After a very long sojourn, politics seems to have returned to the local blogosphere. What is more interesting is that it has sparked some reasonable debate, something that has been missing for a long time.
Cerno was rather irritated by the fact that some lucky people seem to have enormous amounts of time to spend on web, so apologies for starting yet another post on the topic.
Reading the Drummers post, I cam across an interesting comment from David Blacker, on the role of the LTTE in dragging the country back to war.
I think the conduct of the Tigers since 2005 has been despicable and their actions have worsened the plight of the Tamils immeasurably.
To start with, the Tigers organised the boycott of the election that ensured that Ranil Wickremesinghe, architect of the CFA would be defeated. Many speculated that the boycott was organised in concert with the opposition candidate, DBS Jeyaraj certainly seems to think so. RW lost the election by a shade over 180,000 votes, the Jaffna vote alone could have carried him to victory.
The Tigers thus ditched the man responsible for the CFA and elected someone who campaigned on a platform discrediting it. They next went a step further and provoked a conflict by deliberately cutting off the water supply to farmers. It is true that MR campaigned on an anti-CFA platform, but that was just a ploy to get elected, no one seriously contemplated abandoning the CFA. They even had a round or two of talks with the LTTE, after being elected.
It seems rather strange, given the amount of mud that has been thrown on the CFA to recall that the regime actually held talks with the Tigers and to find that the leader of the government delegation "reiterated the government's commitment to peace talks".
In this context it is worth noting that it took the Government a full three years before they finally decided to abrogate the CFA in 2008, so clearly it was far from useless or harmful. If it was, they certainly took their time about deciding on it.
Having restarted the war, the Tigers then turned it into a personal conflict by the bomb attack on the Defence Secretary and a key lieutenant, Sarath Fonseka. Until then it was just another battle, once these two people were attacked there would be no turning back.
The last great blunder of the LTTE was in creating the human shield. When they started losing territory in the west of the country they retreated, but took the civilians with them, who they intended to use as a shield. Had they left them behind they would have been able to look after what little they had. In abandoning their property they were to be left far worse off.
To begin with they could not take everything, they took as much as they could, but whatever was left behind was likely to fall prey to thieves. In abandoning crops, the fields would fall fallow and would be need to be reworked to bring them back to production.
Worse, in the constant moving necessitated by the ever retreating Tigers the people lost what little they carried. One survivor claimed he left with two tractor loads of goods but had only two shopping bags left by the end. They lost their tools and equipment, meaning there was no way to work the land, even if they were to return to it, they lost their personal belongings,their savings, their self respect. In fact, everything.
They were exposed to severe hardship and were traumatised by the fighting and god knows what else. The bulk of the displaced were created by the LTTE, holding them in camps after the fighting ended was only the final insult.
The actions of the LTTE have done the worst damage to the Tamil people and especially so since 2005 when they condemned the entire nation to the most brutal war it has seen its history.
The Tamils and the LTTE are intertwined but the Tamil diaspora need to see the LTTE for what it was - the most damaging thing to the Tamils. There are serious and legitimate questions that need to be posed to the Sri Lankan Government, but there needs to be a clean break from the LTTE.
The Tigers, their flag, emblem and ideology have no place in any discussion on humanitarian concerns, except to be condemned utterly and completely.
Thursday, July 21, 2011
Wednesday, July 20, 2011
Another sovereign bond issue
Sri Lanka has launched another $1,000m bond, the fourth international bond since 2007.
The issue is being managed by Bank of America, Merrill Lynch, Barclays Capital, HSBC, and Royal Bank of Scotland. Some of the banks: Bank of America, Barclays and Merril Lynch are new entrants to Sri Lankan bonds, the weaker market conditions overseas probably necessitating the larger number of players.
What is interesting is the absence of China.
China is the government's lender of choice, politicians are constantly touting the virtues of easy credit from China which goes hand-in-hand with political support at tricky international forums. The Chinese lend freely and ask no questions, a borrowers delight.
Yet, when it comes to raising bonds, the government turns to the hated West. Western banks are used and the bonds expected to be sold in the US, followed by Asia and Europe. True, they have not included the banks involved in the oil hedging deal (Citi, Deutsche and Standard Chartered), but these banks (except Citi) never bid to manage the sovereign bond issue anyway.
So, why turn to the West? Expertise? Certainly, these banks are used to structuring and marketing these products but why pay fat fees to banks and incur all the costs of international roadshows when we could simply issue bonds direct to our friend China?
