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Confronting capitalism – market oriented economy with state guidance

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By Jayampathy Molligoda

Recently the Governor, Central Bank, Professor WD Lakshman, at a media briefing stated that Sri Lanka was following a market- oriented economy with state guidance, involving some controls and restrictions. He was quoted as saying that such a framework would not be successful under an IMF program. This, in my view needs further elaboration. As we understood, IMF programme will essentially impose some conditions such as; maintaining fiscal discipline- not to exceed the government budget deficit beyond say 8-9 % of GDP, not to defend external value of the rupee, meaning not allowing the rupee to depreciate by pumping dollars from the official reserves of the Central Bank, not to go for unnecessary commercial foreign borrowings etc.

 

Managing in turbulent times:

According to IMF global economic outlook based on October 2020 report, most countries imposed stringent lockdown measures and as a result, the economic activities contracted dramatically on a global scale. The report says that although easing lockdowns can lead to a partial recovery, economic activity is likely to remain subdued until health risks abate.

The positive feature of working with IMF is that our credit rating could be improved and our Banks and other financial institutions may be able to transact with foreign financial institutions efficiently and arrange trade finance facilities and commercial borrowings at competitive rates. Also, the Sri Lankan exporters may be able to receive foreign remittances without unnecessary delays and restrictions imposed by foreign correspondence banks. As for credit rating position, Sri Lanka was downgraded four months back and at present, Sri Lanka is ranked C grade. When a country is under an IMF standby facility, there is a greater possibility of the ratings getting improved, thus building confidence among the business partners and foreign multilateral financial institutions like World Bank, ADB, JBIC etc.

As articulated by the Central Bank Governor, the government has been able to contain the trade deficit through stringent import control measures in order to save much needed foreign exchange, as the tourism & travel and some exports such as textile and garment sectors have been badly affected during the year under review. This is in the backdrop of some export targets where the government policy makers were expecting 4-5 billion US $ per annum in terms of tourism proceeds before COVID-19 pandemic hit. In fact, Sri Lankan economy could realise only 0.9 billion US $ from tourism in 2020.

Nevertheless, the Central bank has been able to provide guidance, support and advice to the government to manage the macro- economic fundamentals quite efficiently during these turbulent times, which is commendable. The following table shows the summary of the vital statistics of Sri Lanka’s macro- economic transactions with the rest of the world. An attempt has been made by the writer to make some provisional figures and estimates to ascertain whether Sri Lankan economy could withstand the pressure from this global economic downturn. Also, it is important to critically review the efficacy and effectiveness of the economic policy changes contemplated by the present government policy makers and to what extent they succeed in confronting capitalist economic system in todays’ context.

 

= Author’s estimates

As can be seen, the biggest challenge is in the management of the debt repayment capacity, especially in view of the fact that a total sum of US $ Billion 7 is due during the current year, which is the highest ever debt service figure that the country has to service in order to avoid sovereign default. In addition to above, domestic forex debt repayments such as FCBU and SLDB amounting to 1.5 billion US$ will also become due, however the government may be able to successfully arrange foreign SWAPs from friendly countries’ multilateral financial institutions and Central banks to meet any contingencies. It should be mentioned that the Central Bank of Sri Lanka is vested with the responsibility of the management of the public debt, in terms of Section 113 of the Monetary Law Act.

 

Confronting capitalism:

Throughout the world, economic growth has drastically slowed. Natural resources are exploited for short-term profits. Wealth is concentrated in the hands of a few. When a large number of children living in poverty, multinational ultra- rich elites tuck their money into tax heavens. As we all know, lockdown impacted peoples’ ability to move across borders, but it doesn’t stop money flowing into tax havens around the world, as claimed by Forbes magazine.

Anna Zakrzewski, who leads Boston Consulting Group’s Global Wealth Management division did a detailed study and the economic shocks of coronavirus have meant that offshore financial centres such as Switzerland are back to their old tricks: Banking peoples’ money away from their more- risky homelands.

