by Gomi Senadhira
In June of this year, Cabinet Spokesperson Dr. Bandula Gunawardana told reporters that the Cabinet of Ministers has decided to award 40-year tax concessions for investments in the Colombo Port City as other countries have attractive concessionary packages for foreign investors. “Sri Lankans are operating businesses in Bangladesh, Ethiopia and even Kenya as investing in those countries are more beneficial. We are trying to attract foreign investors to our country. This means we will have to offer more competitive packages,” he had also said at that media briefing. However, soon after the statement by the Cabinet Spokesman, Secretary to the Ministry of Finance, Dr. K M M Siriwardana, stated that the government has not yet taken any decision about granting a 40-year tax concession to investors at the Colombo Port City! With mixed signals from the Cabinet Spokesperson and Secretary, Finance, we do not know if the concessions are approved for investments in the Port City, or not. Haven’t the Chinese investors, in the Port City, and elsewhere, already received enough concessions?
Then came the public exposure, at the Committee on Public Finance (COPF), about the competence and preparedness of the government agencies which provide such concessions. Here I am referring to the performance of the Chairman Board of Investment of Sri Lanka, Raja Edirisuriya, who earlier served as the Executive Director of the Colombo Port City Development Project, when he was questioned about the loss to the Treasury, due to the huge tax breaks given to the Indian Fortune 500 company, HCL Technologies, which has partnered with John Keels Holdings. The Chairman and the BOI officials admitted that they were totally clueless about the revenue loss Sri Lanka would incur due to the long tax holiday extended to the HCL/JKH joint venture. Don’t they calculate this before the concessions are given?
Interestingly, HCL Technologies has been operating in Sri Lanka for about two years. Then why this sudden decision to give additional concessions? Was it in its original agreement with the BOI? Or was it agreed after the HCL decided to occupy 80% of the office space, in Cinnamon Life, by John Keels, and the new office of the HCL in ‘The Offices’ in Cinnamon Life was inaugurated towards the end of last year by then Finance Minister Basil Rajapaksa in the presence Prateek Aggarwal, Chief Financial Officer, HCL Technologies and Krishan Balendra, Chairman, John Keells Holdings. Perhaps, if we ask Mr. Aggarwal, CFO, HCL Technologies, or Mr. Balendra about the revenue loss Sri Lanka would suffer due to the long tax holiday, or additional income HCL and JKH would gain, then we may get a prompt response. After all, these multimillion-dollar deals are calculated, and negotiated, by the parties involved, well in advance. Not done arbitrarily and subjectively, based on the personal whims and fancies of BOI officials, or politicians.
I also believe, the John Keells Group, as stated in its own media release in April this year a “… corporate citizen … gravely concerned with the dire economic circumstances facing the country” and which “… empathize with the hardships and tribulations faced by the people and stand with … fellow citizens in the calls for improved governance, accountability, and transparency,” would explain why this joint venture needs this tax concession, at this juncture, when people, particularly the poor and the vulnerable, are required to pay more and more taxes. After all, any revenue loss needs to be collected through additional taxes.
While awarding blank cheques to foreign and local multinationals, the government is passing on the burden of these concessions by introducing new taxes on Sri Lankan citizens. For example, tax on exporters and the new social security levy.
Now let’s go back to the Cabinet spokesman’s statement about Sri Lankans, particularly our exporters, investing in Bangladesh, Ethiopia, and Kenya “… as investing in those countries are more beneficial.” If so, then what is the objective of raising taxes on exporters? Make investing in Sri Lanka less beneficial for them? Force them out of Sri Lanka? Force them to invest in Chinese Port City where investing is more beneficial for them?
We know, our exporters go to countries like Bangladesh and Ethiopia, mainly because they get a better level of market access into developed country markets from those countries than from Sri Lanka. Not due to tax concessions. We also know that sweeping tax exemptions, awarded arbitrarily, normally attract criminal cartels and money launderers. Good investors go to countries with good governance. Countries where rules and regulations are clear, where governments are accountable and transparent, and where there are reliable tax structures, attract good foreign investors.
