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The Milk Powder Formula – making of Anchor

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by Sumi Moonesinghe narrated to Savitri Rodrigo

Now began the process of picking up the pieces (after the July 1983 riots). In 1984, Killi transferred the staff from Berec, the battery company, to Jones Overseas. We had already drawn up plans to begin the import and distribution of Anchor Milk Powder from New Zealand. Killi recruited an excellent marketing director from India, Jojo Kanjirath, who was a highly-experienced marketer and advertising whiz-kid from J Walter Thompson, and I recruited Metha Abeygunewardene, a well-trained sales manager from Unilever, to be my Sales Director.

I knew my team was powerful and had sufficient strength to compete against Nespray, which was produced by Nestle, the world’s largest Swiss-based company with very deep pockets, I might add. It was a well-established brand, having been in Sri Lanka for over 100 years and thus gaining not just brand loyalty but becoming a generic household name for powdered milk.

This entire idea was a very bold move. We were taking on the world’s largest dairy company and even the New Zealand Dairy Board heads were sceptical of our plans. I still recall the breakfast meeting I had with the Regional Managing Director of NZDB’s subsidiary in Singapore, Alistair Betts, and Global Marketing Director of NZDB in Wellington. “How are you going to take on Nestle?” they asked me and I could hear doubt in their voices. Never in any of the NZDB markets, had anyone been audacious enough to take Nestle head-on.

Then came the next question. “Where do you plan on packing the milk powder?” I had my answer at the ready, having anticipated their questions. I talked at length and finally convinced them that we could and we would take on Nespray. “Here’s my plan,” I said and laid it out on the table. By the end of that meeting, I had their fullest support. That breakfast meeting was the start of the Anchor journey in Sri Lanka and Alistair Betts betting on Sri Lanka.

When I met Alistair initially, I was struck not just by his enthusiasm and personality, but by his work ethic, talent and dynamism. He was always attuned to what was going on and willing to change with the times and it was undoubtedly these traits that saw him spearhead the expansion of NZDB’s markets in South-East Asia. I was saddened by his death in 2005 and it was fitting that he was honoured posthumously in the Queen’s New Year honours list, becoming a companion of the Queen’s Service Order.

In an appreciation written by the Chairman of NZDB Sir Dryden Spring when Alistair passed away, Sir Dryden called him a legend and the face of NZDB, and “the first to crack those (South-East Asian) markets and get New Zealand dairy industry brands into Sri Lanka, Malaysia and Taiwan. Many of those brands are still the strongest we have today.”

I negotiated with the Bank of Ceylon for a line of credit to meet our working capital requirements. We then set up a packing plant in an abandoned garment factory in Ratmalana, on the outskirts of Colombo city, owned by Killi’s dear friend Nari Sabnani. While the hardware was being established aligned with our plan, our biggest challenge emerged with the sales agents. Nespray remained No 1 in their minds, and persuading them to place even just 10 packs of Anchor on the shelves was an uphill task. They were fearful of losing the Nespray distribution rights, which was technically their bread and butter. They didn’t want to put their businesses on the line for this newcomer that no one had heard of.

But we had a trump card —our strong marketing team, picked from the best among the best. We rounded up that expert marketing knowledge and began to pull rabbits out of the hat. Our marketing strategies proved to be the winner. Our brand hyped the concept of Anchor Milk Powder being from New Zealand — the fact that the milk was imported was our first scoring point because the Sri Lankan mindset of ‘imported goods being superior’ was yet a strong thread.

Our packaging and marketing collateral evoked the clean pure air of New Zealand with cows grazing on green grass on pristine plains, adding the innuendo that the cows did not have artificial feed but only consumed natural grass. This subtle canvas was our second scoring point. Our third was reiterating that mothers trusted Anchor because Anchor was pure wholesome milk powder.

And we had more! The mother we espoused needed to have a face. We picked Rosy Senanayake as the face of Anchor. She was a young mother who, before getting married, had represented Sri Lanka at beauty pageants. She had just the right blend of beauty and that young motherly disposition which fitted in well with the pristinely pure marketing strategy we were portraying. In hindsight, Rosy was a great pick as she continued to be associated with Anchor throughout her career, even after she won the Mrs. World title.

