Features
Confronting capitalism – market oriented economy with state guidance
By Jayampathy Molligoda
Recently the Governor, Central Bank, Professor WD Lakshman, at a media briefing stated that Sri Lanka was following a market- oriented economy with state guidance, involving some controls and restrictions. He was quoted as saying that such a framework would not be successful under an IMF program. This, in my view needs further elaboration. As we understood, IMF programme will essentially impose some conditions such as; maintaining fiscal discipline- not to exceed the government budget deficit beyond say 8-9 % of GDP, not to defend external value of the rupee, meaning not allowing the rupee to depreciate by pumping dollars from the official reserves of the Central Bank, not to go for unnecessary commercial foreign borrowings etc.
Managing in turbulent times:
According to IMF global economic outlook based on October 2020 report, most countries imposed stringent lockdown measures and as a result, the economic activities contracted dramatically on a global scale. The report says that although easing lockdowns can lead to a partial recovery, economic activity is likely to remain subdued until health risks abate.
The positive feature of working with IMF is that our credit rating could be improved and our Banks and other financial institutions may be able to transact with foreign financial institutions efficiently and arrange trade finance facilities and commercial borrowings at competitive rates. Also, the Sri Lankan exporters may be able to receive foreign remittances without unnecessary delays and restrictions imposed by foreign correspondence banks. As for credit rating position, Sri Lanka was downgraded four months back and at present, Sri Lanka is ranked C grade. When a country is under an IMF standby facility, there is a greater possibility of the ratings getting improved, thus building confidence among the business partners and foreign multilateral financial institutions like World Bank, ADB, JBIC etc.
As articulated by the Central Bank Governor, the government has been able to contain the trade deficit through stringent import control measures in order to save much needed foreign exchange, as the tourism & travel and some exports such as textile and garment sectors have been badly affected during the year under review. This is in the backdrop of some export targets where the government policy makers were expecting 4-5 billion US $ per annum in terms of tourism proceeds before COVID-19 pandemic hit. In fact, Sri Lankan economy could realise only 0.9 billion US $ from tourism in 2020.
Nevertheless, the Central bank has been able to provide guidance, support and advice to the government to manage the macro- economic fundamentals quite efficiently during these turbulent times, which is commendable. The following table shows the summary of the vital statistics of Sri Lanka’s macro- economic transactions with the rest of the world. An attempt has been made by the writer to make some provisional figures and estimates to ascertain whether Sri Lankan economy could withstand the pressure from this global economic downturn. Also, it is important to critically review the efficacy and effectiveness of the economic policy changes contemplated by the present government policy makers and to what extent they succeed in confronting capitalist economic system in todays’ context.
= Author’s estimates
As can be seen, the biggest challenge is in the management of the debt repayment capacity, especially in view of the fact that a total sum of US $ Billion 7 is due during the current year, which is the highest ever debt service figure that the country has to service in order to avoid sovereign default. In addition to above, domestic forex debt repayments such as FCBU and SLDB amounting to 1.5 billion US$ will also become due, however the government may be able to successfully arrange foreign SWAPs from friendly countries’ multilateral financial institutions and Central banks to meet any contingencies. It should be mentioned that the Central Bank of Sri Lanka is vested with the responsibility of the management of the public debt, in terms of Section 113 of the Monetary Law Act.
Confronting capitalism:
Throughout the world, economic growth has drastically slowed. Natural resources are exploited for short-term profits. Wealth is concentrated in the hands of a few. When a large number of children living in poverty, multinational ultra- rich elites tuck their money into tax heavens. As we all know, lockdown impacted peoples’ ability to move across borders, but it doesn’t stop money flowing into tax havens around the world, as claimed by Forbes magazine.
Anna Zakrzewski, who leads Boston Consulting Group’s Global Wealth Management division did a detailed study and the economic shocks of coronavirus have meant that offshore financial centres such as Switzerland are back to their old tricks: Banking peoples’ money away from their more- risky homelands.
