Features
Mangala’s Economics
I found Karma inexplicable that such an effective Politician was not only taken away prematurely, but we were also denied the right to pay our respects as well.
In recent times, as Foreign Minister he ensured that our International relations were at their best ever.
His period as Finance Minister saw us register with long overdue financial discipline, two consecutive years of primary revenue surpluses in 2017 and 18, for the first time after over fifty years .
In a brief stint as Sports Minister he inspired Vijay Malalasekera’s Interim Committee to such an extent that we recorded our most successful years in International Cricket, with Integrity unquestioned !
Above all he was a very decent, humble, honest and civilised human being and was blessed in consequence with a Midas touch as his tenures will confirm.
We can all stand proudly and say “Here indeed was a true Statesman”
So Let us console ourselves that fate took him prematurely, to enable an early rebirth through his good Karma, and a path thereafter in Politics that will see him as the Head of State of a New Sri Lanka within forty years !
A prosperous era when educated Parliamentarians will adorn that revered Institution, with Country,, ALL its people and self in that order as their priorities and a Parliament that will conduct its affairs with dignity making its people truly proud
“Mangala” deserves that posthumous reward.
In the Interim Dear Sir, Rest in Peace.
A Grateful Citizen
by Deshal de Mel
When Mangala Samaraweera took over the Finance Ministry portfolio in May 2017 Sri Lanka was preparing to face some of its most challenging years in macroeconomic management. 2018 was the year that the government had to make its highest ever domestic debt repayments (LKR 922 billion in capital repayments of domestic debt. For context, in 2020 the domestic debt capital repayment was LKR 456 billion). In 2019 Sri Lanka had to make its highest ever foreign debt repayments (LKR 575 billion foreign capital repayments in 2019. In 2018 the foreign capital repayment was LKR 315 billion and in 2020 it was LKR 505 billion).
In addition to managing an economy where annual debt service payments (LKR 2,022 billion in 2019) were higher than government revenue (LKR 1,891 billion in 2019), in mid-2017 the country was in the midst of its worst drought in 40 years. Agricultural incomes had been decimated and the economy was also hurting from devastating floods in other parts of the country. The fragile coalition between President Maithripala Sirisena’s SLFP and Prime Minister Ranil Wickremesinghe’s UNF was also beginning to show the first signs of cracks as a two year honeymoon period was over. Amidst these challenges Mangala’s time was largely focused on firefighting these critical issues. That did not stop him from taking on some of the most important macroeconomic reforms during his two year stint as Minister of Finance.
Addressing Sri Lanka’s Fiscal Weakness
1996 was the year that Sri Lanka won the cricket world cup but it was also the last year that Sri Lanka had a government revenue to GDP ratio of over 20% (it was 20.1%that year and was consistently above 20% over many years prior to that). Since then revenue had declined dramatically, reaching a nadir of 11.6% in 2014. This was amongst the lowest government revenue performances in the world. Sri Lanka’s recent public expenditure ranging between 17% and 20% of GDP was not high by global standards. As of 2020 Sri Lanka’s government expenditure comprised largely non-discretionary spending including salaries and wages (6% of GDP), interest (6% of GDP), welfare and transfers (4% of GDP). Therefore there is very little room to meaningfully reduce expenditure in a practical manner.
The main causative factor behind Sri Lanka’s consistently high budget deficits was its weak revenue base. Sri Lanka also has an extremely regressive tax structure. As at 2017 approximately 82% of tax revenue was collected as taxes on goods and services and 18% as taxes on income and other direct taxes. Typically taxes on goods and services (indirect taxes) fall disproportionately on the poor. A family would pay the same tax on milk powder regardless of whether their household income is Rs. 50,000 or Rs. 500,000. This was how over 80% of Sri Lanka’s taxes have been collected. This reliance on taxes on goods and services has also contributed to driving up the cost of living as the tax component of prices continues to increase.
Mangala’s simple principle for taxation policy was that the government should wherever possible reduce upfront taxes and costs that disincentivize the commencement or establishment of business. However, once a business is established and profitable, it should pay its fair share in income taxes. This was the opposite to the reality at the time — Sri Lanka’s taxes had hitherto been front loaded into indirect taxes such as cess, PAL, NBT, and VAT — whereas income taxes are low and corporates enjoy a range of income tax holidays. As a result there is typically a high cost of entry into industry and limited competition among established players.
