The administration of President Gotabaya Rajapaksa has largely promoted pro-business positions including announcing tax benefits for new investments to attract foreign direct investment (FDI,) US Department of States’ 2021 Investment Climate Statement said.
As outlined in its election manifesto, the Rajapaksa government’s economic goals, include positioning Sri Lanka as an export-oriented economic hub at the center of the Indian Ocean, improving trade logistics, attracting export-oriented FDI, and boosting firms’ abilities to compete in global markets. However, COVID-19 and the subsequent lockdowns brought new economic challenges, forcing the government to adapt policies to the situation on the ground.
Given below are excerpts of thes tatement: “After 30 years of civil war, Sri Lanka is transitioning from a predominantly rural-based economy to a more urbanized economy focused on manufacturing and services. Sri Lanka’s export economy is dominated by apparel and cash-crop exports, mainly tea, but technology service exports are a significant growth sector. Prior to the April 21, 2019, Easter Sunday attacks, the tourism industry was rapidly expanding, with Lonely Planet naming Sri Lanka its top travel destination in 2019. However, the attacks led to a significant decline in tourism that continued into 2020 due to COVID-19 and the government’s related decision to close its main international airport for commercial passenger arrivals in March 2020. The airport reopened for limited commercial passengers in January 2021, but newly reimposed travel restrictions are resulting in severe contractions for both the tourism and apparel export sectors with potential follow-on impacts in related sectors including services, construction, and agriculture. Tourism revenue dropped 73 percent year-over-year (YoY) in 2020 while apparel exports dropped 15.6 percent in the same period. However, official figures for migrant labor remittances, another significant source of foreign exchange, increased to $7.1 billion in 2020 due to the collapse of informal money transfer systems during the pandemic, despite the job losses to Sri Lankan migrant workers, especially in the Middle East.
“In April 2020, the Ministry of Finance restricted imports of luxury and semi-luxury consumer products such as consumer durables, motor vehicles, and the import of certain agricultural products as a means of saving foreign reserves and creating employment in labor intensive agriculture. With a debt-to-GDP ratio now above 100 percent (of which 60 percent is foreign debt), Sri Lanka is facing a potential liquidity crisis, exacerbated by declining export receipts due to the pandemic. Exports of goods fell 15.6 percent to $10 billion in 2020, down from $12 billion in 2019. Exports of services fell roughly 60 percent to $3 billion in 2020 down from $7.5 billion in 2019.
“FDI in Sri Lanka has largely been concentrated in tourism, real estate, mixed development projects, ports, and telecommunications in recent years. With a growing middle class, investors also see opportunities in franchising, information technology services, and light manufacturing for the domestic market. The Board of Investment (BOI) is the primary government authority responsible for investment, particularly foreign investment, aiming to provide “one-stop” services for foreign investors. The BOI is committed to facilitating FDI and can offer project incentives, arrange utility services, assist in obtaining resident visas for expatriate personnel, and facilitate import and export clearances. However, Sri Lanka’s import regime is one of the most complex and protectionist in the world. Sri Lanka ranks 99th out of 190 countries on the World Bank’s Doing Business Index and ranks very poorly in several areas, including contract enforcement (164 out of 190); paying taxes (142/190); registering property (138/190); and obtaining credit (132/190). Sri Lanka ranks well in protecting minority investors, coming in at 28/190 in 2020.
Sri Lanka’s GDP contracted 3.6 percent to approximately $81 billion in 2020 due to COVID-19, an improvement on the International Monetary Fund (IMF) projection for a 4.6 percent contraction. FDI fell to approximately $550 million in 2020, significantly less than the $1.2 billion in 2019 and $2.3 billion in 2018. The IMF projects a four percent growth in 2021.”
Questionable deal with US energy firm: Professionals’ National Front asks whether govt. received AG’s consent
Prof. Samarajiva concerned about some sections of agreement
By Shamindra Ferdinando
Professionals’ National Front (PNP) Spokesperson Kapila Renuka Perera yesterday warned of dire consequences of going ahead with the government’s controversial agreement with the US energy firm New Fortress Energy. The grouping questioned the rationale behind losing state control/responsibility in ensuring uninterrupted fuel supplies to power stations.
The agreement with the New York based US firm would result in a catastrophe and the loss of state control of the energy sector could pose a threat to national security, Perera said.
Perera pointed out that the agreement had been finalised in a way that it didn’t come under the purview of Sri Lankan law. Responding to another query Perera said that it would be pertinent to ask whether the government had consulted the Attorney General on the questionable agreement.