‘Confronting capitalism’ by Philip Kotler published by American management association explains 14 major problems undermining capitalism and offers real solutions for a troubled economic system. Although best known as a marketing guru, Kotler trained as an economist under three Nobel price- winning economists, namely Prof. Milton Friedman who represented free market economic thinking and two other professors, Paul Samuelson and Robert Solow of MIT. Some of the serious shortcomings of capitalism as articulated by Kotler include: tends to focus narrowly on GDP growth, generates income & wealth inequality, proposes no solution to persisting poverty, exploits natural resources and environment in the absence of regulations, favours short term profits over long run investment planning, fails to pay a living wage and others.

 

New economic and business model for tea plantations:

This reminds me the Sri Lankan tea plantation -RPC model introduced in 1995, where some 88,000 hectares of cultivated tea estates have been transferred to 20 RPCs under 53 year lease period with only one golden share retained by the government, expecting the companies to put in much needed investments in Re/new planting, infilling of tea, optimum utilisation of arable agricultural land and other resources including factory modernisation, tea marketing efforts and other viable diversification options , and improve labour management relations through collective bargaining process etc. As per latest statistics at Tea Board, the total tea production at RPC level has come down to 70.6 million own crop and bought leaf of 24.2 million kilos totalling only 94.8 million kilos in 2020 (total national production in 2020 was 278 million kilos- 34% RPC share) from the 135. 3 million kilos in 1995 where the total national production was as 246 million kilos- 55% RPC share.

in January 2019, the daily wage was revised to Rs 750/ per day under the main collective agreement entered into between the RPCs and worker trade unions in 2003. Unfortunately, the daily attendance allowance and the productivity linked wage rates hitherto enjoyed by the workers have been taken out jointly by the parties to the collective agreement, which the undersigned, as a non- executive director attached to one of the RPCs had made written representations in January ’19 itself to the EFC and the negotiation committee, thus expressing serious concerns. Thereafter, the demand for wage increase came even before the presidential election held in November 2019 from worker trade unions under the collective agreement generally to be negotiated once in two years only. The RPCs have called for a new hybrid wage structure focusing on a revenue share model based on ‘three day’ productivity-focused rates and three daily wage rates -a total package for the entire week for the estate workers. But this was not acceptable to the worker unions quoting ‘six day work rule’ and practical issues. An option favoured by the trade unions is to increase the basic wage which attracts not only EPF/ETF, even the other terminal benefits such as gratuity holiday pay etc. An ‘out-grower model’ where the workers are allocated small plots of land to grow their own tea to sell to the factories was also suggested without much deliberations to study far reaching implications.

In view of the deadlock, the cabinet has decided to refer the demand of Rs 1,000/ daily wage to the tea & rubber industry wage board for a decision and they have incorporated a sum of Rs 900/ together with a budgetary allowance of Rs 100/ to make Rs. 1000 as minimum daily wage payable to the workers under wages board ordinance. The writer has been a proponent of the collective bargaining process under the main collective agreement entered in to 2003. My own view is, once the wage anomaly is sorted out, it is expedient that the parties to get back to the CA and honour the conditions in the said agreement in the best interest of the tea industry, thus maintaining good labour: management relations at estate level

 

Export earnings are getting trickled -down to farmers:

With an annual export earning of LKR 230 billion, at the Colombo tea auction level, the tea prices have increased from Rs 545/= per kilo of made tea in 2019 to Rs 628/= per kilo for the full year 2020. Despite production decreases, which is the main concern today, the foreign exchange earnings have reached this level thanks to the fob price of tea improving from Rs. 822/ per kilo to Rs. 867/ in 2020, due to efforts by our tea exporters- supported by improved quality of the final product by growers and manufacturers and ‘Ceylon Tea’ promotional campaign. Consequently, the export earnings are getting tricked down to tea small holders and in fact, the farmers are receiving Rs 90 per kilo of their green leaf as against Rs 79/= per kilo in 2019 on an average basis. The main thrust would be integrated quality and productivity. Contrary to media reports recently, the majority of RPCs have also been making profits during the year 2020 as per Colombo stock exchange filing. Tea. Credit goes to all the stakeholders of the global tea value chain from our tea grower to Sri Lankan tea marketing companies.

Sri Lankan tea industry is not just a business, it is a way of life for over 2.5 million people and we need to protect and nurture nearly 500,000 small holders and 700 tea factories and 140,000 estate workers by encouraging tea exporters to really focus on promoting and marketing Ceylon Tea B 2 C, in addition to B2 B tea exports. Discerning tea consumers world over are paying premium prices for Ceylon tea, due to promotional campaigns focused on authenticity of the product based on sustainability credentials and wellness factor of Ceylon It is in that context only the recent wage increases should be viewed.