Could it be that China is not particularly interested in these bonds?
China is now this country's main creditor, but the bulk of the lending is project based - for infrastructure, highways, ports, power plants and the like.
The Chinese loans are tied, meaning that the projects need to use Chinese raw materials, (steel, cement etc) and even a fair component of Chinese labour. The proportion of local value addition in these projects is a great deal less than in projects involving international lending agencies.
Thus China earns a return on its loans both in the form of interest (at commercial rates, unlike the subsidised rates offered by lending agencies) and profits on the raw material sold to the project. These projects are therefore a lot more profitable than subscribing to a straightforward bond. It may also be more secure - I do not know if the project assets are mortgaged to the Exim bank (the main lending arm the Chinese) but it is a possibility. Apart from return and security there is another reason why they may not wish to subscribe.
The Government has to have a 'story' to sell a bond and merry tales of reconstruction and infrastructure can be spun. The story only has to be believable to in order to sell, no one really monitors if the money is spent in that manner. What actually happens is that the much of the funds are used to pay interest, roll over existing debt and pay for salaries and other day-to-day expenses.
In terms of an ordinary household, the country is not borrowing to repair the roof, extend the house or buy a labour saving device like a washing machine. We are borrowing in order to buy our food and pay our living expenses, not to invest.
Perhaps the Chinese are willing to finance our infrastructure, at a price, but they may be less willing to finance our consumption, leaving that task to the international banks and bondholders.
As long as the debt is serviced, ultimately from taxes raised from the populace, the banks and bondholders will have no problem but the first sign of trouble will see them flee to the exit, probably sending the rupee to free-fall.
Update: The bond was sold at 6.25%, compared to US treasuries which are currently at 2.96%, full story here.
The issue is being managed by Bank of America, Merrill Lynch, Barclays Capital, HSBC, and Royal Bank of Scotland. Some of the banks: Bank of America, Barclays and Merril Lynch are new entrants to Sri Lankan bonds, the weaker market conditions overseas probably necessitating the larger number of players.
What is interesting is the absence of China.
China is the government's lender of choice, politicians are constantly touting the virtues of easy credit from China which goes hand-in-hand with political support at tricky international forums. The Chinese lend freely and ask no questions, a borrowers delight.
Yet, when it comes to raising bonds, the government turns to the hated West. Western banks are used and the bonds expected to be sold in the US, followed by Asia and Europe. True, they have not included the banks involved in the oil hedging deal (Citi, Deutsche and Standard Chartered), but these banks (except Citi) never bid to manage the sovereign bond issue anyway.
So, why turn to the West? Expertise? Certainly, these banks are used to structuring and marketing these products but why pay fat fees to banks and incur all the costs of international roadshows when we could simply issue bonds direct to our friend China?
Could it be that China is not particularly interested in these bonds?
China is now this country's main creditor, but the bulk of the lending is project based - for infrastructure, highways, ports, power plants and the like.
The Chinese loans are tied, meaning that the projects need to use Chinese raw materials, (steel, cement etc) and even a fair component of Chinese labour. The proportion of local value addition in these projects is a great deal less than in projects involving international lending agencies.
Thus China earns a return on its loans both in the form of interest (at commercial rates, unlike the subsidised rates offered by lending agencies) and profits on the raw material sold to the project. These projects are therefore a lot more profitable than subscribing to a straightforward bond. It may also be more secure - I do not know if the project assets are mortgaged to the Exim bank (the main lending arm the Chinese) but it is a possibility. Apart from return and security there is another reason why they may not wish to subscribe.
The Government has to have a 'story' to sell a bond and merry tales of reconstruction and infrastructure can be spun. The story only has to be believable to in order to sell, no one really monitors if the money is spent in that manner. What actually happens is that the much of the funds are used to pay interest, roll over existing debt and pay for salaries and other day-to-day expenses.
In terms of an ordinary household, the country is not borrowing to repair the roof, extend the house or buy a labour saving device like a washing machine. We are borrowing in order to buy our food and pay our living expenses, not to invest.
Perhaps the Chinese are willing to finance our infrastructure, at a price, but they may be less willing to finance our consumption, leaving that task to the international banks and bondholders.
As long as the debt is serviced, ultimately from taxes raised from the populace, the banks and bondholders will have no problem but the first sign of trouble will see them flee to the exit, probably sending the rupee to free-fall.
