Features
Prioritize Progress NOT Profits
By Rienzie Wijetilleke
(rienzietwij@gmail.com)
Rural development and self-employment are the most critical issues faced by developing countries. In Sri Lanka, over 80% of the population is considered to be ‘rural’ and significantly, the majority of this population consists of youth. The lives of rural Sri Lankans have not improved or evolved substantially and opportunities for economic advancement are few and far between. Sri Lanka can never attain sustainable development until it improves key indicators amongst its rural population. Crucially, the gap between the richest and the poorest is ever expanding. Rapid and geographically-concentrated urbanization necessarily leads to a polarization of a populace, eventually each segment becomes suspicious of the other, unable to reconcile the values of their counterparts. Many in the working poor and underclass have already begun to notice that the upper middle class might spend more in a night at a restaurant than they may earn as monthly wages. As urban city-centres become beacons of opportunity, the rural countryside slips further into stagnation.
US President JFK wrote that “if the free society cannot help the many who are poor, it cannot save the few who are rich”. This quote was part of my introductory message to the “Gami Pubuduwa” scheme which was launched by our team at HNB all the way back in May 1989 with the explicit purpose of providing the rural community with at least part of the multitude of banking facilities available to the urban community. Our idea at HNB was to complement the uplifting of those living in rural areas, areas that are in dire need of accessible roads, formal education and health services. Credit is perhaps considered a villain in the context of the 2008 financial crisis and the numerous cases of fraud and delinquency. Yet without credit, many of the economic success stories of the past several decades would not have been possible. Upward social mobilization, home-ownership, and entrepreneurship are just some facets of human development that simply would not exist if it were not for the concept of credit.
Throughout history, the rural population of Sri Lanka did not have access to credit or other banking facilities, they were denied opportunities for social advancement. “Gami Pubuduwa” was meant to be a tool to enhance the financial inclusivity of the rural population and to harness the innate talents of the farmers and those with an entrepreneurial mindset. As someone born in a small fishing village close to Hikkaduwa, I understood the challenges: the scheme would need to operate within the cultural and social constraints of the village. To achieve this, the “Gami Pubuduwa” scheme could not be successfully managed as a centralized operation, it required an understanding of the economic and social dynamics at the grassroots level. We invested heavily in field officers who were dubbed “Gami Pubudu Upadeshakas” (GPUs). The GPU would become an integral part of this system and would counteract many of the issues that have been known to plague micro-credit schemes. The GPU would necessarily be involved in social, cultural, religious and educational activities and develop close interpersonal ties with the village. The GPU must be able to identify the entrepreneurial spirit and meet their needs by advising the project, drawing up project proposals and fulfilling the documentation. I wrote in 1995 that the GPU is a multifaceted role; a friend, financier and advisor all in one. During this period the recovery rate of the “Gami Pubuduwa” scheme was 97%.
Some of the criticisms or draw backs of micro-credit are certainly legitimate. A poor household can very easily fall into a debt trap, especially since they may not possess sound financial management skills. Some try to hide expenses and borrow funds for consumption purposes. Some schemes are simply “gini poli” loans window dressed as microfinance schemes, charging exorbitant interest rates that necessarily encourage debt traps. Then there is the phenomenon of the informal intermediary who is usually also from the village but with significantly more access to funds. This intermediary, who will easily qualify for a loan will then redistribute the funds to villagers who are unable to qualify, but do so at high interest rates and thus become the ultimate beneficiary.
The GPU, as part of the “Gami Pubuduwa” scheme, becomes essential to the system for many of the above critiques. The GPU will have knowledge of the local industries in the respective village, thus all facilities will only be approved for projects deemed viable. Whether it is farming or agricultural enterprise or small industry, the feasibility of the project is the foremost consideration. The GPU’s constant presence in the village will also deter the intermediaries. In terms of interest rates, our scheme at HNB always applied an interest rate ceiling to ensure that the loans were not exploitative in anyway. Another important issue is that as these borrowers are outside the traditional credit system, they were not supposed to be entered into the CRIB, which makes it challenging to deter a borrower drawing funds from multiple schemes from different institutions. Once again it is the GPU that must be alive to the situation and as an added protection, borrowers are requested to sign a disclaimer that any additional borrowings will only be initiated following discussions with the GPU. For some of the above restrictions to be lifted, we were lucky to have some broad minded individuals at the regulator who supported this vision. The former Governors of the CBSL; late Neville Karunathilake and A.S. Jayawardena saw the benefits such a scheme would bring to our nation’s economy.
It is also critical to understand that agricultural projects and other pursuits of those in the village are unlikely to pay off immediately. It is not simply a case of ensuring monthly repayment, following up on recoveries and executing a mortgage or reclaiming an asset. In the case of an agricultural project, there could be drought or floods, there may be other external factors that reduce prices on the market or there may be some disease or germ which infects the crop. In such cases, the facility should be rolled over for the next harvest period and not simply classified as a statistic. Another issue for agri-businesses is the restrictive cost of transportation to market places and agri-centres which will then buy the produce from the farmer, often at wholesale prices, thus the farmer has virtually no margin when he deducts the cost of transportation. To counteract this, we tried to establish agricultural centres which would be in closer proximity to villages. These centres would act as collection and distribution hubs which, when scaled, would bring fresh produce to the market efficiently with a cost saving to the farmer.
All of the above challenges show that microfinance is no easy task, if it were, the capitalist model would have certainly ensured vast and rapid growth of microfinance around the world. However the opposite is true: microfinance is complicated, requires resources, patience and a willingness to forego short-term profitability. The various economic activities financed under the scheme aside from cultivation and agri-businesses include handicrafts, fisheries, light engineering, trading, construction material production, horticulture etc. The multiple avenues available provide a pathway to upward social mobilization for the villager as well as the village.
More than a lending scheme, microfinance can inculcate a savings habit and is especially crucial to the development of women in rural areas, to provide them with financial independence and allow them the resources to advance themselves and their families. At one point, we at HNB had gathered a comparatively larger deposit base from the villages than we had envisioned.
The main challenge we face in this journey to uplift rural Sri Lanka is the profit motive. As previously stated, real microfinance cannot be judged by its interest income or interest margin, it has to be judged by other, more qualitative factors. The real rewards are down the road: the inclusion of more Sri Lankans into the financial system creates a stronger and more robust economy. It is not much of a challenge nowadays for banks to lend to large corporates and mega government infrastructure projects. Interest and fee income from trade and working capital facilities are steady and require little grassroots interaction. Microfinance is not the same, it cannot be looked upon as simply ‘finance’. It runs deeper, it requires a more measured approach and the subordination of the profit motive for the sake of the greater good. This will be a major challenge for the private sector, but it is a challenge that if successfully met, can change our economic landscape and bring millions out of poverty and destitution, giving life to the hopes and dreams of the men and women that toil so hard for so little.
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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