By Jayampathy Molligoda
According to generally accepted economic theories and their practical application, boosting economic growth has been seen as the best way to create job opportunities and raise living standards of people.
However, the growth is decelerating in Europe, the United States, China, Japan, and other leading economies, as the International Monetary Fund and World Bank recently highlighted by revising their global forecasts for this year substantially downward. Sri Lanka is no exception. Development economists and social scientists know that economic growth alone is not enough to reduce the increased inequality and insecurity accompanying the transformation of work. Moreover, high debt levels, low ratio of exports to GDP, less dependence on traditional export of textile and garments and foreign exchange from travel and tourism revenue, etc., have left policymakers with fewer traditional tools to stimulate the economy in the event of another recession.
Inclusive growth models and labour-intensive industries:
Since we have to live with the Covid-19 pandemic, the government would now look at it slightly different and focus more on livelihood development and better equipping their employable work force and its people. We need to navigate the world of work, in an age of rising automation, stagnant wages, and greater part-time, temporary employment, thereby we could effectively boost the inclusive growth and economic development to improve purchasing power of the working population.
The International Labour commission recommended three practical steps – all of which involve investing more in people – that countries can take to improve social inclusion and economic growth simultaneously. Investing more in people is not only essential to strengthen countries’ social contracts with citizens at a time of rapid technological change. It can also form the basis of a new, more ‘people centric’ growth and development model that may be the best hope for sustaining the economic development and improve economic welfare of the people.
First, countries should increase public and private investment in their peoples’ capabilities, which is the most important way they can durably lift their rate of productivity growth. Sri Lanka must take a bold decision in order to reverse the negative trend of underinvesting in access to quality education and skills development. The commission called on countries to build a universal framework to support lifelong learning – including stronger and better-financed labour-market training and a universal social-protection floor.
Second, governments, together with employers’ and workers’ organizations, should upgrade national rules and institutions relating to work. These influence the quantity and distribution of job opportunities and compensation, and thus the level of purchasing power and aggregate demand within the economy. All workers, regardless of their contractual arrangement or employment status, would enjoy an “adequate living wage” as defined in the ILO’s founding constitution 100 years ago, and health and safety protection at work.
Third, countries should increase public and private investment in labour-intensive economic sectors that generate wider benefits for society. As for Sri Lankan situation, these include tea, rubber and coconut plantation sector, the rural economy, and education and training.
Developing the plantation sector
Sri Lankan plantation sector has a tremendous potential in contributing to the national economic growth and enhancing the purchasing power of the people.
Due to concerns on declining tea and rubber production, we need to focus more on sustainable agricultural practices and other development programmes of estates through infusion of increased investments/management inputs in order to implement an accelerated programme: to increase raising planting materials, to establish nurseries, model tea gardening with drip irrigation, mechanization and appropriate technology, undertake re-planting, crop diversification, agro- forestry, etc.
It appears that the plantation industry presently owned and managed by state owned institutions, RPCs, and tea and rubber small holders have not been able to adapt mitigating strategies for resilience to climate change effects to practice integrated total quality management and productivity enhancement. The writer is of the view that the potential to earn higher foreign exchange and net financial returns through optimum utilization of resources – environmental resources including human resources – has not been harnessed properly. Consequently, the role of the ‘conventional large plantations’ is gradually becoming insignificant – other players thus becoming major contributors to foreign exchange earnings and employment creation. There is a need to migrate into a new economic and business model aligning with national economic and social well-being priorities, whilst making reasonable financial returns for the businesses.
It has become necessary to promote ‘high quality’ plantations, improve sustainable agricultural practices such as use of precision agriculture technology, reducing chemical fertilizers, protecting biodiversity and technological advancements in manufacture.
The government could provide necessary incentives and encouragement in the following two important areas of developmental activities:
1. Move up in the global value chain in core crops such as tea and rubber and/or diversification into other crops such as cinnamon, coconut, coffee, commercial forestry, Other fruit and vegetable must be encouraged by the authorities.
