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Opinion

Unwise double standards on East Container Terminal

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Protest against ECT being awarded to Adani group of India

 

By Harim Peiris

Earlier this week, the Government officially announced that it would not proceed with the proposal to develop the East Container Terminal (ECT) of the Colombo Port, as a joint venture between the Sri Lanka Ports Authority (SLPA) and the Adani Group of India. The announcement by the government, through the Prime Minister no less, raises important questions marks and doubts over the vistas of prosperity and the claims of technocratic policy making and efficient governance, we were all promised by the Government at preceding elections.

 

Private investment into
the Colombo Port

Firstly, a quick look at the Colombo Port would demonstrate that we already have the private sector operating terminals in the Colombo Port, namely the South Asian Gateways Terminals (SAGT), a John Keells Holdings investment and more recently, under the previous Rajapaksa Administration the Colombo International Container Terminal (CICT), a venture with the China Merchants Port Holdings. In both SAGT and CICT, the stake of the Sri Lanka Ports Authority (SAGT) is only fifteen percent (15%). In contrast the proposed joint venture for the ECT with the India’s Adani Group, was to have a majority (51%) Sri Lankan stake, through the Sri Lanka Ports Authority (SLPA) and the Adani group and other project managers, the balance minority stake only.

Further in the case of the CICT, the China Merchants Port Holdings, is a Chinese Government entity and so the investor is not a foreign private investor, but a foreign sovereign entity. The same Chinese Government entity, the China Merchants Port Holdings (China Merchants) also owns 85% of the Hambantota Port. So, the principal of private sector and foreign investor participation in Sri Lankan ports, is a clearly established Sri Lankan State policy, going back over twenty years, the SAGT having commenced operations in 1999.

 

Policy clarity and efficient governance

Foreign direct investment (FDI) is the name of the game for Sri Lanka, to both see significant foreign exchange inflows into Sri Lanka and also to significantly improve our infrastructure which will directly contribute to increased growth in our GDP. Both of these are areas where Sri Lanka lags behind our peer group in South and East Asia. Sri Lanka’s GDP growth of the past eight years or so, have been lower than our war era GDP growth and shipping, especially transshipments is a significant potential growth area, for which port capacity and operating efficiency are crucial.

Regarding foreign direct investment (FDI) as well, Sri Lanka lags behind her peer group, especially through equity investments. Further FDI into infrastructure, is harder to attract, than say service industry investments, because infrastructure investments are not only significantly larger, in hundreds of millions of dollars, but also because the projects are long term in nature. Accordingly, the investment by the Adani group would have been a huge foreign direct investment by a private (not government) Indian company and a precursor and confidence booster for other Indian investments. Sri Lanka, geographically positioned as we are, should endeavour to benefit ourselves from the economic growth and success story next door.

A crucial and essential feature of both public policy and governance is that there be both clarity and certainty. In that respect, honouring commitments and especially written agreements become crucial in the conduct of both international relations and commercial activity. The adherence to contracts and agreements is an essential feature of international, local and every common law tradition in the world.

It is in that context, that the previous Sirisena / Wickremesinghe Administration though extremely critical of the Port City and other grandiose projects of dubious utility value, honoured those contracts and proceeded with the projects because of binding nature of the agreements. It was therefore entirely predictable, the immediate Indian Government response to the Government’s announcement, through its High Commission in Colombo, when it announced that the Indian Government expects adherence and implementation of the tripartite Memorandum of Cooperation (MOC) signed between Sri Lanka, India and Japan, our largest bilateral donor by far, for the development of the ECT.

Reneging on contracts, tearing up the rule book and thumbing our nose at our closest (and giant) neighbour India, together with offending our largest bi lateral donor by far, Japan is very unwise and hardly likely to lead us to vistas of prosperity. Not only has Japan been a firm and reliable friend of Sri Lanka for over half a century, they have been Sri Lanka’s largest bilateral donor. The Japanese also have considerable sway over the Asian Development Bank, which has been one of the largest, long term concessionary lenders for infrastructure to Sri Lanka. Their proposed loan for the ECT was at a half percent compared with the hefty premium to Libor that all the Chinese loans came at. Compare half percent to say, four or five percent for a half a billion dollars. The math does not add up. This is also after the government unilaterally cancelled the Japanese light rail project, which was meant to address the rather obvious need for mass rapid transit in the Colombo district, beyond our colonial era railways.

The Government position seems very strange. We have declined foreign direct investment and torn up an agreement with our largest neighbour India and our largest donor Japan. We find the East Terminal in the Colombo Port strategic but not the Western terminal, or the SAGT or the CICT or even the Hambantota port, just the East Terminal. We can forgive those who suspect a hidden hand and it is not too hard to see from where. Monopolistic or oligopolistic behaviour is rational for the monopolist or the oligarch. The problem is when the Government is subject to their pressure.