Our strategies worked and our sales began growing exponentially. In just 12 years, my very dedicated team, whom I liked to call my Anchor A Team (named after the famous TV series, the A-Team) and were truly like my family, had gained more than 70% market share. Beating the world’s No. 1 food corporation into second place was one of the biggest highlights of my business career.

I could never have done all this without Maha and Killi, and of course Susil, who was always there with a strong shoulder to cry on after major arguments with principals and suppliers. While Killi and Maha were always positioned together as the brothers running the Maharaja Group, they were diametrically opposing personalities. I knew Killi from our days in Singapore when he would visit us, but my first meeting with Maha was in their office at Bankshall Street, when I had been appointed Managing Director of the newly incorporated Jones Overseas Limited.

Maha, the older of the two, possessed a calm and collected personality, while Killi was very visionary, daring, outgoing and equipped with the courage to be different. But they got on extremely well, sharing company responsibilities with Killi’s personality fitting in well to travel the world to rally business for the company and Maha, managing the finances and controlling expenses.

Now that we had beaten Nespray and we were well entrenched in the milk powder market, it was time for another challenge. I wanted to tackle the milk tea segment, which was dominated by Lakspray, a cheaper product with only 26% fat. NZDB refused to supply us an equivalent to Lakspray as their thought process was that it would affect Anchor’s positioning. But on the ground, we were very aware of the market sentiment and so I arranged a meeting with the Directors of the UK Milk Marketing Board at the Savoy in London. My friend Baba Vairasinghe, who was the local agent for the UK Milk Marketing Board, arranged the meeting and accompanied me to it.

Some tough negotiations later, I left London with a signed contract for the supply of milk powder and payment arranged via a Letter of Credit. Not long after, two container loads of milk powder from the UK Milk Marketing Board arrived in Colombo – one went to Lanka Milk Foods, the producers of Lakspray, and the other to Jones Overseas for our new brand. This was a tough call for me and in fact, put to test the relationship and trust that had been built with NZDB. I knew Anchor was strong and the new brand didn’t pose any competition to Anchor. Eventually I was proved right and that little smudge in our relationship was obliterated.

My very able marketing team, headed by Shehara de Silva who created the brand name Ratthi, which in the Sinhala language means calf, was working overtime literally to make sure we continued our winning streak. We went into the market with a real clarion call and Ratthi didn’t disappoint. The calf was on a winning streak.

But our victories were not without some pain. It goes without saying that the world of business is one of ups and downs, but the challenge we faced in 1986 felt like an abyss and I was falling right into it. It was alleged that I was responsible for a consignment of contaminated weevil-infested full cream milk powder, which had been shipped to a semi-government entity under the Ministry of Trade, from the New Zealand Dairy Board.

The story made headlines in major newspapers with my name splashed across the front pages, even though I was only an indenting agent. I was devastated as I had nothing to do with it. This entity then sent a Letter of Demand for USD 1 million to NZDB and blacklisted the world’s largest exporter of dairy products, from supplying to Sri Lanka. The entire episode was impacting my company’s business very badly.

With the situation in dire straits, NZDB sent a technical team to Sri Lanka for an investigation. It was finally confirmed that this consignment of milk powder had been unloaded into a go-down which previously held rice. The importer had not fumigated the go-down prior to the milk powder being unloaded into it. The technical team then spent months sorting out our bags of milk powder. Even with these findings, the ban remained and our business reputation was suffering badly.

Finally, I couldn’t take the stress anymore and decided to meet my friend Lalith Athulathmudali who was the Minister of Trade. The best time to meet Lalith was when he was at breakfast because we could sit and chat undisturbed. I dealt a lot with him as Minister of Trade, due to the nature of my business. I told him what had happened, the findings of the technical team, and asked him to intervene in lifting the blacklist as the fault was not ours. It had already been proven that we had nothing to do with the unclean go-down.