Pointing out the danger of agreeing to international arbitration in respect of the US energy agreement, Perera said the issue at hand should be examined against the backdrop of the debt trap and the crisis in sharply weakened foreign reserves. The PNP spokesperson said that successive governments pursued agendas inimical to the country. The SLPP government was no exception, Perera alleged, urging all stakeholders to reach consensus on matters of national importance. “The US deal is nothing but a disaster. Government cannot act in such an irresponsible way,” Perera said.
Meanwhile, Prof. Rohan Samarajiva says he is supportive of PPPs (private and public partnerships) to bring in foreign capital and expertise, but PPPs should be based on a transparent process to secure the best possible price. “A transparent process whereby we know that the best possible price has been paid and the technical criteria have been satisfied.” He said it was certainly not the case as regards what he called a cloudy transaction involving the government of Sri Lanka and the US-based gas-to-power developer New Fortress Energy.
The one-time Director General of Sri Lanka Telecom (SLT) and political analyst said so when The Island sought his opinion on the US investment on the Yugadanavi power plant aka Kerawalapitiya power station operated by the West Coast Power Limited and the New Fortress Energy receiving the right to build a new LNG plant off Colombo.
The 300MW plant is owned by the country’s largest power supplier LTL Holdings, which is under government control.
Commenting on the recently concluded power deal, Prof. Samarajiva expressed serious concerns over certain provisions in the agreement. One-time DG, Sri Lanka Telecom recalled how exclusivity provisions given to Japan’s Nippon Telegraph and Telephone Corp (NTT) in respect of SLT caused serious issues. Prof. Samarajiva said: “In respect of the agreement with New Fortress Energy, the exclusivity provisions that have been reported are worrisome. I had enormous problems with the five year exclusivity given to NTT when they entered into a PPP on SLT in 1997. The excuse was that it was war time (true) and the rate rebalancing had to be completed (somewhat true). There is no war now, and there is no reason to give a broad exclusivity. If it is not time bound, it’s a recipe for disaster.”
Commenting on the challenges faced by Sri Lanka, Prof. Samarajiva said now that Chinese leader Xi Jinping has announced that China will no longer build coal plants abroad, there wouldn’t be any more additions to Norochcholai. “We need baseload capacity, so I guess LNG is the right fuel. But this must be placed in the larger context of the potential use for cooking and automotive uses. This seems disconnected from a larger plan. Should this be in Kerawalapitiya or in Hambantota/Trinco? Perhaps the right answer is Kerawalapitiya, but the assessment should have been done.”
The Island: At a time, the government has invited foreign investment with the focus on the Colombo Port City, how do you see the growing opposition to the US firm investing in the energy sector here?
Prof. Samarajiva: “The government is hobbled because of the cheap sloganeering while in opposition. But if they admit fault and speak the truth to people I believe it’s possible to marginalize Minister Wimal Weerawansa and his ilk.”
The Island: Do you think the government and the Opposition should seek a consensus on vital national matters such as foreign investments in key sectors?
Prof. Samarajiva:”Absolutely. We need bipartisan approaches to infrastructure.”
The Island: What should be the role of the parliament in such an endeavour?
Prof. Samarajiva: “I believe the crisis has reached a level where a national government should be formed. Parliament is where we should start.”
Prof. Samarajiva said that with the national economy in tatters in the wake of unprecedented devastation caused by the raging Covid-19 epidemic, the country was in such a deepening crisis the Parliament should move as an institution.
‘Agrochemicals smuggled from India a danger’
By Rathindra Kuruwita
The government was turning a blind eye to a racket where large amounts of agro-chemicals are smuggled into the country via the sea, former NGO activist and provincial Governor Rajith Keerthi Tennakoon alleged yesterday.
He told The Island: “This is being done to convince people that the government’s organic agriculture initiative is working. I have personally seen the effects of some agro-chemicals that have been smuggled into the country. These agro-chemicals are extremely potent and will acidify the soil.”
The government banned the import of agro-chemicals a few months ago, claiming that Sri Lanka would be the first country to go 100% organic. Tennakoon said that he thought it should have been done gradually with the consent of all stakeholders.
“However, the government must immediately stop people smuggling in low quality agro-chemicals from India. These agro-chemicals are freely available in agricultural areas and would have devastating impacts on agriculture, farming and human health. The Ministry of Agriculture, Standards Institute and Office of the Registrar of Pesticides are not doing anything about it,” he said.
Tennakoon said that sub-standard agrochemicals are being smuggled in fishing boats to Mannar, Kattankudi, Trincomalee and Weligama harbours. Some of these agro-chemicals were banned in Sri Lanka a decade ago, he added.
“There is no plan to produce adequate amounts of compost. The government knows this. The government also knows that without adequate agrochemicals the agricultural production will decrease significantly in the coming months. Instead of sitting down with all stakeholders and deciding on the best course of action, the government is turning a blind eye to the issue,” he said.
