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Revival of Export Development Council – a far-reaching stride for the acceleration of Sri Lankan exports

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by J. A. A. S. Ranasisnghe

Productivity Specialist and Management Consultant

It is heartening to note that President Gotabaya Rajapaksa has re-galvanized the Export Development Council (EDC) of the Export Development Board (EDB), consisting of nine ministries, after a lapse of 28 years, on the initiative of the Minister in charge Bandula Gunawardana with a view to formulating and implementing national export development policies and programmes. Assuming that the duration of Parliament life is five years, it could be safely assumed that the successive six governments have pathetically failed to promote and develop the Sri Lankans exports as per the mandate given to them in terms of the EDB Act No 40 of 1979 in a competitive global trade environment. The revival of the EDC is a formidable far-reaching intervention by the present government, as the need of the hour is to generate foreign exchange by exporting Sri Lankan commodities. No doubt that His Excellency’s inaugurate address would have sent a chilling impetus on the members of the EDC and other stakeholders, as there had been no forceful policy and administrative interventions from the head of the country for almost three decades.

 

The role of the EDB

The EDB is a brainchild of the late Lalith Athulathmudali who foresaw the necessity of a national policy-making body, at the highest level of governance, to facilitate the development of export oriented economy with the advent of the free-market economy in 1976 and it was possible for his to bring an legislative enactment No 40 of 1979 giving birth to the EDB. By virtue of the provisions of the Act, the President of the country is the chairman of the EDC ably assisted by the Ministers in charge of Trade, Shipping, Industries, Agriculture, Plantation Industries, Textile Industries, Fisheries, Finance, Foreign Affairs, Planning and Rural Industries. In its formative years, the EDB played a catalytic role in promoting exports and the award of the annual presidential awards have had an appreciable impact on the export-oriented institutions. It is a moot point why this vital institution (EDC) was forced to a backseat over the last 28 years and the Ministers in charge of Trade should be totally held responsible for their lackadaisical attitude for not invigorating this vital mechanism. Of the Ministers in charge of Trade, Minister Rishard Badudeen had steered the Ministry of Trade for a considerable period, out of the 28 years, but he appeared to have lacked the foresight to set in motion the EDC and as a result the country lost a cohesive and coordinated approach in generating millions of foreign exchange to the national coffers. With the abandonment of the annual presidential award scheme, the exporters have lost enthusiasm and drive and it would be more correct to say that the EDB has been a rudderless ship drifting without a captiain over the last 28 years.

 

Quality Standards for Imported

raw materials

It would be pertinent to revisit some of the critical issues touched upon by the President at the first meeting of the EDC last Wednesday. The President has emphasised that the import of raw materials required for value added products should meet the highest quality standards under strict supervision. It is quite true that a substantial quantity raw material imported to the country annually do not meet the required quality standard. Take for instance the low quality of pepper imported during the yahapalanaya regime under the guise of re-export after value additions, when the country is saddled with a glut situation of pepper and lack of remunerative prices for pepper cultivators.

 

Pepper Industry

With the surge of world production of pepper since 2017, inevitably there has been a deleterious impact on Sri Lankan pepper and the resultant scenario was that pepper prices in Sri Lanka crashed to $ 2,800 from $ 3,800 per tonne. Right from the second half of 2016, pepper prices have seen a falling trend. It was worse in 2017, 2018 and 2019. In this context, what was the rationale to import low quality of pepper from Vietnam and dump them in the local market thus depriving the local pepper farmers. Had there been an EDC in operation, this high-handed scenario would have never taken place. It is quite clear that the non-existence of EDC had given unbridled powers to the Minister in charge to manipulate the pepper market at the cost o

f the interest to the country and the local pepper growers.

It is well known that the demand for local pepper plummeted drastically when the market was flooded with inferior imported pepper and the pepper growers insisted grievance to discontinue the imports of pepper did not fell in deaf ears of the minister! Alas, In the year 2018 alone, 3,519,083 Kg had been imported to Sri Lanka from Vietnam, Indonesia, Brazil etc. One could just imagine the pathetic situation faced by the local pepper industry in this vicious cycle in the absence of a national body, such as the EDC.