2. Youth/worker empowerment through skill development and career development to mitigate labour shortage,
As for the last point, it is important to ensure ‘dignity’ for the estate youth and small holder. This could be done by empowering them through providing opportunities and many facilities such as;
* creating additional monthly income sources for estate youth in areas such as dairy farming, fruit and vegetable, horticulture, compost manufacturing plants, tree planting, many other vocations and interesting jobs to earn money, provide vocational training for land scaping and gardening, chefs, drivers, security, sales reps, etc.
* government could provide qualified teachers for science and computer studies and schools to have science labs and technical and vocational training classes, standard library facilities, knowledge and interest of ‘scout services’. This will even eliminate use of ‘drugs’ among the school children and increase of alcoholism’ in estates.
* Estate management to provide more opportunities to have access to participate in sports and recreation, social clubs, training centers for cultural activities (Ex: Dance, Yoga, Music and Singing)
* Provide access to banking facilities for continuing higher studies and efficient public service to obtain Identity cards, passports, driving license etc. estate management would arrange providing educational and training facilities for ‘Household cash management system’ in the families.
* Re-designating their jobs; say for an example; Pruning machine operators, mechanized male harvesters, etc., without treating them as a ‘laborer. hold national level ‘Competitions’ to motivate productive employees to recognise their expertise and talent.
By empowering estate youth, we could meet their aspirations, solve their problems including Youths’ habit of purchasing ‘Three Wheelers’ with their parents’ provident fund, gratuity money without thinking about other job opportunities to improve quality of life, etc.
Way forward, inclusive growth model:
A decade ago, leaders of G20 countries pledged to build a more balanced and sustainable growth model that embodied lessons from the economic imbalances and policy mistakes of the past. According to ILO study, the world has since made little progress toward realizing this goal. But the path it must take is clear: sustained, increased investment in people’s capabilities, purchasing power, job opportunities and above all we must have ‘inclusive economic institutions. The Chinese success story and the contrast of South and North Korea, and of the United States and Latin America, illustrate a general principle. Inclusive economic institutions foster economic activity and productivity growth. Sustained economic growth is always accompanied by technological improvements that enable people (labour), land, and existing capital to become more productive. Plantation industry in Sri Lanka could also follow this inclusive growth model to raise the living standards of people.
Ailing rubber sector?
Rubber production in Sri Lanka commenced in 1876, with the planting of nearly 2,000 rubber seedlings at the Henarathgoda Botanical Gardens in Gampaha. The total extent under rubber in 1890 was around 50 ha and in the early 1900s it increased to around 10,000 ha. By 1982 the total extent under rubber was around 180,000 ha. However, the total extent under rubber declined subsequently and at present it is around 130,000 ha.
If the present financial situation of the country is given serious consideration, it is obvious that the income from our export needs to be increased. Rubber is one of the important export crop. It contributes about 0.6% of the total GDP.
Based on Central Bank annual reports the total rubber production in 2013 was 130.4 .1 million Kg and by 2021 it has plummeted to 76.9 million kg. The corresponding average yields are 1247 kg/ha and 679 kg/ ha respectively. These figures indicate that the Sri Lankan rubber sector is ailing in spite of several institutions/projects such as Rubber Development Dep, Rubber Research Institute and STAR project.
According to Statistical Data of the Ministry of Plantation Crops, 130,349 ha are under rubber. 89,246 ha are in the small holder (SH) rubber sector and 41,103 ha are managed by Regional Plantation Companies (RPC). The productivity (kg/ha) of the SH sector in 2013 was 1247 and has decreased to 679 by 2021 a drop of 45%. These values indicate that the productivity of the SH sector has decreased substantially during 2013-2021.
Those in the SH sector gets relevant skills and knowledge through the extension officers who work at grass root level. Thus, extension officers have an important role to play in the proper management of the rubber plantations and increasing rubber yields of the SH sector. It is because of the importance of management practices in the rubber sector, in early 1980 the Advisory Services Dept. was established with the involvement of the Smallholder Rubber Rehabilitation project (SRRP) to make the SH aware of the practices which have an important bearing on the rubber yields. At that time there were nearly 150 rubber extension officers, working for the Advisory Services Department of the Rubber Research Board to assist the SH in the eight districts, to grow, process and market rubber. However, at present there are only around 20 extension staff in the Rubber Research Board and as a result the rubber extension programme appears to be very weak which may have contributed to the decrease (45% ) in the productivity of the SH rubber sector. Extension service has a vital role to play in motivating farmers to cultivate rubber and increase its productivity. Hence, if the government is keen to increase the productivity of this sector, which plays an important role in increasing export earnings, it is essential that the Ministry of Plantation Industries provides an effective extension service and has a Rubber Advisory Department. Perhaps, the Ministry may amalgamate the Rubber Development Department and the Extension Department of RRI as was in the past. It is not necessary for the government to incur additional expenses to implement such changes.
