Features
Single entrepreneur – the difficult years and the Russian trade
(Excerpted from the autobiography of Merrill, J. Fernando)
The early 1970s were difficult years for all businessmen in the country. The changes on the political front and the progressive policy of Ceylonisation resulted in forcing the foreign company owner out, but, simultaneously, created doubt in the minds of the potential local investor/entrepreneur. The Marxist doctrine which underpinned State economic policy and attitude did little to encourage the spirit of private entrepreneurship, unless it was for a few individuals who, for various reasons, found favour with the Government.
The exit of expatriate business families such as the Joneses (of AF Jones) did enable politically-unaffiliated locals such as me, to get a toehold in the tea export business. Given my strongly-held views on the tea export trade, particularly the British domination of the industry, which was highly detrimental to the interests of the producer with its sublimation of the real value potential of the authenticity of Pure Ceylon Tea, I would certainly have eventually set out on my own. The opportunity may not have come so early though, if not for the decidedly ‘foreigner unfriendly’ stance of the first Bandaranaike Government.
In 1974 I launched Merrill J. Fernando Exports Ltd., of which I was the sole owner. I believe this was a turning point in my business career as a tea exporter, for I was able to build on and consolidate on the back of the contacts I had made and the connections that I had established, in most countries of the tea-drinking world. The fact that the company bore my name was later a huge advantage that I did not foresee when I started marketing ‘Dilmah’ as a highly-personalized family brand. The latter eventually became its unique selling point. Whilst unhesitatingly conceding the element of good fortune – divine intervention, in my view – that is inherent in every success story, there was always my readiness to grasp opportunities as they presented themselves, in spite of the ever-present risk element.
I became the fourth largest exporter in the country when, in 1974, Merrill J. Fernando Co. Ltd. exported 24 million pounds of tea. It gave me business satisfaction as I was competing with the giants in the country, but exporting bulk tea to blenders and packers abroad never gave me the sense of achievement I was looking for. It was not a challenge as such an enterprise does not require vision or real skill. One had only to be competitive. The entire process was concerned only with generating volume, which had nothing to do with creating real value. But my long involvement in the bulk tea trade gave me knowledge and experience of the trade, and the trading disciplines, which served me well later when I started marketing my own brand.
My contacts in the USSR began playing a very significant role in my business and the subsequent development of the ‘Dilmah’ brand. Before the dissolution of the USSR, I would visit Moscow at least four or five times a year, mainly in connection with the supply of bulk tea. Grigory Pipinov, who became my friend when he was Deputy Russian Trade Commissioner in Sri Lanka, was of great help to me. During his stint in Sri Lanka, he and his wife Lilian were frequent visitors to my home. He was also a great cook and would spend much more time and effort organizing his frequent barbecue parties, for which he bought the beef from a particular butcher in Borella, and marinate for hours in my kitchen! The level of culinary perfection he required, in his view, could be achieved only by himself.
On all my visits to the USSR, I would be met at the airport by two or three officials and conducted to the National Hotel, the only equivalent then to a five-star hotel in Moscow. It had been built in 1903, during Czarist times, and was located close to both the Red Square and the Kremlin. My meetings were mostly with Grigori Pipinov and Bathov, Chairman of Sojuzplodoimport (Sojuz). The latter was also an extremely nice man and I developed very good relationships with the two, and all of the others that I dealt with. I gained their confidence as, in all my dealings with them, I was absolutely straightforward and they soon they realized that my agenda was what was on the table.
The tea trade in Russia was controlled by the State-owned Sojuz, a Moscow-based entity established in 1966 for the import of various food items in to Russia, including coffee and cocoa. It also owned a couple of premium vodka brands, such as Stolichnaya and Moskovskaya. Despite the subsequent breakup of the Soviet Union and the privatization of many previously State-controlled trade arms, control of Sojuz was retained by the State.
Whilst it was operating under State control, Sojuz imports of tea amounted to about USD 1.5 billion in value, annually. India accounted for about 60% of it, in volume. The balance was made up by China, Indonesia, Vietnam, Sri Lanka, and Bangladesh, collectively. Up to about 1988, average annual imports by the bloc amounted to about 135 million kilos. In the years 1989-1991, the volume reached 200 million kilos and in 1992, increased further to 260 million kilos. Till then, all the tea imported to the CIS bloc (Confederation of Independent States – 11 countries initially, increasing to 12 with the addition of Georgia in 1993), was processed in 16 tea packaging factories spread out across the bloc, and distributed to retail shops at fixed prices, under an agreement with the Ministry of Food and Industry and the Ministry of Internal Trade. The entire process, from importation of bulk to the cup of the consumer, was controlled by the State.