Taxes on incomes have been low for several reasons including open-ended tax holidays, weak collections reliant on self-declaration, and other leakages. The Inland Revenue Act of 2017 was drafted in order to address as many of these issues as possible.
In general the new legislation intended to shift to a rule based tax structure, moving away from discretionary policy which leaves room for leakages and graft. The IRA had important positive impacts on tax collection. Even though the legislation came into effect in April 2018, the full impact of the legislation would only be seen in November 2019 when the 2019/20 filing is completed. The results were impressive. There was a 44% growth in income tax collection in 2019 in spite of major shocks to the economy, tax payers registered with the Inland Revenue Department in 2018 was 986,684 and by 2019 it had increased to 1,505,552. Most importantly, in 2019 the ratio of direct taxes to indirect taxes shifted to 75% to 25% from 83% to 17% in the previous year. Even though marginal, this was an improvement in Sri Lanka’s highly regressive tax structure.
Primary Surpluses
One of Mangala’s key fiscal objectives at MoF was to achieve a primary surplus in the budget. Since independence, Sri Lanka had achieved a primary surplus only in 1954, 1955, and (marginally) in 1992. A primary surplus in the budget occurs when revenue exceeds expenditure minus interest cost. It is the measure of fiscal management that is truly within the control of the Minister of Finance since the past interest cost is payment for past sins. When a primary surplus is achieved it means the government’s revenue exceeds its non-interest expenditure. A primary deficit means the government has to borrow even to finance interest which is undesirable from a debt sustainability perspective. In 2017 Sri Lanka had a primary surplus of Rs.2 billion and in 2018 Rs. 91 billion (0.6% of GDP).
2017 (5.5% of GDP) and 2018 (5.3% of GDP) also saw two of the lowest budget deficits in Sri Lanka’s recent past. In 2016 as well Sri Lanka limited its budget deficit to 5.3% and in 2013 the deficit was 5.4%. However prior to that the only time the budget deficit dipped below 5.3% was in 1977 (4.5% of GDP).
A critique of this achievement is that even though the government had primary surpluses in 2017 and 2018, and the overall debt to GDP decreased in 2017 (from 79% to 78% of GDP), debt to GDP increased to 84.2% in 2018. The reason behind the increase in debt to GDP in 2018 was because of the depreciation of the currency that year due to the global taper tantrum early in the year as the Federal Reserve raised interest rates and the constitutional crisis later that year. When currency weakens, the rupee value of external debt increases, causing the debt to GDP ratio to increase, in spite of the gains made in real fiscal management, which is what can be controlled by the Minister of Finance.
There is also a perception that the decline in GDP growth rates was due to enhanced government revenue measures. However, quarterly GDP growth from Q1 2015 to Q3 2018 averaged 4.3%. This was keeping in line with the average growth levels of 2013 (3.5%) and 2014 (5%). Just as the economy was recovering from the droughts of 2017, this momentum was lost due to the constitutional coup in October 2018 which dragged down Q4 2018 growth to 2.1%. The resulting capital flight and forex reserve sales to defend the rupee resulted in negative market liquidity and higher interest rates that carried on well into 2019, compounded by the Easter Sunday attacks, dragging down 2019 growth as well.
Fuel Price Reform
In early 2018 the hopes of shifting to a market based fuel price formula were fading. This was potentially a major reform given the significant fiscal burden created over the years due to mis-pricing of petrol and diesel and weak balance sheet management by CPC. These factors combined to result in CPC running up debts over LKR 300 billion, mostly placed with the state banks, creating a high-risk fiscal combination. Anchoring retail fuel prices to the global market price (with adjustments for taxes, distribution costs, storage costs, finance costs, and profit margin) would help eliminate additions to the existing fiscal burden of CPC. When global prices rise, the domestic fuel price would rise, when global prices fall, the domestic price would fall. Even if the government chose not to increase retail prices in line with global price shifts, a transparent and publicly available formula would create more visibility on the fiscal costs of such a policy.
