Features
SCAM OR INCOMPETENCE?
By Sanjeewa Jayaweera
The latest controversy to stoke much discussion in both the political arena and the public domain is the purported “sugar scam.” Politicians from both the JVP and SJB have been vociferous in their condemnation, claiming that reducing the Special Commodity Levy (SCL) on sugar was done to benefit a particular trader and that the loss to the state is more than Rs. 15 billion; indeed a substantial amount of money.
In the absence of verifiable data of the trader concerned reflecting his previous sugar import pattern, it is impossible to venture an opinion on the deal – whether it is a scam or a case of serious misjudgment by those vested with the authority to change the SCL on sugar.
What I do know is that politicians do not always tell the whole truth. It does not matter which party is in the opposition or government. In this day and age of electronic and social media, if you tell a lie often enough, it become the truth. Most people will not try to sift the rhetoric from the facts and arrive at a fact-based conclusion.
There is an absence of independent information in our country that the public can access to either confirm or reject a supposition propagated by interested parties. In certain countries, anybody could easily access or obtain records of the monthly quantity of sugar (or any other commodity) imported and by whom. I do not see any issue of confidentiality or trade secrets being compromised by making such information public. In such a scenario, a few independent individuals could confirm to the public whether the trader concerned had increased his import volumes substantially in anticipation of the decrease in the SCL. He could have stored the sugar in a bonded warehouse and cleared the stocks after the SCL was reduced. In that case, we can conclude that the trader had insider information and was a significant beneficiary of the cess reduction. That could indeed be deemed to be a fraud or a scam.
I find that in the last few months, there have been instances of opposition MP’s and others leading the public astray with their comments. The JVP was at the forefront of the campaign that forced the government to cancel the East Container Terminal (ECT) award at the Colombo Port to an Indian, Japanese and Sri Lankan consortium. They, together with trade unions and a section of the Buddhist clergy, claimed that the government was selling off national assets to foreigners.
Despite the investment proposal being a 35-year lease on a build operate transfer (BOT) basis, the ‘sell-off’ allegation was freely made. There is a significant difference between a sale and a lease. In a previous articles, captioned “Why the Government should have honoured the ECT agreement”, published in this newspaper, I set out why I believe the ECT campaign was disingenuous and counterproductive.
Just yesterday (Wednesday), I watched a clip of a JVP MP saying that the government claim that but for the reduction in the SCL to 25 cents, the current retail price of sugar would be about Rs. 170 per kg. This is absolute nonsense. He claimed that the landed cost of sugar in March 2021 was about Rs. 85 per kg and if the previous SCL at Rs. 50 per kg was maintained, then the maximum price should be Rs. 135 per kg and not Rs. 170 per kg. After a pause, he conceded that maybe the importer could keep five rupees per kg as his profit/cost and as such, the maximum price of sugar would be Rs. 140 per kg.
I do not doubt that the MP is unaware of the commercial aspects of a trading transaction. For the benefit of laymen, let me elaborate. Once the sugar is landed, the importer will incur additional costs such as storage, transport and working capital costs and, of course, then keep a profit. It is thereafter sold to a wholesaler who has his costs and profit margin, and after that the retailer who too has his own costs and profit. So, to assume only an additional five rupees per kg post the landed cost is incurred is not accurate and is misleading. Assuming a minimum margin of 5% is kept at each link in this chain, just five rupees per kg over the landed cost and SCL is totally inadequate.
A few weeks ago, the leading spokesman on Economic matters of the SJB, on a television talk show named a leading supermarket chain and claimed that despite the gazetted price of samba rice being Rs. 98 per kg, this particular chain was selling at Rs. 135 per kg. I saw the live program and was shocked. Having worked for the owners of this chain for over two decades, I knew they would not engage in such an act. I contacted some of my former colleagues and checked the claim. I was told the story was wholly untrue. They did not sell samba, and the price quoted by the MP was for keera samba. I encouraged my former colleagues to sue the MP because, in my view, their brand name was tarnished by a wild and incorrect statement. Usually politicians and scribes desist from naming names and say “a well-known supermarket chain etc..” But in this instance the chain was named for whatever reason And an MP who should known better, given his education and stature, made a baseless allegation that has been subsequently retracted.