“I can’t deal with this man,” I told Lalith exasperated, referring to the head of the semi-government entity, and not without a touch of anger. Lalith took one look at me, smiled and said, “Sumi, there’s no man you can’t deal with!” but assured me that he will sort things out, which he did. Looking back, this has been a pattern in my life. Just when I seem to be thrown into challenges that have taken me to the end of my tether sometimes, I seem to find the right person to pull me away from the edge of that precipice.

When it came to the intricacies of business, I was fundamentally self-taught. I had been thrown into the deep end and learned the ropes of commerce and industry on the run, but inherent wisdom told me that some professional value addition in business management would be helpful if I was to conquer the heights I had set for the company. In 1988, I had taken a short course in portfolio management and financial analysis in Geneva. This was a very exciting trip for me as Susil and I had travelled many times to Switzerland and revisiting some of the sites he and I went to, like Mont Blanc and the Matterhorn, gave me much joy. My fellow students and I would study during the week, and on weekends, put our studies aside and take a break doing these tourist runs.

In my quest for upskilling my business acumen, in 1992, I attended a course for chief executives at Wharton Business School at the University of Pennsylvania. This was a great opportunity for me to benchmark my knowledge and business skills with the other course attendees who turned out to be a Who’s Who of global business. I remember the CEOs of ASEA Brown Boveri (ABB) – a Swedish-Swiss MNC, Hewlett-Packard, Procter & Gamble, and ATT being among the participants. Besides learning from an honour roll of erudite economists and financial gurus from the USA, one of the biggest advantages I gained at Wharton was being taught speed reading.

With all the success our milk powder business was having, it was time for us to expand to a new office and factory complex. We obtained a loan of Rs. 600 million from BOC (for the construction of a state-of-the-art milk packing plant, liquid milk processing plant and an office complex. The entire complex was in Biyagama and was designed by Architect Navin Gooneratne. The complex was constructed by Mitsui and Sanken Lanka, which was headed by Ranjith Gunathilake. It housed some of the best dairy processing equipment imported from Holland, Denmark and Germany.

I was completely involved in the project from its very genesis. Both Navin and Ranjith were used to me poring over the designs and asking hundreds of questions, so I could visualise what the end-complex would be like. I knew the measurement of every wall, every angle and every area. I would make frequent visits to the site to keep tabs on progress except when I went on a six-week holiday to Europe with Susil, Anarkali and Aushi. When I returned, my first stop was in Biyagama.

As I drove in I was horrified. There were 16 giant concrete columns running the entire height of the facade of this five storey tall building. I knew this was not a design feature I had approved and immediately called Navin. “What are these monstrous columns doing in the front of my building?” I asked. “I want to make this a green building,” explained Navin patiently. “Those concrete columns are pergolas where plants can be grown. No one will see the concrete building as a result, only green, which will be very pleasing.”

However, I was not pleased. I turned to Ranjith who was privy to this conversation and asked him to remove the 16 columns immediately. “I don’t want to see even a trace of it. You’ll have to saw it off from ground level,” I told him. Ranjith was appalled and Navin was upset. Both tried to talk me out of it but to no avail. I had made up my mind.

The 16 columns disappeared, I was happy and Navin named himself the draftsman of the complex and me, the architect. The rest of the construction period was uneventful and went according to plan.

As Managing Director of Jones Overseas, I had the task of making a speech at the inauguration of the complex. In my address, I said, “I am 51 years old and have worked in this company now for over two decades. The time has come for me to hand over the reins of Managing Director to a younger person.”

No one expected this announcement but in my heart, I knew it was time. We were doing exceptionally well and judging by Sri Lanka’s corporate results, we were only second to Ceylon Tobacco Company in turnover. It’s always good to quit, while at the top!

After the ceremony, while we were returning from Biyagama, the Managing Director of NZDB Warren Larsen who listened to my speech at the inauguration asked me, “Sumi, are you willing to sell the business?” I didn’t think twice and quipped, “If the price is right, we will, but the final decision lies with Killi.”

