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Problems that need addressing to right an economy gone horribly wrong

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by Gnana Moonesinghe

The book “Regional Investment Pioneers in South Asia” by Sanjay Kathuria, Ravindran Yatawara and Xiao’ou zhu published by South Asia Development Forum appears to me to be an appropriate touch point in planning corrections to Sri Lanka’s economic development strategy.

The chapter on the “State of Play in South Asia” is particularly relevant to us as it refers to what needs to be considered to attract foreign investment. This chapter deals with subjects such as intra-regional investment and knowledge connectivity and the reduction in tariffs to encourage trade and investments.

Knowledge transfers are particularly useful to us as it enables better decision making when investing. It informs the reader on production processes, managerial and organizational practices, logistics and exports. Information regarding these features properly implemented will be more than sufficient to direct the Sri Lankan economy on the path to development.Profile of Sri Lanka’s current economic problemA drop in foreign currency reserves has been a significant indicator of the economic problem faced by Sri Lanka. our foreign currency reserves dropped to US$ 1.6 bn in Nov. 2021 triggering fears of possible debt default. To date SL has not defaulted in debt repayment.

This situation is only partly due to the pandemic which caused a sharp drop in tourism earnings and the decline in remittances from the Middle East workers. The pandemic prevented the entry of tourists into Sri Lanka while remittances from those employed in the Middle East that were earlier converted through the banks were diverted to the black market for a better exchange rate. Thus an alternative market had been revived bypassing the banking system.

The above factors made it difficult for the government to maintain the nation’s economic equilibrium. Another reason among many others is overloading the public service with passengers not contributing to economic productivity but paid from public coffers.

The heavy debt service obligations due to short term high cost borrowings and unproductive investments of the recent past like the Hambantota stadium are some of the projects that added to the country’s debt service obligations. Additionally the Central Bank’s insistence in keeping the US $ pegged to an artificial rate has diverted funds from the banks to the unofficial market as illustrated by the case of foreign worker remittances.

The import controls imposed to curb the outflow of foreign exchange have also impacted on export production as well as having a damaging effect on the domestic markets. When imposing import controls, care must be taken to see that it is is better deviced to curtail non essential imports without hurting intermediate and capital goods imports essential specially for the export manufacturing sector.

That would be attractive to the foreign investors who will hopefully enter export manufacturing industries and help develop the economy.

Special emphasis should be placed on the need to review the working of our democratic practices. Their decline can frighten away investor from coming here. Politicians have in recent years held sway over all aspects of the management of the country and the credibility of ‘one country, one law’ for all has eroded. It is frightening that the belief that some are above the law is gaining credence and this has implications for foreign investment.

The Central Bank resorted to uninhibited money creation causing high inflation which resulted in untold misery for the people. This has also contributed to the malfunctioning of society which included the unavailability of jobs as well as the loss of existing jobs. Unemployment in turn has led to suffering without food, medicines, adequate schooling etc. This in the midst of excessive money in the hands of the corrupt few who were able to resort to corrupt practices due to a lack of transparency in the conduct of government business. All this is a deterrent to investment.

In addition to these factors the practice of pluralism as a democratic concept has receded in importance. “Sinhala only” in effective usage since 1956 introduced a division in society where the Sinhala majority considering themselves superior to the rest of the population. Eventually this resulted in the build up of animosities among the different communities that eventually led to the 30-year war for the conduct of which resources and energy that would have otherwise been invested in development was utilized. This further constricted the economy.

It is clear that the entire economy must be restructured to overcome te negatives encountered in the recent past. More attention must be paid to agriculture to make the sector sufficiently attractive for investments in export agriculture. Long term interests should be given precedence over ad hoc measures such as the ban on fertilizer imports at great cost to domestic agriculture.

The rubber industry need to be strengthened with greater value addition utilizing domestic raw material. The development of the dairy sector must be accelerated as milk production and processing have not grown as fast as they should have. This is vital for the import substitution effort as well as the nutritional needs of the people.

