. These factors have adversely contributed to current macro- economic situation lowering the economic growth & development of the country.

From the above economic indicators, it can be seen that during the last seven years, the economic situation got badly affected, out of which during the last two years, it was mainly due to Covid-19 and the year-2019, it was partly due to Easter Sunday attack. Up to now, our economy would have lost nearly US $ 10 billion as opportunity cost on account of tourism proceeds from May 2019 to end November 2021. It is expected that tourist arrivals will pick it up, targeting some 100,000 arrivals per month for the next 12 months ending 2022. It’s unfortunate the ‘political party blame culture’ also contributed to the deterioration of society’s values. Because of these events, the international community lost confidence in supporting SL and even private sector FDIs have failed to come. One can also conclude that inward looking policies will not offer solutions to foreign exchange crisis, although there is nothing wrong in promoting domestic production, smart agriculture and industrial revolutions, which covers ICT development. We cannot find solutions by simply blaming the present government or previous governments, instead the key opinion leaders (KOLs) could get the government of the day to bring in much needed financial discipline through government budgetary process and instil new political culture and demand the government to bring in much needed structural reforms in order to reverse the declining trend.

Radical changes are needed to address structural weaknesses:

During the Presidential elections in November ‘19, a massive mandate was given by masses to the incumbent President, GR to undertake much needed ‘system change’. The economic situation would improve, if we are able to make some structural reforms in the economic front and undertake radical changes in the socio-political front which include changes to some areas of the foreign policy implementation. The solution lies with the Government taking some bold decisions – however they need to be mindful to the political realities and maintain policy consistency, until we are able to overcome difficulties and improve credit rating.

Key structural reforms and radical changes:

a.The present $$$ crisis needs to be resolved immediately.

i.Trade deficit for a long period of time has been around US 10 billion per year.

ii.Expected tourism earnings may not be sufficient to offset deficits in the short term.

iii.External foreign exchange reserves are low- US $1,6 Billion by end November.

iv.Banking system is faced with severe foreign currency shortage for essential items.

b.Under a revolutionary Land reforms and proper land use plan, we need to identify uncultivated land parcels, which includes Mahaweli land to fast track cultivation and development work which could be handled under PPP models by inviting private sector participation with proper monitoring of progress through an effective regulatory mechanism.

c.Use ‘National Sustainable Development Council of Sri Lanka’ as the institutional vehicle to drive green economic policy changes, whilst the Council continues to focus on 17 SDGs.

d.Existing guarantees given by Multilateral agencies for some credit lines may not be available for fuel, diesel, petrol, but only for renewable energy sources. Therefore, if we continue to have diesel plants, sourcing foreign exchange without such credit lines, that becomes a serious issue, that’s why it is necessary to focus more on renewable energy.

e.Structuring mega projects have to be in line with international trends i.e.; Sustainable development goals, COP 26 Glasgow- ‘Climate change’ to attract the right investors for our projects. Indirect costs in delaying our mega projects. Colombo East Terminal (ECT), 300MW convertible power plants, Northern/Central Highway, Port access road etc. are examples resulting from delays. However, there should be a mechanism to ascertain whether the investments made in infrastructure projects are yielding desired, expected returns.

f.Drive against drugs & underworld operations, action against corrupt practices and improve public sector service efficiency. Maintain government fiscal deficit around 7% by increasing direct taxes and restructuring SOEs, thus further reducing the burden of high expenditure.

g. Focus on FDI led ‘export oriented’ growth strategy coupled with increase in domestic production, light industries, SMEs, ICT applications.i.e.; Grama Niladhari tabs etc. and a mechanism to reduce cost of living rise, provide relief packages, and paddy/rice value chain.

h.Within the framework of non- aligned movement, Sri Lanka could slowly shift our foreign relations towards India Japan and the US. This would enable FDIs and bi lateral funds to flow in from these countries including UAE, South Korea, Vietnam to attract funds and resolve US sanctions imposed through western banks. Even the IMF will facilitate structural adjustments and rating will improve.