 

Rubber Industry

Not only the quality but also the quantity of raw materials matters. It is alleged that rubber latex is imported to Sri Lanka by leading rubber manufacturing companies in excess of her actual requirement as there is a shortage of rubber latex in the country for value addition purposes and export. The statistical information book released by the Ministry of Plantation 2017 says that Sri Lanka imported quantity of RSS sheet rubber 43,727 Mt to overcome the scarcity of natural rubber to meet demand of rubber product manufacturers. Compared to RDD export of 2,940 Mt, the import quantity is much greater Thus, in 2017 total import of NR was 61,801 Mt with the corresponding CIF value of Rs. 15.888 million.

As in the case of pepper, the prices of rubber in major rubber growing countries such as Indonesia, Malaysia, Thailand, Vietnam, China and India have hit low bottom prices due to lack of remunerative prices in the world market and this has compelled our local manufacturers to import rubber latex from countries rather than buying rubber from the rubber smallholders. It is alleged that a well-planned ruse is in operation to release part of the NR consignment to the local market through the backdoor, depriving the livelihood income of the small holders of the country. Hence, it is utmost duty of the EDC to take an urgent decision not to give a blanket approval for the import of natural rubber, thus killing the local rubber industry. If at all, the import of natural rubber is required, it has to be vetted by an expert committee representing the Ministry, EDB, Customs, Ceylon Rubber Traders Association, Ceylon Chamber of Commerce, Ministry of Industries. In deciding the quantum of natural rubber to be imported, a mechanism to be designed not to exceed the quantity surpassing the industrial rubber produced and exported. This is the only way to nip this racket in the bud. The members to be appointed to the committee should be above suspicion similar to that of Caesar’s wife, as the unscrupulous players resorted to this high-handed racket are capable of influencing any untrustworthy member of this committee. Trust this proposal will receive the urgent attention of the EDC at the next monthly meeting.

 

Rubber Industry is in the verge

of extinction

The foreign exchange generated by the traditional three crops, namely tea, rubber and coconut used to play a dominant role in the Sri Lankan economy but the dominance of the rubber sector witnessed an alarming trend during the last 25 years as evidenced below.

It would be crystal clear from Table 1 that the annual rubber production has been on a decline for the last eight years and this downward trend is 10% per annum. (Insiders say that the annual production given in the year 2017 is cockeyed, given the unprecedented downfall in the production over the years and the Director General at the time of retirement, prior to taking up a foreign assignment camouflaged the of figures to his advantage). It would thus be seen that the local rubber industry is in the verge of extinction at the present adverse trend of 10% and it will completely routed out from the Sri Lankan soil by the year 2026, if drastic action is not taken to extricate the industry from the bottomless precipice.

The rubber sector is characterized by a series of professional maladies by low productivity, low profitability and low efficiency of operations, alienation of the smallholders from the cultivation due to lack of remunerative prices, dearth of tappers, non-supply of agricultural inputs on time, non-releasing of subsidy payment for new planting and replanting on time, gradual demise of the farmer societies and Group Processing centers, and the high priority being given to subsidy aspects over extension facilities, appointment of non-agriculturist to manage the institution ( Rubber Development Department) for the last 25 years with the amalgamation of the Advisory Services Department of the Rubber Research Board with the Rubber Control Department.

This deterioration trend of the collapse of the rubber industry commenced almost 25 years ago with the termination of the extension services to the rubber smallholders. The absorption of the services of the extension officers hitherto functioned under the Rubber Research Board to a newly created Rubber Development Department was the bane of the downfall. The shortsighted government bureaucrats and the Treasury conveniently were of the view that the rubber smallholders could be easily motivated by way of subsidy payments at the cost of extension services backed by research. The end result which we witness today is the result what we witness in Table 1.

 

New Institutional Arrangement

It will be well-nigh impossible to save the rubber industry unless a radical institutional shake up is made with priority being given to research and extension. It is my considered opinion that the EDC chaired by His Excellency would take a policy decision to create a new institution for the rubber sector.



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Features

Deteriorating rural economy, and food security

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Photo credit: Nefelibata travels

By Dr. C. S. Weeraratna
csweera@sltnet.lk

Sri Lanka is a land of villages. There are around 14,000 of them. According to the Dept. of Census and Statistics, around 80% of the Sri Lankan population live in villages and estates. Most of them are farmers who are supposed to be suitable to be kings if the mud on their bodies are washed out. According to recent estimates, about 30 percent of the total households, in therural districts of Sri Lanka, live below the poverty line. A socio-economic survey, conducted in the recent past, indicates that although the rural sector has the ability to engage in productive activities, there are many constraints.