Today the value of the rupee against the dollar has dropped to a dangerously low level and the rupee was recently devalued to Rs. 230 to the USD after a futile effort of artificially protecting it against market forces. The govt has imposed power cuts, and the people are facing gas, fuel and food shortages. Due to the forex crisis there is inability to even unload essentials already in port.

Threat of trade union protests are on the rise; so is the threat of other civil commotions that will create social dislocation in the country. Foreign exchange reserves are down to dangerously low levels and this not only endangers essential imports but also has implications for the development effort. The economic development of the country has not been pursued in accordance with a well thought plan in recent decades. Several macro economic weaknesses have been compounded by the adverse effects of COVID -19. Restructuring the economy has become urgent to set right the many things that have already gone wrong with no effective corrective measures in sight.



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BRICS emerging as strong rival to G7

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It was in the fitness of things for Indian Prime Minister Narendra Modi to hold a special telephonic conversation with Russian President Vladimir Putin recently for the purpose of enlightening the latter on the need for a peaceful, diplomatic end to the Russian-initiated blood-letting in Ukraine. Hopefully, wise counsel and humanity would prevail and the world would soon witness the initial steps at least to a complete withdrawal of invading Russian troops from Ukraine.

The urgency for an early end to the Russian invasion of Ukraine which revoltingly testifies afresh to the barbaric cruelty man could inflict on his fellows, is underscored, among other things, by the declaration which came at the end of the 14th BRICS Summit, which was held virtually in Beijing recently. Among other things, the declaration said: ‘BRICS reaffirms commitment to ensuring the promotion and protection of democracy, human rights and fundamental freedoms for all with the aim to build a brighter shared future for the international community based on mutually beneficial cooperation.’

It is anybody’s guess as to what meanings President Putin read into pledges of the above kind, but it does not require exceptional brilliance to perceive that the barbaric actions being carried out by his regime against Ukrainian civilians make a shocking mockery of these enlightened pronouncements. It is plain to see that the Russian President is being brazenly cynical by affixing his signature to the declaration. The credibility of BRICS is at risk on account of such perplexing contradictory conduct on the part of its members. BRICS is obliged to rectify these glaring irregularities sooner rather than later.

At this juncture the important clarification must be made that it is the conduct of the Putin regime, and the Putin regime only, that is being subjected to censure here. Such strictures are in no way intended to project in a negative light, the Russian people, who are heirs to a rich, humanistic civilization that produced the likes of Dostoevsky and Tolstoy, among a host of other eminent spirits, who have done humanity proud and over the decades guided humans in the direction of purposeful living. May their priceless heritage live long, is this columnist’s wish.

However, the invaluable civilization which the Russian people have inherited makes it obligatory on their part to bring constant pressure on the Putin regime to end its barbarism against the Ukrainian civilians who are not at all party to the big power politics of Eastern Europe. They need to point out to their rulers that in this day and age there are civilized, diplomatic and cost-effective means of resolving a state’s perceived differences with its neighbours. The spilling of civilian blood, on the scale witnessed in Ukraine, is a phenomenon of the hoary past.

The BRICS grouping, which encompasses some of the world’s predominant economic and political powers, if not for the irregular conduct of the Putin regime, could be said to have struck on a policy framework that is farsighted and proactive on the issue of global equity.

There is the following extract from a report on its recent summit declaration that needs to be focused on. It reads: BRICS notes the need to ensure “Meaningful participation of developing and least developed countries, especially in Africa, in global decision-making processes and structures and make it better attuned to contemporary realities.”

The above are worthy goals that need to be pursued vigorously by global actors that have taken upon themselves the challenge of easing the lot of the world’s powerless countries. The urgency of resuming the North-South Dialogue, among other questions of importance to the South, has time and again been mentioned in this column. This is on account of the fact that the most underdeveloped regions of the South have been today orphaned in the world system.