Therefore, it is suggested the government to appoint an ‘Expert Council’ to look into these areas mandating them to recommend a short- term solution within a set of ‘medium term’ strategic plans for the next three -five years.



Features

The ubiquitous Tuk Tuk elevated to ambassadorial level

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The Sri Lankan three wheeler or tuk tuk and the Indian auto rickshaw are equally loved and despised, but used very much in both countries. Over here they have spread to every city, hamlet and even village. Needless to fear there will be no transport to hire when one descends from bus or train. There will always be the little bug waiting for a fare. And once in a while such a vehicle is the only negotiable one on rutty, inclined roads.

Love and hate? Car-less and permanently driverless women love the little three wheeled contraption. They are taken around marketing, shopping, escorting kids home from school. But male car owner-drivers detest them as dangerous clogs in traffic. They see dark pink when a tuk tuk is observed, red being reserved for private bus drivers. Most housewives adopt a three wheeler that makes for convenience, safety and even camaraderie with the guy at the handle bar. It’s good to adopt a known guy. I have two such – the white capped charioteer and the ex-sportsman gone to spread. The former will take me right into a bank or shop if at all possible. Compromises by stopping with no space left between entrance step or door and invariably warns “paressamen, hemin”. The other takes time to enquire after an ex-domestic whom he carefully conducted to visit relatives and my grandson who loved spinning around with his ‘Sampatha.’ These two are definite blessings in life, I count.

The Ambassador’s vehicle

Ambassador from Mexico to India (2015 – 2018), Melba Pria, made a definite statement of her belief in equality and her avowed aim of “promoting inclusion and strengthening public policy in Mexico and abroad” when she commissioned an auto rickshaw as her official vehicle in New Delhi. She had an auto rickshaw custom built for her designed by a visiting Mexican artist, thus earning herself the sobriquet of ‘Auto Rickshaw Diplomat.” A video sent me had her happily riding behind her suitably suited official driver, Jagchal Chana Dugal, flying the Mexican flag and the cab painted carnival bright with flowers, birds, fruit. The driver may have been duly shocked and to an Indian, a lowering of status. He had to learn to drive a lowly vehicle. Pria’s statement was that she considered herself a Delhi-ite and living in the city did what Delhites did – riding auto rickshaws all the time.

Parliament did not allow this type of vehicle in the premises. She promptly sent a letter of protest/request to the Speaker and won her case. In Sri Lanka a three wheeler is considered a lesser vehicle and many places do not allow such to proceed beyond a certain limit. I’ve met this setback when visiting friends in Crescat Apartments. Also, three wheelers are not allowed in the car park of HSBC, Baudhaloka Mawata. They may have their reasons and Nan won’t fight for equality among vehicles, though to her as a woman who uses them constantly, she feels they should be treated on par with other vehicles. Little wonder that such as I retches with disgust when she sees politicos arrive in their massive limousines provided gratis by the government and petrol paid for by people’s taxes.

Ambassador Pria had visited India previously and was an admirer of Tagore. She sat on the lap of Ravi Shankar and played the sitar when her mother was the Mexican Minister of Culture. She even boastfully claims her name is part Indian and means ‘pleasant’. “India is friends, family, home and so many other things, even my doctors are here.” She loves Delhi with its range of cultural activities.”Delhi is many cities within one city but one must be brave to be an outdoors person here.” She cycles too.

Her affinity to the country was shared by her brother, who, when ill, was brought by her to Delhi to consult a doctor. He died but had said he wanted to bathe in the holy waters of the Ganga in Benares. His ashes were given her with the pot draped in an Indian cloth. She went home with a Mexican cloth over the Indian, symbolically. When she was posted to Japan after her stint in India, she took her auto-rickshaw along. However, what I read did not say it was driving her around the streets of Tokyo – very improbable with the Japanese almost maniacal about cleanliness and atmospheric non-pollution.