‘Confronting capitalism’ by Philip Kotler published by American management association explains 14 major problems undermining capitalism and offers real solutions for a troubled economic system. Although best known as a marketing guru, Kotler trained as an economist under three Nobel price- winning economists, namely Prof. Milton Friedman who represented free market economic thinking and two other professors, Paul Samuelson and Robert Solow of MIT. Some of the serious shortcomings of capitalism as articulated by Kotler include: tends to focus narrowly on GDP growth, generates income & wealth inequality, proposes no solution to persisting poverty, exploits natural resources and environment in the absence of regulations, favours short term profits over long run investment planning, fails to pay a living wage and others.
New economic and business model for tea plantations:
This reminds me the Sri Lankan tea plantation -RPC model introduced in 1995, where some 88,000 hectares of cultivated tea estates have been transferred to 20 RPCs under 53 year lease period with only one golden share retained by the government, expecting the companies to put in much needed investments in Re/new planting, infilling of tea, optimum utilisation of arable agricultural land and other resources including factory modernisation, tea marketing efforts and other viable diversification options , and improve labour management relations through collective bargaining process etc. As per latest statistics at Tea Board, the total tea production at RPC level has come down to 70.6 million own crop and bought leaf of 24.2 million kilos totalling only 94.8 million kilos in 2020 (total national production in 2020 was 278 million kilos- 34% RPC share) from the 135. 3 million kilos in 1995 where the total national production was as 246 million kilos- 55% RPC share.
in January 2019, the daily wage was revised to Rs 750/ per day under the main collective agreement entered into between the RPCs and worker trade unions in 2003. Unfortunately, the daily attendance allowance and the productivity linked wage rates hitherto enjoyed by the workers have been taken out jointly by the parties to the collective agreement, which the undersigned, as a non- executive director attached to one of the RPCs had made written representations in January ’19 itself to the EFC and the negotiation committee, thus expressing serious concerns. Thereafter, the demand for wage increase came even before the presidential election held in November 2019 from worker trade unions under the collective agreement generally to be negotiated once in two years only. The RPCs have called for a new hybrid wage structure focusing on a revenue share model based on ‘three day’ productivity-focused rates and three daily wage rates -a total package for the entire week for the estate workers. But this was not acceptable to the worker unions quoting ‘six day work rule’ and practical issues. An option favoured by the trade unions is to increase the basic wage which attracts not only EPF/ETF, even the other terminal benefits such as gratuity holiday pay etc. An ‘out-grower model’ where the workers are allocated small plots of land to grow their own tea to sell to the factories was also suggested without much deliberations to study far reaching implications.
In view of the deadlock, the cabinet has decided to refer the demand of Rs 1,000/ daily wage to the tea & rubber industry wage board for a decision and they have incorporated a sum of Rs 900/ together with a budgetary allowance of Rs 100/ to make Rs. 1000 as minimum daily wage payable to the workers under wages board ordinance. The writer has been a proponent of the collective bargaining process under the main collective agreement entered in to 2003. My own view is, once the wage anomaly is sorted out, it is expedient that the parties to get back to the CA and honour the conditions in the said agreement in the best interest of the tea industry, thus maintaining good labour: management relations at estate level
Export earnings are getting trickled -down to farmers:
With an annual export earning of LKR 230 billion, at the Colombo tea auction level, the tea prices have increased from Rs 545/= per kilo of made tea in 2019 to Rs 628/= per kilo for the full year 2020. Despite production decreases, which is the main concern today, the foreign exchange earnings have reached this level thanks to the fob price of tea improving from Rs. 822/ per kilo to Rs. 867/ in 2020, due to efforts by our tea exporters- supported by improved quality of the final product by growers and manufacturers and ‘Ceylon Tea’ promotional campaign. Consequently, the export earnings are getting tricked down to tea small holders and in fact, the farmers are receiving Rs 90 per kilo of their green leaf as against Rs 79/= per kilo in 2019 on an average basis. The main thrust would be integrated quality and productivity. Contrary to media reports recently, the majority of RPCs have also been making profits during the year 2020 as per Colombo stock exchange filing. Tea. Credit goes to all the stakeholders of the global tea value chain from our tea grower to Sri Lankan tea marketing companies.
