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Need for multipronged reform programme stressed



(From L) Sathya Karunarathne, Sanjaya Mohottala, MP Mayantha Dissanayake and Prof. Sirimal Abeyratne at the discussion

Pre-budget discussion

The need for multi-pronged broad reforms to stabilise the economy and to ensure long-term policy consistency were some of the key highlights at a pre-budget discussion held on Oct 21, addressing a number of economic issues currently faced by Sri Lanka.

The discussion, titled ‘Budget 2022: Sri Lanka’s Path to Economic Stability,’ was organised by NextGenSL and the Friedrich Naumann Foundation for Freedom in Sri Lanka. Justus Lenz, Policy Advisor for Economic and Financial Affairs at the Liberal Institute, the Friedrich Naumann Foundation for Freedom’s think tank, delivered the keynote speech, in which he shared Germany’s experience in economic revival with the hope of encouraging Sri Lanka to embark on broad and meaningful reforms to revive the economy, said a joint press release issued by NextGenSL and the Friedrich Naumann Foundation.

It said: Lenz drew attention to the fact that Germany’s success was based on four primary factors — 1) Free markets, property rights, and unregulated prices 2) The rule of law, infrastructure, and social policies provided by the state 3) Abstention from direct market interventions (mostly) and 4) Free trade and the EU’s common market.

“Actual economic growth depends entirely on entrepreneurs who develop products and services. But in order to drive development and progress, entrepreneurs need a well-functioning market order which provides freedom and security,” he told the audience. “Facing enormous difficulties, West Germany implemented the Social Market Economy and placed its trust in free markets, the entrepreneurial spirit, and an open society. East Germany bet on central planning and top-down control. In the first 10 or 20 years, the race to prosperity seemed to be a close one. But the long-term effects of both free and controlled markets soon became obvious,” he said.

“A lesson that can be drawn from looking at our experience in Germany is that reforms towards a free-market order can be very successful. If one pursues this direction, it is important to consider that success can take time. The implementation time can be painful and long, as seen both after 1948 and 1989”, adding, “Of course, there is no easy recipe for implementing a free-market order such as the Social Market Economy,” he added.

Following the keynote speech, a panel discussion featuring Prof. Sirimal Abeyratne, MP Mayantha Dissanayake, Sanjaya Mohottala, Chairman, Board of Investments, and Justus Lenz took place, primarily focusing on Sri Lanka’s need for broad economic reforms. Sathya Karunarathne of the Advocata Institute moderated the discussion.

Expressing his views at the panel discussion, Prof. Sirimal Abeyratne, a veteran economist, said that Sri Lana should move away from ad-hoc changes and work towards an overall reform package. “Even measures such as the removal of price controls should have come as part of an overall reform package. Without such an approach, there is going to be an enormous impact on low-income groups,” he said, adding that Sri Lanka should not look for short-term solutions for long-term problems.

“Budget is a short-term policy plan which only focuses on a period of 12 months. But it has to be consistent with a long-term plan. The absence of such consistency has been the problem in Sri Lanka,” he explained, adding that it was important to understand that a budget could not grant relief without someone paying for it.

“We had the space to print money during the early stages of the pandemic. Now, the vaccination process has seen significant progress and Sri Lanka has done a commendable job with the vaccination drive when compared to many other developing nations. As a result, inflation and aggregate demand are increasing, limiting the Central Bank’s ability to finance the budget deficit,” he pointed out.  Prof. Abeyratne was also of the opinion that the current import controls were an “easy way-out” for Sri Lankan lawmakers.

“We must first understand what hinders the growth of domestic production. There are many factors contributing to this situation, but we brush them aside and resort to import controls because that is the easy way out. As a result, the core issues will remain the same,” he explained.

