By Harim Peiris
The New Year 2022 is upon us and with it also, late last year, the completion of two years of the first SLPP administration. As a nation, as we look to the year ahead, the prospects for the vistas of prosperity, we were promised, are not bright and a look back may allow the current administration to charter a new course or an eventual successor to carve out an alternate path. For a country promised vistas of prosperity and splendour, the contrary could hardly be starker; people standing in line for daily essentials, shortages of everything from cooking gas to foreign exchange, with rising inflation and declining real incomes and living standards. The hardest hit is the rural farmer and plantation worker as agricultural and plantation output and yields drop precipitously due to the fiasco that is our fertiliser policy. National life and governance are no better. We seem unable to manage anything from an oil spill to sub-standard fertiliser, and despite various election pledges of both national security and justice we are no closer to knowing who the masterminds of the 2019 Easter bombings were and bringing the conspirators to justice. Our international standing is at an all time low, facing opprobrium in Geneva and very unwisely having moved Sri Lanka away from our traditional ‘friends with all policy’ to an unnecessary alignment with one power at the cost of our relations with others.
Finance Minister Basil Rajapaksa has sought to defray rising criticism and significant erosion of public support to the government by announcing overnight and not through his November Budget, a relief package costing the government over two hundred billion rupees, the highlight of which is a 5000 rupee monthly allowance for all public servants and disabled ex-servicemen. This will indeed be a welcome relief to public servants, but those really hurting even more right now are the rural farmers, the informal sector and daily wage earners, who are seeing living standards and real incomes plummet.
The government’s answer to all this of course, is that the only culprit is COVID-19 and if not for the pandemic, the vistas of prosperity and splendour would be upon us. But even a cursory examination of this thesis proves otherwise. It was unwise and bad policy, pure and simple, which caused the mire in which we find ourselves in today. Many economies in the world, including those in our region, such as even Bangladesh, to whom we now go hat in hand for foreign exchange swaps, saw their economies take a hit during the initial COVID-19 waves in 2020, but rebound in 2021 and are well poised for growth in 2022. That is not the case for Sri Lanka. Our wounds are self-inflicted and exacerbated by the defining weaknesses of this administration, their unwillingness to consult experts, their inability to listen to the community and their complete, if misguided, faith in the righteousness of their cause.
Organic fertiliser fiasco
The first self-inflicted wound, the pain of which is yet to be felt, because the Maha crop season is yet not fully harvested, was the amazingly short-sighted decision, since rescinded, to administer shock therapy to the agricultural sector by banning non-organic fertiliser. Around the world, organic farming is an upmarket niche and not a mass market practice. The SLPP manifesto did promise to work the transition to organic farming but in a phased-out manner, over a decade. The implementation was different. It was sudden, overnight and instantaneous. The task of green agriculture has now been, even more bizarrely, handed over to the Army. It was not only agriculture that was affected, but also the plantations, especially tea, that also relies on fertiliser. Both these sectors combined employ the majority of Sri Lanka’s labour force. The drop in yields and output would push many rural families and plantation worker communities deeper into despair, debt and relative poverty. Food shortages are causing cost-push inflation or prices of daily essentials to soar. The reversal of the non-organic fertiliser policy has come too late and with the significant collateral damage of having to remove any subsidies on fertiliser and not paying the fertiliser importers their dues, running into billions of rupees, for prior period subsidies, thereby effectively restricting their ability to supply fresh stocks. This was not COVID-19 induced.
The previous Sirisena-Wickremesinghe administration had expended political capital and taken the political hits to adjusted direct taxation upwards through the 2018 Budget and the resultant Inland Revenue Amendment Act. Sri Lanka is a country which has the twin anomalies of a very low tax revenue to GDP ratio compounded by a very high indirect to direct tax ratio, which disproportionately falls on the lower income sections of the population; this in a social context of extremely skewed income distribution, where the top ten percent of the population earns just below forty percentile of the national income. In that context, there was absolutely no need for a massive tax cut, in the first flush of election victory, for that top percent of the population. It was both unwise and unnecessary and resulted in a massive fiscal slippage which consequently led to an even more foolish loose money policy by the Central Bank. Today, consequently, the government is without adequate revenue. This was also not COVID-19 induced.
