Import restrictions, wedgie and reality
Monday 13th September, 2021
Nobody has taken kindly to the stringent import restrictions the Central Bank (CB) has imposed, however necessary they may be to shore up the country’s depleting foreign exchange reserves. From the reactions of various people to the government move to restrict imports, one can guess how they prioritise their needs and wants. Most of them are worried about possible shortages of domestic appliances, food items, beverages, skincare products and the like. Their concerns and consternation are understandable. But, curiously, what worries the Opposition is the restriction on underwear imports, of all things!
It is said that the ordinary Sri Lankans think with their stomachs, especially when they vote. In commenting on the 100% cash margin deposit slapped by the CB, the focus of many Opposition worthies has been on a possible shortage of imported underwear; this kind of reaction shows the Opposition MPs’ preoccupation with their nether regions more than anything else—a fact that has become evident from their lewd utterances in Parliament. They have been flogging the underwear issue to the point of queasiness during the past couple of days. The Opposition is bent on getting its back on the government politically, and this may be the reason why it has sought to give the latter a wedgie, but in so doing it has unfortunately reduced an otherwise very serious economic issue to a mere political joke.
Garments, imported or otherwise, are the least of Sri Lankans’ problems, at present, for two reasons. In April, they bought all the clothes in the world as if they had never seen them before, and they have loads and loads of them in their wardrobes; their irresponsible shopping sprees caused an explosive spread of Covid-19, which has led to a situation where they are confined to their homes and cannot wear what they have bought. On the other hand, enough garments are produced locally, and export quality clothes also enter the local market. So, the Opposition politicians’ worry about a possible shortage of underwear is baseless.
Ironically, the present-day political leaders looked down upon garment factories during their Opposition days about three decades ago. When the late President Ranasinghe Premadasa set up garment factories throughout the country to develop the rural economy and provide employment to the poor, the then SLFP-led Opposition ridiculed his project, claiming that he was having Sri Lankan girls stitch jangis for suddhis (underwear for the white women). The JVP, too, looked down upon the garment factory programme and coined a catchy slogan to denigrate it—kellanta gament, kollanta pament (garment factories for girls and pavement hawking for boys). Today, the Opposition led by the late President Premadasa’s son, Sajith, would have the public believe that Sri Lankans will have to do without underwear due to import restrictions! The worst critics of his father’s project at issue have become dependent on garment factories to earn foreign exchange.
It is expected that the 100% cash margin deposit requirement will help maintain the stability of exchange rates and foreign currency market liquidity as it discourages excessive imports of speculative nature. Most of the commodities on the CB list are non-essentials, and the public can do without some of them, or locally produced alternatives thereto are available. But how can tyres be considered non-essentials; are locally manufactured tyres available to prevent shortages due to import restrictions?
True, the blame for the country’s forex woes should be apportioned to successive governments which borrowed heavily from external sources for projects that have become white elephants. A sizeable chunk of the borrowed funds also ended up in the off-shore accounts of the politicians who have been in power during the past several decades. The former Rajapaksa administration was mainly responsible for borrowing excessively and embarking on useless ventures in the name of development. But there is no gainsaying that the country has to adopt drastic measures to hoist itself from the present economic mire. Import restrictions alone will not do. While importers are discouraged from bringing in non-essential goods, action must be taken to ensure that the country benefits from Sri Lankan exporters’ dollars, and exporters do not misprice their goods to park their dollars overseas to make the most of the rupee depreciation. The practice of stashing away dollars overseas and mispricing have aggravated the country’s current account deficit by depressing the dollar inflows. It is doubtful whether any effective measures have been adopted to prevent exporters from under-invoicing goods to keep their dollars abroad and importers from over-invoicing goods to send their dollars out.
Meanwhile, not all mobile phones can be considered non-essential goods. Most Sri Lankans are dependent on mobile phones to carry out their day-to-day functions. The pandemic has made the mobile phone essential for even children following online lessons. There are also others who purchase the latest editions of mobile phones unnecessarily. Import restrictions, therefore, could have been imposed on mobile phones, if at all, above a certain factory price. The same holds true for domestic appliances such as refrigerators which people cannot do without.
