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Redefining Australia’s South Asian foreign policy particularly with Sri Lanka

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By Srimal Fernando and Justin Chua

Australia’s relations with South Asia continues to grow as countries such as Sri Lanka seek to expand their relations with the world. Australia’s push to integrate itself within the Asia-Pacific region has seen it develop stronger relations with Asian countries such as Sri Lanka. With a largely developed economy and society, Australian businesses are seeking new trade and investment opportunities in a region requiring development. Shared historical links between Australia and other Commonwealth countries in the region has helped facilitate greater co-operation and can be readily seen today.

As South Asia continues to further integrate with the rest of the world, greater opportunities exist for countries such as Australia to create synergies with local partners, being brought in to increase trade, mediate conflicts and promote stability within the region and beyond. Countries such as India, with its current foreign policy of the Indo-Pacific, largely coincides with Australia’s policy in South Asia. Being an important island south of India, Sri Lanka has also strengthened its foreign relations with Australia through improving political and economic ties.

 

Sri Lanka-Australia relations

Sri Lanka seeks to become more connected with the world and the geographically distant Australia in the Pacific region seeks to integrate with countries in the Indian Ocean. As Commonwealth nations, the two countries share a significant number of forums to allow for collaboration and understanding. Consequently, Sri Lanka has many opportunities to promote greater trade and investment. For example, many people now travel between Australia and Sri Lanka each year for education, business and sports.

 

Current trade opportunities for further integration

One of the major benefits of Sri Lanka’s geography is its location in the Indian Ocean. Being positioned along one of the busiest shipping routes in the world allows for the country to further develop into a logistics hub for the region. Greater investment in its port and transportation facilities will see greater efficiencies in the movement of goods and services, and potentially encourage more Australian companies to view the country as a gateway to South Asia.

The economies of South Asia are now on Australian investors’ radar, since the economies in the region are growing faster than ever. In addition, Sri Lankan economic policy has increasingly made it easier for Australian companies to invest in the island nation. The clearest signs of this bilateral trade can be seen by trade figures. In 2017, two way trade totalled more than AUD $1.4 billion. Sri Lanka also forms a major link for Australian entrepreneurs to gain great preferential market access to over 1.6 billion consumers through the South Asian Free Trade Area (SAFTA) arrangement.

 

Investment

The Australian Department of Foreign Affairs and Trade notes Australian companies have invested over AUD $89 million in 2017. With this growing trust, Sri Lanka needs to expand its current foreign policy to incorporate Australia more closely as a trade partner, allowing for greater exports and trade. Further liberalization and development in property rights will attract more foreign investors from countries like Australia to invest in Sri Lanka. More road and port infrastructure is being built, so Australian companies will make use of the island nation’s manufacturing and transport logistics industries. In addition, greater development of legal institutions and arbitration facilities may well see Sri Lanka become a trade hub for businesses who are desiring efficient and consistent outcomes in business.

 

Tourism

Australians are increasingly travelling to Sri Lanka for holiday. In 2019, the Australian Department of Foreign Affairs and Trade revealed Sri Lanka was the 20th most popular destination for Australians, with approximately 114,000 Australians visiting the island nation. A greater investment in related industries will see more tourists arrive. Similarly, more direct flights from major Australian cities and promotional campaigns would further support the growth of the Sri Lankan tourism sector.

 

Education

A growing number of Australian educational institutions are also providing opportunities for Sri Lankan students to pursue higher education in a global setting. Each year, thousands of Sri Lankans study various courses in Australia. Within Sri Lanka, more opportunities are available for Sri Lankan students to receive a global education through Australian educational institutions such as RMIT University. Consequently, Australian contributions in education will continue to further promote economic development in Sri Lanka.

 

On future ties

Australian and Sri Lankan ties will continue to deepen through greater cross-border trade and investment. Sri Lanka may well prove to be a gateway for Australians to South Asia in the future through greater development in education, legal institutions and transport infrastructure. On a broader scale, the island nation may one day become a cost-efficient and reliable hub for foreign companies from distant countries like Australia who want greater access to the region.

 

 

Dr. Srimal Fernando is a recipient of the prestigious O.P Jindal Doctoral Fellowship and the SAU Scholarship under the SAARC umbrella. He is an Advisor/Global Editor of Diplomatic Society for South Africa in partnership with Diplomatic World Institute (Brussels). He is also the winner of the 2018/2019 ‘Best Journalist of the Year’ award in South Africa, and has been the recipient of Global Communication Association (GCA) Media Award for 2016. In 2019 Dr Fernando was an Indian Council of World Affairs (ICWA) accolade recipient

 

Justin Chua is a foreign policy analyst who is based in Melbourne, Australia. He has a keen interest in commercial law and international relations with a particular focus on Asia-Pacific countries. He has studied business and law at universities such as RMIT University, University of Melbourne and University of Hong Kong, and has lived and worked in a number of countries in Asia. Chua is an Australian Lawyer as well as a Real Estate Agent.



