The suspicion that Moody lowered our credit rating to ‘junk status’ was for political reasons, that is to blunt the government’s China sympathetic foreign policy, is nonsense. These agencies don’t work like that. There are reasons, whether we agree or not, that these agencies think rational – I use the plural because Standard & Poor and Fitch will follow suit. Since I discard a political motive, I would like to probe what these “rational” grounds may be. Caa1 is defined as speculative of poor standing and subject to very high credit risk.
There could be a fear that impending constitutional changes may lead to internal confrontations, and will not be conducive to international businesses, since a liberal ethos is now considered sine qua non for global business. Gone are the days when capital loved hard regimes. I will not probe this further, since too much has appeared in the media about 20A and so on. The Finance Ministry has reacted to Moody’s that the economy has improved in the last two months (remittances rising to pre-COVID levels, sharp reduction in imports, fall in balance of payments deficit from a feared $8 billion to $6 billion and enhanced activity in the domestic economy), but Moody’s seems to have dismissed these as short-term gains. The medium-term outlook, especially looming fiscal deficits and the employment picture are worrisome. A one-tier downgrade to B3 was perhaps unavoidable, but this two-tier downgrade is quite a blow.
But rating agencies have a two-sided responsibility to investors and debtors, and in this context the inability to create conditions for international private business partners, suppliers and buyers and professionals to interact with local counterparts is a problem. The failure to reopen Colombo airport is a sign of deep trouble. Nowhere else in the world has a country been de facto sealed off and its airports closed for seven months. We have only one real airport; Mattala is irrelevant for business travellers. Shrewd rating agencies and financial houses have taken note of these inconveniences, and know that the economy cannot return to an even keel until normal travel facilities are restored. COVID has been under control in Sri Lanka since July; in August we even successfully held a general election! So, what’s up! Why aren’t the usual lot, Singapore Airlines, Thai, Malaysian and Cathay flying in daily? They do not fly in at all; just QATAR has a daily flight.
Things are made worse by sending out the entirely wrong message. The story now is about restarting tourism, not opening for business! The plan is that tourist arrivals will be allowed at Mattala, only, in groups of 10 to 50, be quarantined for 14 days and then visit permitted sites. Of course, there will be no takers; any fool should be able to see that! The economic stupidity of our administrators is that non-existent tourists, not professional and business travellers, who will never agree to use Mattala, will be vainly sought. In the event neither type will come till BIA is opened.
Concessions to be offered to airlines willing to fly to Mattala are: Full waiver of flight disembarkation and embarkation levy, discounts on ground handling, free-of-charge landing and take-off, fuel at discounted prices and discounts on air tickets for migrant workers who use Mattala. Rating agencies have surely sensed this dilettantism. More important is the frame of mind of authorities who have not even thought of reopening the country for businessmen and professional travellers. Don’t blame the Rating Agencies for the thoroughly unprofessional way in which our Ministers and Ministry Secretaries are pretending to do their job.
Road to Nandikadal: Twists of Kamal and Ranil actions
I am re-reading retired Major General Kamal Gunaratne’s book “Road to Nandikadal ” these days. This is his first hand experience of the battle against LTTE, and his journey in the Sri Lankan army from Thirunelveli in 1983 to Nandikadal in 2009, where the final battle took place. Thirteen years have passed since the defeat of the LTTE in 2009 under the political leadership of former president Mahinda Rajapakse and the then secretary of defence Gotabaya Rajapakse. As we all know, Gotabaya became the president of Sri Lanka in 2019, and resigned last July, due to public pressure, and is currently travelling from country to country without a set destination.
In his book, Kamal has written an interesting chapter titled “A final chance for peace” and detailed the peace process followed by the then government led by Ranil Wickremesinghe, as the prime minister. This is Kamal’s narrative about the memorandum of understanding (MOU), brokered by the Norwegian government and signed by the then prime minister Ranil Wickremesinghe and LTTE leader Velupillai Prabhakaran in 2002. “According to the MoU, members of the LTTE political wing were allowed to enter government controlled areas to commence their political activities. The first group of such LTTE political wing members entered the government controlled area from Muhamalai, singing and cheering, as if they had won the war. They insulted and jeered at the soldiers manning the checkpoint with impunity whilst the poor soldiers, under strict instructions not to react, helplessly looked on. The Navy, which arrested a group of terrorists, was immediately instructed to release them. Upon release, the terrorists threatened the sailors and lifted their sarongs, baring their genitalia at the stunned sailors, who could do nothing but simply look down in shame. Such developments intensified the apprehension we held of things yet to come and prepared ourselves to face untold humiliation in the name of the Motherland”.