Wild elephants:

Wild elephants roaming in some of the dry zone villages,causing death to many and destroying property, aggravate the socio-economic hardships the rural sector has to face, affecting their health, education and many other aspects of the lives.

Chronic Kidney Disease:

Around 70,000 people of the country are affected by a chronic kidney disease (CKDu) . They are mostly in the rural areas of the country and are affected socially and economically. The patients in the final stages of CKDu have to go for dialysis which again affects the economy of rural people . In some families both parents have died and their children are helpless.

Water shortage:

In spite of the country receiving around 100 billion cubic meters of water, annually, there are frequent water shortages, mostly in the rural areas where there are around 12,000 tanks. Most of them are silted, reducing the water holding capacity of these tanks, causing rural communities to face shortage of water which seriously affects crop production and various domestic activities.

Transport:

Lack of reasonable transport facilities, in the rural areas, is one of the main setback to Sri Lanka’s overall prosperity. People living in some rural areas have to cross rivers, using inflated rubber tubes, as there are no bridges. A large number of rural roads remain in a dilapidated condition but, the authorities were more interested in constructing highways.

Inputs:

Fertilisers are a major input in crop production. During the last two cropping seasons, inorganic fertilisers, and pesticides, were not available due to the utterly foolish decision of the former government. Currently, fertilisers are available but they were not available at correct times.

Farmers are forced to obtain seeds at a high cost. For example, a kg of chilli seeds is around Rs. 170,000 and a kg of cabbage seed is sold at Rs 400,000 in the market.

Pest attacks cause considerable problems to farmers. Last year there was the sena caterpillar called “Fall Armyworm” (Spodopteria Frugipedera) which destroyed large extents of cultivated crops. According to press reports, the same pest destroyed thousands of hectares of maize in Ampara causing severe difficulties to the farmers. Brown Plant Hopper tends to destroy paddy.

Marketing:

Those farmers who manage to harvest the crop of rice/vegetables are unable to sell it for a reasonable price. Currently, paddy farmers are unable to sell their Yala paddy crop to cover the costs. Often vegetable farmers are forced to destroy their produce due to inability to market their produce at reasonable prices. Marketing of agricultural products, at a profit to the farmer, is an issue which the authorities need to take cognizance of.

Unemployment:

Unemployment is rampant in the country. As a result of government-imposed restrictions on imports, commercial activities of thousands of companies are slowing down, seriously affecting the private sector in the aftermath of the COVID-19 pandemic. Most of those companies have been compelled to reduce employment, non-renewal of employment contracts, and halting new recruitments, resulting in an increase in unemployment. Thousands of workers, in the construction sector, have already lost their jobs. These business enterprises are currently facing liquidity issues due to a loss of revenue and difficulties in the importation of raw material. Thousands of SMEs have closed down mainly due to lack of inputs, resulting in an increase in unemployment.

As a result of these limiting factors, rural economy is deteriorating. For the success of any development programme to improve the rural economy, it is essential to address the problems of the rural communities. However, the previous governments did not give priority to these critical issues, faced by farmers, who continue to live in abject poverty as a result. Most of them have to pawn their jewellery, or resort to some other ways ,to obtain finances to obtain agricultural inputs, such as seeds, fertilisers, pesticides and labour. Some of them have become prey to micro-credit companies.

All these issues cause untold hardships to thousands of farmers and have a negative impact on the rural economy. No effective actions appear to have been taken, by the relevant authorities, to implement appropriate solutions to these problems, except appointing committees. Those representing the farming community, in the Parliament, appear to be not concerned about the plight of our farming population who have voted them to power.

There is no centralized planning in farming in the country which, sometimes, leads farmers to cultivating the same crop/s, ultimately resulting in gluts. Previous governments attempted to solve this problem by implementing programmes, such as Api Wawamu-Rata Nagamu and Divineguma. But we continue to spend nearly Rs.300 billion, annually to import food. If the authorities are genuinely keen to improve the rural economy, they need to address these issues.