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Features

Why record export earnings may not be good news

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By Gomi Senadhira

The press release by the Central Bank on the external sector performance ,in June 2022, perhaps was the first piece of good news we had received for a long time. According to the press release, “Earnings from merchandise exports, in June 2022, increased by 23.9 percent over the corresponding month, in 2021, recording US dollars 1,248 million, which is the highest ever monthly export earnings recorded. An increase in earnings of both industrial and agricultural exports contributed to this favourable outcome, …. Cumulative export earnings, from January to June 2022, also increased by 14.3 percent, over the same period in the last year, amounting to US dollars 6,514 million.” So, most of us would think we have enough dollars to cover our essential imports. But, apparently, that is not the case.

Earlier, the Central Bank Governor, Dr. Nandalal Weerasinghe, had said that exporters only converted about 20% of their export earnings into Sri Lankan Rupees and the rest was not brought back to Sri Lanka. That amounts to the US $800 million a month! The Governor had also said “… At least 40% of the total export earnings should be added to the formal financial system of the country. So exporters have a responsibility, at a very difficult time like this, to bring back their foreign exchange, through the banking system, and if that happens, then we can resolve the fuel crisis comfortably.”

(Diesel shipment that arrived in Colombo, on 16 July, still not paid for want of dollars – The Island July 30th) It appears as if the Governor is pleading with the exporters to bring back at least 40% of their export earnings. More notably, from Dr Weerasinghe’s statement, it is clear that the exporter had only converted 20% of their export earnings to rupees during the last five months. Did they convert their export earnings to rupees during the last year, or in the previous years? For how long has this been going on? When the Central Bank says “… exporters have a responsibility, at a very difficult time like this, to bring back their foreign exchange, through the banking system,” does that mean the foreign exchange earned, with the exports, is brought through the hawala network, or other similar arrangements?

Exporters deserve credit for the great service they provide and should be rewarded, appropriately. But not disproportionately. The export earnings are not earned by the exporters alone. These earnings are earned by all those who contribute to manufacturing the export products. All of them should be getting their fair share of the export proceeds. If not, there is something terribly wrong with the system. Is this normal in international trade?

During the last few years, some of the studies by Indian scholars, including Utsa Patnaik and Shashi Tharoor, have placed in the public domain some of the less known facts on the effects of the British colonial rule on India. They explain how the British seized India, “… one of the richest countries in the world – accounting for 27% of global GDP in 1700 – and, over 200 years of colonial rule, reduced it to one of the world’s poorest,” and how during the period British Raj siphoned out $45 trillion from India.

How was this done? Patnaik explains, “In the colonial era, most of India’s sizeable foreign exchange earnings went straight to London—severely hampering the country’s ability to import machinery and technology in order to embark on a modernisation path, similar to what Japan did in the 1870s. …, a third of India’s budgetary revenues was … set aside as ‘expenditure abroad’. The secretary of state (SoS) for India, based in London, invited foreign importers to deposit with him the payment (in gold and sterling) for their net imports from India, which disappeared into the SoS’s account in the Bank of England. Against these Indian earnings he issued bills… to an equivalent rupee value—which was paid out of the budget, from the part called ‘expenditure abroad’.” Patnaik underlines that this was “something you’d never find in any independent country,”

But it appears something very similar is happening in Sri Lanka, many years after the independence! If the exporters do not “bring back their foreign exchange ,through the banking system,” or only bring back 20% of it, then how do they pay for goods and services obtained locally? The local value addition for most of our exports is 70% to 80% or higher! The only major exception is cut and polished diamonds. Tea exporters buy tea with rupees. Some of the imported inputs, like fertiliser, or diesel, are sourced locally! The garment industry had moved up the value chain during the last 40 years and provide many value-added services, like designing, locally.

How do the exporters pay for all these goods and services, if they keep more than 60% of their export earnings outside the country? Do they get it through “hawala” or similar arrangements? During the British Raj, payments to local producers were done with the taxes collected by the Raj. In present-day Sri Lanka, how does one manage to raise a large amount of cash to operate such a system?