Given that the Non-aligned Movement and like organizations, that have espoused the resolution of Southern problems over the decades, are today seemingly ineffective and lacking in political and economic clout, indications that the BRICS grouping is in an effort to fill this breach is heartening news for the powerless of the world. Indeed, the crying need is for the poor and powerless to be brought into international decision-making processes that affect their wellbeing and it is hoped that BRICS’s efforts in this regard would bear fruit.

What could help in increasing the confidence of the underdeveloped countries in BRICS, is the latter’s rising economic and political power. While in terms of economic strength, the US remains foremost in the world with a GDP of $ 20.89 trillion, China is not very far behind with a GDP of $ 14.72 trillion. The relevant readings for some other key BRICS countries are as follows: India – $ 2.66 trillion, Russia – $ 1.48 trillion and Brazil $ 1.44 trillion. Of note is also the fact that except for South Africa, the rest of the BRICS are among the first 15 predominant economies, assessed in GDP terms. In a global situation where economics drives politics, these figures speak volumes for the growing power of the BRICS countries.

In other words, the BRICS are very much abreast of the G7 countries in terms of a number of power indices. The fact that many of the BRICS possess a nuclear capability indicates that in military terms too they are almost on par with the G7.

However, what is crucial is that the BRICS, besides helping in modifying the world economic order to serve the best interests of the powerless as well, contribute towards changing the power balances within the vital organs of the UN system, such as the UN Security Council, to render them more widely representative of changing global power realities.

Thus, India and Brazil, for example, need to be in the UNSC because they are major economic powers in their own right. Since they are of a democratic orientation, besides pushing for a further democratization of the UN’s vital organs, they would be in a position to consistently work towards the wellbeing of the underprivileged in their respective regions, which have tremendous development potential.

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Queen of Hearts

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She has certainly won the hearts of many with the charity work she is engaged in, on a regular basis, helping the poor, and the needy.

Pushpika de Silva was crowned Mrs. Sri Lanka for Mrs. World 2021 and she immediately went into action, with her very own charity project – ‘Lend a Helping Hand.’

When launching this project, she said: “Lend a Helping Hand is dear to me. With the very meaning of the title, I am extending my helping hand to my fellow brothers and sisters in need; in a time where our very existence has become a huge question and people battling for daily survival.”

Since ‘Lend a Helping Hand’ became a reality, last year, Pushpika has embarked on many major charity projects, including building a home for a family, and renovating homes of the poor, as well.

The month of June (2022) saw Pushpika very much in action with ‘Lend a Helping Hand.’

She made International Father’s Day a very special occasion by distributing food items to 100 poor families.

“Many are going without a proper meal, so I was very keen, in my own way, to see that these people had something to keep the hunger pangs away.”

A few days later, the Queen of Hearts made sure that 50 more people enjoyed a delicious and nutritious meal.

“In these trying times, we need to help those who are in dire straits and, I believe, if each one of us could satisfy the hunger, and thirst, of at least one person, per day, that would be a blessing from above.”

Pushpika is also concerned about the mothers, with kids, she sees on the roads, begging.

“How helpless is a mother, carrying a small child, to come to the street and ask for something.

“I see this often and I made a special effort to help some of them out, with food and other necessities.”

What makes Pushpika extra special is her love for animals, as well, and she never forgets the street dogs that are having a tough time, these days, scavenging for food.

“These animals, too, need food, and are voiceless, so we need to think of them, as well. Let’s have mercy on them, too. Let’s love them, as well.”

The former beauty queen served a delicious meal for the poor animals, just recently, and will continue with all her charity projects, on a regular basis, she said.

Through her charity project, ‘Lend a Helping Hand,” she believes she can make a change, though small.

And, she says, she plans to be even more active, with her charity work, during these troubled times.

We wish Pushpika de Silva all the very best, and look forward to seeing more of her great deeds, through her ‘Lend a Helping Hand’ campaign.