The 100% cash margin deposit requirement will enable big-time businessmen with enough dollars to monopolise the import market by elbowing out others, and fleece consumers. Such a situation has to be averted. Most of all, the need for revising the list of imports affected by the extreme cash margin deposit measure cannot be overemphasised to prevent it from dealing a crippling punch to the average consumer.
Children paying for others’ sins
Saturday 1st April, 2023
The Anuradhapura Teaching Hospital (ATH) has been compelled to close its paediatric ward because all four paediatricians who worked there have left the country, according to media reports. This, we believe, is just the beginning of trouble in the health sector. The situation is bound to take a turn for the worse with other hospitals, too, having to downsize for want of doctors and other health professionals. The health service is not alone in this predicament. Human capital flight has taken its toll on all sectors. Universities are reportedly experiencing a severe dearth of teachers, and the crème de la crème of IT professionals are also leaving the country in droves, and the day may not be far off when Sri Lanka ceases to be attractive to foreign IT companies, which hire its youth. One of the main reasons for the disconcertingly unprecedented increase in the number of Sri Lankan professionals going overseas for employment is the newly-introduced tax regime, which has sent them reeling.
Government politicians and their apologists have sought to make light of the ongoing protests against tax increases by claiming that high income earners up in arms are only a miniscule section of the population, and the new tax regime has not adversely affected the vast majority of the public. This argument is seriously flawed, as could be seen from the plight of the children of Anuradhapura due to the closure of the ATH paediatric ward.
Moreover, the purchasing power of the middle class, which the protesting professionals belong to, is necessary for the country’s economic growth; it provides opportunities to various industries such as consumer goods, infrastructure, entertainment, leisure, travel, tourism and education. When it diminishes due to high taxes, rising inflation and increasing interest rates, the entire economy suffers. It is only natural that professionals tend to leave the country when their real income drops with no prospect of their lot improving in the foreseeable future. They are intelligent enough to see that it is nothing but stupid to leave the task of rebuilding the economy to the very politicians who ruined it!
The health sector has been plagued by numerous problems such as chronic drug shortage, and now it has another one to contend with. If it deteriorates further owing to the mass emigration of doctors, only the poor will suffer. Politicians are rich enough to pay for healthcare here or overseas. They, who have bankrupted the country, rush to Singapore if they ever so much as catch a cold while the ordinary people who pay through the nose to maintain them are wait-listed even for serious surgical procedures.
One may have reservations about doctors and other professionals and their trade unions, but it behoves the government to engage them and do whatever possible to redress their grievances, which are legitimate. They are not refusing to pay taxes; they are only asking for some relief. The Opposition has come up with a set of alternative tax proposals and revealed how to keep the PAYE tax at affordable levels without causing a drop in the state revenue.
Its views should be taken on board. Another way out may be to enhance the efficiency of the tax collection process. There are many tax evaders including professionals and big businesses, and if the government casts the net wide, it may be able to increase its tax revenue and grant some relief to those who are crying out for relief while paying taxes dutifully. Most of all, government leaders must meet the representatives of protesting trade unions, and make a genuine effort to work out a compromise formula, instead of going all out to frighten them into submission.
‘Narcan’ and franchise
Friday 31st March, 2023
Some good news has thankfully emanated from the US amidst media reports full of gloom and doom. America is known as the land of opportunity, and with reason. Unfortunately, the US has opportunities presenting themselves to the good, the bad and the ugly alike. It therefore has its share of social evils including the extremely high incidence of gun violence, especially school shootings and the ever-increasing drug abuse.
