Features
Trust begets trust
by Usvatte-aratchi
The president’s rhetorical claims on Galle Face Green on February 4, 2023, amplified in Parliament on February 8 that there have been no dehydrating long queues at petrol stations and no protests by peasants demanding fertilizer because of good economic management since he assumed office hid from the public many facets of the slide down to that ‘stability’ at a low level. The economy is in some temporary and unstable hysteresis. The policy changes that brought it about were implemented well before the present president’s accession to office.
Let us look closer at what happened. The country went into default on its foreign debt in April 2022, four months before the new president took office. That action saved for other uses the foreign exchange that we would have paid in interest and capital to foreigners up to that point. That relieved pressure on the balance of payments. By implication, it also saved the value in rupees that would have been necessary to buy the foreign exchange to pay the debt owed to foreigners. That helped to relieve the pressure on the domestic budget. Those resources were released for other uses, contributing to that temporary relief.
What we can expect for the next two years and more is about the same level of resources augmented with the first tranche of the Extended Funds Facility, after the Fund and our government agree on terms. The president’s promise of higher pay for public servants later in the year is pie in the sky. Consequent upon the default on foreign debt payments and the perceived higher risks of lending to Sri Lanka, interest rates on borrowing from banks rose beyond 35 percent per annum. Few enterprises could function with funds borrowed at those rates of interest.
Banks loans, renewed year after year, are a common source of capital for enterprises in this country, in the absence of developed capital markets. The economy shrank in response to higher interest rates as the monetary multiplier became effective in its own time. Bad loan books in banks bloomed. Business activity slowed down and will shrink further. The policy decisions that brought about these changes were made before the present president took office. The recent fluctuation in the value of the rupee is a minor play in speculation. Like all bubbles of this sort in markets, it will break in its short time. Ignore the share market. It does not matter to the economy.
The ratio of imports to GDP, about 40 percent, is a fairly constant number in this economy. Selected imports were banned and the economy necessarily shrank, again. Crop failures called forth mainly out of ignorance and prejudice (with viyath maga [Wise Guys] as partners of government!), severely cut down the income of farmers and peasants and the results of that fall in income worked themselves throughout the economy Major policies and programmes that depressed total income and total demand that brought about the so-called stability antedated the advent of the new president. The central bank cannot raise the supply response as that response is governed by other stimuli: high risks of lending to a bankrupt nation.
In 2022, remittances from workers overseas rose in some degree, with the rise in the rupee value of the dollar. (Elementary, Dr. Watson.) There was some increase in tourism but far too small to compensate for losses in the economy elsewhere. Tourists came partly because foreign currency could buy a lot more after the May 2022 devaluation than before it. A room priced at $100 in 2021 (Rs 20,000) is now available for $ 75, (Rs26,3750), a lower price to the tourist and a higher price to the hotelier. Along with the shrinkage in the economy, the demand for energy fell. The ratio of energy use to GDP is (again) fairly constant. (The former Prime Minister of China, Li Keqiang, devised his own index number for the growth of GDP in China using the quantity of electricity consumed, freight carried and another as guides.)
The sale of petrol in 2022 fell by about 30 percent of its use in (say) 2018, the last year when the economy worked close to capacity. The demand for energy also fell more steeply consequent upon the sharply higher domestic prices, reflecting the higher prices of petroleum and related materials in international markets. (Both price and income effects were at play.) The fall in the quantity of petrol and other fuel sold in 2022 accounts for the disappearance of dehydrating queues in petrol stations. At my neighbourhood petrol station, I have not seen a line of cars waiting to fill up for many months.
Casual evidence of the fall in demand is the sparse traffic on roads even at times of congestion, evident earlier. There were four three-wheeler drivers who, for many years, operated from the top of our lane and there has been none from about mid-2021. The total effects of all this will be evident in the rate at which the economy shrank in 2022 when the figures will come out later this year. (That funny neologism NEGATIVE GROWTH is a challenge to make nonsense intelligible.) These adverse developments were consequent upon policy decisions made by the Gotabaya Rajapaksa government and inherited by the Wickremesinghe government.