Kamal further writes, “At the time of drafting the MoU, experienced officers like myself, knew it was premature to enter into peace negotiations. On the one hand, LTTE could not be trusted to keep their word, as past experience had taught us bitterly, and on the other hand, negotiations should be ideally undertaken from a position of strength”. He continues, “The government of Prime Minister Ranil Wickremesinghe was very confident of the peace process and strongly believed there would never be a war again. They did not have any confidence in the Army, which spurred this belief and therefore pursued peace at any cost”.
Kamal’s criticism of the Wickremesinghe administration continues: “The step motherly treatment the Army received during this period was terrible. Strict instructions were given to cut costs and the ever obedient army reduced many of our facilities and benefits. The army even stopped the annual issue of face towels to soldiers, given as a benefit for decades. It felt like they wanted us to live like ‘Veddhas’ without a bit of comfort”
Now the same Ranil Wickremesinghe is the President and Commander-in-chief of the armed forces, and Kamal Gunaratne, who was highly critical of the Wickremesinghe administration, is the trusted Defence Secretary of the president. Is it a twist of fate or twist of faith!
Need for best relations with China
(This letter was sent in before the announcement of the government decision to allow the Chinese survey vessel to dock at Hambantota – Ed.)
I once met Pieter Keuneman sometime after he had lost the Colombo Central at the general election of 1977. We met at the SSC swimming pool, where he had retreated since his favourite haunt at the Otters was under repair. Without the cares of ministerial office and constituency worries he was in a jovial mood, and in the course of a chat in reference to a derogatory remark by one of our leaders about the prime minister of a neighbouring country, he said, “You know, Ananda, we can talk loosely about people in our country, but in international relations care is needed in commenting on other leaders”.
Pieter, the scion of an illustrious Dutch burgher family, the son of Supreme Court judge A. E Keuneman, after winning several prizes at Royal College, went to Cambridge in 1935. There he became a part of the Communist circle, which included the famous spies Anthony Blunt, later keeper of the Queen’s paintings Kim Philby, and Guy Burgess. Eric Hobsbawm, the renowned historian commenting on this circle, wrote of the very handsome Pieter Keuneman from Ceylon who was greatly envied, since he won the affections of the prettiest girl in the university, the Austrian Hedi Stadlen, whom he later married. Representing the Communist Party in parliament from 1947 to 1977, soft-spoken in the manner of an English academic, Pieter belonged to a galaxy of leaders, whose likes we sorely need now.
I was thinking of Pieter’s comments considering the current imbroglio that we have created with China. Our relations with China in the modern era began in 1953, when in the world recession we were unable to sell rubber, and short of foreign exchange to purchase rice for the nation. The Durdley Senanayake government turned to China, with which we had no diplomatic ties. He sent R G Senanayake, the trade minister, to Peking, where he signed the Rice for Rubber Pact, much to the chagrin of the United States, which withdrew economic aid from Ceylon for trading with a Communist nation at the height of the Cold War.
Diplomatic relations with China were established in 1956 by S W R D Bandaranaike, and relations have prospered under different Sri Lankan leaders and governments, without a hint of discord. In fact, in addition to the vast amount of aid given, China has been a source of strength to Sri Lanka during many crises. In 1974, when the rice ration was on the verge of breaking due to lack of supplies, it was China, to which we turned, and who assisted us when they themselves were short of stocks. In the battle against the LTTE, when armaments from other countries dried up, it was China that supported us with arms, armoured vehicles, trucks, ships and aircraft.
It was China and Pakistan that stood by our armed services in this dire crisis. More recently, amidst the furore, created by Western nations about human rights violations, China was at the forefront of nations that defended us. A few weeks ago, it was reported that the UK was ready with documents to present to the UN Security Council to press for war crimes trials against the Sri Lankan military, but the presence of China and Russia with veto powers prevented it from going ahead with its plan.
It is in this context that we have to view the present troubles that have engulfed us.President Ranil Wickremesinghe, in the short period he has been in office, has won the sympathy of people by the speed with which he has brought some degree of normalcy, to what was a fast-disintegrating political environment. On the economic front, his quiet negotiations and decisions are arousing hopes.
A shadow has been cast over these achievements by the refusal to let in the Chinese ship to Hambantota, a decision made on the spur of the moment after first agreeing to allow it entry. The manner in which it was done is a humiliation for China, one administered by a friend. We must remember that these things matter greatly in Asia.
These are matters that can be rectified among friends, if action is taken immediately, recognising that a mistake has been made. The President should send a high-level representative to assure the Chinese leadership that these are aberrations that a small country suffers due to the threats of big powers, to smoothen ruffled feelings, and normalize relations between two old friends. The American-Indian effort to disrupt a 70-year old friendship, will only lead to its further strengthening in the immediate future
A change of economic policies for Sri Lanka
Millions of Sri Lankans are anxiously waiting to see what actions will be taken to make life bearable again.If we follow the example of successful countries we see them exploit their opportunities, and use the wealth created, not to import cars and go on luxury trips abroad, but to re-invest the money proceeds in further projects to bring in even more money. They proceed in this way until their citizens have good standard of living. Probably, the best example of that compounding of wealth is Singapore.