The good news is that the US Food and Drug Administration (FDA) yesterday approved the sale of Narcan or opioid-overdose-reversing Naloxone nasal spray over the counter. This drug is expected to help save many lives being lost the world over daily due to overdoses of drugs such as heroin and fentanyl. The news of the FDA approval for Narcan broke while we were watching the unfolding drama at the Ceylon Petroleum Corporation (CPC), and thinking of the most effective antidote to the abuse of power, which has become as much a menace as narcotics in this country.
Narcotics, especially hell dust, and political power may look chalk and cheese or apples and oranges, but a close examination thereof, especially their ill-effects, will reveal some striking similarities between them. Both are highly addictive; they stupefy the addicts thereto and even drive them to mindless violence. It is extremely difficult to stop savouring power and chasing the dragon, and when addicts go cold turkey, they develop withdrawal symptoms and become aggressive and pose a danger to everyone around.
The political version of Narcan, in a manner of speaking, is the people’s franchise, which has the potential to counterbalance the abuse of power that is driving the grandees of the incumbent Rajapaksa-Wickremesinghe dispensation to resort to coercion to suppress democratic dissent, crush labour struggles, dispose of national assets, and compass their politico-economic ends.
What the striking trade unions have adduced in support of their industrial action is the proposed restructuring of the CPC. Restructuring and divestiture are interchangeable to all intents and purposes in this country. The Rajapaksa-Wickremesinghe government has not cared to obtain the views of other stakeholders, much less secure their concurrence, as regards the restructuring of the CPC, and is all out to railroad them into toeing its line. It is doing exactly the opposite of what the SLPP undertook to do and obtained two popular mandates for—one in 2019 and the other in 2020.
One of the main planks of the SLPP’s presidential and parliamentary election platforms was its much-avowed antipathy towards the divestiture of public assets. Condemning the privatisation by the UNP-led Yahapalana government of vital public ventures, the SLPP vowed to terminate the divestiture of the state-owned enterprises (SOEs) and other such public assets. But its leaders have unabashedly joined President Ranil Wickremesinghe, a defeated candidate, whom they themselves elevated to the highest position in the country, after his entry to Parliament via the National List, in holding a fire sale of SOEs, having bankrupted the country. They have demonstrated that they are followers of Machiavelli, according to whom “the promise given was a necessity of the past; the word broken is a necessity of the present.” What they are practising is the very antithesis of their election manifestos, and therefore their administration is devoid of legitimacy, which is a prerequisite for the imprimatur of political respectability and public acceptance. This fact has become evident from the outcome of a recent opinion survey, according to which the government’s approval rating has plummeted to an appalling 10 percent!
Those who fear or disregard the will of the public and delay or do away with elections are not fit to govern a country. Needless to say, they must not be allowed to commit a nation to long-term bilateral or multilateral agreements that will affect generations to come. The Rajapaksa-Wickremesinghe regime must hold a general election and ask for a popular mandate for the implementation of its economic programme or hold a referendum thereon. This is something the so-called international community, which claims to promote democracy and good governance, should take cognisance of. If its much-advertised concern about democracy is genuine, it ought to tie aid and trade concessions such as GSP Plus to the conduct of free and fair elections in the recipient countries.
What with the SLPP-UNP combine’s determination to delay the local government polls and carry out its economic programme sans public approval, the Opposition ought to up the ante and bring pressure to bear on the government to hold a general election. But this is a tall order for a bunch of lily-livered politicians who float like bees and sting like butterflies, so to speak.
Get TUs around table
Thursday 30th March, 2023
Long lines of vehicles began to form near filling stations on Wednesday owing to a continuous strike launched by the Ceylon Petroleum Corporation (CPC) trade unions, but the government managed to bring the situation under control and buy time by announcing a fuel price reduction with effect from midnight yesterday; many people decided to wait until today to avail themselves of the weekly fuel quota. The problem however is likely to persist unless the government succeeds in restoring fuel supplies preferably by negotiating with the warring trade unions.