Antecedents

The tuk tuk that is now ubiquitous in Sri Lanka having invaded the Hill Country too is, with its relatives overseas, a vehicle descended from the two-wheeled Italian scooter – Vespa. Italian aircraft designer Corradino D’Ascania evolved the three wheeled vehicle in 1948 and called it Trivespa. In 1956 a cab or hood was added and it was knows as the Piaggio Ape; ‘ape’ being Italian for bee, the vehicle making a buzzing sound.

In Sri Lanka

Recently the tuk tuk came into prominence. Asked to leave his post, OK, sacked, State Minister for Education Reform, Susil Premajayantha, left his office for good in a hired three wheeler which took him home. Or out of camera sight. Did he transfer to his own vehicle (luxury or not) when safe from media scrutiny? No doubt it was a PR stunt. Was it to show he is just one of us? He has no vehicle of his own? He was quoted in a tv clip saying he’ll get himself a car. Whether a dismissed Minister or not, he is a politician with all its attendant characteristics. No pity felt for this SLFPer who was the first to sign membership of the SLPP.

The lowly but much appreciated three wheeler gained customers since Covid 19 when people were advised to travel in open vehicles and taxi drivers hardly ever lower their windows in their air conditioned vehicles. We heard rumours the tuk tuks were to be taken off streets and imports banned by this government when it was new in office. A trick up its collective sleeve? We need this poor man’s vehicle in this country driven to poverty by persons in power who lived grand and built white elephants beyond their and the country’s means.

Of course you get the odd bod in the driving seat – the inexperienced, even unlicensed driver; the aspiring Formula One speedster; and the Lothario who looks back more than watches the road. The advantage is you can tell him off, exhibiting the umbrella you have in hand. That’s a plus point –being able to hop off a tuk tuk with no doors to delay or keep you in.

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Lady in red: Mysterious painting hidden behind a prominent Lankan’s portrait

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ECONOMYNEXT – At 9 a.m. on December 11, 2021, at the National Art Gallery of Sri Lanka, a portrait of Ananda Samarakoon, who famously composed the national anthem, was lifted off its frame to reveal a perfectly preserved painting of an enigmatic woman dressed in a red saree. Who she was, why she was painted and why she was eventually covered up, remains a mystery.

The painting, unearthed during a conservation project of 239 art pieces, is attributed to Mudaliyar Amarasekara, a towering and pioneering figure in Sri Lanka’s art scene.

The project was headed by Tharani Gamage, Director at the Department of Cultural Affairs, Hiranthi Fernando, Curator at the National Art Gallery, and an Art Restoration and Exhibition Committee comprised of eminent artists and scholars in the country.

Jennifer Myers, an easel painting conservation expert from the US, was brought in to assist with the project.

“So I’m just looking at this painting and I notice that the fabric of the canvas that was on the front was different from the canvas at the back… I was kind of pushing between front and back and I could feel there was an air space,” she says.

The conservationist noticed something unusual about the dust collected at the back of the painting.

“Because it’s a painting that’s done in landscape orientation, the dust should be at the bottom of the frame, but here the dust was collected on the side and that was really odd, so we slowly started taking off tacks from the corner and when we looked underneath, it looked like layers of paint on top of a canvas. That’s when we realised there could be another painting at the bottom.”

According to committee member Professor Jagath Weerasinghe, a mural painting conservation expert, Myers used archaeological principles to determine the existence of the second painting underneath.

“It’s very impressive, and precisely why we wanted to get an expert to help us with this project,” he says.

The newly discovered painting was found as a result of an initiative taken by the gallery to preserve some of its most exceptional pieces. From charcoal and watercolour to acrylics and oil paintings, the collection at the gallery spans two centuries and a diverse mix of mediums.

Professor Weerasinghe talks to EconomyNext about the difficulty of finding qualified individuals for the project.

