Wednesday, September 17, 2014

Should the Chinese premier be an advisor to the Government?

Chinese President Xi Jinping has arrived in the 'Wonder of Asia' for a flying visit, flying being the operative word.

His visit is scheduled to last a total of 23 hours, about a third longer than the 15 hours or so that he will spend travelling to and from Beijing. (The fastest flight is on Sri Lankan that is supposed to take 7 hours and 25 minutes, one way). Assuming he spends some of those 23 hours resting or sleeping after the flight the actual hours spent waking may well be as many as those spent on the flight.

No matter, for although his time spent is short, his influence is long. Notably he has single handedly solved a problem that has eluded our leaders for ages: reducing the cost of living.

In the few short hours that he has spent the price was electricity was reduced by 25% and the prices of diesel, petrol and kerosene by Rs. 3, Rs. 5 and Rs. 20.

An amazing feat. Our greatest fear is of the prices rising after his departure. Or after the election, since that happens to be conveniently at hand.

Therefore I propose a simple solution: make premier Xi Jinping a permanent advisor to the Government! This way we will have a more permanent reduction in the cost of living.

We have hundreds of ministers and perhaps thousands of advisors, one more will not do any harm, especially since he has delivered results.

Confucius has said:

 “By three methods we may learn wisdom: First, by reflection, which is noblest; Second, by imitation, which is easiest; and third by experience, which is the bitterest.”

Words to ponder, as we dance merrily down the path taken by many a Banana Republic.

Chinese President XI JinpingPresident Xi Jinping’s visit

Sunday, September 14, 2014

Hotels required to report guest details to police

According to a report in today's Sunday Times:
The management of tourist resorts countrywide is now required to report to the Police Station in their area whenever bookings are made by local guests. Besides their names, the address, the date of arrival and departure are among the data sought.
The report goes on to elaborate that:
such data were often transmitted by the Police Station concerned to the District Intelligence Bureau (DIB). They in turn forward that information to the State Intelligence Service (SIS) at Cambridge Place, Colombo. 
The surveillance has already started, the report quotes a hotel manager who is uncomfortable with sending out the information but does so anyway because "Otherwise they find fault with us.”

Under what law are hotels being required to cough up this information? These acts are probably unconstitutional and outside the law, but what does that matter? The laws of the land exist only for the purpose of repressing the weak, the powerless or some unfortunate political opponent.

The collection of guests data used to happen in the North and East during the conflict but I believe the practice stopped after the war ended. Now it appears to have been resurrected in a wider form that covers all parts of the country. Previously, the Government could claim that there was a war on. Now what excuse do they have? Are they monitoring NGO workers? Journalists? Opposition politicians? Who knows? Perhaps the see enemies around every nook and corner?

There have been stories circulating of the police or military trying to collect information on households in some parts of the country, this new move fits in with a general pattern of surveillance that appears to be in place.   

The Sunday Times report compares this to the acts of the Stasi, or the Ministry of State Security- the secret police that operated in the former East Germany.  Very apt, but the parallels are a lot closer than people suspect. The Stasi were responsible for the surveillance of mail and telephone conversations as well more regular types of spying.

I don't think the post is being monitored but it is known that telephones are being tapped. I believe the practice started in 2008 when all phone users were required to register their  SIM cards. The phone companies then had a database of all users and were required to give access to the powers-that-be.

Such things should not happen in free or open societies, but then, we already know that we are neither, don't we?

Saturday, August 30, 2014

An anthem of hope

Peter Seeger, activist and musician died on the 27th of January this year. A fine musician, he composed in the genre of folk music.

His band (the Weavers) was named after a German play that depicted the uprising of Silesian weavers. One of the lines in the play is "I'll stand it no more, come what may".

The political message in some of his songs resulted in the band being blacklisted in the 1950's and Seeger being hauled up before the House Committee on Un-American Activities in 1955. He reportedly told the committee:

"I am not going to answer any questions as to my association, my philosophical or religious beliefs or my political beliefs, or how I voted in any election, or any of these private affairs. I think these are very improper questions for any American to be asked, especially under such compulsion as this."   

One of his songs was a Freedom Song of the American Civil Rights movement. Wikileaks chose the song as its "Wikileaks song". The song?