Warren was determined to pursue the conversation. I had apprised Killi of the inquiry and when Killi hosted the NZDB team to lunch at his home, the subject of the sale of the company came up for discussion. Killi, who was always astute when it came to business deals, gave Warren the sale price based on future earnings. Then began a spate of lengthy negotiations with the finance director of the Maharaja Group entrusted with the task of number crunching. An agreement was reached.

The sale was completed in September 1996 and the same year in December, I resigned as Managing Director. And that was how we sold Jones Overseas to the New Zealand Dairy Board. With the sale of the company, I was considerably ‘well off’ as they say in Sri Lanka, having made sufficient money to enjoy life without running the rat race I had been used to for so long. I looked inwards and said to myself, “It is time to retire, spend time with our girls and travel the world.” And that is exactly what I did.

But I did keep abreast of news of my milk powder baby and was very happy when I learned eventually that Ratthi had got into the No. 1 position in the milk powder market, beating even Anchor, although a little part of me was sad that Anchor had lost that premier spot which we had built quite painstakingly.

However, while everything was looking good at this moment, during the time of the construction of new factory and office complex, I suffered a setback in my health.

I had become very stressed at work with this construction, travelling to Biyagama and back nearly every day, while ensuring our daily operations were on track, and helping Susil with his political affairs as he was now Chief Minister of the Western Province. The pressure was taking its toll on me.

I had a nagging pain in my spine which became quite debilitating. I consulted Prof. Henry Nanayakkara who referred me to Dr. Wijenaike. I was immediately hospitalised at Nawaloka Hospital and an ECG plus a plethora of other tests done.

Every test result came back negative but the debilitating pain persisted. I then flew to London and got myself admitted to Cromwell Hospital. A battery of tests later, every result was negative once again. There was nothing physically wrong with me. However, the doctor at Cromwell Hospital went a step further and referred me to a psychiatrist. A few sessions later, I was told that the pain was induced by stress. I was on the verge of a breakdown.

Killi was continually in touch with me and when I told him the diagnosis, he read the gravity of the situation and checked me into the Givenchy Spa at Trianon Palace Hotel in Versailles. I was placed on a special diet, received daily treatments with injections to my neck, had an exercise regime, revelled in massages and cycled in the evenings on the luscious 250-acre gardens. It was a total ten days of complete R&R and absolute bliss. One of the rules though was having no contact with the outside world, not even with family. The treatment, which I found out later that Killi had paid for in its entirety, worked.

Through these ten days, Susil was tasked with looking after Anarkali and Aushi. They went off on holiday to Yala with our lifelong friend Navin Gooneratne and his family. Ten days later, I returned to Sri Lanka – with no back pain – refreshed, rejuvenated and having regained my strength. I was ready to complete one of the biggest projects I had taken on – the construction of the new factory and office complex.

Just like everything in my life, I needed to be in control, even when it came to my illness. Through my bouts in hospitals, tests and spa treatment, I would absorb the details of the medical information by listening to doctors, scouring the reports and conducting my own extensive research. Susil himself had various medical issues – from cardiac, to cataract to kidney stones to septicaemia and everything else in-between, and I learned early on that I needed to be as well informed as the medical professionals, to be able to ask the relevant questions. Now I had added to my medical information arsenal and was becoming quite adept at dishing out medical advice, acquiring the title of having an honorary MBBS!

While this was generally a subject that prompted some mirth at dinner conversations, the arsenal I had collated did come in handy. When Anarkali developed a spine ache similar to mine while she was at Merrill Lynch, I knew exactly what to do. Her job was stressful, had long hours and gave her no free time. I organised a treatment regimen for her, similar to what I had at the Givenchy Spa, but at her apartment at Kensington Green, which was a gated community and close to Cromwell Hospital. Ten days later, Anarkali’s back pain disappeared and she was free from pain.

