Features
Confronting capitalism – market oriented economy with state guidance
By Jayampathy Molligoda
Recently the Governor, Central Bank, Professor WD Lakshman, at a media briefing stated that Sri Lanka was following a market- oriented economy with state guidance, involving some controls and restrictions. He was quoted as saying that such a framework would not be successful under an IMF program. This, in my view needs further elaboration. As we understood, IMF programme will essentially impose some conditions such as; maintaining fiscal discipline- not to exceed the government budget deficit beyond say 8-9 % of GDP, not to defend external value of the rupee, meaning not allowing the rupee to depreciate by pumping dollars from the official reserves of the Central Bank, not to go for unnecessary commercial foreign borrowings etc.
Managing in turbulent times:
According to IMF global economic outlook based on October 2020 report, most countries imposed stringent lockdown measures and as a result, the economic activities contracted dramatically on a global scale. The report says that although easing lockdowns can lead to a partial recovery, economic activity is likely to remain subdued until health risks abate.
The positive feature of working with IMF is that our credit rating could be improved and our Banks and other financial institutions may be able to transact with foreign financial institutions efficiently and arrange trade finance facilities and commercial borrowings at competitive rates. Also, the Sri Lankan exporters may be able to receive foreign remittances without unnecessary delays and restrictions imposed by foreign correspondence banks. As for credit rating position, Sri Lanka was downgraded four months back and at present, Sri Lanka is ranked C grade. When a country is under an IMF standby facility, there is a greater possibility of the ratings getting improved, thus building confidence among the business partners and foreign multilateral financial institutions like World Bank, ADB, JBIC etc.
As articulated by the Central Bank Governor, the government has been able to contain the trade deficit through stringent import control measures in order to save much needed foreign exchange, as the tourism & travel and some exports such as textile and garment sectors have been badly affected during the year under review. This is in the backdrop of some export targets where the government policy makers were expecting 4-5 billion US $ per annum in terms of tourism proceeds before COVID-19 pandemic hit. In fact, Sri Lankan economy could realise only 0.9 billion US $ from tourism in 2020.
Nevertheless, the Central bank has been able to provide guidance, support and advice to the government to manage the macro- economic fundamentals quite efficiently during these turbulent times, which is commendable. The following table shows the summary of the vital statistics of Sri Lanka’s macro- economic transactions with the rest of the world. An attempt has been made by the writer to make some provisional figures and estimates to ascertain whether Sri Lankan economy could withstand the pressure from this global economic downturn. Also, it is important to critically review the efficacy and effectiveness of the economic policy changes contemplated by the present government policy makers and to what extent they succeed in confronting capitalist economic system in todays’ context.
= Author’s estimates
As can be seen, the biggest challenge is in the management of the debt repayment capacity, especially in view of the fact that a total sum of US $ Billion 7 is due during the current year, which is the highest ever debt service figure that the country has to service in order to avoid sovereign default. In addition to above, domestic forex debt repayments such as FCBU and SLDB amounting to 1.5 billion US$ will also become due, however the government may be able to successfully arrange foreign SWAPs from friendly countries’ multilateral financial institutions and Central banks to meet any contingencies. It should be mentioned that the Central Bank of Sri Lanka is vested with the responsibility of the management of the public debt, in terms of Section 113 of the Monetary Law Act.
Confronting capitalism:
Throughout the world, economic growth has drastically slowed. Natural resources are exploited for short-term profits. Wealth is concentrated in the hands of a few. When a large number of children living in poverty, multinational ultra- rich elites tuck their money into tax heavens. As we all know, lockdown impacted peoples’ ability to move across borders, but it doesn’t stop money flowing into tax havens around the world, as claimed by Forbes magazine.
Anna Zakrzewski, who leads Boston Consulting Group’s Global Wealth Management division did a detailed study and the economic shocks of coronavirus have meant that offshore financial centres such as Switzerland are back to their old tricks: Banking peoples’ money away from their more- risky homelands.
‘Confronting capitalism’ by Philip Kotler published by American management association explains 14 major problems undermining capitalism and offers real solutions for a troubled economic system. Although best known as a marketing guru, Kotler trained as an economist under three Nobel price- winning economists, namely Prof. Milton Friedman who represented free market economic thinking and two other professors, Paul Samuelson and Robert Solow of MIT. Some of the serious shortcomings of capitalism as articulated by Kotler include: tends to focus narrowly on GDP growth, generates income & wealth inequality, proposes no solution to persisting poverty, exploits natural resources and environment in the absence of regulations, favours short term profits over long run investment planning, fails to pay a living wage and others.