This government reversed some stupid decisions by the former president, who single-handedly and ‘beyond the call of duty’ (as touted to boost his candidacy), destroyed the livelihoods in agriculture including fisheries on a massive scale. Peasants who cannot afford the new high prices for transport with a lower total income are mournfully protesting still, not on the Galle Face Green in Colombo but in rice fields, which ought to be luscious green mid-maha, now sickly brown affected by infection with insects, viruses and bacteria. Infested compost used in rice fields after the ban on the import of chemical fertilizer introduced substituting chemical fertilizer may have introduced pests to fields. The devastation of crops, both rice and corn, is rampant in Ampara, Polonnaruva, Anuradhapura and Kurunegala, all districts that contribute heavily to the marketable surplus of rice and provide feed to poultry farmers.
While the present policy regime is a distinct improvement on the inconsistencies, ignorance and stupidities of the preceding half-military regime, it (the present policy regime) contains standard prescriptions dictated for situations of economic austerity necessary to bring down the level of economic activity to what is affordable; affordable with low import capacity. Following the Hippocrates oath, the government, mercifully, has not harmed the economy in contrast to the earlier regime. The economy cannot work at higher capacity without hitting the ceiling of foreign exchange resources available. Go to Greece a decade back, Thailand 16 years back, and Korea several decades back. (I had written about the impending disasters in this newspaper and spoken about them in other fora for several years. Read a clear warning as early as 2013 in my address to the Annual Sessions of the Sri Lanka Economic Association.)
In no instance, that I cited, was there a surgeon present. But there is work for a team of surgeons and a whole lot of other medics in this instance. WHO will need to send plane loads of surgical supplies. A carbuncle with foul-smelling wounds spread all over this economy and the body politic now presents a serious risk of septicaemia (sepsis). The death rate from sepsis, is 50 percent, more or less, of those affected. Clean up the foul infection of corruption generated and spread by former presidents and their family members, hordes of members of parliament and local government bodies, gangs of government employees and armies of private citizens who helped to spread the bacteria. Some need to be made harmless and others quarantined long-term. The large crowds that throng to hear Anura Kumara Dissanayake, I reckon, are attracted by their persistent, substantiated and convincing promises to eliminate corruption in this society.
Fail in that and the JJB had better find places to hide in. The promises by the president of a bill that will be presented in Parliament to cure these ills in the future is neither here nor there. Every government that came to office after 1994 promised to kill the wild beast of an executive president who still rages savagely, unmolested. The present president who was a powerful figure in the Parliament 2015 -2020 did promise with great solemnity and even more bombastic celebration, that he would revise the constitution to deprive that office of the very powers that he now exploits. So will this bill against corruption be ‘Great Expectations’? To change the entire scene metaphorically, ‘Who is Sinhabahu enough ( ‘kuriru, darunu mee saturaa maranata) to slay this ferocious and woeful foe?’
The time to act is now. The elimination of this gangrene and septicaemia is essential for the revival of the economy. From casual observation, most people will not accept the sincerity of ‘unpopular policies and programmes’ that the president foretold until the general public trusts policymakers’ sincerity. The claims made by politicians of the government and some senior civil servants that there is no money to hold local government elections is another way of saying that among all the payments the government may make in the financial year 2023, holding elections has the lowest priority.
These claims and activities betray a deep-seated distrust of democratic ways of government. All people in democratic societies ought to protest at that ghastly assertion. Most people in our society will be further convinced that this government should not be trusted. Few things will restore trust in government as a frontal attack on corruption in the economy would. Government cannot carry through programmes that hurt the public in the short term without reviving the trust of the people in government which the government had lost much earlier. (I wrote about this in early 2020.) That restoration requires surgery to eliminate the foul and deathly carbuncle. (Recall the ‘restoration’ after (the Short (1640) and Long (1640-1660) Parliaments, the execution of Charles I of England in 1649 and the death of Lord Protector Oliver Cromwell in 1659. The English throne, from which Charles III reigns now, has never been vacant ever since.)
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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