Food Security:

Food Security is closely related to rural economy. According to the United Nation’s Committee on World Food Security, food security is at maximum level when all people, at all times, have physical, social and economic access to sufficient, safe and nutritious food, to meet their dietary needs and food preferences for an active and healthy life. According to World Food Programme’ s latest food security assessment, about three in 10 households (6.26 million people) in Sri Lanka are food insecure. Cost of essential foods has increased during the last few months hindering the population’s ability to consume nutritious food in sufficient amounts. The food security situation is worst among people living in the estate sector.

Nutritious food to meet the dietary requirements of people need to contain mainly carbohydrates, proteins, vitamins and minerals. The local production of carbohydrates (mainly rice and sugar), and proteins (fish and milk) is inadequate to meet the demand. Hence, these food items are imported. During the last few years, we have spent nearly Rs. 300 billion, annually, on food imports, although it has decreased during the last few months, mainly due to restrictions on import of some food.

Availability of rice locally has decreased mainly because of inadequate availability of plant nutrients (nitrogen, phosphorus and potassium) through inorganic fertilisers. This has caused large amounts of rice to be imported. There appears to be no effective programmes to increase sugar production in the country. About two decades ago, in the1990s, sugarcane was cultivated in about 25, 000 hectares. At present, only about 12,000 ha are under sugarcane. The sugar factory, in Kantale, remains out of production, for nearly 15 years.

Availability of fish and milk has reduced due to a number of factors which the government appears to be not taking appropriate measures to increase the production of these items. According to press reports, the government is planning to import cattle from India and Pakistan to increase local milk production. It is foolish to import cattle to enhance milk production in the country without implementing an integrated programme to upgrade local cattle, making available cattle feed and improving veterinary practices in the country.

In Sri Lanka, during the last two decades, perhaps a few thousands of research studies, related to food security, involving billions of rupees worth of scarce resources, have been conducted. It is important that we utilize these research findings to find solutions to the pressing problems of the country. But there appears to be no effective system to make use of the research findings. Lack of an integrated plan is a factor responsible for the decline in food security. There has been rhetoric on rural economic development during the last few years. It is meaningful and effective actions that are necessary.

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A first indication of readiness to go on a new path

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By Jehan Perera

None too soon, President Ranil Wickremesinghe appears to be putting the brakes on the government’s policy of repression in dealing with public protests. His decision to initially sign the Gazette notification declaring key areas of Colombo to be High Security Zones was roundly criticised by human rights organisations including the Human Rights Commission of Sri Lanka. The business sector also complained that this decision which appears to have been made by the security establishment would be injurious to business. Revoking the High Security Zones made practical sense in view of the dubious legal basis of the declaration. The High Security Zones were to be set up under the Official Secrets Act which has hardly anything in common with the purpose of the new regulations.

The High Security Zone concept, which was practiced in the North and East of the country during the time of war, would have made it difficult for vehicles to even park on the roads without first obtaining special permission. There were also legal cases filed in the Supreme Court alleging violation of constitutional rights. The president would also have been aware of the resolution on Sri Lanka that is about to be presented for a vote at the UN Human Rights Council in Geneva. As many as 26 countries have agreed to co-sponsor the resolution, of which 10 are current members of the UNHRC. Sri Lanka is finding itself isolated in terms of human rights in the eyes of the international community which can have costly consequences in terms of reducing the international sympathy and support that the country needs at this time.

The president’s early resort to the security forces to clamp down on the protest movement came as a surprise as his prior track record would have suggested a more nuanced approach to dealing with public agitation. As a follow up to the revocation of the High Security Zones, the president needs to consider revamping government policy on addressing the protest movement. So far the government approach has focused on suppressing the protest movement, on the justification that it will destabilise the economy through strike actions and by chaos on the streets. However, in Sri Lanka’s democratic system a policy of repression is unlikely to be workable. A government that is reluctant to go to the polls must not use the security forces as its prop. The president’s withdrawal of the High Security Zones in Colombo may be understood as an acknowledgement of this reality.

DECLARE AMNESTY

There is general acknowledgement that the President is the most suitable for the task of negotiating with, and making the political case, for more international aid to come to Sri Lanka. During his recent visits to foreign countries he met with top world leaders and would have made his mark. However, it is also important that the president should make his mark on the Sri Lankan people. He needs to win the trust of the people who did not vote for him. Having consolidated himself following his election by parliament to be president, he needs to take a more pro-active role in addressing the roots of the protest movement and not simply quashing its manifestations. There is a need to inform the people what the government will be doing to directly address the terrible impact of the economic crisis on the poorer sections of the population.