(Extracted from Sumi Moonesinghe’s Memoirs)



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Features

Post-War Reconciliation Process: Human Rights violation

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By Dr. S.W. Premaratne
Attorney-at-Law

At each session of the United Nations Human Rights Council (UNHRC), in Geneva, at which the Post-War Reconciliation Process in Sri Lanka was considered, special attention was drawn to the issue of alleged violation of human rights, and humanitarian law, during the last stage of the war, and also the need for taking remedial steps for improving the human rights situation in Sri Lanka. In this article, attention of the reader is drawn to the inconsistency, and contradictory nature of the policy, adopted by successive governments, in Sri Lanka, in response to the role played by the United Nations, and the adverse effect of the failure on the part of the Sri Lankan government to be guided by a consistent and diplomatically pragmatic policy.

Joint Statement of the UNSG and the President of Sri Lanka in 2009

Immediately after the conclusion of the war, in May 2009, the United Nations Secretary General (UNSG), Ban Ki-moon, paid a visit to Sri Lanka and, after a discussion with President Mahinda Rajapaksa, a joint statement was issued on May 23, 2009. According to the Joint Statement, Sri Lanka agreed to attend to the immediate needs of the people, affected by the war, and to initiate a reconciliation process, with the objective of achieving durable peace and economic development, for the benefit of all sections of the Sri Lankan population. The President also gave an assurance, to the UNSG, to attend to the matters that need the most urgent attention, such as the re-settlement of Internationally Displaced Persons (IDP), reconstruction of damaged infrastructure, rehabilitation and reintegration of former child soldiers, and ex-combatants, to civilian life. Of course, the Mahinda Rajapaksa government did not hesitate to attend to most of the above-mentioned immediate needs of the war-affected people, in the North-East.

In the joint statement of the UNSG and the President of Sri Lanka, the most significant part was the expression of the Sri Lankan government’s commitment to the promotion and protection of human rights, in keeping with the international human rights standards, and Sri Lanka’s international obligations. It is also very significant that the UNSG underlined the importance of an accountability process for addressing the violations of international humanitarian and human rights law. According to the joint statement, the President agreed to the need for establishing a mechanism for holding an independent investigation into the allegations of serious violations of human rights, and humanitarian law, both by the LTTE and the Sri Lankan armed forces, committed during the last stage of the war. In expression of Sri Lanka’s strong commitment to fulfill the obligations, in respect of promoting human rights, the Sri Lankan government made a proposal, entitled “assistance to Sri Lanka in the promotion and protection of human rights,” to the UNHRC, on May 27, 2009.

The Sri Lankan government, thereafter, proceeded to appoint the Lessons Learnt and Reconciliation Commission. The LLRC has made a comprehensive analysis of the causes of the conflict and the remedial steps that should be taken by the government for restoration of durable peace and reconciliation. Regarding the issue of violation of human rights, the following recommendations were made by the LLRC:

(i) Launching a full investigation into incidents of disappearance of persons, after surrender to official custody, and, where necessary, instituting prosecutions. According to the LLRC recommendations, instituting prosecutions against the offenders is an imperative, also for the purpose of clearing the good name of the Sri Lankan Army “who have, by and large, conducted themselves in an exemplary manner, in the surrender process”.

(ii) To investigate the specific instances, referred to in the Report, and any reported cases of deliberate attacks on civilians. If the investigations disclose the commission of any offences, appropriate legal action should be taken to prosecute/punish the offenders.

(iii) Regarding the controversial “Channel 4 Video” the LLRC recommended an independent investigation to find out the truth, or otherwise, of the video footage. If such investigation reveals the commission of any offences, it is necessary to prosecute such offenders.

(iv) The Commission also recommended the investigation of alleged disappearances and provide material to the Attorney General to institute criminal proceedings.

(v) The LLRC also brought the attention of the government to instances of persons being detained in custody for a long period of time, under the Prevention of Terrorism Act.

Although the government, led by President Mahinda Rajapaksa, initially indicated its willingness to fulfil the commitments undertaken, with respect to the violation of human rights, and humanitarian law, by the Sri Lankan armed forces and the LTTE, on the occasion of issuing the joint statement with the Secretary General, it became clear, subsequently, that the political leaders in power, led by President Rajapaksa, did not have the political will to act. They were guided by the mindset that by defeating the LTTE, who were generally recognized, at that stage, as a terrorist movement, the Sri Lankan armed forces had been able to unite the country and restore peace after making innumerable sacrifices and, therefore, there was no need for a reconciliation process.