Petroleum workers have downed tools over what they call a sinister move to privatise the CPC. The government is determined to go ahead with its restructuring programme, which is widely considered a euphemism for divestiture, while insisting that the trade unions’ claim is baseless. The Cabinet has already decided to allow three foreign companies to import, store, distribute and retail petroleum products for a period of 20 years. The CPC’s monopoly is fast becoming a thing of the past.
The CPC unions are demanding that the government abandon its restructuring plan, which is an IMF condition. The government is resorting to strong-arm tactics to crush the strike. It has called in the police and the military and declared the CPC premises out of bounds for the striking unions. Saman Rathnapriya, Director General of Trade Unions to President Ranil Wickremesinghe, has taken on the striking unions, which claim that the CPC is making huge profits and therefore must not be privatised. He is supposed to negotiate with trade unions and bring about rapprochement, but he has, in his wisdom, chosen to ride roughshod over them. Interestingly, in trying to pooh-pooh the claim that the CPC is a profit-making venture, Rathnapriya has said it is earning profits by jacking up the prices of its products.
It is popularly said in this country that even if one’s mouth lies, one’s tongue doesn’t. Rathnapriya has admitted, albeit unwittingly, that the government keeps fuel prices unreasonably high to maximise profit while the public is struggling to make ends meet! This exploitative policy is against the founding principles of the CPC, which was set up to serve the interests of the public. The CPC mission statement says, inter alia, that it strives ‘to be a market leader by procuring and supplying petroleum and related products at competitive prices’. One of the main allegations against all multinationals is that they are bent on profit maximisation at the expense of their customers. Sadly, the ‘homegrown’ CPC has failed to be different if the unconscionably high prices of its products are any indication. Perhaps, this is the reason why the petroleum sector trade unions have not succeeded in drumming up enough public support for their struggle. This however does not mean that the people approve of the haphazard disposal of state assets.
There are arguments for and against the restructuring of the CPC. The proponents thereof claim that if the petroleum market is made competitive with more companies being allowed to enter it, benefits will accrue to consumers from competition. But the problem is that there is no such thing as perfect competition in this world; moneybags collude to protect their own interests at the expense of consumers. The advocates of dirigisme or state monopoly over products and services argue that the public benefits from the state involvement in the provision of essential commodities and services, and the CPC must retain its monopolistic status to ensure the country’s energy sovereignty, which is an integral part of national security. If multinationals are allowed to dominate power and energy sectors, they will be able to hold the country to ransom, the critics of the government’s restructuring programme have warned. These arguments are tenable to some extent, but the fact remains that all state-owned enterprises (SOEs), save a few, have become huge liabilities that provide sinecures to the supporters of the government in power and bleed the state coffers dry. Most of these outfits have outlived their purpose and become anachronisms. It is being claimed in some quarters that they need to be restructured, but the baby must not be thrown out with the bathwater. Equally, questions are being raised about the bona fides of some of the foreign companies that are planning to enter the local petroleum market. They are thought to be fronts for some local politicians and their kith and kin. One can only hope that the government will try to clear these doubts and suspicions.
The supporters of the government’s divestiture project argue that when D. S. Senanayake was the Prime Minister, there were no SOEs as such, but the country was prosperous. This is a cleverly masked non sequitur. It was a different era. The British had just left and there were surplus funds; more importantly, waste and corruption were unheard of, and political leaders were statespersons driven by altruism. The country achieved progress in those days mostly because it was free from the likes of the present-day politicians, and its wealth was safe; the wealthy who took to politics ran the risk of being reduced to penury unlike today.
Politicians of every hue and their cronies have ruined the SOEs, which are in the red. Now, they are trying to blame these outfits for the country’s economic woes in a bid to justify the ongoing fire sale of state ventures, some of which are profitable and have even helped lessen the state’s dependence on taxes to a considerable extent much to the benefit of the public.
The government must not try to bulldoze its way through. It must negotiate with the striking CPC unions and try to arrive at a compromise formula. After all, its leaders have a history of negotiating with even the LTTE despite the latter’s savage terror campaign to divide the country, don’t they?
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