 

Conclusion:

From the above it can be seen that the main stakeholders, namely the RPCs, the worker trade unions and the government have failed in working together to attain the mission set out at the time of privatisation of tea plantations in 1992. After 29 years of the first privatisation, it has now become necessary to migrate in to a new economic and business model for RPCs, thus promoting high quality plantations, and need to focus more on sustainable agricultural and manufacturing practices through infusion of increased investments and management inputs. Nevertheless, the success depends on our ability to market and promote ‘Ceylon Tea’ in global target markets as a premium quality beverage under the ‘sustainable food’ category. As Mahatma Gandhi said, the difference between what we are doing and what we are capable of doing would solve most of the world’s problems.



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Features

Credibility in governance through elections and not security forces

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Ranil Wickremesinghe

By Jehan Perera

President Ranil Wickremesinghe’s warning that he is prepared to declare a state of national emergency and use the military to suppress any public protests for change of government would reflect the pressures he is under. The manner in which he has used the security forces to deal with the protest movement has been unexpected. His words and deeds are contradictory to what he has previously stood for as a five-time former prime minister. This is especially true in the case of the ethnic and religious minorities who have consistently voted for him and his party at elections. They have felt safer and more secure under his governments which always sought to reduce the heavy hand of state oppression in which national security is given pride of place. He has always promised them much though he has been unable to deliver on much of what he promised.

Notwithstanding the unfortunate rhetoric and actions of the present time the belief still persists that President Wickremesinghe is the best of the available options. Recent pronouncements of the president have reignited hope that he will address the problems of the religious and ethnic minorities. He has stated that he does not want to leave this problem to the next generation. He has said that he wants to resolve this intractable national problem by the country’s 75th independence anniversary on February 4 next year. The hope that the president will make a fresh effort to resolve their problems has led the main Tamil party, the TNA, to desist from voting against the budget which passed with a relatively small majority. Their spokesperson, M A Sumanthiran said in Parliament that due to the president reaching out to them, stretching out his hand, they did not vote against the budget although they disagreed with it.

It is not only in words that the president has reached out to the ethnic and religious minorities. Reports from the north and east indicate that the Maveer (Heroes) Day commemorations this year took place without incident. During the past two years scores of people were arrested and a massive presence of security forces blocked the people from participating in public events. On this occasion the security forces did not get involved in any attempt to stop the commemorations. University students distributed sweets and even cut a birthday cake to celebrate slain LTTE leader Velupillai Prabhakaran’s birthday. The analogy that the president drew to himself being seen as a Hitler who exterminated ethnic and religious minorities is misplaced. The release of those held under the Prevention of Terrorism Act for engaging in similar acts in the past would further contribute to the reconciliation process.

WORSENING CRISIS

In this context, the president’s use of militaristic rhetoric can only be understood in relation to the growing economic crisis that shows no sign of abating. The anticipated IMF bailout package is at risk of getting indefinitely delayed. It was initially anticipated to come in September then in November but now January is being targeted. Japan’s top brokerage and investment bank, Nomura Holdings Inc, has warned that seven countries – Egypt, Romania, Sri Lanka, Turkey, Czech Republic, Pakistan and Hungary – are now at a high risk of currency crises. Sri Lanka is in third place on the table of risk. The next devaluation of the rupee could see another spike in inflation that will make the cost of living even more unbearable to the masses of people.

The president is on record as having said that the economic crisis will get worse before it improves. Both anecdotal and statistical evidence indicates that it is indeed worsening. University teachers at the University of Sabaragamuwa reported that attendance in their classes was down by at least a quarter. Students who come from other parts of the country are unable to afford the cost of meals and so they stay at home. A study by the Institute of Policy Studies has shown that about four percent of primary, 20 percent of secondary and 26 percent of collegiate students had dropped out of school in the estate sector, which is the worst affected. The future costs to the country of a less well educated population is incalculable and inhumane.