Parliamentarian Mayantha Dissanayake stressed the fact that both the Government and the opposition must work together with a common agenda to revive the economy and to reach a consensus on long-term policy reforms. “There is an urgent need to restore the trust of investors in the country. For this, a clear and cohesive message should be sent out,” Dissanayake said, adding, “We must find ways to restructure the management of these loss-making SOEs. They have become a severe burden on the economy. I would like to suggest a Temasek-like model for the divestment of government stake in these SOEs.  Sri Lanka must strike a fine balance between the aspects of a welfare state and the much-needed economic reforms.”

He was also of the strong view that all reforms must be done in strict adherence to democratic practices, aiming to improve the efficiency and effectiveness of these SOEs. “I am a firm believer of monitoring and evaluation processes. This is why I believe getting rid of the National Audit Commission is an undesirable move by the current administration. Sectoral Oversight Committees, another important tool to ensure accountability, should have been allowed to continue,” the MP said.

He said another pressing problem confronting Sri Lanka at the moment is brain-drain. Even during the time of war, when a number of political leaders were assassinated, we did not see a brain drain of this magnitude,” he said. “This is a serious problem the government must address through meaningful reforms.”

BOI Chairman Sanjaya Mohottala said Sri Lanka’s focus at the moment was to create a compelling environment for FDIs through consistent immediate and long-term reforms. “What we need from the budget the most is stability,” Mohottala said. “This includes better clarity, better transparency, and better consistency.” He added that the country must set the foundation to double the GDP in 10 years with the minimum inconsistencies while addressing a host of other areas and assured the audience that the current administration was working on a number of measures to address the issues faced by investments including ‘simplifying’ the system.

“We must now get out of the pandemic mindset and look for opportunities. We are currently working towards building the capacity in the legal sector to remove some of the impediments. Digitalization of the legal process is a must. Also, we are working to build infrastructure allowing the justice system to address all regulatory-related issues expeditiously,” he said, proposing a pragmatic policy on taxation that would create a better climate for the youth to work in Sri Lanka.

In his remarks at the panel discussion, Justus Lenz said every country must find its own way to address its own. “But we must not forget that good policies are not expensive. Long-term commitment to stability and free-market reforms are not expensive,” he stressed. The German expert also pointed out that it was critically important to remain optimistic and create a long-term consensus on reforms without losing clarity.

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Countrywide power outage act of sabotage, claim TU, officials



Unions suspect sinister attempt to call in military

Engineers say technical fault caused power failure

CEBEU suspends work-to-rule protest

By Ifham Nizam

The government was trying to pin the blame for yesterday’s countrywide power outage on the Ceylon Electricity Board (CEB) trade unions in a bid to call in the military, Joint Trade Union Alliance Convener Ranjan Jayalal said yesterday.

Jayalal told The Island the government’s attempt would tarnish the image of the military and that of the country, but such intimidatory tactics would not deter the CEB unions from continuing with their action against the questionable agreement between the government and the US energy firm, New Fortress, which has been allowed to acquire a 40% stake in the Yugadanavi power plant. “The government is trying to derail our trade union action, scheduled for December 08. Definitely the power outage was an act of sabotage. Two units of the Norochcholai coal-fired power plant and the one at Sapugaskanda had failed,” he added, insisting that the trade unions had nothing do with the power outage. He said union activists had sprung into action to restore power despite their work-to-rule, for the sake of the country and its people.

A senior independent electrical engineer said the power failure was an act of sabotage or attempt at sabotage. “It could have been a rehearsal that misfired,” he added.

Electricity supply in several areas in Colombo and its suburbs were restored around 2.00 p.m. Subsequently, the power supply on Anuradhapura-Habarana, Laxapana-Athurugiriya and Kotmale-Biyagama transmission lines was restored. However, even at 5.30 p.m. most parts of the Gamapaha District experiencing power failures.

CEB General Manager, Eng. M R Ranatunga sand disruptions to the power supply could be considered sabotage. He said CEBEU activists had been dragging their feet on power restoration.

State Minister of National Security & Disaster Management Chamal Rajapaksa said necessary action would be taken against the CEB engineers if it was revealed that the power outage was an act of sabotage.