Update: The bond was sold at 6.25%, compared to US treasuries which are currently at 2.96%, full story here.
Sunday, July 10, 2011
Victorian morals, Victorian ethics
Keen observers of Sri Lankan society may have noted a new emphasis on morality; a morality of a rather pious, preachy kind that is supposedly based on 'traditional' values. There has been a crackdown of 'obscene' content on television, film and some worthy even a proposed a ban on miniskirts.
Viewers of television have to put up with pixellated images each time someone lights up a cigarette, pours a drink or plants a kiss.
Never mind that the so-called traditional values are far from traditional but are based largely on the morality of Victorian England, something brought by the evil conquerors, together with a sprinkling of elements from Islamic and Hindu fundamentalists.
It is a pity that we should wrap ourselves in what is a fairly disagreeable aspect of colonialism while ignoring its far more worthy aspect, Victorian ethics.
As Charles Allen puts it, as far the military and civil administration was concerned, it was 'service, service, service, every time'. To quote:
This attitude was strongest in the civil administration, in the business community, contemptuously referred to as box-wallahs, the moral code was "something akin to that which existed in England at the time of Pitt. It was not considered immoral to have a cut in every contract". Not everyone in business succumbed: .."there were always the established companies, well stocked with public school boys, where it was virtually unknown".
The attitude towards duty was mirrored in the Ceylon Civil Service (CCS), the counterpart to Indian Civil Service (ICS). Talking to the father of a friend, lets call him James, a retired man from the CCS, he was telling me of the high standards that were expected in the service. He said that since the service was fairly small (the annual intake to the CCS was 2-6 cadets a year, the entire ICS never numbered more than 1,300) word of the slightest impropriety quickly got around and a man who had a black mark found that no department would be willing to accept him, he would thus be transferred to the 'pool', a fate worse than death and would quickly resign.
James was in the service when they were first allowed to use their official cars for private work, provided they paid for the fuel. Previously officials who had no private cars would use their cars for their official work but rely on public transport for the private affairs. To do otherwise would be simply inconceivable.
V. L. Wirasinha, in his book on life in the CCS narrates a story where one officer, Ananda-Raja Hallock, was dismissed over allegation of incorrect expense claims. He had claimed the cost of bearers to carry his baggage when moving to a new station, which he was entitled to, but had claimed it at the rate of Rs.1 per mile rather than Rs.1 per bearer. Someone had got to know of this and complained. After an inquiry he was dismissed from the service.
I assumed that given its prestige, the CCS officers were very well paid. James said that this was not the case; had he worked for Lever Brothers he could have earned twice the salary, he preferred the CCS because he felt he would rather not spend the rest of his life selling toothpaste. Again, that attitude towards service.
Interestingly enough, one of the principles of administration: access to the humblest petitioner, was inherited by the British in the Mughal administration that preceded it.
This attitude may be viewed as paternalistic, it probably is but from the point of view of people subject to it, not a bad thing. The underlying principle in democracy is a series of institutional checks on the power of the rulers, to ensure that they act for the greater benefit of its citizens. If the rulers are fired with an ethic of service towards their subjects, then this will go at least partway towards achieving the substance of democracy, even if its forms are absent.
Is it time for us to tell our rulers to discard Victorian morals and embrace Victorian ethics instead?
Viewers of television have to put up with pixellated images each time someone lights up a cigarette, pours a drink or plants a kiss.
Never mind that the so-called traditional values are far from traditional but are based largely on the morality of Victorian England, something brought by the evil conquerors, together with a sprinkling of elements from Islamic and Hindu fundamentalists.
It is a pity that we should wrap ourselves in what is a fairly disagreeable aspect of colonialism while ignoring its far more worthy aspect, Victorian ethics.
As Charles Allen puts it, as far the military and civil administration was concerned, it was 'service, service, service, every time'. To quote:
The prestige of the Raj enhanced the status of the British in India...but it demanded a conscious sense of responsibility towards those under you.
...Victorian ethics of 'honour, decency, truthfulness and running a good show' persisted in India to a quite remarkable degree. ....'I would have no hesitation in saying that during the years I was in India , bribery and corruption were unknown among the British in India' asserts John Morris, one of the fiercest critics of the moral codes of the Raj.
...'Such attitudes created an administration that was 'probably the most incorruptible ever known'.