Sri Lankan tea industry is not just a business, it is a way of life for over 2.5 million people and we need to protect and nurture nearly 500,000 small holders and 700 tea factories and 140,000 estate workers by encouraging tea exporters to really focus on promoting and marketing Ceylon Tea B 2 C, in addition to B2 B tea exports. Discerning tea consumers world over are paying premium prices for Ceylon tea, due to promotional campaigns focused on authenticity of the product based on sustainability credentials and wellness factor of Ceylon It is in that context only the recent wage increases should be viewed.
Conclusion:
From the above it can be seen that the main stakeholders, namely the RPCs, the worker trade unions and the government have failed in working together to attain the mission set out at the time of privatisation of tea plantations in 1992. After 29 years of the first privatisation, it has now become necessary to migrate in to a new economic and business model for RPCs, thus promoting high quality plantations, and need to focus more on sustainable agricultural and manufacturing practices through infusion of increased investments and management inputs. Nevertheless, the success depends on our ability to market and promote ‘Ceylon Tea’ in global target markets as a premium quality beverage under the ‘sustainable food’ category. As Mahatma Gandhi said, the difference between what we are doing and what we are capable of doing would solve most of the world’s problems.
by Dr Gotabhya Ranasinghe
Senior Consultant Cardiologist
National Hospital Sri Lanka
When we sought a meeting with Hon Dr. Ramesh Pathirana, Minister of Health, he graciously cleared his busy schedule to accommodate us. Renowned for his attentive listening and deep understanding, Minister Pathirana is dedicated to advancing the health sector. His openness and transparency exemplify the qualities of an exemplary politician and minister.
Dr. Palitha Mahipala, the current Health Secretary, demonstrates both commendable enthusiasm and unwavering support. This combination of attributes makes him a highly compatible colleague for the esteemed Minister of Health.
Our discussion centered on a project that has been in the works for the past 30 years, one that no other minister had managed to advance.
Minister Pathirana, however, recognized the project’s significance and its potential to revolutionize care for heart patients.
The project involves the construction of a state-of-the-art facility at the premises of the National Hospital Colombo. The project’s location within the premises of the National Hospital underscores its importance and relevance to the healthcare infrastructure of the nation.
This facility will include a cardiology building and a tertiary care center, equipped with the latest technology to handle and treat all types of heart-related conditions and surgeries.
Securing funding was a major milestone for this initiative. Minister Pathirana successfully obtained approval for a $40 billion loan from the Asian Development Bank. With the funding in place, the foundation stone is scheduled to be laid in September this year, and construction will begin in January 2025.
This project guarantees a consistent and uninterrupted supply of stents and related medications for heart patients. As a result, patients will have timely access to essential medical supplies during their treatment and recovery. By securing these critical resources, the project aims to enhance patient outcomes, minimize treatment delays, and maintain the highest standards of cardiac care.
Upon its fruition, this monumental building will serve as a beacon of hope and healing, symbolizing the unwavering dedication to improving patient outcomes and fostering a healthier society.We anticipate a future marked by significant progress and positive outcomes in Sri Lanka’s cardiovascular treatment landscape within the foreseeable timeframe.
by Fr. Emmanuel Fernando, OMI
Jesuit Fr. Aloysius Pieris (affectionately called Fr. Aloy) celebrated his 90th birthday on April 9, 2024 and I, as the editor of our Oblate Journal, THE MISSIONARY OBLATE had gone to press by that time. Immediately I decided to publish an article, appreciating the untiring selfless services he continues to offer for inter-Faith dialogue, the renewal of the Catholic Church, his concern for the poor and the suffering Sri Lankan masses and to me, the present writer.
It was in 1988, when I was appointed Director of the Oblate Scholastics at Ampitiya by the then Oblate Provincial Fr. Anselm Silva, that I came to know Fr. Aloy more closely. Knowing well his expertise in matters spiritual, theological, Indological and pastoral, and with the collaborative spirit of my companion-formators, our Oblate Scholastics were sent to Tulana, the Research and Encounter Centre, Kelaniya, of which he is the Founder-Director, for ‘exposure-programmes’ on matters spiritual, biblical, theological and pastoral. Some of these dimensions according to my view and that of my companion-formators, were not available at the National Seminary, Ampitiya.