There is a widespread sense that those arrested for being members of the protest movement ought not to be subjected to the heavy hand of the law. At the present time, both in Geneva and in Sri Lanka, government spokespersons are denying the severity of the problems that exists. Successive governments denied the excesses that occurred during the war period, both in Geneva and at home. In Sri Lanka the majority of the population were prepared to go along with the denials of war time excesses due to the nature of the ethnic conflict that pitted the ethnic communities against one another. However, a policy of denying the impact of the economic crisis on the poor will not be able to garner similar support from any community in Sri Lanka and will end up pitting the majority of people against the government, just as happened during the height of the Aragalaya.

A declaration of an amnesty for all those accused and arrested for being part of the protest movement would be an act of follow-up statesmanship considering the controversy these arrests are causing both internationally and nationally with the human rights groups and the general public. The ongoing arrests of some who have been part of the protest movement have been justified on the basis that they engaged in violence or supported it. Others are accused of having burnt down the houses of government ministers, including the president’s own ancestral house which contained his family library and valuable works of art. Some have been arrested without being charged before the courts.

Magnanimity, empathy and fairness are very powerful in binding the community together. This is an opportunity for the president to show his empathy with all those others who down the years have lost their own homes to violence, during the two JVP insurrections and during the long period of the ethnic war. The government plans to compensate its members who lost their houses. It needs to also compensate those who lost their lives due to government failure, the most recent being those who died standing in long lines, or when their substandard gas cylinders exploded.

ACCEPT TRUTH

At present, the government is denying the veracity of studies done by international organisations, including UN organisations, on the extent of the malnutrition and stunting that affects children. They are also denying the veracity of claims of corruption in the procurement of fuel and other large contracts, even in the midst of economic crisis. It is also doing little to ameliorate these problems. The government points to the restoration of reasonable supplies of petrol, diesel, cooking gas and electricity which can create an impression of normalcy, but only for those who can afford the much higher prices at which these commodities are available. The government denials of the unequal distribution of the burden will ring hollow with the masses of people, whose support is needed if the government is to govern in a stable political environment.

Instead of denying the existence of problems, the government needs to accept their existence and take measures to address them. This applies to both the problems within the country and that are being discussed internationally. It needs to recognise that its denials have got no traction in Geneva, which is why Sri Lanka has had to face nine resolutions, each one getting more difficult to respond to. The resolution that will be voted on in the UN Human Rights Council later this week will call for greater support for the UN’s evidence gathering mechanism that has already been set up and to provide more support to those countries that pursue universal jurisprudence for crimes committed by Sri Lankan political and military leaders anywhere in the world.

The government needs to use every opportunity it can to seek the support of the international community. With the draft resolution now presented, the eyes of the international community are upon Sri Lanka. While it is too late to change the draft resolution, which will be soon voted on, the government can still seek to restore goodwill among those that are pursuing the resolution on Sri Lanka at the UN Human Rights Council session in Geneva. An amnesty for those who participated in the protest movement could send a positive signal that the government is willing to heed the concerns of the international community regarding human rights and democratic freedoms. The possibility of amnesty to be part of a Truth and Reconciliation Commission in which there is acknowledgment of past violations, expression of regret and accountability for them can also be explored.

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Treaty for a Lost City – inconvenient facts or legal myths?

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By Andrew Sheng
Asia News Netowrk

Is Hong Kong a lost city or being re-born after its baptism of fire? Hong Kong was always a “borrowed place, borrowed time”, to quote the legendary journalist Richard Hughes (1906-1984), immortalised in John Le Carre’s novels on the intersection of media and espionage in cities like Berlin or Istanbul located at the borderlands of great power conflicts. Having returned the city on 1 July 1997, can Britain hold China to the terms and conditions of the 1984 Joint Declaration with China?