If I had a Hammer.

It speaks of a bell of warning, a bell of freedom and of a hammer of justice. A beautiful, poetic song, it became a top 10 hit for the band Peter, Paul and Mary. (Watch the performance here) and read the lyrics below. Does it carry a message for us?

If I had a hammer,
I'd hammer in the morning,
I'd hammer in the evening,
All over this land,
I'd hammer out danger,
I'd hammer out a warning,
I'd hammer out love between,
My brothers and my sisters,
All over this land.

If I had a bell,
I'd ring it in the morning,
I'd ring it in the evening,
All over this land,
I'd ring out danger,
I'd ring out a warning,
I'd ring out love between,
My brothers and my sisters,
All over this land.

If I had a song
I'd sing it in the morning
I'd sing it in the evening
all over this land
I'd sing out danger
I'd sing out a warning
I'd sing out love between
my brothers and my sisters
all over this land

Well, I've got a hammer
and I've got a bell
and I've got a song to sing
all over this land
It's the hammer of justice
It's the bell of freedom
It's a song about love between my
brothers and my sisters
all over this land
It's the hammer of justice
It's the bell of freedom
It's a song about love between my brothers and my
All over this la-a-and

Tuesday, August 26, 2014

Urban regeneration in Colombo

There have been a number of articles on the urban redevelopment that is taking place at break-neck speed in Colombo. Many of these have focused on the human aspects: the plight of evicted residents, the loss of a certain way of life or the change in the character of the city.

There are many positive things that can come from urban renewal, depending on what drives the programme. The earliest ones were apparently carried out in Victorian London to provide social housing to the poor, replacing the terrible slums that they lived in. A similar justification is being used in the case of some of Colombo's new projects but one must note two critical points: the terrible conditions in London at the time, and the underlying purpose of the exercise : to improve the lives of the poor by providing cheap housing for the poor.

Here the impetus seems to be more modern, one of stimulating economic growth through urban regeneration. This is something that has also worked (with varying degrees of success) in many different places. This can certainly work, but only with the right policy and governance framework.

In the case of our fair city I fear it may be a case of putting the cart before the horse.

If the economy booms, consistently over a few years people will have money to spend and there will be demand for land: for shops, for business premises, for entertainment.

When the demand materialises it makes sense to redevelop older or decaying parts of the city, to improve land usage or relieve congestion. If the economy were booming then the Town and Urban Councils would be flush with cash (from trade based taxes) and there would be less need to borrow money to redevelop. It would also be possible to get the private sector involved in the redevelopment process, minimising the need for debt funding.

Urban regeneration needs to go hand in hand with the right policy and good governance because this is what really drives growth. Ideally these should precede the regeneration effort and will help overall growth and the building of confidence. Getting this right policy costs little money but requires enlightened leadership. Once in place, growth will take place overall and attention may be turned towards the more neglected or  decaying parts of the city.

Unfortunately what appears to be happening is debt funded beautification for which there is scant demand and is likely to remain underutilised - because the fundamental drivers are not in place.

What is this business of governance? What does it take to create an economic boom? Restore the rule of law, simplify regulation, minimise the need for permits and licenses (eliminate altogether where possible, simplify where essential) have clear transparent rules that people can simply read and follow. A simple, consistent tax code, simple exchange control regulations and so forth.

What I see now is a maze of ever more complex regulations that appear to keep getting added to at an alarming rate and in a thoroughly haphazard manner. Worse, there are so many ambiguities that no one is sure what they mean so one must go from one public official to another seeking clarifications and approvals.

Bottom line: if this is to work, cut the red tape that is strangling the economy.

Sunday, August 03, 2014

Reviewing positions with the benefit of hindsight

I spend quite a lot of my time analysing events, a process that sometimes ends with a prediction or forecast. Something else that I often do is to review some of my predictions or positions with the benefit of hindsight. I don't do it all the time, just whenever something catches my attention.

Hindsight is a great thing and spending some time contemplating one's previous positions or opinion can be very enlightening. Often it can reveal flaws in reasoning; biases or facts that should have been taken into account. Even when we find ourselves on the wrong side of history we can learn something from our mistakes. It is part of process of refining ones thinking and ideas; an essential part of learning. 