Ever since that time, our Oblate formators/ accompaniers at the Oblate Scholasticate, Ampitiya , have continued to send our Oblate Scholastics to Tulana Centre for deepening their insights and convictions regarding matters needed to serve the people in today’s context. Fr. Aloy also had tried very enthusiastically with the Oblate team headed by Frs. Oswald Firth and Clement Waidyasekara to begin a Theologate, directed by the Religious Congregations in Sri Lanka, for the contextual formation/ accompaniment of their members. It should very well be a desired goal of the Leaders / Provincials of the Religious Congregations.
Besides being a formator/accompanier at the Oblate Scholasticate, I was entrusted also with the task of editing and publishing our Oblate journal, ‘The Missionary Oblate’. To maintain the quality of the journal I continue to depend on Fr. Aloy for his thought-provoking and stimulating articles on Biblical Spirituality, Biblical Theology and Ecclesiology. I am very grateful to him for his generous assistance. Of late, his writings on renewal of the Church, initiated by Pope St. John XX111 and continued by Pope Francis through the Synodal path, published in our Oblate journal, enable our readers to focus their attention also on the needed renewal in the Catholic Church in Sri Lanka. Fr. Aloy appreciated very much the Synodal path adopted by the Jesuit Pope Francis for the renewal of the Church, rooted very much on prayerful discernment. In my Religious and presbyteral life, Fr.Aloy continues to be my spiritual animator / guide and ongoing formator / acccompanier.
Fr. Aloysius Pieris, BA Hons (Lond), LPh (SHC, India), STL (PFT, Naples), PhD (SLU/VC), ThD (Tilburg), D.Ltt (KU), has been one of the eminent Asian theologians well recognized internationally and one who has lectured and held visiting chairs in many universities both in the West and in the East. Many members of Religious Congregations from Asian countries have benefited from his lectures and guidance in the East Asian Pastoral Institute (EAPI) in Manila, Philippines. He had been a Theologian consulted by the Federation of Asian Bishops’ Conferences for many years. During his professorship at the Gregorian University in Rome, he was called to be a member of a special group of advisers on other religions consulted by Pope Paul VI.
Fr. Aloy is the author of more than 30 books and well over 500 Research Papers. Some of his books and articles have been translated and published in several countries. Among those books, one can find the following: 1) The Genesis of an Asian Theology of Liberation (An Autobiographical Excursus on the Art of Theologising in Asia, 2) An Asian Theology of Liberation, 3) Providential Timeliness of Vatican 11 (a long-overdue halt to a scandalous millennium, 4) Give Vatican 11 a chance, 5) Leadership in the Church, 6) Relishing our faith in working for justice (Themes for study and discussion), 7) A Message meant mainly, not exclusively for Jesuits (Background information necessary for helping Francis renew the Church), 8) Lent in Lanka (Reflections and Resolutions, 9) Love meets wisdom (A Christian Experience of Buddhism, 10) Fire and Water 11) God’s Reign for God’s poor, 12) Our Unhiddden Agenda (How we Jesuits work, pray and form our men). He is also the Editor of two journals, Vagdevi, Journal of Religious Reflection and Dialogue, New Series.
Fr. Aloy has a BA in Pali and Sanskrit from the University of London and a Ph.D in Buddhist Philosophy from the University of Sri Lankan, Vidyodaya Campus. On Nov. 23, 2019, he was awarded the prestigious honorary Doctorate of Literature (D.Litt) by the Chancellor of the University of Kelaniya, the Most Venerable Welamitiyawe Dharmakirthi Sri Kusala Dhamma Thera.
Fr. Aloy continues to be a promoter of Gospel values and virtues. Justice as a constitutive dimension of love and social concern for the downtrodden masses are very much noted in his life and work. He had very much appreciated the commitment of the late Fr. Joseph (Joe) Fernando, the National Director of the Social and Economic Centre (SEDEC) for the poor.
In Sri Lanka, a few religious Congregations – the Good Shepherd Sisters, the Christian Brothers, the Marist Brothers and the Oblates – have invited him to animate their members especially during their Provincial Congresses, Chapters and International Conferences. The mainline Christian Churches also have sought his advice and followed his seminars. I, for one, regret very much, that the Sri Lankan authorities of the Catholic Church –today’s Hierarchy—- have not sought Fr.
