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Opinion

Govt. policy needs to be driven by rationality

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By Jehan Perera

Headstrong and misguided leadership has brought the country to a sorry pass.  The Fitch Rating agency has downgraded Sri Lanka to a rank of CC.  This reflects its view of an increased probability of a default event in coming months in light of Sri Lanka’s worsening external liquidity position and drop in foreign-exchange reserves.  The government has responded by finding fault with the ratings agency for being biased and not looking at the entirety of the country’s financial situation and likely sources of foreign exchange inflows.  The governor of the Central Bank had stated that the fast-depleting foreign reserves will receive a boost before the end of the year.  On the other hand, the grim reality is that with every passing month the country’s foreign reserves have been shrinking and positive predictions to the contrary have not materialised.

 A similar situation obtained for over six months in the case of the ban on chemical fertiliser. The government stubbornly stuck to the position of a total ban on the import of chemical fertiliser for use in agriculture and its replacement by organic fertiliser.  The fact that there is no country in the world that relies solely on organic fertiliser for farming was disregarded.  Instead the government held to the ideal that organic agriculture was the best practice, from both a health perspective and in terms of protecting the environment.  There was no instant solution.  In practical terms, this meant a drastic reduction in the country’s agricultural production as hybrid crops that respond best to chemical fertilisers did not receive adequate quantities of nutrients.   A similar phenomenon can be seen in the bid to keep the price of dollars low by artificially restricting demand for them.

 A basic feature of economic theory is that if the price of a commodity is kept artificially low by means of price control, its supply will shrink.  On the other hand, if the price of a commodity is allowed to rise, based on the demand for it, the supply of that commodity in the market will also increase.  This is an economic reality that applies in the case of dollars as much as it will apply in the cases of any other commodity traded in the market.  Due to the price control imposed on dollars, there is a shortage of dollars in the market.  We are nearing the parameters of a failed state, when the state is unable to restrain companies from selling gas cylinders that explode, killing and maiming dozens, and ships are berthed in the harbor awaiting payment to be made in dollars for the good they have transported. Today the prices of fruits, vegetables and grain are at an all-time high due to short supply. Adding to the woes of citizens is the shortage of essential commodities such as milk powder and kerosene oil.

 REMEDY AVAILABLE

There is a need for rational thinking at the present time.  The government demonstrated rational thinking when it ended the ban on chemical fertilisers in the face of farmer protests and expert agricultural advice emanating from Sri Lanka’s academia and practitioners.  It reaffirmed that its longer term policy was one of pursuing organic fertiliser but agreed that the ending of the ban on chemical fertilisers was the rational thing to do in the prevailing circumstances.  In a similar manner, the government needs to deal with the foreign exchange crisis.  Instead of denying the fact that a serious problem exists and hoping that hoped for future flows of foreign exchange would ease the situation, the government needs to take concrete steps to rectify the situation immediately.

 In a rationally argued position paper, the Pathfinder Foundation has recommended that the government goes to the IMF to secure financial assistance.  So far the government has refused to go to the IMF on the grounds that it imposes its own conditions on the loans it grants which are costly to the people of the country.  According to this analysis, an IMF programme could include strengthening the government’s revenue base (widening the tax base and improving tax administration); improving the primary balance in the budget (revenue – (expenditure-interest payments)); proactive, data-driven and non-interventionist monetary policy; a flexible and realistic exchange rate policy to assist in building up external reserves; commercialisation of SOE operations, including full cost-recovery in the pricing of electricity and fuel, restructuring of the CEB and the CPC, the implementation of the Statements of Intent and addressing the losses being incurred by SriLankan Airlines.

 The analysis also makes the point that other countries might be more willing to support Sri Lanka if they were confident that the country would come out of the economic doldrums.  “The package of assistance offered by India is an encouraging start and needs to be finalised as soon as possible. It has to be supplemented by financing from other friendly countries, like Japan. There is scope for India and Japan to work together to support Sri Lanka at this critical juncture. Their willingness to step forward is likely to be greater, if it is known that Sri Lanka has taken a decision to approach the IMF. While our development partners will be wary of having to make an open-ended commitment, they are likely to find bridging finance more palatable.”  https://island.lk/pulling-back-from-the-precipice-a-pathfinder-perspective/

 RATIONAL CHOICES

 The appointment of Foreign Minister Prof G L Peiris as acting Finance Minister, increases the possibility of rationality in the decision, making process taking the upper hand.  As Foreign Minister, he has been tasked with winning more international support for the government.  This would include ensuring that foreign policy and human rights pressures on the government do not lead to an adverse outcome. The international community, especially the Western countries, are looking for signs that the government will pursue some reforms on the lines of the 13th Amendement, Prevention of Terrorism Act or other globally accepted norms.  One of the more serious challenges to the government is to safeguard the GSP Plus tariff privilege that was made available in 2017 after a seven year hiatus when the GSP Plus was withdrawn due to unsatisfactory performance on human rights issues.

