Features
Proposed wage-increase for tea plantation workers:
How it affects the small holders
by Dr Janaka Ratnasiri
The Cabinet of Ministers, at its meeting held on 26.01.2021, has decided to amend the Wages Board Regulations (WBR) by making it mandatory for tea plantation workers be paid a minimum of Rs. 1,000.00 a day. This is a follow up to the proposal made by the Finance Minister in his Budget Speech that “I also propose to increase the daily wage of plantation workers to Rs. 1,000 from January 2021”.
DEMAND BY THE PLANTATION WORKERS FOR A WAGE INCREASE
Since about 2016, tea plantation trade unions have been demanding that a daily wage of Rs. 1,000 be paid to their workers. However, the regional plantation companies (RPC) were resisting their demands, despite intervention by ministers from time to time. In order to ensure votes from the plantation workers, prior to the election, a pledge was given by those who are in office now, that the plantation worker salaries will be increased. The proposal in the budget speech, as well as the recent amendment to the WBR, were outcomes of this pledge.
Tea is grown in Sri Lanka by two groups, the large plantations managed by the Regional Plantation Companies including other public sector institutes, and the small holders of extent below 10 Acres each. According to the 2015 Annual Report of the Tea Small Holdings Development Authority (TSHDA), the small holders produced about 240 million kg of made tea in 2015, while the large estates produced 87 million kg, which are 73% and 27% of the total production, respectively. According to the TSHDA Report, the number of small holdings below 0.5 ha extent comprise 88% which are mostly managed by family members. The rest up to 10 Acres or 4 ha employ paid workers and they are subject to WBR.
The demand for wage increase came from plantation company workers where salaries paid to workers are decided by the collective agreement between the RPCs and worker trade unions negotiated once in two years. During the last agreement, RPCs have offered an increase of the basic to Rs. 600 a day and increases in some allowances making the total daily wage to Rs. 940.00 subject to good attendance (Daily FT, 26.10.2018). But this was not acceptable to the worker unions.
The RPCs have called for a new wage structure focusing on a revenue share model that could have sweeping productivity-focused reforms in the entire industry. An option favoured by the trade unions is the out-grower model where the workers are allocated small plots of land to grow their own tea to sell to the factories (Daily FT of 19.02.2019). In view of this deadlock, the COM decided to incorporate the LKR 1000 as minimum daily wage payable to tea industry workers which is applicable to both estate and small holding workers.
Despite this Cabinet decision, tea plantation workers across the up-country have launched a token strike demanding immediate payment of the agreed pay hike to them, as some RPCs were hesitant to implement the Government decision. With an annual export earning of LKR 240 billion in 2019, a single day production outage means a loss of over LKR 600 million a day to the country.
PRESENT EARNINGS OF PLANTATION WORKERS
Currently, WBR specifies that the tea plantation workers should be paid a minimum of LKR 680.00 a day, subject to satisfactory attendance during the month. In addition, they are paid EPF at 12% of basic salary of Rs. 545.00 and 3% for ETF, making the total wages Rs. 761.75. It should be remembered that plantation workers generally work only for about 6 hours from 0730 h to 1330 h including 30 min for a tea break. They have to stop plucking early so that the day’s collection could be handed over after weighing to the lorry which comes around 1400 h. A plucker works for a maximum of 22 days a month because it takes about a week for a new shoot to develop to be plucked again.
But, on an average, a plucker may work only for about 16-18 days and after deducting his own EFP contribution, may have a take-home pay of about Rs. 12,200 – 13,700 a month. If they pluck above the minimum quota, they may be paid extra at rates varying from employer to employer from Rs./kg 25 to 30, they can earn extra, provided the bushes in the worker’s lot have shoots. Both during dry months (no moisture) and wet months (no radiation), the shoot growth declines and the average yield drops and much extra revenue cannot be expected during these months.
Being daily paid workers, they are not entitled for any paid casual or sick leave unlike monthly paid workers elsewhere. No work means no pay. Unlike other workers in the mercantile sector, tea workers are not entitled for mercantile holidays, neither they have any annual leave. Whereas, in the case of all public sector and mercantile sector workers, the EPF contribution is computed based on the total salary received, in the case of plantation workers, it is computed based on the basic salary only.
The writer believes that this is a violation of the EPF Act. Though workers employed by RPCs may get free housing and free medical facilities, such benefits are not available to the large number of workers employed in the small-holder sector. Hence, there is a need to increase the wages paid to these workers to compensate for the loss of all these benefits.