Less frequently, when one is proved right, there is a certain satisfaction that is derived, something that will drive one to be more forthcoming in one's opinions.

After years of rejecting the need for any inquiry, the Government has made an unexpected U-turn and announced its own international panel to establish if war crimes took place.

Following the (seemingly incredible) war victory five years ago many an educational institute or university held seminars and workshops on the subject of management lessons to be learnt from the war victory; a few examples are here, here, and here.

I don't know if the results of the seminars or workshops were published in full but five years on, may we revisit the question again?

What management lessons did we believe we learnt? Do these need to be reviewed further in the light of recent events ? Were there real lessons to be learnt or were these bodies simply trying to cash in on some cheap publicity?

On the bigger question of the economy, many expected a post war boom. There was a boom but it only lasted a couple of years before ending in a bust in 2012.  Despite the rosy statistics there is now no serious question that things have been in decline since then. What went wrong? More seriously where will it end?

Monday, July 28, 2014

What has happened to our EPF money?

The Sunday Times has published a report on the EPF that gave me an unpleasant shock. The fund does not appear to have the money to repay it's members.

Before getting into the details, lets understand what the fund is and what it is supposed to do. The Employees Provident Fund (EPF) was established under Act No. 15 of 1958 and is currently the largest Social Security Scheme in the country. It is a compulsory fund, all employers regardless of the size or type of business must contribute to the EPF, even if they have only one employee.

The standard contribution is a percentage of the monthly salary of each employee; the employer contributes 12% and the employee 8%. Each month's contribution must be paid before the last date of the following month. Late payments are subject to penalties ranging from 5% to 50%.

The EPF contributions are supposed to be invested for the benefit of the employees. On retirement, the employee can withdraw whatever balance is to his credit - this should be the amounts contributed over the years plus whatever interest earned.

The critical point to note is that the EPF is fully funded by its contributors. The Government does not put in one cent. All the employee gets back is what was paid in by himself and his employer (plus whatever interest).

Therefore there cannot be any shortfall in funds - unless something is seriously wrong. Yet this is what there appears to be - a shortfall in funds. According to the report it appears that withdrawals from the fund by retirees are being paid out of the new contributions made by members.

"Employers’ contribution to the EPF in 2011 was Rs. 61.9 billion with a sum of Rs. 47.3 billion being withdrawn to pay back EPF money for retirees and this amounted to 76 per cent of the total contribution....In 2012 and 2013, 115,000 and 114,000 applicants had withdrawn Rs.48.7 billion and Rs. 50.2 billion, respectively. Employers’ contribution for EPF in 2012 was Rs.70.6 billion and in 2013 the contribution was Rs.80.9 billion."

What should happen by rights is that the withdrawals need to be paid from the investments made, the fresh contributions made by existing members must be invested to provide a return for the new contributors, not pay the retirees. This probably happens on paper but the fund is obviously facing serious problems of cash flow.

So what has happened to our money?

According the EPF's annual report for 2011, 90% of the funds are invested in Government securities, 7.9% in the stock market and the rest in corporate debentures and other debt instruments.

A couple of things raise a red flag.

First is increase in the proportion of the fund invested in the stock market which has jumped from 1.3% in 2009 to 5% in 2010 and 7.9% in 2011.

The second is the delay in publishing the annual reports for 2012 and 2013. We are seven months into 2014, yet the latest accounts available are for 2011. Late publication of accounts is often one of the first symptoms of malpractice. My big worry is has the percentage of funds invested in the stock market increased significantly since 2011?

We have learned of the fraud that has taken place with regard to the fund's stock market investments. A loss of 11.7 billion was reported in 2011 due to stock market losses - insignificant compared to the funds balance of Rs.1,300 billion but compared to the contributions and withdrawals in 2011 the loss is very significant: 18.9% of the contributions or 24.7% of withdrawals.

We know that a part of our money has been lost through fraudulent investments in the stock market. What of the rest? There have been other unauthorised investments such as Rs.2.97 billion on a power generating company,  Rs.810m in a loss-making hotel, Rs.500m in an airline (Mihin Air, perhaps?) and some others. (See this report for a few more details). The biggest issue is that we do not have proper information which prevents in-depth analysis- the easiest way to cover a crime is by hiding the evidence, hence the ongoing campaign against transparency in all spheres.