This attitude was strongest in the civil administration, in the business community, contemptuously referred to as box-wallahs, the moral code was "something akin to that which existed in England at the time of Pitt. It was not considered immoral to have a cut in every contract". Not everyone in business succumbed: .."there were always the established companies, well stocked with public school boys, where it was virtually unknown".
The attitude towards duty was mirrored in the Ceylon Civil Service (CCS), the counterpart to Indian Civil Service (ICS). Talking to the father of a friend, lets call him James, a retired man from the CCS, he was telling me of the high standards that were expected in the service. He said that since the service was fairly small (the annual intake to the CCS was 2-6 cadets a year, the entire ICS never numbered more than 1,300) word of the slightest impropriety quickly got around and a man who had a black mark found that no department would be willing to accept him, he would thus be transferred to the 'pool', a fate worse than death and would quickly resign.
James was in the service when they were first allowed to use their official cars for private work, provided they paid for the fuel. Previously officials who had no private cars would use their cars for their official work but rely on public transport for the private affairs. To do otherwise would be simply inconceivable.
V. L. Wirasinha, in his book on life in the CCS narrates a story where one officer, Ananda-Raja Hallock, was dismissed over allegation of incorrect expense claims. He had claimed the cost of bearers to carry his baggage when moving to a new station, which he was entitled to, but had claimed it at the rate of Rs.1 per mile rather than Rs.1 per bearer. Someone had got to know of this and complained. After an inquiry he was dismissed from the service.
I assumed that given its prestige, the CCS officers were very well paid. James said that this was not the case; had he worked for Lever Brothers he could have earned twice the salary, he preferred the CCS because he felt he would rather not spend the rest of his life selling toothpaste. Again, that attitude towards service.
Interestingly enough, one of the principles of administration: access to the humblest petitioner, was inherited by the British in the Mughal administration that preceded it.
This attitude may be viewed as paternalistic, it probably is but from the point of view of people subject to it, not a bad thing. The underlying principle in democracy is a series of institutional checks on the power of the rulers, to ensure that they act for the greater benefit of its citizens. If the rulers are fired with an ethic of service towards their subjects, then this will go at least partway towards achieving the substance of democracy, even if its forms are absent.
Is it time for us to tell our rulers to discard Victorian morals and embrace Victorian ethics instead?
Wednesday, July 06, 2011
A State in denial?
I opened the Daily News this morning to learn that the Ministry of Power and Energy was denying that power cuts were taking place. The pro-Government Island newspaper has however reported that power cuts in the Biyagama industrial zone were causing a lot of disruption.
What on earth is going on?
When checking around, one person in the office had experienced a power outage from 7pm to 8pm last night. When he had inquired from the Electricity Board they had confirmed that it was a power cut, another person in Ratmalana experienced a power outage from 7-8.30pm last night, although he did not bother to check with the electricity board as to the reason why.
A friend in Battaramulla told me that they were without power all day from 9am-5pm last Saturday, the Electricity Board had said it was for "major repairs" but had not specified what the repair was. Apparently in the past the CEB used to inform them of the nature of the repair so it is a bit suspicious that they were so vague this time around and adding to this is the fact that it came on sharp at 5pm, the time they said it was likely to come back on.
It seems obvious that power cuts are indeed taking place, what is intriguing is the attitude of the Government: to deny that the problem exists. This is not the first time this has happened, the contaminated petrol fiasco saw exactly the same reaction. Persistent denial, until it became impossible to deny, then attempted to blame the users or the petrol pump owners.
It seems that they have cottoned on to a whole new strategy for dealing with problems; deny, deny and deny. With the media tamed, not a lot get reported anyway so people are in the dark. It is only through personal experience, which may be bitter; as in the case of the contaminated petrol or merely uncomfortable; as in the case of a power cut, do people learn the truth.
Perhaps the Government has been spending too much time with PR firms, or perhaps the 18th amendment, in giving new life to the government has infused it with fresh confidence, but it seems that the methods of dealing with critics in the West are now being applied to voters at home.
Quite apart from the moral aspect, the denial of a problem points to a bigger issue: the unwillingness to take responsibility for a problem or to be accountable to the electorate.
It is true that people are easily fooled and politicians all over the world spend some of their time trying to make things look better than they are but if this is taken too far and the only effort spent is on painting some fantastic or Utopian picture then the consequences can be grave.