Like all challenging reforms, ideally the fuel price formula should have been introduced early in the political cycle, market prices were also trending upwards by 2018. In May 2018 the formula commenced implementation. On the 10th of every month the retail price of fuel will be adjusted to reflect the latest global fuel price (Singapore Platts was the anchor used). The timing could not have been worse, and communication could have been a lot better. Global fuel prices had started sky-rocketing from mid-June and peaked at over US$ 80 per barrel in October from the US$ 50 range leading up to May. Naturally the public associated the fuel price formula with rising prices at the pump. Had the formula been implemented a year prior, the public would have seen prices decline and stabilize prior to increasing. But alas, this was not to be, and the formula was scrapped by the new administration.
Trade Liberalisation
As at end 2019 Sri Lanka’s rank in Trade Openness was 140th out of 141 in the Global Competitiveness Index. In spite of being the first country in South Asia to liberalise in 1977, Sri Lanka’s trade protection levels have increased over the last couple of decades. In the 5 years from 2014 to 2018, the average percentage of government revenue collected at the border was around 49%.
The increased layers of taxes on imports results in three key impediments;
i) These import taxes are a significant burden on consumers. The effective import tax rate of several basic consumption products from milk powder to biscuits goes up to 100%.
ii) Import taxes erode competitiveness as domestic firms receive significant protection from global competition leading to less incentive for innovation and dynamism and thus hinders long term productivity improvements — the true driver of economic growth.
iii) Several intermediate imports have high import taxes — including numerous construction materials. This drives up costs for all industries, eroding competitiveness of almost all Sri Lankan enterprise. It also makes Sri Lanka less attractive a destination for FDI.
In Sri Lanka a lot of border taxes take the form of paratariffs. The standard import duty is customs import duty (CID), however since CID is eliminated in Free Trade Agreements (FTAs) with India and Pakistan, successive Sri Lankan governments have added in layers of paratariffs such as cess and the Ports and Aviation Levy (PAL).
In the 2017 November budget it was decided to commence the elimination of most of these paratariffs. Mangala championed this initiative since he recognized the potential positive implications it would have for the economy in the long term. Some of the treasury officials were less enthusiastic, because there would naturally be a short term revenue loss as a result of removing these tariffs and also because it would result in severe lobbying by protected industries, seeking to retain their walls of protection.
Whilst some in the ministry wanted to see tariffs eliminated almost entirely in a big bang reform move, it was necessary to allow time for domestic industry to adjust to this significant change. It was eventually decided that the best approach would be a five year phase out of most paratariffs. This would make the revenue impact easier to absorb — revenue from PAL and cess amounted to around 1% of GDP. To start with though the 2017 November budget would eliminate paratariffs on 1,200 or so of the least sensitive tariff lines. The impact would not be material, but Mangala felt it would be a robust signal — and also give additional time for industry to make adjustments to the envisaged operating environment. In the March 2019 budget the next phase of para-tariffs was eliminated, and a Trade Adjustment Programme was introduced to provide budgetary support for domestic sector entities that face adverse adjustment costs due to exposure to greater global competition.
Welfare Reform
Another important initiative of the Ministry of Finance under Mangala Samaraweera was the effort to streamline welfare payments. One of the first things Mangala asked me was how we can move away from a system of price controls on essential items to provide relief to the public. He understood that price controls are not sustainable since they are poorly targeted, they tend to result in shortages and erosion of quality when market prices exceed the administered price. And of course they are subject to constant abuse. He was very keen that we look at introducing a system where relief is provided to the needy through cash transfers — his favourite example was Bolsa Familia, Brazil’s cash transfer programme.
Of course this required a robust system of identification and targeting of those who are deserving of such support. This would apply not just to those who were of lower income levels, but also those with disabilities, the elderly and infirm, and those vulnerable to and victims of natural disasters. Sri Lanka’s existing system of welfare distribution, Samurdhi, was woefully inadequate in terms of targeting. Samurdhi had vast numbers of undeserving recipients who benefitted from the scheme and more worryingly, large numbers of deserving citizens who were excluded from the scheme. The World Bank provided technical support in designing such a targeting mechanism and after a lot of work the new targeting criteria was finally gazetted in June 2019. The mechanism consisted of objective, verifiable criteria including education levels, housing conditions, income, electricity consumption, assets, and illnesses. If fully implemented this mechanism of targeting, combined with the use of digital payment systems, would have enabled a transparent and efficient scheme of providing welfare to those who most deserved it, without resorting to the economic inefficiencies of indiscriminate price controls. Unfortunately this initiative too did not make it beyond the election cycle.