As it is the situation is a dire one for large swathes of the population. Research from the University of Peradeniya has revealed that close to half of Sri Lanka’s population, 42 percent (up from 14 percent in 2019) are living under the poverty line. Professor of Economics Wasantha Athukorala has said there is a dramatic increase in the poverty level of over three-hold across the past three years. In 2019, nearly 3 million people lived below the poverty line, but that number has increased to 9.6 million in October 2022. In these adverse circumstances stability in a polity can be ensured either through legitimacy or through force. It would be tragic if the latter is the choice that is made.

ELECTORAL SOLUTION

President Wickremesinghe has been stressing the importance of political stability to achieve economic development. His recent statement that the security forces will be used to negate any unauthorised protest is a sign that the government expects the conditions of economic hardship to escalate. The general public who are experiencing extreme economic hardship are appalled at the manner in which those who committed acts of corruption and violence in the past are being overlooked because they belong to the ruling party and its cliques. The IMF has made anti-corruption a prerequisite to qualify for a bailout, calling for “Reducing corruption vulnerabilities through improving fiscal transparency and public financial management, introducing a stronger anti-corruption legal framework, and conducting an in-depth governance diagnostic, supported by IMF technical assistance.”

It is morally unacceptable even if politically pragmatic that the president is failing to take action against the wrongdoers because he needs their votes in parliament. As a start, the president needs to appoint a credible and independent national procurement committee to ensure that major economic contracts are undertaken without corruption. Second, the president needs to bite the bullet on elections. The country’s burning issues would be better accepted by the country and world at large if they are being dealt with by a statesman than by a dictator. Government that is based on the people’s consent constitutes the sum and substance of democracy. This consent is manifested through free and fair elections that are regularly held. Local government elections have been postponed for a year and are reaching their legal maximum in terms of postponement. These elections need to be held before March next year.

Elections will enable the people to express their views in a democratic manner to elect their representatives for the present. This would provide the government with guidance in terms of the decisions it is being called to take to revive the economy and place the burden in a manner that will be acceptable to the people. The provincial council elections have been postponed since 2018. Democratically elected provincial councils share in the burdens of governance. The devolution of power that took place under the 13th Amendment was meant to promote ethnic harmony in the country. The president who has taken the position that he is for a solution to the ethnic conflict should seriously consider conducting the provincial council elections together with the local government elections se their financial costs. By doing so he will also gain legitimacy as a democratic statesman and not a dictator.

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WEDNESDAY – Movie Review

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The Addams Family is back with a new tale to tell! Originally created by Charles Addams as a comic strip published in The New Yorker, it offered readers a sarcastic take on the ‘typical nuclear family’ by substituting it with a more macabre bunch of strange and eerie individuals. Since then the titular family has been adapted on to the big screen many times, from live action movies to animated versions, the Addams Family has gained many fans throughout the years. Created by Alfred Gough and Miles Millar, with Tim Burton working on four episodes of the eight-part series, Wednesday is a welcoming tale for young fans, but unfortunately fails to think outside the box and remains anchored to the floor with a messy storyline.

Dead-eyed Wednesday Addams (Jenna Ortega) is a stubborn, independent and intelligent teenager in this new series. Her penchant for attracting trouble wherever she goes alarms her parents, Morticia (Catherine Zeta-Jones) and Gomez (Luis Guzmán). With an already strained relationship with her parents (specifically her mother), Wednesday is enrolled at Nevermore, an academy for outcasts like herself. Having attended the academy themselves, Morticia and Gomez are hopeful that their daughter will ‘fit right in’. Caught between trying to build her own identity and other teenage complexities, Wednesday soon finds herself in the middle of a twisted mystery.

This is the first time audiences are introduced to a teenage Wednesday, which allowed the creators to build a new world on their own terms, but while keeping true to the original nature of the character. The creators do a fair amount of world building by introducing other outcasts like the Fangs (vampires), Stoners (Gorgons), Scales (sirens) and Furs (werewolves), among others. Nevermore Academy itself is beautiful and comes with the classic package of creepy crypts, hidden rooms and secret societies. The series also offers a decent amount of gore, although they could have added more given Wednesday’s proclivity for gore-related activities. The series deals with classic young-adult tropes which includes teenage crushes, bullies, relationships and even prom, among other things. The series navigates through Wednesday’s journey of self-discovery, which is a new avenue for both the character and the fans. From understanding and displaying her emotions to discovering her identity and understanding her peers, the series takes a deep dive into heavy material.