Dr. L.M.K.Tilakaratna, former Director of RRI, writing to THE ISLAND some time ago very correctly has indicated that communication gap between the RRI scientists and those in the SH is one of the reasons for the decrease in productivity. The rubber training centre located in Matugama which played a very important role in providing knowledge and skills to the SH sectors is not functioning. It is the responsibility of the Chairman of Rubber Research Board (RRB) to see that these activities which have an important bearing on the productivity of the rubber sector are carried out without any interruption. But, the Chairmen of RRB during the last few years appears to have not taken appropriate effective action on these issues. Perhaps it may be because they did not have adequate knowledge on the rubber industry.
Around 70% of the rubber holdings belong to the smallholder sector. There are nearly 100,000 rubber small holders (SH) who need to be provided with technical know- how of the activities involved from land preparation to processing, so that the rubber production is increased qualitatively and quantitatively. In this regard the extension activities are important. It is essential that a better extension service by a trained staff is provided to the rubber smallholders if the government is keen to increase the productivity of this sector.
Dr. C.S. Weeraratna, firstname.lastname@example.org
Former Director, Advisory Services Department, Rubber Research Board.
‘Sethusamudram stupid project’: BJP TNA Chief Annamalai points out ‘multiple’ objections: Response
ANI has, in a news item under the above caption in The Sunday Island has said the BJP Tamil Nadu K. Annamalai has reiterated his claim that the Sethusamudram waterway project fails on multiple fronts, one of which being the potential damage to the ‘Ram Sethu’ [bridge] which according to the epic ‘Ramayana’ was created to rescue Sita from the clutches of Ravana’. What a frivolous objection based on myth or legend at the expense of a development project. However, it is said that the Indian government intends to explore an alternative alignment so that no damage will be done to the Rama Sethu, which means that the Indian government is actively pursuing action on a request from Tamil Nadu to undertake the project by citing the benefits in international navigation through Palk Straits due to the shortening of distance and time.
It is recorded that this project was conceived as far back as in 1860 by Alfred Dunas Taylor during British rule and since then several feasibility studies had been done taking into consideration the objection of religious groups, fisheries, environmental and economic aspects. It is more likely, India may seriously concede to the request by Tamil Nadu and in which case, how will Sri Lanka be affected is a matter to be thought of and action taken to present our views. If this project is undertaken, ships will by-pass our main ports in the South, Colombo and Hambantota and load and unload cargo either at Kankesanthurai or Trincomalee. Our exports and imports will then have to be transported to Kankesanthurai or Trincomalee by rail, road or by ship. Thus, the importance of our main two ports on which we have invested to improve by large scale borrowing will be lost. On the other hand, if objections are raised by Sri Lanka, India may consider further improvements to Kankesanthurai and Trinco harbours as is seen India taking interest in undertaking projects to improve North in relaying the railway track destroyed by the LTTE, roads and also constructing houses including those of Tamil origin settled in estates and also the proposal to connect electricity supply, a vital utility for development of any country, from Tamil Nadu. With Jaffna having an International Airport and improved harbour facilities, Jaffna will be the main business hub, replacing Colombo. Added to all developments done to the North, now comes the news of proposals to implement the 13th Amendment, which will give wide powers for Northerners to transact business and self-rule, so to say, which would be advantages to India as our Tamil leaders look up to India. The keen interest India has taken to resolve the economic crisis by assuring IMF of its support is indicative of India’s interest in the affairs of our country, and maintaining peace in the South Asian region by thwarting attempts of China.
These are random thoughts of mine to be considered by authorities and wish to conclude posing a question – are we to be a colony of India, as we had been in the past with Portuguese, Dutch and the British?
