Features
Sri Lanka’s development and big businesses
Anila Dias Bandaranaike, Ph.D.
There is universal agreement that Sri Lanka is in an economic mess on several fronts. Even those in government, playing ostrich until recently, are beginning to articulate this reality. We cannot get out of this mess in a hurry. It will take prioritisation, commitment and time. It will require government, Big Businesses, small businesses and the people, working together in the national interest, to pull us out of it. As to whether that will happen, remains to be seen.
Qualified professionals with knowledge, acumen and experience, have spoken and written in the public domain on addressing our macro-economic problems – slow economic growth, low government revenue, wasteful expenditure, misaligned interest, exchange and tax rates and parlous levels of foreign earnings, reserves and debt. Some have suggested a clear macro-economic path to start the recovery process with debt restructuring. Is anyone listening?
Development Goals vs. Indicators
When the mess gets critical, we lose sight of the forest for the trees. We forget what these economic terms (trees) and statistics are really about. So, focussing on the forest, this article attempts to connect those terms to the human and environmental aspect of this mess.
Sri Lanka has 2 key resources – its people and its environment.
In that context, economic indicators used to measure development – GDP, FDI, export earnings, inflation, exchange and interest rates, foreign reserves and debt – are merely means to an end. That end goal is to improve human well-being, through sustainable development, which protects the environment for future well-being. Economic indicators are just measures of whether Sri Lanka provides adequate jobs, incomes and domestic and foreign goods and services, at reasonable prices, to its people, to improve their well-being. In that process, if all goes well, corporates grow their businesses and shareholders get better returns on their investments.
However, all households have to earn living wages to feed, clothe, house and educate their families and keep secure and healthy. If the majority are struggling to make ends meet, they will leave Sri Lanka, or take to the streets, or plunder the environment for short term gains. Then, businesses suffer from labour shortages, strikes and social instability, governments from low revenue and overall instability and everyone from environmental degradation and inadequate goods and services for their well-being.
In addition to the problems identified by economic indicators (trees), focussing on the forest conveys that Sri Lanka has two more problems. First is Sri Lanka’s severe brain drain. Professionals, skilled and unskilled workers are leaving the country in frustration and despair. Second is under-valuing our fragile biodiversity, resulting in ill-conceived projects destroying it all over Sri Lanka? One example is the Minneriya “Gathering” of elephants. This can earn massive tourism dollars.
Currently however, high water levels, from excess water being diverted from the Moragahakanda irrigation project into Minneriya tank, threatens the “Gathering”. Tourism earnings and other economic benefits from the “Gathering” are estimated to be several orders of magnitude higher than from the irrigation project’s agricultural output. Does government care? Reducing Sri Lanka’s spectacular St. Clair’s waterfall to a trickle, for hydropower, is another example.
So, just as important as regaining macro-economic stability, is the need to value and grow our human and environmental resources.
Environmental Resources
We must recognise and prioritise our incredible marine life, beaches, rainforests, mangroves, wetlands, water-bodies, and the flora and fauna they hold. We must protect them from ill-conceived and damaging construction, landfills, waste-dumping and sand-mining, as well as from over-using, poaching, illicit-logging and deforestation.
Let’s take tourism as an example. Sri Lanka has two strong competitive advantages. First, its biodiversity, just described. Second, its diverse, sophisticated, cuisine – upcountry and low country Sinhala; Northern, Eastern and upcountry Tamil; and Muslim, Malay and Burgher specialities. However, most roads leading to our environmental and culinary treasures cannot handle large coachloads. So, we should target tourist earnings, rather than numbers, and strategise to attract smaller numbers of high-end, high-spending tourists, who love nature, food and new experiences. We should show-case and promote our unique, local cuisine and brews, rather than serve them imported cheese, salmon and wines, which they can get elsewhere. That way, we raise value addition, reduce imports and promote backward linkages.
Innovative entrepreneurs, including foreigners who operate under the radar, are doing just that – offering community and nature-based tourism and local food, from small, exclusive hideaways, at various price levels. But what of our corporates? They build large hotels in resort areas, catering to coachloads of two-week package holidays for Europe’s low-spending workers. When bombs, tsunamis and pandemics occurred, they begged a debt-riddled government for handouts to recoup their ill-thought investments.
Our wild life parks suffer from irresponsible over-crowding and undisciplined safari vehicles. Yet, has the collective corporate voice raised these issues adequately? Government has even sanctioned baby elephants in private captivity for the influential, with little protest from collective Big Business. Tourism is one example, among many.
