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Editorial

The Crab House

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Wednesday 1st December, 2021

An oft-heard complaint is that Finance Minister Basil Rajapaksa is more absent than present in Parliament during the ongoing debate on Budget 2022. This, however, is not the first time Opposition MPs have complained of the absence of ministers in the House during important debates. The ordinary MPs are no better. The Speaker, more often than not, has a hard time, trying to have quorate sittings.

A budget debate without the presence of the Finance Minister in the House is like Sinhabahu without the Lion’s son, so to speak. Yesterday, only Chief Government Whip Johnston Fernando was present in the front row of the government side when the House took up the issue of gas explosions reported during the last few days. Speaker Mahinda Yapa Abeywardena asked Minister Fernando to ensure that the front-row members of the government were present, especially when the issues of national importance were discussed. One can only hope that the SLPP seniors and their counterparts in the Opposition will heed the Speaker’s concerns, and care to attend Parliament regularly.

Finance Minister Rajapaksa experienced some difficulties in reading out the Budget, last month. If the reading of the Budget is so difficult, how hard its implementation will be is not difficult to imagine. However, what really matters is not the Finance Minister’s speech as such but how the government proposes to implement its budget proposals and bridge the huge deficit. The late President Ranasinghe Premadasa was so averse to long-winded budget speeches, maybe because he had an axe to grind with the then Finance Minister Ronnie de Mel, that he famously said that even a taxi driver could present the national budget! Ironically, today, the economic downturn has been so bad during the past couple of years that even some educated private sector executives work as cabbies at night to augment their declining income; these ‘taxi drivers’ are knowledgeable enough to handle public finance or even present the country’s budget.

Finance Ministers are masters of subterfuge. They say so little in so many words, make ambiguous statements and, most of all, have got obfuscation down to a fine art. Therefore, after their lengthy budget speeches, there arise many questions that need to be answered. So, the Finance Ministers have to be present in the House during budget debates to field questions from the Opposition MPs, and elucidate budget proposals, government policies, etc. The same goes for other ministers, whose presence is required in Parliament when questions are raised about institutions under their purview, and vital issues concerning their subjects are debated. Yesterday, all the ministers should have been in Parliament, where the issue of gas explosions was taken up. Is it that the SLPP frontbenchers do not consider kitchen explosions serious enough to warrant their attention? Let them be warned that it will be a big mistake for them to ignore the so-called kitchen vote, which can make or break governments.

When the senior members of political parties themselves skip parliamentary sessions, how can they expect their juniors to carry out their legislative duties and functions properly? They are like the proverbial crab which, while moving sideways, urges its offspring to walk straight.

Colossal amounts of money are spent on parliamentary sittings which serve little purpose when ministers and MPs do not attend them. Public funds must not be sent down the gurgler in this manner while many people are struggling to dull the pangs of hunger. If Parliament can have a budget debate without most of its members present, the question is why the public should continue to pay through the nose to maintain as many as 225 MPs.



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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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