Before my retirement, I worked as the Chief Financial Officer of a leading carbonated soft drinks manufacturer where sugar was the main raw material . Therefore, I was involved in the decision-making process of procurement and, though not an expert, have a fair idea of how the world sugar market works. We used to purchase a higher grade known as ICUMSA 45, whilst what is sold in the retail market is ICUMSA 150. We used to purchase our sugar primarily through international traders and the price was based on the London futures market. Our contracts were for several months to ensure price stability. However, even then, the SCL was the uncontrollable element.
As I remember, the SCL was reviewed every three months and was either increased, decreased, or maintained as before. The logic was that when the world price of sugar was increasing, the government would reduce the SCL, and when world prices were coming down, the government would increase the SCL. The intention was to maintain a stable retail price.
This policy has its disadvantages in that when world prices reduce, the consumer does not get the benefit. The other side of the coin is that when world prices increase, the consumer is part-protected – a case of “you can’t have your cake and eat it.” A former colleague maintained a 10-year record of SCL revisions and world prices at the time. In most instances, the logic I explained above was followed, but there are a few instances when the reverse did happen!
This same logic is applied to petroleum prices too. When the world oil prices plummeted during the initial wave of Covid-19, the consumer did not benefit. But he’s now being protected as prices rise. This, I think, is not a sound economic policy and is partly the reason why our country is in an economic and financial mess.
I understand that when the government decided to reduce or eliminate the SCL on sugar, the country’s sugar stocks were relatively high. It seems that most traders had purchased excess inventories sufficient for as many as three months from India, the primary supplier of sugar to Sri Lanka. This happened because India usually suspends its export quotas for about three months from the end of September for whatever reason.
So, when the government did decide to reduce the SCL to just 25 cents, the traders were unable to extend the benefit to the consumers immediately as they had significant stocks in hand on which SCL of Rs. 50 per kg had been paid. Obviously, we cannot expect traders to incur a loss by selling below cost. In this scenario, what happens is that there is a shortage in the market with importers, wholesalers and retailers holding stocks.
Sugar was sold at the retail price of Rs. 100 per kg in January 2020. The price increased after April 2020 and with sugar retailed between Rs 130 and Rs. 145 per kg just prior to the reduction of the SCL. In the immediate aftermath, the gazetted price of Rs. 85 per kg was held for a short time only by the privately-owned supermarkets and Sathosa. Supermarkets need to adhere to price controls as they are easily raided and need to avoid negative publicity. However, they will only sell a minimal quantity as losses cannot be borne indefinitely. Invariably, scarcity results and the authorities quietly allow retailers to sell at a higher price. This is when the opposition MP’s shout saying that sugar is not sold at the government mandated price.
I understand that various officials from the Department of Trade, Tariff and Investment Policy, Committee on Cost of Living and the Treasury are involved in the decision-making process when deciding on the merits or otherwise of the revised SCL. They are expected to consider factors such as movement in world prices, impact on government revenue, stocks in hand and cost of living.
In this instance, the authorities do not seem to have done their due diligence in ascertaining the availability of sugar stocks in the market. Had they done so, they would have realized that reducing the SCL on sugar would not benefit the consumer immediately. Substantial stocks cleared at SLC of Rs. 50 per kg was available in the country.
The question is whether the due process was followed, and if not, was it incompetence or ignored to benefit a few? In the absence of verifiable data, I cannot comment. Only an independent commission of inquiry can do so, although we know these are a dime a dozen and nothing much results.
A justifiable question to ask the authorities is why the SCL was not reduced to say Rs. 25 per kg? By reducing it to 25 cents the authorities have nothing to offer the consumer at present when the price of sugar in the world market is increasing. For the record, in July 2016 the Yahapalana government reduced the SCL to 25 cents from Rs. 30 per kg as the sugar prices in the world market increased significantly.
Having worked in the private sector for 25 years, I know successive governments advised by public servants have introduced various economic proposals without thinking through the consequences.
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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