Human Resources
We urgently need labour market and education system reforms. Labour market reforms must address labour shortages, low wages and inflexible labour laws that hurt both employers and employees. Big Business has not put adequate collective effort into reforming archaic labour laws for longer term benefits, rather choosing, with a short-term horizon, to forever work around them. Education system reforms must address inadequate skills in problem-solving, in language and communication, and in computer use. Big Businesses complain about employee quality, but only some put their money where their mouth is.
Let’s take private company wages as an example. Salaries of the few who meteorically rise, are phenomenal. But for the bulk of qualified young executives, salaries are just about enough to live with their parents and take public transport to work. Can we blame brain drain to greener pastures? What about cutbacks during the pandemic? Many businesses were hit by it. But some – health care, online consumer sales and other online activities – thrived. Although social life was curtailed, none at high income levels suffered any material change in their levels of creature comfort. The worst hit were lower income workers, especially daily wage earners. Some had no work and no income at all. Yet, some big companies, even those which thrived, prioritised their bottom lines, and cut wages and benefits to the most vulnerable.
Big Businesses changing gear and thinking in the longer- term interests of their human resources could mean less focus on the immediate bottom line, as well as paying higher non-regressive taxes and higher living wages, training costs and social security benefits to their employees, if they wish to retain them. There is no easy way out.
Big Business Input
Published national data, on the output and employment structure of the Sri Lankan economy, show that large formal businesses total less than half of Sri Lanka’s economic output and about a third of employment. However, their collective voice wields much more influence than their share of those pies. Government and Big Business need each other to survive and to move forward for their own and the national interest. Hence, the collective voice of Big Business can, if they choose to do so, push for better governance and informed investment and development decisions.
But do they? The last 2021 Budget was clearly a disaster, and later proved itself so. However, at a public webinar, along with corporate leaders, a senior EDB official praised it highly. Yet, he resigned his post very soon thereafter. I was once at a formal reception of big business leaders, where some, who had been poking fun at the Central Bank Governor, fawned over him when he joined their group. I may not have agreed with the Governor’s policies, but he did not deserve such blatant hypocrisy. In the last 15 years, I have not seen the Chambers take a strong collective stand against any ill-conceived government decision on any issue.
One example was the Act allowing government takeover of “Non-Performing” companies. Another is the current foreign exchange debacle. The Central Bank Governor cited exporters not converting their earnings to rupees as the reason why banks are facing exchange shortages which, in turn, affects their ability to open LCs. Export groups publicly denied these allegations, but none bluntly stated the real reason – Central Bank’s unofficial directive to banks to artificially hold the exchange rate at Rs. 203/dollar, when it should be much higher! This ill-conceived directive has also affected migrant worker remittances to Sri Lanka. They now resort to alternate unofficial mechanisms to ensure a realistic conversion rate for their hard-earned dollars sent to Sri Lanka. Will business Chambers speak out, before the Governor cites migrant workers too, like exporters, of being unpatriotic?
If Sri Lanka is to get out of this mess, there has to be a paradigm shift in thinking and action among the Big Business community, away from rent-seeking, to pushing for longer-term collective development that will benefit, not just them, but all stakeholders. Straight talk from Big Business may be the only way to get governments to listen and act. If companies fear to speak out individually because of retaliation from government, they must do so collectively, disagreeing and providing constructive criticism, when necessary, through their various Chambers and other business groups. No government can penalise Big Business working together, without detrimental consequences to itself.
Sri Lanka should focus, in the shorter term, on macro-economic stability, and, as importantly, in the longer term, on safeguarding and growing our human and environmental resources. The Big Business community must collectively push for this, in their own longer-term interests.
The “Road Map” presented recently for Sri Lanka to get out of this mess, was definitely a map – it showed us ALL roads to ALL places. Its presentation of 85 colourful slides, each crammed with graphs, charts and words, only conveyed utter, obfuscating, confusion. If meant to show the way forward, 20 succinct slides could have done it. I sympathise with the officers who were commissioned to prepare that “Road Map”. I hope members of the Big Business community, including business chambers and relevant organisations, will use their influential, collective voice for some straight talk, to help the architects of that “Road Map” find their way back into the light and lead Sri Lanka out of the darkness we are currently in.
(The author retired as Assistant Governor of the Central Bank of Sri Lanka (CBSL) in 2007. As Director of Statistics, CBSL, she spearheaded the compilation of Provincial GDP data and the collection of survey data on living conditions in all nine provinces, following a lapse of 20 years since 1983. From 2015 to 2020, she was a member of the three-member Independent Delimitation Commission)
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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