G. A. D Sirimal
Should only private sector employees pay income tax?
By Sanjeewa Jayaweera
Who currently amongst those who receive a salaried income is not on the streets protesting against the need to pay income tax? The obvious answer is only those working in the private sector. The private sector is often slammed for its reluctance to criticise the government for everything wrong with our country. So their reticence may once again result in only private sector employees paying income tax if the government caves into the demands of the public sector employees and trade unionists.
Based on media reports and television visuals, most state sector employees and those working in state-owned enterprises are on the streets demanding that they not be subject to income tax. Yes, a few say they don’t mind paying income tax but at a lower rate and whilst some demand greater transparency regarding how taxpayer money is spent. However, the overall impression created is that state sector employees don’t want to pay income tax.
As someone who worked in the private sector for nearly three decades and paid significant amounts as income tax, I, too, despised the lack of transparency and equity. However, I did not have the luxury of coming to the streets, refusing to pay the tax, or seeking judicial intervention. I had no choice. My employer deducted the tax and remitted the balance to my bank account.
Shockingly, those protesting against paying income tax are not on the breadline. I see there are two segments. The first lot is mostly public sector employees who are at least in middle management. The second is those in state-owned enterprises earning significantly high salaries and overtime despite being overstaffed.
Those working in the public sector who are out on the street are mostly university graduates who benefited from free education, demanded and received a government job, and earned a pension they never contributed to post-retirement. So their reluctance to pay income tax is perplexing, although many would put it down to the entrenched entitlement mindset.
GMOA IS ONCE AGAIN AT THE FOREFRONT
As usual, the Government Medical Officers Association (GMOA) has been the most vociferous of those objecting to increased income tax rates. That is not surprising because even in 2015, they went to the supreme court seeking relief from paying income tax at the highest rate then of 24%. When they failed, they approached the government requesting that doctors be categorised as part of the small and medium enterprises (SMEs) subjected to only 14%!
So it is unsurprising that they do not want to pay income tax at 36%. It amazes me that doctors, despite benefiting from free university education, the right to engage in private practice, and regular car permits have a great reluctance to pay income tax at the same rates as others. Many stories are circulating about how doctors ask patients to settle their fees in cash, particularly post-surgery, to avoid income tax on their fees.
The good doctors have been joined by judges, university professors, university teachers, engineers and bankers. The only lot that has not joined the protests are those working in the department of Inland Revenue! It would be ironic but not surprising if they do.
It is a shocking indictment of our country’s social fabric that the most supposedly educated citizens feel that they should not be paying income tax and that only those employed in the private sector should bear the income tax burden.
THE GOVERNMENT AND PARLIAMENT ARE NOT WALKING THE TALK
Having said that, I certainly endorse those who protest, saying there is a lack of will on the part of the government to reduce state expenditure and, of course, a lack of transparency as to how our taxes are spent and that rampant corruption is going unchecked.
The appointment of cabinet ministers and state ministers well above what is required solely for political expediency is a case in point. That those appointed are inefficient and some stand accused of corruption makes it even harder to digest.
The much-debated expenditure allocation of Rs 200 million for the independence day celebration whilst asking ordinary citizens to tighten their belts is proof of utter insensitivity and an entrenched mindset of political entitlement. Moreover, the explanation given by the President that the world might think that the country lacks the financial resources to celebrate independence day has left me and many other millions totally incredulous.
Several international aid agencies have assessed that over five million of the population cannot adequately feed themselves, and malnutrition among children is at an all-time high. In addition, foreign and local correspondents have filed media reports of the dire situation in our country. As such, the world is aware of our predicament, and this fact should not escape the President and his cabinet. So who are they trying to deceive?
A principle of good leadership is being able to “walk the talk.” In that respect, the President and his cabinet have been woefully lacking. My criticism is not just limited to the current President and cabinet. The parliament, which includes those in the opposition, can easily demonstrate their commitment to austerity measures that they demand from us by voting to curtail their benefits, such as closing down the parliamentary restaurant where it is claimed that sumptuous meals are served. In the overall context of government expenditure, it might be a meagre amount. However, they need to be seen “walking the talk”.