Tea and Perestroika
In 1988, when the Soviet Union collapsed, Russia wanted to import 20,000 MT per month. I agreed to give my buyers 500 MT and then gradually increase it to 1,000 MT. For me, it was a golden opportunity. Pipinov indicated to me that they were considering purchasing Dilmah tea exclusively, in 250 gm and 500 gm packs. I was invited by him to travel to Russia, to meet his Chairman, Bathov, and within a week I was in Moscow.
They accepted whatever price I quoted to them and, in order to maintain the trust in the relationship, I always ensured that my prices stayed reasonable in the context of the prevailing market. I believe that they were fully aware of this. Between 1988 and 2002, I used to ship an average of 100×40 ft. containers per month of bulk tea to Russia. Initially, whilst the dealings were directly with the Russian Government, trading conditions and commercial interactions were stable and reliable. I shipped tea to various ports in the USSR. However, with the dissolution of the Soviet Republic and the consequent muscling in of the Russian Mafia in to the trade, the business became fraught with difficulties and physically dangerous to other participants.
When I first started supplying large volumes against the Sojuz orders, as a result of my heavy buying, the Colombo Auction prices shot up by about Rs. 15 per kilo and I had to absorb substantial losses on my first order. I had indicated to Bathov and Pipinov that I would be quoting a very moderate price on the first order, but that I would have to adjust it thereafter, as I knew for a certainty that the auction price would increase sharply. That is exactly what happened.
On my next trip to Moscow, when Bathov asked me about my losses resulting from the tea market upturn, I told him that irrespective of the bottom line, I would maintain the agreed quality of service. He asked me for my new price for the second order – adjusted by me to cover my previous loss – and actually insisted that I increase it. I made a further small adjustment, but still kept it at a reasonable level. The fact that I did not try to exploit their urgent need for tea to my advantage established trust between us.
The new contracts enabled me to recover the losses I made on the earlier orders and start on the road to profit. I made certain that, irrespective of Colombo Tea Auction price fluctuations, I delivered consistent quality and freshness. This was the business which, for a considerable period of time, made ‘Dilmah’ a household name in Russia and also paved the way for its subsequent successes in other countries.
This importance of establishing one’s credentials with the buyer with the very first order is an invaluable first principle, which I learned for myself when, during my time as a trainee tea taster, I did a little extra business by supplying shops in Negombo with tea. I used to impress on my people in the company, from the very inception, that the tea export trade is a business of frequently-fluctuating fortunes. The latter is directly tied to auction price movement and the first principle is, irrespective of the auction price, to maintain consistent quality. If you supply lower quality to maintain profit, the loss of the buyer is a guaranteed consequence. If you stay the course with integrity, you will eventually prosper.
I entered the Russian trade when the socialist bloc was one nation and, over the years, watched its fragmentation even as I continued to ply my trade with them. One immediate result of the break-up was the sudden increase in tea import volumes, surging from around 135 million kg in 1988 to 260 million kg by 1992. At the time of the dissolution, only the Republic of Russia had the infrastructure for the import and export trade. Therefore, the release of tight state controls and the sudden exposure to a free market environment, presented opportunities to aspiring private sector entrepreneurs to move into an area which, previously, had no direct dealings with local traders.
Our marketing blunder and a lost opportunity
Our traders foolishly misinterpreted Russian market preferences, assuming that it would be an ideal destination for cheap tea, which could be sold with large margins. In fact, this misjudgment of the CIS market – as it later came to be called – even led to requests by our traders for a revision of minimum product standards in exports to Russia. What the newcomers to the Russian trade failed to realize was that even under the previous State monopoly, Russia had been purchasing largely quality tea and that despite the liberalization, the market’s expectations of Ceylon Tea did not change. As a result, eventually, the fly-by-night operators were forced to drop out, whilst the reputed, established brands stayed the course.
The Russian market could be roughly segmented in to four. At the bottom there was space for cheap blends. Then there were the slightly superior blends which came largely from the UK and, above that, Dilmah, noted for its consistent quality. At the top level were a few specialty products from well-known UK brands. A matter of interest was that a few of the multinational and European brands of tea, whilst being expensive, were also of consistent good quality. Those brands were a serious threat to Ceylon Tea, on account of their quicker delivery capability from destinations close to Russian ports, and, also because of their reliable quality.
With my emphasis on supplying quality tea at a proportionate price, as the first major Sri Lankan entrant to the Russian market, I was able to establish a valuable quality principle in the expectation of the Russian consumer of Ceylon Tea. The disintegration of the Soviet Union and the consequent dismantling of the State-controlled centralized purchasing policy was an ideal entry opportunity for our exporters to develop our own brands for export to the newly-created independent states. The market was surging and the Russian buyer was literally at our mercy. However, in the import/export free-for-all which ensued at the fall of the Soviet Union, many of our traders, despite my warnings, entered into cheap bargains with Russian traders to packet and supply low-cost tea under Russian labels instead of establishing purely Sri Lankan/Ceylon Tea brands.