Monetary Policy Legislation
Another potentially game changing reform was the new Monetary Law Act. This legislation was championed by the Central Bank under Indrajit Coomaraswamy, and Mangala supported it to the hilt, even at the tail end of the political cycle. The MLA was designed to provide greater independence to the Central Bank, coupled with accountability measures for the Monetary Board. It would create disciplines around deficit financing (money printing) and establish the legal framework for inflation targeting. These measures would have imposed limitations on some of the most problematic interactions between the monetary and fiscal authorities, that have over the years led to Sri Lanka’s fiscal profligacy, deficit financing, all resulting in ballooning debt and monetary instability. Mangala was not a subject expert, but perhaps his best quality was to listen to the experts and formulate his judgment based on the technical advice that he received. The new Monetary Law Act also did not see the light of day.
2018 Constitutional Coup
It had been a very heavy few weeks in the lead up to the 2019 budget to be presented in early November 2018. The 26th of October was a Friday. The Active Liability Management Bill, a landmark piece of legislation that would allow Sri Lanka to buy back or otherwise manage its lumpy liabilities to smoothen out its repayment obligations, was passed in parliament in the afternoon. This piece of legislation had faced stiff opposition by President Sirisena. We had finished the final draft of the budget speech and had sent it for the final technical annotations. The end of a long week and several long months. As I drove out of the treasury building at around six pm I noticed barricades being hurriedly stacked up near the Presidential Secretariat. I didn’t pay much attention and carried on to catch up with some friends.
About forty five minutes in everyone was getting messages, stating that Mr. Mahinda Rajapaksa is being sworn in as Prime Minister at the Presidential Secretariat. The initial reaction was disbelief since that act would in itself be unconstitutional. I made a couple of phone calls and it was clear something extraordinary was going on so I rushed back to the treasury. Most of the staff was gone by this time but the Minister and a couple of the private staff were still around. Nobody could quite believe what was going on. Having thought things through Mangala wanted to send out a tweet at 8.30pm saying “The appointment of @PresRajapaksa as the Prime Minister is unconstitutional and illegal. This is an anti-democratic coup #LKA.” I asked him if he’s sure he wants to use the word coup. It was a strong word and would have important ramifications. He thought for a few seconds and replied in the affirmative, saying that a coup is exactly what is going on.
The economy took a beating over the subsequent two months. Foreign investors took flight and exited their positions in GoSL rupee denominated treasury securities. Rs. 75 billion worth of foreign investments in government securities was sold in just 2 months, creating massive pressure on the currency, causing the rupee to crash from 172/US$ to Rs. 182/US$ between October and December 2018. The currency was already weak due to the taper tantrum in the early part of the year which hammered all emerging economies. When capital flows started reversing in Q4 and other emerging economies saw a recovery, Sri Lanka was in the midst of the coup and associated capital flight.
During this time the government sold US$ 1 billion worth of reserves in just 1 month as reserves declined from US$ 7.9 billion to US$ 6.9 billion. These were valuable reserves the government had been building up in preparation for the substantial external debt repayments in 2019. More importantly Sri Lanka’s credit rating was downgraded by all three rating agencies in November 2018. On the 30th of November 2018 the yield on the January 2019 ISB had reached 10.7% from 5.6% on 26th October. This meant that Sri Lanka was effectively locked out of global capital markets on the cusp of having to settle over US$ 5.3 billion in debt repayments in 2019, including a US$ 500 million ISB in early January 2019. It was heart breaking for Mangala watching this unfold from the sidelines given all the efforts that he had and the team had taken to keep the economy stable to meet the 2019 debt repayments amidst the global bond market volatility in 2018.
As the economy deteriorated into December it became clear that the adverse impacts of the coup would be long lasting. Due to the sales of US$ 1 billion worth of reserves by the Central Bank, liquidity in the domestic rupee market also reduced dramatically. The market was short LKR 100 billion in the overnight money markets and this pushed up domestic interest rates dramatically as well. Prior to the coup, the 1 year treasury bill was in single digits at 9.5% as at end September 2018, having been at 10.5% when Mangala became Finance Minister. During the coup interest rates shot up to 11.25% by mid-December. The market was LKR 100 billion liquid short till at least April 2019, keeping interest rates elevated and hurting economic growth significantly in 2019. The high interest cost added to Sri Lanka’s debt concerns as well by driving up the cost of domestic debt.