The sponsors of the Resolution 19/2, adopted before the UNHRC, in Geneva, in 2012, required the Sri Lankan government to implement the recommendations of the LLRC. The need for holding an investigation into the allegations of serious violations of human rights, and humanitarian law, during the last stage of the Eelam War IV, was emphasised in the UNHRC Resolutions, adopted in 2012, and the subsequent resolutions, adopted in 2013 and 2014.

Regarding the involvement of the international community, as members of the United Nations and the UNHRC, in a reconciliation process, the attitude of the Mahinda Rajapaksa government was that Sri Lanka being a sovereign state, the other countries, or even the UN, had no right to interfere with or make any recommendations, regarding the settlement of domestic issues of Sri Lanka. The representatives of the Sri Lankan government, who participated in the UNHRC sessions, argued that the officials of the UN and the UNHRC, interfering in the domestic issues of Sri Lanka, amounts to violation of sovereignty of this country. Therefore, such interventions are illegal and as such Sri Lanka was not bound to implement these recommendations of the UNHRC. Regarding the allegation of serious violations of human rights, the response of the Sri Lankan government was that Eelam War IV was a humanitarian operation, conducted strictly in adherence to human rights law, and humanitarian law, and in the course of the military operations, violations of human rights were committed, only by the LTTE.

Regime change in 2015

A change of attitude, towards the involvement of the international community, could be observed during the Yahapalana administration, led by President Maithripala Sirisena and Prime Minister Ranil Wickremesinghe (2015-2019).

The representatives of the Sri Lankan government, at the UNHRC sessions, in Geneva, co-sponsored the Resolution 30/1, which required the Sri Lankan government to hold a credible investigation, by a hybrid tribunal, consisting of both local and foreign judges, to investigate alleged violation of human rights, and humanitarian law, by the members of the armed forces, and the LTTE, during the last stage of the war.

It can be stated that the Sri Lankan government, at that stage, adopted a pragmatic approach by co-sponsoring the resolution. At that stage, the Sri Lankan government felt the state of insolation from the international community, including India, that supported the sponsors of the Resolution against Sri Lanka. The Yahapalana government perceived serious negative consequences if the Sri Lankan government continued to oppose the UNHRC resolutions.

The Yahapalana government also took several constructive steps that contributed towards the creation of a conducive environment for meaningful reconciliation. Foreign Minister of Sri Lanka, Mangala Munasinghe, who participated in the UNHRC sessions, during which the Resolution 30/1 was co-sponsored, informed the UNHRC that the government would initiate a domestic mechanism, after consulting all parties who have a stake in an effective reconciliation process. The Yahapalana government was able to establish domestic mechanisms, such as the Office of Missing Persons (OMP), and the Office for Reparations. These institutions were able to function effectively, at the initial stage. Signing of the International Convention, on the protection of all persons from enforced disappearance, on May 25, 2016, and drafting a Bill for the repeal of the Prevention of Terrorism Act, are some of the progressive steps taken by the Yahapalana government.

Recapture of Political Power by Rajapaksa brothers

The Presidential election, held in November, 2019 and the General elections, in August 2020, brought back to power same political leaders who ruled the country, prior to 2015. This change of government resulted in the reversal of the Sri Lankan government’s policy towards involvement of the UN in the reconciliation process in Sri Lanka. The government, led by the Rajapaksa brothers, opposed the Resolutions brought before the UNHRC, in Geneva, against Sri Lanka and adopted the same confrontationist approach towards the UN’s involvement in the reconciliation process. Co-sponsoring the Resolution 30/1 and co-operating with the UNHRC, by the Yahapalana government, was projected to the Sri Lanka electorate, during the election propaganda campaigns, as an unpardonable betrayal of the armed forces, and the Sri Lankan nation, by the Yahapalana government.