The country has just adopted a new inflation index, with a reduced weightage on food (39%, v about 45% in the old index). Given that food price inflation is high the new index will probably report a lower figure, so everybody will be happy, while the reality is ignored.
Policy needs to be shaped by a proper understanding of problems, pretending that the problem does not exist is the last thing one needs.
And why do we have power cuts? Because the electricity board is running at losses and huge amounts of power are lost in transmission. We don't know exactly how much is lost or how badly it is run because there is no information. Any possibility of getting information was killed off with the defeat of the Right To Information bill. The price of inefficiency and waste must eventually be paid and the public do pay, in terms of an erratic and uncertain power supply.
There is one little solution that will ease the problems of the CEB and cause no disruption to the public. Put the clock forward by half and hour, a simple painless solution that was working fine that was unwound: to please the astrologers.
What on earth is going on?
When checking around, one person in the office had experienced a power outage from 7pm to 8pm last night. When he had inquired from the Electricity Board they had confirmed that it was a power cut, another person in Ratmalana experienced a power outage from 7-8.30pm last night, although he did not bother to check with the electricity board as to the reason why.
A friend in Battaramulla told me that they were without power all day from 9am-5pm last Saturday, the Electricity Board had said it was for "major repairs" but had not specified what the repair was. Apparently in the past the CEB used to inform them of the nature of the repair so it is a bit suspicious that they were so vague this time around and adding to this is the fact that it came on sharp at 5pm, the time they said it was likely to come back on.
It seems obvious that power cuts are indeed taking place, what is intriguing is the attitude of the Government: to deny that the problem exists. This is not the first time this has happened, the contaminated petrol fiasco saw exactly the same reaction. Persistent denial, until it became impossible to deny, then attempted to blame the users or the petrol pump owners.
It seems that they have cottoned on to a whole new strategy for dealing with problems; deny, deny and deny. With the media tamed, not a lot get reported anyway so people are in the dark. It is only through personal experience, which may be bitter; as in the case of the contaminated petrol or merely uncomfortable; as in the case of a power cut, do people learn the truth.
Perhaps the Government has been spending too much time with PR firms, or perhaps the 18th amendment, in giving new life to the government has infused it with fresh confidence, but it seems that the methods of dealing with critics in the West are now being applied to voters at home.
Quite apart from the moral aspect, the denial of a problem points to a bigger issue: the unwillingness to take responsibility for a problem or to be accountable to the electorate.
It is true that people are easily fooled and politicians all over the world spend some of their time trying to make things look better than they are but if this is taken too far and the only effort spent is on painting some fantastic or Utopian picture then the consequences can be grave.
The country has just adopted a new inflation index, with a reduced weightage on food (39%, v about 45% in the old index). Given that food price inflation is high the new index will probably report a lower figure, so everybody will be happy, while the reality is ignored.
Policy needs to be shaped by a proper understanding of problems, pretending that the problem does not exist is the last thing one needs.
And why do we have power cuts? Because the electricity board is running at losses and huge amounts of power are lost in transmission. We don't know exactly how much is lost or how badly it is run because there is no information. Any possibility of getting information was killed off with the defeat of the Right To Information bill. The price of inefficiency and waste must eventually be paid and the public do pay, in terms of an erratic and uncertain power supply.
There is one little solution that will ease the problems of the CEB and cause no disruption to the public. Put the clock forward by half and hour, a simple painless solution that was working fine that was unwound: to please the astrologers.
Tuesday, July 05, 2011
Sri Lanka Insurance buys into Blue Diamonds
I had heard rumours in the stock market that Sri Lanka Insurance (SLIC) was buying into Blue Diamonds (BD) but had dismissed them as being false. The market is full of such wild stories, the object in spreading them being to unload the shares on retail investors. I was therefore quite shocked to discover that this was indeed true.
The rescue of Sri Lanka Insurance from a botched privatisation is regarded as one of the triumphs of the regime. It is profitable, has pots of cash and is therefore now automatically seen as the vehicle of choice through which state investment can take place. It has its own funds and requires only board approval to buy into assets rather than the complicated process of cabinet papers and other procedures necessary for a Government department. There is also no delay in waiting for funds to be released from the Treasury, which is forever short.
Therefore it is not surprising to learn that SLIC is "aggressively looking for companies to turn around". SLIC has already participated in the bail out of Seylan Bank, bought control of Shell Gas and is now set to run restaurants on the new Southern highway.
