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Editorial

Tank farm deal and Newspeak

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Monday 10th January, 2022

The government claims that its Trincomalee oil tank farm deal with India is a huge win for Sri Lanka. If so, the Indo-Lanka Accord (1987), which the Jayewardene government signed, should also be considered a victory for this country, mutatis mutandis. The present-day ‘patriotic’ leaders protested against the Indo-Lanka pact while they were in the Opposition, didn’t they?

In a desperate bid to neutralise the political fallout of the questionable tank farm deal, the government has, in a glossy booklet, titled, Regaining Trincomalee Oil Tank Farm––which reminds us of the disastrous Regaining Sri Lanka programme launched by the UNP-led UNF government (2001-2004)––made a comparison between the 2017 MoU (signed under the yahapalana administration) on the Trinco oil tank farm and the latest agreement. It is obvious that a full-dress agreement and an MoU are two different things, and the government propagandists have sought to compare apples with oranges. Nevertheless, according to the booklet, the benefits that are believed to have accrued to this country from its tank farm deal are as follows: Sri Lanka’s shares in the joint venture to be set up between the Lanka Indian Oil Company (LIOC) and the Ceylon Petroleum Corporation (CPC) have increased from 50 to 51, and the number of Sri Lankan directors from three to four as opposed to LIOC’s three; all 99 tanks were to be leased to LIOC according to the 2017 MoU, but the new agreement will enable the CPC to have 24 tanks as opposed to IOC’s 14, and 61 to be vested in the Joint Venture; the number of tanks under Sri Lanka’s control has increased from zero to 85, and the tanks to be directly under Sri Lanka number 24.

The booklet also says the Joint Venture will be under the purview of the COPE (Committee on Public Enterprises) and subject to questioning by the MPs and the Minister; it will operate following the model of the CPC Storage Terminal Ltd., which is already in operation as a joint venture between the CPC and the LIOC.

Thus, the ‘patriots; who claimed that the LIOC was holding on to the Trinco oil tank farm ‘illegally’ have legalised its hold on Sri Lanka’s strategic asset! Why didn’t they declare what the LIOC had done null and void ab initio, and take over all 99 tanks.

The best analysis of the controversial tank farm agreement has been done by the Federation of National Organizations (FNO), which has, in a letter addressed to President Gotabaya Rajapaksa, demolished the government’s flawed arguments. The salient points in the FNO letter (in Sinhala), a copy of which was made available to us yesterday afternoon, are as follows: the lease period has been increased from 35 years to 50 years; disputes, if any, were to be settled in Sri Lanka previously, but the new agreement has provided for arbitration in Singapore; at present, India is using the oil tanks pending the signing of a lease agreement, but the government has undertaken to hand over to India strategically important 14 oil tanks and bunkering trade for 50 years; it was previously possible to revise the rental periodically, but the government has agreed to make available the storage facilities at the concessionary rate of USD 1,000 per tank, which was agreed upon about 20 years ago [under the UNP-led UNF government]; although the government says 61 tanks will be operated by the proposed joint venture, the new agreement provides for leasing those tanks as well to the LIOC; trade unions have pointed out that three tanks under the CPC will be allocated to Prima Company for water storage; a huge amount of funds will have to be spent on the rehabilitation of the other tanks; there is the likelihood of all tanks being placed under the LIOC ultimately, and the new agreement violates the Constitution of Sri Lanka because it stipulates that no one could engage in port-related commercial activities in Trincomalee without the consent of the LIOC.

The main thrust of the FNO’s argument is that the most important agreement on the tank farm deal has not been presented to the Cabinet for approval; it has gone the same way as the government’s secret agreement with the New Fortress Company. All vital information about the amount of funds the IOC will invest in the venture, and administrative powers, etc., is contained in the agreement which has not been submitted to the Cabinet. The fact that Sri Lanka will own 51% of shares of the proposed joint venture pertains only to the sharing of profits, and not the administrative powers the LIOC will hold therein. The FNO points out that Sri Lanka held 65% of the shares of SriLankan Airlines according to its agreement with Emirates, but the management of the national carrier was done by Emirates.

The FNO also maintains that the government has acted in violation of the people’s sovereignty by not presenting the most important agreement on the oil tanks farm deal to the Cabinet, and bypassed the Eastern Province Governor and had the Land Commissioner General sign the lease agreement instead, in violation of the people’s sovereignty.

Plausible liars in the government’s propaganda team will have a hard time trying to sell the tank farm deal to the Sri Lankan public. They ought to stop insulting Sri Lankans’ intelligence and admit that the government has mismanaged the economy to the point of being left with no alternative but to opt for the disastrous deal in return for economic assistance from India.

People are the best judges, and they will deliver their verdict on the tank farm deal if the government holds the local government elections without postponing them.