Major disruptions to the electricity supply were reported across the country around 11.30 a.m. yesterday owing to a breakdown in transmission lines.

The National Water Supply and Drainage Board (NWS&DB) said the water supply in several areas of Colombo and suburbs had been disrupted due to the breakdown in the power supply as the NWS&D is dependent on the national grid for pumping purposes.

The Ceylon Electricity Board Engineers Union (CEBEU) last night said it had received a favourable response from the government to its demands and therefore decided to suspend its work-to-rule campaign.

The Island learns that President’s Secretary Dr. P. B. Jayasundara will meet a CEBEU delegation, next week.

A senior electrical engineer expressed concern about CEB General Manager’s statement that the power outage was an act of sabotage by the engineers’ union. He denied as baseless the official’s claim.

CEBEU Secretary Dhammike Wimalarathne confirmed that his union had decided to suspend trade union action following an undertaking given by the government to have talks with them.

Meanwhile, CEBEU President Saumya Kumarawadu, addressing the media, yesterday, insisted that the power outage had been due to a technical problem.

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Chamal tells Parliament if power failure is due to sabotage, culprits will be dealt with severely



By Saman Indrajith

Minister of Irrigation and State Minister of Internal Security, Home Affairs and Disaster Management, Chamal Rajapaksa told Parliament yesterday that the government was investigating the causes of yesterday’s countrywide power outage and if it was due to sabotage those responsible would be severely dealt with.

Responding to a question by Anuradhapura District SJB MP Rohana Bandara Dissanayake during the third reading stage debate on Budget 2022 under the expenditure heads of the Ministry of Defence, the Minister said that the government would not tolerate sabotage.

MP Rohana Bandara Dissanayake said that while the national security was being debated in Parliament the entire country was experiencing a power outage which could be considered a serious threat to national security.

He said all reservoirs were brimful and there was sufficient water to generate hydro power.

Colombo District SJB MP Dr. Harsha de Silva said that the entire country was in dark and Parliament was sitting thanks to power supplied by generators.

Minister Rajapaksa said that the government had already called for an investigation and it would not hesitate to take necessary action on the findings of the probe.

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Committee on Public Finance meeting: one-third drop in next Yala harvest predicted



Members of the Committee on Public Finance recently recommended that if the import ban on rice, which was imposed last April, is to be lifted, it should be done only after a proper forecast of the coming Yala harvest.

The Chairman of the Committee on Finance Anura Priyadharshana Yapa pointed out that under the prevailing circumstances, the interest of the paddy farmers and consumers had to be taken into consideration.

In response to MP Yapa’s comment, the Imports and Exports Controller General revealed that, according to the available data, the expected Yala harvest is likely to be only 2/3 as compared to last year.

MP Nalin Fernando pointed out that if businessmen were allowed to import rice freely, the business community would be tempted to import more rice than necessary, driving the paddy prices down and affecting the farming community badly. Hence, the Ministry of Finance should intervene to prevent the local farmer from facing difficulties. MP Fernando also pointed out to the officials of the Ministry of Finance that it was important to make rice freely available at reasonable prices. Sri Lankans did not like rice imported from neighbouring countries, he said.

The Committee on Public Finance was urged to obtain approval for an Extraordinary Gazette Notification permitting the importation of Kekulu, Nadu, Samba and other types of rice as per the order of the Minister of Finance. MP Dr. Harsha de Silva said officials had to investigate the macro economic impact of such orders given without a proper procedural or logical assessment.

The committee members inquired from the officials of the Ministry of Finance who were present at the Committee meeting whether the 2021 Budget forecasts could be fulfilled. According to the statistics and data submitted by the officials of the Ministry of Finance, the committee observed that if only local funds were used to repay all debts, there would be an increase in interest rates in the near future and that would adversely affect the local private sector, (Dr.) Harsha de Silva said.

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