Aloy’s expertise for the renewal of the Catholic Church in Sri Lanka and thus have not benefited from the immense store of wisdom and insight that he can offer to our local Church while the Sri Lankan bishops who governed the Catholic church in the immediate aftermath of the Second Vatican Council (Edmund Fernando OMI, Anthony de Saram, Leo Nanayakkara OSB, Frank Marcus Fernando, Paul Perera,) visited him and consulted him on many matters. Among the Tamil Bishops, Bishop Rayappu Joseph was keeping close contact with him and Bishop J. Deogupillai hosted him and his team visiting him after the horrible Black July massacre of Tamils.
Sri Lanka-Singapore Free Trade Agreement
By Gomi Senadhira
senadhiragomi@gmail.com
“You might tell fairy tales, but the progress of a country cannot be achieved through such narratives. A country cannot be developed by making false promises. The country moved backward because of the electoral promises made by political parties throughout time. We have witnessed that the ultimate result of this is the country becoming bankrupt. Unfortunately, many segments of the population have not come to realize this yet.” – President Ranil Wickremesinghe, 2024 Budget speech
Any Sri Lankan would agree with the above words of President Wickremesinghe on the false promises our politicians and officials make and the fairy tales they narrate which bankrupted this country. So, to understand this, let’s look at one such fairy tale with lots of false promises; Ranil Wickremesinghe’s greatest achievement in the area of international trade and investment promotion during the Yahapalana period, Sri Lanka-Singapore Free Trade Agreement (SLSFTA).
It is appropriate and timely to do it now as Finance Minister Wickremesinghe has just presented to parliament a bill on the National Policy on Economic Transformation which includes the establishment of an Office for International Trade and the Sri Lanka Institute of Economics and International Trade.
Was SLSFTA a “Cleverly negotiated Free Trade Agreement” as stated by the (former) Minister of Development Strategies and International Trade Malik Samarawickrama during the Parliamentary Debate on the SLSFTA in July 2018, or a colossal blunder covered up with lies, false promises, and fairy tales? After SLSFTA was signed there were a number of fairy tales published on this agreement by the Ministry of Development Strategies and International, Institute of Policy Studies, and others.
However, for this article, I would like to limit my comments to the speech by Minister Samarawickrama during the Parliamentary Debate, and the two most important areas in the agreement which were covered up with lies, fairy tales, and false promises, namely: revenue loss for Sri Lanka and Investment from Singapore. On the other important area, “Waste products dumping” I do not want to comment here as I have written extensively on the issue.
1. The revenue loss
During the Parliamentary Debate in July 2018, Minister Samarawickrama stated “…. let me reiterate that this FTA with Singapore has been very cleverly negotiated by us…. The liberalisation programme under this FTA has been carefully designed to have the least impact on domestic industry and revenue collection. We have included all revenue sensitive items in the negative list of items which will not be subject to removal of tariff. Therefore, 97.8% revenue from Customs duty is protected. Our tariff liberalisation will take place over a period of 12-15 years! In fact, the revenue earned through tariffs on goods imported from Singapore last year was Rs. 35 billion.
The revenue loss for over the next 15 years due to the FTA is only Rs. 733 million– which when annualised, on average, is just Rs. 51 million. That is just 0.14% per year! So anyone who claims the Singapore FTA causes revenue loss to the Government cannot do basic arithmetic! Mr. Speaker, in conclusion, I call on my fellow members of this House – don’t mislead the public with baseless criticism that is not grounded in facts. Don’t look at petty politics and use these issues for your own political survival.”
I was surprised to read the minister’s speech because an article published in January 2018 in “The Straits Times“, based on information released by the Singaporean Negotiators stated, “…. With the FTA, tariff savings for Singapore exports are estimated to hit $10 million annually“.
As the annual tariff savings (that is the revenue loss for Sri Lanka) calculated by the Singaporean Negotiators, Singaporean $ 10 million (Sri Lankan rupees 1,200 million in 2018) was way above the rupees’ 733 million revenue loss for 15 years estimated by the Sri Lankan negotiators, it was clear to any observer that one of the parties to the agreement had not done the basic arithmetic!
Six years later, according to a report published by “The Morning” newspaper, speaking at the Committee on Public Finance (COPF) on 7th May 2024, Mr Samarawickrama’s chief trade negotiator K.J. Weerasinghehad had admitted “…. that forecasted revenue loss for the Government of Sri Lanka through the Singapore FTA is Rs. 450 million in 2023 and Rs. 1.3 billion in 2024.”