The question this raises is whether conglomerate diversification adds too much risk to an insurance business. I don't have a clear answer and the regulatory guidelines overseas are a mess to wade through, but my initial instinct is that it does.
Quite apart from the more fundamental question, BD itself is, to put it mildly, rather a mess. A glance at the auditors report in the latest annual report reveals that:
1. A loan of Rs.203.5m that was obtained on the security of jewellery was written back to income in 2005, on the basis that the bank had taken over the security. The company has now been presented with a claim for US$4.32m, on account of this unpaid loan, which is not accounted in the books. If accounted for at face value it would wipe out half the equity of the company.
2. Th balances payable to related parties could not be verified, which means that further possible liabilities could exist.
3. Sales in the financial year 2010 were Rs.46m but the company had to recover Rs.39m worth of unsold stock from its overseas distributor, a related party. It seems that much of that years sales had simply been lying in stock.
When selling through distributors it is vitally important to monitor the off-take of stock from a distributor, this is what the consumer is actually buying. Crafty salesmen often attempt to dump stock on distributors when they need to meet their sales target, this is very common towards the end of the month/quarter/year depending on when the sales incentives are paid and is a source of dispute between the Sales and the Finance departments.
Looking at the balance sheet, trade receivables are equivalent to about half a years sales and stocks are over a years worth of sales, all of which indicate that the product does not seem to be selling well.
SLIC says they want to turn Blue Diamonds around, I think they will have their work cut out.
The rescue of Sri Lanka Insurance from a botched privatisation is regarded as one of the triumphs of the regime. It is profitable, has pots of cash and is therefore now automatically seen as the vehicle of choice through which state investment can take place. It has its own funds and requires only board approval to buy into assets rather than the complicated process of cabinet papers and other procedures necessary for a Government department. There is also no delay in waiting for funds to be released from the Treasury, which is forever short.
Therefore it is not surprising to learn that SLIC is "aggressively looking for companies to turn around". SLIC has already participated in the bail out of Seylan Bank, bought control of Shell Gas and is now set to run restaurants on the new Southern highway.
The question this raises is whether conglomerate diversification adds too much risk to an insurance business. I don't have a clear answer and the regulatory guidelines overseas are a mess to wade through, but my initial instinct is that it does.
Quite apart from the more fundamental question, BD itself is, to put it mildly, rather a mess. A glance at the auditors report in the latest annual report reveals that:
1. A loan of Rs.203.5m that was obtained on the security of jewellery was written back to income in 2005, on the basis that the bank had taken over the security. The company has now been presented with a claim for US$4.32m, on account of this unpaid loan, which is not accounted in the books. If accounted for at face value it would wipe out half the equity of the company.
2. Th balances payable to related parties could not be verified, which means that further possible liabilities could exist.
3. Sales in the financial year 2010 were Rs.46m but the company had to recover Rs.39m worth of unsold stock from its overseas distributor, a related party. It seems that much of that years sales had simply been lying in stock.
When selling through distributors it is vitally important to monitor the off-take of stock from a distributor, this is what the consumer is actually buying. Crafty salesmen often attempt to dump stock on distributors when they need to meet their sales target, this is very common towards the end of the month/quarter/year depending on when the sales incentives are paid and is a source of dispute between the Sales and the Finance departments.
Looking at the balance sheet, trade receivables are equivalent to about half a years sales and stocks are over a years worth of sales, all of which indicate that the product does not seem to be selling well.
SLIC says they want to turn Blue Diamonds around, I think they will have their work cut out.
Friday, July 01, 2011
Contaminated petrol - beware
A couple of people at the company I work for have been affected by contaminated petrol. The fuel pump in the car has been damaged and needs replacement. So far it seems that only petrol cars have been affected, particularly those pumping 90 octane fuel, there are no reports of problems with diesel or 95 octane petrol.
Rumours of substandard or contaminated fuel have been circulating this week. True to form, they were immediately dismissed as vile propaganda by the Government, notwithstanding the long queues of vehicles that were being brought into garages. There was hardly any press coverage either, apart from some brief reports carrying the denial.
When it became absolutely impossible to deny, the Government backtracked a bit and blamed rainwater for the problems. The first proper story emerged only today. It appears that dregs, possibly mixed with rainwater, may have caused the problem.
According to reports from friends and associates, the contaminated petrol contains a dense tar-like substance that clogs up the fuel pump in the vehicle. The fuel pump is lubricated by the fuel circulating inside so when the tar-like substance enters the whole pump seizes and needs replacement.
