Features
Lanka: Dilemmas and economic programmes
Do we consume more than we produce?
by Kumar David
There are gentlemen (and ladies too I presume) who pontificate in learned terms that it is OK for a country to consistently consume more than it produces and everything will eventually turn out fine. One such instance is a vapid discourse by Professor Howard Nichols and two local academic economists, Dr Ganeshamoorthy and Dr Kalpan Rajapaksa. It is available on YouTube at: https://www.youtube.com/watch?v=_AWg6VvTj9g
The discourse is indeed laden with platitudes. The poor are having a hard time; price inflation of everyday goods has become painful (electricity, food, imported stuff; on some essentials inflation is over 50%); there have on occasion been short periods when a primary surplus was absent but the economy ploughed on and didn’t go down the tubes; government revenue sometimes fell short of expenditure but the economy did not collapse; we can go ahead and print money endlessly, what’s wrong with printing; the fundamental crisis in Sri Lanka is the impact of neo-liberalism and so on. All exciting populist music to my leftist ears! All bullshit to may rational intellect!
To my mind the fundamental question underlying our economic past and future is: Has Ceylon/Sri Lanka, considering the post-independence period as a whole, been consuming more than it produces? If the answer to this question is “On the whole, yes” these three gentlemen are bull-shitters ducking the real issue. If on the other hand the answer is “On the whole, no” then their case that the Sri Lanka is being robbed by foreign agents and neo-liberalism and being ripped apart by the IMF holds; the tasks in that case are purely political.
Statistics, hard facts of national output and consumption covering the whole post-independence period are available and economists and international agencies have extracted them. Surely it’s an open and shut case that broadly, national consumption has exceeded national production and that is why we are in deep debt. Inanest was Ganeshamoorthy’s comment that “government expenditure of course far exceeds government revenue, but that’s not consumption by the people”. In welfare sodden Sri Lanka blessed with free education and healthcare, fertiliser subsidies and free rationed rice for decades, down which hole did the government’s deficits disappear? Oh yes, most Ministers and MPs rob but not even a dozen Rajapaksas could have robbed this much – a significant portion of the entire government budget. Tens of thousands of public service employees are corrupt, the billions that corrupt public servants pocket too reach the people. Aren’t they too a very numerous segment of the people? Morality aside, undeniably the money filters down to the populace.
Central Government expenditure was about 14.3% of GDP in 1965, declined steadily to a low of 7.4 % in 1982 and then rose to a high of 17.6% in 2009 at the height of the war. It then fell sharply at the end of the war and hovered in the region of 10% of GDP since then according to World Bank sources. It almost doubled recently (Covid?)! I have shown private consumption from 2012 to 2021 in a figure. It has fluctuated between 75% and 80% of GDP in the last 10 years but the definition excludes purchases of dwellings. The bottom line is that government and private consumption together use up all the GDP; so, where is there money left for capital investment? Capital expenditure was about 14% of GDP in the 1960s and remained in the 25% region for many decades. It shot up to nearly 40% in the 2014 to 2019 period for reasons I don’t understand.
When you live in a naïve universe of make believe left-populist politics of course there is no need to address the most important task; a National Development Programme. What for, our three panellists proclaim we are doing fine, we are only being robbed and cheated by the neoliberals; our tasks are political, not programmatic. We have to “struggle” they imply. That’s why their video conference had not one useful word to say about a national social and economic development plan or programme.
In a very broad sense, the condition of the Sri Lankan patient may be diagnosed as follows.
* National consumption has exceeded production much of the time and we ate our way into debt.
* Excess consumption was financed by foreign borrowing, remittances and outright grants.
* Foreign borrowing plunged the country into a black-hole of ‘dollar indebtedness’.
* Export earnings generally fell short of import expenditure (balance-of-payments deficit).
* Government finances were out of kilter with revenue falling below expenditure.
* Government indebtedness was paid for by rupee printing (chronic fiscal-deficit).
* Rajapaksa (Mattala Airport, Hambantota Harbour & Stadium, Lotus Tower) bankrupted the country.