Then take the impact of some of the new regressive taxes on the poor and lower-middle-class families. For example, the social security levy of 2.5%. According to media reports, the expected revenue from this tax per year is 140 billion rupees. The rich and the poor will have to pay this. The impact of the tax on the rich may perhaps be manageable. But the impact of it on the poor will be brutal. At least, it appears the government had calculated the revenue gains from the tax hikes! Then why don’t they calculate revenue losses from exceptions? Yes, all kinds of exceptions, including multimillion-dollar exceptions to Port City to multimillion-rupee exceptions given to politicians and senior public servants through car permits. If they do that they can identify more reasonable sources for raising government revenue than taxing the poor to pay the poor.
(The writer can be contacted at email@example.com)
Sri Lanka reaching critical level in terms of water stress
By Eng. Thushara Dissanayake
Water stress occurs when the water resources, in a region, or country, are insufficient for human and ecological demands. Although the planet has got 1.386 billion km³ of water, only 2.5% is available as fresh water. According to the United Nations, 2.3 billion people live in water-stressed countries, of which 733 million live in high and critically water-stressed countries.
The level of water stress is calculated by taking into account all the freshwater withdrawals by all major sectors. The important thing, in this regard, is that environmental water requirements are also considered. The main sectors include agriculture, fisheries, industries, and services. Total freshwater withdrawal is the volume of freshwater extracted from rivers, reservoirs, and groundwater sources for the aforementioned sectors. These sources are renewable water sources as they are replenished or recharged from rain. If water is used solely for power generation, that requirement is also used for the calculation. However, in our country that is not the case, as we use the water for agriculture, after power generation.
Sri Lanka is receiving about 2,500 mm average annual rainfall and is blessed with 103 rivers radially flowing to the sea from the central hills. Further, the country has a net surface water storage capacity of about 6 billion cubic meters, with the help of all the major dams and minor tanks of varying capacities. Despite all that, according to the Food and Agriculture Organization of the United Nations, Sri Lanka’s level of water stress is 90.8%, indicating a high level of water stress. In other words, the country is consuming 90.8% percentage of its total available renewable freshwater resources, at present, apart from environmental needs, which are estimated to be 52.8 billion cubic meters. Accordingly, the renewable water withdrawal is equivalent to 12.95 billion cubic meters for all sectors, except the environmental requirement. When the water stress level reaches 100% it would be a critical situation, as meeting further demands for water, from renewable sources, would not be possible. However, at the river basin level, there can be significant differences in water stress levels.
In contrast, water stress, in Kuwait, is 3,850% indicating that the country has got a very little amount of renewable freshwater, when compared to its requirement. Hence, the freshwater requirement of Kuwait is met with seawater desalination, treated wastewater, and brackish groundwater. In India, the figure is 66.5%, which is much better than in Sri Lanka. In the meantime, the average water stress in south Asia is 78%.
According to the level of water stress, we are gradually reaching a critical level, as far as our available freshwater resources are concerned. Given that only 90% of households have access to safe drinking water, and the population is increasing, more and more renewable water resources will be utilized in the near future. If water stress is reached a critical level, it would be a challenge for economic development as water is an essential requirement for many industries.
Like in many other countries, agriculture is the main user of water in Sri Lanka, which consumes nearly 85% of freshwater, while total consumption, for both industrial and domestic sectors ,is close to 12%. Notably, the contribution to the GDP, from the agriculture sector, is just 14.6%, while that of the service sector is 59.2%. However, climatic and field soil conditions affect water use in agriculture, significantly. Being a country, located in the tropics, crop evapotranspiration is comparatively high in Sri Lanka, especially in the dry zone. Still, behavioural changes, with regard to water use, and the availability of sound water infrastructure, can play an important role in water demand management. Therefore, we have to considerably improve our water productivity, especially in the agriculture sector, by increasing the water use efficiency being the main water user. However, a considerable investment is necessary for such infrastructure improvements, in the form of irrigation modernization, to increase water use efficiency.
Another challenge to fresh water is its pollution, due to human and natural phenomena. Water pollution, due to agrochemicals, sewage runoff, and waste disposal, is a high concern at the moment. Natural disasters, like floods, droughts, and landslides, also lead to water degradation. Floods contaminate freshwater sources with hazardous chemicals and debris. Droughts, on the other hand, increase the concentration of hazardous constituents in water as the amount of water available, in freshwater sources, is rapidly abated during droughts. On the other hand, the growing population, and economy, intensify these negative impacts on water quality.