If a sizeable chunk of Sri Lanka’s foreign exchange earnings goes straight to banks in London, New York, Zurich, or elsewhere, severely hampering the country’s ability to import essential items, doesn’t that mean, Sri Lanka’s wealth is getting siphoned out through our exports? And there is not much of a difference between what happened during the colonial period and the post independent Sri Lanka!

So, June’s record export earnings also mean nearly US$ billion was siphoned off during the month! A new record for the month of June! And that means Patnaik was wrong when she said this was not “something you’d never find in any independent country”

That is not good news.

(The writer is a specialist on trade and development issues and can be contacted at senadhiragomi@gmail.com)

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Improving trend needs to be sustained on multiple fronts

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by Jehan Perera

The government appears to have secured political stability in the short term.  So far President Ranil Wickremesinghe’s efforts to restore stability appear to be working. Political stability is necessary for decisions to be made and kept.  It is a necessary element for international support to come in.  One of the IMF’s conditions to provide the country with the multi-billion-dollar loan it seeks is political stability that would ensure that commitments that are made will be kept.  The protest movement has not mobilised public demonstrations on the very large scale of the past after the appearance of Ranil Wickremesinghe in leadership positions, initially as prime minister and subsequently as president. This would be seen as an achievement by the government.  The present governmental line that protests should be within the law is difficult, and also frightening, to challenge when a state of emergency is in force.

The government has shown its ability to wield the emergency law with deterrent effect. Under the state of emergency that President Wickremesinghe declared on July 18, the period that a person may be detained before being brought before a magistrate has been increased from 24 to 72 hours. The authorities have been granted additional powers of search and arrest, and the military has been empowered to detain people for up to a day without disclosing their detention. The state of emergency also gives the president and the police broad powers to ban public gatherings, allows the police or military to order anyone to leave any public place or face arrest, and makes it an offense to cause “disaffection” or to spread “rumours.” However, in a sign that Sri Lanka’s system of checks and balances is still working, the Colombo Chief Magistrate’s Court has rejected a request by the police to ban a public protest planned by political parties and multiple organisations on September 9.

Human Rights watch has pointed out that “these provisions are vague, overly broad, and disproportionate in violation of the rights to freedom of expression, peaceful assembly, association, and movement.”  The midnight strike on the protestors who had camped for over three months at the main protest site at Galle Face would make any reasonable person think twice before getting into physical confrontation with the government.  The social media coverage of events that night showed men in black uniform and wearing masks, attacking the unarmed protestors.  As these men did not wear identification badges, there is a question whether they were part of the official security forces or drawn from other groups that work with them.  This response brought discredit to the perpetrators and disturbed both Sri Lankan people and the international community that have the welfare of Sri Lanka at heart.

The government has also used the full power of the draconian law to ensure that the leadership of the protest movement is neutralised. Several of them have been arrested, some of them given bail, others remanded, which would send a chilling message to the others.  The government has also shown its willingness to offer high positions to those who are prepared to join it.  This has led to a situation where two trade union leaders active in the protest movement have been treated very differently.  One has been offered a high post while the other has been put into prison, although he has now been given bail.  In a signal that he is sensitive to public pressure and human rights concerns, President Wickremesinghe had spoken to leader of the Ceylon Teachers Union, Joseph Stalin, after he was remanded and reportedly said he admires the members of the protest movement who talk of a system change.

ECONOMIC STABILISATION

Apart from the appearance of political stability there is also the appearance of economic stabilisation.  The shortages of cooking gas, petrol and diesel, and the 13-hour power cuts were among the main catalysts of the protest movement.  It was during the period of long power cuts, when staying at home became unbearable, that neigbourhood groups began to converge in urban centres to hold candlelight protests.  However, at this time the supply of gas, petrol and diesel has improved significantly and the kilomere-long lines in front of fuel stations are much less common.  Credit has gone to the QR code system put in place that gives to each vehicle a weekly quota.

The challenge for the government is to ensure that the economic situation continues to be stable without experiencing the acute shortages of key items that causes distress to the general population.  The QR code system can only work if there is petrol and diesel to be distributed.  The current imports of cooking gas, petrol and diesel appear to have been made possible by a World Bank loan which was re-purposed to the purchase of essential items.  However, these funds will dry up soon.  The question is what will happen after that.  There is apprehension that the country will fall once again into a situation of severe shortage.  The government needs to take the people into its confidence regarding the future.  The government also needs to be trusted if it is to be believed.