New economic and business model for tea plantations:
This reminds me the Sri Lankan tea plantation -RPC model introduced in 1995, where some 88,000 hectares of cultivated tea estates have been transferred to 20 RPCs under 53 year lease period with only one golden share retained by the government, expecting the companies to put in much needed investments in Re/new planting, infilling of tea, optimum utilisation of arable agricultural land and other resources including factory modernisation, tea marketing efforts and other viable diversification options , and improve labour management relations through collective bargaining process etc. As per latest statistics at Tea Board, the total tea production at RPC level has come down to 70.6 million own crop and bought leaf of 24.2 million kilos totalling only 94.8 million kilos in 2020 (total national production in 2020 was 278 million kilos- 34% RPC share) from the 135. 3 million kilos in 1995 where the total national production was as 246 million kilos- 55% RPC share.
in January 2019, the daily wage was revised to Rs 750/ per day under the main collective agreement entered into between the RPCs and worker trade unions in 2003. Unfortunately, the daily attendance allowance and the productivity linked wage rates hitherto enjoyed by the workers have been taken out jointly by the parties to the collective agreement, which the undersigned, as a non- executive director attached to one of the RPCs had made written representations in January ’19 itself to the EFC and the negotiation committee, thus expressing serious concerns. Thereafter, the demand for wage increase came even before the presidential election held in November 2019 from worker trade unions under the collective agreement generally to be negotiated once in two years only. The RPCs have called for a new hybrid wage structure focusing on a revenue share model based on ‘three day’ productivity-focused rates and three daily wage rates -a total package for the entire week for the estate workers. But this was not acceptable to the worker unions quoting ‘six day work rule’ and practical issues. An option favoured by the trade unions is to increase the basic wage which attracts not only EPF/ETF, even the other terminal benefits such as gratuity holiday pay etc. An ‘out-grower model’ where the workers are allocated small plots of land to grow their own tea to sell to the factories was also suggested without much deliberations to study far reaching implications.
In view of the deadlock, the cabinet has decided to refer the demand of Rs 1,000/ daily wage to the tea & rubber industry wage board for a decision and they have incorporated a sum of Rs 900/ together with a budgetary allowance of Rs 100/ to make Rs. 1000 as minimum daily wage payable to the workers under wages board ordinance. The writer has been a proponent of the collective bargaining process under the main collective agreement entered in to 2003. My own view is, once the wage anomaly is sorted out, it is expedient that the parties to get back to the CA and honour the conditions in the said agreement in the best interest of the tea industry, thus maintaining good labour: management relations at estate level
Export earnings are getting trickled -down to farmers:
With an annual export earning of LKR 230 billion, at the Colombo tea auction level, the tea prices have increased from Rs 545/= per kilo of made tea in 2019 to Rs 628/= per kilo for the full year 2020. Despite production decreases, which is the main concern today, the foreign exchange earnings have reached this level thanks to the fob price of tea improving from Rs. 822/ per kilo to Rs. 867/ in 2020, due to efforts by our tea exporters- supported by improved quality of the final product by growers and manufacturers and ‘Ceylon Tea’ promotional campaign. Consequently, the export earnings are getting tricked down to tea small holders and in fact, the farmers are receiving Rs 90 per kilo of their green leaf as against Rs 79/= per kilo in 2019 on an average basis. The main thrust would be integrated quality and productivity. Contrary to media reports recently, the majority of RPCs have also been making profits during the year 2020 as per Colombo stock exchange filing. Tea. Credit goes to all the stakeholders of the global tea value chain from our tea grower to Sri Lankan tea marketing companies.
Sri Lankan tea industry is not just a business, it is a way of life for over 2.5 million people and we need to protect and nurture nearly 500,000 small holders and 700 tea factories and 140,000 estate workers by encouraging tea exporters to really focus on promoting and marketing Ceylon Tea B 2 C, in addition to B2 B tea exports. Discerning tea consumers world over are paying premium prices for Ceylon tea, due to promotional campaigns focused on authenticity of the product based on sustainability credentials and wellness factor of Ceylon It is in that context only the recent wage increases should be viewed.
Conclusion:
From the above it can be seen that the main stakeholders, namely the RPCs, the worker trade unions and the government have failed in working together to attain the mission set out at the time of privatisation of tea plantations in 1992. After 29 years of the first privatisation, it has now become necessary to migrate in to a new economic and business model for RPCs, thus promoting high quality plantations, and need to focus more on sustainable agricultural and manufacturing practices through infusion of increased investments and management inputs. Nevertheless, the success depends on our ability to market and promote ‘Ceylon Tea’ in global target markets as a premium quality beverage under the ‘sustainable food’ category. As Mahatma Gandhi said, the difference between what we are doing and what we are capable of doing would solve most of the world’s problems.