The garment and textile industries account for 40% of Sri Lanka’s total exports. The industry is water-intensive, and therefore, it is important to guarantee that it meets the required water supply. Tourism is the third largest foreign exchange earning industry in the county, with a GDP share of 4.5%. The industry needs a considerable amount of water for hotel operations. Hence, future water policies should, among other things, focus on each sector’s contribution to the country’s GDP as well. This is more important than ever, given that we have to uplift the country again, at least to the previous GDP level that prevailed before the recent economic crisis.
Therefore, The sustainability of our freshwater use has become a challenge, and effective demand and supply management policies are essential. Unless we succeed in such endeavors, we will have to think of costly solutions such as water recycling, seawater desalinisation to meet the essential freshwater demands of the country. If we fail to do so, freshwater will be extracted at the expense of environmental water demand and it may end up in an ecological disaster.
(Eng. Thushara Dissanayake is a Chartered Engineer specializing in water resources engineering with over 20 years of experience)
President picks up the gauntlet
by Jehan Perera
By proroguing parliament President Ranil Wickremesinghe has given the parliamentarians, and the country at large, a reminder of the power of the presidency. There was no evident reason for the president to suddenly decide to prorogue parliament. More than 40 parliamentary committees, including important ones concerning public finances, enterprises and accounts have ceased to function. The president’s office has said that when parliament reconvenes on February 8, after the celebration of the country’s 75th Independence Day on February 4, the president will announce new policies and laws, which will be implemented until the centenary celebrations of Sri Lanka’s independence in 2048. Prime Minister Lee Kwan Yew transformed Singapore from a relatively underdeveloped and impoverished agrarian society into one of the world’s most developed countries in the same 25 years that the president has set for Sri Lanka.
President Wickremesinghe has been getting increasingly assertive regarding his position on issues. Recently he attended a large gathering of Muslim clerics, where he was firm in saying that society needs to modernise, and so do religious practices. He has also held fast to his positions on reviving the economy and resolving the economy. There have been widespread protests against the tax hikes being implemented which have eroded the purchasing power of taxpayers. First they had to absorb the impact of inflation that rose to a rate of 80 percent at the time the country reneged on its foreign debt repayments and declared bankruptcy. Now they find their much diminished real incomes being further reduced by a tax rate that reaches 36 percent.
But the government is not relenting. President Wickremesinghe, who holds the finance minister’s portfolio, is going against popular sentiment in being unyielding on the matter of taxes. He appears determined to force the country away from decades of government policies that took the easy route of offering subsidies rather than imposing taxes to use for government expenses and development purposes. In Sri Lanka, the government’s tax revenue is less than 8 percent, whereas in comparable countries the tax revenue is around 20 to 25 percent. The long term cost of living off foreign borrowings rather than generating resources domestically through taxation has been evident for a long while in the slow growth of the economy even prior to the economic collapse.
Another area in which the president appears to have taken the decision to stand firm is the issue of finding a solution to the ethnic conflict. This problem has proven to be unresolvable by governments and political leaders who give deference to ethnic nationalism. Being an ethnic nationalist in the context of Sri Lanka’s ethnic and religious divisions has been a sure way of gaining votes and securing election victories. No leader in Sri Lanka has to date been able to implement the compromise solutions that they periodically arrived at, the last being the 13th Amendment. Earlier ones included the Bandaranaike-Chelvanayakam Pact of 1957 and the Dudley Senanayake-Chelvanayakam Pact of 1965 which could not even be started to be implemented.
At the All Party meeting that he summoned to discuss the ethnic conflict and national reconciliation, President Wickremesinghe took the bull by the horns. He exchanged words with ethnic nationalist parliamentarians who sought to challenge his legitimacy to be making changes. He said, “It is my responsibility as the Executive to carry out the current law. For approximately 37 years, the 13th Amendment has been a part of the constitution. I must implement or someone has to abolish it by way of a 22nd amendment to the constitution by moving a private member’s bill. If the bill was voted against by the majority in the House, then the 13th amendment would have to be implemented. We can’t remain in a middle position saying that either we don’t implement the 13th amendment or abolish it.”