“There is a lack of experts on easel painting conservationists in Sri Lanka. We do have academically trained experts on mural conservation, and they are the ones who made up the committee. We have trained in places like India, Pakistan and Japan, and we knew we had the practical capacity to pull it off.

“But working on a national collection is a difficult task, and we wanted someone from an internationally accepted programme, who had had academic training in the subject to work on it, which is how Jennifer was brought in.”

Myers, National Endowment for the Humanities Painting Conservation Fellow at the Chrysler Museum of Art, laughs as she tells us her title. “It’s a bit of a mouthful,” she says.

Myers has a degree in Museology, and a background in Archeology, Painting, Human anatomy and Bone Structure, all of which are useful for conservation work, which she studied at the University of Delaware.

“My professors at the university spoke about this project, and I was intrigued. This was an opportunity for me to learn about artists and a country that I didn’t know much about before, which is a personal interest of mine. I also thought I had the skills that the gallery was specifically looking for, so I could bring that to the project as well.”

The diversity of the collection was something that she did not expect.

“It was an amazing experience. I learnt about so many artists that we don’t get exposed to in America that often. The diversity of the collection was greater than I was expecting which was interesting and fantastic. There were paintings from a range of years, styles and there were more contemporary pieces; European and European inspired pieces, which I was surprised to see. It was a collection of surprises.”

The project, taken up by the Central Cultural fund at a cost 1.8 million rupees allocated by the Department of Cultural Affairs, was started in October 2021 and is set to be wrapped up by February 2022. Of the collection numbering 240 (with the new painting), 76 will go up for permanent display in the main gallery, and 88 will be exhibited temporarily in the eastern hall.

Professor Weerasinghe, who is also a contemporary artist and archaeologist, stresses the importance of official backup on cases such as these. “The ministry listened to the word of the professionals. So many artworks have been destroyed because of badly done conservation efforts. That’s precisely why we called in an expert. The decision to value professionalism is the most important thing that happened here. If they didn’t do that, none of this would have happened.”

Mithrananda Dharmasiri, Chief Mural Conservation Officer at Central Cultural Fund of Sri Lanka, touches on the misconceptions around conservation. “A lot of people think, can’t an artist just paint over the damage, isn’t that what conservation is? But conservation is a much more scientific, and a completely different thing.”

Professor Weerasinghe agrees, saying, “That is an important point. A conservator is not a scientist. A conservator is not an artist. A conservator is a conservator.”

Gamage gives us some official perspective on the matter.

“This was a joint effort by the ministry and the Committee and it was pulled off beautifully. This is the first time in Sri Lanka that such a large conservation project is being done, with international collaboration as well, and Jennifer was an invaluable part of the team,” he says.

Though Sri Lanka is home to some of the top mural conservation experts in the world, there is a great need for artists who work in other fields as well. With a humid climate that is especially treacherous to paints and fabrics, a greater effort must be put to protect the national artworks of the country, and give systematic education for those who are interested in the field.

The staff at the gallery are hopeful that the opening, as well as the discovery of the new painting, will revive the underappreciated art scene in the country. Finally set to open to the public in March 2022 after its closure in 2013, the new exhibition and the renovated buildings are a tribute to the great artists and artworks that were once hidden away.

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HOW NOT TO RUN AN ELECTION (1950s)

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by Chandra Arulpragasam

I must admit that my experience of elections is limited only to one district (the Batticaloa district), long ago (in the 1950s), and not at the national level. Moreover, as the second Returning Officer, I played second fiddle to the Government Agent, who was actually in charge of the Parliamentary Elections at the district level. However I was given definite responsibilities: first, for staffing the polling booths with government staff officers of executive rank; second, for supervising the actual process of elections in the polling booths; and third, for the counting of ballots once the voting was done.

My first job was difficult because many Sinhalese officers in those days were reluctant to come so far to a Tamil-speaking district. (This was long before the Tigers became the major political or military force in those districts). I was able to overcome this difficulty because some of my Sinhalese friends shared my interest in jungles and lagoons, and they were eager to come as polling officers to the Eastern Province. I had to officially get them to staff the polling booths; but unofficially, I had also to look after them and provide social activities for them.