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Hope and political change:No more Appachis to the rescue

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KUPPI on the current economic and political crisis: intervention 1

by Harshana Rambukwella

In Buddhist literature, there is the Parable of the Burning House where the children of a wealthy man, trapped inside a burning house, refuse to leave it, fearful of leaving its comfort – because the flames are yet to reach them. Ultimately, they do leave because the father promises them wonderful gifts and are saved from the fire. Sri Lankans have long awaited such father figures – in fact, our political culture is built on the belief that such ‘fathers’ will rescue us. But this time around no fathers are coming. As Sri Lankans stare into an uncertain future, and a multitude of daily sufferings, and indignities continue to pile upon us, there is possibly one political and emotional currency that we all need – hope. Hope is a slippery term. One can hope ‘in-vain’ or place one’s faith in some unachievable goal and be lulled into a sense of complacency. But, at the same time, hope can be critically empowering – when insurmountable obstacles threaten to engulf you, it is the one thing that can carry you forward. We have innumerable examples of such ‘hope’ from history – both religious and secular. When Moses led the Israelites to the promised land, ‘hope’ of a new beginning sustained them, as did faith in God. When Queen Viharamahadevi set off on a perilous voyage, she carried hope, within her, along with the hope of an entire people. When Martin Luther King Jr made his iconic ‘I have a dream’ speech, hope of an America where Black people could live in dignity, struck a resonant chord and this historical sense of hope also provided inspiration for the anti-Apartheid struggle in South Africa.

This particular moment, in Sri Lanka, feels a moment of ‘hopelessness’. In March and April, this year, before the cowardly attack on the Gota Go Gama site, in Galle Face, there was a palpable sense of hope in the aragalaya movement as it spread across the country. While people were struggling with many privations, the aragalaya channeled this collective frustration into a form of political and social action, we have rarely seen in this country. There were moments when the aragalaya managed to transcend many divisions – ethnic, religious and class – that had long defined Sri Lanka. It was also largely a youth led movement which probably added to the ‘hope’ that characterized the aragalaya. However, following the May 09th attack something of this ‘hope’ was lost. People began to resign themselves to the fact that the literally and metaphorically ‘old’ politics, and the corrupt culture it represents had returned. A Prime Minister with no electoral base, and a President in hiding, cobbled together a shaky and illegitimate alliance to stay in power. The fuel lines became longer, the gas queues grew, food prices soared and Sri Lanka began to run out of medicines. But, despite sporadic protests and the untiring commitment of a few committed activists, it appeared that the aragalaya was fizzling out and hope was stagnant and dying, like vehicles virtually abandoned on kilometers-long fuel queues.

However, we now have a moment where ‘hope’ is being rekindled. A national movement is gathering pace. As the prospect of the next shipment of fuel appears to recede into the ever-distant future, people’s anger and frustration are once again being channeled towards political change. This is a do-or-die moment for all Sri Lankans. Regardless of our political beliefs, our ideological orientation, our religion or class, the need for political change has never been clearer. Whether you believe that an IMF bailout will save us, or whether you believe that we need a fundamental change in our economic system, and a socially and economically more just society, neither of these scenarios will come to pass without an immediate political change. The political class that now clings to power, in this country, is like a cancer – poisoning and corrupting the entire body politic, even as it destroys itself. The Prime Minister who was supposed to be the messiah channeling international goodwill and finances to the country has failed miserably and we have a President who seems to be in love with the idea of ‘playing president’. The Sri Lankan people have a single existential choice to make in this moment – to rise as one to expel this rotten political order. In Sri Lanka, we are now in that burning house that the Buddha spoke of and we all seem to be waiting for that father to appear and save us. But now we need to change the plot of this parable. No father will come for us. Our fathers (or appachis) have led us to this sorry state. They have lied, deceived and abandoned us. It is now up to us to rediscover the ‘hope’ that will deliver us from the misery of this economic and political crisis. If we do not act now the house will burn down and we will be consumed in its flames.

Initiated by the Kuppi Collective, a group of academics and activists attached to the university system and other educational institutes and actions.

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