With the fragmentation of the Soviet Union, in addition to Sri Lanka, countries such as Indonesia, China, Kenya, and India became active suppliers to the separate states of the original Soviet Union. Collectively, these states comprised the world’s largest single Black Tea market (apart from Indian internal consumption) and I confidently expected the market, jointly, to eventually move up to 300 million kg, annually.
In my experience, when a previously centrally-controlled market is opened for competition, within a matter of months consumers decide on brand preferences, depending on quality, presentation, and price. Once those standards are established in the minds of the consumers, it is difficult to wean them away. Had we quickly developed a strategy by combining both State and private resources to secure a reasonable share of the CIS market by treating it as a preferred region, we would be exporting 120 million kg to that market, annually, today, provided our national production continued to increase at a reasonable rate, ensuring that supplies to other markets did not suffer as a result.
In fact, in March 1993, I made such a proposal to Mr. R. Paskaralingam, then Secretary of the Ministry of Policy Planning and Implementation, suggesting that the Tea Board, Export Development Board, and Central Bank, should pool appropriate resources in developing a marketing plan for the CIS bloc in its entirety. I also offered my total support to such a project, backed by my knowledge and experience in the Russian trade.
3rd March, 1993
Mr. R. Paskaralingam,
Secretary,
Ministry of Policy Planning and Implementation, 123, Wijerama Mawatha,
COLOMBO 7,
Dear Mr. Paskaralingam,
MARKETING STRATEGY TO GUIDE USSR – CIS IMPORTS TOWARDS SALVAGING CEYLON TEA INDISTRY
For many years, we were the major supplier of bulk tea to the former USSR, outside the period when it was a monopoly of Consolexpo. In respect of Value Added Teas, we were the exclusive supplier. In the final year, leading to the breakup of the USSR, our Value Added exports were in excess of Rs. 1 billion.
In the years 1991 and 1992, there were hardly any exports, due to political and economic crisis prevailing in CIS countries,The position leading to exports to CIS countries took a dramatic turn in the last three months, when demand for Value Added Tea, from all Tea producing countries, escalated. India, Indonesia, China, Kenya and Sri Lanka are active in supplying these Republics, at the present time. Within the next six months, consumers will determine their preferences for quality and presentation, which will lead to market share, for each country or product, in what is the world’s largest single tea market.
CIS importers know nothing about tea or private trade, as yet. In this scenario, they are exploited by intermediaries, who contract to supply tea at good prices and draw stock from suppliers in this country at very low prices, for very poor tea. CIS consumers pay high prices for relatively poor tea. This exercise benefits only intermediaries in Europe, UK, USA, Canada and some other countries.
The total CIS market for tea is approximately 300 million kilos, p.a. and it will grow steadily.A suitable strategy must be developed immediately, to secure a good share of this market, for Ceylon tea, which I believe will be 50 million in 1993 and no less than 120 million per year, from 1994, provided we treat CIS as a preferred market and make a concerted effort, using the SLTB, EDB and Central tank to co-operate very closely, towards evolving a marketing plan, which I shall assist in formulating.
I have no doubt that exports to CIS countries will increase Auction price levels, to guarantee the operation of Plantations profitably, if opportunities in that market are harnessed for the benefit of Ceylon tea.
Considerable harm to the image of Ceylon tea has already been caused by misguided exporters, who are shipping very poor tea. Government should not watch this situation helplessly, as it will deny to Ceylon tea, a golden opportunity to balance its annual budget, if the export trade is correctly guided and monitored, in respect of exports to CIS countries.
TEA SMALL HOLDERS FACTORIES LIMITED
I understand that TEA SMALL HOLDERS FACTORIES LIMITED is due for privatization shortly. I shall be prepared to acquire a 51 % stake in it and develop the Company to produce value added teas, at plantation level, and export direct to CIS countries. This would offer maximum possible return to small holders and workers on these plantations. In fact, I may be able to persuade a CIS investor, with tea interests, to participate in this venture. This would be a model on which several ” growers’ co-operatives”, could be developed to manufacture value added products, for direct export.
I shall be leaving for Australia on 15th March and would like to meet with you, soon after your return from the U.S. If you agree with what I suggest, I am prepared to delay my departure by 3 or 4 days, in order to get the marketing plan underway, in association with SLTB, EDB and the Central Bank.
With kind regards,
Yours sincerely,
MERRILL J. FERNANDO,
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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