Loose monetary policy and foreign exchange crisis
The Central Bank, in 2020 and 2021, led by economic theories that predated the fall of the Berlin wall and was inspired most closely perhaps by the Sirimavo Bandaranaike government of 1970-1977 and its protectionist, even isolationist ethos, followed a loose money policy during the years of the pandemic. Saner counsel, including those of the opposition SJB was ignored. Former State Finance Minister Eran Wickramaratne was to point out in 2020, that the problem in economic activity and production was supply side constraints consequent to the lockdowns and loose money would not help or address the situation. It would merely cause massive inflation down the road. The rather obvious forecast has now been fulfilled. The foreign exchange crisis is because the Central Bank by executive fiat, that far exceeds the moral persuasion of markets, insists on maintaining the exchange rate artificially high, essentially seeking to have the export sector subsidise the government’s money printing binge. A solution that cannot really be made to work. While interest rates should only be allowed to rise moderately, the exchange rate would need to be at a more market driven equilibrium, which would result in both greater foreign exchange inflows through formal banking channels, while facilitating foreign direct investment (FDI) as well, which is also at an all time low. None of this is COVID-19 induced.
The cracks in the Government ranks are showing. The minor left party allies are openly voicing their dissent. The SLFP, whose leading lights have been deprived of meaningful ministerial office, has been distancing itself from the Administration and there is fresh speculation in the mainstream press about yet another Cabinet reshuffle including a replacement of the Prime Minister, a rumour squashed by the PM’s media office earlier yesterday. But the disunity can hardly help either policy cohesion or a course correction, both of which are needed for Sri Lanka to recover from the hole we have dug for ourselves. (The writer previously served as Advisor to the President).
Priority need to focus on Controlling Serious Economic Crimes
Open letter to President Gotabaya Rajapaksa
The Ministry of Defence has advertised five vacancies for the “Recruitment as Reserve Assistant Superintendents of Police to the Ministry of Defence, affiliated to the Sri Lanka Police, skilled professionals to become proud members of the Ministry of Defence, dedicated to the sovereignty, unity and territorial integrity of Sri Lanka as well as to public safety and to play a superior role for the nation. These recruits will function as Cyber and Forensic Analyst, Geo-Political and Strategic Analyst, Counter Terrorism and Violent Extremism Analyst, Economic Analyst and Statistical Analyst (the last two covering security perspectives regarding national security)”. Any justified decision to strengthen the knowledge and skills based professional capability of existing human resource of the state is a welcome move, so long as the recruits have in addition to the specified qualifications, requisite commitments to best practice professional standards, ethics, correct attitudes and values.
The caring civil society fervently hopes, in accord with your stated commitments in the manifesto and the several public pronouncements that followed your election as the President, that you, with the support of your Cabinet colleagues and the top officials of the executive, will similarly focus on the essential priority need to focus on controlling serious economic crimes, which can easily debilitate the financial integrity, fiscal and monetary stability and solvency of Sri Lanka; and if allowed unabated will destabilise the economy and prevent the realisation of the goals of splendour and prosperity.
The optimum operational environment to assure financial integrity minimizing serious economic crimes is by having effective laws, regulations, policies, systems, procedures, practices and controls, with efficient and effective independent oversight mechanisms, enforcements, investigations and prosecutions, followed by independent justice systems with penal sanctions and recovery of proceeds of crime. The critical drivers of such a system are independence, capability and professionalism of supporting human resources in the entire chain. It is however quite evident from many case studies that the systems controlling financial integrity of Sri Lanka fails to meet required standards of effectiveness, due mainly to the lack of competent and committed professionals in the chain engaged in independent oversight mechanisms, enforcements, investigations and prosecutions. Due to this incapacity the independent oversight control, enforcement, investigation, prosecution and punishment of offenders of money laundering, transfer pricing, securities offenses, bribery, corruption, financial fraud, organised crimes, drug trafficking, smuggling, and avoidance of taxes/ excise and customs duties are ineffective; and more importantly the recovery of proceeds of these crimes eventually fail and are thus unable to restore the state revenues leaked and state assets stolen or defrauded.
Civil society looks to you as the President, to take early action to strengthen the structures, systems, laws and regulations along with the capacity of the resource persons engaged in the independent oversight control and enforcement of mechanisms; and thereby minimise serious economic crimes system wide and facilitate successful recovery of proceeds of crime. In the above context it is suggested that you pursue the undernoted strategic action steps under your direct leadership supervision:
* Seek Cabinet approval to set up an Enforcement Directorate similar to that of India under the supervision of the Inspector General of Police, reporting to an Independent Public Commission made up of three members, comprising of a high integrity competent retired Appellate Court Judge, a retired Senior Officer of the Auditor General’s Department and a retired Senior Officer of the Central Bank.