 Among the initiatives that Minister Peiris has been leading is the amendment of the Prevention of Terrorism Act.  In recent weeks, as chairman of the ministerial subcommittee on amending the PTA he has invited both sections of civil society and the Bar Association for discussions where the proposed amendments have been presented and responses to them obtained.  Several PTA detainees, whose cases had received international visibility, have been released on bail following these meetings, including the young poet Ahnaf Jazeem, who had been held for over a year and a half in remand prison.

 There are other indications of rationality emerging in choices being made in different areas.  One would be the reinstatement of Dr Shihabdeen Mohamed Shafi and pay his salary arrears after it was suspended in 2019. The surgeon was falsely accused of sterilising thousands of Sinhalese women without their knowledge in the operating theatre during a time of nationalist frenzy that had been whipped up for political reasons. This is not the time for nationalist politics. The new appointments made to independent institutions that are expected to play a watchdog role such as the Right to Information Commission and Human Rights Commission are also likely to send a message that the government is getting serious about charting a new path.  If the current changes are shown to be sustainable, the government will be able to generate greater confidence both locally and in the international community which is crucial for economic development.



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Opinion

What is wrong with Sri Lanka?

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By Dr Laksiri Fernando

It is not the country per se, but the politicians and the people who are wrong. While politicians should take 70 percent responsibility, the people also should take 30 percent. It is true that these wrongs on the part of the politicians or the people are not limited to Sri Lanka. Even in a country like Australia where I now live, there are intermittent corruption, crime, gender abuse, killing, and misguided politics. However, the difference is extremely vast. Sri Lanka’s wrongs are perhaps 50 times higher than a country like Australia.

One may pinpoint this to the economic difference or development. There is some truth in it. However, the whole truth is not that. It is rooted in the political culture and social culture in general. That is one reason why Sri Lanka was not being able to develop after independence like Singapore, Malaysia, South Korea, etc. India also has come to the forefront of development today. Sri Lanka became caught up in a vicious cycle where political culture prevented development, while underdevelopment influenced the political culture.

What is this political culture? It is mainly renovated feudalism with family at the core of politics that dominates the political culture. It is also the same in social culture, families dominating business, religion, entertainment, and the media. Only female members are set apart. It is in a way natural for members of a family to follow their fathers, brothers, or other close members. Or it can happen the other way around, fathers or uncles helping and promoting their siblings.

Even in America or the UK, this could be seen. The Kennedy family promoted members into politics. However, in Sri Lanka this is overwhelming, some families completely dominating politics and social arena. While the Rajapaksas are the most prominent example with abhorrent practices, the Bandaranaikes, the Senanayakes and the Jayewardenes (Ranil Wickremesinghe with links) were also playing the same game. In Australia, I have not come across this process. When John Howard was the Prime Minister, his brother Bob Howard continued to serve as an academic at the University of Sydney whom I used to meet often.

In 1995, I decided to come back to Sri Lanka to serve the country. I applied and got the appointment as the Director of the Sri Lanka Foundation Institute (SLFI) through a competitive interview. It was a great institute with many capabilities and the people working there were quite flexible and committed. However, when it came to filling vacancies and expanding the staff for new tasks, I came across political influences and pressures.

I managed to overcome them luckily as the SLFI came under the purview of Chandrika Kumaratunga as the President and as she did not make any interference at least in my case. However, I resigned and came back to Australia within six months as the situation was unbearable. People who tried to influence me were either top ministers or bureaucrats.

Again, when I finally came back in 1997, I first joined the University of Colombo before undertaking any other appointments. By that time, I had fairly learned how to overcome political influence. The university system was fairly reasonable (not completely) and on that basis it was possible for me to follow my impartial principles. However, there was at least one instance where a former friend of mine tried to blame me publicly, claiming that I myself asked for favours! It was heartrending.

Sri Lanka’s public service is large and widespread. There are around 1.5 million people working in its various institutions, departments, and branches. Although there is the Public Service Commission which is supposed to be independent, even in its appointments political and other influences are paramount. The most discriminated people in this service are Tamils, Muslims, and Women. Although there are over 15 percent of Tamils in the population, their presence in the public service is less than 10 percent. Apart from discrimination on the reason of ethnicity and gender, there are discriminations on the basis of caste, religion and region. The dissolution of Provincial Councils since October 2019 has enlarged these discriminations overwhelmingly.

It is mistakenly claimed that the ‘large state sector’ is the primary defect of Sri Lanka’s economy. It is not the size of the sector that has mattered but its inefficiency, incapacity, unproductivity, and sometimes duplication. In Australia, out of the total workforce, 20 percent are in the state sector. But it is sufficiently productive and provides necessary services even to private enterprises. In Sri Lanka, if we count 12 million as the workforce (adult population 14 million), the state sector comprises only around 12 percent.

The state sector undoubtedly should be restructured, and the workforces should be retrained or even dismissed. There is no point in keeping people like Sirimanna Mahattaya in the public service if we take an example from the teledrama, Kolam Kuttama (Funny Couple)! Even privatising certain (loss-making) state enterprises is in order. However, there are certain sectors and services that the state should hold on to. Education and Health are the most priory sectors among others, depending on national dialogues. It could allow the private sector to participate, but the state should not give up its primary responsibilities.