Regardless of the stock market and other dubious investments I believe the bulk (75%-80%) is still in treasury bills and bonds. These are Government debt and there should be no issue with cash flows - unless the Government is bust and unable to service its debt. This, I am afraid is the sad reality that is becoming ever more evident.

In simple terms, the Government has borrowed this money from the EPF. It now needs to start repaying and is facing difficulties. The way the Government handles this with other lenders is simple - they simply borrow some more and repay the loan. They take new loans to pay old ones and even have to take additional loans to pay the interest (I have looked at this issue in come depth here).

So why not do that with the EPF? The reason is that they are trying very hard to 'manage' the debt statistics. With external lenders there is no choice but to repay - when the money belongs to ordinary citizens then the Government will try some tricks to postpone payment. This is the driving force behind the moves to turn the EPF into a pension scheme. A lump sum payment will be repaced with a monthly payment, paid over heaven knows how many years.

The sustainability of Sri Lanka's debt is an issue, the rating agency Moody's recently warned that overall debt affordability is weak. The Government will not admit that it's debt levels are too high, but it's actions in this instance betray the reality of the situation.

After all, it is not Government money that we are asking for, it is our money that was given to the Government that we want back. Is that too much to ask for?


Ratmale left an excellent comment on this post. With regard to administration costs, it is essential that these be kept to a minimum. As per the annual report, the EPF administration cost is around 0.68% of the fund. However the Government runs two funds the EPF and the ETF. Both funds can be managed by a single entity with almost no increase in administration costs, so for optimal benefit the management of both EPF and ETF should be merged.


Wednesday, July 09, 2014

The killing of planter Nihal Perera: still no justice

It was just over a year ago that a senior planter, Secretary of the Ceylon Planters Association was brutally murdered by - surprise, surprise: the Chairman of the local Pradeshiya Sabha, Anil Champika alias ‘Atha Kota’.

The eyewitness testimony makes for harrowing reading, yet despite public outrage and local protest, absolutely nothing seems to have happened.  The local press took a couple of weeks before even reporting the story properly, but at least they eventually did get around to giving it some proper coverage - although, they shied away from giving it proper publicity.

Coverage and publicity are not the same thing. This story should have been front page, headline news for several weeks. Whatever legal processes should have been followed up closely and questions should have been raised as to why nothing was happening.

Naturally this is far too much to expect from the local media, 'independent' or state. It is some consolation that they did report the story fully (even if it was in the back pages), albeit a couple of weeks after it happened.

A year later, the far more serious anti Muslim violence in Aluthgama and Beruwala did not merit even this limited coverage. The media have mostly concerned themselves with reporting some of the aftermath with no investigation of causes or proper reporting of the incidents themselves.

Most editorials condemned the violence, as did several columnists, which is all very well and may satisfy the conscience of the journalists but the fact remains that editorials and features are not often read. What is mostly read is the news, especially on the front page and in this respect coverage was woefully inadequate. First and foremost people need to know the facts, if they know exactly what happened they will be less ready to blame the victims, a view that is worryingly commonplace and may seed more widespread violence later. (For some good summaries of the Aluthgama violence see here and here)

As with Khuram Shaikh, as with Nihal Perera, as with the Trinco 5 and countless, nameless other victims of the state. These were ordinary people going about their lives in a perfectly normal, ordinary fashion. They broke no laws, were not reckless is behaviour, yet a chance encounter with the agents of State lead to a brutal death.

I hope the killers perish in hell, but that is the best we can expect. With no accountability there can be no justice, past experience testifies. With no news, people will forget and move on. They may only remember, if they or some one they know falls victim. It could be anyone really, even you or me, victims of a bandit State.     

A good piece on the Nihal Perera murder, by a former colleague of his is here, my original piece on Nihal Perera's murder is here.

Update 19th July
I was pleasantly surprised to note that the murderers of Khuram Shaikh have actually been convicted. Lets hope this signifies a change in the system and that other victims may also hope for justice.