The World Bank has given an indication that they are still to be convinced regarding the provision of further assistance to Sri Lanka.  Earlier this month, the World Bank issued a statement “expressing deep concern about the dire economic situation and its impact on the people of Sri Lanka yesterday said it does not plan to offer new financing to Sri Lanka until an adequate macroeconomic policy framework is in place.  Issuing a statement, the World Bank Group said it is repurposing resources under existing loans in its portfolio to help alleviate severe shortages of essential items such as medicines, cooking gas, fertiliser, meals for school children and cash transfers for poor and vulnerable households.  To date, the World Bank has disbursed about US$160 million of these funds to meet urgent needs.”  This is extremely concerning as the World Bank is closely connected to the IMF on which Sri Lanka is pinning its hopes for a big loan.

POLITICAL STABILITY

The issue of political stability is highlighted by the government as being necessary to obtain international assistance and also as a justification for quelling the protest movement through emergency laws.  There is explicit blame being apportioned to the protest movement for creating instability in the polity that is deterring the influx of foreign assistance and investments.  However, the fuller picture needs to be seen.  The IMF as much as the World Bank, and indeed other potential sources of donor support, want their resources to be used for the intended purpose and not be squandered or siphoned away corrupt practices and in sustaining loss-making state institutions.

The hoped-for IMF-supported programme to provide assistance to Sri Lanka is being developed to restore macroeconomic stability and debt sustainability, while protecting the poor and vulnerable, safeguarding financial stability, and stepping up structural reforms to address corruption vulnerabilities and unlock the country’s growth potential. IMF mission team to Sri Lanka last month specifically mentioned the need to reduce corruption stating that “Other challenges that need addressing include containing rising levels of inflation, addressing the severe balance of payments pressures, reducing corruption vulnerabilities and embarking on growth-enhancing reforms.”

Both the international funding agencies and the protest movement are on the same page when it comes to opposing corrupt practices.  The main slogans of the protest movement during their heyday was the ouster of the then president, prime minister and cabinet of ministers, and indeed the entire parliament, on account of the corruption that they believed was responsible for having denuded the country of its foreign exchange reserves. This was not simply the replacement of one set of corrupt leaders by another. There are disturbing signs that some of those accused of corruption are once again on the ascendant.

The underlying demand of the protest movement was and continues to be the very “systems change” that the president has said he admires in his reported discussion with remanded trade union leader Joseph Stalin. Civil disobedience to obtain a government that is transparent and law abiding, that does not steal the wealth of the country, is a noble goal, no less sacred than the civil disobedience struggles engaged in by Mahatma Gandhi in India and Martin Luther King in the United States.  The ingredients for a rebound of the protest movement continue to be in place and hopefully the evidence of a systems change will become more convincing.

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Brenda Mendis… ‘Gindara Kellek’

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I first got to know Brenda Mendis when she was very much a part of the group Aquarius, before joining Mirage..

With Aquarius, her dynamism bloomed, on stage, when she partnered two other female vocalists – from the Philippines.

And…yes, they certainly did rock the scene; the three girls were the talk-of the-town and they were featured at some of the best venues in the city.

She was also, at one time, associated with the band 2Forty2.

Brenda now operates with an outfit called C Plus Band, and with whatever free time, that comes her way, the talented artiste is now working on originals.

The latest is the song ‘Gindara Kellek’ and this is what Brenda has to say:

“I have known this guy Chathurangana de Silva for a very time and he has been involved in composing certain songs for the C Plus Band.

“We then got down to discussing about putting together a song which could be classified as a fast genre in music, and Chathurangana, along with Sampath Fernandopulle, came up with the suggestion for the lyrics, and they did so, based upon a proper observation of my lifestyle and the personality portrayal of myself, and that’s how “Gindara Kellek’ came into the scene.”

Brenda went on to say that the composing was done during a tight schedule.

“As I am the female vocalist, on a full time basis, with the C Plus Band, it took us more time than what is usual spent at a recording session, because of our public performances.”

‘Gindara Kellek’ is not Brenda’s maiden effort. She has been involved in quite a few other originals, including ‘Tharu Peedena Seethale,’ ‘Obai Mage Thaththe,’ ‘Mage Raththaran,’ ‘Kaprinna (Chooty),’ ‘You Never Know,’ ‘Mea Nilwan Nimnaye, and ‘Sitha Igilee Gihin.’ And, they are all uniquely different to each other, she says.

With the country going through a tough period, Brenda, spends her free time working out and reading.

“I would take this opportunity, through your very popular music page, to thank all those who helped me throughout my journey in this wonderful field of music.

“I shall continue to keep music lovers happy, with my music, and I would also thank my followers for supporting me and for being with me throughout my career in showbiz.”

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