I called the owner of my garage today to inform him of the widespread reports and he said that he was already attending to one damaged fuel pump. Being a rather innovative character, he had managed to clean the pump and it seems to be working, at least on the repair bench. He has not yet put it into the vehicle, so there is no saying that the pump can work properly enough with a full load of fuel.
It would be advisable for motorists to wait a week or so before filling up or to use 95 octane fuel, if they must fill up immediately.
Looking at the bigger picture, if rainwater or dregs were indeed the problem it seems strange that diesel and 95 octane petrol have not been affected. Rumours of a price increase last week saw queues at filling stations, so it is possible that the tanks ran low resulting in contaminated dregs of fuel being pumped, but this does not explain why diesel and 95 octane were not affected.
The knee-jerk reaction of the Government to any problem is to deny everything and blame it on a conspiracy. This would be laughable if it were not so serious. The lack of transparency, together with a growing culture of impunity are at root of this.
Transparency sounds like a rather woolly, fanciful idea, but it is the basic necessity if a Government is to be held to account. If the public do not know anything, they can hardly ask questions, so if Government is to be held accountable, then information must be freely available and widely disseminated, hence the importance of the media. In this instance, after days of rumours and denials, it is only now that we see some information emerging, and for the poor motorists, little advice on what the problem is or how to cope with it. As for recovery of costs, forget it. The defeat of the freedom of information bill is symptomatic of this malaise (an analysis of it s importance is available here).
There is also the (possibly related problem) of corruption. There were (unverified) reports on the web that the Acting Chairman had imported substandard fuel from Singapore, implying that he had done it to enrich himself. Too often, people are ready to dismiss corruption saying it is everywhere or that a little bit will not hurt. If this is indeed the result of corruption, then it would serve as a good example of how its true cost is borne by society-at-large.
Rumours of substandard or contaminated fuel have been circulating this week. True to form, they were immediately dismissed as vile propaganda by the Government, notwithstanding the long queues of vehicles that were being brought into garages. There was hardly any press coverage either, apart from some brief reports carrying the denial.
When it became absolutely impossible to deny, the Government backtracked a bit and blamed rainwater for the problems. The first proper story emerged only today. It appears that dregs, possibly mixed with rainwater, may have caused the problem.
According to reports from friends and associates, the contaminated petrol contains a dense tar-like substance that clogs up the fuel pump in the vehicle. The fuel pump is lubricated by the fuel circulating inside so when the tar-like substance enters the whole pump seizes and needs replacement.
I called the owner of my garage today to inform him of the widespread reports and he said that he was already attending to one damaged fuel pump. Being a rather innovative character, he had managed to clean the pump and it seems to be working, at least on the repair bench. He has not yet put it into the vehicle, so there is no saying that the pump can work properly enough with a full load of fuel.
It would be advisable for motorists to wait a week or so before filling up or to use 95 octane fuel, if they must fill up immediately.
Looking at the bigger picture, if rainwater or dregs were indeed the problem it seems strange that diesel and 95 octane petrol have not been affected. Rumours of a price increase last week saw queues at filling stations, so it is possible that the tanks ran low resulting in contaminated dregs of fuel being pumped, but this does not explain why diesel and 95 octane were not affected.
The knee-jerk reaction of the Government to any problem is to deny everything and blame it on a conspiracy. This would be laughable if it were not so serious. The lack of transparency, together with a growing culture of impunity are at root of this.
Transparency sounds like a rather woolly, fanciful idea, but it is the basic necessity if a Government is to be held to account. If the public do not know anything, they can hardly ask questions, so if Government is to be held accountable, then information must be freely available and widely disseminated, hence the importance of the media. In this instance, after days of rumours and denials, it is only now that we see some information emerging, and for the poor motorists, little advice on what the problem is or how to cope with it. As for recovery of costs, forget it. The defeat of the freedom of information bill is symptomatic of this malaise (an analysis of it s importance is available here).
There is also the (possibly related problem) of corruption. There were (unverified) reports on the web that the Acting Chairman had imported substandard fuel from Singapore, implying that he had done it to enrich himself. Too often, people are ready to dismiss corruption saying it is everywhere or that a little bit will not hurt. If this is indeed the result of corruption, then it would serve as a good example of how its true cost is borne by society-at-large.
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