If these numbers are correct, as tariff liberalisation under the SLSFTA has just started, we will pass Rs 2 billion very soon. Then, the question is how Sri Lanka’s trade negotiators made such a colossal blunder. Didn’t they do their basic arithmetic? If they didn’t know how to do basic arithmetic they should have at least done their basic readings. For example, the headline of the article published in The Straits Times in January 2018 was “Singapore, Sri Lanka sign FTA, annual savings of $10m expected”.
Anyway, as Sri Lanka’s chief negotiator reiterated at the COPF meeting that “…. since 99% of the tariffs in Singapore have zero rates of duty, Sri Lanka has agreed on 80% tariff liberalisation over a period of 15 years while expecting Singapore investments to address the imbalance in trade,” let’s turn towards investment.
Investment from Singapore
In July 2018, speaking during the Parliamentary Debate on the FTA this is what Minister Malik Samarawickrama stated on investment from Singapore, “Already, thanks to this FTA, in just the past two-and-a-half months since the agreement came into effect we have received a proposal from Singapore for investment amounting to $ 14.8 billion in an oil refinery for export of petroleum products. In addition, we have proposals for a steel manufacturing plant for exports ($ 1 billion investment), flour milling plant ($ 50 million), sugar refinery ($ 200 million). This adds up to more than $ 16.05 billion in the pipeline on these projects alone.
And all of these projects will create thousands of more jobs for our people. In principle approval has already been granted by the BOI and the investors are awaiting the release of land the environmental approvals to commence the project.
I request the Opposition and those with vested interests to change their narrow-minded thinking and join us to develop our country. We must always look at what is best for the whole community, not just the few who may oppose. We owe it to our people to courageously take decisions that will change their lives for the better.”
According to the media report I quoted earlier, speaking at the Committee on Public Finance (COPF) Chief Negotiator Weerasinghe has admitted that Sri Lanka was not happy with overall Singapore investments that have come in the past few years in return for the trade liberalisation under the Singapore-Sri Lanka Free Trade Agreement. He has added that between 2021 and 2023 the total investment from Singapore had been around $162 million!
What happened to those projects worth $16 billion negotiated, thanks to the SLSFTA, in just the two-and-a-half months after the agreement came into effect and approved by the BOI? I do not know about the steel manufacturing plant for exports ($ 1 billion investment), flour milling plant ($ 50 million) and sugar refinery ($ 200 million).
However, story of the multibillion-dollar investment in the Petroleum Refinery unfolded in a manner that would qualify it as the best fairy tale with false promises presented by our politicians and the officials, prior to 2019 elections.
Though many Sri Lankans got to know, through the media which repeatedly highlighted a plethora of issues surrounding the project and the questionable credentials of the Singaporean investor, the construction work on the Mirrijiwela Oil Refinery along with the cement factory began on the24th of March 2019 with a bang and Minister Ranil Wickremesinghe and his ministers along with the foreign and local dignitaries laid the foundation stones.
That was few months before the 2019 Presidential elections. Inaugurating the construction work Prime Minister Ranil Wickremesinghe said the projects will create thousands of job opportunities in the area and surrounding districts.
The oil refinery, which was to be built over 200 acres of land, with the capacity to refine 200,000 barrels of crude oil per day, was to generate US$7 billion of exports and create 1,500 direct and 3,000 indirect jobs. The construction of the refinery was to be completed in 44 months. Four years later, in August 2023 the Cabinet of Ministers approved the proposal presented by President Ranil Wickremesinghe to cancel the agreement with the investors of the refinery as the project has not been implemented! Can they explain to the country how much money was wasted to produce that fairy tale?
It is obvious that the President, ministers, and officials had made huge blunders and had deliberately misled the public and the parliament on the revenue loss and potential investment from SLSFTA with fairy tales and false promises.
As the president himself said, a country cannot be developed by making false promises or with fairy tales and these false promises and fairy tales had bankrupted the country. “Unfortunately, many segments of the population have not come to realize this yet”.
(The writer, a specialist and an activist on trade and development issues . )
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