Features
Economic challenges: Restructuring welfare state
Three major developments in the latter part of the last century have changed the economic, political and ideological context of the Sri Lankan economy for good. They are firstly, we have arrived at a time where any semblance of a socialist alternative to capitalism has almost disappeared.
By Dr D. Chandraratna
Sri Lanka is in a serious financial crisis. But that is not all. It is distressing to see the emerging sporadic violence. Are we desperately losing the ability to govern, one wonders? Not many are respecting the laws of the state and anarchy reigns occasionally while the general law-abiding citizens look aghast at the spectacle. Some are admiring the Galle Face protest in wonderment while some bloggers are openly calling the armed forces to mutiny. Treasonable offence in all civilized nations! The authorities have not got the ‘guts’ to order them to disperse in the best interests of the country. A few thousand protesters have no mandate to hold the country to ransom. I do not want to malign the noble intentions of the protesters, but our system of government cannot search for solutions outside the democratic framework. If a small window is opened outside constitutional channels, elephants will walk through, the next time. Let me also state that many who align themselves with this ‘aragalaya’ are indirect/direct beneficiaries of the corrupted ‘systems’; i.e., education, health, law, universities, public service, taxation systems, customs, and practically everything under the sun, which have made governance farcical. To put the blame on Rajapaksa’s only is more ‘deserving opportunism’ than the complete truth.
Losing the trust with our representatives has been long-time coming but the voting public opted for them everytime. People have lived with patience and with much favour as justice and fairness will allow. True that patience has now run out. Few months ago, when German Chancellor Angela Merkel retired after nearly two decades in the highest public office, a six-minute applause in the Chancellery reverberated in tandem by countrymen from all over. Such wonders we are unlikely to see ever in our ‘land like no other’. Our politicians are apparently born with a wish to retire in disgrace, having forsaken all opportunities to die as revered statesmen and women. Let us not talk anymore on the subject.
As expats with a debt to the land of our birth, we are sad for the country. People with some intellect cannot see the end anytime soon. Reading the English dailies every morning we are surprised by the waste of Parliamentary time. Perplexed and disturbed, like everyone else, why are the representatives not venturing out with ways and means of earning forex or bridging the ever-expanding budget deficit—fixing the economy. I must express my appreciation to Mr Ali Sabry and some TNA representatives for being honest in their contribution to the parliamentary debates If only we had more of such people, as politicians, no matter which party, how high we could have aimed for and how valuable the Hansard be as a historical document. It hurts us deeply to hear that we are on par with Lebanon, Afghanistan and where else. Bangladesh, Maldives with respect, have become our saviours!
Systems that need Change
Three major developments in the latter part of the last century have changed the economic, political and ideological context of the Sri Lankan economy for good. They are firstly, we have arrived at a time where any semblance of a socialist alternative to capitalism has almost disappeared. Secondly, free market and globalization have become the new economic landscape and our national economy is subject to supranational economic influences. Thirdly, the national economy of Sri Lanka, like most developing countries, is subsumed and refashioned by both geopolitical and global economic systems from which we cannot extricate ourselves. Trade liberalization, and the growing importance of export and imports have resulted in the structural dependence of the state virtually on a open global economy. We knew that by 1980 the Keynesian strategies of reflation, demand management and stimulation were in disarray and the neoliberal economics unilaterally dismantled exchange controls. The major consequence for third world economies, like ours, was distancing the national economy from National State control. Instead of boosting domestic production and creating wealth through whatever stimuli the global economy offered we were unprepared to grab them due to lack of research and development capabilities. Aspirational middle classes with high consumerist tastes, credit card mentalities boosted imports creating an annually yawning deficit managed only by borrowing from lenders at exorbitant rates. We are now drowned in debt. Economic bankruptcy was inevitable.
We were like the proverbial diner who was hoping to pay for the meal from the gems inside the mussels on the plate. While Bretton Woods agencies advocated international competitiveness as the single route to resolve trade imbalances and forex shortages, countries, such as Sri Lanka, had missed the boat in entering the international marketplace, unlike India and other Western countries. We were made to depend on two things, and they were, the export of labour and tourism, the easy route. Oblivious to the ephemeral nature of these two avenues, we were ‘all band-chune’ like the proverbial crabs in the pot. The moment these sources dried up, due to the pandemic, we were scraping the barrel, insolvent and bankrupt. Credit rating agencies broadcast our failure to the world. As an aside, when you see our parliamentarians exiting ‘Temple Trees’ in a luxury vehicle parade the world outside begins to understand how the crisis unfolded. Understandably public anger has burst out in flames as the catastrophe unravelled.
Unprepared entry into the global economy
Our economy, fashioned for years under the shadow of socialism, was thrust headfirst, into the free market with the change of government in 1977. In one stroke all previous attempts to become relatively self-sufficient in import substitution was dealt a major blow. The disarray of Keynesian economics in the 1970 and 80s, followed by a fury of political violence in the ensuing decades, halted the chance of internationalization of the economy. True there were debates about ‘a middle way’ as a method to manage the private/public mix mooted in some quarters but Sri Lanka was tardy in adapting that ‘Middle Way’. The political elements put paid to any such enterprises. For example, in the sphere of higher education where we had the capacity to attract exchange, radical elements thwarted the move. These were fruitfully grasped by European countries and Australia.
The only foray into global markets was in the production of apparel but its boundaries were dictated by outside. Explosive growth of the social expenditure and the rising expectations of the middle classes in the developing world generally made national economies open to advice and restructuring by international agencies, such as the IMF and the World Bank. In the local scene, mismanagement of national finances, clientelist politics, anti-intellectualism of the legislators, the menace of corruption engulfed the whole social fabric, hellbent in pursuit of illicit windfall gains.
In the Third World, Sri Lanka included, a higher level of poverty and inequality appeared demanding more of welfare and an improved social wage. Excessive demand eroded the gains made by the welfare state in its formative years. Education and Health needed supplementation by an exploitative alternate system which was eating into the vitals of the state system. The retreat from the notions of a mixed economy plus an overburdened welfare state, euphemistically but appropriately, called the Nanny State became a millstone round the neck, wasteful and inefficient.
Fiscal crisis of the Welfare State
Sri Lankan welfare state was modelled on the British, after World War II ,to achieve national integration and nation building with national efficiency in education and health and social citizenship. The idea of a one nation with citizenship rights for all was a laudable national objective at the time. Consolidating the nation economically, politically and socially was ideologically sound and yielded fantastic results in the period up to the changes in the world economic architecture. Our ‘Quality of Life’ indices were the best in Asia. With globalisation this laudable objective has become burdensome and the hollow attachment to a lofty ideological dream has become a drain on the economy.
The ideology of welfare exerts a downward pressure on the economy. The time has come for an honest debate on restructuring the welfare state and one system that must change is the ‘Nanny State’. We must, without fear or favour address this burden and follow countries in the West who have ridden over this fiscal crisis of the welfare state. While the Sri Lankan welfare state must be enriched for the deserving by not sticking to universality and institutional welfare, we must look for ways and means to restructure it so that the needy receive a boost in their life chances and are not left behind. We can only afford a residualist welfare state where the vulnerable sections of society are assisted while those who can afford are made to pay. This has been done in many Scandinavian countries. Australia has done the best and we must learn from these nations.
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 . )