Author
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Author
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There’s an ill more dangerous and pervasive than the Coronavirus that’s currently sweeping Sri Lanka. That is the fear to express one’s convictions. Across the public sector of the country in particular many persons holding high office are stringently regulating and controlling the voices of their consciences and this bodes ill for all and the country.
The corrupting impact of fear was discussed in this column a couple of weeks ago when dealing with the military coup in Myanmar. It stands to the enduring credit of ousted Myanmarese Head of Government Aung San Suu Kyi that she, perhaps for the first time in the history of modern political thought, singled out fear, and not power, as the principal cause of corruption within the individual; powerful or otherwise.
To be sure, power corrupts but the corrupting impact of fear is graver and more devastating. For instance, the fear in a person holding ministerial office or in a senior public sector official, that he would lose position and power as a result of speaking out his convictions and sincere beliefs on matters of the first importance, would lead to a country’s ills going unaddressed and uncorrected.
Besides, the individual concerned would be devaluing himself in the eyes of all irrevocably and revealing himself to be a person who would be willing to compromise his moral integrity for petty worldly gain or a ‘mess of pottage’. This happens all the while in Lankan public life. Some of those who have wielded and are wielding immense power in Sri Lanka leave very much to be desired from these standards.
It could be said that fear has prevented Sri Lanka from growing in every vital respect over the decades and has earned for itself the notoriety of being a directionless country.
All these ills and more are contained in the current controversy in Sri Lanka over the disposal of the bodies of Covid victims, for example. The Sri Lankan polity has no choice but to abide by scientific advice on this question. Since authorities of the standing of even the WHO have declared that the burial of the bodies of those dying of Covid could not prove to be injurious to the wider public, the Sri Lankan health authorities could go ahead and sanction the burying of the bodies concerned. What’s preventing the local authorities from taking this course since they claim to be on the side of science? Who or what are they fearing? This is the issue that’s crying out to be probed and answered.
Considering the need for absolute truthfulness and honesty on the part of all relevant persons and quarters in matters such as these, the latter have no choice but to resign from their positions if they are prevented from following the dictates of their consciences. If they are firmly convinced that burials could bring no harm, they are obliged to take up the position that burials should be allowed.
If any ‘higher authority’ is preventing them from allowing burials, our ministers and officials are conscience-bound to renounce their positions in protest, rather than behave compromisingly and engage in ‘double think’ and ‘double talk’. By adopting the latter course they are helping none but keeping the country in a state of chronic uncertainty, which is a handy recipe for social instabiliy and division.
In the Sri Lankan context, the failure on the part of the quarters that matter to follow scientific advice on the burials question could result in the aggravation of Islamophobia, or hatred of the practitioners of Islam, in the country. Sri Lanka could do without this latter phobia and hatred on account of its implications for national stability and development. The 30 year war against separatist forces was all about the prevention by military means of ‘nation-breaking’. The disastrous results for Sri Lanka from this war are continuing to weigh it down and are part of the international offensive against Sri Lanka in the UNHCR.
However, Islamophobia is an almost world wide phenomenon. It was greatly strengthened during Donald Trump’s presidential tenure in the US. While in office Trump resorted to the divisive ruling strategy of quite a few populist authoritarian rulers of the South. Essentially, the manoeuvre is to divide and rule by pandering to the racial prejudices of majority communities.
It has happened continually in Sri Lanka. In the initial post-independence years and for several decades after, it was a case of some populist politicians of the South whipping-up anti-Tamil sentiments. Some Tamil politicians did likewise in respect of the majority community. No doubt, both such quarters have done Sri Lanka immeasurable harm. By failing to follow scientific advice on the burial question and by not doing what is right, Sri Lanka’s current authorities are opening themselves to the charge that they are pandering to religious extremists among the majority community.
The murderous, destructive course of action adopted by some extremist sections among Muslim communities world wide, including of course Sri Lanka, has not earned the condemnation it deserves from moderate Muslims who make-up the preponderant majority in the Muslim community. It is up to moderate opinion in the latter collectivity to come out more strongly and persuasively against religious extremists in their midst. It will prove to have a cementing and unifying impact among communities.
It is not sufficiently appreciated by governments in the global South in particular that by voicing for religious and racial unity and by working consistently towards it, they would be strengthening democratic development, which is an essential condition for a country’s growth in all senses.
A ‘divided house’ is doomed to fall; this is the lesson of history. ‘National security’ cannot be had without human security and peaceful living among communities is central to the latter. There cannot be any ‘double talk’ or ‘politically correct’ opinions on this question. Truth and falsehood are the only valid categories of thought and speech.