In contrast to the Government, the main opposition Samagi Jana Balawegaya (SJB) of Opposition Leader Sajith Premadasa, has very wisely taken a well-balanced position on the ECT, saying a public private partnership is the best way forward.

(The writer served as Advisor, Ministry of Foreign Affairs from 2016-17)



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Opinion

What is wrong with Sri Lanka?

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By Dr Laksiri Fernando

It is not the country per se, but the politicians and the people who are wrong. While politicians should take 70 percent responsibility, the people also should take 30 percent. It is true that these wrongs on the part of the politicians or the people are not limited to Sri Lanka. Even in a country like Australia where I now live, there are intermittent corruption, crime, gender abuse, killing, and misguided politics. However, the difference is extremely vast. Sri Lanka’s wrongs are perhaps 50 times higher than a country like Australia.

One may pinpoint this to the economic difference or development. There is some truth in it. However, the whole truth is not that. It is rooted in the political culture and social culture in general. That is one reason why Sri Lanka was not being able to develop after independence like Singapore, Malaysia, South Korea, etc. India also has come to the forefront of development today. Sri Lanka became caught up in a vicious cycle where political culture prevented development, while underdevelopment influenced the political culture.

What is this political culture? It is mainly renovated feudalism with family at the core of politics that dominates the political culture. It is also the same in social culture, families dominating business, religion, entertainment, and the media. Only female members are set apart. It is in a way natural for members of a family to follow their fathers, brothers, or other close members. Or it can happen the other way around, fathers or uncles helping and promoting their siblings.

Even in America or the UK, this could be seen. The Kennedy family promoted members into politics. However, in Sri Lanka this is overwhelming, some families completely dominating politics and social arena. While the Rajapaksas are the most prominent example with abhorrent practices, the Bandaranaikes, the Senanayakes and the Jayewardenes (Ranil Wickremesinghe with links) were also playing the same game. In Australia, I have not come across this process. When John Howard was the Prime Minister, his brother Bob Howard continued to serve as an academic at the University of Sydney whom I used to meet often.

In 1995, I decided to come back to Sri Lanka to serve the country. I applied and got the appointment as the Director of the Sri Lanka Foundation Institute (SLFI) through a competitive interview. It was a great institute with many capabilities and the people working there were quite flexible and committed. However, when it came to filling vacancies and expanding the staff for new tasks, I came across political influences and pressures.

I managed to overcome them luckily as the SLFI came under the purview of Chandrika Kumaratunga as the President and as she did not make any interference at least in my case. However, I resigned and came back to Australia within six months as the situation was unbearable. People who tried to influence me were either top ministers or bureaucrats.

Again, when I finally came back in 1997, I first joined the University of Colombo before undertaking any other appointments. By that time, I had fairly learned how to overcome political influence. The university system was fairly reasonable (not completely) and on that basis it was possible for me to follow my impartial principles. However, there was at least one instance where a former friend of mine tried to blame me publicly, claiming that I myself asked for favours! It was heartrending.

Sri Lanka’s public service is large and widespread. There are around 1.5 million people working in its various institutions, departments, and branches. Although there is the Public Service Commission which is supposed to be independent, even in its appointments political and other influences are paramount. The most discriminated people in this service are Tamils, Muslims, and Women. Although there are over 15 percent of Tamils in the population, their presence in the public service is less than 10 percent. Apart from discrimination on the reason of ethnicity and gender, there are discriminations on the basis of caste, religion and region. The dissolution of Provincial Councils since October 2019 has enlarged these discriminations overwhelmingly.

It is mistakenly claimed that the ‘large state sector’ is the primary defect of Sri Lanka’s economy. It is not the size of the sector that has mattered but its inefficiency, incapacity, unproductivity, and sometimes duplication. In Australia, out of the total workforce, 20 percent are in the state sector. But it is sufficiently productive and provides necessary services even to private enterprises. In Sri Lanka, if we count 12 million as the workforce (adult population 14 million), the state sector comprises only around 12 percent.

The state sector undoubtedly should be restructured, and the workforces should be retrained or even dismissed. There is no point in keeping people like Sirimanna Mahattaya in the public service if we take an example from the teledrama, Kolam Kuttama (Funny Couple)! Even privatising certain (loss-making) state enterprises is in order. However, there are certain sectors and services that the state should hold on to. Education and Health are the most priory sectors among others, depending on national dialogues. It could allow the private sector to participate, but the state should not give up its primary responsibilities.

There can be other strategic sectors where the private sector could be allowed like the ports, airports, airlines, electricity, gas, oil, and even water, but the state should not give up its responsibilities completely. Public-Private partnership can be a model in certain areas in this respect.