There can be other strategic sectors where the private sector could be allowed like the ports, airports, airlines, electricity, gas, oil, and even water, but the state should not give up its responsibilities completely. Public-Private partnership can be a model in certain areas in this respect.

The stagnation of the education sector has been a primary problem area in Sri Lanka now for a long time. This applies both to school education and university education alike. In the case of university education there have been some curricula and teaching methodology changes but those are not up to modern and current needs.

We still get a huge number of Arts students while the country’s need is in the direction of Science, Technology, Medicine, Nursing and Business Management. Those who come from the Arts streams in schools, if it is not possible to change in the short run, should be able to move to scientific areas, if capable. In Australia, there is no prohibition of changing the stream if the students show high capability in whatever area that they qualify in. School education should be totally reformed with emphasis on scientific and international knowledge.

The discarding of English education (since 1956), in my opinion, has been the major mistake that the country has committed in degrading the educational system, the economy, and the country’s international profile. In recent times young generations are trying to overcome these barriers through private education, tuition, and social media. However, this is mostly limited to the well to do. English should not be considered as a superior or imperial language, but a practical and international language.

While this short article, with word limits, confine to only few areas of ‘wrongs’ that Sri Lanka is committing, a possible conclusion is to call for an overall change in the political and economic system in the country. Those political leaders and parties responsible for the country’s present political and economic crisis should be completely ousted.

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Opinion

Plan to transform country into an export economy

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Dear Mr. President,

A Presidential Media Division statement, titled “Country set for rapid transformation into an export economy” quoted remarks made by you at the inauguration ceremony of a historic temple in Kegalle.

As a caring citizen I said, “three cheers”, happily thinking that at last, the country was on the correct governance path focusing on the creation of new strategic leadership options and policy changes to encourage present and new investors to produce tradable goods and engage in external services. I was delighted that the statement began with a reference that Sri Lanka can no longer continue to rely on borrowings (presumably external?) to address the imbalance between imports and exports, which if pursued will inevitably lead to another economic crisis within a decade.

As I read the rest of the statement, I noted that your plan for achieving such a transformation by holding discussions with the World Bank, ADB and the IMF to initiate a programme and passing two new laws in April. The only other reference even as a vague statement was in relation to implementing an agricultural modernisation programme, where you anticipated results only after 6-7 years. Are you planning in addition to leverage the National Trade Facilitation Committee (NTFC) and its Secretariat as a part of your implementation strategy[ii] ?

I am sure that many highly competent Sri Lankan trade economists (including those who have guided you in the past), will be able to advise you on more important winning strategic policy/implementation and change management options.

They would surely stress the relative importance of developing strategic networking options with supply chains in the region, assisting capable SME’s to upgrade quality/productivity, and enhancing public infrastructure productivity; along with the need to remove para tariffs, enhance ease of doing business, and one stop facilitation center benchmarking services in South Indian states. These can bring big gains, well before dreaming as your short-term goal, leveraging Free Trade Agreements with India, China, Thailand, Singapore, Vietnam and attempting a high jump by  joining RCEP.

Chandra Jayaratne

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Opinion

Solar and wind power projects

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There has been a delay in finalising the unit cost for the proposed 500 Mw wind power project initiated by India’s Adani Group. This is surprising and disturbing as there was a news item that the Cabinet had approved the payment of US dollar cents 14.6 per unit, nearly Rs. 50 in our local currency, without the knowledge of the Ministry for Power and Energy or the Ceylon Electricity Board. If so, what is the reason for the delay in going ahead with the construction of the Wind Power Project at Mannar? The snag may be that other private suppliers too are demanding the same payment as agreed with Adani Group.

As I handled this subject at the Ministry of Power and Energy, I still take interest therein, in my retirement. In my earlier letters to the press, I pointed out the negative aspects of wind and solar projects, mainly, Sri Lanka being an island with a limited land area of 65,610 sq. km, where land is required for agriculture as is seen by the desperate attempt of the government offering uncultivated land both state-owned and private to grow more food.

It is said that four to five acres of land is required to produce 1 Mw of electricity. If so, consider the land requirements for major solar parks. In addition, no plant life is possible under these solar panels, which has multiple effects on the atmosphere. The scenic beauty of this country, which attracts tourists will be lost and thereby foreign exchange which we desperately need. This goes for floating solar projects on hydro reservoirs and lakes which the government has already approved contracts to the private sector. In wind farms, there is the danger to birds and flying insects. It is also reported that due to the noise people cannot settle down in adjacent areas.

It is not my intention to discourage the projects to produce power from renewable sources of energy. I intend to make the authorities concerned seek alternative sites, along the sea coast, avoiding beaches frequented by tourists, rooftop solar panels in all buildings. Do not forget we are actively pursuing the connection of our grid to India and when this project materialises, the energy requirement of this country will be eased to a great extent.

It is strange the Ministers in charge of land and agriculture and also tourism have not objected to setting up solar parks and wind farms on land.

G. A. D. Sirimal

Via e-mail

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