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Editorial

Another ‘loincloth remedy’

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Monday 17th January, 2022

Now, anyone could import rice, paying as little as 25 cents a kilo as duty. Trade Minister Bandula Gunawardena has said the government decision is aimed at preventing a rice shortage and bringing rice prices down. But the question is whether enough foreign exchange is available for rice imports. Minster Gunawardena himself has admitted that there are already 500 freight containers of rice at the Colombo Port pending clearance. The power and energy sectors are in a mega crisis as the country is without enough dollars to pay for fuel imports. Most industries dependent on imported raw materials are struggling to stay afloat; some of them have already gone belly up. Will the Trade Minister or any other SLPP grandee claiming to be well versed in the dismal science explain how forex will be found for rice imports?

The rice shortage and attendant price increases have come about for two reasons. One is the fertiliser shortage, which has resulted in a sharp drop in the Maha yield, and the other is hoarding by big-time millers and wholesalers. The government is not willing to change its fertiliser policy, which has run into stiff resistance from resentful farmers, and it is too impotent to take on the Millers’ Mafia, which has become a law unto itself as politicians benefit from its largesse during elections.

Rice imports are only a band-aid remedy. True, any essential commodity has to be imported in case of a severe shortfall in the domestic supply thereof, but such measures must necessarily be short-term; the government does not seem to know when it will be able to stop rice imports. Unless the fertiliser crisis is resolved urgently, rice imports will go on until the end of time, and several other agricultural products, too, will have to be imported. The country’s food security will be pie in the sky in such an eventuality.

SLPP MP and former President Maithripala Sirisena has, in an interview with Siyatha TV, said he wonders whether there is a move to discourage farmers from engaging in agriculture and drive them to sell their lands to private companies. Multinational corporations have already acquired large extents of land for commercial agriculture here; prominent among them is an international banana producer, which got a foothold here during the previous Rajapaksa government. The present-day leaders seem relentless in their efforts to turn this country into a banana republic.

Meanwhile, let Sirisena be told that his family is also responsible for farmers’ woes; his brother, Dudley, is one of the millers who make unconscionable profits by exploiting both the farmer and the consumer alike; and his relative, State Minister Siripala Gamlath, is also a miller thriving at the expense of the poor paddy farmers and hapless consumers. Shouldn’t he put his own house in order instead of shedding copious tears for farmers and consumers?

Whether the government is working according to a secret plan to make farmers fed up with agriculture, one may not know, but its wrong agricultural policies are fraught with the danger of discouraging the farming community. When farmers suffer massive yield losses, and cannot recover production costs, much less redeem their valuables pawned to raise funds for cultivation purposes, they will be left with no alternative but to vote with their feet. Some of them have already done so, and unless this trend is arrested urgently, the country’s economic crisis will worsen with more dollars having to be spent on food imports. Besides, rural poverty will increase exponentially, and the farmers reduced to penury are likely to migrate to urban centres looking for jobs that are not there. The country may run out of dollars at this rate, and therefore the people will have to starve if imports are promoted as government policy at the expense of the local production of main food items. (We might achieve self-sufficiency only in turmeric!)

The government’s decision to promote imports as a solution to the rice shortage instead of addressing the root causes of the problem is like using a loincloth to control diarrhoea, as a local saying goes.

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Editorial

The galloping stock market

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The booming Colombo Stock Exchange (CSE) last week, after a two-year Covid-impelled silence, hosted its first news conference to share with the media what its chairman, Mr. Dumith Fernando, called a “fantastic story.” He was not exaggerating even slightly. The CSE’s performance last year was more that extraordinary by any standard with several historical highs established in all the indicators that matter. These included the heights reached by both the broader All Share Price Index (ASPI) and S&P 20 measuring the performance of the more liquid and better rated stock. There was also the daily average turnover, which even in highly depreciated rupee terms, that not long ago was computed in the millions is now running into billions. On top of that, there was the equity capital raising initiatives of companies seeking new listings on the trading boards of the exchange. Once upon a time, the CSE laboured might and main to persuade companies to list. But now, companies are jostling in the queue to obtain a quotation and these, without exception, have been several times over-subscribed on the opening day itself. Such successes mean millions, if not billions, of rupees of zero cost capital for newly listed companies.

The story goes on. There are those whispering or derisively labeling the current surge in the stock market as looking very much like something out of Ripley’s Believe It or Not – a “phantom market,” as the CSE boss put it, that is not supported by fundamentals. Such suspicion is inevitable in the context of a rapidly declining economy but with a paradoxically booming stock market running alongside. Fernando easily demolished that contention. There are many reasons, he said, for what the exchange calls the “quantum leap” in the market last year. Not the least among them is the plummeting deposit interest rates now down to single digits. People who once squirreled away their savings in banks or much higher interest paying but riskier finance company fixed deposits, have now found that the CSE has opened possibilities of much better returns in a scenario of plunging interest rates. No wonder then that a new class of investors, far removed from the business savvy high net worth persons who traditionally invested in what they judged as ‘good’ company shares, have become active in the stock market. The old guard looked for a steady dividend stream and capital appreciation in the longer term. Some of them did trade their shares making tidy, if not super, profits. But a large number held their stock over the longer term. The new investors are a different kettle of fish. They are looking for quick, often instant, trading profits, seldom investing in the longer term.