The stagnation of the education sector has been a primary problem area in Sri Lanka now for a long time. This applies both to school education and university education alike. In the case of university education there have been some curricula and teaching methodology changes but those are not up to modern and current needs.

We still get a huge number of Arts students while the country’s need is in the direction of Science, Technology, Medicine, Nursing and Business Management. Those who come from the Arts streams in schools, if it is not possible to change in the short run, should be able to move to scientific areas, if capable. In Australia, there is no prohibition of changing the stream if the students show high capability in whatever area that they qualify in. School education should be totally reformed with emphasis on scientific and international knowledge.

The discarding of English education (since 1956), in my opinion, has been the major mistake that the country has committed in degrading the educational system, the economy, and the country’s international profile. In recent times young generations are trying to overcome these barriers through private education, tuition, and social media. However, this is mostly limited to the well to do. English should not be considered as a superior or imperial language, but a practical and international language.

While this short article, with word limits, confine to only few areas of ‘wrongs’ that Sri Lanka is committing, a possible conclusion is to call for an overall change in the political and economic system in the country. Those political leaders and parties responsible for the country’s present political and economic crisis should be completely ousted.

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Opinion

Plan to transform country into an export economy

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Dear Mr. President,

A Presidential Media Division statement, titled “Country set for rapid transformation into an export economy” quoted remarks made by you at the inauguration ceremony of a historic temple in Kegalle.

As a caring citizen I said, “three cheers”, happily thinking that at last, the country was on the correct governance path focusing on the creation of new strategic leadership options and policy changes to encourage present and new investors to produce tradable goods and engage in external services. I was delighted that the statement began with a reference that Sri Lanka can no longer continue to rely on borrowings (presumably external?) to address the imbalance between imports and exports, which if pursued will inevitably lead to another economic crisis within a decade.

As I read the rest of the statement, I noted that your plan for achieving such a transformation by holding discussions with the World Bank, ADB and the IMF to initiate a programme and passing two new laws in April. The only other reference even as a vague statement was in relation to implementing an agricultural modernisation programme, where you anticipated results only after 6-7 years. Are you planning in addition to leverage the National Trade Facilitation Committee (NTFC) and its Secretariat as a part of your implementation strategy[ii] ?

I am sure that many highly competent Sri Lankan trade economists (including those who have guided you in the past), will be able to advise you on more important winning strategic policy/implementation and change management options.

They would surely stress the relative importance of developing strategic networking options with supply chains in the region, assisting capable SME’s to upgrade quality/productivity, and enhancing public infrastructure productivity; along with the need to remove para tariffs, enhance ease of doing business, and one stop facilitation center benchmarking services in South Indian states. These can bring big gains, well before dreaming as your short-term goal, leveraging Free Trade Agreements with India, China, Thailand, Singapore, Vietnam and attempting a high jump by  joining RCEP.

Chandra Jayaratne

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Opinion

Solar and wind power projects

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There has been a delay in finalising the unit cost for the proposed 500 Mw wind power project initiated by India’s Adani Group. This is surprising and disturbing as there was a news item that the Cabinet had approved the payment of US dollar cents 14.6 per unit, nearly Rs. 50 in our local currency, without the knowledge of the Ministry for Power and Energy or the Ceylon Electricity Board. If so, what is the reason for the delay in going ahead with the construction of the Wind Power Project at Mannar? The snag may be that other private suppliers too are demanding the same payment as agreed with Adani Group.

As I handled this subject at the Ministry of Power and Energy, I still take interest therein, in my retirement. In my earlier letters to the press, I pointed out the negative aspects of wind and solar projects, mainly, Sri Lanka being an island with a limited land area of 65,610 sq. km, where land is required for agriculture as is seen by the desperate attempt of the government offering uncultivated land both state-owned and private to grow more food.

It is said that four to five acres of land is required to produce 1 Mw of electricity. If so, consider the land requirements for major solar parks. In addition, no plant life is possible under these solar panels, which has multiple effects on the atmosphere. The scenic beauty of this country, which attracts tourists will be lost and thereby foreign exchange which we desperately need. This goes for floating solar projects on hydro reservoirs and lakes which the government has already approved contracts to the private sector. In wind farms, there is the danger to birds and flying insects. It is also reported that due to the noise people cannot settle down in adjacent areas.

It is not my intention to discourage the projects to produce power from renewable sources of energy. I intend to make the authorities concerned seek alternative sites, along the sea coast, avoiding beaches frequented by tourists, rooftop solar panels in all buildings. Do not forget we are actively pursuing the connection of our grid to India and when this project materialises, the energy requirement of this country will be eased to a great extent.

It is strange the Ministers in charge of land and agriculture and also tourism have not objected to setting up solar parks and wind farms on land.

G. A. D. Sirimal

Via e-mail

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