In announcing the proposed wage hike for plantation workers, both the Government and the RPCs are deceiving them by adding the employers’ contribution to EPF and ETF as a part of the daily wage of Rs. 1,000. This is not done anywhere else either in the public or in the mercantile sector. When they announce a salary scale, only the basic salary along with allowances are shown, but not the EPF and ETF contributions. The workers themselves may not have understood the difference, but their unions should have seen the unfairness of this computation.
IMPACT OF THE WAGE INCREASE ON THE SMALL HOLDER SECTOR
Small holders get paid for the green leaf supplied to factories at a rate determined by the auction price paid to factories the previous month. Currently, the rate is about Rs. 90 per kilo after deducting for transport and sack weight. In the writer’s experience, a small holding of four acres with an average yield of 1,500 kg of green leaf a month, brings a monthly revenue of Rs. 135,000. The salary bill for four pluckers and a Kankanama will come to an average of Rs. 80,000 a month. This comprises Rs. 30,000 paid to the Kankanama and LKR 12,500 paid to each plucker on an average, including their EPF and ETF contributions. This works out to Rs. 781 a month per plucker, a little over Rs. 762, the minimum specified in the WBR.
The cost of weeding which is done manually, maintenance of drains and retaining walls on an average comes to about Rs. 25,000 a month. The cost of fertilizers and dolomite and their application costs another Rs. 6,000 a month on an average. In addition, there are other costs of infilling, pruning and replanting of unproductive sections which works out to about Rs. 14,000 a month. This leaves only Rs. 10,000 a month as income from the small holding, which is even less than what a worker earnes a month.
Once the WBR is amended to increase the daily wages to Rs. 1000, the Labour Officers will spare no time in visiting the small holdings and insisting the new wages be implemented. If this is done, it will be an added financial burden of Rs. 15,360 a month. This exceeds the amount left in hand after attending to its management properly. Since the small holdings depend entirely on the money paid by the factories, the obvious solution is to increase this amount at least by Rs. 20 a kilo which leaves behind a decent balance in hand. It is obvious that the COM was not concerned about the small holdings when it decided to amend the WBR, but had only the concerns about the RPC workers in mind.
INCREASING THE PAYMENT TO SMALL HOLDINGS BY FACTORIES
Tea samples offered at the auctions are purchased mostly by exporters for supplying to overseas buyers. About 3% is purchased for sale locally. According to the Tea Board Directory, there are about 325 exporters. Originally, only the dedicated companies exported tea but lately the factories as well as RPCs have got involved in export of tea considering the high profit margin. According to the Central Bank 2019 Annual Report, the average auction price of tea was Rs./kg 546.67, while the average export price was LKR/kg 822.25, leaving a margin of Rs./kg 275.58. The total tea (made tea) production in 2019 was 300.13 Mkg, while the quantity exported was 292.65 Mkg. Thus, the exporters had made a gross profit of Rs. 80.65 Billion in 2019.
Export of tea is subject to a CESS levied at Rs./kg 10, which works out to LKR. 2.9 Billion. Further, Rs.one billion is collected as Tea Promotion Levy by SLTB from the exporters. Another 1% or Rs. 2.4 Billion has to be paid to Brokers for conducting the auctions and carrying out quality control checks and certifying on samples received. These brokers comprising 8 companies deserve it because they ensure that quality tea is exported. After paying these taxes, the exporters are still left with a profit margin of about Rs. 65 Billion annually after paying Rs. 10 billion as income tax (assumed).
The export companies presently enjoy the benefit of this revenue shared among its staff. Assuming each company has 50 staff members, the total staff strength is about 16,250, and each of them could earn a salary of about Rs. 400,000 monthly. This is while a plucker earns below 1/25 th of this amount after trudging up and down the hills carrying kilos of leaf on their back in sun and rain. It would be in the interest of the exporters to share their profits among the plantation workers also, because if the industry collapses, there is nothing for them to export.
SHARING OF EXPORT PROFITS AMONG WORKERS
The number of workers employed in tea plantations are estimated to be about 174,000 in 2017 (ILO Publication on Tea Small Holdings, 2018). If each of them is to be paid an additional Rs. 238 monthly for raising the daily rate from Rs. 762 to LKR 1,000, the annual burden will be Rs. 414 Million. The total production in the small holdings in 2019 was 240 Mkg of made tea according to TSHDA, which is equivalent to 960 Mkg of Greenleaf. If the small holder is to be paid Rs./kg 20 more for Greenleaf, the added burden will be Rs. 19.2 Billion.
Thus, for increasing the daily wage to workers in both the estates and small holdings, the total added financial burden will be about Rs. 20 Billion annually. If the tea exporters could part this amount from their profits of Rs. 65 billion, the problem could be solved. The Government may do away with the CESS levy on tea exports to assist this process. Concurrently, an effort should be made by the tea industry to increase the revenue from tea exports.