A media report reported that Rs 800 million had been spent on refurbishing a residence occupied by former President Mahinda Rajapaksa. If this report is indeed correct, then it is an abominable act by someone who keeps repeating that he is with the common person.
A recent report that the Kurunegala Municipal Council has spent Rs. 60 million to remove a stone at a construction site where a building was being constructed for a Maternity and Child Clinic, whereas the approved cost was Rs. 9.3 million reflects the corruption that permeates all state institutions. That none will be charged and jailed for this offence is guaranteed.
I have highlighted a few minor examples of taxpayer money being robbed and wasted. It is, therefore, not surprising that some feel that being subjected to income tax is unfair.
WIDEN THE TAX NET AND IMPOSE A 10% WITHHOLDING TAX ON INTEREST INCOME
There is no doubt that the tax net should be widened. Many liable to tax are not doing so as they are wilfully avoiding tax payment, with many not having a file at the IRD. It was recently reported that as many as 113 members of parliament do not have tax files. In many conversations, a question is raised whether all traders in Pettah have a tax file. From my experience in the private sector, I know that most wholesalers and distributors are either not paying taxes or what they pay is significantly understated. It is generally believed that most of the 500,000 grocery stores are not within the tax net. The IRD is at fault for not forcing these miscreants to register.
An eminently sensible proposal by Dr Nishan De Mel, head of the research agency Verite is to increase the withholding tax (WHT) on interest income to 10 per cent. He has argued that the additional tax collected would enable the government to give a tax reduction to those earning salaries above Rs 100,000 to maybe Rs. 500,000 per month. His suggestion is based on the assumption that most of our country’s “super rich” are underpaying taxes. Taxes collected as the source is guaranteed income for the state. An argument that may be put forward against this is that it will penalise pensioners who may not be liable for tax. The IRD issuing a tax direction can resolve this by confirming that the recipient is not liable for tax. The reluctance of the government to adopt the suggestion is perplexing, if not surprising.
THE NEED TO INCULCATE PAYING OF INCOME TAX AT A YOUNG AGE
Returning to why most state sector employees are reluctant to pay income tax, I believe that the reluctance has been ingrained in their DNA by successive governments by exempting them from income tax. This is because so many good social attributes are taught, and people are exposed to them at a young age.
In my case, my parents inculcated in me that I have a social responsibility to those underprivileged and, of course, the need to adhere to the law of any country I live. At 18, when I worked part-time as a petrol station attendant in the UK whilst studying, my salary was subject to income tax. Despite my nominal wage, I was conditioned to the need to pay income tax. It is the same discipline I adhered to during my working career, and even after my retirement pay my taxes every quarter without any underpayment or delay. It is the same for all private sector employees in our country, where the employer deducts income tax from the salary. So they are conditioned at an early age to the proverb, “Nothing is certain in life other than death and taxes.”
Those employed in state-owned enterprises have gotten used to the employer bearing the tax on their behalf. So the new rule that the employer will no longer be allowed to absorb the tax is causing them much distress. Yet, shockingly, such a scheme has been in existence. The mindset of state employees was illustrated when recently, an employee of the Ministry of Finance justified this practice by saying, “What does it matter whether the employer bears the tax? After all, the IRD receives the tax” It is a shocking reflection of the prevailing attitude.
It is a universally accepted social principle that those better off must contribute a fair share towards maintaining those less well off and other services that the state provides, either free or at subsidised price levels. The responsibility of paying income tax is even more critical in a society that has accepted free education and free health care should be a right of every citizen. It is, therefore, difficult to comprehend why our supposedly educated citizens who have immensely benefited from free education are now unappreciative of the need to repay the state and the citizens a fair share of their income. I am shocked that university professors and teachers, who are assumed to be a fountain of knowledge and appreciate social responsibilities, are also out on the street protesting against the increase in income tax rates. The same applies to those at the Central Bank, who should understand our economy’s perilous state more than others.
Showers above 50mm are likely at some places in Western, Sabaragamuwa, North-Western and Uva provinces.
Sri Lanka Cricket appoints Olympic medalist Susanthika Jayasinghe to promote women’s cricket
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