The 13th Amendment has not been fully implemented since it was passed by parliament with a 2/3 majority in 1987. Successive governments, including ones the president has been a member of variously as a minister or prime minister, have failed to implement it in a significant manner, especially as regards the devolution of police and land powers. When parliament reconvenes on February 8 after prorogation, President Wickremesinghe will be provided the opportunity to address both the parliament and the country on the way forward. Having demonstrated the power of the presidency to prorogue parliament at his discretion, he will be able to set forth his vision of the solution to the ethnic conflict and the roadmap that needs to be followed to get to national reconciliation.
It is significant that on February 20, the president will also acquire the power to dissolve parliament at his discretion. By proroguing parliament, the president has sent a message to both parliamentarians and the larger society that he will soon have the power to dissolve parliament with the same suddenness that he prorogued parliament. On February 20, the parliament would have been in existence for two and a half years. The 21st Amendment empowers the president to dissolve parliament after two and a half years. Most of the parliamentarians belonging to the ruling party are no longer in a position to go to their electorates let alone canvass for votes among the people. Under these fraught circumstances, they would not wish to challenge the president or his commitment to implementing the 13th Amendment in full.
On the other hand, the taming of parliament by the president does not guarantee the success of an accommodation on the ethnic conflict and a sustainable political solution. The ethnic conflict evokes the primordial sentiments of the different ethnic and religious communities. Political parties and politicians are often portrayed as the villains who led the country to decades of ethnic conflict and to war. However, the conflict in the country predates the political parties. In 1928, in response to demands from community leaders in Ceylon as it was then known, the British colonial rulers sent a commission to the country to ascertain whether it was ready for self-rule. The assessment was negative—the Donoughmore commission wrote that the representatives of the biggest community held to the position that their interest was the national interest. All the representatives of the smaller communities who were divided one against the other were united against the biggest.
An important role therefore devolves upon civil society not to fall prey to the divisions that come down the years. There is a need for enlightened leaders of civil society to work with commitment to explain to the people the need for a political solution and inter-ethnic power sharing that the 13th Amendment makes possible. There were signs of this during the height of the Aragalaya when the youth leading the protests called publicly for equal citizenship and non-discrimination on the basis of ethnicity, religion and caste. They pledged not to be divided by ethnic nationalist politicians for their narrow electoral purposes. It is ironic that the government led by President Wickremesinghe has made these enlightened youth leaders the target of a campaign of persecution instead of making them a part of the solution by constructively engaging with them and issuing a general amnesty.
Privatisation of education and demonising of students of Lanka
by Anushka Kahandagamage
Sri Lanka is trapped in debt due to decades of corruption and short-sighted economic policies. To come out of the trap or, I would say, escape the moment, the government is seeking loans from the IMF, or anybody else who is willing to lend, no matter the conditions. To this end, under the IMF’s tutelage, the government is seeking to privatise education, aware that it will face the wrath of the people. In this setting, to suppress the protests, the government has adopted a strategy of demonising students, in the public education system.
School children as “drug addicts”
A media empire, which has strong ties with the current Lankan regime, recently sent shockwaves through schools, and their communities, by reporting cases of school children hooked on harmful narcotics. Following these reports, there were many write ups, social media content and stories published on the menace of drug addiction, among Sri Lankan students. That media network even released a video, interviewing two schoolgirls who claimed to be addicted to harmful substances. In the midst of the media frenzy, the police carried out surprise checks in schools, searching students’ bags. The state humiliated and terrified school children by using the police to conduct surprise checks in the schools and peek into the students’ backpacks, instead of investigating the avenues through which dangerous drugs enter the country. After a week, the Minister of Education claimed he was unaware that the police were conducting surprise checks in schools, with sniffer dogs, adding that there was no need to deploy the police force for this purpose. If the Minister was not aware that the police raided schools, it is not surprising that the state would also turn a blind eye to how narcotics enter the country. While there is a risk of students addicting to dangerous drugs, the state cannot place all the blame on students. Instead of taking responsibility for the state of affairs, and acting to keep harmful substances off the island, the state places the burden on schoolchildren and simply refers to them as “drug addicts.”