On Election Day, I went to monitor the polling places. On one of these monitoring missions, I visited Kattankudi, a Muslim town just south of Batticaloa, where I was actually able to see an act of impersonation for the first time. This case was so outrageous that I will remember it till I die. A pregnant Muslim woman with a sari pulled over her face with only the eyes showing, was challenged. To my utter surprise, ‘she’ was unveiled to reveal a man with a beard and a pillow around his waist, pretending to be pregnant!

Many years later, I used this practical experience (of Kattankudi) to convince SWAPO, the independence movement in Namibia to withhold their agreement to the Turnhalle Agreement. The leader of SWAPO, who became the Prime Minister of Namibia was eager to get my views. I stood by my opinion that they would surely lose that decisive election – for independence – unless they were able to control or at least monitor the whole implementation process of that election. This delayed their independence by about 10 years – until they were able to train the requisite number of workers to monitor the implementation of the whole election process. The experience of Kattankudi went a long way!

To return to my story about the Batticaloa election, I still had to cast my own vote for the Batticaloa town seat. Fortunately or unfortunately, I knew all the candidates for that seat. When I came to the polling station, each of the candidates bowed and smiled, wanting to shake my hand, each of them expecting me to vote for them. I was an LSSP supporter at that time and since there was no LSSP horse in that race, I did not know whom to vote for. I went into the polling booth and impulsively drew a caricature/cartoon of each of the three candidates against their names. I remember drawing a fez cap on the Muslim candidate’s head, and drawing hair on the ears for another candidate (which was his outstanding characteristic) and a moustache on the other candidate. Smiling uneasily and guiltily, I emerged from the ballot booth to engage in small talk with the three candidates.

On Election night, there was a grand counting of votes in the Kachcheri. This was presided over by the Government Agent, but with me in actual charge of the counting. If there was a challenge to any ballot, I would give a ruling on the spot. If it was still contested, it would go to the Government Agent for his ruling. I was dreading that my ballot (with the cartoon of the candidates) would come up for my ruling. It did. And I was the first to shout “Spoilt Ballot”. I heard one of the candidates muttering loudly “bloody fool” – aimed at the person who had cast that ballot! I hastened to agree! The case was reported to the Government Agent, who did not know that his own AGA was responsible for that ballot! I had acted irresponsibly as a presiding officer. On the other hand, it was my own ballot – and if I chose to spoil it, that was my own right!

The night after the election, I invited my friends from the various government departments in Colombo to gather for a social get-together at the Vakaneri Circuit Bungalow. This was about 22 miles north of Batticaloa and situated on a massive rock overlooking the Vakaneri reservoir, which gave water to the Paper Factory. This had been one of my favourite haunts – to enjoy the silence and views of jungle and water.

I had got my friend Carl de Vos, from the private sector, to go up to the bungalow on Election Day and decorate the place, inflate the balloons, etc. – so that it had a festive look even before we arrived. I played a piano accordion at that time – and thus provided the music for singing, dancing and baila sessions. There was much singing of old songs and much drinking of beer. So much so, that the bungalow-keeper when measuring the rain-gauge the next morning (his daily duties in this Irrigation Circuit Bungalow) found to his consternation that there had been so much rain on the previous night (beer converted to urine) that there was danger of flooding – though there had been no rain at all! He grumbled loudly for me to hear: “It is impossible with this AGA dorai”.

Then the “impossible” happened. One of our guests, who had had too much to drink, had slipped and fallen into the reservoir! Knowing that it was deep at this point, that he could not swim and that there were crocodiles in the reservoir, I jumped in and hauled him out quickly – before the crocs could get me!

I heaved a sigh of relief when my election duties had been successfully completed and my social obligations – of playing herdsman to the officers from Colombo – had finally ended.

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