Those in authority everywhere claiming to be democratic need to adopt a scientific outlook on this issue as well. Studies conducted on plural societies in South Asia, for example, reveal that the promotion of friendly, cordial ties among communities invariably brings about healing among estranged groups and produces social peace. This is the truth that is waiting to be acted upon.
Author
By Sanjeewa Jayaweera
It was on 3rd January 1972 that our family arrived in Karachi from Moscow. Our departure from Moscow had been delayed for a few weeks due to the military confrontation between Pakistan and India. It ended on 16th December 1971. After that, international flights were not permitted for some time.
The contrast between Moscow and Karachi was unbelievable. First and foremost, Moscow’s temperature was near minus 40 degrees centigrade, while in Karachi, it was sunny and a warm 28 degrees centigrade. However, what struck us most was the extreme warmth with which the airport authorities greeted our family. As my father was a diplomat, we were quickly ushered to the airport’s VIP Lounge. We were in transit on our way to Rawalpindi, the airport serving the capital of Islamabad.
We quickly realized that the word “we are from Sri Lanka” opened all doors just as saying “open sesame” gained entry to Aladdin’s cave! The broad smile, extreme courtesy, and genuine warmth we received from the Pakistani people were unbelievable.
This was all to do with Mrs Sirima Bandaranaike’s decision to allow Pakistani aircraft to land in Colombo to refuel on the way to Dhaka in East Pakistan during the military confrontation between Pakistan and India. It was a brave decision by Mrs Bandaranaike (Mrs B), and the successive governments and Sri Lanka people are still enjoying the fruits of it. Pakistan has been a steadfast and loyal supporter of our country. They have come to our assistance time and again in times of great need when many have turned their back on us. They have indeed been an “all-weather” friend of our country.
Getting back to 1972, I was an early beneficiary of Pakistani people’s love for Sri Lankans. I failed the entrance exam to gain entry to the only English medium school in Islamabad! However, when I met the Principal, along with my father, he said, “Sanjeewa, although you failed the entrance exam, I will this time make an exception as Sri Lankans are our dear friends.” After that, the joke around the family dinner table was that I owed my education in Pakistan to Mrs B!
At school, my brother and I were extended a warm welcome and always greeted “our good friends from Sri Lanka.” I felt when playing cricket for our college; our runs were cheered more loudly than of others.
One particular incident that I remember well was when the Embassy received a telex from the Foreign inistry. It requested that our High Commissioner seek an immediate meeting with the Prime Minister of Pakistan, Mr Zulifikar Ali Bhutto (ZB), and convey a message from Mrs B. The message requested that an urgent shipment of rice be dispatched to Sri Lanka as there would be an imminent rice shortage. As the Ambassador was not in the station, the responsibility devolved on my father.
It usually takes about a week or more to get an audience with the Prime Minister (PM) of a foreign country due to their busy schedule. However, given the urgency, my father spoke to the Foreign Ministry’s Permanent Sectary, who fortunately was our neighbour and sought an urgent appointment. My father received a call from the PM’s secretary around 10 P.M asking him to come over to the PM’s residence. My father met ZB around midnight. ZB was about to retire to bed and, as such, was in his pyjamas and gown enjoying a cigar! He had greeted my father and had asked, “Mr Jayaweera, what can we do for great friend Madam Bandaranaike?. My father conveyed the message from Colombo and quietly mentioned that there would be riots in the country if there is no rice!
ZB had immediately got the Food Commissioner of Pakistan on the line and said, “I want a shipload of rice to be in Colombo within the next 72 hours!” The Food Commissioner reverted within a few minutes, saying that nothing was available and the last export shipment had left the port only a few hours ago to another country. ZB had instructed to turn the ship around and send it to Colombo. This despite protests from the Food Commissioner about terms and conditions of the Letter of Credit prohibiting non-delivery. Sri Lanka got its delivery of rice!
The next was the visit of Mrs B to Pakistan. On arrival in Rawalpindi airport, she was given a hero’s welcome, which Pakistan had previously only offered to President Gaddafi of Libya, who financially backed Pakistan with his oil money. That day, I missed school and accompanied my parents to the airport. On our way, we witnessed thousands of people had gathered by the roadside to welcome Mrs B.
When we walked to the airport’s tarmac, thousands of people were standing in temporary stands waving Sri Lanka and Pakistan flags and chanting “Sri Lanka Pakistan Zindabad.” The noise emanating from the crowd was as loud and passionate as the cheering that the Pakistani cricket team received during a test match. It was electric!