Public Security Minister: Terrorists still at large pose threat to Sri Lanka
By Saman Indrajith
Public Security Minister Rear Admiral (Retd) Sarath Weerasekera told Parliament on Wednesday (22) that Sri Lanka would be under threat as long as the IS ideology promising 72 virgins in paradise for those who sacrificed their lives in the name of Jihad existed.
“Anyone who believes in that ideology could carry out an attack any time. It is not easy to identify them,” the minister said, responding to a question by SJB Colombo District MP Mujibur Rahman.
Minister Weerasekera said that Ven Gnansara during a recent TV talk show highlighted the same threat and Muslim MPs instead of trying to find faults with the messenger should support the government to get rid of terror ideologies from society.
MP Rahman said: “Ven. Gnanasara has recently made a statement during a live telecast on Hiru TV that there would be another terror attack. He said he had informed the President of the threat. He also said that he had all information including the details of the explosives and where the attack would take place. What action has the government?”
Minister Weerasekera said that inquiries had been made from Ven Gnanasara Thera regarding his statements. “When Ven Gnanasara was questioned by investigators, the he said that he made those statements based on the Al Quran. Ven Gnanasara Thera said that there is a Sinhala translation of Al Quran by Abdul Razeek of Sri Lanka Thowheed Jamaath. That translation contains some sections which may motivate the Muslims to engage in clandestine activities in the name of their religion. He also said so in the TV talk show.
“Ven Gnanasara thera said that no responsible Muslim leader or Islamic religious leader has rejected those sections that advocate terror attacks,” the minister said.
Weerasekera said that Wahabism’s aim was the creation of a theocratic state ruled by an Islamic leader with the title of Caliph. “This ideology is espoused by ISIS. It is not easy to detect persons believe in Wahabism. This is why its hard to make arrests. For example, the Lankan born Islamic terrorist who launched a recent attack in New Zealand had been under surveillance since 2016. Later, he was released by court. He erased pro-ISIS documents and videos from his computer but he did not erase the ideology from his mind.”
The terrorist had knifed innocents believing that he would go to paradise and live with beautiful virgins, the minister said, adding that there were many such people in Sri Lanka.
“There cannot be different laws for different religions. These laws nurture extremist ideologies. Ven Gnanasara’s is right when he says extremists can carry out terror attacks any time. We have strengthened our intelligence network on account of this threat. We need the support of the Muslim people and their organisations to arrest persons who can become a threat. It is wrong to make allegations of racism whenever security forces arrest such extremists. In the aftermath of the Easter Sunday attacks we have detained some people who held and propagated the IS ideology, funded such teachings and associated closely with those who carried out the terror attacks,” he said.
The Minister added that there are Muslim MPs who speak on behalf of those detainees. The terrorists who carried out the suicide terror attacks at the Shangri-La were two sons of a business tycoon.
“They were educated and wealthy. If such educated persons fall prey for the promise of 72 virgins in heaven, what about the youth who have no such education and money? It is not a task difficult to recruit an average Muslim youth with this ideology. They are exposed to teachings that justify terror and killing innocents in the name of religion. They lobbied and exerted pressure on the authorities to release the terror suspect who thereafter carried out a knife attack in New Zealand. Now you see the results.”
Weerasekara said that a leader of the student organisation of the Jamaat e Islami had been involved in damaging Buddha statues in Mawanella. For 25 years the leader of Jamaat-e- Islami had been Rasheed Hajjul Akbar. The man wrote a book which states that Jihad should be launched to protect Islam and that lives had to be sacrificed to achieve that goal.
” Akbar was arrested by the Yahapalana government and MP Mujibur Rahman pressed for his release. This is an MP that spoke highly of the Jamaat-e-Islami. Later, Akbar was released without conditions. The Presidential Commission of Inquiry on page 270 of its report has identified Akbar as one who propagated the creation of an Islamic State in Sri Lanka. The Attorney General should take action to prosecute him for promoting this ideology. The two sons of Akbar’s brother were involved in destroying Buddha statues in Mawanella. They and suicide bomb attacker at Dehiwala were members of the student wing of this organisation. Jamaat-e-Islami literature justifies suicide attacks and it was Akbar who channelled funds for sending Lankan Muslims abroad for training in the 1990s. Muslim MPs got him released. It was our government that took him into custody again. There are such terrorists at large. They are the ones Ven. Gnanasara Thera has warned of. This is much more complicated than the LTTE. We will arrest those who should be arrested and rehabilitate those who should be rehabilitated. We need your support to keep the country safe.”
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