Chinese University of Hong Kong Law Professor CL Lim’s book, ” The Sino-British Joint Declaration” is a meticulously researched legal history of how the Joint Declaration came into being and whether it still has the force of law on both parties. There is a presumption that the Joint Declaration granted democratic rights to Hong Kong. The legal story is much more complex. This book draws on the British National Archives and study of the Basic Law of the Hong Kong Special Administrative Region (1990), the International Covenant on Civil and Political Rights (1966) [ICCPR], United Nations Charter, etc., to lay out the facts and opinions for the reader to judge who is right or wrong.

Cities and states are defined by their Constitutions, communal values, geography, cultures and histories. Prior to 1841, Hong Kong was a barren rock that was indisputably part of China. Hong was ceded under the Treaty of Nanjing after the First Opium War (1839-42); but the expiry of the 99 year New Territories lease meant that Britain could not hold onto Hong Kong after 1997. The People’s Republic of China (PRC), following earlier Chinese governments, has never recognised any “unequal treaty” with the Western Powers, but adopted the face-saving principle that “a sovereign may delegate under international law such control or authority to another for a limited period.” Once that sovereignty is resumed, the PRC will not brook any interference in its internal sovereign matters.

This book reads like a series of Queen’s Counsel briefs, densely argued on complex and subtle points presenting different opinions and perspectives. In normal legal disputes, the arbiter would be an independent court, but there is no final decision between China and United Kingdom, which are the five members of the UN Security Council that can veto any rulings at the United Nations level. The only appeal left is to the court of global public opinion, which is today dominated by the English-speaking media. As media today becomes more and more ideologically driven, it is unlikely that deeply held views will be changed by legal or rational arguments.

The genesis of the Joint Declaration was the need to ensure a smooth return of Hong Kong to China. In 1983, when the New Territories lease (covering 92% of Hong Kong) was running out, Britain initially sought to renew the lease, but found that China under Deng Xiaoping was adamant that China would resume sovereignty over Hong Kong. With confidence slipping, the Hong Kong currency was under attack, only to be restored by a peg against the US dollar. This gave impetus to settle the terms and conditions of return. As the book painstakingly pointed out, British negotiators were operating from a weak hand, wanting to retain as much influence and economic benefits as possible post-1997.

As described in Chapter 3, democracy under colonialism was never part of the negotiations. Hong Kong representatives played no part in the discussions between two sovereign powers. The Joint Declaration itself did not mention the word “democracy”. It basically stated that the Hong Kong SAR “will enjoy a high degree of autonomy, except in foreign and defence affairs” (Article 2) and that rights and freedoms will be ensured by Hong Kong SAR law (Article 5). Since the Basic Law, HKSAR’s constitution, is PRC law, the final interpretation falls to the Standing Committee of the National People’s Congress, not necessarily by the Hong Kong Court of Final Appeals.

The real point of dispute lies in the National Security Law, which was passed by the National People’s Congress in 2020, after the Hong Kong legislature was unable to enact Article 23 of the Basic Law. As public disorder arose with violent protests, the practical issue was whether HKSAR government could handle them without a National Security Law. Hong Kong was uniquely handicapped because in every other international financial centre, there exists very draconian national security laws that protect the integrity and security of the financial system, economy and sovereignty. Hong Kong was deeply polarised. No compromise seemed possible, and continued protests and violence would have destroyed Hong Kong. Between a rock and a hard place, the National Security Law was the least painful alternative barring more physical violence.

Treaty on a Lost Place highlighted the absurd situation of two sovereigns signing one piece of paper having different points of view. Such constructive ambiguity papered over destructive alternatives. The last British Governor Chris Patten was successful in persuading some Hongkongers that one man-one vote was what they deserve. Whether that is a cure all for Hong Kong’s ill is another matter. That his Conservative Party leadership was elected opaquely by of British people shows that different systems may not always practice what they preach. Hong Kong elites failed to correct the injustices that many young faced in not providing them affordable homes with meaningful, well paid jobs. Beijing’s mistake perhaps was to trust that Hong Kong could on her own resolve these contradictions within the larger struggle between China and the West on many fronts.

A Treaty is only a piece of paper. A city is not lost to Britain or China, but lost in its own direction, which must be re-found. The answers will not be found in international law, because that is itself being rediscovered in a new age of multipolar contestation. This book is a major contribution to our understanding of how international law is only one of many guides to the future. Hong Kong has to rediscover her own identity inside a larger identity. That is the tragedy and opportunity facing all islands within the grand ocean of mankind.

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