Today there are droves of what the market calls ‘retailers,’ – relatively small investors with little capital to play with, attracted to the CSE like moths to light. They see many possibilities to earn themselves some good money in the stock market and a record number of new investors, most of them 40-years or younger, have opened trading accounts. Today market players don’t have to visit share-broker offices and wrestle with all kinds of paper work to become active traders. They can do it all from their homes or offices armed with no more than one of those ubiquitous smart phones that many own today. Both brokers and the CSE itself are digtized and offer a modern trading platform nearly on par with what is available in more advanced markets.

Records established by the CSE last year includes the number of new listings up on the trading boards. Dumith Fernando said at the news briefing that last year, mainly in the latter part of 2021, there were as many as 13 initial public offerings. All of them attracted stunning investor interest being oversubscribed, sometimes several times over, on the opening day itself. Analysts confirm that many of these shares gained from their issue prices when trading commenced days later though there was at least one exception. But the general picture was instant profit for many small investors whose trading strategy is to take profit and invest funds realized in selling shares in new shares where they believe further profit is possible. They grumble about inadequate allocations due to the high demand for the shares on offer. But issuers generally tend to be fair to small investors.

Brokers say that the same share is often bought and sold, by a single punter, who will do multiple transactions in the course of a single trading day. Like betting on horses, gambling on a stock exchange is not without risk. But the fact that new players keep entering the market by the day suggests that the risk is much less than at the races and one player’s success attract many new players into the market. Where retailers are concerned, the herd instinct is very much in evidence with interest in a single counter drawing hordes of players into it, rightly or wrongly. The CSE website is full of notifications of the attention of listed companies being drawn into unusual trading activity in their shares. The inevitable response is that the company is unaware of any undisclosed price sensitive information that may have attracted unusual investor interest. Brokers say that low-priced shares may attract interest in a market where an upward trajectory as seen here was all too evident in recent weeks.

How long the carnival will last is anybody’s guess. But there are many putting their money where their gut instincts tell them that there’s more to be made.

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Editorial

Confusion worse confounded

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Saturday 15th January, 2022

People’s attention has shifted from gas explosions, economic woes, forex crisis, power cuts, and other such burning problems to another very serious issue––the detection of a grenade inside All Saints Church, Borella. The manner in which the police are conducting investigations into the incident has given rise to a controversy with the Catholic clergy claiming that the investigators have been barking up the wrong tree. They have produced proof in support of their argument, which sounds cogent.

No sooner had the grenade been found in the church than a person who cleans the shrine was taken into custody on the basis of CCTV footage. He is said to be seen in the video picking up something and placing it behind a statue. Interrogations have led to the arrest of a boy, who is alleged to have been involved in the incident. This is the angle from which the police have chosen to probe the incident. Investigations are continuing.

Archbishop of Colombo Malcolm Cardinal Ranjith tells us something entirely different from the cops’ tale. He has told the media that the police have arrested the wrong person; he has released another part of the CCTV footage at issue, where a man carrying something in a shopping bag is seen entering the church, hanging around there for a while and leaving. The church leaders insist that the police did not examine the entire video carefully, and rushed to conclusions after watching only a part of it. The police ought to explain why they did not do so.

Public Security Minister Sarath Weerasekera has disputed the Cardinal’s assertion and stood by the police. He says irrefutable evidence is already available to prove the charges against the church worker. He has drawn parallels between the church incident and the detection of a grenade at Lanka Hospital a few moons ago.

These different versions of the grenade incident have left the public confused. Who is the man seen in the video? Could he be the person who placed the grenade in the church? The police will have to trace him immediately if they are to allay doubts in the minds of people and the Catholic priests. There are so many CCTV cameras in the vicinity of the church, and it cannot be a difficult task for the police to find the suspect.

One tends to doubt what the police say because they have lost their credibility, and become putty in the hands of politicians. It is popularly said that he that has an ill name is half-hanged. The police have earned notoriety for arresting innocent people in most cases. The arrest of a former LTTE cadre over the execution-style killing of two policemen at Vavunathivu in December 2018 is a case in point. It took several months for the police to find out that the policemen had been killed by the National Thowheed Jamaath terrorists, who subsequently carried out the Easter Sunday attacks. Had they conducted a proper investigation without rushing to conclusions, and arrested the cop killers, perhaps the Easter Sunday carnage could have been prevented.

The police will have to probe the Borella incident from all angles, taking under advisement what the Cardinal and other prelates have said about it. Investigations must be conducted in a transparent manner, and no room left for doubts. Most of all, the police ought to bear in mind that there’ll be hell to pay if they have bungled.

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