Bhikku students as “alcoholics”
The next example is from the Buddhist and Pali University, in Homagama. Similar to the first story, the same media network reported some irregularities occurring in the University. Those irregularities included the student monks forcing incoming students, also monks, to consume weed, liquor and party. Following this news report, some investigations were conducted in the University and empty liquor bottles were found in an abandoned well. Then we witnessed several press conferences where University authorities questioned the student monk leaders. While one cannot and should not disregard students’ violence upon another student, it is interesting to note the way the government is taking up the particular incident, at this particular point of time. There was a massive social media campaign to show that the student-monks are immoral and unworthy of education. It cannot be a coincidence that the student monks, at this University, were actively involved in the Aragalaya. In other words, the government was trying to defame the University, and the students, by labelling them as oppressors and alcoholics.
The Rajapaksa regime continuously used Buddhist monks, in their political operations, especially to incite conflict and win elections. The state has frequently deployed Buddhist monks to further its nationalist agendas. When the state used monks for their agendas, including to instigate violence, the monks were not framed as ‘immoral.’ The higher Buddhist authorities did not take action against groups, like Bodu Bala Sena, or Ravana Balaya, or their violent activities. It is ironic that the Government seems to be concerned about the ‘morality’ or ‘discipline’ of Bhikkus at this moment when many student Bhikkus have joined hands with the people to protest against the state.
University students as “terrorists”
The last example is the most pressing at this moment. On 18th of August, 2022, the police arrested Wasantha Mudalige, the Convenor of the Inter-University Students Federation, under the Prevention of Terrorism Act (PTA). Along with him, the authorities detained Hashan Jeewantha and the convener of the Inter University Bhikku Federation (IUBF), Galwewa Siridhamma Thera. The state labelled the politically active university students as “terrorists”. Again, this cannot have happened by chance; we all know the Aragalaya against the Rajapaksa dictatorship was heavily influenced by the Inter-University Students Federation and the Inter University Bhikku Federation. The student unions were the muscle of the people’s protests against the oppressive and corrupt regime. The Ranil-Rajapaksa regime labelled the student leaders’ terrorists and started arresting them.
The state’s stamping of University students as terrorists is a folly. If the state labels its own youth as “terrorists,” it means that the state has failed miserably because it is its own actions that have pushed them toward what is labelled as “terrorism.” The state should take a step back and reconsider its decisions.
Privatization of Education
The government and the government-validating media demonize students, labelling them as drug addicts, alcoholics and terrorists. The government undermines and defames the country’s student body. By doing so, the government is strategically isolating the students from the larger society and eroding public faith in them. Ironically, drug addicts, alcoholics, and terrorists are all confined to the public school and state university system, not private educational institutions. The media propagates the idea that students enrolled in the state education system are ‘immoral’ and ‘disobedient’. Meanwhile, Ranil Wickremesinghe, the puppet President of the Rajapaksa allies, proposes a new economic system which he thinks will counter the current balance of payment crisis. The proposal includes establishing an educational hub in Sri Lanka, which promises to privatise higher education in the long-term.
The state agenda of privatizing education is not a recent one, but it has been reenergized by the Ranil-Rajapaksa government in the context of crisis. Well before demonising the students, in the public education system, in June 2022 the government, national education commission, came up with an education policy framework.
Biased towards Rajapaksa ideologies, the national education commission that developed the policy, proposed to expand the privatization of higher education. In their report, the committee presents a table demonstrating how Sri Lanka allocates less money on higher education compared with the other middle-income countries. The next section outlines the way Sri Lanka relies more on government grants for higher education than other middle-income countries, which is confusing and contradictory, perhaps reflecting the grossly inadequate overall investment in higher education in the country. Then the report goes on to analyse how the poor school education system creates an unskillful student who is unable to think critically. It finally recommends promoting private participation in higher education, not only through funding but also by matching the curricula to fit the market and increase the “employability” of students. While on the one hand government pushes for privatising higher education, on the other, it demonizes the students in the public educational system. The State has seized the problem by its tail. The government is unable to perceive its own flaws in short-sighted policymaking, law enforcement, and corruption, and instead accuses and defames students, to distract them from its concerted effort to privatise education.
Kuppi is a politics and pedagogy happening on the margins of the lecture hall that parodies, subverts, and simultaneously reaffirms social hierarchies.
(Anushka Kahandagamage is reading for her PhD in the School of Social Sciences, University of Otago)
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