Ortega’s performance as the titular character plays a major role in keeping audiences glued to the screen. This is also the first time viewers are shown a teenage Wednesday Addams, which works to Ortega’s benefit as she depicts more dimensions to the ghoulish, morose character many are associated with based on previous renditions. Her facial expressions and ability to deliver on seriously emotional moments strengthens her role as the lead. The rest of the Addams Family, even with limited screen time, lack the eccentricities their characters should have. Hopeless romantics Morticia and Gomez seem incompatible in this version and Uncle Fester is far less crazy than he ought to be. The only member worth mentioning is the Thing—a severed hand— who brought more character and spirit to the series acting alongside Ortega. With barely any room to develop a majority of the characters are prosaic and tedious, even though they remain vital to the plot.

Apart from Ortega, Gwendoline Christie and Emma Myers deserve honorable mentions for their roles as Nevermore’s head teacher, Larissa Weems and the peppy Enid Sinclair respectively. Enid quickly became a fan favorite as the character was the polar opposite to Wednesday. Her character is vital to Wednesday’s character development and their journey to find common ground as mismatched individuals is amusing.

Christina Ricci who played Wednesday in the 90s returns as ‘normie’ teacher, Miss Thornhill and unfortunately barely stands out and this in large part due to the messy storyline. The series is bogged down with numerous subplots and overlapping tropes and the characters with potential for growth are completely overlooked. With love triangles, bullies and killer monsters on the loose, the series self-destructs and the climax sinks into disappointment.

At the end of the day, Wednesday plays to the beat of the new generation and touches on new themes, which is welcoming seeing as the character should grow up at some point. While not everyone may relate to Wednesday’s teenage perils, it is interesting to witness her growth and her journey as an ‘outcast’ or ‘weirdo’. And while Wednesday doesn’t exactly offer a distinctly unique story, it gives audiences a small taste of what Jenna Ortega’s Wednesday is capable of. Creating a story around a well-established franchise is a difficult task, and in this case the creators fail to add value to their visions. If the series continues, the creators will have the opportunity to think further outside the box and push the limits to Wednesday’s character and give audiences a bone-chilling experience. Wednesday is currently streaming on Netflix.

 

 

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Stage set for… AWESOME FRIDAY

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The past few weeks have been a very busy period for the new-look Mirage outfit…preparing themselves for their big night – Friday, December 2nd – when they would perform, on stage, for the very first time, as Donald Pieries (leader/vocals/drums), Benjy (bass), Niro Wattaladeniya (guitar), Viraj Cooray (guitar/vocals), Asangi Wickramasinghe (keyboard/vocals), along with their two frontline female vocalist, Sharon (Lulu) and Christine.

They have thoroughly immersed themselves in their practice sessions as they are very keen to surprise their fans, music lovers, and well-wishers, on opening night…at the Peacock, Berjaya Hotel, in Mount Lavinia.

Action starts at 8.00 pm and, thereafter, it will be five hours of great music, along with EFFEX DJs Widhara and Damien, interspersed with fun and excitement…for the whole family!

Yes, opening night is for the whole family, so you don’t need to keep some of your family members at home – kids, especially.

Working on their repertoire for Friday, bassist Benjy says “what we will dish out will be extra special, with lots of action on stage.”

It would be interesting to see Sharon (Lulu) doing her thing with Mirage, after her early days with the Gypsies, and, I’m told, a dynamic performance from Sharon is what is in store for all those who make it to the Peacock this Friday

Edward (Eddy) Joseph (centre) with Donald and Benjy

While the band was at one of their practice sessions, last week, they had a surprise visitor – Edward (Eddy) Joseph, a former member of the group Steelers, who is now based in Germany.

Eddy is here on a short visit and is scheduled to return to Germany, tomorrow (30).

He spent an hour with Mirage, at their practice session, and says he is disappointed that he would not be around for the group’s opening night.

However, there is a possibility of several well-known personalities, in the showbiz scene, turning up, on Friday night, to experience the sounds of the new-look Mirage, including Sohan Weerasinghe and Joey Lewis (from London).

Rajiv Sebastian, too, says he is keen to be a part of the fun-filled evening.

You could contact Benjy, on 0777356356, if you need to double check…their plans for AWESOME FRIDAY!

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