Singapore exploited its geographic advantages. It provided cruise ships with bunkering services and repair, later they provided airlines with refueling and expanded that to one night free stop- overs for passengers to buy luxury goods at their glamorous, tax-free shopping malls. The Japanese were making wonderful new gadgets: cameras, music players, portable radio cassette players, binoculars, all available in the malls and sold tax free!! Lee Kuan Yu forbade the ladies to wear denim jeans, and to wear dresses with hem lines coming down two inches below the knee! He even instructed the ladies to smile! No man could have long hair for fear of arrest. Littering was prohibited, so was chewing gum and smoking butts on the roads and pavements. The place was kept clean!
They used the proceeds arising from all this commercial activity to build housing blocks, develop new roads and other beneficial projects. (Individuals were not allowed to walk away with the profits, just to fritter them away.) Sentosa Island had installed a communications dish antenna connecting it with New York and the financial markets. This was an example of intelligent seizing of opportunities. I account for this intelligent development as due to the high educational and knowledge of Singapore’s progressive management. The result is a firm currency, holding its value.
Something similar has happened to Russia. Russia is rich. It is under progressive intelligent management. Stalin had developed the railway network across the full eleven time zones. But many areas remained to be connected. Putin found the finances to develop coal mines, develop oil and gas deposits and build railway bridges and tunnels for better access to markets and their demand for Russian products. Even as you read this, trains of 70 plus trucks, each with 70 tons of coal are grinding their way to China, day and night. Gas is flowing through an extensive network of pipelines, both east to China and west to friendly countries in Southern Europe. Mr. Putin and his men have succeeded in getting Russia fully functional. And the more Russians there are to spend money, so the more demand for goods and services: shops, etc., providing multiplying employment in Russia.
Mr. Putin wants to build a road and rail link south through Iran to India. A design plan is in the works. It is being discussed with Iran and India. Putin is displaying initiative for the benefit of Russia and its citizens. Putin cares for the citizens of Russia and is creating both wealth and jobs too. Architects are designing attractive living spaces and buildings which provide a better environment for Russians and contractors are building it. Education of Russian citizens is playing a big part in Mr. Putin’s thinking, too. Russia needs a talented workforce.
The result is that the currency, the Ruble is strong and does not devalue. It keeps its value.Belarus, Russia’s neighbour, can also be praised for outstanding development. The population in the big towns is cossetted with amenities and facilities which provides a luxurious way of life for townspeople especially those with industrial jobs. However, it must be admitted, the standard of life for the minority 30% population living in the countryside has yet to catch up. The administration is strict and everyone is law abiding. For example, you can leave your hand phone at your seat while you visit the toilet conveniences and it will remain undisturbed until you return.
Belarus, being a mostly agricultural country has a big tractor manufacturing plant, it has a fertiliser mining and producing plant, it has a commercial vehicle plant, DK MAZ which produces industrial trucks such as fire extinguishing trucks and also produces the most comfortable, bright, low step buses and so on, and of course, Belarus makes its own industrial vehicle tyres. The towns are prosperous and clean and Minsk, the capital is a beautifully laid out city. Town apartment blocks are multi-storied living spaces, but are so well designed and fitted as to provide pleasant living spaces for its people. These reduce urban sprawl across the wooded countryside.
What are Sri Lanka’s strengths? It is a small island thus making communications short and sweet. Its location in the Indian Ocean is a plus, its scenic beauty is a plus allowing a thriving tourist trade for people from colder climates, and its soil and climate allows almost anything to be grown. Therefore its agriculture is a great strength. Its long coastline can provide fish if the fisherised. It has deposits of graphite and phosphates which can be exploited to produce profits for further investment in development projects. It has its illiminite sands which are an extremely valuable asset but need to be controlled and exploitation expanded. It has a whole gem mining industry which need to be managed in way beneficial to the government. It has several government owned businesses which need to be overhauled and modernized to convert losses to profits. The rupee in 1948 was equal to the English pound, now it is around 450 rupees to the Pound. That gives a good description of Sri Lankan past governance.
Profits from projects need to be ploughed back into further projects to bring about a higher standard of living for all its inhabitants. Then the Lankan reputation of being a paradise island with happy people will be restored.
Jugglery alleged in Constitution making process: SJB, Gevindu make strong case against jumbo Cabinet
CEB again faces crunch situation with another unit at Norochcholai breaking down
Suppressing the struggle: Education and the Discourse of Class
‘Dates have the highest sugar content to fight Coronavirus’
U.S. Congress to probe assets fleecing by US citizens of Sri Lankan origin
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