46th Sessions

The Resolution, titled “Promoting reconciliation, accountability and human rights,” was adopted by the UNHRC, in Geneva, on March 23, 2021, during the 46th Sessions. By this resolution, a mandate was given to the High Commissioner for Human Rights for initiating a fresh inquiry, outside Sri Lanka, regarding the accountability issues. In this resolution, there is a provision according to which the Office of the High Commissioner for Human Rights is authorized to take on the role of collecting evidence to be used in such prosecutions in the future.

Foreign Minister Prof. G.L. Peiris, making a statement to Parliament of Sri Lanka, subsequent to the adoption of the Resolution before the UNHRC, stated that by the adoption of this resolution, the UN sought to interfere in matters essentially within the domestic jurisdiction of Sri Lanka. He further stated that there was no moral right to interfere into affairs of a sovereign country in this manner. The Minister said that “Sri Lanka categorically rejects this unprecedented proposal in the Resolution”.

48th, 49th and 50th Sessions of the UNHRC

In the reports submitted by the UN High Commissioner for Human Rights, Michelle Bachelot, at the 48th, 49th and 50th Sessions of the UNHRC, she brought the attention of the Sri Lankan government to the concerns of the UNHRC, regarding inadequate progress in the human rights situation, and also the inadequate action taken regarding the investigation of alleged human rights violations, during the last stage of the war.

Her reports also dealt with the various aspects of human rights violations that occurred in Sri Lanka, under the Rajapaksa administration. She made special reference to the increasing militarization of the civil functions of the government, intimidation and harassment of human rights defenders, and journalists, and members of civil rights organizations, which criticized government policies, and detention of individuals, for long periods of time, without trial, under the Prevention of Terrorism Act.

In the report submitted at the 49th sessions, the High Commissioner stated that the OHCHR had already established a “Sri Lanka Accountability Project” and even allocated funds for it. In the report submitted at the 50th Sessions also she referred to this “Accountability Project” outside Sri Lanka, which may have serious consequences a far as Sri Lanka’s relations with leading democratic countries are concerned, especially at a time Sri Lanka is grappling with a veryserious economic crises.

Anti-government protests in Sri Lanka

Only a few hours after President Ranil Wickremesinghe assuming duties of his office, the armed commandos of the Police and troops of the security forces were used to disperse the peaceful, unarmed protesters from the Presidential Secretariat area of the Galle Face, in the early hours of 22nd July. Attention of the international community has been drawn to the undemocratic step of imposing a State of Emergency, and initiating an operation for arresting the protesters who played a leading role in the protest campaign. A message from the US and the Sri Lanka core-group of the UNHRC stated: “The Human Rights Council Sri Lanka Core-Group is dismayed at the violation which took place at Galle Face. We call for full respect for human rights and rule of law”.

Even prior to this unlawful act of attacking the protesters, on July 22, the Special Rapporteur on Freedom of Peaceful Assembly, in his report to the UNHRC, at the 50th Session, held in June 2022, had already warned that Sri Lanka police frequently appear to respond to protests by arresting their participants, in violation of the right to freedom of peaceful assembly”.

Conclusion

The fact that the core-group, and their supporting members of the UNHRC, are determined to go ahead with a project, outside Sri Lanka, for investigating the allegations of serious violations of human rights, and humanitarian law, during the last stage of the war, and continued vigilance of the democratic members of the UNHRC, regarding the deteriorating human rights situation in Sri Lanka, after the conclusion of the war, has caused irreparable injury to Sri Lanka’s friendly relations with these countries. There is no doubt that the Sri Lankan government is now concerned about the highly damaging consequences of the failure to adopt a consistent and diplomatically pragmatic policy in respect of the role assumed by the UN to ensure that Sri Lanka would initiate and proceed with a credible and transparent reconciliation process after the conclusion of the war.

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Features

Why record export earnings may not be good news

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By Gomi Senadhira

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

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

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

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

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

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

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

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

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

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

That is not good news.

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

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Improving trend needs to be sustained on multiple fronts

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by Jehan Perera

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

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

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

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

ECONOMIC STABILISATION

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

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

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

POLITICAL STABILITY

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

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

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

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

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