I believe she was only the second head of state given the privilege of addressing both assemblies of Parliament. The other being Gaddafi. There was genuine affection from Mrs B amongst the people of Pakistan.
I always remember the indefatigable efforts of Mr Abdul Haffez Kardar, a cabinet minister and the President of the Pakistan Cricket Board. From around 1973 onwards, he passionately championed Sri Lanka’s cause to be admitted as a full member of the International Cricket Council (ICC) and granted test status. Every year, he would propose at the ICC’s annual meeting, but England and Australia’s veto kept us out until 1981.
I always felt that our Cricket Board made a mistake by not inviting Pakistan to play our inaugural test match. We should have appreciated Mr Kardar and Pakistan’s efforts. In 1974 the Pakistan board invited our team for a tour involving three test matches and a few first-class games. Most of those who played in our first test match was part of that tour, and no doubt gained significant exposure playing against a highly talented Pakistani team.
Several Pakistani greats were part of the Pakistan and India team that played a match soon after the Central Bank bomb in Colombo to prove that it was safe to play cricket in Colombo. It was a magnificent gesture by both Pakistan and India. Our greatest cricket triumph was in Pakistan when we won the World Cup in 1996. I am sure the players and those who watched the match on TV will remember the passionate support our team received that night from the Pakistani crowd. It was like playing at home!
I also recall reading about how the Pakistani government air freighted several Multi Barrell artillery guns and ammunition to Sri Lanka when the A rmy camp in Jaffna was under severe threat from the LTTE. This was even more important than the shipload of rice that ZB sent. This was crucial as most other countries refused to sell arms to our country during the war.
Time and again, Pakistan has steadfastly supported our country’s cause at the UNHCR. No doubt this year, too, their diplomats will work tirelessly to assist our country.
We extend a warm welcome to Mr Imran Khan, the Prime Minister of Pakistan. He is a truly inspirational individual who was undoubtedly an excellent cricketer. Since retirement from cricket, he has decided to get involved in politics, and after several years of patiently building up his support base, he won the last parliamentary elections. I hope that just as much as he galvanized Sri Lankan cricketers, his political journey would act as a catalyst for people like Kumar Sangakkara and Mahela Jayawardene to get involved in politics. Cricket has been called a “gentleman’s game.” Whilst politics is far from it!.
Author
Believe me, seeing certain videos, on social media, depicting action, on the dance floor, at some of these entertainment venues, got me wondering whether this Coronavirus pandemic is REAL!
To those having a good time, at these particular venues, and, I guess, the management, as well, what the world is experiencing now doesn’t seem to be their concerned.
Obviously, such irresponsible behaviour could create more problems for those who are battling to halt the spread of Covid-19, and the new viriant of Covid, in our part of the world.
The videos, on display, on social media, show certain venues, packed to capacity – with hardly anyone wearing a mask, and social distancing…only a dream..
How can one think of social distancing while gyrating, on a dance floor, that is over crowded!
If this trend continues, it wouldn’t be a surprise if Coronavirus makes its presence felt…at such venues.
And, then, what happens to the entertainment scene, and those involved in this field, especially the musicians? No work, whatsoever!
Lots of countries have closed nightclubs, and venues, where people gather, in order to curtail the spread of this deadly virus that has already claimed the lives of thousands.
Thailand did it and the country is still having lots of restrictions, where entertainment is concerned, and that is probably the reason why Thailand has been able to control the spread of the Coronavirus.
With a population of over 69 million, they have had (so far), a little over 25,000 cases, and 83 deaths, while we, with a population of around 21 million, have over 80,000 cases, and more than 450 deaths.
I’m not saying we should do away with entertainment – totally – but we need to follow a format, connected with the ‘new normal,’ where masks and social distancing are mandatory requirements at these venues. And, dancing, I believe, should be banned, at least temporarily, as one can’t maintain the required social distance, while on the dance floor, especially after drinks.
Police spokesman DIG Ajith Rohana keeps emphasising, on TV, radio, and in the newspapers, the need to adhere to the health regulations, now in force, and that those who fail to do so would be penalised.
He has also stated that plainclothes officers would move around to apprehend such offenders.
Perhaps, he should instruct his officers to pay surprise visits to some of these entertainment venues.
He would certainly have more than a bus load of offenders to be whisked off for PCR/Rapid Antigen tests!
I need to quote what Dr. H.T. Wickremasinghe said in his article, published in The Island of Tuesday, February 16th, 2021:
“…let me conclude, while emphasising the need to continue our general public health measures, such as wearing masks, social distancing, and avoiding crowded gatherings, to reduce the risk of contact with an infected person.
“There is no science to beat common sense.”
But…do some of our folks have this thing called COMMON SENSE!