* There has been a breakdown of the rule of law and judicial independence.
* Ethnic and religious minorities have been marginalised; traumatised is more truthful.
The programme of economic development must contain some obvious components. State and the non-state sectors both have roles – the broad directive role of the state, a capitalist sector, the rural economy and small and medium enterprises (SME). White elephants like Air Lanka must be got rid of and enterprises with excess manpower (petroleum distribution for example) must be gradually rationalised. A broad skills development and retraining plan has to be initiated. The private sector must be allowed to get on with its job. A basket of support has to be provided for the needy. All this has been said ad nauseum and each of these elements all has its place. The trick is prioritising and balancing; a thousand times easier said than done!
The economic programme has to be modern, that is grounded in Twenty-first Century opportunities. An old-fashioned programme that has no familiarity with what’s going on in modern times is worthless. Enterprises need flexibility to innovate and that in turn requires that they have the ‘democratic freedom’ to make risk burdened decisions. This is not a strong suit of state led enterprises but arms-length institutions, think-tanks and private enterprises are better positioned to innovate. I have not thought this through but at this programme drafting stage. It would be good if young minds such as the National Peoples’ Power (NPP) movement turned to the matter.
Flexibility is important in technology heavy enterprises. Let me drop some keywords not to impress you but to signal out the areas: digital technology; bringing together masses of technology and data to extract useful decisions; artificial intelligence; web/internet/social media related concerns; I am very suspicious of crypto-currencies (buy gold instead is my advice) but the block-chain is a powerful tool for ensuring integrity in data management; I am an advocate of wide use of block-chain technology. Risk taking and tech-heavy financial ventures are unsuited to state or state led ventures; flexible arms-length institutions or private or semi-private ventures are more suitable. I hope I have given you an idea of the directions in which I am pointing.
However, don’t go overboard. The mass of the populace will not find this mumbo-jumbo meaningful unless it is converted into rice and parripu (bread & butter). The real economy, the needs of the people consists of tangible material goods. Hence the high-flying programme drafter’s politico-economic space is constrained by the need for tangible, fungible material goods. Let the young and the brilliant battle it out, I have done my bit by pointing out a direction.
Last Sunday, March 26, writing about Joe Biden’s dilemmas I agreed that global banking instability is creating anxiety among policymakers and the week before, March 19 in a piece about Godot mentioned that in the view of many thinkers the only way the world could move forward was global overhaul. On March 5 in a piece on Dystopian Civilisations I mentioned that Paulo Coelho had said the time has come to make changes of a fundamental nature. Pulling these strands together no one will deny that there is global instability. Nevertheless, I hold that the expectation of a quick collapse of the global order, a world revolution around the corner, is unrealistic. The reasoning of Professor Nichols and his two companions in the YouTube video (para 1) makes sense only if the short-termism of neglecting that national consumption exceeds national production is justified. This expectation and complacency are utopian.
Returning to the refrain of an economic programme, that is to come up to date with the opportunities of emerging technology and the possibilities of the 21st Century, one matter is clear. If institutional or workplace democracy and innovation are to flourish, things have to be done differently. Innovation implies risk taking, not common in state-owned enterprises. To reap the benefits of innovation and entrepreneurism, avant-garde institutions must be free to make risk laden decisions. Re innovation in financial and business matters the difficulty that state-linked institutions are up against is well understood. True I am talking about only a small fraction of enterprises and institutions but I am emphasising the point because it puts flexibility and “workplace democracy” on the agenda.
My readers will recall that I have long predicted that the West will, for reasons that I have often repeated, not let Sri Lankan democracy go to the wall or allow this country to collapse into anarchy. It came as no surprise to me that the IMF approved a three to four year $3 billion bailout package, subject to regular review in the hope that our debts can be restructured. Maybe we will con our way out, again, when that time comes. Maybe Ranil will be the lucky sod to benefit!
‘Big picture democracy’ is another matter, it’s a political demand. The news services are overloaded with reports of mass uprisings for democracy as a political demand all over the world. I don’t need to add my voice one more time to this fulsome chorus.
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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