Managing External Debt in 2019
When the Supreme Court verdict came through in 13th December and Mangala returned as Finance Minister, there was a lot of work to be done. Firstly there was no year end budget to authorize payments for 2019, and Sri Lanka had lost access to global capital markets to finance the country’s highest foreign debt repayments in 2019. A quick vote on account was passed by end December, and the next step was to somehow regain access to global capital markets to make sure we can refinance debt repayments. It was unfortunately too late for the January 2019 bond which we had to settle out of the already diminished reserves. Soon afterwards Mangala led a team to Washington to meet with the IMF and re-instate and re-negotiate Sri Lanka’s programme. In spite of Mangala losing his suitcase and D.C. being having a snow day as soon as we arrived, the team met with Christine Lagarde and the technical team led by Manuela Goretti, and after some tough negotiations we were able to set the programme back on track with some important concessions. The external goodwill towards Sri Lanka was palpable, and there was nobody better than Mangala to leverage this to the country’s best advantage.
Over the next two months Mangala had to put together a delayed budget for 2019. This was a particularly tough budget since it was an election year and there were expectations of additional concessions, but at the same time it was critical that the fiscal position would inspire the confidence of global capital markets in order to regain access to external financing. Mangala’s last budget was able to meet both criteria. The March 2019 budget included Programmes such as Gampereliya, a rural infrastructure programme which was seen as a means of providing targeted fiscal impetus to improve cash circulation at the rural level, whilst investing in productive infrastructure leveraging on rural value chains. The enhanced Enterprise Sri Lanka programme was a means of reducing cost of capital, one of the key impediments to SMEs in the country. This was a strategy to provide a targeted reduction in interest rates to productive investments without a general reduction in interest rates. A general reduction in interest rates at the time would have led to an acceleration of capital flight post-coup, and would have further de-stabilized an already volatile external sector. Mangala had some other wonderful ideas in that budget, including providing scholarships for the best performing Advanced Level students to study at any top global university that they qualify for admission.
The budget was also able to satisfy global markets and Sri Lanka regained access to global capital markets. Immediately as the budget was passed, the Central Bank led the process of raising the required International Sovereign Bonds (ISBs) to settle the upcoming debt payments in 2019. However, whilst settling the immediate debt, Mangala and Indrajit Coomaraswamy were also cognizant of the fact that leading into two election years (2019 presidential and 2020 parliamentary), Sri Lanka may face risks in retaining global capital market access to finance debt repayments in 2020 and 2021. Accordingly, Mangala and Indrajit made a conscious decision to raise an additional US$ 2.4 billion dollars worth of ISBs in mid-2019 to build up reserves to US$ 7.6 billion by end 2019 to tide over a volatile couple of years ahead. Whilst today many politicians criticize the previous government’s international sovereign bond strategy, it is the reserves built through the US$ 4.4 billion ISBs raised in 2019 that have been used to settle Sri Lanka’s external debts in 2020 and 2021. Sri Lanka would have already defaulted if not for Mangala and Indrajit’s decision in mid-2019.
True Patriot
There are of course many things that I’m sure Mangala wishes went differently. He wanted to update and upgrade legislation for Customs and Excise — to reduce subjectivity, discretion, and shift to a more rules based framework for both pieces of legislation. He wanted to do move faster on trade reform but the political economy of late stage reform made such intentions difficult to fulfil. He was also keen to invest more in education, health, and reconciliation. He wanted to bring in legislation to address microfinance and informal finance related household indebtedness. There was a lot more than could be done within an interrupted 2 year tenure.
I and many others will miss Mangala not so much for his achievements and efforts as Finance Minister. Nor for his work towards reconciliation from the Sudu Nelum movement to date, for his work in liberalization of the telecom sector in the late 1990s, for his work with the UDA in Colombo’s initial beautification. I will miss a human being of immense courage, who stood for what is right regardless of societal or political compulsions. A man of integrity, conviction, and humility. A patriot in the true sense of the word.
Deshal de Mel Economist based in Sri Lanka
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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