* Enforcement Directorate to be entrusted with the mission of minimizing the identified serious economic crimes systems wide; enhancing oversight mechanism and controls system wide and where suspected that any such crimes having taken place professionally investigating and prosecuting, optimizing recovery of proceeds of crime
* Seek technical support in setting up the Enforcement Directorate from the Financial Integrity Unit of the World Bank and its affiliates Financial Action Task Force, UN Office on Drugs and Crime and the Stolen Asset Recovery Initiative with extended human resource training and development support from bi lateral supporting countries and other specialized agencies
* Recruit competent and highly professional staff for the Directorate, similar to the staff recruited to the Defence Ministry; and support them with requisite resources, knowledge, skills, systems, data bases, best practices and technical and investigation assistance linkages
* Enact essential legal and regulatory reforms, commencing with the early enactment of the Proceeds of Crime Act draft sent to the previous regime for cabinet endorsement
* Enhance the capability of the prosecutors of the Directorate to successfully prosecute serious economic crimes and judges to effectively support the judicial processes connected therewith
* Make it a compulsory requirement of all state remunerated persons to adopt the ethical standard to report to the Directorate any known or suspected non compliances with laws and regulations
Trust you and your advisory team will give due consideration to this submission
S.Thomas’ Class of 62 and O/L 70 Group celebrates 60 years Nexus
By Rohan Mathes
Once again the old boys of the Class of 62 and O/L 70 Group fraternity of S. Thomas’ College Mount Lavinia gathered last Saturday (22nd), under one banner to celebrate their 60 th anniversary of their association and loyalties with their prestigious Alma Mater, long way down from 1962, whence they were admitted to the school by the sea.
This rendezvous was of paramount importance to the membership near and far, inclusive of those domiciled overseas, who had turned up in their numbers to enjoy the long-awaited fellowship, with their comrades, despite the prevailing Covid pandemic restrictions. Nevertheless, those who could not make it, had been amply served by the provision of a Zoom link. Kudos to the organisers who had painstakingly and meticulously planned all the nitty-gritties of this epoch-making celebrations, however with less pomp and pageantry, compared to their fiftieth anniversary celebrations in 2012.
Following the service at the Chapel of the Transfiguration, the Thomians spend the day within the precincts of this hallowed institution which had undoubtedly imparted a unique, state-of the-art and wholesome education to them. They took this rather rare opportunity to joyfully tour around their old school, of course reminiscing their nostalgic memories of their childhood. They were simply overjoyed by viewing the latest developments and modifications done by the school authorities, utilising the charitable donations and contributions made by the old boys, parents and well-wishers of the school, in numerous ways, throughout the years gone by.
At this event, the Group also assisted the college in their project to install “Smart Boards to every class room”, by handing over a cheque to the Sub Warden Asanka Perera, to the value of Rs.400,000, collected from its membership. Esto Perpetua!
Why cry for Djokovic – a reply
I strongly object to the remark Dr Upul Wijayawardhana (Dr U W) made in the first paragraph of his Opinion, in The Island of Saturday 22 January, titled ’Why Cry for Djokovic?’ critiquing Cassandra in her Friday 21 Cassandra Cry.
Dr U W writes: “Cassandra uses her column liberally to criticise our politicians for giving special treatment to their kith and kin.” I, Cassandra, have two reasons to object to this damning statement. I have never criticised politicians for “giving special treatment to their kith and kin”. I have criticised politicians on various other issues such as what they have done, but not on this particular accusation. Hence Dr UW deliberately, or carried away by his writing eloquence, placed me in danger of reprisal. Such is not done.
Please read me in Cassandra Cry on Friday January 28, where this matter, and some others the doctor has written regards Cassandra will be refuted,
Booster shots: Poor public response makes GMOA contemplate legal remedy
Paul Farbrace to be Sri Lanka Head Coach
Govt., SJB haggle over procedure to rescue country
‘Dates have the highest sugar content to fight Coronavirus’
Sunday Island 27 December – Headlines
#Sundayisland Sunday Island- 31 January- Headlines
News6 days ago
MP denies trying to help fugitive through BIA
Politics2 days ago
President’s Dinner for his Old Comrades
Sports6 days ago
Four batsmen strategy backfire as Sri Lanka lose to Zimbabwe
News3 days ago
Professionals’ National Front opposes MILCO appointment
Sports8 hours ago
Paul Farbrace to be Sri Lanka Head Coach
Sports5 days ago
World Cup spot and series at stake due to poor planning
News1 day ago
New Colombo uni VC takes swipe at undergrads
News5 days ago
Endure daily power-cuts or face countrywide indefinite blackouts, warns Minister Gammanpila