INCREASING THE REVENUE FROM
TEA EXPORTS
The writer published an article in The Island of 11th and 13th of November, 2015 describing the strategies to be adopted to increase the export revenue, and also to increase the wage increase. Though it was written more than five years ago and the data little outdated, the reasonings are still valid. The article which appeared in two parts may be accessed via the following links:
http://archive.island.lk/index.php?page_cat=article-details&page=article-details&code_title=135105
http://archive.island.lk/index.php?page_cat=article-details&page=article-details&code_title=135203
One strategy is to move away from the manufacture of traditional orthodox tea to CTC (Crush-Tear-Curl) tea which is in high demand in the western countries like the USA and the UK. Both Kenya and India have overtaken Sri Lanka as major exporters because they supply CTC tea while Sri Lanka sticks to orthodox tea. According to Tea Exporters Association data, Sri Lanka has produced in 2019, out of a total of 300 kt of tea, 274 kt (91.3%) of orthodox tea, 23.6 kt (7.9%) of CTC tea and 2.6 kt (0.8%) of green tea. According to World Exporters Site http://www.worldstopexports.com/tea-imports-by-country/, Sri Lanka in 2019 has occupied only 10% of the tea market in the USA while only 4.1% in the UK. The major importers were Kenya, India and China. Today, most Western countries consume tea in the form of tea bags for which CTC tea is necessary. But to cater to these markets, Sri Lanka will have to increase the CTC output.
World’s highest tea importer is Pakistan, but most of the teas consumed in Pakistan are imported from Kenya, India, Uganda, Rwanda and Tanzania. Currently Sri Lanka’s market share in Pakistan is only 2-3% of total tea imports. A publication by Sri Lanka’s Consulate General of Sri Lanka in Karachi released in December, 2016 has recommended that “While capitalizing on the taste factor, Sri Lankan tea companies should produce quality strong black CTC teas comparable to East African countries focusing on leaf and liquor in large quantities and offer straight lines such as Garden Originals. Pakistan consumers are very particular about the appearance of tea and prefer to drink thick gold color tea”, if Sri Lanka wishes to increase its market share in Pakistan.
The other strategy is to move into producing more high value tea such as green tea and instant tea. According to Central Bank 2019 Annual Report, Sri Lanka has exported 285 Mkg of black tea at an average price of Rs./kg 797.00, 4.75 kt of green tea at an average price of Rs./kg 1,987.00 and 3.07 kt of instant tea at a price of Rs./kg 1.357.00. Hence, the logical step to increase the export revenue from tea is to offer high value tea instead of traditional black tea. But, instead of doing that the Sri Lanka Tea Board was spending billions of rupees on promoting black tea in existing markets. In 2014, the COM approved a budget of LKR 2.3 billion for promotional activities but the Tea Board could not finalize the project for several years because of disputes it ran into in selecting a suitable advertising company.
IMPLICATIONS OF WAGE INCREASE IN THE SMALL HOLDING SECTOR
If the proposed wage increase applies to the small tea holdings without any corresponding increase in the payments made for green leaf supplied to factories, the only option available to the small holder is to give up the tea plantation and consider other options. Among these are shifting to another crop such as cinnamon or pepper along with gliricidea or partition the land into several segments and hand over them to existing workers or others to manage them on their own with no liability to pay any wages to the workers by the land owner.
Gliricidea stems are in demand as a biofuel for use as a source of thermal energy in industries. With the Government giving high priority for renewable energy, industries will have to turn to biofuels as a substitute for oil or gas to generate thermal energy. One barrier they face is the lack of a proper supply chain ensuring continuous supply of biofuels. Already a project supported by UNDP and FAO is assisting the Government to set up fuelwood collecting centres across the country as part of the supply chain improvement. Hence, converting the tea plantation into a gliricidea plantation will help in this venture and provide a source of revenue possibly higher than what the tea plantation provides without any WBR controls.
CONCLUSION
In order to meet the demand made by tea plantation workers, the Government has decided to incorporate the proposed increase to the WBR rather than limiting it to the Collective Agreement between RPCs and Trade Unions. This affects the small holders as well who depend on payments made by factories for green leaf supplied to them. Unless there is a corresponding increase in this payment rate, the small holders have no option other than to give up planting tea.
It is also proposed that the Government should intervene to get the enormous profits earned by exporters to share their profits with the workers enabling the RPCs and small holders to implement the proposed wage rise. Concurrently, the factories should endeavour to produce high-value tea products to increase the export revenue.
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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